PRELIMINARY OFFICIAL STATEMENT DATED APRIL 16, 2008

NEW ISSUE-BOOK ENTRY ONLY RATINGS: Moody’s: f Standard & Poor's: Fitch: (See “Ratings” herein) In the opinion of Co-Bond Counsel to the City, under existing statutes and court decisions and assuming compliance with certain tax covenants described herein, (i) interest on the Bonds is excluded from gross income for Federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) interest on the Bonds 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. See “Tax Exemption” herein for a description of certain other provisions of law, which may affect the Federal tax treatment of interest on the Bonds. In the further opinion of Co-Bond Counsel, under the existing laws of the State of Tennessee, the Bonds and the income therefrom shall be free from all Tennessee state, county and municipal taxes except for inheritance, transfer and estate taxes and except to the extent such interest may be included within the measure of corporate privilege taxes imposed pursuant to the laws of the State of Tennessee.

OFFICIAL STATEMENT circumstances shall this Preliminary Official Statement constitute constitute Statement Official Preliminary this shall circumstances RELATING TO THE ISSUANCE OF CITY OF MEMPHIS, TENNESSEE $98,605,000* General Improvement Bonds, Series 2008

DATED: April 1, 2008 DUE: April 1, as shown below The $98,605,000* General Improvement Bonds, Series 2008 (the “Bonds”) are issuable in fully registered form without coupons. The Bonds will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository of the Bonds. So long as Cede & Co. is the registered owner of the Bonds, as the nominee for DTC, principal and interest shall be payable to Cede & Co., as nominee for DTC, which will, in turn, remit such principal and interest to the DTC participants for subsequent disbursements to the beneficial owners of the Bonds. Individual purchases of the Bonds will be made in book entry form only, in denominations of $5,000 or multiples thereof. Beneficial owners of the Bonds will not receive physical delivery of bond certificates. (See “The Bonds- Book-Entry System” herein). Interest on the Bonds is payable at the rates specified below on April 1 and October 1,

in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws o laws securities the under qualification or registration to prior unlawful be would sale or solicitation offer, such which in commencing October 1, 2008. Interest on the Bonds will be calculated on the basis of a 30-day month and a 360-day year. The Bonds are subject to optional redemption prior to maturity, as more fully described herein. The Bonds are being issued for the purpose of financing the cost of public works projects and to retire certain of the City’s outstanding bond anticipation notes. The Bonds will be direct obligations of the City for which its full faith and credit are pledged and are payable from taxes levied on all taxable property in the City subject to taxation by the City without limitation as to rate or amount. MATURITY SCHEDULE*

Maturity Principal Interest Price or Maturity Principal Interest Price or (April 1) Amount* Rate Yield (April 1) Amount* Rate Yield 2011 $ 1,815,000 % 2020 $ 5,455,000 % 2012 4,065,000 2021 5,730,000 2013 4,185,000 2022 6,015,000 2014 4,310,000 2023 6,315,000 2015 4,465,000 2024 6,630,000 2016 4,620,000 2025 6,960,000 2017 4,805,000 2026 7,310,000 2018 4,995,000 2027 7,675,000 2019 5,195,000 2028 8,060,000 The Bonds will be offered when, as and if issued and subject to the receipt of the approving legal opinions of Hawkins Delafield & Wood LLP, New York, New York, and Charles E. Carpenter, A Professional Corporation, Memphis, Tennessee, Co-Bond Counsel to the City. It is anticipated that the Bonds in definitive form will be available for delivery on or about May1, 2008.

______*Preliminary, subject to adjustment as provided in the Official Notice of Sale.

This Official Statement is dated ______, 2008 THIS PRELIMINARY OFFICIAL STATEMENT AND THE INFORMATION CONTAINED HEREIN ARE SUBJECT TO COMPLETION OR AMENDMENT. Underno an offer to sell or a solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction any in securities of these sale any be there shall nor buy to offer an of a solicitation or sell an offer to 15c2-12(b)(1). Rule SEC by permitted information certain of omission the for except 15c2-12(b)(1) Rule SEC of purposes for City the by “final” deemed been has Statement Official Preliminary this date, of this As such jurisdiction.

The information set forth herein has been provided by the City and other sources deemed reliable. No guaranty is made, however, as to the accuracy or completeness of such information. No dealer, broker, salesman or other person has been authorized to give information or to make any representations, other than those contained in this Official Statement, in connection with the offering contained herein; and if given or made, such information or representations must not be relied upon. This Official Statement, which includes the cover page and appendices, does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person, in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.

This Official Statement is not to be construed as a contract or agreement between the City and any purchaser of the Bonds. Any statements made herein involving matters of opinions, whether or not expressly so stated, are intended merely as opinions and not as representations of fact. The information contained herein is subject to change without notice and neither the delivery hereof nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof.

This Official Statement has been prepared only in connection with the initial offering and sale of the Bonds and may not be reproduced or used in whole or in part for any other purpose.

Questions regarding information in this Official Statement should be directed to Ms. Sheila Whalum, Deputy Director of Finance, City of Memphis, Room 368, 125 North Main Street, Memphis, Tennessee 38103, telephone (901/576-6324). This Official Statement has been prepared by the City in connection with the original offering contained herein. See the "Introduction" on page II-1 for a discussion of the City’s Supplemental Information Statement, which is Part II of this Official Statement.

[Remainder of Page Intentionally Left Blank]

TABLE OF CONTENTS

PART I CITY OFFICIALS...... i TOTAL FUND BALANCES/RETAINED EARNINGS THE BONDS...... 1 TRENDS...... 9 Description of the Bonds ...... 1 LITIGATION...... 9 Book-Entry System ...... 1 CERTAIN LEGAL MATTERS ...... 9 OPTIONAL REDEMPTION ...... 3 OPINIONS OF CO-BOND COUNSEL ...... 9 NOTICE OF REDEMPTION...... 3 CONTINUING DISCLOSURE INFORMATION...... 10 AUTHORITY FOR ISSUANCE OF THE BONDS ...... 3 TAX EXEMPTION...... 10 SECURITY AND REMEDIES ...... 3 Opinion of Co-Bond Counsel ...... 10 INSURANCE ...... 4 Certain Ongoing Federal Tax Requirements ESTIMATED SOURCES AND USES And Covenants ...... 10 OF PROCEEDS...... 4 Certain Collateral Federal Tax Consequences...... 11 CONDENSED CURRENT FINANCIAL RESULTS...... 5 Original Issue Discount ...... 11 SUMMARY OF GENERAL FUND...... 5 Bond Premium...... 11 STATEMENT OF DEBT...... 5 Information Reporting and Backup Withholding ...... 12 DEBT RATIOS ...... 6 Miscellaneous ...... 12 CONTINGENT LIABILITY...... 7 RATINGS...... 12 LONG-TERM DEBT SERVICE SCHEDULE...... 8 CO-FINANCIAL ADVISORS...... 13 SALE OF THE BONDS ...... 14

PART II SUPPLEMENTAL INFORMATION STATEMENT

See Separate Table of Contents at Part II.

The 2007 Annual Financial Report.…………………………………………………………………………….Appendix A Proposed Form of Opinions of Co-Bond Counsel to the City..…………………………………………………Appendix B Form of Continuing Disclosure Certificate……………………………………………………………………..Appendix C

CITY OFFICIALS

DR. WILLIE W. HERENTON, MAYOR

CITY COUNCIL

Scott McCormick, Chairman William C. Boyd Wanda Halbert Joe Brown Reid Hedgepeth Harold B. Collins Myron Lowery Shea Flinn Bill Morrison Edmund Ford, Jr. Jim Strickland Janis Fullilove Barbara Swearengen Ware

ADMINISTRATIVE

Keith L. McGee...... Chief Administrative Officer Robert Lipscomb...... Director of Housing and Community Development Roland McElrath ...... Director of Finance and Administration Richard Burton Arwood ...... Director of Fire Services Estrice Boone ...... Director of General Services Cynthia Buchanan ...... Director of Park Services Dr. Lorene Essex...... Director of Human Resources Larry A. Godwin ...... Director of Police Services Dwan Gilliom...... Director of Public Works Richard Copeland...... Director of Planning and Development Elbert Jefferson, Jr...... City Attorney Kenneth Moody...... Director of Public Services and Neighborhoods Wain Gaskins...... Director of Engineering E. Keenon McCloy...... Director of Library Services Ernest Dobbins ...... Director of Community Enhancement

CO-BOND COUNSEL

Hawkins Delafield & Wood LLP New York, New York

Charles E. Carpenter, A Professional Corporation Memphis, Tennessee

CO-FINANCIAL ADVISORS

First Southwest Company Dallas, Texas

ComCap Advisors Memphis, Tennessee

i

OFFICIAL STATEMENT

RELATING TO THE ISSUANCE OF CITY OF MEMPHIS, TENNESSEE $98,605,000* GENERAL IMPROVEMENT BONDS, SERIES 2008

This Official Statement, which includes the cover page and the appendices attached hereto, contains information concerning the City of Memphis, Tennessee (the “City”), a municipal corporation in the State of Tennessee, including the City Council of the City of Memphis, Tennessee (the “Council”) and the $98,605,000* City of Memphis General Improvement Bonds, Series 2008 (the “Bonds”) . All quotations from, and summaries and explanations of, provisions of statutes contained herein do not purport to be complete and are qualified in their entirety by reference to the official compilations thereof, and all references to the Bonds and proceedings of the City relating thereto are qualified in their entirety by reference to the form of the Bonds and such proceedings.

The following appendices are attached hereto:

APPENDIX A - The 2007 Annual Financial Report APPENDIX B - Form of Opinions of Co-Bond Counsel to the City APPENDIX C - Form of Continuing Disclosure Certificate

THE BONDS

DESCRIPTION OF THE BONDS The Bonds will be issued under and subject to the terms and conditions contained in resolutions adopted by the Council on May 2, 2006, March 20, 2007, and April 15, 2008 (collectively, the “Resolution”). The Bonds are being issued to finance the costs of public works projects and retire certain of the City’s outstanding bond anticipation notes. The Bonds will be direct obligations of the City for which its full faith and credit are pledged and are payable from taxes levied on all taxable property in the City subject to taxation by the City without limitation as to rate or amount. The Bonds will be dated, will mature and bear interest, all as set forth on the cover of this Official Statement. Interest on the Bonds will be payable semiannually on April 1 and October 1 in each year beginning October 1, 2008. The Bonds will be issued as fully registered Bonds without coupons, in the denomination of $5,000 or integral multiples thereof. Interest on the Bonds will be calculated on the basis of a 360-day year of twelve 30-day months. Interest on the Bonds will be paid to the person in whose name the Bond is registered in the Bond registration books kept by the Registrar and Paying Agent as of the close of business on the fifteenth day of the calendar month next preceding any interest payment date. The Bank of New York Trust Company, N.A., Dallas, Texas, is the Registrar and Paying Agent for the Bonds.

BOOK-ENTRY SYSTEM The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully- registered Bond certificate will be issued for each maturity as set forth on the inside cover page of this Official Statement, each in the aggregate principal amount of such maturity, and will be deposited with DTC.

______* Preliminary, subject to adjustment as provided in the Official Notice of Sale.

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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 2.2 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, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation and Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange, LLC., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the Bonds 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 the Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

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Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the City or Agent, 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 Paying Agent, 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 Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the City. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered

The City may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor depository). In that event, Bond certificates will be printed and delivered to DTC.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof.

The City will have no responsibility or obligation to Direct Participants, to Indirect Participants or to Beneficial Owners with respect to (i) the accuracy of any records maintained by DTC, any Direct Participants or Indirect Participants, or (ii) the payment by DTC, any Direct Participants or any Indirect Participants of any amount in respect of principal or redemption price of or interest on the Bonds, or (iii) any notice which is permitted or required to be given to owners (except such notice as is required to be given by the City to DTC), or (iv) the selection by DTC of any Participant to receive payment in the event of a partial redemption of the Bonds, or (v) any consent given or other action taken by DTC as owner of the Bonds, or (vi) any other event or purpose.

OPTIONAL REDEMPTION*

The Bonds maturing on or before April 1, 2018 shall not be subject to redemption prior to maturity. The Bonds maturing on or after April 1, 2019 shall be subject to optional redemption by the City on or after April 1, 2018 in whole or in part at any time in such order as determined by the City and by lot within a maturity (if less than a full maturity is to be redeemed) at the principal amount of the Bonds to be redeemed, together with the interest accrued thereon to the date fixed for redemption.

NOTICE OF REDEMPTION Notice of any redemption of the Bonds shall specify the Bonds to be redeemed, the redemption date and the place where the amount due will be payable. Such notice shall also state that upon the date fixed for redemption the principal amount thereof plus the premium, if any, due on the redemption date together with the accrued interest thereon shall become due and payable. The City shall cause the Registrar for the Bonds to mail a copy of such notice at least 30 days before the redemption date to the registered owners of the Bonds at their address appearing on the registration books as of the 45th day preceding the date fixed for redemption. As long as a book-entry system is used to determine ownership of the Bonds, the City shall send notice of redemption to DTC. Any failure of DTC to mail such notice to any DTC participant will not affect the sufficiency or the validity of the redemption of the Bonds.

AUTHORITY FOR ISSUANCE OF THE BONDS The Bonds are being issued pursuant to the provisions of the Local Government Public Obligations Act of 1986, constituting Chapter 21 of Title 9, Tennessee Code Annotated, as amended, and the Resolution.

______*Preliminary, subject to change.

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The Bonds will be direct general obligations of the City and the City has pledged its full faith and credit and unlimited taxing power to the punctual payment of the principal of and interest on the Bonds. A tax sufficient to pay when due such principal and interest shall be levied annually and assessed, collected and paid, in like manner with the other taxes of the City and shall be in addition to all other taxes authorized or limited by law. It shall be the duty of the Council to include in the annual levy a tax sufficient to pay the principal of and interest on the Bonds as the same become due. When any part of the principal of or interest on the Bonds shall not be paid when due there shall be levied and assessed by said Council and collected by the proper collecting officers at the first assessment, levy and collection of taxes in the City, after such omission or failure, a tax sufficient to pay the same. Any holder or holders of the Bonds, including a trustee or trustees for holders of the Bonds, shall have the right, in addition to all other rights: (a) by mandamus or other suit, action, or proceeding in any court of competent jurisdiction to enforce his or their rights against the City and the Council and any officer, agent or employee of the City, including, but not limited to, the right to require the City and its Council and any proper officer, agent or employee of the City to assess, levy and collect taxes adequate to carry out any agreement as to, or pledge of, such taxes and to require the City and its Council and any officer, agent or employee of the City to carry out any other covenants and agreements and to perform its and their duties under the provisions of Chapter 21 of Title 9, Tennessee Code Annotated; and (b) by action or suit in equity, to enjoin any acts or things which may be unlawful or a violation of the rights of such holder or holders of the Bonds.

INSURANCE The City will consider all bids made whether a commitment for bond insurance is included. Depending on market conditions and the cost effectiveness of bond insurance, the bidder, at the time of pricing of the Bonds, may elect to purchase bond insurance to insure the payment of principal of and interest on all or a portion of the Bonds when due. If the successful bidder elects to obtain bond insurance for any portion of the Bonds, information regarding the provider of bond insurance and a specimen form of the bond insurance policy will be included in the final Official Statement.

ESTIMATED SOURCES AND USES OF PROCEEDS Sources of Funds Par Amount $ [Net Original Issue Premium/Discount] Accrued Interest Total $

Uses of Funds Retirement of Bond Anticipation Notes Project Cost Underwriter’s Discount [Bond Insurance Premium] Costs of Issuance (1) Total $ ______(1) Includes co-bond counsel fees, co-financial advisor fees, rating agencies fees, printing and mailing expenses and other miscellaneous expenses.

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CONDENSED CURRENT FINANCIAL RESULTS (In Thousands of Dollars)

For the fiscal year ended June 30, 2007, the audited net operating results for the general fund revenues/transfers were $552,546,000 and expenditures/transfers were $507,965,000 resulting in a $44,581,000 increase in General Fund total fund balance. This positive impact on fund balance is primarily attributable to an increase in sales and property tax collections

As of the second quarter of FY2008, actual revenues received represented 65.9% if total revenues (including transfers) budgeted for FY 2008. Approximately 97.7% of budgeted current property taxes have been collected as of December 31, 2007.

The City adopted a $537,679,851 General Fund operating budget for the fiscal year ended June 30, 2008 with a planned contribution to fund balance of $4,102,887. The City has exceeded the established goal of maintaining at least 10% fund balance as a percent of General Fund expenditures.

SUMMARY OF GENERAL FUND (Years Ended June 30) (In Thousands of Dollars)

2003 2004 2005 2006 2007(1) Beginning Fund Balance $ 65,008 $ 61,784 $ 26,402 $ 1,212 $ 38,737 Revenues and other sources 487,775 498,859 497,022 547,131 552,546 Expenditures and other uses (490,999) (534,241) (522,212) (514,403) (507,965) Ending Fund Balance $ 61,784 $ 26,402 $ 1,212 $ 33,940 $ 83,318

Ending Undesignated Fund Balance $ 53,189 $ 19,598 $ (4,100) $ 29,746 $ 76,571 ______(1) The difference in the 2006 ending fund balance and the 2007 beginning fund balance is a result of an adjustment for compensated absences of $6.039 million and the reclassification of $1.242 million from the General Fund to the Special Revenue Fund.

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STATEMENT OF DEBT As of June 30, 2007(1) (Audited)

Total General Obligation Debt: General Improvement Bonds(1) $ 952,451,258 School Bonds 13,350,000 Capital Lease Obligations 7,510,000 Commercial Paper 120,000,000 $ 1,093,311,258

Plus: This Issue 100,000,000 Less: Retired Commercial Paper (70,000,000)* Total General Obligation Debt after this Issue $ 1,123,311,258

Less: Self Supporting Debt: (2) Airport Bonds $ 10,855,000 Convention Center Bonds 1,683,600 Port Commission Bonds 5,123,762 (17,662,362) Net General Obligation Debt after this Issue $ 1,105,648,896

City’s Share of Shelby County Net Overlapping Debt(3) 1,227,801,000 Net and Overlapping Debt after this Issue $ 2,333,449,896

DEBT RATIOS Net Debt Total Debt Net Debt Including City of City of Overlapping Memphis Memphis Debt Debt Per Capita (a) $ 1,754.10 $ 1,726.52 $ 3,643.78 Debt/Assessed Valuation (b) 9.88% 9.72% 20.52% Debt/Appraised Valuation I 3.07% 3.02% 6.38%

(a) City of Memphis Population (2003 estimate): 640,393 (b) Assessed Valuation: (4) $ 11,369,792 (c) Appraised Valuation: (4) $ 36,554,763

______Source: City’s Department of Debt Management * Preliminary, subject to adjustment as provided in the Official Notice of Sale. Footnotes on following page

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______(1) The Statement of Debt includes June 30, 2007 balance and the $120,000,000 outstanding Commercial Paper. This statement does not include the following outstanding revenue bonds as they are payable solely from the net revenues derived from the respective systems: $1,212,702,000 Electric System Revenue Bonds; $13,940,000 Water Division Bonds: $526,765,000 Memphis-Shelby County Airport Authority Airport Revenue Bonds; $251,010,000 Memphis-Shelby County Airport Authority Special Facilities Revenue Bonds and $153,700,000 Sanitary System Revenue Bonds.

