notice of correction - speerfinancial.com 2012c ws... · notice of correction for $8,260,000* city...

NOTICE OF CORRECTION

FOR

$8,260,000* CITY OF WAUKEGAN Lake County, Illinois

First Lien Water and Sewer System Revenue Bonds, Series 2012C

Selling On

October 1, 2012 Between 9:45 and 10:00, C.D.T.

(Closed Speer Auction Speer)

Referencing the Official Statement and the Official Notice of Sale dated September 18, 2012, for the above referenced bond issue:

THE BOND ARE NOT BANK QUALIFIED The correction is in the first paragraph on the cover page of the Official Statement as described below:

In the opinion of Miller, Canfield, Paddock and Stone, P.L.C., Bond Counsel, under existing statutes, judicial decisions, regulations and rulings, interest on the Bonds, as defined herein, is excludable from gross income under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), for federal income tax purposes. Interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum tax, and such interest is not taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. Interest on the Bonds is not exempt from income taxation in the State of Illinois. See “TAX MATTERS” herein. The Bonds are NOT “qualified tax-exempt obligations” under Section 265(b)(3) of the Internal Revenue Code of 1986, as amended.

Revised September 19, 2012

For additional information please contact Speer Financial, Inc., Suite 4100, One North LaSalle Street, Chicago, Illinois 60602; telephone (312) 346-3700; FAX (312) 346-8833.

NOTICE OF CORRECTION

FOR

$8,260,000* CITY OF WAUKEGAN Lake County, Illinois


Selling On

October 1, 2012 Between 9:45 and 10:00, C.D.T.

(Closed Speer Auction Speer)

Referencing the Official Statement and the Official Notice of Sale now dated September 20, 2012, for the above referenced bond issue:

THE BOND ARE NOT BANK QUALIFIED The corrections are on the cover page, in the “TAX MATTERS” section and “APPENDIX C” of the Official Statement: Please refer to the updated Official Statement posted on our website at www.speerfinancial.com

Revised September 20, 2012

For additional information please contact Speer Financial, Inc., Suite 4100, One North LaSalle Street, Chicago, Illinois 60602; telephone (312) 346-3700; FAX (312) 346-8833.

New Issue Investment Rating: Moody's Investors Service …A2

Final Official Statement Dated October 1, 2012

In the opinion of Miller, Canfield, Paddock and Stone, P.L.C., Bond Counsel, under existing statutes, judicial decisions, regulations and rulings, interest on the Bonds, as defined herein, is excludable from gross income under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), for federal income tax purposes. Interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum tax, and such interest is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. Interest on the Bonds is not exempt from income taxation in the State of Illinois. See “TAX MATTERS” herein.

$8,180,000 CITY OF WAUKEGAN Lake County, Illinois First Lien Water and Sewer System Revenue Bonds, Series 2012C

Dated: Date of Delivery Book-Entry Due December 30, 2013-2032

The $8,180,000 First Lien Water and Sewer System Revenue Bonds, Series 2012C (the “Bonds”), are being issued by the City of Waukegan, Lake County, Illinois (the “City”). Interest is payable semiannually on June 30 and December 30 of each year, commencing June 30, 2013. The Bonds will be issued using a book-entry system. The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Bonds. The ownership of one fully registered Bond for each maturity will be registered in the name of Cede & Co., as nominee for DTC and no physical delivery of Bonds will be made to purchasers. The Bonds will mature on December 30 in the following years and amounts.

AMOUNTS, MATURITIES, INTEREST RATES, PRICES OR YIELDS AND CUSIP NUMBERS Principal Due Interest Yield or CUSIP Principal Due Interest Yield or CUSIP Amount Dec. 30 Rate Price Number Amount Dec. 30 Rate Price Number $245,000 2013 2.000% 0.500% 943011 HU3 $350,000...... 2021* 3.000% 2.400% 943011 JC1 300,000 . 2014 2.000% 0.800% 943011 HV1 360,000...... 2022* 3.000% 2.550% 943011 JD9 310,000 . 2015 2.000% 1.100% 943011 HW9 370,000...... 2023* 3.000% 2.700% 943011 JE7 315,000 . 2016 2.000% 1.250% 943011 HX7 385,000...... 2024* 3.000% 2.850% 943011 JF4 325,000 . 2017 2.000% 1.450% 943011 HY5 395,000...... 2025 3.000% 3.050% 943011 JG2 325,000 . 2018 2.000% 1.650% 943011 HZ2 405,000...... 2026 3.000% 3.150% 943011 JH0 335,000 . 2019 2.000% 2.000% 943011 JA5 420,000...... 2027 3.125% 3.250% 943011 JJ6 340,000 . 2020 2.250% 2.250% 943011 JB3 *These maturities have been priced to call.

CUSIP Number $3,000,000......... 3.250% Term Bond due December 30, 2032; Yield........ 3.420% 943011 JP2

For further details see “MANDATORY REDEMPTION” herein.

OPTIONAL REDEMPTION

Bonds due December 30, 2013-2020, inclusive, are non-callable. Bonds due December 30, 2021-2032, inclusive, are callable in whole or in part on any

date on or after December 30, 2020, at a price of par and accrued interest. If less than all the Bonds are called, they shall be redeemed in such principal amounts and from such maturities as determined by the City and within any maturity by lot. See “OPTIONAL REDEMPTION” herein.

PURPOSE, LEGALITY AND SECURITY

The proceeds of the Bonds will be used to construct improvements to the City’s Waterworks and Sewerage System, to fund the First Lien Bond Reserve Account and to pay the costs of issuing the Bonds. See “THE PROJECT” herein.

In the opinion of Miller, Canfield, Paddock and Stone, P.L.C., Chicago, Illinois, Bond Counsel, the Bonds will constitute valid and legally binding obligations of the City, and are payable both as to principal and interest from the Net Revenues of the Waterworks and Sewerage System of the City and the moneys, securities and funds pledged therefore under the Bond Ordinance, subject to the withdrawal and application of such moneys, securities and funds in accordance with the provision of the Bond Ordinance. Neither the full faith and credit nor the taxing power of the City is pledged for the payment of the Bonds.

The City has authorized preparation of the Final Official Statement containing pertinent information relative to the Bonds and the City. Copies of that

Final Official Statement can be obtained from the Underwriter, as defined herein. Additional information may also be obtained from the City or from the independent public finance consultants to the City:

Established 1954

Speer Financial, Inc. INDEPENDENT PUBLIC FINANCE CONSULTANTS

ONE NORTH LASALLE STREET, SUITE 4100 • CHICAGO, ILLINOIS 60602 Telephone: (312) 346-3700; Facsimile: (312) 346-8833

www.speerfinancial.com

City of Waukegan, Lake County, Illinois First Lien Water and Sewer System Revenue Bonds, Series 2012C

2

No dealer, broker, salesman or other person has been authorized by the City to give any information or to make

any representations with respect to the Bonds other than as contained in this Final Official Statement and, if given or made, such other information or representations must not be relied upon as having been authorized by the City. Certain information contained in this Final Official Statement may have been obtained from sources other than records of the City and, while believed to be reliable, is not guaranteed as to completeness. THE INFORMATION AND EXPRESSIONS OF OPINION IN THIS FINAL OFFICIAL STATEMENT ARE SUBJECT TO CHANGE, AND NEITHER THE DELIVERY OF THIS FINAL OFFICIAL STATEMENT NOR ANY SALE MADE HERE UNDER SHALL CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CITY SINCE THE DATE HEREOF.

References herein to laws, rules, regulations, ordinances, resolutions, agreements, reports and other documents

do not purport to be comprehensive or definitive. All references to such documents are qualified in their entirety by reference to the particular document, the full text of which may contain qualifications of and exceptions to statements made herein. Where full texts have not been included as appendices to this Final Official Statement they will be furnished on request. This Final Official Statement does not constitute an offer to sell, or solicitation of an offer to buy, any securities to any person in any jurisdiction where such offer or solicitation of such offer would be unlawful.


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BOND ISSUE SUMMARY

This Bond Issue Summary is expressly qualified by the entire Final Official Statement, which is provided for the convenience of potential investors and which should be reviewed in their entirety by potential investors. Issuer: The City of Waukegan, Lake County, Illinois. Issue: $8,180,000 First Lien Water and Sewer System Revenue Bonds, Series 2012C. Dated Date: Date of delivery. Interest Due: Each June 30 and December 30, commencing June 30, 2013. Principal Due: Serially each December 30, commencing December 30, 2013 through December 30, 2027 and 2032,

as detailed on the front page of this Final Official Statement. Optional Redemption: Bonds due December 30, 2013-2020, inclusive, are non-callable. Bonds due December 30, 2021-

2032, inclusive, are callable in whole or in part on any date on or after December 30, 2020, at a price of par and accrued interest. If less than all the Bonds are called, they shall be redeemed in such principal amounts and from such maturities as determined by the City and within any maturity by lot. See “OPTIONAL REDEMPTION” herein.

Mandatory Redemption: The Bonds are subject to mandatory redemption. See “MANDATORY REDEMPTION” herein. Authorization: The City is a home rule unit under the 1970 Illinois Constitution and as such has no statutory debt

limitation, and is not required to seek referendum approval to issue the Bonds. Credit Rating: The Bonds are rated “A2”from Moody’s Investors Service. Purpose: The proceeds of the Bonds will be used to construct improvements to the City’s Waterworks and

Sewerage System, to fund the First Lien Bond Reserve Account and to pay the costs of issuing the Bonds. See “THE PROJECT” herein.

Security: The Bonds will constitute valid and legally binding obligations of the City, and are payable both as to

principal and interest from the Net Revenues of the Waterworks and Sewerage System of the City and the moneys, securities and funds pledged therefore under the Bond Ordinance, subject to the withdrawal and application of such moneys, securities and funds in accordance with the provision of the Bond Ordinance. Neither the full faith and credit nor the taxing power of the City is pledged for the payment of the Bonds.

Tax Exemption: Miller, Canfield, Paddock and Stone, P.L.C., will provide an opinion as to the tax exemption of the

Bonds as discussed under “TAX MATTERS” in this Final Official Statement. Interest on the Bonds is not exempt from present State of Illinois income taxes.

No Bank Qualification: The Bonds are not “qualified tax-exempt obligations” under Section 265(b)(3) of the Internal Revenue

Code of 1986, as amended. Bond Registrar/Paying Agent: Amalgamated Bank of Chicago, Chicago, Illinois. Delivery: The Bonds are expected to be delivered on or about October 15, 2012. Book-Entry Form: The Bonds will be registered in the name of Cede & Co. as nominee for The Depository Trust

Company (“DTC”), New York, New York. DTC will act as securities depository of the Bonds. See APPENDIX B herein.

Denomination: $5,000 or integral multiples thereof. Financial Advisor: Speer Financial, Inc., Chicago, Illinois. Co-Financial Advisor: Public Financial Management, Inc., (PFM), Chicago, Illinois.


4

CITY OF WAUKEGAN Lake County, Illinois

Robert G. Sabonjian

Mayor

Samuel D. Cunningham Lisa May Rafael Rivera Harold Beadling Gregory Moisio Larry TenPas

Thomas J. Koncan, Jr. Edith Newsome Bill Valko _______________________________

Officials

Wayne Motley

City Clerk Dr. John R. Schwab

City Treasurer Tina M. Smigielski, C.P.A.Director of

Finance & Administration

Miller, Canfield, Paddock and Stone, P.L.C.

Bond Counsel

Finn & Finn, Ltd.

Corporation Counsel

Thomas Hagerty

Director of Public Works

Brian Andersen

Water Utilities Superintendent

Speer Financial, Inc. Financial Advisor

Public Finance Management, Inc. (PFM)

Co-Financial Advisor


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THE ORDINANCE

See APPENDIX C “SUMMARY OF CERTAIN PROVISIONS OF THE BOND ORDINANCE” herein.

THE SYSTEM

The City owned Water and Sewer System (the “System”) provides Lake Michigan water to its residents. Water is treated at the City owned water treatment plant. The plant has a raw and finished capacity of 18 million gallons per day (“MGD”). There are 360 miles of water distribution mains ranging in size from 4” to 30”. The System has three booster stations. Storage capacity consists of 9.8 million gallons of storage, three ground storage water tanks of 4 million, 3 million and 2.8 million gallons, respectively. The City of Waukegan (the “City”) sells water to the Villages of Beach Park, Park City and Green Oaks. Sewage treatment is handled by the North Shore Sanitary District. The City’s sanitary sewer system delivers sewage to the North Shore Sanitary District and consists of 13 Sanitary Lift Stations, 242 miles of gravity sanitary sewer mains, and 245 miles of storm sewers and 5.5 miles of sanitary force mains. The average and peak daily demand for both water and sewer are 9 MGD and 16 MGD, respectively.

Sewage treatment is handled by the North Shore Sanitary District. The City’s sanitary sewer system delivers

sewage to the North Shore Sanitary District and consists of 13 Sanitary Lift Stations, 242 miles of gravity sanitary sewer mains, and 245 miles of storm sewers and 5.5 miles of sanitary force mains.

The average and peak daily demand for both water and sewer are 9 MGD and 16 MGD, respectively. The System currently has 21,408 accounts.

Customer Data – Number of Accounts

Fiscal Years Ended April 30: 2008 2009 2010 2011 2012 Number of Accounts ............ 20,417 20,333 20,300 21,616 21,408

Customer Data -Water and Sewer

Fiscal Years Ended April 30: 2008 2009 2010 Gallons Billed Dollars Billed Gallons Billed Dollars Billed Gallons Billed Dollars Billed Residential ............ 1,974,666 $ 6,682,970 1,837,105 $ 6,494,714 1,826,761 $ 7,080,836 Commercial ............. 593,723 1,957,543 567,118 1,943,251 535,291 2,011,740 Industrial ............. 30,919 102,352 25,356 87,934 24,557 89,881 Governmental and Wholesale 537,616 1,869,395 496,400 1,719,309 475,248 1,595,879 Total ................ 3,136,923 $10,612,259 2,925,979 $10,245,208 2,861,856 $10,778,336 Total Water and Sewer .. 3,136,923 $10,612,259 2,925,979 $10,245,208 2,861,856 $10,778,336 Total Water Only ....... 488,401 1,617,871 452,272 1,498,714 440,223 1,396,591 Total Sewer Only ....... 3,741 46,655 2,658 42,511 3,307 34,756 Total ................ 3,629,064 $12,276,786 3,380,910 $11,786,434 3,305,386 $12,209,683

Fiscal Years Ended April 30: 2011 2012 Gallons Billed Dollars Billed Gallons Billed Dollars Billed Residential .............................. 1,666,580 $ 6,931,211 1,403,556 $ 6,533,051 Commercial ............................... 538,472 2,047,961 484,459 1,858,320 Industrial ................................ 18,499 72,400 25,787 97,767 Government and Wholesale .................. 484,558 1,620,021 464,638 1,556,063 Total ................................... 2,708,109 $10,671,593 2,378,440 $10,045,201 Total Water and Sewer ..................... 2,237,398 $ 9,173,265 1,929,912 $ 8,608,573 Total Water Only .......................... 467,316 1,461,135 445,850 1,394,508 Total Sewer Only (non metered sewer only) . 3,396 37,193 2,678 42,120 Total ................................... 2,708,109 $10,671,593 2,378,440 $10,045,201


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Major Users - Top Ten System Users

As of April 30, 2012

Gallons Billed Dollars Name Product or Service In Thousands Billed Park City ........................... Municipality ........................... 236,114 $ 739,237 Beach Park ......................... Municipality ........................... 95,392 301,140 Waukegan Illinois Hospital .......... Hospital ............................... 46,539 155,959 Green Oaks .......................... Municipality ........................... 46,101 172,879 Lake County Public Building ......... County Government ...................... 27,045 107,926 National Gypsum ..................... Drywall, Cement Board, Gypsum Board .... 22,065 86,798 Blue Cross Blue Shield .............. Insurance .............................. 18,198 71,552 Abbott Labs ......................... Pharmaceuticals ........................ 15,020 43,752 Lakeside Tower ...................... Apartments ............................. 12,875 50,635 Bayside Terrace ..................... Apartments ............................. 11,631 45,684 Total ............................. ....................................... 530,980 $1,775,562 Total Billed ................................................................ 2,378,440 10,045,201 Percent of Total ............................................................ 22.32% 17.68%

Water and Sewer Rates Billing is quarterly and is rotated on a weekly basis. Penalties are 10% of the outstanding bill added 21 days

after the due date of the bill. Approximately 1% are in arrears over 90 days. Rates are listed below: Effective 11/1/2004 8/1/2009 05/01/2012 05/01/2013 Within the City limits Combined Water and Sewer-Per quarter: First 10,000 gallons, per 1,000 gallons ............ $3.20 $3.70 $3.89 $4.08 Next 25,000 gallons, per 1,000 gallons ............. $3.50 $4.05 $4.25 $4.47 Over 90,000 gallons per 1,000 gallons(1) ........... $3.46 $4.00 $4.20 $4.41 Next 125 gallons per 1,000 gallons(1) .............. $3.39 $3.92 N/A N/A Water Only, Per Quarter: First 10,000 gallons, per 1,000 gallons ............ $1.97 $2.28 $2.39 $2.51 Next 25,000 gallons, per 1,000 gallons ............. $2.27 $2.62 $2.75 $2.89 Over 90,000 gallons per 1,000 gallons(1) ........... $2.23 $2.58 $2.71 $2.84 Next 125 gallons per 1,000 gallons (1) ............. $2.16 $2.50 N/A N/A Minimum Charges per Quarter-Residential: Residential: Water Only ........................................ $8.00 $9.24 $9.70 $10.19 Sewer Only ........................................ $6.00 $6.93 $7.28 $ 7.64 Water/sewer ....................................... $14.00 $16.17 $16.98 $17.83 Minimum Charges Per Quarter- Non-Residential: Non-residential: Water only ......................................... $15.00 $17.33 $19.40 $20.37 Sewer only ......................................... $12.00 $13.86 $14.55 $15.28 Water/sewer only ................................... $27.00 $31.19 $33.96 $35.65 Effective 11/1/2008 Residential Outside City Limits(2): First 10,000 gallons, per 1,000 gallons ............ $4.12 Next 25,000 gallons, per 1,000 gallons ............. $4.76 Next 90,000 gallons per 1,000 gallons .............. $4.68 Over 125,000 gallons per 1,000 gallons ............. $4.54 Notes: (1) This category if for rates effective 11/1/2004 and 8/1/2009 only. (2) Effective September 1, 2008 the minimum charge for water customers outside the City was $37.80. As of April 2011 this was changed to a minimum charge equal to usage of 10,000 gallons.


