See $6,425,000 URBAN REDEVELOPMENT AGENCY OF THE CITY … · 2014. 2. 28. · TWO SEPARATE ISSUES...

TWO SEPARATE ISSUES RATING(Book-Entry Only) Moody’s: A1

See “MISCELLANEOUS - Rating” herein.

In the opinion of Bond Counsel, under existing law, (a) interest on the Series 2014A Bonds is excluded from gross income for federal income tax purposes, (b) interest on the Series 2014A Bonds is not a specific “item of tax preference” for purposes of the federal alternative minimum tax imposed on individuals and corporations, (c) the Series 2014A Bonds are “qualified tax-exempt obligations” for purposes of financial institutions deducting interest expense allocable to interest on the Series 2014A Bonds, and (d) interest on the Series 2014A Bonds is exempt from State of Georgia income taxation, subject to the conditions and limitations described herein. The opinion contains greater detail, and is subject to exceptions, as noted in “LEGAL MATTERS - Opinion of Bond Counsel” herein.

Interest on the Series 2014B Bonds is included in gross income for federal income tax purposes and therefore is not exempt from federal income taxation. Interest on the Series 2014B Bonds is, however, exempt from State of Georgia income taxation. See “LEGAL MATTERS - Certain Tax Consequences of Owning Series 2014B Bonds” herein.

$6,425,000 URBAN REDEVELOPMENT AGENCY OF THE CITY OF KENNESAW, GEORGIA

Parking Project Revenue Bonds, Series 2014 New Issue New Issue

$3,620,000 $2,805,000 Parking Project Revenue Bonds, Parking Project Taxable Revenue Bonds,

Series 2014A Series 2014B

Dated: Date of Issuance Due: February 1, as shown on the inside front cover hereof

The Parking Project Revenue Bonds, Series 2014A (the “Series 2014A Bonds”) and the Parking Project Taxable Revenue Bonds, Series 2014B (the “Series 2014B Bonds”) are being issued by the Urban Redevelopment Agency of the City of Kennesaw, Georgia (the “Agency”) for the purpose of financing the costs of acquiring a new six-level parking deck and adjacent surface parking to be constructed in the downtown area of the City of Kennesaw, Georgia. See “PLAN OF FINANCING” herein.

Interest on the Series 2014A Bonds and the Series 2014B Bonds (collectively the “Series 2014 Bonds”) is payable semiannually on August 1 and February 1 of each year, commencing on August 1, 2014. All Series 2014 Bonds bear interest from their date of issuance. See “INTRODUCTION - Description of the Series 2014 Bonds” herein.

The Series 2014 Bonds will be issued as fully registered bonds, registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), to which payments of principal, premium, if any, and interest will be made. Purchasers will acquire beneficial interests in the Series 2014 Bonds in book-entry form only. DTC will remit such payments to its participants who will be responsible for remittance to beneficial owners. See “INTRODUCTION - Description of the Series 2014 Bonds” herein.

The Series 2014 Bonds are subject to optional, mandatory sinking fund, and extraordinary optional redemption prior to maturity as described herein. See “THE SERIES 2014 BONDS - Redemption” herein.

The Series 2014 Bonds are special limited obligations of the Agency payable solely from and secured by a pledge of and lien on payments to be made by the City of Kennesaw, Georgia (the “City”) to the Agency pursuant to an Intergovernmental Service Agreement (the “Agreement”), dated as of February 1, 2014, to be entered into between the Agency and the City. Under the terms of the Agreement, the City will agree to make payments to the Agency in amounts sufficient to enable the Agency to pay the principal of, premium, if any, and interest on the Series 2014 Bonds when due. The City’s obligation to make the payments required by the Agreement is absolute and unconditional and will not expire so long as any of the Series 2014 Bonds remain outstanding and unpaid. The City will agree in the Agreement to levy an annual ad valorem tax on all taxable property located within the corporate limits of the City, at such rates without limitation, as may be necessary to produce in each year revenues that are sufficient to fulfill the City’s obligations under the Agreement. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2014 BONDS” herein.

The maturities, principal amounts, interest rates, prices or yields, and CUSIP numbers of the Series 2014 Bonds are set forth on the inside front cover of this Official Statement.

This cover page contains certain information for quick reference only. It is not a summary of this Official Statement. Investors must read the entire Official Statement to obtain information essential to making an informed investment decision.

The Series 2014 Bonds are offered when, as, and if issued by the Agency and accepted by the Underwriter, subject to prior sale and to withdrawal or modification of the offer without notice, and are subject to the approving opinion of McKenna Long & Aldridge LLP, Atlanta, Georgia, Bond Counsel. Certain legal matters will be passed on for the Agency and the City by their counsel, Bentley, Bentley & Bentley, Marietta, Georgia, and for the Underwriter by its counsel, McKenna Long & Aldridge LLP, Atlanta, Georgia. The Series 2014 Bonds are expected to be available for delivery in book-entry form only through the facilities of DTC in New York, New York on or about March 4, 2014.

Dated: February 25, 2014

MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, PRICES OR YIELDS, AND CUSIPS

$3,620,000 Parking Project Revenue Bonds,

Series 2014A $490,000 Serial Bonds

Maturity Principal Amount

Interest Rate Yield CUSIP1

2033 $240,000 3.75% 3.82% 489496 AC3 2034 250,000 3.80 3.90 489496 AD1

$525,000 4.00% Term Bonds due February 1, 2036, to Yield 4.12%, CUSIP1 489496 AU3 $875,000 4.25% Term Bonds due February 1, 2039, to Yield 4.38%, CUSIP1 489496 AE9 $645,000 4.50% Term Bonds due February 1, 2041, Priced at 100%, CUSIP1 489496 AV1

$1,085,000 5.125% Term Bonds due February 1, 2044, to Yield 4.44%, CUSIP1 489496 AF62

$2,805,000 Parking Project Taxable Revenue Bonds,

Series 2014B

Maturity Principal Amount

Interest Rate Yield CUSIP1 Maturity

Principal Amount

Interest Rate Yield CUSIP1

2015 $140,000 2.00% 0.85% 489496 AG4 2020 $125,000 4.00% 3.20% 489496 AM1 2016 115,000 2.00 1.25 489496 AH2 2021 135,000 4.00 3.50 489496 AN9 2017 120,000 2.00 1.75 489496 AJ8 2022 140,000 4.00 3.80 489496 AP4 2018 120,000 3.00 2.50 489496 AK5 2023 145,000 4.25 4.05 489496 AQ2 2019 125,000 3.00 2.75 489496 AL3 2024 150,000 4.50 4.25 489496 AR0

$490,000 4.70% Term Bonds due February 1, 2027, Priced at 100%, CUSIP1 489496 AS8

$1,000,000 5.25% Term Bonds due February 1, 2032, to Yield 5.20%, CUSIP1 489496 AT62

________________________ 1 CUSIP data herein is provided by Standard & Poor’s, CUSIP Services Bureau, a division of the McGraw-Hill

Companies, Inc. The Agency is not responsible for the selection of CUSIP numbers, nor is any representation made as to their correctness on the Series 2014 Bonds or as indicated above.

2 Yield to February 1, 2024 optional redemption date.

URBAN REDEVELOPMENT AGENCY OF THE CITY OF KENNESAW, GEORGIA

Members

Arthur L. Hunt, Chairman Cindy Giles

Herb Richardson

____________________________

CITY OF KENNESAW

ELECTED OFFICIALS

Mayor and Council of the City of Kennesaw

Mark Mathews, Mayor Cris Eaton-Welsh, Council Post 1 Tim Killingsworth, Council Post 2 Leonard Church, Council Post 3 Debra Williams, Council Post 4 Jim Sebastian, Council Post 5

APPOINTED OFFICIALS

Steve Kennedy, City Manager Debra Taylor, City Clerk

R. Randall Bentley, Sr., City Attorney

____________________________

SPECIAL SERVICES

Independent Auditors

Mauldin & Jenkins LLC Atlanta, Georgia

Underwriter

Raymond James & Associates, Inc. Atlanta, Georgia

Bond Counsel and Underwriter’s Counsel

McKenna Long & Aldridge LLP Atlanta, Georgia

(THIS PAGE IS INTENTIONALLY LEFT BLANK)

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TABLE OF CONTENTS

Page

INTRODUCTION.........................................................................................................................................................1

The Agency ............................................................................................................................................................1 The City..................................................................................................................................................................1 Purpose of the Series 2014 Bonds ..........................................................................................................................1 Security and Sources of Payment for the Series 2014 Bonds.................................................................................2 Description of the Series 2014 Bonds ....................................................................................................................2 Tax Consequences ..................................................................................................................................................2 Bond Registrar, Paying Agent, Custodian, and Depository....................................................................................3 Professionals Involved in the Offering ...................................................................................................................3 Legal Authority ......................................................................................................................................................3 Offering and Delivery of the Series 2014 Bonds....................................................................................................3 Continuing Disclosure ............................................................................................................................................3 Other Information...................................................................................................................................................4

PLAN OF FINANCING................................................................................................................................................6

Estimated Sources and Applications of Funds .......................................................................................................6 The Parking Project ................................................................................................................................................6

THE SERIES 2014 BONDS..........................................................................................................................................8

Description .............................................................................................................................................................8 Redemption ............................................................................................................................................................8 Book-Entry Only System .....................................................................................................................................10 Legal Authority ....................................................................................................................................................12 Investments...........................................................................................................................................................13 Principal and Interest Requirements.....................................................................................................................14

SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2014 BONDS....................................................15

Agreement ............................................................................................................................................................15 Resolution.............................................................................................................................................................15 Limited Obligations..............................................................................................................................................15 Enforceability of Remedies ..................................................................................................................................16

THE AGENCY............................................................................................................................................................16

THE CITY...................................................................................................................................................................17

Introduction ..........................................................................................................................................................17 City Administration and Officials ........................................................................................................................17 City Services.........................................................................................................................................................18 City Facilities .......................................................................................................................................................18 Demographic Information ....................................................................................................................................18 Economic Information..........................................................................................................................................19 Employees, Employee Relations, and Labor Organizations.................................................................................21 City Amenities......................................................................................................................................................21

CITY DEBT STRUCTURE ........................................................................................................................................23

Summary of City Debt By Category ....................................................................................................................23 Proposed Debt ......................................................................................................................................................24 Debt Service Requirements ..................................................................................................................................25 Overlapping Debt .................................................................................................................................................26 Debt Ratios ...........................................................................................................................................................27 Debt History .........................................................................................................................................................27 Limitations on City Debt ......................................................................................................................................28

Page

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CITY AD VALOREM TAXATION...........................................................................................................................29

Introduction ..........................................................................................................................................................29 Property Subject to Taxation ................................................................................................................................29 Assessed Value.....................................................................................................................................................29 Annual Tax Levy..................................................................................................................................................30 Property Tax Collections......................................................................................................................................30 Historical Property Tax Data................................................................................................................................31 Ten Largest Taxpayers .........................................................................................................................................33

CITY FINANCIAL INFORMATION.........................................................................................................................34

Accounting System and Policies ..........................................................................................................................34 Five Year General Fund History ..........................................................................................................................34 Management Comments Concerning Material Trends in Revenues and Expenditures........................................36 Budgetary Process ................................................................................................................................................36 General Fund Budgets ..........................................................................................................................................37 Capital Improvements ..........................................................................................................................................38 Sources of Tax Revenues .....................................................................................................................................39 Employee Benefits ...............................................................................................................................................39 Insurance Coverage and Governmental Immunity ...............................................................................................41

LEGAL MATTERS ....................................................................................................................................................42

Pending Litigation ................................................................................................................................................42 Opinion of Bond Counsel .....................................................................................................................................43 Original Issue Discount and Premium on Series 2014A Bonds ...........................................................................44 Collateral Federal Tax Consequences of Owning Series 2014A Bonds...............................................................44 Changes in Federal and State Tax Law ................................................................................................................45 Certain Tax Consequences of Owning Series 2014B Bonds................................................................................46 State of Georgia Tax Reform Legislation.............................................................................................................47 Closing Certificates ..............................................................................................................................................47

MISCELLANEOUS....................................................................................................................................................48

Rating ...................................................................................................................................................................48 Underwriting ........................................................................................................................................................48 Independent Auditors ...........................................................................................................................................48 Additional Information.........................................................................................................................................48

RESPONSIBILITY FOR OFFICIAL STATEMENT .................................................................................................49

APPENDIX A: FINANCIAL STATEMENTS OF THE CITY................................................................................A-1

APPENDIX B: DEFINITIONS AND SUMMARIES OF PRINCIPAL DOCUMENTS.........................................B-1

Definitions..........................................................................................................................................................B-1 The Resolution ..................................................................................................................................................B-4 The Agreement...................................................................................................................................................B-9 The Disclosure Certificate................................................................................................................................B-12

APPENDIX C: FORM OF LEGAL OPINION ........................................................................................................C-1

OFFICIAL STATEMENT

of the


relating to its

$6,425,000

PARKING PROJECT REVENUE BONDS

New Issue New Issue $3,620,000 $2,805,000

Parking Project Revenue Bonds, Parking Project Taxable Revenue Bonds, Series 2014A Series 2014B

INTRODUCTION

The purpose of this Official Statement, which includes the cover page and the Appendices hereto, is to furnish certain information in connection with the sale by the Urban Redevelopment Agency of the City of Kennesaw, Georgia of its Parking Project Revenue Bonds, consisting of $3,620,000 in aggregate principal amount of its Parking Project Revenue Bonds, Series 2014A (the “Series 2014A Bonds”), and $2,805,000 in aggregate principal amount of its Parking Project Taxable Revenue Bonds, Series 2014B (the “Series 2014B Bonds”). The Series 2014A Bonds and the Series 2014B Bonds are referred to collectively as the “Series 2014 Bonds” in this Official Statement and will be differentiated, where necessary, by reference to the Series 2014A Bonds and the Series 2014B Bonds. Definitions of certain terms used in this Official Statement and not otherwise defined herein are set forth in Appendix B to this Official Statement under the heading “DEFINITIONS.”

This Introduction is not a summary of this Official Statement and is intended only for quick reference. It is only a brief description of and guide to, and is qualified in its entirety by reference to, more complete and detailed information contained in the entire Official Statement, including the cover page and the Appendices hereto, and the documents summarized or described herein. Potential investors should fully review the entire Official Statement. The offering of the Series 2014 Bonds to potential investors is made only by means of the entire Official Statement, including the Appendices hereto. No person is authorized to detach this Introduction from the Official Statement or to otherwise use it without the entire Official Statement, including the Appendices hereto.

The Agency

The Urban Redevelopment Agency of the City of Kennesaw, Georgia (the “Agency”), the issuer of the Series 2014 Bonds, is a public body corporate and politic created and existing under the laws of the State of Georgia. For more complete information, see “THE AGENCY” herein.

The City

The City of Kennesaw (the “City”) is a municipal corporation of the State of Georgia created by an Act of the General Assembly of the State of Georgia in 1877. The City is located in Cobb County in the northwestern portion of the State of Georgia approximately 26 miles northwest of the City of Atlanta. For more complete information, see “THE CITY” herein.

Purpose of the Series 2014 Bonds

The Agency is issuing the Series 2014 Bonds for the purpose of providing funds to finance the costs of acquiring a new six-level parking deck and adjacent surface parking to be constructed in the downtown area of the

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City, and to finance the costs of issuing the Series 2014 Bonds. For more complete information, see “PLAN OF FINANCING” herein.

Security and Sources of Payment for the Series 2014 Bonds

The Series 2014 Bonds are special limited obligations of the Agency payable solely from and secured by a pledge of and lien on payments to be made by the City to the Agency pursuant to an Intergovernmental Service Agreement (the “Agreement”), to be dated as of February 1, 2014, to be entered into between the Agency and the City. Under the terms of the Agreement, the City will agree to make payments to the Agency in amounts sufficient to enable the Agency to pay the principal of, premium, if any, and interest on the Series 2014 Bonds when due. The City’s obligation to make the payments required by the Agreement is absolute and unconditional and will not expire so long as any of the Series 2014 Bonds remain outstanding and unpaid. The City will agree in the Agreement to levy an annual ad valorem tax on all taxable property located within the corporate limits of the City, at such rates without limitation, as may be necessary to produce in each year revenues that are sufficient to fulfill the City’s obligations under the Agreement.

To secure its obligations under the Series 2014 Bonds, the Agency adopted a Master Bond Resolution on February 25, 2014 (the “Resolution”), pursuant to which the Agency has collaterally assigned and pledged for the benefit of the owners of the Series 2014 Bonds all of the Agency’s right, title, interest, and remedies (except Unassigned Rights) in and to the Agreement, including all payments to be made by the City pursuant to the Agreement.

For more complete and detailed information, see “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2014 BONDS” herein.

Description of the Series 2014 Bonds

Redemption. The Series 2014 Bonds are subject to optional, mandatory sinking fund, and extraordinary optional redemption prior to maturity. The Series 2014 Bonds maturing on or after February 1, 2025 are redeemable at the option of the Agency, upon the request of the City, not earlier than February 1, 2024, at the prices and on the terms described in this Official Statement. The Series 2014A Bonds maturing on February 1, 2036, 2039, 2041, and 2044 are subject to mandatory sinking fund redemption by the Agency on the dates and in the amounts described in this Official Statement. The Series 2014B Bonds maturing on February 1, 2027 and 2032 are subject to mandatory sinking fund redemption by the Agency on the dates and in the amounts described in this Official Statement. The Series 2014 Bonds are subject to extraordinary optional redemption prior to maturity on the dates and in the amounts described in this Official Statement. For more complete information, see “THE SERIES 2014 BONDS - Redemption” herein.

Denominations. The Series 2014 Bonds are issuable in the denominations of $5,000 or any integral multiple thereof.

Book-Entry Bonds. Each of the Series 2014 Bonds will be issued as fully registered bonds in the denomination of one bond per aggregate principal amount of the stated maturity thereof, and, when issued, will be registered in the name of Cede & Co., as nominee for The Depository Trust Company (“DTC”), New York, New York, an automated depository for securities and clearing house for securities transactions, which will act as securities depository for the Series 2014 Bonds. Purchasers will not receive certificates representing their ownership interest in the Series 2014 Bonds purchased. Purchases of beneficial interests in the Series 2014 Bonds will be made in book-entry only form (without certificates), in authorized denominations, and, under certain circumstances as more fully described in this Official Statement, such beneficial interests are exchangeable for one or more fully registered bonds of like principal amount and maturity in authorized denominations. For more complete information, see “THE SERIES 2014 BONDS - Book-Entry Only System” herein.

Payments. So long as DTC or its nominee, Cede & Co., is the registered owner of the Series 2014 Bonds, payments of the principal of, premium, if any, and interest on the Series 2014 Bonds will be made directly to Cede & Co., which will remit such payments to the DTC participants, which will in turn remit such payments to the beneficial owners of the Series 2014 Bonds.

For a more complete description of the Series 2014 Bonds, see “THE SERIES 2014 BONDS” herein.

Tax Consequences

In the opinion of Bond Counsel, under existing law, (a) interest on the Series 2014A Bonds is excluded from gross income for federal income tax purposes, (b) interest on the Series 2014A Bonds is not a specific “item of tax

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preference” for purposes of the federal alternative minimum tax imposed on individuals and corporations, (c) the Series 2014A Bonds are “qualified tax-exempt obligations” for purposes of financial institutions deducting interest expense allocable to interest on the Series 2014A Bonds, and (d) interest on the Series 2014A Bonds is exempt from State of Georgia income taxation, subject to the conditions and limitations described herein. Interest on the Series 2014B Bonds is included in gross income for federal income tax purposes and therefore is not exempt from federal income taxation. Interest on the Series 2014B Bonds is, however, exempt from State of Georgia income taxation. See Appendix C hereto for the form of the opinion Bond Counsel proposes to deliver in connection with the issuance of the Series 2014 Bonds. For a more complete discussion of such opinion and certain other tax consequences of owning the Series 2014 Bonds, including certain exceptions to the exclusion of the interest on the Series 2014A Bonds from gross income, see “LEGAL MATTERS - Opinion of Bond Counsel, - Original Issue Discount and Premium on Series 2014A Bonds, - Collateral Federal Tax Consequences of Owning Series 2014A Bonds, and - Certain Tax Consequences of Owning Series 2014B Bonds” herein.

Bond Registrar, Paying Agent, Custodian, and Depository

Regions Bank, Atlanta, Georgia, will act as bond registrar and as paying agent for the Series 2014 Bonds. Regions Bank, Atlanta, Georgia, will act as custodian of the Sinking Fund created under the Resolution and as depository of the Project Fund created under the Resolution.

Professionals Involved in the Offering

Certain legal matters pertaining to the Agency and its authorization and issuance of the Series 2014 Bonds are subject to the approving opinion of McKenna Long & Aldridge LLP, Atlanta, Georgia, Bond Counsel. Copies of such opinion will be available at the time of delivery of the Series 2014 Bonds, and a copy of the proposed form of such opinion is attached hereto as Appendix C. Certain legal matters will be passed on for the Agency and the City by their counsel, Bentley, Bentley & Bentley, Marietta, Georgia, and for the Underwriter by its counsel, McKenna Long & Aldridge LLP, Atlanta, Georgia. The basic financial statements of the City as of September 30, 2012 and for the year then ended, attached hereto as Appendix A, have been audited by Mauldin & Jenkins, LLC, Atlanta, Georgia, independent certified public accountants, to the extent and for the period indicated in its report thereon, which appears in Appendix A hereto. See “MISCELLANEOUS - Independent Auditors” herein.

Legal Authority

The Series 2014 Bonds are being issued in accordance with the Constitution of the State of Georgia and pursuant to the authority granted by the statutes of the State of Georgia. For more complete information, see “THE SERIES 2014 BONDS - Legal Authority” herein.

Offering and Delivery of the Series 2014 Bonds

The Series 2014 Bonds are offered when, as, and if issued by the Agency and accepted by the Underwriter, subject to prior sale and to withdrawal or modification of the offer without notice. The Series 2014 Bonds are expected to be available for delivery in book-entry form only through the facilities of DTC in New York, New York on or about March 4, 2014.

Continuing Disclosure

The Agency has determined that no financial or operating data concerning the Agency is material to any decision to purchase, hold, or sell the Series 2014 Bonds, and the Agency will not provide any such information. The City has undertaken all responsibilities for any continuing disclosure to beneficial owners of the Series 2014 Bonds as described below, and the Agency will have no liability to the beneficial owners of the Series 2014 Bonds or any other person with respect to such disclosures.

The City has covenanted in the Agreement and a Continuing Disclosure Certificates (each a “Disclosure Certificate”) for the benefit of the beneficial owners of each issue of the Series 2014 Bonds to provide certain financial information and operating data relating to the City (the “Annual Report”) by not later than 210 days after the end of each fiscal year of the City, commencing with fiscal year 2013, and to provide notices of the occurrence of certain enumerated events. The Annual Report will be filed by the City with the Municipal Securities Rulemaking Board (the “MSRB”) in an electronic format as prescribed by the MSRB (which, as of the date hereof, is the Electronic Municipal Market Access (“EMMA”) system of the MSRB). The notices of certain events will be filed by the City with the MSRB in an electronic format as prescribed by the MSRB (which, as of the date hereof, is EMMA). The specific nature of the information to be contained in the Annual Report or the notices of certain

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events is summarized in Appendix B hereto under the caption “THE CONTINUING DISCLOSURE CERTIFICATE.” These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5).

Other Information

This Official Statement speaks only as of its date, and the information contained herein is subject to change without notice.

This Official Statement contains forecasts, projections, and estimates that are based on current expectations but are not intended as representations of fact or guarantees of results. If and when included in this Official Statement, the words “expects,” “forecasts,” “projects,” “intends,” “anticipates,” “estimates,” and analogous expressions are intended to identify forward-looking statements as defined in the Securities Act of 1933, as amended, and any such statements inherently are subject to a variety of risks and uncertainties, which could cause actual results to differ materially from those contemplated in such forward-looking statements. These forward-looking statements speak only as of the date of this Official Statement. The Agency and the City each disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions, or circumstances on which any such statement is based.

This Official Statement and the Appendices hereto contain brief descriptions of, among other matters, the Agency, the City, the Series 2014 Bonds, the Agreement, the Resolution, the Disclosure Certificate, and the security and sources of payment for the Series 2014 Bonds. Such descriptions and information do not purport to be comprehensive or definitive. The summaries of various constitutional provisions and statutes, the Agreement, the Resolution, the Disclosure Certificate, and other documents are intended as summaries only and are qualified in their entirety by reference to such laws and documents, and references herein to the Series 2014 Bonds are qualified in their entirety to the form thereof included in the Resolution. Copies of the Agreement, the Resolution, the Disclosure Certificate, and other documents and information are available, upon request and upon payment to the City of a charge for copying, mailing, and handling, from Steve Kennedy, City Manager, 2529 J.O. Stephenson Avenue, Kennesaw, Georgia 30144, telephone (770) 429-4544. During the period of the offering of the Series 2014 Bonds copies of such documents are available, upon request and upon payment to the Underwriter of a charge for copying, mailing, and handling, from Raymond James & Associates, Inc., Two Buckhead Plaza, 3050 Peachtree Road, N.W., Suite 702, Atlanta, Georgia 30305, telephone (404) 240-6854.

The Series 2014 Bonds have not been registered under the Securities Act of 1933, and the Resolution has not been qualified under the Trust Indenture Act of 1939, in reliance on exemptions contained in such Acts.

This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2014 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation, or sale.

No dealer, broker, salesman, or other person has been authorized by the Agency, the City, or the Underwriter to give any information or to make any representations other than those contained in this Official Statement, and, if given or made, such other information or representations should not be relied upon as having been authorized by the Agency, the City, or the Underwriter. Except where otherwise indicated, all information contained in this Official Statement has been provided by the City. The information set forth herein has been obtained by the City from sources that are believed to be reliable. The Agency has not provided information regarding the City and does not certify as to the accuracy or sufficiency of the disclosure practices of or content of the information provided by the City, and is not responsible for the information provided by the City. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities law as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The information contained herein is subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances create an implication that there has been no change in the affairs of the Agency, the City, or the other matters described herein since the date hereof or the earlier dates set forth herein as of which certain information contained herein is given.

In connection with this offering, the Underwriter may over-allot or effect transactions that stabilize or maintain the market prices of the Series 2014 Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time.

Neither the United States Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Series 2014 Bonds or reviewed or passed upon the adequacy or accuracy of this Official Statement. Any representation to the contrary may be a criminal offense.

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The order and placement of information in this Official Statement, including the appendices, are not an indication of relevance, materiality, or relative importance, and this Official Statement, including the appendices, must be read in its entirety. The captions and headings in this Official Statement are for convenience only and in no way define, limit, or describe the scope or intent, or affect the meaning or construction, of any provision or section in this Official Statement.

THIS OFFICIAL STATEMENT IS BEING PROVIDED TO PROSPECTIVE PURCHASERS EITHER IN BOUND PRINTED FORM (“ORIGINAL BOUND FORMAT”) OR IN ELECTRONIC FORMAT ON THE FOLLOWING WEBSITE: www.onlinemuni.com. THIS OFFICIAL STATEMENT MAY BE RELIED UPON ONLY IF IT IS IN ITS ORIGINAL BOUND FORMAT OR IS PRINTED IN ITS ENTIRETY DIRECTLY FROM SUCH WEBSITE.

[Remainder of Page Intentionally Left Blank]

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PLAN OF FINANCING

Estimated Sources and Applications of Funds

The sources and applications of funds in connection with the issuance of the Series 2014 Bonds are estimated below.

Estimated Sources of Funds:

Proceeds of Series 2014A Bonds1 $3,647,072 Proceeds of Series 2014B Bonds2 2,832,830 Estimated Interest Earnings3 80,528

Total Sources of Funds $6,560,430

Estimated Applications of Funds: Cost of Parking Project4 $6,274,984 Costs of Issuance5 189,071 Underwriting Fee6 96,375

Total Applications of Funds $6,560,430 ________________________ 1 After adding net premium of $27,071.55. 2 After adding premium of $27,830.35. 3 Based on estimated earnings on the escrowed funds during construction at an investment rate of 0.52% over a

period of 30 months. 4 See “PLAN OF FINANCING - The Parking Project” herein. 5 Includes legal and accounting fees, initial Bond Registrar’s and Paying Agent’s fees, printing costs, validation

court costs, and other costs of issuance. 6 1.50% of the principal amount of the Series 2014 Bonds. See “MISCELLANEOUS - Underwriting” herein. The Parking Project

The Agency plans to use the proceeds of the Series 2014 Bonds, after the payment of the costs of issuing the Series 2014 Bonds, to finance the costs of acquiring a new six-level parking deck and adjacent surface and street parking to be constructed in the downtown area of the City (the “Parking Project’).

On December 18, 2006, the Mayor and Council of the City of Kennesaw approved an urban redevelopment plan entitled the “Amended and Restated Downtown Kennesaw Urban Redevelopment Plan” (the “Amended Plan”). The Amended Plan establishes goals and objectives for the redevelopment of the City’s downtown area, including promoting a “pedestrian friendly” community, encouraging new housing in mixed-use developments, promoting commercial or retail development, and encouraging adequate public and private parking serving short and long term needs for both business and public activities.

In 2009, in furtherance of the goals and objectives set forth in the Amended Plan, the Agency issued a revenue bond in the principal amount of $2.8 million in order to acquire approximately five acres of land (the “Land”) at the intersection of Main Street and Watts Drive in the City’s downtown area and across from the Kennesaw City Hall. The acquisition was intended to help the City attract a private developer that could develop a mixed-use project on the Land, including residential, retail, and parking uses. Pursuant to intergovernmental agreements among the City, the Agency, and the Kennesaw Development Authority (the “KDA”), which was created to promote the revitalization and redevelopment of properties within the City, the Agency subsequently conveyed the Land to the KDA.

In 2012, the KDA entered into an agreement to sell the Land to South City Partners, LLC, or entities managed by South City Partners, LLC (the “Developer”), in order for the Developer to develop a mixed-use project consisting of multifamily residential units, retail space, and surface and deck parking (the “Mixed-Use Development”). The Developer is based in Atlanta, Georgia and develops multifamily residential and mixed-use properties across the southeastern United States. In order to induce the Developer to purchase the Land and proceed with the Mixed-Use Development, the City negotiated the terms of a proposed transaction with the Developer pursuant to which the

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Agency, upon completion of the Mixed-Use Development by the Developer, would purchase the parking components of the Mixed-Use Development from the Developer, reserving a portion of the parking for the residential component of the Mixed-Use Development, with the remainder of the parking to be used as public parking.

Accordingly, the Developer has committed to acquire the Land from the KDA for a purchase price of approximately $3.0 million on the date of issuance and delivery of the Series 2014 Bonds, and the proceeds of the sale of the Land to the Developer will be used to retire the revenue bonds that were issued by the Agency in 2009 to acquire the Land. The Developer has represented to the City, the Agency, and the KDA that it has conditional commitments from equity and bank loan financing sources sufficient to acquire the Land and to construct the Mixed-Use Development. The Mixed-Use Development is designed to include (i) approximately 10,000 square feet of ground floor retail rental space; (ii) four stories of multifamily rental housing consisting of approximately 169 one bedroom units, 72 two bedroom units, and 11 three bedroom units and amenities that include a swimming pool, fitness center, and clubhouse; (iii) a six-level parking deck with approximately 414 parking spaces (approximately 349 parking spaces to be reserved for the rental housing tenants and the remaining approximately 65 parking spaces to be available as public parking); and (iv) approximately 168 spaces of surface and street parking available as public parking. The total cost of the Mixed-Use Development (including purchasing the Land) is approximately $38.2 million.

The parking components of the Mixed-Use Development constitute the Parking Project to be financed by the proceeds of the Series 2014 Bonds. The Parking Project will be constructed by the Developer and then acquired by the Agency pursuant to the terms of a Purchase and Sale Agreement (the “Purchase Agreement”), to be dated the date of issuance and delivery of the Series 2014 Bonds, between the Agency and the Developer. Pursuant to the Purchase Agreement, the Developer will agree to sell and the Agency will agree to purchase the completed Parking Project for a purchase price of approximately $6.2 million, subject to certain adjustments and payable only after completion of the construction of the Mixed-Use Development, which includes the Parking Project. The Purchase Agreement provides that the Developer will enter into a guaranteed maximum price construction contract with a third party general contractor for the hard construction costs associated with the Mixed-Use Development and will construct and deliver the Parking Project in accordance with plans and specifications identified in the Purchase Agreement. Pursuant to the Purchase Agreement, the Developer will agree to commence construction of the Parking Project no later than 30 days after entering into the Purchase Agreement (such commencement of construction expected to be no later than March 27, 2014) and to cause completion of the Mixed-Use Development, which includes the Parking Project, no later than the date which is 30 months from the date the Developer closed on the purchase of the Land (such completion expected to be no later than October 4, 2016), subject to certain extensions set forth in the Purchase Agreement. The Purchase Agreement provides that the closing of the purchase and sale of the Parking Project (the “Parking Project Closing”) will occur 15 days after the Developer evidences such completion of the Mixed-Use Development by delivering to the Agency a certificate of occupancy issued by the City for the Mixed-Use Development (the “Certificate of Occupancy”).

Proceeds of the Series 2014 Bonds, after payment of issuance costs, will be deposited in escrow with State Bank & Trust, Atlanta, Georgia, as escrow agent (the “Escrow Agent”), pursuant to an Escrow Agreement (the “Escrow Agreement”), to be dated the date of issuance and delivery of the Series 2014 Bonds, between the Developer, the Agency, and the Escrow Agent. The Escrow Agreement provides that Escrow Agent will disburse the escrowed funds representing the purchase price for the Developer at the Parking Project Closing, subject to certain conditions. The Escrow Agreement further provides that if the Parking Project Closing does not occur timely in accordance with the terms of the Purchase Agreement due to a default by the Developer, the Escrow Agent will disburse the escrowed funds to the Agency (or, if so directed in writing by the Agency and the City, to the Project Fund Depository), subject to certain conditions.

The timely completion of the construction of the Mixed-Use Development by the Developer is dependent upon, among other factors, promptly obtaining approvals and permits from various governmental agencies and the absence of delays due to strikes, shortages of labor and materials, and adverse weather conditions. The cost of constructing the Mixed-Use Development may be affected by factors beyond the control of the Developer, including strikes, energy, labor, and material shortages, subcontractor defaults, adverse weather conditions, and other unforeseen contingencies. There can be no assurance that the Developer will complete the construction of the Mixed-Use Development in accordance with its present construction schedule and construction budget or in accordance with the terms of the Purchase Agreement. As discussed above, the Agency is obligated to purchase the Parking Project only if the Developer evidences completion of the Mixed-Use Development by delivering the Certificate of Occupancy within the time period and pursuant to other conditions set forth in the Purchase Agreement.

In the event the Agency does not acquire good and marketable fee simple title to the Parking Project by April 4, 2017 and in accordance with the other conditions set forth in the Purchase Agreement, including delivery of the Certificate of Occupancy, the City has the right to direct the Agency to, and upon such direction the Agency will, exercise its option to redeem Series 2014 Bonds prior to maturity on or after

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May 1, 2017 pursuant to the extraordinary optional redemption provisions described under “THE SERIES 2014 BONDS - Redemption -- Extraordinary Optional Redemption” herein. Once the Agency acquires good and marketable fee simple title to the Parking Project, the Series 2014 Bonds will no longer be subject to such extraordinary optional redemption.

THE SERIES 2014 BONDS

Description

The Series 2014A Bonds are being issued in the aggregate principal amount of $3,620,000, and the Series 2014B Bonds are being issued in the aggregate principal amount of $2,805,000. The Series 2014 Bonds, as initially issued, will be dated as of as of their date of issuance and delivery, and will bear interest at the rates per annum set forth on the inside front cover page of this Official Statement, computed on the basis of a 360-day year consisting of twelve 30-day months, payable on August 1, 2014 and semiannually thereafter on February 1 and August 1 of each year (each an “Interest Payment Date”) and will mature on the dates and in the amounts set forth on the inside front cover page of this Official Statement, unless earlier called for redemption.

Each Series 2014 Bond will bear interest from the Interest Payment Date next preceding the date of authentication thereof unless such date of authentication is an Interest Payment Date, in which event such Series 2014 Bond will bear interest from such Interest Payment Date, or unless such date of authentication is prior to the first Interest Payment Date, in which event such Series 2014 Bond will bear interest from its dated date; provided, however, that if at the time of authentication of any Series 2014 Bond, interest is in default on such Series 2014 Bond, such Series 2014 Bond will bear interest from the Interest Payment Date to which interest has been paid or if no interest has theretofore been paid on such Series 2014 Bond, from its dated date.

The Series 2014 Bonds are issuable only as fully registered bonds, without coupons, in the denomination of $5,000 or any integral multiple thereof. Purchases of beneficial ownership interests in the Series 2014 Bonds will be made in book-entry form, and purchasers will not receive certificates representing interests in the Series 2014 Bonds so purchased. If the book-entry system is discontinued, Series 2014 Bonds will be delivered as described in the Resolution, and beneficial owners will become the registered owners of the Series 2014 Bonds. See “THE SERIES 2014 BONDS - Book-Entry Only System” herein.