(2) The Statement of Debt is prepared to reflect that the Airport Bonds, Convention Center Bonds and Port Commission Bonds are considered to be self-supporting and appropriate fund transfers have historically been made. (3) Net debt outstanding for Shelby County as of June 30, 2007 was $1,782,004 of which $1,227,801 or 68.9% is applicable to the City of Memphis. (4) Amount reflects values officially released by the County Assessor for the fiscal year ended June 30, 2007.

CONTINGENT LIABILITY The Memphis and Shelby County Sports Authority, Inc. (the “Authority”) issued on May 29, 2002 $202,290,000 of its revenue bonds, all of which bonds outstanding on April 3, 2007, were refunded by $187,335,000 of the Authority’s Revenue Refunding Bonds, Series 2007, issued on that date (the “Authority Bonds”), to finance and refinance the acquisition, construction and equipping of an arena (the “FedExForum”) for the National Basketball Association’s franchise known as the Memphis Grizzlies (the “Grizzlies”). The Authority Bonds are payable as to principal and interest from (i) seat rental fees derived from the FedExForum, (ii) certain sales tax rebate revenues to the City and to Shelby County, Tennessee (the “County”), (iii) City hotel/motel tax revenues derived from certain hotel/motel taxes imposed by the City, (iv) County hotel/motel tax revenues derived from certain hotel/motel taxes imposed by the County, (v) certain payments in lieu of taxes from the Water Division of Memphis Light, Gas and Water, and (vi) certain car rental taxes collected in the County (collectively, the “Project Revenue Stream).

In the event the Project Revenue Stream is insufficient to pay the debt service on the Authority Bonds, the City and the County have agreed to timely appropriate from legally available non-ad valorem revenues, not later than the fiscal year following the date of such deficit, but no later than October 31 of such fiscal year, sufficient moneys to replenish draws from the debt service reserve fund relating to the Authority Bonds (the “Reserve Fund”).

The City’s obligation to fund any deficits in the Reserve Fund from such non ad-valorem revenues is limited to 50% of such deficit and the maximum amount of such replenishment obligation is the debt service on not to exceed $115,000,000 of the Authority Bonds, which represents one-half of the authorized Authority Bonds. THE CITY CAN OFFER NO ASSURANCE AS TO WHETHER THERE WILL BE FUTURE DEFICITS THAT IT WILL BE REQUIRED TO PAY. No feasibility report with respect to the Project was prepared.

Compensated Absence Liabilities Governmental Accounting Standards require recognition of the liability for compensated absences, which has been earned and is reasonably expected to be paid to existing employees. The City has recognized the non-current portion of this liability for governmental activities in its Statement of Net Assets in the amount of $76,910,000 as of June 30, 2007.

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CITY OF MEMPHIS, TENNESSEE LONG-TERM DEBT SERVICE SCHEDULE (1) (Thousands of Dollars)

Fiscal Year Existing Debt Service (2) % of This Issue Total Proposed Debt Service % of Ending Principal Principal June 30 Principal Interest Total Retired Principal Interest Total Principal Interest Total Retired

2008 $ 42,925 $ 46,064 $ 88,989 2009 58,564 46,754 105,318 2010 61,803 43,580 105,383 2011 62,932 40,796 103,728 2012 61,761 37,892 99,653 29.6% 2013 64,031 32,490 96,521 2014 63,240 29,337 92,577 2015 64,650 26,275 90,925 2016 63,690 23,053 86,743 2017 61,920 19,903 81,823 62.2% 2018 60,010 16,812 76,822 2019 57,480 13,800 71,280 2020 54,080 11,107 65,187 2021 50,660 8,492 59,152 2022 42,435 6,270 48,705 89.4% 2023 36,760 4,173 40,933 2024 24,780 2,707 27,487 2025 15,665 1,790 17,455 2026 16,415 1,044 17,459 2027 9,510 451 9,961 100.0 %

973,311 412,790 1,386,101

(1) Does not include $120 million of Commercial Paper currently outstanding.

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TOTAL FUND BALANCES/RETAINED EARNINGS TRENDS (June 30) (In Thousands of Dollars)

Fund Types 2003 2004 2005 2006 2007 General: Reserved $ 8,595 $ 6,804 $ 5,312 $ 4,194 6,747 Unreserved 53,189 19,598 (4,100) 29,746 76,571 Special Revenue (1) (6,542) (4,758) (4,208) (2,275) 6,608 Debt Service 13,277 13,918 8,042 30,418 53,793 Capital Improvements (1) 8,660 19,407 303 (27,577) (31,809) Governmental Funds $ 77,179 $ 54,969 $ 5,349 $ 34,506 $ 111,910

Enterprise (2) 213,876 214,117 212,950 225,569 232,536 Internal Services Funds ( 15,644) ( 15,064) ( 8,433) (3,521) (274) Proprietary Funds 198,232 199,053 204,517 222,048 232,262 Total $ 275,411 $ 254,022 $ 209,866 $ 256,554 $ 344,172 ______(1) Excludes the Board of Education Component Unit. (2) Excludes Memphis Light, Gas, and Water Division, the Convention Center, the Mid-South Coliseum, MATA, and the Port Commission.

LITIGATION At the time of original delivery of the Bonds, there will be furnished to the Purchasers of the Bonds a certificate of certain officers of the City stating that there is no litigation then pending, or to their knowledge threatened, affecting the corporate existence or boundaries of the City, or the titles of its officials to their respective offices, or the validity of the Bonds or the power of the City to levy and collect taxes to pay the Bonds. Such certificate may make reference to litigation involving the annexation by the City of certain territory adjacent to the City. There are two (2) annexation ordinances being presently challenged. They are the Southwind-Wyndyke annexation and South Cordova annexation. A final resolution of the annexation cases in favor of the City will result in additional taxes and revenue for the City. However, it is the opinion of the City Attorney that these matters are not material to the City's financial condition, based on information known at the date of this Official Statement.

CERTAIN LEGAL MATTERS The Bonds will be offered when, as and if issued and subject to the receipt of the approving legal opinions of Hawkins Delafield & Wood LLP, New York, New York, and Charles E. Carpenter, A Professional Corporation, Memphis, Tennessee, Co-Bond Counsel to the City. For the proposed form of opinions of Co-Bond Counsel, see Appendix B hereto.

OPINIONS OF CO-BOND COUNSEL The City will deliver to the Purchasers of the Bonds with the executed Bonds, dated as of the date of the delivery of the Bonds, the opinions of Hawkins Delafield & Wood LLP, New York, New York, and Charles E. Carpenter, A Professional Corporation, Memphis, Tennessee, Co-Bond Counsel to the City, that the Bonds are valid and legally binding obligations of the City and that the City has the power and is obligated to levy ad valorem taxes for the payment of the Bonds and the interest thereon on all taxable property in the City, subject to taxation by the City, without limitation as to rate or amount, provided, however, that the rights of the holders of the Bonds and the enforceability of the Bonds may be subject to judicial discretion, the exercise of the sovereign police powers of the State of Tennessee, and to the valid bankruptcy, insolvency, reorganization, moratorium or other laws affecting the relief of debtors. Co-Bond Counsel is not passing upon the accuracy or completeness of the Official Statement. For the proposed form of opinions of Co-Bond Counsel, see Appendix B hereto.

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CONTINUING DISCLOSURE INFORMATION Rule 15c2-12 under the Securities and Exchange Act of 1934, as amended (the “Rule”), prohibits an underwriter from purchasing or selling municipal securities unless it has determined that the issuer of such securities has committed to provide annually certain information, including audited financial information, and notice of various events described in the Rule, if material. The City has covenanted for the benefit of the holders of the Bonds that, consistent with the Rule, the City will provide: annual financial information for the City, including audited financial statements of the City for each fiscal year ending on and after June 30, 2008, in a timely manner, notices of certain events with respect to the Bonds, if material, including principal and interest payment delinquencies, non- payment related defaults, unscheduled draws on debt service reserves reflecting financial difficulties, substitution of credit or liquidity providers or their failure to perform, adverse tax opinions or events affecting the tax-exempt status of the Bonds; modifications to rights of security holders, certain bond calls and defeasances and rating changes; and notice of any failure of the City to provide required annual financial information not later than December 31, 2008 or any December 31 thereafter. The annual financial information referred to above will be provided to each nationally recognized municipal securities information repository and to the appropriate state information depository, if any. The notices of certain events referred to above will be provided either to each nationally recognized municipal securities information repository or to the Municipal Securities Rulemaking Board, and to the appropriate state information depository, if any. No state information depository has been designated for the State of Tennessee. Filings also may be made with dissemination agents or conduits in addition to or in lieu of the filings referred to above. The continuing obligation to provide annual financial information and notices referred to above will terminate with respect to the Bonds when the Bonds are no longer outstanding. Any failure by the City to comply with the foregoing will not constitute a default with respect to the Bonds. For the form of the Continuing Disclosure Certificate relating to the Bonds, see Appendix C hereto.

TAX EXEMPTION

OPINION OF CO-BOND COUNSEL In the opinion of Co-Bond Counsel to the City, under existing statutes and court decisions and assuming continuing compliance with certain tax covenants described herein, (i)interest on the Bonds is excluded from the gross income for Federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"), and (ii)interest on the Bonds 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, Co-Bond Counsel has relied on certain representations, certifications of fact, and statements of reasonable expectations made by the City and others in connection with the Bonds, and Co- Bond Counsel has assumed compliance by the City with certain ongoing covenants to assure the exclusion of interest on the Bonds from gross income under Section 103 of the Code. In addition, in the opinion of Co-Bond Counsel, under the existing laws of Tennessee, the Bonds and the income therefrom shall be free from all Tennessee state, county and municipal taxes except for inheritance, transfer and estate taxes and except to the extent such interest may be included within the measure of corporate privilege taxes imposed pursuant to the laws of the State of Tennessee. See “Miscellaneous” below for a discussion for certain litigation that may relate to this tax exemption. Co-Bond Counsel expresses no opinion regarding any other Federal or state tax consequences with respect to the Bonds. Co-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. Co-Bond Counsel expresses no opinion on the effect of any action hereafter taken or not taken in reliance upon an opinion of other counsel on the exclusion from gross income for Federal income tax purposes of interest on the Bonds, or under state and local tax law.

CERTAIN ONGOING FEDERAL TAX REQUIREMENTS AND COVENANTS The Code establishes certain ongoing requirements that must be met subsequent to the issuance and delivery of the Bonds in order that interest on the Bonds 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 Bonds, 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 Bonds 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 with certain applicable requirements of the Code to assure the exclusion of interest on the Bonds from gross income under Section 103 of the Code.

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CERTAIN COLLATERAL FEDERAL TAX CONSEQUENCES The following is a brief discussion of certain collateral Federal income tax matters with respect to the Bonds. It does not purport to address all aspects of Federal taxation that may be relevant to a particular owner of a Bond. 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 Bonds. Prospective owners of the Bonds 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 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 Bonds 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 “Original issue discount” (“OID”) is the excess of the sum of all amounts payable at the stated maturity of a Bond (excluding certain “qualified stated interest” that is unconditionally payable at least annually at prescribed rates) over the issue price of that maturity. In general, the “issue price” of a maturity means the first price at which a substantial amount of the Bonds of that maturity was sold (excluding sales to bond houses, brokers, or similar persons acting in the capacity as underwriters, placement agents, or wholesalers). In general, the issue price for each maturity of Bonds is expected to be the initial public offering price set forth on the inside cover page of this Official Statement. Bond Counsel further is of the opinion that, for any Bonds having OID (a “Discount Bond”), OID that has accrued and is properly allocable to the owners of the Discount Bonds under Section 1288 of the Code is excludable from gross income for Federal income tax purposes to the same extent as other interest on the Bonds. In general, under Section 1288 of the Code, OID on a Discount Bond accrues under a constant yield method, based on a periodic compounding of interest over prescribed accrual periods using a compounding rate determined by reference to the yield on that Discount Bond. An owner’s adjusted basis in a Discount Bond is increased by accrued OID for purposes of determining gain or loss on sale, exchange, or other disposition of such Bond. Accrued OID may be taken into account as an increase in the amount of tax-exempt income received or deemed to have been received for purposes of determining various other tax consequences of owning a Discount Bond even though there will not be a corresponding cash payment. Owners of Discount Bonds should consult their own tax advisors with respect to the treatment of original issue discount for Federal income tax purposes, including various special rules relating thereto, and the state and local tax consequences of acquiring, holding, and disposing of Discount Bonds.

BOND PREMIUM In general, if an owner acquires a Bond for a purchase price (excluding accrued interest) or otherwise at a tax basis that reflects a premium over the sum of all amounts payable on the Bond after the acquisition date (excluding certain “qualified stated interest” that is unconditionally payable at least annually at prescribed rates), that premium constitutes “bond premium” on that Bond (a “Premium Bond”). In general, under Section 171 of the Code, an owner of a Premium Bond must amortize the bond premium over the remaining term of the Premium Bond, based on the owner’s yield over the remaining term of the Premium Bond, determined based on constant yield principles (in certain cases involving a Premium Bond callable prior to its stated maturity date, the amortization period and yield may be required to be determined on the basis of an earlier call date that results in the lowest yield on such bond). An owner of a Premium Bond must amortize the bond premium by offsetting the qualified stated interest allocable to each interest accrual period under the owner’s regular method of accounting against the bond premium allocable to that period. In the case of a tax-exempt Premium Bond, if the bond premium allocable to an accrual period exceeds the qualified stated interest allocable to that accrual period, the excess is a nondeductible loss. Under certain circumstances, the owner of a Premium Bond may realize a taxable gain upon disposition of the Premium Bond even though it is sold or redeemed for an amount less than or equal to the owner’s original acquisition cost. Owners of any Premium Bonds should consult their own tax advisors regarding the treatment of bond premium for Federal income tax purposes, including various special rules relating thereto, and state and local tax consequences, in connection with the acquisition, ownership, amortization of bond premium on, sale, exchange, or other disposition of Premium Bonds.

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INFORMATION REPORTING AND BACKUP WITHHOLDING Information reporting requirements apply to interest (including OID) paid on tax-exempt obligations, including the Bonds. In general, such requirements are satisfied if the interest recipient completes, and provides the payor with, a Form W-9, “Request for Taxpayer Identification Number and Certification,” or unless the recipient is one of a limited class of exempt recipients, including corporations. A recipient not otherwise exempt from information reporting who fails to satisfy the information reporting requirements will be subject to “backup withholding,” which means that the payor is required to deduct and withhold a tax from the interest payment, calculated in the manner set forth in the Code. For the foregoing purpose, a “payor” generally refers to the person or entity from whom a recipient receives its payments of interest or who collects such payments on behalf of the recipient. If an owner purchasing a Bond through a brokerage account has executed a Form W-9 in connection with the establishment of such account, as generally can be expected, no backup withholding should occur. In any event, backup withholding does not affect the excludability of the interest on the Bonds from gross income for Federal income tax purposes. Any amounts withheld pursuant to backup withholding would be allowed as a refund or a credit against the owner’s Federal income tax once the required information is furnished to the Internal Revenue Service.

MISCELLANEOUS Tax legislation, administrative actions taken by tax authorities, and court decisions, whether at the Federal or state level, may adversely affect the tax-exempt status of interest on the Bonds under Federal or state law and could affect the market price or marketability of the Bonds. Prospective purchasers should be aware that the United States Supreme Court is in the process of reviewing Davis v. Dep’t of Revenue of the Finance and Admin. Cabinet, 197 S.W. 3d 557 (Ky. App. 2006), cert. granted 127 S.Ct. 2451 (2007) (mem.), a decision of a Kentucky appellate court, which held that provisions of Kentucky tax law that provided more favorable income tax treatment for holders of bonds issued by Kentucky municipal bond issuers than for other holders of non-Kentucky municipal bonds violated the Commerce Clause of the United States Constitution. Tennessee statutes provide more favorable Tennessee income tax treatment for holders of bonds issued by the State of Tennessee and its political subdivisions. If the United States Supreme Court affirms the holding of the Kentucky court, subsequent Tennessee judicial decisions or legislation designed to ensure the constitutionality of Tennessee tax law could, among other alternatives, adversely affect the Tennessee tax exemption of outstanding bonds, including the Bonds, to the extent constitutionally permissible, or result in the exemption from taxes imposed by the State of Tennessee or any county or municipality of interest on certain bonds issued by other states and their political subdivisions, either of which actions might affect the market price or marketability of the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding the foregoing matters. RATINGS Moody’s Investors Service, Inc., Standard & Poor’s Ratings Group and Fitch Ratings have given the Bonds ratings of __, ___, and ____, respectively. The ratings reflect only the views of the respective rating agency. Any explanation of the significance of the ratings may be obtained only from the respective rating agency furnishing the same at the following addresses: Moody’s Investors Services, Inc., 99 Church Street, New York, New York 10007; Standard & Poor’s Ratings Group, 55 Water Street, New York, New York 10041; and Fitch Ratings, One State Street Plaza, New York, New York 10004. The City furnished to each rating agency certain information and materials, some of which may not have been included in this Official Statement, relating to the City as well as outstanding debt of the City. Generally, rating agencies base their ratings upon such information and materials and upon investigations, studies and assumptions by the ratings agencies. There can be no assurance that a rating will continue for any given period of time or that it will not be lowered or withdrawn entirely by a rating agency if in its judgment circumstances so warrant. Any such downward change in or withdrawal of a rating may have an adverse effect on the marketability or market price of outstanding securities.

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CO-FINANCIAL ADVISORS This Official Statement has been prepared under the direction of the City of Memphis by the Director of Finance and Administration and with the assistance of First Southwest Company, Dallas, Texas ("First Southwest") and ComCap Advisors, Memphis, Tennessee ("ComCap") each employed by the City to perform professional services in the capacity of Co-Financial Advisor. In their role as Co-Financial Advisor to the City, First Southwest and ComCap have provided advice on the plan of financing and structure of the issue, reviewed and commented on certain legal documents, drafted certain portions of the Official Statement based upon information provided by the City, and will review the pricing of the Bonds by the purchasers thereof. The information set forth herein has been obtained from the City and other sources, which are believed to be reliable. The Co-Financial Advisor has not verified the factual information contained in the Official Statement but relied on the information supplied by the City and the City's Certificate as to the Official Statement.