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Rates Approved on September 17, 2012 Effective 05/01/2014 05/01/2015 05/01/2016 05/01/2017 Within the City limits Combined Water and Sewer-Per quarter: First 10,000 gallons, per 1,000 gallons ............ $4.19 $4.29 $4.40 $4.51 Next 25,000 gallons, per 1,000 gallons ............. $4.57 $4.69 $4.81 $4.93 Over 90,000 gallons per 1,000 gallons .............. $4.52 $4.63 $4.75 $4.87 Water Only, Charge Per Quarter: First 10,000 gallons, per 1,000 gallons ............ $2.57 $2.64 $2.70 $2.77 Next 25,000 gallons, per 1,000 gallons ............. $2.96 $3.03 $3.11 $3.19 Over 90,000 gallons per 1,000 gallons .............. $2.92 $2.99 $3.06 $3.14 Minimum Charges Per Quarter – Residential: Water Only ......................................... $10.44 $10.70 $10.97 $11.24 Sewer Only ......................................... $7.83 $8.03 $8.23 $8.44 Water/sewer ........................................ $18.28 $18.74 $19.21 $19.69 Minimum Charges Per quarter -Non-Residential: Water only ......................................... $20.88 $21.40 $21.94 $22.49 Sewer only ......................................... $15.66 $16.05 $16.45 $16.86 Water/sewer only ................................... $36.54 $37.45 $38.39 $39.35 Minimum Charges per quarter - Residential Outside City Limits: Water only ......................................... $20.88 $21.40 $21.94 $22.49 Sewer only ......................................... $15.66 $16.05 $16.45 $16.86 Water/sewer only ................................... $36.54 $37.45 $38.39 $39.35

THE PROJECT

The proceeds of the Bonds will be used to pay the costs of improvements to the City owned Waterworks and Sewerage System including replacement of a traveling screen, water treatment improvements consisting of flocculation and sedimentation basin solids collection improvements, emergency generator installation, filter rehabilitation and media improvements, solid disposal system modifications, miscellaneous plant improvements, to fund the First Lien Bond Reserve Account and to pay the costs of issuance.

Sources and Uses of Funds SOURCES:(1) Par Amount of Bonds .......................................... $8,180,000 Total Sources .................................................. $8,180,000

USES: Bond issue costs (1) ............................................ $ 229,075 Deposit to First Lien Bond Reserve Account .............. 600,925

Cost of Construction: Traveling Screen Replacement ............................................. $1,000,000 Flocculation/Sedimentation Basin Solids Collection Improvements 2,000,000 Emergency Generator Installation ........................................ 2,000,000 Filter Rehabilitation/Media Improvements .............................. 1,200,000 Solids Disposal System Modification .................................... 650,000 Miscellaneous Plant Improvements ....................................... 500,000 Deposit to Project Construction Fund ...................... $7,350,000 Total Uses ...................................................... $8,180,000

Notes: (1) Includes underwriter's discount, legal, financial and administration fixed costs of issuance and bond rounding.


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SYSTEM FINANCIAL INFORMATION

Budgeting

The City Council annually adopts an appropriation ordinance for all funds of the City except for agency funds, although two special revenue funds, two capital projects funds, and four debt service funds were budgeted to have no activity. Budgetary control is legally maintained at the fund level. The City’s appropriation ordinance provides transfer authority to the Mayor and Director of Finance and Administration within and between departments of the same fund. Transfers among funds must be approved by majority vote of the City Council. City Council action is also required for the approval of supplemental appropriation ordinances. The City Council also adopts an annual budget setting forth estimated revenues and expenditures, which can only be amended by Council action. However, the appropriation ordinance controls legal restrictions on expenditures. All appropriations lapse at year end.

Investment Policy The City’s Investment Policy conforms to the Illinois State Statutes which state that any public agency may invest public funds in (1) bonds, certificates of indebtedness, treasury bills or other securities now or hereinafter issued by an agency of the United States or guaranteed by the full faith and credit of the United States as to principal and interest, (2) interest-bearing savings accounts, interest bearing certificates of deposit or interest bearing time deposits, (3) short term obligations of corporations organized in the United States with assets exceeding $500,000,000, (4) money market mutual funds registered under the Investment Company Act of 1940, (5) the Illinois Public Treasurer’s Investment Pool, (6) repurchase agreements, and (7) other investments allowed by Illinois State Statutes. In practice, the City maintains a conservative policy which generally restricts investments to repurchase agreements with local financial institutions and U.S. Treasury Securities although the police and fire pension funds also invest in equity securities.

Financial Reports The City's financial statements are audited annually by certified public accountants. The City's financial

statements are completed on a modified accrual basis of accounting consistent with generally accepted accounting principles applicable to governmental entities.

No Consent or Updated Information Requested of the Auditor

The tables and excerpts (collectively, the “Excerpted Financial Information”) contained in this “FINANCIAL INFORMATION” section and in APPENDIX A are from the audited financial statements of the City, including the audited financial statements for the fiscal year ended April 30, 2011 (the “2011 Audit”). The 2011 Audit has been prepared by Baker Tilly Virchow Krause, LLP, Certified Public Accountants, Oak Brook, Illinois, (the “Auditor”), and approved by formal action of the City Council. The City has not requested the Auditor to update information contained in the Excerpted Financial Information; nor has the City requested that the Auditor consent to the use of the Excerpted Financial Information in this Final Official Statement. Other than as expressly set forth in this Final Official Statement, the financial information contained in the Excerpted Financial Information has not been updated since the date of the 2011 Audit. The inclusion of the Excerpted Financial Information in this Final Official Statement in and of itself is not intended to demonstrate the fiscal condition of the City since the date of the 2011 Audit. Questions or inquiries relating to financial information of the City since the date of the 2011 Audit should be directed to the City.

Summary Financial Information

The following tables are summaries and do not purport to be the complete audits, copies of which are available upon request. See APPENDIX A for excerpts of the City's 2011 Audit.


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Waterworks and Sewerage Fund Statement of Net Assets

Audited as of April 30 2007 2008 2009 2010 2011 ASSETS: Current Assets: Cash and Cash Equivalents ............................ $ 2,797,585 $ 347,879 $ 98,071 $ 200,568 $ 4,485,821 Receivables: Accounts ............................................. 0 0 2,215,094 2,227,390 2,165,587 Intergovernmental .................................... 0 0 104,232 0 0 Trade Receivables, Net: Billed ............................................... 606,217 612,369 0 0 0 Unbilled ............................................. 2,479,052 1,539,349 0 0 0 Accrued Interest ..................................... 0 0 0 0 0 Grants Receivable .................................... 79,345 104,232 0 16,749 63,246 Prepaid Expenses ..................................... 7,172 332,452 16,749 78,168 Inventories .......................................... 325,044 365,334 0 0 0 Due from Other Funds ................................. 143,480 45,701 0 271,361 623,419 Total Current Assets ................................ $ 6,437,895 $ 3,347,316 $ 2,434,146 $ 2,716,068 $ 7,416,241 Non-Current Assets: Capital Assets Not Being Depreciated(1) ............... $ 0 $ 0 $ 3,305,650 $ 1,158,748 $ 1,311,793 Capital Assets Being Depreciated(1) ................... 58,041,783 58,057,942 55,980,874 Capital Assets, Net of Depreciation: .................. Land ................................................. $ 1,040,947 $ 1,040,947 $ 0 $ 176,514 $ 137,180 Building, Parking Lots and Improvements .............. 5,398,868 5,910,855 0 0 0 Machinery and Equipment .............................. 1,445,440 1,157,802 0 0 0 System Infrastructure ................................ 34,053,267 35,272,317 0 0 0 Vehicles ............................................. 1,235,877 901,630 0 0 0 Total Capital Assets ................................ $43,174,399 $44,283,551 $61,347,433 $59,393,204 $57,429,847 Special Assessments Receivable ........................ $ 302,961 $ 251,310 $ 214,982 $ 0 $ 0 Deferred Bond Issuance Costs .......................... 24,913 16,823 0 0 0 Total Non Current Assets ............................ 43,502,273 44,551,684 61,562,415 $59,393,204 $57,429,847 Total Assets ........................................ $49,940,168 $47,899,000 $63,996,561 $62,109,272 $64,846,088 LIABILITIES: Current Liabilities: Accounts Payable ..................................... $ 812,486 $ 1,172,446 $ 1,529,102 $ 169,635 $ 885,804 Accrued Salaries ..................................... 135,413 162,666 153,699 155,037 150,111 Interest Payable ..................................... 108,378 28,856 26,232 5,327 26,492 Other Current Liabilities ............................ 0 0 32,794 31,855 14,084 Due to Other Funds (Short Term) ...................... 372,842 946,535 1,910,714 2,018,924 973,904 Deferred Revenues .................................... 0 0 33,129 0 0 Deposits ............................................. 0 0 0 11,700 15,941 Current Portion of Long-Term Debt .................... 1,159,265 1,000,227 964,129 950,921 732,935 Total Current Liabilities ........................... $ 2,588,384 $ 3,310,730 $ 4,649,799 $ 3,343,399 $ 2,799,271 Non Current Liabilities: Bonds Payable ........................................ $ 461,743 $ 277,728 $ 3,031,241(2) $ 2,031,875(2) $ 3,023,685(2) Total Bonds Payable ................................. $ 461,743 $ 277,728 $ 3,031,241 $ 2,031,875 $ 3,023,685 Note Payable .......................................... $ 3,245,340 $ 2,707,758 $ 0 $ 0 $ 0 Capital Leases Payable ................................ 1,050,910 845,012 0 0 0 Total Bonds and Capital Leases Payable .............. $ 4,757,993 $ 3,830,498 $ 3,031,241 $ 2,031,875 $ 3,023,685 Other Non Current Liabilities: Compensated Absences ................................. $ 345,176 $ 360,685 $ 0 $ 0 $ 0 Customer Deposits .................................... 117,639 105,178 99,173 0 0 Deferred Grant Revenue ............................... 49,909 33,129 0 0 0 Total Non Current Liabilities ....................... $ 5,270,717 $ 4,329,490 $ 3,130,414 $ 2,031,875 $ 3,023,685 Total Liabilities ................................... $ 7,859,101 $ 7,640,220 $ 7,780,213 $ 5,375,274 $ 5,822,956 NET ASSETS: Invested in Capital Assets, Net of Related Debt ....... $37,257,141 $39,452,826 $58,216,123 $56,632,912 $55,493,182 Unrestricted .......................................... 4,823,926 805,954 (1,999,775) 101,086 3,529,950 Total Net Assets .................................... $42,081,067 $40,258,780 $56,216,348 $56,733,998 $59,023,132 Notes: (1) Fiscal year 2009 figures are recorded in a different manner than prior years. (2) Categorized as Non Current Portion of Long Term Debt in 2009 and 2010.


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Waterworks and Sewerage Fund

Statement of Revenues and Expenditures

Audited Year Ended April 30 2007 2008 2009 2010 2011 OPERATING REVENUES: Water and Sewer Billings .............................. $10,754,585 $10,554,366 $10,395,887 $11,131,288 $10,806,003 Permits and Fees ...................................... 444,301 358,021 174,519 174,654 616,347 Penalties/Fines and Forfeitures ....................... 226,692 213,154 245,990 234,582 229,442 Miscellaneous Income .................................. 34,428 7,921 78,389 71,179 85,156 Total Operating Revenues ............................ $11,460,006 $11,133,462 $10,894,785 $11,611,703 $11,736,948 OPERATING EXPENSES: Personnel - Compensation .............................. $ 3,184,147 $ 3,350,725 $ 3,462,521 $ 3,258,008 $ 2,798,750 Personnel - Benefits, Taxes and Insurance ............. 1,423,042 1,510,249 1,610,866 1,330,287 1,690,124 Contractual Services .................................. 1,892,039 2,554,429 1,424,310 1,473,727 1,626,227 Commodities ........................................... 955,878 1,097,762 1,170,579 966,443 752,185 Bad Debt Expenses ..................................... 0 0 0 0 173,438 Operating Expenses Before Depreciation .............. $ 7,455,106 $ 8,513,165 $ 7,668,276 $ 7,028,465 $ 7,040,724 Depreciation .......................................... $ 2,117,936 $ 2,012,787 $ 2,137,125 $ 2,166,130 $ 2,201,685 Capital Outlay ........................................ 0 0 888,290 442,635 248,298 Total Operating Expenses ............................ $ 9,573,042 $10,525,952 $10,693,691 $ 9,637,230 $ 9,490,707 Operating Income (Loss) ............................... 1,886,964 607,510 201,094 $ 1,974,473 $ 2,246,241 Non Operating Income (Expenses): Interest Earned ...................................... $ 148,632 $ 35,854 $ 603 $ 27 $ 50 Other Miscellaneous Revenue .......................... 0 0 0 288,166 Grant Revenue ........................................ 988,891 125,000 250,000 251,200 631,900 Services Provided by General Fund .................... (40,000) 0 0 0 0 Special Assessment Revenue ........................... 0 12,029 0 0 0 Net Gain/(Loss) on Disposal of Fixed Assets .......... (5,887) 0 (80,486) 0 0 Interest and Fiscal Charges .......................... (293,804) (235,701) (190,063) (121,363) (132,071) Total Non Operating Revenue ......................... $ 797,832 $ (62,818) $ (19,946) $ 129,864 $ 788,045 Net Income Before Transfers ........................... $ 2,684,796 $ 544,692 $ 181,148 $ 2,104,337 $ 3,034,286 Operating Transfers In (Out), Net ..................... (2,896,751) (1,404,373) (1,055,654) (1,586,687) (745,152) Change in Net Assets .................................. $ (211,955) $ (859,681) $ (874,506) $ 517,650 $ 2,289,134 Net Assets, Beginning of the Year ..................... 42,293,022 41,118,461 57,090,854(1) 56,216,348 56,733,998 Net Assets, End of the Year ........................... $42,081,067 $40,258,780 $56,216,348 $56,733,998 $59,023,132 Note: (1) As restated.


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Waterworks and Sewerage Fund Net Available for Debt Service

Audited Year Ended April 30 2007 2008 2009 2010 2011 OPERATING REVENUES: Water and Sewer Billings .......................... $10,754,585 $10,554,366 $10,395,887 $11,131,288 $10,806,003 Permits and Fees .................................. 444,301 358,021 174,519 174,654 616,347 Penalties ......................................... 226,692 213,154 245,990 234,582 229,442 Miscellaneous Income .............................. 34,428 7,921 78,389 71,179 85,156 Total Operating Revenues ........................ $11,460,006 $11,133,462 $10,894,785 $11,611,703 $11,736,948 OPERATING EXPENSES: Personnel - Compensation .......................... $ 3,184,147 $ 3,350,725 $ 3,462,521 $ 3,258,008 $ 2,798,750 Personnel - Benefits, Taxes and Insurance ......... 1,423,042 1,510,249 1,610,866 1,330,287 1,690,124 Contractual Services .............................. 1,892,039 2,554,429 1,424,310 1,473,727 1,626,227 Commodities ....................................... 955,878 1,097,762 1,170,579 966,443 752,185 Bad Debt Expenses ................................. 0 0 0 0 173,438 Operating Expenses Before Depreciation ............ $ 7,455,106 $ 8,513,165 $ 7,668,276 $ 7,028,465 $ 7,040,724 Operating Income (Loss) Before Depreciation and Capital Outlay ............................... $ 4,004,900 $ 2,620,297 $ 3,226,509 $ 4,583,238 $ 4,696,224 Plus: Non Operating Income: Interest Earned ................................... 148,632 35,854 603 27 50 Net Available for Debt Service .................... $ 4,153,532 $ 2,656,151 $ 3,227,112 $ 4,583,265 $ 4,696,274

Debt Service and Coverage


Net Available for Debt Service Year Debt Service(1) Series 2010D The Bonds Total Coverage (2) 2012 ........ $4,696,274 $ 142,525 $ 0 $ 142,525(3) 32.95X 2013 ........ 4,696,274 145,575 522,101 667,676 7.03X 2014 ........ 4,696,274 143,475 524,425 667,900 7.03X 2015 ........ 4,696,274 140,675 528,425 669,100 7.02X 2016 ........ 4,696,274 142,875 527,225 670,100 7.01X 2017 ........ 4,696,274 139,875 530,925 670,800 7.00X 2018 ........ 4,696,274 141,875 524,425 666,300 7.05X 2019 ........ 4,696,274 138,675 527,925 666,600 7.05X 2020 ........ 4,696,274 140,475 526,225 666,700 7.04X 2021 ........ 4,696,274 142,075 528,575 670,650 7.00X 2022 ........ 4,696,274 143,025 528,075 671,100 7.00X 2023 ........ 4,696,274 138,750 527,275 666,025 7.05X 2024 ........ 4,696,274 139,475 531,175 670,650 7.00X 2025 ........ 4,696,274 139,975 529,625 669,600 7.01X 2026 ........ 4,696,274 140,250 527,775 668,025 7.03X 2027 ........ 4,696,274 139,750 530,625 670,375 7.01X 2028 ........ 4,696,274 139,000 607,500 746,500 6.29X 2029 ........ 4,696,274 138,000 605,925 743,925 6.31X 2030 ........ 4,696,274 141,750 603,863 745,613 6.30X 2031 ........ 4,696,274 0 746,313 746,313 6.29X 2032 ........ 4,696,274 0 748,563 748,563 6.27X Total ..... $2,678,075 $11,226,964 $13,905,039

Notes (1) Based on the City's Financial Statements for fiscal year ended April 30, 2011. (2) The City is planning to fully fund the First Lien Bond Reserve Account from bond proceeds.