Redemption

Optional Redemption

The Series 2014 Bonds maturing on and after February 1, 2025, are subject to optional redemption prior to maturity by the Agency upon the written direction of the City pursuant to the Agreement, in whole or in part on any business day (and if in part in an authorized denomination), in either case on or after February 1, 2024, at the redemption price equal to 100% of the principal amount thereof plus accrued interest thereon to such redemption date and without premium, all in the manner provided in the Resolution.

Mandatory Redemption of Series 2014A Bonds

The Series 2014A Bonds maturing on February 1, 2036, 2039, 2041, and 2044 are subject to mandatory sinking fund redemption prior to maturity, in part by lot, in specified amounts as described below at a redemption price equal to 100% of the principal amount thereof plus accrued interest to the redemption date, but without premium, in the following years:

Series 2014A Bonds Maturing February 1, 2036

February 1 Principal of the Year Amount

2035 $255,000

(Leaving $270,000 to mature February 1, 2036)

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2037 $280,000 2038 290,000




2040 $315,000




2042 $345,000 2043 360,000


Mandatory Redemption of Series 2014B Bonds

The Series 2014B Bonds maturing on February 1, 2027 and 2032 are subject to mandatory sinking fund redemption prior to maturity, in part by lot, in specified amounts as described below at a redemption price equal to 100% of the principal amount thereof plus accrued interest to the redemption date, but without premium, in the following years:

Series 2014B Bonds Maturing February 1, 2027


2025 $155,000 2026 165,000


Series 2014B Bonds Maturing February 1, 2032


2028 $180,000 2029 190,000 2030 200,000 2031 210,000


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Extraordinary Optional Redemption

The Series 2014 Bonds are subject to extraordinary redemption prior to maturity at the option of the Agency upon the written direction of the City pursuant to the Agreement, in the event the Agency does not acquire good and marketable fee simple title to the Parking Project by April 4, 2017 and in accordance with the other conditions set forth in the Purchase Agreement, including delivery of the Certificate of Occupancy. If called for redemption in such event, the Series 2014 Bonds will be subject to redemption by the Agency at any time in whole or in part on any business day (and if in part in an authorized denomination), in either case on or after May 1, 2017, at the redemption price equal to 100% of the principal amount thereof plus accrued interest thereon to such redemption date and without premium, all in the manner provided in the Resolution. Once the Agency acquires good and marketable fee simple title to the Parking Project, the Series 2014 Bonds will no longer be subject to such extraordinary optional redemption. See “PLAN OF FINANCING - The Parking Project” herein.

Selection of Series 2014 Bonds to be Redeemed

If less than all of the Series 2014 Bonds of like maturity shall be called for redemption, the particular Series 2014 Bonds, or portions of Series 2014 Bonds, to be redeemed shall be selected by lot by the Agency (at the direction of the City) or in such other manner as the Agency (at the direction of the City) may deem proper. The portion of any Series 2014 Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of $5,000 or an integral multiple thereof and, in selecting portions of such Series 2014 Bonds for redemption, the Agency shall treat each such Series 2014 Bond as representing that number of Series 2014 Bonds that is obtained by dividing the principal amount of such Series 2014 Bond to be redeemed in part by $5,000.

Redemption Notices

Unless waived by any owner of Series 2014 Bonds to be redeemed, official notice of any redemption of Series 2014 Bonds will be given by the Bond Registrar on behalf of the Agency by mailing a copy of an official redemption notice by first class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed for redemption to the registered owner of the Series 2014 Bond or Series 2014 Bonds to be redeemed at the address shown on the Bond Register or at such other address as is furnished in writing by such registered owner to the Bond Registrar.

Notice having been given in the manner and under the conditions described above, and monies for payment of the redemption price being held by the Paying Agent as provided in the Resolution, the Series 2014 Bonds or portions of Series 2014 Bonds so called for redemption will, on the redemption date designated in such notice, become and be due and payable at the redemption price provided for redemption of such Series 2014 Bonds on such date, and interest on the Series 2014 Bonds or portions of Series 2014 Bonds so called for redemption will cease to accrue, such Series 2014 Bonds or portions of Series 2014 Bonds will cease to be entitled to any lien, benefit, or security under the Resolution, and the owners of such Series 2014 Bonds or portions of Series 2014 Bonds will have no rights in respect thereof except to receive payment of the redemption price thereof.

Book-Entry Only System

The Depository Trust Company (“DTC”), New York, New York, or its successor, will act as securities depository for the Series 2014 Bonds. The Series 2014 Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered Series 2014 Bond will be issued for each maturity of each series of the Series 2014 Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC.

So long as DTC or its nominee is the registered owner of the Series 2014 Bonds, payments of the principal and redemption premium of and interest due on the Series 2014 Bonds will be payable directly to DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities

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Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchases of Series 2014 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2014 Bonds on DTC’s records. The ownership interest of each actual purchaser of each Series 2014 Bond (a “Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2014 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 Series 2014 Bonds, except in the event that use of the book-entry system for the Series 2014 Bonds is discontinued.

To facilitate subsequent transfers, all Series 2014 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 Series 2014 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 Series 2014 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2014 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 will be sent to DTC. If less than all of the Series 2014 Bonds within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Series 2014 Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Agency as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Series 2014 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal, premium, and interest payments on the Series 2014 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 Agency or the Paying Agent, on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Paying Agent, or the Agency, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Agency or the Paying 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.

A Beneficial Owner will give notice to elect to have its Series 2014 Bonds purchased or tendered, through its Participant, to the Paying Agent, and will effect delivery of such Series 2014 Bonds by causing the Direct Participant to transfer the Participant’s interest in the Series 2014 Bonds, on DTC’s records, to the Paying Agent. The requirement for physical delivery of Series 2014 Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Series 2014 Bonds are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Series 2014 Bonds to the Paying Agent’s DTC account.

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DTC may discontinue providing its services as securities depository with respect to the Series 2014 Bonds at any time by giving reasonable notice to the Agency and the Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Series 2014 Bonds are required to be printed and delivered.

The Agency may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Series 2014 Bonds will be printed and delivered to DTC.

The information concerning DTC and DTC’s book-entry system set forth above has been obtained from sources that the Agency believes to be reliable, but the Agency takes no responsibility for the accuracy thereof.

SO LONG AS CEDE & CO., AS NOMINEE FOR DTC, IS THE SOLE BONDHOLDER, THE AGENCY SHALL TREAT CEDE & CO. AS THE ONLY BONDHOLDER FOR ALL PURPOSES, INCLUDING RECEIPT OF ALL PRINCIPAL AND PREMIUM OF AND INTEREST ON THE SERIES 2014 BONDS, RECEIPT OF NOTICES, VOTING, AND REQUESTING OR DIRECTING THE AGENCY TO TAKE OR NOT TO TAKE, OR CONSENTING TO, CERTAIN ACTIONS. THE AGENCY HAS NO RESPONSIBILITY OR OBLIGATION TO THE DIRECT OR INDIRECT PARTICIPANTS OR THE BENEFICIAL OWNERS WITH RESPECT TO (A) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT OR INDIRECT PARTICIPANT; (B) THE PAYMENT BY ANY DIRECT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL AND PREMIUM OF AND INTEREST ON THE SERIES 2014 BONDS; (C) THE DELIVERY OR TIMELINESS OF DELIVERY BY ANY DIRECT OR INDIRECT PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER THAT IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE RESOLUTION TO BE GIVEN TO BONDHOLDERS; OR (D) OTHER ACTION TAKEN BY DTC OR CEDE & CO. AS BONDHOLDER.

Beneficial Owners of the Series 2014 Bonds may experience some delay in their receipt of distributions of principal and interest on the Series 2014 Bonds since such distributions will be forwarded by the Paying Agent to DTC and DTC will credit such distributions to the accounts of Direct Participants, which will thereafter credit them to the accounts of Beneficial Owners either directly or indirectly through Indirect Participants.

Issuance of the Series 2014 Bonds in book-entry form may reduce the liquidity of the Series 2014 Bonds in the secondary trading market since investors may be unwilling to purchase Series 2014 Bonds for which they cannot obtain physical certificates. In addition, since transactions in the Series 2014 Bonds can be effected only through DTC, Direct Participants, Indirect Participants, and certain banks, the ability of a Beneficial Owner to pledge Series 2014 Bonds to persons or entities that do not participate in the DTC system, or otherwise to take action in respect of such Series 2014 Bonds, may be limited due to lack of a physical certificate. Beneficial Owners will not be recognized by the Paying Agent as registered owners for purposes of the Resolution, and Beneficial Owners will be permitted to exercise the rights of registered owners only indirectly through DTC and the Direct or Indirect Participants.

Legal Authority

The Series 2014 Bonds are being issued pursuant to the authority granted by Chapter 61 of Title 36 of the Official Code of Georgia Annotated, entitled the “Urban Redevelopment Law,” as amended (the “Urban Redevelopment Law”), and the Resolution.

The Agency is authorized pursuant to the Urban Redevelopment Law:

(1) to issue bonds to finance the undertaking of any “urban redevelopment project” under the Urban Redevelopment Law, which bonds shall be made payable, as to both principal and interest, solely from the income, proceeds, revenues, and funds of the Agency derived from or held in connection with its undertaking and carrying out of urban redevelopment projects under the Urban Redevelopment Law;

(2) to undertake and carry out within the territorial limits of the City “urban redevelopment projects,” which are defined to include undertakings or activities of the Agency in an urban redevelopment area under the Urban Redevelopment Law for the elimination and for the prevention of the development or spread of slums and may involve slum clearance and redevelopment in an urban redevelopment area, rehabilitation or conservation in an urban redevelopment area, or any combination or part thereof, in accordance with an urban redevelopment plan adopted pursuant to the Urban Redevelopment Law; and

(3) to make and execute contracts and other instruments necessary or convenient to the exercise of its powers under the Urban Redevelopment Law, to acquire, by purchase, grant, or otherwise, any real property (defined to include all lands, including improvements and fixtures thereon and property of any nature appurtenant thereto or used in connection therewith), to hold, improve, clear, or prepare for redevelopment any

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such property, and to borrow money for the purposes of the Urban Redevelopment Law and to give such security as may be required and to enter into and carry out contracts in connection therewith.

The Mayor and Council of the City of Kennesaw (the “Mayor and Council”), by resolution adopted on August 4, 2003, designated the area covered by the hereinafter defined Urban Redevelopment Plan as an “urban redevelopment area” or “slum area,” which the Mayor and Council designated as appropriate for an urban redevelopment project. The Mayor and Council held a public hearing on September 2, 2003, after public notice, on a proposed urban redevelopment plan entitled the “City of Kennesaw Urban Redevelopment Plan” (the “Original Plan”). The Mayor and Council, by resolution adopted on September 15, 2003, approved the Original Plan and the urban redevelopment project set forth therein. The Mayor and Council held a public hearing on December 18, 2006, after public notice, on proposed modifications to the Original Plan as set forth in a proposed amendment and restatement of the Original Plan entitled “Amended and Restated Downtown Kennesaw Urban Redevelopment Plan” (the “Amended Plan”). The Mayor and Council, by resolution adopted on December 18, 2006, approved the Amended Plan and the urban redevelopment projects set forth therein.

Article IX, Section II, Paragraph III(a) of the Constitution of the State of Georgia of 1983 authorizes the City to provide parking facilities. The Urban Redevelopment Law authorizes the City to appropriate such funds and make such expenditures as may be necessary to carry out the purposes of the Urban Redevelopment Law and to levy taxes and assessments for such purposes. Article IX, Section III, Paragraph I of the Constitution of the State of Georgia of 1983 authorizes the City to contract for any period not exceeding fifty years with any public corporation or public authority for joint services, for the provision of services, or for the joint or separate use of facilities or equipment, if such contract deals with activities, services, or facilities that the contracting parties are authorized by law to undertake or provide.

The execution, delivery, and performance of the Agreement by the City was authorized and approved pursuant to a resolution adopted by the Mayor and Council on February 17, 2014.

Investments

For a description of how the proceeds of the Series 2014 Bonds are to be invested pending their use, the provisions governing those investments, the conditions that must be satisfied before the proceeds of the Series 2014 Bonds may be applied to their intended use, and other provisions governing the investment of the proceeds of the Series 2014 Bonds and the amounts held to pay debt service on the Series 2014 Bonds, see “THE RESOLUTION - Funds Created by the Resolution and Flow of Funds and - Investments” in Appendix B hereto.


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Principal and Interest Requirements

Following are the principal and interest payment requirements with respect to the Series 2014 Bonds, for the calendar years shown below. For purposes of calculating the principal payable in any year, the relevant maturity or mandatory redemption amount is used. A description of the debt service requirements of the City is set forth under “CITY DEBT STRUCTURE - Debt Service Requirements” herein.

Series 2014A Bonds Series 2014B Bonds Total Total Combined

Year Ending Debt Service Debt Service Debt Service December 31 Principal Interest Requirements Principal Interest Requirements Requirements

2014 $ --- $ 65,871.82 $ 65,871.82 $ --- $ 48,711.10 $ 48,711.10 $ 114,582.92 2015 --- 161,318.76 161,318.76 140,000 117,892.50 257,892.50 419,211.26 2016 --- 161,318.76 161,318.76 115,000 115,342.50 230,342.50 391,661.26 2017 --- 161,318.76 161,318.76 120,000 112,992.50 232,992.50 394,311.26 2018 --- 161,318.76 161,318.76 120,000 109,992.50 229,992.50 391,311.26 2019 --- 161,318.76 161,318.76 125,000 106,317.50 231,317.50 392,636.26 2020 --- 161,318.76 161,318.76 125,000 101,942.50 226,942.50 388,261.26 2021 --- 161,318.76 161,318.76 135,000 96,742.50 231,742.50 393,061.26 2022 --- 161,318.76 161,318.76 140,000 91,242.50 231,242.50 392,561.26 2023 --- 161,318.76 161,318.76 145,000 85,361.25 230,361.25 391,680.01 2024 --- 161,318.76 161,318.76 150,000 78,905.00 228,905.00 390,223.76 2025 --- 161,318.76 161,318.76 155,000 71,887.50 226,887.50 388,206.26 2026 --- 161,318.76 161,318.76 165,000 64,367.50 229,367.50 390,686.26 2027 --- 161,318.76 161,318.76 170,000 56,495.00 226,495.00 387,813.76 2028 --- 161,318.76 161,318.76 180,000 47,775.00 227,775.00 389,093.76 2029 --- 161,318.76 161,318.76 190,000 38,062.50 228,062.50 389,381.26 2030 --- 161,318.76 161,318.76 200,000 27,825.00 227,825.00 389,143.76 2031 --- 161,318.76 161,318.76 210,000 17,062.50 227,062.50 388,381.26 2032 --- 161,318.76 161,318.76 220,000 5,775.00 225,775.00 387,093.76 2033 240,000 156,818.76 396,818.76 --- --- --- 396,818.76 2034 250,000 147,568.76 397,568.76 --- --- --- 397,568.76 2035 255,000 137,718.76 392,718.76 --- --- --- 392,718.76 2036 270,000 127,218.76 397,218.76 --- --- --- 397,218.76 2037 280,000 115,868.76 395,868.76 --- --- --- 395,868.76 2038 290,000 103,756.26 393,756.26 --- --- --- 393,756.26 2039 305,000 91,112.51 396,112.51 --- --- --- 396,112.51 2040 315,000 77,543.76 392,543.76 --- --- --- 392,543.76 2041 330,000 63,031.26 393,031.26 --- --- --- 393,031.26 2042 345,000 46,765.63 391,765.63 --- --- --- 391,765.63 2043 360,000 28,700.00 388,700.00 --- --- --- 388,700.00 2044 380,000 9,737.50 389,737.50 --- --- --- 389,737.50

Total $3,620,000 $4,075,450.22 $7,695,450.22 $2,805,000 $1,394,692.35 $4,199,692.35 $11,895,142.57

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SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2014 BONDS

Agreement

Pursuant to the Agreement, the City will agree to pay to the Agency for the services set forth in the Agreement payments in such amounts and at such times as will be sufficient to enable the Agency to pay the principal of, premium, if any, and interest on the Series 2014 Bonds, as and when the same become due and payable. The obligation of the City to make the payments required by the Agreement is a general obligation of the City, to which its full faith and credit and unlimited taxing power are pledged.

The City has agreed in the Agreement to levy, to the extent necessary, an annual ad valorem tax on all taxable property located within the corporate limits of the City, as now existent and as the same may hereafter be extended, at such rate or rates, without limitation as to rate or amount, as may be necessary to produce in each year revenues that will be sufficient to fulfill the City’s obligations under the Agreement, from which revenues the City agreed to appropriate sums sufficient to pay in full when due all of the City’s obligations under the Agreement.

The City has also agreed in the Agreement that in order to make funds available for such purpose in each fiscal year, it will, in its general revenue, appropriation, and budgetary measures through which its tax funds or revenues and the allocation thereof are controlled or provided for, include sums sufficient to satisfy any such payments that may be required to be made under the Agreement, whether or not any other sums are included in such measure, until all payments so required to be made under the Agreement shall have been made in full.

The City’s obligation to make the payments required under the Agreement is absolute and unconditional and will not expire so long as any of the Series 2014 Bonds remain outstanding and unpaid. See “THE AGREEMENT - Obligations of City Absolute and Unconditional” in Appendix B hereto.

Resolution

To secure its obligations under the Series 2014 Bonds, the Agency has adopted the Resolution, pursuant to which the Agency has collaterally assigned and pledged for the benefit of the owners of the Series 2014 Bonds all of the Agency’s right, title, interest, and remedies in and to the Agreement, including all payments to be received thereunder. The Resolution provides that the lien of this pledge is valid and binding against the Agency and against all parties having claims of any kind against the Agency, whether such claims arise in contract, tort, or otherwise and irrespective of whether such parties have notice of the lien created by the Resolution. The Agency has covenanted in the Resolution not to create or permit to be created any lien, security interest, or charge upon the Pledged Revenues or the Agreement, other than the pledge and assignment created by the Resolution. See “THE RESOLUTION - Liens” in Appendix B hereto.

The Agency has not granted any lien on or security interest in the Parking Project or any other assets of the Agency or the revenues therefrom (other than the Pledged Revenues) to secure the Series 2014 Bonds.

The Resolution permits the issuance of additional parity bonds, which, if issued, would be equally and ratably secured on a parity basis with the Series 2014 Bonds. See “THE RESOLUTION - Additional Bonds” in Appendix B hereto.

The Agency may issue other bonds for the purpose of financing unrelated projects, which are not and will not be secured by the Resolution or the Agreement. Such bonds, except any parity bonds issued under the Resolution, will be secured by instruments separate and apart from the Resolution and the Agreement.

Limited Obligations

The Series 2014 Bonds are special limited obligations of the Agency payable solely from the payments to be made by the City to the Agency pursuant to the Agreement. The Series 2014 Bonds are not payable from and are not secured by a charge, lien, or encumbrance upon any funds or assets of the Agency other than the Pledged Revenues and the funds created and held under the Resolution.

The Series 2014 Bonds, however, do not constitute direct obligations of the City and are not directly secured by the general faith and credit or the taxing power of the City, the State of Georgia, or any other political subdivision thereof, and the Series 2014 Bonds will not be or be deemed to constitute a debt of the State of Georgia, the Agency, or the City or any other political subdivision of the State of Georgia within the meaning of any pertinent constitutional or statutory limitation on indebtedness. The Agency has no taxing power and has no legal right to receive appropriations from the State of Georgia or the City, except under the Agreement. No owner of any Series 2014 Bonds shall, by virtue of being such an owner and without regard to

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any rights such owner may have under other instruments and agreements, including the Agreement, ever have the right to compel the exercise of the taxing power of the State of Georgia or any political subdivision thereof, including the City, to pay the Series 2014 Bonds or the interest thereon, or to enforce the payment thereof against any property of the Agency (other than property assigned and pledged under the Resolution), the State of Georgia, or any political subdivision thereof, including the City.

Enforceability of Remedies

The realization of value from the pledge of the Pledged Revenues and the taxing power of the City under the Agreement upon any default will depend upon the exercise of various remedies specified by the Resolution and the Agreement. These and other remedies may require judicial actions, which are often subject to discretion and delay and which may be difficult to pursue. The enforceability of rights and remedies with respect to the Series 2014 Bonds may be limited by state and federal laws, rulings, and decisions affecting remedies and by bankruptcy, reorganization, insolvency, or other laws affecting creditors’ rights or remedies heretofore or hereafter enacted. A court may decide not to order the specific performance of the covenants contained in the Resolution or the Agreement.

Section 36-80-5 of the Official Code of Georgia Annotated provides that no authority or county created under the Constitution or laws of the State of Georgia shall be authorized to file a petition for relief from payment of its debts as they mature or a petition for composition of its debts under any federal statute providing for such relief or composition or otherwise to take advantage of any federal statute providing for the adjustment of debts of political subdivisions and public agencies and instrumentalities. Section 36-80-5 of the Official Code of Georgia Annotated also provides that no chief executive, board of commissioners, or other governmental officer, governing body, or organization shall be empowered to cause or authorize the filing by or on behalf of any authority or county created under the Constitution or laws of the State of Georgia of any petition for relief from payment of its debts as they mature or a petition for composition of its debts under any federal statute providing for such relief or composition or otherwise to take advantage of any federal statute providing for the adjustment of debts of political subdivisions and public agencies and instrumentalities.

THE AGENCY

The Urban Redevelopment Agency of the City of Kennesaw, Georgia is a public body corporate and politic created and existing under the laws of the State of Georgia, particularly the Urban Redevelopment Law. The City, by resolution adopted on September 2, 2003, activated the Agency and elected to have the Agency exercise the City’s “urban redevelopment project powers” under the Urban Redevelopment Law.

The Agency has authorized the use of this Official Statement but has not participated in the preparation of this Official Statement and, except for the information under the captions “THE AGENCY” and “LEGAL MATTERS - Pending Litigation” pertaining to the Agency, has not provided or made any investigation with respect to any of the information contained in this Official Statement, and does not assume any responsibility for the accuracy or completeness of the information contained herein.

THE AGENCY HAS NO TAXING POWER AND HAS NO LEGAL RIGHT TO RECEIVE APPROPRIATIONS OR OTHER PAYMENTS FROM THE CITY OR ANY OTHER GOVERNMENTAL BODY, EXCEPT FOR THE PAYMENTS THE CITY HAS CONTRACTED TO MAKE UNDER THE AGREEMENT.

The affairs of the Agency are conducted by a Board of Commissioners consisting of three members. The Mayor of the City, with the advice and consent of the Council of the City, appoints the members of the Board of Commissioners of the Agency for staggered terms of office of three years. The Urban Redevelopment Law requires all commissioners of the Agency to reside in the City.

Information concerning the current members of the Board of Commissioners of the Agency is set forth below.

Name and Office Held Expiration of Term Principal Occupation

Arthur L. Hunt, Chairman September 1, 2014 Driving School Instructor Cindy Giles September 1, 2016 Engineering Consultant and

Homemaker Herb Richardson September 1, 2015 Operations Director, Big Peach

Running Company

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THE CITY

Introduction

The City is a municipal corporation created and existing under the laws of the State of Georgia and has as its formal name the “City of Kennesaw, Georgia.” The City is located in the northwestern portion of the State of Georgia approximately 26 miles northwest of the City of Atlanta. The City is located in the northwestern portion of Cobb County, approximately seven miles northwest of the City of Marietta, the county seat of Cobb County. The City was originally chartered in 1877 and presently has a land area of approximately 8.4 square miles. At its highest point of elevation, the City is situated at 1,092 feet above sea level, and the City’s terrain is rolling.

City Administration and Officials

The corporate governmental powers of the City are vested in a Mayor and five councilmembers known as the “Mayor and Council of the City of Kennesaw.” The Mayor and councilmembers are elected at large by the qualified voters of the City and serve four-year terms of office. To be eligible for the office of Mayor or councilmember a person must be at least 21 years of age, must be a qualified voter of the City, and must be a bona fide resident of the City for one year prior to election day. No person is qualified to hold the office of Mayor or councilmember who has been convicted of a felony unless such person has received a full pardon and has had all rights of citizenship restored.

The Mayor is the chief executive officer of the City. The Mayor presides at all meetings of the Mayor and Council and has a vote only in the case of a tie vote by the councilmembers. The Mayor has the right to veto any resolution or ordinance of the Council, which veto may be overridden only upon the affirmative vote of four-fifths of the councilmembers.

Information concerning the current Mayor and Council is set forth below:

Name and Office Held Expiration of Term Number of

Years in Office Principal Occupation

Mark Mathews, Mayor December 31, 2015 51 Governmental Relations, MetroAtlanta Ambulance

Cris Eaton-Welsh, Council Post 1 December 31, 2015 5 Chiropractor Tim Killingsworth, Council Post 2 December 31, 2015 6 Consultant Leonard Church, Council Post 3 December 31, 2017 02 Dental Prosthetics Business Debra Williams, Council Post 4 December 31, 2017 02 Public Relations Jim Sebastian, Council Post 5 December 31, 2017 02 Consultant

________________________ 1 Prior to his service as Mayor, Mr. Mathews served 13 years as a councilmember. 2 Term of office commenced on January 6, 2014.

Under the City’s Charter, the City Manager is appointed by and serves at the pleasure and direction of the Mayor and Council and assumes the position and duties as the chief administrative officer of the City and such other duties as may be assigned by the Mayor and Council from time to time, including but not limited to director of finance and administration, purchasing agent for all departments, coordinator of commissions and departments of the City, and the general management of City business under the direction and guidance of the Mayor and Council.

Steve Kennedy has served as the City Manager since March 2004. Mr. Kennedy has worked in municipal finance and management positions for over 35 years. These included similar positions in the Cities of Thomasville and Cartersville, Georgia. Mr. Kennedy received his BBA in Accounting and Finance from Valdosta State University in 1975.

Gina Auld has served as the Director of Finance of the City since October 2007. Mrs. Auld began her career in public accounting, auditing local governments throughout metropolitan Atlanta. Ms. Auld worked in public accounting for 16 years before transitioning to working for local governments and has worked in governmental accounting for 25 years. Ms. Auld received her BBA in Accounting from Kennesaw State University in 1988 and became a Certified Public Accountant in 1990.

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City Services

The City provides a full range of municipal government services to its residents. The City provides police protection services to residents of the City, the cost of which is financed by general fund revenues. The City also provides traffic control, library, recreational, municipal court, cultural, and 911 services to its residents and acquires, constructs, and maintains roads, traffic signals, and infrastructure, the cost of which is financed by general fund revenues. The City provides sanitation services to residents of the City, the cost of which is entirely financed through user fees. The sanitation collection services were outsourced to a private company effective October 1, 2013.

City Facilities

The City maintains approximately 114 miles of streets, 28 traffic lights, 1,422 street lights, and 57 miles of stormwater pipes. The City police department had, as of October 1, 2013, one police station, 65 sworn police officers, four civilian employees, and 66 vehicles. The City owns and maintains 16 parks consisting of approximately 110 acres, two lighted tennis courts, six lighted baseball fields, four lighted softball fields, one lighted soccer field, two community centers, 15 playgrounds and 14 picnic areas.

The City owns and maintains a botanical garden known as the “Smith-Gilbert Gardens,” which includes the Hiram Butler Home (ca. 1880), 31 sculptures, and approximately 16 acres of planned gardens with over 3,000 species of plants, several of which are rare in American gardens. United by woodland paths, the botanical garden consists of separate groupings with individual elements including the only public bonsai exhibit in Georgia, the Palladino Camellia Garden, a tea house and waterfall area, a rose garden, and a conifer display.

The City also owns and maintains a history museum known as “The Southern Museum of Civil War and Locomotive History,” which includes approximately 40,000 square feet of exhibit space, an 8,000 square foot interactive Jolley Education Center, a library/archive, and a gift shop. The museum houses three permanent exhibitions: one exhibit featuring the importance of railroads during the Civil War; another exhibit including the famous locomotive, the General, and focusing on the “Great Locomotive Chase,” which involved the General and began in Big Shanty, the forerunner of the City; and a third exhibit focusing on the Glover Machine Works, a turn-of-the-century locomotive manufacturer that was located in nearby Marietta, Georgia. The museum also accommodates temporary exhibits developed internally or hosted through the museum’s affiliation with the Smithsonian Institute.

Demographic Information

Set forth below is selected demographic data for the City and Cobb County.

Cobb County City Per Capita Household Effective Median

Year Population1 Population1 Income2 Buying Income3 Age1

2012 30,990 707,442 $ n/a n/a n/a 2011 30,400 697,366 45,923 n/a 35.4 2010 30,112 689,695 44,427 $89,812 n/a 2009 33,043 714,692 43,290 90,333 34.8 2008 32,689 704,822 44,352 93,045 36.2 2000 21,675 607,751 36,427 50,707 33.2 1990 8,936 447,745 22,624 41,850 31.7 1980 5,095 297,718 11,354 20,378 29.2 1970 3,548 196,793 3,870 n/a 25.4

________________________ Sources: 1 U.S. Department of Commerce, Bureau of the Census. All population figures for years other than 1970, 1980,

1990, 2000, and 2010 are estimates by the U.S. Department of Commerce, Bureau of the Census. 2 U.S. Department of Commerce, Bureau of Economic Analysis. 3 Editor & Publisher Market Guide. This publication was not published in 2011 and 2012.

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Economic Information

The following information is provided to give prospective investors an overview of the general economic conditions in the City and Cobb County. These statistics have not been adjusted to reflect economic trends.

Retail Sales (in thousands)

Year Cobb County 2012 n/a 2011 n/a 2010 $11,888,344 2009 12,476,197 2008 12,472,832

________________________ Source: Editor & Publisher Market Guide. This publication was not published in 2011 and 2012.

Summary of City Building Permits

Residential1

Commercial/Industrial/Other Single Family Multi-Family Year Permits Value Units Value Units Value

2012 186 $ 7,932,766 1,193 $296,631,266 1,052 $126,748,046 2011 171 20,947,753 886 217,577,920 872 113,722,321 2010 134 11,155,576 713 153,918,157 300 36,940,418 2009 129 7,579,221 409 85,453,231 141 22,351,221 2008 152 20,232,844 727 160,982,770 341 47,624,601 ____________________ Source: 1 U.S. Department of Commerce, Bureau of the Census, Construction Statistics Division.

Set forth below are the percentages of land use for various purposes within the City, computed based upon the assessed values of the various categories for ad valorem property tax purposes.

Category of Land Use

Year Residential Commercial Industrial Other1 2013 49.63% 46.48% 2.62% 1.27% 2012 49.97 46.25 2.58 1.20 2011 55.81 40.66 2.56 0.97 2010 55.40 41.16 2.50 0.94 2009 57.23 39.31 2.55 0.91

________________________ 1 Includes agricultural, preferential conservation use, utility, and miscellaneous. Source: State of Georgia Department of Revenue, Property Tax Division.

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Following is a table showing the percentage of the 2011 payroll distribution in Cobb County for each major sector of the local economy.

Percentage of 2011 Payroll

Distribution in Cobb County By Sector

Percentage of 2011 Industry Payroll Distribution

Forestry, Fishing, Hunting, Agriculture Support 0.05% Mining 0.03 Utilities 0.69 Construction 6.77 Manufacturing 6.07 Wholesale Trade 9.40 Retail Trade 12.15 Transportation and Warehousing 2.17 Information 3.25 Finance and Insurance 5.69 Real Estate and Rental and Leasing 2.08 Professional, Scientific, and Technical Services 8.67 Management of Companies and Enterprises 6.13 Administrative, Support, Waste Management, and

Remediation Services 9.13 Educational Services 1.51 Health Care and Social Assistance 10.30 Arts, Entertainment, and Recreation 1.45 Accommodation and Food Services 9.23 Other Services 0.03 Unclassified Establishments 5.20 100.00%

________________________ Source: U.S. County Business Patterns, U.S. Department of Commerce, Bureau of the Census.

Set forth below are the ten largest private employers located in the City as of October 1, 2013, their industries, and their approximate number of employees. There can be no assurance that any employer listed below will continue to be located in the City or will continue employment at the level stated. No independent investigation has been made of, and no representation can be made as to, the stability or financial condition of the companies listed below.

Employer Industry Employees

Publix Super Markets Retail Grocery Stores 347 Fabric.com Electronic Shopping 249 Atlanta Bonded Warehouse General Warehouse and Storage 230 Tug Technologies Corporation Transportation Equipment Manufacturing 193 Shady Grove Rest Home Health Services 125 Qualistaff Staffing, LLC Employment Placement Agencies 100 Crane Nuclear Metal Products Manufacturing 86 Owens & Minor Distribution Wholesale Trade 80 Beaumont Products Manufacturing Equipment 77 Polyone Chemical and Allied Products Manufacturing 57

________________________ Source: City of Kennesaw Business License Department.

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Set forth below are labor statistics for the City for the past five years, with comparative data for Cobb County and the State of Georgia.

2008 2009 2010 2011 2012

Employment 16,433 15,894 14,710 14,877 15,217 Unemployment 1,159 1,954 2,027 1,912 1,593 Total Labor Force 17,592 17,848 16,737 16,789 16,810 City Unemployment Rate 6.6% 10.9% 12.1% 11.4% 9.5% Cobb County Unemployment Rate 5.6% 9.0% 9.6% 9.1% 8.1% State Unemployment Rate 6.3% 9.8% 10.2% 9.9% 9.0%

________________________ Source: State of Georgia Department of Labor.

According to the State of Georgia Department of Labor, the preliminary December 2013 unemployment rate of the City was 7.0 percent, compared to 6.1 percent for Cobb County and 7.2 percent for the State of Georgia.

Total Deposits in City

Financial Institutions as of June 30

Total Deposits Year (in thousands)

2013 $827,122 2012 906,063 2011 730,737 2010 694,048 2009 712,969

________________________ Source: State of Georgia Department of Banking and Finance.

According to the State of Georgia Department of Banking and Finance as of June 30, 2013, the City had 10 financial institutions with a total of 20 branch offices.

Employees, Employee Relations, and Labor Organizations

The City employed 219 persons in all departments of government as of January 1, 2014, 206 full-time and 13 part-time and temporary. No employees of the City are represented by labor organizations or are covered by collective bargaining agreements, and the City is not aware of any union organizing efforts at the present time. The City Manager believes that employee relations are good.

City Amenities

Private entities and other governmental entities provide certain services and facilities to residents of the City, aside from those provided by the City. The City is supplied water and sewer services by Cobb County, natural gas service by all major suppliers, electric service by Georgia Power Company and Cobb EMC, telephone service by AT&T and all major suppliers, and cable television service by all major suppliers. The City is served by WellStar Kennestone Hospital in Marietta, a 633-bed general acute care hospital, Children’s Healthcare at Town Center, Physicians Immediate Med, Resurgens Orthopedics, Kaiser Permanente, WellStar Medical Group Urgent Care, and Kennesaw Urgent Care. Swift-Cantrell Park and Adams Park are located in the City and Kennesaw Mountain National Battlefield Park, Pineridge Memorial Park, Noonday Creek Park, Big Shanty Park, and Leone Hall Price Park provide recreational amenities to City residents. There are approximately 60 churches located in the City. The City receives all radio and television stations transmitting from the Atlanta area. Newspapers circulated in the City include The Brightside, The Kennesaw Ledger, The Marietta Daily Journal, and The Atlanta Journal-Constitution. Highways serving the City include U.S. Highway 41 and U.S. Interstate Highway 75. CSX Railroad and Norfolk Southern provide railway freight services to the City. Cobb Community Transit and Greyhound Bus Lines provide bus service to the City. The City is located within close proximity of three airports: Hartsfield-Jackson Atlanta International Airport, which provides international, domestic, freight, and charter air service, McCollum Airport, which is adjacent to the City, with a lighted 4,500-foot asphalt runway, and Cartersville airport, with a 5,760-foot

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asphalt runway. The City is within the Cobb County School District, and City residents are served by five of its elementary schools, six of its middle schools, and three of its high schools. Mt. Paran Christian School, North Cobb Christian and The Walker School are the primary private schools that support area residents and their families. Colleges and universities available within close proximity to the City include Kennesaw State University, ITT Technical Institute, Cobb Beauty College, Chattahoochee Technical College, Southern Polytechnic State University, and Life University.


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CITY DEBT STRUCTURE

Summary of City Debt By Category

Set forth below is information concerning debt of the City as of February 1, 2014. The information set forth below should be read in conjunction with the City’s financial statements included as Appendix A hereto.

Amount To Be Amount Amount Outstanding Outstanding Upon Authorized (less Sinking Fund Issuance of

Category of Debt But Unissued Installments Paid) Series 2014 Bonds

General Obligation Bonds1 $-0- $11,155,000 $11,155,000 Intergovernmental Contracts2

The Agency (securing the Series 2014 Bonds)3

-0- -0- 6,425,000

The Agency (securing its Revenue Bonds (City of Kennesaw, Georgia Project), Series 2003)4

-0- 835,000 835,000

The Agency (securing its Revenue Bond (City of Kennesaw, Georgia Project), Series 2009)5

-0- 2,735,000 -0-

Kennesaw Downtown Development Authority (securing its revenue bonds and notes)6

-0- 3,276,846 3,276,846

Capital Leases7 -0- 244,460 244,460

Total $-0- $18,246,306 $21,936,306 ________________________ 1 General obligations of the City to which its full faith and credit and taxing power are pledged. 2 General obligations (represented by separate contracts with the named public entities, which are pledged to the

payment of revenue bonds, notes, or other obligations issued by such public entities) of the City to which its faith and credit and taxing power are pledged. These obligations do not constitute debt of the City for purposes of the constitutional debt limit described in “CITY DEBT STRUCTURE - Limitations on City Debt” herein and do not count against the City’s debt limitation.