SALE OF THE BONDS

The Bonds will be sold by the City at a competitive public sale on April 23, 2008 at 9:30 a.m., Central Time, via bids received by the PARITY® electronic bid submission system, a service of i-Deal LLC. Details concerning the sale of the Bonds are contained in the Official Notice of Sale dated April 16, 2008 which was available to bidders for the Bonds with this Preliminary Official Statement.

______(the “Underwriter”) has agreed, subject to the conditions of Closing set forth in the Official Notice of Sale, to purchase the Bonds at a purchase price of $______(consisting of the par amount of the Bonds, plus/less $______net original issue premium/discount and less underwriter’s discount of $______).

The Bonds will be offered at the respective initial public offering prices shown on the inside cover page of this Official Statement. The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing the Bonds into investment trusts) and others at prices lower than the public offering prices stated on the inside cover page hereof. The initial public offering prices may be changed from time to time by the Underwriter in its discretion.

Approved by resolution of the City Council of the City of Memphis, Tennessee on April 15, 2008.

Mayor

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PART II SUPPLEMENTAL INFORMATION STATEMENT

CITY OF MEMPHIS, TENNESSEE

In addition to providing audited financial information as of and for the year ended June 30, 2006, the City of Memphis, Tennessee intends that this Supplemental Information Statement will be used, together with information specifically provided by the City for that purpose, in connection with the offering and issuance by the City of its securities. The City of Memphis has prepared a comprehensive annual financial report containing additional financial statements and other information for the periods covered by this Supplemental Information Statement. Please contact Ms. Sheila Whalum, Deputy Director of Finance, 125 North Main Street, Room 368, Memphis, Tennessee 38103 (901/576-6324) for questions regarding information in this Supplemental Information Statement, copies of Annual Financial Reports, or placement on the mailing list for the Supplemental Information Statement. The date of this Supplemental Information Statement is as of June 30, 2006 unless otherwise noted. No person, except as noted on the cover page, has been authorized by the City to give any information or to make any representations not contained in this Supplemental Information Statement or any supplement which may be issued hereto, and if given or made, such other information or representations must not be relied upon as having been authorized. The information, estimates, and expressions of opinion in this Supplemental Information Statement are subject to change without notice. The delivery of this Supplemental Information Statement shall not, under any circumstances, create any implication that there has been no material change in the affairs of the City since the date of this Supplemental Information Statement.

[Remainder of Page Intentionally Left Blank]

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TABLE OF CONTENTS

If used in conjunction with an Official Statement or Offering Memorandum, this Table of Contents will relate only to this Supplemental Information Statement. A separate Table of Contents should be included for such Official Statement or Offering Memorandum.

CITY OF MEMPHIS, TENNESSEE ...... 1 Capital Projects Fund ...... 18 Introduction ...... 3 Sewer Fund...... 19 Governmental Structure...... 3 Notes To Summary Statements ...... 19 Organization Chart ...... 6 ECONOMIC AND DEMOGRAPHIC FINANCIAL MANAGEMENT...... 6 INFORMATION...... 20 Division of Finance ...... 7 Population Trends...... 20 Fiscal Year...... 7 Income and Buying Income...... 20 Financial Reporting ...... 7 Employment ...... 21 Accounting System...... 7 Percentage of Persons Basis of Accounting...... 7 Employed by Major Industry...... 22 Fund Structure ...... 7 Largest Employers ...... 23 GASB 34 ...... 7 Housing and Construction ...... 24 Other Post Employee Benefits...... 8 Financial Institutions ...... 25 Cash Management System...... 8 The Economy ...... 26 Risk Management...... 8 Trade Area...... 26 Labor Relations...... 8 Agribusiness...... 26 Budgeting And Appropriations Procedures...... 9 Tourism ...... 26 Retirement System...... 9 ECONOMIC DEVELOPMENT ...... 27 FINANCIAL INFORMATION...... 10 Central Business District ...... 27 Property Tax ...... 10 Residential Development...... 27 Other Sources of Revenue ...... 10 Entertainment/Retail...... 28 Property Tax Rate Distribution...... 11 Office Space ...... 28 Ten Largest Taxpayers Of Memphis ...... 11 Memphis Redbirds & AutoZone Park...... 28 Property Tax Levies and Collections...... 12 Memphis Grizzlies Basketball Arena...... 28 Values of Taxable Property ...... 13 Cook Convention Center Expansion ...... 29 Compensated Absence Liabilities...... 13 Transportation and Distribution ...... 29 Debt Service as a Percentage of Total Expenditures13 Utilities...... 32 Bond Authorization ...... 13 Education...... 34 Short Term Borrowing...... 13 Medical Facilities ...... 35 Debt Limit ...... 14 Government...... 36 Principal of Outstanding General Obligation Debt.. 14 Libraries ...... 36 Debt Ratio Trends...... 14 Communications...... 36 MAJOR FUNDS SUMMARIES...... 15 Recreation...... 36 General Fund ...... 15 MLGW Water Division Pilot ...... 37 Special Revenue Funds...... 16 Debt Service Fund ...... 17

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THE CITY OF MEMPHIS, TENNESSEE INTRODUCTION Memphis is located on the east bank of the Mississippi River in the southwest corner of Tennessee. Memphis is the State’s largest city and the county seat of Shelby County. The corporate limits contain 324.5 square miles, representing 40.9 percent of the total land area of Shelby County. Memphis ranks as the 18th largest city in the nation. According to the U. S. Bureau of the Census, the 2000 population was 650,100.

GOVERNMENTAL STRUCTURE The City of Memphis was incorporated as a city in 1826. Memphis operated under a commission form of government from 1909 until January 1, 1968. At that time, a Mayor-Council form of government was established. The Council is composed of thirteen representative citizens who are elected for four-year terms. Six council members are elected at large in multi-member districts, which territorial boundaries are determined by dividing the City in half with each multi-member district consisting of three (3) council member numbered positions. Single member districts, numbered 1 - 7, elect the remaining seven (7) council members. The Council elects its own chairperson, exercises legislative powers, approves budgets and establishes the tax rate. The Mayor is elected to a four-year term. The Mayor carries out the policies of the City and appoints City board members, officers and division directors, with Council approval. The City’s operating and service departments are organized under the Chief Administrative Officer who is appointed by and serves at the pleasure of the Mayor. The Mayor may veto action of the Council, but a simple majority can override any veto. The Chief Administrative Officer, under the direction of the Mayor, coordinates the activities of all administrative divisions of City Government. He acts as liaison officer between the Mayor and all divisions, bureaus, boards, commissions and authorities. The directors of all divisions, excluding City Attorney, report to the Chief Administrative Officer on administrative procedures. The major administrative divisions of the City include: Engineering, Executive, Finance, Fire Services, General Services, Housing and Community Development, Human Resources, Information Systems, Legal, Park Services, Office of Planning and Development, Police Services, Public Works/Sanitation, Community Enhancement and Public Services and Neighborhoods. The Mayor is responsible for all appointments to boards which serve the City. These include the boards of the Memphis Light, Gas and Water Division (“MLGW”); Memphis Area Transit Authority; Memphis Housing Authority; Center City Commission; Memphis & Shelby County Convention Center Complex; Memphis Brooks Museum of Art; Mid-South Coliseum; Memphis & Shelby County Building Code Advisory Board; and Memphis & Shelby County Public Library Board. The Mayor appoints five of the seven members of the Board of the Memphis- Shelby County Airport Authority. Most of the members of these boards are private citizens giving their time to the City without compensation.

ADMINISTRATION The following are brief personal resumes of City Administration officials: Dr. Willie W. Herenton, Mayor of the City of Memphis Dr. Herenton was sworn into a fifth four-year term of office on January 1, 2008. He began his initial term as Mayor on January 1, 1992. Dr. Herenton is the former Superintendent of Schools for the City of Memphis Board of Education, having served in that capacity for twelve years. Prior to being Superintendent, Dr. Herenton’s professional experiences include, but are not limited to, classroom teacher, principal, instructor at Southern Illinois University and Deputy Superintendent of the Memphis City School System. Dr. Herenton is a native Memphian and a product of the public school system. A graduate of LeMoyne College and University of Memphis (formerly Memphis State University), he earned his Ph.D. Degree from Southern Illinois University. Dr. Herenton has received numerous awards for outstanding service in education and many honors for his charitable and civic activities. He serves on the National Board of Directors of the Union League, Junior Achievement and the National Conference of Christians and Jews. Dr. Herenton has served on several corporate boards including The Promus Companies Incorporated, formerly Holiday Corporation, and First Tennessee National Corporation. He has devoted time to many civic and service organizations such as March of Dimes, United Way, Rotary Club, Boy Scouts and the Economic Club of Memphis. Mayor Herenton was selected the American City and County's 2003 Municipal Leader of the Year, for his progressive leadership in downtown revitalization, securing a National Basketball Association franchise and guiding the City through improvements in financial stability, economic growth and public safety.

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Keith L. McGee, Chief Administrative Officer

Mr. McGee was confirmed as Chief Administrative Officer on December 16, 2003. Mr. McGee was previously Director and Deputy Director of the Human Resources Division. He is responsible for coordinating and directing the activities of all administrative and operating divisions of City Government. The CAO acts as the Mayor's liaison with the Council and all boards, commissions and authorities. Mr. McGee has 22 years of experience in the field of human resources and criminal justice with the city and county governments. Mr. McGee holds a bachelor's degree in human services from Thomas Edison State College in Trenton, New Jersey. He is also a national professional speaker, trainer and facilitator and a consultant for the U.S. Department of Justice's National Institute of Corrections and a graduate of Leadership Memphis. Mr. McGee is a lifelong resident of Memphis and is involved in a wide range of civic activities. Roland McElrath, Director of Finance and Administration Roland McElrath was appointed Director of Finance and Administration on September 7, 2005. Mr. McElrath previously served as Director from 1996 to 2001. As the Director, Mr. McElrath is responsible for managing all aspects of the City’s major financial operations, including compiling the City’s annual operating and capital improvements budgets; investing surplus operating and retirement system funds; disbursing all City funds, and handling all administrative matters affecting the Finance Division. He served two years as Associate Superintendent of Business Operations for the Memphis City School System. He holds a BBA in Accounting from the University of Tennessee and a MBA in Finance from the University of Memphis (formerly Memphis State University). Mr. McElrath is a certified public accountant. He also serves as the Chief Financial Officer for the Memphis Housing Authority. Sheila Whalum, Deputy Director of Finance and Administration/ Financial Operations Sheila Whalum was appointed Deputy Director of Finance and Administration in May 2004. Ms. Whalum has worked in the Finance Division since 1995 in various positions including Debt Administrator, Debt Coordinator, and Investment Analyst. Ms. Whalum has direct responsibility for the Debt & Investment Management Service Center, which includes managing the total debt function for the City and all debt issuance and managing the Investment & Pension Fund Portfolios. Ms. Whalum earned a Master of Business Administration degree from the University of Phoenix in 2003. Ms. Whalum graduated from the University of Memphis with a Bachelor of Arts degree in Communications in 1987. She has received the Certificate of Achievement from the State of Tennessee Education Swap Training Course, the Certificate of Completion for Arbitrage Compliance and Ms. Whalum has a Certificate of Achievement (Program of Continuing Education in Public Finance) from Public Financial Management in Philadelphia, Pennsylvania – 2000. Ms. Whalum received a Certificate of Achievement for the Institute for Executive Leadership from Rhodes College, Memphis, Tennessee – 2002. Ms. Whalum is the City's Liaison for the Memphis-Shelby County Airport Authority Board. Ms. Whalum is a lifelong resident of Memphis and is deeply involved in her church.

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James E. Stokes, Deputy Director of Finance and Administration/ Financial Management

Mr. Stokes was appointed Deputy Director of Finance and Administration in September 2006. He is responsible for the administration of all accounting activities related to the General Fund including revenue budgeting and forecasting, and other specific financial duties. The primary areas of responsibility for Mr. Stokes are senior management oversight of the Budgeting Office, Comptroller’s Office and the Purchasing Office. He routinely interfaces with operating Divisions regarding billing and collection of operating Division revenues. In addition, Mr. Stokes serves as a member of the Pension Investment Committee. Mr. Stokes’ work experience is a combination of independent CPA practice, Corporate Fortune 500 roles in internal audit, financial analysis and strategic business unit controllership, and financial consulting for corporate, municipal and non-profit clients. Prior to joining the City of Memphis, he worked as an Associate in the Boston office of Resources Global Professionals with a primary focus on Sarbanes Oxley consulting projects. In 1977, he graduated from Memphis State University, earning a Bachelor of Business Administration Degree in Accounting. Mr. Stokes is a member of the AICPA and received his Certified Public accountant certificate from the State of Arkansas. Elbert Jefferson, Jr., City Attorney Elbert Jefferson, Jr. was appointed City Attorney in March 2007. He served as Deputy City Attorney from 1997-1999 and 2002 to the date of his appointment as City Attorney. He served as Deputy Director/General Counsel for the Memphis Housing Authority from 1999 to 2002. Mr. Jefferson was admitted to the Tennessee Bar in 1991 and received his law degree from the University of Tennessee College of Law in 1989. He received his B.A. degree in Political Science from LeMoyne-Owen College in 1986, where he graduated Magna Cum Laude. He is the President of the Ben Jones Chapter of the National Bar Association. Mr. Jefferson has taught Business Law and other related courses at Education America – Southeast College of Technology (1999), as well as LeMoyne- Owen College (1994-1999). He has presented various topics at conferences of the International Municipal Lawyers Association, the National Bar Association and locally. He is a former board member with Volunteer Memphis. Among his duties as City Attorney in overseeing all areas of legal service, his specific practice areas include General Litigation, Land Use and Zoning, and Employment Law. Patrice W. Thomas, City Comptroller Ms. Thomas was appointed City Comptroller in September 2004. As defined by the City Charter, she is responsible for management of the accounting and financial reporting activities of the City. This responsibility includes the preparation of financial reports, the processing of all disbursement activities, and the retention and retrieval of all records including the preparation and retention of the agendas and minutes of the City Council Meetings. As Comptroller, Ms. Thomas also serves as a member of the Healthcare, Pension Board and Pension Investment Committees. She received a dual degree from Christian Brothers University in Accounting and Telecommunications/Information Systems Management and is currently pursuing a Masters in Finance, Insurance and Real Estate at the University of Memphis. Ms. Thomas has over nine years of public and private accounting experience and is recognized by the State of Tennessee as a Certified Public Accountant.

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CITY OF MEMPHIS, TENNESSEE ORGANIZATION CHART

CITIZENS OF MEMPHIS

JUDICIAL MAYOR CITY BOARD OF COUNCIL EDUCATION (1)

CHIEF APPOINTED ADMINISTRATIVE BOARDS & OFFICER AUTHORITIES (1)

ƒ City Attorney ƒ Public Services & Neighborhoods ƒ Engineering ƒ Public Works ƒ Executive ƒ Memphis Area Transit Authority ƒ Finance ƒ Memphis Light, Gas and Water ƒ Fire Services ƒ Memphis Brooks Museum of Art ƒ General Services ƒ Memphis Public Library ƒ Housing & Community Development ƒ Center City Commission ƒ Human Resources ƒ Memphis & Shelby County Airport Authority ƒ Office of Planning & Development ƒ Memphis & Shelby County Convention Center ƒ Park Services ƒ Memphis & Shelby County Building Code Advisory ƒ Police Services Board ƒ Community Enhancement

(1) The Board of Education and the appointed boards and authorities for Memphis Area Transit Authority (MATA), Memphis Light, Gas and Water (MLG&W), Memphis and Shelby County Airport Authority, and Memphis Light, Gas and Water Retirement and Pension System are legally separate from the primary government. The budget for MATA is in the Grants & Agencies section of this budget book. The budgets for Board of Education, MLG&W, Memphis and Shelby County Airport Authority, and MLG&W Retirement and Pension System are not presented in this document.

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FINANCIAL MANAGEMENT

DIVISION OF FINANCE The Division of Finance is responsible for all fiscal affairs, information systems, financial management and related systems of the City. The Director is charged with overall City financial policy and reports directly to the Chief Administrative Officer. He is primarily responsible for the accounting, financial reporting, debt and investment policy, risk management, financial support systems and tax collection functions for the City. The activities of the Division are currently organized into six service centers. The Office of the Comptroller, Purchasing and Budget service centers report directly to the Deputy Director of Finance/Financial Management. The Office of the Treasury and Debt and Investment service centers report directly to the Deputy Director of Finance. The Mayor appoints all of these positions.

FISCAL YEAR The City operates on a fiscal year that commences July 1 and ends June 30.

FINANCIAL REPORTING The City maintains a financial reporting system, which provides timely and accurate reports on the City’s financial position and the results of its operation. Independent auditors, as required by law, have audited the City’s financial statements annually for more than 40 years. The Governmental 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 annual financial reports for the fiscal years ended June 30, 1977 through 2006. The certificate evidences conformance with the high financial reporting standards promulgated by the Government Accounting Standards Board (“GASB”). The City believes its 2007 report will meet these same standards, and it has been submitted to GFOA for review.

ACCOUNTING SYSTEM The City’s accounting system is maintained by the Comptroller’s Office. Each of the independent boards and commissions maintains separate accounting systems. In addition, the City retains an independent certified public accounting firm to provide annual audits of all City funds.

BASIS OF ACCOUNTING The City of Memphis follows accounting principles set forth in Audits of State and Local Governments, published by the American Institute of Certified Public Accountants, and in statements and interpretations issued by the GASB. Accounting records for general governmental operations are maintained on a modified accrual basis. Under this system, revenues are recorded when susceptible to accrual, that is, both measurable and available. Expenditures, other than interest on long-term debt, are recorded when the liability is incurred, if measurable, and if the liability will be paid from expendable available financial resources. Budgetary control is maintained in each of the appropriate funds by a formal appropriation and encumbrance system. Salary expenditures and commitments such as purchase orders and contracts are recorded when the liability is incurred.

FUND STRUCTURE The City utilizes the fund types and account groups recommended by GASB Statement 1. They are: • Governmental Funds to account for most general governmental functions; • Proprietary Funds to account for ongoing activities and organizations that are similar to private enterprises; • Fiduciary Funds to account for assets held by the City in a trust capacity; • Internal Service Funds to account for the financing of goods or services provided by one department to other departments or agencies of the City on a cost reimbursement basis.

GASB 34 The Governmental Accounting Standards Board (“GASB”) imposed significant new accounting standards on state and local governments pursuant to Statement No. 34 (“GASB 34”). GASB 34 was effective commencing in fiscal year 2001-02 for state and local governments with over $100 million in revenues. The City is in compliance with GASB 34.