Deposits to the First Lien Bonds Reserve Account and the Depreciation, Improvement and Extension Account are not included the calculation of coverage. The current balances in the First Lien Bond Reserve Account and the Depreciation, Improvement and Extension Account are $145,575 and $250,000, respectively.

(3) Represents full year requirement.


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SYSTEM DEBT INFORMATION

After the issuance of the Bonds the City will have $9,940,000 of first lien water and sewer system revenue bonds. The City also has outstanding $87,431,455 of general obligation bonds, $6,010,000 of parking fees and sales tax revenue bonds, $2,275,000 of special assessment improvement bonds, and $965,485 of capital leases as of August 1, 2012. The Waukegan Public Library is a component unit of the City and has $3,690,000 of Library General Obligation Debt Certificates payable. The City has met its previous debt requirements promptly.

Waterworks and Sewerage Revenue Bonds

(Principal Only)

Series The Cumulative Retirement Year 2010D Bonds Total Amount Percent 2012 ........... $ 65,000 $ 0 $ 65,000 $ 65,000 0.65% 2013 ........... 70,000 245,000 315,000 380,000 3.82% 2014 ........... 70,000 300,000 370,000 750,000 7.55% 2015 ........... 70,000 310,000 380,000 1,130,000 11.37% 2016 ........... 75,000 315,000 390,000 1,520,000 15.29% 2017 ........... 75,000 325,000 400,000 1,920,000 19.32% 2018 ........... 80,000 325,000 405,000 2,325,000 23.39% 2019 ........... 80,000 335,000 415,000 2,740,000 27.57% 2020 ........... 85,000 340,000 425,000 3,165,000 31.84% 2021 ........... 90,000 350,000 440,000 3,605,000 36.27% 2022 ........... 95,000 360,000 455,000 4,060,000 40.85% 2023 ........... 95,000 370,000 465,000 4,525,000 45.52% 2024 ........... 100,000 385,000 485,000 5,010,000 50.40% 2025 ........... 105,000 395,000 500,000 5,510,000 55.43% 2026 ........... 110,000 405,000 515,000 6,025,000 60.61% 2027 ........... 115,000 420,000 535,000 6,560,000 66.00% 2028 ........... 120,000 510,000 630,000 7,190,000 72.33% 2029 ........... 125,000 525,000 650,000 7,840,000 78.87% 2030 ........... 135,000 540,000 675,000 8,515,000 85.66% 2031 ........... 0 700,000 700,000 9,215,000 92.71% 2032 ........... 0 725,000 725,000 9,940,000 100.00% Total ........ $1,760,000 $8,180,000 $9,940,000


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THE CITY

The City, incorporated in 1859, encompasses an area of 24 square miles situated along Lake Michigan and is the County seat of Lake County. The City is located approximately 45 miles north of Chicago and 60 miles south of Milwaukee. The population at the 1990 Census was 69,392. The population reported at the 2000 Census, was 87,901, an increase of 26.7% over 1990. The population reported at the 2010 Census was 89,078, an increase of 1.4% over 2000.

The City attracted early settlers due to its convenience as a port city. The Waukegan Harbor is one of two Illinois ports on Lake Michigan and is the first Illinois port on the St. Lawrence Seaway commerce route. The Waukegan Near North Historic District contains some of the oldest buildings in the City. The area was placed on the National Register of Historic Places in 1978. Homes in the Historic District include Victorian, Prairie School, Italianate, Greek Revival, and Victorian Gothic styles, many of which have been restored. City Government and Services The City operates as a Mayoral/Aldermanic form of government with one alderman elected from each of nine wards. The Mayor, City Clerk, and City Treasurer are elected from the community at-large. City officials serve four year terms. The City is home rule by virtue of its population pursuant to authority granted by the 1970 Illinois Constitution. The City employs 440 full-time employees. The Police Department has approximately 130 sworn officers. Included in their activities are drug education programs, community policing, and a mobile police unit designed to enhance neighborhood security. The Fire Department has approximately 111 firefighters and civilian personnel. There are five full-service fire stations strategically located throughout the community that provide round-the-clock services. The Public Works Department has approximately 88 total employees and is responsible for maintaining the infrastructure of the City which includes the streets, sidewalks, sewers, and water plant operations. The Waukegan Port District The Waukegan Port District has jurisdiction over the Waukegan Harbor and the Waukegan Regional Airport. The Waukegan Harbor consists of two harbor areas with nearly 1,000 slips. The north harbor, with 250 slips, is the original harbor dating to the turn of the century. In 1984, the south harbor opened adding approximately 750 slips, approximately 40 of which were removed in 2008 when the Port District renovated the South Pier docks by demolishing and replacing half of the existing marina with new floating docks. The interior basin of Waukegan’s north harbor encompasses 14 acres and has a 200 foot wide channel entrance with an average depth of 16-18 feet. The port offers access to world markets through the St. Lawrence Seaway, which connects the Great Lakes with the Atlantic Ocean. Moreover, two major freight rail lines and a network of highways link industries to nationwide markets. The Waukegan Port District operates and maintains launching ramps for small boats and two recreational boat harbors with the following facilities: nearly 1,000 permanent slips, washroom facilities, showers, laundry, gift shop, gas docks, sanitary pump-out units, transient moorings, telephone, water and electric. The entrance to the south harbor is from the south end of the break wall, the mouth being 125 feet wide and an average depth of 9 feet. Fishing is permitted from the break walls out of the harbor. An area called Slip One is used to unload cement and gypsum from upper Michigan that is then processed or packaged for use in the area.

The City issued bonds on behalf of the Port District in 1984 and refinanced such bonds in 1992 and 2000 to cover part of the costs of building the south marina. Revenues to provide for operation and debt service expenses are derived from user fees by recreational boaters, several small tenants of the harbor and the commercial shipping interests located in the harbor.


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The Waukegan Regional Airport, a general aviation facility, encompasses an area of about 535 acres and serves

private and corporate, itinerant and some military aircraft with approximately 100,000 operations a year. The primary runway, the northeast-southwest runway, is 6,000 feet long and 150 feet wide. The crosswind runway, the northwest-southeast runway, is 3,750 feet long and 75 feet wide. Approximately 200 aircraft including approximately 50 corporate jets, 25 corporate turboprops and 100 single engine private planes are berthed at the airport. Except for approximately 20 planes the aircraft based at the airport are housed in T-hangars and hangars. The airport has a complete instrument-landing system, a manned air control tower and U.S. Customs services and is the only publicly-owned airport near Chicago that can be expanded to help relieve congestion of jet traffic at O’Hare International Airport. Transportation The City’s key location makes it easily accessible from north or south. I-94, U.S. Route 41 and Illinois Route 131 (Green Bay Road) are located on the western edge of the City providing north/south access to the Chicago metropolitan area, Milwaukee and nearby communities. East/west arterials include Illinois Route 120/Belvidere Road, Illinois Route 132/Grand Avenue, and Washington Street.

The City is about an hour’s drive from Chicago or Milwaukee. O’Hare International Airport is approximately 40 minutes away and Milwaukee’s General Mitchell Field is approximately 45 minutes away. The Waukegan Regional Airport offers travelers quick transport locally and internationally. By plane, Chicago and Milwaukee can be reached in less than 30 minutes. The Metra train service provides commuter hourly service to the North Shore and Chicago via the Chicago & Northwestern rail line. Service to Chicago is approximately 65 minutes. PACE bus service serves Waukegan and surrounding areas. Education

Lake County (Waukegan) Community Unit School District Number 60 (the “District”) is the main school

district serving 68% of the City. The District has an enrollment of approximately 16,000 students as of the 2011/2012 school year and includes seven preschool sites, 15 elementary schools, five middle schools and one high school in three buildings. Special needs assistance as well as “gifted” courses, computer labs and after-school tutoring programs are available in all subjects and at all levels. Bi-lingual classes are also available. Waukegan High School offers its students college preparatory courses as well as vocational training. The total high school enrollment is approximately 4,300. Higher education in the area is available at Robert Morris University in the City, DeVry University and Columbia College in nearby Gurnee.

Other school districts that serve the rest of the City’s population include Lake County School District Numbers

3, 50, 56, 68, 70, Unit School District Number 187, and High School District Numbers 121, 126, and 128. The City is also home to the fast growing Lakeshore Campus of the College of Lake County. Lake Forest

College and Lake Forest Graduate School of Management are located in Lake Forest. Trinity International University in Bannockburn, and St. Mary of the Lake Seminary in Mundelein are also nearby.


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Community Life The City’s half-mile of public beach is open from Memorial Day to Labor Day. Activities include volleyball, windsurfing, swimming, sunbathing and beachfront bonfires at Waukegan Municipal Beach. The Waukegan Park District, a separate unit of local government, is a nationally acclaimed park district covering 21 square miles. It owns 46 sites totaling 719 acres. Facilities include an 8,600 square foot sports and fitness center that opened in 2006, two public golf courses (one 18-hole and one 9-hole course), one recreation center, a cultural arts center, an outdoor swimming pool, a skate park and BMX bicycle track and numerous playing fields. The District offers classes and programs for toddlers to seniors, including day camps, youth programs, and year-round sports leagues. The Lake County YMCA houses an indoor pool, racquetball courts, gymnasium, fitness center and indoor track. The City’s senior center, Park Place, offers a large variety of classes and programs also.

Waukegan Public Library offers residents a collection consisting of books, videos and DVDs, compact disks, magazine subscriptions and computer terminals with internet access, word processing, games and educational software.

Vista Health System serves City residents. Acute care services, including Level II Trauma services, are provided by Vista Medical Center East. Vista Medical Center West provides mental health, in-patient rehabilitation services and a full service emergency department.

SOCIOECONOMIC INFORMATION

The Amhurst Lake Business Park is located on a 50-acre site on the west side of the City and contains both

office and industrial property. Sites range in size from 2.5 to 16 acres capable of supporting 1,000,000 total square feet of space with buildings ranging from 40,000 square feet to 300,000 square feet.

Following are lists of large employers located in the City and in the surrounding area.

Major City Employers(1)

Approximate Name Product/Service Employment Lake County ..................................... Government .............................................................. 3,055 (2) Unit School District No. 60 ..................... Education ............................................................... 1,900 Vista Health .................................... Acute Care Hospital and Specialized Health Care Facility ................. 1,300 (3) Coleman Cable Systems, Inc. ..................... Wire Products Corporate Headquarters ..................................... 1,100 Medline Industries, Inc. ........................ Surgical Equipment Packs and Medical Supplies ............................ 850 WMS Industries, Inc. ............................ Video Games ............................................................. 500 Yaskawa Electric America, Inc. .................. Machine Tool Controls .................................................... 420 Uline, Inc. ..................................... Mail Order Packaging and Shipping Supplies ............................... 400 Cardinal Health, Inc. ........................... Medical Supplies Distribution Center ..................................... 340 Lake County Press, Inc. ......................... Commercial Printing...................................................... 207 PEER Bearing Co. ................................ Bearing Manufacturing .................................................... 200 Nosco, Inc. ..................................... Divisional Headquarters and Lithographic Printing and Folding Cartons .... 200 Visual Pak ...................................... Company Headquarters and Contract Manufacturing, Packaging, and Assembly . 200 United Conveyor Corp. ........................... Corporate Headquarters and Conveyors and Integrated Systems .............. 200 JST Corp. ....................................... Connector Sales ......................................................... 200 North Shore Gas Co. ............................. Natural Gas Utility...................................................... 200 Notes: (1) Source: 2012 Illinois Manufacturers Directory, 2012 Illinois Services Directory and a selective telephone survey.

(2) The County employs a total of 2,701 full-time and 354 part-time budgeted positions of which approximately 2,000 are employed in the City.

(3) Combined Vista Medical Center East Vista Medical Center West.


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Major Area Employers(1) Approximate

Location Name Product/Service Employment North Chicago ........ Great Lakes Training Center .............. Military ............................................... 11,000 (2) North Chicago ........ Abbott Laboratories ...................... Pharmaceutical Products Headquarters ................... 5,200 Lincolnshire ......... Aon Hewitt, LLC .......................... Employee Benefits and Compensation Consultants ......... 5,000 Gurnee ............... Gurnee Mills ............................. Shopping Center ........................................ 5,000 Multiple ............. Baxter Healthcare Corp. .................. Medical and Hospital Equipment ......................... 4,550 (3) Gurnee ............... Six Flags Great America .................. Amusement Park ......................................... 3,000 (4) Deerfield ............ Takeda Pharmaceuticals North America, Inc. Corporate Headquarters and Pharmaceuticals ............. 2,668 Deerfield ............ Walgreen Co. ............................. Drug Stores Corporate Headquarters ..................... 2,500 Deerfield ............ Kinetek, Inc. ............................ Corporate Headquarters and Commercial Printing ......... 2,500 Libertyville ......... Advocate Condell Medical Center .......... Hospital ............................................... 2,200 Grayslake ............ College of Lake County ................... Community College ...................................... 1,818 Lake Forest .......... Northwestern Lake Forest Hospital ........ Hospital ............................................... 1,600 Lake Forest .......... Hospira, Inc. ............................ Medical Infusion Systems ............................... 1,350 Highland Park ........ Highland Park Hospital ................... Hospital ............................................... 1,200 Lincolnshire ......... Quill Corp. .............................. Stationary and Office Supplies ......................... 1,200 Lake Forest .......... W.W. Grainger Co., Inc. .................. Industrial Machinery Corporate Headquarters ............ 1,200 Lake Forest .......... Trustmark Mutual Holding Co. ............. Health and Life Insurance and Benefits Administration .. 800 Deerfield ............ Astellas Pharma US, Inc. ................. Corporate Headquarters and Wholesale Pharmaceuticals ... 800 Deerfield ............ United Stationers ........................ Corporate Headquarters and Wholesale Office Equipment .. 800 Notes: (1) Source: 2012 Illinois Manufacturers Directory, 2012 Illinois Services Directory and a selective telephone survey. (2) Civilian and military personnel. (3) Includes 1,900 in Round Lake and 2,650 in Deerfield. (4) Employment is seasonal.

The following tables show employment by industry and by occupation for the City, Lake County (the “County”) and the State of Illinois (the “State”) as reported by the U.S. Census Bureau 2006-2010 American Community Survey 5-year estimated values.

Employment By Industry(1)

The City Lake County State of Illinois Classification Number Percent Number Percent Number Percent Agriculture, Forestry, Fishing and Hunting, and Mining ....... 60 0.1% 1,061 0.3% 65,279 1.1% Construction ................................................ 2,631 6.5% 19,586 5.8% 361,528 6.0% Manufacturing ............................................... 9,406 23.2% 55,826 16.6% 789,606 13.0% Wholesale Trade.............................................. 1,496 3.7% 16,797 5.0% 207,774 3.4% Retail Trade ................................................ 4,976 12.3% 39,600 11.8% 657,040 10.8% Transportation and Warehousing, and Utilities ................ 1,709 4.2% 12,517 3.7% 356,345 5.9% Information ................................................. 506 1.3% 6,909 2.1% 140,821 2.3% Finance and Insurance, and Real Estate and Rental and Leasing 1,563 3.9% 27,720 8.2% 475,856 7.8% Professional, Scientific, and Management, Administrative, and Waste Management Services ................................... 5,124 12.7% 43,624 12.9% 657,479 10.8% Educational Services and Health Care and Social Assistance ... 6,027 14.9% 61,192 18.2% 1,312,067 21.6% Arts, Entertainment and Recreation and Accommodation and Food Services............................................... 3,782 9.3% 27,131 8.1% 518,641 8.6% Other Services, Except Public Administration ................. 1,643 4.1% 15,076 4.5% 288,895 4.8% Public Administration ........................................ 1,533 3.8% 9,851 2.9% 231,517 3.8% Total ..................................................... 40,456 100.0% 336,890 100.0% 6,062,848 100.0%

Note: (1) Source: U.S. Census Bureau American FactFinder 2006-2010 American Community Survey. Information from the 2010 Census is not available as of the date of this Final Official Statement.


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Employment By Occupation(1) The City Lake County State of Illinois Classification Number Percent Number Percent Number Percent Management, Business Science and Arts ..................... 8,083 20.0% 138,691 41.2% 2,159,236 35.6% Service .................................................. 9,125 22.6% 46,541 13.8% 989,889 16.3% Sales and Office ......................................... 9,376 23.2% 89,284 26.5% 1,566,966 25.8% Natural Resources, Construction, and Maintenance .......... 3,648 9.0% 23,793 7.1% 490,469 8.1% Production, Transportation, and Material Moving ............ 10,224 25.3% 38,581 11.5% 856,288 14.1% Total ................................................... 40,456 100.0% 336,890 100.0% 6,062,848 100.0%

Note: (1) Source: U.S. Census Bureau American FactFinder 2006-2010 American Community Survey. Information from the 2010 Census is not available as of the date of this Final Official Statement.

Unemployment Rates

Annual Average Unemployment Rates(1)

Calendar The Lake State of Year City County Illinois 2003 ............................... 8.2% 6.0% 6.7% 2004 ............................... 7.5% 5.5% 6.2% 2005 ............................... 6.8% 4.7% 5.7% 2006 ............................... 6.2% 4.2% 4.5% 2007 ............................... 7.0% 5.0% 5.0% 2008 ............................... 9.1% 6.7% 6.5% 2009 ............................... 13.2% 9.8% 10.1% 2010 ............................... 14.2% 10.5% 10.3% 2011 ............................... 12.7% 9.4% 9.8% 2012(2) ............................ 11.0% 9.0% 9.3% Notes: (1) Source: Illinois Department of Employment Security.

(2) Preliminary for July 2012.

Building Permits

Residential Single Family building permits have averaged $163,436 for the full years 2007 to 2011 in the City, excluding the value of land.