3 Represents the Agreement, which is pledged to the payment of the Series 2014 Bonds. 4 Represents an existing agreement of sale with the Agency, which is pledged to the payment of revenue bonds

issued by the Agency to finance improvements to the City’s city hall building. 5 Represents an existing agreement of sale with the Agency, which is pledged to the payment of revenue bonds

issued by the Agency to finance the acquisition of land on which the Parking Project is to be located. These bonds will be redeemed from the proceeds of the sale of such land to the Developer. See “PLAN OF FINANCING - The Parking Project” herein.

6 Represents existing contracts with the Kennesaw Downtown Development Authority, which are pledged to the payment of revenue bonds and notes issued by the Kennesaw Downtown Development Authority to finance an expansion of the City’s museum and strategic land acquisitions.

7 The financial obligations of the City under the capital leases do not constitute general obligations of the City to which its faith and credit or taxing power are pledged, but are subject to and dependent upon lawful appropriations of general revenues being made by the Mayor and Council to pay the payments due in each fiscal year under the instruments. The City’s obligations under the instruments are from year to year only and do not constitute a mandatory payment obligation of the City in any fiscal year in which funds are not appropriated by the City to pay the payments due in such fiscal year. The City’s obligations under the instruments do not constitute debt of the City for purposes of the constitutional debt limit described in “CITY DEBT STRUCTURE - Limitations on City Debt” herein and do not count against the City’s debt limitation.

Reference is made to Note 17 of the basic financial statements of the City included as Appendix A for a

discussion of the contingent liabilities of the City.

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There has never been a default in payment of the principal of or interest on any general obligation bonds issued by the City.

Proposed Debt

The City has in the past issued short-term tax anticipation notes each year for working capital purposes in anticipation of receipt of tax revenues and expects to continue to do so in the future. The notes historically are issued in June of each year and mature by December 31 of the same year. The City expects to issue these notes in the principal amount of approximately $5.0 million in each of the next five years.

The City has also in the past periodically entered into capital leases to finance equipment and vehicles, and the City expects to continue to do so in the future.

The City has no other present plans to incur additional debt in the next five years.


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Debt Service Requirements

Set forth below are the debt service requirements of the City for all categories of debt upon the issuance of the Series 2014 Bonds.

Fiscal Total

Year Ending General Intergovernmental Capital Debt Service September 30 Obligation Bonds Contracts1 Leases Requirements

2014 $ 229,793 216,658.17 $ 87,598 534,049.17 2015 963,977 1,068,379.51 90,536 2,122,892.51 2016 962,347 1,040,384.26 47,251 2,049,982.26 2017 969,687 1,321,563.51 30,486 2,321,736.51 2018 975,791 1,011,509.51 --- 1,987,300.51 2019 975,762 1,014,471.26 --- 1,990,233.26 2020 979,600 824,405.26 --- 1,804,005.26 2021 987,099 831,285.26 --- 1,818,384.26 2022 993,156 827,081.26 --- 1,820,237.26 2023 1,002,668 391,680.01 --- 1,394,348.01 2024 1,010,532 390,223.76 --- 1,400,755.76 2025 1,021,645 388,206.26 --- 1,409,851.26 2026 1,030,904 390,686.26 --- 1,421,590.26 2027 1,038,309 387,813.76 --- 1,426,122.76 2028 1,058,551 389,093.76 --- 1,447,644.76 2029 1,066,527 389,381.26 --- 1,455,908.26 2030 --- 389,143.76 --- 389,143.76 2031 --- 388,381.26 --- 388,381.26 2032 --- 387,093.76 --- 387,093.76 2033 --- 396,818.76 --- 396,818.76 2034 --- 397,568.76 --- 397,568.76 2035 --- 392,718.76 --- 392,718.76 2036 --- 397,218.76 --- 397,218.76 2037 --- 395,868.76 --- 395,868.76 2038 --- 393,756.26 --- 393,756.26 2039 --- 396,112.51 --- 396,112.51 2040 --- 392,543.76 --- 392,543.76 2041 --- 393,031.26 --- 393,031.26 2042 --- 391,765.63 --- 391,765.63 2043 --- 388,700.00 --- 388,700.00 2044 --- 389,737.50 --- 389,737.50

Totals $15,266,348 $16,773,282.57 $255,871 $32,295,501.57 ________________________ 1 Includes the Agreement, pledged to the payment of the Series 2014 Bonds (see “THE SERIES 2014 BONDS -

Principal and Interest Requirements” herein), and the other intergovernmental contracts described under the heading “CITY DEBT STRUCTURE - Summary of City Debt by Category” herein.

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Overlapping Debt

In addition to the City’s debt obligations, property owners in the City are responsible for any debt obligations of other taxing entities in the proportion to which the jurisdiction of the City overlaps such entities. Set forth below is the estimated overlapping general obligation debt and estimated overlapping property tax supported or guaranteed revenue debt of the City as of February 1, 2014. Although the City has attempted to obtain accurate information as to the outstanding overlapping debt, it does not warrant its completeness or accuracy, as there is no central reporting entity which has this information available, and the amounts are based on information supplied by others.

Amount of Amount of Percent of Outstanding

Name of Authorized But Outstanding Debt Debt Chargeable to Overlapping Entity Unissued Debt (Less Sinking Fund) Property in the City1

Cobb County General Obligation Bonds $-0- $ 29,065,000 3.51% Intergovernmental Contracts2

Cobb-Marietta Coliseum and Exhibit Hall Authority -0- 41,635,000 3.51

Downtown Marietta Development Authority

-0- 1,460,000 3.51

Cobb County Solid Waste Management Authority -0- 2,000,000 3.51

Notes3 -0- 156,060,874 3.51

Total $-0- $239,890,874 ________________________ 1 The percentage of each overlapping entity’s outstanding debt chargeable to property in the City is calculated by

dividing the gross assessed valuation of property in the City by the gross assessed valuation of property in the overlapping entity.

2 Represents intergovernmental contracts pledged to the payment of revenue bonds issued by these public entities. 3 Payable to the Georgia Environmental Facilities Authority. These obligations constitute general obligations of

Cobb County to which its full faith and credit and taxing power are pledged.

On November 26, 2013, Cobb County, Georgia, the Cobb-Marietta Coliseum and Exhibit Hall Authority, and the Atlanta National League Baseball Club, Inc., which owns and operates the Atlanta Braves baseball franchise, entered into a Memorandum of Understanding relating to a proposed relocation of the Atlanta Braves to Cobb County. The Memorandum of Understanding outlines certain material terms of the parties’ agreement for the financing, construction, and operation within Cobb County of a new stadium for the Atlanta Braves, a new retail and entertainment district adjacent to the new stadium, and related infrastructure. The Memorandum of Understanding provides that the total budget for the stadium project is $672 million, of which Cobb County will agree to contribute approximately $300 million to be financed by debt obligations secured by various Cobb County tax and fee sources. Although the details of these debt obligations have not yet been made public by Cobb County, to the extent that Cobb County incurs general obligation debt or property tax supported or guaranteed revenue debt to finance its contribution, such debt would constitute overlapping debt chargeable to property in the City.

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Debt Ratios

Set forth below is the property tax supported debt per capita of the City as of the end of each of the City’s past five fiscal years.

Year Ended

September 30 Direct Tax

Supported Debt Overlapping Tax Supported Debt

Overall Tax Supported Debt

20131 $230.18 $433.94 $664.12 2012 244.47 505.84 750.31 2011 263.23 591.66 854.89 2010 279.11 463.31 742.42 2009 181.25 379.82 561.07

________________________ 1 Based upon last available population figures.

Set forth below is the property tax supported debt of the City expressed as a percentage of total assessed value of taxable property within the City as of the end of each of the City’s past five fiscal years.

Year Ended




2013 0.70% 1.32% 2.02% 2012 0.72 1.49 2.21 2011 0.72 1.62 2.34 2010 0.70 1.16 1.86 2009 0.50 1.04 1.54

Set forth below is the property tax supported debt of the City expressed as a percentage of total estimated

market value of taxable property within the City as of the end of each of the City’s past five fiscal years.

Year Ended




2013 0.28% 0.53% 0.81 2012 0.29 0.60 0.89 2011 0.29 0.65 0.94 2010 0.28 0.46 0.74 2009 0.20 0.42 0.62

Debt History

Set forth below is information concerning long-term and short-term liabilities (excluding interfund payables) of the City outstanding as of the end of each of its past five fiscal years.

Amount Outstanding as of September 30 (Audited) Category of Liabilities 2009 2010 2011 2012

Year Ended September 30,

2013 (Unaudited) Short-Term $ 9,427,077 $ 8,323,208 $ 8,567,942 $ 8,802,671 $ 8,760,778 Long-Term 19,078,858 21,455,687 21,473,336 21,326,815 20,665,705

Total $28,505,935 $29,778,895 $30,041,278 $30,129,486 $29,416,483

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Limitations on City Debt

The Constitution of the State of Georgia provides that the City may not incur long-term obligations payable out of general property taxes without the approval of a majority of the qualified voters of the City voting at an election called to approve the obligations. In addition, under the Constitution of the State of Georgia, the City may not incur long-term obligations payable out of general property taxes in excess of 10 percent of the assessed value of all taxable property within the City.

Neither the Agreement nor the Series 2014 Bonds are considered debt of the City for purposes of the foregoing constitutional limitations. Therefore, no vote was required to be held with respect to the Agreement or the Series 2014 Bonds, and neither the Agreement nor the Series 2014 Bonds count against the City’s debt limitations.

Short-term obligations (those payable within the same calendar year in which they are incurred), lease and installment purchase obligations subject to annual appropriation, and intergovernmental obligations (such as the Agreement and the other intergovernmental contracts described under the heading “CITY DEBT STRUCTURE - Summary of City Debt by Category” herein) are not subject to the legal limitations described above. Georgia law provides, however, that no lease or installment purchase contract subject to annual appropriation (excluding intergovernmental contracts such as the Agreement and the other intergovernmental contracts described under the heading “CITY DEBT STRUCTURE - Summary of City Debt by Category” herein) may be delivered if the principal portion of such contract, when added to the amount of debt subject to the debt limitation described above, exceeds 10 percent of the assessed value of all taxable property within the City. Georgia law also provides that no lease or installment purchase contract subject to annual appropriation (excluding intergovernmental contracts such as the Agreement and the other intergovernmental contracts described under the heading “CITY DEBT STRUCTURE - Summary of City Debt by Category” herein) with respect to real property may be developed and executed or renewed, refinanced, or restructured if the lesser of either of the following is exceeded:

(1) the average annual payments on the aggregate of all such outstanding contracts exceed 7.5 percent of the governmental fund revenues of the City for the calendar year preceding the delivery of such contract plus any available special county one percent sales and use tax proceeds collected; or

(2) the outstanding principal balance on the aggregate of all such outstanding contracts exceeds $25 million.

As computed in the table below, based upon the 2013 assessed value of taxable property within the City, the City could incur (upon necessary voter approval) approximately $84,203,237 of long-term obligations payable out of general property taxes (or general obligation bonds).

Computation of Legal Debt Margin

Assessed Value of Taxable Property as of December 31, 2013 $953,582,367

Debt Limit (10% of Assessed Value) $95,358,237 Amount of Debt Applicable to Debt Limit 11,155,000

Legal Debt Margin $84,203,237

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CITY AD VALOREM TAXATION

Introduction

An important source of revenue to fund the operations of the City is ad valorem property taxes. Ad valorem property taxes accounted for an annual average of approximately 45% of City General Fund revenues for the City’s past five fiscal years and are budgeted to account for approximately 41% of General Fund revenues for the year ending September 30, 2014. Ad valorem property taxes are levied annually in mills (one tenth of one percent) upon each dollar of assessed property value.

Property Subject to Taxation

Ad valorem property taxes are levied, based upon value, against real and personal property within the City. There are, however, certain classes of property that are exempt from taxation, including public property, religious property, charitable property, property of nonprofit hospitals, nonprofit homes for the aged, and nonprofit homes for the mentally handicapped, college and certain educational property, public library property, certain farm products, certain air and water pollution control property, and personal effects.

In addition, the City allows exemptions from ad valorem taxation for (1) homesteads, or owner-occupied residences, of persons who are 65 years of age or older, for the full value of that homestead (this exemption, however, is inapplicable to taxes levied to pay bonded indebtedness); (2) homesteads, or owner-occupied residences, of disabled veterans and certain un-remarried surviving spouses of disabled veterans, not to exceed the greater of $32,500 or an amount determined under federal law (currently $64,960); (3) homesteads, or owner-occupied residences, of un-remarried surviving spouses of peace officers or firefighters who were killed in the line of duty, for the full value of that homestead; (4) the homestead, or owner-occupied residence, of each person, in an amount equal to the amount by which the current year assessed value of the homestead exceeds the assessed value of that homestead for the taxable year immediately preceding the taxable year in which this exemption is first granted to such person (this exemption, however, is inapplicable to taxes levied for fire prevention purposes and to pay bonded indebtedness); and (5) the inventory of companies that manufacture, process, or warehouse goods in the City, known as the “freeport” exemption.

In the 2012 legislative session, which concluded on March 29, 2012, the Georgia General Assembly enacted legislation known as House Bill 386 (“HB 386”). Georgia Governor Nathan Deal signed HB 386 into law on April 19, 2012. HB 386 provides a number of changes to Georgia’s tax laws that will impact local governments in Georgia, including the elimination of the ad valorem tax on motor vehicles and the replacement of such ad valorem tax with onetime state and local title fees whenever any motor vehicle changes ownership on or after March 1, 2013. For more information, see “LEGAL MATTERS - State of Georgia Tax Reform Legislation” herein.

Assessed Value

Assessed valuation, which represents the value upon which ad valorem property taxes are levied, is calculated as a percentage of fair market value. Georgia law requires all municipalities to use the fair market value finally determined for county ad valorem tax purposes in determining the fair market value of property within their respective tax jurisdictions for purposes of municipal ad valorem property taxation. Georgia law requires Cobb County to furnish without charge to the Mayor and Council of the City the final determinations of the fair market value of property within the City as soon as such information is available.

Georgia law requires taxable tangible property to be assessed, with certain exceptions, at 40 percent of its fair market value and to be taxed on a levy made by each respective tax jurisdiction according to 40 percent of the property’s fair market value. Georgia law requires certain agricultural real property to be assessed for ad valorem property tax purposes at 75 percent of the value of which other real property is assessed, requires certain historical property to be valued at a lower fair market value for ad valorem property tax purposes, and requires certain agricultural, timber, and environmentally sensitive real property and certain single-family real property located in transitional developing areas to be valued at their “current uses” (as opposed to fair market value).

The chief appraiser of Cobb County is required to submit a certified list of assessments for all taxable property, except motor vehicles and property owned by public utilities, within Cobb County to the Cobb County Board of Tax Assessors. The Tax Commissioner of Cobb County is required to present the tax returns of Cobb County to the Cobb County Board of Tax Assessors by April 11 of each year. The Cobb County Board of Tax Assessors is required to complete its revision and assessment of returns by June 1 of each year and to forward a copy of the completed digest to the State of Georgia Revenue Commissioner for examination and approval. The State of Georgia Revenue Commissioner has the authority to examine the digest for the purpose of determining if the valuations of property are reasonably uniform and equalized between and within counties. Assessments may also be subject to review at various stages by the Cobb County Board of Equalization and the state courts.

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The State of Georgia Motor Vehicle Tax Unit assesses the value of motor vehicles by make, model, and year by county and provides this information to each county tax office. Cobb County provides the City with its motor vehicle assessed values and bills and collects these taxes on behalf of the City. The State of Georgia Property Tax Unit assesses the value of the property of public utilities and divides the assessment into two parts, assessed value of property and assessed value of franchise, and provides these amounts to the City which bills these taxes to the utilities.

Annual Tax Levy

The City determines a rate of levy for each fiscal year by computing a rate which, when levied upon the assessed value of taxable property within its corporate limits, will produce the necessary amount of property tax revenues. The City then levies its ad valorem property taxes by ordinance.

Property Tax Collections

The City bills and collects its own property taxes, with the exception of taxes on motor vehicles, which are billed and collected by Cobb County on behalf of the City. Real and personal property taxes, except motor vehicle taxes, are levied during the fall of each year on the assessed value listed as of January 1. Taxes levied by the City are normally billed on October 1 and are normally payable on December 1. Motor vehicle taxes are levied, due, and collected on a staggered basis throughout the entire calendar year; however, only motor vehicles titled prior to March 1, 2013 are subject to ad valorem tax. For more information, see “LEGAL MATTERS - State of Georgia Tax Reform Legislation” herein. Interest of 12% per annum applies to taxes paid after the due date, and a one-time penalty of 10% applies to taxes paid more than 90 days after the due date.

All taxes levied on real and personal property, together with interest thereon and penalties for late payment, constitute a perpetual lien on and against the property taxed arising after January 1 in the year in which taxed. The lien becomes enforceable 90 days after the due date of the taxes. Georgia law provides that taxes must be paid before any other debt, lien, or claim of any kind, except for certain claims against the estate of a decedent and except that the title and operation of a security deed is superior to the taxes assessed against the owner of property when the tax represents an assessment upon property of the owner other than the property specifically subject to the title and operation of the security deed.

Collection of delinquent real property taxes is enforceable by tax sale of such realty. Delinquent personal property taxes are similarly enforceable by seizure and sale of the taxpayer’s personal property. There can be no assurance, however, that the value of property sold, in the event of a tax sale, will be sufficient to produce the amount required to pay in full the delinquent taxes, including any interest or penalties thereon.

When the last day for the payment of taxes has arrived, the finance director of the City is required to notify the taxpayer in writing of the fact that the taxes have not been paid and that, unless paid, an execution will be issued. At any time after thirty days from giving the notice described in the preceding sentence, the finance director of the City is required to issue an execution for nonpayment of taxes to the police chief of the City. The police chief, designated as the marshal of the City, may then publish a notice of the sale in a local newspaper weekly for four weeks and give the taxpayer ten days written notice by registered or certified mail. A public sale of the property may then be made by the police chief at City Hall on the first Tuesday of the month after the required notices are given.

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Historical Property Tax Data

Set forth below is information concerning the assessed (40% of fair market value) and estimated actual value of taxable property within the City for calendar years 2008 through 2013.

Assessed Values General Maintenance Maintenance Estimated

Calendar Real and Personal Public Motor Mobile Gross Bond Obligation Bond & Operation & Operation Actual Year Property Utilities Vehicles Homes Tax Digest Exemptions Tax Digest1 Exemptions Tax Digest2 Value

2008 $1,115,209,965 $ 7,816,551 $83,839,109 $2,005,396 $1,208,871,021 $60,299,326 $1,148,571,695 $60,969,750 $1,147,901,271 $3,022,177,553 2009 1,106,889,924 9,084,359 83,462,195 2,015,896 1,201,452,374 58,500,962 1,142,951,412 59,156,982 1,142,295,392 3,003,630,935 2010 1,031,855,129 8,585,846 70,683,550 1,908,476 1,113,033,001 58,289,744 1,054,743,257 59,204,944 1,053,828,057 2,782,582,503 2011 969,702,671 8,690,812 69,153,300 1,840,722 1,049,387,505 50,642,462 998,745,043 51,617,482 997,770,023 2,623,468,763 2012 932,691,848 10,460,175 73,465,160 1,803,150 1,018,420,333 53,385,769 965,034,564 54,249,741 964,170,592 2,546,050,833 2013 924,090,127 11,034,297 75,678,880 1,629,972 1,012,433,276 58,850,909 953,582,367 60,017,721 952,415,555 2,531,083,190

________________________ 1 Total assessed value, after deducting exemptions, for purposes of levying tax for City’s general obligation bonds. 2 Total assessed value, after deducting exemptions, for purposes of levying tax for City maintenance and operation, including payments under the Agreement. Sources: State of Georgia Department of Revenue, Property Tax Division; the City.


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Set forth below is information concerning the rate of levy of property taxes per $1,000 of assessed value, or millage rates, of the City and all overlapping governments, for calendar years 2008 through 2013.

City

Calendar Maintenance Debt Cobb Cobb County State of Year and Operation1 Service Total County School District Georgia Total

2008 8.00 1.50 9.50 9.60 18.90 0.25 38.25 2009 8.00 1.50 9.50 9.60 18.90 0.25 38.25 2010 8.00 1.50 9.50 9.60 18.90 0.25 38.25 2011 8.00 1.50 9.50 11.11 18.90 0.25 39.76 2012 8.00 1.50 9.50 11.11 18.90 0.20 39.76 2013 8.00 1.50 9.50 10.91 18.90 0.15 39.46

________________________ 1 Includes taxes levied to make payments under the Agreement.

Set forth below is information concerning property tax levies and collections (excluding public utilities, motor vehicles, and mobile homes) of the City for its General Fund for the past five fiscal years of the City.

Tax Collections Fiscal Year1 Tax Levy

Current Year’s Levy

Prior Years Total

Percentage of Collection of

Current Year’s Levy to

Tax Levy

Percentage of Total Tax Collections to Tax Levy

Delinquent Taxes

Outstanding as of Year End

2009 $8,620,072 $8,427,743 $142,161 $8,569,904 97.8% 99.4% $ 25,018 2010 9,024,356 8,894,329 172,767 9,067,096 98.6 100.5 41,504 2011 8,476,633 8,303,209 158,711 8,461,920 97.9 99.8 86,491 2012 8,036,051 7,869,525 71,682 7,941,207 97.9 98.8 89,170 2013 7,696,157 7,550,158 173,339 7,723,497 98.1 100.4 145,999

________________________ 1 Relates to preceding calendar year tax digest.

Set forth below is the estimated value of total tax title liens (or fi fas) owned by the City as of the end of its past five fiscal years. The amounts set forth below are cumulative amounts from all preceding years.

Estimated Value as of September 30

2009 2010 2011 2012 2013 $25,018 $41,504 $86,491 $89,170 $145,999

Delinquent property taxes of the City are written off when the statute of limitations for their collection (7 years)

expires or if no property is found to levy upon, if earlier. The delinquent taxes written off are usually for personal property, which are more difficult to collect than taxes on real property.

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Ten Largest Taxpayers

Set forth below are the ten largest taxpayers of the City for calendar year 2013. A determination of the largest taxpayers within the City can be made only by manually reviewing individual tax records. Therefore, it is possible that owners of several small parcels may have an aggregate assessment in excess of those set forth in the table below. Furthermore, the taxpayers shown in the table below may own additional parcels within the City. No independent investigation has been made of, and consequently no representation can be made as to, the financial condition of any of the taxpayers listed below or that such taxpayers will continue to maintain their status as major taxpayers in the City.

Percent Taxes Assessed of Gross

Taxpayer Nature of Business Levied Valuation Tax Digest EI Kennesaw LLC Apartments $157,696 $16,599,600 1.64% Busbee Development LLC Apartments 121,011 12,738,040 1.26 Kennesaw Gardens Associates Apartments 97,858 10,300,800 1.02 Atlanta RDC Co Real Estate 81,068 8,533,488 0.84 Owens & Minor Distribution Inc. Wholesale Trade 71,804 7,558,274 0.75 Alta Ridenour LLC Apartments 68,358 7,195,611 0.71 Park at Kennesaw LLC Apartments 62,662 6,596,000 0.65 Lakeside Vista Apartments LP Apartments 58,797 6,189,200 0.61 Exeter 3625 Kennesaw LLC Real Estate 53,882 5,671,800 0.56 ACC OP Frey LLC Apartments 51,677 5,439,720 0.54

Total $824,813 $86,822,533 8.58%


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CITY FINANCIAL INFORMATION

Accounting System and Policies

The accounting practices and policies of the City conform to generally accepted accounting principles as applied to governments. The City’s accounting system is organized and operated on a fund basis. The City’s funds are segregated for the purpose of accounting for the operation of specific activities or attaining certain objectives. The City’s primary fund is the General Fund, which contains all City revenues except those which are specifically allocated for other purposes. The City may appropriate money from the General Fund for all ordinary City expenses. The Agency is accounted for as a blended component unit of the City. The Kennesaw Downtown Development Authority and the Kennesaw Development Authority are accounted for as discretely presented component units of the City. The City also maintains several other funds to account for specific activities or to attain certain objectives.

The funds of the City are grouped into two broad categories:

(1) Governmental Funds - This category includes the General Fund, Special Revenue Funds, Capital Projects Fund, and Debt Service Fund. The General Fund is the principal operating fund of the City and is used to account for all activities of the City not otherwise accounted for in a special fund. The City has five Special Revenue Funds (the Asset Forfeiture Fund, the E911 Fund, the Hotel/Motel Tax Fund, the Cemetery Fund, and the Impact Fees Fund), which account for specific revenues that are legally restricted to expenditures for a particular purpose. The City has two Capital Projects Funds (the Capital Projects Fund and the SPLOST Fund), which account for the acquisition or construction of capital facilities. The City has one Debt Service Fund, which is used to account for the accumulation of resources for and the payment of debt service on general long-term debt and related costs.

(2) Proprietary Funds - This category includes the Enterprise Funds and the Internal Service Funds. The Enterprise Funds account for the operations that are financed and operated in a manner similar to private business enterprises. The City has three Enterprise Funds, which are the Sanitation Fund, the Museum Fund, and the Smith-Gilbert Gardens Fund. The Internal Service Funds account for the services performed by a central service department for other departments or agencies of the City. The City has one Internal Service Fund, the Self Insurance Fund, which accounts for the accumulation of resources to be used for health insurance related costs. The Internal Service Funds account for City operations that are designed to be self-supporting.

On October 18, 2004, the Mayor and Council enacted an ordinance (the “2004 Ordinance”), which remains in effect, that provides that in the event the City sells its water and sewer system, the City must invest a minimum of $9 million of the net proceeds therefrom in any investment vehicle permitted by Georgia law. The 2004 Ordinance further provides that the principal balance may neither be spent nor sold without first putting the same question describing such use of the principal balance on a public referendum, and such expenditure of the principal balance may be spent or sold only upon its approval by a majority of the voters casting a vote in such public referendum. The 2004 Ordinance further provides that the foregoing limitation does not affect the right of the Mayor and Council to use any accumulated interest generated by the chosen investment vehicle for whatever lawful purposes the Mayor and Council so determine, including, but not limited to, the repayment of bonded indebtedness and other municipal obligations. In 2005, the City sold its water and sewer system to Cobb County, and the City has restricted the use of the proceeds of that sale ($9,000,000) to voter approved use in accordance with the 2004 Ordinance. The Mayor and Council may, if it wishes, change or repeal the 2004 Ordinance under home rule powers granted to all municipalities under Georgia law.

Note 1 of the basic financial statements of the City included as Appendix A to this Official Statement contains a detailed discussion of the City’s significant accounting policies.

Five Year General Fund History

Set forth below is an historical, comparative summary of the revenues, expenditures, and changes in fund balance of the City’s General Fund for the past five fiscal years. Information in the following table for fiscal years 2009 to 2012 has been extracted from audited financial statements of the City for the years ended September 30, 2009 to 2012. See “CITY FINANCIAL INFORMATION - Accounting System and Policies” herein. Information in the following table for the year ended September 30, 2013 has been prepared by the City without audit. Although taken from audited financial statements (in the case of the information shown for fiscal years 2009 to 2012 only), no representation is made that the information is comparable from year to year, or that the information as shown taken by itself presents fairly the financial condition of the City for the fiscal years shown. For more complete information, reference is made to the audited financial statements for fiscal years 2009 to 2012 and to the unaudited financial information for fiscal year 2013, copies of which are available from the City upon request.

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City General Fund

Years Ended September 30 (Audited)

2009 2010 2011 2012


2013 (Unaudited) Revenues:

Taxes $13,754,131 $13,925,819 $13,659,556 $13,595,325 $14,015,915 Licenses and Permits 168,949 196,922 342,350 420,812 409,154 Intergovernmental 1,356,369 2,803,151 2,063,740 1,086,266 1,173,952 Fines and Forfeitures 1,259,470 2,806,558 1,559,121 1,363,867 1,186,235 Charges for Services 610,756 577,459 776,358 825,189 844,774 Contributions 17,287 5,537 416,736 2,750 500 Interest Income (Net Loss on

Investments) 542,259 321,701 396,399 370,959 (518,490) Other Revenues 185,455 170,309 136,701 642,229 177,709

Total Revenues 17,894,676 20,807,456 19,350,961 18,307,397 17,289,749

Expenditures: Current:

General Government 4,232,759 3,884,257 4,146,581 3,847,933 4,015,796 Judicial 325,283 318,139 346,774 327,480 364,160 Public Safety 4,957,231 5,227,792 5,416,324 5,402,810 5,604,145 Public Works 2,195,239 2,328,467 2,515,375 2,435,937 2,521,616 Culture and Recreation 2,113,140 2,180,807 2,311,614 2,228,070 2,255,699 Housing and Development 1,103,472 983,173 1,109,355 876,137 852,765

Capital Outlay 697,320 518,680 1,594,783 806,046 899,380 Debt Service 1,357,324 1,123,309 1,085,138 1,102,859 1,097,571

Total Expenditures 16,981,768 16,564,624 18,525,944 17,027,272 17,611,132

Excess of Revenues over Expenditures 912,908 4,242,832 825,017 1,280,125 (321,383)

Other Financing Sources (Uses): Issuance of Long-Term Debt 94,100 --- 281,236 159,992 --- Proceeds from Sale of Capital

Assets 22,828 100 13,331 5,388 6,156 Transfers In1 466,947 508,394 854,356 1,019,325 971,341 Transfers Out2 (1,476,103) (4,656,874) (2,449,161) (1,647,672) (1,807,547)

Total Other Financing Sources (Uses) (892,228) (4,148,380) (1,300,238) (462,967) (830,050)

Net Change in Fund Balance 20,680 94,452 (475,221) 817,158 (1,151,433)

Fund Balance, Beginning of Year3 8,061,953 8,082,633 8,177,085 7,701,864 7,417,2714

Fund Balance, End of Year3 $ 8,082,633 $ 8,177,085 $ 7,701,864 $ 8,519,0224 $ 6,265,838 _____________________________________________

1 Represents primarily transfers from the Sanitation Fund. 2 Represents primarily transfers to the Museum Fund, the Capital Projects Fund, and the Smith-Gilbert Gardens

Fund. 3 Fund balance includes the amount restricted for voter approved use and invested pursuant to the 2004 Ordinance.

Although initially equal to $9,000,000, the amount fluctuates from year as the investments are adjusted to fair value. See “CITY FINANCIAL INFORMATION - Accounting System and Policies” herein.

4 Beginning fund balance for the fiscal year ended September 30, 2013 is different than the September 30, 2012 ending fund balance due to a change in reporting entity. The City created a new fund to account for its equitable sharing activity and moved the opening balances out of the General Fund, resulting in a decrease to the General Fund's beginning fund balance.

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Management Comments Concerning Material Trends in Revenues and Expenditures

For a narrative overview and analysis of the financial activities of the City for fiscal year 2012, see “Management’s Discussion and Analysis” included in Appendix A to this Official Statement. The Management’s Discussion and Analysis is not a required part of the basic financial statements of the City but is supplementary information required by the Governmental Accounting Standards Board that has not been audited by the City’s auditor.

Since fiscal year 2009, the City’s General Fund net change in fund balance has ranged from a high of $817,158 in fiscal year 2012 to low of $(1,151,433) (unaudited) in fiscal year 2013. During each fiscal year since fiscal year 2009, the City has made operating transfers ranging from approximately $500,000 to approximately $1,000,000 from its Sanitation Fund to its General Fund to reimburse its General Fund for expenditures related to the sanitation system that were paid from the General Fund.

Since 2009, the City’s General Fund balance increased from $8,082,633 in fiscal year 2009 to $8,519,022 in fiscal year 2012. Fiscal year 2012 resulted in an increase of $817,158. Fiscal years 2009 and 2010 resulted in increases in the City’s General Fund balance of $20,680 and $94,452, respectively. Fiscal year 2011 resulted in a decrease of $(475,221) and fiscal year 2013 resulted in a decrease of $(1,151,433) (unaudited).

The decrease in the General Fund balance in fiscal 2013 was primarily due to adjusting investments to fair value at year end as required by GASB and actual license and permit revenue falling below budget. The increase in the General Fund balance in fiscal year 2012 was primarily due to actual property tax revenue exceeding budget and the collection of lawsuit settlement proceeds. The fiscal year 2011 decrease in the General Fund balance was primarily due to transfers out to the Museum Fund and Smith-Gilbert Gardens Fund being higher than budgeted. The fiscal year 2009 and 2010 increases in the General Fund balance were the result of reductions in expenditures by the City.

As of the end of fiscal year 2013, the City’s unaudited General Fund balance was equal to approximately 36% of unaudited General Fund revenues, and the unassigned portion of the General Fund balance of $(3,412,511) (which excludes non-spendable fund balance of $1,434,165 for long-term advances, inventories and prepaid expenditures, and restricted fund balance of $8,244,185 for public safety, debt service and a future use to be determined from the sale of the water system proceeds) equaled 20.1% of fiscal year 2013 General Fund revenues.

Fiscal year 2014 General Fund revenues (including operating transfers from the Sanitation Fund and other financing sources) are budgeted at $19,842,538, which represents an approximately 7.1% increase from fiscal year unaudited 2013 General Fund revenues. Fiscal year 2014 General Fund expenditures (including operating transfers out) are budgeted at $19,842,538, which represents an approximately 2.2% increase from fiscal year 2013 unaudited General Fund expenditures. No assurance can be given that the actual General Fund results for fiscal year 2014 will equal or exceed the amounts presently budgeted for fiscal year 2014.

Budgetary Process

Georgia law requires each municipality to operate under an annual balanced budget adopted by ordinance or resolution. A budget ordinance or resolution is balanced when the sum of estimated net revenues and appropriated fund balances is equal to appropriations.

The City adopts annual appropriated budgets for its General Fund, its Special Revenue Funds, and its Debt Service Fund using the modified accrual basis of accounting, which is in conformity with generally accepted accounting principles and which is consistent with the basis of accounting used in the City’s General Fund financial statements. The City adopts project-length budgets for its Capital Project Funds. The City adopts annual budgets for its Proprietary Funds for planning, control, cost allocation, and evaluation purposes, but these budgets are not required to be reported.

In May of each year, information is transmitted to the various departments to enable them to prepare their operating budget requests for the next fiscal year. Prior to August of each year, the budgetary requests are returned and are reviewed by the City Manager. The City Manager then prepares a proposed line item operating budget and submits it to the Mayor and Council by August. The proposed operating budget includes proposed expenditures and the means for financing them. Public hearings are then conducted in the City to obtain taxpayer comments on the proposed budget. The budget is legally adopted by the second meeting of the Mayor and Council in September through passage of an ordinance by the Mayor and Council.

Budgetary control (the level at which expenditures may not legally exceed appropriations) is maintained at the departmental level. The City Manager is authorized to transfer budget amounts within a department; however, any revisions that alter the total expenditures of a department require a budget amendment by the Mayor and Council.

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Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of moneys are recorded in order to reserve that portion of the applicable appropriation, is not employed by the City. Thus, appropriations outstanding at year-end lapse under generally accepted accounting principles because they do not constitute expenditures or liabilities.

General Fund Budgets

Set forth below is a summary of the City’s adopted budget for its General Fund for the year ending September 30, 2014. This budget is based upon certain assumptions and estimates of the City regarding future events, transactions, and circumstances. Realization of the results projected in this budget will depend upon implementation by management of the City of policies and procedures consistent with the assumptions. There can be no assurance that actual events will correspond with such assumptions, that uncontrollable factors will not affect such assumptions, or that the projected results will be achieved. Accordingly, the actual results achieved could vary materially from those projected in the budget set forth below.

General Fund Budget for Year Ending September 30, 2014

Revenues: Taxes $14,293,366 Licenses and Permits 353,023 Intergovernmental 1,042,518 Fines and Forfeitures 1,285,000 Charges for Services 855,178 Contributions 6,000 Interest Income 400,000 Other Revenues 164,000

Total Revenues 18,399,085 Expenditures:

Current: General Government 3,247,779 Judicial 365,186 Public Safety 5,341,745 Public Works 2,427,101 Culture and Recreation 2,118,323 Housing and Development 1,902,289

Capital Outlay 988,609 Debt Service 1,625,092

Total Expenditures 18,016,124 Excess of Revenues over Expenditures 382,961 Other Financing Sources (Uses):

Issuance of Long-Term Debt 340,000 Proceeds from Sale of Capital Assets 10,000 Transfers In1 1,093,453 Transfers Out2 (1,826,414)

Total Other Financing Sources (Uses) (382,961) Net Change in Fund Balance $ -0-

_____________________________________________

1 Represents primarily budgeted transfers from the Sanitation Fund. 2 Represents primarily budgeted transfers to the Museum Fund, the Capital Fund, and the Smith-Gilbert Gardens

Fund.

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The City has, with some exceptions, conformed to its General Fund budgets for its past five fiscal years. Set forth below is a summary of unfavorable variances between budgeted and actual amounts for the General Fund for the fiscal years ended September 30, 2009 to 2012.

