CITY of HUNTSVILLE, ALABAMA $36,395,000* $28,345,000* General Obligation Warrants General Obligation School Warrants Series 2016-A Series 2016-B

PRELIMINARY OFFICIAL STATEMENT DATED JUNE 3, 2016 RATINGS: Standard & Poor’s: AAA Moody’s: Aaa NEW ISSUE - Book-Entry Only (See "RATINGS" herein) In the opinion of Bond Counsel to the City, assuming continuing compliance by the City with certain covenants set forth in the proceedings under which the Warrants are issued with respect to certain conditions imposed by Section 103 of the Internal Revenue Code of 1986, as amended, the interest income on the Warrants will be excludable from gross income of the recipients thereof for federal income tax purposes and will not be an item of tax preference for the purpose of computing the alternative minimum tax on individuals and corporations. Bond Counsel to the City is further of the opinion that the interest income on the Warrants is, under existing statutes and regulations, exempt from Alabama income taxation. CITY OF HUNTSVILLE, ALABAMA $36,395,000* $28,345,000* General Obligation Warrants General Obligation School Warrants Series 2016-A Series 2016-B

$40,750,000* $34,500,000* General Obligation Refunding Warrants General Obligation School Refunding Warrants Series 2016-C Series 2016-D

Dated: Date of Delivery Due: May 1,

ircumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of solicitation the or sell to offer an constitute Statement Official Preliminary this shall ircumstances as shown on the inside cover hereof FOR MATURITY SCHEDULE, INTEREST RATES, AND PRICE/YIELDS, SEE INSIDE COVER The above-referenced Series 2016-A Warrants, Series 2016-B Warrants, Series 2016-C Warrants and would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. such any of laws securities the under or qualification registration to prior unlawful be would Series 2016-D Warrants (collectively, the "Warrants") are issuable as fully registered warrants and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), to which principal and interest payments on the Warrants will be made so long as Cede & Co. is the registered owner of the Warrants. Individual purchases of the Warrants will be made in Book-Entry Only form, and individual purchasers ("Beneficial Owners") of the Warrants will not receive physical delivery of warrant certificates. The principal of the Warrants will be payable at the principal corporate trust office of Regions Bank in the City of Birmingham, Alabama (the "Bank"), at maturity or redemption. Interest on the Warrants will be payable on November 1, 2016, and semiannually thereafter on each May 1 and November 1, all by check or draft mailed to the registered owner of each Warrant. The Warrants will be direct general obligations of the City of Huntsville, Alabama (the "City"), for the payment of which the full faith and credit of the City will be irrevocably pledged. Certain of the Warrants are subject to redemption by the City prior to maturity at the times, in the manner, and subject to the terms described herein. BIDS FOR THE PURCHASE OF THE WARRANTS WILL BE RECEIVED ON JUNE 14, 2016, BUT FOR EACH SERIES OF THE WARRANTS ONLY AT THE TIME DESIGNATED FOR SUCH SERIES AS DESCRIBED HEREIN AND IN THE ATTACHED NOTICES OF SALE SET FORTH ON APPENDIX F FOR THE SERIES 2016-A WARRANTS, APPENDIX G FOR THE SERIES 2016-B WARRANTS, APPENDIX H FOR THE SERIES 2016-C WARRANTS, AND APPENDIX I FOR THE SERIES 2016-D WARRANTS. . THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT A SUMMARY OF THE ISSUES. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. The Warrants are offered when, as, and if issued by the City and are subject to approval of the validity thereof by Bradley Arant Boult Cummings LLP, Bond Counsel to the City, and certain other conditions. Public Financial Management, Inc., Huntsville, Alabama, is serving as Financial Advisor to the City. It is expected that the Warrants will be available for delivery on ______, 2016, which such delivery shall be made through DTC. Dated: ______

* Preliminary; subject to change. This Preliminary Official Statement and the information contained therein are subject to completion or amendment. Under no c no Under amendment. or completion to subject are therein contained information the and Statement Official Preliminary This or sale solicitation offer, such which in jurisdiction any in securities the of sale any be there shall nor buy, to offer an CITY OF HUNTSVILLE, ALABAMA

$36,395,000* $28,345,000* General Obligation Warrants General Obligation School Warrants Series 2016-A Series 2016-B Maturity Principal Interest Price/ Maturity Principal Interest Price/ (May 1) Amount* Rate Yield (May 1) Amount* Rate Yield 2017 $ 645,000 2024 $ 650,000 2018 540,000 2025 1,015,000 2019 555,000 2026 1,470,000 2020 575,000 2027 1,970,000 2021 600,000 2028 2,105,000 2022 1,550,000 2029 2,215,000 2023 1,630,000 2039 2,325,000 2024 1,710,000 2031 2,440,000 2025 1,795,000 2032 2,560,000 2026 1,885,000 2033 2,690,000 2027 1,980,000 2034 2,825,000 2028 2,080,000 2035 2,965,000 2029 2,185,000 2036 3,115,000 2030 2,295,000 2031 2,410,000 2032 2,525,000 2033 2,655,000 2034 2,785,000 2035 2,925,000 2036 3,070,000

$40,750,000* $34,500,000* General Obligation Refunding Warrants General Obligation School Refunding Warrants Series 2016-C Series 2016-D Maturity Principal Interest Price/ Maturity Principal Interest Price/ (May 1) Amount* Rate Yield (May 1) Amount* Rate Yield 2017 $ 675,000 2017 $ 475,000 2018 2,220,000 2018 330,000 2019 5,135,000 2019 2,980,000 2020 2,210,000 2020 285,000 2021 360,000 2021 285,000 2022 2,640,000 2022 1,005,000 2023 5,090,000 2023 3,020,000 2024 2,710,000 2024 2,690,000 2025 4,970,000 2025 5,350,000 2026 2,430,000 2026 2,660,000 2027 2,510,000 2027 2,725,000 2028 6,705,000 2028 6,810,000 2029 3,095,000 2029 2,895,000 2030 2,990,000

* Preliminary; subject to change.

CITY OF HUNTSVILLE, ALABAMA Post Office Box 308 308 Fountain Circle Huntsville, Alabama 35804-0308 (256) 427-5080

Mayor Tommy Battle

City Council Will Culver Richard Showers, Sr. President President Pro Tempore

Bill Kling, Jr. Dr. Jennie Robinson Mark Russell

City Administrator John Hamilton

Finance Director Peggy Sargent

City Attorney Trey Riley

City Treasurer Ken Benion

Financial Advisor Public Financial Management, Inc. Huntsville, Alabama

Bond Counsel Bradley Arant Boult Cummings LLP Birmingham, Alabama

Independent Certified Public Accountants Beason & Nalley, Inc. Huntsville, Alabama

Certain information contained in or incorporated by reference in this Official Statement has been obtained by the City from DTC and other sources that are deemed reliable. No representation or warranty is made, however, as to the accuracy or completeness of such information by the City. This Official Statement is being used in connection with the sale of securities as referred to herein and may not be used, in whole or in part, for any other purpose. The delivery of this Official Statement at any time does not imply that information herein is correct as of any time subsequent to its date.

No dealer, broker, salesperson or any other person has been authorized by the City to give any information or to make any representation other than as contained in this Official Statement in connection with the offering described herein and, if given or made, such other information or representation must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy any securities other than those described on the inside cover page, nor shall there be any offer to sell, solicitation of an offer to buy or sale of such securities in any jurisdiction in which it is unlawful to make such offer, solicitation or sale. Neither this Official Statement nor any statement that may have been made verbally or in writing is to be construed as a contract with the registered or beneficial owners of the Warrants.

Any statements made in this Official Statement, including the Appendices, involving matters of opinion or estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of such estimates will be realized. This Official Statement contains certain forward-looking statements and information that are based on the City's beliefs as well as assumptions made by and information currently available to the City.

TABLE OF CONTENTS

INTRODUCTION ...... 1 CONTINUING DISCLOSURE ...... 2 THE SERIES 2016-A WARRANTS ...... 3 THE SERIES 2016-B WARRANTS ...... 5 THE SERIES 2016-C WARRANTS ...... 7 THE SERIES 2016-D WARRANTS ...... 8 PLAN OF REFUNDING ...... 10 CERTAIN PROVISIONS RESPECTING THE WARRANTS ...... 11 FINANCIAL SYSTEM ...... 14 SOURCES OF REVENUES ...... 17 REVENUES AND EXPENDITURES ...... 21 DEBT MANAGEMENT ...... 22 SCHEDULED GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS OF THE CITY ...... 26 AD VALOREM TAXES ...... 29 POSTEMPLOYMENT BENEFITS ...... 32 FEDERAL BANKRUPTCY ACT ...... 34 LITIGATION AND OTHER MATTERS ...... 34 TAX MATTERS...... 36 RATINGS ...... 38 APPROVAL OF LEGAL PROCEEDINGS ...... 38 AUDITED FINANCIAL STATEMENTS ...... 38 FINANCIAL ADVISOR ...... 39 UNDERWRITING ...... 39 MISCELLANEOUS ...... 40

APPENDIX A – City of Huntsville – Certain Demographic Information APPENDIX B – City of Huntsville – Governmental Organization and Functions APPENDIX C – Audited Financial Statements of the City for the Fiscal Year Ended September 30, 2015 APPENDIX D – Forms of Opinions of Bond Counsel APPENDIX E – Summary of Continuing Disclosure Agreement APPENDIX F – Notice of Sale – Series 2016-A Warrants APPENDIX G – Notice of Sale – Series 2016-B Warrants APPENDIX H – Notice of Sale – Series 2016-C Warrants APPENDIX I – Notice of Sale – Series 2016-D Warrants

iii

OFFICIAL STATEMENT

Pertaining to

CITY OF HUNTSVILLE, ALABAMA

$36,395,000* $28,345,000* General Obligation Warrants General Obligation School Warrants Series 2016-A Series 2016-B

$40,750,000* $34,500,000* General Obligation Refunding Warrants General Obligation School Refunding Warrants Series 2016-C Series 2016-D

INTRODUCTION General

This Official Statement of the City of Huntsville, Alabama (the "City"), which includes the cover page and appendices hereto, sets forth information concerning the City and its proposed $36,395,000* General Obligation Warrants, Series 2016-A (the "Series 2016-A Warrants"), $28,345,000* General Obligation School Warrants, Series 2016-B (the "Series 2016-B Warrants"), $40,750,000* General Obligation Refunding Warrants, Series 2016-C (the "Series 2016-C Warrants") and $34,500,000* General Obligation School Refunding Warrants, Series 2016-D (the "Series 2016-D Warrants" and, together with the Series 2016-A Warrants, the Series 2016-B Warrants and the Series 2016-C Warrants, the "Warrants"). The Warrants are being issued pursuant to the provisions of an ordinance adopted by the governing body of the City (the "Ordinance").

The Warrants are being issued in order to pay the costs of certain public capital improvements, refinance certain indebtedness of the City, and pay the costs of issuing the Warrants, all as more particularly described herein. The Warrants will constitute general obligations of the City payable from and secured by a pledge of the full faith and credit of the City.

Neither the delivery of this Official Statement nor any sale made hereunder implies that there has not been any change in the affairs of the City at any time subsequent to the date hereof.

The City will make available annual financial statements and other pertinent credit information, including the Comprehensive Annual Financial Report, upon request by any warrantholder or prospective warrantholder. Copies of all periodic reports will also be made available by the City, or its agent, to provide information to persons wishing to receive it. The City reserves the right to charge such persons a reasonable fee to cover reproduction, handling and postage.

Reference is hereby made to the Appendices of this Official Statement setting forth certain information about the City and the City's audited financial statements for the fiscal year of the City ended September 30, 2015, prepared by Beason & Nalley, Inc., Certified Public Accountants, Huntsville, Alabama, the proposed forms of approving opinions of Bradley Arant Boult Cummings LLP, Birmingham, Alabama, Bond Counsel to the City, and the summary of the Continuing Disclosure Agreement.

The City was incorporated in 1811 and is one of the oldest incorporated municipalities in the State of Alabama. The mailing address of the City is P.O. Box 308, Huntsville, Alabama 35804, and the telephone number is (256) 427-5080.

Bid Process

Bids for the purchase of the Series 2016-A Warrants, the Series 2016-B Warrants, the Series 2016-C Warrants and the Series 2016-D Warrants will be received as described in the notice of sale for each

1 such series attached hereto as Appendix F, Appendix G, Appendix H, and Appendix I, respectively, at the following times on June 14, 2016 (the "Bid Date"):

Warrants Bid Time Series 2016-A Warrants 9:30 A.M., Central Time Series 2016-B Warrants 10:00 A.M., Central Time Series 2016-C Warrants 10:30 A.M., Central Time Series 2016-D Warrants 11:00 A.M., Central Time

The terms applicable for the public sale of the Series 2016-A Warrants, Series 2016-B Warrants, the Series 2016-C Warrants and the Series 2016-D Warrants are contained in Appendix F, Appendix G, Appendix H and Appendix I, respectively. With respect to each of the Series 2016-A Warrants, the Series 2016-B Warrants, the Series 2016-C Warrants, and the Series 2016-D Warrants, such series will be sold as a whole to the successful bidder thereof.

CONTINUING DISCLOSURE

General

Upon issuance of the Warrants, the City will have entered into a Continuing Disclosure Agreement for the benefit of the holders of the Warrants wherein the City will agree to provide annually certain financial information and operating data relating to the City (the "Annual Reports"), and notices of certain events through the Electronic Municipal Market Access ("EMMA") system established by the Municipal Securities Rulemaking Board (the "MSRB") (or such other system as may be subsequently authorized by the MSRB).

The specific nature of the information to be contained in the Annual Reports or the notices of material events and the other provisions of the Continuing Disclosure Agreement are summarized in Appendix E hereto. A failure by the City to comply with the Continuing Disclosure Agreement must be reported in accordance with Rule 15c2-12 (the "Rule") promulgated by the Securities and Exchange Commission of the United States of America, and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Warrants in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Warrants and their market price.

Ratings Changes. Certain warrants issued by the City, and the Public Building Authority of the City of Huntsville's (the "PBA") $86,415,000 initial principal amount Municipal Justice and Public Safety Center Lease Revenue Capital Improvement and Refunding Bonds, Series 2007 (the "Series 2007 PBA Bonds"), for which the City is an obligated person, during prior years are insured by various bond insurance companies. The ratings on those bond insurance companies have been downgraded at various times over the last several years. Information about the downgrades was publicly reported. The City did not file a notice under the Rule with respect to each such downgrade. On May 1, 2010, Moody‘s Investors Service ("Moody’s") recalibrated its US municipal ratings from the municipal scale to the global scale. As a result of such recalibration, (i) the underlying ratings assigned by Moody’s to the City’s general obligation indebtedness changed from "Aa1" to "Aaa", (ii) the underlying ratings assigned by Moody’s to the Series 2007 PBA Bonds changed from "Aa2" to "Aa1", and (iii) the underlying ratings on certain limited obligation revenue warrants issued by the City payable from its gas system ("Gas System Warrants"), its water system ("Water System Warrants") and its electric system ("Electric System Warrants" and, together with the Gas System Warrants and Water System Warrants, the "Utility Warrants"), changed as follows: Previous May 1, 2010 Rating Rating Change Gas System Warrants "A1" "Aa2" Water System Warrants "Aa2" "Aa1" Electric System Warrants "Aa2" "Aa1" 2

On April 5, 2010, Standard & Poor’s Corporation ("S&P") changed its underlying rating on the Series 2007 PBA Bonds from "AA" to "AA+". On February 10, 2010, S&P changed its underlying ratings on the City’s Water System Warrants from "AA+" to "AAA" and on the City’s Gas System Warrants from "AA-" to "AA". Information about the rating changes made by Moody’s and S&P described above was publicly reported. The City did not file a material event notice on EMMA regarding such changes with respect to its general obligation warrants and the Series 2007 PBA Bonds until August 1, 2014, and did not file a material event notice on EMMA regarding such changes with respect to the Utility Warrants until August 4, 2014, which such dates are each more than 10 business days after such changes.

Annual Reports. The City did not file its required annual report for the fiscal year ended September 30, 2009, until April 30, 2010, which was approximately one month beyond the deadline imposed under the City's then outstanding continuing disclosure agreements, did not file its required annual report for the fiscal year ended September 30, 2011, until April 2, 2012, which was the first business day following the date such report was required to be filed, and did not file its required annual report for the fiscal year ended September 30, 2015, until April 15, 2016, which was approximately fifteen days beyond the deadline imposed under the City's then outstanding continuing disclosure agreements. Additionally, the City did not link the annual reports filed on EMMA for the fiscal years ended September 30, 2009, September 30, 2010, September 30, 2011 and September 30, 2012 to any of its general obligation warrants issued during the 2002 calendar year, and did not link its annual reports filed for each of the last five years on EMMA to the Series 2007 Bonds.

The annual reports required to be filed by the City under its continuing disclosure agreements respecting the Utility Warrants for the fiscal years ended September 30, 2009, and September 30, 2010, were not posted on EMMA until April 12, 2011.

THE SERIES 2016-A WARRANTS

Purpose

The Series 2016-A Warrants are being issued to (i) pay the costs of various public capital improvements within the City consisting of public roadway improvements, public park and recreation improvements, bridge improvements, public safety improvements, and various other public capital improvements within the City (the "2016-A Improvements"), and (ii) pay the costs of issuing the Series 2016- A Warrants.

Security

The Series 2016-A Warrants are general obligations of the City for the payment of the principal of and interest on which the full faith and credit of the City will be irrevocably pledged.

Maturities and Interest Rates

The Series 2016-A Warrants are dated their date of issuance and delivery and mature on May 1 in the principal amounts and bear interest at the per annum rates set forth on the inside cover page of this Official Statement. The Series 2016-A Warrants shall be issued only as fully registered warrants in denominations of $5,000 or any integral multiple thereof.

Sources and Uses of Proceeds

The proceeds to be derived from the sale of the Series 2016-A Warrants are expected to be applied substantially as follows:

Sources Par amount of Series 2016-A Warrants [Plus/Less] [Net] Original Issue [Premium/Discount] Total Sources 3

Uses 2016-A Improvements Costs of issuance (including bid discount, legal, financial advisor, printing, and other costs) Total Uses

Redemption

Optional Redemption. Those of the Series 2016-A Warrants having stated maturities in 2027 and thereafter will be subject to redemption prior to their respective maturities, at the option of the City, as a whole or in part (but if in part, in such maturities as the City in its discretion shall designate, and if less than all Series 2016-A Warrants of a single maturity are to be redeemed, those to be redeemed to be selected by the Trustee by lot), on May 1, 2026, and on any date thereafter, at a redemption price equal to the face amount of Series 2016-A Warrants to be redeemed plus accrued interest thereon to the date fixed for redemption.

[Mandatory Redemption. The Series 2016-A Warrants maturing in ____ and ____ (the "Series 2016-A Term Warrants") shall be redeemed, at a redemption price equal to the face amount of Series 2016-A Warrants to be redeemed plus accrued interest thereon to the date fixed for redemption, on the dates and in the principal amounts as follows:

Series 2016-A Term Warrants Maturing in ____ Year Principal Amount ([______] 1) to be Redeemed

In the event that the City shall have partially redeemed the Series 2016-A Term Warrants or shall have provided for a partial redemption of the Series 2016-A Term Warrants in such a manner that the Series 2016-A Term Warrants for the redemption of which provision is made are considered as fully paid, the City may elect to apply all or any part (but only in integral multiples of $5,000) of the principal amount of such Series 2016-A Term Warrants so redeemed or to be redeemed to the reduction of the principal amount of Series 2016-A Term Warrants required to be redeemed pursuant to the schedules set forth immediately above on any May 1 coterminous with or subsequent to the date such optional redemption actually occurs.]

Manner, Notice and Effect of Redemption. Notice of any redemption (other than mandatory redemption) of the Series 2016-A Term Warrants shall be given to the affected holder thereof not less than 30 days before the date fixed for redemption. If the book-entry system is in effect, such notice of redemption shall be given to DTC (as defined below) and shall be forwarded by DTC to the affected holders of Series 2016-A Term Warrants through methods established by the rules and operational arrangements of DTC. If the book-entry system is not in effect, notice of redemption shall be given to the holders of Series 2016-A Term Warrants being redeemed by registered or certified mail. No further interest will accrue, after the date fixed for redemption, on the principal of any Series 2016-A Term Warrants called for redemption if notice has been

4 duly given and payment therefor has been duly provided, and in such event any Series 2016-A Term Warrants called for redemption will no longer be protected by the provisions of the Indenture.

[Partial Redemption of Series 2016-A Term Warrants. If less than all Series 2016-A Term Warrants outstanding are to be redeemed, the principal amount of Series 2016-A Term Warrants to be redeemed may be specified by the City by notice delivered to the Trustee prior to the date when the Trustee must give notice of the redemption to holders of the Series 2016-A Term Warrants, or, in the absence of receipt by the Trustee of such notice, shall be determined in accordance with the book-entry system or if the book-entry system is no longer in effect by lot or by such other method as the Trustee shall deem fair and appropriate; provided, however, that the Series 2016-A Term Warrants are subject to redemption only in principal amounts of $5,000 or any integral multiple thereof.]

THE SERIES 2016-B WARRANTS

Purpose

The Series 2016-B Warrants are being issued to (i) pay the costs of public school capital improvements including, among others, construction of a new elementary school and other renovations and improvements for public school facilities within the City operated by the Huntsville City School Board and various other public school improvements within the City (the "2016-B Improvements"), and (ii) pay the costs of issuing the Series 2016-B Warrants.

Security

The Series 2016-B Warrants are general obligations of the City for the payment of the principal of and interest on which the full faith and credit of the City will be irrevocably pledged.

Maturities and Interest Rates

The Series 2016-B Warrants are dated their date of issuance and delivery and mature on May 1 in the principal amounts and bear interest at the per annum rates set forth on the inside cover page of this Official Statement. The Series 2016-B Warrants shall be issued only as fully registered warrants in denominations of $5,000 or any integral multiple thereof.

Sources and Uses of Proceeds

The proceeds to be derived from the sale of the Series 2016-B Warrants are expected to be applied substantially as follows:

Sources Par amount of Series 2016-B Warrants [Plus/Less] [Net] Original Issue [Premium/Discount] Total Sources

Uses 2016-B Improvements Costs of issuance (including bid discount, legal, financial advisor, printing, and other costs) Total Uses

Redemption

Optional Redemption. Those of the Series 2016-B Warrants having stated maturities in 2027 and thereafter will be subject to redemption prior to their respective maturities, at the option of the City, as a whole or in part (but if in part, in such maturities as the City in its discretion shall designate, and if less than all

Series 2016-B Warrants of a single maturity are to be redeemed, those to be redeemed to be selected by the Trustee by lot), on May 1, 2026, and on any date thereafter, at a redemption price equal to the face amount of Series 2016-B Warrants to be redeemed plus accrued interest thereon to the date fixed for redemption.

[Mandatory Redemption. The Series 2016-B Warrants maturing in ____ and ____ (the "Series 2016-B Term Warrants") shall be redeemed, at a redemption price equal to the face amount of Series 2016-B Warrants to be redeemed plus accrued interest thereon to the date fixed for redemption, on the dates and in the principal amounts as follows:

Series 2016-B Term Warrants Maturing in ____ Year Principal Amount ([______] 1) to be Redeemed

In the event that the City shall have partially redeemed the Series 2016-B Term Warrants or shall have provided for a partial redemption of the Series 2016-B Term Warrants in such a manner that the Series 2016-B Term Warrants for the redemption of which provision is made are considered as fully paid, the City may elect to apply all or any part (but only in integral multiples of $5,000) of the principal amount of such Series 2016-B Term Warrants so redeemed or to be redeemed to the reduction of the principal amount of Series 2016-B Term Warrants required to be redeemed pursuant to the schedules set forth immediately above on any May 1 coterminous with or subsequent to the date such optional redemption actually occurs.]

Manner, Notice and Effect of Redemption. Notice of any redemption (other than mandatory redemption) of the Series 2016-B Term Warrants shall be given to the affected holder thereof not less than 30 days before the date fixed for redemption. If the book-entry system is in effect, such notice of redemption shall be given to DTC (as defined below) and shall be forwarded by DTC to the affected holders of Series 2016-B Term Warrants through methods established by the rules and operational arrangements of DTC. If the book-entry system is not in effect, notice of redemption shall be given to the holders of Series 2016-B Term Warrants being redeemed by registered or certified mail. No further interest will accrue, after the date fixed for redemption, on the principal of any Series 2016-B Term Warrants called for redemption if notice has been duly given and payment therefor has been duly provided, and in such event any Series 2016-B Term Warrants called for redemption will no longer be protected by the provisions of the Indenture.

[Partial Redemption of Series 2016-B Term Warrants. If less than all Series 2016-B Term Warrants outstanding are to be redeemed, the principal amount of Series 2016-B Term Warrants to be redeemed may be specified by the City by notice delivered to the Trustee prior to the date when the Trustee must give notice of the redemption to holders of the Series 2016-B Term Warrants, or, in the absence of receipt by the Trustee of such notice, shall be determined in accordance with the book-entry system or if the book- entry system is no longer in effect by lot or by such other method as the Trustee shall deem fair and appropriate; provided, however, that the Series 2016-B Term Warrants are subject to redemption only in principal amounts of $5,000 or any integral multiple thereof.]

THE SERIES 2016-C WARRANTS

Purpose

The Series 2016-C Warrants are being issued to (i) redeem and retire certain outstanding obligations of the City, and (ii) pay the costs of issuing the Series 2016-C Warrants. See “PLAN OF REFUNDING” herein.

Security

The Series 2016-C Warrants are general obligations of the City for the payment of the principal of and interest on which the full faith and credit of the City will be irrevocably pledged.

Maturities and Interest Rates

The Series 2016-C Warrants are dated their date of issuance and delivery and mature on May 1 in the principal amounts and bear interest at the per annum rates set forth on the inside cover page of this Official Statement. The Series 2016-C Warrants shall be issued only as fully registered warrants in denominations of $5,000 or any integral multiple thereof.

Sources and Uses of Proceeds

The proceeds to be derived from the sale of the Series 2016-C Warrants are expected to be applied substantially as follows:

Sources Par amount of Series 2016-C Warrants [Plus/Less] [Net] Original Issue [Premium/Discount] Total Sources

Uses Deposit to Escrow Fund Costs of issuance (including bid discount, legal, financial advisor, printing, and other costs) Total Uses

Redemption

Optional Redemption. Those of the Series 2016-C Warrants having stated maturities in 2027 and thereafter will be subject to redemption prior to their respective maturities, at the option of the City, as a whole or in part (but if in part, in such maturities as the City in its discretion shall designate, and if less than all Series 2016-C Warrants of a single maturity are to be redeemed, those to be redeemed to be selected by the Trustee by lot), on May 1, 2026, and on any date thereafter, at a redemption price equal to the face amount of Series 2016-C Warrants to be redeemed plus accrued interest thereon to the date fixed for redemption.

[Mandatory Redemption. The Series 2016-C Warrants maturing in ____ and ____ (the "Series 2016-C Term Warrants") shall be redeemed, at a redemption price equal to the face amount of Series 2016-C Warrants to be redeemed plus accrued interest thereon to the date fixed for redemption, on the dates and in the principal amounts as follows:

Series 2016-C Term Warrants Maturing in ____ Year Principal Amount ([______] 1) to be Redeemed

In the event that the City shall have partially redeemed the Series 2016-C Term Warrants or shall have provided for a partial redemption of the Series 2016-C Term Warrants in such a manner that the Series 2016-C Term Warrants for the redemption of which provision is made are considered as fully paid, the City may elect to apply all or any part (but only in integral multiples of $5,000) of the principal amount of such Series 2016-C Term Warrants so redeemed or to be redeemed to the reduction of the principal amount of Series 2016-C Term Warrants required to be redeemed pursuant to the schedules set forth immediately above on any May 1 coterminous with or subsequent to the date such optional redemption actually occurs.]

Manner, Notice and Effect of Redemption. Notice of any redemption (other than mandatory redemption) of the Series 2016-C Term Warrants shall be given to the affected holder thereof not less than 30 days before the date fixed for redemption. If the book-entry system is in effect, such notice of redemption shall be given to DTC (as defined below) and shall be forwarded by DTC to the affected holders of Series 2016-C Term Warrants through methods established by the rules and operational arrangements of DTC. If the book-entry system is not in effect, notice of redemption shall be given to the holders of Series 2016-C Term Warrants being redeemed by registered or certified mail. No further interest will accrue, after the date fixed for redemption, on the principal of any Series 2016-C Term Warrants called for redemption if notice has been duly given and payment therefor has been duly provided, and in such event any Series 2016-C Term Warrants called for redemption will no longer be protected by the provisions of the Indenture.

[Partial Redemption of Series 2016-C Term Warrants. If less than all Series 2016-C Term Warrants outstanding are to be redeemed, the principal amount of Series 2016-C Term Warrants to be redeemed may be specified by the City by notice delivered to the Trustee prior to the date when the Trustee must give notice of the redemption to holders of the Series 2016-C Term Warrants, or, in the absence of receipt by the Trustee of such notice, shall be determined in accordance with the book-entry system or if the book- entry system is no longer in effect by lot or by such other method as the Trustee shall deem fair and appropriate; provided, however, that the Series 2016-C Term Warrants are subject to redemption only in principal amounts of $5,000 or any integral multiple thereof.]

THE SERIES 2016-D WARRANTS

Purpose

The Series 2016-D Warrants are being issued to (i) redeem and retire certain outstanding obligations of the City and, (ii) pay the costs of issuing the Series 2016-D Warrants. See “PLAN OF REFUNDING” herein.

Security

The Series 2016-D Warrants are general obligations of the City for the payment of the principal of and interest on which the full faith and credit of the City will be irrevocably pledged.

Maturities and Interest Rates 8

The Series 2016-D Warrants are dated their date of issuance and delivery and mature on May 1 in the principal amounts and bear interest at the per annum rates set forth on the inside cover page of this Official Statement. The Series 2016-D Warrants shall be issued only as fully registered warrants in denominations of $5,000 or any integral multiple thereof.

Sources and Uses of Proceeds

The proceeds to be derived from the sale of the Series 2016-D Warrants are expected to be applied substantially as follows:

Sources Par amount of Series 2016-D Warrants [Plus/Less] [Net] Original Issue [Premium/Discount] Total Sources

Uses Deposit to Escrow Fund Costs of issuance (including bid discount, legal, financial advisor, printing, and other costs) Total Uses

Redemption

Optional Redemption. Those of the Series 2016-D Warrants having stated maturities in 2027 and thereafter will be subject to redemption prior to their respective maturities, at the option of the City, as a whole or in part (but if in part, in such maturities as the City in its discretion shall designate, and if less than all Series 2016-D Warrants of a single maturity are to be redeemed, those to be redeemed to be selected by the Trustee by lot), on May 1, 2026, and on any date thereafter, at a redemption price equal to the face amount of Series 2016-D Warrants to be redeemed plus accrued interest thereon to the date fixed for redemption.

[Mandatory Redemption. The Series 2016-D Warrants maturing in ____ and ____ (the "Series 2016-D Term Warrants") shall be redeemed, at a redemption price equal to the face amount of Series 2016-D Warrants to be redeemed plus accrued interest thereon to the date fixed for redemption, on the dates and in the principal amounts as follows:

Series 2016-D Term Warrants Maturing in ____ Year Principal Amount ([______] 1) to be Redeemed

In the event that the City shall have partially redeemed the Series 2016-D Term Warrants or shall have provided for a partial redemption of the Series 2016-D Term Warrants in such a manner that the Series 2016-D Term Warrants for the redemption of which provision is made are considered as fully paid, the City may elect to apply all or any part (but only in integral multiples of $5,000) of the principal amount of such Series 2016-D Term Warrants so redeemed or to be redeemed to the reduction of the principal amount of Series 2016-D Term Warrants required to be redeemed pursuant to the schedules set forth immediately above on any May 1 coterminous with or subsequent to the date such optional redemption actually occurs.]

Manner, Notice and Effect of Redemption. Notice of any redemption (other than mandatory redemption) of the Series 2016-D Term Warrants shall be given to the affected holder thereof not less than 30 days before the date fixed for redemption. If the book-entry system is in effect, such notice of redemption shall be given to DTC (as defined below) and shall be forwarded by DTC to the affected holders of Series 2016-D Term Warrants through methods established by the rules and operational arrangements of DTC. If the book-entry system is not in effect, notice of redemption shall be given to the holders of Series 2016-D Term Warrants being redeemed by registered or certified mail. No further interest will accrue, after the date fixed for redemption, on the principal of any Series 2016-D Term Warrants called for redemption if notice has been duly given and payment therefor has been duly provided, and in such event any Series 2016-D Term Warrants called for redemption will no longer be protected by the provisions of the Indenture.

[Partial Redemption of Series 2016-D Term Warrants. If less than all Series 2016-D Term Warrants outstanding are to be redeemed, the principal amount of Series 2016-D Term Warrants to be redeemed may be specified by the City by notice delivered to the Trustee prior to the date when the Trustee must give notice of the redemption to holders of the Series 2016-D Term Warrants, or, in the absence of receipt by the Trustee of such notice, shall be determined in accordance with the book-entry system or if the book-entry system is no longer in effect by lot or by such other method as the Trustee shall deem fair and appropriate; provided, however, that the Series 2016-D Term Warrants are subject to redemption only in principal amounts of $5,000 or any integral multiple thereof.]

PLAN OF REFUNDING

Plan of Refunding

Proceeds from the issuance of the Series 2016-C Warrants and the Series 2016-D Warrants will be applied to refund and retire all or portions of the City’s (i) General Obligation Warrants, Series 2007-A, dated May 1, 2007 (the "Refunded Series 2007-A Warrants"), (ii) General Obligation Capital Improvement and Refunding Warrants, Series 2009-A, dated March 4, 2009 (the "Refunded Series 2009-A Warrants"), (iii) General Obligation School Capital Improvement and Refunding Warrants, Series 2009-B, dated March 4, 2009 (the "Refunded Series 2009-B Warrants"), (iv) General Obligation Capital Improvement and Refunding Warrants, Series 2011-A, dated November 22, 2011 (the "Refunded Series 2011-A Warrants"), and (v) General Obligation School Capital Improvement Warrants, Series 2011-B, dated November 22, 2011 (the "Refunded Series 2011-B Warrants" and, together with the Refunded Series 2007-A Warrants, the Refunded Series 2009-A Warrants, the Refunded Series 2009-B Warrants, and the Refunded Series 2011-A Warrants, the “Refunded Warrants”).

Simultaneously with the issuance of the Series 2016-C Warrants and the Series 2016-D Warrants, the City and Regions Bank, in its capacity as paying agent for the Refunded Warrants, will enter into an Escrow Trust Agreement pursuant to which the City will deposit into a special escrow fund created therein (the "Escrow Fund") cash and direct obligations of the United States of America maturing in such amounts and paying interest on such dates as will be sufficient to provide for payment of (i) the maturing installments of interest on the Refunded Series 2007-A Warrants through and including May 1, 2017, and to pay, on May 1, 2017, the redemption price of the Refunded Series 2007-A Warrants, (ii) the maturing installments of interest on the Refunded Series 2009-A Warrants and the Refunded Series 2009-B Warrants through and including September 1, 2018, and to pay, on September 1, 2018, the redemption price of the Refunded Series 2009-A Warrants and the Refunded Series 2009-B Warrants, (iii) the maturing installments of interest on the Refunded Series 2011-A Warrants through and including September 1, 2021, and to pay, on September 1, 2021, the 10 redemption price of the Refunded Series 2011-A Warrants, and (iv) the maturing installments of interest on the Refunded Series 2011-B Warrants through and including May 1, 2021, and to pay, on May 1, 2021, the redemption price of the Refunded Series 2011-B Warrants.

Verification Report

The adequacy of (i) the cash and maturing principal and interest earned on the direct obligations of the United States of America to be put on deposit in the Escrow Fund to provide for the redemption and payment of the Refunded Warrants as aforesaid, and (ii) the actuarial yield on the Warrants and all direct obligations of the United States of America to be put on deposit in the Escrow Fund to pay and redeem the Refunded Warrants as aforesaid, which computations support the conclusion that the Warrants are not "arbitrage bonds" under Section 148 of the Internal Revenue Code of 1986, as amended, will be verified by The Arbitrage Group, Inc. (the “Verification Agent”).

CERTAIN PROVISIONS RESPECTING THE WARRANTS

Security and Source of Payment; Payment Record of the City

General. The Warrants will be general obligations of the City for payment of the principal of and the interest on which the full faith and credit of the City will be pledged.

Revenues. Revenues of the City legally available for payment of the principal of and the interest on the Warrants include sales, property, business and other license taxes, revenues from the operation of certain City-owned enterprises and other general revenues of the City. Information describing the taxes collected by the City and certain other revenues of the City is set forth in this Official Statement under the captions "FINANCIAL SYSTEM," "SOURCES OF REVENUES," and "AD VALOREM TAXES" below. See also "DEBT MANAGEMENT" below.

Debt Management Policy. Although the City’s general obligation bonds and warrants are not limited as to source of payment, the City has a long-standing debt management policy under which it budgets annually and sets aside certain tax proceeds and other moneys in separate funds for the payment of debt service on certain of its general obligation bonds and warrants. The revenues from the operation of the City’s sanitary sewer or wastewater system (the "Sewer System") are paid into an Enterprise Fund known as the "Water Pollution Control Fund" and used to pay the expenses of operating and maintaining the Sewer System and the debt service on obligations issued by the City for sanitary sewer purposes. The proceeds from a 6.5 mill ad valorem tax for debt service (the "Bond Tax") and a portion of the proceeds from the City-levied school tax (the "School Tax"), both authorized by the Alabama Constitution, are customarily paid into certain Special Revenue Funds for transfer into certain "Debt Service Funds" (though a portion of the Bond Tax is transferred directly to the trustee for the Series 2007 PBA Bonds). For a more complete description of these funds and transfers thereto and therefrom, see "FINANCIAL SYSTEM - Accounting System." The City expects that debt service on the Warrants will be paid out of budgeted revenues.

Future Borrowings. Pursuant to its ten-year Capital Improvement Plan, the City anticipates borrowing approximately $22.8 million in 2018 and $3.5 million in 2019. The City may from time to time borrow additional money in connection with various City projects or at the request of the Huntsville School System based on its administration of the School Tax.

TIF Revenue Warrants. In connection with the obligations of the City under the Annexation and Development Agreement that is hereinafter defined and described, the City expects from time to time to issue to L W Redstone Company, LLC various series of taxable limited obligation revenue warrants (the "TIF5 Revenue Warrants"), payable solely out of TIF revenues generated in connection with TIF5, hereinafter described, in order to pay the costs of various public infrastructure improvements referable to the project described in the Annexation and Development Agreement. The TIF5 Revenue Warrants will be payable solely out of TIF revenues generated within TIF5, and in that regard will not constitute an indebtedness of the City 11 for purposes of the City's constitutional debt limit. Under the Annexation and Development Agreement the City may issue up to $76,000,000 of TIF Revenue Warrants. Payment obligations evidenced by the TIF Revenue Warrants shall be deemed satisfied and paid in full at maturity to the extent not covered by TIF Revenues generated within the boundary of TIF5 during the term of such obligations. To date the City has issued TIF Revenue Warrants in principal amount of not to exceed $37,500,000 pursuant to the Annexation and Development Agreement.

Payment Record. The City has never defaulted in the payment of debt service on its warrants, bonds or other funded indebtedness, nor has it refunded indebtedness for the purpose of preventing or avoiding such a default.

Payment of Principal and Interest

Except as described below under "Book-Entry Only System", the principal of each series of the Warrants is payable at the principal corporate trust office of Regions Bank (the "Bank") in the City of Birmingham, Alabama, upon presentation and surrender of such series. Interest on each series of the Warrants (computed on the basis of a 360-day year of 12 consecutive 30-day months) is payable semiannually on each November 1 and May 1, commencing November 1, 2016. Interest on each series of the Warrants is payable in lawful money of the United States of America by check or draft mailed by the Bank to the lawful holders of such series at the address shown on the registry books of the Bank pertaining to such series on the October 15 or April 15, as the case may be, next preceding any interest payment date.

Book-Entry Only System

Portions of the following information concerning The Depository Trust Company ("DTC") and DTC's book-entry system have been obtained from DTC. The City and the Bank make no representation as to the accuracy of such information.

General. Initially, DTC will act as Securities Depository for the Warrants. The Warrants initially will be issued solely in book-entry form to be held under DTC's book-entry system, registered in the name of Cede & Co. (DTC's partnership nominee). Initially, one fully-registered Warrant certificate for each maturity will be issued for the Warrants, in the aggregate principal amount of Warrants of such maturity, and will be deposited with DTC.

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

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

To facilitate subsequent transfers, all Warrants 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 Warrants with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Warrants; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Warrants are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Redemption notices shall be sent to DTC. If less than all of the Warrants within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Warrants 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 Warrants are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Redemption proceeds, distributions, and dividend payments on the Warrants 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 Bank, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Bank, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Bank, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

In the event of the discontinuance of the book-entry system for the Warrants, Warrant certificates will be printed and delivered and the following provisions of the Ordinance will apply: (i) principal of the Warrants will be payable upon surrender of the Warrants at the designated office of the Bank; (ii) Warrants may be transferred or exchanged for other Warrants of authorized denominations as set forth in the next succeeding paragraph; and (iii) Warrants will be issued in denominations as described above under "THE SERIES 2016-A WARRANTS – Maturities and Interest Rates", "THE SERIES 2016-B WARRANTS –

Maturities and Interest Rates", "THE SERIES 2016-C WARRANTS – Maturities and Interest Rates", and "THE SERIES 2016-D WARRANTS – Maturities and Interest Rates" above.

Certain Provisions Respecting Registration and Transfer of the Warrants

The following provisions shall apply only upon discontinuance of the book-entry only system described above. The Warrants shall be registered as to both principal and interest and may be transferred only on the registry books of the Bank pertaining to the Warrants. No transfer of the Warrants shall be permitted except upon presentation and surrender of such Warrant at the office of the Bank with written power to transfer signed by the registered owner thereof in person or by a duly authorized attorney in form and with guaranty of signature satisfactory to the Bank. The holder of one or more of the Warrants may, upon request, and upon the surrender to the Bank of such Warrant, exchange such Warrant for Warrants of other authorized denominations ($5,000 principal amount or any integral multiple thereof) of the same series, maturity and interest rate and together aggregating the same principal amount as the Warrants so surrendered. Any registration, transfer and exchange of Warrants shall be without expense to the holder thereof, except that the holder shall pay all taxes and other governmental charges, if any, required to be paid in connection with such transfer, registration or exchange. The holder of any Warrant will be required to pay any expenses incurred in connection with the replacement of a mutilated, lost, stolen or destroyed Warrant. If any Warrant is duly called for redemption (in whole or in part), the Bank shall not be required to register or transfer such Warrant during the period of forty- five (45) days next preceding the date fixed for redemption.

The Ordinance provides that each holder of the Warrants, by receiving or accepting the Warrants, consents and agrees and is estopped to deny that, insofar as the City and the Bank are concerned, the Warrants may be transferred only in accordance with the provisions of the Ordinance. The Ordinance also provides that each transferee of the Warrants takes them subject to all principal and interest payments in fact made with respect to the Warrants.

The Ordinance provides that the Bank shall not be required to register or transfer (i) any Series 2016-A Warrant during the period following the October 15 or April 15 next preceding any November 1 or June 1, respectively (each, a "2016-A Record Date"), (ii) any Series 2016-B Warrant during the period following the October 15 or April 15 next preceding any November 1 or June 1, respectively (each, a "2016-B Record Date"), (iii) any Series 2016-C Warrant during the period following the October 15 or April 15 next preceding any November 1 or June 1, respectively (each, a "2016-C Record Date"), and (iv) any Series 2016-D Warrant during the period following the October 15 or April 15 next preceding any November 1 or June 1, respectively (each, a "2016-D Record Date"). If any Warrant is called for redemption, the Bank is not required to register or transfer any such Warrant during the period of forty-five (45) days next preceding the date fixed for its redemption. Reference is made to the provisions of the Ordinance in full for its provisions pertaining to the registration, transfer and exchange of Warrants and the method of payment of the principal thereof and interest thereon.

FINANCIAL SYSTEM

General

The City maintains a financial reporting system designed to provide timely and accurate reports of receipts and expenditures. Internal accounting controls, which are developed and monitored by the City Finance Department, are designed to provide reasonable, but not absolute, assurance regarding (1) the safeguarding of assets against loss from unauthorized use or disposition, and (2) the reliability of financial records for preparing financial statements and maintaining accountability for assets. Activities of the City are monitored internally on a monthly basis and are audited annually, as required by law, by independent certified public accountants. The report of such accountants for the fiscal year ended September 30, 2015 (the City’s most recent audit), is included as a part of this Official Statement in Appendix C.

Budget System 14

Prior to the commencement of each fiscal year, the Mayor, in conjunction with the administrative staff and the City’s department heads, prepares an annual operating budget for City Council approval. The budget represents a complete financial plan for the City and reflects the projection of all receipts and disbursements from all sources, including all revenues, expenditures and the surplus or deficit in the General Fund and all special funds of the City. Once the budget is adopted by the City Council, the Mayor as chief executive officer is authorized to approve transfers of budgeted amounts within the three major expenditure categories - capital, operating and personnel. Any expenditure request that results in budget increases, overruns or transfers from one of the three major expenditure categories to another must, under existing procedures, have City Council approval.

The budget for the General Fund is customarily adopted on a departmental line item basis consistent with generally accepted accounting principles (GAAP). Budgetary control is maintained at the departmental line item level by the encumbrance of estimated purchase amounts prior to the release of purchase orders to vendors. The City has an ordinance which requires that a mid-year review be undertaken and adjustments made to expenditures in the fiscal year to compensate for any deviations from budget in the first six months of that year. Furthermore, by ordinance, the City is required to maintain at all times an undesignated General Fund balance of 11.5% of the current fiscal year’s General Fund recurring revenues. The fund balance was at the required policy amount at the close of each of the last five fiscal years. The City expects to meet this requirement for the fiscal year ending September 30, 2016.

The City maintains a ten (10) year Capital Improvement Plan which forecasts expenditures for capital improvements. This plan includes local roads and the City’s financing share of non-local roads, drainage projects, and preservation of the natural environment, public safety and acquisition of land for industrial growth.

During the budget process, the Mayor requests that each department head assign priorities to department capital improvements, by year, for the number of years to be budgeted. After interviewing each department head, the Mayor then proposes a Capital Improvements Program to the City Council for its consideration. Capital expenditures were and will be funded with borrowings or with internally generated funds.

Accounting System

The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures, or expenses, as appropriate. The various funds designated in the City’s financial statements (attached hereto as Appendix C) include the following:

General Fund. The General Fund, which is the general operating fund of the City, is the largest and most important accounting activity of the City and accounts for the current operations of the general government and all financial resources except those required to be accounted for in another fund. Expenditures from the General Fund are financed from a variety of revenue sources, including ad valorem and sales and use taxes, licenses and permits, charges for services, and fines and forfeitures. See "SOURCES OF REVENUES".

Special Revenue Fund. The Special Revenue Fund is used to account for the proceeds of restricted property taxes, state gasoline taxes and seizure/forfeiture revenues, which are as follows:

6.5-Mill School Tax - accounts for the School Tax authorized to be levied for school purposes until the tax year for which City taxes become due and payable on October 1, 2046.

6.5-Mill Bond Tax - accounts for the Bond Tax levied under authority of Section 216 of the Constitution of Alabama of 1901, as amended, the proceeds of which may be used to pay principal of and interest on bonds.

7-Cent State Gasoline Tax - accounts for the City’s share of a 7-cent gasoline tax and 2-cent inspection fee levied by the State, the proceeds of which are required by state law to be used only for street and highway purposes.

4/5-Cent State Gasoline Tax - accounts for the City’s share of a 4- cent and 5-cent gasoline tax levied by the State, the proceeds of which must, under state law, be used only for resurfacing, restoring and rehabilitating roads and bridges.

TIFs - accounts for collection of property taxes and other revenues of the TIF Districts and the related capital projects.

2014 Capital Improvement Fund. In fiscal year 2014, the City established the 2014 Capital Improvement Fund, a special revenue fund, to account for the proceeds of a one-percent sales and use tax levied by the City effective March 1, 2014. This fund accounts for the capital and economic development expenditures authorized for this fund, and the debt service on projects intended to be paid from the taxes. A portion of the debt service on the Warrants will be paid from this fund.

Debt Service Fund. The Debt Service Fund is used to account for the accumulation of moneys for, and the payment of, principal of and interest on long-term debt and related costs, other than long-term debt payable from special assessments and debt issued for and serviced primarily by City-owned enterprises.

Capital Projects Funds. Capital Project Funds are used to account for financial resources used for the acquisition or construction of major capital facilities (other than those financed by Enterprise Funds and TIF taxes of the Special Revenue Fund). In most cases, the City uses the Capital Improvement Fund to account for the expenditure of the proceeds from all warrant issues, and uses separate accounts within that to show that the proceeds of the issues were spent only on the project or projects and for the purpose or purposes authorized, and that any unused warrant proceeds or project deficits were properly handled and accounted for in accordance with applicable legal, budgetary and policy provisions.

The proceeds from the Warrants to pay for capital improvements will be accounted for in capital project funds, as will the expenditures of the proceeds of the Warrants.

There are instances in which the General Fund or a Special Revenue Fund budgets and expends its own resources for long-term improvements, which may involve general long-term borrowing, and such outlays are properly accounted for in those funds without a separate Capital Projects Fund. The City also maintains other capital projects funds to account for the expansion and development of two industrial parks, which are financed by revenues other than long-term debt.

Enterprise Funds. Enterprise Funds are used to account for operations that provide goods or services to the general public on a continuing basis and that are financed and operated similarly to private business enterprises -- i.e., those the costs of which are to be financed or recovered primarily through user charges, or those for which it is deemed advisable (for capital maintenance, public policy, management control, accountability, or other purposes) that periodic determinations be made of revenues earned, expenses incurred, and net income. The City currently maintains Enterprise Funds for the operation of the City’s Sanitary Sewer System, the Municipal Iceplex and the Von Braun Center, and accounts for the operations of one of its "discrete component units" (Huntsville Utilities) as an Enterprise Fund. With the exception of the

Enterprise Funds, which may be characterized as "proprietary" funds, all above-mentioned funds currently maintained by the City are categorized as "governmental" funds.

SOURCES OF REVENUES Introduction Sales and use taxes and business licenses and permits are directly related to changes in personal income rate, price levels and general economic conditions and have in the past (subject to certain exceptions) increased at a more rapid rate than ad valorem taxes. Shared state, local and intergovernmental revenue is not subject to periodic appropriations, but results from general statutory allocation to the City of a portion of certain taxes collected by the State of Alabama and Madison County. Additional information on the principal City revenue sources is provided in the following paragraphs. While the following paragraphs show the rates at which certain of these tax proceeds have increased, the City makes no representation that future increases will be at the same or greater rates or that there will, in fact, be any such increases. Property Taxes and Payments in Lieu of Taxes Property or ad valorem taxes are levied under various provisions of the constitution and statutes of Alabama and, except for the 6.5-mill general purpose tax, may be used only for the purpose or purposes for which they are levied. Under present law, the rates at which local ad valorem taxes are levied may be increased only after approval by the Alabama Legislature and a majority vote of the qualified electors of the affected jurisdiction. See "AD VALOREM TAXES". Payments in lieu of taxes, calculated on various bases, are made to the General Fund by Huntsville Utilities with respect to the City-owned electric, water and natural gas systems. Under the City’s contract with the Tennessee Valley Authority (TVA) for the purchase of electric power, payments in lieu of taxes with respect to the electric system may be made to the City based upon the application of the total ad valorem tax rate to the full book value of the electric system’s properties. Payments in lieu of taxes are also received by the General Fund in lesser amounts from the water and natural gas systems, computed on the basis of gross revenues. All such payments are made, at the option of the City Council, in lieu of taxes which would be due if such utility systems were subject to ad valorem taxation. The City also receives certain payments in lieu of taxes from the TVA and from the Huntsville Housing Authority. Ad valorem property taxes paid on real property are subject to periodic adjustment based upon reappraisals required by the State Department of Revenue. See "Property Re-evaluation Program" under "AD VALOREM TAXES". The following table shows the receipts from the 6.5-mill general purpose tax and from payments in lieu of property taxes for fiscal years shown:

6.5 Mill Tax TVA Payments in Huntsville Utilities Fiscal General Fund Lieu of Electric Payments in Year General Purpose Property Taxes Lieu of Property Taxes Total 2015 $16,286,176 $2,881,380 $11,874,498 $31,042,054 2014 16,337,360 2,908,572 11,613,743 30,859,675 2013 16,021,068 3,072,492 11,644,597 30,738,157 2012 14,761,559 3,328,060 11,818,433 29,908,052 2011 13,707,427 3,195,236 12,107,276 29,009,939

Source: Comprehensive Annual Financial Reports of the City for Fiscal Years 2011-2015 (modified accrual basis of accounting).

Sales and License Taxes

Sales and Use Taxes. The largest sources of General Fund revenues are the sales and use taxes levied by ordinance of the City. Retailers are required to collect the sales tax on sales of tangible personal property at retail from the consumer and to pay collections to the City, monthly. The use tax is levied upon the use of tangible personal property brought into the City and upon which the sales tax has not previously been paid. The sales and use tax was increased effective November 1, 1989, when the basic rate was raised from 3% to 3.5% and the automobile rate was increased from 1.5% to 1.75% (certain

17 manufacturing machinery being exempt). Additionally, the general sales and use tax rate was raised from 3.5% to 4.5% effective March 1, 2014. The total sales tax rate paid by persons purchasing items in the City in Madison County is 9% - 4% being collected for the State and 0.5% for Madison County; and the rate is 10.5% in those portions of the City within Limestone County - 4% being collected for the State and 2% for Limestone County.

The following table shows sales and use tax receipts for the fiscal years shown and the percentage increase in such receipts over those for the preceding fiscal year.

Percentage Fiscal Increase Year Revenues (Decrease) 2015 $143,169,504 3.3% 2014 138,661,511 2.7% 2013 135,057,237 1.9% 2012 132,503,675 4.8% 2011 126,470,618 2.0%

Sales and use taxes are reported prior to the 1.0% general sales and use tax increase effective March 1, 2014. Source: Comprehensive Annual Financial Reports of the City for Fiscal Years 2011-2015. General Fund Statement of Revenues, Expenditures and Changes in Fund Balance (modified accrual basis of accounting).

By ordinance, the City designates the below special annual appropriations from the gross proceeds of sales and use taxes levied by the City:

(1) For the 3.5% general sales and use tax and 1.75% automotive rates, 18.0% of sales and use taxes are appropriated in the year earned from the General Fund to the Capital Improvement Fund.

(2) For the 3.5% general sales and use tax and 1.75% automotive rates, 14.7% of sales and use taxes are appropriated in the year earned from the General Fund to the Huntsville Board of Education.

(3) For the 1.0% general sales and use tax rate effective March 1, 2014, 100% of sales and use taxes are reported as revenue in the 2014 Capital Improvement Fund, and earmarked for certain capital and economic development purposes.

There is no express constitutional or statutory maximum on the rates at which sales and use taxes may be levied by the City. Except for limitations concerning the rates at which privilege or business license taxes may be levied on certain types of business (such as banks and insurance companies), there are no express constitutional or statutory limitations upon the rates at which privilege or business license taxes may be levied by the City. The statements made in this paragraph concerning sales and use taxes and privilege or business license taxes are subject, however, to the qualification that, under applicable judicial precedents, none of such taxes may be levied at rates that are confiscatory or "unreasonable".

Licenses and Permits. Under general authority granted to cities and towns in Alabama by the Alabama Legislature, the City levies privilege license taxes on the privilege of engaging in certain businesses and professions within the corporate limits of the City. Most license taxes are computed as a stated amount plus a percentage of gross receipts based on a graduated scale. The following table shows receipts from licenses and permits for the fiscal years shown, and the percentage increase in such receipts over those for the preceding fiscal year:

Fiscal Percentage Increase Year Receipts (Decrease) 2015 $23,679,897 (0.5%) 2014 $23,819,364 0.0 2013 23,850,640 8.2 2012 22,033,292 3.0 2011 21,389,753 (1.6)

Source: Comprehensive Annual Financial Reports of the City for Fiscal Years 2011-2015. General Fund Statement of Revenues, Expenditures and Changes in Fund Balance (modified accrual basis of accounting). Tax Increment Financing Districts From fiscal years 2000 through 2006, the City created five tax increment financing districts (such districts, together with TIF5 hereinafter defined, are frequently referred to as "TIF Districts" or "TIFs") as a part of the City's long-range economic development plan. TIF 1 was closed in 2009 and TIF 3 was closed in 2012, and all associated debt obligations have been retired. In fiscal year 2010, the City created a tax increment financing district ("TIF5") in connection with the obligations of the City under an Annexation and Development Agreement dated March 25, 2010 (the "Annexation and Development Agreement") between the City and L W Redstone Company, LLC. TIF5 was adopted by the City Council on May 13, 2010 and the Madison County Commission on May 17, 2010. The TIF Districts have been adopted by the City and the Madison County Commission pursuant to Alabama law. The Huntsville Board of Education has consented to the inclusion of a portion of the local school taxes and other school ad valorem taxes within the incremented taxes, but such inclusion will not affect the amount of School Tax currently being collected as only incremental tax revenues are retained by the TIFs. The total levy in Madison County is fifty-eight mills and none of the Districts include the 6.5 mill state ad valorem tax or 5.5 mill county-wide education ad valorem tax. Pursuant to Act No. 2010-184 enacted at the 2010 Regular Session of the Legislature of Alabama, TIF5 also includes proceeds from the 6.5 mill ad valorem tax levied by the State in the form of a payment-in-lieu-of-tax from the TIF5 property owners. Tax Collections

TIFs 2 and 3 were established in fiscal year 2000, and taxes have been collected through fiscal year 2013 except that TIF 3 was closed in 2012, having surplus tax collections. TIF 3A was established in 2001, and taxes have been collected through fiscal year 2013. TIF 4 was established in fiscal 2006, and taxes have been collected through fiscal year 2013. TIF5 was approved in May 2010, so the collection of taxes has not yet commenced to a significant degree. The taxes collected are as follows:

TIF 2* TIF 3 Fiscal Revised Year Projected* Actual Projected Actual 2016 $1,022,816 $992,202 -----** -----** 2015 972,751 923,016 -----** -----** 2014 924,932 926,219 -----** -----** 2013 879,261 919,861 -----** -----** 2012 835,639 934,327 $4,202,894 $10,706,019 2011 793,976 956,619 3,986,464 10,887,400 2010 754,183 921,035 3,421,447 10,291,659

2009 716,177 934,942 3,148,540 8,281,879 2008 679,876 884,964 2,369,896 5,860,267 2007 645,205 815,400 1,844,358 4,870,074 2006 612,091 839,470 1,631,644 3,831,551 2005 580,463 529,266 1,508,277 1,322,449 2004 550,254 512,835 1,117,642 1,072,176 2003 53,877 195,649 522,983 849,386 2002 26,320 48,229 379,300 512,469 Total $10,047,821 $11,334,035 $24,133,445 $58,485,329

TIF 3A TIF 4* Fiscal Revised Year Projected Actual Projected* Actual 2016 $2,259,000 $3,000,268 $1,643,093 $1,490,772 2015 2,592,000 2,471,645 1,169,699 1,188,620 2014 2,592,000 2,223,331 1,146,764 1,130,185 2013 1,488,000 2,245,708 1,124,278 1,146,763 2012 1,488,000 1,942,201 1,102,233 1,114,882 2011 1,488,000 1,943,022 1,080,621 1,210,119 2010 1,488,000 1,926,538 1,059,432 1,149,362 2009 1,488,000 1,798,547 932,454 1,013,328 2008 1,488,000 2,323,459 1,027,540 505,373 2007 1,488,000 1,034,060 -- -- 2006 713,000 974,826 -- -- 2005 713,000 872,845 -- -- 2004 -- 183,083 -- -- 2003 -- 2,775 -- -- Total $22,942,309 $19,618,000 $9,949,404 $10,286,114

TIF 5*** Fiscal Year Projected Actual 2016 $62,400 $596,591 2015 61,176 434,361 2014 59,976 407,740 2013 58,800 51,520 Total $242,352 $1,190,213

* The City has, from time to time, adjusted projections for TIF 2 and TIF 4 so as to better align projections (both prior and future years) with actual performance of the TIF. The projections shown above are based on the most recent revisions by the City. ** TIF3 closed in fiscal year 2012. *** Proceeds collected from TIF 5 are used to pay debt service on limited obligation revenues warrants of the City issued to finance the costs of improvements within TIF 5. See “DEBT MANAGEMENT - TIF Revenue Warrants – TIF 5” herein.

REVENUES AND EXPENDITURES

The following table sets forth the audited revenues, expenditures and changes in fund balance for the City for all governmental fund types for the fiscal years ended September 30, 2011 through September 30, 2015, inclusive, which such information was extracted from the audited financial statements of the City for such fiscal years and should be read in conjunction with the financial statements of the City attached hereto as Appendix C.

2015 2014 2013 2012 2011 Revenues Sales and Use Tax $181,057,346 $159,781,025 $135,057,237 $132,503,675 $126,470,618 Property Tax 54,748,223 54,253,368 53,241,717 54,699,340 58,861,760 Other taxes 41,977,292 41,090,211 39,075,002 39,691,873 39,795,730 Licenses & permits 23,679,897 23,819,364 23,850,640 22,033,292 21,389,753 Fines & forfeitures 3,754,603 3,473,013 3,129,923 3,240,931 3,485,908 Revenues from money & property 4,744,704 6,461,335 4,511,397 6,211,960 4,470,530 Charges for services 16,947,087 16,549,021 16,215,457 15,071,641 14,849,097 Intergovernmental 29,747,386 27,987,674 30,395,247 21,380,475 17,480,708 Gifts & donations 2,922,892 3,275,381 5,817,108 3,911,580 6,440,919 Other revenues 1,831,703 2,486,427 1,450,476 2,122,359 1,663,967

Total Revenues 361,411,133 339,176,819 312,744,204 300,867,126 294,908,990

Expenditures Current General government 29,170,852 28,227,710 26,200,191 28,697,542 23,065,197 Public safety 83,826,858 82,331,558 80,070,974 80,502,982 76,605,943 Public services 128,975,662 74,322,641 72,239,663 77,422,057 67,250,778 Urban development 18,806,466 27,725,654 17,562,142 16,288,150 20,107,047 Debt Service Principal 43,323,319 34,054,729 50,829,052 32,412,110 32,242,118 Interest 24,800,838 24,753,072 23,912,271 23,527,397 22,400,482 Fiscal charges 2,149 849 17,087 15,804 21,546 Debt issuance costs 621,319 1,414,594 249,956 1,246,871 6,500 Capital projects construction & outlay 55,563,121 28,117,331 29,658,555 20,600,429 23,300,805 Intergovernmental assistance 44,913,309 165,783,884 63,366,078 83,144,550 54,835,373

Total expenditures 430,003,893 466,732,022 364,105,969 363,857,892 319,835,789

Excess of revenues over (under) expenditures (68,592,760) (127,555,203) (51,361,765) (62,990,766) (24,926,799)

Other financing sources (uses)

Long-term debt issued 69,718,637 196,870,969 27,770,132 151,704,893 13,778,928 Premium on debt issue 9,925,229 24,816,375 311,879 17,425,336 -- Payment to escrow agent 0 (95,982,662) (20,988,033) (56,303,167) -- Transfers in 79,797,073 79,517,324 91,546,692 90,282,567 89,431,120 Transfers (out) (82,590,783) (82,037,527) (94,361,027) (92,643,580) (104,340,972)

Total other financing sources (uses) 76,850,156 123,184,479 4,279,643 110,466,049 (1,130,924)

Net change in fund balances 8,257,396 (4,370,724) (47,082,122) 47,475,283 (26,057,723)

Fund Balance, Beginning 154,973,872 159,344,596 206,426,718 158,103,354 184,161,077

Prior Period Adjustment ------848,081 --

Fund Balance, Ending $163,293,396 $154,973,872 $159,344,596 $206,426,718 $158,103,354

DEBT MANAGEMENT

General

The principal forms of indebtedness that the City is authorized to incur include general obligation bonds, general obligation warrants, general obligation bond anticipation notes, revenue anticipation notes, gasoline tax anticipation warrants, and various revenue anticipation bonds and warrants relating to enterprises. In addition, the City has the power to enter into certain leases which constitute a charge upon the general credit of the City. General obligation warrants, general and special obligation bonds financing street, sidewalk and sewer improvements and supported (wholly or in part) by assessments therefor, certain revenue anticipation bonds and notes and capitalized lease obligations may be issued or incurred without voter approval.

Existing statutes also permit the City, without the approval of the electorate, to enter into certain financing lease arrangements with county and municipal public building authorities with respect to needed municipal buildings and facilities; such lease arrangements are required to be on a year-to-year basis and may be considered as essentially "off-balance sheet" debt. No such financing lease arrangements on the part of the City are now in effect other than the City’s lease with The Public Building Authority of the City of Huntsville shown in the table herein below under the caption "Long-Term General Obligation Indebtedness of the City".

There follows, in the discussion and tables below, various references to the existing City indebtedness. All such references exclude debt for the full retirement of which irrevocable deposits of funds or U.S. Government securities have been made.

Included in the material under section entitled "DEBT MANAGEMENT" are several references to the amount of assessed value of property in the City. The amount stated in each case includes and refers to only City property in Madison County. The City has annexed a substantial amount of land located in neighboring Limestone County. Most of this Limestone County land is now agricultural in nature; in the judgment of the City, the amount of the assessed value of property in Limestone County that is now within the City’s corporate limits is insignificant in relation to the assessed value of the City property in Madison County.