City Building Permits(1)

(Excludes the Value of Land)

New Residential Calendar Single-Family Multi-Family Commercial All Others Total Year Units Value Number Value Number Value Number Value Value

2003 .... 85 $13,369,672 18 $1,330,100 13 $13,861,901 3,516 $41,808,872 $ 70,370,545 2004 .... 76 15,482,862 6 865,200 18 23,887,771 3,502 36,202,457 76,438,290 2005 .... 94 20,676,062 225 22,181,730 25 42,296,603 3,154 43,854,351 129,008,746 2006 .... 34 7,199,975 30 5,120,400 15 26,351,339 1,998 39,077,500 77,749,214 2007 .... 45 7,539,955 48 1,730,400 25 48,497,662 2,955 71,234,510 129,002,527 2008 .... 22 3,606,100 85 5,410,800 9 26,925,469 1,625 42,970,588 78,912,957 2009 .... 14 2,207,675 36 3,680,400 2 10,247,862 3,112 47,045,884 63,181,821 2010 .... 23 3,549,207 0 0 3 2,402,253 2,415 36,703,425 42,654,885 2011 .... 5 911,535 1 10,815,878 5 11,626,187 2,516 40,248,388 63,601,988 2012(2) . 7 705,263 0 0 0 0 3,158 41,781,465 42,486,728

Notes: (1) Source: The City. (2) Represents building permit activity through August 20, 2012.


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Housing

The U.S. Census Bureau 2006-2010 American Community Survey 5-year estimated values reported that the

median value of owner-occupied homes was $165,200 for the City, $287,300 for the County and $200,500 for the State of Illinois. The market value of specified owner-occupied units was as follows.

Specified Owner-Occupied Units(1)

The City Lake County State of Illinois Value Number Percent Number Percent Number Percent Under $50,000 .................... 316 1.9% 4,312 2.3% 216,017 6.5% $50,000 to $99,999 ............... 900 5.4% 3,932 2.1% 450,834 13.7% $100,000 to $149,999 ............ 4,779 28.5% 15,917 8.5% 455,940 13.8% $150,000 to $199,999 ............. 6,273 37.4% 30,830 16.4% 505,936 15.3% $200,000 to $299,999 ............. 3,039 18.1% 43,082 23.0% 723,366 21.9% $300,000 to $499,999 ............. 1,002 6.0% 47,129 25.1% 643,537 19.5% $500,000 to $999,999 ............. 314 1.9% 33,541 17.9% 250,844 7.6% $1,000,000 or more ............... 135 0.8% 8,709 4.6% 54,217 1.6% Total .......................... 16,758 100.0% 187,452 100.0% 3,300,691 100.0% Note: (1) Source: U.S. Census Bureau American FactFinder 2006-2010 American Community Survey. Information from the 2010 Census is not available as of the date of this Final Official Statement.

Mortgage Status(1)

The City Peoria County State of Illinois

Value Number Percent Number Percent Number Percent Housing Units with a Mortgage ................ 12,979 77.4% 145,828 77.8% 2,296,372 69.6% Housing Units without a Mortgage ............. 3,779 22.6% 41,624 22.2% 1,004,319 30.4% Total ...................................... 16,758 100.0% 187,452 100.0% 3,300,691 100.0% Note: (1) Source: U.S. Bureau of the Census, American Community Survey 5-year estimates 2006 to 2010.

Income

Per Capita Personal Income for the Ten Highest Income Counties in the State(1) Rank 2006-2010 1 ..................... Lake County ................. $38,120 2 ..................... DuPage County ............... 37,849 3 ..................... McHenry County .............. 31,838 4 ..................... Monroe County ............... 31,091 5 ..................... Kendall County .............. 30,565 6 ..................... Will County ................. 29,811 7 ..................... Kane County ................. 29,480 8 ..................... Woodford County ............. 29,475 9 ..................... Cook County ................. 29,335 10 ..................... Sangamon County ............. 28,394

Note: (1) Source: U.S. Bureau of the Census. 2006-2010

American Community 5-Year Estimates.


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The following shows a ranking of median family income for the Chicago metropolitan area from the 2006-2010 American Community Survey.

Ranking of Median Family Income(1)

Ill. Family Ill. County Income Rank DuPage County ............. $92,423 1 Lake County ............... 91,693 2 Kendall County ............ 87,309 3 McHenry County ............ 86,698 4 Will County ............... 85,488 5 Kane County ............... 77,998 7 Cook County ............... 65,039 20

Note: (1) Source: U.S. Bureau of the Census. 2006-2010 American Community 5-Year Estimates.

According to the U.S. Census Bureau 2006-2010 American Community Survey 5-year estimated values, the

City had a median family income of $53,526. This compares to $91,693 for the County and $68,236 for the State of Illinois. The following table represents the distribution of family incomes for the City, the County and the State of Illinois at the time of the 2006-2010 American Community Survey. Family Income(1)

The City Lake County State of Illinois Income Number Percent Number Percent Number Percent Under $10,000 ......................... 944 4.6% 3,647 2.0% 131,278 4.2% $10,000 to $14,999 .................... 603 3.0% 2,410 1.4% 87,888 2.8% $15,000 to $24,999 .................... 1,954 9.6% 7,621 4.3% 228,903 7.2% $25,000 to $34,999 .................... 2,467 12.1% 9,879 5.5% 264,029 8.4% $35,000 to $49,999 .................... 3,414 16.8% 17,206 9.7% 401,825 12.7% $50,000 to $74,999 .................... 4,382 21.6% 28,762 16.2% 622,596 19.7% $75,000 to $99,999 .................... 3,111 15.3% 27,781 15.6% 492,434 15.6% $100,000 to $149,999 .................. 2,378 11.7% 36,995 20.8% 538,135 17.0% $150,000 to $199,999 .................. 736 3.6% 19,765 11.1% 199,365 6.3% $200,000 or more ...................... 320 1.6% 24,006 13.5% 195,094 6.2% Total ............................... 20,309 100.0% 178,072 100.0% 3,161,547 100.0% Note: (1) Source: U.S. Census Bureau American FactFinder 2006-2010 American Community Survey. Information from the 2010 Census is not available as of the date of this Final Official Statement.


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According to the U.S. Census Bureau 2006-2010 American Community Survey 5-year estimated values, the

City had a median household income of $47,987. This compares to $78,948 for the County and $55,735 for the State of Illinois. The following table represents the distribution of household incomes for the City, the County and the State of Illinois at the time of the 2006-2010 American Community Survey.

Household Income(1)

The City Lake County State of Illinois Income Number Percent Number Percent Number Percent Under $10,000 ......................... 1,905 6.5% 8,604 3.6% 327,492 6.9% $10,000 to $14,999 .................... 1,154 4.0% 6,138 2.6% 230,008 4.8% $15,000 to $24,999 .................... 3,427 11.7% 15,305 6.4% 483,034 10.1% $25,000 to $34,999 .................... 3,794 13.0% 16,632 7.0% 463,776 9.7% $35,000 to $49,999 .................... 4,942 16.9% 26,284 11.0% 644,024 13.5% $50,000 to $74,999 .................... 6,113 20.9% 40,669 17.0% 896,686 18.8% $75,000 to $99,999 .................... 3,780 13.0% 34,941 14.6% 630,368 13.2% $100,000 to $149,999 .................. 2,777 9.5% 42,692 17.8% 642,112 13.5% $150,000 to $199,999 .................. 878 3.0% 21,847 9.1% 229,128 4.8% $200,000 or more ...................... 418 1.4% 26,134 10.9% 223,323 4.7% Total ............................... 29,188 100.0% 239,246 100.0% 4,769,951 100.0% Note: (1) Source: U.S. Census Bureau American FactFinder 2006-2010 American Community Survey. Information from the 2010 Census is not available as of the date of this Final Official Statement.

Retail Activity

Following is a summary of the City's sales tax receipts as collected and disbursed by the State of Illinois.

Retailers' Occupation, Service Occupation and Use Tax(1)

Calendar Year Municipal Tax Annual Percent Home Rule Ending December 31 Distributions(2) Change + (-) Sales Tax(3) Total

2002 .......................... $7,617,205 (7.11%)(4) $2,175,406 $ 9,792,611 2003 .......................... 7,303,362 (4.12%) 4,387,933 11,691,294 2004 .......................... 7,457,342 2.11% 4,452,955 11,910,296 2005 .......................... 7,446,212 (0.15%) 4,612,119 12,058,331 2006 .......................... 8,090,445 8.65% 5,066,133 13,156,578 2007 .......................... 8,656,210 6.99% 5,406,957 14,063,167 2008 .......................... 8,437,622 (2.53%) 5,455,829 13,893,451 2009 .......................... 8,571,824 1.59% 5,028,133 13,599,957 2010 .......................... 7,792,114 (9.10%) 5,324,447 13,116,561 2011 .......................... 7,921,232 1.66% 5,407,750 13,328,982 Growth from 2002 to 2011 ............................ 3.99% Notes: (1) Source: Illinois Department of Revenue.

(2) Tax distributions are based on records of the Illinois Department of Revenue relating to the 1% municipal portion of the Retailer’s Occupation, Service Occupation and Use Tax, collected on behalf of the City, less a State administration fee. The municipal 1% includes tax receipts from the sale of food and drugs which are not taxed by the State.

(3) The 1% Home Rule Sales Tax became effective July 1, 2002. Distribution to the City commenced in October 2002.

(4) The 2002 percentage is based on a 2001 sales tax of $8,200,398.


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Sales Tax Receipts by Kind of Business(1)

(For the 12 months ended December 31, 2011) Municipal Home Rule Tax(2) Percent Sales Tax(3) Total General Merchandise ....................... $ 909,500 11.22% $ 629,334 $ 1,538,834 Food ...................................... 1,197,988 14.78% 318,433 1,516,420 Drinking and Eating Places ................ 808,642 9.97% 795,326 1,603,968 Apparel ................................... 269,989 3.33% 200,806 470,795 Furniture, Household & Radio .............. 98,119 1.21% 96,200 194,319 Lumber Building and Hardware .............. 379,058 4.68% 378,802 757,860 Automotive and Filling Stations ........... 1,725,712 21.29% 1,040,660 2,766,371 Drugs and Misc. Retail .................... 1,699,520 20.96% 1,234,999 2,934,519 Agriculture and All Other ................. 824,242 10.17% 708,920 1,533,162 Manufactures .............................. 194,865 2.40% 192,730 387,595 Total ................................... $8,107,634 100.00% $5,596,210 $13,703,843 Notes: (1) Source: State of Illinois, Department of Revenue.

(2) The amount returned to the City is equal to 1% of taxable sales made at businesses located with the the corporate limits of the City. (3) The 1% Home Rule Sales Tax became effective July 1, 2002. Distribution to the City commenced in October 2002.

MANAGEMENT DISCUSSION

Over the past four-years, the City has faced bond rating downgrades, workforce reductions, program cuts, and reining in city services. In face of those obstacles, the City has built on its strengths and put plans in place to correct long-term structural deficiencies. The May 1, 2012 to April 30, 2013 (Fiscal Year 2012/2013) budget was drafted with a view toward continued transparency, accountability and professionalism at every level of the organization. The Fiscal Year 2012/2013 budget is balanced due to cost cutting by departments and stabilized revenue sources. Only grant-funded positions are planned to be added to the City’s headcount during the fiscal year, and no lay-offs are anticipated.

The City has retained a professional lobbyist in order to secure state and federal dollars to add police officers

and firefighters, as well as make long overdue improvements to the City’s lakefront. This includes seeking funds for road improvements and the creation of a multi-modal transportation hub at the downtown/lakefront train station in cooperation with Union Pacific, Metra and Pace. After many years working with the State and Federal Environmental Protection Agencies, lakefront remediation will be finished within 18 months, finally opening up the entire lakefront for redevelopment.

The City has entered into an intergovernmental agreement with College of Lake County to expand their

Lakeshore campus with a state-of-the-art facility. Karcher ArtSpace Lofts is the conversion of a vacant, derelict former hotel to 36 affordable live-work artist lofts in the heart of downtown, using a combination of public funds and private investment. These two projects highlight the burgeoning arts, entertainment and education district being formed in downtown Waukegan.

The City is also using existing Tax Increment Financing (“TIF”) districts to bolster reinvestment throughout the

City. Due to TIF incentives, Woodland Foods relocated their specialty gourmet ingredient supply firm to the City’s northwest corridor and, more recently, Paintball City, a paintball and baseball entertainment venue, began rehabilitating a structure in the City’s southwest business and retail district. The City is presently working on a detailed policy and application process relative to the review of future TIF requests and other financial incentives to both facilitate development and make sure the City is getting the best return on its investment. It is anticipated that the new TIF policy will be presented to City Council in the fall, and is part of an ongoing effort to bolster economic development along with a new Business Retention and Expansion program and a restructured Renaissance Commission assembled to make well-informed recommendations relative to orderly development.


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In collaboration with Indianapolis-based development consultants, the City will be hosting a series of forums

with high profile regional development companies to showcase underutilized City-owned assets and other development opportunities throughout the City. The City has also invited the Urban Land Institute (“ULI”) to assemble a Technical Assistance Panel to revisit the Downtown-Lakefront Master Plan as it relates to land use along the lakefront, particularly the harbor area. ULI’s efforts will lend renewed focus to the Master Plan and recapture the momentum generated by the City’s award winning development plan. Under a grant-supported position provided by the USEPA Region 5 office, the City has also been working closely with former Kenosha Mayor on developing strategies and building partnership to lay the framework for the redevelopment of the harbor and other lakefront properties. Finally, the City received a grant from the Chicago Metropolitan Agency for Planning’s Local Technical Assistance Program and has been working closely with that agency to address a variety of issues in our neighborhoods and along our commercial corridors. This work promises to result in stakeholder-inspired strategies to encourage reinvestment in areas formerly neglected.

Absent incentives, several other companies and institutions, including Kinter International, Tecnova, Fischer

Paper, Northwestern University and Anderson and Associates, have either moved to, invested in, or made substantial additions to existing facilities along the corridor.

The City’s current administration is committed to rebuilding a strong financial foundation. Current obligations are funded in the Fiscal Year 2012/2013 budget, and reserves are strengthened to prudently prepare for the future. The City Council recently adopted a Fund Stabilization Policy committing to a formalized process to maintain fund balance reserves and clearly identify the uses of fund balances. The City leadership believes that it is in a position to rebuild a strong financial foundation for a prosperous City and to continue promoting the City as a viable choice for businesses, families, and visitors.

EMPLOYEE RETIREMENT AND OTHER POSTEMPLOYMENT BENEFITS OBLIGATIONS

See APPENDIX A herein for a discussion of the City’s employee retirement and other postemployment benefits obligations.

REGISTRATION, TRANSFER AND EXCHANGE

See also APPENDIX B for information on registration, transfer and exchange of book-entry bonds. The Bonds will be initially issued as book-entry bonds.

The City shall cause books (the “Bond Register”) for the registration and for the transfer of the Bonds to be kept at the principal office maintained for the purpose by the Bond Registrar in Chicago, Illinois. The City will authorize to be prepared, and the Bond Registrar shall keep custody of, multiple bond blanks executed by the City for use in the transfer and exchange of Bonds.

Any Bond may be transferred or exchanged, but only in the manner, subject to the limitations, and upon

payment of the charges as set forth in the Bond Ordinance (the “Ordinance”). Upon surrender for transfer or exchange of any Bond at the principal office maintained for the purpose by the Bond Registrar, duly endorsed by, or accompanied by a written instrument or instruments of transfer in form satisfactory to the Bond Registrar and duly executed by the registered owner or such owner’s attorney duly authorized in writing, the City shall execute and the Bond Registrar shall authenticate, date and deliver in the name of the registered owner, transferee or transferees (as the case may be) a new fully registered Bond or Bonds of the same maturity and interest rate of authorized denominations, for a like aggregate principal amount.


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The execution by the City of any fully registered Bond shall constitute full and due authorization of such Bond, and the Bond Registrar shall thereby be authorized to authenticate, date and deliver such Bond, provided, however, the principal amount of outstanding Bonds of each maturity authenticated by the Bond Registrar shall not exceed the authorized principal amount of Bonds for such maturity less Bonds previously paid.

The Bond Registrar shall not be required to transfer or exchange any Bond following the close of business on the 15th day of the month in which an interest payment date occurs on such Bond (known as the record date), nor to transfer or exchange any Bond after notice calling such Bond for redemption has been mailed, nor during a period of fifteen days next preceding mailing of a notice of redemption of any Bonds. The person in whose name any Bond shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of the principal of or interest on any Bonds shall be made only to or upon the order of the registered owner thereof or such owner’s legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid.

No service charge shall be made for any transfer or exchange of Bonds, but the City or the Bond Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Bonds except in the case of the issuance of a Bond or Bonds for the unredeemed portion of a bond surrendered for redemption.

RISK FACTORS

Purchasers of the 2012C Bonds are advised of certain risk factors and investment considerations with respect to the payment of the principal of, premium, if any, and interest on the 2012C Bonds, and possible revisions to federal tax laws that could affect the tax treatment of the interest of the 2012C Bonds. This discussion of risk factors is not intended to be exhaustive and the order in which the following factors are presented is not intended to reflect the relative importance of any such risks.

Financial Projections and Estimates. Estimates of projected revenues, expenses and the cost of the Project

contained in this Final Official Statement and the realization of such estimates, are subject to, among other things, future economic and other conditions that are unpredictable and that may adversely affect such revenues, expenses and projected costs.

Changes in Management or Policies. Changes in key management personnel of the System or City Council

policies could adversely or beneficially affect the financial performance of the System to an extent that cannot be determined at this time.

Regulation by Government Entities. The System is subject to regulation and control by certain governmental

agencies. Neither the City not its consultants can predict future policies such agencies may adopt. Future changes could result in the City having to discontinue operations at certain facilities or to make unanticipated and significant capital expenditures and could also generate substantial litigation.

Environmental Regulation. Water utilities are subject to continuing environmental regulation. Federal, state

and local standards and procedures that regulate the environmental impact of water utilities are subject to change. These changes may arise from continuing legislative, regulatory and judicial action regarding such standards and procedures. Consequently, there is no assurance that System facilities in operation will remain subject to the regulations currently in effect, will always be in compliance with further regulations or will always be able to obtain all required operating permits. An inability to comply with environmental standards could result in reduced operation levels and fines. Legislative, regulatory, administrative or enforcement actions involving environmental controls could also adversely affect the operation of the facilities of the System.