General Fund Unfavorable Variances

Years Ended September 30 2009 2010 2011 2012

Revenues: Taxes $(104,887) $ --- $ (35,165) $ --- Licenses and Permits --- --- (2,456) --- Fines and Forfeitures (264,021) --- (212,996) (74,133) Charges for Services (42,750) (100,197) --- --- Intergovernmental (400,362) (671,970) --- (34,094) Contributions --- (6,250) --- (4,800) Interest --- (138,799) (29,166) (79,041) Miscellaneous (23,949) --- (211,977)

Other Financing Sources (Uses): Transfers In --- (4,047) (30,237) (28,414) Proceeds from Sale of Capital

Assets (1,128) (9,900) --- (4,612) Issuance of Long-Term Debt (91,500) (124) (80,700) (20,158) Transfers Out --- --- (333,891) ---

Net Cumulative Variance Favorable (Unfavorable) $20,680 $94,452 $(475,221) $817,158

The City undertakes periodic budget revisions in which the City’s adopted budget is amended to reflect actual

events that have occurred during the City’s current fiscal year. The City has not yet amended its adopted budget for fiscal year 2014 for its General Fund. The City expects to conform to its adopted budget for its General Fund, as amended, for fiscal year 2014.

Capital Improvements

The City has in effect a five year capital improvements plan, which allows the City to plan, on a long-term basis, for future capital needs. Each year the plan is updated.

The following table summarizes capital outlay for the City’s governmental capital assets (excluding capital assets accounted for in the Enterprise Funds) for the past five fiscal years.

Years Ended September 30 (Audited) Function and Activity 2009 2010 2011 2012


2013 (Unaudited)Land $ --- $2,109,162 $ 74,595 $ --- $ 14,325 Infrastructure 952,280 614,817 1,343,560 759,733 991,994 Buildings --- 35,825 178,240 --- 104,894 Machinery and Equipment 282,285 43,943 265,278 53,614 174,426 Land Improvements 72,750 2,502,975 128,156 --- 47,829 Vehicles 341,382 23,407 469,937 222,358 328,590 Construction in Progress 561,382 488,665 34,648 547,773 3,046,844

Total $2,210,025 $5,818,794 $2,494,414 $1,583,478 $4,708,902

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Set forth below is a summary of the City’s five year capital improvements plan.

Years Ending September 30 Type of

Capital Expenditure 2014 2015 2016 2017 2018 Total

General Government $ 40,000 $ 15,000 $ 15,000 $ 15,000 $ 15,000 $ 100,000 Public Safety 170,000 170,000 170,000 --- 100,0000 610,000 Public Works 3,930,000 2,300,000 2,235,000 1,785,000 500,000 10,750,000 Culture and Recreation 1,155,750 1,155,750 655,749 599,000 500,0000 4,066,249 Smith-Gilbert Gardens 600,000 600,000 --- --- --- 1,200,000

Total Costs $5,895,750 $4,240,750 $3,075,749 $2,399,000 $1,115,000 $16,726,249

Type of Funding Source

General Fund $ 384,000 $ 459,000 $ 294,000 $ 124,000 $ 115,0000 $ 1,376,000 SPLOST 5,311,750 3,781,750 2,781,749 2,275,000 1,000,0000 15,350,249 Total Sources $5,895,750 $4,240,750 $3,075,749 $2,399,000 $1,115,0000 $16,726,249 Sources of Tax Revenues

Set forth below are the City’s general fund tax revenues by source for each of its past five fiscal years.

General Fund Tax Revenues by Source

Alcoholic Beverage Vehicle

Fiscal Property Intangible Excise Franchise Premium Ad Valorem Year Tax Tax Tax Tax Tax Tax Other Total

2009 $8,924,996 $51,328 $379,727 $1,526,658 $1,201,730 $707,835 $ 961,857 $13,754,131 2010 9,015,599 53,636 349,387 1,585,542 1,166,804 672,109 1,082,742 13,925,819 2011 8,390,413 46,681 344,779 1,695,379 1,396,948 708,020 1,077,336 13,659,556 2012 8,027,498 81,432 409,158 1,721,137 1,483,792 718,995 1,153,314 13,595,325 20131 7,694,835 77,687 404,631 1,690,243 1,536,325 1,388,049 1,224,145 14,015,915

________________________ 1 Unaudited.

Employee Benefits

The City participates in a defined-benefit pension plan covering all full-time employees and elected officials, which is administered through the Georgia Municipal Employees Benefit System (“GMEBS”), an agent multiple-employer public employee retirement system that acts as a common investment and administrative agent for cities in the State of Georgia. The pension fund is accumulated from employee contributions, City contributions, and income from the investment of accumulated funds. City employees who are covered under the plan are required by the City to contribute 2% of their annual salary. Set forth below is selected information about the City’s pension plan.

Pension Plan Membership

As of January 1, 2013 Retirees and Beneficiaries Receiving Benefits 45 Terminated Participants Entitled to But Not Yet

Receiving Benefits 27 Active Participants 177

Total number of plan participants 249

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Schedule of Funding Progress

Actuarial Valuation

Date

Actuarial Value

of Assets

Actuarial Accrued Liability (AAL)

Unfunded AAL (UAAL)

Funded Ratio

Covered Payroll

UAAL as a Percentage of Covered

Payroll

January 1, 2009 $4,976,755 $ 7,550,019 $2,573,264 65.92% $7,305,557 35.22% January 1, 2010 6,673,434 8,344,873 1,671,439 79.97 7,573,223 22.07 January 1, 2011 7,704,106 9,915,146 2,211,040 77.70 7,527,440 29.37 January 1, 2012 8,589,913 10,801,905 2,211,992 79.52 7,701,603 28.72 January 1, 2013 9,658,212 11,746,192 2,087,980 82.22 7,338,429 28.45

The City is required by Georgia law to have an actuarial valuation of its defined-benefit pension plan done once

every two years. The City met the minimum funding levels prescribed by state law through September 30, 2013. Note 11 of the basic financial statements of the City included as Appendix A to this Official Statement contains a detailed description of the City’s defined-benefit pension plan.

The City has an actuarial valuation of its defined-benefit pension done once every year. The actuarial report prepared by The Segal Company, dated February 7, 2013, presents the results of the January 1, 2013 actuarial valuation of the plan. Following are the principal actuarial assumptions and other information used by The Segal Company in preparing the actuarial valuation as of January 1, 2013.

Actuarial Cost Method Projected unit credit Amortization Method Closed level dollar for remaining unfunded liability Remaining Amortization Period Varies for the bases, with a net effective amortization of 10 years Asset Valuation Method Sum of actuarial value at beginning of year and the cash flow during

the year plus the assumed investment return, adjusted by 10% of the amount that the value exceeds or is less than the market value at end of year. The actuarial value is adjusted, if necessary, to be within 50% of market value for 2009, 44% of market value for 2010, 38% of market value for 2011, 32% of market value for 2012, 26% of market value for 2013, and 20% of market value for 2014 and later years.

Actuarial Assumptions: Investment Rate of Return 7.75% per annum Projected Salary Increases 3.50% plus age and service based merit increases Cost-of-Living Adjustments 0%

The actuarial report recommends that the City contribute $885,914 for fiscal year 2014 in order to maintain the actuarial soundness of the plan and to ensure that the plan is sufficiently funded by the time the current group of active participants has retired. The actuarial report indicates that the recommended contribution represents 11.76% of the expected payroll of covered employees. The actuarial report further indicates that, for illustrative purposes only, if valuation assets had been reset to market value, the plan’s funded ratio would have been 74.72% and the recommended contribution would have been $1,011,396. For more complete information, reference is made to the actuarial report, a copy of which is available from the City upon request.

INFORMATION INCLUDED IN THIS SECTION REGARDING THE DEFINED-BENEFIT PENSION PLAN RELIES ON INFORMATION PRODUCED BY THE PENSION PLAN AND ITS INDEPENDENT ACCOUNTANTS AND ACTUARIES. ACTUARIAL ASSESSMENTS ARE “FORWARD-LOOKING” INFORMATION THAT REFLECT THE JUDGMENT OF THE FIDUCIARIES OF THE PENSION PLAN. ACTUARIAL ASSESSMENTS ARE BASED UPON A VARIETY OF ASSUMPTIONS, ONE OR MORE OF WHICH MAY PROVE TO BE INACCURATE OR BE CHANGED IN THE FUTURE, AND WILL CHANGE WITH THE FUTURE EXPERIENCE OF THE PENSION PLAN.

The City also maintains a single employer, defined-contribution plan created in accordance with Internal Revenue Code Section 401(a) for all full-time employees. In a defined-contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. The City has no liability under this plan except for contributions established and made each year. Full-time employees are eligible to participate in the plan upon date of hire. Participants in the plan are required to contribute a minimum of 2% of their annual compensation and the City will match up to 1% of contributions. The City’s contributions allocated to each employee’s account are fully vested immediately. The plan is administered by a third-party administrator, Nationwide. As of September 30,

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2013, there were 89 participants in the plan. For the year ended September 30, 2013, participants in the plan contributed $191,071 and the City contributed $43,112. Note 13 of the basic financial statements of the City included as Appendix A to this Official Statement contains a detailed description of the City’s defined-contribution plan.

The City also offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan is available to all full-time employees. The plan permits participants to defer income taxation of a portion of their salary to future years. Participation in the plan is optional. Amounts participants may defer under the plan are subject to statutory limits. The deferred compensation is not available to participants until termination, retirement, death, or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property, or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights of the City subject only to the claims of the City’s general creditors. Participants’ rights under the plan are equal to those of general creditors of the City in an amount equal to the fair market value of the deferred account for each participant. The City believes that it is unlikely that it will use these assets to satisfy the claims of general creditors in the future. The City believes that it has no liability for losses under the plan but does have the duty of care that would be required of an ordinary prudent investor in making plan investments. Note 13 of the audited financial statements of the City included as Appendix A to this Official Statement contains a description of the City’s deferred compensation plan.

In addition to pension and deferred compensation benefits, the City provides certain health care benefits for retired employees of the City funded through the Other Post Employment Benefit Trust, administered by GMEBS. The benefit levels, employee contributions, and employer contributions are governed by the City and can be amended by the City. The City’s employees who are also participants in the City’s defined-benefit pension plan are eligible for these post-employment retirement benefits upon reaching a combined 70 years of age and years of service. The cost of these benefits is recognized as expenditures as claims and premiums are paid. For the year ended September 30, 2013, the City contributed approximately $7,959 to post-employment retirement benefits costs. The City currently funds and intends to continue to fund these benefits on a pay-as-you-go basis. No trust fund has been established for future funding of these benefits. As of January 1, 2013, the date of the most recent actuarial report, the actuarial accrued liability for benefits was $4,326,625. As of January 1, 2013, the most recent actuarial valuation date, there were 174 active employees participating in the plan and 10 retirees receiving benefits from the plan. Note 12 of the audited financial statements of the City included as Appendix A to this Official Statement contains a detailed description of the City’s post-employment healthcare plan.

City employees accrue vacation and sick leave in different amounts, depending upon the period of time the City has employed them. The maximum amount of vacation leave that employees may accumulate is 280 hours. The City pays accrued vacation leave and compensatory time upon termination of employment and has reflected a liability for accumulated vacation pay and compensatory time in its financial statements. As of September 30, 2013, accrued vacation pay in the City’s governmental funds totaled $667,196 (unaudited). The maximum amount of sick leave that City employees may accumulate is 240 hours. The City does not pay accrued sick leave upon termination of employment. Accumulated sick leave is not reflected as a liability in the City’s financial statements.

Insurance Coverage and Governmental Immunity

The General Assembly of the State of Georgia has declared, in Section 36-33-1 of the Official Code of Georgia Annotated, that it is the public policy of the State of Georgia that there is no waiver of the sovereign immunity of municipal corporations and that municipal corporations shall be immune from liability for damages. This policy is applicable to actions based upon tort but is not applicable to actions based upon contract. The City, however, may be unable to rely upon the defense of sovereign immunity and may be subject to liability in the event of suits alleging causes of action founded upon various federal laws, such as suits filed pursuant to 42 U.S.C. § 1983 alleging the deprivation of federal constitutional or statutory rights of an individual and suits alleging anti-competitive practices and violations of the federal antitrust laws by the City in the exercise of its delegated powers. Section 36-33-1 of the Official Code of Georgia Annotated also provides that a municipal corporation shall not waive its immunity by the purchase of liability insurance, except for vehicular liability insurance or unless the insurance policy covers an occurrence for which the defense of sovereign immunity is available, but the waiver is limited to the extent of the limits of the insurance policy. Section 36-33-1 of the Official Code of Georgia Annotated also provides that municipal corporations are not liable for failure to perform or for errors in performing their legislative or judicial powers, but are liable for neglect to perform or improper or unskillful performance of their ministerial duties.

The City carries liability insurance for the types of claims and in amounts that are customary for similar entities for those categories of claims that are not subject to the defense of sovereign immunity. The City also carries property and casualty damage insurance on buildings and other physical assets.

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Present insurance coverage is summarized below:

Type Amount in Force

Property (Building and Contents) $28,940,676

Limits of Liability Type Each Occurrence Aggregate

Public Officials Liability $1,000,000 $5,000,000 Employee Benefits Liability 1,000,000 5,000,000 General Liability 1,000,000 None Automobile Liability 1,000,000 None Law Enforcement

Professional Liability 1,000,000 None Public Official Bond (City Clerk) 500,000 None Crime Bond 500,000 None Workers’ Compensation Statutory Statutory

The City is self-insured on a limited basis for group health and medical coverage and pays for such claims as

they become due. Reference is made to Note 16 of the City’s financial statements included as Appendix A for a discussion of the City’s risk management program. The City requires payment and performance surety bonds and builders’ risk insurance of all contractors and subcontractors involved in its public works projects. The City requires the surety bonds to be issued by surety firms listed on the U.S. Treasury-approved list and the builders’ risk insurance to be in the amount of the contract sums.

LEGAL MATTERS

Pending Litigation

The City, like other similar bodies, is subject to a variety of suits and proceedings arising in the ordinary conduct of its affairs. The City, after reviewing the current status of all pending and threatened litigation with its counsel, Bentley, Bentley & Bentley, believes that, while the outcome of litigation cannot be predicted, the final settlement of all lawsuits that have been filed and of any actions or claims pending or threatened against the City or its officials in such capacity are adequately covered by insurance or will not have a material adverse effect upon the financial position or results of operations of the City.

There is no litigation now pending or, to the knowledge of the Agency or the City, threatened against the Agency or the City that restrains or enjoins the issuance or delivery of the Series 2014 Bonds, the provision of the security for the payment of the Series 2014 Bonds, or the use of the proceeds of the Series 2014 Bonds or that questions or contests the validity of the Series 2014 Bonds or the proceedings and authority under which they are to be issued. Neither the creation, organization, or existence of the Agency or the City, nor the title of the present members or other officials of the Agency or the City to their respective offices, is being contested or questioned. There is no litigation pending or, to the knowledge of the Agency, threatened that in any manner questions the right of the Agency to adopt the Resolution, to enter into the Agreement, or to secure the Series 2014 Bonds in the manner provided in the Resolution. No litigation and no proceedings are pending against the City or its officials, or to their knowledge are threatened against them, that would affect the sale of the Series 2014 Bonds, the security therefor, or the ability of the City to enter into and perform its obligations under the Agreement.

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Opinion of Bond Counsel

Legal matters incident to the authorization, validity, and issuance of the Series 2014 Bonds are subject to the unqualified approving opinion of McKenna Long & Aldridge LLP, Atlanta, Georgia, Bond Counsel, whose opinion will be available at the time of delivery of the Series 2014 Bonds. It is anticipated that the approving opinion will be in substantially the form attached to this Official Statement as Appendix C.

The Internal Revenue Code of 1986, as amended (the “Code”), contains a number of requirements and restrictions which apply to the Series 2014A Bonds. These include restrictions on investments, requirements for periodic payment of arbitrage profits to the United States, requirements regarding the use of Series 2014A Bond proceeds, and other restrictions and requirements. Failure to comply with certain of such requirements and restrictions may cause interest on the Series 2014A Bonds to become subject to federal income taxation, retroactive, in some cases, to the date of issuance of the Series 2014A Bonds.

In the opinion of Bond Counsel, under existing law, interest on the Series 2014A Bonds (including any original issue discount properly allocable to an owner thereof) is excluded from gross income for federal income tax (including the tax imposed by Chapter 2A of Subtitle A of the Code) purposes. Moreover, in the opinion of Bond Counsel, interest on the Series 2014A Bonds is not a specific “item of tax preference” for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, it should be noted that, for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted current earnings. For purposes of Chapter 2A of Subtitle A of the Code, interest on the Series 2014A Bonds, by virtue of being excluded from gross income under Chapter 1 of Subtitle A of the Code, is excluded from the modified adjusted gross income of individuals, from the adjusted gross income of estates and trusts, and from the net investment income of taxpayers that are subject to the 3.8% tax, which was enacted into law as part of the Patient Protection and Affordable Care Act and imposed pursuant to Section 1411 of the Code (the “Affordable Care Tax”). The foregoing opinions are subject to the condition that the Agency and the City comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Series 2014A Bonds in order that the interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. Failure to comply with certain of such requirements may cause the inclusion of the interest on the Series 2014A Bonds in gross income for federal income tax (including the tax imposed by Chapter 2A of Subtitle A of the Code) purposes to be retroactive to the date of issuance of the Series 2014A Bonds.

In concluding that interest on the Series 2014A Bonds is excluded from gross income for federal income tax (including the tax imposed by Chapter 2A of Subtitle A of the Code) purposes, Bond Counsel will rely, as to questions of fact material to its opinion, upon certified proceedings and other certifications of public officials furnished to Bond Counsel, without undertaking to verify any of them by independent investigation. If certain of these items are incorrect, interest on the Series 2014A Bonds may become included in gross income for federal income tax purposes retroactive, in some cases, to the date of issuance of the Series 2014A Bonds.

Pursuant to Section 1411 of the Code (which is contained in Chapter 2A of Subtitle A of the Code), for taxable years beginning after December 31, 2012, a 3.8% tax is imposed on individuals on the lesser of (1) net investment income and (2) any excess of the modified adjusted gross income over the applicable threshold amount. For individuals filing joint federal tax returns or as surviving spouses, the applicable threshold is $250,000; for married individuals filing separate returns, the applicable threshold is $125,000; and for other individuals, the applicable threshold is $200,000. This 3.8% tax is also imposed on estates and trusts on the lesser of (1) their undistributed net investment incomes and (2) any excess of their adjusted gross incomes over the dollar amount at which the highest tax bracket in Section 1(e) of the Code begins for the taxable year. Subject to the exceptions, conditions, and limitations set forth in the opinion of Bond Counsel, interest on the Series 2014A Bonds is excluded from modified adjusted gross income, adjusted gross income, and net investment income for purposes of the Affordable Care Tax. Gain, however, if any, from the sale or other disposition of Series 2014A Bonds will be taken into account in such calculations.

In addition, in the opinion of Bond Counsel, the Series 2014A Bonds are “qualified tax-exempt obligations” within the meaning of Section 265(b)(3) of the Code, and, in the case of certain financial institutions (within the meaning of Section 265(b)(5) of the Code), a deduction is allowed for 80 percent of that portion of such financial institutions’ interest expense allocable to interest on the Series 2014A Bonds.

Bond Counsel expresses no opinion regarding any other federal tax consequences arising with respect to the Series 2014A Bonds.

In the further opinion of Bond Counsel, the interest on the Series 2014A Bonds is exempt from State of Georgia income taxation. Bond Counsel has not opined as to whether interest on the Series 2014A Bonds is subject to state or local income taxation in jurisdictions other than Georgia; interest on the Series 2014A Bonds may or may not be subject to state or local income taxation in jurisdictions other than Georgia under applicable state or local laws.

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Each purchaser of the Series 2014A Bonds should consult its own tax advisor regarding the tax-exempt status of the interest on the Series 2014A Bonds in a particular state or local jurisdiction other than Georgia.

Original Issue Discount and Premium on Series 2014A Bonds

In the opinion of Bond Counsel, under existing law, the original issue discount in the selling price of the Series 2014A Bonds maturing February 1, 2033 through 2039, inclusive (the “Discount Bonds”), to the extent properly allocable to each owner of such Discount Bond, is excluded from gross income for federal income tax purposes with respect to such owner. The original issue discount is the excess of the stated redemption price at maturity of such Discount Bond over the initial offering price to the public, excluding underwriters and other intermediaries, at which price a substantial amount of such Discount Bonds were sold.

Under Section 1288 of the Code, original issue discount on tax-exempt obligations accrues on a constant yield to maturity basis. The amount of original issue discount that accrues to an owner of a Discount Bond who acquires such Discount Bond in this offering during any accrual period generally equals (i) the issue price of such Discount Bond plus the amount of original issue discount accrued in all prior accrual periods, multiplied by (ii) the yield to maturity of such Discount Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), less (iii) any interest payable on such Discount Bond during such accrual period.

The amount of original issue discount so accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excluded from gross income for federal income tax purposes, and will increase the owner’s tax basis in such Discount Bond for the purpose of determining gain or loss upon a subsequent sale, exchange, payment, or redemption. Any gain realized by an owner from a sale, exchange, payment, or redemption of a Discount Bond would be treated as gain from the sale or exchange of such Discount Bond.

Owners of Discount Bonds should consult their own tax advisors with respect to the state and local tax consequences of owning Discount Bonds. Under the tax laws of certain state and local jurisdictions, the amount of interest considered to have accrued to an owner of a Discount Bond may also be deemed to be received in the year of such accrual, even though there will not be a corresponding cash payment, rather than upon the disposition, redemption, or maturity of such Discount Bond for purposes of determining such owner’s income tax liability under such state or local tax laws.

The Series 2014A Bonds maturing February 1, 2044 (the “Premium Series 2014A Bonds”), are being sold at prices in excess of the principal amount thereof. Under the Code, the excess of an owner’s cost basis of a bond over the principal amount of such bond (other than a bond held as inventory, stock in trade, or for sale to customers in the ordinary course of business) is generally characterized as “bond premium.” For federal income tax purposes, bond premium is amortized over the term of the related bond. An owner will therefore be required to decrease its basis in the Premium Series 2014A Bonds by the amount of amortizable bond premium attributable to each taxable year it holds Premium Series 2014A Bonds. The amount of amortizable bond premium attributable to each taxable year is determined on an actuarial basis at a constant interest rate compounded on each interest payment date. The amortizable bond premium attributable to a taxable year is not deductible for federal income tax purposes. Purchasers of Premium Series 2014A Bonds should consult their own tax advisors with respect to the precise determination for federal income tax purposes of the treatment of bond premium upon sale, redemption, or other disposition of Premium Series 2014A Bonds.

Collateral Federal Tax Consequences of Owning Series 2014A Bonds

Ownership of the Series 2014A Bonds may result in collateral federal tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, certain recipients of Social Security or railroad retirement benefits, foreign corporations operating branches in the United States, certain Subchapter S corporations, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry the Series 2014A Bonds. The following is a general description of certain of these consequences:

1. Interest on the Series 2014A Bonds is included in the adjusted current earnings of corporations, and such corporations may therefore be required to include as an adjustment in their calculation of alternative minimum taxable income 75% of the excess of adjusted current earnings over alternative minimum taxable income (determined without regard to this adjustment and prior to reduction for certain net operating losses).

2. No deduction is allowable for interest on indebtedness incurred or continued to purchase or carry the Series 2014A Bonds or, in the case of a financial institution, that portion of the owner’s interest expense allocated to

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interest on the Series 2014A Bonds, except with respect to certain financial institutions (within the meaning of Section 265(b)(5) of the Code).

3. Property and casualty insurance companies are required to reduce the amount of their deductible underwriting losses by 15% of their amount of tax-exempt interest, including interest on the Series 2014A Bonds. If the amount of this reduction exceeds the amount otherwise deductible as losses incurred, such excess may be includable in income.

4. Certain recipients of Social Security benefits and railroad retirement benefits will be required to include a portion of such benefits within gross income by reason of receipt or accrual of interest on the Series 2014A Bonds.

5. A branch-level tax is imposed on certain earnings and profits of foreign corporations operating branches in the United States, and interest on the Series 2014A Bonds may be included in the determination of such domestic branches’ taxable base on which this tax is imposed.

6. Passive investment income, including interest on the Series 2014A Bonds, may be subject to federal income taxation for any Subchapter S corporation that has Subchapter C earnings and profits at the close of the taxable year, if greater than 25% of the gross receipts of such Subchapter S corporation is passive investment income.

7. Payments of interest on the Series 2014A Bonds are subject to reporting to the Internal Revenue Service (the “IRS”) and to payees on Form 1099-INT (or successor form), and the Paying Agent (or its agent) may be required to withhold federal tax (referred to as “backup withholding”) from any such payment on a Series 2014A Bond, which is imposed at the rate of 28% of the gross amount of any such payment, if (i) the owner fails to furnish the Paying Agent (or its agent) his or her taxpayer identification number (“TIN”), the accuracy of which has been certified under the penalty of perjury, (ii) the Paying Agent (or its agent) has been notified by the IRS that the owner of the Series 2014A Bond has supplied an incorrect TIN, (iii) the IRS has notified the Paying Agent (or its agent) that the owner of the Series 2014A Bond has failed properly to report certain income to the IRS, or (iv) when required to do so, the owner of the Series 2014A Bond fails to certify under the penalty of perjury that he or she is not subject to backup withholding.

The foregoing is not intended as a detailed or comprehensive description of all possible consequences of purchasing or holding the Series 2014A Bonds. Persons considering the purchase of the Series 2014A Bonds should consult with their tax advisor as to the consequences of buying or holding the Series 2014A Bonds in their particular circumstances.

Changes in Federal and State Tax Law

From time to time, legislative proposals may be made to change federal or state law that, if enacted, would eliminate the exclusion of interest on tax-exempt bonds from gross income for federal income tax purposes or any state law exemption or would otherwise diminish the advantages of ownership of tax-exempt bonds for one or more categories of taxpayers for federal or state law purposes. Any such proposal could, in certain circumstances, even become effective with respect to tax-exempt bonds issued or purchased prior to enactment or announcement of the proposal. In addition, from time to time, administrative actions, including regulations, rulings, and other administrative authorities, may be announced or proposed and litigation may be commenced or threatened that, if they become a legal authority, could eliminate or diminish the advantages of ownership of tax-exempt bonds for one or more categories of taxpayers for federal or state law purposes. The mere existence or announcement of any such legislative proposal or commencement or threatening of any such administrative action or litigation could impair the marketability or market value of the 2014A Bonds, at least temporarily, whether or not it is ultimately enacted into law or become a legal authority.

As a recent example, on April 10, 2013, President Obama submitted to Congress his Administration’s Fiscal Year 2014 Revenue Proposals. This included a proposal (the “28% Proposal”) that would reduce the “tax value” of specified deductions and exclusions from the adjusted gross incomes of higher-income individual taxpayers to their relative “tax values,” which would be determined as if the items related to such deductions and exclusions (collectively, the “Specified Modifications”) had been incurred or received by a lower-income taxpayer, whose marginal rate of federal income tax is 28%. For this purpose, higher-income taxpayers would generally include those taxpayers who are subject to federal income tax at marginal tax rates of at least 33%. Interest on federally tax-exempt bonds, such as the 2014A Bonds, would constitute one of these Specified Modifications. To the extent that the marginal federal income tax rate on a higher-income taxpayer’s taxable income as increased by the Specified Modifications (as so increased, “Modified Taxable Income”) would be at least 33%, then the taxpayer would effectively bear an additional tax on the amount of his or her Specified Modifications calculated at a rate equal to the excess of the applicable marginal tax rate (or rates) imposed on such a taxpayer, based on his or her Modified Taxable Income, over 28%.

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If enacted into law, the 28% Proposal would be effective for taxable years beginning after December 31, 2013, and, as such, could adversely affect higher-income owners of federally tax-exempt bonds issued or purchased before that date, by preventing them from realizing the full current benefit of the tax status of interest on such bonds. The threat of enactment of the 28% Proposal, or any similar proposal, also could adversely affect the market price for and marketability of such bonds in the secondary market, whether or not such proposal is enacted into law. No assurance can be given as to whether the 28% Proposal or another proposal of a like nature will not be introduced in the current or a future session of Congress or be enacted into law, with adverse effects on owners of outstanding federally tax-exempt bonds that are similar to or greater than submission of the 28% Proposal to Congress.

The opinion expressed by Bond Counsel is based upon the U.S. Constitution and the State of Georgia Constitution, implemented by statutes enacted thereunder, and as interpreted by judicial, regulatory, and other administrative authorities existing as of the date of issuance and delivery of the 2014A Bonds. Bond Counsel expresses no opinion as of any date subsequent thereto or with respect to any proposed or pending legislation or proposed, pending, or threatened administrative actions or litigation. Potential purchasers of the 2014A Bonds should consult their tax advisors regarding any pending or proposed legislation, administrative action, or litigation of the type referred to or characterized above as part of their investment decision and thereafter, as appropriate.

Certain Tax Consequences of Owning Series 2014B Bonds

The following constitutes a discussion of certain of the federal and State of Georgia income tax consequences of the purchase, ownership, and disposition of the Series 2014B Bonds. This summary is presented for informational purposes only and is intended to be a discussion primarily of the federal and State of Georgia income tax consequences to individual owners who are citizens or residents of the United States. It is not practicable to comment on all aspects of the federal, state, and local tax laws which may affect an individual owner’s purchase of the Series 2014B Bonds. Therefore, state (other than State of Georgia), local, and foreign tax consequences are not discussed, nor are the tax consequences to owners other than individuals. Such tax consequences will vary with each purchaser, depending upon its individual situation. The following summary should not be considered as legal or tax advice to prospective purchasers of the Series 2014B Bonds.

Taxability

The interest on the Series 2014B Bonds is included in gross income of the United States resident owners thereof for federal income tax purposes and therefore is not exempt from federal income taxation. The interest on the Series 2014B Bonds is, however, exempt from State of Georgia income taxation.

Bond Premium on Series 2014B Bonds

The Series 2014B Bonds maturing February 1, 2015 through 2024, inclusive, and February 1, 2032 (collectively the “Premium Series 2014B Bonds”), are being sold at prices in excess of the principal amount thereof. Under the Code, the excess of an owner’s cost basis of a bond over the principal amount of such bond (other than a bond held as inventory, stock in trade, or for sale to customers in the ordinary course of business) is generally characterized as “bond premium.” Purchasers of Premium Series 2014B Bonds should consult their own tax advisors with respect to the determination for federal and State of Georgia income tax purposes of the treatment of bond premium thereon.

Backup Withholding and Reporting Requirements

Interest payments with respect to the Series 2014B Bonds will be reported to the owners and the Internal Revenue Service (the “IRS”). Such amounts will normally not be subject to withholding of federal income tax. However, the Agency or its agent may be required to withhold federal income tax at a rate of 28% from payments to certain owners (“backup withholding”) in accordance with Section 3406 of the Internal Revenue Code. This tax may be withheld from certain payments if (i) an owner fails to furnish the Agency or its agent with his or her tax identification number (“TIN”) certified under penalties of perjury, (ii) the Agency or its agent is notified by the IRS that the TIN furnished by an owner is incorrect, (iii) the IRS notifies the Agency or its agent that an owner has failed to report properly certain income to the IRS, or (iv) when required to do so, an owner fails to certify under penalty of perjury that he or she is not subject to backup withholding.

Circular 230

Prospective investors are urged to consult their own tax advisors before determining whether to purchase Series 2014B Bonds. The tax discussion herein under “LEGAL MATTERS - Certain Tax Consequences of Owning Series 2014B Bonds” was not intended or written to be used, and cannot be used, for purposes of avoiding taxpayer penalties. This discussion was written to support the promotion or marketing of the Series 2014B Bonds.

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Other Tax Consequences to Investors

There may be other federal, state, local, or foreign tax considerations applicable to the circumstances of a particular investor. Prospective investors are urged to consult their own tax advisors before determining whether to purchase Series 2014B Bonds. Purchasers of Series 2014B Bonds who are nonresident alien individuals, corporations that are not incorporated in the United States or under the laws of the United States or of any state of the United States, or other non-United States persons should consult their own tax advisors with respect to the possible applicability of United States withholding and other taxes on income realized in respect to the Series 2014B Bonds.

State of Georgia Tax Reform Legislation

During the 2012 legislative session, which concluded on March 29, 2012, the Georgia General Assembly enacted legislation known as House Bill 386 (“HB 386”). Georgia Governor Nathan Deal signed HB 386 into law on April 19, 2012. HB 386 provides a number of changes to Georgia’s tax laws that will impact local governments in Georgia, including the City. These changes include the following:

• Elimination of the state and local sales tax and the ad valorem tax on motor vehicles and the replacement of such taxes with onetime state and local title fees whenever any motor vehicle changes ownership on or after March 1, 2013. These title fees equaled 6.5% of the “fair market value” of the motor vehicle (less any trade-in value) for vehicles titled from March 1, 2013 through December 31, 2013, equal 6.75% of the “fair market value” of the motor vehicle (less any trade-in value) for vehicles titled in 2014, and will equal 7% of the “fair market value” of the motor vehicle (less any trade-in value) for vehicles titled in 2015 and thereafter. The revenues from these fees are allocated among state and local governments by formula.

• Elimination of the state and local sales tax (except for any local sales tax for educational purposes) on the sales, use, storage or consumption of energy used in manufacturing, subject to a four year phase in of 25% per year that began on January 1, 2013 until it reaches the full exemption on January 1, 2016; however, HB 386 permits each City to adopt an ordinance to levy and collect an excise tax upon the sale or use of energy used in manufacturing to make up for the sales tax revenues lost as a result of the imposition of the sales tax exemption described above.

• Expansion of the definition of “dealer” required to collect local and state sales tax on internet transactions to include out-of-state vendors with affiliate relationships with Georgia vendors if gross sales in Georgia during the preceding 12 months exceeded $50,000.

• Comprehensive revision of the income tax credit for the qualified donation of conservation real property, including the reduction of the cap of the conservation easement tax credit to $500,000. HB 386 also prohibits counties, cities, and consolidated governments from holding a conservation easement unless the encumbered property is located at least partly within the boundaries of such local government.

• Reinstitution of sales tax holidays for the purchase of school supplies (2 days in August) and energy-efficient or water efficient products (3 days in October). The Georgia General Assembly eliminated similar sales tax holidays for 2010 and 2011 as a result of the economic downturn.

The City is currently uncertain as to the impact that HB 386 will have on its revenues in future years as the various provisions of HB 386 continue to become effective. In a letter dated March 19, 2012 addressed to the Georgia House Ways and Means Committee one day prior to the vote by the Georgia House of Representatives on HB 386, the Department of Audits and Accounts of the State of Georgia cited a report from the Georgia State University Fiscal Research Center that estimated that HB 386 would result in a revenue decline for Georgia local governments of approximately $200 million in the aggregate during fiscal years 2013 through 2015. No assurance can be given that the revenue impact of HB 386 on Georgia local governments, including the City, will not be greater than such estimate.

Closing Certificates

At closing of the sale of the Series 2014 Bonds by the Underwriter, the Agency and the City will each deliver to the Underwriter a certificate that no litigation is pending or threatened against it that would have a material effect on the issuance or validity of the Series 2014 Bonds or performance under the Agreement or the Resolution or, in the case of the City, on the financial condition of the City. In addition, the City will deliver to the Underwriter a certificate that the information contained in this Official Statement does not contain any misstatement of a material fact and does not omit to state any material fact necessary to make the statements herein contained, in light of the circumstances under which they were made, not misleading.

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MISCELLANEOUS

Rating

Moody’s Investors Service, Inc. has assigned a rating of “A1” to the Series 2014 Bonds. The rating reflects only the view of the rating agency, and any desired explanation of the significance of the rating should be obtained from the rating agency at the following address: Moody’s Investors Service, Inc., 7 World Trade Center, 250 Greenwich Street, New York, New York 10007. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies, and assumptions of its own. There is no assurance that such rating will remain unchanged for any given period of time or that it will not be revised downward or withdrawn entirely by the rating agency, if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the liquidity and market price of the Series 2014 Bonds.

Underwriting

The Series 2014A Bonds will be purchased for re-offering at negotiated sale by Raymond James & Associates, Inc. (the “Underwriter”), from the Agency at an aggregate purchase price of 100.747833 percent of the principal amount of the Series 2014A Bonds. The Series 2014B Bonds will be purchased for re-offering at negotiated sale by the Underwriter from the Agency at an aggregate purchase price of 100.992169 percent of the principal amount of the Series 2014B Bonds. The Underwriter will enter into a Bond Purchase Agreement that provides that the Underwriter will purchase all of the Series 2014 Bonds, if any are purchased. The Underwriter will receive a fee for acting as the underwriter for the Series 2014 Bonds equal to 1.50% of the aggregate principal amount of the Series 2014 Bonds purchased by the Underwriter, which will aggregate $96,375. The obligation of the Underwriter to accept delivery of the Series 2014 Bonds will be subject to various conditions contained in the Bond Purchase Agreement.

The Underwriter intends to offer the Series 2014 Bonds to the public initially at the offering prices set forth on the cover page of this Official Statement, which offering prices may subsequently be changed from time to time by the Underwriter without any requirement of prior notice. The Underwriter may offer and sell the Series 2014 Bonds to certain dealers (including dealers depositing Series 2014 Bonds into investment trusts) at prices lower than the public offering prices set forth on the cover page of this Official Statement or otherwise allow concessions to such dealers who may re-allow concessions to other dealers. Any discounts or commissions that may be received by such dealers in connection with the sale of the Series 2014 Bonds will be deducted from the Underwriter’s underwriting fee.