Legal Debt Margin

The City’s present constitutional debt limit is an amount equal to twenty percent (20%) of the assessed value of the property therein. However, the following, among other types of indebtedness, are under existing general law not chargeable to the City’s constitutional debt limit: obligations issued for the purpose of acquiring, providing or constructing schools, waterworks or sewers; obligations incurred for street or sidewalk improvements where the costs thereof, in whole or in part, are to be assessed against the property abutting such improvements; subject to certain conditions, tax anticipation notes; certain lease obligations; and revenue securities issued for the purpose of extending, enlarging or improving water, electric, gas or sewer systems and payable solely from the revenues of one or more of such systems. Further, by virtue of a constitutional provision applicable only to the City and Madison County, certain general obligation bonds issued for industrial development purposes, which may themselves be issued in an amount up to 20% of the assessed value of the property in the City, are also not chargeable to the generally applicable 20% debt limit. No such general obligation industrial development bonds may be issued, however (except for financing the acquisition of industrial sites), unless the City simultaneously enters into a lease or other similar arrangement providing for net rentals sufficient to pay debt service. The City does not have any such general obligation industrial development bonds outstanding.

The following schedule analyzes the City's constitutional debt margin prior to issuance of the proposed Warrants:

Net assessed value of real and personal property, October 1, 2014 assessment date(1) $2,774,456,000 22

Debt limit (20% of assessed value) 554,891,000

Maximum amount of all outstanding debt of the City(2) 702,040,000

Less those portions not chargeable to debt limit:

Lease revenue bonds of the PBA(3) 59,490,000 Debt payable from other revenues: General obligation sewer warrants 62,897,687 Sewer revenue warrants 27,485,000 Warrants issued for school purposes 203,107,500 Total debt not chargeable to debt limit 352,980,187

Maximum amount of debt chargeable to debt limit 349,059,813

Constitutional debt margin (not less than) $205,831,187

(1) The total reported by the Madison County Tax Assessor on the abstract for the city district tax, which is the basis for collection of the 6.5 mill general fund and 6.5 mill special revenue fund tax. The most recent assessment date pertinent to this calculation is October 1, 2014. Does not include any assessed values for property within the City’s jurisdiction in Limestone County. (2) Reflects principal amounts as of April 1, 2016. Excludes (i) $63,750,000 outstanding debt payable from revenues of the electric, water and gas systems of the City that are operated by Huntsville Utilities, and (ii) $67,382,500 outstanding taxable limited obligation debt payable from tax increment financing revenues (reflecting the principal amount of such warrants issued plus accrued but unpaid interest thereon), which such debt is not chargeable to the City’s constitutional debt limit. (3) The Series 2007 PBA Bonds.

Direct and Overlapping Tax-Supported Debt

The following schedule reflects the maximum amount of direct and overlapping tax- supported debt of the City prior to issuance of the Warrants:

Percent of Debt City's Net Direct Debt Applicable to Share Direct Debt Outstanding* the City** of Debt

General Obligation Warrants $552,247,313 $100.0% $552,247,313

Overlapping Debt

Madison County, Alabama, $20,951,875 65.01% $13,621,813 general obligation debt

Total $573,199,188 $565,868,126

* City of Huntsville Net Direct Debt Outstanding excludes (i) General Obligation Warrants and Sewer Revenue Warrants reported in the Enterprise Funds and payable from proprietary revenue sources of the City, (ii) obligations referable to lease revenue bonds of the PBA, and (iii) taxable limited obligation revenue warrants payable solely from TIF5 revenues. ** The Madison County percentage is the ratio of the assessed value of all taxable real and personal property, excluding motor vehicles, in the City for the 6.5 mill School Tax ($2,678,920,880), to the assessed value of all taxable real and personal property, excluding motor vehicles, in Madison County for 5.5 mills of county school district taxes ($4,120,625,660). All data as of October 1, 2014.

The following schedule shows the percentage of maximum direct and overlapping tax- supported debt to assessed value per capita in the City prior to issuance of the proposed Warrants:

Direct general obligation debt(1) $552,247,313 Overlapping $13,621,813

Total (direct and overlapping debt) $565,868,126

Total net assessed value of property in City (10/01/2014 assessment date) $2,774,456,000

Ratio of direct debt to City's assessed value 19.9%

Ratio of direct and overlapping debt to City’s assessed value 20.40%

2014 population of City 188,226

Per capita direct debt $2,934

Per capita direct and overlapping debt $3,006 ______(1) Excludes general obligation warrants reported in the Enterprise Funds and payable from proprietary revenue sources of the City and obligations referable to lease revenue bonds of the PBA.

Long-Term General Obligation Indebtedness of the City

The following table lists the amount of all long-term general obligation bonds and warrants of the City prior to issuance of the proposed Warrants:

Principal Principal Outstanding Description Amount Issued (not in excess of) General Obligation Warrants, Series 2007-A $49,090,000 $9,965,000 Series 2007 PBA Bonds (1) 86,415,000 54,490,000 General Obligation Capital Improvement and Refunding Warrants, Series 79,970,000 25,460,000 2009-A General Obligation School Capital Improvement and Refunding Warrants, 71,745,000 19,255,000 Series 2009-B General Obligation Refunding and Capital Improvement Warrants, Series 91,535,000 48,880,000 2010-A General Obligation Capital Improvement Warrants (Build America 62,490,000 53,550,000 Bonds), Series 2010-B General Obligation Capital Improvement Warrants (Recovery Zone 7,520,000 7,520,000 Economic Development Bonds), Series 2010-C Taxable General Obligation Refunding Warrants, Series 2010-D 11,695,000 8,790,000 General Obligation Capital Improvement and Refunding Warrants, Series 62,420,000 46,945,000 2011-A General Obligation School Capital Improvement Warrants, Series 2011-B 50,275,000 50,275,000 General Obligation Refunding and Capital Improvement Warrants, Series 56,305,000 49,870,000 2012-A General Obligation Refunding Warrant, Series 2013-A 6,450,000 6,055,000 General Obligation Refunding Warrants, Series 2013-B 14,580,000 14,580,000 General Obligation School Warrants, Series 2013-C 77,050,000 75,855,000 General Obligation Warrants, Series 2013-D 24,970,000 23,175,000 General Obligation Warrant, Series 2013-E 6,460,000 5,185,000

General Obligation Refunding Warrants, Series 2014-A 54,110,000 53,990,000 General Obligation Lease Refunding and Capital Improvement Warrants, 19,345,000 19,205,000 Series 2014-B General Obligation School Refunding and Capital Improvement Warrants, 27,045,000 27,015,000 Series 2014-C General Obligation Warrants, Series 2015-A 61,390,000 61,390,000 Taxable General Obligation Warrants, Series 2015-B 8,185,000 8,185,000 Total $929,045,000 $669,635,000

(1) Represents payments referable to the Series 2007 PBA Bonds, which are revenue bond obligations of the PBA paid by lease payments made by the City for use of a municipal public safety and corrections facility in the City.

Sewer Revenue Warrants

The City has issued warrants payable to the Alabama Water Pollution Control Authority for the purpose of providing funds to pay costs of sewer improvements. The City has the following outstanding indebtedness payable to Alabama Water Pollution Control Authority as of April 2, 2016, all of which are payable solely out of the revenues derived from the operation of the City's sanitary sewer system. Principal Outstanding as of Issue April 2, 2016 Sewer Revenue Warrant, Series 1996-SRF $3,040,000 Sewer Revenue Refunding Warrant, Series 2010-CWSRF-BL 5,830,000 Sewer Revenue Refunding Warrant, Series 2010B-CWSRF-BL 5,645,000 Sewer Revenue Refunding Warrant, Series 2010C-CWSRF-BL 5,345,000 Sewer Revenue Refunding Warrant, Series 2010D-CWSRF-BL 6,415,000 Sewer Revenue Warrant, Series 2011-CWSRF-DL 1,885,000

Other Utility Revenue Warrants

The following table lists all outstanding City bonds and warrants as of April 2, 2016, payable solely out of revenues from the electric, water and natural gas systems of the City that are operated by Huntsville Utilities: Principal Outstanding as of Issue April 2, 2016 Water Revenue Warrants, Series 2015 $92,810,000 Subordinated Water Revenue Warrant, Series 2013-DWSRF-DL 170,000 Electric System Revenue Warrants, Series 2011 24,010,000 Water Revenue Warrants, Series 2008 30,115,000 Electric System Revenue Refunding Warrants, Series 2007 6,085,000 Natural Gas Revenue Warrants, Series 2005 6,600,000

The City intends to issue a series of limited obligation warrants aggregating not more than $35,000,000 in principal amount payable solely out of revenues from its electric system (the “Proposed 2016 Electric Revenue Warrants”) on parity with its Electric System Revenue Warrants, Series 2011, and Electric System Revenue Warrants, Series 2007 to pay the costs of designing, developing, constructing, equipping, acquiring and installing automated metering infrastructure, a meter data management system, fiber system backbone improvements for substation connections, transformers improvements, line improvements, substation improvements and various other capital improvements and equipment to the electric system of the City.

TIF Revenue Warrants – TIF5

The City has issued five series of limited obligation warrants aggregating not to exceed $37,500,000 payable solely out of tax increment revenues collected from TIF5. See the paragraph entitled "TIF Revenue Warrants" under "THE WARRANTS - Security and Source of Payment; Payment Record of the City" herein.

SCHEDULED GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS OF THE CITY

Estimated Fiscal Year Debt Service Requirements for the Warrants

Series 2016-A Warrants. The following reflects the estimated debt service requirements respecting the proposed Series 2016-A Warrants on a fiscal year basis: Fiscal Year Principal* Interest* Total* 2017 $645,000 $1,487,233 $2,132,233 2018 540,000 1,759,400 2,299,400 2019 555,000 1,743,200 2,298,200 2020 575,000 1,721,000 2,296,000 2021 600,000 1,698,000 2,298,000 2022 1,550,000 1,674,000 3,224,000 2023 1,630,000 1,596,500 3,226,500 2024 1,710,000 1,515,000 3,225,000 2025 1,795,000 1,429,500 3,224,500 2026 1,885,000 1,339,750 3,224,750 2027 1,980,000 1,245,500 3,225,500 2028 2,080,000 1,146,500 3,226,500 2029 2,185,000 1,042,500 3,227,500 2030 2,295,000 933,250 3,228,250 2031 2,410,000 818,500 3,228,500 2032 2,525,000 698,000 3,223,000 2033 2,655,000 571,750 3,226,750 2034 2,785,000 439,000 3,224,000 2035 2,925,000 299,750 3,224,750 2036 3,070,000 153,500 3,223,500

* Preliminary; subject to change.

Series 2016-B Warrants. The following reflects the estimated debt service requirements respecting the proposed Series 2016-B Warrants on a fiscal year basis: Fiscal Year Principal* Interest* Total* 2017 -- $1,184,978 $1,184,978 2018 -- 1,417,250 1,417,250 2019 -- 1,417,250 1,417,250 2020 -- 1,417,250 1,417,250 2021 -- 1,417,250 1,417,250 2022 -- 1,417,250 1,417,250 2023 -- 1,417,250 1,417,250 2024 $ 650,000 1,417,250 2,067,250 2025 1,015,000 1,384,750 2,399,750 2026 1,470,000 1,334,000 2,804,000 2027 1,970,000 1,260,500 3,230,500

2028 2,105,000 1,162,000 3,267,000 2029 2,215,000 1,056,750 3,271,750 2030 2,325,000 946,000 3,271,000 2031 2,440,000 829,750 3,269,750 2032 2,560,000 707,750 3,267,750 2033 2,690,000 579,750 3,269,750 2034 2,825,000 445,250 3,270,250 2035 2,965,000 304,000 3,269,000 2036 3,115,000 155,750 3,270,750

* Preliminary; subject to change.

Series 2016-C Warrants. The following reflects the estimated debt service requirements respecting the proposed Series 2016-C Warrants on a fiscal year basis: Fiscal Year Principal* Interest* Total* 2017 $ 675,000 $ 868,887 $ 1,543,887 2018 2,220,000 1,025,700 3,245,700 2019 5,135,000 981,300 6,116,300 2020 2,210,000 878,600 3,088,600 2021 360,000 834,400 1,194,400 2022 2,640,000 827,200 3,467,200 2023 5,090,000 774,400 5,864,400 2024 2,710,000 672,600 3,382,600 2025 4,970,000 591,300 5,561,300 2026 2,430,000 442,200 2,872,200 2027 2,510,000 369,300 2,879,300 2028 6,705,000 294,000 6,999,000 2029 3,095,000 92,850 3,187,850

* Preliminary; subject to change.

Series 2016-D Warrants. The following reflects the estimated debt service requirements respecting the proposed Series 2016-D Warrants on a fiscal year basis: Fiscal Year Principal* Interest* Total* 2017 $ 475,000 $795,309 $1,270,309 2018 330,000 941,700 1,271,700 2019 2,980,000 935,100 3,915,100 2020 285,000 875,500 1,160,500 2021 285,000 869,800 1,154,800 2022 1,005,000 864,100 1,869,100 2023 3,020,000 844,000 3,864,000 2024 2,690,000 783,600 3,473,600 2025 5,350,000 702,900 6,052,900 2026 2,660,000 542,400 3,202,400 2027 2,725,000 462,600 3,187,600 2028 6,810,000 380,850 7,190,850 2029 2,895,000 176,550 3,071,550 2030 2,990,000 89,700 3,079,700

* Preliminary; subject to change.

Estimated Annual Debt Service Requirements for all General Obligation Bonds and Warrants Following Issuance of the Proposed Warrants

The following table reflects the estimated annual debt service requirements respecting all general obligation bonds and warrants of the City prior to issuance of the proposed Warrants, plus the preliminary debt service on the proposed Warrants, on a fiscal year basis:

Fiscal Fixed Rate The Series 2007 Total Debt Year Debt(1) Warrants* PBA Bonds(2) Service* 2016 $41,319,721 -- $4,982,650 $46,302,371 2017 58,377,572 6,131,407 4,981,925 69,490,904 2018 58,485,314 8,234,050 4,981,325 71,700,689 2019 58,746,635 13,746,850 4,981,625 77,475,110 2020 57,724,434 7,962,350 4,133,300 69,820,084 2021 56,490,705 6,064,450 4,134,925 66,690,080 2022 56,454,110 9,977,550 4,134,138 70,565,798 2023 53,020,624 14,372,150 4,134,225 71,526,999 2024 50,591,389 12,148,450 4,133,138 66,872,977 2025 49,217,765 17,238,450 4,137,300 70,593,515 2026 49,058,039 12,103,350 4,136,425 65,297,814 2027 43,966,990 12,522,900 4,135,175 60,625,065 2028 42,366,413 20,683,350 4,133,300 67,183,063 2029 39,404,290 12,758,650 5,446,688 57,609,628 2030 31,957,356 9,578,950 4,074,075 45,610,381 2031 32,532,488 6,498,250 4,073,950 43,104,688 2032 28,036,055 6,490,750 4,076,825 38,603,630 2033 23,089,771 6,496,500 4,072,450 33,658,721 2034 18,860,407 6,494,250 4,070,575 29,425,232 2035 8,476,561 6,493,750 5,837,056 20,807,367 2036 3,610,154 6,494,250 5,834,831 15,939,235 2037 3,605,953 5,835,375 9,441,328 2038 471,272 471,272 2039 467,013 467,013 2040 467,334 467,334 2041 467,026 467,026 2042 471,088 471,088 2043 469,312 469,312 2044 466,907 466,907 2045 468,873 468,873

(1) Includes: the Series 2007-A Warrants, the Series 2009-A Warrants, the Series 2009-B Warrants, the Series 2010-A Warrants, the Series 2010-B Warrants, the Series 2010-C Warrants, the Series 2010-D Warrants, the Series 2011-A Warrants, the Series 2011-B Warrants, the Series 2012-A Warrants, the Series 2013-A Warrant, the Series 2013-B Warrants, the Series 2013-C Warrants, the Series 2013-D Warrants, the Series 2013-E Warrant, the Series 2014-A Warrants, the Series 2014-B Warrants, the Series 2014-C Warrants, the Series 2015-A Warrants and the Series 2015-B Warrants. The Series 2010-B Warrants were issued as "Build America Bonds", and the Series 2010-C Warrants were issued as "Recovery Zone Economic Development Bonds". Debt service does not reflect receipt of the subsidy estimated to be received by the City from the federal government respecting the payment of interest on the Series 2010-B Warrants and the Series 2010-C Warrants. This column does not reflect the removal of debt service on the Refunded Warrants. (2) Reflects annual debt service requirements on the Series 2007 PBA Bonds issued by the PBA. Revenue obligations of the PBA are payable from lease payments made by the City for use of a municipal public safety and corrections facility in the City. * Preliminary; subject to change.

AD VALOREM TAXES

General

The levy and collection of ad valorem taxes in Alabama are subject to the provisions of the Constitution of Alabama of 1901, which limits the ratios at which property may be assessed, specifies the maximum millage rates that may be levied on property and limits total ad valorem taxes on any property in any year. Recent constitutional changes and statutory enactments, summarized below, have caused significant changes in Alabama’s ad valorem tax structure.

Classification of Taxable Property

For purposes of ad valorem taxation, all taxable property in Alabama is required under current law to be divided into the following four classes:

Class I - All property of utilities used in their business*

Class II - All property not otherwise classified*

Class III - All agricultural, forest and single family, owner-occupied residential property, and historic buildings and sites

Class IV - Private passenger automobiles and pickup trucks

*Under applicable law, railroad property is not considered Class I (utility) property and is instead Class II.

Taxable property designated as "Class III" may, upon the request of the owner of such property, be appraised at its "current use value" rather than its "fair and reasonable market value". "Current use value" was originally defined in a legislative act as the value of such property based on the use being made of it on October 1 of the preceding year, without taking into consideration the "prospective value such property might have if it were put to some other possible use." Amendatory legislation, effective since the beginning of the 1981-82 tax year, extensively revised the formulas and methods to be used in computing the current use property value of agricultural and forest property. However, the original statutory definition, though somewhat modified, remains applicable to residential and historical property. There are exempted from all ad valorem taxes household and kitchen furniture, farm tractors, farming implements when used exclusively in connection with agricultural property, and inventories of goods, wares and merchandise.

Assessment Ratios

The following are the assessment ratios now in effect in the City for purposes of state and local taxation:

Class I – 30% Class II – 20 Class III – 10 Class IV – 15

Although current law provides in effect that with respect to ad valorem taxes levied by the City, the governing body of the City may, subject to the approval of the Legislature and of a majority of the electorate of the City at a special election, and in accordance with criteria established by legislative act, adjust (by increasing or decreasing) the ratio of assessed value of any class of taxable property to its fair and reasonable market value or its current use value (as the case may be), the governing body of the City has not heretofore sought to make any adjustment of the assessment ratio applicable to any class of taxable property in the City and has no present plans for any such adjustment. The Legislature has no power over the adjustment of assessment ratios pertaining to local taxes except to approve or disapprove an adjustment proposed by a 29 local taxing authority. The assessment ratio applicable to each class of taxable property must in any event be uniform with respect to ad valorem taxes levied by the City.

Current Ad Valorem Tax Rates

Pursuant to the constitution and laws of the State of Alabama, ad valorem taxes on property in the City (within Madison County) are currently levied at the following rates:

Rates in Mills (Dollars per $1,000 of Assessed Value) State of Alabama 6.5 Madison County: General 7.0 Road and Bridge 4.0 County-wide School (See note (a) below) 4.0 County-wide School (See note (a) below) 1.5

City of Huntsville: General 6.5 Bond Tax 6.5 District School 10.5 District School 5.0 School Tax (See note (b) below) 6.5 TOTAL MILLS 58.0

Source: Madison County Tax Assessor

Existing law provides that the rate of any ad valorem tax levied by the City may be increased only after the approval of the Alabama Legislature and of a majority of the electorate of the City at a special election. A general constitutional limitation on the total ad valorem taxes (i.e., state, county, municipal, school district, etc.) on any property in any one year to certain percentages of the fair and reasonable market value of such property is by its terms not applicable to property in the City.

(a) While each of these particular taxes is levied by Madison County, a portion of the proceeds therefrom is required by law to be distributed to the Board of Education.

(b) This tax is levied pursuant to constitutional provisions requiring periodic tax elections. Authority for the levy of this school tax expires with the tax year for which City taxes become due and payable October 1, 2046.

Homestead Exemption

The governing body of the City is authorized by law to grant a homestead exemption of not exceeding $4,000 in assessed value against any City ad valorem tax except one "earmarked for public school purposes." The City Council has not heretofore granted any such homestead exemption against any of the ad valorem taxes currently levied by the City.

Property Tax Litigation

The levy, assessment and collection of ad valorem taxes in Alabama have, over the past twenty years, been subject to significant litigation, which has resulted in substantial changes in Alabama’s property tax system affecting ad valorem tax receipts of the various taxing authorities (including the City). The City has not been a party to any such litigation that relates solely to ad valorem taxes levied by the City.

Assessment and Collection

Ad valorem taxes on taxable properties, except motor vehicles and public utility properties, are assessed by the County Tax Assessor and collected by the County Tax Collector. Ad valorem taxes on motor vehicles in the City are assessed and collected by the Madison County License Director, and ad valorem taxes on public utility properties are assessed by the State Department of Revenue and collected by the County Tax Collector.

Ad valorem taxes are due and payable on October 1 and delinquent after December 31 in each year (except for taxes with respect to motor vehicles, which have varying due dates), after which a penalty and interest are required to be charged. If real property taxes are not paid by the March 1 following the due date, a tax sale is required to be held.

The Madison County Tax Collector has in recent years consistently collected in excess of 98% of ad valorem taxes (state, county, municipal and school district).

Property Re-evaluation Program

Under existing procedures of the State Department of Revenue, each county in the State is effectively required to carry out a property reappraisal program at least once every five years. The Department of Revenue also annually reviews the appraised values and the fair market values of a representative sample of taxable property in each county in the State. A county property reappraisal program is customarily ordered by the Department of Revenue if such annual review indicates that the appraised value of property in such county has fallen below 85% of its then current fair market value.

The current level of property tax collection is dependent on many factors, including possible taxpayer appeals from increased property assessments. There can be no assurance that the current level of property tax collection will continue.

Largest Ad Valorem Taxpayers

Listed below are the largest ad valorem taxpayers in the City. The total assessed values are as of October 1, 2015, and do not include automobiles.

City Assessed Name of Taxpayer Valuation Toyota Motor Manufacturing Al. $117,058,380 Generics International US Inc. 27,408,320 Huntsville NYL LLC 23,954,860 Bellsouth Telecommunications Inc. 21,042,500 BASF Catalysts LLC 17,969,640 IMI Huntsville LLC 16,963,100 Adtran Inc. 16,966,760 Crestwood Healthcare LP 12,684,380 Generics International US Inc. 12,461,620 Redstone Federal Credit Union 9,519,280

Source: Madison County Tax Assessor.

Assessed Valuations. The following table shows the estimated assessed values, by category, of properties within the corporate limits of the City as of the indicated assessment dates:

Real and Personal Property ($ in thousands)*

Assessment Residential/ Public Motor Industrial Date October 1 Corporate Utilities Vehicles Exemptions Total 2014 $2,959,299 $26,914 $269,328 ($481,085) $2,774,456 2013 2,856,531 26,818 260,691 (478,909) 2,665,131 2012 2,833,751 28,591 256,731 (484,267) 2,634,806 2011 2,812,099 27,581 241,516 (507,132) 2,574,064 2010 2,755,884 26,732 241,515 (517,010) 2,507,121

* Includes only property in Madison County. See footnote to caption "DEBT MANAGEMENT."

POSTEMPLOYMENT BENEFITS

Retirement Plan. The Employees’ Retirement System of Alabama (the "Employees’ System") was created in 1945 pursuant to an act of the Legislature of Alabama. The City has been a participant in the Employees’ System continuously since January 1, 1948, and it has no other pension plan or pension liability with respect to its employees. Huntsville Utilities constitutes a separate participating employer under the Employees’ System.

The Employees’ System does not undertake to fund the retirement plans of participating employers, and it acts only in an administrative capacity and then only upon the election of the participating employers. The statute permitting such election provides that the Employees’ System "shall not be liable for the payment of any pensions or other benefits on account of the employees or pensioners of any employer (i.e., the City) for which reserves have not been previously created from funds contributed by such employer or its employees for such benefits". The statute further provides that the agreement of a participating employer to contribute to the Employees’ System on account of its employees is irrevocable (except to the extent described in the next paragraph), and that should it become financially unable to make the normal and accrued liability contribution, such participating employer would be deemed to be in default under the Employees’ System.

The statute specifies that in the event any participating employer elects to withdraw from the Employees’ System by mutual agreement with its employees, the rights and privileges of existing beneficiaries shall not, as a result of such withdrawal, be diminished or impaired. The statute further requires (a) that upon any such withdrawal, the consulting actuaries must certify to the participating employer an actuarial determination of the reserves necessary to provide existing benefits, and (b) that if the reserves are insufficient for this purpose, the participating employer must agree to appropriate such amount as may be necessary to maintain existing benefits.

As of September 30, 2015, substantially all the City’s permanent employees were participants in the Employees’ System, as were substantially all of the employees of Huntsville Utilities. All permanent employees are participants upon commencement of service as such and automatically enrolled as active members of the Employees’ System; temporary employees are not eligible.

Those eligible for retirement benefits from the City (as Tier 1 employees) include (1) employees with 10 or more years of service who have reached age 60, (2) employees who become disabled before retirement age if they have 10 years or more creditable service, and (3) employees who, regardless of age, retire after 25 years or more creditable service. Employees of Huntsville Utilities are eligible for retirement after 30 years.

In 2011, the State of Alabama changed the retirement eligibility, employee contribution and retirement benefit amount for all eligible employees hired after December 31, 2012 (Tier 2 employees),

32 essentially increasing the retirement age and employee contribution, and decreasing the retirement benefit. The change does not presently significantly affect the City's cost contributions or actuarial values as few employees are subject to the new requirements.

The maximum annual retirement benefit for City Tier 1 employees is 2.0125 percent multiplied by the number of years of creditable service multiplied by the average final compensation (average of the highest three fiscal years (October - September) out of the last 10 fiscal years during which the member made contributions.

For those employees of the City who retire or whose employment is terminated before they satisfy applicable benefit-eligibility requirements, member contributions are returned in full, along with a portion of the accumulated interest.

Employees of Huntsville Utilities are subject to separate contribution rates established by the Water, Electric and Natural Gas Boards, respectively, and the Employees’ Retirement System. Funding for such retirement plans is derived from revenues of Huntsville Utilities and not from general funds of the City.

The current employee contribution rate is 5% and 6% of compensation for non-public safety and public safety employees, respectively. Contributions by the City are made on the basis of certain actuarial calculations in amounts which, together with the employees’ contributions, are projected to provide at the time of retirement the benefits contemplated by the retirement program. The highest employer contribution rate paid by the City most recently changed as of October 1, 2015 is currently 13.62% of payroll, consisting of (a) a normal contribution rate of 2.85% of payroll, (b) an accrued liability rate of 10.40% of payroll, (c) an administrative charge rate of 0.35% of payroll, and (d) a pre-retirement death benefit rate of 0.02% of payroll. Employer contributions respecting general service employees of the City are paid from general fund.

The following table shows the amounts of employee and employer contributions respecting all City employees (other than employees of Huntsville Utilities and employees of The Solid Waste Disposal Authority of the City of Huntsville) paid into the Employees’ System during the specified fiscal years (from the Employees’ System and City payroll records):

Fiscal Year Ended Employee Employee Employer Employer September 30, Rate Contribution Rate Contribution 2015 5-6% $5,993,271 13.62% $14,884,651 2014 5-6% 5,149,597 13.92 12,997,129 2013 5-6% 5,392,929 12.72 12,616,572 2012 5-6% 5,368,516 12.41 12,304,430 2011 5-6% 5,141,774 13.70 13,411,630

The Employees’ System is required by statute to use certain actuarial methods in calculating the annual contribution requirements and unfunded actuarial liability. These methods differ from the methods required by the Governmental Accounting Standards Board ("GASB") which are intended to provide standardized means of comparing the funding status and progress of governmental employers. The City has been advised by the Employees’ System that, based on the most recently available actuarial valuation (as of September 30, 2014), the total unfunded but accrued liability of the City for employee retirement benefits, calculated in accordance with GASB methods, was $177,512,922.

Other Postemployment Benefits. The City provides qualifying retirees with medical benefits under a City-insured plan established in 1989 (the "OPEB Plan"). The OPEB Plan benefits are funded and administered through the Post-Employment Benefits Trust, established on September 11, 2008. City employees eligible for retirement may make a one-time election to participate in the OPEB Plan, and, upon making this election, participating retirees and their selected dependents receive coverage until the retiree reaches 65 years of age. City retirees participating in the OPEB Plan pay approximately 30% of the annual benefit premium rate (active City employees pay approximately 15%). As of and for the fiscal year ended 33

September 30, 2014, the annual cost to the City of the OPEB Plan was $3,565,158, and the City's unfunded actuarial accrued liability for the OPEB Plan as of the most recent actuarial valuation on September 30, 2014, was $49,787,256.

Employee Relations. The City considers labor relations with its employees to be satisfactory. While the City understands that some of its fire-fighters are members of a statutorily-authorized fire fighters association and while existing law requires municipal officials to receive and consider in good faith wage and other employment proposals made by the employees, the City does not recognize, as the bargaining unit for its employees, any labor union or other similar organization nor does it negotiate wages or other conditions of employment with any employee or labor organization.

FEDERAL BANKRUPTCY ACT

Under certain conditions, Title 11 of the United States Code, 11 U.S.C. 101, et seq. (the "Bankruptcy Code") permits a municipality to file a petition for relief in federal bankruptcy court to adjust debts under Chapter 9 of the Bankruptcy Code. Debt adjustment may include restructuring, reduction or other impairment of debt, subject to various conditions and limitations set forth in the Bankruptcy Code. Section 101 of the Bankruptcy Code defines "municipality" to mean a political subdivision, public agency or instrumentality of a State. To be eligible to file a Chapter 9 bankruptcy petition under Section 109 of the Bankruptcy Code, a municipality must be "specifically authorized, in its capacity as a municipality or by name, to be a debtor under [Chapter 9], or by a governmental officer or organization empowered by State law to authorize such entity to be a debtor under [Chapter 9]." Section 109 of the Bankruptcy Code imposes additional requirements for a municipality to be eligible to file bankruptcy. Without limitation, the municipality must (a) be insolvent (either unable to pay debts as they come due or generally not paying debts as they come due); (b) desire to effect a debt adjustment plan; and (c) meet certain requirements regarding negotiations with creditors (or certain exceptions to such requirements). Alabama law authorizes municipalities (including the City), counties and certain public authorities to file petitions under the Bankruptcy Code. The other conditions to eligibility are fact-specific to the time of filing the petition.

The approving legal opinion of Bond Counsel will contain the customary reservation that the rights of the holders of the Warrants and the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights and the exercise of judicial discretion in appropriate cases. See the proposed form of approving legal opinion set forth in Appendix D respecting the Warrants.

LITIGATION AND OTHER MATTERS

General There is no litigation pending or, to the knowledge of the City, threatened, attacking or questioning the validity of the Warrants or the issuance and sale thereof and there is no litigation pending or, to the knowledge of the City, threatened, relating to the organization or boundaries of the City or the incumbency of any of its officers or officials. Simultaneously with the delivery of the Warrants, the City will deliver a certificate to the effect that no such litigation is pending or, to the knowledge of the City, threatened.

The City is a defendant in various lawsuits, and there are various other claims pending or threatened against the City with respect to which lawsuits may be filed, including several under Section 1983 of Title 42 of the United States Code. The City does not, on account of availability, costs and coverages offered, carry any general or professional liability insurance (though the City does carry general liability insurance for public transit vehicles and drivers). Except as stated in the last paragraph under this heading, in the opinion of the City Attorney, the maximum probable liability of the City with respect to all the lawsuits and claims that are pending or threatened against the City, taken together, will not have a material adverse effect on the financial condition of the City.

Court decisions have substantially eroded the immunity from tort liability formerly enjoyed by local governmental units in Alabama. However, Chapter 93 of Title 11 of the Code of Alabama 1975, as 34 amended, now prescribes certain maximum limits on the liability of local governmental units (such as the City) for bodily injury, sickness, disease or death sustained by a person and for injury or destruction of tangible property. These limits are presently $100,000 in the case of bodily injury or death of one person in any single occurrence, $300,000 in aggregate where more than two persons have claims or judgments on account of bodily injury or death arising out of any single occurrence, and $100,000 in the case of property damage arising out of a single occurrence. Applicable decisions of the Supreme Court of Alabama have upheld the constitutionality of Chapter 93 (although indicating that there is no statutory "aggregate limit" with respect to property damage arising out of a single occurrence comparable to that specified for personal injury or death claims) and have limited the applicability of Chapter 93 to causes of action arising after its effective date, May 23, 1977. While the matter may not be free from doubt, it should be assumed that the liability limitations of Chapter 93 are not applicable to causes of action under Section 1983 of Title 42 of the United States Code.

Other Matters

As has been previously reported by the City, during 2011 the Office of Inspector General ("OIG") of the U.S. Department of Housing and Urban Development ("HUD") conducted an audit review of the City's Community Development Department's ("CDD") HOME Investment Partnerships ("HOME") and Community Development Block Grant ("CDBG") programs. The stated objectives of the OIG audit were to determine whether CDD's commitment to use HOME and CDBG funds for the acquisition and rehabilitation of an apartment complex in the City known as "Mirabeau" was an eligible activity, and whether CDD had adequate controls and procedures to ensure appropriate accountability and administration of that project in accordance with HUD's policies and guidelines.

On August 19, 2011, OIG issued a draft audit report (the "Draft OIG Report") under which OIG provided, among other things, preliminary findings to the effect that CDD lacked adequate controls and procedures to ensure appropriate accountability for, and administration of, the Mirabeau apartment project in accordance with HUD policies and guidelines. The Draft OIG Report also contained preliminary recommendations that the City (i) repay approximately $7.0 to $7.6 million in CDBG, Urban Development Action Grant ("UDAG"), HOME, and Community Housing Development Organizations ("CHDO") funds and loans, (ii) inspect the Mirabeau project to identify deficiencies and require owners to correct the same, (iii) review all City participation agreements to ensure compliance with applicable HUD requirements, and (iv) prepare a cost allocation plan and provide it to HUD for review.

In the spring of 2014, OIG conducted its final exit interview, and on May 29, 2014, OIG issued its final determinations, which included some, but not all, of the City’s responses on each issue. The OIG final determination is a recommendation to HUD that the City reimburse HUD for $3.4 million in what OIG termed “ineligible” or “unsupported.” On June 20, 2014, the Birmingham HUD Field Office (“Birmingham HUD”) issued a letter to the City concurring with the OIG recommendation. Birmingham HUD gave the City 45 days to respond. The City responded to Birmingham HUD on August 13, 2014, denying some of the reimbursement claims and seeking a meeting with HUD to reconcile any differences regarding the amount of reimbursement and to conclude these issues. On March 3, 2015, HUD Birmingham contacted Huntsville asking for any status update on matters since August 2014. The City provided an updated position in March 2016. On October 2, 2015, HUD contacted the City revising some of its findings from June 20, 2014, and seeking a response from the City. The City met with HUD to discuss a possible resolution to the outstanding issues surrounding the OIG audit. On November 12, 2015, the City sent an updated letter to HUD Birmingham informing it of the discussions that had been ongoing and asking for resolution. On December 14, 2015, HUD asked the City to confirm its negotiated proposal for a resolution of the OIG findings. On January 5, 2016, the City provided HUD with a written proposal to resolve the OIG issues. The City is waiting on a response from HUD.

As also has been previously reported by the City, HUD conducted a separate review to determine whether the City is complying with the applicable requirements of Section 504 of the Rehabilitation Act of 1973, as amended ("Section 504"), Section 109 of the Housing and Community Development Act of 1974, as amended, Section 3 of the Housing and Urban Development Act of 1974, as amended ("Section 3"), and Title VI of the Civil Rights Act of 1964, as amended, with regard to programs and activities funded 35 through the CDBG, HOME and Neighborhood Stabilization Program grants. HUD issued some preliminary determinations, portions of which the City challenged. In the summer of 2012, the City received a formal Determination of Noncompliance with the mandate of Section 504. The City has continued its discussions with HUD regarding the same. In December of 2013, HUD followed up its Determination of Noncompliance with a proposed Voluntary Compliance Agreement ("VCA") that it would like to enter with the City on Section 504 and Section 3 issues. There are no fines, penalties or requests for reimbursement in the proposed VCA. The City has responded to the proposed VCA and is continuing to work with HUD on this matter.

TAX MATTERS

Opinion of Bond Counsel. In the opinion of Bradley Arant Boult Cummings LLP, Bond Counsel to the City, under existing statutes and court decisions and assuming continuing compliance with certain tax covenants described herein, interest on the Warrants is excluded from gross income for federal income tax purposes pursuant to Section 103 of the Code. Interest on the Warrants is not treated as a preference item in calculating the alternative minimum tax imposed on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. In rendering its opinion, Bond Counsel to the City has relied on certain representations, certifications of fact, and statements of reasonable expectations made by the City and others in connection with the Warrants, and Bond Counsel to the City has assumed compliance with certain ongoing covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the Warrants from gross income under Section 103 of the Code.

Bond Counsel is further of the opinion that the interest income on the Warrants is exempt from present Alabama income taxation.

Bond Counsel expresses no opinion regarding any other federal or state tax consequences with respect to the Warrants. Bond Counsel renders its opinion under existing statutes and court decisions as of the issue date and assumes no obligation to update its opinion after the issue date to reflect any future action, fact or circumstance, or change in law or interpretation, or otherwise. Bond Counsel expresses no opinion on the effect of any action taken in reliance upon an opinion of other counsel on the exclusion from gross income for federal income tax purposes of interest on the Warrants.

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

Certain Collateral Federal Tax Consequences. The following is a brief discussion of certain collateral federal income tax matters with respect to the Warrants. It does not purport to deal with all aspects of federal taxation that may be relevant to a particular owner of a Warrants. Prospective investors, particularly those who may be subject to special rules, are advised to consult their own tax advisors regarding the federal tax consequences of owning and disposing of the Warrants.

Prospective owners of the Warrants should be aware that the ownership of such obligations may result in collateral federal income tax consequences to various categories of persons, such as corporations (including S corporations and foreign corporations), financial institutions, property and casualty and life insurance companies, individual recipients of Social Security and railroad retirement benefits, individuals otherwise eligible for the earned income tax credit, and taxpayers deemed to have 36 incurred or continued indebtedness to purchase or carry obligations the interest on which is not included in gross income for federal income tax purposes. Interest on the Warrants may be taken into account in determining the tax liability of foreign corporations subject to the branch profits tax imposed by Section 884 of the Code.

[Original Issue Discount. The initial public offering price to be paid for certain of the Warrants (the "Original Issue Discount Warrants") is less than the principal amount thereof. Under existing law, the difference between (i) the amount payable at the maturity of each Original Issue Discount Warrant, and (ii) the initial offering price to the public of such Original Issue Discount Warrant constitutes original issue discount with respect to such Original Issue Discount Warrant in the hands of any owner who has purchased such Original Issue Discount Warrant in the initial public offering of the Warrants. Such initial owner is entitled to exclude from gross income (as defined in Section 61 of the Code) an amount of income with respect to such Original Issue Discount Warrant equal to that portion of the amount of such original issue discount allocable to the period that such Original Issue Discount Warrant continues to be owned by such owner. In the event of the redemption, sale or other taxable disposition of such Original Issue Discount Warrant prior to stated maturity, however, the amount realized by such owner in excess of the basis of such Original Issue Discount Warrant in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Original Issue Discount Warrant was held by such initial owner) is includable in gross income.

Under existing law, the original issue discount on each Original Issue Discount Warrant is accrued daily to the stated maturity thereof (in amounts calculated as described below for each six-month period ending on the date before the semiannual anniversary date of the Warrants and ratably within each such six-month period) and the accrued amount is added to an initial owner's basis for such Original Issue Discount Warrant for purposes of determining the amount of gain or loss recognized by such owner upon the redemption, sale or other taxable disposition thereof. The amount (if any) to be added to basis for each accrual period is equal to (a) the sum of the issue price and the amount of original issue discount accrued in prior periods (if any) multiplied by the yield to maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period) less (b) the amounts payable as current interest during such accrual period on such Warrants.

The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Original Issue Discount Warrants which are not purchased in the initial offering at the initial offering price may be determined according to rules which differ from those described above. All owners of Original Issue Discount Warrants should consult their own tax advisors with respect to the determination for federal, state and local income tax purposes of interest accrued upon redemption, sale or other disposition of such Original Issue Discount Warrants and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale, gift or other disposition of such Original Issue Discount Warrants.]

[Original Issue Premium. The initial public offering price to be paid for certain of the Warrants (the "Original Issue Premium Warrants") is greater than the principal amount thereof. Under existing law, any owner who has purchased an Original Issue Premium Warrant in the initial public offering of the Warrants is required to reduce his basis in such Original Issue Premium Warrant by the amount of premium allocable to periods during which he holds such Original Issue Premium Warrant, and the amount of premium allocable to each accrual period will be applied to reduce the amount of interest received by the owner during each such period. All owners of Original Issue Premium Warrants should consult their own tax advisors with respect to the determination for federal, state and local income tax purposes of interest accrued upon redemption, sale or other disposition of such Original Issue Premium Warrant and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale, gift or other disposition of such Original Issue Premium Warrant.]

Bank Qualification. The Warrants have not been designated as "qualified tax-exempt obligations" under Section 265 of the Code.

Post-Issuance Compliance. The tax-exempt status of the Warrants could be affected by post- issuance events. Various requirements of the Code must be observed or satisfied after the issuance of the Warrants in order for such interest to remain excludable from gross income of the holders thereof. These requirements include restrictions on use of the proceeds of the Warrants, use of the facilities financed by the Warrants, investment of proceeds of the Warrants, and the rebate of so-called excess arbitrage earnings. The City is primarily responsible for such compliance, and a failure to comply could result in the inclusion of interest on the Warrants in gross income retroactive to the date of issuance of the Warrants.

Likewise, the Internal Revenue Service (the "IRS") conducts an audit program to examine compliance with the requirements applicable to tax-exempt obligations. If the Warrants become the subject of an audit, under current IRS procedures, the City would be treated as the taxpayer in the initial stages of an audit, and the owners of the Warrants would have limited rights to participate in the audit process. The initiation of an audit with respect to the Warrants could adversely affect the market value and liquidity of the Warrants, even though no final determination about the tax-exempt status would have been made. If an audit were to result in a final determination that the Warrants do not qualify as tax-exempt obligations, such a determination could be retroactive in effect to the date of issuance of the Warrants.

No Mandatory Redemption due to Event of Taxability. The Ordinance does not provide for mandatory redemption of the Warrants or payment of any additional interest or penalty if a determination is made that the Warrants do not comply with the existing requirements of the Code or if a subsequent change in law adversely affects the tax-exempt status of the Warrants or the economic benefit of investing in the Warrants.

Future Legislative Changes. Proposed, pending or future tax legislation, administrative actions taken by tax authorities, or court decisions, whether at the federal or state level, may adversely affect the tax-exempt status of the interest on the Warrants subsequent to their issuance. Future legislation could directly or indirectly reduce or eliminate the value of certain deductions and exclusions, including the benefit of the exclusion of tax-exempt interest on the Warrants from gross income for federal income tax purposes. Any such proposed legislation, actions or decisions, whether or not enacted, taken or rendered, could also adversely affect the value and liquidity of the Warrants. Prospective purchasers of the Warrants should consult their own tax advisors regarding the forgoing matters.

RATINGS

Standard and Poor’s Ratings Services ("S&P") and Moody’s Investors Service, Inc., have assigned underlying ratings of "AAA" and "Aaa", respectively, to the Warrants. Such credit ratings reflect only the view of such credit rating agencies, and an explanation of the significance of such credit ratings may be obtained only from the credit rating agencies furnishing the same. There is no assurance that either such credit rating will remain in effect for any given period of time or that either may not be lowered or withdrawn entirely if, in the judgment of the credit rating agency in question, circumstances should warrant such action. Any such downward revision or withdrawal of any credit rating assigned to the Warrants may have an adverse effect on the market price of the Warrants.

APPROVAL OF LEGAL PROCEEDINGS

Legal matters incident to the authorization and issuance of the Warrants by the City are subject to the approval of Bradley Arant Boult Cummings LLP, Birmingham, Alabama, Bond Counsel to the City, whose approving opinions respecting the Warrants will be in substantially the forms attached hereto as Appendix D.

AUDITED FINANCIAL STATEMENTS

The audited financial statements of the City for the year ended September 30, 2015, are attached as Appendix C.

FINANCIAL ADVISOR

Public Financial Management, Inc., Huntsville, Alabama (the "Financial Advisor") is serving as financial advisor to the City in connection with the issuance of the Warrants. The Financial Advisor assisted in the preparation of this Official Statement and in other matters relating to the planning, structuring and issuance of the Warrants, and provided other advice to the City. The Financial Advisor will not engage in any underwriting activities with regard to the issuance and sale of the Warrants. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement, and is not obligated to review or ensure compliance with the undertaking by the City to provide continuing secondary market disclosure.

UNDERWRITING

The Series 2016-A Warrants are being purchased by [______] at a price of [$______] (which price reflects a bid discount of [$______] [plus/less] [net] original issue [premium/discount] of [$______]. The Series 2016-A Warrants may be sold and offered to certain dealers (including dealers depositing such bonds into investment trusts) at prices lower than such public offering prices, and such public offering prices may be changed from time to time by the said purchaser.

The Series 2016-B Warrants are being purchased by [______] at a price of [$______] (which price reflects a bid discount of [$______] [plus/less] [net] original issue [premium/discount] of [$______]. The Series 2016-B Warrants may be sold and offered to certain dealers (including dealers depositing such bonds into investment trusts) at prices lower than such public offering prices, and such public offering prices may be changed from time to time by the said purchaser.

The Series 2016-C Warrants are being purchased by [______] at a price of [$______] (which price reflects a bid discount of [$______] [plus/less] [net] original issue [premium/discount] of [$______]. The Series 2016-C Warrants may be sold and offered to certain dealers (including dealers depositing such bonds into investment trusts) at prices lower than such public offering prices, and such public offering prices may be changed from time to time by the said purchaser.

The Series 2016-D Warrants are being purchased by [______] at a price of [$______] (which price reflects a bid discount of [$______] [plus/less] [net] original issue [premium/discount] of [$______]. The Series 2016-D Warrants may be sold and offered to certain dealers (including dealers depositing such bonds into investment trusts) at prices lower than such public offering prices, and such public offering prices may be changed from time to time by the said purchaser.

MISCELLANEOUS

The summaries and descriptions of provisions of the Ordinance and all references to other materials not purporting to be quoted in full are qualified in their entirety by reference to the complete provisions of the documents and other materials summarized or described. So far as any statements made in this Official Statement involve matters of opinion, forecasts or estimates, whether or not expressly stated, they are set forth as such and not as representations of fact.

The Appendices are integral parts of this Official Statement and must be read together with all other parts of this Official Statement.

CITY OF HUNTSVILLE, ALABAMA

By /s/ Tommy Battle Mayor

Dated: [______, 2016]

APPENDIX A

CERTAIN DEMOGRAPHIC INFORMATION CITY OF HUNTSVILLE, ALABAMA

APPENDIX A

CERTAIN DEMOGRAPHIC INFORMATION HUNTSVILLE MSA

General Information

The City of Huntsville (the "City"), the county seat of Madison County (the "County"), was incorporated in 1811 and is one of the oldest incorporated municipalities in the State. Centrally situated in the Tennessee River Valley of north Alabama (the Tennessee River being the southern boundary of Madison County), the City is located approximately 95 miles north of Birmingham, approximately 103 miles south of Nashville, Tennessee, and approximately 180 miles northwest of Atlanta, Georgia.

The City is the central economic base of the State's third largest Metropolitan Statistical Area ("MSA") and is the primary economic engine for the Northern Alabama, Southern Tennessee region. The eight counties adjoining Huntsville/Madison County form a thriving regional market.

Initially, the City prospered as a commercial center in an agricultural area and also grew from the manufacture of cotton goods, flour, shoes, lumber, pumps and other products. During World War II the construction of two arsenals -- Huntsville and Redstone -- gave the City new military and strategic importance as a principal manufacturing site of chemical artillery shells and explosives. Although arsenal activities were sharply curtailed during the immediate postwar period, in 1950 the U.S. Army transferred its missile experts, including the late Dr. Werner Von Braun and a team of German rocket scientists, to the City.

Following the successful launching of a Jupiter C missile in 1958, the U.S. Army's missile program and the Marshall Space Flight Center for the National Aeronautics and Space Administration were located in the City. As a result, the City experienced a rapid influx of population during the decades of the 1950's and 1960's. Beginning in the mid 1960's, cutbacks in the space program slowed growth in Huntsville. However, the 1980 Census showed that the City maintained strong economic indicators and a youthful, well-educated labor force. As the City's economy began to diversify in the 1980's, recovery was swift.

The City's population grew by approximately 9.7% between 1980 and 1990. During this same time, the Huntsville MSA grew by approximately 20.6%, reflecting additional growth in the immediate vicinity of the City. According to the 2000 Census, the City’s population was 156,216 and the Huntsville MSA (Madison County and Limestone County) was 343,798, indicating a 10.4% increase in growth within and around Huntsville during this time. According to the 2010 Census, the City’s population was 180,883 and the Huntsville MSA was 419,431, indicating a 20.1% increase in growth from 2000 to 2010. As of July 1, 2014, the U.S. Census Bureau estimated the city of Huntsville’s population to be 188,226. See Population Characteristics.

Income, education, and employment levels are all substantially higher in Huntsville than in the state of Alabama and compare favorably to national and regional indices. The Huntsville economy is one of the strongest economies in the Southeast, marked by low unemployment, steady job growth, and income levels that regularly lead the region. Huntsville compares favorably in numerous categories to some of the leading cities in the Southeast and Southwest United States.

Annual Unemployment Rate MSA 2000 2011 2012 2013 2014 2015 Austin, TX 3.1% 6.8% 5.8% 5.2% 4.2% 3.3% Charlotte, NC 3.4 10.7 9.3 8.1 6.3 5.4 Durham, NC 2.9 7.8 7.2 6.2 4.9 4.9 Huntsville, AL 3.2 7.2 6.1 5.5 5.7 5.4 Raleigh, NC 2.5 8.4 7.6 6.4 5.0 4.7

Appendix A – Page 1

Alabama 4.1 9.6 8.0 7.2 6.8 6.1 United States 4.0 8.9 8.1 7.4 6.2 5.3

Source: Bureau of Labor Statistics, Local Area Unemployment Statistics as of March 2016 (Preliminary)

Total Employment MSA 2000 2011 2012 2013 2014 2015 Austin, TX 672,700 806,300 838,600 878,100 914,200 944,800 Charlotte, NC 766,800 975,700 1,003,300 1,028,600 1,064,900 1,102,000 Durham, NC 261,700 273,100 279,000 284,300 290,800 296,700 Huntsville, AL 184,900 208,600 210,400 214,100 215,800 218,600 Raleigh, NC 436,800 509,600 525,500 540,400 559,700 574,600 Alabama 1,931,200 1,870,000 1,885,100 1,902,600 1,923,200 1,950,700 United States 131,785,000 131,932,000 134,175,000 136,381,000 138,958,000 141,865,000

Source: Bureau of Labor Statistics, Current Employment Statistics, Total Nonfarm Employment (place of work), not seasonally adjusted as of March 2016 (Preliminary)

Effective Buying Income MSA 2000 2011 2012 2013 2014 2015 Austin, TX $36,321 $46,689 $46,818 $46,436 $49,227 52,519 Charlotte, NC 42,002 43,480 43,239 40,098 42,601 44,772 Durham, NC 34,955 40,505 40,427 40,852 42,641 44,374 Huntsville, AL 38,588 42,352 42,429 45,770 47,650 49,455 Raleigh, NC 39,268 46,994 46,997 46,212 49,538 50,655 Alabama 31,098 33,291 33,226 35,077 38,079 39,074 United States 37,233 41,368 41,253 41,358 43,715 45,448 ______Source: Nielson/Claritas Survey of Buying Power/Median Household Effective Buying Income

Mean Annual Wage MSA 2000 2010 2011 2012 2013 2014 Austin, TX $40,409 $46,130 $47,490 $47,080 $47,900 48,150 Charlotte, NC 36,392 44,630 45,610 45,750 46,820 48,290 Durham, NC 41,671 53,220 53,930 54,500 54,440 55,840 Huntsville, AL 35,009 48,080 49,070 49,860 50,840 51,730 Raleigh, NC 34,049 44,810 45,220 45,880 47,100 47,430 Alabama 28,453 38,590 39,180 39,550 40,240 40,890 United States 34,718 44,410 45,230 45,790 46,440 47,230

Source: Bureau of Labor Statistics, Occupational Employment Statistics May 2014 (Not updated since May 2014)

Per Capita Personal Income by Metropolitan Area

MSA 2000 2010 2011 2012 2013 2014 Austin, TX $32,862 $40,009 $42,412 $45,321 $45,407 47,026 Charlotte, NC 30,996 37,783 39,302 41,974 40,709 42,425 Durham, NC 31,215 41,881 43,213 45,613 44,622 45,867 Huntsville, AL 28,672 40,204 41,646 42,196 41,835 43,059 Raleigh, NC 34,450 43,636 44,379 47,100 45,356 46,636 Alabama 26,145 34,073 35,202 36,036 36,176 37,512

Appendix A – Page 2

United States 31,798 40,277 42,453 44,266 44,438 46,049

Source: Bureau of Economic Analysis, Table SA1-3 and CA1-3 Personal Income Summary, Last updated September 30, 2015.

NOTE: The U.S. Department of Housing and Urban Development estimates that the median family income of families in the nation for 2015 is $65,800, for families in Alabama is $55,500, and for families in the Huntsville MSA is $75,000.

Professional & Business Service Employment MSA 2000 2011 2012 2013 2014 2015 Austin, TX 91,900 121,400 129,600 139,300 149,200 157,300 Charlotte, NC 120,000 155,300 159,300 164,100 176,100 180,600 Durham, NC 33,000 35,700 36,600 36,200 36,900 38,500 Huntsville, AL 33,300 48,200 48,200 49,300 49,600 49,700 Raleigh, NC 75,400 90,700 96,400 102,700 108,000 114,100 Alabama 185,200 213,300 217,700 218,700 223,700 228,200 United States 16,666,000 17,332,000 17,932,000 18,560,000 19,096,000 19,672,000 ______Source: Bureau of Labor Statistics, Current Employment Statistics as of March 2016 (Preliminary)

Population Characteristics

According to the 2010 Federal Decennial Census, the City is both the largest municipality in Madison County and the fourth largest municipality in the State, while Madison County is the third largest county in the State. The following table depicts the history of population growth in Madison County, the City of Huntsville, and the Huntsville MSA since 1980. The Huntsville Metro area includes Madison and Limestone Counties.

Population Growth

Madison City of Huntsville Metro Census County Huntsville Area (MSA) 1980 196,966 145,604 242,971 1990 238,912 159,789 293,047 2000 276,700 156,216 343,798 2005 298,192 166,313 370,064 2006 304,307 168,132 379,304 2007 312,734 171,327 387,705 2008 319,510 176,645 397,228 2009 327,744 179,653 406,316 2010 336,204 180,883 419,431 2011 339,681 182,247 425,218 2012 342,762 183,775 430,146 2013 346,892 186,254 435,737 2014 350,299 188,226 441,086

Source: U.S. Census Bureau (www.census.gov) as of July 1, 2014 (Most current available)

Major Economic Activity

Appendix A – Page 3

High-technology research and manufacturing is a continuing source of economic growth in the City. At one time, federally-funded space and defense programs were the dominant high-technology activities in the City. However, as the economy of the City has grown and diversified, companies and individuals with high- technology backgrounds have become increasingly active in the private sector.

Economic Diversification. Federally funded space and defense programs have a significant impact on the Huntsville region. However, economic analysts for local organizations such as the Huntsville/Madison County Chamber of Commerce and the Alabama State Employment Service point to the increasing shares of trade and services employment as indications that the economy has become more diversified. In addition, the education and technical skills associated with the space and defense programs in the region have been applied in the private sector, as evidenced by the success of numerous high-technology firms that originated in Huntsville. Such firms include: Sanmina/SCI Systems, a Fortune 500 computer manufacturer established in Huntsville in 1961; Intergraph Corporation, a computer graphics firm established in Huntsville in 1969; Nichols Research Corporation, a diversified computer services firm established in 1976 which later merged with Computer Sciences Corporation in 1999; ADTRAN, Inc., a telecommunications firm founded in 1985; Avocent, a leading provider of KVM switching and remote access devices which was acquired in 2010 by Emerson; Dynetics, an information technology company providing services to the U.S. Government and others since 1974, headquartered in Huntsville; Digium®, Inc., established in 1999 and headquartered in Huntsville, which created, owns and is the innovative force behind Asterisk, the most widely used open-source telephony software in the world; Nektar Therapeutics, with headquarters in San Francisco and locations in Huntsville and India, a clinical-stage biopharmaceutical company developing a pipeline of drug candidates that utilize its PEGylation and polymer conjugate technology platforms, which are designed to improve the benefits of drugs for patients; and DIATHERIX Laboratories, Inc., headquartered in Huntsville, which provides clinical laboratory services on a multiplexing platform for the detection of infectious diseases.

HudsonAlpha Institute for Biotechnology is a nonprofit institute dedicated to innovating in the field of genomic technology and sciences across a spectrum of biological problems. Its mission is three-fold: sparking scientific discoveries that can impact human health and wellbeing; fostering biotech entrepreneurship; and encouraging the creation of a genomics-literate workforce and society. Since opening in 2008, HudsonAlpha, under the leadership of Dr. Richard M. Myers —a key collaborator on the Human Genome Project — has built a name for itself in genetics and genomics research and biotech education.

HudsonAlpha’s 270,000 square-foot facility is the cornerstone of the 152-acre Cummings Research Park Biotechnology Campus. Currently, 31 biotechnology businesses reside with the nonprofit institute on the campus and together these organizations employ over 680 individuals. This synergistic cluster of life sciences talent promises collaborative innovation to turn knowledge and ideas into commercial products and services for improving human life and strengthening Alabama’s progressively diverse economy.

The biotech campus currently features two other facilities: the Jackson Center, a full-service conference facility, and 701 McMillian Way, which provides an additional 88,000 square feet of lab and office space. McMillian Park, the central green space connecting current facilities and future growth, boasts intertwining walkways that create a double-helix — the structure of DNA and the path to understanding living organisms. Two water features and hundreds of plantings are also contained in the park.

The following table depicts industrial job growth for announced new and expanding companies in Huntsville/Madison County for the period 2000 to 2015. It is interesting to note the continued diversification of the local employment base and that only three of the largest announced developments from 2000-2015 were by federal contractors.

Announced New and Expanding Industry

Total Total New Largest Single Year New Jobs Investment Development

Appendix A – Page 4

2000 3,618 $147,260,000 West Teleservices 2001 1,923 397,101,900 Toyota Motor Manufacturing 2002 2,301 325,632,100 Kohler Industries 2003 1,458 85,835,000 Embassy Suites Hotels 2004 3,512 318,825,529 Toyota Motor Manufacturing 2005 7,017 685,849,435 Hudson-Alpha Inst. Biotech. 2006 3,188 175,350,000 Verizon Wireless 2007 4,181 115,860,000 International Diesel of AL 2008 3,811 96,093,846 BASF Catalysts 2009 2,027 219,290,000 Toyota Motor Manuf. of AL 2010 2,901 152,886,089 Raytheon Company 2011 1,956 133,428,000 Boeing Company 2012 1,189 231,077,749 Toyota Motor Manuf. of AL. 2013 1,603 266,545,020 Toyota Motor Manuf. of AL 2014 3,423 323,067,000 Toyota Motor Manuf. of AL 2015 1,246 73,094,000 Cummings Aerospace

Source: Huntsville Chamber of Commerce/Economic Development/New & Expanding Industry

High Technology/Industrial Activity. Research and industrial parks are the center of much of the high-technology and manufacturing activity within or near the city of Huntsville. Those parks include Cummings Research Park, Chase Industrial Park, Jetplex Industrial Park (on Airport property), Lowe Industrial Park, Chelsea Industrial Park, Thornton Research Park, Gateway Research Park, North Huntsville Industrial Park, Arlington Industrial Park, SouthPoint Industrial Park and Triana Industrial Park. One of the country’s leading science and technology parks, Cummings Research Park is a key component of the Huntsville community’s aerospace and defense success. Located adjacent to Redstone Arsenal, the 3,800-acre park is home to more than 300 companies employing 30,000 workers. Twenty-three of the top 26 U.S. government contractors have operations in Huntsville, as do 57 of the top 100. Numerous Fortune 500 companies and global technology corporations have major operations in Cummings Research Park performing aerospace and defense technology research and development. This collection of technical expertise gives the Huntsville community the highest concentration of engineers in the country and is vital to supporting major Department of Defense and NASA contract programs and commercial technology applications. The University of Alabama in Huntsville is also located in the park and is annually ranked among the highest technology research universities in the U.S. The unique synergy of academia, government and industry working together on a global scale makes the Huntsville community a premier technology center of excellence for aerospace and defense research and development.

The Jetplex Industrial Park (JIP) includes 4,000 acres of which approximately 2,800 acres are currently available for development. From this strategic Southeastern location, the Jetplex Industrial Park offers a rare combination of air, rail, and truck transportation. The Park is divided into six sections allowing for various types of economic development opportunities ranging from warehousing/ distribution, office, aviation/aerospace, and light manufacturing/assembly. Major industrial park tenants include The Boeing Company, LG Electronics, Navistar, Northrop Grumman, Yulista Management Services, and SESI. There are 54 companies located in JIP with approximately 5,000 employees.

Source: Huntsville Madison County Airport Authority, Marketing

In February 2014, Remington Outdoor Co. announced that it would expand with a new manufacturing facility in Huntsville. The plant opened in 2015 in an 840,000 square foot building located near Huntsville International Airport in the Jetplex Industrial Park. Opening with over 300 employees, it is expected to create 2,000 jobs by 2021. At full employment, the new Remington plant will be the third-largest private employer in Madison County. The Remington RM380 was the first gun to be made by the company in its new Huntsville plant.

Appendix A – Page 5

Lowe Industrial Park, Chase Industrial Park, Chelsea Industrial Park, Thornton Research Park and Gateway Research Park house a number of companies including Intergraph Corporation (one of the City’s largest employers), Engelhard, Browning Ferris Industries, MagnaTek and PB&S Chemical. Madison Industrial Park, along with privately held Arlington and other parks, including Triana Industrial Park, continue to support a growing industrial and service base of business in the communities near Huntsville. In addition, Southpoint Industrial Park, a 260 acre privately developed Industrial Park, is under development in the City of Huntsville at the I-65/I-565 interchange.

Toyota Motor Manufacturing Alabama (TMMAL) is the only Toyota plant globally to produce four- cylinder, V6 and V8 engines at the same facility. The Huntsville facility builds four-cylinder engines for the Camry, Highlander, RAV4 and Venza vehicles; V6 engines for the Highlander and the Tundra and Tacoma pick-up trucks; and V8 engines for the Sequoia SUV and Tundra. The plant’s total annual engine capacity is more than 750,000. With more than 1,200 team members and investments totaling more than $850 million, TMMAL has made a substantial impact on North Alabama for almost 15 years. Toyota announced the Huntsville facility in 2001 and broke ground later that same year. The first Toyota V-8 engine ever made outside of Japan came off the line at TMMAL in 2003. Since then, the facility has expanded three times to add V-6, an all-new V-8 and four-cylinder engines. These expansions have more than doubled the plant’s initial size and production volume.

Source: Toyota, External Affairs

In January, 2015 Polaris Industries announced plans to build a 600,000-square-foot plant on a 453- acre site located within the Huntsville city limits in Limestone County. Polaris specializes in all-terrain vehicles (ATVs), the Polaris RANGER® and RZR® side-by-side vehicles, snowmobiles, motorcycles and on- road electric/hybrid powered vehicles. Polaris officials say they are on schedule to open the $150 million plant in early 2016 and employ at least 1,700 people at full production.

Google Fiber is bringing its Internet service to Huntsville for the first time. Google Fiber will lease data fiber capacity from Huntsville Utilities, which is extending its fiber-optic cable network. Huntsville Utilities will build out the entire fiber backbone and will then lease space on the network to Google, who will connect it to individual addresses. The first customers should start to get gigabit internet from their network by mid-2017 with a complete roll out expected by 2020.

Retail. While high technology research and manufacturing continue to dominate Huntsville’s economy, retailing has been steadily growing in recent years. This is especially significant since Huntsville derives a significant portion of its operating budget from sales tax collections. A major factor in this growth is Huntsville’s above-average per capita and median family incomes. This healthy buying power has attracted many national retailers to the area.

In 2007, Bridge Street Town Center was built as a mixed-use lifestyle center in Huntsville featuring over 75 upscale shops and restaurants, a 210-room Westin Huntsville Hotel with 74 luxury residential units occupying the top five floors, a 14-screen Monaco Pictures and a six story office tower. The property also features a customer service center, 5-acre lake with gondola boats and water craft rentals, carousel, fountains and lots of green open spaces. During 2014 the outdoor lifestyle and power center welcomed a new $20 million Belk, three parking areas creating 1,023 new parking spaces, PANDORA and Michael Kors stores, a 5,000-square-foot Orvis, Kate Spade New York and Dickey's Barbecue Pit. Two chain restaurants, BRAVO! Cucina Italiana and Texas de Brazil, opened during the first quarter of 2015. Bridge Street is located on the corner of Old Madison Pike and Research Park Boulevard in the heart of Cummings Research Park.