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Bankruptcy. The rights and remedies provided in the Bond Ordinance may be limited by and are subject to

the provisions of federal bankruptcy laws, to other laws or equitable principles that may affect the enforcement of creditors’ rights, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against local governments. The various opinions of counsel to be delivered with respect to the 2012C Bonds and the Bond Ordinance will be similarly qualified.

Insurance Claims. Increases in the cost of general liability insurance coverage and the amounts paid in

settlement of liability claims not covered by insurance could adversely affect the financial performance of the System to an extent that cannot be determined at this time.

Organized Labor Efforts. Certain employees of the City’s Water and Sewer System are represented by

collective bargaining units. Labor disputes with these collective bargaining units could result in adverse labor actions or increased labor costs.

Natural Disasters. The occurrence of natural disasters, such as tornados, earthquakes, floods or droughts,

could damage the facilities of the City, affect water supply, interrupt services or otherwise impair operations and the ability of the System to produce revenues.

Terrorist Attacks. Although potential terrorist attacks could temporarily disrupt water service, the City has

taken and continues to take precautions to minimize this risk. Miscellaneous Factors. The water supply industry in general has experienced, or may in the future

experience, problems including (a) the effects of inflation on the costs of operation of facilities, (b) uncertainties in predicting future demand requirements and (c) increased financing requirements coupled with the increased cost and uncertain availability of capital.

TAX MATTERS

In the opinion of Miller, Canfield, Paddock and Stone, P.L.C., Bond Counsel, under existing law, the interest on the Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. Further, with respect to corporations (as defined for federal income tax purposes) such interest will be taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on such corporations. Bond Counsel will express no opinion regarding any other federal or state tax consequences arising with respect to the Bonds and the interest thereon.

The opinion on federal tax matters is based on the accuracy of certain representations and certifications, and

continuing compliance with certain covenants, of the City contained in the transcript of proceedings and which are intended to evidence and assure the foregoing, including that the Bonds are and will remain obligations the interest on which is excludable from gross income for federal income tax purposes. The City has covenanted to take the actions required of it for the interest on the Bonds to be and to remain excludable from gross income for federal income tax purposes, and not to take any actions that would adversely affect that exclusion. Bond Counsel’s opinion assumes the accuracy of the City’s certifications and representations and the continuing compliance with the City’s covenants. Noncompliance with these covenants by the City may cause the interest on the Bonds to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. After the date of issuance of the Bonds, Bond Counsel will not undertake to determine (or to so inform any person) whether any actions taken or not taken, or any events occurring or not occurring, or any other matters coming to Bond Counsel’s attention, may adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or the market prices of the Bonds.


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The opinion of Bond Counsel is based on current legal authority and covers certain matters not directly

addressed by such authority. It represents Bond Counsel’s legal judgment as to the excludability of interest on the Bonds from gross income for federal income tax purposes but is not a guarantee of that conclusion. The opinion is not binding on the Internal Revenue Service (“IRS”) or any court. Bond Counsel cannot give and has not given any opinion or assurance about the effect of future changes in the Internal Revenue Code of 1986, as amended (the “Code”), the applicable regulations, the interpretations thereof or the enforcement thereof by the IRS.

Ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers,

including, without limitation, corporations subject to the branch profits tax, financial institutions, certain insurance companies, certain S corporations, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry the Bonds. Bond Counsel will express no opinion regarding any such consequences.

Tax Treatment Of Accruals On Original Issue Discount Bonds

Under existing law, if the initial public offering price to the public (excluding bond houses and brokers) of a Bond is less than the stated redemption price of such Bonds at maturity, then such Bond is considered to have “original issue discount” equal to the difference between such initial offering price and the amount payable at maturity (such Bonds are referred to as “OID Bonds”). Such discount is treated as interest excludable from federal gross income to the extent properly allocable to each registered owner thereof. The original issue discount accrues over the term to maturity of each such OID Bonds on the basis of a constant interest rate compounded at the end of each six-month period (or shorter period) from the date of original issue with straight-line interpolations between compounding dates. The amount of original issue discount accruing during each period is added to the adjusted basis of such OID Bonds to determine taxable gain upon disposition (including sale, redemption or payment on maturity) of such OID Bonds.

The Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers

of OID Bonds who purchase such OID Bonds after the initial offering of a substantial amount thereof. Owners who do not purchase such OID Bonds in the initial offering at the initial offering prices should consult their own tax advisors with respect to the tax consequences of ownership of such OID Bonds.

All holders of the OID Bonds should consult their own tax advisors with respect to the allowance of a deduction

for any loss on a sale or other disposition of an OID Bond to the extent such loss is attributable to accrued original issue discount.

Amortizable Bond Premium

For federal income tax purposes, the excess of the initial offering price to the public (excluding bond houses and brokers) at which a Bond is sold over the amount payable at maturity thereof constitutes for the original purchasers of such Bonds (collectively, the “Original Premium Bonds”) an amortizable bond premium. Bonds other than Original Premium Bonds may also be subject to an amortizable bond premium determined generally with regard to the taxpayer’s basis (for purposes of determining loss on a sale or exchange) and the amount payable on maturity or, in certain cases, on an earlier call date (such bonds being referred to herein collectively with the Original Premium Bonds as the “Premium Bonds”). Such amortizable bond premium is not deductible from gross income. The amount of amortizable bond premium allocable to each taxable year is generally determined on the basis of the taxpayer’s yield to maturity determined by using the taxpayer’s basis (for purposes of determining loss on sale or exchange) of such Premium Bonds and compounding at the close of each six-month accrual period. The amount of amortizable bond premium allocable to each taxable year is deducted from the taxpayer’s adjusted basis of such Premium Bonds to determine taxable gain upon disposition (including sale, redemption or payment at maturity) of such Premium Bonds.


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All holders of the Premium Bonds should consult with their own tax advisors as to the amount and effect of the

amortizable bond premium.

Market Discount

The “market discount rules” of the Code apply to the Bonds. Accordingly, holders acquiring their Bonds subsequent to the initial issuance of the Bonds will generally be required to treat market discount recognized under the provisions of the Code as ordinary taxable income (as opposed to capital gain income). Holders should consult their own tax advisors regarding the application of the market discount provisions of the Code and the advisability of making any of the elections relating to market discount allowed by the Code.

Information Reporting And Backup Withholding

Information reporting requirements apply to interest paid after March 31, 2007 on tax-exempt obligations, including the Bonds. In general, such requirements are satisfied if the interest recipient completes, and provides the payor with, a Form W-9, “Request for Taxpayer Identification Number and Certification,” or unless the recipient is one of a limited class of exempt recipients, including corporations. A recipient not otherwise exempt from information reporting who fails to satisfy the information reporting requirements will be subject to “backup withholding,” which means that the payor is required to deduct and withhold a tax from the interest payment, calculated in the manner set forth in the Code. For the foregoing purpose, a “payor” generally refers to the person or entity from whom a recipient receives its payments of interest or who collects such payments on behalf of the recipient.

If an owner purchasing the Bonds through a brokerage account has executed a Form W-9 in connection with the

establishment of such account no backup withholding should occur. In any event, backup withholding does not affect the excludability of the interest on the Bonds from gross income for federal income tax purposes. Any amounts withheld pursuant to backup withholding would be allowed as a refund or a credit against the owner’s federal income tax once the required information is furnished to the IRS.

Future Developments

Bond Counsel’s engagement with respect to the Bonds ends with the issuance of the Bonds and, unless separately engaged, bond counsel is not obligated to defend the City in the event of an audit examination by the IRS. The IRS has a program to audit tax-exempt obligations to determine whether the interest thereon is includible in gross income for federal income tax purposes. If the IRS does audit the Bonds, under current IRS procedures, the IRS will treat the City as the taxpayer and the beneficial owners of the Bonds will have only limited rights, if any, to obtain and participate in judicial review of such audit.

NO ASSURANCE CAN BE GIVEN THAT ANY FUTURE LEGISLATION OR CLARIFICATIONS OR AMENDMENTS TO THE CODE, IF ENACTED INTO LAW, WILL NOT CONTAIN PROPOSALS WHICH COULD CAUSE THE INTEREST ON THE BONDS TO BE SUBJECT DIRECTLY OR INDIRECTLY TO FEDERAL INCOME TAXATION, ADVERSELY AFFECT THE MARKET PRICE OR MARKETABILITY OF THE BONDS, OR OTHERWISE PREVENT THE HOLDERS FROM REALIZING THE FULL CURRENT BENEFIT OF THE STATUS OF THE INTEREST THEREON. BOND COUNSEL EXPRESSES NO OPINION REGARDING ANY PENDING OR PROPOSED FEDERAL TAX LEGISLATION.


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FURTHER, NO ASSURANCE CAN BE GIVEN THAT ANY ACTIONS OF THE INTERNAL REVENUE SERVICE, INCLUDING, BUT NOT LIMITED TO, SELECTION OF THE BONDS FOR AUDIT EXAMINATION, OR THE COURSE OR RESULT OF ANY EXAMINATION OF THE BONDS, OR OTHER BONDS WHICH PRESENT SIMILAR TAX ISSUES, WILL NOT AFFECT THE MARKET PRICE OF THE BONDS. INVESTORS SHOULD CONSULT WITH THEIR TAX ADVISORS AS TO THE TAX CONSEQUENCES OF THEIR ACQUISITION, HOLDING OR DISPOSITION OF THE BONDS, INCLUDING THE IMPACT OF ANY PENDING OR PROPOSED FEDERAL TAX LEGISLATION.

CONTINUING DISCLOSURE

The City will enter into a Continuing Disclosure Undertaking (the “Undertaking”) for the benefit of the beneficial owners of the Bonds to send certain information annually and to provide notice of certain events to the Municipal Securities Rulemaking Board (the “MSRB”) pursuant to the requirements of Section (b)(5) of Rule 15c2-12 (the “Rule”) adopted by the Securities and Exchange Commission (the “Commission”) under the Securities Exchange Act of 1934. No person, other than the City, has undertaken, or is otherwise expected, to provide continuing disclosure with respect to the Bonds. The information to be provided on an annual basis, the events which will be noticed on an occurrence basis and a summary of other terms of the Undertaking, including termination, amendment and remedies, are set forth below under “THE UNDERTAKING.”

For the past five years the City has not filed its Financial Statements within the time period specified in their various Undertakings. A failure by the City to comply with the Undertaking will not constitute a default under the Ordinance and beneficial owners of the Bonds are limited to the remedies described in the Undertaking. See “THE UNDERTAKING - Consequences of Failure of the City to Provide Information.” The City must report any failure to comply with the Undertaking in accordance with the Rule. Any broker, dealer or municipal securities dealer must consider such report before recommending the purchase or sale of the Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds and their market price.

Bond Counsel expresses no opinion as to whether the Undertaking complies with the requirements of Section

(b)(5) of the Rule. Corrective Action Related to Certain Continuing Disclosure Requirements

While the City is currently in compliance with respect to its undertakings to file annual disclosure reports relating to its prior bonds in accordance with the Rule, the City did not distribute audited financial statements in a timely manner as required by Section (b)(5) of the Rule (as described below).


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For the last five years, the City filed the Annual Financial Statements required by the respective undertakings related to its prior bonds (each an "Undertaking" and collectively, the "Undertakings"), pursuant to the Rule, after the required filing date of within 210 days or within 240 days after the last day of the City's fiscal year (currently April 30), as set forth in the respective Undertaking. On November 11, 2011, the City filed the required operating data relating to its prior general obligation bonds. On November 18, 2011, the City filed the required operating data relating to its prior parking fee and sales tax revenue bonds and water and sewer system revenue bonds. On November 30, 2011, the City filed a notice of failure to provide annual financial information for the fiscal year ended April 30, 2011. On December 28, 2011, the City filed its fiscal year 2011 audited financial statements as required by the Undertakings. On January 9, 2012, the City filed a Material Event Notice regarding rating changes with respect to the bond insurers for certain of its prior bonds. The required filing date for the City's prior bonds issued prior to the City's Series 2009A Bonds is 240 days after the last day of the City's fiscal year. However, the required filing date for the City's Series 2009A Bonds, Series 2010A Bonds, Series 2010B Bonds, Series 2010C Bonds and Series 2010D Bonds is 210 days after the last day of the City's fiscal year. The required filing date for the Bonds offered hereby is 240 days after the last day of the City's fiscal year.

The City has implemented procedures to ensure that its annual financial information and operating data are filed on a timely basis. The City will file its audited financial statements with EMMA by the 240th day for these Bonds (and by the 210th day for those series of bonds identified in the prior paragraph) after the end of the fiscal year and if not provided by such filing date then they shall be provided when available to the City. The City intends to make timely disclosures in the future. The City is currently in compliance with the Undertakings previously entered into by it pursuant to the Rule.

THE UNDERTAKING

The following is a brief summary of certain provisions of the Undertaking of the City and does not purport to

be complete. The statements made under this caption are subject to the detailed provisions of the Undertaking, a copy of which is available upon request from the City.

Annual Financial Information Disclosure

The City covenants that it will disseminate its Annual Financial Information and its Audited Financial Statements, if any (as described below) to the MSRB in such manner and format and accompanied by identifying information as is prescribed by the MSRB or the Commission at the time of delivery of such information within 240 days after the last day of the City’s fiscal year (currently April 30). If Audited Financial Statements are not available when the Annual Financial Information is filed, the City will file unaudited financial statements. The City will submit Audited Financial Statements to the MSRB’s Electronic Municipal Market Access (“EMMA”) system within 30 days after availability to the City. MSRB Rule G-32 requires all EMMA filings to be in word-searchable PDF format. This requirement extends to all documents to be filed with EMMA, including financial statements and other externally prepared reports.


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“Annual Financial Information” means:

1. All of the tables under the heading “THE SYSTEM” within this Final Official Statement; and 2. All of the tables under the heading “SYSTEM FINANCIAL INFORMATION” within this

Final Official Statement; and 3. All of the tables under the heading “SYSTEM DEBT INFORMATION” within this Final

Official Statement.

“Audited Financial Statements” means financial statements of the City as audited annually by independent certified public accountants. Audited Financial Statements are expected to continue to be prepared according to Generally Accepted Accounting Principles as applicable to governmental units (i.e., as subject to the pronouncements of the Governmental Accounting Standards Board and subject to any express requirements of State law). Reportable Events Disclosure

The City covenants that it will disseminate in a timely manner (not in excess of ten business days after the occurrence of the Reportable Event) Reportable Events Disclosure to the MSRB in such manner and format and accompanied by identifying information as is prescribed by the MSRB or the Commission at the time of delivery of such information. MSRB Rule G-32 requires all EMMA filings to be in word-searchable PDF format. This requirement extends to all documents to be filed with EMMA, including financial statements and other externally prepared reports. The “Events” are:

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 security, or other material events affecting the tax status of the security

7. Modifications to the rights of security holders, if material 8. Bond calls, if material, and tender offers 9. Defeasances 10. Release, substitution or sale of property securing repayment of the securities, 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 any such actions, other than pursuant to its terms, if material

14. Appointment of a successor or additional trustee or the change of name of a trustee, if material. This 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.


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Consequences of Failure of the City to Provide Information

The City shall give notice in a timely manner to the MSRB of any failure to provide disclosure of Annual Financial Information and Audited Financial Statements when the same are due under the Undertaking.

In the event of a failure of the City to comply with any provision of the Undertaking, the beneficial owner of any Bond may seek mandamus or specific performance by court order, to cause the City to comply with its obligations under the Undertaking. A default under the Undertaking shall not be deemed a default under the Bond Ordinance, and the sole remedy under the Undertaking in the event of any failure of the City to comply with the Undertaking shall be an action to compel performance. Amendment; Waiver

Notwithstanding any other provision of the Undertaking, the City by resolution or ordinance authorizing such amendment or waiver, may amend the Undertaking, and any provision of the Undertaking may be waived, if:

(a) (i) The amendment or the waiver is made in connection with a change in circumstances that arises from a change in legal requirements, including, without limitation, pursuant to a “no-action” letter issued by the Commission, a change in law, or a change in the identity, nature, or status of the City, or type of business conducted; or

(ii) The Undertaking, as amended, or the provision, as waived, would have complied with the requirements of the Rule at the time of the primary offering, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (b) The amendment or waiver does not materially impair the interests of the beneficial owners of the Bonds, as determined by parties unaffiliated with the City (such as Bond Counsel).

In the event that the Commission or the MSRB or other regulatory authority approves or requires Annual

Financial Information or notices of a Reportable Event to be filed with a central post office, governmental agency or similar entity other than the MSRB or in lieu of the MSRB, the City shall, if required, make such dissemination to such central post office, governmental agency or similar entity without the necessity of amending the Undertaking. Termination of Undertaking

The Undertaking shall be terminated if the City shall no longer have any legal liability for any obligation on or relating to repayment of the Bonds under the Bond Ordinance. The City shall give notice to the MSRB in a timely manner if this paragraph is applicable.


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Additional Information

Nothing in the Undertaking shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in the Undertaking or any other means of communication, or including any other information in any Annual Financial Information or Audited Financial Statements or notice of occurrence of a Reportable Event, in addition to that which is required by the Undertaking. If the City chooses to include any information from any document or notice of occurrence of a Reportable Event in addition to that which is specifically required by the Undertaking, the City shall have no obligation under the Undertaking to update such information or include it in any future disclosure or notice of occurrence of a Reportable Event. Dissemination of Information; Dissemination Agent

When filings are required to be made with the MSRB in accordance with the Undertaking, such filings are required to be made through its EMMA system for municipal securities disclosure or through any other electronic format or system prescribed by the MSRB for purposes of the Rule.

The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its

obligations under the Undertaking, and may discharge any such Agent, with or without appointing a successor Dissemination Agent.

OPTIONAL REDEMPTION

Bonds due December 30, 2013-2020, inclusive, are non-callable. Bonds due December 30, 2021-2032, inclusive, are callable in whole or in part on any date on or after December 30, 2020, at a price of par and accrued interest. If less than all the Bonds are called, they shall be redeemed in such principal amounts and from such maturities as determined by the City and within any maturity by lot.