Independent Auditors

The basic financial statements of the City as of September 30, 2012, and for the year then ended, attached hereto as Appendix A, have been audited by Mauldin & Jenkins LLC, Atlanta, Georgia, independent certified public accountants, to the extent and for the period indicated in its report thereon, which appears in Appendix A. Such financial statements have been included herein in reliance upon the report of Mauldin & Jenkins LLC.

Additional Information

Use of the words “shall,” “must,” or “will” in this Official Statement in summaries of documents or laws to describe future events or continuing obligations is not intended as a representation that such event will occur or obligation will be fulfilled but only that the document or law contemplates or requires such event to occur or obligation to be fulfilled.

Any statements made in this Official Statement involving estimates or matters of opinion, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates or matters of opinion will be realized. Neither this Official Statement nor any statement that may have been made orally or in writing is to be construed as a contract with the owners of the Series 2014 Bonds.

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RESPONSIBILITY FOR OFFICIAL STATEMENT

The execution and delivery of this Official Statement, and its distribution and use by the Underwriter, have been duly authorized and approved by the Agency and the City. The contents of this Official Statement are the responsibility of the City, except that the Agency is responsible for the statements contained under the caption “THE AGENCY” and the information with respect to the Agency appearing under the caption “LEGAL MATTERS - Pending Litigation” herein, and, with the exception of the foregoing information for which the Agency is responsible, the Agency makes no representation as to the accuracy or completeness of any information contained herein.

URBAN REDEVELOPMENT AGENCY OF

THE CITY OF KENNESAW, GEORGIA By: /s/ Arthur L. Hunt Chairman, Board of Commissioners

CITY OF KENNESAW, GEORGIA

By: /s/ Mark Mathews Mayor


APPENDIX A

FINANCIAL STATEMENTS OF THE CITY

The basic financial statements of the City as of September 30, 2012, and for the year then ended, included as this Appendix A, have been audited by Mauldin & Jenkins LLC, Atlanta, Georgia, independent certified public accountants, to the extent and for the period indicated in its report thereon, which appears in this Appendix A. Such financial statements have been included herein in reliance upon the report of Mauldin & Jenkins LLC.




ANNUAL FINANCIAL REPORT

FOR THE FISCAL YEAR ENDED

SEPTEMBER 30, 2012

Prepared By: Gina Auld

Finance Director

ii


ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED

SEPTEMBER 30, 2012

TABLE OF CONTENTS Page FINANCIAL SECTION

Independent Auditor's Report ....................................................................................................................... 2-3

Management’s Discussion and Analysis ................................................................................................... 4-14

Basic Financial Statements:

Government-wide Financial Statements:

Statement of Net Assets ......................................................................................................................... 15

Statement of Activities ........................................................................................................................... 16

Fund Financial Statements:

Balance Sheet – Governmental Funds .................................................................................................. 17

Statement of Revenues, Expenditures, and Changes in Fund

Balances - Governmental Funds ....................................................................................................... 18

Reconciliation of the Statement of Revenues, Expenditures, and Changes in

Fund Balances of Governmental Funds to the Statement of Activities ........................................ 19

General Fund - Statement of Revenues, Expenditures, and Changes in

Fund Balances – Budget and Actual ................................................................................................ 20

Statement of Net Assets – Proprietary Funds ...................................................................................... 21

Statement of Revenues, Expenses, and Changes in Fund Net

Assets - Proprietary Funds ................................................................................................................ 22

Statement of Cash Flows – Proprietary Funds ..................................................................................... 23

Notes to Financial Statements ............................................................................................................... 24-57

Required Supplementary Information – Schedules of Funding Progress ................................................ 58

FINANCIAL SECTION

INDEPENDENT AUDITOR'S REPORT Honorable Mayor and Members Of City Council

City of Kennesaw, Georgia We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Kennesaw, Georgia as of and for the year ended September 30, 2012, which collectively comprise the City of Kennesaw, Georgia’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Kennesaw, Georgia's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Kennesaw, Georgia as of September 30, 2012, and the respective changes in financial position, and where applicable, cash flows, thereof and the respective budgetary comparison for the General Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America.

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In accordance with Government Auditing Standards, we have also issued our report dated March 4, 2013, on our consideration of the City of Kennesaw, Georgia's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis and Schedules of Funding Progress (on pages 4 through 14 and 58) be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Government Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Atlanta, Georgia March 4, 2013

MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited)

September 30, 2012 City of Kennesaw, Georgia

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This section of the City of Kennesaw, Georgia’s (the City) annual report provides readers with a narrative overview and analysis of the financial activities of the City for the fiscal year ended September 30, 2012. We encourage readers to consider the information presented here in conjunction with additional information in the letter of transmittal which can be found at the front of this report. Financial Highlights

The City’s total assets exceed liabilities by $61,988,884 at the end of the year. This amount includes $41,795,507 invested in capital assets net of accumulated depreciation and related debt, restricted net assets of $22,999,987 and unrestricted net assets deficit of $2,806,610.

The City’s total net assets increased by $3,832,043 (7%) to $61,988,884. The net assets for governmental

activities increased by $3,707,978 (7%) and business-type net assets increased by $124,065 (3%).

As of the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $21,018,465, an increase of $4,104,957. The net unassigned fund balance is a deficit of $3,074,941.

At the end of the current fiscal year, unassigned fund balance for the general fund was a deficit of $2,599,475. The City’s total debt decreased by $105,075 (.5%) during the current fiscal year due to bond payments.

Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. The statement of net assets presents information on all of the City’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the government’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flow in future periods (e.g. uncollected taxes and earned but unused vacation leave). The government-wide financial statements of the City are divided into three categories:

Governmental activities – These include the basic services provided by the City including police, culture

and recreation, public works and general administration. Business-type activities – These include services for which the City charges specific fees which are

meant to cover the cost of providing the services. These include sanitation (solid waste collection), the Southern Museum of Civil War and Locomotive History and the Smith-Gilbert Gardens.



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Component units – Included in the component units for the City is the Kennesaw Downtown Development Authority and the Kennesaw Development Authority. Although these organizations are separate legal entities, the City is financially accountable for them.

Governmental activities and business-type activities are consolidated and add to the total for the primary government.

Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains nine individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the general fund and SPLOST fund which are considered to be major funds. Data from the other seven governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts annual appropriated budgets for its governmental funds except for the SPLOST and capital project funds. A budgetary comparison statement has been provided for these funds to demonstrate compliance with the budget. The basic governmental fund financial statements can be found on pages 17-19 of this report. Proprietary funds. The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its Sanitation, Museum and Gardens. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City uses an internal service fund to account for its risk management activities. Because this service predominantly benefits governmental rather than business-type functions, it has been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the Sanitation, Museum and Gardens. Sanitation and Museum are considered to be major funds of the City. The internal service fund is also presented in proprietary fund financial statements. The basic proprietary fund financial statements can be found on pages 21-23 of this report.



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Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 24-57 of this report. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City progress in funding its obligation to provide pension benefits to its employees. Required supplementary information can be found on page 58 of this report. The combining statements referred to earlier in connection with nonmajor governmental funds are presented immediately following the required supplementary information on pensions. Combining and individual fund statements and schedules can be found on pages 59-71 of this report. Government-wide Financial Analysis The following table reflects the condensed Statement of Net Assets for the current year. The City’s net assets increased by $3,832,043 (7%) in fiscal year 2012. The net assets of the governmental activities include $38,194,452 investment in capital assets net of related debt. Capital assets of $54,514,344 include land, buildings, park improvements, machinery and equipment net of accumulated depreciation. Related debt includes bonds of $16,055,000 and capital leases of $264,892. The net assets of the business-type activities include $3,601,055 investment in capital assets net of related debt. Capital assets of $7,358,607 include land, building, other improvements, equipment, and museum artifacts, net of accumulated depreciation. Related debt includes notes of $3,515,000 and capital leases of $242,552. For more detailed information, see the Statement of Net Assets on page 15 of the financial statements and the notes to the financial statements.

Total %Change

2012 2011 2012 2011 2012 2011 2011-12ASSETSCurrent and other assets 27,990$ 23,646$ 2,256$ 2,157$ 30,246$ 25,803$ 17.2%Capital assets 54,514 55,074 7,359 7,322 61,873 62,396 -0.8% Total assets 82,504 78,720 9,615 9,479 92,119 88,199 4.4%LIABILITIESCurrent and other liabilities 7,689 7,613 1,113 954 8,802 8,567 2.7%Long-term debt outstanding 17,690 17,690 3,637 3,784 21,327 21,474 -0.7% Total Liabilities 25,379 25,303 4,750 4,738 30,129 30,041 0.3%NET ASSETSInvested in capital assets, net of related debt 38,195 38,212 3,601 3,397 41,796 41,609 0.4%Restricted 23,000 19,214 - - 23,000 19,214 19.7%Unrestricted (4,070) (4,009) 1,263 1,343 (2,807) (2,666) 5.3% Total Net Assets 57,125$ 53,417$ 4,864$ 4,740$ 61,989$ 58,157$ 6.6%

Table 1Statement of Net Assets

As of September 30(in thousands)

ActivitiesGovernmental Business-type

Activities Total



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Changes in Net Assets The City’s total revenues before transfers were $26,797,169 in fiscal year 2012. Expenses before transfers were $22,965,126 during that same period. Governmental and business-type activities combined provided a $3,832,043 increase in net assets. Governmental activities revenues, before transfers, were $23,678,214 and included $4,509,355 charges for services, $5,049,343 grant and contribution revenues and $8,858,088 in property taxes. The largest governmental activities expenses were for public safety of $6,976,574 (police and jail), public works of $3,922,629, general government of $4,187,479 and recreation of $2,547,847. Expenses include depreciation expense as explained in the notes to the financial statements (Note 6). Business-type activity revenues, before transfers, were $3,118,955 and included $3,059,077 charges for services and $58,728 grant and contribution revenues. The largest business-type activity expenses were for salaries and wages of $970,095, landfill disposal fees of $284,874 and marketing of $147,238.



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Total %Change

2012 2011 2012 2011 2012 2011 2011-12RevenuesProgram RevenuesCharges for services 4,509$ 3,888$ 3,059$ 3,121$ 7,568$ 7,009$ 8%Operating grants and contributions 381 374 1 1 382 375 2%Capital grants and contributions 4,669 1,954 58 70 4,727 2,024 134%General revenuesProperty taxes 8,858 9,122 - - 8,858 9,122 -3%Other taxes 4,884 4,589 - - 4,884 4,589 6%Investment income 372 398 1 1 373 399 -7%Gain from sale of capital assets 5 13 - 7 5 20 0%Total Revenues 23,678 20,338 3,119 3,200 26,797 23,538 14%

ExpensesGeneral Government 4,187 4,544 - - 4,187 4,544 -8%Judicial 343 365 - - 343 365 -6%Public Safety 6,976 7,039 - - 6,976 7,039 -1%Public Works 3,923 4,036 - - 3,923 4,036 -3%Culture and Recreation 2,548 2,683 - - 2,548 2,683 -5%Housing and Development 908 1,155 - - 908 1,155 -21%Interest on long-term debt 804 821 - - 804 821 -2%Museum - - 1,307 1,444 1,307 1,444 -9%Sanitation - - 1,649 1,593 1,649 1,593 4%Gardens - - 320 287 320 287 11%Total Expenses 19,689 20,643 3,276 3,324 22,965 23,967 -4%Excess (Deficiency) before Transfers 3,989 (305) (157) (124) 3,832 (429) -993%Transfers (281) (561) 281 561 - - 0%Increase (Decrease) in Net Assets 3,708 (866) 124 437 3,832 (429) -993%Beginning Net Assets 53,417 54,283 4,740 4,303 58,157 58,586 -1%Ending Net Assets 57,125$ 53,417$ 4,864$ 4,740$ 61,989$ 58,157$ 7%

ActivitiesBusiness-type

Activities Total

Table 2Changes in Net Assets

September 30(in thousands)

Governmental

September

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Public wo20%

Culture andrecreation

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Revenue Impacts: Property taxes of $8,858,088 provided 37% of governmental revenues for general operations. The M&O

millage rate remained at 8.00 mills. The bond millage remained at 1.5 mills which is restricted to service the debt of the general obligation bond issue for recreation and transportation improvements.

The transfers to proprietary funds were $280,886 which was a $280,558 decrease from the prior year. Funds

are transferred to the Museum and Gardens as cash is needed. Less cash was needed during the year; therefore, transfers decreased.

Charges for services include amounts charged for providing E911 service of $1,013,639, recreation fees of $674,300 and municipal court fines of $1,363,867.

Expense Impacts

General Government expenses decreased due to unfilled positions in the Finance and Information Technology Departments. There were also software maintenance and computer project delays and building repair and maintenance delays in this fiscal year. Legal fees were down due to decreased litigation.

Funds transferred to the Kennesaw Downtown Development Authority (KDDA) decreased during the fiscal

year thereby reducing Housing and Development expenses. In the prior year, KDDA had several downtown projects which required City fund transfers such as the Main Street Plaza Project, Wade Green Store and underground tank removal on a site previously owned by the KDDA.

The Museum reorganized their workforce and put the marketing services out for bid during the year. As a

result, their salary and marketing expenses decreased.

The Sanitation Fund had an increase in expenses due to Storm water Projects that they supported during the year.

The Smith-Gilbert Gardens added part time staff resulting in higher expenses.

2012 2011 2012 2011 2012 2011FUND

Museum 436$ 417$ 1,307$ 1,444$ (871)$ (1,027)$ Sanitation 2,559 2,664 1,649 1,593 910 1,071 Gardens 123 111 320 287 (197) (176) Total 3,118$ 3,192$ 3,276$ 3,324 (158)$ (132)$

Table 4Business-type Activities

September 30(in thousands)

Program Revenues Program Expense Program Income (Loss)



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Program revenues for business-type activities for fiscal year 2012 were $3,117,805, a $73,378 decrease compared to the prior year. Museum group and school tours were up in 2012. Also, vehicle rental tax revenue recorded in the Museum was up twenty three percent (23%) over the prior year. Both garden tours and program fees revenues increased this year. Even with the Museum and Gardens increases, the decrease in the Sanitation Fund refuse collection fees resulted in an overall net decrease in program revenues. Total program expenses for business-type activities were $3,275,776 in 2012, $47,913 less than the prior year. The Museum had decreases in both salaries and marketing due to work force reorganization and working with a new marketing firm.

Fund Revenues/Sources Fund Balances Revenues/ Expenditures/ Over (Under) Balances9/30/2011 Sources Uses Expenditures/Uses 9/30/2012

FUND

General Fund 7,702$ 19,492$ 18,675$ 817$ 8,519$ SPLOST 6,320 3,952 364 3,588 9,908

Table 5Financial Analysis of the City's Major Governmental Funds

(in thousands)

At September 30, 2012, the City’s governmental funds reported a combined fund balance of $21,018,465, which is a net increase of $4,104,957 from the previous year. The General Fund received $450,000 of lawsuit settlement funds. These lawsuit funds were originally paid out during 2009. The SPLOST fund had an increase in fund balance of $3,587,627 due to nine months of the new 2011 SPLOST collections. Other non major Governmental Funds had a net decrease in fund balance of $299,828 primarily due to the decrease in Capital Projects and Urban Redevelopment Agency (URA) Funds. Capital Projects funds were utilized for the Old Hwy 41 Project and the URA made debt service payments on the 2009 bond issue. The nonspendable portion of fund balance includes amounts restricted for long-term advances to the E911 Fund. The restricted and committed portions of fund balance represent amounts restricted for seized assets held by the Police Department, debt service, capital projects and proceeds from the sale of the water and sewer system in 2005 that cannot be spent without voter approval. General Fund The General Fund had a $817,158 increase in fund balance, to end the fiscal year at $8,519,022. SPLOST Fund The SPLOST Fund had an increase in fund balance of $3,587,627 due to the 2011 SPLOST approved by the voters that the City began collecting during this fiscal year. General Fund Budgetary Highlights A statement comparing the original and final budgets and the variance from the final budget to actual results is included on page 20 of the financial statements. In September 2011, the City Council appropriated $17,830,771 for general fund expenditures in the 2012 fiscal year budget. The City’s legal level of budgeting control is at the department level. The City made several budget transfers during the year and any made between departments were approved by the Mayor & Council.



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Primary reasons for the differences between the final budget and actual results in the General Fund include: Revenues:

Real and personal property taxes were over budget. Municipal court fines were under budget Interest earnings were under budget due to a lower rate of return. Miscellaneous revenue was over budget due to lawsuit settlement proceeds.

Expenditures:

Mayor & Council contingency expenditures was under budget. Information Technology expenditures were under budget due to software maintenance and computer project

delays. Building Department electricity expenditures came in under budget. The Corrections Department did not fill a position and as a result salaries came in under budget. Public Works Central Services was under budget in both professional services and vehicle repair and

maintenance expenses.

Other Financing Sources (Uses): Issuance of long-term debt came in under budget. Transfers out to the Capital Projects Fund were under budget due to delay in Trail Project.

Capital Assets The City’s investment in capital assets for its governmental and business-type activities as of September 30, 2012, amounted to $61,872,951 (net of accumulated depreciation of $32,844,363). Investment in capital assets includes land, buildings, infrastructure, museum artifacts and machinery and equipment. The total decrease in the City’s investment in capital assets for the current fiscal year was 1%. For more detailed information concerning capital assets, see note 6 to the financial statements.

2012 2011 2012 2011 2012 2011

Land 13,885$ 13,885$ 7$ 7$ 13,892$ 13,892$ Construction in progress 1,031 483 - - 1,031 483 Museum artifacts - - 679 623 679 623 Buildings and improvements 6,710 7,017 5,775 5,932 12,485 12,949 Park land 6,737 6,925 - - 6,737 6,925 Infrastructure 23,774 24,144 - - 23,774 24,144 Furniture, machinery and equipment 1,417 1,653 196 193 1,613 1,846 Vehicles 960 967 702 567 1,662 1,534 Total 54,514$ 55,074$ 7,359$ 7,322$ 61,873$ 62,396$

Table 6Capital AssetsSeptember 30

(in thousands)


Activities Total

(net of depreciation)



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This year’s major capital asset additions included: Governmental Activities:

Woodland Acres project - $173,755 Old 41 @ Stanley HWY project - $119,966 Cobb Parkway @ Old 41 project - $112,600 Various SPLOST road projects - $230,637 Depot Project - $106,954 LARP Resurfacing - $150,990

Kennesaw Downtown Development Authority:

2765 South Main Street renovation project - $86,270 2765 South Main Street building purchase - $322,693

Long-Term Debt At the end of 2012 fiscal year, the City had $22,941,887 in outstanding long-term debt. This is a net decrease of $105,075 compared to the prior year. More detailed information about the City’s long-term liabilities is included in note 8 to the financial statements. State statutes limit the amount of general obligation debt a governmental entity may issue to 10% of the total tax digest. The current debt limitation for the City is $104,938,751, which is in excess of the City’s outstanding general obligation debt.

2012 2011 2012 2011 2012 2011

General Obligation Bonds 12,125$ 12,580$ -$ -$ 12,125$ 12,580$ Revenue Bonds 3,930 4,070 - - 3,930 4,070 Leases Payable 265 212 243 135 508 347 Claims and judgments - - - - - - Notes Payable - - 3,515 3,790 3,515 3,790 OPEB obligation 1,888 1,326 274 200 2,162 1,526 Compensated absences 670 694 32 40 702 734 Total 18,878$ 18,882$ 4,064$ 4,165$ 22,942$ 23,047$

Table 7Outstanding Debt at September 30

(in thousands)


Activities Total



14

Economic and Next Year’s Budget and Rates Funding for the City’s governmental activities is derived from property tax, other taxes (occupational taxes), fees (franchise fees, building permits), grants and investment earnings. During the FY 2012 budget process, the City considered projections on the state and local economy to estimate tax revenues for the proposed budget. As a result of these projections the City’s general fund budget for FY13 was $1.3 million more than FY12. The FY13 budget was $19,131,260. The downturn in the economy continues to prompt an increase in property tax appeals. The City’s FY13 tax digest reported an overall decrease in real and personal property tax for the third year in a row. The City has prepared for these declining property tax decreases by cutting their budget each year. Even though property tax revenue projections were down, the City was able to increase the FY13 budget due to other revenue sources such as building permits and impact fees. Building permit revenue and impact fee revenue was up approximately $77,000 and $180,000, respectively, over the prior year due to an increase in development. The City has budgeted for this increase to continue into FY13. Occupational tax revenue remained consistent with prior year and the City is anticipating that this revenue will remain consistent in FY13. Revenues for the business-type activities and certain governmental activities (recreational programs and permitting) come from user fees. In the past, the City’s water utility generated significant revenue for the City. The City Council decided to sell the City’s water utility effective December 2005. The Council restricted $9 million of the $12 million sales proceeds to be invested in such a manner as to offset the revenue loss due to the sale. It was calculated the investment must yield approximately a 5% return to accomplish this goal. This continues to be a challenge to accomplish this goal due to the declining interest rates. The City received the final payout for the 2005 SPLOST revenue during FY12 and received nine (9) months of the new 2011 SPLOST during FY12. It is projected that the City will receive $22.1 million as its share over the term of the 2011 SPLOST which consists of $16.6 million and $5.5 million for transportation projects and park projects, respectively. The City resurfaces streets under the Georgia Department of Transportation’s Local Assistance Road Program (LARP). LARP funds typically have covered approximately 30-34% of the total cost of the City’s resurfacing projects in this program. The City received $110,000 in LARP funding during FY12 and anticipates the same for FY13. The City relies on SPLOST, LARP and local funds for resurfacing projects. Financial Contact This financial report is designed to provide a general overview of the City’s finances, comply with finance related laws and regulations, and demonstrate the City’s commitment to public accountability. Questions concerning any of the information provided in this report or requests for additional information should be directed to the Finance Director at 2529 J. O. Stephenson Avenue, Kennesaw, Georgia 30144.

Downtown

Development Development

ASSETS Activities Activities Total Authority Authority

Cash and cash equivalents $ 13,124,582 $ 1,650,021 $ 14,774,603 $ 4,611 $ 123,731 Taxes receivable 500,111 - 500,111 - - Other receivables 1,968,997 - 1,968,997 - - Accounts receivable, net of allowances - 348,929 348,929 - 27,644 Due from other governments 574,717 - 574,717 - - Due from component units 2,313,349 - 2,313,349 - - Internal balances (95,613) 95,613 - - - Land held for resale - - - - 2,312,919 Inventory 16,806 73,421 90,227 - - Prepaid items 391,396 87,992 479,388 - - Restricted cash 2,946,181 - 2,946,181 - - Restricted investments 6,032,361 - 6,032,361 - - Deferred charges, unamortized balance 216,556 - 216,556 - - Note receivable from primary government - - - 3,515,000 - Interest receivable from primary government - - - 52,491 - Capital assets: Non-depreciable 14,915,842 686,441 15,602,283 296,270 - Depreciable, net of accumulated depreciation 39,598,502 6,672,166 46,270,668 823,512 -

Total assets 82,503,787 9,614,583 92,118,370 4,691,884 2,464,294

LIABILITIES

Accounts payable 517,108 79,951 597,059 2,633 6,192 Accrued liabilities 817,706 388,128 1,205,834 1,500 - Accrued interest payable 141,621 50,363 191,984 52,491 - Unearned revenue 25,000 167,722 192,722 - - Due to primary government - - - - 2,313,349 Tax anticipation note payable 5,000,000 - 5,000,000 - - Net OPEB obligation due in more than one year 1,888,145 274,444 2,162,589 - - Compensated absences, due within one year 460,855 32,173 493,028 - - Compensated absences, due in more than one year 208,826 - 208,826 - - Notes payable to component unit, due within one year - 285,000 285,000 - - Notes payable to component unit, due in more than one year - 3,230,000 3,230,000 - - Notes payable, due within one year - - - 27,335 - Notes payable, due in more than one year - - - 467,949 - Capital leases, due within one year 106,788 110,256 217,044 - - Capital leases, due in more than one year 158,104 132,296 290,400 - - Bonds payable, due within one year 620,000 - 620,000 285,000 - Bonds payable, due in more than one year 15,435,000 - 15,435,000 3,230,000 -

Total liabilities 25,379,153 4,750,333 30,129,486 4,066,908 2,319,541

NET ASSETS

Invested in capital assets, net of related debt 38,194,452 3,601,055 41,795,507 624,498 - Restricted for:

Public safety 1,143,570 - 1,143,570 - - Culture and recreation 11,033 - 11,033 - - Park and recreation impact fee projects 226,431 - 226,431 - - Capital projects 10,428,449 - 10,428,449 - - Debt service 2,789,784 - 2,789,784 - - Voter approved use 8,400,720 - 8,400,720 - -

Unrestricted (4,069,805) 1,263,195 (2,806,610) 478 144,753

Total net assets $ 57,124,634 $ 4,864,250 $ 61,988,884 $ 624,976 $ 144,753

The accompanying notes are an integral part of these financial statements.


STATEMENT OF NET ASSETSSEPTEMBER 30, 2012

Governmental Business-type

Primary Government Component Units

15


STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012

Program Revenues

Operating Capital

Charges for Grants and Grants and

Functions/Programs Expenses Services Contributions Contributions

Primary government:

Governmental activities:General government $ 4,187,479 $ 645,807 $ 376,393 $ - Judicial 342,790 1,229,945 - - Public safety 6,976,574 1,197,405 4,069 416,455 Public works 3,922,629 343,370 - 4,249,676 Culture and recreation 2,547,847 779,069 - 2,750 Housing and development 907,986 313,759 - - Interest on long-term debt 804,045 - - -

Total governmental activities 19,689,350 4,509,355 380,462 4,668,881

Business-type activities:Sanitation 1,649,055 2,558,808 - - Museum 1,307,352 378,466 - 57,794 Gardens 319,369 121,803 934 -

Total business-type activities 3,275,776 3,059,077 934 57,794 Total primary government $ 22,965,126 $ 7,568,432 $ 381,396 $ 4,726,675

Component units:

Downtown Development Authority $ 247,366 $ 33,219 $ - $ - Development Authority 72,289 - - -

Total component units $ 319,655 $ 33,219 $ - $ -

General revenues:Property taxesFranchise taxesInsurance premium taxesBusiness taxesOther taxesUnrestricted investment earningsGain on sale of capital assetsMiscellaneous

TransfersTotal general revenues and transfers

Change in net assetsNet assets, beginning of year, restatedNet assets, end of year


Changes in Net Assets

Primary Government Component Units

Downtown

Governmental Business-type Development Development

Activities Activities Total Authority Authority

$ (3,165,279) $ - $ (3,165,279) $ - $ - 887,155 - 887,155 - -

(5,358,645) - (5,358,645) - - 670,417 - 670,417 - -

(1,766,028) - (1,766,028) - - (594,227) - (594,227) - - (804,045) - (804,045) - -

(10,130,652) - (10,130,652) - -

- 909,753 909,753 - - - (871,092) (871,092) - - - (196,632) (196,632) - - - (157,971) (157,971) - -

(10,130,652) (157,971) (10,288,623) - -

- - - (214,147) - - - - - (72,289)

$ - $ - $ - $ (214,147) $ (72,289)

$ 8,858,088 $ - $ 8,858,088 $ - $ - 1,721,137 - 1,721,137 - - 1,483,792 - 1,483,792 - - 1,040,848 - 1,040,848 - -

638,106 - 638,106 - - 372,157 1,150 373,307 33 129

5,388 - 5,388 - - - - - 209,196 76,225

(280,886) 280,886 - - - 13,838,630 282,036 14,120,666 209,229 76,354

3,707,978 124,065 3,832,043 (4,918) 4,065 53,416,656 4,740,185 58,156,841 629,894 140,688

$ 57,124,634 $ 4,864,250 $ 61,988,884 $ 624,976 $ 144,753

Net (Expenses) Revenues and

16


BALANCE SHEETGOVERNMENTAL FUNDS

SEPTEMBER 30, 2012

Total

Governmental Governmental

ASSETS Fund Funds Funds

Cash and cash equivalents $ 2,854,313 $ 9,432,429 $ 823,782 $ 13,110,524 Taxes receivable 487,266 - 12,845 500,111 Other receivables 1,716,272 - 235,577 1,951,849 Due from other governments 79,996 494,721 - 574,717 Due from other funds - - 2,311,719 2,311,719 Due from component unit 2,313,349 - - 2,313,349 Restricted cash 2,946,181 - - 2,946,181 Restricted investments 6,032,361 - - 6,032,361 Advances to other funds 667,428 - - 667,428 Inventory 16,806 - - 16,806 Prepaid expenditures 349,960 - 17,992 367,952

Total assets $ 17,463,932 $ 9,927,150 $ 3,401,915 $ 30,792,997

LIABILITIES AND FUND BALANCES

LIABILITIES Accounts payable $ 322,171 $ 19,474 $ 90,073 $ 431,718 Accrued liabilities 641,511 - 25,508 667,019 Deferred revenues 447,028 - 10,583 457,611 Due to other funds 2,522,779 - 16,556 2,539,335 Advances from other funds - - 667,428 667,428 Tax anticipation note payable 5,000,000 - - 5,000,000 Accrued interest 11,421 - - 11,421

Total liabilities 8,944,910 19,474 810,148 9,774,532

FUND BALANCES Fund balances: Nonspendable: Long-term advances 667,428 - - 667,428 Inventories 16,806 - - 16,806 Prepaid expenditures 349,960 - 17,992 367,952

Restricted: Public safety 1,105,761 - 37,809 1,143,570 Culture and recreation - - 11,033 11,033 Capital projects - 9,907,676 520,773 10,428,449 Debt service 577,822 - 2,211,962 2,789,784 Parks and recreation impact fee projects - - 226,431 226,431 Voter approved use 8,400,720 - - 8,400,720

Committed: Cemetery maintenance - - 32,515 32,515

Assigned: Cemetery maintenance - - 8,718 8,718

Unassigned (2,599,475) - (475,466) (3,074,941)

Total fund balances 8,519,022 9,907,676 2,591,767 21,018,465

Total liabilities and fund balances $ 17,463,932 $ 9,927,150 $ 3,401,915

Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 54,514,344 Some receivables are not available to pay for current-period expenditures and, therefore, are deferred in the funds. 432,611 Long-term liabilities are not due and payable in the current period and, therefore are not reported in the funds. (16,903,217) Net OPEB obligations are not due and payable in the current period and, therefore are not reported in the funds. (1,888,145) Internal service funds are used by management to charge the costs of health insurance to individual funds. The assets and liabilities of the internal service fund are included in the governmental activities. (49,424)

Net assets of governmental activities $ 57,124,634


Other

General SPLOST

Fund

17


STATEMENT OF REVENUES, EXPENDITURES, ANDCHANGES IN FUND BALANCES

GOVERNMENTAL FUNDSFOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012

Total

Governmental Governmental

Fund Funds Funds

REVENUES

Taxes $ 13,595,325 $ - $ 35,051 $ 13,630,376 Licenses and permits 420,812 - 202,557 623,369 Intergovernmental 1,086,266 3,926,042 - 5,012,308 Fines and forfeitures 1,363,867 - 2,864 1,366,731 Charges for services 825,189 - 1,015,343 1,840,532 Contributions 2,750 - 500 3,250 Interest income 370,959 25,911 1,133 398,003 Other revenues 642,229 - 33,785 676,014 Total revenues 18,307,397 3,951,953 1,291,233 23,550,583

EXPENDITURES

Current:General government 3,847,933 - - 3,847,933 Judicial 327,480 - - 327,480 Public safety 5,402,810 - 1,128,963 6,531,773 Public works 2,435,937 - 3,411 2,439,348 Culture and recreation 2,228,070 - 17,435 2,245,505 Housing and development 876,137 - - 876,137

Capital outlay 806,046 364,326 404,525 1,574,897 Debt service:

Principal retirements 562,468 - 140,000 702,468 Interest and fiscal charges 540,391 - 244,188 784,579

Total expenditures 17,027,272 364,326 1,938,522 19,330,120

Excess (deficiency) of revenues over (under) expenditures 1,280,125 3,587,627 (647,289) 4,220,463

OTHER FINANCING SOURCES (USES)

Issuance of long-term debt 159,992 - - 159,992 Proceeds from sale of capital assets 5,388 - - 5,388 Transfers in 1,019,325 - 365,775 1,385,100 Transfers out (1,647,672) - (18,314) (1,665,986) Total other financing sources (uses) (462,967) - 347,461 (115,506)

Net change in fund balance 817,158 3,587,627 (299,828) 4,104,957

FUND BALANCES, beginning of year 7,701,864 6,320,049 2,891,595 16,913,508

FUND BALANCES, end of year $ 8,519,022 $ 9,907,676 $ 2,591,767 $ 21,018,465


Fund

Other

General SPLOST

18


RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS

TO THE STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012

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

Net change in fund balances - total governmental funds $ 4,104,957

Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost ofthose assets is allocated over their estimated useful lives and reported as depreciation expense. This is theamount by which depreciation exceeded capital outlay in the current period. (559,664)

Revenues in the statement of activities that do not provide current financial resources are not reported asrevenues in the funds. 122,178

The issuance of long-term debt provides current financial resources to governmental funds, while the repayment ofthe principal of long-term debt consumes the current financial resources of governmental funds. Neithertransaction, however, has any effect on net assets. This amount is the net effect of these differences in thetreatment of long-term debt and related items. 519,040 Internal service funds are used by management to charge the costs of health and workers' compensation insurance to individual funds. The net expenses of the internal service funds is reported with governmental activities. 55,843

Some expenses reported in the statement of activities do not require the use of current financial resources and,therefore, are not reported as expenditures in governmental funds. (534,376)

Change in net assets - governmental activities $ 3,707,978


19


GENERAL FUNDSTATEMENT OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCES - BUDGET AND ACTUALFOR THE YEAR ENDED SEPTEMBER 30, 2012

Final Actual Final BudgetREVENUES

Taxes $ 12,721,072 $ 13,362,564 $ 13,595,325 $ 232,761 Licenses and permits 217,652 392,652 420,812 28,160 Fines and forfeitures 1,538,000 1,438,000 1,363,867 (74,133) Charges for services 712,305 784,700 825,189 40,489 Intergovernmental 1,076,031 1,120,360 1,086,266 (34,094) Contributions 7,550 7,550 2,750 (4,800) Interest 450,000 450,000 370,959 (79,041) Miscellaneous 157,110 211,418 642,229 430,811

Total revenues 16,879,720 17,767,244 18,307,397 540,153

EXPENDITURESCurrent:

General government:Mayor and council 491,865 490,665 475,985 14,680 City manager 732,695 771,995 771,983 12 Financial administration 666,789 665,521 657,053 8,468 Legal and audit 269,200 268,900 260,410 8,490 Information technology 876,605 883,293 847,306 35,987 Buildings 918,225 918,225 835,196 83,029

Total general government 3,955,379 3,998,599 3,847,933 150,666

Judicial 343,677 343,677 327,480 16,197

Public safety:Police 4,074,908 4,796,914 4,790,426 6,488 Corrections 629,192 629,192 612,384 16,808

Total public safety 4,704,100 5,426,106 5,402,810 23,296

Public works:Central services 576,882 576,882 547,535 29,347 Highways and streets 1,343,694 1,475,721 1,474,589 1,132 Stormwater - 414,045 413,813 232

Total public works 1,920,576 2,466,648 2,435,937 30,711

Culture and recreation 2,140,034 2,229,746 2,228,070 1,676

Housing and development:Construction and inspection 314,849 339,049 337,732 1,317 Planning and zoning 208,108 210,808 210,342 466 Economic development 326,864 328,714 328,063 651

Total housing and development 849,821 878,571 876,137 2,434

Capital outlay 480,600 865,821 806,046 59,775

Debt service:Principal 766,682 562,682 562,468 214 Interest 705,960 543,328 540,391 2,937

Total debt service 1,472,642 1,106,010 1,102,859 3,151

Total expenditures 15,866,829 17,315,178 17,027,272 287,906

Excess of revenues over expenditures 1,012,891 452,066 1,280,125 828,059

OTHER FINANCING SOURCES (USES)Proceeds from sale of capital assets 10,000 10,000 5,388 (4,612) Issuance of long-term debt 177,000 180,150 159,992 (20,158) Transfers in 764,051 1,047,739 1,019,325 (28,414) Transfers out (1,963,942) (1,689,955) (1,647,672) 42,283

Total other financing sources (uses) (1,012,891) (452,066) (462,967) (10,901)

Net change in fund balances - - 817,158 817,158

FUND BALANCES, beginning of year 7,701,864 7,701,864 7,701,864 -

FUND BALANCES, end of year $ 7,701,864 $ 7,701,864 $ 8,519,022 $ 817,158


BudgetOriginal

Variance With

20


STATEMENT OF NET ASSETSPROPRIETARY FUNDSSEPTEMBER 30, 2012

Enterprise FundSanitation Museum Gardens

ASSETS Fund Fund Fund Totals Fund

CURRENT ASSETSCash $ 1,443,963 $ 135,110 $ 70,948 $ 1,650,021 $ 14,058Accounts receivable 348,929 - - 348,929 17,148Due from other funds 83,392 11,314 - 94,706 141,873 Inventory - 70,030 3,391 73,421 - Prepaids 58,464 28,766 762 87,992 23,444

Total current assets 1,934,748 245,220 75,101 2,255,069 196,523

CAPITAL ASSETSNon-depreciable assets - 686,441 - 686,441 - Depreciable assets 1,491,191 7,832,060 97,310 9,420,561 -