In November 2012, ground was broken on the new $100 million Twickenham Square lodging/living/retail/office space development on the old Council Courts housing project site near Huntsville Hospital. The development is anchored by a 33,500 square foot Publix supermarket, a 101-room Homewood

Appendix A – Page 6

Suites hotel, a 246-loft apartment building and a 110,000 square foot, five-story office tower, Twickenham Place. Homewood Suites hotel was the first business to open at Twickenham Square, followed by Publix, which opened in May 2014. The city built a nearly $10 million, 920-space parking garage adjacent to the development. Twickenham Square is also home to Artisan at Twickenham Square, H&R Block, Beaute Nail Spa and FirstBank. The mixed-use development welcomed Cajun Steamer Bar and Grill, The Chocolate Martini Bar, Mei Wei and Supercuts in early 2015. Ruth’s Chris Steakhouse plans to relocate from the Embassy Suites Hotel & Spa and plans to be serving guests at the newly renovated restaurant at Twickenham Square by the fall of 2016. The Twickenham Place office tower houses Huntsville Hospital’s clinical laboratory, which is in the top ten largest clinical labs in the country. The new office tower is connected to Huntsville Hospital by an elevated pedestrian bridge. The development should generate more than $2 million annually in sales, property, lodging and liquor taxes, plus more than $1.5 million in sales taxes on construction materials.

Cabela’s has completed construction of an 80,000-square-foot superstore at the $80 million newly planned mixed-use development, Parkside Town Centre in Huntsville and opened for business in fall of 2015. The project is near the intersection of Interstate 565 and Research Park Boulevard. It is the first Cabela’s store in Alabama and one of only a handful in the Southeast. The store employs approximately 180 full and part time employees from the area. Parkside Town Centre includes 300,000 square feet of various commercial, retail and related enterprises and is meant to complement its neighbor, Bridge Street Town Centre.

In June 2014, ground was broken at the Shops at Merchants Walk, a $50 million 100,000 square foot shopping development. Anchored by Whole Foods Market, the Shops at Merchants Walk also hosts Maki Fresh Sushi Rolls and Japanese Grill, Mountain High Outfitters, Orangetheory Fitness and Farm Burger. The Shops at Merchants Walk is expected to generate approximately $58.75 million in new sales taxes and $1.4 million in property taxes over the next 25 years and is expected to create additional commercial development in the area.

In April of 2015, work began on a $70 million mixed-use project called CityCentre at Big Spring. It will take over the now demolished Holiday Inn site near Big Spring International Park and Von Braun Center in downtown Huntsville. Phase I will include a 150-unit new-to-market AC Hotel, 31,000 square feet of retail stores and restaurants, 53,000 square feet of office loft space and 270 multi-family apartments. Phase II will represent a $30 million investment with a 130-key urban hotel and 50,000 square feet of mixed-commercial and office loft space. Phase I is set to open in 2017.

Sealy Property Development is building a $34 million five-story building featuring 197 upscale lofts and 21,000 square feet of street-level retail and restaurant space in a former parking lot at the corner of Jefferson Street and Holmes Avenue across from the federal courthouse. Site work began in May 2015 at The Avenue, which will offer a resort-style swimming pool, 400-vehicle parking garage and large sidewalks to encourage outdoor dining and pedestrian walking. The lofts will open in phases beginning in early summer 2016, while the commercial spaces will launch no later than fall the same year.

National Aeronautics and Space Administration. The Marshall Space Flight Center in Huntsville was established in 1960 as the lead agency for the National Aeronautics and Space Administration ("NASA") for development of the Saturn rockets for travel to the moon. Building on the successes of past programs, including Saturn and the Space Shuttle, the center provides the engineering expertise behind propulsion and transportation systems and has recently begun development of the Space Launch System (SLS), the most powerful rocket system ever. SLS will enable exploration beyond low-earth orbit via cargo and eventually crewed flights. Supporting around-the-clock operations on the International Space Station through the Payload Operations Center, Marshall develops, integrates, and operates major logistics, life support, and scientific experiment components and systems that enable living and working in space. The center conducts fundamental and applied scientific research and enables scientific discovery by developing hardware and instruments, most notably the Center’s past experience with the Hubble and Chandra X-Ray Observatories, which lead to discoveries in space science and Earth science. Marshall also provides technical and project management

Appendix A – Page 7 expertise in support of the agency’s science and mission systems programs. The Marshall Space Flight Center’s budget for fiscal year 2014 totaled $2.3 billion which is approximately 13% of the total NASA budget. Currently, NASA has approximately 2,400 civil service employees and is engaged in more than 200 partnerships, fostering co-development of technologies or providing NASA capabilities to the private sector and academia.

Source: Marshall Space Flight Center Office of Government and Community Relations

Military. Since the early 1950s, Huntsville, Alabama has been one of the United States’ principal centers for space and defense technology. Home to the work of Dr. Werner von Braun and America’s rocket development programs, the Huntsville community and Redstone Arsenal became the location of choice for the country’s best and brightest aerospace engineers and scientists during the 1960s. Rocket City USA, as the region was known, gave original meaning to the term “rocket science”.

Today, Redstone Arsenal is a diverse federal campus for more than 55 major federal agencies and organizations providing the highest level of technology development for national defense and space exploration. Army commands manage key logistics, missile and aviation programs while NASA’s Marshall Space Flight Center is responsible for large components of America’s space program. Roughly half of the Army’s weapons procurement budget is managed on Redstone Arsenal, including all US Army aviation systems, missile systems and missile defense systems.

Other federal agencies perform a wide variety of intelligence and homeland defense functions on Redstone. Cummings Research Park, one of the country’s original and largest science and technology parks, is home to many of the 300+ national and international aerospace and defense contractors that call Huntsville home.

There is a significant military presence in Huntsville/Madison County. As of July 2014, Redstone employed some 34,500 DOD civilians and contractor employees and 1,000 active military personnel (this does not include construction workers on base). Activities in the area involve a number of different organizations including:

U.S. Army Materiel Command (AMC) is an Army Major Command responsible for materiel readiness including technology, acquisition support, materiel development, logistics power projection and sustainment. The Command’s missions range from development of sophisticated weapon systems and cutting-edge research to maintenance and distribution of spare parts and supplies to US Army units located around the globe. If a soldier shoots it, drives it, flies it, wears it, communicates with it, or eats it, AMC provides it.

U.S. Army Space & Missile Defense Command (SMDC) is responsible for developing the Army’s missile defense systems including support of space and ground-based midcourse defense and assuring the Army’s access to and utilization of space assets in the execution of their mission.

U.S. Army Aviation & Missile Command (AMCOM) provides support to joint warfighters and allies to ensure aviation and missile system readiness for combat operations. The Command is responsible for the development, acquisition and fielding of aviation and missile systems and the integration of aviation and missile technology. AMCOM develops, acquires, fields and sustains aviation, missile and unmanned vehicle systems, ensuring readiness with a seamless transition to combat operations.

U.S. Army Security Assistance Command (USASAC) is responsible for managing security assistance programs and Foreign Military Sales for the Army. USASAC is known as the

Appendix A – Page 8

“Army’s Face to the World” because it serves as the primary entry point for US Army materiel and service related FMS requirements.

Army Contracting Command (ACC) supports the warfighter worldwide through the acquisition of equipment, supplies and services vital to the soldier’s mission and well-being. The Command Headquarters relocated to Redstone Arsenal in 2011.

Expeditionary Contracting Command (ECC) is responsible for expeditionary contracting across all military operations for Army Service Component Commanders and the Joint Warfighter and support to Army and other joint operations as well as other defense organizations outside the continental United States.

Program Executive Office – Aviation (PEO AVN) is the Army manager responsible for providing overall direction and guidance for the development, acquisition, testing, product improvement and fielding of Army aviation programs of record including the Apache Attack Helicopter, Cargo Helicopter, Utility Helicopter, Non-Standard Rotary Wing Aircraft, Fixed Wing Aircraft, Aviation Systems, Unmanned Aircraft System and Armed Scout Helicopter.

Program Executive Office – Missiles & Space (PEO M&S) provides centralized management for all Army tactical and air defense missile programs and selected Army space programs. The PEO was established in January 2005 with the merger of the PEO Air, Space and Missile Defense and the PEO Tactical Missiles.

U.S. Army Aviation and Missile Research Development and Engineering Center (AMRDEC) is the Army’s focal point for providing research, development and engineering technology and services for aviation and missile platforms. AMRDEC manages and conducts research, exploratory and advanced development, and provides one-stop lifecycle engineering and scientific support for aviation and missile systems and UAV platforms.

Redstone Test Center (RTC) was created through the merger of the Redstone Technical Test Center (RTTC) and the Aviation Technical test Center (ATTC) in 2010. RTC specializes in line-of-sight missile and rocket testing, guidance system testing, optical and electro optical systems, air-armament component tests and electromagnetic environmental effects testing of aircraft systems. RTC is the designated DOD lighting effects tester for explosive ordnance and munitions. RTC also tests and certifies all modifications to the Army aviation fleet.

U.S. Army Garrison (USAG) Redstone, executes daily operations effectively and efficiently with a qualified and professional workforce. The focus of its workforce is the continued viability and sustainability of the installation, achieved through deliberate strategic planning and appropriate execution of services and programs. The Garrison strives for excellence every day to make certain its tenant organizations can execute their peacetime and wartime missions without concern for any interruption in home-station support.

2nd Recruiting Brigade conducts recruiting operations for non-prior and prior service recruits for the Active Army and Army Reserves in several states across the Southeast, Puerto Rico and the Virgin Islands. The brigade is supported by numerous recruiting battalions and recruiting companies and partners with a wide range of colleges, ROTC programs, high schools, and vocational trade schools.

Fox Army Health Center (FAHC) is part of the Southern Regional Medical Command which provides access to quality and cost-effective primary care for patients while maintaining a state of readiness for mobilization. FAHC provides many types of services for Redstone,

Appendix A – Page 9

including direct healthcare, public health and education, occupational medicine and industrial hygiene.

Logistics Support Activity (LOGSA) supports Army operations through timely and integrated life cycle logistics information, knowledge and expertise. LOGSA maintains the Army’s official single authoritative logistics data repository. LOGSA provides critical logistics information capabilities through analytical tools and business intelligence solutions to effectively acquire, manage, equip, and sustain the materiel requirements of the U.S. Army.

Missile Defense Agency (MDA) is the Department of Defense agency that facilitates the research, development, acquisition and integration of multi-service capabilities into seamless theater and national missile defense systems.

Defense Intelligence Agency – Missile & Space Intelligence Center (MSIC), is an intelligence organization charged with producing scientific and technological intelligence on adversary surface-to-air missiles and ballistic missile systems and directed energy systems. This intelligence includes characteristics, capabilities and limitations of foreign military systems.

U. S. Army Engineering and Support Center, Huntsville, is a specialized agency of the U.S. Corps of Engineers. The Huntsville Center manages national programs that have a broad scope, require standardization across corps of engineers boundaries, or are otherwise complex in nature.

Source: Redstone Arsenal Public Affairs Office; www.garrison.redstonearmy.mil

BRAC. There have been five previous rounds of Base Realignment and Closure (BRAC) – a congressionally approved process for shrinking military infrastructure. Redstone Arsenal has gained significant roles, missions and personnel through this process.

The 2005 BRAC relocated the Army Materiel Command's headquarters to Redstone Arsenal from Fort Belvoir, Va., along with more than 1,350 AMC positions and the AMC commander, a four-star command which is the first for Alabama. Other BRAC moves include the Missile Defense Agency relocation of more than 2,200 positions; more than 200 positions added to the Army Space and Missile Defense Command headquarters; the U.S. Security Assistance Command's move into a headquarters adjoining AMC and bringing another 340 jobs; bringing the Aviation Technical Test Center from Fort Rucker to Redstone Arsenal and creating the Redstone Test Center and more than 300 new jobs; and moving the headquarters for the Army's 2nd Recruiting Brigade and 75 jobs on the arsenal into yet another new building.

Additional growth is expected to continue as businesses and contractors locate or expand to Huntsville to be close to their customers on Redstone Arsenal. A significant number of jobs have been created in support of BRAC positions and more growth is predicted in local schools, hospitals, restaurants and other businesses to serve the increased population. For example, the headquarters for the Army Contracting Command and Expeditionary Contracting Command, and about 350 positions, were moved to Redstone Arsenal, even though the move was not mandated by BRAC.

In 2010, leaders with Redstone Arsenal and the city of Huntsville were presented the designs for Redstone Gateway, a 468-acre development that will accommodate growth on Redstone Arsenal and from new defense contractors relocating as a result of BRAC 2005. The land is owned by the U.S. Government and is under a long-term master lease to the developers through the Enhanced Use Lease (EUL) program. Through this master lease, the joint venture will work closely with Redstone Arsenal to create a business park that will total approximately 4.6 million square feet of office and retail space as well as hotel amenities when completed. Approximately 4.4 million square feet of Class A office space will be built in three phases, with three to six story buildings containing 80,000 to 165,000 square feet, of which 1.2 million square feet will be

Appendix A – Page 10 secured office space. Three office buildings have been fully leased to The Boeing Company, one building has been fully leased to DRS Technologies, and a second building is currently under construction. According to the developers, Redstone Gateway is possibly the largest currently active real estate project in the nation.

Raytheon opened a state-of-the-art missile production facility on Redstone Arsenal in November 2012, creating an estimated 300 new jobs. The aerospace company Raytheon already employs about 600 people in Huntsville. The company plans to assemble and test the Standard Missile-3 and Standard Missile-6 at a 70,000 square-foot facility. Those programs are managed by the Missile Defense Agency at Redstone Arsenal. Huntsville is the only Raytheon location that includes all six of the company's primary business units: Integrated Defense Systems, Intelligence and Information Systems, Missile Systems, Network Centric Systems, Technical Services, and Space and Airborne Systems.

Source: Chamber of Commerce Huntsville/Madison County, COPT Properties, and AL.COM

Labor Force Characteristics

According to the 2014 American Community Survey 5 Year Estimates, the City had a "labor force participation rate" of 64.8%, compared with 58.8% for the State of Alabama and 63.9% for the United States.

The quality of the City's work force is enhanced by the educational attainments of a significant portion of the work force. The following table compares the educational attainments, for persons over 25 years of age, with respect to the City, the State of Alabama and the United States.

Educational Attainment

City of State of United Huntsville Alabama States

Percentage high school graduates or higher 88.5% 83.7% 86.3% Percentage bachelor's degree or higher 35.4% 23.1% 29.3%

Source: U.S. Department of Commerce, Bureau of the Census, 2014 ACS 5 Year Estimates (Most current available)

Employment Data

Civilian Labor Force. The following table provides statistics regarding the average civilian labor force and unemployment rates of Huntsville/Madison County in the years indicated:

2000 2011 2012 2013 2014 2015 Labor Force 175,460 210,585 209,258 210,408 208,671 208,293 Unemployment Rates Huntsville/Madison County 2.8% 8.4% 7.0% 6.4% 6.1% 5.4% State of Alabama 4.6 8.5 7.1 6.5 6.5 6.1 United States 4.0 8.9 8.1 7.4 6.2 5.3

Source: Alabama Department of Labor, Bureau of Labor Statistics (2015 data preliminary)

Major Employers in the Huntsville Region

As shown in the following table, there are 12 private sector firms with employment in excess of 1,000 employees. The major private sector employers in the Huntsville Region include The Boeing Company (aerospace), SAIC, Camber Corporation and ADTRAN, each with more than 1,500 employees in 2015. Most

Appendix A – Page 11 of the major employers are involved in high-technology research and manufacturing, previously noted as a leading source of economic activity in the Huntsville Region.

MAJOR EMPLOYERS IN THE HUNTSVILLE REGION

Private Employers Number of Employees The Boeing Company 2,600 SAIC 2,277 Camber Corporation 2,125 ADTRAN 1,549 Technicolor 1,450 PAR 1,350 Intergraph Corporation 1,325 Northrop Grumman 1,200 Verizon Wireless Call Center 1,200 Toyota Manufacturing 1,150 Wyle CAS Group 1,085 Lockheed Martin Corporation 1,084 Dynetics, Inc. 982 Crestwood Medical Center 920 Jacobs ESSSA Group 850 Teledyne Brown Engineering 794

Public Employers U.S. Army/Redstone Arsenal* 31,500 NASA/Marshall Space Flight Center * 6,500 Huntsville Hospital System 6,341 Huntsville City Schools 3,000 Madison County Schools 2,389 City of Huntsville 2,206 UAHuntsville 1,660 Madison County 1,242 Alabama A&M University 1,207 Madison City Schools 976 * Includes contractors ______Source: Chamber of Commerce Huntsville/Madison County, December 2015

Employment Data. The total number of persons employed in Huntsville/Madison County in nonagricultural wage and salary employment decreased between 2010 and 2012, but has increased since then to the highest level yet. The four largest sectors of employment are (in descending order) services (106,100), government (48,500), retail trade (23,400) and manufacturing (22,900), in the Huntsville Region during 2015.

Huntsville Metropolitan Area Employment by Industry Sector (in thousands)

2010 2011 2012 2013 2014 2015

Manufacturing 26.4 21.8 21.2 21.2 22.6 22.9 Durable 22.7 18.7 18.2 17.8 19.3 19.5 Non-Durable 3.7 3.1 3.0 3.4 3.3 3.4 Construction & Mining 6.6 6.6 6.5 6.8 8.0 8.4 Transportation/Utilities 2.7 2.6 2.5 2.6 2.6 3.0

Appendix A – Page 12

Wholesale Trade 5.5 5.5 5.6 5.6 5.8 5.8 Retail Trade 22.0 23.0 21.9 23.3 22.7 23.4 Finance/Insurance/Real Estate 6.2 6.1 6.2 6.1 6.3 6.3 Services 89.7 90.9 91.8 94.0 97.6 106.1 Government 48.2 50.6 49.8 49.5 49.9 48.5

Total Nonagricultural 209.3 207.1 205.5 209.1 215.7 218.1 Employment

Source: Alabama Department of Labor, Bureau of Labor Statistics (Averages through December 2015)

Utilities Facilities and Service

The City owns its own electric, water, wastewater (sanitary sewer) and natural gas systems. The following table shows total connections to the several City-owned utilities for the years indicated.

Utility Connections Year Electric* Water Natural Gas Sewer

2005 148,040 77,258 44,105 62,400 2006 151,329 79,392 44,923 63,500 2007 155,991 82,035 46,165 64,600 2008 159,415 83,652 46,896 65,500 2009 161,179 84,543 47,277 67,700 2010 163,708 85,937 47,747 67,100** 2011 171,058 88,195 48,616 69,000 2012 172,141 89,280 49,010 69,600 2013 172,331 88,185 49,395 73,400 2014 177,776 91,805 50,605 74,200 2015 180,893 93,103 51,655 75,100

______*Includes electrical connections in Madison County outside City limits. **In 2010 the City of Huntsville sewer system underwent a billing change that resulted in a commercial consolidation, thus appearing to lower the number of sewer connections. Source: Huntsville Utilities and City of Huntsville

Construction Activity

The following table shows the value of new building permits issued in the City for the fiscal years indicated.

Value of Building Permits* (Residential Apartment and Commercial/Industrial)

Commercial/ Year Residential Apartment Industrial Total

2005 $53,949,572 -- $251,980,507 $305,930,079 2006 59,193,692 $12,284,320 289,268,058 306,746,070 2007 69,324,698 73,366,333 257,689,367 400,380,398 2008 45,055,563 37,108,158 197,117,416 279,281,137 2009 46,014,460 24,624,748 111,635,798 182,275,006

Appendix A – Page 13

2010 45,385,091 -- 136,237,193 181,622,284 2011 67,349,833 23,890,934 199,764,460 291,005,227 2012 72,510,679 37,965,634 201,958,518 312,434,831 2013 76,153,776 31,493,814 258,148,571 365,796,161 2014 68,232,945 24,971,287 260,554,000 393,758,232 2015 50,480,824 25,086,049 146,238,696 221,805,569 ______*Exclusive of "Moving and Demolition Permits" and consists of new construction only Source: City of Huntsville, Inspection Department

Education

Primary and Secondary Education. The City school system is now comprised of sixty-four pre-K programs, twenty-one elementary schools (including kindergarten), seven middle schools, five P-8 programs, seven senior high schools, and a vocational school. In addition, there are three magnet schools serving students in elementary and middle school grades and four magnet programs operating within existing high schools. These magnet programs emphasize science, foreign language, creative and performing arts, pre-engineering and international education. Students of City schools consistently score above national and state averages on standardized achievement tests and on the American College Test (ACT). Enrollment for the City School System for the 2015-2016 school year is 24,057 with 2,464 teachers and support personnel employed.

Madison County and the City of Madison also have public school systems, and in addition to public schools, there are approximately fifty private kindergartens and private schools (including church-related or parochial schools) in the City and the County.

Higher Education. There are three state-supported four-year colleges and universities located within or near the City: the University of Alabama in Huntsville, a campus of the University of Alabama system; Alabama A & M University; Athens State University, located in the City of Athens, Alabama, approximately 20 miles west of the City; and Oakwood University, a private four-year university. Other area institutions include John C. Calhoun State Community College, J. F. Drake State Community and Technical College, and North Alabama Skills Center.

Source: City of Huntsville School System

Medical and Health Services

Huntsville Hospital, the second largest hospital in Alabama, is a 941-bed hospital that serves as the regional referral center for north Alabama and southern Tennessee. In recent years, the hospital has expanded its service throughout the region with the development of Huntsville Hospital Health System, making it the third largest publicly owned hospital system in the nation with more than 1,800 beds and 12,000 employees. Huntsville Hospital has more than 8,000 employees and has a medical staff with more than 800 physicians. Huntsville Hospital serves as a teaching facility for UAB’s Family Practice Residency Program. The hospital also operates Huntsville Hospital for Women & Children, one of only three pediatric hospitals in the state. Affiliates of Huntsville Hospital include the 101-bed Athens-Limestone Hospital, 185-bed Helen Keller Hospital in Sheffield, 25-bed Red Bay Hospital, 273-bed Decatur Morgan Hospital-Decatur Campus, 120-bed Decatur Morgan Hospital-Parkway Campus, 98-bed Lawrence Medical Center in Moulton, The Heart Center, Inc. of Huntsville, 50-bed Madison Hospital and a multi-specialty physician network. Huntsville Hospital also owns a 70-bed rehabilitation hospital in Huntsville which is managed by HealthSouth. Huntsville Hospital is governed by a volunteer board appointed by the City Council through the Health Care Authority of the City of Huntsville.

Source: www.huntsvillehospital.org

Appendix A – Page 14

In addition to the main campus, the Health Care Authority of the City of Huntsville has established a clinical presence in Madison, Alabama, a rapidly growing city approximately ten miles west of Huntsville. The Madison Medical Park is the current location of a comprehensive imaging center, a wellness center, physical therapy, a sleep center, several professional office buildings and the location for the Madison Hospital, Alabama’s newest hospital completed in February 2012. Madison Hospital, operated by the Authority, serves the residents of the City of Madison and communities in western Madison County. The full service 60-bed hospital offers medical, surgical, obstetrical, non-invasive cardiac care, special procedures, emergency care, imaging, and therapy services. Designed with growth in mind, the new facility was constructed so that the infrastructure supports the eventual expansion of up to 200 beds as the community grows and additional services are needed. Madison Hospital employs 300 full time equivalents, most of whom are clinical staff. The Authority’s investment in construction and equipment was approximately $71 million, as approved by the State of Alabama. ______Source: www.madisonhospital.org

The City also hosts a 150-bed full service acute care hospital, Crestwood Medical Center, which has more than 530 physicians on staff representing more than 50 different specialties. ______Source: www.crestwoodmedcenter.com

The Space and Rocket Center

The U.S. Space and Rocket Center, a state agency operated by the Alabama Space Science Exhibit Commission, which opened in 1969 is one of the major tourist attractions in Alabama, attracting some 350,000 visitors annually. Recent additions include a full-scale space shuttle and portions of the Space Station. A related activity of the Space and Rocket Center is U.S. Space Camp, a hands-on educational experience for young people and, in special corporate camps, adults. The U.S. Space Camp attracts approximately 35,000 young people and adults each year for its Space Camp and Corporate Camp programs.

Transportation

The City of Huntsville is accessed by highway, waterways and a modern airport facility. U.S. Interstate Highway 65, which runs between Chicago and Mobile, is connected to the City by I-565. There are four major highways 231 (North-South), 431 (North-South), 72 (East-West) and 72 Alternate (East-West) which traverse the City and provide access to outlying areas. The City is served by numerous common carriers, including the Norfolk Southern Railway. In 2004 Huntsville built a new public transit center just off I-565 which is home to the offices of the Public Transit and Parking Services, and the Convention and Visitor’s Bureau. It serves as the central transfer point for the city’s shuttle bus service.

The Huntsville-Madison County Airport Authority (a joint authority of the City and Madison County) operates the Huntsville International Airport located approximately twelve miles west of the downtown area of the City and the principal airport serving northern Alabama and parts of Tennessee and Georgia. Airport operations are conducted on approximately 3,400 acres of land and include two active runways, associated taxiways and an industrial park. The airport is served by numerous carriers including: American, Delta, and United Airlines.

The Huntsville-Madison County Airport Authority has developed an industrial park and foreign trade zone on approximately 1,700 acres surrounding the airport operations area. There are 54 companies including Boeing, Raytheon, LG, and Siemens Automotive situated on 1,470 acres within the Industrial Park at the Airport. The International Intermodal Center commenced operations in December, 1986. The Center is an inland port that offers at one location a hub of multi-modal services for containerized rail, truck and air cargo.

Quality of Life

Appendix A – Page 15

Huntsville is situated in the foothills of the Appalachian Mountains, and the natural beauty of the area contains many opportunities for hiking, biking, golfing, outdoor exploration and water sports on the Tennessee River and nearby Lake Guntersville. The mild climate allows for outdoor enjoyment throughout much of the year. Huntsville offers a number of parks, natural reserves, nature trails and a stop on the Robert Trent Jones Golf Trail.

Huntsville’s downtown is undergoing a renaissance with a growing and vibrant nightlife. The arts are fully covered between Huntsville’s Broadway Theatre League, the Huntsville Ballet Company and the Huntsville Symphony Orchestra. The Embassy Suites Huntsville is conveniently located right in the heart of downtown Huntsville and is connected by a sky bridge to the city's convention center space, the Von Braun Center, and to the city's sports arena, concert hall and playhouse.

The Von Braun Center underwent major renovations which started in 2010. The renovations transformed the VBC’s Arena that was originally constructed in 1975. The renovation plans changed the facade of the Arena to a modern glass frontage overlooking Big Spring Park as well as expanded the lobby by adding more pre-function space and a pub. The project also added over 1,000 seats to concert setups, VIP suites, and additional restrooms. The Von Braun Center Concert Hall also underwent a major renovation.

Source: http://www.vonbrauncenter.com/construction

Among the many museums and historic sites are the U.S. Space and Rocket Center, the Huntsville Museum of Art and several children’s museums.

Huntsville is home to Lowe Mill ARTS & Entertainment, America’s largest independent center for the arts. With over 120 working artists, small businesses, restaurants, and a live performance venue, this huge historic textile mill is now a rising home for music, art, and culture. Lowe Mill recently completed a 37,000 square foot expansion in December 2014.

In sports, Huntsville hosts a minor league hockey (SPHL) team and a Southern Indoor Football League (SIFL) team.

Appendix A – Page 16

APPENDIX B

GOVERNMENTAL ORGANIZATION AND FUNCTIONS

APPENDIX B

CITY OF HUNTSVILLE

GOVERNMENTAL ORGANIZATION AND FUNCTIONS

Governmental Organization

The City is a municipal corporation under the laws of the State of Alabama. The municipal government may be characterized as a "strong" mayor-council form of government, wherein the mayor is elected at large for a four-year term to serve as the full-time administrative head of the City government. The Mayor is assisted in the day-to-day management of the City by an administrative assistant and a professional staff who oversee the various departments of the City.

The City Council, which consists of five members elected for staggered terms of four years each, operates exclusively as a legislative body and acts with respect to the executive branch of the City government (including all appointive officers, department directors and employees) only through ordinances and resolutions formally adopted at Council meetings. Members of the City Council are elected from five electoral districts. Each member of the City Council is required to reside in the district which he or she represents and to be elected by the qualified electors residing in such district.

The present Mayor and members of the City Council, and the dates of beginning and ending of their respective current terms of office, are as follows:

Date of Beginning Date of Ending Name of Current Term of Current Term Tommy Battle, Mayor November 5, 2012 November 7, 2016 Will Culver November 5, 2012 November 7, 2016 Bill Kling, Jr. November 3, 2014 November 5, 2018 Dr. Jennie Robinson November 3, 2014 November 5, 2018 Mark Russell November 3, 2014 November 5, 2018 Richard Showers, Sr. November 5, 2012 November 7, 2016

Colonel (Ret.) John Hamilton became City Administrator effective as of November 1, 2013. In December 2015, Peggy Sargent became the Finance Director of the City. Ms. Sargent received a Bachelor of Science degree in Marketing and a Bachelor of Science degree in Accounting from the University of Alabama at Huntsville in 1996 and 2000, respectively. She also received her Master’s Degree in Management in 2002 from the University of Alabama at Huntsville. Ms. Sargent worked in the finance department of Teledyne-Brown for the past 11 years, most recently as Controller, before becoming Finance Director of the City.

Ken Benion is the City Clerk –Treasurer. Ken Benion was appointed City Clerk – Treasurer as of January 4th 2016. Mr. Benion is a Certified Public Accountant with 19 years governmental accounting experience. He received his Bachelor of Business Administration degree from Tennessee State University 1981. Mr. Benion been with the City of Huntsville since January of 2010. He most recently served as Director of Community Development since September 2011.

Marion “Trey” Riley is the City Attorney. Mr. Riley was appointed as City Attorney in the Fall of 2015. Mr. Riley received a Bachelor in Business Administration degree from Auburn University in 1977, and his Juris Doctorate degree from the University of Alabama School of Law in 1980. Upon graduating from law school, Mr. Riley served a brief tenure as an Assistant District Attorney, and thereafter engaged in the solo practice of law for almost 35 years, representing a broad cross-section of individuals in a

Appendix B – Page 1 wide variety of legal matters before numerous different tribunals, primarily in Alabama but also in surrounding states.

The City Administrator, the Finance Director, the City Attorney, and the City Clerk-Treasurer are appointed by the Mayor, subject to the approval of the Council, for four-year terms concurrent with that of the Mayor.

Certain City Officials

Tommy Battle, Mayor. Mr. Battle is currently serving his second term as Mayor of the City. He was first elected Mayor in 2008, and before then served on the City Council between 1984 and 1988. A commercial real estate developer, Mayor Battle has served on various local boards within the City, including the Huntsville Emergency Medical Services, Inc., board, EarlyWorks Children's Museum board and the administrative council of Trinity United Methodist Church. Mayor Battle received his B.S. degree in Business Administration from the University of Alabama.

Dr. Richard Showers, Sr., Council Member. Dr. Showers, representing District 1, was first elected to the City Council in 1988. Dr. Showers received his B.S. degree in Agribusiness Education and his M.S. degree in Trade and Industrial Education from Alabama A&M University and has done further study at Auburn University in Adult and Continuing Education. He received an honorary doctorate degree in Humanities in 1998. He has been an elementary school technology instructor, a middle school earth science instructor, a middle school industrial arts instructor, a vocational education instructor, adult education instructor, and adult education coordinator. Dr. Showers retired from Huntsville City Schools in June 2005, Basic Vocational Instructor, Huntsville Center for Technology. Dr. Showers is a former member of the Trustee Board and Chairman of the Academic Affairs Sub-committee at Alabama A&M University, Normal, Alabama; and is also a Chartered Trustee at Selma University, Selma, Alabama. Dr. Showers is a member of the Union Chapel Missionary Baptist Church and serves on the Deacon Ministries and is a Senior Adult Teacher of the Sunday school.

Mark Russell, Council Member. Mr. Russell, representing District 2, was first elected to the City Council in 2002. He holds a B.S. degree in Business Administration from Auburn University and is employed by a private defense contractor. He has been active in several civic organizations and several youth development programs, most notably the Boys and Girls Club.

Dr. Jennie Robinson, Council Member. Dr. Robinson, representing District 3, was first elected to the City Council in 2014. Prior to her election to the City Council, Dr. Robinson served three terms on the Huntsville City Schools Board of Education. Before being elected to the School Board in 2002, Dr. Robinson served five times as a PTA president in Huntsville city schools. She has also served on the Executive Committee of the Alabama Association of School Boards (AASB) and chaired the State Legislative Committee for AASB. Dr. Robinson received her Doctor of Philosophy and Master’s Degree in Consumer Behavior from Purdue University, and she owns a management consulting firm specializing in strategic planning and leadership development for corporations and non-profits. She is a graduate of Leadership Alabama and Leadership Huntsville. She received the Distinguished Leadership Award from Leadership Huntsville Madison County in 2006. She also serves on the boards of Leadership Huntsville Madison County and the Rotary Club of Greater Huntsville.

Bill Kling, Jr., Council Member. Mr. Kling, representing District 4, was elected to the City Council in 1988. He received a B.S. degree in Mass Media Communications and Public Administration from the University of Alabama, and an M.S. degree in Urban Studies from Alabama A & M University. Mr. Kling was a recipient of Troy State University's "Grover C. Hall" journalism fellowship. He is professionally accredited by the Southern Public Relations Federation. Mr. Kling previously served as a member of the Huntsville City Board of Education. Mr. Kling has held numerous positions in the broadcast and public relations field including public relations director, radio announcer and newscaster for a public radio station and

Appendix B – Page 2 broadcast instructor and public relations specialist for John C. Calhoun Junior College. Mr. Kling is a past President of the Huntsville Press Club.

Will Culver, Council Member. Mr. Culver, representing District 5, was first elected to the City Council in 2008. Mr. Culver holds a B.A. degree in Political Science and a Master in Business Administration from Alabama Agricultural & Mechanical University. Mr. Culver also received a Master’s Degree in Justice and Public Safety from Auburn University in Montgomery, and a J.D. degree from the Birmingham School of Law. Mr. Culver has worked as a police officer for the City Police Department and has been very active throughout the State of Alabama in the Drug Abuse Resistance Education (D.A.R.E.) program in the City. Mr. Culver works as an Adjunct Professor in the Department of Behavioral Sciences and serves as Chair of the External Advisory Committee at Alabama Agricultural & Mechanical University. Mr. Culver also serves as Associate Minister at Union Hill Primitive Baptist Church and as a Youth Pastor at Calvary Church of the Nazarene, both of which are located within the City. Mr. Culver retired from the City of Huntsville and was the Chief Magistrate of Municipal Court. Councilman Culver is President of the Huntsville City Council.

Employees

General. As of September 30, 2013, the City employed 2,500 people and the City-owned but separately operated Huntsville Utilities employed 581 people. The employees of the City are administered under a separate personnel system from that of Huntsville Utilities.

Municipal Powers and Functions

The City provides police and fire protection, streets and highways, garbage and refuse collection and disposal, sanitary sewage and disposal service and certain recreational and cultural services. It is only in the area of law enforcement, where state and county officers have concurrent jurisdiction, that there is any significant overlap in City-furnished governmental-type services. The City (through the City-owned Huntsville Utilities) also provides, subject to policies established by the several utilities boards, electric, water and natural gas service for its citizens. For information as to a change in the furnishing of garbage and refuse disposal service, see "Refuse-to-Energy Plant", below.

Several municipal functions have been delegated, by statute or authorized City ordinance or resolution, to municipal boards or commissions, such as the several utilities boards, including the following functions: industrial development, solid waste disposal, health care, library services, museum and civic center operations and public housing. Some, but not all, of these boards or authorities may issue revenue debt. Policy decisions concerning these functions are in most cases made by the applicable board or commission (the members of which are appointed by the Mayor or the City Council) and implemented by an administrative head or staff responsible to such board or commission.

Certain municipal or public functions are performed jointly with Madison County (the "County") through statutory authorities or boards whose members are appointed by the governing bodies of both the City and the County. Such authorities or boards include The Huntsville-Madison County Airport Authority (which is responsible for the operation of Huntsville International Airport), the Huntsville-Madison County Mental Health Board, the Huntsville-Madison County Civil Defense Board and The Huntsville and Madison County Railroad Authority. In addition, the City and County governing bodies jointly elect the members of the Huntsville-Madison County Marina and Port Authority, a public corporation created under an act of the Alabama Legislature to construct and operate marina and port facilities.

Funding for certain municipal boards or commissions is provided, in whole or in part, by the City, and in other cases, such boards or commissions operate as separate public corporations created by the City, but funded entirely through revenues generated by the particular municipal functions involved.

Annexation Program

Appendix B – Page 3

The City annexes land considered important to its future growth and economic expansion, which has included significant acreage in the past twenty years. Madison County annexations in excess of 40,000 acres have primarily been in the east, with mostly mixed, higher value residential developments occurring. The annexation in Limestone County, which is west of Madison County, primarily borders the Huntsville International Airport and Interstate 565, and is generally planned for commercial development. Smaller tracts are regularly being annexed, however, for residential and commercial uses.

With very few exceptions, the City’s annexations have been accomplished by petition of the landowner requesting annexation. There is no pending or threatened legal action contesting the validity or legality of any of the City’s annexations.

The City, in concert with the Metropolitan Planning Organization (MPO), has adopted a major street plan for the entire City. The rights of way for the streets shown on the master street plan are being protected from development as provided by Alabama law. The expansion and extension of these major streets will be the major expenditure for the City resulting from the City’s annexation programs. Most of the local streets in the annexed areas will be constructed to City standards and specifications by developers as subdivision of property and development occur.

The City has in operation sufficient sewer treatment capacity for the annexed areas and future annexations. The City generally extends sewer outfall lines and facilities into annexed areas when there is a finding of sufficient economic return to justify such extension. The City’s extension policy and its sewer rate structure are, in general, a significant part of its economic development policy.

The rate of growth in the annexed areas is unpredictable, and the full extent of any impact on the City’s finances and resources cannot be measured. While the City cannot make a definite prediction or offer assurances that development will in fact occur in these areas, the City does expect that, as a result of the annexations and the services offered by the City in those areas, considerable industrial and commercial development and supporting residential development will occur.

Huntsville Utilities

The City considers its four municipally-owned utilities systems (water, electric, gas and sanitary sewer) to be among its most valuable assets. However, except for the Sewer System (which is both owned and operated directly by the City), such systems are operated by separate boards of directors which are responsible for their supervision and control and the members of which are appointed by the City Council. The water, electric and natural gas systems operate separately from the City under the name of Huntsville Utilities and are managed by Bill Pippin, President and CEO. The employees of Huntsville Utilities are subject to personnel rules established by the respective utilities boards and administered by a separate Personnel Department of Huntsville Utilities. The financial statements of the City attached hereto as Appendix C include the water, electric and natural gas systems, although it should be noted that the City’s independent auditors have not examined these financial statements and that their opinion thereon is based solely on reports of other auditors.

Refuse-to-Energy Plant

The Solid Waste Disposal Authority of the City of Huntsville (the "Authority") constructed a solid waste resource recovery plant to assist the City in its solid waste disposal program. The plant, which was completed in July of 1990, was designed to convert garbage and other solid waste into energy (steam), primarily for use by and sale to the Department of the Army at Redstone Arsenal, an Army facility near the City. The Authority is a public corporation separate from the City, the members of the Board of Directors of which are appointed by the City Council. In 1987 the City Council adopted an ordinance authorizing the transfer and conveyance by the City to the Authority, without the payment of any pecuniary consideration, of

Appendix B – Page 4 the City’s existing landfill, which, along with the plant and recycling programs, constitutes an integrated system for the disposal of solid waste and other refuse operated by or for the account of the Authority. Such transfer and conveyance was effected in August, 1988, when the Authority authorized the issuance of bonds to finance the construction of the plant. Pursuant to an agreement with the Authority, Ogden Martin Systems of Huntsville, Inc. now known as Covanta Huntsville, Inc. (an affiliate of Ogden Corporation, now known as Covanta Energy, Inc.) designed, constructed, and is operating the plant for the Authority.

In the ordinance authorizing the transfer and conveyance of the City’s existing landfill to the Authority, the City Council also authorized the execution of a Solid Waste Delivery Agreement between the City and the Authority, under which the City agreed (a) to deliver to the Authority, for processing or other disposal, substantially all solid waste and other refuse collected by the City through its solid waste collection system (as well as substantially all the sewage sludge generated through the operation of the City’s sanitary sewer or wastewater system) and (b) to pay to the Authority, for such processing or other disposal, such tipping fees as the Authority may from time to time impose and charge. This Agreement provides that all tipping fees and any other moneys due by the City under the Agreement are to be payable solely out of the current or general operating revenues or funds of the City received or receivable by it for or during the fiscal year during which such tipping fees or other moneys are required to be paid. The current rates are $39.90 for municipal solid waste and $26.50 for construction and demolition waste and may be adjusted in the future. The many variable factors on which any such adjustments in the future will depend (including, for example, plant operating results, landfill acquisition, if any, and operating costs, the effect of existing and future environmental laws and landfill regulations, and general economic conditions) are such that the City cannot accurately predict the extent of such adjustments, but it does expect increases in the amount of tipping fees over the next 25 to 30 years.

The City has taken steps to reduce the waste stream by instituting the following recycling programs: (1) the recycling of white goods at the landfill and (2) the first citywide curbside recycling program in the State of Alabama, for the removal and recycling of newspaper, plastics, metals, magazines, motor oil, and batteries. The Authority also operates a separate hazardous household wastes program. These recycling programs are expected to allow the City to meet any currently anticipated changes in environmental law which may mandate a reduction in the waste stream. The Authority expects that, even after such reductions in the waste stream are made, the amount of solid waste to be delivered by the City, together with amounts to be delivered by the Army, will continue to be in excess of the required minimum amount the Authority has agreed to deliver to the plant.

The Authority has entered into a steam sales agreement with the Department of the Army, providing for the sale of steam by the Authority to the Army for use at Redstone Arsenal. The agreement between the Authority and the Army is not, however, a take-or-pay contract and does not obligate the Army to pay for steam that is not delivered or available for delivery. While the City expects that revenues from tipping fees and from the sale of steam to the Army will be sufficient to pay the costs of operating the plant and the landfill there can be no assurance that such tipping fees and steam sale revenues will be sufficient to pay all such expenses and any future debt service and that the payment by the City to the Authority of substantial tipping fees, as authorized in the Solid Waste Delivery Agreement, may be necessary. At this point in time, all of the debt of the Authority has been repaid and there is no current debt service requirement for the Authority. The failure of the plant to operate in the manner expected, as well as any substantial plant "down-time", would adversely affect expected steam sale revenues and thus result in tipping fee increases substantially in excess of those otherwise expected. However, the plant has complete redundancy; it has four fossil-fuel-fired boilers which could supply steam to the Army if the failure to operate in the manner expected is related to the incineration of solid waste.

Miscellaneous Municipal Functions

The City, the County and the State of Alabama have coextensive law enforcement jurisdiction. The City operates a misdemeanor court system.

Appendix B – Page 5

The State is responsible for maintaining state and federal highways in the City. Further, pursuant to an understanding between the County and the City, the County maintains certain roads and streets in the Green Mountain area annexed by the City in 1973.

While public health service is principally a state function, the City historically has made annual contributions to the Madison County Department of Public Health.

The City finances all major public recreation facilities in the City except for (a) Ditto Landing and Marina, which has received some appropriations from Madison County, and (b) Monte Sano State Park, which is located adjacent to the City and is owned and operated by the State.

Huntsville International Airport is owned and operated by The Huntsville-Madison County Airport Authority, the members of the Board of Directors of which are appointed by the governing bodies of the City and the County.

Appendix B – Page 6

APPENDIX C

AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2015

CITY OF HUNTSVILLE, ALABAMA

COMPREHENSIVE ANNUAL FINANCIAL REPORT 2015

Fiscal Year Ended September 30, 2015

Prepared by Finance Department

-1- City of Huntsville Comprehensive Annual Financial Report SEPTEMBER 30, 2015

TABLE OF CONTENTS

Part I - Introductory Section: Page

Letter of Transmittal ...... 5 GFOA Certificate of Achievement ...... 10 Organizational Chart ...... 11 List of Elected Officials ...... 12

Part II - Financial Section:

Independent Auditor’s...... Report . 14 Management’s Discussion and Analysis ...... 17

Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position ...... 32 Statement of Activities ...... 33

Fund Financial Statements: Balance Sheet – Governmental Funds...... 34 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds ...... 35 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ...... 36 Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual ...... 37 Statement of Net Position –Proprietary Funds ...... 39 Statement of Revenues, Expenses, and Changes in Fund Net Position – Proprietary Funds ...... 40 Statement of Cash Flows – Proprietary Funds ...... 41 Statement of Fiduciary Net Position – Fiduciary Funds ...... 43 Statement of Changes in Fiduciary Net Position – Fiduciary Funds ...... 44

Combining Statement of Net Position – Discretely Presented Component Units ...... 46 Combining Statement of Activities – Discretely Presented Component Units ...... 47

Notes to the Financial Statements ...... 49

Required Supplementary Pension Information: Schedule of Changes in Net Pension Liability ...... 97 Schedule of Employer Contributions ...... 98

Supplementary Information: Combining and Individual Fund Financial Statements: Balance Sheet – General Fund...... 100 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget & Actual – General Fund ...... 101 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget & Actual – By Activity – General Fund ...... 102 Schedule of Special Appropriations – Budget & Actual – General Fund ...... 109 Introduction of Nonmajor Governmental Funds ...... 111 Combining Balance Sheet – Nonmajor Governmental Funds ...... 112 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – Nonmajor Governmental Funds ...... 113 Schedules of Revenues, Expenditures, and Changes in Fund Balance – Budget to Actual – By Activity - The Special Revenue Fund ...... 114 Schedules of Revenues, Expenditures, and Changes in Fund Balance – Budget to Actual – By Activity - Other Governmenta...... l Funds . 115

-1- City of Huntsville Comprehensive Annual Financial Report SEPTEMBER 30, 2015

Page Part III - Statistical Section:

Introduction ...... 126 Net Position By Component ...... 127 Changes In Net Position ...... 128 Fund Balances Of Governmental Funds ...... 130 Changes In Fund Balances Of Governmental Funds ...... 131 Governmental Activities Tax Revenues By Source ...... 132 Sales & Property Tax Rates ...... 133 Property Tax Levies and Collections ...... 134 Estimated Assessed and Estimated Actual Value Of Taxable Property (Thousands) ...... 135 Principal Taxpayers – Sales & Property Taxes ...... 136 Ratios Of Outstanding Debt By Type ...... 137 Ratios Of General Obligation Debt Outstanding ...... 138 Legal Debt Margin Information ...... 139 Computation Of Direct And Overlapping Debt ...... 140 Revenue Warrant Coverage-Water Pollution Control Fund Warrants ...... 141 Demographic and Economic Statistics ...... 142 Principal Employers ...... 143 City Government Employees By Function ...... 144 Operating Indicators and Capital Asset Statistics By Function ...... 145

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INTRODUCTORY SECTION

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April 14, 2016

The Honorable Tommy Battle, Mayor, Members of the City Council, and Citizens of Huntsville City of Huntsville, Alabama

Honorable Mayor and Council, and Citizens:

This Comprehensive Annual Financial Report of the City of Huntsville, Alabama, for the fiscal year ended September 30, 2015, is hereby presented to you. This report has been prepared to summarize the financial results of the City's operations in 2015, and to help you understand its financial condition.

City management, primarily the Finance Director and Clerk-Treasurer are responsible for this report, because it is based on the information they have provided about City finances. To help insure that this information is reasonable and reliable, management has established a system of controls that is designed to protect the City's assets from loss, theft, or misuse, and produce reliable financial information. Because the cost of such controls should not outweigh their benefits, the City's system is intended to provide reasonable, not absolute, confidence that the City's financial statements are materially accurate. As Finance Director and Clerk-Treasurer, we have primary responsibility for City financial matters, and to the best of our knowledge and belief, this report is complete and reliable in all material respects.

State law requires an annual audit of the City's financial statements by independent certified public accountants, who must conduct the audit in accordance with established standards. Beason & Nalley, Inc., a certified public accounting firm in Huntsville, conducted the audit and their report on the City's basic financial statements is included herein. It contains an “unmodified opinion," commonly known as a "clean opinion," regarding the City's financial statements, meaning the auditors have concluded the City's financial statements conform with established accounting principles. Also, the City is required by federal law to conduct a "Single Audit," or audit of the City's compliance with the requirements of federal grants it has received. The auditors are required to report on the City's system of controls and the City's compliance with legal requirements, and they have issued their reports to City management.

Accounting standards require management to provide a narrative introduction, overview and analysis with the financial statements, in the form of Management’s Discussion and Analysis (MD&A), which can be found on page 17.

Profile of the Government

The City was incorporated on December 9, 1811 and is operated under a Mayor-Council form of government. The City currently has a land area of about 215 square miles and a population of about 188,000. The City is empowered to levy taxes on real and personal property and to extend its corporate limits through annexation.

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Policy making and legislature authority are vested in a five-member City Council who are, among other things, responsible for passing local ordinances, adopting budgets, appointing committees and board members of related organizations and approving the appointment of department heads. The Mayor is responsible for carrying out the policies and ordinances of the City Council, supervising the operations of the City, and appointing department heads. The Mayor and Council members are elected to four-year staggered terms with elections every two years for three of the six positions. All Council members are elected from within their respective districts.

The City provides a full range of services through its various departments. Several important public services are provided by organizations for which the City has some legal oversight responsibility. The Huntsville Public Library, Art Museum, Alabama Constitution Village Museums, Burritt Museum, Public Building Authority, Huntsville Tennis Center, Von Braun Center and Benton H. Wilcoxon Municipal Iceplex were established by the City to be managed by separate boards. Because the City has some financial and legal responsibility for their operations, they are included in the City's financial statements. Also, the Huntsville Utilities Electric, Gas and Water Systems, the Huntsville/Madison County Convention & Visitors' Bureau, and the Downtown Redevelopment Authority, are included in the City's financial statements because of the City's oversight responsibilities, although they are legally separate entities.

The annual budget serves as the foundation for the City's financial planning and control. The Mayor is required to submit a budget proposal to the City Council for most of the City's departments and funds by September 1 of each fiscal year. The Council, after public comment and evaluation, must adopt a balanced operating budget by the beginning of the fiscal year each October 1. The budget is adopted by fund, department (e.g. urban development), division (e.g. engineering), activity (personnel, operating and capital), and object (e.g. salaries). For funds which include the City's the operating departments (e.g. General Fund), the Mayor and department heads are authorized to make budget transfers within departments' objects, but the Council must approve transfers between activities and funds. Comparisons of department and fund budgets to actual amounts are provided in this report on pages 37 through 38, 99 through 107, and 112 through 120.

Factors Affecting Financial Condition

The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City operates. Many factors affect the City's financial strength and operations, including the national economy, spending by the large federal agencies based in Huntsville, local economic development, quality of local education systems, and effectiveness of City management in its use of resources.

Economic Conditions

The City began a period of recovery after the 2008-2010 national recession, and its financial position continued to strengthen through 2015. An important factor in managing through tough economic conditions is the City’s economic development efforts. Strategic planning that focuses far into the future has helped promote revenue stability through business diversification and residential growth.

The City’s population, business base, and revenue grew at an accelerated rate through early 2008. With the recession, City revenues first stagnated in February 2008, then decreased, and began to stabilize in early 2010. The greatest impact was from lower consumer and construction industry spending that decreased sales tax and license revenue. Interest rates dropped sharply and City interest earnings followed. Federal government program spending in Huntsville remained basically stable throughout the recession, which lessened the recession’s effects on the City.s The City i experiencing some reductions in local federal spending due to federal budget reductions, which is expected to continue, although the effect is uncertain. Offsetting some of this, however, is the broad diversity of federal activities in Huntsville, which is more than the well-known military and space research and development programs.

The local unemployment rate continues to improve, and is below state and national figures. A growing employment rate while the population is growing is a positive sign for local business conditions. The median family income of Huntsville residents still exceeds national and state figures.

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Significant swings in City revenues are inherently likely because more than forty percent of total City revenue is linked to consumer spending activity, e.g. sales tax. As such, diversification of our business base is especially critical, so that employment and spending will not be concentrated in too narrow a manner. In other words, diversification can offset some of the inherent swings in consumer spending activity.

The City aggressively cultivates partnerships with state and federal agencies and, as a result, a significant number of local road projects include state and federal funding. Most notably, in 2014 the City and State agreed upon a $250 million road improvement program, with each providing one-half of the cost. The City increased its sales tax by one percent on March 1, 2014, to finance its share. This five-year plan will greatly enhance major thoroughfares across the City, maintaining our short-commute reputation.

The following significant economic development projects were announced from 2013 to early 2016, due largely to incentives by the City and its valuable State and local government partners:

i Twickenham Square, a mixed development that includes residential units, a high-rise office, a hotel, a City parking garage and a Publix grocery store in south downtown are mostly complete, which has completely renovated the former federal housing project located there.

i Remington Outdoor Company purchased a facility and opened a new advanced manufacturing plant in Huntsville that employs 2,000 workers in 2015.

i In June 2014, ground was broken at the Shops at Merchants Walk, a 100,000 square foot shopping development that is anchored by Whole Foods Market and includes other new venues to the City.

i Cabela’s announced in June 2014 that it would begin construction that fall on an 80,000-square- foot superstore at the $80 million newly planned mixed-use development Parkside Town Centre in Huntsville. The project is near the intersection of Interstate 565 and Research Park Boulevard. The store opened in September 2015. It is the first Cabela’s store in Alabama and one of only a handful in the Southeast.

i During 2014, the Bridge Street Town Center welcomed a new $20 million Belk, three parking areas creating 1,023 new parking spaces, and several important retail and restaurant venues.

i In January 2015, Polaris Industries announced plans to build a 600,000-square-foot plant on a 453- acre site located within the Huntsville city limits in Limestone County. Polaris specializes in all- terrain vehicles (ATVs), the Polaris RANGER® and RZR® side-by-side vehicles, snowmobiles, motorcycles and on-road electric/hybrid powered vehicles. Polaris broke ground on the $142 million plant in 2015 and official plan to open it in the second quarter of 2016 and create at least 1,700 new jobs.

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i In April of 2015 work began on a mixed-use project called CityCentre at Big Spring, in the heart of downtown. Phase I will include a new-to-market boutique hotel, 31,000 square feet of retail stores and restaurants, 53,000 square feet of office loft space and 200 multi-family apartments.

The Marshall Space Flight Center in Huntsville was established in 1960 as the lead agency for the National Aeronautics and Space Administration ("NASA") for development of the Saturn rockets for travel to the moon. Building on the successes of past programs including Saturn and the Space Shuttle, the center provides the engineering expertise behind propulsion and transportation systems and has recently begun development of the Space Launch System (SLS), the most powerful rocket system ever. SLS will enable exploration beyond low-earth orbit via cargo and eventually crewed flights.

The City’s work is mostly complete for the current infrastructure phase at Redstone Gateway Park, a partnership with Redstone Arsenal through its enhanced use lease program, and private developers. The $1 billion office park at Redstone’s primary entrance will expand the City’s ability to meet the needs of the local defense industry, and highly compliments our Cummings Research Park. Much of the public infrastructure has been completed through the City’s TIF 5, and office buildings are complete and occupied with new ones under construction.

Huntsville City Schools is building or rebuilding $200 million of school facilities across the city. This combined with improvements in educational achievement throughout the system are further enhancing the City’s reputation as a place for quality public education.

In summary, the local economic outlook is positive, but some financial challenges remain. Growth in the demand for public services will exert pressure on spending requirements, and restoring budgetary reductions in the past several years will remain a near-term challenge. The City will also experience growing pressure from increasing pension contributions and the rising cost of retiree health care benefits.

Management of City Resources

Long-term capital planning. Much of the City's growth and vitality depend on public infrastructure, and the Mayor and Council continue to plan comprehensively for development and maintenance of this expensive asset. The ten-year capital improvement plans establish spending priorities and identifies funding needs, primarily long-term debt, and is updated every year.

Long-term debt management. Most of the City's capital and school construction projects are financed with long-term debt, and managing debt size and complexity within available revenues requires careful long-term planning. The ten-year capital plans provide the framework for managing existing debt for current and upcoming capital projects. Capital spending pressure, however, will remain high because of budgetary reductions required during the recession.

The City issued new debt in 2015 and 2016, for a variety of capital projects, and for work at Redstone Gateway, for which private developers are providing the financing. The City is also looking to refinance some outstanding debt in the near future to reduce interest costs.

An important factor in assessing the economic health of the City of Huntsville, and the City’s finances, is the credit rating assigned by credit rating agencies, because of their in-depth review of economic conditions and City financial performance. The City most recently received a Aaa rating from Moody’s Investors Service, Inc. and a AAA rating from Standard & Poor’s Rating Services in March 2015, which is eight years in a row the City has achieved this respectable accomplishment. The manner in which city leaders respond to our economic challenges will be a critical factor in maintaining this high rating.

General Fund reserves. City ordinance generally requires that at least 11.5 percent of General Fund revenue budget be kept in unassigned fund balance, so the City has adequate working capital and can respond to unexpected financial shocks. The City met this requirement in 2015, and had fund balance in excess of the requirement.

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Cash management. The City's investment policy intends to maximize earnings while protecting cash assets. The City invests operating funds conservatively, and only in certificates of deposit, money market accounts, and Federal securities, as required by state and city law.

Operational efficiency. Mayor Battle has continually challenged all City departments to improve their operations and the quality of citizen services, which has been effective as personnel and operating costs in 2015 were generally lower than budget plans. Financial challenges remain due to increasing demand for public services and new infrastructure as the City grows more rapidly than in recent years.

Financial and risk management. Sound financial management practices are a very important part of the City meeting its obligation for public services. The City is regarded for conservative financial management amidst its financial challenges. Maintaining these practices will require careful prioritization of spending desires.

Pension and other postemployment benefits. The cost of providing benefits to City retirees is a significant commitment of current and future resources. There is a misperception that the State of Alabama provides financial assistance for these pension benefits through the Retirement Systems of Alabama, but the City pays 100 percent of benefit costs after employee contributions and plan earnings. The City has met all of its obligations and incorporates the effect of expected benefit cost increases in making annual budget decisions. Information about the retirement plans is found on pages 84 through 92 of this report. Because of benefit increases and plan earnings in recent years, the amount of City pension benefits that are considered “funded” has dropped significantly, and the City’s costs have risen accordingly. Future increases may occur. Also, given the increasing cost of health care and the number of employees eligible to retire, management of retiree benefits must be very intentional and consider all issues to help provide balance between retiree benefits and other financial obligations of the City.

Awards and Acknowledgements

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 for its Comprehensive Annual Financial Report for the fiscal year ended September 30, 2014. The Certificate of Achievement is a prestigious national award that recognizes conformance with the highest standards for preparation of state and local government financial reports. The Certificate of Achievement is valid for a period of one year only. Management believes that this report conforms to GFOA's requirements and is submitting it for consideration of another award.

The staff of the Finance Department assisted in the preparation of this report. We appreciate their hard work and the support of the Mayor and City Council members, whose commitment to good financial stewardship makes our financial success possible.

Respectfully,

-9- -10- City of Huntsville Organizational Structure

Citizens of Huntsville

City Council Admin. City Council Mayor Office Office

General Government Public Safety

Human Clerk-Treasurer Finance I.T.S. Legal Animal Services Fire & Rescue Police E.M.A. Municipal Court Resources -11-

Public Services Urban Development

Fleet General Landscape Community Natural Cemetery Engineering Inspection Maintenance Services Management Development Resources

Recreation Planning- Planning- Traffic Water Polluton Parking Public Transit Public Works Services Administration Long Rage Engineering Control

CITY OF HUNTSVILLE ELECTED OFFICIALS September 30, 2014

MAYOR TERM OF OFFICE

Honorable Tommy Battle November 2012 – 2016

CITY COUNCIL MEMBERS

District 1 - Richard Showers Term Expires 2016

District 2 - Mark Russell Term Expires 2018

District 3 - Jennie Robinson Term Expires 2018

District 4 - Bill Kling Term Expires 2018

District 5 - Will Culver Term Expires 2016

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FINANCIAL SECTION

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Independent Auditor’s Report

The Honorable Mayor and Members of the City Council City of Huntsville, Alabama

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business- type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Huntsville, Alabama (the City), as of and for the year ended September 30, 2015, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the City of Huntsville Electric, Natural Gas, and Water Systems (Huntsville Utilities), and the Huntsville/Madison County Convention and Visitors Bureau, which are component units of the City, or the financial statements of the Public Library Special Revenue Fund, the Huntsville Museum of Art - Board Special Revenue Fund, the Von Braun Center Enterprise Fund, and the Municipal IcePlex Enterprise Fund. Those financial statements represent 99.9% of the total assets, and 100% of the revenues of the discretely presented component units; 8.6% of the total assets and 4.7% of the revenues of the special revenue funds; and 21.5% of the total assets and 18.3% of the operating revenues of the enterprise funds. Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our opinion, insofar as it relates to the amounts included for these entities, is based on the reports of the other auditors.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. The financial statements of the Huntsville/Madison County Convention and Visitors Bureau, which is a component unit of the City, and the Huntsville Museum of Art –Board Special Revenue Fund were not audited in accordance with Government Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or Beason & Nalley, Inc. error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that 101 Monroe Street are appropriate in the circumstances, but not for the purpose of expressing an opinion on the Huntsville, Alabama effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also 35801-4829 includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. (256) 533-1720 (800) 416-1946 We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our (256) 534-8558 Fax audit opinions. www.beasonnalley.com

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Opinions

In our opinion, based on our audit and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Huntsville, Alabama, as of September 30, 2015, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matters

As discussed in Notes 1b and 5I, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27, as well as Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date – an amendment of GASB Statement No. 68, as of October 1, 2014. These standards significantly changed the accounting for the City’s net pension liability and the related disclosures. Our opinions are not modified with respect to this matter.

As also described in Note 5I to the financial statements, the City has recorded prior period adjustments which affected the beginning net assets of the Governmental and Business-Type Activities and the Water Pollution Control Fund, a major proprietary fund.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, beginning on page 17, and budgetary comparison information, on pages 37 through 38, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We and other auditors have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We and the other auditors do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Huntsville, Alabama’s basic financial statements. The introductory section, supplementary information section, and statistical section, as listed in the table of contents, and collectively referred to as supplementary information as follows, are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The combining and individual nonmajor fund financial statements as well as the schedules of revenues, expenditures and changes in fund balance budgetary comparisons are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied by us and the other auditors in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, based on our audit and the reports of other auditors, the information is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

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Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated April 14, 2016, on our consideration of the City of Huntsville, Alabama’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

Huntsville, Alabama

April 14, 2016

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Management's Discussion and Analysis

As management of the City, we offer readers this narrative overview and analysis of the City’s financial activities for the fiscal year ended September 30, 2015. We encourage readers to consider the information presented here and in the letter of transmittal at the front of this report, and the City’s financial statements that follow.

Financial Highlights

As explained in more detail below, City financial activities are presented in two ways:

i The government-wide financial statements provide a broad overview of the City’s finances, in a manner similar to private-sector businesses.

i The fund financial statements provide information about City financial resources that have been segregated for specific activities or objectives.

From the Government-Wide Financial Statements:

i The City’s net position was $734.2 million at the close of fiscal year 2015, a decrease of $181.3 million from 2014 – the majority of which is related to the implementation of GASB Statement Nos. 68 and 71, which reduced beginning net position of governmental activities by $149.8 million and beginning net position of business-type activities by $13.1 million. The net position of the governmental activities decreased an additional $17.4 million and the net position of the business-type activities increased $10.3 million.

i The unrestricted net position of the governmental activities are negative $423 million, which means the City must meet its ongoing obligations to citizens and creditors from future revenues (see table on page 20).

i Total revenues of the governmental activities increased $18.4 million from 2014 to 2015, or 5.2 percent, and total expenses decreased $61.1 million, or 13.6 percent.

i The City’s business-type activities have a total net position of $303.6 million, and $17.5 million is unrestricted. Revenues of the business-type activities increased $280 thousand in 2015, or 0.6 percent, and their expenses increased $1.6 million, or 3.9 percent.

From the Fund Financial Statements:

i As of September 30, 2015, the governmental funds reported a combined ending fund balance of $163.3 million, an increase of $8.3 million from the prior year, which included the following significant changes:

o General Fund - $5.2 million deficit.

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o The Special Revenue Fund – a $1.9 million surplus. o Capital Improvement Fund – a $3.1 million deficit, because of spending money received or borrowed in excess of new borrowings and unspent proceeds from prior years on capital and other activities a planned o 2014 Capital Improvement Fund – a $17.9 million surplus, due to a full year of collections on the new one percent sales and use tax levied in 2014, which will be spent in future years. o Cummings Research Park Fund – a $3.1 million deficit, due to fulfillments of construction commitments from the prior year related to Redstone and the Parkside Town Center

More detailed information for each of the above is provided beginning on page 24.

i Of the $163 million fund balance, $137.5 million is restricted or has been allocated for certain purposes by the City Council, leaving a $25.7 million balance (including $27.7 million for General Fund contingencies).

i The General Fund has a fund balance of $35.4 million, and $3.2 million is available for any purpose.

i The net change in the principal amount of the City’s debt associated with governmental activities increased $30.5 million in 2015, representing $73.8 million of new debt and $43.3 million paid in principal.

Using this Annual Report

This discussion and analysis is an introduction to the City’s basic financial statements. The City’s basic financial statements consist of three components: (1) government-wide financial statements, (2) fund financial statements, and (3) notes to the financial statements. This report also contains supplementary information in addition to the basic financial statements themselves.

Reporting the City as a Whole

The government-wide financial statements consist of the Statement of Net Position and the Statement of Activities, and provide readers with a longer-term view of the City’s finances. One of the most important questions asked about City finances is, “Is the City as a whole better or worse off as a result of the year’s activities?” These statements report information in a way that helps answer this question. They include all assets and liabilities of the City using the accrual basis of accounting, which is similar to the accounting used by private-sector businesses – all revenues and expenses are taken into account regardless of when cash is received or paid.

The Statement of Net Position presents one measure of the City’s financial health or financial position, by showing the difference between the City assets and deferred outflows of resources, and the City’s liabilities and deferred inflows of resources, or net position. Increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating, along with considering nonfinancial factors such changes in the property tax base or the condition of City assets used by the public.

The Statement of Activities shows how the City’s net position changed during the most recent fiscal year.