The Bond Registrar will give notice of redemption, identifying the Bonds (or portions thereof) to be redeemed, by mailing a copy of the redemption notice by first class mail not less than thirty (30) days nor more than sixty (60) days prior to the date fixed for redemption to the registered owner of each Bond (or portion thereof) to be redeemed at the address shown on the registration books maintained by the Bond Registrar. Unless moneys sufficient to pay the redemption price of the Bonds to be redeemed are received by the Bond Registrar prior to the giving of such notice of redemption, such notice may, at the option of the City, state that said redemption will be conditional upon the receipt of such moneys by the Bond Registrar on or prior to the date fixed for redemption. If such moneys are not received, such notice will be of no force and effect, the City will not redeem such Bonds, and the Bond Registrar will give notice, in the same manner in which the notice of redemption has been given, that such moneys were not so received and that such Bonds will not be redeemed. Otherwise, prior to any redemption date, the City will deposit with the Bond Registrar an amount of money sufficient to pay the redemption price of all the Bonds or portions of Bonds which are to be redeemed on the date.

Subject to the provisions for a conditional redemption described above, notice of redemption having been given as described above and in the Bond Ordinance, the Bonds or portions of Bonds so to be redeemed will, on the redemption date, become due and payable at the redemption price therein specified, and from and after such date (unless the City shall default in the payment of the redemption price) such Bonds or portions of Bonds shall cease to bear interest. Upon surrender of such Bonds for redemption in accordance with said notice, such Bonds will be paid by the Bond Registrar at the redemption price.


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MANDATORY REDEMPTION

The Bonds maturing on December 30, 2032, are subject to mandatory redemption, in part by lot, on December

30, 2028-2031, consisting of sinking fund payments at redemption prices equal to the principal amounts set forth below:

Year Principal Amount 2028....................... $510,000 2029....................... 525,000 2030....................... 540,000 2031....................... 700,000

The final principal amount of the Bonds maturing on December 30, 2032, is $725,000. All of the Bonds subject to mandatory sinking fund redemption shall be redeemed at a redemption price equal to the principal amount thereof to be redeemed. The Bond Registrar is authorized and directed to mail notice of mandatory sinking fund redemption of the Bonds in the manner provided in the Bond Ordinance. Whenever the Bonds subject to mandatory sinking fund redemption are redeemed at the option of the City, the principal amount thereof so redeemed shall be credited against the unsatisfied balance of further sinking fund installments or final maturity amount established with respect to such Bonds, in such amount and against such installments or final maturity amount as shall be determined by the City in the proceedings authorizing such optional redemption or, in the absence of such determination, shall be credited against the unsatisfied balance of the applicable sinking fund installments next ensuing, and with respect to which notice of redemption has not yet been given.

The Registrar will give notice of redemption, identifying the Bonds (or portions thereof) to be redeemed, by mailing a copy of the redemption notice by first class mail not less than thirty (30) days nor more than sixty (60) days prior to the date fixed for redemption to the registered owner of each Bond (or portion thereof) to be redeemed at the address shown on the registration books maintained by the Registrar. Failure to give such notice by mail to any registered owner of the Bonds (or portion thereof) or any defect therein shall not affect the validity of any proceedings for the redemption of other Bonds (or portions thereof). All Bonds (or portions thereof) so called for redemption will cease to bear interest after the specified redemption date, provided funds for their redemption are on deposit at the place of payment at that time.

LITIGATION

There is no litigation of any nature now pending or threatened restraining or enjoining the issuance, sale,

execution or delivery of the Bonds, or in any way contesting or affecting the validity of the Bonds or any proceedings of the City taken with respect to the issuance or sale thereof.


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CERTAIN LEGAL MATTERS

Certain legal matters incident to the authorization, issuance and sale of the Bonds are subject to the approving

legal opinion of Miller, Canfield, Paddock and Stone, P.L.C., Chicago, Illinois, as Bond Counsel (the “Bond Counsel”), who has been retained by, and acts as, Bond Counsel to the City. Bond Counsel has not been retained or consulted on disclosure matters and has not undertaken to review or verify the accuracy, completeness or sufficiency of this Final Official Statement or other offering material relating to the Bonds and assumes no responsibility for the statements or information contained in or incorporated by reference in this Final Official Statement, except that in its capacity as Bond Counsel, Miller, Canfield, Paddock and Stone, P.L.C. has, at the request of the City, reviewed only those portions of this Final Official Statement involving the description of the Bonds, the security for the Bonds (excluding forecasts, projections, estimates or any other financial or economic information in connection therewith). This review was undertaken solely at the request and for the benefit of the City and did not include any obligation to establish or confirm factual matters set forth herein.

FINAL OFFICIAL STATEMENT AUTHORIZATION

This Final Official Statement has been authorized for distribution to prospective purchasers of the Bonds. All

statements, information, and statistics herein are believed to be correct but are not guaranteed by the consultants or by the City, and all expressions of opinion, whether or not so stated, are intended only as such.

INVESTMENT RATING The City has supplied certain information and material concerning the Bonds and the City to the rating service

shown on the cover page, including certain information and materials which may not have been included in this Final Official Statement, as part of its application for an investment rating on the Bonds. A rating reflects only the views of the rating agency assigning such rating and an explanation of the significance of such rating may be obtained from such rating agency. Generally, such rating service bases its rating on such information and material, and also on such investigations, studies and assumptions that it may undertake independently. There is no assurance that such rating will continue for any given period of time or that it may not be lowered or withdrawn entirely by such rating service if, in its judgment, circumstances so warrant. Any such downward change in or withdrawal of such rating may have an adverse effect on the secondary market price of the Bonds. An explanation of the significance of the investment rating may be obtained from the rating agency: Moody’s Investors Service, 7 World Trade Center at 250 Greenwich Street, New York, New York 10007, telephone 212-553-1658. The City will provide appropriate periodic credit information to the rating service to maintain a rating on the Bonds.

DEFEASANCE

The Bonds are subject to legal defeasance by the irrevocable deposit of full faith and credit obligations of the United States of America, obligations the timely payment of which are guaranteed by the United States Treasury, or certificates of participation in a trust comprised solely of full faith and credit obligations of the United States of America (collectively, the “Government Obligations”) with a bank or trust company acting as escrow agent. Any such deposit must be of sufficient amount that the receipts from the Government Obligations plus any cash on deposit will be sufficient to pay debt service on the Bonds when due or as called for redemption.


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Any bonds or interest installments appertaining thereto, whether at or prior to the maturity or the redemption date of such bonds, shall be deemed to have been paid if (1) in case any such bonds are to be redeemed prior to the maturity thereof, there shall have been taken all action necessary to call such bonds for redemption and notice of such redemption shall have been duly given or provision shall have been made for the giving of such notice, and (2) there shall have been deposited in trust with a bank, trust company or national banking association acting as fiduciary for such purpose either (i) moneys in an amount which shall be sufficient, or (ii) “Federal Obligations” as defined below, the principal of and the interest on which when due will provide moneys which, together with any moneys on deposit with such fiduciary at the same time for such purpose, shall be sufficient, to pay when due the principal of, redemption premium, if any, and interest due and to become due on said bonds on and prior to the applicable redemption date or maturity date thereof.

The term “Federal Obligations” means (i) non-callable, direct obligations of the United States of America, (ii) non-callable and non-prepayable, direct obligations of any agency of the United States of America, which are unconditionally guaranteed by the United States of America as to full and timely payment of principal and interest, (iii) non-callable, non-prepayable coupons or interest installments from the securities described in clause (i) or clause (ii) which are stripped pursuant to programs of the Department of the Treasury of the United States of America, or (iv) coupons or interest installments stripped from bonds of the Resolution Funding Corporation.

UNDERWRITING

The Bonds were offered for sale by the City at a public, competitive sale on October 1, 2012. The best bid submitted at the sale was submitted by Hutchinson, Shockey, Erley & Co., Chicago, Illinois (the “Underwriter”). The City awarded the contract for sale of the Bonds to the Underwriter at a price of $8,045,754.05. The Underwriter has represented to the City that the Bonds have been subsequently re-offered to the public initially at the yields or prices set forth in the addendum to this Final Official Statement.

FINANCIAL ADVISOR

The City has engaged Speer Financial, Inc. as financial advisor (the “Financial Advisor”) in connection with the issuance and sale of the Bonds. The Financial Advisor is a Registered Municipal Advisor in accordance with the rules of the Municipal Securities Board (the “MSRB”). The Financial Advisor will not participate in the underwriting of the Bonds. The financial information included in the Final Final Official Statement has been compiled by the Financial Advisor. Such information does not purport to be a review, audit or certified forecast of future events and may not conform with accounting principles applicable to compilations of financial information. The Financial Advisor is not a firm of certified public accountants and does not serve in that capacity or provide accounting services in connection with the Bonds. The Financial Advisor is not obligated to undertake any independent verification of or to assume any responsibility for the accuracy, completeness or fairness of the information contained in this Final Official Statement, nor is the Financial Advisor obligated by the City’s continuing disclosure undertaking.


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CERTIFICATION

We have examined this Final Official Statement dated October 1, 2012, for the $8,180,000 First Lien Water and Sewer System Revenue Bonds, Series 2012C, believe it to be true and correct and will provide to the purchaser of the Bonds at the time of delivery a certificate confirming to the purchasers that to the best of our knowledge and belief information in the Official Statement was at the time of the sale of the Bonds and, including any addenda thereto, was at the time of delivery of the Bonds true and correct in all material respects and does not include any untrue statement of a material fact, nor does it omit the statement of any material fact required to be stated therein, or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. /s/ TINA M. SMIGIELSKI, C.P.A. /s/ ROBERT G. SABONJIAN

Director of Finance & Administration Mayor CITY OF WAUKEGAN CITY OF WAUKEGAN Lake County, Illinois Lake County, Illinois

APPENDIX A

THE CITY OF WAUKEGAN LAKE COUNTY, ILLINOIS

EXCERPTS OF FISCAL YEAR 2011 AUDITED FINANCIAL STATEMENTS

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APPENDIX B DESCRIBING BOOK-ENTRY-ONLY ISSUANCE

1. The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for

the Bonds (the “Securities”). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC.

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

3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which

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

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

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5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

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

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

8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the City or the Paying Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Paying Agent, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or 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.

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

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

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

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

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APPENDIX C SUMMARY OF CERTAIN PROVISIONS OF THE BOND ORDINANCE

The following is a summary of certain provisions of the Bond Ordinance. This summary is not to be considered a full statement of the terms of the Bond Ordinance and is qualified by reference thereto and is subject to the full text of the Bond Ordinance.

Definitions

As used or referred to in the Bond Ordinance, unless a different meaning clearly appears from the context: “Accountant” means an independent certified public accountant or firm of public accountants licensed in the State of Illinois; “Aggregate Maximum Annual Debt Service” means, as of any date of computation, an amount of money equal to greatest of the respective aggregate amounts of First Lien Debt Service and Second Lien Debt Service for the then current or any future Bond Year; “Annual Budget” means the budget or amended budget for a Fiscal Year adopted by the City or in effect pursuant to the Bond Ordinance; “Bond” means any of the bonds of the City authenticated and delivered under and pursuant to the Bond Ordinance, including the 2012C First Lien Bonds, any Additional First Lien Bonds and any Second Lien Bonds; “Bondholder” or the term “holder” or the term “registered owner” or any similar term, when used with reference to a Bond or Bonds, means any person who shall be the registered owner of any Outstanding Bond or Bonds; “Bond Insurance Policy” means a municipal bond insurance policy purchased by the City and issued by a Bond Insurer, which guarantees payment of principal of and interest on a Bond or Bonds; “Bond Insurer” means, with respect to any Series of Bonds, each insurance company that has insured the payment of the principal of and interest on all or any portion of such Series and any successor thereto; “Bond Registrar” means (a) Amalgamated Bank of Chicago, with respect to the 2012C First Lien Bonds and (b) the City Treasurer or a bank, trust company or national banking association selected by the City with respect to any other Series of Bonds; and their respective successors; “Bond Year” means the annual period ending with the 30th day of December of any year; “City Council” means the City Council of the City, the governing body of the City; “City Officer” means the Mayor, City Clerk or City Treasurer or designees or assigns, or any of them acting together;

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“Consulting Engineer” means an independent engineer or engineering firm or corporation of reputation for skill and experience with respect to construction and operation of a waterworks and sewerage system and facilities, as may from time to time be employed by the City;

“Counsel’s Opinion” means an opinion signed by an attorney or firm of attorneys of recognized standing (who may be the Corporation Counsel) selected by the City; “Coverage Revenues” means for any period of time, the remainder after deducting the amount of Revenues derived from connection fees and charges for such period from the Net Revenues for such period; “Defeasance Obligation” means direct non-callable obligations of the United States of America and securities fully and unconditionally guaranteed as to the timely payment of principal and interest by the United States of America, to which direct obligation or guarantee the full faith and credit of the United States of America has been pledged, Refcorp interest strips, CATS, TIGRS, STRPS, or defeased municipal bonds rated AAA by Standard & Poor’s Corporation or Aaa by Moody’s Investors Service (or any combination thereof); “Escrow Agent” means any bank, trust company or national banking association that is selected by the City to hold Defeasance Obligations and cash in trust pursuant to the defeasance provisions of the Bond Ordinance; “First Lien Bond” means any 2012C First Lien Bond and any Additional First Lien Bond; “First Lien Bond Reserve Deposit Amount” means (a) if the deficiency in the First Lien Bond Reserve Account exists because of an increase in the First Lien Bond Reserve Requirement that is attributable to the increase in First Lien Maximum Annual Debt Service resulting from the issuance of a Series of Additional First Lien Bonds, the monthly deposit amount for that month specified in the written order of the City at the time of issuance of such Series (provided that such deficiency must be satisfied within 12 months) or (b) if the deficiency in the First Lien Bond Reserve Account exists for any other reason, the monthly deposit amount for that month set forth in a certificate of a City Officer, which certificate shall set forth a schedule of equal monthly deposits sufficient to restore the sum held in the First Lien Bond Reserve Account to the First Lien Bond Reserve Requirement within not more than one year from the latest date when the sum held in the First Lien Bond Reserve Account equaled or exceeded the First Lien Bond Reserve Requirement or (c) if the deficiency in the First Lien Bond Reserve Account has existed for 12 or more consecutive months then, notwithstanding any monthly deposit amount determined pursuant to clause (a) or clause (b), the monthly deposit amount for that month shall be the amount required to increase the sum then held in the First Lien Bond Reserve Account to the First Lien Bond Reserve Requirement; “First Lien Bond Reserve Requirement” means, as of any particular date of computation and with respect to particular First Lien Bonds Outstanding, an aggregate amount of money and Reserve Account Assets equal to the lesser of (i) First Lien Maximum Annual Debt Service; (ii) 10% of the stated principal amount of the particular First Lien Bonds Outstanding; and (iii) 125% of the average annual First Lien Debt Service.

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“First Lien Debt Service” means, as of any particular date of computation and with respect to a particular Bond Year, an amount of money equal to the aggregate of (a) all interest payable during such Bond Year on all First Lien Bonds Outstanding on said date of computation, except interest payable from the proceeds of sale of Bonds deposited in the First Lien Bond Service Account or in a Capitalized Interest Account for First Lien Bonds, plus (b) the principal amount of all First Lien Bonds Outstanding on said date of computation which mature during such Bond Year, plus (c) the amount of all Sinking Fund Installments payable during such Bond Year with respect to any First Lien Bonds Outstanding on said date of computation, all calculated on the assumption that First Lien Bonds will after said date of computation cease to be Outstanding by reason, but only by reason, of the payment of First Lien Bonds when due and the payment when due and application in accordance with the Ordinance of Sinking Fund Installments payable at or after said date of calculation;

“First Lien Maximum Annual Debt Service” means, as of any date of computation, an amount of money equal to the greatest of the respective amounts of First Lien Debt Service for the then current or any future Bond Year; “Fiscal Year” means the period of twelve calendar months ending with the last day of December of any year; “Insured Bond” means any Bond with respect to which the payment of principal and interest is guaranteed by a Bond Insurance Policy; “Net Revenues,” when used with respect to a period of time, means the excess (if any) of the Revenues for such period of time over the Operating Expenses for such period of time; “Operating Expenses” means the City’s reasonable and necessary current expenses of maintaining, repairing and operating the System, including, without limiting the generality of the foregoing, all administrative, general and commercial expenses, insurance and surety bond premiums, payments to others for provision or supply of engineering expenses, legal expenses, auditing expenses, payments to pension, retirement, health and hospitalization funds, any taxes or rebates (including arbitrage rebate payments to the United States Treasury), which may be lawfully imposed on the City or its income or operations or the property under its control, ordinary and current rentals of equipment or other property, other rentals, usual expenses of maintenance and repair, refunds of moneys lawfully due to others, and any other current expenses or payments required to be paid by the City, all to the extent properly and directly attributable to the System, expenses in connection with the issuance of Bonds, and the expenses, liabilities and compensation of the Bond Registrar, but not including any reserves for operation, maintenance or repair or any allowance for depreciation, amortization, payment of principal of or interest on Bonds, franchise fees or similar charges;

“Operating Requirement” means, as of any particular date of computation, an amount of money equal to one-sixth of the amount required for payment of Operating Expenses in the current Fiscal Year, as shown by the Annual Budget then in effect;