1,491,191 8,518,501 97,310 10,107,002 - Accumulated depreciation (717,143) (2,007,647) (23,605) (2,748,395) -

774,048 6,510,854 73,705 7,358,607 -

Total assets 2,708,796 6,756,074 148,806 9,613,676 196,523

LIABILITIES

CURRENT LIABILITIESAccounts payable 35,359 18,316 26,276 79,951 85,390 Accrued liabilities 17,296 64,281 6,199 87,776 150,687Deposits payable 350,715 - - 350,715 - Compensated absences payable 22,925 7,262 1,986 32,173 - Due to other funds 6,010 2,359 594 8,963 - Unearned revenue 167,722 - - 167,722 - Capital lease, due within one year 110,256 - - 110,256 - Notes payable, due within one year - 285,000 - 285,000 -

Total current liabilities 710,283 377,218 35,055 1,122,556 236,077

NONCURRENT LIABILITIES

Capital lease, due in more than one year 132,296 - - 132,296 - Note payable, due in more than one year - 3,230,000 - 3,230,000 - Net OPEB liability 135,981 103,942 34,521 274,444 -

Total noncurrent liabilities 268,277 3,333,942 34,521 3,636,740 -

Total liabilities 978,560 3,711,160 69,576 4,759,296 236,077

NET ASSETSInvested in capital assets, net of related debt 531,496 2,995,854 73,705 3,601,055 - Unrestricted 1,198,740 49,060 5,525 1,253,325 (39,554)

Total net assets $ 1,730,236 $ 3,044,914 $ 79,230 4,854,380 $ (39,554)

Adjustment to reflect the consolidation of internal service fund activities to enterprise funds 9,870 Net assets of business-type activities $ 4,864,250


Business-type Activities - Enterprise Funds

Nonmajor GovernmentalActivities

Internal Service

21


STATEMENT OF REVENUES, EXPENSES, ANDCHANGES IN FUND NET ASSETS

PROPRIETARY FUNDSFOR THE YEAR ENDED SEPTEMBER 30, 2012

Enterprise FundSanitation Museum Gardens

Fund Fund Fund Totals FundOPERATING REVENUE

Sanitation fees $ 2,532,622 $ - $ - $ 2,532,622 $ - Charges for sales and services 26,186 297,153 49,120 372,459 2,584,220Miscellaneous - 81,313 72,683 153,996 -

Total operating revenues 2,558,808 378,466 121,803 3,059,077 2,584,220

OPERATING EXPENSESCost of sales and services 1,553,941 934,620 311,863 2,800,424 121,465Claims - - - - 2,399,945Depreciation 94,238 217,755 8,754 320,747 -

Total operating expenses 1,648,179 1,152,375 320,617 3,121,171 2,521,410

Operating income (loss) 910,629 (773,909) (198,814) (62,094) 62,810

NON-OPERATING INCOME (EXPENSES)Interest income 997 128 25 1,150 65Intergovernmental - - 934 934 - Interest expense (4,240) (157,397) - (161,637) -

Total non-operating income (expenses) (3,243) (157,269) 959 (159,553) 65

Income (loss) before transfers and contributions 907,386 (931,178) (197,855) (221,647) 62,875

Capital contributions - 57,794 - 57,794 - Transfers in - 1,055,194 245,017 1,300,211 - Transfers out (1,019,325) - - (1,019,325) -

Total capital contributions and transfers (1,019,325) 1,112,988 245,017 338,680 -

Change in net assets (111,939) 181,810 47,162 117,033 62,875

Total net assets, beginning of year, restated 1,842,175 2,863,104 32,068 (102,429)

Total net assets, end of year $ 1,730,236 $ 3,044,914 $ 79,230 $ (39,554)

Adjustment to reflect the consolidation of internal service fund activities to enterprise funds 7,032 Change in net assets of business-type activities $ 124,065


GovernmentalActivities

Internal Service

Nonmajor


22


STATEMENT OF CASH FLOWS PROPRIETARY FUNDS

FOR THE YEAR ENDED SEPTEMBER 30, 2012

Nonmajor GovernmentalEnterprise Fund Activities

Sanitation Museum Gardens Internal ServiceFund Fund Fund Totals Fund

CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users $ 2,696,397 $ 378,466 $ 120,914 $ 3,195,777 $ 2,504,170 Payments to suppliers 131,111 (429,361) (93,317) (391,567) (2,495,750) Payments to employees (867,553) (503,426) (198,038) (1,569,017) -

Net cash provided by (used in) operating activities 1,959,955 (554,321) (170,441) 1,235,193 8,420

CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES

Transfers in from other funds - 1,043,880 245,017 1,288,897 - Transfers out to other funds (1,019,325) - - (1,019,325) -

Net cash provided by (used in) non-capital financing activities (1,019,325) 1,043,880 245,017 269,572 -

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES

Purchase of capital assets (263,696) (6,625) (30,769) (301,090) - Principal payments on notes payable - (275,000) - (275,000) - Issuance of capital lease 219,681 - - 219,681 - Principal payments on capital lease (111,742) - - (111,742) - Interest paid (4,240) (163,631) - (167,871) - Grants and capital contributions - 1,215 934 2,149 -

Net cash used in capital and related financing activities (159,997) (444,041) (29,835) (633,873) -

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received 997 128 25 1,150 65

Net cash provided by investing activities 997 128 25 1,150 65

Net increase in cash 781,630 45,646 44,766 872,042 8,485

Cash, beginning of year 662,333 89,464 26,182 777,979 5,573

Cash, end of year $ 1,443,963 $ 135,110 $ 70,948 $ 1,650,021 $ 14,058

RECONCILIATION OF OPERATING INCOME (LOSS) TO

NET CASH PROVIDED BY (USED IN)

OPERATING ACTIVITIES

Operating income (loss) $ 910,629 $ (773,909) $ (198,814) $ (62,094) $ 62,810 Adjustments to reconcile operating income (loss)

to net cash provided by (used in) operating activities:Depreciation 94,238 217,755 8,754 320,747 - Change in assets and liabilities:

Decrease in accounts receivable 53,159 - 45 53,204 61,823 Decrease (increase) in due from other funds 791,736 - - 791,736 (141,873) Increase in prepaid items (22,634) (18,884) (501) (42,019) (23,444) Increase in inventory - (18,919) (4) (18,923) - Increase in accounts payable 11,312 13,001 6,904 31,217 85,390 Increase (decrease) in accrued liabilities (1,278) 5,034 1,030 4,786 (36,286) Increase in customer deposits payable 59,345 - - 59,345 - Increase in OPEB liability 35,302 25,569 13,060 73,931 - Decrease in compensated absences payable (2,949) (4,291) (575) (7,815) - Increase (decrease) in unearned revenue 25,085 - (934) 24,151 - Increase in due to other funds 6,010 323 594 6,927 -

Net cash proivded by (used in) operating activities $ 1,959,955 $ (554,321) $ (170,441) $ 1,235,193 $ 8,420

NONCASH CAPITAL AND RELATED

FINANCING ACTIVITIESCapital contributions $ - $ 56,579 $ - $ 56,579 $ -



23

24

CITY OF KENNESAW, GEORGIA NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements of the City of Kennesaw, Georgia (the “City”) have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the City's accounting policies are described below.

A. Reporting Entity The City operates under a council/manager form of government and provides the following services to its citizens: public safety, public works, parks and recreation, public improvements, and general and administrative services. The accompanying financial statements present the City and its component units, entities for which the City is considered to be financially accountable. Each discretely presented component unit is reported in a separate column in the government-wide financial statements to emphasize that it is legally separate from the City. Discretely Presented Component Units The Kennesaw Downtown Development Authority (the “KDDA”) has been included as a discretely presented component unit in the accompanying financial statements. The City appoints its seven member board and all debt issuances must be first approved by the City Council. Financial information with regard to the KDDA can be obtained from Kennesaw City Hall. Separate financial statements for the Kennesaw Downtown Development Authority are not prepared. The Kennesaw Development Authority (the “KDA”) has been included as a discretely presented component unit in the accompanying financial statements. The City appoints its seven member board and all debt issuances must be first approved by the City Council. Financial information with regard to the KDA can be obtained from Kennesaw City Hall. Separate financial statements for the Kennesaw Development Authority are not prepared. Blended Component Unit The Kennesaw Urban Redevelopment Agency (the “KURA”) has been included as a blended component unit in the accompanying financial statements. The City appoints its three member board. Although it is legally separate from the City, its sole purpose is to finance construction and acquisitions of the City. The debt and assets of the KURA have been reported as a form of the City’s debt and assets and all debt service activity is reported as debt service activity of the City.

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NOTES TO FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

B. Government-wide and Fund Financial Statements

The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. However, any interfund services provided and used are not eliminated as this process would distort the direct costs and program revenues reported in the various functions. Government-wide financial statements do not provide information by fund, but distinguish between the City’s governmental activities and business-type activities. Governmental activities, which are normally supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from discretely presented component units. The statement of net assets will include non-current assets and non-current liabilities. In addition, the government-wide statement of activities reflects depreciation expense on the City’s capital assets. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not considered program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.

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C. Measurement Focus, Basis of Accounting and Basis of Presentation

The government-wide financial statements are reported using the economic resource measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period, with the exception of intergovernmental revenue which is considered available if collected within 180 days of year end. Expenditures are generally recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, sales taxes, franchise taxes, licenses, intergovernmental grants, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period, if available. All other revenue items are considered to be measurable and available only when cash is received by the City. In accordance with GASB Statement No. 33, “Accounting and Financial Reporting for Non-exchange Transactions,” the corresponding assets (receivables) in non-exchange transactions are recognized in the period in which the underlying exchange occurs, when an enforceable legal claim has arisen, when all eligibility requirements have been met, or when resources are received, depending on the revenue source. In accordance with GASB Statement No. 34, major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.

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C. Measurement Focus, Basis of Accounting and Basis of Presentation (Continued) The City reports the following major governmental funds: The General Fund is the City’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund.

The SPLOST Fund accounts for the receipts of special purpose local option sales tax (SPLOST) funds and expenditures of money for capital projects approved in the SPLOST resolution. The City reports the following major proprietary funds: The Sanitation Fund accounts for the collection of fees for garbage collection, disposal and recycling programs and related expenses. The Museum Fund accounts for the activity related to the operation of the City’s Museum. The City also reports the following fund types: The Special Revenue Funds are used to account for specific revenues, such as confiscations and forfeitures, E911 revenues, hotel/motel tax revenues, charges for cemetery plot sales, charges for various impact fee permits and various grants and contributions, which are legally restricted or committed to expenditures for particular purposes. The Capital Project Fund is used to account for the expenditures of money for major capital projects. This fund is general in nature and may be used to finance any capital project that the City Council designates. The Debt Service Fund is used to accounts for the resources accumulated and payments made for principal and interest on long-term debt of the City. The Internal Service Fund accounts for the accumulation of resources to be used for health insurance related costs, as the City is partially self-insured.

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C. Measurement Focus, Basis of Accounting and Basis of Presentation (Continued)

Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the enterprise funds are charges for goods and services provided. Operating expenses of the enterprise funds include the cost of these goods and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.

D. Budgets

Annual appropriated budgets are adopted for all funds, except capital project funds, which have project length budgets. The budgets for the proprietary funds are for management control purposes and are not required to be reported. Budgets are adopted on a modified accrual basis, which is consistent with generally accepted accounting principles for governmental funds. All appropriations lapse at fiscal year end. Encumbrance accounting - under which purchase orders, contracts and other commitments for the expenditure of resources are recorded to reserve that portion of the applicable appropriation - is not employed by the City.

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E. Deposits and Investments

Georgia statutes authorize the City to invest in the following: (1) obligations of Georgia or any other state; (2) obligations of the United States; (3) obligations fully insured or guaranteed by the United States government or one of its agencies; (4) obligations of any corporation of the United States government; (5) prime bankers’ acceptances; (6) the State of Georgia local government investment pool; (7) repurchase agreements; and (8) obligations of any other political subdivisions of the State of Georgia. Any investment or deposit in excess of the federal depository insured amounts must be collateralized by an equivalent amount of state or U.S. obligations. For purposes of the statement of cash flows, all highly liquid investments with an original maturity of less than 90 days are considered to be cash equivalents. Investments are reported at fair value as determined by quoted market prices.

F. Receivables and Payables

Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year as well as all other outstanding balances between funds is reported as “due to/from other funds.” Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” Advances between funds, as reported in the fund financial statements, represent long-term borrowing arrangements with established repayment schedules, and are offset by a fund balance account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources.

G. Inventories

Inventories are valued at cost, which approximates market, using the first-in/first-out (FIFO) method. Inventories consist of expendable supplies held for consumption. The cost is recorded as an asset at the time the individual item is purchased. Inventories reported in the governmental funds are equally offset by fund balance, which indicates that they do not constitute “available, spendable resources” even though they are a component of net current assets.

H. Prepaid Items

Payments made to vendors for services that will benefit periods beyond September 30, 2012, are recorded as prepaid items in both government-wide and fund financial statements. These items are accounted for using the consumption method.

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I. Capital Assets

Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities column in the government-wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The City has reported infrastructure consistent with the retroactive infrastructure reporting requirements of GASB Statement 34. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets’ lives are not capitalized. Capital assets of the primary government, as well as the component units, are depreciated using the straight line method over the following estimated useful lives:

Assets Years

Infrastructure 30-50Buildings 10-40Land improvements 10-40Machinery and equipment 3-20Vehicles 3-10

J. Compensated Absences

It is the City’s policy to permit employees to accumulate earned but unused vacation and sick pay benefits. There is no liability for non-vesting accumulated rights to receive sick pay benefits since the City does not have a policy to pay any amounts when employees separate from service with the City. All vacation pay is accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee resignations and retirements.

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K. Long-Term Obligations

In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the term of the bonds using the effective interest method. Bonds payable are reported net of the applicable discount or premium. Issuance costs are reported as deferred charges. Proprietary fund type loans payable are reported as liabilities at their outstanding value. Loan issuance costs are reported as deferred charges and amortized over the term of the loan using straight-line, which is determined to not be materially different from the effective interest method. In the fund financial statements, governmental fund types report the face amount of debt issued and related premiums or discounts as other financing sources and bond issuance costs as expenditures.

L. Fund Equity

Fund equity at the governmental fund financial reporting level is classified as “fund balance.” Fund equity for all other reporting is classified as “net assets.” Fund Balance – Generally, fund balance represents the difference between the assets and liabilities under the current financial resources measurement focus of accounting. In the fund financial statements, governmental funds report fund balance classifications that comprise a hierarchy based primarily on the extent to which the City is bound to honor constraints on the specific purpose for which amounts in those funds can be spent.

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NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) L. Fund Equity (Continued)

Fund balances are classified as follows: Nonspendable – Fund balances are reported as nonspendable when amounts cannot be

spent because they are either (a) not in spendable form (i.e., items that are not expected to be converted to cash) or (b) legally or contractually required to be maintained intact.

Restricted – Fund balances are reported as restricted when there are limitations imposed

on their use either through enabling legislation adopted by the City or through external restrictions imposed by creditors, grantors, laws or regulations of other governments.

Committed – Fund balances are reported as committed when they can be used only for

specific purposes pursuant to constraints imposed by a formal resolution of the City Council. Only the City Council may modify or rescind the commitment through the passage of a resolution.

Assigned – Fund balances are reported as assigned when amounts are constrained by

the City’s intent to be used for specific purposes, but are neither restricted nor committed. The City Council has expressly delegated to the City Manager the authority to assign funds for particular purposes.

Unassigned – Fund balances are reported as unassigned as the residual amount when

the balances do not meet any of the above criterion. The City reports positive unassigned fund balance only in the General Fund. Negative unassigned fund balances may be reported in all funds.

Flow Assumptions – When both restricted and unrestricted amounts of fund balance are available for use for expenditures incurred, it is the City’s policy to use restricted amounts first and then unrestricted amounts as they are needed. For unrestricted amounts of fund balance, it is the City’s policy to use fund balance in the following order: (1) Committed, (2) Assigned, (3) Unassigned. Net Assets – Net assets represent the difference between assets and liabilities in reporting which utilizes the economic resources measurement focus. Net assets invested in capital assets, net of related debt, consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used (i.e., the amount that the City has spent) for the acquisition, construction or improvement of those assets. Net assets are reported as restricted using the same definition as used for restricted fund balance as described in the section above. All other net assets are reported as unrestricted.

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M. Management Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenditures/expenses during the period. Actual results could differ from those estimates.

NOTE 2. RECONCILIATION OF GOVERNMENT-WIDE FINANCIAL STATEMENTS AND FUND FINANCIAL STATEMENTS

A. Explanation of Certain Differences Between the Governmental Fund Balance Sheet

and the Government-wide Statement of Net Assets

The governmental fund balance sheet includes a reconciliation between fund balance – total

governmental funds and net assets – governmental activities as reported in the government-wide statement of net assets. One element of that reconciliation explains that “long-term liabilities are not due and payable in the current period and therefore are not reported in the funds.” The details of this $16,903,217 difference are as follows: Capital leases payable $ (264,892) Bonds payable (16,055,000) Bond issuance costs 216,556 Accrued interest payable (130,200) Compensated absences (669,681)

Net adjustment to reduce fund balance - total governmentalfunds to arrive at net assets - governmental activities $ (16,903,217)

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NOTE 2. RECONCILIATION OF GOVERNMENT-WIDE FINANCIAL STATEMENTS AND FUND FINANCIAL STATEMENTS (Continued)

B. Explanation of Certain Differences Between the Governmental Fund Statement of

Revenues, Expenditures, and Changes in Fund Balances and the Government-wide

Statement of Activities

The governmental fund statement of revenues, expenditures, and changes in fund balances includes a reconciliation between net changes in fund balances – total governmental funds and changes in net assets of governmental activities as reported in the government-wide statement of activities. One element of that reconciliation explains that “Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their useful lives and reported as depreciation expense.” The details of this $559,664 difference are as follows:

Capital outlay $ 1,583,478 Depreciation expense (2,143,142) Net adjustment to decrease net changes in fund balances - total

governmental funds to arrive at changes in net assets ofgovernmental activities $ (559,664)

Another element of that reconciliation explains that “The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets.” The details of this $519,040 difference are as follows:

Proceeds from issuance of long-term debt $ (159,992) Amortization of deferred charges (23,436) Principal retirement of long-term debt 702,468 Net adjustment to increase net changes in fund balances - total

governmental funds to arrive at changes in net assets ofgovernmental activities $ 519,040

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NOTE 2. RECONCILIATION OF GOVERNMENT-WIDE FINANCIAL STATEMENTS AND FUND FINANCIAL STATEMENTS (Continued)

B. Explanation of Certain Differences Between the Governmental Fund Statement of

Revenues, Expenditures, and Changes in Fund Balances and the Government-wide

Statement of Activities (Continued)

Another element of that reconciliation explains that “Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds.” The details of this $534,376 difference are as follows: Compensated absences $ 24,088 Change in OPEB accrual (562,434) Accrued interest 3,970 Net adjustment to decrease net changes in fund balances - total

governmental funds to arrive at changes in net assets ofgovernmental activities $ (534,376)

NOTE 3. LEGAL COMPLIANCE - BUDGETS The City of Kennesaw, Georgia employs the following procedures in establishing its annual budget: 1. The City Manager submits a proposed operating budget to the City Council. The operating

budget includes proposed expenditures and the means for financing them. 2. Prior to any action by the Council, the City publishes the proposed budget in the official

legal organ, other community newspapers and makes copies available to the residents of the City.

3. Public meetings are held to obtain taxpayer comments. 4. The budget is then legally enacted through passage of a resolution by the City Council by

October 1 each fiscal year. 5. Budgetary control is exercised at the department level. The City Manager is authorized to

transfer budget amounts within a department; however, any revisions that alter the total expenditures of a department require a budget amendment by the City Council. Budget amounts shown in these financial statements reflect amendments approved by the City Council. Such amendments resulted in no supplemental appropriations.

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NOTE 4. DEPOSITS AND INVESTMENTS

As of September 30, 2012, the City of Kennesaw had the following investments: Investment Maturities Fair Value

Certificate of deposit 1 - 5 years $ 150,000 U.S. Government obligations 1 - 5 years 375,564 U.S. Government obligations 5 - 10 years 655,025 U.S. Government obligations 10 - 15 years 3,889,020 U.S. Government obligations 15 - 20 years 962,752

Total $ 6,032,361

Interest Rate Risk: The City does not have a formal policy that addresses interest rate risk. At September 30, 2012 the above investments were subject to interest rate risk. Interest rate risk is the risk that a government may face should changes in interest rates affect the fair value of its investments. The above U.S. Government obligations have been reported as restricted investments in the General Fund. These amounts represent proceeds from the prior sale of the City’s water and sewer system that are required by an amendment to the City’s charter to be put before the City’s voters in a public referendum, along with a description of the intended use, for a majority approval by the voters before it may be spent or sold. This amount has also been reported as part of restricted fund balance in the General Fund. Credit Risk: The City does not have a formal policy to address credit risk aside from adherence to State statutes for investments. State statutes authorize the City to invest in obligations of the State of Georgia or other states; obligations issued by the U.S. government; obligations fully insured or guaranteed by the U.S. government or by a government agency of the United States; obligations of any corporation of the U.S. government; prime bankers' acceptances; the local government investment pool established by state law; repurchase agreements; and obligations of other political subdivisions of the State of Georgia. Custodial Credit Risk – Deposits: Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. State statutes, and City policy, require all deposits and investments (other than federal or state government instruments) to be collateralized by depository insurance, obligations of the U.S. government, or bonds of public authorities, counties, or municipalities. As of September 30, 2012, the City‘s and its component units’ deposits were properly insured and collateralized.

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NOTE 5. RECEIVABLES

Property taxes are levied on property values assessed as of January 1. Tax bills are levied on October 1. The billings are considered due upon receipt by the taxpayer; however, the actual due date is December 1. After these dates, the bill becomes delinquent and penalties and interest may be assessed by the City. Property taxes are recorded as receivables and deferred revenues when assessed. Revenues are recognized when available. Receivables at September 30, 2012, for the City’s individual major funds and nonmajor funds in the aggregate, including the applicable allowances for uncollectible accounts are as follows:

Receivables: Taxes $ 555,110 $ - $ - $ 12,845 Accounts - - 634,855 235,577 Due from other governments 79,996 494,721 - - Other 1,740,972 - - - Less allowance for uncollectible (92,544) - (285,926) - Net total receivable $ 2,283,534 $ 494,721 $ 348,929 $ 248,422

SanitationGeneral SPLOST

OtherNonmajor

Funds

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NOTE 6. CAPITAL ASSETS

Primary Government

Capital asset activity for the fiscal year ended September 30, 2012, is as follows:

Beginning EndingBalance Increases Transfers Decreases Balance

Governmental activities:

Capital assets, not being depreciated:Land $ 13,885,277 $ - $ - $ - $ 13,885,277 Construction in progress 482,792 547,773 - - 1,030,565

Total 14,368,069 547,773 - - 14,915,842

Capital assets, being depreciated:Buildings 10,323,856 - - - 10,323,856 Infrastructure 44,156,380 759,733 - - 44,916,113 Machinery and equipment 3,816,425 53,614 - (5,400) 3,864,639 Land improvements 7,482,911 - - - 7,482,911 Vehicles 2,957,262 222,358 - (72,669) 3,106,951

Total 68,736,834 1,035,705 - (78,069) 69,694,470

Less accumulated depreciation for:Buildings (3,307,436) (306,507) - - (3,613,943) Infrastructure (20,011,760) (1,129,925) - - (21,141,685) Machinery and equipment (2,163,641) (289,681) - 5,400 (2,447,922) Land improvements (557,745) (187,768) - - (745,513) Vehicles (1,990,313) (229,261) - 72,669 (2,146,905)

Total (28,030,895) (2,143,142) - 78,069 (30,095,968)

Total capi tal assets, beingdepreciated, net 40,705,939 (1,107,437) - - 39,598,502

Governmental activitiescapital assets, net $ 55,074,008 $ (559,664) $ - $ - $ 54,514,344

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NOTE 6. CAPITAL ASSETS (Continued)

Beginning EndingBalance Increases Decreases Balance

Business-type activities:

Capital assets, not being depreciated:Museum artifacts $ 622,862 $ 56,579 $ - $ 679,441 Land 7,000 - - 7,000

Total 629,862 56,579 - 686,441

Capital assets, being depreciated:Buildings and structures 7,432,979 30,769 - 7,463,748 Furniture and fixtures 83,736 - - 83,736 Vehicles 1,115,570 219,681 - 1,335,251 Machinery and equipment 487,186 50,640 - 537,826

Total 9,119,471 301,090 - 9,420,561

Less accumulated depreciation for:Buildings and structures (1,500,741) (188,458) - (1,689,199) Furniture and fixtures (42,562) (13,293) - (55,855) Vehicles (548,631) (84,624) - (633,255) Machinery and equipment (335,714) (34,372) - (370,086)

Total (2,427,648) (320,747) - (2,748,395)

Total capi tal assets, beingdepreciated, net 6,691,823 (19,657) - 6,672,166

Business-type activitiescapital assets, net $ 7,321,685 $ 36,922 $ - $ 7,358,607

Depreciation expense was charged to functions/programs of the primary government as follows:

Governmental activities:General government $ 253,945 Judicial 4,696 Public safety 218,433 Public works 1,425,220 Culture and recreation 240,848

Total depreciation expense - governmental activities $ 2,143,142

Business-type activities:Sanitation $ 94,238 Museum 217,755 Gardens 8,754

Total depreciation expense - business-type activities $ 320,747

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NOTE 6. CAPITAL ASSETS (Continued)

Kennesaw Downtown Development Authority

Beginning EndingBalance Increases Decreases Balance

Capital assets, not being depreciated: Land and improvements $ 210,000 $ - $ - $ 210,000 Construction in progress - 86,270 - 86,270

Total 210,000 86,270 - 296,270

Capital assets, being depreciated:Sites and improvements 450,854 - - 450,854 Buildings and improvements 107,681 322,693 - 430,374

Total 558,535 322,693 - 881,228

Less accumulated depreciation for:Sites and improvements (17,823) (15,514) - (33,337) Buildings and improvements (20,277) (4,102) - (24,379)

Total (38,100) (19,616) - (57,716)

Total capi tal assets, beingdepreciated, net 520,435 303,077 - 823,512

Total capital assets, net $ 730,435 $ 389,347 $ - $ 1,119,782

NOTE 7. SHORT-TERM BORROWINGS

The City paid off a tax anticipation note for operating purposes of $5,000,000 at a local financial institution. The borrowing, with an interest rate of 1.00%, matured on December 29, 2011. As of September 30, 2012, the principal was paid in full. During the year ending September 30, 2012 the City used a new tax anticipation note for operating purposes; the balance of the note is $5,000,000. The new note has an interest rate of 0.77% and matures on December 28, 2012. Total short-term borrowings interest incurred and expensed for the period ended September 30, 2012, was $25,151. The following is a summary of the tax anticipation note payable for the period ended September 30, 2012:

Beginning Ending

Balance Additions Reductions Balance

Tax anticipation note $ 5,000,000 $ 5,000,000 $ (5,000,000) $ 5,000,000

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NOTE 8. LONG-TERM DEBT

Primary Government

Long-term liability activity for the year ended September 30, 2012, was as follows:

Beginning Ending Due WithinBalance Additions Reductions Balance One Year

Governmental activities:General obligation bonds $ 12,580,000 $ - $ (455,000) $ 12,125,000 $ 475,000 Revenue bonds 4,070,000 - (140,000) 3,930,000 145,000 Capital leases 212,368 159,992 (107,468) 264,892 106,788 OPEB obligation 1,325,711 567,935 (5,501) 1,888,145 - Compensated absences 693,769 452,783 (476,871) 669,681 460,855 Governmental activity

Long-term liabilities $ 18,881,848 $ 1,180,710 $ (1,184,840) $ 18,877,718 $ 1,187,643

Beginning Ending Due WithinBalance Additions Reductions Balance One Year

Business-type activities:Note payable - due to component unit $ 3,790,000 $ - $ (275,000) $ 3,515,000 $ 285,000 Capital lease 134,613 219,681 (111,742) 242,552 110,256 OPEB obligation 200,513 74,625 (694) 274,444 - Compensated absences 39,988 38,516 (46,331) 32,173 32,173 Business-type activity

Long-term liabilities $ 4,165,114 $ 332,822 $ (433,767) $ 4,064,169 $ 427,429

For governmental activities, compensated absences and OPEB obligations are liquidated by the General Fund. For business-type activities, compensated absences and OPEB obligations are liquidated by all enterprise funds.

Capital Leases - Equipment. The City has entered into lease agreements as lessee for financing the acquisition of equipment (vehicles), machinery, and improvements used in general governmental activities and business-type activities. The lease agreements qualify as capital leases for accounting purposes (titles transfer at the end of the lease terms) and, therefore, have been recorded at the present values of the future minimum lease payments as of the date of their inceptions. As of September 30, 2012, the City had $346,624 and $403,286 for governmental activities and business-type activities, respectively, of machinery and equipment under capital leases.

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NOTE 8. LONG-TERM DEBT (Continued)

The City’s total capital lease debt service requirements to maturity are as follows:

Fiscal Year Ending September 30,2013 $ 113,795 $ 115,9822014 87,575 46,1512015 60,051 46,1512016 16,817 46,151Total minimum lease payments 278,238 254,435Less amount representing interest 13,346 11,883 Present value of future minimum lease payments $ 264,892 $ 242,552

GovernmentalActivities

Business-typeActivities

General Obligation Bonds. In November 2004 and January 2005 the City issued $9,000,000 and $6,000,000, respectively, of Various Purpose Series 2004 & 2005 General Obligation Bonds. The proceeds from the bonds will be used to pay for the costs of acquiring, constructing, equipping and renovating certain transportation projects, and parks and recreation projects, as well as the issuance costs. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The bonds were issued as 25-year serial bonds with interest rates of 4.12%. General obligation bond debt service requirements to maturity are as follows:

Fiscal Year Ending September 30,2013 $ 475,000 $ 489,765 $ 964,765 2014 495,000 469,783 964,783 2015 515,000 448,977 963,977 2016 535,000 427,347 962,347 2017 565,000 404,687 969,687 2018-2022 3,270,000 1,641,408 4,911,408 2023-2027 4,230,000 874,058 5,104,058 2028-2029 2,040,000 85,078 2,125,078 Total $ 12,125,000 $ 4,841,103 $ 16,966,103

InterestPrincipal Total

Revenue Bonds. In October 2003 the Kennesaw Urban Redevelopment Agency (KURA), a blended component unit, issued $2,100,000 of Series 2003 Revenue Bonds. The bonds bear interest at 3.95% and are payable each February 1 and August 1 starting in 2005 through 2019. The proceeds from the bond issue were used to pay for the costs of expanding City Hall, as well as the issuance costs.

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Additionally, in December 2009 the KURA issued $2,800,000 of Series 2009 Revenue Bonds. The bonds bear interest at 7.00% and are payable each February 1 and August 1 starting in 2014 through 2034. The proceeds from the bond issue were used to acquire land for future development, as well as the issuance costs. The Revenue bond debt service requirements to maturity are as follows:

Fiscal Year Ending September 30,2013 $ 145,000 $ 237,771 $ 382,771 2014 215,000 229,670 444,670 2015 220,000 219,096 439,096 2016 230,000 208,150 438,150 2017 240,000 196,656 436,656 2018-2022 830,000 819,646 1,649,646 2023-2027 660,000 607,950 1,267,950 2028-2032 925,000 333,025 1,258,025 2033-2034 465,000 33,076 498,076 Total $ 3,930,000 $ 2,885,040 $ 6,815,040

InterestPrincipal Total

Note payable - due to Component Unit. The Kennesaw Downtown Development Authority (“KDDA”) issued $4,990,000 of revenue bonds in 2001 to expand the Southern Museum of Civil War and Locomotive History. The City entered into a contract with KDDA whereby the City agreed to pay the bond trustee an amount equal to the annual debt service on the bonds. For financial reporting purposes, the City has recorded a note payable due to the Authority in an amount equal to the outstanding indebtedness of the KDDA with respect to these revenue bonds. The KDDA has recorded a note receivable from the City, which equals the outstanding balance of these revenue bonds. The debt service requirements to maturity on the note payable are as follows:

Principal Interest TotalYear Ending September 30,

2013 285,000$ 151,088$ 436,088$ 2014 300,000 137,984 437,984 2015 310,000 124,320 434,320 2016 325,000 110,096 435,096 2017 340,000 95,200 435,200 2018-2022 1,955,000 226,800 2,181,800 Total 3,515,000$ 845,488$ 4,360,488$

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Kennesaw Downtown Development Authority

Long-term liability activity for the year ended September 30, 2012, is as follows:

Beginning Ending Due Within

Balance Additions Reductions Balance One Year

Revenue bonds $ 3,790,000 $ - $ (275,000) $ 3,515,000 $ 285,000 Note payable 142,170 369,850 (16,736) 495,284 27,335

Total long-term liabilities $ 3,932,170 $ 369,850 $ (291,736) $ 4,010,284 $ 312,335

Revenue bonds. The Kennesaw Downtown Development Authority (“KDDA”) issued $4,990,000 of revenue bonds in 2001 to expand the Southern Museum of Civil War and Locomotive History. The City entered into a contract with KDDA whereby the City agreed to pay the bond trustee an amount equal to the annual debt service on the bonds. The bonds bear interest at a rate of 4.48% annually and are due on June 1 each year, beginning in 2002 through 2021. The debt service requirements to maturity on the bonds payable are as follows:


2013 285,000$ 151,088$ 436,088$ 2014 300,000 137,984 437,984 2015 310,000 124,320 434,320 2016 325,000 110,096 435,096 2017 340,000 95,200 435,200 2018-2022 1,955,000 226,800 2,181,800 Total 3,515,000$ 845,488$ 4,360,488$

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Note payable. In September 2005 the KDDA entered into a note payable with a local financial institution; the note was used to acquire real estate. The note was originally executed for $200,000, with an interest rate of 6.50%. The note is paid each month beginning December 1, 2005 through November 1, 2020. The debt service requirements to maturity are as follows:


2013 12,755$ 8,151$ 20,906$ 2014 13,610 7,297 20,907 2015 14,521 6,385 20,906 2016 15,494 5,413 20,907 2017 16,531 4,375 20,906 2018-2021 57,239 6,193 63,432 Total 130,150$ 37,814$ 167,964$

In February 2012 the KDDA entered into a note payable with a local financial institution; the note was used to acquire real estate and the attached building at 2765 Main Street Kennesaw, GA 30144. The note was originally executed for $250,000, with an interest rate of 4.75%. The note is paid each month beginning July 3, 2012 through February 3, 2017. The debt service requirements to maturity are as follows:


2013 7,949$ 11,742$ 19,691$ 2014 8,340 11,351 19,691 2015 8,751 10,941 19,692 2016 9,152 10,540 19,692 2017 213,253 3,442 216,695 Total 247,445$ 48,016$ 295,461$

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In February 2012, the KDDA entered into a note payable with a local financial institution; the agreement was used for building improvements to the property purchased at 2765 Main Street Kennesaw, GA 30144. The agreement was originally executed for $119,850, with an interest rate of 3.10%. The agreement is paid each month beginning July 3, 2012 through January 3, 2017. The debt service requirements to maturity are as follows:


2013 6,631$ 3,604$ 10,235$ 2014 6,843 3,393 10,236 2015 7,061 3,174 10,235 2016 7,278 2,958 10,236 2017 89,876 707 90,583 Total 117,689$ 13,836$ 131,525$

NOTE 9. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS The composition of interfund balances as of September 30, 2012, is as follows: Due to / from other funds: Receivable Fund Payable Fund

Sanitation fund General fund $ 83,392 Museum fund Nonmajor governmental funds 11,314 Nonmajor governmental funds General fund 2,311,719 Internal service fund General fund 127,668 Internal service fund Sanitation fund 6,010 Internal service fund Museum fund 2,359 Internal service fund Nonmajor governmental funds 5,242 Internal service fund Nonmajor enterprise funds 594

$ 2,548,298

Amount

All interfund balances resulted from the time lag between the dates that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments between funds are made.

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NOTE 9. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS (Continued)

Due to/from primary government and component units:

Receivable Entity Payable Entity

Primary government - Component unit - Development General Fund Authority $ 2,313,349

Amount

In addition to the amounts noted as due to/from primary government and component units above, the City has reported a due to component unit, in the amount of $50,363, in the Museum fund which represents the interest accrued on the bonds. This is reported as accrued interest in the Museum fund. Interfund transfers:

Transfers In Transfers Out

General fund Sanitation fund $ 1,019,325

Museum fund General fund $ 1,036,880Museum fund Nonmajor governmental funds 18,314

$ 1,055,194

Nonmajor governmental funds General fund $ 365,775

Nonmajor enterprise funds General fund $ 245,017

Amount

Transfers are used to (1) move revenues from the fund that statute or budget requires collecting them to the fund that statute or budget requires to expend them and (2) use unrestricted revenues collected in the General Fund to finance various programs accounts for in other funds in accordance with budgetary authorizations. Advances to/from other funds are as follows:

Receivable Fund Payable Fund

General fund Nonmajor governmental funds $ 667,428

Amount

The amounts payable to the General Fund relate to equipment startup costs paid for by the General fund.