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OTHER POST EMPLOYEE BENEFITS

GASB is the body responsible for promulgating accounting and financial reporting standards that are followed by state and local governments desiring to present financial statements in accordance with generally accepted accounting principles (“GAAP”). State and local governments generally adhere to GASB rules and issue GAAP financial statements to meet expectations of debt community—audited financial statements in conformity with GAAP. Two recently issued GASB Statements (Nos. 43 and 45) that provide accounting and financial reporting requirments for retiree healthcare plans and employer participants, commonly known as Other Post Employee Benefits (“OPEB”) have effective dates of fiscal year ended June 30, 2007 for the plan and June 30, 2008 for the employer. The City has received a preliminary actuarial evaluation of its post employment benefits other than pensions which consists of health insurance benefits. Based on the current benefits, the unfunded accrued liability is approximately $826 million. Currently, the City’s annual pay-as-you-go cost is $20 million. The City is currently exploring the establishment of a trust to fully fund such obligations.

CASH MANAGEMENT SYSTEM The City’s Cash Management System is maintained in the Investment Management Department of the Division of Finance. The objectives of the System are preservation of principal, maintenance of liquidity, and maximizing the return on investments. The City’s banking relationship is designed to capture the gains possible through external float management and utilizes techniques such as controlled disbursement accounts and lockbox services. Depository services are awarded to the lowest bidder providing the most comprehensive services. Currently, First Tennessee Bank, N.A., Memphis, Tennessee, serves as the depository for all City funds. The concept of cash management has been expanded from the traditional functions of maximizing collection efficiency and the investing of idle funds to include all working capital functions: inventories, payables, receivables and all other types of receipts and disbursements, including payroll. Cash flow planning is continuously updated to provide timely forecasting of cash requirements. This not only enhances investment opportunities but also provides for long-range debt planning. It should be noted that the City’s major funds traditionally have a favorable cash flow due to the timing of receipts and disbursements. Property taxes, the largest revenue source in the General and Debt Service Funds are due and substantially collected in the first quarter of the fiscal year. Cash management provides an additional source of revenue, earning more than $ 6.5 million in fiscal year 2007. The City’s deposit collateralization practices are indicative of the highest levels of financial prudence and responsibility. The collateralization coverage was computed using the monthly valuation and adjustment procedures in accordance with the stringent standards of State law governing State funds and at June 30, 2007 met GASB category 1 requirements.

RISK MANAGEMENT The Risk Management service center is responsible for all property and casualty insurance procurement for the City. Risk Management identifies risks and exposures, determines the best technique to manage the risk, implements the risk technique and monitors the program to detect exposure and risk changes. The Health and Safety Office is responsible for administering the On-the-Job Injury (“OJI”) program for the City. OJI receives and investigates all claims for accidents of City employees and processes these claims, if necessary. OJI also provides resources for job safety training and education in order to comply with OSHA standards and regulations.

LABOR RELATIONS The City currently has approximately 6,938 permanent full-time employees; approximately 4,761 are represented by employee labor organizations. The effective agreements with these organizations will expire on June 30, 2008. The American Federation of State, County and Municipal Employees, Local 1733, represents approximately 1,180 employees; the Memphis Police Association represents approximately 1,573 police officers; and the International Association of Fire Fighters, Local 1784, represents approximately 1,459 employees. The International Union of Operating Engineers represents 254 employees; the International Association of Machinists and Aerospace Workers represents 111 employees; the International Brotherhood of Electrical Workers represents 64 employees; and 6 Craft Union represents 56 employees, and Communication Workers of America 128. In June of 1978 the City professionalized the labor relations function. All labor related activity is now coordinated through the Labor Relations Service Center of the Division of Human Resources. In addition to the general administration of labor agreements, the Service Center provides extensive management and non- management training and coordinates all labor negotiations. II - 8

On November 7, 1978, the voters of the City approved an amendment to the City Charter, which prohibits strikes by City employees, provides for the automatic dismissal of any striking employee and allows for their reinstatement only as "new probationary employees." In addition, an impasse procedure has been developed to resolve agreement renewal disputes between the City and employee organizations. This procedure provides for a three-person fact-finding committee made up of City Council members. Council members of any impasse committee are chosen by lot. The committee evaluates the economic positions at impasse and recommends the last best offer total package of either union or the City. The full council may accept the committee's recommendation or overturn it and accept the position of the other party. In addition to the 1978 changes, labor negotiations, in accordance with State law, are conducted in open meetings.

BUDGETING AND APPROPRIATIONS PROCEDURES The financial plans of the City are included in the annual capital and operating budgets. These budgets project all receipts and disbursements, and present the level of governmental services and the method of distributing costs to the various segments of the community through the collection of taxes and fees. The Council has final responsibility for approving certain program and fiscal policies, approving the annual Operating Budget and the Capital Improvement Program, and setting the tax rate and fees for services. The Administration is responsible for proposing programs and recommending funding levels to the Council and for implementing service programs in accordance with established goals and objectives.

OPERATING BUDGET. The Annual Operating Budget is submitted to the Council approximately 90 days prior to the end of the fiscal year. At least 30 days prior to the end of the fiscal year, the City Council is expected to approve the Operating Budget. No later than the passage of the Operating Budget Ordinance, the Council must enact such revenue measures required to balance the budget. GFOA presented a Certificate of Recognition for Budget Preparation to the City for its operating budget for the fiscal years beginning July 1, 2004 through June 30, 2005. The Distinguished Budget Presentation Award is evidence that the City's budget documents are of the highest quality that meets the needs of decision-makers and citizens. The City will continue to submit its budget to the GFOA's budget awards program.

CAPITAL BUDGET. The Capital Budget and Capital Improvement Program are prepared annually to detail the capital expenditures planned for each of the next five fiscal years. The total costs of each project and the sources of funding (local, state, federal and private) required to finance each project are estimated. The Capital Improvement Program is prepared and recommended by the Mayor and presented to the Council for adoption. The Capital Improvement Program authorizes in detail the capital expenditures to be made or incurred in the next five fiscal years and is then adopted by the Council concurrently with the Capital Budget. Additional authorizations for each capital project in the Capital Budget must precede the expenditures of construction funds. The Capital Budget must be in full conformity with that part of the Capital Improvement Program applicable to the fiscal year that it covers. The timetable for approval of the Capital Budget and Capital Improvement Program closely parallels that of the Operating Budget.

RETIREMENT SYSTEM The City maintains a retirement system that covers approximately 5,526 current City employees and 4,044 retirees as of June 30, 2007. General City employees only are covered under this system. A small portion of the hourly rate employees are covered under the Social Security program instead of the retirement systems. In addition, separate retirement systems are operated by the Memphis Board of Education, MLGW, Memphis-Shelby County Airport Authority, and the Memphis Libraries. For prudent management of the total assets of the retirement funds, the services of several professional investment managers are utilized. In addition, a small part of each fund is invested in short-term obligations by the City for the payment of benefits to the retirees. Semi-annual meetings are held with each of the managers to review and assess investment objectives and performance with the overall assistance of a fund advisor who compiles the data on each manager’s activities. City management and the Pension Board closely observe the future costs of both benefit improvements and changes in retirement trends of employees. Recommendations of actuaries are carefully considered and appropriate measures are taken to insure that the pension plans are actuarially sound. The City has recognized its responsibility to employees and future administrations by adequately funding the benefit costs. See Notes on Pension and Retirement Plans in the June 30, 2007 General Purpose Financial Statements.

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FINANCIAL INFORMATION

PROPERTY TAX The Property Tax (Real Estate and Personal Property) provides the City with a major source of revenue for a variety of functions. The Property Tax levy is without legal limit. The City Council reserves and allocates a portion of the property tax rate among general government, public education and the payment of the debt service on obligations which are not paid from various enterprise funds. The Shelby County Assessor of Property assesses all real estate and personal property, including some utilities not under the jurisdiction of the Tennessee Regulatory Authority (TRA). The TRA assesses some intangible personal property related to banks. The City completed a full reappraisal of all properties in the City for the 2005 tax year (collections in FY06). The appraised values approximate market value. This ratio of assessment in the Property Assessment and Classification Act of 1993, provides for assessing farm and residential real property at 25% of the current market value, commercial and industrial real property at 40% of the current market value, personal property at 30% of the current market value and real and personal property of public utilities at 55% of the current value with corresponding reductions in tax rates. New appraisal changes in real estate will occur only when improvements are made to existing structures or demolition of existing structures occur or when improvements are made on vacant property. Reappraisal does not occur based on property sales. Personal property assessments are made annually based upon returns submitted by the taxpayers and are, therefore, maintained at current market value. The City plans to reappraise all real estate property and revise all assessments every four years in the future based on current market values. Public Utilities are assessed by the TRA and are automatically reviewed by the State Board of Equalization; these assessments include real estate and personal property on the basis of location and usage. Currently, under a ruling by the State Board of Equalization, the appraised value of public utilities is being reduced by multiplying it by a factor computed by dividing the appraised valuation for tax purposes of all real property within the City by the current market value. The assessed value is based on this reduced appraised value.

OTHER SOURCES OF REVENUE General Sales Tax

The general (local) sales tax is currently levied at a rate of 2.25% on the first $1,600 of a sale of any single item.

Beer Sales Tax

This tax is 17% on the wholesale price of beer containing not more than 5% alcohol. It is collected by the wholesaler and remitted monthly, less collection fees to the City Treasurer.

Alcoholic Beverage Tax

This tax is a 5% inspection fee charged to retailers on the sale of alcoholic beverages. The fee is based on the wholesale price, collected by the wholesaler, and is remitted monthly, less collection fees to the City Treasurer.

Telephone Franchise Taxes

This tax, which is paid by Bell South Telecommunications, is a 5% tax on local service and intrastate long distance calls. Currently, a dispute exists between the City and Bell South Telecommunications and the matter is in litigation. Pending resolution of the litigation the City has ceased collection of the 5% tax.

Hotel/Motel Occupancy Tax

This tax is 1.7% of gross occupancy revenues, not including revenues from residents of 30 or more continuous days. There is a 2% credit if payment is made on or before the 20th of each month and a 10% year interest and 1% month penalty if delinquent.

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State Tax Revenues (Local Share)

The City receives funds from the State of Tennessee which are briefly described below: (1) State Income Tax – This is a 6% tax on income from dividends on stocks or interest on certain bonds. 3/8 of the revenue is distributed to the local government by situs. (2) State Sales Tax – A 7% sales tax is imposed on the gross proceeds from retail sale or use of tangible personal property and some services. Over 60% of total state shared revenues that the City receives is derived from this source.

(3) State Gasoline Taxes – The City receives a pro-rata share of the State Gasoline Tax of $.20 per gallon and the State Motor Vehicle Tax (Diesel) of $.17 per gallon that is earmarked for Tennessee municipalities. Allocation among Tennessee cities is determined on a per capita basis. These funds are used for street maintenance and for debt service on bond proceeds used for street capital improvement projects. (4) Other State Taxes – The City also receives State revenues derived from the Beer Tax, Alcoholic Beverage Tax, Liquor by the Drink Tax, TVA in Lieu-of-Tax Payments, and Bank Excise Tax.

PROPERTY TAX RATE DISTRIBUTION 2003 2004 2005 2006 2007 General Government $ 1.68 $ 1.68 $ 1.68 $ 1.91 $ 1.91 Schools 0.86 0.86 0.86 0.83 0.83 Debt Service Fund 0.69 0.69 0.69 0.69 0.69 Total Tax Rate $ 3.23 $ 3.23 $ 3.23 $ 3.43 $ 3.43

Source: 2007 Comprehensive Annual Financial Report, Pg. 78

TEN LARGEST TAXPAYERS OF MEMPHIS

2007 Percentage of Taxable Total Taxable Assessed Assessed Value Value

Federal Express $ 440,530,252 3.87% Bell South Telecommunications 119,670,334 1.05 Wolfchase Galleria, LTD 53,210,400 0.47 AMISUB (St. Francis Hospital) Inc. 38,720,000 0.34 Pinnacle Airlines, Inc. 34,248,416 0.30 Cingular Wireless 27,116,125 0.24 Northwest Airlines, Inc. 23,947,089 0.21 Cargill 21,992,070 0.19 Shopping Center Associates 21,564,320 0.19 DRA CRT Germantown Center LP 19,974,560 0.18

Total Assessed Valuation of Top 10 Taxpayers 800,973,566 7.04 Balance of Assessed Valuation 10,568,818,859 92.96 $ 11,369,792,425 100.00%

Source: 2007 Comprehensive Annual Financial Report, Exhibit X-8, Pg. 140

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PROPERTY TAX LEVIES AND COLLECTIONS

Amounts are expressed in thousands of dollars.

Total Tax Current Percent Delinquent Total Collections as Outstanding Delinquent as Year Levy Collections Collected Collections Collections Percent of Levy Delinquent Percent of Levy 1998 186,904 175,353 93.82 6,398 181,751 97.24 20,025 10.71 1999 210,701 193,905 92.03 8,236 202,141 95.94 19,460 9.24 2000 234,064 213,875 91.37 4,468 218,343 93.28 21,030 8.98 2001 284,215 260,939 91.81 10,691 271,630 95.57 22,694 7.98 2002 314,191 293,022 93.26 11,780 304,802 97.01 26,273 8.36 2003 309,293 286,509 92.63 14,156 300,666 97.21 26,940 8.71 2004 325,696 296,247 90.96 16,495 312,742 96.02 29,109 8.94 2005 324,341 300,717 92.72 15,067 315,784 97.36 30,283 9.34 2006 380,947 356,887 93.68 15,836 372,723 97.84 30,367 7.97 2007 384,844 361,359 93.90 16,264 377,623 98.12 30,620 7.96

Source: 2007 Comprehensive Annual Financial Report, Exhibit X-9, Pg. 141 ______

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VALUES OF TAXABLE PROPERTY

Amounts are expressed in millions of dollars.

Real Property Personal Property Real & Personal Farm & Residential Commercial & Industrial Commercial & Industrial Utilities & Carriers Total Fiscal Assessed Actual Assessed Actual Assessed Actual Assessed Actual Assessed Actual Year Value Value Value Value Value Value Value Value Value Value 1998 3,037 12,147 3,215 8,177 824 2,744 595 1,082 7,672 24,150 1999 3,264 13,055 3,594 9,131 1,023 3,404 719 1,307 8,600 26,897 2000 3,290 13,158 3,392 8,632 1,024 3,408 751 1,366 8,456 26,565 2001 3,841 15,363 4,077 10,360 1,004 3,340 777 1,413 9,698 30,475 2002 3,825 15,301 3,980 10,112 1,055 3,512 904 1,644 9,765 30,570 2003 4,197 16,787 4,106 10,437 1,052 3,502 847 1,540 10,201 32,265 2004 4,240 16,458 3,972 10,097 998 3,322 784 1,425 9,993 31,802 2005 4,870 19,479 4,372 11,119 1,030 3,430 837 1,522 11,109 35,550 2006 4,912 19,648 4,279 10,884 1,043 3,475 922 1,676 11,156 35,683 2007

Source: Comprehensive Annual Financial Report, June 30, 2007.

COMPENSATED ABSENCE LIABILITIES GASB Statement 16 requires recognition of the liability for compensated absences that has been earned and is reasonably expected to be paid to existing employees. The City of Memphis has recognized the non-current portion of this liability for general City employees in its Statement of General Long-Term Debt Account Group in the amount of $76,910,000 as of June 30, 2007.

DEBT SERVICE AS A PERCENTAGE OF TOTAL EXPENDITURES (Years Ended June 30) (In Thousands of Dollars)

2003 2004 2005 2006 2007 Total General Fund Expenditures (1) $ 490,999 $ 534,241 $ 522,212 $ 514,403 $ 593,079

Total G. O. Debt Service 80,599 91,102 88,665 85,363 82,481 Net Debt Service 75,103 86,276 82,937 80,262 77,545

Total Debt Service to Expenditures 16.42% 17.05% 16.98% 16.59% 13.91% Net Debt Service to Expenditures 15.30% 16.15% 15.88% 15.60% 13.07%

______(1) Includes other uses.

BOND AUTHORIZATION Bonds are authorized on behalf of the City by an initial resolution of the City Council that requires a simple majority (subject to the Mayor’s veto power). The initial resolution must be published one time in a newspaper of general circulation in the City. Unless 10% of the registered voters of the City protest the issuance of the Bonds within twenty days of publication, the Bonds may be issued as authorized. Refunding Bonds are authorized to be issued pursuant to a Resolution of the Council, subject to prior approval by the State Director of Local Finance.

SHORT TERM BORROWING Under the provisions of the Tennessee Code Annotated, municipalities in Tennessee are authorized through their respective governing bodies, upon approval by the State Director of Local Finance, to issue interest bearing bond anticipation notes and capital notes for all municipal purposes for which general obligation bonds can be legally authorized and issued. The City may issue other short-term obligations, which may include tax or revenue anticipation notes in amounts not to exceed 60 percent of the amount appropriated for which such notes are being issued.

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DEBT LIMIT Tennessee Code Annotated provides that bonds may be issued by a municipality without regard to any limit on indebtedness.

PRINCIPAL OF OUTSTANDING GENERAL OBLIGATION DEBT (As of June 30) (In Thousands of Dollars)

2003 2004 2005 2006 2007 Long-Term Bonds: General purpose $ 812,888 $ 769,133 $ 841,494 $ 879,264 $ 941,732 School 18,316 16,679 15,621 14,512 13,350 Airport 22,615 19,915 17,140 14,090 10,855 State Loans for Sewer 2,302 1,108 192 - - Convention Center 2,708 2,473 2,226 1,963 1,684 Port Commission 6,634 6,160 5,831 5,486 5,124 Notes Payable 3,143 2,357 1,571 786 - Total Long-Term Bonds 891,304 817,825 884,075 916,101 972,744

Short-Term Commitments: Capital Outlay Notes - - - - - Capital Lease Obligations 10,053 4,215 2,626 970 - Bond Anticipation Notes 25,000 125,000 125,000 114,000 70,000 Total Short Term Debt 35,053 129,215 127,626 114,970 70,000

Total General Obligation Indebtedness $ 903,659 $ 947,040 $ 1,011,701 $ 1,031,071 $ 1,042,744

Source: 2007Comprehensive Annual Financial Report, Exhibit F-4, Pg. 126

DEBT RATIO TRENDS General Bonded Debt To Appraised and Assessed Values And Bonded Debt Per Capita (Years Ended June 30) 2003 2004 2005 2006 2007

Estimated population(1) 673,120 671,929 672,277 640,393 640,393

Appraised Value of Property $32,265,194 $31,801,586 $35,550,325 $35,682,731 $36,554,763 Assessed Value of Property 10,200,919 9,992,954 11,108,644 11,156,092 11,369,792

Total GO Debt ($Thousands) 903,659 947,040 1,011,701 1,031,071 1,042,744 Self-supporting Debt 34,259 29,656 25,386 21,539 17,663 Net GO Debt 869,400 917,384 986,315 1,009,532 1,025,081 Bonded Debt per Capita Total Debt $1,342 $1,409 $1,505 $1,610 $1,628 Net Debt $1,292 $1,385 $1,467 $1,576 $1,601 Bonded Debt to Appraised Value Total Debt 2.80% 2.98% 2.85% 2.89% 2.85% Net Debt 2.69% 2.88% 2.77% 2.83% 2.80% Bonded Debt to Assessed Value Total Debt 8.86% 9.48% 9.11% 9.24% 9.17% Net Debt 8.52% 9.18% 8.88% 9.05% 9.02%

(1) Source: U.S. Census Bureau Annual Estimates of the Population for Incorporated Places over 100,000; Comprehensive Annual Financial Report, Exhibit X-12, pg. 144.