In both of the above statements, we divide the City’s activities into three components: i Governmental Activities – Most of the City’s basic service operations are reported here, including police, fire, public works, and the administrative departments. Taxes, business licenses and customer charges finance most of these activities.

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i Business-Type Activities – The City charges fees to customers to cover most of the cost of certain activities, such as for sanitary sewer service and Von Braun Center events, and these activities are reported here. i Component Units – The City includes three legally separate entities in this report, Huntsville Utilities, the Huntsville/Madison County Conventions & Visitors’ Bureau and the Downtown Redevelopment Authority. Although legally separate, these “component units” are included because the City is financially accountable for them.

The government-wide financial statements can be found on pages 32 and 33 of this report.

Reporting the City’s Funds

A “fund” is a set of related accounts that is used to help the City control and manage money for particular purposes. The City, like other state and local governments, uses “fund accounting” to show that it is meeting legal responsibilities for using certain revenue, or support other objectives of City management. Some funds are required to be established by State law (like state gasoline taxes) or debt agreements, and the City Council establishes all other funds (like the Capital Improvement Fund). The City has two kinds of funds that use different accounting methods: i Governmental funds – Most of the City’s basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can be readily converted to cash. The governmental funds statements provide a detailed short-term view of the City’s administrative and basic service operations, helping a reader determine whether there are more or fewer financial resources that can be spent in the near future to finance the City’s activities. Because the fund financial statements use a different accounting method than the government-wide statements described above, we provide an explanation of the differences at the bottom of the fund financial statements.

The first governmental fund financial statements appear on pages 34 to 38. i Proprietary Funds – When the City charges customers for the services it provides and intends for these charges to cover most of the cost of those services, these are generally reported in proprietary funds. In the City’s case, all such activities are reported as enterprise funds, a type of proprietary fund. These fund financial statements report the same information as the government-wide statements for business- type activities.

The proprietary fund financial statements appear on pages 39 through 42.

The City as Trustee

The City is trustee, or “fiduciary” for its retirees’ post-retirement healthcare benefits. Because the assets in this trust arrangement can only be used to provide retiree benefits, and not to finance other City activities, the trust’s activities are reported in a separate Statement of Fiduciary Net Position and Statement of Changes in Fiduciary Net Position, appearing on pages 43 and 44. The City is responsible for ensuring that the assets reported in this fund are used for their intended purposes.

Notes to the financial statements

The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 49 through 94.

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Other information

In addition to the financial statements and accompanying notes, this report also presents certain supplementary information. Because the City adopts an annual operating budget for certain funds, a comparison of budget to actual by activity (i.e. personnel, operating, capital and other) is provided for the applicable funds to demonstrate compliance with this budget. This information and the information on smaller governmental funds can be found beginning on page 99.

The City as a Whole

As noted earlier, net position may serve as a useful indicator of the City’s financial position. The City’s net position was $734.4 million at the close of the most recent fiscal year, a decrease of $181.2 million. In 2015, net position decreased from ongoing activity by $7.2 million, and from restatement of prior period net position of $174 million, which was primarily attributable to the implementation of GASB Statement Nos. 68 and 71. The decrease in net position from ongoing activity was a dramatic increase from 2014 as the City had a significant amount of expenses related to Huntsville City Schools that were higher in 2014 and did not repeat in 2015.

It is important to note that this net position is largely restricted in some manner and not available to finance City activities. The most significant restriction is the $1.1 billion invested in capital assets (e.g. land, buildings, streets, and bridges), less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; therefore, these assets are not available as an economic resource as are other components of net position. Although the City’s investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay debt must be provided from other sources, since capital assets themselves cannot be used to pay these liabilities. An additional $39.4 million of the City’s net position is subject to restrictions concerning its use, as required by state or federal law (not City Council restrictions).

After considering the restricted net position above, the remainder of net is position is unrestricted, which in the City’s case is negative. This is because for the City’s governmental activities, the unrestricted assets and deferred outflows of resources are $423 million less than unrestricted liabilities. This figure is further analyzed as follows:

Unrestricted liabilities arising from governmental activities: Long-term debt incurred for non-City governmental activities: Huntsville City Schools ($252,863,810) Von Braun Center (23,005,787) Other (60,704,036) Other liabilities: Accrued interest (8,452,851) Compensated absences (21,974,969) Net pension liability (152,950,947) Accrued claims and judgments, long-term 0 Total (519,952,400) Unrestricted assets available 96,806,473 Unrestricted net position ($423,145,927)

The long-term debt detailed above was used to construct assets that are not owned by the City governmental activities, but the City’s governmental activities are responsible for repayment of the debt. While assets are not currently on hand to pay these liabilities, the City expects to pay the debt from annually- recurring revenues established for that purpose. For example, the long-term debt issued for the Huntsville City Schools is expected to be repaid from the collection of a 6.5 mill property tax restricted for school purposes. The other liabilities detailed above must be paid from other revenues of future periods.

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An overview of the City’s net position and changes to net position is as follows:

Governmental Activities Business-Type Activities Total 2015 2014 2015 2014 2015 2014

Net Position:

Current and other assets $196,343,525 $189,229,005 $33,722,252 $37,536,660 $230,065,777 $226,765,665 Capital assets 1,134,082,068 1,133,612,737 384,864,653 387,058,930 1,518,947,261 1,520,671,667

Total assets 1,330,426,133 1,322,841,742 418,586,905 424,595,590 1,749,013,038 1,747,437,332

Deferred outflows of resources 34,050,839 22,950,725 2,788,515 2,163,749 36,839,354 25,114,474

Long-term liabilities 886,803,100 698,685,356 113,483,147 114,440,827 1,000,286,247 813,126,183 Other liabilities 37,890,227 39,829,307 3,536,168 4,050,652 41,426,395 43,879,959

Total liabilities 924,693,327 738,514,663 117,019,315 118,491,479 1,041,712,642 857,006,142

Deferred inflows of resources 9,105,544 0 797,065 0 9,902,609 0

Net position: Net invest. in capital assets 797,217,611 833,092,652 286,013,940 274,288,062 1,083,231,551 1,107,380,714 Restricted 56,606,417 36,683,825 0 554,023 56,606,417 37,237,848 Unrestricted (423,145,927) (262,498,673) 17,545,100 33,425,775 (405,600,827) (229,072,898)

Total net position $430,678,101 $607,277,804 $303,559,040 $308,267,860 $734,237,141 $915,545,664

Changes in Net Position:

Revenues Program revenues: Charges for services $47,795,555 $47,746,119 $47,305,879 $45,908,443 $95,101,434 $93,654,562 Operating grants & contrib. 24,437,539 26,850,683 0 0 24,437,539 26,850,683 Capital grants & contrib. 21,290,616 21,349,944 2,409,031 3,525,530 23,699,647 24,875,474 General revenues: Sales taxes 181,057,346 159,401,801 0 0 181,057,346 159,401,801 Property taxes 54,748,223 54,253,368 0 0 54,748,223 54,253,368 Other taxes 41,737,789 41,039,618 0 0 41,737,789 41,039,618 Interest on investments 450,481 672,898 63,140 73,467 513,621 746,365 Other 1,951,356 1,180,504 0 0 1,951,356 1,180,504 Gains (losses) on sales of assets (304,271) 2,263,811 0 0 (304,271) 2,263,811 Total revenues 373,164,634 354,758,746 49,788,050 49,507,440 422,942,684 404,266,186

Expenses General government 29,989,299 29,153,904 0 0 29,989,299 29,153,904 Public safety 89,257,242 88,372,786 0 0 89,257,242 88,372,786 Public services 168,284,768 237,413,535 0 0 168,284,768 237,413,535 Urban development 43,242,563 36,683,268 0 0 43,242,563 36,683,268 Interest on long-term debt 26,224,071 26,658,311 0 0 26,224,071 26,658,311 Unallocated depreciation 31,002,001 30,740,478 0 0 31,002,001 30,740,478 Water pollution control 0 0 28,593,512 27,244,801 28,593,512 27,244,801 Other 0 0 13,659,090 13,423,435 13,659,090 13,423,435 Total expenses 387,999,944 449,022,282 42,252,602 40,668,236 430,252,546 489,690,518

Net change before transfers (14,835,310) (94,263,536) 7,525,448 8,839,204 (7,309,862) (85,424,332) Transfers (2,726,833) (2,318,504) 2,726,833 2,318,504 0 0

Change in net position (17,562,143) (96,582,040) 11,157,708 11,157,708 (7,309,862) (85,424,332)

Net position, begin., restated 448,240,244 703,859,844 293,306,759 297,110,152 741,547,003 1,000,969,996

Net position, ending $430,678,101 $607,277,804 $303,559,040 $308,267,860 $734,237,141 $915,545,664

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The increase (decrease) for the various components of net position shown above is as follows:

Governmental Activities Business-Type Activities Total 2015 2014 2015 2014 2015 2014

Change in Net Position by Component:

Invested in capital assets Net additions of capital assets $54,542,531 $45,628,545 $12,326,106 $14,039,880 $66,868,637 $59,668,425 Depreciation of capital assets (43,801,579) (44,345,281) (12,669,267) (12,370,090) (56,470,846) (56,715,371) Change in capital-related debt (37,344,912) 83,501 13,920,155 7,059,999 (23,424,757) 7,143,500 Prior period adjustment (9,271,081) (1,851,116) (11,122,197) Change in SRF drawdowns 0 0 0 (1,103,331) 0 (1,103,331) (35,875,041) 1,366,765 11,725,878 7,626,458 (24,149,163) 8,993,223 Other restrictions Capital projects 17,142,727 (9,643,201) (554,023) (6,304,100) 16,588,704 (15,947,301) Debt service 1,074,450 (7,673,297) 0 0 1,074,450 (7,673,297) City schools 343,970 1,954,514 0 0 343,970 1,954,514 Other restrictions 1,361,445 (1,056,850) 0 0 1,361,445 (1,056,850) 19,922,592 (16,418,834) (554,023) (6,304,100) 19,368,569 (22,722,934) Unrestricted General Fund 35,233 (21,151) 0 0 35,233 (21,151) The Special Revenue Fund (1,881,606) 0 0 0 (1,881,606) 0 Capital Improvement Fund 5,446,372 (879,207) 0 0 5,446,372 (879,207) 2014 Capital Imp. Fund (17,920,636) 0 0 (17,920,636) 0 Cummings Res. Park Fund 2,915,981 1,528,072 0 0 2,915,981 1,528,072 Water Pollution Control Fund 0 0 554,023 8,672,134 554,023 8,672,134 Restatement for GASB 68/71 (149,766,479) 0 (13,109,980) 0 (162,876,459) 0 Change in non-capital related liabilities 12,215,891 (89,617,900) 0 0 12,215,891 (89,617,900) Change in deferred outflows (2,586,466) 6,060,173 (573,306) 824,984 (3,159,772) 6,885,157 Change in deferred inflows (9,105,544) (797,065) (9,902,609) Other 0 1,400,042 (1,954,347) 338,232 (1,954,347) 1,738,274 (160,647,254) (81,529,971) (15,880,675) 9,835,350 (176,527,929) (71,694,621)

Change in net position ($176,599,703) ($96,582,040) ($4,708,820) $11,157,708 ($181,308,523) ($85,424,332)

Governmental Activities:

Total revenues from governmental activities were $42.1 million more in 2015 compared to 2014, and the most significant changes were as follows:

Charges for services Building permits (-10.2%) (201,085) Privilege licenses (+4.5%) 775,769 Municipal Court fines (+8.5%) 125,537 Cemetery receipts (+106.2%) 208,348 Sanitation charges (+1.4%) 161,490

Capital grants and donations Intergovernmental capital grants 2,663,688 FTA grant for facility (696,884)

Operating grants and donations FEMA grant for 2011 tornado damage cleanup (1,215,990) HUD Grants for Urban Development (298,073) Perpetual care donation – one time receipt in FY14 (1,386,600)

General revenues Sales/use taxes (+13.6%) 21,655,545 Property taxes (+1.0%) 494,855 1% lodgings tax (+6.3%) 54,133 5% lodgings tax (+3.3%) 144,894 Utilities Water payments (+12.6%) 237,255 Sale of property for park expansion 900,000 Gains on sales of assets – sales of Cummings Research Park lot in FY14 (2,049,765)

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Revenues from governmental activities can be illustrated as follows:

Other 0.6% Property taxes 14.7% Other taxes 11.2%

Charges for services 12.8% Sales & use taxes 48.5% Operating grants/donations 6.5%

Capital grants/donations 5.7%

Expenses were $61 million lower in 2015 with most functional expenses being comparable with the prior year. General Government activities had a slight increase of $835 thousand, which amounted to a 2.9% increase over 2014 expenses. Public Safety activities remained fairly constant overall, with an increase of $884 thousand, which was an overall increase of only 1% over 2014 Public Safety expenses.

The most significant changes in the current year were within the Public Services and Urban Development activities. Public Services activities expenses decreased $69 million or 29.2% from the prior year. This was mainly due the fact that the City transferred $104 million in debt proceeds to the Huntsville City Schools in the prior year. This was a one-time transaction that did not reoccur in the current year, greatly decreasing the overall expenditures in this activity. This was primarily offset by a $48 million transfer of funds to the Alabama Department of Transportation (ALDOT) in relation to a commitment made in the prior year for improving roadways in the City. The transfer to ALDOT was funded by additional debt proceeds from the 2015 A warrants issued in the current year.

Urban Development activities expenses increased $6.5 million, or 17.9% over 2014. This was primarily related to additional funds provided for large economic developments which promise to make huge impacts to the community starting with jobs.

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Revenues and expenses for the governmental activities can be illustrated as follows:

Program Revenues & Expenses - Governmental Activities Program revenues Expenses $200

$150

$100

Millions $50

$0 General Public safety Public services Urban Interest on Unallocated government development long-term debt depreciation

Business-Type Activities:

Total revenues increased $274 thousand, or 0.6%. Operating revenues actually increased $1.4 million or 3.0%, but the amount of donated subdivision sewer assets and capital grants for the Water Pollution Control Fund decreased a net of $1.1 million. Expenses for all activities increased $1.5 million, or 3.7%, with the main increases being in personnel and normal operating expenses of the Water Pollution Control Fund and the Von Braun Center.

Program Revenues & Expenses - Business-Type Activities (a)

Expenses Program revenues $0 $5 $10 $15 $20 $25 $30 $35 $40

Sewer system

Civic center

Millions

(a) The Ice Complex is not comparatively significant for purposes of this chart.

The City’s Funds

As noted earlier, the City uses fund accounting to show that it is meeting legal responsibilities for using certain revenue, or support other objectives of City management.

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Governmental Funds

The focus of the City’s governmental funds is to provide information about financial resources that can be spent in the near future to finance the City’s activities. The combined fund balances of the City’s governmental funds as of September 30, 2015, was $163 million. This amount is available for spending but is subject to certain restrictions or limitations, as follows:

Nonspendable - amounts that cannot be spent because they are not in spendable form or for which there are obligations to keep the amounts intact. $3,228,122 Restricted – amounts that are restricted for specific purposes by federal or state law, or contractual obligations. 87,613,558 Committed - amounts that can only be used for specific purposes enumerated in City Council ordinances related to the levying or earmarking of specific revenue sources. 36,670,030 Assigned - amounts based on the City’s intent to use them for certain purposes, including positive fund balances of the entities managed by City Council-appointed boards. 9,944,356 Unassigned - amounts that cannot be classified otherwise, including certain fund balances of the Board-managed entities and the 11.5% contingency reserve of the General Fund. 25,777,330

Total $163,233,396

More detail concerning the above fund balances may be found on page 79. The total fund balances of the governmental funds increased $8.3 million in 2015, and the significant changes were as follows:

General Fund. The General Fund, as the City’s primary operating fund, accounts for many diverse activities, and the 2015 highlights were:

i The fund balance of the General Fund decreased $5.2 million in 2015, to $35.4 million at year- end, which includes a $26 million unassigned balance, although $27.8 million of this amount is held for contingencies.

i The original revenue budget was $245.7 million and expenditures were $241.9 million, a $3.8 million planned surplus. Significant changes were made to the budget totaling $8.7 million (see page 27), so the final budget reflected a $5 million deficit. The changes, in total, were supported by available fund balance from the prior year, and mostly consisted of re-establishing the budgets for unfinished capital expenditures from 2014, or for new capital items.

i Actual revenues were $1.9 million more than the final revenue budget, and the significant deviations from the budget were as follows:

Over (Under) Budget Sales/use taxes – 3.3% higher than 2014 and 7.3% more than budget $1,038,504 Fines/forfeitures – 8.1% higher than 2014 and 16% more than budget 489,303 Sanitation charges – 1.4% higher than 2014 and 1% more than budget 128,365 All other accounts - none individually significant 194,275 Total ($1,850,447)

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-25- Management's Discussion and Analysis City of Huntsville

i Actual expenditures were $2.8 million more than the final budget, and the significant deviations from the budget were as follows:

(Over) Under Budget Finance department capital expenditures – amounts expected for the remaining components of the ERP system not fully implemented $1,220,404 General Personnel expenses - reflecting increased in insurance costs across the City (4,877,107) Information Technology Services Capital - for communication software 250,336 Emergency management operating expenses – based on timing of related grants and operating needs (222,570) Fire and Rescue personnel, operating and capital costs (545,453) Police personnel costs – related to grant funding for officers (503,662) Landscape outside contract costs -lower service demands and less temporary labor costs 275,088 Parks and Recreation personnel and operating 266,170 Madison County Commission appropriations 375,000

Capital Improvement Fund – reported a $17.9 million surplus, primarily because of spending of debt proceeds from the issuance of the 2015A Warrants in the current year along with remaining unspent proceeds from previous outstanding issues which outweighed the amount of new debt proceeds from the 2015A and amounts received as intergovernmental assistance received on projects primarily related to the Alabama Department of Transportation. Generally, the fund will report an increase when new debt is issued is more than the spending of such in subsequent years.

2014 Capital Improvement Fund – reported a $17.9 million surplus, due to a full year of collections of the new one percent sales/taxes in 2015. The amounts of these funds received in the current year exceed expenditures on allowable capital and economic development projects. The remaining funds and future collections will continue to support capital and economic development projects in future years.

Cummings Research Park Fund – reported a $3.1 million deficit, due to fulfillment of Redstone and Parkside Town Center commitments made during the prior year.

Proprietary Funds

The focus of the City's enterprise funds is to provide the same type of information as found in the government-wide financial statements, but in more detail.

The net position of the enterprise funds decreased $4.7 million in 2015. Net position was increased $10.2 million in 2015 from normal operations. However, overall net position was decreased due to a prior period adjustment of $14.9 million related to the implementation of GASB Statement Nos. 68 and 71. The Water Pollution Control Fund and Von Braun Center Fund net position were decreased due to implementation of GASB Statements Nos. 68 and 71 by $10.3 and $4.6, respectively in 2015. The Water Pollution Control Fund net position increased $11.4 million from operations; operating revenues increased $1.6 million and operating expenses increased $1.9 million. A significant amount of the unrestricted net position, including the 2015 surplus, is budgeted for ongoing system capital improvements.

The Von Braun Center Fund net position decreased $3,796,073. While operating revenues and liquor/lodging tax transfers from the General Fund more than cover operating expenses, depreciation expense of $2.4 million is not covered by such, which is a continuing matter for future consideration (i.e. maintaining the condition of the Center’s assets at acceptable levels). Given this reality, the City has often constructed improvements to Center’s assets using other City resources.

-26- Management's Discussion and Analysis City of Huntsville

General Fund Budgetary Highlights

Variances between General Fund budget and actual amounts is described on page 25, and the net differences between the original and final budget is summarized below. An amount shown in the “Net Change to Budget” column was an increase or (decrease) in the net budget.

Net Change to

Budget Re-appropriation of ERP system project $1,726,662 Re-appropriation of cemetery capital project 2,334,467 Increase for outside legal costs 400,000 Decrease in ITS operations for allocation to various departments (752,842) Increase in various departments from allocation previously reported in ITS operations 752,842 Increase for purchase of FTA capital expenditures mostly funded by grant funds 1,380,229 Increase for one-time Early Works supplemental transfer 200,000

Total change $6,041,358

Capital Asset and Debt Administration

Capital Assets. The City’s investment in capital assets for governmental and business-type activities as of September 30, 2015, totals $1.5 billion (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements, machinery and equipment, park facilities, roads, curbs and gutters, streets and sidewalks, greenways, drainage and sewer systems. Total capital assets increased $500 thousand in 2015 - $44.3 million of net additions less $43.8 million of depreciation.

The largest capital acquisitions during the year were as follows:

Purchased by the City WPC various sewer line rehabilitation $9,864,606 Land for WPC on West Governors Drive 556,091 Eldorado National EX Rider II Low Floor Buses (6) 2,090,654 Lots for Parkside Town Center 3,991,368 Downtown Gateway Road 2,682,129 Governors West improvements 1,702,906 Bob Wallace Ave/ Merchants Walk improvements 485,281 Jefferson Street Streetscapes 566,868 Wayfinder Signage Project 315,634 EMA Warning Siren Control System 549,228

Donated to the City Donated subdivision infrastructure 10,732,356

Total $31,737,121

-27- Management's Discussion and Analysis City of Huntsville

A summary of the City’s capital assets is as follows:

City of Huntsville's Capital Assets (net of accumulated depreciation)

Governmental Activities Business-Type Activities Total 2015 2014 2015 2014 2015 2014

Land $90,960,839 $85,575,016 $7,785,116 $7,229,025 $98,745,955 $92,804,041 Construction in process 36,778,891 20,105,820 192,809 197,315 36,971,700 20,303,135 Land improvements 20,109,619 20,658,846 0 0 20,109,619 20,658,846 Buildings and improvements 170,757,078 171,084,142 372,253,947 375,410,964 543,011,025 546,495,106 Infrastructure 792,816,466 812,747,786 0 0 792,816,466 812,747,786 Other 22,659,715 23,441,127 4,632,781 4,221,626 27,292,496 27,662,753 Total $1,134,082,608 $1,133,612,737 $384,864,653 $387,058,930 $1,518,947,261 $1,520,671,667

Additional information on the City’s capital assets can be found in Note 4B on pages 65 through 68.

Long-term debt. As of September 30, 2014, the City had $750.9 million of long-term debt outstanding. Of this amount, $622.5 million is debt backed by the full faith and credit of the City, and $128.4 million is comprised of revenue bonds and warrants secured solely by specific revenue sources (e.g. sewer system charges).

City of Huntsville's Outstanding Debt

Governmental Activities Business-Type Activities Total 2015 2014 2015 2014 2015 2014

General obligation warrants $557,549,418 $521,252,603 $64,980,586 $73,382,397 $622,530,004 $594,635,000 Revenue warrants 41,453,320 45,206,622 27,485,000 32,525,000 68,938,320 77,731,622 Lease revenue bonds 59,490,000 61,575,000 0 0 59,490,000 61,575,000 Total $658,492,738 $628,034,225 $92,465,586 $105,907,397 $750,958,324 $733,941,622

In 2015, the City issued $61.4 million of debt to pay the costs of roadway, park and recreation improvements, bridge improvements, public safety improvements and various other capital within the City. The primary use of the funds was to fund its annual commitment to the Alabama Department of Transportation for their improvements to roadways within the City. The City also issued $8.2 million taxable obligation warrants in order to redeem a significant portion of EUL warrants issued under the 2010-A issue. The City paid $33.3 and $2.1 million towards principal of general obligation and revenue warrants of governmental activities and $8.4 million and $5 million towards principal of general obligation and sewer revenue warrants of the business-type activities, respectively, in 2015.

The City’s general obligation bond rating by Moody’s Investors Service, Inc. and Standard & Poor’s Corporation is Aaa and AAA, respectively.

Other than debt paid from proprietary fund revenue sources (e.g. sewer debt and revenue bonds), State of Alabama law limits the amount of general obligation debt cities can issue for purposes other than schools and drainage systems to twenty percent of the assessed value of real and personal property. As of September 30, 2015, the City's allocable debt outstanding was $278.1 million less than the legal debt limit.

Additional information regarding the City’s long-term debt can be found in Note 4E on pages 70 through 78.

2016 Budget

-28- Management's Discussion and Analysis City of Huntsville

The Mayor and City Council considered many factors when developing the fiscal year 2016 budget. Huntsville’s revenues were affected during the national recession such that reductions in expenditures and capital projects were necessary, and a more conservative revenue approach has been adopted. A 2015 General Fund recurring revenue budget of $258.9 million was adopted, which is $13.2 million, or 5.38% more than 2015 actual recurring revenues. Expenditures in the 2015 budget were balanced within revenues. As of April 13, 2016, revenues and expenditures are within budgetary goals.

Request for Information

This financial report is designed with a general overview of the City’s finances and to demonstrate accountability for the money it receives from taxpayers, customers, and creditors. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Department, P.O. Box 308, Huntsville, Alabama 35804, by calling (256) 427- 5080, or by sending an email to [email protected]. This report and other City financial information is available on the City's website at www.huntsvilleal.gov/finance.

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-30-

BASIC FINANCIAL STATEMENTS

-31- CITY OF HUNTSVILLE STATEMENT OF NET POSITION September 30, 2015

Primary Government Governmental Business-Type Component Activities Activities Total Units

ASSETS Cash & investments, at cost $153,614,801 $18,291,206 $171,906,007 $115,811,200 Receivables (net of allowances) 22,159,153 3,917,132 26,076,285 54,750,933 Due from governmental entities 7,120,653 0 7,120,653 0 Inventories 206,170 223,627 429,797 13,906,634 Prepaid items 300,841 63,676 364,517 79,572 Internal balances (11,226,611) 11,226,611 0 0 Restricted assets: Cash & investments, at cost 24,168,518 0 24,168,518 147,485,007 Capital assets: Land, collections and construction in process 127,739,730 7,977,925 135,717,655 65,181,742 Other assets, net of accum. depreciation 1,006,342,878 376,886,728 1,383,229,606 478,795,140 Other assets: Regulatory asset - bond issuance costs 0 0 0 1,515,287

Total assets 1,330,426,133 418,586,905 1,749,013,038 877,525,515

DEFERRED OUTFLOWS OF RESOURCES Losses on debt refundings 20,664,206 1,611,078 22,275,284 222,669 Pension contributions subsequent to measurement date 13,386,633 1,177,437 14,564,070 5,383,805 Total deferred outflows of resources 34,050,839 2,788,515 36,839,354 5,606,474

LIABILITIES Accounts payable 10,875,979 1,429,679 12,305,658 54,716,134 -32- Accrued liabilities 16,063,399 833,869 16,897,268 11,241,287 Contract retainages 6,570,604 21,070 6,591,674 0 Due to governmental entities 456,051 0 456,051 0 Unearned revenue 2,675,119 1,251,550 3,926,669 6,265,462 Other 1,769,075 0 1,769,075 0 Liabilities payable from restricted assets: Other 0 0 0 1,596,379 Noncurrent liabilities Due within one year 30,854,578 14,456,511 45,311,089 5,025,000 Due in more than one year 855,428,522 99,026,636 954,455,158 280,037,275

Total liabilities 924,693,327 117,019,315 1,041,712,642 358,881,537

DEFERRED INFLOWS OF RESOURCES Pension plan investment earnings (losses) 9,105,544 797,065 9,902,609 2,950,609 Total deferred inflows of resources 9,105,544 797,065 9,902,609 2,950,609

NET POSITION Net investment in capital assets 797,217,611 286,013,940 1,083,231,551 372,680,628 Restricted for: Capital projects 42,225,244 0 42,225,244 7,320,826 City schools 3,259,280 0 3,259,280 0 Debt service 3,778,991 0 3,778,991 95,335,359 Other 7,342,902 0 7,342,902 149,510 Unrestricted (423,145,927) 17,545,100 (405,600,827) 45,813,520

Total net position $430,678,101 $303,559,040 $734,237,141 $521,299,843

The accompanying notes are an integral part of this statement. CITY OF HUNTSVILLE STATEMENT OF ACTIVITIES For the Year Ended September 30, 2015

Program Revenue Net Revenue (Expense) & Changes in Net Position Operating Capital Charges for Grants & Grants & Governmental Business-type Component Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Units

Primary Government

Governmental activities General government $29,989,299 $22,052,325 $1,202,453 $1,524,347 ($5,210,174) $0 ($5,210,174) $0 Public safety 89,257,242 4,681,849 0 94,044 (84,481,349) 0 (84,481,349) 0 Public services 168,284,768 18,328,708 21,414,023 86,058 (128,455,979) 0 (128,455,979) 0 Urban development 43,242,563 2,732,673 1,821,063 19,586,167 (19,102,660) 0 (19,102,660) 0 Interest on long-term debt 26,224,071 0 0 0 (26,224,071) 0 (26,224,071) 0 Unallocated depreciation 31,002,001 0 0 0 (31,002,001) 0 (31,002,001) 0

Total governmental activities 387,999,944 47,795,555 24,437,539 21,290,616 (294,476,234) 0 (294,476,234) 0

Business-type activities Water pollution control 28,593,512 37,680,083 0 2,409,031 0 11,495,602 11,495,602 0 Civic center 12,043,936 8,202,625 0 0 0 (3,841,311) (3,841,311) 0 Ice complex 1,615,154 1,423,171 0 0 0 (191,983) (191,983) 0

-33- Total business-type activities 42,252,602 47,305,879 0 2,409,031 0 7,462,308 7,462,308 0

Total primary government $430,252,546 $95,101,434 $24,437,539 $23,699,647 (294,476,234) 7,462,308 (287,013,926) 0

Component Units All $573,940,092 $577,441,367 $10,000 $4,663,194 0 0 0 8,174,469

Total component units $573,940,092 $577,441,367 $10,000 $4,663,194 0 0 0 8,174,469

General Revenues Sales & use taxes 181,057,346 0 181,057,346 0 Property taxes 54,748,223 0 54,748,223 0 Other taxes 41,737,789 0 41,737,789 528,696 Interest on investments 450,481 63,140 513,621 410,739 Other 1,951,356 0 1,951,356 1,939,563 Gain (loss) on sales of assets (304,271) 0 (304,271) 162,252 Transfers (2,726,833) 2,726,833 0 0

Total general revenues & transfers 276,914,091 2,789,973 279,704,064 3,041,250

Change in net position (17,562,143) 10,252,281 (7,309,862) 11,215,719

Net position, beginning, restated 448,240,244 293,306,759 741,547,003 573,856,828

Net position, ending $430,678,101 $303,559,040 $734,237,141 $521,299,843

The accompanying notes are an integral part of this statement. CITY OF HUNTSVILLE GOVERNMENTAL FUNDS BALANCE SHEET September 30, 2015

2014 Other Total General The Special Capital Capital Governmental Governmental Fund Debt Service Revenue Improvements Improvements Funds Funds ASSETS Cash & investments, at cost $80,501,394 $5,820 $2,787,996 $21,863,723 $37,820,977 $10,634,891 $153,614,801 Receivables (net of allowances) Accounts 15,592,677 0 728,608 750 3,317,347 612,778 20,252,160 Notes 0 0 0 0 0 1,845,037 1,845,037 Accrued interest 0 0 0 0 0 61,956 61,956 Due from other funds 1,523,712 0 3,747,469 31,320,094 2,992,860 0 39,584,135 Due from governmental entities 2,389,729 0 0 4,205,577 0 525,347 7,120,653 Restricted assets: 0 Cash & investments, at cost 0 0 3,780,892 20,387,626 0 0 24,168,518 Inventories 141,405 0 0 0 0 64,765 206,170 Prepaid items 189,256 0 0 0 0 111,585 300,841

Total assets $100,338,173 $5,820 $11,044,965 $77,777,770 $44,131,184 $13,856,359 $247,154,271

LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCE Liabilities Accounts payable $3,982,747 $123 $634 $6,233,051 $108,803 $550,621 $10,875,979 Accrued liabilities 7,125,871 0 0 0 0 484,677 7,610,548 Contract retainages 5,800,323 0 0 770,281 0 0 6,570,604 Due to other funds 42,982,736 0 2,574,477 0 5,018,763 234,770 50,810,746 Due to governmental entities 456,051 0 0 0 0 0 456,051 Unearned revenue 227,813 0 0 0 0 252,233 480,046 Other 1,769,075 0 0 0 0 0 1,769,075 Payable from restricted assets: Due to other funds 0 0 0 0 0 0 0

Total liabilities 62,344,616 123 2,575,111 7,003,332 5,127,566 1,522,301 78,573,049

Deferred inflows of resources Deferred revenue 2,576,444 0 0 2,469,983 0 241,399 5,287,826

Fund balance Nonspendable 330,661 0 0 0 0 2,957,461 3,288,122 Restricted 459,360 0 8,469,854 37,918,554 39,003,618 1,762,172 87,613,558 Committed 3,978,387 0 0 30,385,901 0 2,305,742 36,670,030 Assigned 4,634,414 5,697 0 0 0 5,304,245 9,944,356 Unassigned 26,014,291 0 0 0 0 (236,961) 25,777,330

Total fund balance 35,417,113 5,697 8,469,854 68,304,455 39,003,618 12,092,659 163,293,396

Total liabilities, deferred inflows of resources, and fund balance $100,338,173 $5,820 $11,044,965 $77,777,770 $44,131,184 $13,856,359

Amounts reported for governmental activities in the Statement of Net Position are different because:

Capital assets used in governmental activities are not financial resources and are therefore not reported in the funds. 1,134,082,608

Losses on the refunding of governmental activities debt are reported as deferred outflows in the government- wide statements, but do not represent financial resource and are therefore not reported in the funds. 20,664,206

Certain receivables are reported as assets in the government-wide statements. These receivables are not available to pay current period expenditures in the funds, and are therefore not reported as revenue but as deferred inflows in the funds. 3,092,753

Long-term debt is not due and payable in the current period and are therefore not reported in the funds: Bonds and warrants payable, face value ($658,492,739) Plus issuance premiums to be amortized as interest expense (52,864,445) (711,357,184)

The deferred outflows of resources, deferred inflows of resources, and the net pension liability related to the City's pension plan are not expected to be liquidated with expendable financial resources and, therefore, are not reported in the funds (148,669,858)

Other long-term liabilities are not due and payable in the current period and are therefore not reported in the funds: Accrued interest payable (8,452,851) Claims and judgments 0 Compensated absences (21,974,969)

Net position of governmental activities $430,678,101

The accompanying notes are an integral part of this statement.

-34- CITY OF HUNTSVILLE GOVERNMENTAL FUNDS STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES For the Year Ended September 30, 2015

2014 Other Total General The Special Capital Capital Governmental Governmental Fund Debt Service Revenue Improvements Improvements Funds Funds REVENUE Sales & use taxes $143,169,504 $0 $0 $0 $37,887,842 $0 $181,057,346 Property taxes 16,286,176 0 38,462,047 0 0 0 54,748,223 Other taxes 38,378,288 0 3,437,782 161,222 0 0 41,977,292 Licenses & permits 23,679,897 0 0 0 0 0 23,679,897 Fines & forfeitures 3,021,408 0 397,702 0 0 335,493 3,754,603 Revenues from money & property 1,227,022 190 5,476 1,187,493 122,925 2,201,598 4,744,704 Charges for services 16,947,087 0 0 0 0 0 16,947,087 Intergovernmental 3,278,967 15,533,905 0 6,233,009 0 4,701,505 29,747,386 Gifts & donations 104,167 0 0 582,085 0 2,236,640 2,922,892 Other revenues 1,436,186 0 0 108,804 0 286,713 1,831,703

Total revenues 247,528,702 15,534,095 42,303,007 8,272,613 38,010,767 9,761,949 361,411,133

EXPENDITURES Current General government 29,167,768 0 399 2,163 239 283 29,170,852 Public safety 83,305,797 0 128,848 392,213 0 0 83,826,858 Public services 60,247,468 0 2,978,366 54,109,688 0 11,640,140 128,975,662 Urban development 12,823,650 0 0 1,488,224 0 4,494,592 18,806,466 Debt service 0 Principal 0 33,278,185 7,960,134 0 0 2,085,000 43,323,319 Interest 0 21,130,766 720,297 0 0 2,949,775 24,800,838 Fiscal charges 0 2,149 0 0 0 0 2,149 Debt issuance costs 0 0 0 621,319 0 0 621,319 Capital projects construction and outlay 0 0 0 33,363,742 20,089,892 2,109,487 55,563,121 Intergovernmental assistance 24,957,226 0 16,592,174 2,232,139 0 1,131,770 44,913,309

Total expenditures 210,501,909 54,411,100 28,380,218 92,209,488 20,090,131 24,411,047 430,003,893

Excess (deficiency) of revenues over expenditures 37,026,793 (38,877,005) 13,922,789 (83,936,875) 17,920,636 (14,649,098) (68,592,760)

OTHER FINANCING SOURCES (USES) Long-term debt issued 0 0 8,328,637 61,390,000 0 0 69,718,637 Premium on debt issue 0 0 0 9,925,229 0 0 9,925,229 Transfer to refunding escrow agent 0 0 0 0 0 0 0 Transfers in 208,226 38,875,046 2,006,000 25,288,986 0 13,436,430 79,814,688 Transfers (out) (42,409,290) 0 (22,375,820) (15,785,632) 0 (1,975,528) (82,546,270)

Total other financing sources (uses) (42,201,064) 38,875,046 (12,041,183) 80,818,583 0 11,460,902 76,912,284

Net change in fund balance (5,174,271) (1,959) 1,881,606 (3,118,292) 17,920,636 (3,188,196) 8,319,524

Fund balance, beginning 40,591,384 7,656 6,588,248 71,422,747 21,082,982 15,280,855 154,973,872

Fund balance, ending $35,417,113 $5,697 $8,469,854 $68,304,455 $39,003,618 $12,092,659 $163,293,396

The accompanying notes are an integral part of this statement.

-35- CITY OF HUNTSVILLE RECONCILIATION OF THE STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended September 30, 2015

Amounts reported for governmental activities in the Statement of Activities are different because:

Net change in fund balances - total governmental funds $8,319,524

Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period: Capital outlay $42,622,888 Depreciation expense (43,766,000) (1,143,112)

In the Statement of Activities, the value of capital assets contributed to the government are reported as revenue from capital contributions, but these are not reported as revenue in the governmental funds. 10,778,023

In the Statement of Activities, only the gain(loss) on the disposal of capital assets are reported, but in the governmental funds, the proceeds from the disposals are reported. Thus, the difference is the carrying value of the disposed assets. 101,293

Governmental funds report transfers of current financial resources to other funds as an expenditure, and only report transfers in of current financial resources as revenue. In the Statement of Activities for governmental activities, however, transfers of capital assets (net of related debt) from and to business-type activities are recorded as revenue and expenditures, respectively. This amount is the net amount of transfers of capital assets (net of related debt) to/from governmental activities to/from business-type activities, which is included in transfers in the Statement of Activities. 4,749

The proceeds from the issuance of long-term debt provides current financial resources to the governmental funds, and the repayment of long-term debt is an expenditure, which are reported above. In the government-wide statements, however, issuing debt increases long-term liabilities and repayment of debt reduces long-term liabilities in the Statement of Net Position. Also, the premium received is amortized as a reduction in interest expense over time in the Statement of Activities. The differences are as follows:

Long-term debt issued or incurred (73,781,833) Premiums received on long-term debt issued (9,925,229) Principal repayments 43,323,319 Amortization of premium as interest expense 5,592,915 (34,790,828)

Amounts paid to refund old debt consumes current financial resources and are reported as an expenditure in the governmental funds. In the government-wide statements, however, the difference between the carrying value of the refunded debt and new debt is reported as a deferred inflow or outflow in the Statement of Net Position, and amortized as interest expense over time in the Statement of Activities. The differences are as follows:

Transfers to escrow agent on refunded debt 0 Amortization of refunding gain/loss as interest expense (2,286,519) (2,286,519)

For governmental funds, certain revenues have been earned, but because they are not received within a defined period of time after year-end, they are not considered available to finance the expenditures of the year ended, These revenues are not included in governmental fund revenues but are included in revenue of the governmental activities in the Statement of Activities. 1,400,509

Certain expenses reported in the Statement of Activities do not require the use of current financial resources and are therefore not reported as expenditures in the governmental funds:

Change in accrued interest (666,433) Change in compensated absences liability (375,969) Change in net pension liability 1,096,620 54,218

Change In Net Position Of Governmental Activities ($17,562,143)

The accompanying notes are an integral part of this statement.

-36- CITY OF HUNTSVILLE GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET & ACTUAL For the Year Ended September 30, 2015

Variance with Final Budget Budget Positive Original Final Actual Amounts (Negative)

REVENUES Taxes and payments in lieu of taxes $196,480,000 $196,480,000 $197,833,968 $1,353,968 Licenses and permits 24,169,200 24,169,200 23,679,897 (489,303) Fines and forfeitures 2,605,500 2,605,500 3,021,408 415,908 Revenues from money and property 967,566 967,566 1,227,022 259,456 Charges for services 16,468,840 16,468,840 16,947,087 478,247 Intergovernmental 3,661,540 3,661,540 3,278,967 (382,573) Gifts and donations 0 0 104,167 104,167 Other revenues 1,325,609 1,325,609 1,436,186 110,577

Total revenues 245,678,255 245,678,255 247,528,702 1,850,447

EXPENDITURES Current General government 24,594,049 26,515,592 29,167,768 (2,652,176) Public safety 81,688,642 83,864,352 83,305,797 558,555 Public services 54,500,048 59,030,914 60,247,468 (1,216,554) Urban development 12,977,426 13,093,566 12,823,650 269,916 Capital projects construction 0 0 0 0 Intergovernmental assistance 25,231,800 25,231,800 24,957,226 274,574

Total expenditures 198,991,965 207,736,224 210,501,909 (2,765,685)

Excess of revenues over expenditures 46,686,290 37,942,031 37,026,793 (915,238)

OTHER FINANCING SOURCES (USES) Transfers out (42,917,779) (42,917,779) (42,409,290) 508,489

Total other financing sources (uses) (42,917,779) (42,917,779) (42,201,064) 716,715

Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses 3,768,511 (4,975,748) (5,174,271) (198,523)

Fund balance, beginning 40,591,384 40,591,384 40,591,384 0

Fund balance, ending $44,359,895 $35,615,636 $35,417,113 ($198,523)

The accompanying notes are an integral part of this statement. -37- CITY OF HUNTSVILLE THE SPECIAL REVENUE FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET & ACTUAL For the Year Ended September 30, 2015

Variance with Final Budget Positive Original Budget Final Budget Actual Amounts (Negative)

REVENUES Taxes and payments in lieu of taxes $42,628,054 $42,628,054 $41,899,829 ($728,225) Fines and forfeitures 0 0 397,702 397,702 Revenues from money and property 288,900 288,900 5,476 (283,424)

Total revenues 42,916,954 42,916,954 42,303,007 (613,947)

EXPENDITURES Current General government 0 0 399 (399) Public safety 0 0 128,848 (128,848) Public services 2,906,000 2,958,091 2,978,366 (20,275) Debt service 0 0 8,680,431 (8,680,431) Intergovernmental assistance 16,944,924 17,741,713 16,592,174 1,149,539

Total expenditures 19,850,924 20,699,804 28,380,218 (7,680,414)

Excess of revenues over expenditures 23,066,030 22,217,150 13,922,789 (8,294,361)

OTHER FINANCING SOURCES (USES) Long-term debt issued 0 0 8,328,637 8,328,637 Transfer to refunding escrow agent 0 0 0 0 Transfers in 0 0 2,006,000 2,006,000 Transfers (out) (20,729,914) (20,484,929) (22,375,820) (1,890,891)

Total other financing sources (uses) (20,729,914) (20,484,929) (12,041,183) 8,443,746

Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses 2,336,116 1,732,221 1,881,606 149,385

Fund balance, beginning 6,588,248 6,588,248 6,588,248 0

Fund balance, ending $8,924,364 $8,320,469 $8,469,854 $149,385

The accompanying notes are an integral part of this statement. -38- CITY OF HUNTSVILLE PROPRIETARY FUNDS STATEMENT OF NET POSITION September 30, 2015

Business-Type Activities -- Enterprise Funds

Water Municipal Pollution Von Braun IcePlex Control Center (Nonmajor) (1) Totals ASSETS Current assets Cash & investments, at cost $13,737,351 $4,159,240 $394,615 $18,291,206 Receivables (net of allowance) Accounts 2,917,607 979,550 19,975 3,917,132 Due from other funds 11,226,611 0 0 11,226,611 Inventories, at cost 0 218,485 5,142 223,627 Prepaid items 0 60,343 3,333 63,676 Total current assets 27,881,569 5,417,618 423,065 33,722,252

Noncurrent assets Restricted assets: Due from other funds 0 0 0 0 Capital assets: Land 4,558,419 3,226,697 0 7,785,116 Buildings 207,557,822 78,284,915 4,344,530 290,187,267 Improvements other than buildings 303,209,342 11,981,011 0 315,190,353 Furniture & equipment 10,366,358 3,690,537 814,607 14,871,502 Construction work in progress 0 192,809 0 192,809 Less accumulated depreciation (212,044,609) (28,163,813) (3,153,972) (243,362,394) Total noncurrent assets 313,647,332 69,212,156 2,005,165 384,864,653

Total assets 341,528,901 74,629,774 2,428,230 418,586,905

DEFERRED OUTFLOWS OF RESOURCES Losses on debt refundings 1,611,078 0 0 1,611,078 Pension contributions subsequent to measurement date 735,981 441,456 0 1,177,437

Total deferred outflows of resources 2,347,059 441,456 0 2,788,515

LIABILITIES Current liabilities Accounts payable 597,196 442,913 389,570 1,429,679 Accrued liabilities 619,655 172,623 41,591 833,869 Contract retainages 21,070 0 0 21,070 Compensated absences 83,900 404,699 0 488,599 General obligations warrants payable - current 8,742,912 0 0 8,742,912 Revenue warrants payable - current 5,225,000 0 0 5,225,000 Unearned revenue 0 1,241,737 9,813 1,251,550 Total current liabilities 15,289,733 2,261,972 440,974 17,992,679

Noncurrent liabilities General obligation warrants payable (net of unamortized premium) 62,622,801 0 0 62,622,801 Revenue warrants payable 22,260,000 0 0 22,260,000 Net pension obligation liability 8,612,018 4,776,717 13,388,735 Compensated absences 755,100 0 0 755,100 Total noncurrent liabilities 94,249,919 4,776,717 0 99,026,636

Total liabilities 109,539,652 7,038,689 440,974 117,019,315

DEFERRED INFLOWS OF RESOURCES Pension plan investment earnings (losses) 512,695 284,370 0 797,065

Total deferred inflows of resources 512,695 284,370 0 797,065

NET POSITION Net investment in capital assets 214,796,619 69,212,156 2,005,165 286,013,940 Restricted for capItal projects 0 0 0 0 Unrestricted 19,026,994 (1,463,985) (17,909) 17,545,100

Total net position $233,823,613 $67,748,171 $1,987,256 $303,559,040

(1) The Municipal IcePlex Fund is the only nonmajor proprietary fund

The accompanying notes are an integral part of this statement.

-39- CITY OF HUNTSVILLE PROPRIETARY FUNDS STATEMENT OF REVENUE, EXPENSES AND CHANGES IN FUND NET POSITION For the Year Ended September 30, 2015

Business-Type Activities -- Enterprise Funds

Water Municipal Pollution Von Braun IcePlex Control Center (Nonmajor) (1) Totals Operating revenue Charges for services $37,680,083 $8,202,625 $1,423,171 $47,305,879

Total operating revenue 37,680,083 8,202,625 1,423,171 47,305,879

Operating expenses Personnel, operations & maintenance 13,163,117 8,313,112 1,198,118 22,674,347 Utilities 1,839,488 1,370,542 216,984 3,427,014 Depreciation and amortization 10,134,398 2,360,282 174,586 12,669,266

Total operating expenses 25,137,003 12,043,936 1,589,688 38,770,627

Operating income (loss) 12,543,080 (3,841,311) (166,517) 8,535,252

Nonoperating revenue (expenses) Interest income 17,902 45,238 0 63,140 Interest expense (3,459,798) 0 (25,466) (3,485,264) Miscellaneous revenue (expense) 3,289 0 0 3,289

Total nonoperating revenue (expenses) (3,438,607) 45,238 (25,466) (3,418,835)

Income before contributions, transfers & special items 9,104,473 (3,796,073) (191,983) 5,116,417

Capital contributions 2,026,739 0 0 2,026,739 Intergovernmental grants-capital 382,292 0 0 382,292 Transfers in 0 2,806,581 0 2,806,581 Transfers (out) (79,748) 0 0 (79,748)

Change in net position 11,433,756 (989,492) (191,983) 10,252,281

Total net position, beginning 232,673,693 73,414,928 2,179,239 308,267,860

Prior period adjustment (10,283,836) (4,677,265) 0 (14,961,101)

Total net position, ending $233,823,613 $67,748,171 $1,987,256 $303,559,040

(1) The Municipal IcePlex Fund is the only nonmajor proprietary fund

The accompanying notes are an integral part of this statement.

-40- CITY OF HUNTSVILLE PROPRIETARY FUNDS STATEMENT OF CASH FLOWS For the Year Ended September 30, 2015 Page 1 of 2

Business-Type Activities -- Enterprise Funds

Water Municipal Pollution Von Braun IcePlex Control Center (Nonmajor) (1) Totals Operating activities Receipts from customers and users $37,923,955 $9,523,492 $1,270,219 $48,717,666 Payments to suppliers (11,972,405) (7,206,857) (389,204) (19,568,466) Payments to employees (3,935,645) (3,586,608) (663,453) (8,185,706) Receipts (payments) from interfund services provided 7,864,036 0 0 7,864,036 Other 3,289 (78,278) 0 (74,989)

Net cash provided (used) by operating activities 29,883,230 (1,348,251) 217,562 28,752,541

Noncapital financing activities Transfers in 0 2,806,581 0 2,806,581 Transfers (out) (79,748) 0 0 (79,748)

Net cash provided (used) by noncapital financing activities (79,748) 2,806,581 0 2,726,833

Capital and related financing activities Acquisition and construction of capital assets (9,605,611) (639,072) (54,689) (10,299,372) Temporary advance for capital fundraising 0 0 0 0 SRF loan fund drawdowns 0 0 0 0 Interfund transfers for capital projects 0 0 0 0 Intergovernmental grants-capital 1,134,798 0 0 1,134,798 Proceeds from issuing warrants, net 0 0 0 0 Principal payments on notes and warrants (13,441,811) 0 0 (13,441,811) Interest paid on notes and warrants (3,879,119) 0 0 (3,879,119)

Net cash provided (used) by capital and related financing activities (25,791,743) (639,072) (54,689) (26,485,504)

Investing activities Interest received 17,902 45,238 0 63,140

Net cash provided (used) by investing activites 17,902 45,238 0 63,140

Net increase (decrease) in cash and cash equivalents 4,029,641 864,496 162,873 5,057,010

Cash and cash equivalents, beginning 9,707,710 3,294,744 231,742 13,234,196

Cash and cash equivalents, ending $13,737,351 $4,159,240 $394,615 $18,291,206

The accompanying notes are an integral part of this statement.

-41- CITY OF HUNTSVILLE PROPRIETARY FUNDS STATEMENT OF CASH FLOWS For the Year Ended September 30, 2015 Page 2 of 2

Business-Type Activities -- Enterprise Funds Water Municipal Pollution Von Braun IcePlex Control Center (Nonmajor) (1) Totals

Operating income (loss) $12,543,080 ($3,841,311) ($166,517) $8,535,252

Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 10,134,398 2,360,282 174,586 12,669,266 Miscellaneous items 3,289 8,502 0 11,791 Decrease (increase) in operating assets and increase (decrease) in operating liabilities: Change in assets and liabilities: Receivables 243,872 (244,046) 235,418 235,244 Accounts payable (895,968) (19,440) 357,207 (558,201) Contract retainages (69,495) 0 0 (69,495) Prepaid items 0 1,684 15,247 16,931 Inventory 0 0 3,108 3,108 Due to (from) other funds 7,864,036 0 0 7,864,036 Accrued liabilities 60,018 (28,930) 12,349 43,437 Unearned revenue 0 449,383 (413,836) 35,547 Other items 0 (34,375) 0 (34,375)

Net cash provided (used) by operating activities $29,883,230 ($1,348,251) $217,562 $28,752,541

Supplemental information

Noncash activities Capital assets donated from private developers $2,026,739 $0 $0 $2,026,739 Transfer out of net capital assets $79,748 $0 $0 $79,748

(1) The Municipal IcePlex Fund is the only nonmajor proprietary fund

The accompanying notes are an integral part of this statement.

-42- CITY OF HUNTSVILLE STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS September 30, 2015

Post-Retirement Benefits Trust ASSETS Cash & cash equivalents $499,559 Receivables: Contributions 1,047,140 Interest & dividends 54,016 Investments, at fair value: U.S. Treasury & agency obligations 1,768,953 Corporate bonds 3,269,116 Corporate stocks 2,262,830 Mortgage-Backed securities 1,100,395 Other investments 626,382

Total assets 10,628,391

LIABILITIES Accounts payable 53,981

Total liabilities 53,981

NET POSITION Held in trust for other postemployment benefits $10,574,410

The accompanying notes are an integral part of this statement.

-43- CITY OF HUNTSVILLE STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS For the Year Ended September 30, 2014

Post-Retirement Benefits Trust

ADDITIONS Contributions: Employer $3,743,400 Plan members 1,249,244 Total contributions 4,992,644

Investment earnings 44,069 Less investment expenses 0 Net investment earnings 44,069

Total additions 5,036,713

DEDUCTIONS Benefits 3,672,965

Total deductions 3,672,965

Change in net position 1,363,748

Net position, beginning 9,210,662

Net position, ending $10,574,410

The accompanying notes are an integral part of this statement.

-44-

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-45- CITY OF HUNTSVILLE DISCRETELY PRESENTED COMPONENT UNITS COMBINING STATEMENT OF NET POSITION September 30, 2015

Business-Type Activities Governmental Activities Huntsville Utilities Electric Water Gas HMC CVB DRA Total

ASSETS Cash & investments, at cost $51,683,035 $29,826,764 $33,581,247 $716,930 $3,224 $115,811,200 Receivables (net of allowances) 46,050,552 6,856,418 1,843,963 0 0 54,750,933 Due from governmental entities 0 0 0 0 0 0 Inventories 6,648,802 1,838,212 5,413,533 6,087 0 13,906,634 Prepaid items 17,111 7,027 6,417 49,017 0 79,572 Restricted assets Cash & investments, at cost 39,029,238 99,650,737 8,805,032 0 0 147,485,007 Capital assets Land and construction in process 15,821,056 41,942,631 7,418,055 0 0 65,181,742 Other assets, net of accum. depreciation 223,543,132 157,729,196 97,214,982 307,830 0 478,795,140 Other assets: Regulatory asset - bond issuance costs 310,136 1,205,151 0 0 0 1,515,287

Total assets 383,103,062 339,056,136 154,283,229 1,079,864 3,224 877,525,515

DEFERRED OUTFLOWS OF RESOURCES Losses on debt refundings 222,669 0 0 0 0 222,669 Pension contributions subsequent to measurement date 1,890,601 884,645 2,552,653 55,906 0 5,383,805 -46-

Total deferred outflows of resources 2,113,270 884,645 2,552,653 55,906 0 5,606,474

LIABILITIES Accounts payable 39,761,422 12,679,153 2,207,283 68,276 0 54,716,134 Accrued liabilities 5,176,939 3,490,629 2,460,701 113,018 0 11,241,287 Customer deposits 6,265,462 0 0 0 0 6,265,462 Liabilities payable from restricted assets: Other 487,642 1,108,737 0 0 0 1,596,379 Noncurrent liabilities Due within one year 2,530,000 2,495,000 0 0 0 5,025,000 Due in more than one year 91,130,399 150,842,905 37,857,309 206,662 0 280,037,275

Total liabilities 145,351,864 170,616,424 42,525,293 387,956 0 358,881,537

DEFERRED INFLOWS OF RESOURCES Pension plan investment earnings (losses) 962,278 486,698 1,437,698 63,935 0 2,950,609

Total deferred inflows of resources 962,278 486,698 1,437,698 63,935 0 2,950,609

NET POSITION Net investment in capital assets 204,062,611 63,677,150 104,633,037 307,830 0 372,680,628 Restricted for: Debt service 0 95,335,359 0 0 0 95,335,359 Capital projects 7,072,123 0 0 248,703 0 7,320,826 Other 0 0 0 149,510 0 149,510 Unrestricted 27,767,456 9,825,150 8,239,854 (22,164) 3,224 45,813,520

Total net position $238,902,190 $168,837,659 $112,872,891 $683,879 $3,224 $521,299,843

The accompanying notes are an integral part of this statement. CITY OF HUNTSVILLE DISCRETELY PRESENTED COMPONENT UNITS COMBINING STATEMENT OF ACTIVITIES For the Year Ended September 30, 2015

Program Revenue Net Revenue (Expense) & Changes in Net Position Operating Capital Business-Type Activities Governmental Activities Charges for Grants & Grants & Huntsville Utilities Functions/Programs Expenses Services Contributions Contributions Electric Water Gas HMC CVB DRA Total

Component Units

Huntsville Utilities Electric System $493,668,092 $491,778,059 $0 $0 ($1,890,033) $0 $0 $0 $0 ($1,890,033) Huntsville Utilities Water System 31,614,250 38,497,809 0 3,765,603 0 10,649,162 0 0 0 10,649,162 Huntsville Utilities Gas System 46,103,731 47,160,819 0 897,591 0 0 1,954,679 0 0 1,954,679 HMC CVB 2,554,019 4,680 10,000 0 0 0 0 (2,539,339) 0 (2,539,339) DRA 0 0 0 0 0 0 0 0 0 0

Total component units $573,940,092 $577,441,367 $10,000 $4,663,194 (1,890,033) 10,649,162 1,954,679 (2,539,339) 0 8,174,469

General Revenues Other taxes $0 $0 $0 $528,696 $0 $528,696 Interest on investments 206,964 37,334 166,057 384 0 410,739 Gain on the sale of capital assets 90,717 38,855 32,680 0 0 162,252 Other 0 0 0 1,939,563 0 1,939,563

Total general revenues & transfers 297,681 76,189 198,737 2,468,643 0 3,041,250 -47- Change in net position (1,592,352) 10,725,351 2,153,416 (70,696) 0 11,215,719

Net position, beginning, restated 265,993,589 169,516,099 137,342,739 1,001,177 3,224 573,856,828

Prior period adjustment - GASB 68 and 71 (25,499,047) (11,403,791) (26,623,264) (246,602) 0 (63,772,704)

Net position, ending $238,902,190 $168,837,659 $112,872,891 $683,879 $3,224 $521,299,843

The accompanying notes are an integral part of this statement.

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-48-

City of Huntsville Notes To The Financial Statements September 30, 2015

TABLE OF CONTENTS

Note Page

1. Summary of Significant Accounting Policies A. Reporting Entity ...... 50 B. Accounting Standards ...... 51 C. Government-wide and Fund Financial Statements ...... 52 D. Measurement Focus, Basis of Accounting and Basis of Presentation ...... 52 E. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position or Equity ...... 55

2. Reconciliation of Government-wide and Fund Financial Statements A. Explanation of net position invested in capital assets of the governmental activities in the government-wide statement of net position ...... 58

3. Stewardship, Compliance and Accountability A. Budgetary Information ...... 58 B. Excess of Expenditures Over Appropriations...... 59 C. Deficit Fund Equity ...... 60 D. Continuing Disclosure Matters ...... 60

4. Detailed Notes on All Funds A. Deposits and Investments ...... 62 B. Capital Assets ...... 65 C. Interfund Receivables, Payables, and Transfers ...... 68 D. Leases ...... 69 E. Long-Term...... Debt . 70 F. Fund Balance Classifications and Usage ...... 79 G. Sales and Use Tax Revenue Earmarking ...... 80 H. Tax Equivalents ...... 80

5. Other Information A. Segment Information - Enterprise Funds ...... 80 B. Contingent Liabilities and Commitments ...... 80 C. Related Organizations ...... 83 D. Jointly Governed Organizations ...... 83 E. Pension Plans ...... 84 F. Post-Retirement Medical Plans ...... 90 G. Risk Financing Programs ...... 92 H. Prior Period Restatements and Adjustments ...... 93 I. Subsequent Events ...... 94

-49- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting principles of the City conform to accounting principles generally accepted in the United States of America applicable to governmental entities. The Governmental Accounting Standards Board ("GASB") is the standards-setting body for establishing governmental accounting and financial reporting principles. The significant accounting policies of the City are described herein.

A. Reporting Entity

Thef City o Huntsville, Alabama (the “City”) was incorporated December 9, 1811n under a act of the Mississippi Territorial Legislature and is operated under a Mayor-Council form of government. These financial statements present the City and its component units, entities for which the City is considered to be financially accountable. Each component unit presented has a September 30 year end.

Blended Component Unit

Blended component units, although legally separate entities, are, in substance, part of the City’s operations and so data from these units are combined with the data of the primary government:

i Public Building Authority - The Public Building Authority (Authority) of the City of Huntsville was organized for the sole purpose of constructing a public safety and municipal court facility, including the city/county jail, foro lease t and use by the City. The Authority is governed by a three-member board which is appointed by the City Council. The Authority is reported as a Special Revenue fund type.

Discretely Presented Component Units

Each discretely presented component unit is reported in a separate column in a combining statement in the basic financial statements with the total of all discretely presented component units reported in the government-wide financial statements, to emphasize that they are legally separate from the City:

i Huntsville Utilities - The Huntsville Utilities (Utilities) provides utility services to residents of the City. The Utilities is governed by three legally separate boards which are appointed by the City Council: the Huntsville Electric Utility Board, the Huntsville Water Utility Board, and the Huntsville Natural Gas Utility Board. All significant Board actions require substantive approval by the City Council, and the City is secondarily liable for the outstanding debt of the Utilities. The financial statements related to the three boards have been stated separately. The Utility Systems are presented as Proprietary Fund types.

i Huntsville/Madison County Convention and Visitors Bureau (HMC CVB) - The HMC CVB provides advertising and promotional activities to help promote tourism and economic development in the Huntsville/Madison County area. The HMC CVB is governed by a seven-member board. Four members are appointed by the City government and three appointed by the County government. The City is obligated to provide significant financial assistance to the HMC CVB i n the form of liquor and lodging tax receipts collected by the City. The HMC CVB is presented as a Governmental Fund type.

i Downtown Redevelopment Authority (DRA) - The DRA was created by Act of the Alabama Legislature to revitalize and restore the City’s downtown area. The DRA is governed by a nine-member board appointed by the City Council. All DRA projects require substantive approval by the City Council. The DRA is presented as a Governmental Fund type.

Complete financial statements for each of the individual component units may be obtained at the administrative offices of the entities.

Huntsville Utilities Public Building Authority 112 Spragins Street 4th Floor Municipal Building Huntsville, Alabama 35801 308 Fountain Circle Huntsville, Alabama 35801

-50- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Huntsville/Madison County Downtown Redevelopment Authority Convention and Visitors Bureau 4th Floor Municipal Building 500 Church Street 308 Fountain Circle Huntsville, Alabama 35801 Huntsville, Alabama 35801

B. Accounting Standards

The City’s financial statements are prepared in accordance with standards promulgated by the GASB. The status of the City’s adoption of recently-issued GASB standards is as follows:

Statement Adoption Effect on Financial No. Name Description Year Statements 68 Accounting and Financial Reporting for Change in the measurement and 2015 Statements are restated Pensions reporting of pension-related and now include net costs. pension obligations along with related deferred inflows of resources and deferred outflows of resources related differences in actual earnings from projected and timing of contributions ino relation t valuation (see detail of restatement in Note 5H) 69 Government Combinations and Change in reporting disposals of 2015 None Disposals of Government Operations certain operations 70 Accounting and Financial Reporting for Change in account and reporting 2014 None Nonexchange Financial Guarantees of guarantees to outside organizations 71 Pension Contributions Made Further clarification of effect of 2015 Statements are restated Subsequent to the Measurement Date pension contributions and now include subsequent to the measurement recognition of changes in date required for GASB 68 and accruals and deferred itsn effect o beginning net outflows related to position contributions made after valuation date (see detail of restatement in Note 5H) 72 Fair Value Measurement and Determination of fair value of 2016 Not determined Application certain assets and liabilities 74 Financial Reporting for Requires supplemental 2017 Not determined Postemployment Benefit Plans Other information and further Than Pension Plans disclosures related to the OPEB liability 75 Accounting and Financial Reporting for Recognition of the full OPEB 2018 Not determined Postemployment Benefits Other Than liability and a more in-depth Pensions measure of OPEB expense 76 The Hierarchy of Generally Accepted Identifies the hierarchy of GAAP 2016 Not determined Accounting Principles within the current governmental reporting environment 77 Tax Abatement Disclosures More detailed information about 2017 Not determined tax abatements 80 Blending Requirements for Certain Amends blending requirements 2017 Not determined Component Units to include not-for-profit corporations where primary government is the sole corporate member

-51- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

C. Government-wide and Fund Financial Statements

Financial information of the City, the primary government, and the Utilities, the HMC CVB and the DRA, the City’s component units, is presented as follows:

i Management’s discussion and analysis introduces the basic financial statements and provides an analytical overview of the City’s financial activities.

i Basic Financial Statements: Government-wide financial statements consist of a Statement of Net Position and a Statement of Activities.

These statements report all of the non-fiduciary activities of the City and its component units. Governmental activities are reported separately from business-type activities. Governmental activities are normally supported by taxes and intergovernmental revenues whereas business-type activities are normally supported by fees and charges from services and are usually intended by management to be financially self-sustaining.

The Statement of Activities presents a comparison between direct expenses and program revenues for the different business-type activities of the City and for each function of the City’s governmental activities. Direct expenses are those that are clearly identifiable with a specific program or function. Program revenues include (a) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or program and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or program. Revenues that are not classified as program revenues, including all taxes and other items, are presented as general revenues.

i Fund financial statements consist of a series of statements focusing on information about the City’s major governmental and enterprise funds. Separate financial statements are presented for the governmental, proprietary and fiduciary funds.