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NOTE 10. OPERATING LEASES

The City leases copy machines under non-cancelable operating leases. Total costs for such leases were $29,928 for the fiscal year ended September 30, 2012. The future minimum lease payments for these leases are as follows:

Year Ending

September 30,2013 $ 29,9282014 28,7402015 28,740

$ 87,408

NOTE 11. DEFINED BENEFIT PENSION PLAN

Plan Description The City, as authorized by the City Council, has established a defined benefit pension plan (The City of Kennesaw Retirement Plan) covering all full-time employees. The City’s pension plan is affiliated with the Georgia Municipal Employee Benefit System (GMEBS), an agent multiple-employer pension plan administered by the Georgia Municipal Association. Contributions made by the City are commingled with contributions made by other members of GMEBS for investment purposes. The City does not own any securities on its own. Investment income from the securities is allocated on a pro rata basis. The Georgia Municipal Association issues a publicly available financial report that includes financial statements and required supplementary information for GMEBS. That report may be obtained by writing to Georgia Municipal Association, Risk Management and Employee Benefit Services, 201 Pryor Street, NW, Atlanta, Georgia 30303 or by calling (404) 688-0472. As provided by state law, benefit provisions for participants in GMEBS are established by the respective employers. As authorized by City Council, the plan provides pension benefits and death and disability benefits for plan members and beneficiaries. All employees who work at least thirty hours a week are eligible to participate after one year. Elected officials have no waiting period for eligibility. Benefits vest after ten years of service. A City employee who retires at age 65 with five years of service is entitled to benefits of 2.0% of final average earnings in excess of covered compensation. An employee may elect early retirement at age 55 provided he has a minimum of ten years total credited service to receive full benefits. Elected officials are entitled to $64 for each year of service after reaching normal retirement age.

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NOTE 11. DEFINED BENEFIT PENSION PLAN (Continued)

At January 1, 2012, the date of the most recent actuarial valuation, there were 256 participants consisting of the following:

Retirees and beneficiaries currently receiving benefits 41 Terminated vested participants not yet receiving benefits 25 Active employees - vested 62 Active employees - nonvested 128

Total 256

Funding Policy The Plan is subject to minimum funding standards of the Georgia Public Retirement Systems Standards law. The board of Trustees of GMEBS has adopted a recommended actuarial funding policy for the plan which meets state minimum requirements and will accumulate sufficient funds to provide the benefits under the plan. The funding policy for the plan is to contribute an amount equal to or greater than the recommended contribution described below. For 2012, the actuarially determined contribution rate was 11.44% of covered payroll. For 2012, the City’s recommended contribution was $883,626. Actual contributions totaled $883,626. The recommended contribution was determined as part of the January 1, 2011 actuarial valuation using the projected unit credit actuarial cost method. Actuarial assumptions include a 7.75% rate of return on investments and projected salary increases are based on years of service and age of employees with rates ranging from 4% to 11% (3.5% due to inflation). The period, and related method, for amortizing the initial unfunded actuarial accrued liability is 30 years from 1982 and current changes in the unfunded actuarial accrued liability over 15 years for actuarial gains and losses, 20 years for plan provision and 30 years for actuarial assumptions and cost methods as a level dollar amount. These amortization periods are closed for this plan year. The actuarial value of the plan assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a ten year period.

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NOTE 11. DEFINED BENEFIT PENSION PLAN (Continued)

Employer Contributions

The funding policy for the Plan is to contribute an amount equal to the recommended contribution as determined by the Plan’s actuary. The recommended contribution was determined as part of the January 1, 2011 actuarial valuation. The chart below shows the annual pension cost, which equaled the Annual Required Contribution (ARC), for the current year and prior two years along with the percentage actually contributed by the City.

Fiscal Year Annual Actual Percentage of Net

Ended Pension Pension APC Pension

September 30 Cost (APC) Contribution Contributed Obligation

2012 $ 883,626 $ 883,626 100.0 % $ - 2011 771,422 771,422 100.0 - 2010 762,181 762,181 100.0 -

As of the most recent valuation date, January 1, 2012, the funded status of the Plan was as follows:

UAAL as a

Actuarial Actuarial Actuarial Annual Percentage ofValuation Value Accrued Funded Unfunded Covered Covered

Date of Assets Liability (AAL) Ratio AAL Payroll Payroll

1/1/2012 8,589,913$ 10,801,905$ 79.52% 2,211,992$ 7,701,603$ 28.72%

The required schedule of funding progress immediately following the notes to the financial statements presents multiyear trend information about whether the actuarial value of plan net assets is increasing or decreasing over time relative to the actuarial accrued liability. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future, and actuarially determined amounts are subject to continual revision as results are compared to past expectations and new estimates are made about the future. Actuarial calculations reflect a long-term perspective. Calculations are based on the substantive plan in effect as of January 1, 2012.

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NOTE 12. OTHER POST EMPLOYEMENT BENEFITS

Plan Description The City of Kennesaw Other Post-Retirement Benefits Plan (the “OPEB Plan”) is a single-employer defined benefit post-retirement health care, dental and vision plan, or other post employment benefit (OPEB) plan. The City has not elected to advance fund the plan, but rather maintains the plan on a “pay as you go” basis, in that claims are paid as they arise, rather than establishing an irrevocable trust to accumulate restricted funds.

Benefits

Eligible retirees and former employees are offered the same health, prescription drug, and dental coverage as active employees. The City pays 100% of the employee premium and 0% of family premium for the PPO plan and 100% of the employee premium and 0% of family premiums for the EPO plan. There is a maximum out-of-pocket cost to the employee of $1,000 per year per individual or $3,000 per family. The individual limits of coverage by the City total $125,000 per claim per calendar year. After individual limits are met, the insurance carrier covers additional claims. Eligibility

Eligible participants for Other Post-Employment Benefits include: 1. Retired employees meeting the rule of 70 (age + years of service = 70); and 2. Employee must be receiving a pension from GMA. Plan Membership As of January 1, 2011, the most recent actuarial valuation date, the Plan membership included the following categories of participants:

Retirees, beneficiaries, and dependents 7 Active participants 193

200

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NOTE 12. OTHER POST EMPLOYEMENT BENEFITS (Continued)

City Contributions

The annual required contribution for the current year was determined as part of the January 1, 2011, actuarial valuation. The actuarial assumptions included:

Cost Method Projected Unit Credit Actuarial Asset Valuation Method Market Value Assumed Rate of Return on Investments 4.0% Annual Inflation 3.5% Healthcare Cost Trend Rate 9.0% Ultimate Healthcare Cost Trend Rate 5.0% Year of Ultimate Trend Rate 2018 Amortization Method Level dollar, closed Remaining Amortization Period 23 years The following is a schedule of funding progress using the projected unit credit method. As of the most recent valuation date, January 1, 2011, the funded status of the Plan was as follows:

Actuarial Actuarial Accrued Unfunded UAAL as aActuarial Value of Liabil ity AAL Funded Covered Percentage ofValuation Assets (AAL) (UAAL) Ratio Payroll Covered Payroll

Date (a) (b) (b-a) (a/b) (c ) (b-a/c)1/1/2011 -$ 3,784,934$ 3,784,934$ 0.0% 7,461,575$ 50.7%

The required schedule of funding progress immediately following the notes to the financial statements presents multiyear trend information about whether the actuarial value of plan net assets is increasing or decreasing over time relative to the actuarial accrued liability. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future, and actuarially determined amounts are subject to continual revision as results are compared to past expectations and new estimates are made about the future. Actuarial calculations reflect a long-term perspective. Calculations are based on the substantive plan in effect as of January 1, 2011.

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NOTE 12. OTHER POST EMPLOYEMENT BENEFITS (Continued)

Annual OPEB Cost

The City’s actuarially determined contribution, OPEB cost and increase in net OPEB obligation for the year ended September 30, 2012, is as follows:

Annual required contribution 685,236$ Interest on net OPEB obligation 61,049 Adjustments to annual required contribution (103,725) Annual OPEB cost 642,560 Contributions made 6,195 Increase in net OPEB obligation 636,365 Net OPEB obligation, beginning of year 1,526,224 Net OPEB obligation, end of year 2,162,589$

Annual OPEB Cost The recommended contribution was determined as part of the January 1, 2011 actuarial valuation. The chart below shows the annual OPEB cost for the current and two preceding years, along with the percentage actually contributed by the City.

Fiscal Year Annual OPEB Employer Net OPEBEnding Cost Contribution Obligation

September 30, 2012 642,560$ 6,195$ 1% 2,162,589$ September 30, 2011 607,317 6,268 1% 1,526,224 September 30, 2010 483,529 7,433 2% 925,175

Cost ContributedAnnual OPEB

Schedule of Employer Costs and ContributionsPercentage of

NOTE 13. DEFINED CONTRIBUTION PENSION PLAN

The City of Kennesaw’s Internal Revenue Code Section 457 and 401(a) Plans are deferred compensation plans and qualify as a defined contribution pension plan. The Plan is administered by Valic and Nationwide for all full time employees. Participants are required to contribute a minimum of 2% of their annual compensation and the City will match up to 1% of contributions. Plan provisions and contribution requirements are established and may be amended by the City’s Council. At September 30, 2012, there were 86 plan members. During the year ending September 30, 2012 employee contributions were $166,631 and employer contributions were $39,392.

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NOTE 14. FUND DEFICITS

For the year ended September 30, 2012, the City’s E911 Fund and Self Insurance Internal Service Fund had fund deficits of $457,474 and $39,554 respectively. The fund deficit in the E911 Fund will be reduced through future user charges and General Fund appropriations, as needed. The fund deficit in the Self Insurance Fund will be reduced through increased charges to user funds, as needed.

NOTE 15. JOINT VENTURE

Under Georgia law, the City, in conjunction with other cities and counties in the Atlanta, Georgia area, is a member of the Atlanta Regional Commission (ARC). Dues to the ARC are assessed at the County level and are, accordingly, paid by Cobb County. Membership in the ARC is required by the Official Code of Georgia Annotated (OCGA) Section 50-8-34 which provides for the organizational structure of the ARC in Georgia. The ARC Board membership includes the chief elected official of each county and various municipalities of the area. OCGA 50-8-39.1 provides that the member governments are liable for any debts or obligations of the ARC. Separate financial statements may be obtained from ARC, 40 Courtland Street, NE, Atlanta, Georgia 30303.

NOTE 16. RISK MANAGEMENT

The City is exposed to various risks of losses related to: torts; thefts of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City is partially self-insured for medical claims. The self-insurance plan is described below. The City has purchased insurance for all other risks of loss, including workers compensation. The City uses Georgia Interlocal Risk Management Agency (GIRMA) and Worker’s Compensation Self-Insurance Fund (WCSIF), public entity risk pools currently operating as common risk management and insurance programs for member local governments, as their property/liability insurance and workers compensation insurance providers. As part of these risk pools, the City is obligated to pay all contributions and assessments as prescribed by the pools, to cooperate with the pool’s agents and attorneys, to follow loss reduction procedures established by the funds, and to report as promptly as possible, and in accordance with any coverage descriptions issued, all incidents which could result in the funds being required to pay any claim of loss. The City is also to allow the pool’s agents and attorneys to represent the City in investigation, settlement discussions and all levels of litigation arising out of any claim made against the City within the scope of loss protection furnished by the funds.

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NOTE 16. RISK MANAGEMENT (Continued)

The funds are to defend and protect the members of the funds against liability or loss as prescribed in the member government contract and in accordance with the workers' compensation law of Georgia. The funds are to pay all cost taxed against members in any legal proceeding defended by the members, all interest accruing after entry of judgment, and all expenses incurred for investigation, negotiation or defense. Settled claims have not exceeded the coverages in the last three fiscal years.

Active Employees. The City is partially self-insured for employee medical claims. The City pays 89% of the employee premium and 85% of family premium for the PPO plan and 91% of the employee premium and 89% of family premiums for the EPO plan. There is a maximum out-of-pocket cost to the employee of $1,000 per year per individual or $3,000 per family. Each employee’s portion of the medical premium cost is withheld from that employee’s paycheck.

The City pays aggregate claims up to $125,000. After the claims reach this amount, a private insurance carrier will pay the remaining claims. In addition to the aggregate limit, the City’s self-insurance is limited to $125,000 per individual per calendar year. After an individual’s claims reach this amount, the private insurance carrier will begin covering them. The City has entered into a contract with a third party to administer the program. This activity is reported in the Self-Insurance Fund and in the government-wide financial statements.

The City has accrued a liability for medical claims that were incurred but not paid before fiscal year end. Retirees. The City provides medical coverage for retirees of the City up to the age of 65. The City pays 100% of the employee premium and 0% of family premium for the PPO plan and 100% of the employee premium and 0% of family premiums for the EPO plan. There is a maximum out-of-pocket cost to the employee of $1,000 per year per individual or $3,000 per family. The retirees’ medical claims are included in the annual limit discussed above. The individual limits of coverage by the City total $125,000 per claim per calendar year. After individual limits are met, the private insurance carrier covers additional claims. This activity is reported in the General Fund. The following table describes the activity related to employee and retiree medical claims. The end of year claims liability is reported as a current liability in the internal service fund because it is anticipated to be paid within one fiscal year. Currently, 7 retirees are eligible for post-retirement benefits. These post-retirement benefits are funded on a pay-as-you go basis and totaled $6,195 for the year ended September 30, 2012.

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NOTE 16. RISK MANAGEMENT (Continued)

Changes in the claims liability for the year ended September 30, 2012 and 2011 are as follows:

Beginning of Current Year End of

Fiscal Year Claims Claims and Changes Claims Year ClaimsYear Liability in Estimates Paid Liability

2012 186,973$ 2,169,553$ 2,205,839$ 150,687$ 2011 155,214$ 2,579,673$ 2,547,914$ 186,973$

NOTE 17. COMMITMENTS AND CONTINGENCIES

Litigation:

The City is a defendant in certain legal actions in the nature of claims for alleged damages to persons and property and other similar types of actions rising in the course of City operations. Liability, if any, which might result from these proceedings, would not, in the opinion of management and legal counsel, have a material adverse effect on the financial position of the City.

Contractual Commitments:

For the fiscal year ended September 30, 2012, contractual commitments on uncompleted contracts were $700,533.

Grant Contingencies:

The City has received federal and state grants for specific purposes that are subject to review and audit by the grantor agencies. Such audits could lead to the disallowance of certain expenditures previously reimbursed by those agencies. Based upon prior experience, management of the City believes such disallowances, if any, will not be significant.

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NOTE 18. HOTEL/MOTEL LODGING TAX

The City imposes a hotel/motel tax on lodging facilities within the City. The tax was assessed at 8%. Revenues were $35,051 for the year ended September 30, 2012. Of this amount 100%, or $35,051, was expended. Expenditures of the tax were used to promote tourism, conventions, and trade shows to operate, maintain, and market a conference center facility as required by O.C.G.A. 48-13-51.

NOTE 19. RESTRICTED FUND BALANCE

The City has reported $8,400,720 of the General Fund’s fund balance as restricted for voter approved use. This amount is also reported as restricted in the government-wide statement of net assets. In 2005, the City sold the infrastructure from their water and sewer system to Cobb County and these are the proceeds from that sale. The City deposited the funds into a restricted investment and enacted a city ordinance requiring the council to obtain voter approval, through a city-wide vote, for any and all uses of the proceeds. Council has no intentions or plans for the use of the funds as of September 30, 2012.

NOTE 20. PRIOR PERIOD RESTATEMENT The City has determined that a restatement of beginning net assets of the Sanitation Fund is necessary to record additional Sanitation receivables and related revenues for the period ending September 30, 2011. These balances were not recorded due to the City reducing revenues instead of increasing receivables when reclassifying accounts receivable credit balances as a liability. These adjustments resulted in changes to the beginning net assets of the Sanitation Fund as follows: Net assets, Sanitation Fund, as previously reported 1,699,538$ Restatement for credit balances related to sanitation bil lings 142,637 Beginning net assets, Sanitation Fund, restated 1,842,175$

The above restatement also caused an adjustment to beginning net assets of business-type activities as follows: Net assets, business-type activities, as previously reported 4,597,548$ Restatement for credit balances related to sanitation bil lings 142,637 Beginning net assets, business-type activities, restated 4,740,185$

REQUIRED SUPPLEMENTARY INFORMATION


REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULES OF FUNDING PROGRESSFOR THE YEAR ENDED SEPTEMBER 30, 2012

Actuarial Actuarial Accrued Unfunded UAAL as aActuarial Value of Liability (AAL) AAL Funded Covered Percentage ofValuation Assets Entry Age (UAAL) Ratio Payroll Covered Payroll

Date (a) (b) (b-a) (a/b) (c ) (b-a/c)1/1/2012 8,589,913$ 10,801,905$ 2,211,992 79.52% 7,701,603$ 28.72%1/1/2011 7,704,106 9,915,146 2,211,040 77.70% 7,527,440 29.37%1/1/2010 6,673,434 8,344,873 1,671,439 79.97% 7,573,223 22.07%1/1/2009 4,976,755 7,550,019 2,573,264 65.92% 7,305,557 35.22%1/1/2008 5,280,764 6,648,981 1,368,217 79.42% 6,302,382 21.71%1/1/2007 4,510,096 5,806,717 1,296,621 77.67% 6,100,617 21.25%

Note: See assumptions used for the above schedule in Note 11 to the financial statements.

Actuarial Actuarial Accrued Unfunded UAAL as aActuarial Value of Liability (AAL) AAL Funded Covered Percentage ofValuation Assets Entry Age (UAAL) Ratio Payroll Covered Payroll

Date (a) (b) (b-a) (a/b) (c ) (b-a/c)1/1/2011 -$ 3,784,934$ 3,784,934$ 0.00% 7,461,575$ 50.73%9/30/2009 - 2,604,421 2,604,421 0.00% 7,406,662 35.16%

Note: See assumptions used for the above schedule in Note 12 to the financial statements.

Defined Benefit Pension Plan

Other Post-Employment Benefit Plan

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APPENDIX B

DEFINITIONS AND SUMMARIES OF PRINCIPAL DOCUMENTS

This Appendix B has been prepared by McKenna Long & Aldridge LLP, Atlanta, Georgia, Bond Counsel.



APPENDIX B

DEFINITIONS AND SUMMARIES OF PRINCIPAL DOCUMENTS

DEFINITIONS

Certain words and terms used in this Official Statement are defined herein. In addition to the words and terms defined elsewhere herein, the following words and terms are defined in this Official Statement.

“Additional Bonds” means the additional parity Bonds authorized to be issued by the Agency pursuant to the terms and conditions of the Resolution.

“Additions” or “Alterations” means modifications, repairs, renewals, improvements, replacements, alterations, additions, enlargements, or expansions in, on, or to the Parking Project, including any and all machinery, furnishings, and equipment therefor.

“Agency” means the Urban Redevelopment Agency of the City of Kennesaw, Georgia, a public corporation created and existing under the laws of the State of Georgia, and its successors and assigns.

“Agreement” means the Intergovernmental Service Agreement, dated as of February 1, 2014, by and between the City and the Agency, as the same may be supplemented and amended from time to time in accordance with the provisions thereof.

“Authorized Agency Representative” means the person at the time designated to act on behalf of the Agency by written certificate furnished to the City and the Project Fund Depository, containing the specimen signature of such person and signed on behalf of the Agency by the Chairman or Vice Chairman of its Governing Body. Such certificate or any subsequent or supplemental certificate so executed may designate an alternate or alternates.

“Authorized City Representative” means the person at the time designated to act on behalf of the City by written certificate furnished to the Agency and the Project Fund Depository, containing the specimen signature of such person and signed on behalf of the City by its Mayor or Mayor Pro Tem. Such certificate or any subsequent or supplemental certificate so executed may designate an alternate or alternates.

“Bond Counsel” means any firm of nationally recognized bond counsel experienced in matters relating to tax-exempt financing appointed by the City.

“Bondholders” means the Persons in whose names any of the Bonds are registered on the registration books of the Agency.

“Bond Register” means the registration books maintained and to be maintained by the Bond Registrar.

“Bond Registrar” means the commercial bank appointed by the Agency to maintain, in accordance with the provisions of the Resolution, the registration books of the Agency for any series of Bonds. Regions Bank, Atlanta, Georgia, is the initial Bond Registrar for the Series 2014 Bonds.

“Bonds” means the Series 2014 Bonds and all series of Additional Bonds from time to time authenticated and delivered under the Resolution.

“Certificate of Occupancy” means a certificate of occupancy issued by the City for the mixed-use development of the Developer that includes the Parking Project.

“City” means the City of Kennesaw, Georgia, a municipal corporation created and existing under the laws of the State, and its successors and assigns.

“Code” means the Internal Revenue Code of 1986, as amended.

“Construction Contracts” means the Purchase Agreement and any other contracts for the construction of the Parking Project and the contracts between the Agency and suppliers of materials and Equipment.

B-2

“Consulting Architect” means the architect or architectural firm designated as the “Project Architect” pursuant to the Purchase Agreement or such other architect or architectural firm at the time employed by the City and designated to act on behalf of the Agency by written certificate furnished to the Project Fund Depository, containing the signature of such person or the signature of a partner or officer of such firm, and signed on behalf of the City by the its Mayor or Mayor Pro Tem and on behalf of the Agency by the Chairman or Vice Chairman of its Governing Body. The Consulting Architect must be registered and qualified to practice under the laws of the State and may not be a full time employee of the Agency or the City.

“Costs of the Project” means those costs and expenses in connection with the acquisition, construction, and installation of the Parking Project permitted by the Agreement to be paid or reimbursed from proceeds of the Bonds.

“Developer” means SCP Kennesaw Main Owner, LLC, a limited liability company duly formed and existing under the laws of the State of Georgia, and its legal successors and assigns, in its capacity as the developer and seller of the Parking Project.

“Equipment” means the equipment, machinery, furnishings, and other property described in Exhibit B to the Agreement.

“Escrow Agent” means State Bank and Trust, Atlanta, Georgia, and its successors and assigns, or any successor escrow agent appointed by pursuant to the Escrow Agreement.

“Escrow Agreement” means the Escrow Agreement, dated March 4, 2014, among the Developer, the Agency, and the Escrow Agent, as amended, modified, or supplemented from time to time.

“Event of Default” means, with respect to the Resolution, any of the events described as such in “THE RESOLUTION - Events of Default” in this Appendix B, or, with respect to the Agreement, any of the events described as such in “THE AGREEMENT - Events of Default” in this Appendix B.

“Facilities” means those certain buildings, facilities, and improvements constituting part of the Parking Project and not constituting part of the Equipment, which are located on the Premises.

“Fiscal Year” means any period of twelve consecutive months adopted by the City as its fiscal year for financial reporting purposes and will initially mean the period beginning on October 1 of each calendar year and ending on September 30 of the next calendar year.

“Governing Body” means, in the case of the Agency, its Board of Commissioners and, in the case of the City, its Mayor and Council.

“Government Obligations” means direct general obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of Treasury of the United States of America) or obligations the payment of the principal of and interest on which when due are fully and unconditionally guaranteed by the United States of America.

“Interest Payment Date” means February 1 and August 1 of each year.

“Investment Earnings” means all interest received on and profits derived from investments made with Pledged Revenues or any monies in the funds and accounts established under the Resolution.

“Moody’s” means Moody’s Investors Service, Inc. or, if such corporation is dissolved or liquidated or otherwise ceases to perform securities rating services, such other nationally recognized securities rating agency as may be designated in writing by the City.

“Outstanding Bonds” or “Bonds Outstanding” or “Outstanding” means all Bonds that have been duly authenticated and delivered by the Bond Registrar under the Resolution, except:

(a) Bonds theretofore cancelled or required to be cancelled by the Bond Registrar,

(b) Bonds that are deemed to have been paid in accordance with the Resolution, and

(c) Bonds in substitution for which other Bonds have been authenticated and delivered under the Resolution.

If the Resolution is discharged pursuant to the Resolution, no Bonds will be deemed to be outstanding within the meaning of this provision.

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“Parking Project” means the urban redevelopment project consisting of approximately 0.5749 acres of land to be improved with a six-level parking structure and approximately 2.1978 acres of land to be improved with surface parking and located at the intersection of Main Street and Watts Drive in the City, and all related property both real and personal, consisting of the Premises, the Facilities, and the Equipment.

“Paying Agent” means the commercial bank or banks appointed by the Agency to serve as paying agent in accordance with the terms of the Resolution for any series of Bonds, and their successors and assigns. Regions Bank, Atlanta, Georgia, is the initial Paying Agent for the Series 2014 Bonds.

“Permitted Investments” means obligations in which the Agency is permitted to invest monies of the Agency pursuant to applicable law that have (or are collateralized by obligations that have) a Rating by any Rating Agency which is equal to or greater than the third highest long-term Rating of such Rating Agency, or that bears (or are collateralized by obligations that bear) the second highest short-term Rating of such Rating Agency.

“Person” means natural persons, firms, joint ventures, associations, trusts, partnerships, corporations, and public bodies.

“Plans and Specifications” means the detailed plans and specifications for the construction of the Parking Project prepared by the Consulting Architect or by architects and engineers acceptable to the Consulting Architect, as amended from time to time pursuant to the Purchase Agreement, a copy of which is or will be on file with the Agency.

“Pledged Revenues” means the revenues received by the Agency constituting payments pursuant to the Agreement.

“Premises” means the real estate upon which the Parking Project is to be constructed, as more particularly described in the Agreement.

“Project Fund” means the fund created in the Resolution and referred to as the “Urban Redevelopment Agency of the City of Kennesaw, Georgia Project Fund.”

“Project Fund Depository” means initially Regions Bank, Atlanta, Georgia, and its successors and assigns, or any successor depository for the Project Fund hereafter appointed by the Agency at the direction of the City; provided, however, the Project Fund Depository will at all times be a commercial bank.

“Purchase Agreement” means the Purchase and Sale Agreement, dated March 4, 2014, between the Developer, as seller, and the Agency, as purchaser, as amended, modified, or supplemented from time to time.

“Rating” means a rating in one of the categories by a Rating Agency, disregarding pluses, minuses, and numerical gradations.

“Rating Agencies” or “Rating Agency” means Moody’s and Standard & Poor’s or any successors thereto, and any other nationally recognized credit rating agency then maintaining a rating on any Bonds at the request of the City. If at any time a particular Rating Agency does not have a rating outstanding with respect to the relevant Bonds, then a reference to Rating Agency or Rating Agencies will not include such Rating Agency.

“Regulations” means the Treasury Regulations promulgated under and pursuant to the Code.

“Resolution” means the Master Bond Resolution adopted by the Agency on February 25, 2014, as it may from time to time be modified, supplemented, or amended by Supplemental Resolutions.

“Series Resolution” means a bond resolution or bond resolutions (which may be supplemented by one or more bond resolutions) to be adopted prior to the delivery of any series of Additional Bonds. Such a bond resolution as supplemented must establish the date or dates of the pertinent series of Additional Bonds, the schedule of maturities thereof, the name of the purchaser or purchasers of each series of Additional Bonds, the purchase price thereof, the rate or rates of interest to be borne thereby, whether fixed or variable, and the terms and conditions, if any, under which such Bonds may be made subject to redemption (mandatory or optional) prior to maturity and such other details as the Agency may determine.

“Series 2014 Bonds” means, collectively, the Series 2014A Bonds and the Series 2014B Bonds.

“Series 2014 Disclosure Certificate” means the Continuing Disclosure Certificate, dated the date of issuance of the Series 2014 Bonds, of the City, as originally executed and as it may be amended from time to time in accordance with the terms thereof.

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“Series 2014A Account” means the account established within the Project Fund pursuant to the Resolution.

“Series 2014A Bonds” means the revenue bonds designated “Urban Redevelopment Agency of the City of Kennesaw, Georgia Parking Project Revenue Bonds, Series 2014A,” to be dated the date of issuance and delivery thereof, in the aggregate principal amount of $3,620,000, to be issued pursuant to the Resolution.

“Series 2014B Account” means the account established within the Project Fund pursuant to the Resolution.

“Series 2014B Bonds” means the revenue bonds designated “Urban Redevelopment Agency of the City of Kennesaw, Georgia Parking Project Revenue Bonds, Series 2014B,” to be dated the date of issuance and delivery thereof, in the aggregate principal amount of $2,805,000, to be issued pursuant to the Resolution.

“Sinking Fund” means the fund created in the Resolution and referred to as the “Urban Redevelopment Agency of the City of Kennesaw, Georgia Sinking Fund.”

“Sinking Fund Custodian” means initially Regions Bank, Atlanta, Georgia, and its successors and assigns, or any successor custodian for the Sinking Fund hereafter appointed by the Agency at the direction of the City; provided, however, the Sinking Fund Custodian will at all times be a commercial bank.

“Standard and Poor’s” or “S&P” means Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc., or, if such corporation is dissolved or liquidated or otherwise ceases to perform securities rating services, such other nationally recognized securities rating agency as may be designated by the City.

“Supplemental Resolution” means (a) any Series Resolution and (b) any modification, amendment, or supplement to the Resolution other than a Series Resolution.

“Tax-Exempt Bonds” means any Bonds the interest on which has been determined, in an unqualified opinion of Bond Counsel, to be excludable from the gross income of the owners thereof for federal income tax purposes.

THE RESOLUTION

Introduction

The Master Bond Resolution adopted by the Agency on February 25, 2014, is a contract for the benefit of the owners of the Bonds which specifies the terms and details of the Series 2014 Bonds and which defines the security for the Series 2014 Bonds. The following is a summary, which does not purport to be comprehensive or definitive, of certain provisions of the Resolution. Reference is made to the Resolution in its entirety for a complete recital of the detailed provisions thereof, copies of which are available from the Agency upon request.

Pledge of Revenues and Assignment of Agreement

Under the terms of the Resolution, all Pledged Revenues are pledged by the Agency to the prompt payment of the principal of, redemption premium, if any, and interest on the Bonds. Such monies will immediately be subject to the lien of this pledge for the benefit of the Bondholders without any physical delivery thereof or further act, and the lien of this pledge will be valid and binding against the Agency and against all other persons having claims against the Agency, whether such claims have arisen in tort, contract, or otherwise and irrespective of whether such parties have notice thereof. Under the terms of the Resolution, this pledge will rank superior to all other pledges that may hereafter be made of any of the funds and accounts pledged in the Resolution.

Under the terms of the Resolution, in order to secure the Agency’s obligations under the Bonds, the Agency has collaterally assigned, for the benefit of the Bondholders, all of the right, title, and interest of the Agency in and to the Agreement (except for the Unassigned Rights), and all extensions and renewals of the term thereof, if any, and all amounts encumbered thereby, including, but without limiting the generality of the foregoing, the present and continuing right to make claim for, collect, receive, and make receipt for payments and other sums of money payable, receivable, or to be held thereunder, to bring any actions and proceedings thereunder or for the enforcement thereof, and to do any and all other things that the Agency is or may become entitled to do under the foregoing, provided that the assignment made by the Resolution will not impair or diminish any obligation of the Agency under the provisions of the Agreement or impair or diminish the right of the Agency to enforce compliance with the obligations of the City under the Agreement.

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Funds Created by the Resolution and Flow of Funds

Under the terms of the Resolution, the Agency has established the following funds and accounts, and the monies deposited in such funds and accounts will be held in trust for the purposes set forth in the Resolution:

(1) the Sinking Fund; and

(2) the Project Fund, and therein the Series 2014A Account and the Series 2014B Account.

The Sinking Fund will be maintained by the Sinking Fund Custodian, and the Project Fund will be maintained by the Project Fund Depository.

Sinking Fund

Under the terms of the Resolution, all Pledged Revenues will be deposited in the Sinking Fund from time to time as received by the Agency. No further payments need be made into the Sinking Fund whenever the amount available therein is sufficient to retire all Bonds then Outstanding and to pay all unpaid interest accrued and to accrue prior to such retirement.

The Sinking Fund will be used as a sinking fund to pay the principal of, premium, if any, and interest on the Bonds. The payments provided for in the Agreement are to be remitted directly to the Sinking Fund Custodian for the account of the Agency and deposited in the Sinking Fund. Monies in the Sinking Fund will be used solely as a fund for the payment of the principal of, premium, if any, and interest on the Bonds, for the redemption of the Bonds at or prior to maturity, and to purchase Bonds in the open market pursuant to the Resolution; provided, however, that monies in the Sinking Fund may be invested in Permitted Investments maturing or redeemable at the option of the holder prior to the next succeeding Interest Payment Date.

Project Fund

The Resolution requires the Agency to establish within the Project Fund a separate account for each series of Bonds. The Agency has established the Series 2014A Account, into which a portion of the proceeds of the Series 2014A Bonds will be deposited and the Series 2014B Account, into which a portion of the proceeds of the Series 2014B Bonds will be deposited. Monies in the Project Fund will be held by the Project Fund Depository and applied to the payment of costs in accordance with and subject to the provisions and restrictions set forth in the Resolution and in any related Series Resolution. The Agency will not cause or permit to be paid from the Project Fund any sums except in accordance with such provisions and restrictions; provided, however, that any monies in the Project Fund not needed for the payment of current obligations during the course of construction may be invested in Permitted Investments maturing not later than (i) the date upon which such monies will be needed according to a schedule of anticipated payments from the Project Fund filed with the Project Fund Depository by the City, as modified from time to time by supplemental filings made by the City, or (ii) in the absence of such schedule, 24 months from the date of purchase, in either case upon written direction of the City.

Monies in each account in the Project Fund will be used solely for the purposes set forth in the Resolution and the Agreement. Except as otherwise provided in the Resolution, all disbursements from the Project Fund will be made upon draft, signed by an Authorized Agency Representative and an Authorized City Representative, presented with with such other requisitions, certificates, applications for payment and other documents as may be required under the Agreement. Withdrawals for investment purposes only may be made by the Project Fund Depository to comply with written directions from the Authorized City Representative without any requisition other than such direction.

All proceeds of Bonds remaining in the Project Fund after the completion of the Parking Project, less amounts retained or set aside to meet costs not then due and payable or which are being contested, will be deposited in the Sinking Fund.

Investments

Monies in the funds and accounts established under the Resolution must be invested and reinvested at the highest rates reasonably available, in accordance with the Resolution. Investment Earnings in each fund and account must remain in such fund or account and will serve as a credit against amounts otherwise required to be paid into such fund or account. Monies in each of such funds must be accounted for as a separate and special fund apart from all other Agency or City funds. All investments made under the Resolution will, for purposes of the Resolution, be carried at cost plus amortized discount.

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Additional Bonds

The Resolution provides that no other revenue bonds or other obligations will hereafter be issued that are payable from or enjoy a lien on the Pledged Revenues prior to the lien created for the payment of the Series 2014 Bonds. Under the terms of the Resolution, Additional Bonds may be issued by the Agency, however, from time to time, ranking as to lien on the Pledged Revenues on a parity with the Series 2014 Bonds, provided all of the following conditions are met:

(a) None of the Outstanding Bonds are in default as to payment of principal or interest.

(b) The Agency is in compliance with the terms and conditions of the Resolution and the Agreement and the City is in compliance with the terms and conditions of the Agreement.

(c) The payments to be made into the Sinking Fund must have been made in the full amounts required.

(d) The Agency and the City must amend the Agreement and reaffirm all applicable provisions of the Agreement, under the terms of which amendment the City must obligate itself to pay to the Agency payments sufficient to enable the Agency to pay the principal of, premium, if any, and interest on the Outstanding Bonds and the Additional Bonds proposed to be issued as the same become due and payable, either at maturity or by proceedings for mandatory redemption.

(e) The Agency must pass proper proceedings reciting that all of the above requirements have been met, must authorize the issuance of the Additional Bonds, and must provide in such proceedings, among other things, the date or dates of such Additional Bonds, the rate or rates of interest which such Additional Bonds will bear, the maturity dates of such Additional Bonds, redemption provisions for such Additional Bonds, and provisions for registration of such Additional Bonds. In addition, the proceedings of the Agency must establish any additional accounts, if any, required in funds established pursuant to the Resolution. The interest on the Additional Bonds of any such issue must fall due on February 1 and August 1 of each year, and the principal amount of such Additional Bonds must mature in installments on February 1 or August 1, or both, but, as to principal on such Bonds, not necessarily in each year or in equal installments. The proceedings for such Additional Bonds may contain additional restrictions on the issuance of Additional Bonds, which restrictions may, so long as, but only so long as, such Additional Bonds remain Outstanding, be for the benefit of any other Bonds secured by the Resolution. Any such proceeding or proceedings must ratify and reaffirm, by reference, all of the applicable terms, conditions, and provisions of the Resolution.

(f) The Agency must furnish the City with a duly certified copy of the Series Resolution authorizing the issuance of such Additional Bonds, and the City, acting by and through its Governing Body, must acknowledge receipt of the certified copy of such Series Resolution, retain such Series Resolution in its permanent records, and authorize the issuance of such Additional Bonds.

(g) The requirements of the Agreement have been satisfied.

(h) Such Additional Bonds and all proceedings relative thereto, and the security therefor, must be validated as prescribed by law.

Additional Bonds may be issued by the Agency to provide funds to pay any one or more of the following: (i) the costs of completing the Parking Project, (ii) the costs of making such Additions or Alterations in, on, or to the Parking Project as the City may deem necessary or desirable and as will not impair the nature of the Parking Project and as will be located on the Premises, (iii) to refund any Bonds, and (iv) the costs of the issuance and sale of Additional Bonds and capitalized or funded interest for such period and such other costs reasonably related to the financing as may be agreed upon by the City and the Agency.