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MAJOR FUNDS SUMMARIES

GENERAL FUND Revenues, Expenditures, and Changes in Fund Balance (1) (Years Ended June 30) (In Thousands of Dollars)

2003 2004 2005 2006 2007(2) Revenues and Other Sources Local Taxes $ 344,873 $ 359,271 $ 362,206 $ 361,395 $ 366,383 State Taxes 49,899 46,641 49,711 57,353 64,545 Licenses and Permits 11,921 12,257 12,059 12,478 11,918 Fines and Forfeitures 11,023 10,772 10,980 9,224 8,838 Charges for Services 17,655 19,133 19,072 20,719 23,644 Investment Income 1,135 553 384 1,842 5,149 Federal and State Grants 1,277 10,708 3,731 2,598 1,709 Other Revenues and Other Sources 22,716 17,953 16,950 13,756 14,292 Operating Transfers In 27,276 21,571 21,929 67,766 56,068 Total Revenues and Other Sources 487,775 498,859 497,022 547,131 552,546

Expenditures and Other Uses General Government 107,191 121,943 118,397 116,614 115,356 Public Safety 279,558 293,611 306,968 317,565 319,906 Community Services 62,341 64,259 57,570 51,551 53,757 Transportation & Environment 18,857 19,614 17,143 18,197 5,769 Operating Transfers Out 23,052 34,814 22,134 10,476 13,177 Total Expenditures and Other Uses 490,999 534,241 522,212 514,403 507,965

Revenues and Other Sources Over (Under) Expenditures and Other Uses (3,224) (35,382) (25,190) 32,728 44,581

Fund Balance – Beginning of Period 65,008 61,784 26,402 1,212 38,737

Fund Balance – End of Period $ 61,784 $ 26,402 $ 1,212 $ 33,940 $83,318

(1) See Notes to Summary Statements. (2) 2007 Comprehensive Annual Financial Report, Exhibit A-5, Pg. 35

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SPECIAL REVENUE FUNDS Revenues, Expenditures and Changes in Fund Balances(1) (Years Ended June 30) (In Thousands of Dollars)

2003 2004 2005 2006 2007 Revenues and Other Sources State Taxes (Local Share) $ 21,662 $ 22,165 $ 25,730 $ 26,249 $ 28,009 Local Taxes 4,827 5,220 5,964 3,806 3,381 Local Taxes – Education 79,590 83,974 85,446 91,297 93,108 Hotel/Motel Tax 3,206 3,313 3,541 4,003 4,210 Fines and Forfeitures 2,095 1,802 2,659 3,785 4,584 Charges for Services 22,450 22,136 22,067 46,222 48,663 Investment Income 98 33 19 179 421 Federal Grants 40,738 46,155 39,024 32,614 39,964 State Grants 6,336 18,901 8,739 3,173 3,602 Other Revenues and Other Sources 5,463 4,262 3,552 153,557 141,579 Operating Transfers In 21,201 32,619 23,368 9,198 9,099 Total Revenues and Other Sources 207,666 240,580 220,109 374,083 376,620

Expenditures and Other Uses General Government 41,864 36,793 30,123 24,822 26,185 Public Safety 6,693 3,594 2,373 2,625 3,785 Education 79,590 83,974 85,446 90,946 91,952 Community Service 15,368 40,325 34,098 28,478 37,647 Transportation 43,029 51,512 43,047 46,992 62,430 Other Expenditures and Other Uses - - - 179,576 143,204 Operating Transfers Out 21,882 22,598 24,472 26,591 8,641 Total Expenditures and Other Uses 208,426 238,796 219,559 400,030 373,844

Excess of Revenues and Other Sources Over (Under) Expenditures and Other Uses (760) 1,784 550 (25,947) 2,776

Fund Balance – Beginning of Period (5,782) (6,542) (4,758) (3,905) (27,977) Fund Balance – End of Period $ 6,542 $ (4,758) $ (4,208) $ (29,852) $ (25,201)

(1) See Notes to Summary Statements on page II-19.

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DEBT SERVICE FUND Revenues, Expenditures, and Changes in Fund Balance (1) (Years Ended June 30) (In Thousands of Dollars)

2003 2004 2005 2006 2007 Revenues and Other Sources Property Taxes $ 64,411 $ 68,177 $ 68,947 $ 76,547 $ 77,410 Hotel-Motel Tax 393 393 395 396 397 Investment Income 946 634 451 1,053 1,841 Intergovernmental: Memphis-Shelby County Airport Authority 3,496 3,547 3,573 3,791 3,860 Memphis-Shelby County Port Commission 451 473 329 345 363 Memphis Area Transit Authority - - - 1,710 - Board of Education 6,300 6,314 6,325 6,338 6348 Other Enterprise Funds - - - - - Other Revenues and Other Sources 7,570 16,343 10,658 22,211 18,091 Proceeds of Refunding Bonds 24,413 36,444 313,094 40,800 96,151 Total Revenues and Other Sources 107,980 132,325 403,772 153,191 204,461

Expenditures and Other Uses Redemption of Serial Bonds & Notes 43,341 50,792 52,385 45,260 36,528 Interest 37,258 40,310 37,065 43,338 46,738 Payment of refunded bonds 24,257 36,343 310,290 40,385 95,172 Other 8,640 4,239 9,908 1,832 2,648 Total Expenditures and Other Uses 113,496 131,684 409,648 130,815 181,086

Revenues and Other Sources Over (Under) Expenditures and Other Uses (5,516) 641 (5,876) 22,376 23,375

Fund Balance – Beginning of Period 18,793 13,277 13,918 8,042 30,418

Fund Balance – End of Period $ 13,277 $ 13,918 $ 8,042 $ 30,418 $ 53,793

(1) See Notes to Summary Statements on page II-19.

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CAPITAL PROJECTS FUND Summary of Revenues, Expenditures, and Changes in Fund Balances (1) (Years Ended June 30) (In Thousands of Dollars)

2003 2004 2005 (2) 2006 2007 Revenues and Other Sources Property Taxes - - - $ 351 $ 355 Federal and State Grants $ 2,414 $ 195 $ 571 $ 779 $ 667 Investment Income 1 1 1 - - Intergov. & Other Revenues 1,971 1,713 3,527 715 534 Operating Transfers In 337 18 15 6 - Financing Proceeds 100,763 100,000 234,337 149,845 137,416 Total Revenues and Other Sources 105,486 101,927 238,451 151,696 138,972

Expenditures and Other Uses Projects and Issuance costs 98,019 91,161 147,503 99,576 63,204 Retirement of refunded debt obligation - - 100,000 80,000 80,000 Operating Transfer Out - 19 - - - Total Expenditures and Other Uses 98,019 91,180 247,503 179,576 143,204

Revenue and Other Sources Over (Under) Expenditures and Other Uses 7,467 10,747 (9,052) (27,880) (4,232)

Fund Balance – Beginning of Period 1,193 8,660 9,355 303 (27,577)

Fund Balance – End of Period $ 8,660 $ 19,407 $__303 $ (27,557) $ (31,809)

(1) See Notes to Summary Statements. (2) The difference in the 2004 ending fund balance and the 2005 beginning fund balance is result of an adjustment made to prior year assets of (1,843) and prior year revenue of (8,209).

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SEWER FUND

Summary of Revenues, Expenses, and Changes in Fund Equity/Net Assets(1) (Years Ended June 30) (In Thousands of Dollars)

2003 2004 2005 2006 2007 Operating Revenues Sewer Service Fees $ 34,773 $ 35,722 $ 46,909 $ 48,670 $ 52,543

Operating Expenses - Other Than Depreciation and Amortization 33,690 31,038 33,495 30,783 30,907 Depreciation on Assets - Acquired with Own Funds 9,874 9,235 11,678 12,119 12,571 43,564 40,273 45,173 42,902 43,478

Operating Income (Loss) (8,791) (4,551) 1,736 5,768 9,065

Non-Operating Revenues Interest on Investments 937 140 21 1,515 1,570 Other 4,039 7,417 5,266 5,898 3,286 4,976 7,557 5,287 7,413 4,856

Non-Operating Expenses Interest on State Loan 135 79 29 5 - Interest on Bonded Debt 4,856 4,862 5,475 6,192 6,052 Loss on Sale of Capital Assets 1,723 - - - - Transfer to Other Funds 1,300 1,300 1,300 5,137 5,909 8,014 6,241 6,804 11,334 11,961

Net Income (Loss) (11,829) (3,235) 219 1,847 1,960

Fund Equity / Net Assets – Beginning of Period 224,358 212,529 209,294 209,513 211,360

Fund Equity / Net Assets – End of Period $ 212,529 $ 209,294 $ 209,513 $ 211,360 $ 213,320

(1) See Notes to Summary Statements.

NOTES TO SUMMARY STATEMENTS Reference is made to the notes to the audited financial statements included herein of certain funds of the City of Memphis for a summary of accounting policies of the General Fund, Special Revenue Funds, Debt Service Fund, and Capital Projects Fund. See Note 1 of the Notes to the 2007 audited general purpose financial statements for a complete definition of the reporting entity. 1. Independent auditors have not examined summary statements.

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ECONOMIC AND DEMOGRAPHIC INFORMATION

POPULATION TRENDS HISTORICAL POPULATION 1970-2007 Memphis Shelby State of United MSA (1) County Tennessee States 1970 856,795 722,111 3,926,018 205,052,174 1980 938,777 777,113 4,591,120 227,224,681 1990 1,007,306 826,330 4,877,203 249,464,396 2000 1,095,327 897,472 5,689,283 281,421,906 2007 1,280,553 910,100 6,156,719 301,621,157 ______Source: Bureau of the Census (1) Metropolitan Statistical Area comprising Fayette, Shelby, and Tipton Counties, Tennessee, Crittenden County, Arkansas, and DeSoto County, Mississippi.

INCOME AND BUYING INCOME PER CAPITA PERSONAL INCOME: SHELBY COUNTY, SOUTHEAST REGION AND UNITED STATES 2003 2004 2005 2006 Shelby County (1) $ 33,549 $ 34,878 $ 36,160 - Southeast Region (2) 28,470 29,912 31,088 $ 31,558 United States 31,459 33,090 34,471 36,307 ______Source: U. S. Bureau of Economic Analysis. (1) 2006 County data unavailable. (2) Southeast Region includes Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia.

NUMBER OF FAMILIES BY INCOME RANGE IN MEMPHIS Number of Families Percentage of Families 1980 1990 2000 1980 1990 2000 Under $10,000 47,446 26,982 18,278 28.86% 17.42% 11.40% $10,000 - $14,999 24,919 14,745 10,808 15.16 9.52 6.80 $15,000 - $24,999 44,843 29,417 22,440 27.28 18.99 14.00 $25,000 - $49,999 39,570 52,407 49,943 24.07 33.84 31.20 $50,000 and over 7,623 31,330 58,580 4.63 20.23 36.60 Total 164,401 154,881 160,049 100.00% 100.00% 100.00% ______Source: U.S. Bureau of the Census.

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2004 PERCENTAGE OF HOUSEHOLDS BY EFFECTIVE BUYING INCOME City of Shelby State of United Memphis County Tennessee States $20,000 - $34,999 25.8% 22.2% 24.1% 22.5% $35,000 - $49,999 18.0 17.6 19.0 19.3 $50,000 and over 26.2 36.6 31.9 36.7 Median Household EBI $31,502 $38,297 $35,645 $39,324 ______Source: Sales & Marketing Management Magazine, Survey of Buying Power, September 2005.

EMPLOYMENT

LABOR FORCE TRENDS Persons in Shelby County (000’s) Unemployment Rate Shelby Employed Unemployed County Tennessee USA 1997 409.3 20.0 4.7 5.4 4.9 1998 421.0 16.4 3.8 4.2 4.5 1999 428.6 19.7 3.8 4.0 4.2 2000 423.9 17.3 3.9 4.0 4.0 2001 419.2 19.0 4.4 4.6 4.7 2002 413.7 23.3 5.3 5.2 5.8 2003 411.7 26.0 5.9 5.5 6.0 2004 407.7 26.7 6.2 5.4 5.5 2005 404.6 27.7 6.4 5.6 5.1 2006 418.1 30.1 6.7 5.8 4.6 2007 427.4 22.3 5.0 5.2 4.6 ______Source: Tennessee Department of Employment Security website www.state.tn.us/labor-wtd/laborfigures.

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PERCENTAGE OF PERSONS EMPLOYED BY MAJOR INDUSTRY MEMPHIS MSA, STATE AND UNITED STATES

2002 2003 2004 2005 2006 Total, All Industries (In thousands) 613.1 616.7 616.4 626.2 637.5 In Percentages: Construction and Mining 4.2% 4.1% 4.3% 4.3% 4.3 Manufacturing 9.0 8.7 8.6 8.5 8.5 Transportation and Public Utilities 10.2 10.3 10.1 10.1 10.1 Trade (Wholesale & Retail) 17.5 17.4 17.4 17.7 17.3 Information 1.6 1.6 1.4 1.3 1.2 Financial Activities 5.5 5.3 5.4 5.2 5.2 Services 37.8 38.0 38.3 38.4 39.6 Government 14.4 14.5 14.6 14.4 13.8

2002 2003 2004 2005 2006 Total, All Industries (In thousands) 2,664.4 2,662.7 2,701.1 2,724.8 2,789.9 In Percentages: Construction and Mining 4.5% 4.5% 4.5% 4.5% 4.9 Manufacturing 16.1 15.5 15.2 15.1 14.0 Transportation and Public Utilities 5.2 5.2 5.2 5.1 5.3 Trade (Wholesale & Retail) 16.5 16.5 16.6 16.7 16.6 Information 2.0 1.9 1.8 1.8 1.8 Financial Activities 5.2 5.3 5.3 5.3 5.1 Services 35.2 35.6 36.1 36.3 37.3 Government 15.4 15.4 15.3 15.2 15.0

2002 2003 2004 2005 2006 Total, All Industries (In thousands) 130,341.0 129,999.0 131,480.0 133,631.0 136,987.5 In Percentages: Construction and Mining 5.6% 5.6% 5.7% 5.9% 6.1 Manufacturing 11.7 11.2 10.9 10.7 10.2 Transportation and Public Utilities 3.7 3.7 3.7 3.7 3.7 Trade (Wholesale & Retail) 15.9 15.8 15.7 15.6 15.6 Information 2.6 2.5 2.4 2.4 2.2 Financial Activities 6.0 6.1 6.1 6.2 6.1 Services 38.0 38.6 39.0 39.3 40.0 Government 16.5 16.6 16.4 16.3 16.1

Source: U.S. Bureau of Labor Statistics Data

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LARGEST EMPLOYERS

LARGEST EMPLOYERS The following table presents employers with 1,500 or more employees from all sectors in the metropolitan area.

Local Company Name Employees Primary Business/ Local Function Federal Express Corporation 30,000 Air Courier Services Memphis City Schools 16,000 Elementary & Secondary Schools United States Government 14,800 General Government, Not Elsewhere Classified Methodist Healthcare 10,000 Hospital Baptist Memorial Healthcare Corp. 8,000 Hospital Shelby County Government 7,183 Executive Offices Memphis City Government 6,680 Executive Offices Wal-Mart Stores, Inc. 6,500 Miscellaneous General Merchandise Naval Support Activity Mid-South 6,500 Nonclassificable Tennessee State Government 5,247 General Government, NEC Shelby County Schools 5,014 Elementary & Secondary Schools Park Place Entertainment 4,057 Casinos & Hotel Resorts University of Tennessee, Memphis 4,000 Colleges & Universities Internal Revenue Service 3,500 Public Taxation Kroger Delta Marketing 3,500 Grocery Stores United Postal Service 3,500 Postal Services First Tennessee Bank 3,287 Bank International Paper 3,200 Printing & Writing Paper St. Jude Children's Research Hospital 3,000 Specialty Hospital University of Memphis 2,800 Colleges & Universities Horseshoe Casino & Hotel 2,679 Casino & Hotel Resort Memphis Light, Gas & Water 2,634 Utilities Catholic Diocese of Memphis 2,500 Religious Organizations Century Management Inc. 2,500 Fast Food Restaurants Desoto County School System 2,500 Elementary and Secondary Schools United Parcel Service 2,500 Courier Services Northwest Airlines 2,400 Air Transportation, Scheduled Swift Transportation 2,100 Trucking Companies Harrah’s Entertainment, Inc. 2,100 Casino AutoZone, Inc. 2,000 Auto Supply Stores Regional Medical Center (The Med) 2,000 General Medical & Surgical Hospital St. Francis Hospital 2,000 Hospital Veterans' Affairs Medical Center 2,000 Hospital UT Medical Group, Inc. 2,000 Offices & Clinics of Doctors of Medicine Williams-Sonoma 1,800 Specialty Home Products Valenti Mid-South Management, LLC 1,800 Fast Food Places Gold Strike Casino Resort 1,600 Casino Tipton County Board of Public Education 1,520 Elementary and Secondary Schools Regions Financial Corporation 1,500 Bank Mirabile Investment Corporation 1,500 Fast Food Restaurants Medtronic Sotamor Danek 1,500 Orthopedic and Surgical Appliances ______Source: Memphis Chamber of Commerce March 2008.

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HOUSING AND CONSTRUCTION HOUSING UNITS Shelby County, Tennessee 1970 – 2000

Total Owner Renter Renter Vacancy Year Units Units Units Number Rate

1970 222,628 126,714 95,914 5,113 5.3% 1980 286,381 158,171 111,015 7,771 7.0% 1990 327,796 180,490 123,081 24,255 19.7% 2000 362,964 213,360 125,006 10,375 8.3% ______Source: U.S. Bureau of the Census, 1970, 1980, 1990 and 2000.