D. Measurement Focus, Basis of Accounting and Basis of Presentation

Government-wide Financial Statements

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. 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.

Fund Financial Statements

Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon 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 they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-t erm debt are reported as other financing sources.

Property taxes (if levied), other taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government.

-52- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Proprietary funds are reported using the economic resources measurement focus and the accrual basis of accounting, identical to the government-wide financial statements.

The City reports the following major governmental funds:

i The General Fund is the City’s primary operating fund. It accounts for all financial resources of the government, except those required to be accounted for in another fund.

i The Debt Service Fund of the City accounts for the servicing of most long-term debt not being financed by Proprietary F unds. Sources of funds for the servicing of the debt include property taxes restricted for debt service through the 6½ Mill property tax accounted for in the Special Revenue Fund, and a portion of sales taxes transferred from the General Fund to the Capital Improvement Fund.

i The Special Revenue Fund of the City accounts for revenue sources that are legally restricted to expenditures for specific purposes according to state or federal law, which are primarily property taxes and state gasoline taxes. This fund does not include federal and state grant revenues that pertain to the operating activities of various city departments and are accounted for in the General Fund.

i The Capital Improvements Fund of the City accounts for the cost of constructing a variety of public works projects and related debt service, and the cost of various City departments’ capital spending and maintenance activities. Financing is provided by general obligation debt, a transfer from the General Fund of approximately eighteen percent of annual sales taxes, and interest revenue.

i The 2014 Capital Improvements Fund of the City accounts for the cost of constructing various road projects and related debt service, and the cost of economic development projects. Financing is provided by a one-cent sales and use tax levied March 1, 2014.

The City reports the following major enterprise funds:

i The Water Pollution Control Fund accounts for sanitary sewer services provided to the residents of the City. All activities necessary to provide such services are accounted for in this fund, including, but not limited to, administration, operations, maintenance, financing and related debt service.

i The Von Braun Center Fund accounts for the operation and maintenance of a City-owned civic auditorium and arts center that derives its revenues primarily from rents and fees charged for use of the facilities.

Additionally, the City reports the following fund type, which group some of the funds described above:

Governmental Funds:

i The Special Revenue Funds, a fund type to be distinguished from, but which includes The Special Revenue Fund described above, account for revenue sources that are legally restricted to expenditures for specific purposes and generally pertain to the operating activities of various City departments (including City activities managed by separate boards) and the Public Building Authority. Such funds are established when required by statute, charter provision, local ordinance, or executive decision to finance particular functions or activities.

-53- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

i The Capital Projects Funds account for the acquisition of capital assets or construction of major capital projects not being financed by Proprietary Funds.

Proprietary Funds:

i Enterprise Funds oare used t account for those operations that are financed and operated in a manner similar to private business or where the City has decided that the determination of revenues earned, costs incurred and/or net income is necessa ry for management accountability.

Fiduciary Funds:

i T he Post-Retirement Benefits Trust Fund accounts for the activities of the City’s post-retirement medical benefits plan, which accumulates resources for post-employment benefit payments to qualified employees.

As a general rule, the effect of interfund activity has been removed from the government-wide financial statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between various functions of the City. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned.

Amounts reported as program revenues include (1) charges to customers or applicants for goods, services, or privileges provided, (2) operating grants and contributions, and (3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes.

Proprietary funds distinguish operating revenues and expense from non-operating items. Operating revenues and expense generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the Water Pollution Control and Von Braun Center enterprise funds are charges to customers for services. Operating expenses for the enterprise funds include the cost of services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

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-54- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

E. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position or Equity

Deposits and Investments

The City’s cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition.

Investments are stated at fair value except for money market investments which include short-term, highly liquid debt instruments which are reported at cost or amortized cost. Any differences between the market value and cost of investments, other than short-term money market investments, are reflected in investment income.

The Utilities considers all highly liquid temporary cash investments with low interest rate risk to be cash equivalents. Cash purchases and sales of these investments generally are part of the Utilities’ cash management activities rather than part of its operating, investing and financing activities, and details of these transactions are not reported in the statement of cash flows. Special funds are provided for under trust indentures and are not considered cash equivalents. All special funds are considered investments for purposes of classifications in the statement of cash flows.

Receivables and Payables

All outstanding balances between funds are reported as “due to/from other funds.” Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances”.

All trade and property tax receivables are shown net of an allowance for uncollectibles.

Amounts receivable from federal, state, county, and local governments are classified as “due from other governmental entities.” No individually significant amounts were due from any single entity as of September 30, 2015.

Noncurrent portions of long-term receivables due to Governmental Funds are reported on their balance sheets, in spite of their spending measurement focus. Special reporting treatments are used to indicate, however, that they should not be considered “available spendable resources,” since they do not represent net current assets. Recognition of Governmental Fund type revenues represented by noncurrent receivables is deferred until they become current receivables. Noncurrent portions of long- term loans receivable are offset by fund balance reserve accounts.

Property taxes are assessed on October 1 and levied on the subsequent October 1 for the fiscal year beginning on the levy date, at which time a lien is attached. These taxes are due and payable on October 1 (levy date) and delinquent after December 31 in each year (except with respect to motor vehicles, which have varying due dates), after which a penalty and interest are required to be charged. If real property taxes are not paid by the June 15 following the due date, a tax sale is required to be held. Revenue is recognized in the year when the taxes are levied and collected. The taxes are collected by the Madison County tax collector and remitted to the City net of a collection fee ranging from 1 to 5 percent for the different taxes.

Inventories and Prepaid Items

Inventories are valued at cost using the first-in/first-out (FIFO) method. The costs of governmental fund-type inventories are recorded as expenditures when consumed rather than when purchased.

Certain payments to vendors for costs applicable to future accounting periods are recorded as expenditures when consumed and as prepaid items in both government-wide and fund financial statements.

-55- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Restricted Assets

Cash and investments that must be used for restricted purposes, which generally refers to amounts that will be spent beyond the next year are reported as “Restricted Assets” in the government-wide statements of net position and fund financial statements balance sheets. Receivables associated with long-term capital spending are similarly reported. Also, some restricted cash and investments are held by one fund bute will b expended in other fund, which creates a interfund payable/receivable. These amounts are reported as “Restricted Assets” and “Liabilities Payable from Restricted Assets” in the affected fund financial statements – the government-wide statements do not report these amounts as interfund transactions are eliminated in those statements.

Capital Assets

Capital assets include property, plant, equipment, infrastructure (like roads, bridges, sidewalks, and similar items) and intangible (like computer software and easements) assets. They are reported in the applicable governmental or business-type activities columns in the government-wide financial statements, and are defined by the City as having an initial individual cost of more than $5,000 and an estimated useful life in excess of one year, and that are either (1) tangible in nature or (2) intangible in nature, that is lacking physical substance and being nonfinancial. These assets are recorded at historical cost or estimated historical cost if purchased or constructed, and donated capital assets are recorded at estimated fair market value at the date of donation.

Whenever possible, intangible capital assets are grouped and reported in the same manner as related tangible assets, e.g. computer software is reported with “equipment” and property easements are reported with “infrastructure.” Only significant intangible assets that cannot be grouped in this manner are reported separately, but there were not any such assets as of September 30, 2015.

The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of the capital assets of business-type activities is reflected in the capitalized value of the asset constructed.

Property, plant and equipment of the component units are generally recorded using the same policy as the City.

Depreciation of all exhaustible capital assets except infrastructure is charged as an expense against their operations or functions whereas the infrastructure depreciation is unallocated. The amortization of intangible assets having definite useful lives is reported as depreciation against the operation/function to which the intangible asset relates, or with infrastructure depreciation. Capital assets of the primary government and the component units are depreciated using the straight-line method, generally over the following estimated useful lives:

Buildings 25-50 years Sidewalks, streets, and bridges 50 years Traffic signals 10-20 years Utility plants in service 40-50 years Sewer improvements: Pumping stations 50 years Outfall lines 50 years Land improvements 25 years Surface lots 10 years Furniture and equipment 5-12 years Greenways 15 years Drainage systems 50 years

Regulatory Assets

The Utilities reports unamortized debt issuance costs applicable to future periods, which customer charges will fund, as regulatory assets.

-56- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Compensated Absences

All full-time employees of the City accumulate vacation (annual leave), compensatory time, holiday and sick leave during the calendar year. On January 1 of each year vacation hours in excess of 260 are forfeited. Employees are encouraged to use all compensatory time as soon as possible after it is earned. Compensatory time accumulated through December 31 each year is forfeited if noyt used b June 30 of the following year. Sick leave is accumulated with no year-end forfeiture; holiday leave accumulated in each calendar must be used by June 30 of the following year or is forfeited. Upon termination, an employee will be paid a maximum of 260 hours vacation, 160 hours compensatory time and 240 hours holiday.

Accumulated hours in excess of the aforementioned limits and all accumulated sick leave is forfeited. However, if termination iso due t retirement, the employee will be paid forf 50% o accumulated sick leave. Accumulated vacation and holiday and the estimated amount of sick leave payable upon retirement is considered to be and is accrued as a current or long-term liability, depending on the period in which the payable leave is expected to be used.

The compensated absences policy of the Utilities is substantially the same as stated above except the maximum accumulated vacation is 280 hours and if termination is due to retirement, the employee will be paid 25% of accumulated sick leave.

Deferred Outflows/Inflows of Resources

The City has deferred outflows and deferred inflows of resources. Deferred outflows of resources are a consumption of assets by the City that is applicable to a future reporting period and consists of the unamortized amounts for losses on debt refundings. Deferred inflows of resources are an acquisition of assets by the City that is applicable to a future reporting period and consist of deferred revenue.

Long-term Obligations

In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type Statementt of Ne Position. Debt premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. Bonds and warrants payable are reported net of the applicable premium or discount. Debt issuance costs are expensed in the year incurred

In the fund financial statements, governmental fund types recognize debt premiums and discounts, as well as issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, even if withheld from the actual net proceeds received, are reported as debt service expenditures.

Restrictions of Net Position and Fund Balances

Thef use o certain assets is restricted based on debt covenants, grantors, contributors, or federal and state laws. The amount of these assets is reported as restricted net position and restricted fund balances in the basic financial statements, and these restrictions consist of the following: (1) resources held by the City or on deposit with paying agents for the repayment of long- term debt pursuant to debt covenants and state law are “restricted for debt service,” (2) the unexpended portion of debt proceeds that are restricted for use in construction are “restricted for capital projects”, (3) property taxes collected by the City restricted for public school purposes are “restricted for city schools”, and (4) resources restricted for specific purposes pursuant to state and federal law are “restricted for other.” None of the City’s restricted net position is restricted by enabling legislation, but rather by stater law o contractual obligations.

When expenditu res are incurred to which restricted or unrestricted amounts may be applied, the City’s policy is to use restricted net position first.

-57- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 2 – RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS

A. Explanation of net position invested in capital assets of the governmental activities in the government-wide Statement of Net Position:

Af portion o the net position reported in the Statement of Net Position is reported as net investment in capital assets (e.g. land, buildings, streets, and bridges) because these assets are not available for future spending. These assets are reported net of odebt used t acquire those assets, as follows:

Governmental activities capital assets, net $1,134,082,608 Less debt outstanding expended for capital assets (336,864,997) Net position invested in capital assets $797,217,611

NOTE 3 - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY

A. Budgetary Information

Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America. The following section describes the budgeted and non-budgeted funds:

Annually-Budgeted Governmental Funds i General Fund i Debt Service Fund i The Special Revenue Fund i 2014 Capital Improvements Fund i Capital Projects Funds

Governmental Funds Not Annually-Budgeted i Community Development Fund i Community Development Rehabilitation Loan Fund i Public Library Fund i Burritt Museum Fund i Alabama Constitution Village Fund i Art Museum Fund i Public Building Authority Fund i Huntsville Tennis Center Fund i Federal Building Authority Fund i Perpetual Care Fund

The Public Library Fund, Burritt Museum Fund, Art Museum Fund, Huntsville Tennis Center[A1], Alabama Constitution Village Fund, and Federal Building Authority Fund are managed by separate boards appointed by City Council, but are not separate legal entities, and are independent of the City’s budgeting process. The Public Building Authority Fund is a blended component unit of the City which is managed by a separate board appointed by the City Council and is independent of the City’s budgeting process. The Community Development Fund and the Community Development Rehabilitation Loan Fund adopt project-length budgets as prescribed by grantor provisions.

The City follows these procedures in establishing the budgetary data reflected in the financial statements of the annually - budgeted funds:

1. Around May 1, instructions and budget documents are distributed to departments and a revenue estimate for the following fiscal year is prepared.

2. Between June 1 and September 1 the following steps occur: Departments return copies of completed budget request forms to the Finance Department.

-58- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 3 - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY - CONTINUED

The Mayor and budget staff begin individual departmental reviews and prepare recommended changes to departmental budgets. The Mayor submits recommended departmental changes to individual departments affected with a copy submitted to the City Council Finance Committee. Departments incorporate recommended budget changes and update budget schedules. The Mayor’s recommended budget is finalized for submission to the City Council.

3. Between September 1 and September 30 these final steps occur: The Mayor presents the proposed budget to the City Council.

The City Council takes final action for approval of the operating budget by the beginning date of the fiscal year. The annual budget is prepared by fund, department, division, activity, and object. For the General Fund and other funds that include operating City departments, the Mayor, or appointed City staff, is authorized to make budget transfers by object within the activity categories of each department: personnel, operating and capital outlay. For annually- budgeted Special Revenue Funds, the Mayor, or appointed Citys staff, i authorized to make budget transfers within the fund. Transfers of appropriations between activity categories of operating departments or between funds and special appropriations require approval of the City Council. The legal level of budgetary control is by activity for General Fund departments and by fund for annually-budgeted Special Revenue Funds. Budget amendments were made and approved by City Council for annually-budgeted funds during the year which were not significant relative to the total budget. The original and final/amended budget amounts are reflected in these financial statements.

Encumbrance accounting is employed in Governmental Funds. Encumbrances (e.g., purchase orders, contracts) outstanding at year-end lapse, tand do no constitute expenditures or liabilities because the commitments will be re-appropriated and honored during the subsequent year. As such, encumbrances at year-end are reported as designations of fund balances.

B. Excess of Expenditures Over Appropriations

The following funds incurred expenditures in excess of appropriations of the following amounts for the year ended September 30, 2015:

General Fund [A2]Current Expenditures: General Government: Administration – personnel $15,753 Administration – capital 8,482 Clerk-Treasurer – personnel 28,482 Finance – personnel 5,749 Fleet Management – personnel 57,042 General Expenses – personnel 4,877,107 Human Resources – personnel 38,126 Legal – operating 848 Public Safety: Fire and Rescue – personnel 244,037 Fire and Rescue – operating 762,931 Public Services: Cemetery - operating 62,850 General Services – personnel 45,227 General Services – capital 5,970 Landscape Management – personnel 71,433 Public Transit – personnel 49,496 Public Works – personnel 210,996 Urban Development: Inspection – personnel 37,804 Planning – personnel 14,986

-59- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

Special Appropriations – b oard of education 100,426

NOTE 3 - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY – CONTINUED

Special Revenue Fund Current Expenditures: Public Safety Seizure subfund- operating 128,848 Public Services 6.5 Mill School Tax subfund – capital 133,905 7 Cent Gas tax subfund – operating 72,673 Intergovernmental Assistance Tif 2 subfund – operating 46 Tif 4 subfund – operating 37

Capital Improvements Special Revenue Fund Current Expenditures: Public Services Capital Improvements – debt service 31,011

The General Fund expenditures in excess of budget were largely due to expenditures occurring late in the fiscal year, some of which were not completely known until the fiscal year had ended and the budget could not be amended. There were expenditures known to less than budgeted by more than these excesses, which provided the source of those funds. The excess expenditures in the other funds were provided by either revenues or available fund balance in the funds.

C. Deficit Fund Equity

As of September 30, 2015, Art Museum Fund had a deficit fund balance of $161,003,s which i expected to be funded by future revenues or transfers from the General Fund.[A3]

D. Continuing Disclosure Matters[A4]

The City must comply with a variety of covenants and continuing disclosure requirements pertaining to its outstanding debt obligations. With respect to its continuing disclosure requirements, the City has disclosed the following in an official statement respecting City general obligation warrants issued prior to year-end:

Ratings Changes. Certain warrants issued by the City and bonds issued by the Public Building Authority of the City of Huntsville (“PBA”) (for which the City is an obligated person) during prior years are insured by various bond insurance companies. The ratings on those bond insurance companies have been downgraded at various times over the past five years. Information about the downgrades was publicly reported. The City did not file a notice under the Rule with respect to each such downgrade. ,On May 1 2010, Moody‘s Investors Service ("Moody’s") recalibrated its US municipal ratings from the municipal scale to the global scale. As a result of such recalibration, (i) the underlying ratings assigned by Moody’s to the City’s general obligation indebtedness changed from "Aa1" to "Aaa", (ii) the underlying ratings assigned by Moody’s to the PBA bonds changed from "Aa2" to "Aa1", and (iii) the underlying ratings on certain limited obligation revenue warrants issued by the City payable from its gas system ("Gas System Warrants"), its water system ("Water System Warrants") and its electric system ("Electric System Warrants" and, together with the Gas System Warrants and Water System Warrants, the "Utility Warrants"), changed as follows: Previous May 1, 2010 Rating Rating Change Gas System Warrants "A1" "Aa2" Water System Warrants "Aa2" "Aa1" Electric System Warrants "Aa2" "Aa1"

-60- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

,On April 5 2010, Standard & Poor’s Corporation ("S&P") changed its underlying rating on the Series 2007 PBA Bonds from "Aa2" to "Aa1". On February 10, 2010, S&P changed its underlying ratings on the City’s Water System Warrants from "AA+" to "AAA" and on the City’s Gas System Warrants from "AA-" to "AA".

Information about the rating changes made by Moody’s and S&P described above was publicly reported. The City did not file a material event notice on Electronic Municipal Market Access ("EMMA") system regarding such changes with respect to its general obligation warrants and the PBA bonds until August 1, 2014, and did not file a material event notice on EMMA regarding such changes with respect to the Utility Warrants until August 4, 2014, which such dates are each more than 10 business days after such changes.

Annual Reports. The City did not file its required annual report for the fiscal year ended September 30, 2009, until April 30, 2010, which was approximately one month beyond the deadline imposed under the City's then outstanding continuing disclosure agreements, and did not file its required annual report for the fiscal year ended September 30, 2011, until April 2, 2012, which was the first business day following the date such report was required to be filed. Additionally, the City did not link the annual reports filed on EMMA for the fiscal years ended September 30, 2009, September 30, 2010, September 30, 2011 and September 30, 2012 to any of its general obligation warrants issued during the 2002 calendar year, and did not link its annual reports filed for each of the last five years on EMMA to the Series 2007 Bonds. The City did not file the September 30, 2015 report upon the initial filing deadline of March 31, 2016, but posted notice of this violation on EMMA and corrected this through filing of this annual report on April 14, 2016.

On November 26, 2014, the City made a submission (the "MCDC Submission") to the U.S. Securities & Exchange Commission pursuant to the Commission’s Municipal Compliance Disclosure Cooperative Initiative, for not reporting in an official statement concerning a series of Electric System Warrants the approximately 1 year delay in filing on EMMA the annual report respecting the Utility Warrants for the fiscal year ended September 30, 2009, as described above. The City has not received a response from the SEC to the MCDC Submission[A5].

-61- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 4 – DETAILED NOTES ON ALL FUNDS

A. Deposits and Investments

The following information is provided to give an indication of the steps the City takes to protect its cash deposits and the level of risk assumed for certain investments. For purpose s of this Note 4A, the City and its discretely-presented component units are collectively referred to as “City entities.”s A of September 30, 2015, the City had the following cash and investments:

Discretely- Presented Post-Retirement Primary Component Benefits Trust Government Units Fiduciary Fund Cash on hand and in banks $85,785,995 $120,287,660 $0 Investments: Money market mutual funds (cash equivalents) 95,226,948 137,304,689 499,559 U.S. Treasury obligations 15,061,582 0 1,768,953 Repurchase agreements 0 2,705,428 0 Corporate bonds 0 0 3,269,116 Corporate stocks 0 0 2,262,830 Mortgage-Backed securities 0 0 1,100,395 Other 0 2,998,430 626,382 Total investments 110,288,530 143,008,547 9,527,235 Total $196,074,525 $263,296,207 $9,527,235

Cash and investment policies

State law limits the kinds of investments that Alabama municipalities can make to: (1) accounts and certificates of deposits with banks or saving associations that are qualified public depositories; (2) direct obligations of the U.S. Department of the Treasury and certain federal agencies (collectively referred in this note as “USTO”); (3) certain qualified obligations of any state and their agencies; (4) common trust funds, collective investment funds maintained by qualified institutions, or any registered mutual ffunds, all o which must hold a prescribed amount of obligations meeting the requirements of 1 – 3 above; and (5) for postemployment benefit trusts, a broad investments portfolio i permitted, including government and corporate bonds, and corporate stocks.

City investment policy, which is established by ordinance, requires and permits the same investments as required by state law. City policy limits deposits in financial institutions to no more than fifty percent in a single institution, and the City was in compliance with this requirement at September 30, 2015.

Interest rate risk

The City entities manage their exposure to declines in fair values of investments due to market interest rate changes by limiting the maturity of their directly-held investments to less than oner year, o by only purchasing obligations that it intends to hold to maturity. Directly-held investments having a maturity of more than one year are only purchased in connection with long-term construction projects, longer-term General Fund cash reserves, or long-term post-retirement benefit obligations, for which the risk of having to liquidate the investments prior to maturity and realize losses in fair value, are minimized. Generally, City entities limit their investments in mutual funds to those for which the underlying obligations have a weighted-average maturity of 180 days or less.

The maturities of all investments except those held by the Post-Retirement Benefits Trust are categorized as follows:

Discretely- Presented Primary Component Government Units Less than six months $95,199,639 $48,502,511 Six months to one year 0 27,864,507 One to three years 9,013,611 37,109,244 Greater than three years 6,015,280 29,532,285 Total $110,228,530 $143,008,547

-62- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

The Post-Retirement Benefits Trust manages interest rate risk over a longer-term, seeking to maximize return. The maturities of this fund’s debt securities are categorized as follows:

Par Value % of Total Less than five years $3,398,000 52.4% Five to ten years 982,146 15.2% Ten to twenty years 528,902 8.2% Twenty to thirty years 1,571,674 24.2% Total $6,480,722 100.0% Credit risk

As described above, state and City law limit the kind of investments that City entities can make. All of the investments of the City entities were limited to directly-owned USTO or money market mutual funds that primarily hold USTO.

For the Post-Retirement Benefits Trust, the credit quality of all debt securities including USTO, were as follows:

Fair Value % of Total Aaa (USTO included here) $2,038,811 30.1% Aa1 137,451 2.0% Aa2 68,000 1.0% Aa3 270,813 4.0% A1 411,423 6.1% A2 478,633 7.1% A3 681,693 10.1% Baa1 746,112 11.0% Baa2 335,295 5.0% Other(a) 1,596,615 23.6% Total $6,764,846 100.0%

(a) Ratings are not available, primarily for investments in Federal National Mortgage Association and Federal Home Loan Mortgage Corporation mortgage pools.

-63- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 4 – DETAILED NOTES ON ALL FUNDS – CONTINUED

Concentration of credit risk

Other than its investment in USTO or USTO mutual funds, the City entities and the Post-Retirement Benefits Trust did not have any single investment (debt and equity investments) that had a value in excess of five percent of the their respective total investments.

Custodial credit risk

The City requires all bank deposits, which includes USTO money market funds held by banks, be insured by federal depository insurance or the Security for Alabama Funds Enhancement, or SAFE Program, which was the case for all bank deposits as of September 30, 2015, except for minor cash deposits and cash on hand. The SAFE Program is administered by the State Treasurer according to State of Alabama statute, and any bank or financial institution in the State of Alabama accepting deposits of public funds is required to insure those funds by pledging eligible collateral to the State Treasurer for the SAFE collateral pool. The entire pool stands behind each deposit. Eligible collateral are those securities currently designated as acceptable collateral for state deposits as defined by State law. Also, the deposits with banks complied with state and City investment policies, except that regarding the City’s fifty-percent limitation on deposits with any one institution, at numerous times during the year, the City wasn not i compliance with this requirement. The public funds deposit policies of local financial institutions has changed in the last several years, making compliance with the fifty-percent policy more difficult to administer on a daily basis, but City financial managers make all reasonable efforts to substantively comply with the policy. Deposits that exceed the requirement have only been made in the largest financial institutions.

All of the City entities’ direct investments in U.S. Treasury obligations were held by bank trust departments as agents of the City entities and in the respective entity’s name. The Utilities’ $2.7 million investment in a repurchase agreement is collateralized by UTSO, but the underlying securities are held by the investment’s counterparty, not in the name of the Utilities. The USTO investments of the General Fund are held by a bank trust department as agent of the City in the City’s name. All of the investments of the Post-Retirement Benefits Trust are held by bank trust departments as agent of the Trust in the Trust’s name.

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-64- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 4 – DETAILED NOTES ON ALL FUNDS – CONTINUED

B. Capital Assets[A6]

An adjustment was made to the beginning balances of the capital assets of the governmental and business activities, to correct errors in the amounts reported as of September 30, 2014. Significant assets donated to the City in prior years had not been properly identified and recorded in the financial statements, along with certain reclassifications and other corrections, and a prior period adjustment was made to the capital asset accounts is as follows:

2014 Balance, as originally Prior Period 2014 Balance, reported Adjustment As adjusted Governmental activities: Capital assets, not being depreciated: Land $85,575,016 ($974,802) $84,600,214 Construction in progress 20,105,820 0 20,105,820 Total capital assets, not being depreciated 105,680,836 (974,802) 104,706,034

Capital assets, being depreciated: Land improvements 43,164,202 0 43,164,202 Buildings and improvements 252,552,800 0 252,552,800 Furniture, equipment and other 98,204,040 0 98,204,040 Infrastructure 1,710,955,054 (9,211,119) 1,701,743,935 Total capital assets, being depreciated 2,104,876,096 (9,211,119) 2,095,664,977

Less accumulated depreciation for: Land improvements (22,505,356) 0 (22,505,356) Buildings and improvements (81,468,658) 0 (81,468,658) Furniture, equipment and other (74,762,913) 0 (74,762,913) Infrastructure (898,207,268) 914,840 (897,292,428) Total accumulated depreciation (1,076,944,195) 1,575,492 (1,076,029,355)

Total capital assets, being depreciated, net 1,027,931,901 (8,296,279) 1,019,635,622

Governmental activities capital assets, net $1,133,612,737 ($9,271,081) 1,124,341,656

Business-type activities: Capital assets, not being depreciated: Land $7,229,025 $0 $7,229,025 Construction in progress 197,315 0 197,315 Total capital assets, not being depreciated 7,426,340 0 7,426,340

Capital assets, being depreciated: Buildings and improvements 597,089,215 (2,055,653) 595,033,562 Furniture, equipment and other 13,985,777 0 13,985,777 Total capital assets, being depreciated 611,074,992 (2,055,653) 609,019,339

Less accumulated depreciation for: Buildings and improvements (221,678,251) 204,537 (221,473,714) Furniture, equipment and other (9,764,151) 0 (9,764,151) Total accumulated depreciation (231,442,402) 204,537 (231,237,865)

Total capital assets, being depreciated, net 379,632,590 (1,851,116) 377,781,474

Business-type activities capital assets, net $387,058,930 ($1,851,116) $385,207,814

-65- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

Capital asset activity for the year ended September 30, 2015,s was a follows[A7]:

Beginning Additions/ Deletions/ Ending Balance Transfers-in Transfers-out Balance Governmental activities: Capital assets, not being depreciated: Land $84,600,214 $6,360,625 $0 $90,960,839 Construction in progress 20,105,820 23,049,605 (6,376,534) 36,778,891 Total capital assets, not being depreciated 104,706,034 29,410,230 (6,376,534) 127,739,730

Capital assets, being depreciated: Land improvements 43,164,202 866,313 0 44,030,515 Buildings and improvements 252,552,800 5,284,448 0 257,837,248 Furniture, equipment and other 98,204,040 5,556,396 (2,953,934) 100,806,502 Infrastructure 1,701,743,935 19,367,898 0 1,721,111,833 Total capital assets, being depreciated 2,095,664,977 31,075,055 (2,953,934) 2,123,786,098

Less accumulated depreciation for: Land improvements (22,505,356) (1,415,540) 0 (23,920,896) Buildings and improvements (81,468,658) (5,611,512) 0 (87,080,170) Furniture, equipment and other (74,762,913) (5,771,588) 2,387,714 (78,146,787) Infrastructure (897,292,428) (31,002,939) 0 (928,295,367) Total accumulated depreciation (1,076,029,355) (43,801,579) 2,387,714 (1,117,443,220)

Total capital assets, being depreciated, net 1,019,635,622 (12,726,524) (566,220) 1,006,342,878

Governmental activities capital assets, net $1,124,341,656 $16,683,706 ($6,942,754) $1,134,082,608

Business-type activities: Capital assets, not being depreciated: Land $7,229,025 $556,091 $0 $7,785,116 Construction in progress 197,315 100,912 (105,418) 192,809 Total capital assets, not being depreciated 7,426,340 657,003 (105,418) 7,977,925

Capital assets, being depreciated: Buildings and improvements 595,033,562 10,344,058 0 605,377,620 Furniture, equipment and other 13,985,777 1,439,652 (553,927) 14,871,502 Total capital assets, being depreciated 609,019,339 11,783,710 (553,927) 620,249,122

Less accumulated depreciation for: Buildings and improvements (221,473,714) (11,649,959) 0 (233,123,673) Furniture, equipment and other (9,764,151) (1,019,308) 544,738 (10,238,721) Total accumulated depreciation (231,237,865) (12,669,267) 544,738 (243,362,394)

Total capital assets, being depreciated, net 377,781,474 (885,557) (9,189) 376,886,728

Business-type activities capital assets, net $385,207,814 ($228,554) ($114,607) $384,864,653

In 2015, management determined that estimates used in valuing land rights for donated subdivisions in the prior year had mistakenly caused overstatements of these amounts. Therefore, the beginning balances of capital assets and accumulated depreciation have been restated as noted above. See further details on effect on beginning net position along with other restatements in Note 5H.

Governmental Governmental Governmental Activities Business-Type Activities Activities Accumulated Business-Type Activities Land Infrastructure Depreciation- Activities Building & A/D - Building & Infrastructure Improvements Improvements Beginning balance, a previously stated $85,575,016 $1,710,955,054 $(898,207,268) $597,089,215 ($221,678,251) Prior period adjustment (974,802) (9,211,119) 914,840 (2,055,653) 204,537 Beginning balance, as restated $84,600,214 $1,701,743,935 $(897,292,428) $595,033,562 ($221,473,714)

-66- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 4 – DETAILED NOTES ON ALL FUNDS – CONTINUED

For the year ended September 30, 2015, depreciation expense and transfers-in of the primary government were as follows:[A8]

Governmental activities: General government $610,749 Public Safety 4,057,208 Public Services 7,531,251 Urban development 565,130 Total depreciation expense charged to functions/programs 12,764,338 Depreciation for infrastructure assets not allocated to the functions 31,002,001 Total depreciation expense 43,766,339 Transfers-in from business-type activities 35,240 Total depreciation and transfers-in – governmental activities $43,801,579

Business-type activities: Water Pollution Control Fund $10,134,398 Von Braun Center Fund 2,360,282 Municipal Iceplex Fund 174,586 Total depreciation expense 12,669,266 Transfers-in from governmental-type activities 0 Total depreciation expense – business-type activities $12,669,266

Activity for the discretely presented component unit, Utilities, for the year ended September 30, 2015, was as follows:

Beginning Additions/ Deletions/ Ending Balance Transfers-in Transfers-out Balance Utilities-Electric System: Capital assets, not being depreciated: Land $4,759,767 $0 $0 $4,759,767 Construction in progress 3,599,284 9,836,426 (2,374,421) 11,061,289 Total capital assets, not being depreciated 8,359,051 9,836,426 (2,374,421) 15,821,056

Capital assets, being depreciated: Buildings and improvements 431,893,042 8,328,226 (1,975,452) 438,245,816 Furniture, equipment and other 45,950,276 2,374,726 (753,047) 47,571,956

Total capital assets, being depreciated 477,743,318 10,702,952 (2,728,499) 485,817,773 Less accumulated depreciation (245,076,908) (19,926,230) 2,728,499 (262,274,640) Total capital assets, being depreciated, net 232,666,410 (9,223,278) 0 223,543,133

Electric System capital assets, net $241,125,461 $613,148 ($2,374,421) $239,364,188

Utilities-Water System: Capital assets, not being depreciated: Land $1,746,193 $99,778 $0 $1,845,971 Construction in progress 8,559,911 33,166,729 (1,629,980) 40,096,660 Total capital assets, not being depreciated 10,306,104 33,266,507 (1,629,980) 41,942,631

Capital assets, being depreciated: Buildings and improvements 259,157,977 4,876,848 (334,487) 263,700,338 Furniture, equipment and other 13,357,795 350,664 (179,287) 13,529,172

Total capital assets, being depreciated 272,515,772 5,227,512 (513,774) 277,229,510 Less accumulated depreciation (112,268,472) (7,745,616) 513,774 (119,500,314) Total capital assets, being depreciated, net 160,247,300 (2,518,104) 0 157,729,196

Water System capital assets, net $170,553,404 $30,748,403 ($1,629,980) $199,671,827

NOTE 4 – DETAILED NOTES ON ALL FUNDS – CONTINUED

-67- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

Utilities-Gas System: Capital assets, not being depreciated: Land $1,803,038 $0 $0 $1,803,038 Construction in progress 5,214,566 4,064,749 (3,664,298) 5,615,017 Total capital assets, not being depreciated 7,017,604 4,064,749 (3,664,298) 7,418,055

Capital assets, being depreciated: Buildings and improvements 140,578,615 6,899,845 (69,719) 147,408,741 Furniture, equipment and other 12,396,518 609,839 (137,785) 12,868,572

Total capital assets, being depreciated 152,975,133 7,509,684 (207,504) 160,277,313 Less accumulated depreciation (58,320,832) (4,949,003) 207,504 (63,062,331) Total capital assets, being depreciated, net 94,654,301 2,560,681 0 97,214,982

Gas System capital assets, net $101,671,905 $6,625,430 (3,664,298) $104,633,037

Activity for the discretely presented component unit, the HMC CVB, for the year ended September 30, 2014, was as follows:

Beginning Additions/ Deletions/ Ending Balance Transfers-in Transfers-out Balance Capital assets, being depreciated: Furniture, equipment and other $769,127 $73,315 $0 $842,442 Less accumulated depreciation (508,092) (26,520) 0 (534,612)

Total capital assets, being depreciated, net 261,035 46,795 0 307,830

Governmental activities capital assets, net $261,035 $46,795 $0 $307,830

The discretely presented component unit, DRA, does not have any capital assets as of September 30, 2015.

C. Interfund Receivables, Payables and Transfers

The amounts receivable and payable between the various funds as of September 30, 2015, were as follows:

Receivable Fund Payable Fund Amount Total

Governmental Funds General The Special Revenue $1,288,942 Nonmajor Governmental 234,770 $1,523,712

The Special Revenue General 3,747,469

Capital Improvement General $25,015,796 The Special Revenue 1,285,535 2014 Capital Improvement 5,018,763 31,320,094

2014 Capital Improvement General 2,992,860

Total Governmental Funds 39,584,135 Proprietary Funds Water Pollution Control Enterprise General 11,226,611

Total Proprietary Funds 11,226,611

Total $50,810,746

-68- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 4 – DETAILED NOTES ON ALL FUNDS – CONTINUED

The amounts transferred among the various funds for the year ended September 30, 2015, were as follows:

Transferred From Transferred To Amount Total

Governmental Funds General 2014 Capital Improvement $23,182,729 Debt Service 7,439,366 Public Building Authority (a) 1,143,986 Other Nonmajor Governmental 6,972,526 The Special Revenue 956,000 Von Braun Center Enterprise 2,714,683 $42,409,290

The Special Revenue General 31,464 Capital Improvement 1,279,000 Debt Service 17,193,709 Public Building Authority (a) 3,871,647 22,375,820

Capital Improvements General Fund 101,762 Debt Service 14,241,972 The Special Revenue 1,050,000 Nonmajor Governmental 300,000 Von Braun Center Enterprise 91,898 15,785,632

Nonmajor Governmental 2014 Capital Improvement 827,257 Nonmajor Governmental 1,148,271 1,975,528

Water Pollution Control General Fund 79,749

Total Governmental Funds $82,621,270

(a) The Public Building Authority Fund is a nonmajor governmental fund, but is shown separately here.

In general, permanent transfers are used to (1) move revenues from the fund that collects the money to the fund that expends the money and (2) move resources appropriated for debt service to the debt service fund as debt service payments become due. The receivable/payable balances result from the time lag between the dates that transactions are recorded in the accounting system and actual payments between the funds are made. In addition to permanent transfers, temporary transfers are made for cash management purposes, which are reflected in the receivable/payable balances.

Capital assets that are transferred between governmental and business-type activities are reported differently in the government- wide and fund financial statements, thus the net transfer amounts reported in each may not be the same. In the government- wide Statement of Activities, all transfers are reported in the same manner and will offset. Any difference resulting from such transfers are explained in the reconciliation appearing in the Statement of Revenue, Expenditures and Changes in Fund Balance for governmental funds.

D. Leases

Operating Leases. T he City leases buildings under non-cancelable operating leases, for which the total costs were approximately $532,895 in 2015. The future minimum lease payments by fiscal year are as follows:

2016 $487,810 2017 427,697 2018 369,451 2019 312,876 2020 65,959 Total $1,663,793

Capital Leases[A9]. The City is not a party to any capitals leases a of September 30, 2015.

-69- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 4 – DETAILED NOTES ON ALL FUNDS – CONTINUED

E. Long-Term Debt

General Obligation Warrants

The City issues general obligation ("G.O.") warrants, which are a direct obligations and pledges o f the full faith andf credit o the City, for the following purposes:

a. For the acquisition and construction of major capital facilities and equipment. b. For the construction of school facilities, on behalf of the Huntsville Board of Education. c. To refund (refinance) other G.O. warrants. d. To refund (refinance) sewer revenue warrants, which, although G.O. debt, are paid with revenues generated by the sewer system revenues, for in the Water Pollution Control Enterprise Fund, a business-type activity of the City. e. For the construction of public improvements in the tax increment financing districts ("TIFs") of the City (see below).

Lease Revenue Bonds

The Public Building Authority, a blended component unit of the City, issued bonds for the construction and expansion of a public safety and municipal court facility, including the city jail, now operated as the Huntsville-Madison County Jail (see “Joint Jail Annual Commitment” in Note 5B). Repayment of the bonds is secured solely by annual lease payments the City is required to make to the Authority. Pursuant to the trust indentures under which the bonds were issued, the Authority has deposited a surety bond having a value equal to the highest annual debt service on the bonds, in lieu of maintaining cash in the debt service reserves. The Authority was in compliance with bond covenants at year-end. The bonds do not constitute a direct obligation and pledge of the full faith and credit of the City.

Sewer Revenue Warrants

The Alabama Water Pollution Control Authority permits local governments to participate in a State Revolving Loan Fund ("SRF") program, whereby the Authority issues debt (“Authority Bonds”) for the purpose of making loans to participating local governments to upgrade water and sewer treatment facilities and distribution systems. The repayment of such Authority Bonds is evidenced by securities issued by the participating governments. Pursuant to the SRF program, the City has issued several series of sewer revenue warrants ("SRF warrants") since 1995. The SRF warrants are secured solely by a pledge of sewer system revenues, which are accounted for in the Water Pollution Control Enterprise Fund, a business-type activity of the City, and the City has covenanted that the revenues will be maintained at the levels required by fthe terms o the SRF warrants. The SRF warrants do not constitute a direct obligation and pledge of the full faith and credit of the City.

Tax Increment Financing Districts Debt – General Obligation Warrants

As described above, the City has issued various series of G.O. warrants for the construction of public improvements within the City's TIF areas. The City intends to repay the warrants from the proceeds of tax increment revenues accounted for in The Special Revenue Fund, but the G.O. warrants are not secured by such revenues or any other pledge.

Tax Increment Financing District 5 Debt – Taxable Revenue Warrants

Beginning in 2010, the City issued taxable revenue warrants for the construction of public improvements in the City's TIF District No. 5, an Enhanced Use Lease area within the U.S. Army’s Redstone Arsenal (“EUL Warrants”). The EUL Warrants are issued on a private placement basis and structured as drawdown obligations, which permits drawdowns at the City’s request to finance certain construction costs. The EUL Warrants are issued pursuant to an agreement (“EUL Agreement”) with a private entity for the development of an office park within TIF 5. Under the EUL Agreement, the City may issue EUL Warrants in two or more oseries up t an aggregate maximum principal amount of not to exceed $76 million. On March 1 of each year, the accrued and unpaid interest on each note is added to the principal balance.

-70- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 4 – DETAILED NOTES ON ALL FUNDS – CONTINUED

The amounts associated with each series as of September 30, 2015, were as follows:.

Maximum Note Principal Compounded Total Note Series Principal Amount Balance Accrued Interest Balance

2010-A $10,000,000 $2,768,468 $2,006,116 $4,774,584 2010-B 20,000,000 20,000,000 7,715,547 27,715,547 2012-A 3,000,000 2,997,386 879,277 3,876,663 2012-B 3,000,000 2,766,423 605,512 3,371,935 2013-A 1,500,000 1,500,000 214,591 1,714,591 Total $37,500,000 $30,032,277 $11,421,043 $41,453,320

Repayment of the EUL Warrants is secured by a pledge of the TIF 5 tax revenue, which is reported in The Special Revenue Fund. Also, the EUL Agreement requires the City to redeem the outstanding balance, plus accrued interest, of any EUL Warrant, to the extent that TIF 5 tax revenue is sufficient as defined by a formula in the EUL Agreement. Generally, the minimum required redemption is $5 million. When an EUL Warrant redemption is required, the City intends to issue refunding taxable debt obligations, most likely general obligations of the City. TIF 5 tax revenues were approximately $495,000 in 2015, and the City redeemed approximately $8.0 million of EUL Warrants in May 2015 through issuance of $8.1 million in general obligation warrants.

The EUL Warrants do not constitute a direct obligation and pledge of the full faith and credit of the City.

Source of Repayment of Long-Term Debt

Repayment of the City's long-terms debt i generally provided for as follows:

Type of Debt Paid From Resources Provided By

Governmental Activities: G.O. warrants - major capital facilities Debt Service Fund The Special Revenue Fund, General Fund and Capital Improvements Fund

G.O. warrants - school facilities Debt Service Fund The Special Revenue Fund (6.5 Mill School Tax revenue)

G.O. warrants – TIFs Debt Service Fund The Special Revenue Fund (TIF tax revenues)

EUL Revenue Warrants – TIF 5 Debt Service Fund The Special Revenue Fund (TIF 5 tax revenue)

Lease revenue bonds Public Building Authority Fund The Special Revenue Fund (6.5 Mill Tax revenue), General Fund and Capital Improvements Fund

Business-Type Activities: G.O. warrants (sewer) and SRF sewer Water Pollution Control Fund Water Pollution Control Fund revenue warrants

-71- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 4 – DETAILED NOTES ON ALL FUNDS – CONTINUED

Utility Revenue Warrants - Huntsville Utilities Component Unit

The City has issued on behalf of the Huntsville Electric System, City of Huntsville Water System fand City o Huntsville Gas System, discrete component units, various series of utility revenue warrants, for the purpose of constructing additions to the capital facilities of such systems, and for refunding other revenue warrants. Repayment of these warrants is secured by net revenues of the respective systems, after deducting certain operating costs. Pursuant to trust indentures effective for the utility revenue warrants, the systems are also required to maintain debt service reserve accounts for a portion of the outstanding principal. The systems were in compliance with the reserve requirements at year-end. These warrants do not constitute direct obligations and pledges o f the full faith and credit of the City.

Advance and Current Refundings

The City has issued refunding warrants to provide for the current and advance refunding of other debt. For advance-refunded warrants, the City uses the refunding warrant proceeds to purchase U.S. Government State and Local Government Series securities that are placed in an irrevocable trust for the purpose of funding debt service requirements of the refunded warrants. As a result, the refunded warrants are considered to be defeased and the liability has been removed from the governmental activities column of the Statement of Net Position. Any resulting economic gain or loss is deferred and amortized over the lesser of the remaining life of the refunded or refunding warrants.

Advance Refundings – Advance refunding transactions for the current year, and prior years for which the refunded warrants are still outstanding on September 30, 2015,s were a follows (in thousands):

Refunding Warrants Refunded Warrants Fiscal Face Refunded Outstanding Debt Service Economic Year Series Amount Series Amount Balance Diff. (a) Gain (Loss)

PRIMARY GOVERNMENT

Governmental Activities:

2012 2012A $35,995 2005C $36,255 $36,255 $2,476 ($4,728) 2014 2014A $2,200 2005A $2,350 $2,350 $143 $243 2014 2014A $4,800 2005C $4,805 $4,805 $339 ($130) 2014 2014A $22,060 2007A $21,456 $21,456 $2,006 ($2,046) 2014 2014A $11,865 2009A $12,262 $12,262 $971 ($1,106) 2014 2014B $19,345 2007 PBA $17,335 $17,335 $1,919 ($1,869) 2014 2014C $27,045 2009B $26,900 $26,900 $1,663 ($4,473)

Business-Type Activities:

2010 2010A $10,280 2002D $10,295 $10,295 $563 ($2,004) 2014 2014A $7,830 2007A $8,439 $8,439 $704 ($838) 2014 2014A $5,355 2009A $5,538 $5,538 $444 ($433)

(a) includes debt service savings and savings realized up-front in cash in the refunding transaction.

-72- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 4 – DETAILED NOTES ON ALL FUNDS – CONTINUED

Outstanding Debt

The amount of debt outstanding at September 30, 2015, and information related to it was as follows:

Principal Amount Face Final Interest Maturities Ending Due Within Series Amount Dated Maturity Rates (%) (thousands) Balance One Year

PRIMARY GOVERNMENT

Governmental Activities

G.O. Warrants (non-sewer portion) 2007A 31,967,145 05/01/07 10/01/28 4.0 - 5.0 325 - 1,825 6,154,863 814,977 2009A 66,838,000 03/04/09 09/01/29 2.75 - 5.0 2,077 - 7,312 20,659,555 3,567,111 2009B 71,745,000 03/04/09 09/01/29 2.25 - 5.0 2,560 - 4,735 19,255,000 3,210,000 2010A 74,300,000 09/14/10 03/01/37 3.0 - 5.0 980 - 6,315 43,465,000 3,660,000 2010B (a) 50,895,000 09/14/10 09/01/30 .61 - 5.06 365 - 1,940 43,605,000 2,580,000 2010C (a) 7,520,000 09/14/10 09/01/32 5.0 0 - 3,855 7,520,000 0 2010D (b) 11,695,000 09/14/10 09/01/27 .61 - 4.35 570 - 905 8,790,000 605,000 2011A 45,190,000 11/22/11 03/01/31 2.0 - 5.0 1,590 - 3,135 35,930,000 3,135,000 2011B 50,275,000 11/22/11 05/01/33 2.0 - 5.0 1,965 - 4,020 50,275,000 1,965,000 2012A 41,660,000 05/03/12 11/01/25 2.0 - 5.0 765 - 4,500 38,420,000 765,000 2013A 6,450,000 05/23/13 06/01/23 1.6 395 – 870 6,055,000 500,000 2013B 14,580,000 05/23/13 06/01/37 3.5 – 4.0 850 – 1,260 14,580,000 0 2013C 77,050,000 09/03/14 11/01/33 2.0 - 5.0 865 - 6,570 76,185,000 330,000 2013D 24,970,000 09/03/14 11/01/33 2.0 - 5.0 890 -1,850 24,080,000 905,000 2013E 6,460,000 09/03/14 01/01/23 2.4 625 - 815 5,835,000 650,000 2014A 40,925,000 09/03/14 08/01/37 3.0 - 5.0 940 – 3,995 40,805,000 1,095,000 2014B 19,345,000 09/03/14 11/01/33 2.0 - 5.0 1,101 - 1,725 19,345,000 140,000 2014C 27,045,000 09/03/14 09/01/29 2.0 - 5.0 2,775 - 4,215 27,015,000 20,000 2015A 61,390,000 06/30/15 05/01/35 5.0 1,985 – 4,630 61,390,000 2,355,000 2015B (b) 8,185,000 05/04/15 05/01/25 .66 – 4.19 175 – 3,765 8,185,000 180,000 738,485,145 557,549,418 26,477,088

Private Placement Taxable Revenue Warrants(d) 2010A EUL 10,000,000 07/26/10 07/26/40 9.95 n.a. 4,774,584 0 [A10] 2010B EUL 20,000,000 10/28/10 07/26/40 9.95 n.a. 27,715,547 0 2012A EUL 3,000,000 01/26/12 07/26/40 9.95 n.a. 3,876,663 0 2012B EUL 3,000,000 05/24/12 07/26/40 9.95 n.a. 3,371,935 0 2013A EUL 1,500,000 02/28/13 07/26/40 9.95 n.a. 1,714,591 0 37,500,000 41,453,320 0

Lease Revenue Bonds - Public Building Authority 2007(e) 86,415,000 9/18/07 10/01/36 4.0 - 5.0 1,625 - 5,700 59,490,000 2,180,000 86,415,000 59,490,000 2,180,000

Total governmental activities 862,400,145 658,492,738 28,657,088

(continued)

-73- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 4 – DETAILED NOTES ON ALL FUNDS – CONTINUED

Outstanding Debt - Continued

Principal Amount Face Final Interest Maturities Ending Due Within Series Amount Dated Maturity Rates (%) (thousands) Balance One Year

Business-Type activities

G.O. Warrants - sewer system 2007A 17,122,855 5/1/07 5/15/14 4.0 - 5.0 325 – 725 3,810,139 760,023 2009A 13,132,000 3/4/10 9/1/29 2.75 - 5.0 412 – 980 4,800,447 542,889 2010A 17,235,000 9/14/10 3/1/37 3.0 - 4.0 70 - 5,335 5,335,000 5,335,000 2010B (a) 11,595,000 9/14/10 9/1/30 .61 - 5.06 0 – 800 9,945,000 565,000 2011A 17,230,000 11/22/11 3/1/31 2.0 - 5.0 555 - 1,305 14,775,000 625,000 2012A 14,645,000 5/3/12 11/1/27 2.0 - 5.0 330 - 1,395 13,130,000 915,000 2014A 13,185,000 09/03/14 08/01/29 2.0 - 5.0 625 - 2,025 13,185,000 0 104,144,855 64,980,586 8,742,912

Sewer Revenue Warrants - State Revolving Loan Fund 1996 22,380,000 1/26/96 8/15/17 3.18 775 - 1,550 3,040,000 1,490,000 2010A (c) 17,435,000 1/27/98 8/15/20 2.61 595 - 1,215 5,830,000 880,000 2010B (c) 16,760,000 12/1/98 8/15/20 2.57 590 - 1,145 5,645,000 1,045,000 2010C (c) 15,180,000 12/22/99 8/15/21 2.57 515 - 1,070 5,345,000 995,000 2010D (c) 13,045,000 12/14/00 8/15/22 3.00 440 – 920 5,740,000 730,000 2012 2,130,000 11/1/11 8/15/32 2.90 80 – 140 1,885,000 85,000 86,930,000 27,485,000 5,225,000

Total business-type 191,074,855 activities 92,465,586 13,967,912

Total Primary Government 1,053,475,000 750,958,324 42,625,000

(a) Series 2010B and 2010C general obligation warrants are taxable Build America Bonds and Recovery Zone Economic Development Bonds, respectively, under the Internal Revenue Code. (b) Series 2010D and 2015B warrants are taxable general obligation warrants. (c) The 2010 series of State Revolving Loan Fund warrants are refunding warrants issued for the sole purpose of reducing the interest rate on the various refunded warrants. The original issue data is for the original, now refunded warrants. (d) The EUL warrants are taxable revenue warrants, structured as drawdown obligations not to exceed a maximum amount. T he face amount shown is the maximum amount available under the warrant, while the balance shown is what is outstanding under each warrant, plus accrued interest added to the note balance. In the Changes in Long- Term Liabilities table below, the additions shown pertaining to these warrants was the amount actually drawn during the year and accrued interest added to the note balance, not the face value. (e) The balance reported for the 2007 Lease Revenue Bonds is after the principal payment due on October 1st of the next fiscal year, since such amount was transferred to the principal & interest fund for the obligation prior to that date.

(continued)

-74- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 4 – DETAILED NOTES ON ALL FUNDS – CONTINUED

Outstanding Debt - Continued

COMPONENT UNIT - HUNTSVILLE UTILITIES

Business-Type Activities

Electric System Revenue Warrants 2007 $13,195,000 12/01/07 12/01/19 4.0 705 - 2,110 7,950,000 1,865,000 2012 28,285,000 12/21/11 12/01/32 2.0 - 4.02 1,789 - 2,405 24,675,000 665,000 41,480,000 32,625,000 2,530,000

Water System Revenue Warrants 2008 43,660,000 05/01/08 11/01/34 2.7 - 5.0 700 - 2,885 29,605,000 2,490,000 2013SRF 180,000 02/14/13 08/15/33 2.75 5 – 10 170,000 5,000 2015 92,810,000 11/01/16 11/01/36 3.0 – 5.0 3,175 – 6,910 92,810,000 0 136,650,000 122,585,000 2,495,000

Total Component Units $178,130,000 $155,210,000 $5,025,000

Future Debt Service

The City’s future debt service requirements on its outstanding warrants and bonds as of September 30, 2015 are shown below. There is $3,780,892 available in The Special Revenue Fund to service general obligation debt.

All interest amounts in the below tables are reported before reducti on for the interest subsidy payments expected from the Internal Revenue Service on the Build America Bonds and Recovery Zone Economic Development Bonds outstanding as described above.

PRIMARY GOVERNMENT G.O. Warrants Lease Rev. Bonds Governmental activities: Principal Interest Principal Interest 2016 26,477,088 23,975,551 2,180,000 2,845,525 2017 28,857,099 23,452,155 2,280,000 2,758,325 2018 30,074,447 22,343,874 2,385,000 2,644,325 2019 31,600,556 21,158,204 1,625,000 2,548,925 2020 31,916,368 19,779,097 1,710,000 2,467,675 2021-2025 157,806,666 78,253,018 9,865,000 11,045,225 2026-2030 143,707,194 42,847,566 13,935,000 8,266,925 2031-2035 97,380,000 12,277,657 19,810,000 4,563,713 2036-2040 7,655,000 966,726 5,700,000 270,750 2041-2045 2,075,000 268,205 0 0 Total governmental activities $557,549,418 $245,322,053 $59,490,000 $37,411,388

(continued)

-75- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 4 – DETAILED NOTES ON ALL FUNDS – CONTINUED

Future Debt Service - Continued

G.O. Warrants Revenue Warrants Business-type activities: Principal Interest Principal Interest 2016 8,742,912 2,739,612 5,225,000 729,443 2017 3,517,901 2,413,792 5,425,000 585,950 2018 3,660,553 2,275,362 4,025,000 436,938 2019 3,744,444 2,118,261 4,175,000 333,368 2020 3,958,632 1,952,518 4,335,000 225,932 2021-2025 22,208,334 7,041,300 3,410,000 272,662 2026-2030 17,842,810 2,154,496 615,000 94,395 2031-2035 1,305,000 32,625 275,000 12,035 Total business-type activities 64,980,586 20,727,966 27,485,000 2,690,723

Total Primary Government (a) $709,415,004 $306,152,130

COMPONENT UNITS Electric Rev. Warrants Water Rev. Warrants Business-Type Activities - Huntsville Utilities Principal Interest Principal Interest 2016 $2,530,000 $1,415,650 $2,495,000 $4,490,921 2017 2,620,000 1,319,350 6,280,000 5,387,744 2018 2,735,000 1,215,625 5,935,000 5,150,888 2019 2,840,000 1,104,125 6,050,000 4,899,013 2020 1,560,000 1,016,125 4,190,000 4,675,513 2021-2025 7,955,000 3,895,500 23,870,000 20,439,128 2026-2030 8,405,000 1,937,925 30,335,000 13,973,778 2031-2035 3,980,000 160,800 36,520,000 5,988,964 2036-2040 0 0 6,910,000 172,750 Total $32,625,000 $12,065,100 $122,585,000 $65,178,699

(a) does not include the EUL Warrants as of September 30, 2015, for which, in the absence of significant TIF 5 tax revenue upon which repayment of the warrants and accrued interest depends, the future debt service obligations of the City are not determinable.

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-76- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 4 – DETAILED NOTES ON ALL FUNDS – CONTINUED

Changes in Long-Term Liabilities

Long-term liability activity for the year ended September 30, 2015,s was a follows[A11]:

PRIMARY GOVERNMENT Amounts Beginning Ending Due Within Balance Additions(a) Reductions Balance One Year Governmental Activities:

General obligation warrants $521,252,603 $69,575,000 ($33,278,185) $557,549,418 $26,477,088 EUL revenue warrants 45,206,622 4,206,832 (7,960,133) 41,453,321 0 Lease revenue bonds 61,575,000 0 (2,085,000) 59,490,000 2,180,000

Subtotal 628,034,225 73,781,832 (43,323,318) 658,492,739 28,657,088

Issue discounts & premiums 48,532,131 9,925,229 (5,592,915) 52,864,445

Total warrant, bonds, & notes 676,566,356 83,707,061 (48,916,233) 711,357,184 28,657,088

Compensated absences 21,599,000 13,132,492 (12,756,523) 21,974,969 2,197,490 Claims & judgments 520,000 686,699 (686,699) 520,000 520,000 Net pension liability 163,453,060 4,281,089 (14,783,202) 152,950,947

Governmental activities long-term liabilities $862,138,416 101,807,341 ($77,142,657) $886,803,100 $31,374,578

The City’s General Fund is generally responsible for liquidating the liability for compensated absences and claims and judgments, since most of the activities affecting that liability occur within General Fund departments.

Business-Type Activities:

General obligation warrants $73,382,397 $0 ($8,401,815) $64,980,586 $8,742,912 Sewer revenue warrants 32,525,000 0 (5,040,000) 27,485,000 5,225,000

Subtotal 105,907,397 0 (13,441,815) 92,465,586 13,967,912

Issue discounts & premiums 7,417,494 0 (1,032,367) 6,385,127

Total warrants 113,324,891 0 (14,474,182) 98,850,713 13,967,912

Compensated absences 1,115,936 602,504 (474,741) 1,243,699 488,599 Net pension liability 14,308,050 380,372 (1,299,687) 13,388,735

Business-type activities long-term liabilities $114,440,827 $118,763 ($14,474,182) $113,483,147 $14,456,511

(a) Additions for the EUL revenue warrants include principal draws and accrued interest added to the note balances.

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-77- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 4 – DETAILED NOTES ON ALL FUNDS – CONTINUED

Changes in Long-Term Liabilities – Continued

COMPONENT UNITS - HUNTSVILLE UTILITIES (All Business-Type Activities) Amounts Beginning Ending Due Within Balance Additions Reductions Balance One Year

Electric System Revenue warrants $35,065,000 $0 ($2,440,000) $32,625,000 $2,530,000 Issue discounts & premiums 2,672,461 0 (49,263) 2,623,198 Total warrants 37,737,461 0 (2,489,263) 35,248,198 2,530,000 Noncurrent customer deposits 38,093,460 6,193,625 (6,064,508) 38,222,577 6,265,462

Total Electric System long-term liabilities $75,830,921 $6,193,625 ($8,553,771) $73,470,775 $8,795,462

Water System Revenue warrants $32,180,000 $92,810,000 ($2,405,000) $122,585,000 $2,495,000 Issue discounts & premiums 1,001,031 12,610,058 (104,998) 13,506,091 Total warrants 33,181,031 105,420,058 (2,509,998) 136,091,091 2,495,000 Noncurrent customer deposits 5,018,695 812,201 (693,876) 5,137,020 0

Total Water System long-term liabilities $38,199,726 $106,232,259 ($3,203,874) $141,228,111 $2,495,000

Gas System Revenue warrants $7,060,000 $0 (7,060,000) $0 $0 Total warrants 7,060,000 0 (7,060,000) 0 0 Noncurrent customer deposits 10,353,204 1,673,401 (1,508,436) 10,518,169 0

Total Gas System long-term liabilities $17,413,204 $1,673,401 ($5,551,564) $10,518,169 $0

Uses of Governmental Activities Long-Term Debt

The carrying value of outstanding debt for governmental activities as of September 30, 2015, and the purpose for which this amount has been or will be expended was as follows:

Debt issued for capital asset purposes: Invested in assets as of year-end $336,864,997 Not yet invested in assets as of year-end 37,918,554 Debt issued for non-capital asset purposes: Huntsville City Schools 252,863,810 Von Braun Center 23,005,787 Intergovernmental 60,704,036 Total $711,357,184

Derivative Financial Instruments

The City was not a party to any derivative financial instruments as of September 30, 2015, or during the year then ended.

-78- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 4 – DETAILED NOTES ON ALL FUNDS – CONTINUED

F. Fund Balance Classifications

As described in NOTE 1.E., under the heading “Restrictions of Net Position and Fund Balances,” some of the City’s fund balances are restricted by state or federal law, or by contractual obligations. In the fund financial statements, fund balances that are not restricted are classified based on the extent to which the City is bound to honor constraints on how certain resources can be spent, as described below.

Nonspendable - amounts that cannot be spent because they are not in spendable form or for which there are obligations to keep the amounts intact:

Not in spendable form: Inventories, prepaid expenses and long-term receivables $2,897,048 Spendable: Endowment funds required by donors to remain intact 391,074 Total $3,288,122

Committed - amounts that can only be used for specific purposes enumerated in City Council ordinances related to the levying or earmarking of specific revenue sources. The City Council is the City’s highest level of decision-making authority, and its actions require a simple majority vote to commit and un-commit City resources:

Liquor and 6% lodging taxes committed for tourism development $2,572,713 1% lodging tax committed for recreation projects 1,405,674 Unexpended revenues of the Capital Improvement Fund committed for capital improvements 30,385,901 Unexpended revenues of the Cummings Research Park Fund committed for research park development 2,305,742 Other Total $36,670,030

Assigned - amounts based on the City’s intent to use them for purposes declared by City Council by adopted resolutions, and all such resolutions require subsequent appropriation by the City Council prior to incurring expenditures. This classification also includes the positive fund balances of the entities managed by City Council-appointed boards (Public Library, Burritt Museum, Art Museum, Huntsville Tennis Center, and Alabama Constitution Village):

Cemetery improvements $38,509 General Fund appropriations subsequent to year-end 4,595,905 Debt Service fund 5,697 Long-term care of city cemeteries 2,686,844 Board-managed activities 2,617,401 Total $9,944,356

Unassigned - amounts that cannot be classified otherwise, including any deficit fund balances of the Board-managed entities. The City Council has a policy ordinance to set aside 11.5 percent of the General Fund recurring revenue budget for contingencies, but this policy does not constitute a revenue stabilization policy nor does it include formal provisions for the use or subsequent restoration of this fund balance:

City contingency reserve of the General Fund $27,793,231 Unassigned balance of the General Fund (1,778,940) Balances of the board-managed entities (236,961) Total $25,777,330

-79- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 4 – DETAILED NOTES ON ALL FUNDS – CONTINUED

Usage Policy

When expenditures are incurred t o which more than one classification of fund balance may be applied, the City’s policy is apply fund balances in the following order: committed, assigned, and unassigned.

G. Sales and Use Tax Revenue Earmarking

Certain City sales and use taxes levied prior to March 1, 2015, which are General Fund revenues, are earmarked by City Council ordinance, as follows:

i 18.0 percent is paid to the Capital Improvement Capital Projects Fund. i 14.7 percent is paid to the Huntsville City Board of Education.

These do not represent restrictions on the fund balance of the City at September 30, 2015, but represent designations of future revenue which will be considered in determining budget appropriations for future years.

Effective March 1, 2014, the City levied an additional one percent general rate sales and use tax. This revenue is reported in the 2014 Capital Improvements Fund, and is earmarked within that fund for road improvements and economic development projects.

H. Tax Equivalents

The Utilities, component units of the City, are required to pay to the City a tax equivalent which is determined by applying the current property tax rates to the Utilities’ net plant in service at the end of the preceding year. The amount of tax equivalents paid to the City by the Utilities during 2015 was $11,874,498 by the Electric System, $2,639,940 by the Natural Gas System, and $2,132,637 by the Water System. These amounts are reported as payments in lieu of taxes in the General Fund of the City and as operating expenses in the financial statements of the Utilities.

NOTE 5 – OTHER INFORMATION

A . Segment Information - Enterprise Funds

The only enterprise fund for which the City is required to present segment information is the Water Pollution Control Enterprise Fund, the information for which is shown in the basic financial statements.

B. Contingent Liabilities and Commitments[A12]

Litigation. Thes City i a defendant in a number of claims and lawsuits. The outcome of these matters is uncertain as of the date of this report. The City Attorney estimates the total liability with respect to these claims and lawsuits that is not covered by insurance will not exceed $520,000, $520,000 of which is estimated to be currently payable and has been accrued as a liability in the City’s General Fund at September 30, 2015. These amounts plus all other estimated claims and lawsuits are summarized as follows:

Reported In: Government-Wide General Fund Statement of Net Description Financial Statements Position

Filed claims and lawsuits, general $520,000 $520,000 Estimated unfiled claims and lawsuits 0 0

Total $520,000 $520,000

-80- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 5 – OTHER INFORMATION– CONTINUED

In addition to the above, the City entered into a settlement agreement for a claim filed under the Americans With Disabilities Act. The City has provided for fthe cost o the capital improvements required under the agreement in its long-term plans totaling $500,000 annually, and will be reported as incurred when the capital improvements are made.