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“Outstanding,” when used with reference to Bonds and as of any particular date, describes all Bonds authenticated and delivered except (a) any Bond canceled by the City or the Bond Registrar at or before said date, (b) any Bond for the payment or redemption of which either (i) cash, equal to the principal amount or Redemption Price thereof, as the case may be, with interest to the date of maturity or redemption date, or (ii) Defeasance Obligations and cash, if necessary, in the amounts, of the maturities and otherwise conforming with the provisions of the Bond Ordinance, shall have theretofore been deposited with an Escrow Agent in trust (whether upon or prior to maturity or the redemption date of such Bond) and, except in the case of a Bond to be paid at maturity, of which notice of redemption shall have been given or provided for in accordance with the Bond Ordinance, and (c) any Bond in lieu of or in substitution for which another Bond shall have been authenticated and delivered; “Principal Installment” means, as of any particular date of calculation, an amount of money equal to the sum of (a) the principal amount of Outstanding Bonds that mature on a single future date, reduced by the aggregate principal amount of such Outstanding Bonds that would at or before said future date cease to be Outstanding by reason of the payment when due and application in accordance with the Bond Ordinance of Sinking Fund Installments payable at or before such future date toward the retirement of such Outstanding Bonds, and (b) the amount of any Sinking Fund Installment payable on said future date toward the retirement of any Outstanding Bonds; and said future date is deemed to be the date when such Principal Installment is payable and the date of such Principal Installment; “Redemption Price,” when used with respect to a Bond, means (a) the principal amount of such Bond plus the applicable premium, if any, payable upon redemption thereof in the manner contemplated in accordance with its terms pursuant to the Bond Ordinance or in a Series Bond Order, or (b) such other amount of money payable upon the redemption thereof as may be specified in the Supplemental Ordinance authorizing the issuance of such Bond or in a Series Bond Order; “Reserve Account Assets” means (a) any irrevocable and unconditional letter of credit issued by a bank for the account of the City and for the benefit of the Bond Registrar on behalf of the Bondholders, provided that such bank maintains an office, agency or branch in the United States of America and, provided further that, as of the date of issuance of such letter of credit, such bank is rated in the highest rating category by Moody’s Investors Service and Standard and Poor’s Corporation or (b) any irrevocable and unconditional municipal bond insurance policy or surety bond issued by any insurance company licensed to conduct an insurance business in any state of the United States of America or by a service corporation acting on behalf of one or more such insurance companies; provided that, as of the time of issuance of such insurance policy or surety bond, such insurance company or companies are rated in the highest rating category by Moody’s Investors Service and Standard and Poor’s Corporation; “Revenues” means (i) all revenues, income, rents and receipts derived by the City from or attributable to the ownership and operation of the System, or any contractual arrangement with respect to the use of the System or any portion thereof, (ii) the proceeds of any insurance covering business interruption loss relating to the System, and (iii) income earned from investment of moneys in the Revenue Fund; “Second Lien Bond” means any of the Bonds authenticated and delivered under and pursuant to Section 305, being one of the Bonds authorized by Section 301 and Sections 313 and 314;

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“Second Lien Bond Reserve Deposit Amount” means (a) if the deficiency in the Second Lien Bond Reserve Account exists because of an increase in the Second Lien Bond Reserve Requirement that is attributable to the increase in Second Lien Maximum Annual Debt Service resulting from the issuance of a Series of Second Lien Bonds, the monthly deposit amount for that month specified in the written order of the City at the time of issuance of such Series (provided that such deficiency must be satisfied within 12 months) or (b) if the deficiency in the Second Lien Bond Reserve Account exists for any other reason, the monthly deposit amount for that month set forth in a certificate of a City Officer, which certificate shall set forth a schedule of equal monthly deposits sufficient to restore the sum held in the Second Lien Bond Reserve Account to the Second Lien Bond Reserve Requirement within not more than one year from the latest date when the sum held in the Second Lien Bond Reserve Account equaled or exceeded the Second Lien Bond Reserve Requirement or (c) if the deficiency in the Second Lien Bond Reserve Account has existed for 12 or more consecutive months then, notwithstanding any monthly deposit amount determined pursuant to clause (a) or clause (b), the monthly deposit amount for that month shall be the amount required to increase the sum then held in the Second Lien Bond Reserve Account to the Second Lien Bond Reserve Requirement; “Second Lien Bond Reserve Requirement” means, as of any particular date of computation and with respect to particular Second Lien Bonds Outstanding, an aggregate amount of money and Reserve Account Assets equal to the lesser of (i) Second Lien Maximum Annual Debt Service; (ii) 10% of the stated principal amount of the particular Second Lien Bonds Outstanding; and (iii) 125% of the average annual Second Lien Debt Service or such other amount set forth in the proceedings of the City authorizing the initial issuance of a Series of Second Lien Bonds; “Second Lien Debt Service” means, as of any particular date of computation and with respect to a particular Bond Year, an amount of money equal to the aggregate of (a) all interest payable during such Bond Year on all Second Lien Bonds Outstanding on said date of computation, except interest payable from the proceeds of sale of Bonds deposited in the Second Lien Bond Service Account or in a Capitalized Interest Account for Second Lien Bonds, plus (b) the principal amount of all Second Lien Bonds Outstanding on said date of computation which mature during such Bond Year, plus (c) the amount of all Sinking Fund Installments payable during such Bond Year with respect to any Second Lien Bonds Outstanding on said date of computation, all calculated on the assumption that Bonds will after said date of computation cease to be Outstanding by reason, but only by reason, of the payment of Bonds when due and the payment when due and application of Sinking Fund Installments payable at or after said date of calculation; “Second Lien Maximum Annual Debt Service” means, as of any date of computation, an amount of money equal to the greatest of the respective amounts of Second Lien Debt Service for the then current or any future Bond Year; “Second Lien Revenues” means the Net Revenues remaining after all then current required deposits to the First Lien Bond Service Account and the First Lien Bond Reserve Account have been fully satisfied; “Series” means all of the Bonds authenticated and delivered on original issuance in a simultaneous transaction; and any Bond thereafter authenticated and delivered in lieu of or substitution for any of such Bonds;

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“Series Bond Order” means, with respect to a Series of Bonds, the written order executed by a City Officer determining the details and terms of sale of such Series not otherwise determined by the Bond Ordinance or a Supplemental Ordinance of the City authorizing a Series of Additional First Lien Bonds or Second Lien Bonds; “Service Charges” means the rates, fees or other charges imposed by the City for the use of services of the System; “Sinking Fund Installment” means the amount of money required by the Ordinance, by a Supplemental Ordinance of the City authorizing a Series of Bonds, or by a Series Bond Order to be paid by the City on a particular installment date toward the retirement of any particular Outstanding Bonds of like Series, which mature on a single date after said installment date, but does not include any amount payable by reason only of the maturity of a Bond, and, for all purposes hereof, said installment date is deemed to be the date when such Sinking Fund Installment is payable and the date of such Sinking Fund Installment, and said particular Outstanding Bonds are deemed to be the Bonds entitled to such Sinking Fund Installment and for which such Sinking Fund Installment is established and is or is to be paid; “Subordinated Indebtedness” means any bonds or other obligations of the City secured by a pledge of or other lien on Revenues or amounts withdrawn from the Surplus Account to the extent permitted by the Bond Ordinance; “Supplemental Ordinance” means any ordinance amending or supplementing the Bond Ordinance; “System” means the existing combined waterworks and sewerage system of the City and any additions thereto consisting of the 2012C Project and any other additions, improvements, replacements and betterments to or relating to the combined “waterworks and sewerage system” of the City as such terms are defined in Section 11-139-1 of the Illinois Municipal Code including all other properties or interests in properties, equipment, contracts, structures and appurtenances, owned or used by the City in connection with the provision of water supply and sewerage collection and treatment; “System Reserve Requirement” means, as of any particular date of computation, the amount of $250,000 or the amount, if any, as may most recently have been established by an ordinance of the City, as the amount reasonably necessary as a reserve for expenses with respect to the System for major repairs, renewals, replacements or maintenance items of a type not recurring annually or at shorter intervals; “2012C Bond” means any 2012C First Lien Bond; “2012C First Lien Bonds” means any First Lien Water and Sewer System Revenue Bonds, Series 2012C;

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Bond Ordinance to Constitute Contract In consideration of the purchase and acceptance of the Bonds by those who shall hold the same from time to time, the provisions of the Bond Ordinance shall be deemed to be and shall constitute contracts between the City and the holders from time to time of the Bonds. The pledges made in the Bond Ordinance and the covenants and agreements set forth to be performed on behalf of the City shall be for the equal benefit, protection and security of the holders of any and all of the Bonds, all of which, regardless of the time or times of their issue or maturity, shall be of equal rank without preference, priority or distinction of any of the Bonds over any other thereof except as expressly provided in or pursuant to the Bond Ordinance. Limited Obligation of Bonds The 2012C Bonds shall be limited obligations of the City payable from the Net Revenues of the System, and the moneys, securities and funds pledged therefor under the Bond Ordinance, subject to the withdrawal and application of such moneys, securities and funds in accordance with the provisions of the Bond Ordinance. The 2012C Bonds shall not be deemed to constitute general obligations of the City. Neither the full faith and credit nor the general taxing power of the City is pledged to the payment of the principal of or interest on the 2012C Bonds. All 2012C Bonds and, if and to the extent so provided in the Supplemental Ordinance authorizing the issuance of any particular Series of Additional First Lien Bonds or Second Lien Bonds, the Bonds of such Series shall be entitled to the benefits of the continuing pledge and lien created by the Bond Ordinance to secure the full and final payment of the principal or Redemption Price of and interest on all of said Bonds.

Pledges Securing Bonds

(A) Subject only to the right of the City to cause amounts to be withdrawn therefrom and paid on account of Operating Expenses of the System under the Bond Ordinance or for other purposes specified in the Bond Ordinance, the Revenues and, except for Capitalized Interest Accounts, all moneys and securities paid or to be paid to or held or to be held under the Bond Ordinance, are hereby pledged to secure the payment of the principal of, redemption premium, if any, and interest on the First Lien Bonds. (B) Subject only to the right of the City to cause amounts to be withdrawn therefrom and paid on account of Operating Expenses of the System under the provisions of the Bond Ordinance or for other purposes specified in the Bond Ordinance and the first and prior pledge of the Revenues and other moneys made pursuant to paragraph (A) above as security for the payment at the First Lien Bonds, the Second Lien Revenues, are hereby pledged to secure the payment of the principal of, redemption premium, if any, and interest on any Second Lien Bonds. (C) The moneys held in any Capitalized Interest Account established and maintained for the purpose of capitalizing interest on any Series of Bonds are pledged as security for the payment of such Series of Bonds.

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(D) These pledges are made pursuant to Section 13 of the Local Government Debt Reform Act and shall be valid and binding from and after the date of the first delivery of any Bonds. The Revenues as received by the City, and other moneys pledged shall immediately be subject to the lien of these pledges without any physical delivery thereof or further act, and the lien of these pledges and the obligation to perform the contractual provisions made in the Bond Ordinance shall have priority over any or all other obligations and liabilities of the City, and the lien of these pledges shall be valid and binding as against all parties having claims of any kind in tort, contract or otherwise against the City irrespective of whether such parties have notice thereof.

Deposit of Service Charges

All Service Charges shall be collected by the City and deposited daily, as far as practicable, in the Revenue Fund. Any moneys received by the City from any other source for operating, maintaining or repairing the System may also be deposited in the Revenue Fund. Periodic Withdrawals from Revenue Fund As of the first business day of each month in each Fiscal Year, the City shall make payments from the Revenue Fund into the following several Accounts, but as to each such Account only within the limitation hereinbelow indicated with respect thereto and only after maximum payment within such limitation into every such Account previously mentioned in the following tabulation:

FIRST: Into the Operating Account, to the extent, if any, needed to increase the amount in the Operating Account to the Operating Requirement.

SECOND: Into the First Lien Bond Service Account, to the extent, if any, needed to increase the

amount in the First Lien Bond Service Account so that it equals the amount of money obtained by aggregating the several sums, computed with respect to the Outstanding First Lien Bonds of each Series, of (i) any unpaid interest due on First Lien Bonds at or before such date, (ii) the Principal Installments of First Lien Bonds matured and unpaid at or before said date, (iii) all interest on First Lien Bonds accrued and not paid through the end of the current month, other than compound interest accreted to a Capital Appreciation Bond which shall be deemed to accrue in the 12 months immediately prior to the maturity of such Capital Appreciation Bond, less any portion of such interest payable from an applicable Capitalized Interest Account, and (iv) that portion of each Principal Installment with respect to First Lien Bonds next payable after said date that would have accrued to the end of the current month if such Principal Installment were deemed to accrue monthly in equal amounts from the next preceding Principal Installment due date for such Series or, if there shall be no preceding due date or such preceding due date is more than one year prior to the next Principal Installment due date then, from a date one year prior to such next Principal Installment due date or from the date of issuance of the First Lien Bonds of such Series, whichever date is later.

THIRD: To any provider of a Reserve Account Asset with respect to a First Lien Bond, the amount

then due such provider as reimbursement for any unreimbursed payments made by such provider pursuant to the terms of such Reserve Account Asset.

FOURTH: Into the First Lien Bond Reserve Account, when the amount in the First Lien Bond Reserve Account is less than the First Lien Bond Reserve Requirement, the lesser of (i) the First Lien Bond Reserve Deposit Amount for that month and (ii) the amount needed to increase the amount in the First Lien Bond Reserve Account so that it equals the First Lien Bond Reserve Requirement.

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FIFTH: Into the Second Lien Bond Service Account, to the extent, if any, needed to increase the amount in the Second Lien Bond Service Account so that it equals the amount of money obtained by aggregating the several sums, computed with respect to the Outstanding Second Lien Bonds of each Series, of (i) any unpaid interest due on Second Lien Bonds at or before such date, (ii) the Principal Installments of Second Lien Bonds matured and unpaid at or before said date, (iii) all interest on Second Lien Bonds accrued and not paid through the end of the current month other than compound interest accreted to a Capital Appreciation Bond which shall be deemed to accrue in the 12 months immediately prior to the maturity of such Capital Appreciation Bond, less any portion of such interest payable from an applicable Capitalized Interest Account, and (iv) that portion of each Principal Installment with respect to Second Lien Bonds next payable after said date that would have accrued to the end of the current month if such Principal Installment were deemed to accrue monthly in equal amounts from the next preceding Principal Installment due date for such Series or, if there shall be no preceding due date or such preceding due date is more than one year prior to the next Principal Installment due date then, from a date one year prior to such next Principal Installment due date or from the date of issuance of the Second Lien Bonds of such Series, whichever date is later.

SIXTH: To any provider of a Reserve Account Assets with respect to Second Lien Bonds, the

amount then due such provider as reimbursement for any unreimbursed payments made by such provider pursuant to the terms of such Reserve Account Asset.

SEVENTH: Into the Second Lien Bond Reserve Account, when the amount in the Second Lien Bond

Reserve Account is less than the Second Lien Bond Reserve Requirement, the lesser of (i) the Second Lien Bond Reserve Deposit Amount for that month and (ii) the amount needed to increase the amount in the Second Lien Bond Reserve Account so that it equals the Second Lien Bond Reserve Requirement.

EIGHTH: Into the Depreciation, Improvement and Extension Account, when the amount in the

Depreciation, Improvement and Extension Account is less than the System Reserve Requirement, the lesser of (i) $4,000 and (ii) the amount needed to increase the amount in the Depreciation, Improvement and Extension Account so that it equals the System Reserve Requirement.

NINTH: Into the Surplus Account, to any extent.

Application of Operating Account The City shall make payment from time to time out of the Operating Account of all amounts required for the operation, maintenance or repair of the System and for reasonable and necessary Operating Expenses. If at any time there shall not be a sufficient amount in the Operating Account to provide for any required withdrawal, the City shall withdraw from the Surplus Account and pay into the Operating Account the amount sufficient to make up such deficiency therein. Application of First Lien Bond Service Account (A) The City shall withdraw from the First Lien Bond Service Account (including any sum deposited therein from a Capitalized Interest Account), prior to each interest payment date of the First Lien Bonds, an amount equal to the interest due on the First Lien Bonds on such interest payment date, and apply the same to the payment of said interest when due.

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(B) The City shall withdraw from the First Lien Bond Service Account, prior to each Principal Installment due date an amount equal to the principal amount of First Lien Bonds, if any, maturing on said day, and apply the same to the payment of the principal of said First Lien Bonds when due.

(C) The City shall establish and maintain in the First Lien Bond Service Account a separate sub-account for each particular group of First Lien Bonds of like tenor and Series that mature on a single date and for which Sinking Fund Installments are established. Moneys paid into the First Lien Bond Service Account as a Sinking Fund Installment in any year shall upon receipt be segregated and set aside in said sub-accounts in proportion to the respective amounts of the Sinking Fund Installments payable on the next ensuing Sinking Fund Installment due date with respect to the particular First Lien Bonds for which each such sub-account is maintained.

(D) The City shall apply moneys in any sub-account established in the First Lien Bond Service Account to the purchase or redemption of the First Lien Bonds for which such sub-account is maintained or to the payment of the principal thereof at maturity. If at any date there shall be moneys in any such sub-account and there shall be Outstanding none of the First Lien Bonds for which such sub-account was established, said sub-account shall be closed and the moneys therein shall be withdrawn therefrom and shall be applied by the City as if paid into the First Lien Bond Service Account of said date.

(E) On or prior to the 60th day next preceding the Sinking Fund Installment due date, the moneys held for the payment of such Sinking Fund Installment may be applied for the purchase of First Lien Bonds of the Series and maturity for which such Sinking Fund Installment was established in an amount not exceeding that necessary to complete the retirement of the unsatisfied balance of First Lien Bonds to be redeemed from such Sinking Fund Installment on the Sinking Fund Installment due date for such First Lien Bonds next ensuing. First Lien Bonds purchased pursuant to this paragraph shall be canceled by the Bond Registrar and the principal amount thereof shall be credited against the unsatisfied balance of the applicable Sinking Fund Installment next due and payable. The purchase price paid (excluding accrued interest but including any brokerage and other charges) for any First Lien Bond shall not exceed the Redemption Price of such First Lien Bond applicable upon its redemption on the next date on which such First Lien Bond could be redeemed in accordance with its terms by the application of Sinking Fund Installments. Subject to the limitations hereinbefore set forth or referred to in this Section, the City may purchase First Lien Bonds at such times, for such prices, in such amounts and in such manner (whether after advertisement for tenders or otherwise) as directed by a City Officer and as may be possible with the amount of moneys available therefor in the applicable sinking fund sub-account within the First Lien Bond Service Account. Accrued interest on First Lien Bonds purchased pursuant to this paragraph shall be paid from the First Lien Bond Service Account.