TOTAL BUILDING PERMITS

Fiscal Valuation Year Number (In $000’s) 2003 6,687 680,039 2004 7,741 680,577 2005 7,372 687,078 2006 6,632 823,813 2007 5,986 923,360 ______Source: Memphis and Shelby County Office of Construction Code Enforcement.

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FINANCIAL INSTITUTIONS MEMPHIS AREA BANKS

INSTITUTION Inside Memphis Deposits Offices Inside Market

First Tennessee Bank, N. A. 36 $ 13,173,873 Regions Bank 35 2,025,200 Suntrust Bank 27 1,331,992 Bank of America, N. A. 15 590,601 AmSouth Bank 12 497,903 Independent Bank 4 414,124 Bank of Bartlett 3 263,382 Trust One Bank 3 204,944 Financial FSB 1 194,126 Cadence Bank N.A. 3 185,393 Bancorpsouth Bank 5 146,340 First Trust Bank for Savings 1 132,819 Commercial Bank & Trust Co. 3 114,334 Tri-State Bank of Memphis 5 100,565 BankTennessee 2 82,236 Renasant Bank 1 78,526 Trustmark National Bank 4 71,667 Paragon National Bank 2 63,384 Wachovia Bank National Assn. 3 59,877 INSOUTH Bank 2 53,322 First Citizens National Bank 1 46,018 Landmark Community Bank 1 34,951 First Bank 2 23,475 Brighton Bank 1 21,045 Community Bank National Assn. 1 16,561 First Alliance Bank 1 15,312 First State Bank 1 10,553 Merchant & Farmers Bank 1 966

176 $ 19,953,489

______Source: Federal Deposit Insurance Corporation, June 30, 2006.

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THE ECONOMY

In recent years, the economy of Memphis has experienced notable success in terms of the attraction of new business and the continued growth of existing business. This success is due in part to Memphis’ unique location as a geographic center of the nation, which provides easy accessibility for distribution of products and services throughout the Unites States.

TRADE AREA Trade facilities in Memphis are extensive and serve a trade area of 76 counties, which includes all of Shelby County, with a narrow axis roughly 200 miles east and west and a longer axis paralleling the Mississippi River 300 miles north and south. This trade territory includes 13 counties in Arkansas, one county in Kentucky, 41 counties in Mississippi, two counties in Missouri, and 19 counties in Tennessee.

AGRIBUSINESS The Mid-South area, encompassing the farm rich Mississippi River Delta, is one of the richest agricultural areas in the nation. Farming is a major occupation of the region, and like the development of industrialization of the country, farming has developed into major agribusiness activities. The 203-day growing season and favorable climate encourage the production of a variety of products. The major emphasis is on cotton, soybeans and beef cattle, with additional interest in rice, corn, peaches, apples, and a variety of vegetables. Memphis is the world’s largest spot cotton market, with over 40 percent of the nation’s entire cotton crop traded here annually. In addition to being the leading cotton market, Memphis is now the nation’s second largest processor of soybeans, third largest meat processor, and third largest total food processor. Also, agricultural processors, packers, shippers, distributors, and merchants are becoming increasingly visible contributors to the growth of Memphis and its economy. Nearly every supplier of machines, equipment, chemicals, and technology to the farm and the industry levels of agribusiness utilize Memphis as a major sales and distribution center. An international agricultural market center, Agricenter International was established in 1985. The $7.7 million, 140,000 square-foot exhibition center provides a forum for manufacturers, researchers and agribusiness organizations and producers from across the country. Facilities at Agricenter include a 1,000-acre demonstration farm, both indoor and outdoor exhibition space, and an auditorium with seating capacity of 500. Agricenter is located in the eastern section of Shelby County about 30 minutes from downtown Memphis. Agricenter is a non- profit entity that operates on a management contract with the Shelby County Agricenter Commission.

TOURISM The City’s tourism industry has shown considerable growth since 1980. Among the principal reasons for the growth have been the investment of public funds into tourism development projects, the area’s music, culture and industry, and the development of casino gaming in nearby North Mississippi. Over the past few years, the City has funded a number of projects that have positively affected tourism. The redevelopment of Beale Street, famous for the birth of the Blues, has added a significant entertainment and cultural attraction. The Memphis Brooks Museum of Art continues to be a popular cultural amenity. The ongoing multi- million dollar improvements to the Memphis Zoo and Aquarium, the Liberty Bowl Memorial Stadium, Memphis Pink Palace Museum and the National Civil Rights Museum have likewise helped stimulate tourism. The City’s two single largest tourist spots draw on the area’s rich music heritage. The Beale Street Historic District is located in downtown Memphis and on an annual basis attracts approximately 2.5 million patrons, both tourists and residents. The District was developed through both government and private efforts beginning in 1983 and is on the National Register as an official historic district. Entertainment in the District focuses on the Blues which developed on Beale Street throughout the early and middle part of the preceding century. The other large music-related attraction is Graceland, the home of the late Elvis Presley. The mansion and related area is set up as a museum honoring the early rock and roll pioneer. It attracts more than 750,000 people every year, many of whom make Graceland the primary reason for their visit to the City. Much of the area’s tourism activity is focused on downtown Memphis. In 1982, the City of Memphis opened Mud Island, a park and museum devoted to the history, environment and culture of the Mississippi River. The Convention Center is downtown and hosts business and other gatherings. It has been the site of the Wonders: Memphis International Cultural Series since 1991. In 1993, the trolley system started operating on the main Street Mall with the principal purpose of shuttling visitors between various tourist and business locations located downtown.

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The National Civil Rights Museum at the Lorraine Motel officially opened in September 1991. The National Civil Rights Museum is the first comprehensive overview of the American civil rights movement in exhibit form. The museum’s goal is to instill in viewers an appreciation of the history, the struggle, and the important events and personalities in the civil rights movement. The museum houses 10,000 square feet of exhibitions, an auditorium, a courtyard for dramatic presentations, and museum offices. There are over 15,000 hotel rooms in Memphis and in the surrounding area, including the historic Peabody Hotel, the Marriott Convention Center Hotel, and the East Memphis Hilton and Holiday Inn hotels.

ECONOMIC DEVELOPMENT The City of Memphis and Shelby County have combined their development efforts into one unit under the Memphis-Shelby County Office of Planning and Development. In addition, two economic development corporations have been established under the Center City Commission that was formed in 1977. Both the City of Memphis and Shelby County Government provide moneys for the operation of the Commission. The first corporation, Center City Revenue Finance Corporation, issues mortgage revenue bonds for qualified projects and also administers a payment-in-lieu-of-taxes (PILOT) program for the center city area and the latter, Center City Development Corporation, promotes comprehensive redevelopment of the central business district. The Center City Commission is currently engaged in mobilizing resources and support for a number of other downtown projects including the renovation of several older commercial buildings. The Commission is also involved in efforts to develop residential housing in the downtown area, improved public transportation access through the area, and a range of financial incentives to developers seeking to restore, redevelop, or construct other projects that relate to the overall planning objectives. The Memphis and Shelby County Industrial Development Board promotes industrial or labor intensive development throughout Shelby County. The Memphis and Shelby County Industrial Development board administers a separate PILOT Program that promotes business expansion and industrial development throughout the County as well as the City. Applicants are encouraged to make a significant long-term commitment to the community in terms of capital investment, job creation and strength of wages. In 2005, 18 companies received tax incentives as a result of the program. In turn, these companies invested $431.7 million and committed over 3,000 new jobs. The PILOT Program awarded these companies $64.7 million dollars in tax incentives. The City of Memphis, in a unique partnership with the National Geographic Society, launched “Wonders: The Memphis International Cultural Series” in 1991. The exhibitions feature art and artifacts from France, Egypt, Turkey, the Vatican, the Soviet Union, China and Peru. They travel to about 15 cities in North America over several years, starting in Memphis. The “Wonders” series has a significant economic impact throughout Shelby County. The City will continue to host “Wonders” exhibitions every two years.

CENTRAL BUSINESS DISTRICT The Central Business District has undergone major redevelopment with both private and public investments totaling over $2.0 billion. Recommendations for downtown improvements in transportation, land use, public parks and other amenities, and neighborhood revitalization are elements in several plans prepared since 1987 and are currently in progress. Financial incentives including special incentives targeted for small developers remain in place and are available through the Center City Revenue Finance Corporation and Center City Development Corporation. The Center City Commission, formed in 1977, serves as the official partnership for downtown revitalization between local government and the private sector. The Commission serves as a coordinator of the various downtown developments, programs, and activities and also provides marketing and promotions for downtown. Management of the Mid-America Mall also falls under the jurisdiction of the Center City Commission.

RESIDENTIAL DEVELOPMENT At present there are over 10,000 households with a population of more than 23,000 persons in the downtown area and this number is projected to increase by 2,000 residents per year over the next 5 years. The occupancy rate in downtown is consistently in excess of 95% for both rental and for sale housing.

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ENTERTAINMENT/RETAIL Entertainment remains one of the strongest segments in the downtown market while retail continues to be moderate but steady. The continued revitalization of Beale Street and riverfront development, the new expansion to the National Civil Rights Museum Center, the new Peabody Entertainment and Retail Center, a 300-square foot urban entertainment center anchored by a 21-screen movie theater, and newly constructed basketball arena and sports complex known as the FedEx Forum, as well as numerous nightspots and restaurants will serve to keep the downtown area active.

OFFICE SPACE The office market in downtown has an occupancy rate of approximately 80 percent. This is slightly lower than the rate in the suburban office market and is due in part to a limited amount of Class A space. Major renovations have been approved and are proceeding that will enhance the downtown office market by providing additional Class A space in the core as well as in adjacent districts.

MEMPHIS REDBIRDS & AUTOZONE PARK The Memphis Redbirds (the AAA farm club of the St. Louis Cardinals) play at the AutoZone Park which is a state-of-the-art baseball stadium in downtown Memphis that contains 14,500 seats and two upper decks consisting of 1,500 club seats and 44 luxury suites. AutoZone Park provides seating beyond left field, and a children’s playground beyond the centerfield fence.

MEMPHIS GRIZZLIES’ BASKETBALL ARENA The construction of the FedExForum (the "Arena"), an 18,200 seat state of the art multipurpose sports, entertainment and public assembly facility with suites, loge boxes and other premium seating, was completed in September 2004. The County and City have also entered into a Memphis Arena Use and Operating Agreement with Hoops, LP, ("Hoops") owners of the Memphis Grizzlies team of the National Basketball Association, dated June 29, 2001, as amended (the "Use and Operating Agreement"), which governs the grant of rights, term of agreement, use and limitations, operating covenants, fees paid by Hoops, operating revenues and expenses and other matters relating to the operation of the Arena. Under the Use and Operating Agreement, all income and revenue received from the use, occupancy and possession of the Arena shall be the property of Hoops, and Hoops shall be responsible for all costs and expenses of occupancy, possession and operations of the Arena, including operating losses. Also, the revenues received by Hoops for naming rights shall be the property of Hoops. In addition, Hoops is required to pay rent during the term of the Use and Operating agreement in the form of a per seat rental fee on all public-paid Arena events. Hoops or any successor collections agent will collect the Seat Rental Fees from all events at the Arena ("Seat Rental Fees"). Under the terms of the Use and Operating Agreement, Hoops is obligated to pay to the County and City, a Seat Rental Fee in the amount of $1.14 per seat sold to be collected by Hoops on all sporting, entertainment, exhibition, performance and other events (including NBA pre-season, regular season and playoff games, collectively, the Home Basketball Games") at the Arena for which an admission price must be paid in order to attend such event ("Paid Arena Events"). Hoops is also obligated to pay $1.15 on all paid Home Basketball Games collected by Hoops, exhibition games involving the Team and other sporting, entertainment, exhibition and performance events related to and intended to promote the Team at the Pyramid ("Paid Franchise Events"). Under the terms of the Interlocal Agreement, as amended and restated, entered into among the County, the City and the Memphis-Shelby Sports Authority (the "Interlocal Agreement"), the County and City have pledged all Seat Rental Fees to the payment of the Bonds until the Bonds are fully paid. Pursuant to the Interlocal Agreement, in the event the Revenues pledged to the support of the Bonds shall prove to be insufficient to pay debt service on such Bonds in any bond year (ending on October 31), the County and the City, pursuant to the provisions of Section 7-67-116 of the Tennessee Code Annotated, have covenanted to timely appropriate from legally available non-ad valorem revenues, not later than October 31 of the fiscal year ending June 30 following the date of such deficit, sufficient moneys to replenish draws ("Debt Service Reserve Fund Replenishment Obligations") from the Debt Service Reserve Fund used to make scheduled debt service on the Bonds in the prior year.

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The obligation of the County and the City to replenish draws on the Debt Service Reserve Fund relating to the Bonds shall be apportioned on the following basis: 50% County, and 50% City, and shall not be joint. The maximum amount of the County's or City's Debt Service Reserve Fund Replenishment Obligation, respectively, under the Interlocal Agreement is the debt service payments on not to exceed $115,000,000 of the Authority's Bonds, which is approximately one-half (1/2) of the authorized Bonds. The obligation to restore the Debt Service Reserve Fund is not a general obligation of the County or the City. See "CONTINGENT LIABILITY" in Part I.

COOK CONVENTION CENTER EXPANSION Construction on the Memphis Cook Convention Center expansion has been completed. The $70 million expansion added nearly 80,000 square feet of new exhibit and meeting space. The facility also includes a 28,000 square-foot ballroom, a 35,000 square-foot special exhibit hall, 10 additional meeting rooms and a 2,100 seat multi- purpose performing arts center. The project officially opened January 2003.

TRANSPORTATION AND DISTRIBUTION Transportation plays a major role in the economy of the Memphis Metropolitan Statistical Area. With the Memphis International Airport (“Airport”), the Port of Memphis, seven federal highways, 15 state highways and two U.S. interstate systems (with a third under construction), the City of Memphis is truly America’s Distribution Center. More metropolitan markets can be served overnight (within 600 miles) from Memphis than any other city in the central United States. Memphis offers multiple inter-modal transportation options such as air to truck or truck to air, water to truck or rail or rail to truck. Memphis boasts the fourth busiest inland river port with enhanced inter- modal capabilities Air Service – The Memphis International Airport is the world’s largest cargo airport and the single largest economic engine in the Mid-South. The Airport has been designated as the United State’s best example of an Aerotropolis and Airport and City leaders are working to establish Memphis as “America’s Aerotropolis”. The Airport is located on a 4,300-acre site on the southern outskirts of Memphis. Six major passenger carriers serve the airport: AirTran, American, Continental, Delta, Frontier, and Northwest. Northwest uses the Airport as a major hub in its operational networks. Thirteen commuter and regional airlines also serve the airport. More than 26,000 individuals work at the Airport and include airline, Airport Authority, FAA, concessionaire and tenant employees with a total payroll of over $900,000,000. Passenger enplanements were almost 5.4 million for 2007 and aircraft movements totaled almost 375,000. The Airport is also the headquarters of FedEx Express, an all-cargo airline, specializing in rapid personalized airfreight service. All phases of transporting packages are performed by their parent, FedEx Corporation; a Fortune 500 company who’s World Headquarters are located in Memphis. In addition to FedEx Express, all major airfreight carriers provide aircraft service to Memphis. The Memphis-Shelby County Airport Authority, created in 1969 by official action of the City and County, operates the Airport. A seven-member Board of Commissioners governs the Authority. The Mayor of the City appoints the Board for seven-year terms, of which two are nominated by the Mayor of Shelby County; the Memphis City Council confirms all appointments. There are also six general aviation airports in the Memphis SMSA that provide additional facilities for private recreational and business traffic. The Airport has four runways equipped with precision instrument landing systems suitable for use by large aircraft and a surface movement guidance system allowing the Airport to operate down to a 300 feet runway visual range. The terminal building has 85 gates to accommodate passenger aircraft and includes a Federal Inspection Station for clearing international flights and associated passengers. Passenger and cargo carriers play an important role in the Memphis economy. The Authority continues to see multiple construction projects throughout the Airport. Currently, the Authority is developing the southeast area of the airfield for cargo expansion and is working with the Tennessee Air National Guard (“TnANG”) in conjunction with their relocation to this area also. The TnANG is building replacement facilities, a new aircraft parking apron and a taxiway to the parking apron with completion anticipated in the winter of 2008. In the front of the Airport, the Authority has just completed a reconfiguration of the entrance and exit roadways to the main terminal building. Additionally, construction will begin for a new parking facility north of the existing garage. Over the next three years the Federal Aviation Administration will be constructing a new air traffic control tower to be located in close proximity to the existing tower at the entrance to the Airport. The new tower will allow for continued growth of the aviation system in Memphis. The Memphis-Amsterdam connection continues to be the largest of the six international markets served from the Airport. The KLM Royal Dutch Airlines-Northwest partnership began serving this market in 1995. This flight was taken over fully by Northwest in June 2004. The number of flights has grown from three a week to daily. The daily flight assists not only passenger travel, but also aids freight companies by connecting them to a key distribution center for Europe.