The Utilities are parties to a number of legal actions arising in the ordinary course of the business. In management’s opinion, the Utilities have adequate legal defenses and/or insurance coverage for each of these actions and does not believe that they will materially affect the Utilities’ operations or financial position.

Grants. The City participates in a number of federal, state, and county programs that are fully or partially funded by grants received from other government units. Except as described next, as of September 30, 2015, significant amounts of grant expenditures have not been audited by the grantor agencies but the City believes that future disallowed expenditures related to the unaudited grant programs, if any, will not have a material effect on any of the individual funds or the overall financial position of the City.

HUD Grant Review[A13]. During 2011 the Office of Inspector General ("OIG") of the U.S. Department of Housing and Urban Development ("HUD") conducted an audit review of the City's Community Development Department's ("CDD") HOME Investment Partnerships ("HOME") and Community Development Block Grant ("CDBG") programs. The stated objectives of the OIG audit were to determine whether CDD's commitment to use HOME and CDBG funds for the acquisition and rehabilitation of an apartment complex in the City known as "Mirabeau" was an eligible activity, and whether CDD had adequate controls and procedures to ensure appropriate accountability and administration of that project in accordance with HUD's policies and guidelines.

In 2014, OIG conducted its final exit interview, and on May 29, 2014, OIG issued its final determinations, which included some, but not all, of the City’s response on each issue. The OIG final determination is a recommendation to HUD that the City reimburse HUD for $3.4 million in what OIG termed “ineligible” or “unsupported.”n O June 24, 2014, the Birmingham HUD Field Office (“Birmingham HUD”) issued a letter to the City concurring with the OIG recommendation. Birmingham HUD gave the City 45 days to respond. The City responded to Birmingham HUD denying some of the reimbursement claims and seeking a meeting owith HUD t reconcile any differences regarding the amount of reimbursement and to conclude these issues. To date, the City has not heard any response from HUD regarding such a meeting or finalizing the reimbursement issues. The city will continue to try and work with HUD to resolve these issues.

Also, HUD conducted a separate review to determine whether the City is complying with the applicable requirements of Section 504 of the Rehabilitation Act of 1973, as amended ("Section 504"), Section 109 of the Housing and Community Development Act of 1974, as amended, Section 3 of the Housing and Urban Development Act of 1974, as amended ("Section 3"), and Title VI of the Civil Rights Act of 1964, as amended, with regard to programs and activities funded through the CDBG, HOME and Neighborhood Stabilization Program grants. HUD issued some preliminary determinations, portions of which the City challenged. In the summer of 2012, the City received a formal Determination of Noncompliance with the mandate of Section 504. The City has continued its discussions with HUD regarding the same. In December of 2013, HUD followed up its Determination of Noncompliance with a proposed Voluntary Compliance Agreement ("VCA") that it would like to enter with the City on Section 504 and Section 3 issues. There are no fines, penalties or requests for reimbursement in the proposed VCA. The City has responded to the proposed VCA and is continuing to work with HUD on this matter.

The City has been working, and intends to continue working, with OIG and HUD on these matters. The amounts that may ultimately be payable to HUD cannot be determined as of March 31, 2016, and the financial statements as of September 30, 2015, do not include a liabilityo related t this matter.

-81- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 5 – OTHER INFORMATION– CONTINUED

Huntsville Utilities Gas Purchase Commitments. The Gas System has entered into a purchase contract with Tennessee Energy Acquisition Corporation to establish the purchase price for natural gas. The contracts allow the Gas System to lock in certain volumes of gas to be purchased and prices for that gas. Under the contract, the Gas System has committed to purchase 790,750 MMBtus through 2016 and 1,572,500 MMBtus per year through December 2026 at index less fifty-six cents.

Huntsville Utilities Electric Purchase Commitments. Under its wholesale power agreement, the Electric System is committed to purchase its electric power and energy requirement from the Tennessee Valley Authority. The rates for such purchases are subject to review periodically.

Encumbrances. T he City had outstanding purchase orders related to operating needs and contractual commitments as of September 30, 2015, which represent and encumbrance on resources at year-end, the most significant of which were as follows:

General Fund $1,260,500 Capital Improvement Fund 26,718,072 Total $27,978,572

These encumbrances are already included in the classifications of net position and fund balances in the financial statements as of September 30, 2015.

Joint Jail Annual Commitment. The City and Madison County Commission are parties to an Intergovernmental Jail Agreement (Agreement) by which they agreed to combine and consolidate jail facilities. The City, acting through the Public Building Authority, expanded the existing City jail so that City and County inmates could be housed in a single facility. The County operates the facility known as the Huntsville-Madison County Jail, and pays the cost of such operations.

Under the Agreement, the City must provide $2.1 million to the County each year until 2040, to assist in the cost of jail operations. The City may also have to pay additional amounts based on City inmate capacity during a particular year.

Joint Jail Construction Costs. As described above, the City constructed the expansion to the former city jail now operated as the Huntsville-Madison County Jail.n I 2006 significant architectural, engineering design, and structural problems were discovered in the construction of the expansion, which cost a significant amount to remedy. The remediation cost and cost to complete was $50 million more than originally planned for the $30 million project. The City sued the architect, the structural engineer, the former general contractor, and a number of subcontractors to recover damages, hoping to recover a portion of the additional cost. The contractor counter-sued the City for damages relating to its termination by the City. The matter is presently in mediation, with partial settlements having been effected among some of the parties. While the final outcome is uncertain, the City’s exposure to additional costs has been limited to a maximum of $200,000. It is unlikely the City will recover additional sums of money in the form of damages from remaining defendants, although the possibility exists for the City to recover a nominal amount of money and its outcome is uncertain as of March 31, 2016, and the financial statements do not include a liability with respect to this matter.

State of Alabama Road Funding Agreement. In early 2014, the City executed an agreement with the Alabama Department of Transportation under which the City and State each committed to provide $125 million toward the cost of improving certain roadways in the City,f most o which are state highways and will be constructed by the State. The City is obligated to provide its share of such commitment to the State as follows: $50 million in September 2015, and $25 million in September 2016, 2017 and 2018, less the cost of certain roads being constructed by the City under the agreement. The City increased its sales and usey tax b one percent on March 1, 2014, to provide the funding for this commitment.

Huntsville City Schools Commitment. In 2014, the City executed an agreement with the Huntsville Board of Education under which the City is purchasing two school facilities for a total cost of about $8.5 million, less the $6 million of cost of a road funded by the City. The City expects to pay the $2.5 million balance to the Board in 2017 when the City takes ownership of the facilities.

-82- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 5 – OTHER INFORMATION– CONTINUED

Economic Development Commitments.s A of September 30, 2015, the City made the following significant economic development commitments to private entities:

i T he City committed $14.9 million as an incentive for the location of a manufacturing company in the City, and such amount has been paid as of March 31, 2014, from the 2014 Capital Improvement Fund. The City committed $8.0 million as an incentive for a retail development, $2.0 million of which the City paid in fiscal year 2015 from the Capital Improvement Fund, and the balance of which will be paid ratably over approximately five years. The payments by the City are related to public parking commitments by the developer over twenty-five years, but the City will elect to report the payments as expenditures when paid.

i The City committed $1.4 millionn as a incentive for an undisclosed project, which the City expects to pay in fiscal year 2015 from the Capital Improvement Fund. [A14] C. Related Organizations

The following organizations are legally separate entities which the City appoints a voting majority of the governing board but has no financial relationship or obligations to the entities and has nor control o influence over the entities’ operations.

Huntsville Housing Authority

The Huntsville Housing Authority is a legally separate organization which is governed by a five member board appointed by the City Council. The City has no ability to influence the operations of the Authority nor has any financial relationship or obligations related to the Authority.

Solid Waste Disposal Authority

The Solid Waste Disposal Authority is a legally separate organization which is governed by a five member board appointed by the City. The City has no ability to influence the operations of the Authority nor has any financial obligations related to the Authority. The City is obligated to use the Authority for its waste disposal through a contract with the Authority. However, this is considered to be an exchange transaction between two entities and is not considered a manifestation of a financial benefit or burden relationship between the entities. Fees paid to the Authority by the City for the in 2015 were $3.3 million. The City was also indebted to the Authority in the amount of $272,000 for waste disposal fees as of September 30, 2015.

Health Care Authority

The Health Care Authority is a legally separate organization which manages a local public hospital. The Authority is governed by a five member board appointed by the City Council. The City has no ability to influence the operations of the Authority nor has any financial relationship or obligations related to the Authority.

D. Jointly Governed Organizations

The following organizations are separate legal entities which are jointly governed by the City and Madison County in which neither government appoints a voting majority of the Board. The organizations were created for the benefit of city and county residents and generally receive financial assistance from both governments.

Huntsville-Madison County Marina and Port Authority

The Marina and Port Authority is a separate legal entity governed by a five member board to operate the marina and port facilities on the Tennessee River. The City and Madison County each appoint two of the members with one member jointly appointed. Thes City i partially responsible for funding the deficits of the Authority but did not appropriate funds or provide financial assistance to the Authority during 2015.

-83- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 5 – OTHER INFORMATION– CONTINUED

Huntsville-Madison County Railroad Authority

The Railroad Authority is a separate legal entity governed by a five member board to operate rail service to certain industry concerns in Madison County. The City and Madison County each appoint two of the members with one member jointly appointed. The City is partially responsible for funding deficits of the Authority but does not provide the Authority an annual appropriation.

Huntsville-Madison County Airport Authority

The Airport Authority is a separate legal entity governed by a five member board to operate the Huntsville International Airport. The City and Madison County each appoint two of the members with one member jointly appointed. The City is not responsible for funding any deficits of the Authority and does not provide an annual appropriation to the Authority.

Madison County Communications District

The District is a separate legal entity governed by a seven membero board t operate the Enhanced 911 Emergency Communication System for Huntsville and Madison County. The City and Madison County each appoint three of the members with one member jointly appointed. The City is not responsible for funding any deficits of the District and does not provide an annual appropriation to the District.

E. Pension Plans

Plan Description The Employees’ Retirement System of Alabama, an agency multiple-employer plan, was established October 1, 1945 under the provisions of Act 515 of the Legislature of 1945 for the purpose of providing retirement allowances and other specified benefits for state employees, State Police, and on an elective basis, to all cities, counties, towns and quasi-public organizations. The responsibility for the general administration and operation of ERS is vested in its Board of Control. The ERS Board of Control consists of 13 trustees. The Plan is administered by the Retirement Systems of Alabama (RSA). Title 36-Chapter 27 of fthe Code o Alabama grants the authority to establish and amend the benefit terms to the ERS Board of Control. The Plan issues a publicly available financial report that can be obtained at www.rsa-al.gov.

The ERS Board of Control consists of 13 trustees as follows: 1) The Governor, ex officio. 2) The State Treasurer, ex officio. 3) The State Personnel Director, ex officio. 4) The State Director of Finance, ex officio. 5) Three vested members of ERS appointed by the Governor for a term of four years, no two of whom are from the same department of state government nor from any department of which an ex officio trustee is the head. 6) Six members of ERS who are elected by members from the same category of ERS for a term of four years as follows: a. Two retired members with one from the ranks of retired state employees and one from the ranks of retired employees of a city, county, or a public agency each of whom is an active beneficiary of ERS. b. Two vested active state employees. c. Two vested active employees of an employer participating in ERS pursuant to § 36-27-6.

-84- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 5 – OTHER INFORMATION– CONTINUED

Benefits Provided

State law establishes retirement benefits as well as death and disability benefits and any ad hoc increase in postretirement benefits for the ERS. Benefits for ERS members vest after 10 years of creditable service. State employees who retire after age 60 (52 for State Police) with 10 years or more of creditable service or with 25 years of service (regardless of age) are entitled to a n annual retirement benefit, payable monthly for life. Local employees who retire after age 60 with 10 years or more of creditable service or with 25 or 30 years of service (regardless of age), depending on the particular entity’s election, are entitled to an annual retirement benefit, payable monthly for life. Service and disability retirement benefits are based on a guaranteed minimum or a formula method, with the member receiving payment under the method that yields the highest monthly benefit. Under the formula method, members of the ERS (except State Police) are allowed 2.0125% of their average final compensation (highest 3 of the last 10 years) for each year of service. State Police are allowed 2.875% for each year of State Police service in computing the formula method.

Actf 377 o the Legislature of 2012 established a new tier of benefits (Tier 2) for members hired on or after January 1, 2013. Tier 2 ERS members are eligible for retirement after age 62 (56 for State Police) with 10 years or more of creditable service and are entitled to an annual retirement benefit, payable monthly for life. Service and disability retirement benefits are based on a guaranteed minimum or a formula method, with the member receiving payment under the method that yields the highest monthly benefit. Under the formula method, Tier 2 members of the ERS (except State Police) are allowed 1.65% of their average final compensation (highest 5 of the last 10 years) for each year of service. State Police are allowed 2.375% for each year of state police service in computing the formula method. Members are eligible for disability retirement if they have 10 years of credible service, are currently in-service, and determined by the RSA Medical Board to be permanently incapacitated from further performance of duty. Preretirement death benefits are calculated and paid to the beneficiary on the member’s age, service credit, employment status and eligibility for retirement.

The ERS serves approximately 846 local participating employers. These participating employers include 287 cities, 65 counties, and 494 other public entities. The ERS membership includes approximately 83,874 participants. As of September 30, 2014, membership consisted of:

Retirees and beneficiaries currently 21,691 receiving benefits Terminated employees entitled to 1,252 but not yet receiving benefits Terminated employees not 5,048 entitled to a benefit Active Members 55,883 Total 83,874

-85- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 5 – OTHER INFORMATION– CONTINUED

Contributions. Covered members of the ERS contributed 5% of earnable compensation to the ERS as required by statute until September 30, 2011. From October 1, 2011, to September 30, 2012, covered members of the ERS were required by statute to contribute 7.25% of earnable compensation. Effective October 1, 2012, covered members of the ERS are required by statute to contribute 7.50% of earnable compensation. Certified law enforcement, correctional officers, and firefighters of the ERS contributed 6% of earnable compensation as required by statute until September 30, 2011. From October 1, 2011, to September 30, 2012, certified law enforcement, correctional officers, and firefighters of the ERS were required by statute to contribute 8.25% of earnable compensation. Effective October 1, 2012, certified law enforcement, correctional officers, and firefighters of the ERS are required by statute to contribute 8.50% of earnable compensation. State Police of the ERS contribute 10% of earnable compensation. ERS local participating employers are not required by statute to increase contribution rates for their members.

Tier 2 covered members of the ERS contribute 6% of earnable compensation to the ERS as required by statute. Tier 2 certified law enforcement, correctional officers, and firefighters of the ERS are required by statute to contribute 7% of earnable compensation. Tier 2 State Police members of the ERS contribute 10% of earnable compensation. These contributions rates are the same for Tier 2 covered members of ERS local participating employers.

T he ERS establishes rates based upon an actuarially determined rate recommended by an independent actuary. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with additional amounts to finance any unfunded accrued liability, the pre-retirement death benefit and administrative expenses of the Plan. For the year ended September 30, 2015 (or other year-end if not September), the City’s active employee contribution rate was 5.39% of covered employee payroll, and the City’s average contribution rate to fund the normal and accrued liability costs was 12.11% of covered employee payroll.

City’s contractually required contribution rate for the year ended September 30, 2015 was 12.61% of pensionable pay for Tier 1 employees, and 10.31% of pensionable pay for Tier 2 employees,. These required contribution rates are based upon the actuarial valuation dated September 30, 2013, a percent of annual pensionable payroll, and actuarially determined as an amount that, when combined with member contributions, is expected to finance the costs of benefits earned by members during the year, with an additional amount to finance any unfunded accrued liability. Total employer contributions to the pension plan from the System were $14,564,070 for the year ended September 30, 2015.

Net Pension Liability

The City’s net pension liability was measured as of September 30, 2014, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as September 30, 2013 rolled forward to September 30, 2014 using standard roll-forward techniques as shown in the following table:

Total Pension Liability as of September 30, 2013 (a) $ 490,933,569

Entry Age Normal Cost for October 1, 2013-September 30, 2014 (b) $ 8,706,017

Actual Benefit Payments and Refunds for October 1, 2013-September 30, 2014 (c) $ 26,825,501

Total Pension Liability as of September 30, 2014 [(a) x (1.08)] + (b) – [(c) x (1.04)] $ 511,015,750

-86- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 5 – OTHER INFORMATION– CONTINUED

Actuarial assumptions

The total pension liability in the September 30, 2013 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement:

Inflation 3.00% Salary increases 3.75% - 7.25% Investment rate of return* 8.00%

*Net of pension plan investment expense

Mortality rates for ERS were based on the RP-2000 Combined Mortality Table Projected with Scale AA to 2015 set forward three years for males and two years for females. The rates of mortality for the period after disability retirement are according to the sex distinct RP-2000 Disability Mortality Table.

The actuarial assumptions used in the September 30, 2013 valuation were based on the results of an investigation of the economic and demographic experience for the ERS based upon participant data as of September 30, 2010. The Board of Control accepted and approved these changes on January 27, 2012, which became effective at the beginning of fiscal year 2012.

The long-term expected rate of return on pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target asset allocation and best estimates of geometric real rates of return for each major asset class are as follows:

Long-Term Target Expected Rate of Allocation Return*

Fixed Income 25.00% 5.00%

U.S. Large Stocks 34.00% 9.00%

U.S. Mid Stocks 8.00% 12.00%

U.S. Small Stocks 3.00% 15.00%

International Developed Market Stocks 15.00% 11.00%

International Emerging Market Stocks 3.00% 16.00%

Real Estate 10.00% 7.50%

Cash 2.00% 1.50%

Total 100.00%

-87- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 5 – OTHER INFORMATION– CONTINUED

Discount rate

The discount rate used to measure the total pension liability was the long term rate of return, 8%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that the employer contributions will be made in accordance with the funding policy adopted by the ERS Board of Control. Based on those assumptions, components of the pension plan’s fiduciary net position were projected to be available to make all projected future benefit payments of current pan members. 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.

Changes in Net Pension Liability

Increase (Decrease) Total Pension Plan Fiduciary Net Net Pension Liability Position Liability (a) (b) (a)-(b) Balances at 9/30/2013 $490,933,569 $313,172,459 $177,761,110 Changes for the year: Service cost 8,706,017 0 8,706,017 Interest 38,201,665 0 38,201,665 Differences between expected and actual experience 0 0 0 Contributions--employer 0 14,884,651 (14,884,651) Contributions--employee 0 5,993,271 (5,993,271) Net investment income 0 37,204,039 (37,204,039) Benefit payments, including refunds of employee contributions (26,825,501) (26,825,501) 0 Administrative expense 0 0 0 Transfers Among Employers 0 241,147 (241,147) Net changes 20,082,181 31,503,608 (11,421,427)

Balances at 9/30/2014 $ 511,051,750 $ 344,676,067 $ 166,339,683

-88- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 5 – OTHER INFORMATION– CONTINUED

Benefits provided-Continued

Changes in Net Pension Liability

Sensitivity of the net pension liability to changes in the discount rate

The following table presents the City’s net pension liability calculated using the discount rate of 8%, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower (7%) or 1-percentage-point higher (9%) than the current rate:

1% Decrease Current Rate 1% Increases (7.00%) (8.00%) (9.00%) City’s net pension liability $222,597,988 $166,339,683 $118,618,958

Pension plan fiduciary net position

Detailed information about the pension plan’s fiduciary net position is available in the separately issued RSA Comprehensive Annual Report for the fiscal year ended September 30, 2014. The supporting actuarial information is included in the GASB Statement No. 68 Report for the ERS prepared as of September 30, 2014. The auditor’s report dated June 3, 2015 on the Schedule of Changes in Fiduciary Net Position by Employer and accompanying notes is also available. The additional financial and actuarial information is available at www.rsa-al.gov.

Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

For the year ended September 30, 2015, the City recognized pension expense of $13,467,449. At September 30, 2015, the City reported deferred outflows of resources and deferred inflows of resources related to pensions of the following sources:

Deferred Outflows Deferred Inflows of Resources of Resources Differences between expected and actual experience $0 $0 Changes of assumptions 0 0 Net difference between projected and actual earnings on pension plan investments 0 9,902,608 Employer contributions subsequent to the measurement date 14,564,070 0

Total $14,564,070 9,902,608

-89- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 5 – OTHER INFORMATION– CONTINUED

Amounts reported as deferred outflows of resources and deferredf inflows o resources to pensions will be recognized in pension expense as follows:

Year ended September 30: 2016 $2,475,652 2017 2,475,652 2018 2,475,652 2019 2,475,652 2020 0 Thereafter 0

F. Post-Retirement Medical Plans

The City and Huntsville Utilities Systems provide other post-retirement benefits (“OPEB”) to retired employees, primarily medical benefits. Assets are accumulated on an ongoing basis to pay the cost of future benefits, and the City and Utilities are accumulating these assets in restricted trusts established exclusively for this purpose, to which retiree and employer contributions are made and from which benefit payments are made.

Information contained in this note for the Utilities is what is available from their separately-issued financial statements.

Plan Descriptions. The City plan, established in 1989, provides benefits similar to those provided under the City’s medical plan for active employees, a self-insured plan under which retirees and active employees are combined. All employees eligible for retirement may make a one-time election to participate upon retirement. Coverage is provided for the electing retiree and chosen dependents until the retiree is 65 years of age. Under the Utilities’ plan, all employees meeting retirement eligibility requirements and having at least twenty years of service are eligible to participate, and continues after age 65.

Funding Policies. City retirees pay about 30% of the annually-established benefit premium rate (active employees pay fifteen percent).e Th City and Utilities must contribute the cost of benefits at a rate that is based on an actuarial valuation prepared in accordance with certain parameters In 2014, the City’s rate was about 3.7% of annual covered payroll and the Utilities’ was about 5.5%.

Annual OPEB Cost. For 2015, the City’s and Utilities annual benefit costs were equal to the required contribution, determined by actuarial valuations as of September 30, 2015, and is summarized as follows:

Schedule of Annual OPEB Cost (latest available)

Percentage of Annual Annual OPEB Net OPEB Fiscal Year OPEB Cost Cost Contributed Obligation City 2014 3,565,158 100% 0 2013 3,565,158 100% 0 2012 3,503,297 100% 0 Huntsville Utilities 2014 1,737,361 100% 0 2013 1,682,686 100% 0 2012 2,193,181 100% 0

Funded Status and Funding Progress. The funded status of the OPEB plans as of September 30 2014, is shown in the schedule below, which also presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

-90- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 5 – OTHER INFORMATION– CONTINUED

Schedule of Funding Progress for the Plans (latest available)

Actuarial UAAL as a Actuarial Actuarial Accrued Unfunded Percentage Valuation Value of Liability (AAL) AAL Funded Covered of Covered Date Assets Proj. Unit Credit (UAAL) Ratio Payroll Payroll City 9/30/14 $9,210,662 $58,997,918 $49,787,256 15.61% 101,710,815 49.0% 9/30/12 $6,083,605 $49,663,792 $43,580,187 12.25% $96,797,111 45.0% 9/30/10 $1,973,041 $53,107,681 $51,134,640 3.72% $91,530,319 55.9%

Utilities 9/30/14 7,031,343 31,268,397 24,237,054 22.49% 37,591,987 64.5% (combined) 9/30/13 5,676,120 28,835,898 23,156,778 19.70% 35,227,751 65.7% 9/30/12 5,264,905 24,769,164 19,504,259 21.30% 37,293,743 52.3%

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the health care cost trend. 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 past expectations and new estimates are made about the future.

Actuarial Methods and Assumptions. Projections of benefits for financial reporting purposes are based on the substantive OPEB plans (as understood by the employers and plan members) and include the types of benefits provided at the time of the valuations 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 short-term volatility in the actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

-91- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 5 – OTHER INFORMATION– CONTINUED

The City’s actuarial valuation as of September 30, 2014, was based on: (a) the projected unit credit method actuarial cost method, (b) a 4.5% investment rate of return and 3.25% inflation rate,n (c) a 8.5% medical cost trend rate graded to 5.0% over 6 years, (d) a 60.0% participation rate by retirees and 55.0% participation rate by spouses of participating retirees, (e) retirement rates consistent with the City’s pension plan actuarial valuation, and (f) a 30-year amortizatiof n period o the actuarial liability as a level percentage of projected payroll on an open basis.

The Utilities’ actuarial valuation as of September 30, 2014, was based on: (a) the projected unit credit method actuarial cost method, (b) a 6.25% investment r ate of return and 3.25% inflation rate, (c) a 8.5% medical cost trend rate graded to 5.0% over 6 ye ars, (d) retirement rates consistent with the Utilities’ pension plan actuarial valuation, and (e) a 30-year amortization period of the actuarial liability as a level percentage of projected payroll on an open basis.

Financial Reporting. City plan assets are accounted for in the Post-Retirement Benefits Trust Fiduciary Fund, for which a separate financial report is not published.

G. Risk Financing Programs

The City has elected to retain risk related to the employees’ health insurance, workers’ compensation insurance and legal claims and judgments against the City. The City does maintain insurance coverage for health insurance claims in excess of $200,000 per claim/medical event and for workers’ compensation claims in excess of $500,000 per occurrence. For legal claims and lawsuits, the State of Alabama prescribes maximum limits of liability for local government units. These limits are presently $100,000 for bodily injury or death for one person in any single occurrence and $300,000 for two or more persons in a single occurrence. The limit for property damage is $100,000 per single occurrence. Anticipated insurance claims are estimated using historical data and actuarial studies. Anticipated legal claims are estimated by the City’s legal counsel. All legal claims estimated to be currently payable during the fiscal year, although possibly reported to the City after September 30, 2015, have been accrued as a liability in the General Fund as of September 30, 2015. Insurance claims have been accrued as a liability in the General Fund. Insurance and legal expenditures are allocated within various departments of the General Fund and to other funds of the Cityn based o payroll and other experience factors. No changes in insurance coverage occurred compared to the previous year nor has the City experienced any insurance settlements in excess of insurance coverage over the past three years.

Changes in the balances of claims liabilities (net of anticipated insurance coverage) for the fiscal year ended September 30, 2015 were as follows[A15]:

Employees’ Health Care Workers’ Compensation 2015 2014 2015 2014 Unpaid claims, beginning of year $1,187,900 $1,125,000 $3,500,878 $3,500,878 Incurred claims 14,064,649 16,348,856 1,365,685 1,365,685 Less claim payments (13,804,549) (16,285,956) (1,697,803) (1,365,685)

Unpaid claims, end of year (a) $1,448,000 $1,187,900 $3,168,760 $3,500,878

Legal Claims Total 2015 2014 2015 2014 Unpaid claims, beginning of year $520,000 $650,000 $5,208,778 $5,275,878 Incurred claims 686,699 556,700 16,117,033 18,271,241 Less claim payments (686,699) (686,700) (16,189,051) (18,338,341)

Unpaid claims, end of year (a) $520,000 $520,000 $5,136,760 $5,208,778

(a) Total unpaid claims are reported in the government-wide Statement of Net Position.

The Electric, Water and Gas systems of the Utilities are also self-insured for general liability, health insurance and workers’ compensation insurance. Reinsurance has been purchased to limit the exposure to catastrophic loss for health insurance and workers’ compensation insurance claims.

-92- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

NOTE 5 – OTHER INFORMATION – CONTINUED

H. Prior Period Restatements and Adjustments

As discussed in Note 1B above, the City implemented the provisions of GASB Statement No, 68, Accounting and Financial Reporting for Pensions - an Amendment of GASB Statement No. 27 and Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an Amendment of GASB No. 68, effective October 1, 2014. The result of this was a prior-year adjustment to the net position of governmental activities, business-type activities and proprietary funds.

Also, during 2015, it was determined by management, that the estimates of cost related to recording of land rights related to donated subdivisions and property were improperly estimated resulting in an overstatement of the original value assigned to these land rights. Therefore, beginning net position and capital assets for governmental activities, business-type activities and proprietary funds were restated resulting in a decrease of each as noted below.

Business- Governmental Type Activities Activities Total

Beginning net position, as originally reported $607,277,804 $308,267,860 $915,545,664

Restatements: Correction of overstatement of capital assets related to overestimate of land rights value (9,271,081) (1,851,121) (11,122,202) Cumulative Effect of Implementing GASB Statement Nos. 68 & 71 (149,766,479) (13,109,980) (162,876,459)

Beginning net position, restated $448,240,244 $293,306,759 $741,547,003

The implementation of the above standards had an effect on the beginning net position of the following proprietary fund statements as well

Water Pollution Von Braun Control Fund Center Total Effect

Beginning net position, as originally reported $232,673,693 $73,414,928 $308,267,860

Restatements: Correction of overstatement of capital assets related to overestimate of land rights value (1,851,121) 0 (1,851,121) Cumulative Effect of Implementing GASB Statement Nos. 68 & 71 (8,387,715) (4,677,265) (13,064,980)

Beginning net position, restated $222,389,857 $68,737,663 $293,306,759

-93- City of Huntsville Notes To The Financial Statements - Continued September 30, 2015

Component Units

The Utilities restated the beginning net position reported in the Statement of Activities-Discretely Presented Component Units for the reasons shown below. The changes do not affect the fund financial statements.

Utilities Utilities Utilities Electric Water Gas System System System

Beginning net position, as originally reported $265,993,589 $169,516,099 $137,342,739

Restatements: Cumulative Effect of Implementing GASB Statement Nos. 68 & 71 (25,499,047) (11,403,791) (26,263,264)

Beginning net position, restated $240,494,542 $158,112,308 $110,719,475

The Huntsville Madison County Convention and Visitors Bureau (HMC CVB) restated the beginning net position reported in the Statement of Activities-Discretely Presented Component Units for the reasons shown below. The changes do not affect the fund financial statements.

HMC CVB

Beginning net position, as originally reported $1,001,177

Restatements: Cumulative Effect of Implementing GASB Statement Nos. 68 & 71 (246,602)

Beginning net position, restated $754,575

I. Subsequent Events

The City has evaluated subsequent events through April 14, 2016, the date on which the financial statements were available for issue.

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-95-

REQUIRED SUPPLEMENTARY PENSION INFORMATION

-96- CITY OF HUNTSVILLE SCHEDULE OF CHANGES IN NET PENSION LIABILITY EMPLOYEES' RETIREMENT SYSTEMS OF ALABAMA

COMPONENT UNITS Huntsville Total pension liability City of Huntsville Utilities HMC CVB Service cost $ 8,706,017 $ 2,623,427 $ 61,421 Interest 38,201,665 12,461,295 180,039 Changes in benefit terms - - - Differences between actual & expected experience - - - Changes of assumptions - - - Benefit payments, including refunds of employee contributions (26,825,501) (8,498,045) (71,475) Net change in total pension liability 20,082,181 6,586,677 169,985 Total pension liability-beginning 490,933,569 160,015,214 2,286,220 Total pension liability-ending (a) 511,015,750 166,601,891 2,456,205

Plan fiduciary net positon Contribution-employer 14,884,651 5,279,569 51,960 Contribution-employee 5,993,271 1,971,180 41,586 Net investment income 37,204,039 10,845,840 239,814 Benefit payments, including refunds of employee contributions (26,825,501) (8,498,045) - Transfers among employees 247,147 (234,344) (71,475) Administrative expense - - - Net change in plan fiduciary net postion-beginning 31,503,607 9,364,200 261,885 Plan fiduciary net position-beginning 313,172,459 91,209,544 1,987,658 Plan fiduciary net position-ending (b) $ 344,676,066 $ 100,573,744 $ 2,249,543

Net pension liability (asset)- ending (a)-(b) 166,339,684.00 66,028,147 206,662

Plan fiduciary net position as a percentage of total pension liability 67.45% 60.37% 91.59%

Covered- employee payroll 101,710,815 38,635,798 689,599

Net pension liability (asset) as a percentage of covered-employee payroll 163.54% 170.90% 29.97%

This schedule is presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compiled, governments should present information fo those years for which information is available.

-97- CITY OF HUNTSVILLE SCHEDULE OF EMPLOYER CONTRIBUTIONS EMPLOYEES' RETIREMENT SYSTEMS OF ALABAMA

COMPONENT UNITS Huntsville City of Huntsville Utilities HMC CVB Actuarially determined contribution $ 14,565,070 $ 5,264,518 $ 50,470

Contributions in relation to the actuarially determined contribution $ 14,565,070 5,264,518 50,470

Contribution deficiency (excess) $ - $ - $ -

Covered-employee payroll $ 101,710,815.00 $ 19,567,004.00 $ 9,655,596.00

Contributions as a percentage of covered-employee payroll 14.32% 26.91% 0.52%

Notes to Schedule

Actuarially determined contribution rates are calculated as of September 30, two years prior to the end of the fiscal year in which contributions are reported. Contributions for fiscal year 2015 were based on September 30, 2012 actuarial valuation.

Methods and assumptions used to determine contribution rates:

Actuarial cost method Entry Age

Amortization method Level percent closed

Remaining amortization method 30 years

Asset valuation method Five year smoothed market

Inflation 3.00%

Salary increases 3.75 - 7.25%, including inflation

Investment rate of return 8.00%, net of pension plan investment expense, including inflation

-98-

SUPPLEMENTARY INFORMATION

-99- CITY OF HUNTSVILLE GENERAL FUND BALANCE SHEET September 30, 2015

ASSETS Cash & investments, at cost $80,501,394 Receivables (net of allowances) 15,592,677 Due from other funds 1,523,712 Due from other governmental entities 2,389,729 Inventories 141,405 Prepaid items 189,256

Total assets $100,338,173

LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCE Liabiliites Accounts payable $3,982,747 Accrued liabilities 7,125,871 Contract retainages 5,800,323 Due to other funds 42,982,736 Due to other governmental entities 456,051 Unearned revenue 227,813 Other 1,769,075

Total liabilities 62,344,616

Deferred inflows of resources Deferred revenue 2,576,444

Total deferred inflows of resources 2,576,444

Fund balance Nonspendable 330,661 Restricted 459,360 Committed 3,978,387 Assigned 4,634,414 Unassigned 26,014,291

Total fund balance 35,417,113

Total liabilities, deferred inflows of resources and fund balance $100,338,173

-100- CITY OF HUNTSVILLE GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL For the Year Ended September 30, 2015

Variance with Final Budget Budget Positive Original Final Actual (Negative)

Total revenues 245,678,255 245,678,255 247,528,702 1,850,447

EXPENDITURES Current General government 24,594,049 26,515,592 29,167,768 (2,652,176) Public safety 81,688,642 83,864,352 83,305,797 558,555 Public services 54,500,048 59,030,914 60,247,468 (1,216,554) Urban development 12,977,426 13,093,566 12,823,650 269,916 Debt service 0 0 0 0 Capital projects construction 0 0 0 0 Intergovernmental assistance 25,231,800 25,231,800 24,957,226 274,574

Total expenditures 198,991,965 207,736,224 210,501,909 (2,765,685)

Excess of revenues over expenditures 46,686,290 37,942,031 37,026,793 (915,238)

OTHER FINANCING SOURCES (USES) Long-term debt issued 0 0 0 0 Premium on debt issue 0 0 0 0 Capital lease proceeds 0 0 0 0 Transfers in 0 0 208,226 208,226 Transfers out (42,917,779) (42,917,779) (42,409,290) 508,489

Total other financing sources (uses) (42,917,779) (42,917,779) (42,201,064) 716,715

Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses 3,768,511 (4,975,748) (5,174,271) (198,523)

Fund balance, beginning 40,591,384 40,591,384 40,591,384 0

Fund balance, ending $44,359,895 $35,615,636 $35,417,113 ($198,523)

-101- CITY OF HUNTSVILLE GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - BY ACTIVITY For the Year Ended September 30, 2015 Page 1 of 7

Variance with Final Budget Budget Positive Original Final Actual (Negative) REVENUES

Taxes and payments in lieu of taxes Sales and use $142,131,000 $142,131,000 $143,169,504 $1,038,504 Ad valorem 16,843,000 16,843,000 16,286,176 (556,824) Other 37,506,000 37,506,000 38,378,288 872,288

Total 196,480,000 196,480,000 197,833,968 1,353,968

Licenses and permits Privilege 20,631,000 20,631,000 20,248,683 (382,317) Building permits 1,998,000 1,998,000 1,776,960 (221,040) Other 1,540,200 1,540,200 1,654,254 114,054

Total 24,169,200 24,169,200 23,679,897 (489,303)

Fines and forfeitures 2,605,500 2,605,500 3,021,408 415,908

Revenues from money and property Interest 115,766 115,766 277,880 162,114 Recreational receipts 616,900 616,900 622,431 5,531 Other 234,900 234,900 326,711 91,811

Total 967,566 967,566 1,227,022 259,456

Charges for current services Sanitation charges 11,957,000 11,957,000 12,085,365 128,365 Parking revenue 2,167,700 2,167,700 2,224,760 57,060 Other 2,344,140 2,344,140 2,636,962 292,822

Total 16,468,840 16,468,840 16,947,087 478,247

Intergovernmental 3,661,540 3,661,540 3,278,967 (382,573)

Gifts and donations 0 0 104,167 104,167

Other revenues 1,325,609 1,325,609 1,436,186 110,577

TOTAL REVENUES 245,678,255 245,678,255 247,528,702 1,850,447

-102- CITY OF HUNTSVILLE GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - BY ACTIVITY For the Year Ended September 30, 2015 Page 2 of 7

Variance with Final Budget Budget Positive Original Final Actual (Negative) EXPENDITURES

Current Expenditures

General Government

Administration Personnel 1,341,974 1,341,974 1,357,727 (15,753) Operating 155,520 170,452 167,227 3,225 Capital 0 7,600 16,082 (8,482)

Total 1,497,494 1,520,026 1,541,036 (21,010)

City Council Personnel 396,624 379,499 370,305 9,194 Operating 37,110 58,816 51,523 7,293 Capital 0 0 0 0

Total 433,734 438,315 421,828 16,487

Clerk-Treasurer Personnel 1,227,017 1,227,017 1,255,499 (28,482) Operating 191,515 199,241 142,089 57,152 Capital 0 30,800 30,725 75

Total 1,418,532 1,457,058 1,428,313 28,745

Finance Personnel 2,359,463 2,359,463 2,365,212 (5,749) Operating 321,510 566,265 358,464 207,801 Capital 0 1,726,662 506,258 1,220,404

Total 2,680,973 4,652,390 3,229,934 1,422,456

Fleet Management Personnel 3,023,926 3,023,926 3,080,968 (57,042) Operating 386,720 387,906 381,173 6,733 Capital 0 0 0 0

Total 3,410,646 3,411,832 3,462,141 (50,309)

General expenses Personnel 1,741,000 1,741,000 6,618,107 (4,877,107) Operating 3,626,760 4,026,760 3,589,015 437,745 Capital 0 0 0 0

Total 5,367,760 5,767,760 10,207,122 (4,439,362)

-103- CITY OF HUNTSVILLE GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - BY ACTIVITY For the Year Ended September 30, 2015 Page 3 of 7

Variance with Final Budget Budget Positive Original Final Actual (Negative) Human Resources Personnel 750,196 740,096 778,222 (38,126) Operating 149,240 186,236 153,889 32,347 Capital 0 0 0 0

Total 899,436 926,332 932,111 (5,779)

Information Technology Services Personnel 3,623,763 3,623,763 3,606,420 17,343 Operating 3,475,239 2,660,159 2,580,333 79,826 Capital 0 264,035 13,699 250,336

Total 7,099,002 6,547,957 6,200,452 347,505

Legal Personnel 1,710,212 1,710,212 1,667,273 42,939 Operating 76,260 76,710 77,558 (848) Capital 0 7,000 0 7,000

Total 1,786,472 1,793,922 1,744,831 49,091

Special appropriations 0

Total general government 24,594,049 26,515,592 29,167,768 (2,652,176)

Public Safety

Animal Services Personnel 1,621,320 1,615,320 1,583,912 31,408 Operating 289,010 314,114 304,445 9,669 Capital 0 0 0 0

Total 1,910,330 1,929,434 1,888,357 41,077

Emergency Management Personnel 779,158 779,158 747,204 31,954 Operating 58,070 386,256 163,686 222,570 Capital 0 0 0 0

Total 837,228 1,165,414 910,890 254,524

Fire and Rescue Personnel 30,796,444 30,796,444 31,040,481 (244,037) Operating 1,356,610 1,441,967 2,204,898 (762,931) Capital 0 972,807 511,292 461,515

Total 32,153,054 33,211,218 33,756,671 (545,453)

-104- CITY OF HUNTSVILLE GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - BY ACTIVITY For the Year Ended September 30, 2015 Page 4 of 7

Variance with Final Budget Budget Positive Original Final Actual (Negative) Municipal court Personnel 3,171,760 3,171,760 3,104,684 67,076 Operating 202,220 206,151 195,601 10,550 Capital 0 0 0 0

Total 3,373,980 3,377,911 3,300,285 77,626

Police Personnel 39,550,765 40,109,248 39,605,586 503,662 Operating 3,772,925 3,898,194 3,707,172 191,022 Capital 0 82,573 46,476 36,097

Total 43,323,690 44,090,015 43,359,234 730,781

Special appropriations 90,360 90,360 90,360 0

Total public safety 81,688,642 83,864,352 83,305,797 558,555

Public Services

Cemetery Personnel 692,584 692,584 677,416 15,168 Operating 257,040 271,523 334,373 (62,850) Capital 0 2,334,467 2,264,353 70,114

Total 949,624 3,298,574 3,276,142 22,432

General Services Personnel 2,992,270 2,992,270 3,037,497 (45,227) Operating 5,739,560 5,913,510 5,766,991 146,519 Capital 0 0 5,970 (5,970)

Total 8,731,830 8,905,780 8,810,458 95,322

Landscape Management Personnel 7,078,458 7,078,458 7,149,891 (71,433) Operating 3,406,640 3,459,553 3,184,465 275,088 Capital 0 82,874 0 82,874

Total 10,485,098 10,620,885 10,334,356 286,529

-105- CITY OF HUNTSVILLE GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - BY ACTIVITY For the Year Ended September 30, 2015 Page 5 of 7

Variance with Final Budget Budget Positive Original Final Actual (Negative) Parking Personnel 1,270,849 1,270,849 1,232,574 38,275 Operating 408,185 478,112 367,877 110,235 Capital 0 50,000 49,970 30

Total 1,679,034 1,798,961 1,650,421 148,540

Parks & Recreation Personnel 6,035,906 6,035,906 5,908,638 127,268 Operating 619,910 635,786 496,884 138,902 Capital 0 0 0 0

Total 6,655,816 6,671,692 6,405,522 266,170

Public Transit Personnel 2,783,614 2,783,614 2,833,110 (49,496) Operating 1,189,640 1,212,044 1,023,644 188,400 Capital 838,000 2,218,229 2,137,683 80,546

Total 4,811,254 6,213,887 5,994,437 219,450

Public Works Personnel 12,543,502 12,543,502 12,754,498 (210,996) Operating 6,394,840 6,317,799 6,055,476 262,323 Capital 0 185,784 80,267 105,517

Total 18,938,342 19,047,085 18,890,241 156,844

Special appropriations 2,249,050 2,474,050 4,885,891 (2,411,841)

Total public services 54,500,048 59,030,914 60,247,468 (1,216,554)

Urban Development

Engineering Personnel 3,055,149 3,055,149 3,053,474 1,675 Operating 103,165 115,084 77,922 37,162 Capital 0 0 0 0

Total 3,158,314 3,170,233 3,131,396 38,837

Inspection Personnel 2,024,690 2,024,690 2,062,494 (37,804) Operating 152,140 208,070 121,602 86,468 Capital 0 0 0 0

Total 2,176,830 2,232,760 2,184,096 48,664

-106- CITY OF HUNTSVILLE GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - BY ACTIVITY For the Year Ended September 30, 2015 Page 6 of 7

Variance with Final Budget Budget Positive Original Final Actual (Negative) Natural Resources Personnel 636,954 636,954 619,296 17,658 Operating 42,900 42,900 35,261 7,639 Capital 0 0 0 0

Total 679,854 679,854 654,557 25,297

Planning Personnel 3,224,020 3,224,020 3,239,006 (14,986) Operating 344,690 349,752 258,779 90,973 Capital 0 0 0 0

Total 3,568,710 3,573,772 3,497,785 75,987

Traffic Engineering Personnel 2,483,218 2,435,218 2,377,328 57,890 Operating 360,220 443,849 420,689 23,160 Capital 0 7,600 7,519 81

Total 2,843,438 2,886,667 2,805,536 81,131

Special appropriations 550,280 550,280 550,280 0

Total urban development 12,977,426 13,093,566 12,823,650 269,916

Debt Service Principal 0 0 0 0 Interest 0 0 0 0 Debt issue costs 0 0 0 0

Total 0 0 0 0

Capital Projects Construction 0 0 0 0

Intergovermental Assistance Huntsville Board of Education 20,873,300 20,873,300 20,973,726 (100,426) Madison County Commission 3,023,800 3,023,800 2,648,800 375,000 Madison County Health Department 1,334,700 1,334,700 1,334,700 0

Total 25,231,800 25,231,800 24,957,226 274,574

TOTAL EXPENDITURES 198,991,965 207,736,224 210,501,909 (2,765,685)

-107- CITY OF HUNTSVILLE GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - BY ACTIVITY For the Year Ended September 30, 2015 Page 7 of 7

Variance with Final Budget Budget Positive Original Final Actual (Negative)

Excess of revenues over expenditures 46,686,290 37,942,031 37,026,793 (915,238)

Total other financing sources (uses) (42,917,779) (42,917,779) (42,201,064) 716,715

Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses 3,768,511 (4,975,748) (5,174,271) (198,523)

Fund balance, beginning 40,591,384 40,591,384 40,591,384 0

Prior period adjustment 0 0 0 0

Fund balance, ending $44,359,895 $35,615,636 $35,417,113 ($198,523)

-108- CITY OF HUNTSVILLE GENERAL FUND SCHEDULE OF SPECIAL APPROPRIATIONS - BUDGET AND ACTUAL For the Year Ended September 30, 2015

Variance with Final Budget Positive Original Budget Final Budget Actual (Negative) Public Safety Huntsville Community Watch Association $21,510 $21,510 $21,510 $0 Huntsville/Madison County Rescue Squad, Inc. 4,320 4,320 4,320 0 Partnership for Drug Free Community 64,530 64,530 64,530 0 90,360 90,360 90,360 0 Public Services Arts Council, Inc. 238,600 238,600 238,600 0 Boys & Girls Club, Inc. 43,830 43,830 43,830 0 Community Action Agency 87,750 87,750 87,750 0 First Stop, Inc. 83,830 108,830 108,830 0 Harris Home for Children 0 26,280 26,280 0 Heals, Inc. 21,960 21,960 21,960 0 Human Relations Commission 900 900 900 0 Huntsville Beautification Committee 4,410 4,410 4,410 0 Huntsville Child Care Center, Inc. 13,140 13,140 13,140 0 Huntsville Hospital 150,000 150,000 150,000 0 Huntsville Jaycees 2,160 2,160 2,160 0 Huntsville Sports Commission, Inc. 0 0 409,505 (409,505) Huntsville Symphony Orchestra 49,510 49,510 49,510 0 Huntsville/Madison County Botanical Gardens, Inc. 170,550 170,550 214,380 (43,830) Huntsville/Madison County Convention & Vis. Bureau 0 0 1,925,564 (1,925,564) Huntsville/Madison County Senior Center, Inc. 366,000 366,000 366,000 0 International Services Council of Huntsville/Madison Co. 26,280 26,280 26,280 0 Legal Services of Alabama, Inc. 17,550 17,550 17,550 0 LIFT Housing, Inc. 11,210 11,210 11,210 0 Madison County Mental Retardation Board, Inc. 35,100 35,100 35,100 0 Meadow Hills Initiative, Inc. 3,960 3,960 0 3,960 Mental Health Board, Inc. (Mental Health Center) 813,380 813,380 813,380 0 North Alabama Science Center, Inc. 0 0 0 0 Northwest Huntsville Community Services Org., Inc. 26,280 0 0 0 Science Center/Sci Quest 0 200,000 200,000 0 Second Mile Development, Inc. 21,960 21,960 21,960 0 Tennessee Valley Jazz Society, Inc. 0 0 0 0 U.S. Space & Rocket Center Foundation, inc. 0 0 38,414 (38,414) United Cerebral Palsy of Huntsville/Madison County, Inc. 30,690 30,690 28,133 2,557 United Hill Personal Growth Center, Inc. 0 0 1,045 (1,045) Weeden House Museum 30,000 30,000 30,000 0 Budgetary 1% Lodging Tax Appropriations 0 0 0 0 2,249,050 2,474,050 4,885,891 (2,411,841) Urban Development Business Tech. Development Center, Inc. ("BizTech") 87,750 87,750 87,750 0 Chamber of Commerce of Huntsville/Madison County 250,000 250,000 250,000 0 Downtown Huntsville, Inc. 90,000 90,000 90,000 0 North Alabama African-American Chamber of Commerce 21,960 21,960 21,960 0 North Alabama Coalition for the Homeless, Inc. 40,000 40,000 40,000 0 The Land Trust of Huntsville and North Alabama, Inc. 60,570 60,570 60,570 0 550,280 550,280 550,280 0

$2,889,690 $3,114,690 $5,526,531 ($2,411,841)

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-110-

OTHER GOVERNMENTAL FUNDS

The City maintains these governmental funds that are considered nonmajor funds.

Community Development Special Revenue Fund - to account for the development of viable urban communities, including decent housing and a suitable living environment and expanding economic opportunities, principally for persons of low and moderate income. Financing is provided by federal community development grants under Title I of the Housing and Community Development Act of 1974, as amended. Such grants provide for payment of the City's Community Development program costs and may be used only for that purpose.

Community Development Rehabilitation Loan Special Revenue Fund - to account for the financing of the rehabilitation of privately owned properties as part of the City's Community Development program. Financing is provided by federal community development grants under Title I of the Housing and Community Development Act of 1974, as amended and grants under the HUD Home Program. Such grants provide for payment of the City's Community Development program costs and may be used only for that purpose.

Public Building Authority Special Revenue Fund – prior to 2011, the fund accounted for the construction and expansion of public safety facilities. After 2010, the fund accounts for the payment of debt service related to construction of the facilities. Financing is provided by governmental funds of the City.

Public Library Special Revenue Fund - to account for the operation of the public library. Most of its financing is received from the General Fund and other governmental entities.

Burritt Museum Special Revenue Fund - to account for the operations of a museum in the City. Financing is provided by the General Fund of the City.

Alabama Constitution Village Special Revenue Fund - to account for the operations of historical tourist attractions in the City. Financing for the construction of the facilities was provided by federal EDA grants and operating financing is provided by admission fees and the General Fund of the City.

Art Museum Special Revenue Fund - to account for the operation of the City of Huntsville Museum of Art. Financing is provided by the General Fund of the City and private sources.

Huntsville Tennis Center Special Revenue Fund - to account for the operations of a City-constructed tennis center in the City. Financing is provided by the General Fund of the City and user fees.

Federal Building Authority Special Revenue Fund - to account for the economic development activities related to federal programs, financed primarily through state grant assistance.

Perpetual Care Fund - to account for the collection of cemetery revenues earmarked by local ordinance for the long-term care of the City-owned cemeteries.

Cummings Research Park Capital Projects Fund - to account for land sales, purchases and development costs of a research park in the City.

Industrial Park Capital Projects Fund - to account for land sales, purchases and development costs of various industrial parks within the City.

-111- CITY OF HUNTSVILLE NONMAJOR GOVERNMENTAL FUNDS (by fund type) COMBINING BALANCE SHEET September 30, 2015

Special Revenue Funds Capital Projects Funds Total Community Public Alabama Huntsville Federal Nonmajor Community Development Building Public Burritt Constitution Art Tennis Building Perpetual Cummings Governmental Development Rehabilitation Authority Library Museum Village Museum Center Authority Care Research Park Industrial Park Funds ASSETS Cash & investments, at cost $443,559 $314,220 $10 $3,584,302 $3,827 $191,060 $31,366 $331,537 $728,574 $2,686,844 $2,319,592 $0 $10,634,891 Receivables (net of allowances) Accounts 0 0 0 10,040 0 545,000 57,738 0 0 0 0 0 612,778 Notes 690,582 1,154,455 0 0 0 0 0 0 0 0 0 0 1,845,037 Accrued interest 61,956 0 0 0 0 0 0 0 0 0 0 0 61,956 Due from other funds 0 0 0 0 0 0 0 0 0 0 0 0 0 Due from governmental entities 284,764 178,283 0 0 0 0 62,300 0 0 0 0 0 525,347 Inventories 0 0 0 0 0 39,766 17,028 7,971 0 0 0 0 64,765 Prepaid items 4,901 0 0 0 0 0 106,684 0 0 0 0 0 111,585

Total assets $1,485,762 $1,646,958 $10 $3,594,342 $3,827 $775,826 $275,116 $339,508 $728,574 $2,686,844 $2,319,592 $0 $13,856,359

LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCE Liabiliites

-112- Accounts payable $107,387 $233,208 $0 $68,170 $0 $0 $116,748 $21,258 $0 $0 $3,850 $0 $550,621 Accrued liabilities 0 0 0 406,585 0 0 77,138 954 0 0 0 0 484,677 Due to other funds 91,464 0 0 0 0 143,306 0 0 0 0 0 0 234,770 Unearned revenue 0 0 0 0 0 0 242,233 0 0 0 10,000 0 252,233

Total liabilities 198,851 233,208 0 474,755 0 143,306 436,119 22,212 0 0 13,850 0 1,522,301

Deferred inflows of resources Deferred revenue 199,193 42,206 0 0 0 0 0 0 0 0 0 0 241,399

Total deferred inflows of resources 199,193 42,206 0 0 0 0 0 0 0 0 0 0 241,399

Fund balances Nonspendable 695,483 1,154,455 0 391,074 0 584,766 123,712 7,971 0 0 0 0 2,957,461 Restricted 392,235 217,089 10 424,264 0 0 0 0 728,574 0 0 0 1,762,172 Committed 0 0 0 0 0 0 0 0 0 0 2,305,742 0 2,305,742 Assigned 0 0 0 2,304,249 3,827 0 0 309,325 0 2,686,844 0 0 5,304,245 Unassigned 0 0 0 0 0 47,754 (284,715) 0 0 0 0 0 (236,961)

Total fund balance (deficit) 1,087,718 1,371,544 10 3,119,587 3,827 632,520 (161,003) 317,296 728,574 2,686,844 2,305,742 0 12,092,659

Total liabilities, deferred inflows of resources, and fund balance $1,485,762 $1,646,958 $10 $3,594,342 $3,827 $775,826 $275,116 $339,508 $728,574 $2,686,844 $2,319,592 $0 $13,856,359 CITY OF HUNTSVILLE NONMAJOR GOVERNMENTAL FUNDS (by fund type) COMBINING STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES For the Year Ended September 30, 2015

Special Revenue Funds Capital Projects Funds Total Community Public Alabama Huntsville Federal Nonmajor Community Development Building Public Burritt Constitution Art Tennis Building Perpetual Cummings Governmental Development Rehabilitation Authority Library Museum Village Museum Center Authority Care Research Park Industrial Park Funds REVENUE Taxes and payments in lieu of taxes $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Fines & forfeitures 0 0 0 335,493 0 0 0 0 0 0 0 0 335,493 Revenues from money & property 231,814 11,077 19,148 202,159 12,419 880,392 380,242 441,801 524 1,315 20,707 0 2,201,598 Intergovernmental 1,172,992 1,490,523 0 1,798,117 0 85,000 154,873 0 0 0 0 0 4,701,505 Gifts & donations 0 0 0 245,642 459,508 235,233 1,116,257 0 60,000 0 120,000 0 2,236,640 Other revenues 0 252,408 0 31,175 0 2,090 0 1,040 0 0 0 0 286,713

Total revenues 1,404,806 1,754,008 19,148 2,612,586 471,927 1,202,715 1,651,372 442,841 60,524 1,315 140,707 0 9,761,949

EXPENDITURES Current General government 0 0 0 0 0 0 0 0 0 0 283 0 283 Public services 0 0 0 5,832,280 924,723 1,782,273 2,326,780 774,084 0 0 0 0 11,640,140 Urban development 3,210,864 1,253,679 0 0 0 0 0 0 0 0 30,049 0 4,494,592

-113- Debt service Principal 0 0 2,085,000 0 0 0 0 0 0 0 0 0 2,085,000 Interest 0 0 2,949,775 0 0 0 0 0 0 0 0 0 2,949,775 Capital projects construction 0 0 0 0 0 0 0 0 0 0 2,109,487 0 2,109,487 Intergovernmental assistance 0 0 0 0 0 0 0 0 1,131,770 0 0 0 1,131,770

Total expenditures 3,210,864 1,253,679 5,034,775 5,832,280 924,723 1,782,273 2,326,780 774,084 1,131,770 0 2,139,819 0 24,411,047

Excess (deficiency) of revenues over expenditures (1,806,058) 500,329 (5,015,627) (3,219,694) (452,796) (579,558) (675,408) (331,243) (1,071,246) 1,315 (1,999,112) 0 (14,649,098)

OTHER FINANCING SOURCES (USES) Transfers in 1,396,501 150,000 5,015,633 3,800,000 444,895 673,856 658,375 195,400 1,101,770 0 0 0 13,436,430 Transfers (out) 0 (46,501) 0 0 0 0 0 0 0 0 (1,101,770) (827,257) (1,975,528)

Total other financing sources (uses) 1,396,501 103,499 5,015,633 3,800,000 444,895 673,856 658,375 195,400 1,101,770 0 (1,101,770) (827,257) 11,460,902

Net change in fund balance (409,557) 603,828 6 580,306 (7,901) 94,298 (17,033) (135,843) 30,524 1,315 (3,100,882) (827,257) (3,188,196)

Fund balance (deficit), beginning 1,497,275 767,716 4 2,539,281 11,728 538,222 (143,970) 453,139 698,050 2,685,529 5,406,624 827,257 15,280,855

Fund balance (deficit), ending $1,087,718 $1,371,544 $10 $3,119,587 $3,827 632,520 ($161,003) $317,296 $728,574 $2,686,844 $2,305,742 $0 $12,092,659 CITY OF HUNTSVILLE THE SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - BY ACTIVITY For the Year Ended September 30, 2015 Page 1 of 5

Variance with Final Budget Budget Positive City Subfund Original Final Actual (Negative)

4/5 Cent Gas Tax Fund Revenues Taxes and payments in lieu of taxes $1,279,000 $1,279,000 $1,381,554 $102,554 Revenues from money and property 0 0 1,042 1,042 Total 1,279,000 1,279,000 1,382,596 103,596

Expenditures Operating 0 52,091 9 52,082 Total 0 52,091 9 52,082

Excess (Deficiency) of Revenues Over Expenditures 1,279,000 1,226,909 1,382,587 155,678

Other financing sources (uses) Transfers in(out) (1,279,000) (1,279,000) (1,279,000) 0

Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses 0 (52,091) 103,587 155,678

Fund balance, beginning 115,741 115,741 115,741 0

Fund balance, ending $115,741 $63,650 $219,328 $155,678

6.5 Mill Tax Fund Revenues Taxes and payments in lieu of taxes $16,843,000 $16,843,000 $16,286,328 ($556,672) Revenues from money and property 0 0 0 0 Total 16,843,000 16,843,000 16,286,328 (556,672)

Expenditures Operating 0 0 0 0 Total 0 0 0 0

Excess (Deficiency) of Revenues Over Expenditures 16,843,000 16,843,000 16,286,328 (556,672)

Other financing sources (uses) Transfer to refunding escrow agent 0 0 0 0 Transfers in(out) (16,843,000) (16,598,015) (16,578,871) 19,144

Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses 0 244,985 (292,543) (537,528)

Fund balance, beginning 22,822 22,822 22,822 0

Fund balance, ending $22,822 $267,807 ($269,721) ($537,528)

-114- CITY OF HUNTSVILLE THE SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - BY ACTIVITY For the Year Ended September 30, 2015 Page 2 of 5

Variance with Final Budget Budget Positive City Subfund Original Final Actual (Negative)

6.5 Mill School Tax Fund Revenues Taxes and payments in lieu of taxes 17,319,000 17,319,000 17,097,008 (221,992) Revenues from money and property 288,900 288,900 75 (288,825) Total 17,607,900 17,607,900 17,097,083 (510,817)

Expenditures Capital 16,400,000 16,400,000 16,533,906 (133,906) Total 16,400,000 16,400,000 16,533,906 (133,906)

Excess (Deficiency) of Revenues Over Expenditures 1,207,900 1,207,900 563,177 (644,723)

Other financing sources (uses) Transfers in(out) (78,829) (78,829) (219,207) (140,378)

Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses 1,129,071 1,129,071 343,970 (785,101)

Fund balance, beginning 2,915,310 2,915,310 2,915,310 0

Fund balance, ending $4,044,381 $4,044,381 $3,259,280 ($785,101)

7 Cent Gas Tax Fund Revenues Taxes and payments in lieu of taxes $1,950,000 $1,950,000 $2,056,227 $106,227 Revenues from money and property 0 0 1,693 1,693 Total 1,950,000 1,950,000 2,057,920 107,920

Expenditures Operating 2,906,000 2,906,000 2,978,673 (72,673) Total 2,906,000 2,906,000 2,978,673 (72,673)

Excess (Deficiency) of Revenues Over Expenditures (956,000) (956,000) (920,753) 35,247

Other financing sources (uses) Transfers in(out) 956,000 956,000 956,000 0

Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses 0 0 35,247 35,247

Fund balance, beginning 157,958 157,958 157,958 0

Fund balance, ending $157,958 $157,958 $193,205 $35,247

-115- CITY OF HUNTSVILLE THE SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - BY ACTIVITY For the Year Ended September 30, 2015 Page 3 of 5

Variance with Final Budget Budget Positive City Subfund Original Final Actual (Negative)

Seizure Fund Revenues Fines and forfeitures $0 $0 $397,702 $397,702 Revenues from money and property 0 0 1,069 1,069 Total 0 0 398,771 398,771

Expenditures Operating 0 0 128,848 (128,848) Total 0 0 128,848 (128,848)

Excess (Deficiency) of Revenues Over Expenditures 0 0 269,923 269,923

Other financing sources (uses) Transfers in(out) 0 0 (31,464) (31,464)

Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses 0 0 238,459 238,459

Fund balance, beginning 453,869 453,869 453,869 0

Fund balance, ending $453,869 $453,869 $692,328 $238,459

TIF 2 Fund Revenues Taxes and payments in lieu of taxes $930,431 $930,431 $923,016 ($7,415) Revenues from money and property 0 0 0 0 Total 930,431 930,431 923,016 (7,415)

Expenditures Operating 0 0 46 (46) Total 0 0 46 (46)

Excess (Deficiency) of Revenues Over Expenditures 930,431 930,431 922,970 (7,369)

Other financing sources (uses) Transfers in(out) (909,429) (909,429) (909,429) 0

Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses 21,002 21,002 13,541 (7,369)

Fund balance, beginning 2,447 2,447 2,447 0

Fund balance, ending $23,449 $23,449 $15,988 ($7,369)

-116- CITY OF HUNTSVILLE THE SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - BY ACTIVITY For the Year Ended September 30, 2015 Page 4 of 5

Variance with Final Budget Budget Positive City Subfund Original Final Actual (Negative)

TIF 3A Fund Revenues Taxes and payments in lieu of taxes $2,592,000 $2,592,000 $2,471,645 ($120,355) Revenues from money and property 0 0 0 0 Total 2,592,000 2,592,000 2,471,645 (120,355)

Excess (Deficiency) of Revenues Over Expenditures 2,592,000 2,592,000 2,471,645 (120,355)

Other financing sources (uses) Transfers in(out) (1,491,271) (1,491,271) (1,491,271) 0

Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses 1,100,729 1,100,729 980,374 (120,355)

Fund balance, beginning 2,679,048 2,679,048 2,679,048 0

Fund balance, ending $3,779,777 $3,779,777 $3,659,422 ($120,355)

TIF 4 Fund Revenues Taxes and payments in lieu of taxes $1,169,699 $1,169,699 $1,188,620 $18,921 Revenues from money and property 0 0 1,067 1,067 Total 1,169,699 1,169,699 1,189,687 19,988

Expenditures Operating 0 0 37 (37) Total 0 0 37 (37)

Excess (Deficiency) of Revenues Over Expenditures 1,169,699 1,169,699 1,189,650 19,951

Other financing sources (uses) Transfers in(out) (1,084,385) (1,084,385) (816,578) 267,807

Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses 85,314 85,314 373,072 287,758

Fund balance, beginning 220 220 220 0

Fund balance, ending $85,534 $85,534 $373,292 $287,758

-117- CITY OF HUNTSVILLE THE SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - BY ACTIVITY For the Year Ended September 30, 2015 Page 5 of 5

Variance with Final Budget Budget Positive City Subfund Original Final Actual (Negative)

TIF 5 Fund Revenues Taxes and payments in lieu of taxes $544,924 $544,924 $495,431 ($49,493) Revenues from money and property 0 0 530 530 Total 544,924 544,924 495,961 (48,963)

Expenditures Capital 544,924 1,341,713 58,268 1,283,445 Debt Service 0 8,152,260 8,680,431 (528,171) Total 544,924 9,493,973 8,738,699 755,274

Excess (Deficiency) of Revenues Over Expenditures 0 (8,949,049) (8,242,738) 706,311

Other financing sources (uses) Long-term debt issued 0 0 8,328,637 8,328,637

Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses 0 (8,949,049) 85,899 9,034,948

Fund balance, beginning 240,833 240,833 240,833 0

Fund balance, ending $240,833 ($8,708,216) $326,732 $9,034,948

Grand Total - The Special Revenue Fund Revenues Taxes and payments in lieu of taxes $42,628,054 $42,628,054 $41,899,829 ($728,225) Fines and forfeitures 0 0 397,702 397,702 Revenues from money and property 288,900 288,900 5,476 (283,424) Total 42,916,954 42,916,954 42,303,007 (613,947)

Expenditures Operating 2,906,000 2,958,091 3,107,613 (149,522) Capital 16,944,924 17,741,713 16,592,174 1,149,539 Debt service 0 0 8,680,431 (8,680,431) Total 19,850,924 20,699,804 28,380,218 (7,680,414)

Excess (Deficiency) of Revenues Over Expenditures 23,066,030 22,217,150 13,922,789 (8,294,361)

Other financing sources (uses) Long-term debt issued 0 0 8,328,637 8,328,637 Transfer to refunding escrow agent 0 0 0 0 Transfers in(out) (20,729,914) (20,484,929) (20,369,820) 115,109

Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses 2,336,116 1,732,221 1,881,606 149,385

Fund balance, beginning 6,588,248 6,588,248 6,588,248 0

Fund balance, ending $8,924,364 $8,320,469 $8,469,854 $149,385

-118- CITY OF HUNTSVILLE OTHER GOVERNMENTAL FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - BY ACTIVITY For the Year Ended September 30, 2015 Page 1 of 5

2014 Capital Improvments Special Revenue Fund Variance with Final Budget Budget Positive Original Final Actual (Negative)

REVENUES Taxes and payments in lieu of taxes $36,500,000 $36,500,000 $37,887,842 $1,387,842 Revenues from money and property 0 0 122,925 122,925

Total revenues 36,500,000 36,500,000 38,010,767 1,510,767

EXPENDITURES Capital 89,473,000 55,774,866 20,090,131 35,684,735

Total expenditures 89,473,000 55,774,866 20,090,131 35,684,735

Excess of revenues over expenditures (52,973,000) (19,274,866) 17,920,636 37,195,502

OTHER FINANCING SOURCES (USES) Transfers in 0 0 0 0 Transfers out 0 0 0 0

Total other financing sources (uses) 0 0 0 0

Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses (52,973,000) (19,274,866) 17,920,636 37,195,502

Fund balance, beginning 21,082,982 21,082,982 21,082,982 0

Prior period adjustment 0 0 0 0

Fund balance, ending ($31,890,018) $1,808,116 $39,003,618 $37,195,502

-119- CITY OF HUNTSVILLE OTHER GOVERNMENTAL FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - BY ACTIVITY For the Year Ended September 30, 2014 Page 2 of 5

Capital Improvments Special Revenue Fund Variance with Final Budget Budget Positive Original Final Actual (Negative)

REVENUES Taxes and payments in lieu of taxes $0 $0 $161,222 $161,222 Revenues from money and property $499,300 $499,300 $1,187,493 688,193 Intergovernmental 0 0 6,233,009 6,233,009 Gifts and donations 0 0 582,085 582,085 Other revenues 0 0 108,804 108,804

Total revenues 499,300 499,300 8,272,613 7,773,313

EXPENDITURES Capital 23,643,967 123,773,749 91,588,169 32,185,580 Debt service 0 590,308 621,319 (31,011)

Total expenditures 23,643,967 124,364,057 92,209,488 32,154,569

Excess of revenues over expenditures (23,144,667) (123,864,757) (83,936,875) 39,927,882

OTHER FINANCING SOURCES (USES) Long-term debt issued 23,350,000 23,350,000 61,390,000 (38,040,000) Premium on debt issue 0 0 9,925,229 9,925,229 Transfer to debt escrow agent 0 0 0 0 Transfers in 22,598,360 22,598,360 25,288,986 2,690,626 Transfers out (17,101,444) (17,101,444) (15,785,632) 1,315,812

Total other financing sources (uses) 28,846,916 28,846,916 80,818,583 51,971,667

Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses 5,702,249 (95,017,841) (3,118,292) 91,899,549

Fund balance, beginning 71,422,747 71,422,747 71,422,747 0

Prior period adjustment 0 0 0 0

Fund balance, ending $77,124,996 ($23,595,094) $68,304,455 $91,899,549

-120- CITY OF HUNTSVILLE OTHER GOVERNMENTAL FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - BY ACTIVITY For the Year Ended September 30, 2014 Page 3 of 5

Cummings Research Park Capital Projects Fund Variance with Final Budget Positive Original Budget Final Budget Actual Amounts (Negative)

REVENUES Revenues from money and property $0 $0 $20,707 $20,707 Gifts and donations 0 0 120,000 120,000

Total revenues 0 0 140,707 140,707

EXPENDITURES Capital 0 2,326,217 2,139,819 186,398

Total expenditures 0 2,326,217 2,139,819 186,398

Excess of revenues over expenditures 0 (2,326,217) (1,999,112) 327,105

OTHER FINANCING SOURCES (USES) Transfers in 0 0 0 0 Transfers out 0 0 (1,101,770) (1,101,770)

Total other financing sources (uses) 0 0 (1,101,770) (1,101,770)

Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses 0 (2,326,217) (3,100,882) (774,665)

Fund balance, beginning 5,406,624 5,406,624 5,406,624 0

Fund balance, ending $5,406,624 $3,080,407 $2,305,742 ($774,665)

-121- CITY OF HUNTSVILLE OTHER GOVERNMENTAL FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - BY ACTIVITY For the Year Ended September 30, 2015 Page 4 of 5

Industrial Park Capital Projects Fund Variance with Final Budget Positive Original Budget Final Budget Actual Amounts (Negative)

REVENUES Revenues from money and property $0 $0 $0 $0 Other revenue 0 0 0 0

Total revenues $0 $0 $0 $0

EXPENDITURES Capital 0 0 0 0

Total expenditures 0 0 0 0

Excess (Deficiency) of Revenues Over Expenditures 0 0 0 0

OTHER FINANCING SOURCES (USES) Transfers in(out) 0 (827,257) (827,257) 0

Total other financing sources (uses) 0 (827,257) (827,257) 0

Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses 0 (827,257) (827,257) 0

Fund balance, beginning 827,257 827,257 827,257 0

Fund balance, ending $827,257 $0 $0 $0

-122- CITY OF HUNTSVILLE OTHER GOVERNMENTAL FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - BY ACTIVITY For the Year Ended September 30, 2015 Page 5 of 5

Debt Service Fund Variance with Final Budget Budget Positive Original Final Actual (Negative)

REVENUES Revenues from money and property $0 $0 $190 $190 Intergovernmental 15,400,000 15,533,905 15,533,905 0

Total revenues 15,400,000 15,533,905 15,534,095 190

EXPENDITURES Debt service 56,056,202 55,151,008 54,411,100 739,908

Total expenditures 56,056,202 55,151,008 54,411,100 739,908

Excess of revenues over expenditures (40,656,202) (39,617,103) (38,877,005) 740,098

OTHER FINANCING SOURCES (USES) Transfers in 40,381,918 39,617,102 38,875,046 (742,056) Transfers out 0 0 0 0

Total other financing sources (uses) 40,381,918 39,617,102 38,875,046 (742,056)

Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses (274,284) (1) (1,959) (1,958)

Fund balance, beginning 7,656 7,656 7,656 0

Fund balance, ending ($266,628) $7,655 $5,697 ($1,958)

-123-

STATISTICAL SECTION

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-125-

STATISTICAL SECTION

This part of the City’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statement, note disclosures, and required supplementary information says about the government’s overall financial health.