Liens

The Agency has covenanted in the Resolution not to create or permit to be created any lien, security interest, or charge upon the Pledged Revenues or the Agreement, other than the pledge and assignment created by the Resolution.

Events of Default

Under the terms of the Resolution, each of the following events is an “Event of Default” if: (a) payment of the principal of and redemption premium, if any, on any of the Bonds has not been made when the same becomes due and payable, either at maturity or by proceedings for redemption; or (b) payment of any installment of interest on

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any Bond has not been made when the same becomes due and payable; or (c) the Agency, for any reason, has been rendered incapable of fulfilling its obligations under the Resolution; or (d) an “Event of Default” has occurred under the Agreement, or (e) the City or the Agency has defaulted in the due and punctual performance of any other of the covenants, conditions, agreements, or provisions contained in the Bonds, the Agreement, or the Resolution, and such default has continued for thirty (30) days after written notice, specifying such default and requiring the same to be remedied, has been given to the City and the Agency by any Bondholder.

Remedies

Upon the happening and continuance of any Event of Default, then and in every such case any Bondholder may proceed, subject to the provisions of the next paragraph, to protect and enforce the rights of the Bondholders under the Resolution by a suit, action, or special proceedings in equity, or at law, for the specific performance of any covenant or agreement contained in the Resolution or in aid or execution of any power granted in the Resolution, or contained in the Agreement or granted in the Agreement, or for the enforcement of any proper legal or equitable remedy as such Bondholder deems most effectual to protect and enforce the rights aforesaid, insofar as such may be authorized by law.

No one or more owners of the Bonds secured by the Resolution will have any right in any manner whatever by its or their action to affect, disturb, or prejudice the security granted and provided for in the Resolution, or to enforce any right under the Resolution, except in the manner provided in the Resolution, and all proceedings at law or in equity must be instituted, had, and maintained for the equal benefit of all owners of such Outstanding Bonds.

Supplemental Resolutions

The Agency, from time to time and at any time, subject to the conditions and restrictions in the Resolution, may adopt one or more resolutions which thereafter will form a part of the Resolution, for any one or more or all of the following purposes:

(a) to add to the covenants and agreements of the Agency in the Resolution other covenants and agreements thereafter to be observed, or to surrender, restrict, or limit any right or power reserved in the Resolution to or conferred upon the Agency (including but not limited to the right to issue Additional Bonds);

(b) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting, or supplementing any defective provision, contained in the Resolution, or in regard to matters or questions arising under the Resolution, as the Agency may deem necessary or desirable and not inconsistent with the Resolution and which will not have a material adverse effect on the interests of the Bondholders;

(c) to provide for the issuance of Additional Bonds, in accordance with the provisions of the Resolution;

(d) to grant to or confer any additional rights, remedies, powers, or authorities that may be lawfully granted to or conferred upon the owners of the Bonds;

(e) to subject to the lien and pledge of the Resolution additional revenues, receipts, properties, or other collateral;

(f) to evidence the appointment of successors to the Project Fund Depository, the Sinking Fund Custodian, the Paying Agent, or the Bond Registrar;

(g) to modify, amend, or supplement the Resolution or any proceedings supplemental to the Resolution in such manner as to permit the qualification of the Resolution under the Trust Indenture Act of 1939 or any federal statute hereinafter in effect, and similarly to add to the Resolution, or to any proceedings supplemental to the Resolution, such other terms, conditions, and provisions as may be permitted or required by the Trust Indenture Act of 1939 or any similar federal statute;

(h) to make any modification or amendment of the Resolution, not adverse to the interests of the Bondholders, required in order to make the Bonds eligible for acceptance by The Depository Trust Company or any similar holding institution or to permit the issuance of the Bonds or interests therein in book-entry form; or

(i) to make changes and modifications, and to add such provisions, as may be necessary to obtain or maintain an investment grade rating for the Bonds.

Any Supplemental Resolution described above may be adopted by the Agency without the consent of or notice to any of the owners of the Bonds at the time Outstanding.

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In addition to Supplemental Resolutions described above, with the consent of the Bondholders, the Agency may from time to time and at any time adopt a Supplemental Resolution for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Resolution; provided, however, that no such Supplemental Resolution will: (1) extend the maturity date of any Bond or the due date of any mandatory sinking fund redemption with respect to any Bond, (2) reduce or extend the time of payment of the principal of, redemption premium, or interest on any Bond, (3) reduce any premium payable upon the redemption of any Bond or advance the date upon which any Bond may first be called for redemption prior to its stated maturity date, (4) give to any Bond or Bonds a preference over any other Bond or Bonds, (5) reduce the percentage of owners of the Bonds required to approve any such Supplemental Resolution, or (6) deprive the owners of the Bonds (except as aforesaid) of the right to payment of the Bonds from the Pledged Revenues, in each case without the consent of the owners of all the Bonds then Outstanding.

Amendment of Agreement

The City and the Agency, from time to time and at any time, subject to the conditions and restrictions in the Resolution, may amend, change, or modify the Agreement as may be required:

(a) by the provisions of the Agreement;

(b) to cure any ambiguity, or cure, correct, or supplement any defective provision contained in the Agreement, or in regard to matters or questions arising under the Agreement, as the Agency may deem necessary or desirable and not inconsistent with the Resolution and which will not have a material adverse effect on the interests of the Bondholders;

(c) to make such changes and modifications, and to add such provisions, as may be necessary to obtain or maintain an investment grade rating for the Bonds; or

(d) to conform the Agreement to any changes made to the Resolution by a Supplemental Resolution permitted by the Resolution.

Except for the amendments, modifications, or changes to the Agreement described above, neither the Agency nor the City may amend, change, or modify the Agreement unless the owners of at least 65% of the aggregate principal amount of the Bonds then Outstanding have filed with the Agency and the City within three months after the date of adoption of resolutions approving such amendment, change, or modification properly executed instruments approving the execution of such amendment, change, or modification, each such Bondholder instrument to be accompanied by proof of ownership of Bonds to which such instrument refers; provided, however, nothing contained in the Resolution will permit, or be construed as permitting, any amendment, change, or modification of the City’s unconditional obligation to make the payments required under the Agreement to the Agency without the consent of every owner of Bonds affected thereby.

Defeasance

Bonds for the payment or redemption of which sufficient monies or sufficient Government Obligations have been deposited with or for the account of the Paying Agent (whether upon or prior to the maturity or the redemption date of such Bonds) will be deemed to be paid and no longer Outstanding under the Resolution; provided, however, that if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption has been duly given as provided in the Resolution or firm and irrevocable arrangements have been made for the giving thereof. Government Obligations will be considered sufficient for purposes of the Resolution only (i) if such Government Obligations are not callable by the Agency of the Government Obligations prior to their stated maturity and (ii) if such Government Obligations fall due and bear interest in such amounts and at such times as will assure sufficient cash (whether or not such Government Obligations are redeemed by the Agency pursuant to any right of redemption) to pay currently maturing interest and to pay principal of and redemption premiums, if any, on the Bonds when due.

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THE AGREEMENT

Introduction

The Agreement, dated as of February 1, 2014, between the Agency and the City, will secure the City’s obligations under the Series 2014 Bonds. The following is a summary, which does not purport to be comprehensive or definitive, of certain provisions of the Agreement. Reference is made to the Agreement in its entirety for a complete recital of the detailed provisions thereof.

Agreement to Issue the Series 2014 Bonds; Application of Proceeds

In order to provide funds for payment of the costs of acquiring, constructing, and installing the Parking Project, the Agency has agreed in the Agreement that it will sell and cause to be delivered to the Persons designated by the Underwriter the Series 2014A Bonds in the aggregate principal amount of $3,620,000 and the Series 2014B Bonds in the aggregate principal amount of $2,805,000. The Agency has covenanted and agreed that it will apply the proceeds derived from the sale of the Series 2014 Bonds as provided in the Resolution and will use the moneys deposited in the Project Fund created under the Resolution to pay the costs of acquiring, constructing, and installing the Parking Project and to pay the costs of issuing the Bond. The Agency will use all other funds received from other sources for the acquisition, construction, and installation of the Parking Project for the intended purpose.

Agreement to Acquire the Parking Project

The Agency has agreed to acquire, construct, and install the Parking Project pursuant to and in the manner set forth in the Purchase Agreement (which provides that the Agency will acquire the Parking Project upon completion from the Developer). The Agency will not permit the acquisition, construction, or installation of the Parking Project to be accomplished in any manner that is not in accordance with the Purchase Agreement, as long as any such agreement is in effect.

City’s Payment Obligation

Until the principal of, premium, if any, and interest on the Bonds has been fully paid or provision for the payment thereof has been made in accordance with the Resolution, the City will pay to the Sinking Fund Custodian for the account of the Agency as payment for the services rendered under the Agreement, the following amounts:

(i) on or before each January 31 or July 31, as the case may be, a sum equal to the amount payable on the next succeeding February 1 or August 1, whichever is closer, as interest on the Bonds, as provided in the Resolution, and

(ii) on or before each January 31, a sum equal to the principal of the Bonds due on the next succeeding February 1, whether by maturity or by mandatory redemption, as provided in the Resolution.

Each payment described above is due on the day preceding an interest or principal payment date or redemption date until the Bonds are fully paid or payment is provided therefor in accordance with the Resolution and will be sufficient, after giving credit for funds held in the Sinking Fund available for such purpose, to pay the total amount of interest, principal, redemption requirement, and premium, if any, payable on the Bonds on the next succeeding principal or interest payment date or on the next succeeding redemption date for Bonds. Any such payment may be reduced and need not be made to the extent that there are monies on deposit in the Sinking Fund in excess of the amount required for the payment of Bonds theretofore matured or called for redemption, the amount required for the payment of interest for which checks or drafts have been mailed by or on behalf of the Agency, and past due interest in all cases where Bonds have not been presented for payment. Further, if the amount held by the Sinking Fund Custodian in the Sinking Fund is sufficient to pay at the times required the principal of, premium, if any, and interest on the Bonds then remaining unpaid, the City will not be obligated to make any further payments under the provisions of the preceding paragraph. There will also be a credit against remaining payments for Bonds purchased, redeemed, or cancelled, as provided in the Resolution. Any payment not received by the Sinking Fund Custodian when due will continue as an obligation of the City until paid and will bear interest at the rate of interest on the Bonds to which such payment relates. As provided in the Agreement, payments will be increased to cover the payment of principal of, redemption premium, if any, and interest on any Additional Bonds.

The City has agreed to pay all reasonable out-of-pocket costs and expenses of the Agency incurred in connection with its negotiation, structuring, documenting, and closing the Series 2014 Bonds and the Purchase Agreement, including, without limitation, the reasonable fees and disbursements of counsel for the Agency and Bond Counsel. The City has agreed to pay all reasonable out-of-pocket costs and expenses of the Agency incurred in connection with its administration or modification of, or in connection with the preservation of its rights under,

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enforcement of, or any refinancing, renegotiation, restructuring, or termination of, the Agreement or any instruments referred to in the Agreement or any amendment, waiver, or consent relating hereto, including, without limitation, the reasonable fees and disbursements of counsel for the Agency.

The City will also pay to the Agency an amount equal to (i) any costs incurred by the Agency in connection with the issuance of any series of Bonds to the extent such costs are not paid from proceeds of such Bonds, (ii) the reasonable fees and expenses of the Bond Registrar, the Paying Agent, the Sinking Fund Custodian, the Project Fund Depository, and the Escrow Agent, to the extent that the Agency is obligated to pay such fees and expenses, and (iii) any costs reasonably incurred by the Agency in connection with its ownership of the Parking Project, including, without limitation, any costs of operation, maintenance, repair, replacement of the Parking Project, and any costs incurred by the Agency pursuant to the Parking Easement.

Such additional payments will be billed to the City by the Agency from time to time, together with a statement certifying that the amount billed has been incurred or paid by the Agency for one or more of the above items. Amounts so billed must be paid by the City within thirty (30) days after receipt of the bill by the City.

In the event the City fails to make any of the payments required above, the item or installment so in default will continue as an obligation of the City until the amount in default has been fully paid.

Source of Funds for City’s Payment Obligations

As security for the payments required to be made and the obligations required to be performed by the City under the Agreement, the City has pledged to the Agency its full faith and credit and taxing power for such payment and performance. The City has agreed that, in order to make any payments when due from its general funds to the extent required under the Agreement, the City will exercise its powers of taxation to the extent necessary to pay the amounts required under the Agreement and will make available and use for such payments all taxes levied and collected for that purpose together with funds received from any other sources. The City has further agreed that in order to make funds available for such purpose in each Fiscal Year, it will, in its general revenue, appropriation, and budgetary measures through which its tax funds or revenues and the allocation thereof are controlled or provided for, include sums sufficient to satisfy any such payments, whether or not any other sums are included in such measure, until all payments required to be made under the Agreement have been made in full. The obligation of the City to make any payments required to be made under the Agreement from its general funds will constitute a general obligation of the City and a pledge of the full faith and credit of the City to provide the funds required to fulfill any such obligation.

The City has further agreed that it will, to the extent necessary, levy an annual ad valorem tax on all taxable property located within the territorial limits of the City, as now existent and as the same may hereafter be extended, at such rate or rates, without limitation as to rate or amount, as may be necessary to produce in each year revenues that will be sufficient to fulfill the City’s obligations under the Agreement, from which revenues the City has agreed to appropriate sums sufficient to pay in full when due all of the City’s obligations under the Agreement. Nothing contained in the Agreement, however, may be construed as limiting the right of the City to make the payments required to be made under the Agreement out of any funds lawfully available to the City for such purpose, from whatever source derived (including general funds).

Special Investment Covenants

The Issuer and the County have each agreed that they will not directly or indirectly use or permit the use of any proceeds (as defined in the Regulations) of any Tax-Exempt Bonds or any other funds of the Issuer or the County, or take or omit to take any action, or direct the Project Fund Depository or the Sinking Fund Custodian to invest any funds held by it, in such manner as will, or allow any “related party” (as defined in Section 1.150-1(b) of the Regulations) to enter into any arrangement, formal or informal, as will, cause any Tax-Exempt Bonds to be “federally guaranteed,” as such term is used and defined in Section 149(b) of the Code, or to be “arbitrage bonds” within the meaning of Section 148 of the Code, and any Regulations proposed or promulgated in connection therewith. To that end, the Issuer and the County will comply with all requirements of Section 149(b) and Section 148 of the Code to the extent applicable to any Tax-Exempt Bonds. In the event that at any time the Issuer or the County is of the opinion that for purposes of this restriction it is necessary to dispose of any investment or to restrict or limit the yield on any investment held under the Resolution or otherwise, the Issuer or the County, as the case may be, will so instruct the Project Fund Depository or the Sinking Fund Custodian in writing.

Special Investment Covenants

The Agency and the City have each agreed that they will not directly or indirectly use or permit the use of any proceeds (as defined in the Regulations) of any Tax-Exempt Bonds or any other funds of the Agency or the City, or

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take or omit to take any action, or direct the Project Fund Depository, the Sinking Fund Custodian, or the Escrow Agent to invest any funds held by it, in such manner as will, or allow any “related party” (as defined in Section 1.150 1(b) of the Regulations) to enter into any arrangement, formal or informal, as will, cause any Tax-Exempt Bonds to be “federally guaranteed,” as such term is used and defined in Section 149(b) of the Code, or to be “arbitrage bonds” within the meaning of Section 148 of the Code, and any Regulations proposed or promulgated in connection therewith. To that end, the Agency and the City will comply with all requirements of Section 149(b) and Section 148 of the Code to the extent applicable to any Tax-Exempt Bonds. In the event that at any time the Agency or the City is of the opinion that for purposes of the Agreement it is necessary to dispose of any investment or to restrict or limit the yield on any investment held under the Resolution or otherwise, the Agency or the City, as the case may be, will so instruct the Project Fund Depository, the Sinking Fund Custodian, or the Escrow Agent in writing.

Events of Default

The Agreement provides that the occurrence of any one of the following will constitute an “Event of Default” thereunder:

(a) The City’s failure to pay the amounts required to be paid under the Agreement at the times specified therein.

(b) The City’s breach in any material respect of any representation or warranty contained in the Agreement or the City’s failure in any material respect to observe, perform, or comply with any covenant, condition, or agreement in the Agreement on the part of the City to be observed or performed, other than as described in clause (a) above, for a period of thirty (30) days after written notice specifying such breach or failure and requesting that it be remedied, given to the City by the Agency or the Bondholders, unless the Bondholders agree in writing to an extension of such time prior to its expiration (provided that, in the case of any such breach or default that cannot with due diligence be cured within such thirty (30) day period but can be wholly cured within a period of time not materially detrimental to the rights of the Agency and the Bondholders, to be determined conclusively by the Bondholders, it will not constitute an Event of Default if corrective action is instituted by the City within the applicable period and diligently pursued until the breach or default is corrected in accordance with and subject to any directions or limitations of time established in writing by the Bondholders).

(c) The City will (i) apply for or consent to the appointment of or the taking or possession by a receiver, custodian, trustee, or liquidator of it or of all or a substantial part of its property, (ii) enter into an agreement of composition with its creditors, (iii) admit in writing its inability to pay its debts as such debts become due, (iv) make a general assignment for the benefit of its creditors, (v) commence a voluntary case under the federal bankruptcy law (as now or hereafter in effect), (vi) file a petition or answer seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, (vii) fail to controvert in a timely or appropriate manner or acquiesce in writing to any petition filed against it in an involuntary case under such federal bankruptcy law, or (viii) take any action for the purpose of effecting any of the foregoing.

(d) A proceeding or case will be commenced, without the application of the City, in any court of competent jurisdiction, seeking (i) the liquidation, reorganization, dissolution, winding-up, or composition or adjustment of debts of the City, (ii) the appointment of a trustee, receiver, custodian, liquidator, or the like of the City or of all or any substantial part of the assets of it, or (iii) similar relief in respect of the City under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition and adjustment of debts, and such proceeding or case continues undismissed or an order, judgment, or decree approving or ordering any of the foregoing has been entered and continues unvacated and unstayed and in effect for a period of sixty (60) days, whether consecutive or not.

Remedies on Default

Whenever any Event of Default occurs, the Agency, to the extent permitted by law, may take any one or more of the following remedial steps:

(a) The Agency may have access to and inspect, examine, and make copies of the books and records and any and all accounts and similar data of the City.

(b) The Agency may from time to time take whatever action at law or in equity or under the terms of the Agreement may appear necessary or desirable to collect the amounts payable by the City under the Agreement then due or thereafter to become due, or to enforce performance and observance of any obligation, agreement, or covenant of the City under the Agreement.

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No action taken pursuant to clauses (a) and (b) above will relieve the City from its obligations under the Agreement, all of which will survive any such action, and the Agency will be permitted to take whatever action at law or in equity as may appear necessary and desirable to collect the amounts then due and thereafter to become due or to enforce the performance and observance of any obligation, agreement, or covenant of the City thereunder.

Term

The term of the Agreement will commence with its execution and delivery and will remain in full force and effect until midnight, February 1, 2044, subject to provisions of the Agreement permitting earlier termination, or if all the Bonds have not been paid or retired (or provision for such payment has not been made as provided in the Resolution), until such date as such payment or provision has been made; but in no event may the term of the Agreement exceed fifty years.

Obligations of City Absolute and Unconditional

The Agreement provides that it will constitute security for the Bondholders and that the obligations of the City under the Agreement are a general obligation of the City and are absolute and unconditional irrespective of any defense or any rights of setoff, recoupment, or counterclaim, except for payment, the City may otherwise have against the Agency. The City has agreed that it will not (i) suspend, abate, reduce, abrogate, diminish, postpone, modify, or discontinue any payments provided for in the Agreement, (ii) fail to observe any of its other agreements contained in the Agreement, or (iii) terminate its obligations under the Agreement for any contingency, act of God, event, or cause whatsoever.

THE CONTINUING DISCLOSURE CERTIFICATE

Introduction

The Continuing Disclosure Certificate of the City (the “Disclosure Certificate”) specifies the terms and details of the City’s continuing disclosure obligations in complying with Securities and Exchange Commission Rule 15c2-12(b)(5). The following is a summary, which does not purport to be comprehensive or definitive, of certain provisions of the Disclosure Certificate. Reference is made to the Disclosure Certificate in its entirety for a complete recital of the detailed provisions thereof, copies of which are available from the Agency upon request.

Definitions

The following capitalized terms have the following meanings for purposes of the Disclosure Certificate:

“Annual Report” means any Annual Report provided by the City pursuant to the provisions of the Disclosure Certificate described herein under the caption “THE CONTINUING DISCLOSURE CERTIFICATE - Provision of Annual Reports and - Content of Annual Reports.”

“Bondholders” means the beneficial owners of the Series 2014 Bonds.

“Dissemination Agent” means Raymond James & Associates, Inc., Atlanta, Georgia or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation.

“EMMA” means the Electronic Municipal Market Access system of the MSRB.

“Fiscal Year” means any period of twelve consecutive months adopted by the City as its fiscal year for financial reporting purposes and initially means the period beginning on October 1 of each calendar year and ending on September 30 of the next calendar year.

“Listed Events” means any of the events listed in the provisions of the Disclosure Certificate described herein under the caption “THE CONTINUING DISCLOSURE CERTIFICATE - Reporting of Significant Events.”

“MSRB” means the Municipal Securities Rulemaking Board.

“Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

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Provision of Annual Reports

The City has agreed in the Disclosure Certificate to, or to cause the Dissemination Agent to, not later than 210 days after the end of each Fiscal Year, commencing with Fiscal Year 2013, provide to the MSRB in an electronic format as prescribed by the MSRB (which, as of the date hereof, is EMMA) an Annual Report that is consistent with the requirements of the provisions of the Disclosure Certificate described below under the caption “THE CONTINUING DISCLOSURE CERTIFICATE - Content of Annual Reports.” Not later than fifteen business days prior to such date, the City has agreed to provide the Annual Report to the Dissemination Agent (if other than the City). The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in the provisions of the Disclosure Certificate described below under the caption “THE CONTINUING DISCLOSURE CERTIFICATE - Content of Annual Reports”; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report.

If the City is unable to provide to the MSRB an Annual Report by the date required as described above, the City must send a notice to the MSRB in an electronic format as prescribed by the MSRB (which, as of the date hereof, is EMMA) of such failure. The Dissemination Agent is required to:

(i) determine each year prior to the date for providing the Annual Report the appropriate electronic format prescribed by the MSRB for filing with the MSRB and the proper form for such filing; and

(ii) if the Dissemination Agent is other than the City, file a report with the City certifying that the Annual Report has been provided pursuant to the Disclosure Certificate, and stating the date it was provided.

The City is required to promptly file a notice of any change in its Fiscal Year with the MSRB in an electronic format as prescribed by the MSRB (which, as of the date hereof, is EMMA). If the audit report specified in clause (1) of the provisions of the Disclosure Certificate described below under the caption “THE CONTINUING DISCLOSURE CERTIFICATE - Content of Annual Reports” is not submitted as part of the Annual Report to the MSRB pursuant to the Disclosure Certificate, the City agreed to, or to cause the Dissemination Agent to, provide to the MSRB in an electronic format as prescribed by the MSRB (which, as of the date hereof, is EMMA) such audit report, together with the audited financial statements of the City to which such audit report relates, when they are available to the City.

Content of Annual Reports

The Disclosure Certificate requires the City’s Annual Report to contain or incorporate by reference the following:

(1) the City’s basic financial statements for the preceding Fiscal Year, which must be prepared in accordance with generally accepted accounting principles, as in effect from time to time, and which must be accompanied by an audit report, if available at the time of submission of the Annual Report to the MSRB pursuant to the Disclosure Certificate, resulting from an audit conducted by an independent certified public accountant or firm of independent certified public accountants in conformity with generally accepted auditing standards;

(2) if generally accepted accounting principles have changed since the last Annual Report was submitted pursuant to the Disclosure Certificate and if such changes are material to the City, a narrative explanation describing the impact of such changes on the City; and

(3) information for the preceding Fiscal Year regarding the following categories of financial information and operating data of the City: (A) the legal debt margin of the City, (B) the property tax digest of the City, (C) the millage rates of the City, (D) the property tax levies and collections of the City, (E) the estimated value of total tax executions owned by the City, (F) the ten largest taxpayers of the City, (G) the City’s General Fund tax revenues by source, (H) the analysis of funding progress of the City’s defined-benefit pension plan, and (I) the insurance coverage of the City.

Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of the City or related public entities, which are available to the public on the MSRB’s Internet Web site or filed with the Securities and Exchange Commission. The City must clearly identify each such other document so incorporated by reference.

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Reporting of Significant Events

The Disclosure Certificate governs the giving of notices of the occurrence of any of the following events with respect to the Series 2014 Bonds:

(1) Principal and interest payment delinquencies;

(2) Non-payment related defaults, if material;

(3) Unscheduled draws on debt service reserves reflecting financial difficulties;

(4) Unscheduled draws on credit enhancements reflecting financial difficulties;

(5) Substitution of credit or liquidity providers, or their failure to perform;

(6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Series 2014A Bonds, or other material events affecting the tax status of the Series 2014A Bonds;

(7) Modifications to rights of Bondholders, if material;

(8) Series 2014 Bond calls, if material, and tender offers;

(9) Defeasances;

(10) Release, substitution, or sale of property securing repayment of the Series 2014 Bonds, if material;

(11) Rating changes;

(12) Bankruptcy, insolvency, receivership, or similar event of the City;

(13) The consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to such actions, other than pursuant to its terms, if material; and

(14) Appointment of a successor or additional trustee or the change of name of a trustee, if material.

For purposes of the event identified in clause 12, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City.

If the City obtains knowledge of the occurrence of a Listed Event, the City has agreed to file in a timely manner not in excess of ten business days after such occurrence a notice of such occurrence with the MSRB in an electronic format as prescribed by the MSRB (which, as of the date hereof, is EMMA). Notwithstanding the foregoing, notice of Listed Events described in clauses 8 (other than tender offers) and 9 need not be given under the Disclosure Certificate any earlier than the notice (if any) of the underlying event is given to the owners of the affected Bonds pursuant to the Resolution.

Termination of Reporting Obligation

The City’s obligations under the Disclosure Certificate will terminate upon the legal defeasance, prior redemption, or payment in full of all of the Series 2014 Bonds.

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Dissemination Agent

The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under the Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent is Raymond James & Associates, Inc.

Amendment; Waiver

Notwithstanding any other provision of the Disclosure Certificate, the City may amend the Disclosure Certificate, and any provision of the Disclosure Certificate may be waived, if

(a) such amendment or waiver is made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of the obligor on the Series 2014 Bonds, or type of business conducted;

(b) such amendment or waiver does not materially impair the interests of the Bondholders, as determined either by an unqualified opinion of nationally recognized bond counsel filed with the City or by the approving vote of the Bondholders owning more than two-thirds in aggregate principal amount of the Series 2014 Bonds Outstanding at the time of such amendment or waiver; and

(c) such amendment or waiver is supported by an opinion of counsel expert in federal securities laws, to the effect that such amendment or waiver would not, in and of itself, cause the undertakings in the Disclosure Certificate to violate the Rule if such amendment or waiver had been effective on the date of the Disclosure Certificate but taking into account any subsequent change in or official interpretation of the Rule, as well as any change in circumstances.

If any provision of the Disclosure Certificate described herein under the caption “THE CONTINUING DISCLOSURE CERTIFICATE - Content of Annual Reports” is amended or waived, the first Annual Report containing any amended, or omitting any waived, operating data or financial information must explain, in narrative form, the reasons for the amendment or waiver and the impact of the change in the type of operating data or financial information being provided.

If the provisions of the Disclosure Certificate described herein under the caption “THE CONTINUING DISCLOSURE CERTIFICATE - Content of Annual Reports” specifying the accounting principles to be followed in preparing the City’s financial statements are amended or waived, the Annual Report for the year in which the change is made must 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. The comparison must include a qualitative 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, in order to provide information to the Bondholders to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison must also be quantitative. The City must file a notice of the change in the accounting principles with the MSRB in an electronic format as prescribed by the MSRB (which, as of the date hereof, is EMMA) on or before the effective date of any such amendment or waiver.

Additional Information

Nothing in the Disclosure Certificate will prevent the City from disseminating any other information, using the means of dissemination set forth in the Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by the Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by the Disclosure Certificate, the City will have no obligation under the Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

Default

In the event of a failure of the City to comply with any provision of the Disclosure Certificate, any Bondholder may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the City to comply with its obligations under the Disclosure Certificate. A default under the Disclosure Certificate will not be deemed an “event of default” or “default” under the Resolution or the Agreement, and the sole remedy under the Disclosure Certificate in the event of any failure of the City to comply with the Disclosure Certificate will be an action to compel performance. A court may decide not to order the specific performance of the covenants contained in the Disclosure Certificate. Nothing contained in the Resolution or the Disclosure Certificate may obligate the levy of any tax for the City’s obligations set forth in the Disclosure

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Certificate, and the taxes levied to pay the principal of and interest on the Series 2014 Bonds will not be subject to use for this purpose.

Identifying Information

All documents provided to the MSRB pursuant to the Disclosure Certificate must be accompanied by identifying information prescribed by the MSRB.

APPENDIX C

FORM OF LEGAL OPINION

The form of Legal Opinion included as this Appendix C has been prepared by McKenna Long & Aldridge LLP, Atlanta, Georgia, Bond Counsel, and is substantially the form to be given in connection with the delivery of the Series 2014 Bonds.



FORM OF OPINION OF BOND COUNSEL

___________, 2014

Urban Redevelopment Agency of the City of Kennesaw, Georgia

Kennesaw, Georgia

Re: $3,620,000 Urban Redevelopment Agency of the City of Kennesaw, Georgia Parking Project Revenue Bonds, Series 2014A (the “Series 2014A Bonds”)

$2,805,000 Urban Redevelopment Agency of the City of Kennesaw, Georgia Parking Project Taxable Revenue Bonds, Series 2014B (the “Series 2014B Bonds”)

Ladies and Gentlemen:

We have acted as Bond Counsel in connection with the issuance and delivery on this date by the Urban Redevelopment Agency of the City of Kennesaw, Georgia (the “Agency”) of $3,620,000 in original aggregate principal amount of revenue bonds designated “Urban Redevelopment Agency of the City of Kennesaw, Georgia Parking Project Revenue Bonds, Series 2014A” and $2,805,000 in original aggregate principal amount of revenue bonds designated “Urban Redevelopment Agency of the City of Kennesaw, Georgia Parking Project Taxable Revenue Bonds, Series 2014B (collectively the “Series 2014 Bonds”).

We have examined the law and such certified proceedings and other papers authorizing and relating to the Series 2014 Bonds as we deem necessary to render this opinion, including the following:

1. Chapter 61 of Title 36 of the Official Code of Georgia Annotated, known as the “Urban Redevelopment Law” (the “Urban Redevelopment Law”).

2. Certified copy of a Master Bond Resolution of the Agency adopted on February 25, 2014 (the “Bond Resolution”).

3. Certified copy of an Authorizing Resolution of the City of Kennesaw, Georgia (the “City”) adopted on February 17, 2014.

4. Fully executed counterpart of the Intergovernmental Service Agreement (the “Agreement”), dated as of February 1, 2014, between the Agency and the City.


___________, 2014 Page 2

5. Fully executed counterpart of the Certificate as to Arbitrage Matters of the Agency (the “Non-Arbitrage Certificate”), dated the date hereof.

6. Fully executed counterpart of the City’s Tax Certificate (the “Tax Certificate”), dated the date hereof.

The Series 2014 Bonds are being issued under and pursuant to the Urban Redevelopment Law and the Bond Resolution for the purpose of financing the costs of acquiring a new six-level parking deck and adjacent surface parking to be constructed in the downtown area of the City.

As to questions of fact material to our opinion, we have relied upon the following items, without undertaking to verify any of them by independent investigation: (a) certified proceedings and other certifications of public officials furnished to us, (b) certifications furnished to us by or on behalf of the Agency and the City (including certifications made in the Non-Arbitrage Certificate and the Tax Certificate), and (c) representations of the Agency and the City contained in such proceedings and in documents delivered in connection with the issuance of the Series 2014 Bonds.

In our capacity as Bond Counsel, we have not been engaged or undertaken to review the accuracy, completeness, or sufficiency of the Official Statement or any other offering material relating to the Series 2014 Bonds (except to the extent, if any, stated in the Official Statement), and we express no opinion relating thereto (excepting only the matters set forth as our opinion in the Official Statement).

Based upon the foregoing, it is our opinion, as of the date hereof and under existing law, that:

(1) The Agency was duly created and is validly existing as a public body corporate and politic and public corporation under the Constitution and laws of the State of Georgia, including particularly the Urban Redevelopment Law, and has all requisite power and authority (i) to adopt and perform its obligations the Bond Resolution, (ii) to issue, sell, and deliver the Series 2014 Bonds and use the proceeds thereof for the purposes and upon the terms and conditions set forth in the Bond Resolution, and (iii) to enter into and perform its obligations under the Agreement.

(2) The Bond Resolution has been duly adopted by the Agency and constitutes the legal, valid, and binding obligation of the Agency enforceable upon the Agency. The Agreement has been duly authorized, executed, and delivered by the Agency and constitutes the legal, valid, and binding obligation of the Agency enforceable upon the Agency.

(3) Pursuant to the Urban Redevelopment Law, the Bond Resolution creates a valid and enforceable lien on the funds pledged by the Bond Resolution to secure the Series 2014 Bonds,


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on a parity with any other Bonds (as defined in the Bond Resolution) issued or to be issued by the Agency under the Bond Resolution, subject to no prior lien granted under the Urban Redevelopment Law.

(4) The Series 2014 Bonds have been duly authorized, executed, issued, and delivered by the Agency and are the legal, valid, and binding special or limited obligations of the Agency, payable solely from the amounts pledged under the Bond Resolution, which include amounts paid to the Agency by the City under the Agreement.

(5) The Agreement has been duly authorized, executed, and delivered by the City and constitutes the legal, valid, and binding obligation of the City enforceable upon the City.

(6) The interest on the Series 2014A Bonds (including any original issue discount properly allocable to an owner thereof) is excluded from gross income for federal income tax (including the tax imposed by Chapter 2A of Subtitle A of the Internal Revenue Code of 1986, as amended (the “Code”)) purposes and is not a specific “item of tax preference” for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, it should be noted that, for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted current earnings. The opinions set forth in the immediately preceding sentence are subject to the condition that the Agency and the City comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Series 2014A Bonds in order that the interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. Failure to comply with certain of such requirements may cause the inclusion of the interest on the Series 2014A Bonds in gross income for federal income tax (including the tax imposed by Chapter 2A of Subtitle A of the Code) purposes to be retroactive to the date of issuance of the Series 2014A Bonds. The Series 2014A Bonds are a “qualified tax-exempt obligations,” within the meaning of Section 265(b)(3) of the Code, and, in the case of certain financial institutions (within the meaning of Section 265(b)(5) of the Code), a deduction is allowed for 80 percent of that portion of such financial institutions’ interest expense allocable to interest on the Series 2014A Bonds. We express no opinion regarding any other federal tax consequences arising with respect to the Series 2014A Bonds.

(7) The interest on the Series 2014 Bonds is exempt from State of Georgia income taxation.

The rights of the owners of the Series 2014 Bonds and the enforceability of the Series 2014 Bonds, the Bond Resolution, and the Agreement (i) may be limited by bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting the enforcement of creditors’ rights, (ii) may be subject to general principles of equity (regardless of whether such


___________, 2014 Page 4

enforceability is considered in a proceeding in equity or at law), and (iii) may also be subject to the exercise of judicial discretion in appropriate cases.

This opinion is limited to the matters expressly set forth above, and no opinion is implied or may be inferred beyond the matters so stated. We expressly disclaim any duty to update this opinion in the future for any changes of fact or law that may affect any of the opinions expressed herein.

Very truly yours, MCKENNA LONG & ALDRIDGE LLP By:

Partner

SUMMARY OF CONTENTS 1

Page

Introduction ............................................................................. 1 Plan of Financing ..................................................................... 6 The Series 2014 Bonds ............................................................ 8 Security and Sources of Payment

for the Series 2014 Bonds ............................................ 15 The Agency ............................................................................ 16 The City ................................................................................ 17 City Debt Structure ................................................................ 23 City Ad Valorem Taxation .................................................... 29 City Financial Information ..................................................... 34 Legal Matters ......................................................................... 42 Miscellaneous ........................................................................ 48 Responsibility for Official Statement .................................... 49 Appendix A: Financial Statements

of the City ................................................................... A-1 Appendix B: Definitions and Summaries of

Principal Documents ................................................... B-1 Appendix C: Form of Legal Opinion ................................... C-1

$6,425,000


Parking Project Revenue Bonds, Series 2014

New Issue$3,620,000

Parking Project Revenue Bonds,

Series 2014A

New Issue$2,805,000

Parking Project Taxable Revenue

Bonds, Series 2014B

OFFICIAL STATEMENT

No dealer, broker, salesman, or other person has been

authorized to give any information or to make any representations, other than those contained in this Official Statement, and, if given or made, such other information or representations should not be relied upon as having been authorized by the Agency, the City, or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2014 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation, or sale. The delivery of this Official Statement at any time does not imply that the information herein is correct as of any time subsequent to this date.

RAYMOND JAMES

Dated: February 25, 2014

1 See detailed “TABLE OF CONTENTS” on pages (i) to (ii).

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