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The FedEx World Hub facilities presently cover 550 acres on the airport grounds and is their primary overnight package sorting facility for the world. FedEx handles approximately 98% of all cargo at the Airport. FedEx continues to focus on improving sort capacity and on utilizing bigger, more fuel-efficient aircraft. With new aircraft on order that will enable cargo flights in excess of 6,100 miles and payload capacities of more than 170,000 pounds, the Airport’s World Runway enables FedEx to connect to every corner of the world from Memphis. FedEx just renegotiated its lease with the Memphis-Shelby County Airport Authority in 2007 to consolidate and extend the existing land lease out 30 more years. The total space leased by FedEx is 30.5 million square feet. The following table summarizes airport activity for calendar year 2007 as compared to calendar year 2006. Passengers Enplaned: Domestic International Total Movements Major Airlines 2,868,871 180,773 3,049,644 69,504 Regional/Commuter 2,312,629 - 2,312,629 127,406 Other 5,061 126 5,187 134,418

2007 Total 5,186,561 180,899 5,367,460 331,328 2006 Total 5,150,732 169,214 5,319,946 336,670

Increase (Decrease) 35,829 11,685 47,514 (5,342) Percent Increase (Decrease) 0.7% 6.91% 0.83% (1.59%)

Tons of Cargo Enplaned: Domestic International Air Mail Total Major Airlines 3,933,525 4,536,249 4,305 8,474,079 Regional/Commuter 1,295,466 - 14,515, 1,309,981 Cargo Airlines 4,206,376,628 183,453,188 5,145,797 4,394,975,613

2007 Total 4,211,605,619 187,989,437 5,164,617 4,404,759,673 2006 Total 4,061,030,391 190,546,120 10,961,835 4,262,538,346

Increase (Decrease) 150,575,228 (2,556,683) (5,797,218) 142,221,327 Percent Increase (Decrease) 3.71% (1.34%) (52.89%) 3.34%

Water - The Mississippi River ranks third in length, fourth in drainage area and fifth in volume among the world’s ten largest rivers. Reaching from the Gulf of Mexico deep into the heartlands of the United States, the Mississippi River System encompasses about 8,900 miles of inland navigable waterways. This system has also helped make Memphis a close neighbor of the agricultural Midwest and the industrial East and West Coasts. The Mississippi River is the heart of a network of inland navigable waterways in excess of 25,000 miles in length that connects with the Gulf of Mexico. The waterways also provide barge service to New Orleans and along the Gulf Intracoastal Waterway. This intracoastal waterways system of approximately 1,173 miles connects Florida and Texas and has offered Memphis’ industry unprecedented growth opportunities. In addition, regular service is available to Europe, Asia and the world via the waterway system. There is an abundance of usable industrially zoned land in Memphis, much of which is located where industry may utilize the water and the low-cost transportation of the Mississippi River. The Mississippi River provides extraordinary opportunities for the attraction of industries, especially those that rely on water transportation. Lying just off the River on McKellar Lake, President’s Island, Frank Pidgeon and Rivergate Industrial Parks are excellent industrial locations. All of them front or are near a stillwater harbor which has a minimum depth of nine feet. In terms of freight handled, Memphis is the third largest shallow draft river port in the U.S. and second largest inland shallow draft river port on the Mississippi River. The Memphis port provides favorable transportation rates for waterborne movements and excellent port facilities that interconnect with other modes of transportation. The port handles more than 17 million tons of barge driven cargo each year. The navigation channel is maintained by the U.S. Army Corps of Engineers. A minimum 9-foot depth and 300-foot width is available year round, but a 12- foot deep channel is available approximately nine months of the year. Favorable climatic conditions permit year- round availability of water transportation to the present 161 tenants of the Port of Memphis and other users of the waterways. The value of the annual flow of goods and services is approximately $680 million. A major portion of the recent tonnage increase is due to the port’s improved handling capabilities for petroleum products.

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Of the original 960 flood-free acres located on President’s Island, only 2.4 percent of the land remains available, consisting of sixteen acres of waterfront land and seven acres of back land. Plans now exist to make an additional 1,000 acres of back land available for development. The Island already has two river-rail-truck terminals, which provide excellent overland facilities for foreign and domestic water shipments. All necessary utilities and services, including U.S. Customs inspections and a Foreign Trade Zone, are available.

Total tonnage shipped through the Port of Memphis for the past years 1996 to 2005 is presented in the table below: TOTAL TONNAGE PORT OF MEMPHIS

Year Total Tonnage 1996 15,944,945 1997 18.100,000 1998 17,211,000 1999 16,811,000 2000 18,269,265 2001 16,907,000 2002 16,401,000 2003 18,191,000 2004 17,520,000 2005 17,095,000 ______Source: U.S. Department of the Army Corps of Engineers.

Two still-water harbors in the Memphis area provide shelter from the river current. Wolf River Harbor is the original harbor, located in north Memphis; and McKellar Lake is a $50 million, man-made harbor just south of the Central Business District. Public facilities include three public terminals; LASH service; roll-on, roll-off service; bulk loading facilities to barges; bulk sacking facilities; chemical fertilizer storage tanks; heavy lifts up to 100 tons (CBI Nuclear heavy lift to 1200T); two boat/barge repair facilities; and six grain elevators. Most major common carrier barge lines provide service to the Memphis Port including American Commercial Barge Lines, Federal Barge Lines, Ohio Barge Lines, Sioux City and New Orleans Barge Lines, DRAVO-Mechling Corporation, Riverway Barge Corporation, and Valley Barge Lines. Rail - Six Class One railroads operate out of Memphis with competitive freight service to all principal cities in the U.S and direct, on-line service to 35 states. Serving the Memphis area are the Norfolk Southern Railroad, Illinois Central Gulf Railroad, Burlington Northern, Seaboard System, St. Louis-Southwestern Railway Lines and the Union Pacific System. Eighteen other rail carriers maintain off-duty offices in Memphis for the development and coordination of traffic over their lines. The rail lines offer a variety of modern specialized equipment and service, especially piggyback and containerized freight. Highway - Memphis is connected to the rest of the nation by eight federal, three interstate and seven state highway systems. These highways combined with a circumferential expressway and two highway bridges crossing the Mississippi River make all parts of Memphis readily accessible to its surrounding communities. Public Transit - The Memphis Area Transit Authority (“MATA”) provides public mass transportation in Memphis, with limited service furnished in Germantown, Raleigh, Bartlett, Millington and Collierville. According to MATA officials, this fleet of 232 buses provides 53,000 trips daily. Of the 33 total bus routes, 5 are Blazer (express) routes, 7 are cross-town routes and 21 are local routes. MATA also operates a shuttle service known as the “Hustle Bus” between downtown Memphis and the Medical Center, a service initially funded by a Federal Demonstration Grant. MATA is presently operating 10 privately sponsored “showboat” buses. These theme buses operate on routes combining tourist attractions, restaurants, and shopping facilities. MATA, as with most metropolitan transit systems, has been faced with decreasing federal subsidies and rising costs. The MATA Board has responded to these pressures by a combination of increased fares and service reductions, as well as a current effort to lease excess buses to other transit authorities across the nation. Interstate Bus Lines - Continental Trailways/Greyhound Bus Lines is the major interstate bus line servicing Memphis, offering bus service from its Memphis terminal to the continental United States and Canada and supported by three smaller lines: Bridge Transit Corp., Great Southern Coaches and Gulf Transport Co.

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UTILITIES

Memphis Light, Gas and Water Division (“MLGW”) is a municipally owned utility which distributes electric power and natural gas throughout Memphis and Shelby County, and water within Memphis and certain adjacent areas. MLGW was created by an amendment to the Charter of the City by Chapter 381 of the Private Acts of the General Assembly, adopted March 9, 1939. MLGW is managed by a Board, which consists of five members nominated by the Mayor and approved by the Council for three-year terms. MLGW has control over the administration of its activities in connection with MLGW’s business affairs. It operates as three separate divisions (Electric, Gas and Water), for accounting and financial purposes. MLGW’s fiscal year is the calendar year. The Electric Division of MLGW designs, constructs, operates and maintains an electrical transmission and distribution system which serves all of Shelby County, Tennessee. The Electric Division does not generate any electric power but purchases its entire supply from the Tennessee Valley Authority (TVA) pursuant to the Power Contract. Under the Power Contract, TVA agrees to supply the amount of electric power required for service to the Electric Division’s customers and the Electric Division agrees to purchase all of its electric power from TVA. MLGW has contracts with four pipelines—Texas Gas Transmission,,Trunkline Gas Company, Panhandle Eastern Pipeline, and ANR—for delivery of natural gas. MLGW receives gas from Texas, Louisiana, the Gulf of Mexico, Canada, and the Midwest. MLGW purchases physical gas from numerous suppliers at the above referenced receipt points. Several pressures are available, which vary from 4 ounces to 650 pounds, depending on the location of the gas main. Customers are billed on the basis of the normal delivery pressure of 14.90 psi at 60 degrees Fahrenheit regardless of the delivery pressure. Memphis water is provided through an excellent artisan water supply. The water is soft bicarbonate, low in sulphate and chlorides, and contains low natural organic matter and no harmful bacteria. It is aerated, filtered, chlorinated and fluoridated at eleven combination water treatment plants and pumping stations in Memphis, each adjacent to its well field. These water plants are interconnected by a network of mains and pumping on average a total of 150 million gallons per day.

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Utility usage and customer base for electricity, gas and water for the past five years is presented in the following table: MEMPHIS LIGHT, GAS AND WATER DIVISION Use and Customer Trends (Years ended December 31)

2003 2004 2005 2006 2007 ELECTRIC DIVISION Power Use – Millions of Kilowatt Hours: Residential 5,155 5,261 5,665 5,652 5,873 Commercial 8,743 8,912 9,163 9,128 9,379 Total 13,898 14,173 14,828 14,780 15,252 System Demand – Maximum Hourly Use – Kilowatts: 3,236 3,241 3,361 3,436 3,533

Number of Customers – Thousands: Residential 354 357 361 366 368 Commercial 66 60 59 61 61 Total 420 417 420 427 429

GAS DIVISION Gas Use – Millions of Cubic Feet: Residential 21,028 18,977 19,221 17,909 17,538 Commercial 19,307 18,940 19,810 19,056 19,645 Total 40,335 37,917 39,031 36,965 37,183 System Demand – Maximum Daily Use – Billions of CF 549 480 430 460 461

Number of Customers – Thousands: Residential 284 289 292 296 297 Commercial 30 24 22 23 23 Total 314 313 314 319 320

WATER DIVISION Water Use – Millions of cubic Feet: Residential 2,685 2,693 2,863 2,920 2,995 Commercial 3,138 3,180 3,436 3,086 3,268 Total 5,823 5,873 6,299 6,006 6,263 System Demand – Maximum Hourly Rate – MGD 258 247 269 299 310

Number of Customers – Thousands: Residential 223 225 228 231 232 Commercial 24 25 24 25 26 Total 247 250 252 256 258 ______Source: Memphis Light, Gas and Water Division Note: 2007 Data Un-Audited

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EDUCATION Memphis City Schools is one of the largest school systems in the nation with over 16,733 employees. All schools are approved by the Tennessee State Department of Education. The Southern Association of Schools and Colleges accredit the secondary and elementary schools, and some junior high schools are in the process of accreditation by SACS. There are also approximately 71 private schools in Memphis and Shelby County. MEMBERSHIP AND ATTENDANCE Memphis City Schools

Average Daily Average Daily School Year Membership Attendance 1997-1998 110,536 99,678 1998-1999 111,138 101,410 1999-2000 117,795 109,795 2000-2001 115,878 107,328 2001-2002 116,974 107,504 2002-2003 117,753 108,655 2003-2004 115,702 106,323 2004-2005 117,562 108,809 2005-2006 116,393 107,735 2006-2007 113,671 105,432 ______Source: Board of Education, Memphis City Schools

Colleges and Universities in the Memphis area are: Baptist Memorial Hospital School of Nursing Memphis Christian College (The) Center for Continuing Education Memphis Theological Seminary Christian Brothers University Methodist Hospital School of Nursing Crichton College Mid-America Baptist Theological Seminary Harding College Graduate School of Rhodes College Bible and Religion Southern College of Optometry Joint University Center Southwest Tennessee Community College LeMoyne-Owen College Tennessee Technology Center at Memphis Memphis College of Arts University of Memphis Memphis Area Vocational Technical School University of Tennessee Medical Units Memphis Baptist College William R. Moore School of Technology

The University of Memphis (the “U of M”), a co-educational institution founded in 1909, is a state-supported institution with schools in Arts and Sciences, Business Administration, Education and Law. The U of M offers graduate schools of Arts and Sciences, Business, Education, Engineering and Industrial Technology. Research services provided by the U of M include the Bureau of Business and Economic Research, the Bureau of Social Research, and the Bureau of Educational Services and Research. The U of M also has a Center for Regional Development to provide counseling in industrial expansion efforts. The University of Tennessee Center for the Health Sciences is the largest and only publicly owned medical center in Tennessee. The College of Medicine graduates approximately 200 physicians each year. Included in the Center are the College of Dentistry, College of Pharmacy, College of Nursing, College of Basic Medical Sciences and a Graduate School of Medical Sciences.

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MEDICAL FACILITIES

The City of Memphis, encompassing one of the most comprehensive collections of health care centers in the nation, has 21 hospitals providing over 4,652 beds and numerous other health care facilities. There are also 34 nursing homes (with a total of approximately 4,200 beds), and 29 homes for the aged, 13 assisted care living facilities, 20 home care organizations, 22 surgery centers. The Regional Medical Center at Memphis (“The MED”) is a private not-for-profit acute care facility operating 365 beds. With more than 14,000 admissions and 140,000 outpatient visits per year, the hospital trains approximately 750 medical students, residents and fellows annually. The hospital has the only accredited skin bank in the State, the only HIV/AIDS center in the Mid-South, and the Diggs-Kraus Sickle Cell Research Center. The MED's Centers of Excellence include The Elvis Presley Memorial Trauma Center, which is the only Level 1 trauma center in the Mid-South and the third busiest in the nation; The Firefighters Regional Burn Center, the only full-service center in a 150-mile radius; The Newborn Center, the only Level IV center in West Tennessee and one of the oldest and largest newborn intensive care units in the nation; the Wound Care Center, which specializes in the treatment of chronic non-healing wounds; and High Risk Obstetrics, where more babies are born each year than in any other Memphis hospital. Baptist Memorial Health Care Corp. (“Baptist”) is the world’s largest private hospital, based on number of admissions. The University of Tennessee Medical Units located within the center provide unusual teaching opportunities that attract high level personnel from throughout the nation. Baptist has recently completed a $172.5 million expansion to its Baptist East facility, including a new heart hospital and freestanding women's hospital, the first of its kind in the MidSouth and other services. Methodist Health Systems (“Methodist”) is the largest private, not-for-profit hospital in the United States. Methodist is the healthcare provider of choice for almost 500,000 people. Methodist's health care system was cited as a national model for diversity and is included in a study by a United Nations agency. Methodist Central includes an outpatient surgery and diagnostic center as does Methodist South, which includes state-of-the-art MRI. Methodist North claims virtual reality capabilities and added 26 beds primarily to support its growing cardiology program. A professional office building houses physician offices, outpatient surgery center and a comprehensive imaging center. The emergency department has been expended and improved. In 1995, it acquired the region’s largest pediatric hospital, LeBonheur Children’s Medical Center. This 225-bed facility has a dominant market share in the pediatric healthcare market and operates clinics and outpatient facilities in various locations. HCIA and William M. Mercer named Methodist among the “Top 100 Hospitals-Benchmark for Success” in the United States. This distinction was achieved based on nine criteria that measured clinical, financial and operation performance. It is the only West Tennessee hospital to receive this designation. St. Jude Children’s Research Hospital, (“St. Jude”) was founded by the late actor, Danny Thomas. St. Jude is the world’s leading childhood cancer research center and the only institution devoted solely to the study of catastrophic childhood illnesses, with its primary focus on leukemia and solid tumors. The hospital has approximately 3,000 patients. It treats patients from across the country and throughout the Western Hemisphere, all with no charge. In 1991, St. Jude completed its first $134 million, five-year expansion-renovation program. The expanded facilities enabled the hospital to intensify research in areas of childhood cancer, blood disorders and infectious diseases and to develop a genetics research program. St. Jude also has begun a research and treatment effort against pediatric acquired immune deficiency syndrome. St. Jude is undertaking its second five-year expansion program. This program includes the construction of five new buildings and renovation of existing buildings at a cost of $1 billion. In 2003, its $36 million Good Manufacturing Practices facility was completed and will manufacture vaccines and gene therapy components for treating patients. Additionally this expansion includes an $11 million Memphis Grizzlies House with 100 rooms for patients and their families. This combination of new facilities, new equipment and expanded research has increased employment from 2,000 to near 3,700 and pushed annual operating costs to over $400 million. The adjacent UPTOWN neighborhood is currently being redeveloped to provide mixed income housing for a portion of these new workers.

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GOVERNMENT

Navy Memphis Complex at Millington - The Bureau of Naval Personnel and related commands have relocated from the Washington, D.C. area to Millington, located in north Shelby County, including the Naval Manpower Analysis Center with 200 personnel. The Defense Department located a satellite office of the Defense Finance and Accounting Service at Navy Memphis and the U.S. Army Corps of Engineers has located its Finance and Accounting Office there as well. The Department of Defense also recommended that three additional commands be relocated to Navy Memphis. These include the Naval Recruiting Command from Arlington, Virginia, the Naval Health Research Center and the Navy Personnel Research and Development Center from San Diego, California. Prior to 1995, the U.S. Navy operated a large technical training school and airfield at Millington. Those commands and personnel were relocated to several other bases outside the region following nationwide consolidations in the early and mid 1990s. During those same consolidations, the Defense Department also closed its large depot warehouse complex in Memphis. Internal Revenue Service - The Internal Revenue Service Center, one of only 10 similar facilities in the country to be designated as a computer center, customer service site, and submission processing site, was activated in 1971 and serves a 6-state area. The Center’s employment varies from approximately 2,300 to over 4,200 during the year, peaking during tax season. The Center is a 130-acre site near the Airport, which includes 11 buildings with a total of 900,000 square feet of space. The local payroll is in excess of $90 million.

LIBRARIES The City enjoys a library system with 19 branches throughout the area and an annual circulation of more than 4 million books. The Memphis Public Library system houses 1.7 million volumes. Colleges, universities, businesses, industries, and organizations maintain numerous other libraries. The $70 million Memphis Public Library and Information Center also opened the new Benjamin L. Hooks library to serve as the information hub of the Mid- South. It serves as the flagship for the 19 branches. Situated in the middle of the City, the new 330,000 square-foot facility is larger and more accessible to all residents. The Memphis Public Library is the only library in the United States with both its own radio and television station.

COMMUNICATIONS One major daily newspaper, which is circulated throughout the 76-county area, a financial daily, and many weekly publications serve Shelby County. There are six television stations in Shelby County: ABC, CBS, NBC, PBS, FOX, and two independent stations. In addition, Time Warner cable television is available. There are 16 AM, 4 noncommercial, and 16 commercial FM radio stations. BellSouth Communications and numerous other providers of long distance service operate within the City. The network provides a vast range of services and communication techniques to over 302,000 main line telephones in the area, including service to more than 295,000 households. The City serves as one of the regional post office and bulk mail distribution centers for the eleven-state Southern Postal Region. This is the headquarters for the administration of more than 7,500 post offices.

RECREATION Shelby County is famous for its duck hunting and the surrounding areas provide deer hunting, upland game hunting for squirrel, rabbit, quail, and doves, and year-round fishing for bass, crappie and pan fish. There are two state parks in Shelby County: the 12,512-acre Meeman-Shelby Forest State Park, and T.O. Fuller State Park. Chickasaw State Park with 11,000 acres and Natchez Trace State Park with 42,000 acres are nearby in West Tennessee. Audubon (373 acres), Overton (357 acres), King Riverside (340 acres), and Edmund Orgill Park (443 acres plus 160 acres undeveloped) are the County’s largest and most popular parks. The Park Commission supervises 63 playgrounds during the summer, providing 20,000 children with lunches. There are also baseball fields throughout the County, 10 publicly owned and 17 privately owned golf courses and numerous swimming, tennis, bowling and skating facilities. Shelby County is also the home of the prestigious Southwind Tournament Players Club Golf Course, home of the Federal Express St. Jude Hospital Memphis Classic Golf Tournament. There are 25 community centers in Memphis as well as a children’s theater and a hobby center, a center for the handicapped, and four senior citizens centers. Boating and water-skiing are popular activities, while facilities for other individual sports such as handball, horseback riding, or archery are also provided throughout the Shelby County area.