Subsection Page

Financial Trends - These schedules contain trend information to help the reader understand how the government’s financial performance and well-being have changed over time. Included are government-wide summaries of net position, and revenue, expenses, and fund balances of governmental funds and their revenue and expenditures...... 127

Revenue Capacity - These schedules contain information to help the reader assess the government’s most significant local revenue sources – sales and property taxes. Included are a 10-year tax revenue summary, property values and tax collections, and principal taxpayers...... 132

Debt Capacity - These schedules present information to help the reader assess the affordability of the government’s current levels of outstanding debt and the government’s ability to issue additional debt in the future...... 137

Demographic and Economic Information - These schedules offer demographic and economic indicators to help the reader understand the environment within which the government’s financial activities take place...... 142

Operating Information - These schedules contain service and infrastructure data to help the reader understand how the information in the government’s financial report relates to the services the government provides and the activities it performs...... 144

-126- CITY OF HUNTSVILLE NET POSITION BY COMPONENT

2015 2014 2013 (b) 2012 (b) 2011 (b) 2010 (a) 2009 (a) 2008 2007 2006

Governmental activities Net investment in capital assets $797,217,611 $833,092,652 $831,725,887 $809,527,915 $806,901,120 $802,221,037 $845,268,444 $677,876,604 $676,752,598 $662,489,220 Restricted 56,606,417 36,683,825 53,102,659 92,060,940 69,827,306 59,953,224 49,434,712 58,692,417 64,781,469 72,084,583 Unrestricted (423,145,927) (262,498,673) (180,968,702) (191,382,729) (134,886,509) (115,487,088) (119,390,646) (49,782,330) (59,903,462) (79,759,378)

Total net position $430,678,101 $607,277,804 $703,859,844 $710,206,126 $741,841,917 $746,687,173 $775,312,510 $686,786,691 $681,630,605 $654,814,425

Business-type activities Net investment in capital assets $286,013,940 $274,288,062 $266,661,604 $261,861,356 $257,197,485 $229,307,244 $205,036,558 $133,673,199 $132,100,127 $130,856,625 Restricted 0 554,023 6,858,123 14,820,632 9,998,784 10,802,923 12,046,366 0 0 0 Unrestricted 17,545,100 33,425,775 23,590,425 11,684,296 13,797,524 21,960,699 22,147,903 28,086,038 20,183,620 10,807,675

Total net position $303,559,040 $308,267,860 $297,110,152 $288,366,284 $280,993,793 $262,070,866 $239,230,827 $161,759,237 $152,283,747 $141,664,300

Primary government Net investment in capital assets $1,083,231,551 $1,107,380,714 $1,098,387,491 $1,071,389,271 $1,064,098,605 $1,031,528,281 $1,050,305,002 $811,549,803 $808,852,725 $793,345,845 Restricted 56,606,417 37,237,848 59,960,782 106,881,572 79,826,090 70,756,147 61,481,078 58,692,417 64,781,469 72,084,583 Unrestricted (405,600,827) (229,072,898) (157,378,277) (179,698,433) (121,088,985) (93,526,389) (97,242,743) (21,696,292) (39,719,842) (68,951,703)

-127- Total primary government net position $734,237,141 $915,545,664 $1,000,969,996 $998,572,410 $1,022,835,710 $1,008,758,039 $1,014,543,337 $848,545,928 $833,914,352 $796,478,725

Source: Comprehensive annual financial reports

(a) Includes the effect of a prior period adjustment made in 2011 and 2010 related to capital asset additions. Note that the invested in capital assets figure has not been restated prior to 2009.

(b) Includes the effect of restatements and prior period adjustments made in 2013 related to capital asset additions and debt issuance costs. Note that no figures related to these adjustments have been restated prior to 2011. Also, the term "net position" is used beginning in 2013, rather than "net assets" in prior years. CITY OF HUNTSVILLE CHANGES IN NET POSITION Page 1 of 2

Expenses Governmental activities: General government $29,989,299 $29,153,904 $26,715,719 $26,733,928 $24,420,239 $22,148,340 $28,684,548 $24,413,094 $21,850,177 $18,899,918 Public safety 89,257,242 88,372,786 85,724,764 83,352,893 82,143,685 82,875,148 78,799,511 76,952,205 68,430,602 62,262,521 Public services 168,284,768 237,413,535 128,811,922 137,948,724 108,810,956 109,197,353 163,161,869 99,059,863 92,368,138 89,603,382 Urban development 43,242,563 36,683,268 28,867,478 39,156,948 38,663,677 26,455,675 18,492,051 24,467,222 24,078,509 18,320,523 Intergovernmental assistance (a) 0 0 0 0 0 0 0 0 0 0 Interest on long-term debt 26,224,071 26,658,311 25,455,799 25,462,843 22,976,363 20,727,443 21,534,346 22,416,453 22,140,985 20,238,610 Unallocated depreciation 31,002,001 30,740,478 30,455,028 29,882,021 29,467,360 29,328,626 28,549,209 26,015,619 25,728,773 26,276,581 Total governmental activities expenses 387,999,944 449,022,282 326,030,710 342,537,357 306,482,280 290,732,585 339,221,534 273,324,456 254,597,184 235,601,535 Business-type activities: Water pollution control 28,593,512 27,244,801 27,720,695 30,318,335 31,138,113 27,061,582 26,875,881 26,765,661 23,399,766 20,899,980 Civic Center 12,043,936 11,842,331 10,961,440 11,128,503 10,125,697 9,728,536 9,966,778 9,690,975 9,357,380 8,475,896 Ice Complex 1,615,154 1,581,104 1,482,712 1,395,951 1,207,208 1,056,821 1,047,050 1,107,937 1,182,323 1,034,614 Total business-type activities expenses 42,252,602 40,668,236 40,164,847 42,842,789 42,471,018 37,846,939 37,889,709 37,564,573 33,939,469 30,410,490 Total primary government expenses 430,252,546 489,690,518 366,195,557 385,380,146 348,953,298 328,579,524 377,111,243 310,889,029 288,536,653 266,012,025

Program Revenues

-128- Governmental activities: Charges for services: General government 22,052,325 22,021,774 21,925,264 20,777,576 20,090,489 19,546,315 18,777,070 18,976,662 18,425,046 15,800,779 Public Safety 4,681,849 4,642,898 4,116,642 3,920,660 4,042,948 4,206,968 4,051,824 3,671,778 3,415,790 3,564,980 Public Services 18,328,708 17,988,274 18,388,361 18,116,407 18,024,375 16,467,291 16,758,939 16,610,479 15,757,762 15,216,215 Urban Development 2,732,673 3,093,173 3,307,178 2,492,147 2,632,710 2,979,979 3,688,251 4,381,380 5,991,224 4,507,747 Operating grants and contributions 24,437,539 26,850,683 21,199,994 12,395,570 10,087,125 9,607,076 5,534,331 6,041,500 7,634,443 8,555,901 Capital grants and contributions 21,290,616 21,349,944 23,956,342 24,501,646 23,279,382 11,477,997 35,454,871 8,916,135 11,735,527 8,112,379 Total governmental activities program revenues 93,523,710 95,946,746 92,893,781 82,204,006 78,157,029 64,285,626 84,265,286 58,597,934 62,959,792 55,758,001 Business-type activities: Charges for services: Water pollution control 37,680,083 36,032,232 35,792,089 36,141,264 37,321,532 33,518,016 32,905,736 33,149,416 33,370,745 30,434,720 Civic Center 8,202,625 8,358,106 7,361,245 7,212,347 6,839,392 6,514,808 7,146,456 7,085,111 6,685,865 5,330,606 Ice Complex 1,423,171 1,518,105 1,414,996 1,405,130 1,089,071 1,002,102 917,173 967,984 927,874 922,102 Operating grants and contributions 0 0 0 0 0 0 0 0 0 0 Capital grants and contributions 2,409,031 3,525,530 1,341,687 2,980,046 2,147,144 1,787,827 5,293,814 2,361,822 0 41,822 Total business-type activities program revenues 49,714,910 49,433,973 45,910,017 47,738,787 47,397,139 42,822,753 46,263,179 43,564,333 40,984,484 36,729,250 Total primary government program revenues 143,238,620 145,380,719 138,803,798 129,942,793 125,554,168 107,108,379 130,528,465 102,162,267 103,944,276 92,487,251

Net(expense)revenue Governmental activities (294,476,234) (353,075,536) (233,136,929) (260,333,351) (228,325,251) (226,446,959) (254,956,248) (214,726,522) (191,637,392) (179,843,534) Business-type activities 7,462,308 8,765,737 5,745,170 4,895,998 4,926,121 4,975,814 8,373,470 5,999,760 7,045,015 6,318,760 Total primary government net expenses (287,013,926) (344,309,799) (227,391,759) (255,437,353) (223,399,130) (221,471,145) (246,582,778) (208,726,762) (184,592,377) (173,524,774) CITY OF HUNTSVILLE CHANGES IN NET POSITION Page 2 of 2

General Revenues and Other Changes in Net Position Governmental activities: Taxes Sales & use taxes 181,057,346 159,401,801 135,099,924 132,772,011 127,235,936 123,934,078 122,161,198 127,565,012 125,723,726 114,580,803 Property taxes 54,748,223 54,253,368 53,241,717 54,699,340 58,861,760 57,285,006 54,078,571 50,210,471 43,153,397 40,235,507 Other taxes 41,737,789 41,039,618 39,075,002 39,691,873 39,795,730 39,451,787 38,537,905 37,537,970 37,319,663 35,719,573 Interest on Investments 450,481 672,898 775,306 1,124,316 969,805 798,035 1,116,673 6,150,108 7,979,874 6,253,502 Other 1,951,356 1,180,504 1,305,543 944,235 1,172,264 20,071,808 3,899,387 2,724,336 5,479,430 1,429,408 Gains (losses) on sales of assets (304,271) 2,263,811 205,554 1,893,432 232,794 1,142,410 3,897,397 1,010,961 2,295,338 5,341,938 Extraordinary impairment loss 0 0 0 0 0 (27,067,437) 0 0 0 0 Transfers (2,726,833) (2,318,504) (2,912,399) (2,427,647) (14,909,852) (17,794,065) (3,406,942) (5,316,250) (3,026,808) (2,753,377) Total governmental activities 276,914,091 256,493,496 226,790,647 228,697,560 213,358,437 197,821,622 220,284,189 219,882,608 218,924,620 200,807,354 Business-type activities Interest on Investments 63,140 73,467 86,299 48,846 44,439 70,160 102,738 404,992 547,624 238,851 Gains (losses) on sales of assets 0 0 0 0 0 0 30,000 0 0 0 Transfers 2,726,833 2,318,504 2,912,399 2,427,647 14,909,852 17,794,065 3,406,942 3,070,738 3,026,808 2,753,377 Total business-type activities 2,789,973 2,391,971 2,998,698 2,476,493 14,954,291 17,864,225 3,539,680 3,475,730 3,574,432 2,992,228 Total primary government 279,704,064 258,885,467 229,789,345 231,174,053 228,312,728 215,685,847 223,823,869 223,358,338 222,499,052 203,799,582 -129- Change in Net Position Governmental activities (17,562,143) (96,582,040) (6,346,282) (31,635,791) (14,966,814) (28,625,337) (34,672,059) 5,156,086 27,287,228 20,963,820 Business-type activities 10,252,281 11,157,708 8,743,868 7,372,491 19,880,412 22,840,039 11,913,150 9,475,490 10,619,447 9,310,988

Total primary government ($7,309,862) ($85,424,332) $2,397,586 ($24,263,300) $4,913,598 ($5,785,298) ($22,758,909) $14,631,576 $37,906,675 $30,274,808

Source: Comprehensive annual financial reports.

(a) Includes the effect of prior period adjustments made in 2011 and 2010 related to capital asset additions. Note that no figures related to these adjustments have been restated prior to 2009.

(b) Intergovernmental assistance is primarily provided to the Huntsville Board of Education, either direct payments or in the construction of school facilities that are assets of the Board. Financing for such assistance is provided by recurring property taxes or tax increment financing districts property taxes. This expense is included in other function expenses beginning in 2006.

(c) Includes the effect of restatements and prior period adjustments made in 2013 related to capital asset additions and debt issuance costs. Note that no figures related to these adjustments have been restated prior to 2011. Also, the term "net position" is used beginning in 2013, rather than "net assets" in prior years. CITY OF HUNTSVILLE FUND BALANCES OF GOVERNMENTAL FUNDS

2,015 2014 2013 2012 2011 2010 2009 2008 2007 2006

General Fund Nonspendable 330,661 295,347 103,136 100,429 156,555 - - - - - Restricted 459,360 494,593 336,926 244,449 211,399 - - - - - Committed 3,978,387 2,384,910 622,963 417,977 2,940,666 - - - - - Assigned 4,634,414 6,333,577 8,331,843 6,869,250 5,757,645 - - - - - Unassigned 26,014,291 31,082,957 30,630,183 31,151,798 29,227,404 - - - - - Reserved - - - - - 452,658 2,268,657 2,535,938 10,642,444 209,272 Unreserved - - - - - 37,387,163 41,623,212 53,444,399 59,095,252 48,597,754

Total general fund 35,417,113 40,591,384 40,025,051 38,783,903 38,293,669 37,839,821 43,891,869 55,980,337 69,737,696 48,807,026

All other governemental funds Nonspendable 2,957,461 1,934,453 1,257,751 1,230,972 992,765 - - - - - Restricted 87,154,198 76,162,879 76,162,879 124,922,741 73,184,953 ------130- Committed 32,691,643 30,615,652 30,615,652 37,375,254 42,403,656 - - - - - Assigned 5,309,942 6,032,259 5,898,703 5,216,839 4,259,078 - - - - - Unassigned (236,961) (362,755) (236,855) (1,102,991) (182,686) - - - - - Reserved - - - - - 55,597,074 76,818,638 63,566,881 54,246,282 9,453,684 Unreserved, reported in: - - - - - Debt Service fund - - - - - 3,449,602 3,412,682 3,232,744 3,350,116 3,234,567 Special revenue funds - - - - - (2,149,120) (1,644,735) 1,351,011 31,720,227 26,197,393 Permanent funds - - - - - 1,264,302 1,246,187 1,225,666 1,177,400 1,098,569 Capital project funds - - - - - 88,159,398 28,143,542 38,361,839 57,887,452 67,383,192

Total all other governmental funds 127,876,283 114,382,488 113,698,130 167,642,815 120,657,766 146,321,256 107,976,314 107,738,141 148,381,477 107,367,405

Total fund balance 163,293,396 $154,973,872 $153,723,181 $206,426,718 $158,951,435 $184,161,077 $151,868,183 $163,718,478 $218,119,173 $156,174,431

Source: Comprehensive annual financial reports. CITY OF HUNTSVILLE CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS

2015 2014 2013 2012 2011 2010 2009 2008 2007 2006

Revenues Sales and Use Tax $181,057,346 $159,781,025 $135,057,237 $132,503,675 $126,470,618 $123,934,078 $122,161,198 $127,565,012 $125,723,726 $114,580,803 Property Tax 54,748,223 54,253,368 53,241,717 54,699,340 58,861,760 57,285,006 54,078,571 50,210,471 43,153,397 40,235,507 Other taxes 41,977,292 41,090,211 39,075,002 39,691,873 39,795,730 39,451,787 38,537,905 37,537,970 37,319,663 35,633,301 Licenses and permits 23,679,897 23,819,364 23,850,640 22,033,292 21,389,753 21,739,746 22,216,726 23,054,259 24,131,627 20,192,700 Fines and forfeitures 3,754,603 3,473,013 3,129,923 3,240,931 3,485,908 3,730,949 3,909,186 3,535,338 3,333,458 3,416,351 Revenues from money and property 4,744,704 6,461,335 4,511,397 6,211,960 4,470,530 5,694,484 9,375,326 9,866,155 14,137,444 16,507,127 Charges for services 16,947,087 16,549,021 16,215,457 15,071,641 14,849,097 13,355,299 13,352,783 13,265,357 12,772,475 12,256,065 Intergovernmental 29,747,386 27,987,674 30,395,247 21,380,475 18,328,789 18,848,842 18,311,488 14,838,735 20,075,214 12,145,124 Gifts and donations 2,922,892 3,275,381 5,817,108 3,911,580 6,440,919 9,105,851 1,982,596 2,147,148 1,783,533 1,414,325 Other revenues 1,831,703 2,486,427 1,450,476 2,122,359 1,663,967 4,029,865 1,669,735 2,948,574 1,862,393 2,073,152

Total Revenues 361,411,133 339,176,819 312,744,204 300,867,126 295,757,071 297,175,907 285,595,514 284,969,019 284,292,930 258,454,455

Expenditures General government 29,170,852 28,227,710 26,200,191 28,697,542 23,065,197 23,540,359 27,076,571 19,954,377 20,526,138 18,457,838 Public safety 83,826,858 82,331,558 80,070,974 80,502,982 76,605,943 77,047,963 73,422,216 74,106,520 68,560,726 60,234,292 Public services 128,975,662 74,322,641 72,239,663 77,422,057 67,250,778 70,201,183 71,145,870 73,786,496 75,449,975 66,626,701 Urban development 18,806,466 27,725,654 17,562,142 16,288,150 20,107,047 16,476,084 16,663,058 17,334,448 20,923,861 16,929,088 Debt service -131- Principal 43,323,319 34,054,729 50,829,052 32,412,110 32,242,118 35,498,028 107,287,240 28,125,603 27,712,653 25,445,585 Interest 24,800,838 24,753,072 23,912,271 23,527,397 22,400,482 22,828,178 23,859,727 20,713,975 20,788,626 20,288,933 Fiscal charges 2,149 849 17,087 15,804 21,546 13,304 11,449 53,471 52,789 73,236 Debt issuance costs 621,319 1,414,594 249,956 1,246,871 6,500 1,148,689 1,116,280 0 1,935,175 778,962 Capital projects construction and outlay 55,563,121 28,117,331 29,658,555 20,600,429 23,300,805 32,578,946 39,807,540 61,960,481 31,786,986 31,152,674 Intergovernmental assistance 44,913,309 165,783,884 63,366,078 83,144,550 54,835,373 43,747,892 90,864,329 30,688,444 26,564,854 22,857,303

Total expenditures 430,003,893 466,732,022 364,105,969 363,857,892 319,835,789 323,080,626 451,254,280 326,723,815 294,301,783 262,844,612

Excess of revenues over (under) expenditures (68,592,760) (127,555,203) (51,361,765) (62,990,766) (24,078,718) (25,904,719) (165,658,766) (41,754,796) (10,008,853) (4,390,157)

Other financing sources(uses) Long-term debt issued 69,718,637 196,870,969 27,770,132 151,704,893 13,778,928 145,244,100 147,538,000 0 129,135,000 68,070,000 Premium on debt issue 9,925,229 24,816,375 311,879 17,425,336 0 7,106,178 9,662,918 0 2,491,409 3,030,036 Payment to escrow agent 0 (95,982,662) (20,988,033) (56,303,167) 0 (76,308,888) 0 0 (56,168,927) 0 Capital lease proceeds 0 0 0 0 0 0 0 0 0 232,957 Transfers in 79,797,073 79,517,324 91,546,692 90,282,567 89,431,120 92,329,571 160,826,423 86,590,155 87,250,263 92,454,496 Transfers (out) (82,590,783) (82,037,527) (94,361,027) (92,643,580) (104,340,972) (110,173,348) (164,218,870) (99,236,054) (90,283,102) (95,207,873)

Total other financing sources(uses) 76,850,156 123,184,479 4,279,643 110,466,049 (1,130,924) 58,197,613 153,808,471 (12,645,899) 72,424,643 68,579,616

Net change in fund balances $8,257,396 ($4,370,724) ($47,082,122) $47,475,283 ($25,209,642) $32,292,894 ($11,850,295) ($54,400,695) $62,415,790 $64,189,459

Debt service as a percentage of noncapital expenditures 26.4% 28.3% 38.3% 28.2% 29.2% 31.8% 70.2% 26.4% 27.2% 28.7%

Source: Comprehensive annual financial reports. CITY OF HUNTSVILLE GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE

Huntsville Fiscal Sales and Property City City City City City City State Utilities T.V.A. State State All Year Use Tax Tax Leasing Liquor Lodging Gasoline Wine Tobacco Gasoline P.I.L.O.T. P.I.L.O.T. Beverage Tobacco Other Total

2006 $114,580,803 $40,235,507 $2,786,309 $1,722,226 $4,445,996 $1,006,452 $138,289 $1,378,086 $3,170,148 $14,036,975 $2,569,143 $1,663,442 $302,046 $2,500,461 $190,535,883

2007 $125,723,726 $43,153,397 $2,970,016 $1,831,422 $5,351,353 $1,067,227 $160,878 $1,387,160 $3,202,542 $14,266,958 $3,070,588 $1,754,201 $317,580 $1,939,738 $206,196,786

2008 $127,565,012 $50,210,471 $2,945,100 $2,077,439 $5,924,004 $1,072,348 $166,983 $1,354,237 $3,109,810 $14,648,826 $3,080,532 $1,788,958 $306,172 $1,063,561 $215,313,453

2009 $122,161,198 $54,078,571 $2,724,440 $2,238,761 $5,691,836 $1,059,697 $158,869 $1,345,472 $3,113,969 $15,544,289 $3,061,800 $1,763,041 $298,603 $1,537,129 $214,777,675

2010 $123,934,078 $57,285,006 $2,709,184 $2,385,303 $5,806,607 $1,082,108 $158,953 $1,384,660 $3,171,632 $16,654,708 $2,874,444 $1,751,714 $286,959 $1,185,515 $220,670,871

2011 $126,470,618 $58,861,760 $2,868,384 $2,337,309 $6,144,514 $1,074,319 $178,512 $1,342,972 $3,146,176 $16,387,516 $3,195,236 $1,631,263 $318,969 $1,170,559 $225,128,108

2012 $132,503,675 $54,699,340 $2,996,122 $2,445,579 $6,129,998 $1,188,538 $179,981 $1,236,213 $3,304,230 $15,531,412 $3,328,060 $1,724,802 $263,188 $1,363,750 $226,894,888

2013 $135,057,237 $53,241,717 $2,719,021 $2,369,026 $6,191,970 $1,202,412 $178,378 $1,183,813 $3,254,180 $15,765,419 $3,072,492 $1,604,197 $230,914 $1,303,180 $227,373,956

-132- 2014 $159,781,025 $54,253,368 $2,631,568 $2,522,257 $7,303,150 $1,265,771 $180,806 $1,229,518 $3,275,006 $16,222,522 $2,908,572 $1,649,427 $144,987 $1,756,627 $255,124,604

2015 $181,057,346 $54,748,223 $2,920,756 $2,665,032 $7,560,909 $1,235,379 $197,135 $1,212,139 $3,437,782 $16,647,075 $2,881,380 $1,674,900 $223,136 $1,321,669 $277,782,861

Source: Comprehensive annual financial reports CITY OF HUNTSVILLE SALES & PROPERTY TAX RATES

SALES TAX

Fiscal Year City County State Total

2006 3.5% 0.5% 4.0% 8.0% 2007 3.5% 0.5% 4.0% 8.0% 2008 3.5% 0.5% 4.0% 8.0% 2009 3.5% 0.5% 4.0% 8.0% 2010 3.5% 0.5% 4.0% 8.0% 2011 3.5% 0.5% 4.0% 8.0% 2012 3.5% 0.5% 4.0% 8.0% 2013 3.5% 0.5% 4.0% 8.0% 2014 (1.0% increase 3/1/14) 4.5% 0.5% 4.0% 9.0% 2015 4.5% 0.5% 4.0% 9.0%

Note: Above data is the tax rate inside the City limits within Madison County.

PROPERTY TAX RATES - ALL DIRECT AND OVERLAPPING GOVERNMENTS (Per $1000 of Assessed Value)

City of Huntsville City Debt County Fiscal General School Service School Year Fund Funds Funds Total District County State Total

2006 6.5 22.0 6.5 35.0 5.5 11.0 6.5 58.0 2007 6.5 22.0 6.5 35.0 5.5 11.0 6.5 58.0 2008 6.5 22.0 6.5 35.0 5.5 11.0 6.5 58.0 2009 6.5 22.0 6.5 35.0 5.5 11.0 6.5 58.0 2010 6.5 22.0 6.5 35.0 5.5 11.0 6.5 58.0 2011 6.5 22.0 6.5 35.0 5.5 11.0 6.5 58.0 2012 6.5 22.0 6.5 35.0 5.5 11.0 6.5 58.0 2013 6.5 22.0 6.5 35.0 5.5 11.0 6.5 58.0 2014 6.5 22.0 6.5 35.0 5.5 11.0 6.5 58.0 2015 6.5 22.0 6.5 35.0 5.5 11.0 6.5 58.0

Note: Does not include Limestone County property located within the City limits as it is currently not a significant value.

-133- CITY OF HUNTSVILLE PROPERTY TAX LEVIES AND COLLECTIONS

Percent of Total Total Total Tax Tax Tax Collections Levy Collections (a) to Tax Levy

2005-2006 $140,488,139 $138,268,426 98.4%

2006-2007 $149,465,737 $148,620,312 99.4%

2007-2008 $168,234,235 $166,393,544 98.9%

2008-2009 $179,688,391 $179,104,699 99.7%

2009-2010 $188,576,265 $187,648,619 99.5%

2010-2011 $190,572,100 $190,108,734 99.8%

2011-2012 $190,241,294 $190,022,859 99.9%

2012-2013 $194,614,998 $194,498,556 99.9%

2013-2014 $197,403,885 $197,526,366 100.1%

2014-2015 $199,883,714 $199,969,065 100.0%

(a) Taxes are levied on October 1 and are payable by December 31, at which time they become delinquent and result in a tax sale to enforce collection. The Tax Collector does not provide the years in which the taxes are collected, but because of the collection policy, most are collected within the year of the levy. Collections are net of refunds.

Source: Madison County Tax Collectors office, for entire Madison County collections. Does not include Limestone County property located within the City limits as it is currently not a significant value.

-134- CITY OF HUNTSVILLE PROPERTY TAXES ESTIMATED ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY (thousands)

Assessed Value Assessment Real and Personal Property To Total Date Class I Class 2 Class 3 Penalties Exempt Class 4 Total Total Estimated October 1, Assessed Actual Assessed Actual Assessed Actual Assessed Assessed Assessed Actual Assessed Actual Actual Value

2005 $33,832 $112,774 $1,628,923 $8,144,616 $631,620 $6,316,200 $4,184 ($526,903) $204,144 $1,360,960 $1,975,800 $15,934,550 12.4%

2006 $33,146 $110,488 $1,814,243 $9,071,215 $697,207 $6,972,072 $5,601 ($557,311) $214,374 $1,426,160 $2,207,260 $17,579,935 12.6%

2007 $33,626 $112,086 $1,921,701 $9,608,503 $744,423 $7,444,226 $6,751 ($591,001) $221,997 $1,479,980 $2,337,497 $18,644,795 12.5%

2008 $33,417 $111,391 $1,980,302 $9,901,509 $786,525 $7,865,245 $5,106 ($562,663) $227,114 $1,514,093 $2,469,801 $19,392,238 12.7%

2009 $30,191 $100,637 $1,981,468 $9,907,339 $811,896 $8,118,963 $3,496 ($560,668) $206,932 $1,379,547 $2,473,315 $19,506,486 12.7%

2010 $26,732 $89,106 $1,916,313 $9,581,567 $839,571 $8,395,710 $2,095 ($517,010) $224,336 $1,495,573 $2,492,037 $19,561,956 12.7%

2011 $27,581 $91,937 $1,948,313 $9,741,566 $863,786 $8,637,862 $1,830 ($507,132) $241,516 $1,610,107 $2,575,894 $20,081,472 12.8% -135- 2012 $28,591 $95,302 $1,955,237 $9,776,187 $878,514 $8,785,143 $2,334 ($484,267) $256,731 $1,711,543 $2,637,140 $20,368,175 12.9%

2013 $26,818 $89,393 $1,977,673 $9,888,366 $878,858 $8,788,580 $3,031 ($478,909) $260,691 $1,737,940 $2,668,162 $20,504,279 13.0%

2014 $26,915 $89,717 $2,067,967 $10,339,835 $891,333 $8,913,330 $3,076 ($480,953) $269,328 $1,795,520 $2,777,666 $21,138,402 13.1%

Assessment Date Note: Property is initially assessed on October 1 each year for the taxes to be levied on the following October 1. Adjustments are made after the assessment until the next August, when the assessments are finalized for the upcoming October levy. Therefore, the assessed value figures above will result in tax collections beginning one year later. For example, the assessment in 2012 above was levied on October 1, 2012, and collected during the City's 2014 fiscal year.

Valuation Note: The above figures are those reported by the Madison County Tax Assessor on the abstract for the city district tax, which is the basis for collection of the 6.5 mill general fund and 6.5 mill special revenue fund tax. Property located within the City limits in Limestone County is not included as this is currently not a significant value.

Class and Assessment % Note: Class 1 - All property of utilities used in their business - 30% Class 2 - All property not otherwise classified - 20% Class 3 - All agricultural, forest and single family, owner-occupied residential property, and historic property - 10% Class 4 - Private passenger automobiles and pickup trucks -15%

Tax Rate Note: For purposes of the property tax base figures above, the direct rate that applies to these bases is 6.5 mills of tax on the assessed value (i.e. 0.65%). CITY OF HUNTSVILLE PRINCIPAL TAXPAYERS - SALES & PROPERTY TAXES

SALES & USE TAXES Top 100 Taxpayers (approximate) Total Tax % of Total Tax

2006 $61,600,652 $114,580,803 53.8% 2007 $67,513,282 $125,723,726 53.7% 2008 $67,540,596 $127,565,012 52.9% 2009 $65,039,625 $122,161,198 53.2% 2010 $68,513,620 $123,934,078 55.3% 2011 $68,060,713 $126,470,618 53.8% 2012 $73,600,757 $132,503,675 55.5% 2013 $74,582,224 $135,057,237 55.2% 2014 $85,343,403 $159,781,025 53.4% 2015 $98,998,235 $181,057,346 54.7%

Source: City Finance Department. City and state law do not permit the disclosure of tax information for specific taxpayers, and city policy restricts disclosures on fewer than the top 100 taxpayers. Collections from the largest City taxpayers are not concentrated in particular industries or products, but generally pertain to sales of a diverse variety of consumer goods.

Note: Information prior to 2006 is not available.

PROPERTY TAXES 2015 2006 City Percentage City Percentage Assessed of Total Assessed of Total Valuation Rank Assessed Value Valuation Rank Assessed Value

Toyota Motor Manufacturing Alabama $117,058,380 1 4.2% Generics International US Inc $27,408,320 2 1.0% Huntsville NYL LLC $23,954,860 3 0.9% Bell South Telecommunications Inc $21,042,500 4 0.8% $27,246,700 1 1.4% BASF Catalysts LLC $17,969,640 5 0.6% IMI Huntsville LLC $16,963,100 6 0.6% ADTRAN Inc $16,966,760 7 0.6% Generics International US Inc $12,684,380 8 0.5% Crestwood Healthcare LP $12,461,620 9 0.4% 6,811,520 10 0.3% Redstone Federal Credit Union $9,519,280 10 0.3% $7,996,400 8 0.4% Colonial Realty LP $16,204,120 2 0.8% Siemens VDO Automotive $11,236,380 3 0.6% Engelhard Corp. $10,660,940 4 0.5% Sanmina SCI Technology $8,831,320 5 0.4% Inland Southeast Hsv LLC $8,414,300 6 0.4% Parkway Place Limited $8,158,580 7 0.4% Madison Square Assco LTD $7,719,700 9 0.4%

Top 10 subtotal $276,028,840 9.9% $113,279,960 5.7%

Other taxpayers $2,501,637,160 90.1% $1,862,520,040 94.3%

Totals $2,777,666,000 100.0% $1,975,800,000 100.0%

-136- CITY OF HUNTSVILLE RATIOS OF OUTSTANDING DEBT BY TYPE (amounts expressed in thousands, except per capita amounts)

Governmental Activities Business-Type Activities Sewer System General PBA General Sewer System Total Debt as % Fiscal Obligation Revenue Lease Revenue Capital Obligation Revenue Capital Primary Per of Personal Year Warrants Warrants Bonds Leases Warrants Warrants Leases Government Capita Income

2006 $392,235 $0 $54,798 $1,865 $45,581 $64,245 $106 $558,830 $3,282 4.59%

2007 $409,609 $0 $87,607 $1,323 $52,038 $75,980 $29 $626,586 $3,618 4.78%

2008 $373,868 $0 $87,568 $763 $55,293 $76,560 $4 $594,056 $3,396 4.26%

2009 $423,606 $0 $87,108 $234 $64,763 $71,800 $0 $647,511 $3,621 4.31%

2010 $469,181 $834 $86,628 $120 $72,658 $66,865 $0 $696,286 $3,876 4.50% -137- 2011 $434,877 $14,613 $86,133 $64 $66,719 $61,745 $0 $664,151 $3,688 4.11%

2012 $503,719 $29,193 $85,619 $0 $95,968 $42,065 $0 $756,564 $4,135 4.43%

2013 $452,459 $35,933 $83,759 $0 $88,120 $37,380 $0 $697,651 $3,731 3.89%

2014 $568,664 $45,206 $62,697 $0 $80,799 $32,525 $0 $789,891 $4,198 4.33%

2015 $496,159 $41,453 $59,490 $0 $0 $64,980 $27,485 $0 $689,567 $3,664 3.63%

Source: Comprehensive annual financial reports. See the Schedule of Demographic and Economic Statistics for median family income and population data.

Note: Outstanding debt includes face value and unamortized original issue premium/discounts CITY OF HUNTSVILLE RATIOS OF GENERAL OBLIGATION DEBT OUTSTANDING (amounts expressed in thousands)

Percentage of Sewer System Estimated General General Actual Taxable Fiscal Obligation Obligation Value of Per Year Warrants Warrants Total Property Capita

2006 $392,235 $45,581 $437,816 2.5% $2,572

2007 $409,609 $52,038 $461,647 2.5% $2,666

2008 $373,868 $55,293 $429,161 2.2% $2,400

2009 $423,606 $64,763 $488,369 2.5% $2,718

2010 $469,181 $72,658 $541,839 2.8% $3,008

2011 $434,877 $66,719 $501,596 2.5% $2,742

2012 $503,719 $95,968 $599,687 2.9% $3,263

2013 $452,459 $88,120 $540,579 2.6% $2,902

2014 $568,664 $80,799 $649,463 3.1% $3,450

2015 $496,159 $64,980 $561,139 Not available Not available

Source: Comprehensive annual financial reports. See the Schedule of Demographic and Economic Statistics for population data. See the Schedule of Estimated Assessed and Estimated Actual Value of Taxable Property

Note: Outstanding debt includes face value and unamortized original issue premium/discounts

-138- CITY OF HUNTSVILLE LEGAL DEBT MARGIN INFORMATION

2015 2014 2013 2012 2011 2010 2009 2008 2007 2006

Debt limit 554,918,000 533,026,200 526,961,200 514,812,800 498,407,400 494,663,000 493,960,200 467,499,200 441,452,000 395,160,000 Total net debt applicable to limit 276,811,706 294,217,898 267,510,207 276,293,944 258,004,189 292,953,851 248,535,628 236,541,190 269,238,480 259,259,048 Legal debt margin 278,106,294 238,808,302 259,450,993 238,518,856 240,403,211 201,709,149 245,424,572 230,958,010 172,213,520 135,900,952

Total net debt applicable to limit as a percentage of debt limit 49.9% 55.2% 50.8% 53.7% 51.8% 59.2% 50.3% 50.6% 61.0% 65.6%

Legal Debt Margin Calculation for Current Fiscal Year

Assessed value of real and personal property, October 1, 2014 (a) $2,774,590,000

Debt limit - 20 percent of total assessed value 554,918,000

All outstanding debt of the City $689,568,320

-139- Less those portions not chargeable to the debt limit: Lease revenue bonds of the Public Building Authority 59,490,000 Debt payable from other revenues: General obligation sewer warrants 64,980,582 Sewer revenue warrants 27,485,000 Private placement revenue warrants 41,453,320 Warrants issued for schools 215,566,821

Total not chargeable 408,975,723

Total debt chargeable to debt limit 280,592,597

Less assets available for debt service 3,780,891 276,811,706

Legal debt margin $278,106,294

(a) does not include penalty assessments that are not includable in this calculation.

Note: The above data is determined in accordance with governmental accounting standards and may differ from the methods used when determining the data under Alabama law for municipalities. Parties interested in this data in connection with City debt obligations should rely on official statements and other information issued by the City specifically in regard to those matters. CITY OF HUNTSVILLE COMPUTATION OF DIRECT AND OVERLAPPING DEBT

Percentage Amount Applicable Applicable Net Debt to City of to City of Jurisdiction Outstanding (a) Huntsville (b) Huntsville

City of Huntsville $641,853,978 100.0% $641,853,978 Madison County 13,258,961 67.6% $8,963,058

Total $650,817,036

(a) City of Huntsville net debt outstanding includes all general obligation debt, revenue-backed debt and revenue bonds of the Public Building Authority financed with general government revenues, less amounts available for debt service in the various funds. It does not include general obligation and other debt serviced with resources from proprietary funds. Outstanding includes face value and unamortized original issue premium/discounts.

(b) The Madison County percentage is the ratio of the assessed value of all taxable real and personal property, excluding motor vehicles, in the City ($2,572,072,020) for 22 mills of city school district taxes, to the assessed value of all taxable real and personal property, excluding motor vehicles, in Madison County ($3,965,421,840) for 5.5 mills of county school district taxes. All data as of the most recently released tax abstract (October 1, 2014).

-140- CITY OF HUNTSVILLE REVENUE WARRANT COVERAGE WATER POLLUTION CONTROL FUND WARRANTS (a)

Net Revenue Direct Available Fiscal Gross Operating for Debt Debt Service Requirements(a) Year Revenues (b) Expenses (c) Service Principal(d) Interest Total Coverage

2006 $30,633,229 $10,869,617 $19,763,612 $6,935,000 $4,768,338 $11,703,338 1.69

2007 $33,893,278 $12,813,710 $21,079,568 $7,790,000 $4,852,048 $12,642,048 1.67

2008 $33,515,315 $15,632,820 $17,882,495 $8,430,000 $5,487,061 $13,917,061 1.28

2009 $32,975,967 $12,788,101 $20,187,866 $9,193,100 $5,493,372 $14,686,472 1.37

2010 $33,556,946 $12,799,431 $20,757,515 $10,008,646 $5,208,679 $15,217,325 1.36

2011 $37,332,443 $17,532,204 $19,800,239 $10,508,858 $4,692,755 $15,201,613 1.30

2012 $36,153,998 $16,246,846 $19,907,152 $11,661,625 $4,610,899 $16,272,524 1.22

2013 $35,835,744 $13,149,771 $22,685,973 $11,700,948 $4,720,969 $16,421,917 1.38

2014 $36,056,556 $13,439,347 $22,617,209 $12,725,271 $4,389,828 $17,115,099 1.32

2015 $37,697,985 $15,046,587 $22,651,398 $13,441,815 $4,013,909 $17,455,724 1.30

(a) Debt service for general obligation warrants issued for sewer purposes, and revenue warrants.

(b) Gross revenues available for debt service include customer charges and interest income.

(d) Does not include principal amount of refunded debt.

-141- CITY OF HUNTSVILLE DEMOGRAPHIC AND ECONOMIC STATISTICS

Total Per Capita Fiscal Personal Personal Unemployment Year Population (a) Income (b) Income (b) Rate (c)

2005 170,251 $12,174,073 $32,949 3.0%

2006 173,189 $13,114,483 $34,689 2.8%

2007 174,938 $13,951,201 $36,084 2.6%

2008 178,819 $15,010,000 $37,938 3.7%

2009 179,653 $15,476,000 $38,090 7.2%

2010 180,105 $16,148,000 $38,523 7.4%

2011 182,956 $17,073,000 $40,126 7.6%

2012 183,772 $17,916,554 $41,595 6.7%

2013 186,254 $18,256,805 $41,899 5.5%

2014 188,226 $18,992,753 $43,059 5.0%

(a) The data is based on the most recent Federal Census, as updated for annual average increases in households.

(b) The personal income amounts are for the Huntsville Metropolitan Statistical Area, which consists of Madison and Limestone counties. The population of the MSA is much higher than the City population figures above. The source of the data is the Bureau of Economic Analysis.

(c) The unemployment rate data is for Madison County. The source of the data is the LMI Division of the Alabama Department of Labor.

-142- CITY OF HUNTSVILLE PRINCIPAL EMPLOYERS

2015 2011 Percentage Percentage Number of of Total Number of of Total Employers Employees Rank Labor Force Employees Rank Labor Force

US Army/Redstone Arsenal 18,270 1 8.7% 17,400 1 8.3%

Huntsville Hospital System 6,341 2 3.0% 6,280 2 3.0%

NASA/Marshall Space Flight Center 4,615 3 2.2% 4,260 3 2.0%

The Boeing Co 2,600 4 1.2% 2,600 4 1.2%

SAIC(Science Applications Internation Corp) 2,277 5 1.1% 2,242 5 1.1%

Camber Corporation 2,125 6 1.0%

ADTRAN, INC 1,549 7 0.7% 1,740 6 0.8%

Technicolor / CINRAM, INC 1,450 8 0.7% 1,450 9 0.7%

PAR 1,350 9 0.6%

Intergraph Corporation 1,325 10 0.6% 1,325 10 0.6%

Sanmina-SCI Corporation 1,578 7 0.8%

Teledyne Brown Engineering 1,530 8 0.7%

Total Employees of 10 Principal Employers 41,902 19.8% 40,405 19.2%

Employees of Other Employers 168,840 80.2% 169,759 80.8%

Total Civilian Labor Force 210,742 100.0% 210,164 100.0%

Source: Chamber of Commerce Huntsville/Madison County North Alabama Development Association Alabama Department of Labor

Note: This employement data represents persons employed in Huntsville/Madison County in nonagricultural wage and salary occupations and does not include the local government employers.

-143- CITY OF HUNTSVILLE CITY GOVERNMENT EMPLOYEES BY FUNCTION

Function 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006

General Government Administration 12 13 12 12 13 15 15 11 16 15 City Council 8 8 10 10 10 10 10 10 10 10 Clerk-Treasurer 18 18 18 18 18 18 18 18 18 20 Finance 33 31 33 33 33 31 31 31 28 28 Human Resources 13 13 13 13 13 13 13 13 11 11 I.T.S. 48 48 47 47 47 46 46 47 42 40 Legal 16 16 16 16 16 16 16 17 17 16 Total 148 147 149 149 150 149 149 147 142 140

Public Safety Animal Services 31 28 28 28 28 28 28 28 27 27 EMA 9 9 9 9 9 9 9 9 8 8 Fire and Rescue 396 395 395 400 387 377 377 354 343 340 Municipal Court 48 48 48 47 46 48 48 48 46 46 Police 632 632 628 628 628 629 613 615 603 596 Total 1,116 1,112 1,108 1,112 1,098 1,091 1,075 1,054 1,027 1,017

Public Services Cemetery 12 24 24 23 23 24 24 24 22 22 General Services 53 64 63 81 83 90 90 86 79 79 Projects Management 0 0 0 0 0 0 0 9 7 7 Fleet Services 46 47 47 47 49 52 35 34 33 33 Parks & Recreation 191 185 185 182 181 180 172 172 172 172 Landscape Management 133 132 232 232 190 229 229 225 255 253 Parking 54 54 54 54 54 55 55 55 55 55 Public Transportation 75 73 73 67 68 68 68 68 43 43 Public Works 246 245 246 258 256 287 268 272 287 284 Water Pollution Control 125 124 124 123 123 123 123 120 115 113 Total 935 948 1,048 1,067 1,027 1,108 1,064 1,065 1,068 1,061

Urban Development Community Development 44 44 44 44 40 40 40 40 42 42 Engineering 46 45 45 45 45 47 48 49 49 70 Inspection 29 29 28 28 28 28 28 28 30 28 Natural Resources 7 7 7 7 7 7 7 7 7 7 Planning 45 47 46 47 45 43 43 43 39 36 Traffic Engineering 39 39 39 39 38 33 34 31 29 0 Total 210 211 209 210 203 198 200 198 196 183

Total for all departments 2,409 2,418 2,514 2,538 2,478 2,546 2,488 2,464 2,433 2,401

Source: City of Huntsville Annual Budget

-144- CITY OF HUNTSVILLE OPERATING INDICATORS AND CAPITAL ASSET STATISTICS BY FUNCTION

Function 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006

Public Safety Fire and Rescue Number of fire stations 19 18 17 17 16 16 16 16 16 16 Fire insurance rating 3/9 3/9 3/9 3/9 3/9 4/9 4/9 3/9 3 3 Number of calls answered 17,021 16,587 15,036 14,418 14,749 21,279 20,689 21,442 23,472 22,675 Inspections 5,715 4,829 5,464 4,928 4,540 5,438 5,250 5,375 4,500 3,900 Police Number of police stations 4 4 4 4 4 4 4 4 4 4 Physical arrests 12,371 13,040 12,499 11,253 11,849 15,045 14,179 13,625 14,020 13,148 Parking violations 10,469 10,535 9,674 11,870 11,645 13,472 13,586 16,587 15,392 9,631 Traffic violations 39,908 44,256 33,488 31,508 33,280 43,906 42,173 37,932 31,554 37,792

Public Services Recreation Services Admissions to Aquatic Facilities 100,011 99,180 101,992 101,091 87,582 88,058 87,009 99,440 88,194 78,546 Participants in Community Center programs 5,480 3,521 2,477 2,986 2,989 3,030 3,780 2,881 4,724 5,272 Participants in Youth Athletic programs 5,836 5,883 5,730 6,062 6,438 6,573 6,771 6,709 7,246 7,829 Participants in Adult Athletic programs 1,954 3,084 3,853 6,442 5,897 6,263 6,282 6,684 4,678 4,357 Number of parks 64 63 62 62 62 63 63 63 63 60 Baseball fields 48 48 48 50 49 57 57 57 57 57 Softball fields 48 48 48 42 41 41 41 41 41 41 -145- Soccer fields & Multi-purpose fields 41 41 41 59 58 50 50 50 50 50 Football fields 2 2 2 2 2 4 4 4 4 4 Golf courses 1 1 1 1 1 1 1 1 1 1 Tennis courts 56 56 55 66 53 66 66 65 65 59 Recreation centers 12 13 13 13 13 12 11 11 11 11 Enclosed swimming pools 3 3 3 3 3 3 3 3 3 3 Public Works Streets (Beginning 2011 - Lane Miles) 38,932 38,402 38,046 37,816 36,573 3,423 2,960 2,684 2,684 2,654 Street lights 22,535 22,410 22,169 21,923 21,890 21,820 21,720 20,631 20,631 19,762 Signalized street intersections 369 366 359 356 350 350 310 300 300 288 Controled intersections 11,648 11,620 11,553 11,540 11,500 11,250 11,000 10,850 10,850 10,606 Major storm sewers (miles) 1,346 1,346 1,411 1,404 892 892 892 892 892 785 Potholes repaired 13,012 7,312 9,408 8,638 10,804 13,662 13,264 5,528 8,275 9,925 Sanitation Refuse collected (tons/day) 286 267 266 258 240 236 232 229 227 222 Trash collected (tons/day) 165 174 167 174 197 157 171 167 158 175 Water Pollution Control Avg daily sewage treatment(M gallon/day) 36.59 33.19 40.64 37.03 41.04 34.11 27.10 22.71 21.92 23.57 Sanitary sewers (miles) 1,430 1,420 1,365 1,365 1,290 1,290 1,260 1,260 1,260 1,200 Utilities New connections 1,312 850 889 1,107 752 648 191 228 359 357 Water main breaks 95 79 85 64 74 115 45 93 55 73 Average daily consumption (000 gallons) 40,518 38,406 37,364 41,347 40,216 41,508 37,674 42,010 46,124 41,098 Water meters in use 92,919 91,513 90,802 89,280 88,195 85,437 84,882 83,653 77,504 77,504

Sources: Various city departments

Notes: * data is not available In 2005 an EMS response program was started in the Fire Department

APPENDIX D

FORMS OF OPINIONS OF BOND COUNSEL

City of Huntsville Huntsville, Alabama

We have examined certified copies of proceedings of the governing body of the City of Huntsville (herein called the "City"), in the State of Alabama, and other documents submitted to us pertaining to the authorization, sale and issuance of

$______CITY OF HUNTSVILLE, ALABAMA General Obligation Warrants Series 2016-A

(herein called the "Series 2016-A Warrants"). We have not examined the Series 2016-A Warrants as executed, but we have been furnished with appropriate certificates respecting their execution. The statements herein made and the opinions hereinafter expressed are based upon our examination of the proceedings and documents so furnished to us.

We are of the following opinion: that the Series 2016-A Warrants have been validly authorized and issued pursuant to the applicable provisions of the Constitution and laws of Alabama, are in due and legal form and constitute valid orders on the City Treasurer of the City, for the payment of the principal of and the interest and premium, if any, on which the City has validly and irrevocably pledged its full faith and credit; and that under existing statutes, the interest income on the Series 2016-A Warrants is exempt from income taxation by the State of Alabama.

We are further of the opinion that under the Internal Revenue Code of 1986, as amended (herein called the "Code"), as presently construed and administered, and assuming compliance by the City with its covenants pertaining to certain requirements of federal tax law that are set forth in the proceedings authorizing the issuance of the Series 2016-A Warrants, the interest on the Series 2016-A Warrants will be excludable from gross income of the recipients thereof for federal income tax purposes pursuant to the provisions of Section 103(a) of the Code, and the interest on the Series 2016-A Warrants will not be an item of tax preference included in alternative minimum taxable income for the purpose of computing the minimum tax imposed by Section 55 of the Code. We note, however, that interest on the Series 2016-A Warrants is taken into account in determining adjusted current earnings for purposes of the federal alternative minimum tax imposed on certain corporations. We express no opinion with respect to the federal tax consequences to the recipients of the interest on the Series 2016-A Warrants under any provision of the Code not referred to above.

We express no opinion herein regarding the accuracy, adequacy or completeness of the Official Statement of the City relating to the Series 2016-A Warrants. Further, we express no opinion regarding tax consequences arising with respect to the Series 2016-A Warrants other than as expressly set forth herein.

The rights of the holders of the Series 2016-A Warrants and the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights and the exercise of judicial discretion in appropriate cases.

This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur.

Yours very truly,

Appendix D - 1

City of Huntsville Huntsville, Alabama

$______CITY OF HUNTSVILLE, ALABAMA General Obligation School Warrants Series 2016-B

(herein called the "Series 2016-B Warrants"). We have not examined the Series 2016-B Warrants as executed, but we have been furnished with appropriate certificates respecting their execution. The statements herein made and the opinions hereinafter expressed are based upon our examination of the proceedings and documents so furnished to us.

We are of the following opinion: that the Series 2016-B Warrants have been validly authorized and issued pursuant to the applicable provisions of the Constitution and laws of Alabama, are in due and legal form and constitute valid orders on the City Treasurer of the City, for the payment of the principal of and the interest and premium, if any, on which the City has validly and irrevocably pledged its full faith and credit; and that under existing statutes, the interest income on the Series 2016-B Warrants is exempt from income taxation by the State of Alabama.

We are further of the opinion that under the Internal Revenue Code of 1986, as amended (herein called the "Code"), as presently construed and administered, and assuming compliance by the City with its covenants pertaining to certain requirements of federal tax law that are set forth in the proceedings authorizing the issuance of the Series 2016-B Warrants, the interest on the Series 2016-B Warrants will be excludable from gross income of the recipients thereof for federal income tax purposes pursuant to the provisions of Section 103(a) of the Code, and the interest on the Series 2016-B Warrants will not be an item of tax preference included in alternative minimum taxable income for the purpose of computing the minimum tax imposed by Section 55 of the Code. We note, however, that interest on the Series 2016-B Warrants is taken into account in determining adjusted current earnings for purposes of the federal alternative minimum tax imposed on certain corporations. We express no opinion with respect to the federal tax consequences to the recipients of the interest on the Series 2016-B Warrants under any provision of the Code not referred to above.

We express no opinion herein regarding the accuracy, adequacy or completeness of the Official Statement of the City relating to the Series 2016-B Warrants. Further, we express no opinion regarding tax consequences arising with respect to the Series 2016-B Warrants other than as expressly set forth herein.

The rights of the holders of the Series 2016-B Warrants and the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights and the exercise of judicial discretion in appropriate cases.

Yours very truly,

Appendix D - 2

City of Huntsville Huntsville, Alabama

$______CITY OF HUNTSVILLE, ALABAMA General Obligation Refunding Warrants Series 2016-C

(herein called the "Series 2016-C Warrants"). We have not examined the Series 2016-C Warrants as executed, but we have been furnished with appropriate certificates respecting their execution. The statements herein made and the opinions hereinafter expressed are based upon our examination of the proceedings and documents so furnished to us.

We are of the following opinion: that the Series 2016-C Warrants have been validly authorized and issued pursuant to the applicable provisions of the Constitution and laws of Alabama, are in due and legal form and constitute valid orders on the City Treasurer of the City, for the payment of the principal of and the interest and premium, if any, on which the City has validly and irrevocably pledged its full faith and credit; and that under existing statutes, the interest income on the Series 2016-C Warrants is exempt from income taxation by the State of Alabama.

We are further of the opinion that under the Internal Revenue Code of 1986, as amended (herein called the "Code"), as presently construed and administered, and assuming compliance by the City with its covenants pertaining to certain requirements of federal tax law that are set forth in the proceedings authorizing the issuance of the Series 2016-C Warrants, the interest on the Series 2016-C Warrants will be excludable from gross income of the recipients thereof for federal income tax purposes pursuant to the provisions of Section 103(a) of the Code, and the interest on the Series 2016-C Warrants will not be an item of tax preference included in alternative minimum taxable income for the purpose of computing the minimum tax imposed by Section 55 of the Code. We note, however, that interest on the Series 2016-C Warrants is taken into account in determining adjusted current earnings for purposes of the federal alternative minimum tax imposed on certain corporations. We express no opinion with respect to the federal tax consequences to the recipients of the interest on the Series 2016-C Warrants under any provision of the Code not referred to above.

We express no opinion herein regarding the accuracy, adequacy or completeness of the Official Statement of the City relating to the Series 2016-C Warrants. Further, we express no opinion regarding tax consequences arising with respect to the Series 2016-C Warrants other than as expressly set forth herein.

The rights of the holders of the Series 2016-C Warrants and the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights and the exercise of judicial discretion in appropriate cases.

Yours very truly,

Appendix D - 3

City of Huntsville Huntsville, Alabama

$______CITY OF HUNTSVILLE, ALABAMA General Obligation School Refunding Warrants Series 2016-D

(herein called the "Series 2016-D Warrants"). We have not examined the Series 2016-D Warrants as executed, but we have been furnished with appropriate certificates respecting their execution. The statements herein made and the opinions hereinafter expressed are based upon our examination of the proceedings and documents so furnished to us.

We are of the following opinion: that the Series 2016-D Warrants have been validly authorized and issued pursuant to the applicable provisions of the Constitution and laws of Alabama, are in due and legal form and constitute valid orders on the City Treasurer of the City, for the payment of the principal of and the interest and premium, if any, on which the City has validly and irrevocably pledged its full faith and credit; and that under existing statutes, the interest income on the Series 2016-D Warrants is exempt from income taxation by the State of Alabama.

We are further of the opinion that under the Internal Revenue Code of 1986, as amended (herein called the "Code"), as presently construed and administered, and assuming compliance by the City with its covenants pertaining to certain requirements of federal tax law that are set forth in the proceedings authorizing the issuance of the Series 2016-D Warrants, the interest on the Series 2016-D Warrants will be excludable from gross income of the recipients thereof for federal income tax purposes pursuant to the provisions of Section 103(a) of the Code, and the interest on the Series 2016-D Warrants will not be an item of tax preference included in alternative minimum taxable income for the purpose of computing the minimum tax imposed by Section 55 of the Code. We note, however, that interest on the Series 2016-D Warrants is taken into account in determining adjusted current earnings for purposes of the federal alternative minimum tax imposed on certain corporations. We express no opinion with respect to the federal tax consequences to the recipients of the interest on the Series 2016-D Warrants under any provision of the Code not referred to above.

We express no opinion herein regarding the accuracy, adequacy or completeness of the Official Statement of the City relating to the Series 2016-D Warrants. Further, we express no opinion regarding tax consequences arising with respect to the Series 2016-D Warrants other than as expressly set forth herein.

The rights of the holders of the Series 2016-D Warrants and the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights and the exercise of judicial discretion in appropriate cases.

Yours very truly,

Appendix D - 4

APPENDIX E

SUMMARY OF CONTINUING DISCLOSURE AGREEMENT

Summary of Continuing Disclosure Agreement

The following is a summary of the Continuing Disclosure Agreement (the "Agreement") entered into by the City, for the benefit of the holders of the Warrants, in order to assist the winning bidders for the Warrants in complying with the provisions of Rule 15c2-12 (the "Rule"), promulgated by the Securities and Exchange Commission of the United States of America (the "Commission") pursuant to the Securities Exchange Act of 1934. Except where otherwise defined in this Appendix, all capitalized terms have the meaning assigned in the front portion of this Official Statement.

Annual Report of the City. The City agrees, in accordance with the provisions of the Rule, to provide or cause to be provided through the Electronic Municipal Market Access system ("EMMA") established by the Municipal Securities Rulemaking Board ("MSRB") (or such other system as may be subsequently authorized by the MSRB), not later than 270 days after the close of each fiscal year of the City (October 1 - September 30) commencing after September 30, 2016, the following annual financial information and operating data (the "Annual Report"): the audited financial statements of the City and notes thereto. The City also agrees, in accordance with the Rule, to provide or cause to be provided through EMMA (or such other system as may be authorized by the MSRB) notice of any failure to provide the Annual Report or any part thereof.

Notice of Certain Events. The City agrees to provide or cause to be provided, in a timely manner, through EMMA (or such other system as may be authorized by the MSRB) within ten (10) business days of the occurrence of any of the following events with respect to the Warrants:

(i) principal and interest payment delinquencies;

(ii) non-payment related defaults, if material;

(iii) unscheduled draws on debt service reserves reflecting financial difficulties;

(iv) unscheduled draws on credit enhancements reflecting financial difficulties;

(v) substitution of credit or liquidity providers, or their failure to perform;

(vi) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Warrants, or other material events affecting the tax status of the Warrants;

(vii) modifications of the rights of holders of the Warrants;

(viii) calls for redemption, other than scheduled mandatory redemption, of any of the Warrants if material, and notice of tender offers;

(ix) defeasances;

(x) release, substitution or sale of property securing repayment of the Warrants, if material;

(xi) rating changes;

(xii) Bankruptcy, insolvency, receivership or similar event of the City or of any obligated person respecting the Warrants;

(xiii) the consummation of a merger, consolidation, or acquisition involving the City or any obligated person respecting the Warrants (each, an "Obligated Person") or the sale of all or substantially all of the assets of the Obligated Person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action, or the termination of a definitive agreement related to any such actions, other than pursuant to its terms, if material;

Appendix E - Page 1

(xiv) appointment of a successor or additional trustee or paying agent or the change of name of a trustee or paying agent, if material; and

(xv) failure of the City to timely file its Annual Report.

Additional Information. The City may from time to time choose to provide other information in addition to the information and notices listed above, but the City does not undertake in the Agreement to commit to provide any such additional information or to update or to continue to provide such additional information or notices once provided.

Amendment; Waiver. The City may amend the Agreement and any provision of the Agreement may be waived, if such amendment or waiver is supported by an opinion of counsel expert in federal securities laws, to the effect that such amendment or waiver would not cause the undertakings therein to violate the Rule taking into account any subsequent change in or official interpretation of the Rule.

Beneficiaries and Enforcement. The City agrees that its undertakings pursuant to the Rule set forth in the Agreement are intended to be for the benefit of the holders of the Warrants and shall be enforceable by such holders. No failure by the City to comply with its obligations under the Agreement shall constitute an event of default under the Ordinance.

Appendix E - Page 2

APPENDIX F

NOTICE OF SALE – SERIES 2016-A WARRANTS

Appendix F

Notice of Sale

City of Huntsville, Alabama $36,395,000* General Obligation Warrants Series 2016-A

The City of Huntsville, Alabama, a municipal corporation under the laws of the State of Alabama (the "City"), invites bids for the purchase of the above-referenced warrants (the "Series 2016-A Warrants"), at 9:30 o’clock, A.M., Central Time, on June 14, 2016 (the "Bid Date"), which bids will be viewed publicly at the office of Public Financial Management, Inc. ("PFM"), located at 116 Jefferson Street South, Suite 301, Huntsville, Alabama 35801.

Dates and Places of Payment

The Series 2016-A Warrants will be issued in fully registered form in denominations of $5,000 or any integral multiple thereof and will be dated the date of their delivery (expected to be June 30, 2016), (ii) interest on the Series 2016-A Warrants will be payable on November 1, 2016, and semiannually thereafter on May 1 and November 1 of each year until final maturity, and (iii) the principal of the Series 2016-A Warrants will be payable at the corporate trust office of Regions Bank, an Alabama banking corporation (the "Bank"), in the City of Birmingham, Alabama, on the dates shown herein.

Form of Delivery of Series 2016-A Warrants

The Series 2016-A Warrants, when issued, will be issued in the name of and held by Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"). DTC will act as securities depository for the Series 2016-A Warrants. Purchases of beneficial interests in the Series 2016-A Warrants will be made in book-entry form, in denominations of $5,000 or any integral multiple thereof. Purchasers will not receive certificates representing their beneficial interests in the Series 2016-A Warrants. So long as DTC or its nominee, Cede & Co., is the registered owner of the Series 2016-A Warrants, payment of principal and interest will be made directly to DTC or such nominee. 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 Participants and Indirect Participants of DTC.

______* Preliminary; subject to change.

Appendix F - Page 1

Principal Amortization

The Series 2016-A Warrants will mature or be subject to mandatory redemption on May 1 in the following years and principal amounts:

Principal Year Amount* 2017 $ 645,000 2018 540,000 2019 555,000 2020 575,000 2021 600,000 2022 1,550,000 2023 1,630,000 2024 1,710,000 2025 1,795,000 2026 1,885,000 2027 1,980,000 2028 2,080,000 2029 2,185,000 2030 2,295,000 2031 2,410,000 2032 2,525,000 2033 2,655,000 2034 2,785,000 2035 2,925,000 2036 3,070,000

* Preliminary; subject to change.

Reservation of Right of City to Reduce or Increase Annual Principal Amounts of Series 2016-A Warrants

The preliminary amounts of each annual principal payment relating to the Series 2016-A Warrants as set forth in this Notice of Sale (the "Preliminary Principal Amounts") may be revised by the City prior to the time bids are to be received (the "Revised Principal Amounts"). Any such revisions will be communicated through Thomson Financial ("TM3"), www.TM3.com or IPREO not later than 3:00 o’clock, P.M., Central Time, on the last calendar day prior to the Bid Date. If no such revisions are made, the Preliminary Principal Amounts will constitute the Revised Principal Amounts. Bidders shall submit bids based on the Revised Principal Amounts, and the Revised Principal Amounts will be used to compare bids and select a winning bidder. Bidders may not adjust principal amounts or maturity dates.

After selecting the winning bid, the City will determine each final annual principal amount of the Series 2016-A Warrants (the "Final Annual Principal Amounts"). In determining the Final Annual Principal Amounts, the City will not increase or reduce any annual principal amount by more than 20% of such amount, and will not increase or reduce the total aggregate principal amount of the Series 2016-A Warrants by more than 15%. ANY DETERMINATION BY THE CITY OF THE FINAL ANNUAL PRINCIPAL AMOUNTS WITHIN THESE PARAMETERS SHALL BE BINDING UPON THE SUCCESSFUL BIDDER. THE SUCCESSFUL BIDDER MAY NOT WITHDRAW ITS BID OR CHANGE THE INTEREST RATES BID OR THE INITIAL REOFFERING PRICES AS A RESULT OF ANY CHANGES MADE TO THE REVISED ANNUAL PRINCIPAL AMOUNTS WITHIN THESE LIMITS.

The dollar amount bid by the successful bidder will be adjusted to reflect any adjustments in the Revised Annual Principal Amounts. Such adjusted bid price will reflect changes in the dollar amount of the underwriter’s discount per $1,000 of par amount of the Series 2016-A Warrants from the underwriter’s discount which would have been received based on the purchase price in the winning bid and the initial public offering prices. The Final Annual Principal Amounts and the adjusted bid price for the Series 2016-A Warrants will be communicated to the successful bidder by 2:30 o’clock, P.M., Central Time, on the Bid Date.

Appendix F - Page 2

Serial Series 2016-A Warrants or Term Series 2016-A Warrants

Subject to the provisions regarding interest rate restrictions set forth below under "Bidding Conditions Relating to the Series 2016-A Warrants", bidders may provide that the Series 2016-A Warrants be issued as serial Series 2016-A Warrants or may provide that any two or more consecutive annual principal amounts maturing on or after May 1, 2027 be combined into one or more term Series 2016-A Warrants. If the successful bidder designates consecutive annual principal amounts to be combined into one or more term Series 2016-A Warrants, each such term Series 2016-A Warrant shall be subject to mandatory redemption by the City commencing on the May 1 of the first year which has been combined to form such term Series 2016-A Warrant and continuing on May 1 in each year thereafter until May 1 of the stated maturity date of that term Series 2016-A Warrant, on which date the remaining balance thereof shall be payable. FOR EACH TERM SERIES 2016-A WARRANT BID, THE INTEREST RATE FOR THE PRINCIPAL AMOUNT TO BE DUE IN THE YEAR OF STATED MATURITY, AND THE INTEREST RATE FOR EACH PORTION SUBJECT TO MANDATORY REDEMPTION IN THE YEARS PRIOR TO STATED MATURITY, SHALL BE IDENTICAL AND, FURTHER, SHALL COMPLY STRICTLY WITH THE RESTRICTIONS FOR SUCH YEARS SET FORTH BELOW UNDER "Bidding Conditions Relating to the Series 2016-A Warrants". The amount of any term Series 2016-A Warrant to be redeemed or paid in any year shall be equal to the principal amount specified for such year as set forth in the table above under the caption "Principal Payments", as the same shall be adjusted to reflect the Final Annual Principal Amounts. Term Series 2016-A Warrants to be redeemed in any year by mandatory redemption shall be redeemed at par and shall be selected by lot from among the term Series 2016-A Warrants then subject to mandatory redemption in such year. The City may, at its option, credit against any mandatory redemption requirement term Series 2016-A Warrants of the maturity then subject to redemption which have been purchased and canceled by the City or which have been optionally redeemed by the City and not theretofore applied as a credit against any mandatory redemption requirement. Optional Redemption Provisions

Those of the Series 2016-A Warrants having a stated maturity on May 1, 2027, and thereafter, shall be subject to redemption and payment, at the option of the City, on any date on or after May 1, 2026, in whole or in part (and if in part, in multiples of $5,000 in such maturities as the City in its sole discretion shall designate, and if less than all the Series 2016-A Warrants having the same maturity are to be redeemed, those to be redeemed shall be selected by the Bank by lot), at and for a redemption price for each Series 2016-A Warrant (or portion thereof) redeemed equal to the face or par amount thereof plus accrued interest to the redemption date.

Purpose

The Series 2016-A Warrants are being issued for the purpose of paying the costs of various public capital improvements within the City and to pay the costs of issuing the Series 2016-A Warrants.

Security

The Series 2016-A Warrants will constitute general obligations of the City secured by a pledge of the full faith and credit of the City.

Bidding Conditions Relating to the Series 2016-A Warrants

Bidders must bid to purchase all of the Series 2016-A Warrants. Any bid for less than all of the Series 2016-A Warrants will be disqualified. Bidders must specify a rate of interest for each maturity of the Series 2016-A Warrants, and no zero rate of interest may be specified. All Series 2016-A Warrants of any maturity (including principal amounts of a term Series 2016-A Warrant subject to mandatory redemption) must bear the same rate of interest throughout their term. Bidders may bid to purchase the Series 2016- A Warrants from the City at discount or at a premium; provided (i) no bid will be considered to purchase the Series 2016-A Warrants if, for any maturity of the Series 2016-A Warrants, the bid is at a price less than 98.5% of the par amount of such maturity; and

Appendix F - Page 3

(ii) no bid will be considered if the coupon interest rate for any Series 2016-A Warrants maturing or subject to mandatory redemption on May 1, 2027, or any date thereafter, is less than 5.00%

Special Terms, Covenants or other Requirements Not Permitted

No bidder will be allowed to specify (either before or after the award of the Series 2016-A Warrants) pricing or other contractual terms other than the regular interest rates and purchase price per this Notice of Sale.

Form of Bids

Bids for the Series 2016-A Warrants must be submitted in electronic form via PARITY® in the manner described below by not later than 9:30 A.M., Central Time, on the Bid Date.

Formal award of the Series 2016-A Warrants will be made by 4:00 o'clock, P.M., Central Time, on the Bid Date.

No bid will be received after 9:30 A.M., Central Time, on the Bid Date. To the extent any instructions or directions set forth in PARITY® conflict with this Notice of Sale, the terms of this Notice of Sale shall control. For further information about PARITY®, potential bidders may contact PFM, financial advisor to the City, at (256) 536-3035, or PARITY® at i-Deal, (212) 849-5021.

Every bid must be unconditional, irrevocable and in accordance with the terms and conditions set forth in this Notice of Sale.

Disclaimer

Each bidder shall be solely responsible for making the necessary arrangements to access the PARITY® system for purposes of submitting its bid in a timely manner and in compliance with the requirements of this Notice of Sale. Neither the City nor PARITY® shall have any duty or obligation to provide or assure such access to any bidder, and neither the City nor PARITY® shall be responsible for the proper operation of, or have any liability for, any delays or interruptions of, or any damages caused by, the PARITY® system. The City is authorizing the use of PARITY® as a communication mechanism to conduct electronic bidding for the Series 2016-A Warrants, but such system is not an agent of the City. The City is not bound by any advice and determination of PARITY® to the effect that any particular bid complies with the terms of this Notice of Sale and in particular the specifications set forth in "Bidding Conditions relating to the Series 2016-A Warrants" hereinabove and "Basis of Award" hereinbelow. All costs and expenses incurred by bidders in connection with their registration via PARITY® are the sole responsibility of such bidders.

Basis of Award

The Series 2016-A Warrants will be awarded to the bidder submitting a bid in conformance with this Notice of Sale that produces the lowest true interest cost to the City. The true interest cost (expressed as an annual interest rate) will be the rate necessary, when using a 360-day year and semiannual compounding, to discount the debt service payments from the payment dates to the dated date of the Series 2016-A Warrants and to the price bid. If two or more bids are submitted that produce the same lowest true interest cost for the Series 2016-A Warrants, the City shall select the successful bidder by lot.

If satisfactory bids are received for the Series 2016-A Warrants, the bidder submitting the qualifying bid resulting in the lowest true interest cost for the Series 2016-A Warrants will be advised by 11:30 A.M., Central Time, on the Bid Date that it is the apparent successful bidder, subject to the official award of the Series 2016-A Warrants by the City later that afternoon.

Diversity

It is the intent of the City that appropriate consideration be given to firms that reflect the racial and ethnic diversity of the City of Huntsville. The City requests and strongly urges bidders to include such firms in their management group or syndicate.

Appendix F - Page 4

Delivery and Payment

Delivery of the Series 2016-A Warrants is expected to occur on June 30, 2016. The Series 2016-A Warrants will be delivered through DTC in New York, New York. The successful bidder(s) shall pay for the Series 2016-A Warrants on the date of delivery in immediately available federal funds. Any expense of providing federal funds shall be borne by the purchaser(s). Payment on the delivery date shall be made in an amount equal to the price bid for the Series 2016-A Warrants purchased.

Right to Reject Bids; Waive Irregularities

The City reserves the right to reject any and all bids and to waive any irregularity or informality in any bid.

Insurance

The successful bidder may purchase municipal bond insurance, if available, for some or all of the Series 2016-A Warrants. However, the delivery of such Series 2016-A Warrants shall not be conditioned upon the issuance of any such insurance. Payment of any insurance premium and satisfaction of any conditions to the issuance of a municipal bond insurance policy, including payment for any legal opinion to be delivered to any insurer, shall be the sole responsibility of the bidder. In particular, the City shall have no obligation to enter into any additional agreements with respect to the provision of any such insurance. FAILURE OF AN INSURANCE PROVIDER TO ISSUE A POLICY OF MUNICIPAL BOND INSURANCE SHALL NOT JUSTIFY FAILURE OR REFUSAL BY THE SUCCESSFUL BIDDER TO ACCEPT DELIVERY OF, OR PAY FOR, THE SERIES 2016-A WARRANTS, OR ANY PORTION THEREOF.

Reoffering Prices Relating to the Series 2016-A Warrants

The successful bidder will be required, within one-half hour after being notified that it has submitted the lowest bid for the Series 2016-A Warrants, to advise the City of the initial public offering price of such warrants (the "Initial Public Offering Price"). The successful bidder will also be required, prior to the delivery of the Series 2016-A Warrants, to furnish to the City a certificate acceptable to Bond Counsel to the City stating that (i) as of the sale date, the successful bidder offered or reasonably expected to offer all of the Series 2016-A Warrants for sale to public purchasers (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers) at the Initial Public Offering Price, (ii) as of the closing date, all of the Series 2016-A Warrants have actually been offered to the general public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers) in a bona fide public offering at the Initial Public Offering Price, and (iii) as of the sale date, the successful bidder reasonably expected that the initial sales of at least 10% of each maturity of the Series 2016-A Warrants has been sold to the general public at the Initial Public Offering Price stated in the Official Statement of the City respecting the Series 2016-A Warrants, or otherwise providing such certifications as to the Initial Public Offering Price for the Series 2016-A Warrants as shall be acceptable to such bond counsel.

Continuing Disclosure

In order to assist bidders in complying with Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, the City will undertake, pursuant to the ordinance by which the City will authorize the issuance of the Series 2016-A Warrants, to provide annual reports and notices of certain events respecting the Series 2016-A Warrants. A description of this undertaking is set forth in the Preliminary Official Statement of the City respecting the Series 2016-A Warrants (the “Preliminary Official Statement”), and will also be set forth in the final Official Statement of the City with respect to the Series 2016-A Warrants.

Legal Opinion

The Series 2016-A Warrants will be sold subject to the approving opinion of Bradley Arant Boult Cummings LLP, Birmingham, Alabama, Bond Counsel to the City.

It shall be a condition of the obligation of a purchaser to accept delivery of and to pay for the applicable Series 2016-A Warrants that, contemporaneously with such delivery and payment, there shall be furnished to the successful bidder, without expense to it, the approval opinion of Bond Counsel to the City in the form attached to the Preliminary Official Statement.

Appendix F - Page 5

CUSIP Numbers

It is anticipated that CUSIP identification numbers will be printed on the Series 2016-A Warrants, but neither the failure to print such numbers on any Series 2016-A Warrant nor any error with respect thereto shall constitute a cause for a failure or refusal by the purchaser thereof to accept delivery of or pay for the Series 2016-A Warrants. The successful bidder for the Series 2016-A Warrants shall be responsible for ordering and obtaining CUSIP numbers for the Series 2016-A Warrants, and the CUSIP Service Bureau charge for the assignment of said numbers for the Series 2016-A Warrants shall be paid for by the successful bidder.

Concerning the Preliminary Official Statement

The Preliminary Official Statement of the City with respect to the Series 2016-A Warrants, which contains further information concerning the Series 2016-A Warrants and financial and other information pertaining to the City, may be obtained from PFM, financial advisor to the City, at the address for PFM set forth above.

The Preliminary Official Statement and the information contained therein have been deemed final by the City as of its date within the meaning of Rule 15c2-12 under the Securities Exchange Act of 1934, with permitted omissions, but are subject to change without notice and to completion or amendment in the Official Statement in final form.

Official Statement

The City will provide the successful bidder such reasonable number of printed copies of the final Official Statement respecting the Series 2016-A Warrants as such bidder may request, no later than seven (7) business days after the day the Series 2016-A Warrants are awarded. Up to one hundred (100) copies of the final Official Statement will be furnished without cost to the successful bidder of the Series 2016-A Warrants and further copies, if desired, will be made available at the successful bidder’s expense.

Right to Modify or Amend

The City reserves the right to modify or amend this Notice of Sale; however, such modifications or amendments shall be made not later than 3:00 o’clock, P.M., Central Time, on the last calendar day prior to the Bid Date and communicated through Thomson Financial (TM3), www.TM3.com or IPREO.

Postponement

The City reserves the right to postpone, from time to time, the date established for the receipt of bids of the Series 2016-A Warrants. Any such postponement will be announced through Thomson Financial (TM3), www.TM3.com or IPREO, not later than 3:00 o’clock, P.M., Central Time, on the last calendar day prior to the Bid Date.

CITY OF HUNTSVILLE, ALABAMA

/s/ Tommy Battle Mayor

Dated: June 3, 2016

Appendix F - Page 6

APPENDIX G

NOTICE OF SALE – SERIES 2016-B WARRANTS

Appendix G

Notice of Sale

City of Huntsville, Alabama $28,345,000* General Obligation School Warrants Series 2016-B

The City of Huntsville, Alabama, a municipal corporation under the laws of the State of Alabama (the "City"), invites bids for the purchase of the above-referenced warrants (the "Series 2016-B Warrants"), at 10:00 o’clock, A.M., Central Time, on June 14, 2016 (the "Bid Date"), which bids will be viewed publicly at the office of Public Financial Management, Inc. ("PFM"), located at 116 Jefferson Street South, Suite 301, Huntsville, Alabama 35801.

Dates and Places of Payment

The Series 2016-B Warrants will be issued in fully registered form in denominations of $5,000 or any integral multiple thereof and will be dated the date of their delivery (expected to be June 30, 2016), (ii) interest on the Series 2016-B Warrants will be payable on November 1, 2016, and semiannually thereafter on May 1 and November 1 of each year until final maturity, and (iii) the principal of the Series 2016-B Warrants will be payable at the corporate trust office of Regions Bank, an Alabama banking corporation (the "Bank"), in the City of Birmingham, Alabama, on the dates shown herein.

Form of Delivery of Series 2016-B Warrants

The Series 2016-B Warrants, when issued, will be issued in the name of and held by Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"). DTC will act as securities depository for the Series 2016-B Warrants. Purchases of beneficial interests in the Series 2016-B Warrants will be made in book-entry form, in denominations of $5,000 or any integral multiple thereof. Purchasers will not receive certificates representing their beneficial interests in the Series 2016-B Warrants. So long as DTC or its nominee, Cede & Co., is the registered owner of the Series 2016-B Warrants, payment of principal and interest will be made directly to DTC or such nominee. 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 Participants and Indirect Participants of DTC.

______* Preliminary; subject to change.

Appendix G - Page 1

Principal Amortization

The Series 2016-B Warrants will mature or be subject to mandatory redemption on May 1 in the following years and principal amounts:

Principal Year Amount* 2024 $ 650,000 2025 1,015,000 2026 1,470,000 2027 1,970,000 2028 2,105,000 2029 2,215,000 2030 2,325,000 2031 2,440,000 2032 2,560,000 2033 2,690,000 2034 2,825,000 2035 2,965,000 2036 3,115,000

* Preliminary; subject to change.

Reservation of Right of City to Reduce or Increase Annual Principal Amounts of Series 2016-B Warrants

The preliminary amounts of each annual principal payment relating to the Series 2016-B Warrants as set forth in this Notice of Sale (the "Preliminary Principal Amounts") may be revised by the City prior to the time bids are to be received (the "Revised Principal Amounts"). Any such revisions will be communicated through Thomson Financial ("TM3"), www.TM3.com or IPREO not later than 3:00 o’clock, P.M., Central Time, on the last calendar day prior to the Bid Date. If no such revisions are made, the Preliminary Principal Amounts will constitute the Revised Principal Amounts. Bidders shall submit bids based on the Revised Principal Amounts, and the Revised Principal Amounts will be used to compare bids and select a winning bidder. Bidders may not adjust principal amounts or maturity dates.

After selecting the winning bid, the City will determine each final annual principal amount of the Series 2016-B Warrants (the "Final Annual Principal Amounts"). In determining the Final Annual Principal Amounts, the City will not increase or reduce any annual principal amount by more than 20% of such amount, and will not increase or reduce the total aggregate principal amount of the Series 2016-B Warrants by more than 15%. ANY DETERMINATION BY THE CITY OF THE FINAL ANNUAL PRINCIPAL AMOUNTS WITHIN THESE PARAMETERS SHALL BE BINDING UPON THE SUCCESSFUL BIDDER. THE SUCCESSFUL BIDDER MAY NOT WITHDRAW ITS BID OR CHANGE THE INTEREST RATES BID OR THE INITIAL REOFFERING PRICES AS A RESULT OF ANY CHANGES MADE TO THE REVISED ANNUAL PRINCIPAL AMOUNTS WITHIN THESE LIMITS.

The dollar amount bid by the successful bidder will be adjusted to reflect any adjustments in the Revised Annual Principal Amounts. Such adjusted bid price will reflect changes in the dollar amount of the underwriter’s discount per $1,000 of par amount of the Series 2016-B Warrants from the underwriter’s discount which would have been received based on the purchase price in the winning bid and the initial public offering prices. The Final Annual Principal Amounts and the adjusted bid price for the Series 2016-B Warrants will be communicated to the successful bidder by 2:30 o’clock, P.M., Central Time, on the Bid Date.

Serial Series 2016-B Warrants or Term Series 2016-B Warrants

Subject to the provisions regarding interest rate restrictions set forth below under "Bidding Conditions Relating to the Series 2016-B Warrants", bidders may provide that the Series 2016-B Warrants be issued as serial Series 2016-B Warrants or may provide that any two or more consecutive annual principal amounts maturing on or after May 1, 2027 be combined into one or more term Series 2016-B Warrants. If the successful bidder designates consecutive annual principal amounts to be combined into one or more term Series 2016-B Warrants, each such term Series 2016-B Warrant shall be subject to mandatory redemption by the City commencing on the May 1 of the first year which has Appendix G - Page 2 been combined to form such term Series 2016-B Warrant and continuing on May 1 in each year thereafter until May 1 of the stated maturity date of that term Series 2016-B Warrant, on which date the remaining balance thereof shall be payable. FOR EACH TERM SERIES 2016-B WARRANT BID, THE INTEREST RATE FOR THE PRINCIPAL AMOUNT TO BE DUE IN THE YEAR OF STATED MATURITY, AND THE INTEREST RATE FOR EACH PORTION SUBJECT TO MANDATORY REDEMPTION IN THE YEARS PRIOR TO STATED MATURITY, SHALL BE IDENTICAL AND, FURTHER, SHALL COMPLY STRICTLY WITH THE RESTRICTIONS FOR SUCH YEARS SET FORTH BELOW UNDER "Bidding Conditions Relating to the Series 2016-B Warrants". The amount of any term Series 2016-B Warrant to be redeemed or paid in any year shall be equal to the principal amount specified for such year as set forth in the table above under the caption "Principal Payments", as the same shall be adjusted to reflect the Final Annual Principal Amounts. Term Series 2016-B Warrants to be redeemed in any year by mandatory redemption shall be redeemed at par and shall be selected by lot from among the term Series 2016-B Warrants then subject to mandatory redemption in such year. The City may, at its option, credit against any mandatory redemption requirement term Series 2016-B Warrants of the maturity then subject to redemption which have been purchased and canceled by the City or which have been optionally redeemed by the City and not theretofore applied as a credit against any mandatory redemption requirement. Optional Redemption Provisions

Those of the Series 2016-B Warrants having a stated maturity on May 1, 2027, and thereafter, shall be subject to redemption and payment, at the option of the City, on any date on or after May 1, 2026, in whole or in part (and if in part, in multiples of $5,000 in such maturities as the City in its sole discretion shall designate, and if less than all the Series 2016-B Warrants having the same maturity are to be redeemed, those to be redeemed shall be selected by the Bank by lot), at and for a redemption price for each Series 2016-B Warrant (or portion thereof) redeemed equal to the face or par amount thereof plus accrued interest to the redemption date.

Purpose

The Series 2016-B Warrants are being issued for the purpose of paying the costs of various public school capital improvements within the City and to pay the costs of issuing the Series 2016-B Warrants.

Security

The Series 2016-B Warrants will constitute general obligations of the City secured by a pledge of the full faith and credit of the City.

Bidding Conditions Relating to the Series 2016-B Warrants

Bidders must bid to purchase all of the Series 2016-B Warrants. Any bid for less than all of the Series 2016-B Warrants will be disqualified. Bidders must specify a rate of interest for each maturity of the Series 2016-B Warrants, and no zero rate of interest may be specified. All Series 2016-B Warrants of any maturity (including principal amounts of a term Series 2016-B Warrant subject to mandatory redemption) must bear the same rate of interest throughout their term. Bidders may bid to purchase the Series 2016- B Warrants from the City at discount or at a premium; provided (i) no bid will be considered to purchase the Series 2016-B Warrants if, for any maturity of the Series 2016-B Warrants, the bid is at a price less than 98.5% of the par amount of such maturity; and

(ii) no bid will be considered if the coupon interest rate for any Series 2016-B Warrants maturing or subject to mandatory redemption on May 1, 2027, or any date thereafter, is less than 5.00%

Special Terms, Covenants or other Requirements Not Permitted

No bidder will be allowed to specify (either before or after the award of the Series 2016-B Warrants) pricing or other contractual terms other than the regular interest rates and purchase price per this Notice of Sale.

Appendix G - Page 3

Form of Bids

Bids for the Series 2016-B Warrants must be submitted in electronic form via PARITY® in the manner described below by not later than 10:00 A.M., Central Time, on the Bid Date.

Formal award of the Series 2016-B Warrants will be made by 4:00 o'clock, P.M., Central Time, on the Bid Date.

No bid will be received after 10:00 A.M., Central Time, on the Bid Date. To the extent any instructions or directions set forth in PARITY® conflict with this Notice of Sale, the terms of this Notice of Sale shall control. For further information about PARITY®, potential bidders may contact PFM, financial advisor to the City, at (256) 536-3035, or PARITY® at i-Deal, (212) 849-5021.

Every bid must be unconditional, irrevocable and in accordance with the terms and conditions set forth in this Notice of Sale.

Disclaimer

Each bidder shall be solely responsible for making the necessary arrangements to access the PARITY® system for purposes of submitting its bid in a timely manner and in compliance with the requirements of this Notice of Sale. Neither the City nor PARITY® shall have any duty or obligation to provide or assure such access to any bidder, and neither the City nor PARITY® shall be responsible for the proper operation of, or have any liability for, any delays or interruptions of, or any damages caused by, the PARITY® system. The City is authorizing the use of PARITY® as a communication mechanism to conduct electronic bidding for the Series 2016-B Warrants, but such system is not an agent of the City. The City is not bound by any advice and determination of PARITY® to the effect that any particular bid complies with the terms of this Notice of Sale and in particular the specifications set forth in "Bidding Conditions relating to the Series 2016-B Warrants" hereinabove and "Basis of Award" hereinbelow. All costs and expenses incurred by bidders in connection with their registration via PARITY® are the sole responsibility of such bidders.

Basis of Award

The Series 2016-B Warrants will be awarded to the bidder submitting a bid in conformance with this Notice of Sale that produces the lowest true interest cost to the City. The true interest cost (expressed as an annual interest rate) will be the rate necessary, when using a 360-day year and semiannual compounding, to discount the debt service payments from the payment dates to the dated date of the Series 2016-B Warrants and to the price bid. If two or more bids are submitted that produce the same lowest true interest cost for the Series 2016-B Warrants, the City shall select the successful bidder by lot.

If satisfactory bids are received for the Series 2016-B Warrants, the bidder submitting the qualifying bid resulting in the lowest true interest cost for the Series 2016-B Warrants will be advised by 11:30 A.M., Central Time, on the Bid Date that it is the apparent successful bidder, subject to the official award of the Series 2016-B Warrants by the City later that afternoon.

Diversity

Delivery and Payment

Delivery of the Series 2016-B Warrants is expected to occur on June 30, 2016. The Series 2016-B Warrants will be delivered through DTC in New York, New York. The successful bidder(s) shall pay for the Series 2016-B Warrants on the date of delivery in immediately available federal funds. Any expense of providing federal funds shall be borne by the purchaser(s). Payment on the delivery date shall be made in an amount equal to the price bid for the Series 2016-B Warrants purchased.

Right to Reject Bids; Waive Irregularities

The City reserves the right to reject any and all bids and to waive any irregularity or informality in any bid.

Appendix G - Page 4

Insurance

The successful bidder may purchase municipal bond insurance, if available, for some or all of the Series 2016-B Warrants. However, the delivery of such Series 2016-B Warrants shall not be conditioned upon the issuance of any such insurance. Payment of any insurance premium and satisfaction of any conditions to the issuance of a municipal bond insurance policy, including payment for any legal opinion to be delivered to any insurer, shall be the sole responsibility of the bidder. In particular, the City shall have no obligation to enter into any additional agreements with respect to the provision of any such insurance. FAILURE OF AN INSURANCE PROVIDER TO ISSUE A POLICY OF MUNICIPAL BOND INSURANCE SHALL NOT JUSTIFY FAILURE OR REFUSAL BY THE SUCCESSFUL BIDDER TO ACCEPT DELIVERY OF, OR PAY FOR, THE SERIES 2016-B WARRANTS, OR ANY PORTION THEREOF.

Reoffering Prices Relating to the Series 2016-B Warrants

The successful bidder will be required, within one-half hour after being notified that it has submitted the lowest bid for the Series 2016-B Warrants, to advise the City of the initial public offering price of such warrants (the "Initial Public Offering Price"). The successful bidder will also be required, prior to the delivery of the Series 2016-B Warrants, to furnish to the City a certificate acceptable to Bond Counsel to the City stating that (i) as of the sale date, the successful bidder offered or reasonably expected to offer all of the Series 2016-B Warrants for sale to public purchasers (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers) at the Initial Public Offering Price, (ii) as of the closing date, all of the Series 2016-B Warrants have actually been offered to the general public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers) in a bona fide public offering at the Initial Public Offering Price, and (iii) as of the sale date, the successful bidder reasonably expected that the initial sales of at least 10% of each maturity of the Series 2016-B Warrants has been sold to the general public at the Initial Public Offering Price stated in the Official Statement of the City respecting the Series 2016-B Warrants, or otherwise providing such certifications as to the Initial Public Offering Price for the Series 2016-B Warrants as shall be acceptable to such bond counsel.

Continuing Disclosure

In order to assist bidders in complying with Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, the City will undertake, pursuant to the ordinance by which the City will authorize the issuance of the Series 2016-B Warrants, to provide annual reports and notices of certain events respecting the Series 2016-B Warrants. A description of this undertaking is set forth in the Preliminary Official Statement of the City respecting the Series 2016-B Warrants (the “Preliminary Official Statement”), and will also be set forth in the final Official Statement of the City with respect to the Series 2016-B Warrants.

Legal Opinion

The Series 2016-B Warrants will be sold subject to the approving opinion of Bradley Arant Boult Cummings LLP, Birmingham, Alabama, Bond Counsel to the City.

It shall be a condition of the obligation of a purchaser to accept delivery of and to pay for the applicable Series 2016-B Warrants that, contemporaneously with such delivery and payment, there shall be furnished to the successful bidder, without expense to it, the approval opinion of Bond Counsel to the City in the form attached to the Preliminary Official Statement.

CUSIP Numbers

It is anticipated that CUSIP identification numbers will be printed on the Series 2016-B Warrants, but neither the failure to print such numbers on any Series 2016-B Warrant nor any error with respect thereto shall constitute a cause for a failure or refusal by the purchaser thereof to accept delivery of or pay for the Series 2016-B Warrants. The successful bidder for the Series 2016-B Warrants shall be responsible for ordering and obtaining CUSIP numbers for the Series 2016-B Warrants, and the CUSIP Service Bureau charge for the assignment of said numbers for the Series 2016-B Warrants shall be paid for by the successful bidder.

Concerning the Preliminary Official Statement

The Preliminary Official Statement of the City with respect to the Series 2016-B Warrants, which contains further information concerning the Series 2016-B Warrants and financial and other information pertaining to the City, may be obtained from PFM, financial advisor to the City, at the address for PFM set forth above. Appendix G - Page 5

Official Statement

The City will provide the successful bidder such reasonable number of printed copies of the final Official Statement respecting the Series 2016-B Warrants as such bidder may request, no later than seven (7) business days after the day the Series 2016-B Warrants are awarded. Up to one hundred (100) copies of the final Official Statement will be furnished without cost to the successful bidder of the Series 2016-B Warrants and further copies, if desired, will be made available at the successful bidder’s expense.

Right to Modify or Amend

Postponement

The City reserves the right to postpone, from time to time, the date established for the receipt of bids of the Series 2016-B Warrants. Any such postponement will be announced through Thomson Financial (TM3), www.TM3.com or IPREO, not later than 3:00 o’clock, P.M., Central Time, on the last calendar day prior to the Bid Date.

CITY OF HUNTSVILLE, ALABAMA

/s/ Tommy Battle Mayor

Dated: June 3, 2016

Appendix G - Page 6

APPENDIX H

NOTICE OF SALE – SERIES 2016-C WARRANTS

Appendix H

Notice of Sale

City of Huntsville, Alabama $40,750,000* General Obligation Refunding Warrants Series 2016-C

The City of Huntsville, Alabama, a municipal corporation under the laws of the State of Alabama (the "City"), invites bids for the purchase of the above-referenced warrants (the "Series 2016-C Warrants"), at 10:30 o’clock, A.M., Central Time, on June 14, 2016 (the "Bid Date"), which bids will be viewed publicly at the office of Public Financial Management, Inc. ("PFM"), located at 116 Jefferson Street South, Suite 301, Huntsville, Alabama 35801.

Dates and Places of Payment

The Series 2016-C Warrants will be issued in fully registered form in denominations of $5,000 or any integral multiple thereof and will be dated the date of their delivery (expected to be June 30, 2016), (ii) interest on the Series 2016-C Warrants will be payable on November 1, 2016, and semiannually thereafter on May 1 and November 1 of each year until final maturity, and (iii) the principal of the Series 2016-C Warrants will be payable at the corporate trust office of Regions Bank, an Alabama banking corporation (the "Bank"), in the City of Birmingham, Alabama, on the dates shown herein.

Form of Delivery of Series 2016-C Warrants

The Series 2016-C Warrants, when issued, will be issued in the name of and held by Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"). DTC will act as securities depository for the Series 2016-C Warrants. Purchases of beneficial interests in the Series 2016-C Warrants will be made in book-entry form, in denominations of $5,000 or any integral multiple thereof. Purchasers will not receive certificates representing their beneficial interests in the Series 2016-C Warrants. So long as DTC or its nominee, Cede & Co., is the registered owner of the Series 2016-C Warrants, payment of principal and interest will be made directly to DTC or such nominee. 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 Participants and Indirect Participants of DTC.

______* Preliminary; subject to change.

Appendix H - Page 1

Principal Amortization

The Series 2016-C Warrants will mature or be subject to mandatory redemption on May 1 in the following years and principal amounts:

Principal Year Amount* 2017 $ 675,000 2018 2,220,000 2019 5,135,000 2020 2,210,000 2021 360,000 2022 2,640,000 2023 5,090,000 2024 2,710,000 2025 4,970,000 2026 2,430,000 2027 2,510,000 2028 6,705,000 2029 3,095,000

* Preliminary; subject to change.

Reservation of Right of City to Reduce or Increase Annual Principal Amounts of Series 2016-C Warrants

The preliminary amounts of each annual principal payment relating to the Series 2016-C Warrants as set forth in this Notice of Sale (the "Preliminary Principal Amounts") may be revised by the City prior to the time bids are to be received (the "Revised Principal Amounts"). Any such revisions will be communicated through Thomson Financial ("TM3"), www.TM3.com or IPREO not later than 3:00 o’clock, P.M., Central Time, on the last calendar day prior to the Bid Date. If no such revisions are made, the Preliminary Principal Amounts will constitute the Revised Principal Amounts. Bidders shall submit bids based on the Revised Principal Amounts, and the Revised Principal Amounts will be used to compare bids and select a winning bidder. Bidders may not adjust principal amounts or maturity dates.

After selecting the winning bid, the City will determine each final annual principal amount of the Series 2016-C Warrants (the "Final Annual Principal Amounts"). In determining the Final Annual Principal Amounts, the City will not increase or reduce any annual principal amount by more than 20% of such amount, and will not increase or reduce the total aggregate principal amount of the Series 2016-C Warrants by more than 15%. ANY DETERMINATION BY THE CITY OF THE FINAL ANNUAL PRINCIPAL AMOUNTS WITHIN THESE PARAMETERS SHALL BE BINDING UPON THE SUCCESSFUL BIDDER. THE SUCCESSFUL BIDDER MAY NOT WITHDRAW ITS BID OR CHANGE THE INTEREST RATES BID OR THE INITIAL REOFFERING PRICES AS A RESULT OF ANY CHANGES MADE TO THE REVISED ANNUAL PRINCIPAL AMOUNTS WITHIN THESE LIMITS.

The dollar amount bid by the successful bidder will be adjusted to reflect any adjustments in the Revised Annual Principal Amounts. Such adjusted bid price will reflect changes in the dollar amount of the underwriter’s discount per $1,000 of par amount of the Series 2016-C Warrants from the underwriter’s discount which would have been received based on the purchase price in the winning bid and the initial public offering prices. The Final Annual Principal Amounts and the adjusted bid price for the Series 2016-C Warrants will be communicated to the successful bidder by 2:30 o’clock, P.M., Central Time, on the Bid Date.

Serial Series 2016-C Warrants or Term Series 2016-C Warrants

Subject to the provisions regarding interest rate restrictions set forth below under "Bidding Conditions Relating to the Series 2016-C Warrants", bidders may provide that the Series 2016-C Warrants be issued as serial Series 2016-C Warrants or may provide that any two or more consecutive annual principal amounts maturing on or after May 1, 2027 be combined into one or more term Series 2016-C Warrants. If the successful bidder designates consecutive annual principal amounts to be combined into one or more term Series 2016-C Warrants, each such term Series 2016-C Warrant shall be subject to mandatory redemption by the City commencing on the May 1 of the first year which has Appendix H - Page 2 been combined to form such term Series 2016-C Warrant and continuing on May 1 in each year thereafter until May 1 of the stated maturity date of that term Series 2016-C Warrant, on which date the remaining balance thereof shall be payable. FOR EACH TERM SERIES 2016-C WARRANT BID, THE INTEREST RATE FOR THE PRINCIPAL AMOUNT TO BE DUE IN THE YEAR OF STATED MATURITY, AND THE INTEREST RATE FOR EACH PORTION SUBJECT TO MANDATORY REDEMPTION IN THE YEARS PRIOR TO STATED MATURITY, SHALL BE IDENTICAL AND, FURTHER, SHALL COMPLY STRICTLY WITH THE RESTRICTIONS FOR SUCH YEARS SET FORTH BELOW UNDER "Bidding Conditions Relating to the Series 2016-C Warrants". The amount of any term Series 2016-C Warrant to be redeemed or paid in any year shall be equal to the principal amount specified for such year as set forth in the table above under the caption "Principal Payments", as the same shall be adjusted to reflect the Final Annual Principal Amounts. Term Series 2016-C Warrants to be redeemed in any year by mandatory redemption shall be redeemed at par and shall be selected by lot from among the term Series 2016-C Warrants then subject to mandatory redemption in such year. The City may, at its option, credit against any mandatory redemption requirement term Series 2016-C Warrants of the maturity then subject to redemption which have been purchased and canceled by the City or which have been optionally redeemed by the City and not theretofore applied as a credit against any mandatory redemption requirement. Optional Redemption Provisions

Those of the Series 2016-C Warrants having a stated maturity on May 1, 2027, and thereafter, shall be subject to redemption and payment, at the option of the City, on any date on or after May 1, 2026, in whole or in part (and if in part, in multiples of $5,000 in such maturities as the City in its sole discretion shall designate, and if less than all the Series 2016-C Warrants having the same maturity are to be redeemed, those to be redeemed shall be selected by the Bank by lot), at and for a redemption price for each Series 2016-C Warrant (or portion thereof) redeemed equal to the face or par amount thereof plus accrued interest to the redemption date.

Purpose

The Series 2016-C Warrants are being issued for the purpose of redeeming and refunding certain obligation of the City and paying the costs of issuing the Series 2016-C Warrants.

Security

The Series 2016-C Warrants will constitute general obligations of the City secured by a pledge of the full faith and credit of the City.

Bidding Conditions Relating to the Series 2016-C Warrants

Bidders must bid to purchase all of the Series 2016-C Warrants. Any bid for less than all of the Series 2016-C Warrants will be disqualified. Bidders must specify a rate of interest for each maturity of the Series 2016-C Warrants, and no zero rate of interest may be specified. All Series 2016-C Warrants of any maturity (including principal amounts of a term Series 2016-C Warrant subject to mandatory redemption) must bear the same rate of interest throughout their term. Bidders may bid to purchase the Series 2016- C Warrants from the City at discount or at a premium; provided, no bid will be considered to purchase the Series 2016-C Warrants if, for any maturity of the Series 2016-C Warrants, the bid is at a price less than 98.5% of the par amount of such maturity. Special Terms, Covenants or other Requirements Not Permitted

No bidder will be allowed to specify (either before or after the award of the Series 2016-C Warrants) pricing or other contractual terms other than the regular interest rates and purchase price per this Notice of Sale.

Form of Bids

Bids for the Series 2016-C Warrants must be submitted in electronic form via PARITY® in the manner described below by not later than 10:30 A.M., Central Time, on the Bid Date.

Formal award of the Series 2016-C Warrants will be made by 4:00 o'clock, P.M., Central Time, on the Bid Date. Appendix H - Page 3

No bid will be received after 10:30 A.M., Central Time, on the Bid Date. To the extent any instructions or directions set forth in PARITY® conflict with this Notice of Sale, the terms of this Notice of Sale shall control. For further information about PARITY®, potential bidders may contact PFM, financial advisor to the City, at (256) 536-3035, or PARITY® at i-Deal, (212) 849-5021.

Every bid must be unconditional, irrevocable and in accordance with the terms and conditions set forth in this Notice of Sale.

Disclaimer

Each bidder shall be solely responsible for making the necessary arrangements to access the PARITY® system for purposes of submitting its bid in a timely manner and in compliance with the requirements of this Notice of Sale. Neither the City nor PARITY® shall have any duty or obligation to provide or assure such access to any bidder, and neither the City nor PARITY® shall be responsible for the proper operation of, or have any liability for, any delays or interruptions of, or any damages caused by, the PARITY® system. The City is authorizing the use of PARITY® as a communication mechanism to conduct electronic bidding for the Series 2016-C Warrants, but such system is not an agent of the City. The City is not bound by any advice and determination of PARITY® to the effect that any particular bid complies with the terms of this Notice of Sale and in particular the specifications set forth in "Bidding Conditions relating to the Series 2016-C Warrants" hereinabove and "Basis of Award" hereinbelow. All costs and expenses incurred by bidders in connection with their registration via PARITY® are the sole responsibility of such bidders.

Basis of Award

The Series 2016-C Warrants will be awarded to the bidder submitting a bid in conformance with this Notice of Sale that produces the lowest true interest cost to the City. The true interest cost (expressed as an annual interest rate) will be the rate necessary, when using a 360-day year and semiannual compounding, to discount the debt service payments from the payment dates to the dated date of the Series 2016-C Warrants and to the price bid. If two or more bids are submitted that produce the same lowest true interest cost for the Series 2016-C Warrants, the City shall select the successful bidder by lot.

If satisfactory bids are received for the Series 2016-C Warrants, the bidder submitting the qualifying bid resulting in the lowest true interest cost for the Series 2016-C Warrants will be advised by 11:30 A.M., Central Time, on the Bid Date that it is the apparent successful bidder, subject to the official award of the Series 2016-C Warrants by the City later that afternoon.

Diversity

Delivery and Payment

Delivery of the Series 2016-C Warrants is expected to occur on June 30, 2016. The Series 2016-C Warrants will be delivered through DTC in New York, New York. The successful bidder(s) shall pay for the Series 2016-C Warrants on the date of delivery in immediately available federal funds. Any expense of providing federal funds shall be borne by the purchaser(s). Payment on the delivery date shall be made in an amount equal to the price bid for the Series 2016-C Warrants purchased.

Right to Reject Bids; Waive Irregularities

The City reserves the right to reject any and all bids and to waive any irregularity or informality in any bid.

Insurance

The successful bidder may purchase municipal bond insurance, if available, for some or all of the Series 2016-C Warrants. However, the delivery of such Series 2016-C Warrants shall not be conditioned upon the issuance of any such insurance. Payment of any insurance premium and satisfaction of any conditions to the issuance of a municipal bond insurance policy, including payment for any legal opinion to be delivered to any insurer, shall be the sole responsibility of the bidder. In Appendix H - Page 4 particular, the City shall have no obligation to enter into any additional agreements with respect to the provision of any such insurance. FAILURE OF AN INSURANCE PROVIDER TO ISSUE A POLICY OF MUNICIPAL BOND INSURANCE SHALL NOT JUSTIFY FAILURE OR REFUSAL BY THE SUCCESSFUL BIDDER TO ACCEPT DELIVERY OF, OR PAY FOR, THE SERIES 2016-C WARRANTS, OR ANY PORTION THEREOF.

Reoffering Prices Relating to the Series 2016-C Warrants

The successful bidder will be required, within one-half hour after being notified that it has submitted the lowest bid for the Series 2016-C Warrants, to advise the City of the initial public offering price of such warrants (the "Initial Public Offering Price"). The successful bidder will also be required, prior to the delivery of the Series 2016-C Warrants, to furnish to the City a certificate acceptable to Bond Counsel to the City stating that (i) as of the sale date, the successful bidder offered or reasonably expected to offer all of the Series 2016-C Warrants for sale to public purchasers (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers) at the Initial Public Offering Price, (ii) as of the closing date, all of the Series 2016-C Warrants have actually been offered to the general public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers) in a bona fide public offering at the Initial Public Offering Price, and (iii) as of the sale date, the successful bidder reasonably expected that the initial sales of at least 10% of each maturity of the Series 2016-C Warrants has been sold to the general public at the Initial Public Offering Price stated in the Official Statement of the City respecting the Series 2016-C Warrants, or otherwise providing such certifications as to the Initial Public Offering Price for the Series 2016-C Warrants as shall be acceptable to such bond counsel.

Continuing Disclosure

In order to assist bidders in complying with Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, the City will undertake, pursuant to the ordinance by which the City will authorize the issuance of the Series 2016-C Warrants, to provide annual reports and notices of certain events respecting the Series 2016-C Warrants. A description of this undertaking is set forth in the Preliminary Official Statement of the City respecting the Series 2016-C Warrants (the “Preliminary Official Statement”), and will also be set forth in the final Official Statement of the City with respect to the Series 2016-C Warrants.

Legal Opinion

The Series 2016-C Warrants will be sold subject to the approving opinion of Bradley Arant Boult Cummings LLP, Birmingham, Alabama, Bond Counsel to the City.

It shall be a condition of the obligation of a purchaser to accept delivery of and to pay for the applicable Series 2016-C Warrants that, contemporaneously with such delivery and payment, there shall be furnished to the successful bidder, without expense to it, the approval opinion of Bond Counsel to the City in the form attached to the Preliminary Official Statement.

CUSIP Numbers

It is anticipated that CUSIP identification numbers will be printed on the Series 2016-C Warrants, but neither the failure to print such numbers on any Series 2016-C Warrant nor any error with respect thereto shall constitute a cause for a failure or refusal by the purchaser thereof to accept delivery of or pay for the Series 2016-C Warrants. The successful bidder for the Series 2016-C Warrants shall be responsible for ordering and obtaining CUSIP numbers for the Series 2016-C Warrants, and the CUSIP Service Bureau charge for the assignment of said numbers for the Series 2016-C Warrants shall be paid for by the successful bidder.

Concerning the Preliminary Official Statement

The Preliminary Official Statement of the City with respect to the Series 2016-C Warrants, which contains further information concerning the Series 2016-C Warrants and financial and other information pertaining to the City, may be obtained from PFM, financial advisor to the City, at the address for PFM set forth above.

Appendix H - Page 5

Official Statement

The City will provide the successful bidder such reasonable number of printed copies of the final Official Statement respecting the Series 2016-C Warrants as such bidder may request, no later than seven (7) business days after the day the Series 2016-C Warrants are awarded. Up to one hundred (100) copies of the final Official Statement will be furnished without cost to the successful bidder of the Series 2016-C Warrants and further copies, if desired, will be made available at the successful bidder’s expense.

Right to Modify or Amend

Postponement

The City reserves the right to postpone, from time to time, the date established for the receipt of bids of the Series 2016-C Warrants. Any such postponement will be announced through Thomson Financial (TM3), www.TM3.com or IPREO, not later than 3:00 o’clock, P.M., Central Time, on the last calendar day prior to the Bid Date.

CITY OF HUNTSVILLE, ALABAMA

/s/ Tommy Battle Mayor

Dated: June 3, 2016

Appendix H - Page 6

APPENDIX H

NOTICE OF SALE – SERIES 2016-D WARRANTS

Appendix I

City of Huntsville, Alabama $34,500,000* General Obligation School Refunding Warrants Series 2016-D

The City of Huntsville, Alabama, a municipal corporation under the laws of the State of Alabama (the "City"), invites bids for the purchase of the above-referenced warrants (the "Series 2016-D Warrants"), at 11:00 o’clock, A.M., Central Time, on June 14, 2016 (the "Bid Date"), which bids will be viewed publicly at the office of Public Financial Management, Inc. ("PFM"), located at 116 Jefferson Street South, Suite 301, Huntsville, Alabama 35801.

Dates and Places of Payment

The Series 2016-D Warrants will be issued in fully registered form in denominations of $5,000 or any integral multiple thereof and will be dated the date of their delivery (expected to be June 30, 2016), (ii) interest on the Series 2016-D Warrants will be payable on November 1, 2016, and semiannually thereafter on May 1 and November 1 of each year until final maturity, and (iii) the principal of the Series 2016-D Warrants will be payable at the corporate trust office of Regions Bank, an Alabama banking corporation (the "Bank"), in the City of Birmingham, Alabama, on the dates shown herein.

Form of Delivery of Series 2016-D Warrants

The Series 2016-D Warrants, when issued, will be issued in the name of and held by Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"). DTC will act as securities depository for the Series 2016-D Warrants. Purchases of beneficial interests in the Series 2016-D Warrants will be made in book-entry form, in denominations of $5,000 or any integral multiple thereof. Purchasers will not receive certificates representing their beneficial interests in the Series 2016-D Warrants. So long as DTC or its nominee, Cede & Co., is the registered owner of the Series 2016-D Warrants, payment of principal and interest will be made directly to DTC or such nominee. 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 Participants and Indirect Participants of DTC.

______* Preliminary; subject to change.

Appendix I - Page 1

Principal Amortization

The Series 2016-D Warrants will mature or be subject to mandatory redemption on May 1 in the following years and principal amounts:

Principal Year Amount* 2017 $ 475,000 2018 330,000 2019 2,980,000 2020 285,000 2021 285,000 2022 1,005,000 2023 3,020,000 2024 2,690,000 2025 5,350,000 2026 2,660,000 2027 2,725,000 2028 6,810,000 2029 2,895,000 2030 2,990,000

* Preliminary; subject to change.

Reservation of Right of City to Reduce or Increase Annual Principal Amounts of Series 2016-D Warrants

The preliminary amounts of each annual principal payment relating to the Series 2016-D Warrants as set forth in this Notice of Sale (the "Preliminary Principal Amounts") may be revised by the City prior to the time bids are to be received (the "Revised Principal Amounts"). Any such revisions will be communicated through Thomson Financial ("TM3"), www.TM3.com or IPREO not later than 3:00 o’clock, P.M., Central Time, on the last calendar day prior to the Bid Date. If no such revisions are made, the Preliminary Principal Amounts will constitute the Revised Principal Amounts. Bidders shall submit bids based on the Revised Principal Amounts, and the Revised Principal Amounts will be used to compare bids and select a winning bidder. Bidders may not adjust principal amounts or maturity dates.

After selecting the winning bid, the City will determine each final annual principal amount of the Series 2016-D Warrants (the "Final Annual Principal Amounts"). In determining the Final Annual Principal Amounts, the City will not increase or reduce any annual principal amount by more than 20% of such amount, and will not increase or reduce the total aggregate principal amount of the Series 2016-D Warrants by more than 15%. ANY DETERMINATION BY THE CITY OF THE FINAL ANNUAL PRINCIPAL AMOUNTS WITHIN THESE PARAMETERS SHALL BE BINDING UPON THE SUCCESSFUL BIDDER. THE SUCCESSFUL BIDDER MAY NOT WITHDRAW ITS BID OR CHANGE THE INTEREST RATES BID OR THE INITIAL REOFFERING PRICES AS A RESULT OF ANY CHANGES MADE TO THE REVISED ANNUAL PRINCIPAL AMOUNTS WITHIN THESE LIMITS.

The dollar amount bid by the successful bidder will be adjusted to reflect any adjustments in the Revised Annual Principal Amounts. Such adjusted bid price will reflect changes in the dollar amount of the underwriter’s discount per $1,000 of par amount of the Series 2016-D Warrants from the underwriter’s discount which would have been received based on the purchase price in the winning bid and the initial public offering prices. The Final Annual Principal Amounts and the adjusted bid price for the Series 2016-D Warrants will be communicated to the successful bidder by 2:30 o’clock, P.M., Central Time, on the Bid Date.

Serial Series 2016-D Warrants or Term Series 2016-D Warrants

Subject to the provisions regarding interest rate restrictions set forth below under "Bidding Conditions Relating to the Series 2016-D Warrants", bidders may provide that the Series 2016-D Warrants be issued as serial Series 2016-D Warrants or may provide that any two or more consecutive annual principal amounts maturing on or after May 1, 2027 be combined into one or more term Series 2016-D Warrants. If the successful bidder designates consecutive annual principal amounts to be combined into one or more term Series 2016-D Warrants, each such term Series 2016-D Warrant shall be subject to mandatory redemption by the City commencing on the May 1 of the first year which has Appendix I - Page 2 been combined to form such term Series 2016-D Warrant and continuing on May 1 in each year thereafter until May 1 of the stated maturity date of that term Series 2016-D Warrant, on which date the remaining balance thereof shall be payable. FOR EACH TERM SERIES 2016-D WARRANT BID, THE INTEREST RATE FOR THE PRINCIPAL AMOUNT TO BE DUE IN THE YEAR OF STATED MATURITY, AND THE INTEREST RATE FOR EACH PORTION SUBJECT TO MANDATORY REDEMPTION IN THE YEARS PRIOR TO STATED MATURITY, SHALL BE IDENTICAL AND, FURTHER, SHALL COMPLY STRICTLY WITH THE RESTRICTIONS FOR SUCH YEARS SET FORTH BELOW UNDER "Bidding Conditions Relating to the Series 2016-D Warrants". The amount of any term Series 2016-D Warrant to be redeemed or paid in any year shall be equal to the principal amount specified for such year as set forth in the table above under the caption "Principal Payments", as the same shall be adjusted to reflect the Final Annual Principal Amounts. Term Series 2016-D Warrants to be redeemed in any year by mandatory redemption shall be redeemed at par and shall be selected by lot from among the term Series 2016-D Warrants then subject to mandatory redemption in such year. The City may, at its option, credit against any mandatory redemption requirement term Series 2016-D Warrants of the maturity then subject to redemption which have been purchased and canceled by the City or which have been optionally redeemed by the City and not theretofore applied as a credit against any mandatory redemption requirement. Optional Redemption Provisions

Those of the Series 2016-D Warrants having a stated maturity on May 1, 2027, and thereafter, shall be subject to redemption and payment, at the option of the City, on any date on or after May 1, 2026, in whole or in part (and if in part, in multiples of $5,000 in such maturities as the City in its sole discretion shall designate, and if less than all the Series 2016-D Warrants having the same maturity are to be redeemed, those to be redeemed shall be selected by the Bank by lot), at and for a redemption price for each Series 2016-D Warrant (or portion thereof) redeemed equal to the face or par amount thereof plus accrued interest to the redemption date.

Purpose

The Series 2016-D Warrants are being issued for the purpose of redeeming and refunding certain obligation of the City and paying the costs of issuing the Series 2016-D Warrants.

Security

The Series 2016-D Warrants will constitute general obligations of the City secured by a pledge of the full faith and credit of the City.

Bidding Conditions Relating to the Series 2016-D Warrants

Bidders must bid to purchase all of the Series 2016-D Warrants. Any bid for less than all of the Series 2016-D Warrants will be disqualified. Bidders must specify a rate of interest for each maturity of the Series 2016-D Warrants, and no zero rate of interest may be specified. All Series 2016-D Warrants of any maturity (including principal amounts of a term Series 2016-D Warrant subject to mandatory redemption) must bear the same rate of interest throughout their term. Bidders may bid to purchase the Series 2016- D Warrants from the City at discount or at a premium; provided, no bid will be considered to purchase the Series 2016-D Warrants if, for any maturity of the Series 2016-D Warrants, the bid is at a price less than 98.5% of the par amount of such maturity. Special Terms, Covenants or other Requirements Not Permitted

No bidder will be allowed to specify (either before or after the award of the Series 2016-D Warrants) pricing or other contractual terms other than the regular interest rates and purchase price per this Notice of Sale.

Form of Bids

Bids for the Series 2016-D Warrants must be submitted in electronic form via PARITY® in the manner described below by not later than 11:00 A.M., Central Time, on the Bid Date.

Formal award of the Series 2016-D Warrants will be made by 4:00 o'clock, P.M., Central Time, on the Bid Date. Appendix I - Page 3

No bid will be received after 11:00 A.M., Central Time, on the Bid Date. To the extent any instructions or directions set forth in PARITY® conflict with this Notice of Sale, the terms of this Notice of Sale shall control. For further information about PARITY®, potential bidders may contact PFM, financial advisor to the City, at (256) 536-3035, or PARITY® at i-Deal, (212) 849-5021.

Every bid must be unconditional, irrevocable and in accordance with the terms and conditions set forth in this Notice of Sale.

Disclaimer

Each bidder shall be solely responsible for making the necessary arrangements to access the PARITY® system for purposes of submitting its bid in a timely manner and in compliance with the requirements of this Notice of Sale. Neither the City nor PARITY® shall have any duty or obligation to provide or assure such access to any bidder, and neither the City nor PARITY® shall be responsible for the proper operation of, or have any liability for, any delays or interruptions of, or any damages caused by, the PARITY® system. The City is authorizing the use of PARITY® as a communication mechanism to conduct electronic bidding for the Series 2016-D Warrants, but such system is not an agent of the City. The City is not bound by any advice and determination of PARITY® to the effect that any particular bid complies with the terms of this Notice of Sale and in particular the specifications set forth in "Bidding Conditions relating to the Series 2016-D Warrants" hereinabove and "Basis of Award" hereinbelow. All costs and expenses incurred by bidders in connection with their registration via PARITY® are the sole responsibility of such bidders.

Basis of Award

The Series 2016-D Warrants will be awarded to the bidder submitting a bid in conformance with this Notice of Sale that produces the lowest true interest cost to the City. The true interest cost (expressed as an annual interest rate) will be the rate necessary, when using a 360-day year and semiannual compounding, to discount the debt service payments from the payment dates to the dated date of the Series 2016-D Warrants and to the price bid. If two or more bids are submitted that produce the same lowest true interest cost for the Series 2016-D Warrants, the City shall select the successful bidder by lot.

If satisfactory bids are received for the Series 2016-D Warrants, the bidder submitting the qualifying bid resulting in the lowest true interest cost for the Series 2016-D Warrants will be advised by 11:30 A.M., Central Time, on the Bid Date that it is the apparent successful bidder, subject to the official award of the Series 2016-D Warrants by the City later that afternoon.

Diversity

Delivery and Payment

Delivery of the Series 2016-D Warrants is expected to occur on June 30, 2016. The Series 2016-D Warrants will be delivered through DTC in New York, New York. The successful bidder(s) shall pay for the Series 2016-D Warrants on the date of delivery in immediately available federal funds. Any expense of providing federal funds shall be borne by the purchaser(s). Payment on the delivery date shall be made in an amount equal to the price bid for the Series 2016-D Warrants purchased.

Right to Reject Bids; Waive Irregularities

The City reserves the right to reject any and all bids and to waive any irregularity or informality in any bid.

Insurance

The successful bidder may purchase municipal bond insurance, if available, for some or all of the Series 2016-D Warrants. However, the delivery of such Series 2016-D Warrants shall not be conditioned upon the issuance of any such insurance. Payment of any insurance premium and satisfaction of any conditions to the issuance of a municipal bond insurance policy, including payment for any legal opinion to be delivered to any insurer, shall be the sole responsibility of the bidder. In Appendix I - Page 4 particular, the City shall have no obligation to enter into any additional agreements with respect to the provision of any such insurance. FAILURE OF AN INSURANCE PROVIDER TO ISSUE A POLICY OF MUNICIPAL BOND INSURANCE SHALL NOT JUSTIFY FAILURE OR REFUSAL BY THE SUCCESSFUL BIDDER TO ACCEPT DELIVERY OF, OR PAY FOR, THE SERIES 2016-D WARRANTS, OR ANY PORTION THEREOF.

Reoffering Prices Relating to the Series 2016-D Warrants

The successful bidder will be required, within one-half hour after being notified that it has submitted the lowest bid for the Series 2016-D Warrants, to advise the City of the initial public offering price of such warrants (the "Initial Public Offering Price"). The successful bidder will also be required, prior to the delivery of the Series 2016-D Warrants, to furnish to the City a certificate acceptable to Bond Counsel to the City stating that (i) as of the sale date, the successful bidder offered or reasonably expected to offer all of the Series 2016-D Warrants for sale to public purchasers (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers) at the Initial Public Offering Price, (ii) as of the closing date, all of the Series 2016-D Warrants have actually been offered to the general public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers) in a bona fide public offering at the Initial Public Offering Price, and (iii) as of the sale date, the successful bidder reasonably expected that the initial sales of at least 10% of each maturity of the Series 2016-D Warrants has been sold to the general public at the Initial Public Offering Price stated in the Official Statement of the City respecting the Series 2016-D Warrants, or otherwise providing such certifications as to the Initial Public Offering Price for the Series 2016-D Warrants as shall be acceptable to such bond counsel.

Continuing Disclosure

In order to assist bidders in complying with Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, the City will undertake, pursuant to the ordinance by which the City will authorize the issuance of the Series 2016-D Warrants, to provide annual reports and notices of certain events respecting the Series 2016-D Warrants. A description of this undertaking is set forth in the Preliminary Official Statement of the City respecting the Series 2016-D Warrants (the “Preliminary Official Statement”), and will also be set forth in the final Official Statement of the City with respect to the Series 2016-D Warrants.

Legal Opinion

The Series 2016-D Warrants will be sold subject to the approving opinion of Bradley Arant Boult Cummings LLP, Birmingham, Alabama, Bond Counsel to the City.

It shall be a condition of the obligation of a purchaser to accept delivery of and to pay for the applicable Series 2016-D Warrants that, contemporaneously with such delivery and payment, there shall be furnished to the successful bidder, without expense to it, the approval opinion of Bond Counsel to the City in the form attached to the Preliminary Official Statement.

CUSIP Numbers

It is anticipated that CUSIP identification numbers will be printed on the Series 2016-D Warrants, but neither the failure to print such numbers on any Series 2016-D Warrant nor any error with respect thereto shall constitute a cause for a failure or refusal by the purchaser thereof to accept delivery of or pay for the Series 2016-D Warrants. The successful bidder for the Series 2016-D Warrants shall be responsible for ordering and obtaining CUSIP numbers for the Series 2016-D Warrants, and the CUSIP Service Bureau charge for the assignment of said numbers for the Series 2016-D Warrants shall be paid for by the successful bidder.

Concerning the Preliminary Official Statement

The Preliminary Official Statement of the City with respect to the Series 2016-D Warrants, which contains further information concerning the Series 2016-D Warrants and financial and other information pertaining to the City, may be obtained from PFM, financial advisor to the City, at the address for PFM set forth above.

Appendix I - Page 5

Official Statement

The City will provide the successful bidder such reasonable number of printed copies of the final Official Statement respecting the Series 2016-D Warrants as such bidder may request, no later than seven (7) business days after the day the Series 2016-D Warrants are awarded. Up to one hundred (100) copies of the final Official Statement will be furnished without cost to the successful bidder of the Series 2016-D Warrants and further copies, if desired, will be made available at the successful bidder’s expense.

Right to Modify or Amend

Postponement

The City reserves the right to postpone, from time to time, the date established for the receipt of bids of the Series 2016-D Warrants. Any such postponement will be announced through Thomson Financial (TM3), www.TM3.com or IPREO, not later than 3:00 o’clock, P.M., Central Time, on the last calendar day prior to the Bid Date.

CITY OF HUNTSVILLE, ALABAMA

/s/ Tommy Battle Mayor

Dated: June 3, 2016

Appendix I - Page 6