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Athletics of the spectator sportsmen include the Memphis Grizzlies NBA Basketball Team, FedEx St. Jude Hospital Memphis Classic Golf tournament, U.S. Kroger/St. Jude Tennis Championship National Indoor Tennis Championship, Liberty Bowl, Southern Heritage Football Classic, Memphis Redbirds AAA baseball, Memphis River Kings (Central Hockey League), U of M Tigers basketball competition, professional exhibition games, and high school tournaments, in addition to musical events and trade expositions. The Memphis Gun Club, the Germantown Charity Horse Show, and the National Bird Dog Championship provide other opportunities for the sports-minded.

MLGW WATER DIVISION PILOT The Water Division of Memphis Light, Gas and Water ("MLGW") has contracted for payments-in-lieu-of- taxes ("PILOT") with the City of Memphis. The City has pledged the PILOTs towards the financing of the FedExForum. The City collected $1.706 million in FY03, $2.5 million in FY04 and thereafter expects to collect annually $2.5 million in PILOTs until FY2028.

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APPENDIX A 2007 GENERAL PURPOSE FINANCIAL STATEMENTS

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APPENDIX B PROPOSED FORM OF OPINIONS OF CO-BOND COUNSEL

May ______, 2008

City Council City of Memphis City Hall Memphis, Tennessee

Ladies and Gentlemen:

CITY OF MEMPHIS, TENNESSEE

$______GENERAL IMPROVEMENT BONDS, SERIES 2008

At your request, as co-bond counsel to the City of Memphis, Tennessee (the “City”), we have examined into the validity of an issue of $______principal amount of General Improvement Bonds, Series 2008 (the “Bonds”) of the City. The Bonds are dated the date hereof and mature, bear interest and are subject to redemption prior to maturity as provided in the Resolution hereinafter mentioned.

The Bonds recite that they are issued under the Constitution and statutes of the State of Tennessee, including Title 9, Chapter 21 of the Tennessee Code Annotated, being the Local Government Public Obligations Act of 1986, as amended (the “Act”), and pursuant to resolutions adopted by the Council of the City on May 2, 2006, March 20, 2007, and April 15, 2008 (collectively referred to herein as the “Resolution”), for the purposes of retiring certain outstanding bond anticipation notes of the City. We have examined (i) the Constitution and statutes of the State of Tennessee, including the Act; (ii) certified copies of the Resolution and other proceedings authorizing the issuance, sale and delivery of the Bonds; (iii) the Charter of the City; (iv) such other papers, instruments, documents and proceedings as we have deemed necessary or advisable; and (v) a specimen Bond.

In our opinion, the Bonds have been authorized and issued in accordance with the Constitution and statutes of the State of Tennessee, and the Charter of the City, and constitute valid and legally binding obligations of the City, and the City has power and is obligated to levy ad valorem taxes upon all property within the City subject to taxation by the City, without limitation as to rate or amount, sufficient to provide for the payment of the principal of and interest on the Bonds as the same respectively become due and payable. It is to be understood that the rights of the holders of the Bonds and the enforceability thereof may be subject to judicial discretion, to the exercise of the sovereign police powers of the State of Tennessee and to valid bankruptcy, insolvency, reorganization, moratorium or other laws affecting the relief of debtors.

It is also our opinion that, under existing statutes and court decisions and assuming compliance with certain tax covenants described herein, interest on the Bonds is excluded from gross income for Federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and 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 the opinions in this paragraph, we have relied on certain representations, certifications of fact, and statements of reasonable expectations made by the City and others in connection with the Bonds, and have assumed compliance by the City with certain ongoing covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the Bonds from gross income under Section 103 of the Code. Under the Code, noncompliance with such requirements may cause the interest on the Bonds to be included in gross income for Federal income tax purposes retroactive to the date of issuance thereof, irrespective of the date on which such noncompliance occurs or is discovered.

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It is also our opinion that under the existing laws of the State of Tennessee, the Bonds and the interest thereon are exempt from taxation within such State, except inheritance, transfer and estate taxes and except to the extent such interest may be included within the measure of corporate privilege taxes imposed pursuant to the laws of the State of Tennessee.

We express no opinion regarding Federal, state or local income tax consequences arising with respect to the Bonds, or the ownership or disposition thereof, except as stated above, or as to the effect of any action taken or not taken in reliance upon an opinion of counsel, other than ourselves, on the exclusion from gross income for Federal income tax purposes of interest on the Bonds, or under state and local tax laws.

We undertake no responsibility for the accuracy, completeness or fairness of any official statement or other offering materials relating to the Bonds and express herein no opinion relating thereto.

This opinion letter is rendered solely with regard to the matters expressly opined on above and does not consider or extend to any documents, agreements, representations or other material of any kind not specifically opined on above. No other opinions are intended nor should they be inferred.

This opinion is issued as of the date hereof, and we assume no obligation to update, revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law, or in interpretations thereof, that may hereafter occur, or for any other reason whatsoever.

Very truly yours,

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APPENDIX C FORM OF CONTINUING DISCLOSURE CERTIFICATE

CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Certificate (the “Certificate”) dated as of ______, 2008 is executed and delivered in connection with the issuance of $______principal amount of General Improvement Bonds, Series 2008 (“Bonds”) of the City of Memphis, Tennessee (the “City”) and pursuant to resolutions adopted by the City Council of the City on July 1, 2003, May 2, 2006, March 20, 2007, and April 15, 2008 (collectively the “Resolution”). Capitalized terms used in this Certificate shall have the respective meanings specified above or in Article I hereof. Pursuant to the Resolution, the City agrees as follows:

ARTICLE I Definitions

Section 1.1. Definitions. The following terms used in this Certificate shall have the following respective meanings:

(1) “Annual Financial Information” means, collectively, (i) the financial information and operating data with respect to the City for each fiscal year of the type in the Official Statement, under the headings “Statement of Debt,” “Long-Term Debt Service Schedule,” “Total Fund Balances/Retained Earnings Trends,” “Property Tax Levies and Collections,” “Values of Taxable Property,” “Other Sources of Revenue” and “Debt Ratio Trends,” and “Appendix A to the Official Statement,” and (ii) information regarding amendments to this Certificate required pursuant to Sections 4.2(c) and (d) of this Certificate. Annual Financial Information shall include Audited Financial Statements, if available, or Unaudited Financial Statements.

The descriptions contained in clause (i) above of financial information and operating data constituting Annual Financial Information are of general categories of financial information and operating data. Where such descriptions include information that no longer can be generated because the operations to which it related have been materially changed or discontinued, a statement to that effect shall be provided in lieu of such information.

(2) “Audited Financial Statements” means the annual financial statements, if any, of the City, audited by such auditor as shall then be required or permitted by State law or the Resolution. Audited Financial Statements shall be prepared in accordance with GAAP for governmental units as prescribed by GASB; provided, however, that the City may from time to time, if required by federal or State legal requirements, modify the basis upon which its financial statements are prepared. Notice of any such modification shall be provided to each NRMSIR and the SID, and shall include a reference to the specific federal or State law or regulation describing such accounting basis.

(3) “Counsel” means Hawkins Delafield & Wood LLP, or Charles E. Carpenter, A Professional Corporation, or other nationally recognized bond counsel or counsel expert in federal securities laws, in each case acceptable to the City.

(4) “GAAP” means generally accepted accounting principles for governmental units as prescribed by the Governmental Accounting Standards Board.

(5) “Material Event” means any of the following events with respect to the Bonds, whether relating to the City or otherwise, if material:

(i) principal and interest payment delinquencies; (ii) non-payment related defaults; (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 or events affecting the tax-exempt status of the security; (vii) modifications to rights of securityholders; (viii) bond calls; (ix) defeasances; (x) release, substitution, or sale of property securing repayment of the securities; and (xi) rating changes.

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(6) “Material Event Notice” means notice of a Material Event.

(7) “MSRB” means the Municipal Securities Rulemaking Board established pursuant to the provisions of Section 15B(b)(1) of the Securities Exchange Act of 1934.

(8) “NRMSIR” means, at any time, a then-existing nationally recognized municipal securities information repository, as recognized from time to time by the SEC for the purposes referred to in the Rule. The NRMSIRs as of the date of this Certificate are Bloomberg Municipal Repository, DPC Data Inc., FT Interactive Data and Standard & Poor’s Securities Evaluations, Inc. Filing information relating to such NRMSIRs is set forth in Exhibit A hereto.

(9) “Official Statement” means the “final official statement” as defined in paragraph (f)(3) of the Rule.

(10) “Rule” means Rule 15c2-12 promulgated by the SEC under the Securities and Exchange Act of 1934 as amended (17 CFR Part 240, §240.15c2-12), as in effect on the date of this Certificate, including any official interpretations thereof issued either before or after the effective date of this Certificate which are applicable to this Certificate.

(11) “SEC” means the United States Securities and Exchange Commission.

(12) “SID” means, at any time, a then-existing state information depository, if any, as operated or designated as such by or on behalf of the State for the purposes referred to in the Rule. As of the date of this Certificate, there is no SID.

(13) “State” means the State of Tennessee.

(14) “Unaudited Financial Statements” means the same as Audited Financial Statements, except the same shall not have been audited.

ARTICLE II The Undertaking

Section 2.1. Purpose. This Certificate shall constitute a written undertaking for the benefit of the holders of the Bonds, and is being executed and delivered solely to assist the underwriters of the Bonds in complying with subsection (b)(5) of the Rule.

Section 2.2. Annual Financial Information. (a) The City shall provide Annual Financial Information for the City with respect to each fiscal year of the City, commencing with fiscal year beginning July 1, 2008, by no later than six months after the end of the respective fiscal year, to each NRMSIR and the SID.

(b) The City shall provide, in a timely manner, notice of any failure of the City to provide the Annual Financial Information by the date specified in subsection (a) above to (i) either the MSRB or each NRMSIR, and (ii) the SID.

Section 2.3. Audited Financial Statements. If not provided as part of Annual Financial Information by the dates required by Section 2.2(a) hereof, the City shall provide Audited Financial Statements, when and if available, to each NRMSIR and the SID.

Section 2.4. Notices of Material Events. (a) If a Material Event occurs, the City shall provide, in a timely manner, a Material Event Notice to (i) either the MSRB or each NRMSIR and (ii) the SID.

(b) Upon any legal defeasance of the Bonds, the City shall provide notice of such defeasance to (i) each NRMSIR or the MSRB and (ii) the SID, which notice shall state whether the Bonds to be defeased have been defeased to maturity or to redemption and the timing of such maturity or redemption.

Section 2.5. Additional Disclosure Obligations. The City acknowledges and understands that other state and federal laws, including but not limited to the Securities Act of 1933 and SEC Rule 10b-5 C-2

promulgated under the Securities Exchange Act of 1934, may apply to the City, and that under some circumstance compliance with this Certificate, without additional disclosures or other action, may not fully discharge all duties and obligations of the City under such laws.

Section 2.6. Additional Information. Nothing in this Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Certificate or any other means of communication, or including any other information in any Annual Financial Information or Material Event Notice, in addition to that which is required by this Certificate. If the City chooses to include any information in any Annual Financial Information or Material Event Notice in addition to that which is specifically required by this Certificate, the City shall have no obligation under this Certificate to update such information or include it in any future Annual Financial Information or Material Event Notice.

Section 2.7. No Previous Non-Compliance. The City represents that since July 3, 1995, it has not failed to comply in any material respect with any previous undertaking in a written contract or agreement specified in paragraph (b)(5)(i) of the Rule.

ARTICLE III Operating Rules

Section 3.1. Reference to Other Documents. It shall be sufficient for purposes of Section 2.2 hereof if the City provides Annual Financial Information by specific reference to documents (i) either (1) provided to each NRMSIR existing at the time of such reference and the SID, or (2) filed with the SEC, or (ii) if such a document is an Official Statement, available from the MSRB.

Section 3.2. Submission of Information. Annual Financial Information may be provided in one document or multiple documents, and at one time or in part from time to time.

Section 3.3. Material Event Notices. Each notice of a Material Event hereunder shall indicate that it is a notice of a Material Event and shall include the CUSIP number of the City or the CUSIP numbers of the Bonds.

Section 3.4. Filing with Certain Dissemination Agents or Conduits. Any filing under this Certificate may be made (i) solely by transmitting such filing to the Texas Municipal Advisory Council (the “MAC”) as provided at http://www.disclosuresusa.org unless the SEC has withdrawn the interpretive advice in its letter to the MAC dated September 7, 2004, or (ii) by filing the same with any dissemination agent or conduit, including any “central post office” or similar entity, assuming or charged with responsibility for accepting notices, documents or information for transmission to such NRMSIR or SID, to the extent permitted by the SEC or SEC staff or required by the SEC. For this purpose, permission shall be deemed to have been granted by the SEC staff if and to the extent the agent or conduit has received an interpretive letter, which has not been withdrawn, from the SEC staff to the effect that using the agent or conduit to transmit information to the NRMSIRs and the SID will be treated for purposes of the Rule as if such information were transmitted directly to the NRMSIRs and the SID.

Section 3.5 Transmission of Information and Notices. Unless otherwise required by law and, in the City’s sole determination, subject to technical and economic feasibility, the City shall employ such methods of information and notice transmission as shall be requested or recommended by the recipients of the City’s information and notices.

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ARTICLE IV Termination, Amendment and Enforcement

Section 4.1. Termination.

(a) The City’s obligations under this Certificate shall terminate upon legal defeasance, prior redemption or payment in full of all of the Bonds.

(b) This Certificate or any provision hereof, shall be null and void in the event that the City (1) delivers to the City an opinion of Counsel, addressed to the City, to the effect that those portions of the Rule which require the provisions of this Certificate or any of such provisions, do not or no longer apply to the Bonds, whether because such portions of the Rule are invalid, have been repealed, or otherwise, as shall be specified in such opinion, and (2) delivers copies of such opinion to each NRMSIR and the SID.

Section 4.2. Amendment.

(a) This Certificate may be amended, by written certificate of the Comptroller of the City, without the consent of the holders of the Bonds if all of the following conditions are satisfied: (1) such amendment is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law (including rules or regulations) or in interpretations thereof, or a change in the identity, nature or status of the City or the type of business conducted thereby, (2) this Certificate as so amended would have complied with the requirements of the Rule as of the date of this Certificate, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, (3) the City shall have received an opinion of Counsel addressed to the City, to the same effect as set forth in clause (2) above and further to the effect that the amendment does not materially impair the interests of the holders of the Bonds and (4) the City delivers copies of such opinion and amendment to each NRMSIR and the SID.

(b) In addition to subsection (a) above, this Certificate may be amended and any provision of this Certificate may be waived, by written certificate of the Comptroller of the City, without the consent of the holders of the Bonds, if all of the following conditions are satisfied: (1) an amendment to the Rule is adopted, or a new or modified official interpretation of the Rule is issued, after the effective date hereof which is applicable to this Certificate; (2) the City shall have received an opinion of Counsel to the effect that performance by the City under this Certificate as so amended or giving effect to such waiver, as the case may be, will not result in a violation of the Rule; and (3) the City shall have delivered copies of such opinion and amendment to each NRMSIR and the SID.

(c) In addition to subsections (a) and (b) above, this Certificate may be amended by written certificate of the Comptroller of the City, without the consent of the holders of the Bonds, if the City shall have received an opinion of Counsel, addressed to the City, to the effect that the amendment is permitted by rule, order or other official pronouncement, or is consistent with any interpretive advice or no-action positions of Staff, of the SEC.

(d) To the extent any amendment to this Certificate results in a change in the types of financial information or operating data provided pursuant to this Certificate, the first Annual Financial Information provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the change.

(e) If an amendment is made to the accounting principles to be followed in preparing financial statements, the Annual Financial Information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Such comparison shall include a qualitative and, to the extent reasonably feasible, quantitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information. Notice of any such amendment shall be provided by the City to (i) either the MSRB or each NRMSIR and (ii) the SID.

Section 4.3. Benefit; Third-Party Beneficiaries; Enforcement. (a) The provisions of this Certificate shall constitute a contract with and inure solely to the benefit of the holders from time to time of the Bonds. Beneficial owners of Bonds shall be third-party beneficiaries of this Certificate. C-4

(b) Except as provided in this subparagraph (b), the provisions of this Certificate shall create no rights in any person or entity. The obligations of the City to comply with the provisions of this Certificate shall be enforceable by the holders of the Bonds, including beneficial owners thereof. The Bond holders’ rights to enforce the provisions of this Certificate shall be limited solely to a right, by action in mandamus or for specific performance, to compel performance of the City’s obligations under this Certificate and the Resolution. In consideration of the third-party beneficiary status of beneficial owners of Bonds pursuant to subsection (a) of this Section, beneficial owners shall be deemed to be holders of Bonds for purposes of this subsection (b).

(c) Any failure by the City to perform in accordance with this Certificate shall not constitute a default under the Resolution and any rights and remedies provided by the Resolution upon the occurrence of a default shall not apply to any such failure.

(d) This Certificate shall be construed and interpreted in accordance with the laws of the State, and any suits and actions arising out of this Certificate shall be instituted in a court of competent jurisdiction in the State; provided, however, that to the extent this Certificate addresses matters of federal securities laws, including the Rule, this Certificate shall be construed in accordance with such federal securities laws and official interpretations thereof.

IN WITNESS WHEREOF, I have hereunto executed this Certificate this ____ day of May, 2008.

CITY OF MEMPHIS, TENNESSEE

By: ______Director of Finance and Administration

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EXHIBIT A to Continuing Disclosure Certificate

Filing information relating to the Nationally Recognized Municipal Securities Information Repositories approved by the Securities and Exchange Commission (subject to change):

Bloomberg Municipal Repository Interactive Data Pricing and 100 Business Park Drive Reference Data, Inc. Skillman, New Jersey 08558 Attention: NRMSIR Telephone: (609) 279-3225 100 William Street, 15th Floor Fax: (609) 279-5962 New York, New York 10038 E-mail address: [email protected] Telephone: (212) 771-6999; (800) 689-8466 Fax: (212) 771-7390 DPC Data Inc. E-mail address: [email protected] One Executive Drive Fort Lee, NJ 07024 Standard & Poor’s Securities Evaluations, Inc. Telephone: (201) 346-0701 55 Water Street, 45th Floor Fax: (201) 947-0107 New York, New York 10041 E-mail address: [email protected] Telephone: (212) 438-4595 Fax: (212) 438-3975 E-mail address: [email protected]

An updated list of NRMSIRs may be found at the Securities and Exchange Commission website (www.sec.gov).

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