(F) As soon as practicable after the 60th and before the 30th day prior to the due date of each Sinking Fund Installment, the Bond Registrar shall call for redemption on said date and by application of said Sinking Fund Installment such principal amount of the First Lien Bonds entitled to such Sinking Fund Installment as is required to redeem the unsatisfied balance of such Sinking Fund Installment. The City shall withdraw from the First Lien Bond Service Account, prior to each sinking fund redemption date, an amount equal to the Redemption Price of the First Lien Bonds called for redemption on said date, and apply the same to the payment of the Redemption Price of said First Lien Bonds when due.

(G) If 10 days prior to any interest payment date or Principal Installment due date, there shall not be a sufficient amount in the First Lien Bond Service Account to provide for any withdrawal therefrom required under the provisions of paragraph (A), paragraph (B) or paragraph (F) above, then the City shall immediately withdraw first from the Surplus Account and then from the Depreciation, Improvement and Extension Account and deposit into the First Lien Bond Service Account, the amount needed to cure such deficiency.

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(H) If five days prior to any interest payment date or Principal Installment due date, there shall not be a sufficient amount in the First Lien Bond Service Account to provide for any withdrawal therefrom required under the provisions of paragraph (A), paragraph (B) or paragraph (F) above, then the City shall withdraw from the First Lien Bond Reserve Account and pay into the First Lien Bond Service Account the amount needed to cure such deficiency.

Application of First Lien Bond Reserve Account If on any date all withdrawals or payments from the First Lien Bond Reserve Account required by any other provision of the Ordinance shall have been made, the City shall withdraw from the First Lien Bond Reserve Account the amount of any excess therein over the First Lien Bond Reserve Requirement as of such date and shall pay the moneys so withdrawn into the First Lien Bond Service Account. Moneys in the First Lien Bond Reserve Account may be withdrawn from the First Lien Bond Reserve Account and deposited in trust with the Escrow Agent for the payment of the principal or Redemption Price of and interest on Bonds in accordance with the defeasance provisions of the Bond Ordinance, provided that immediately after such withdrawal the amount held in the First Lien Bond Reserve Account equals or exceeds the First Lien Bond Reserve Requirement. The City shall maintain in the First Lien Bond Reserve Account an amount equal to the First Lien Bond Reserve Requirement. In lieu of the deposit of money in the First Lien Bond Reserve Account in satisfaction of the First Lien Bond Reserve Requirement, the City may hold Reserve Account Assets. The City shall not accept any letter of credit, insurance policy or surety bond as a Reserve Account Asset until it shall have been provided with an opinion of counsel of the issuer of such Reserve Account Asset that such Reserve Account Asset is a valid and binding obligation of such issuer enforceable in accordance with its terms. Each such letter of credit shall not be terminable by the bank issuing such letter of credit on less than three years’ written notice to the City. Each such insurance policy or surety bond shall not permit the cancellation thereof by the issuer. The acceptance of any Reserve Account Asset shall be subject to the prior written approval thereof by each Bond Insurer, such approval to be evidenced by a certificate executed by an officer of such Bond Insurer and filed with the City. In computing the value of Reserve Account Assets, each insurance policy or surety bond shall be valued at the amount of the coverage under such insurance policy or surety bond which may be drawn upon by the City or the Bond Registrar on such date of valuation and each letter of credit shall be valued at the undrawn stated amount thereof which may be drawn upon by the City or the Bond Registrar on such date of valuation. Application of Second Lien Bond Service Account (A) The City shall withdraw from the Second Lien Bond Service Account (including any sum deposited therein from a Capitalized Interest Account), prior to each interest payment date of the Second Lien Bonds, an amount equal to the interest due on the Second Lien Bonds on such interest payment date, and apply the same to the payment of said interest when due. (B) The City shall withdraw from the Second Lien Bond Service Account, prior to each Principal Installment due date an amount equal to the principal amount of Second Lien Bonds, if any, maturing on said day, and apply the same to the payment of the principal of said Second Lien Bonds when due.

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(C) The City shall establish and maintain in the Second Lien Bond Service Account a separate sub-account for each particular group of Second Lien Bonds of like tenor and Series that mature on a single date and for which Sinking Fund Installments are established. Moneys paid into the Second Lien Bond Service Account as a Sinking Fund Installment in any year shall upon receipt be segregated and set aside in said sub-accounts in proportion to the respective amounts of the Sinking Fund Installments payable on the next ensuing Sinking Fund Installment due date with respect to the particular Second Lien Bonds for which each such sub-account is maintained.

(D) The City shall apply moneys in any sub-account established in the Second Lien Bond Service Account as provided in paragraph (C) above to the purchase or redemption of the Second Lien Bonds for which such sub-account is maintained or to the payment of the principal thereof at maturity. If at any date there shall be money in any such sub-account and there shall be Outstanding none of the Second Lien Bonds for which such sub-account was established, said sub-account shall be closed and the moneys therein shall be withdrawn therefrom and shall be applied by the City as if paid into the Second Lien Bond Service Account on said date.

(E) On or prior to the 60th day next preceding the Sinking Fund Installment due date, the moneys held for the payment of such Sinking Fund Installment may be applied for the purchase of Second Lien Bonds of the Series and maturity for which such Sinking Fund Installment was established in an amount not exceeding that necessary to complete the retirement of the unsatisfied balance of Second Lien Bonds to be redeemed from such Sinking Fund Installment on the Sinking Fund Installment due date for such Second Lien Bonds next ensuing. Second Lien Bonds purchased pursuant to this paragraph shall be canceled by the Bond Registrar and the principal amount thereof shall be credited against the unsatisfied balance of the applicable Sinking Fund Installment next due and payable. The purchase price paid (excluding accrued interest but including any brokerage and other charges) for any Second Lien Bond shall not exceed the Redemption Price of such Second Lien Bond applicable upon its redemption on the next date on which such Second Lien Bond could be redeemed in accordance with its terms by the application of Sinking Fund Installments. Subject to the limitations hereinbefore set forth or referred to in this Section, the City may purchase Second Lien Bonds at such times, for such prices, in such amounts and in such manner (whether after advertisement for tenders or otherwise) as directed by a City Officer and as may be possible with the amount of moneys available therefor in the applicable sinking fund sub-account within the Second Lien Bond Service Account. Accrued interest on Bonds purchased pursuant to this paragraph shall be paid from the Second Lien Bond Service Account.

(F) As soon as practicable after the 60th and before the 30th day prior to the due date of each Sinking Fund Installment, the Bond Registrar shall call for redemption on said date and by application of said Sinking Fund Installment such principal amount of the Second Lien Bonds entitled to such Sinking Fund Installment as is required to redeem the unsatisfied balance of such Sinking Fund Installment. The City shall withdraw from the Second Lien Bond Service Account, prior to each sinking fund redemption date, an amount equal to the Redemption Price of the Second Lien Bonds called for redemption on said date, and apply the same to the payment of the Redemption Price of said Second Lien Bonds when due.

(G) If 10 days prior to any interest payment date or Principal Installment due date, there shall not be a sufficient amount in the Second Lien Bond Service Account to provide for any withdrawal therefrom required under the provisions of paragraph (A), paragraph (B) or paragraph (F) above and all withdrawals required for payment of interest or Principal Installment due on the First Lien Bonds from the Surplus Account and then from the Depreciation, Improvement and Extension Account for deposit into the First Lien Bond Service Account shall sooner have been made, then the City shall immediately withdraw Second from the Surplus Account and then from the Depreciation, Improvement and Extension Account and deposit into the Second Lien Bond Service Account, the amount needed to cure such deficiency.

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(H) If five days prior to any interest payment date or Principal Installment due date, there shall not be a sufficient amount in the Second Lien Bond Service Account to provide for any withdrawal therefrom required under the provisions of paragraph (A), paragraph (B) or paragraph (F) above, then the City shall withdraw from the Second Lien Bond Reserve Account and pay into the Second Lien Bond Service Account the amount needed to cure such deficiency. Application of Second Lien Bond Reserve Account If on any date all withdrawals or payments from the Second Lien Bond Reserve Account required by any other provision of the Bond Ordinance shall have been made, the City shall withdraw from the Second Lien Bond Reserve Account the amount of any excess therein over the Second Lien Bond Reserve Requirement as of such date and shall pay the moneys so withdrawn into the Second Lien Bond Service Account. Moneys in the Second Lien Bond Reserve Account may be withdrawn from the Second Lien Bond Reserve Account and deposited in trust with an Escrow Agent for the payment of the principal or Redemption Price of and interest on Bonds in accordance with the defeasance provisions of the Bond Ordinance, provided that immediately after such withdrawal the amount held in the Second Lien Bond Reserve Account equals or exceeds the Second Lien Bond Reserve Requirement. The City shall maintain in the Second Lien Bond Reserve Account an amount equal to the Second Lien Bond Reserve Requirement. In lieu of the deposit of money in the Second Lien Bond Reserve Account in satisfaction of the Second Lien Bond Reserve Requirement, the City may hold Reserve Account Assets. The City shall not accept any letter of credit, insurance policy or surety bond as a Reserve Account Asset until it shall have been provided with an opinion of counsel of the issuer of such Reserve Account Asset that such Reserve Account Asset is a valid and binding obligation of such issuer enforceable in accordance with its terms. Each such letter of credit shall not be terminable by the bank issuing such letter of credit on less than three years written notice to the City. Each such insurance policy or surety bond shall not permit the cancellation thereof by the issuer. The acceptance of any Reserve Account Asset shall be subject to the prior written approval thereof by each Bond Insurer, such approval to be evidenced by a certificate executed by an officer of such Bond Insurer and filed with the City. In computing the value of Reserve Account Assets, each insurance policy or surety bond shall be valued at the amount of the coverage under such insurance policy or surety bond which may be drawn upon by the City or the Bond Registrar on such date of valuation and each letter of credit shall be valued at the undrawn stated amount thereof which may be drawn upon by the City or the Bond Registrar on such date of valuation.

Application of Depreciation, Improvement and Extension Account The City may at any time withdraw moneys held in the Depreciation, Improvement and Extension Account for the purpose of paying the costs of extraordinary maintenance, necessary repairs and replacements and contingencies related to the System or for improvements, replacements and repairs to the System in order that the System may at all times provide efficient services. If on any date the sum held in the Depreciation, Improvement and Extension Account exceeds the System Reserve Requirement, then the City may transfer such excess amount to the Revenue Fund or any other account therein.

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Application of Surplus Account Subject to the provisions of any ordinance, indenture or instrument securing the payment of Subordinated Indebtedness, whenever at any date in a Fiscal Year, the amount in the First Lien Bond Reserve Account equals or exceeds the First Lien Bond Reserve Requirement, the amount in the Second Lien Bond Reserve Account equals or exceeds the Second Lien Bond Reserve Requirement and the City is not in default in the payment of the principal of or interest on or Redemption Price of any of the Bonds, the City may withdraw from and pay out of the Surplus Account any amount in the Surplus Account which is in excess of the amounts then reasonably required in the opinion of the City to be reserved for payment or security of the Bonds, payment of any rebate due the United States of America under Section 148(f) of the Internal Revenue Code of 1986 with respect to Bonds, and for any current or anticipated necessary reconstruction of the System. Moneys withdrawn from the Surplus Account may be deposited into any Fund or Account maintained under the Ordinance. Upon the payment of Subordinated Indebtedness, the payment of the cost of System capital improvements and the redemption or purchase of Outstanding Bonds, moneys withdrawn from the Surplus Account may be applied for any lawful purpose of the City. All amounts withdrawn from the Surplus Account that are not deposited into any Fund or Account maintained under the Bond Ordinance shall forthwith upon withdrawal be forever free and clear of any lien or pledge created by the Bond Ordinance.

Purchase of Bonds The City may purchase and may cancel Bonds from any available funds at public or private sale, at any time and at such prices as the City may in its discretion determine. If the City elects to cancel a Bond no Bonds shall be issued in lieu thereof. In the case of the purchase and subsequent cancellation of Bonds of a Series and maturity for which Sinking Fund Installments shall have been established, the City shall, by a certificate of a City Officer, elect the manner in which the principal amount of such Bonds shall be credited against future Sinking Fund Installments. Payment of Bonds Subject always to the condition that any obligation of the City under the Bond Ordinance shall only be payable from Net Revenues, and other moneys, securities and funds pledged pursuant to the Bond Ordinance, the City shall duly and punctually pay or cause to be paid the principal of every Bond and the interest thereon, at the dates and places and in the manner mentioned in the Bonds, according to the true intent and meaning thereof. No Holder or Holders of any of the Bonds shall ever have the right to compel any exercise of the taxing power of the City to pay the Bonds or the interest thereon, and the Bonds shall not constitute general obligations of the City.

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Operation and Maintenance of System The City shall at all times operate the System properly and in a sound and economical manner, and shall maintain, preserve and keep the same properly or cause the same to be so maintained, preserved and kept, with the appurtenances and every part and parcel thereof, in good repair, working order and condition, and shall from time to time make or cause to be made, all necessary and proper repairs, replacements and renewals so that at all times the operation of the System may be properly conducted. The City will not permit or grant a franchise for the operation of any competing waterworks system or combined waterworks and sewerage system within the City. Payment of Lawful Charges The City shall pay all taxes and assessments or other municipal or governmental charges, if any, lawfully levied or assessed upon it or in respect of the System, or upon any part thereof or any revenue therefrom, when the same shall become due, and shall duly observe and comply with all valid requirements of any municipal or governmental authority relative to any part of the System, and shall not create or suffer to be created any lien or charge upon the System or upon the Revenues except as provided in the Bond Ordinance. The City shall pay or cause to be discharged, or will make adequate provision to satisfy and discharge within sixty days after the same shall accrue, all lawful claims and demands for labor, materials, supplies or other objects which, if unpaid, might by law become a lien upon the System or the revenues therefrom; provided, however, that the City is not required to pay or cause to be discharged, or make provision for, any such lien or charge, so long as the validity thereof shall be contested in good faith and by appropriate legal proceedings. Limitations on Operating Expenses The City shall not incur Operating Expenses in any year in excess of the reasonable and necessary amount thereof, and shall not expend any amount or incur any indebtedness for maintenance, repair and operation in excess of the amounts provided for Operating Expenses in the Annual Budget then in effect.

Service Charges

For all direct or indirect use and services of the System, the City shall charge and collect Service Charges. The City shall prescribe a schedule of Service Charges, and shall charge and collect Service Charges in accordance with such initial schedule or any revision thereof from time to time in effect, and shall, whenever and as often as it shall appear necessary, make such revisions in any such schedule and prescribe, charge and collect such Service Charges, as may be necessary or proper in order that, the Revenues collected (including any proceeds to the City of use and occupancy insurance deposited by the City in the Revenue Fund) will be at least sufficient:

(a) at all times to pay all Operating Expenses and maintain, preserve and keep the System in good repair, working order and condition, and

(b) to provide in each Fiscal Year a sum equal to one hundred twenty-five per centum (125%) of the sum of the First Lien Debt Service and the Second Lien Debt Service for the Bond Year commencing during such Fiscal Year, and

(c) by deposit and application of Revenues, to maintain in the First Lien Bond Reserve Account an

amount equal to the First Lien Bond Reserve Requirement, and

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(d) by deposit and application of Revenues, to maintain in the Second Lien Bond Reserve Account an amount equal to the Second Lien Bond Reserve Requirement, and

(e) by the deposit and application of Revenues, to provide for the monthly deposits to the

Depreciation, Improvement and Extension Account, and (f) at all times to provide for any deficits of the City resulting from failure to receive any Service

Charges or from any other cause and comply in all respects with the terms and provisions of the Bond Ordinance and pay and discharge all charges or liens payable out of the Revenues when due and enforceable.

The City shall so plan, schedule and prosecute all construction on or about the System, and shall so operate and maintain the System, as to entitle it at all times to charge and collect Service Charges and to collect Revenues with respect to the System, and shall take all reasonable measures permitted by law to enforce prompt payment to it of all Service Charges and Revenues. Insurance and Reconstruction

The City shall at all times maintain with responsible insurers all such insurance as is customarily maintained with respect to waterworks systems of like character against loss of or damage to the System and against loss of Revenues and against public and other liability to the extent reasonably necessary to protect the interest of the City and the Bondholders. If any useful part of the System shall be damaged or destroyed, the City shall, as expeditiously as may be possible, commence and diligently prosecute the repair or replacement of the damaged property so as to restore the same to use. The proceeds of any such insurance shall be payable to the City and (except for proceeds of use and occupancy insurance) shall be applied to the necessary costs involved in such repair and replacement and, to the extent not so applied, shall (together with proceeds of any such use and occupancy insurance) be deposited by the City as Revenues. In the event that the costs of such repair and replacement of the damaged property exceed the proceeds of such insurance available for payment of the same, funds available in the Surplus Account shall be used to the extent necessary for such purposes, and if funds available in the Surplus Account are insufficient therefor, funds available in the Depreciation, Improvement and Extension Account shall be used to the extend necessary for such purposes. Sale or Encumbrance

No part of the System shall be sold, leased, mortgaged, pledged, encumbered or otherwise disposed of; provided, however, that the City may sell, exchange or lease at any time and from time to time any property or facilities constituting part of the System and not useful or necessary in the construction, reconstruction or operation thereof, but any proceeds of any such sale, exchange or lease, if payable in installments, shall be deposited in the Revenue Fund as Revenues; and any such proceeds not so payable shall be deposited in the Surplus Account.

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Creation of Liens

The City shall not issue any bonds, notes, or other evidences of indebtedness, other than the Bonds, secured by a pledge of or other lien or charge on the Revenues (including amounts which the City may thereafter be entitled to expend for Operating Expenses) and shall not create or cause to be created any lien or charge on such Revenues or on any amounts held by the City under the Bond Ordinance; provided, however, that the City is not prevented from issuing bonds or notes or other obligations payable out of, or secured by a pledge of, Revenues to be derived on and after such date as the pledge of the Revenues provided in the Bond Ordinance shall be discharged and satisfied as provided in the Bond Ordinance, or from issuing bonds or notes or other obligations for the purposes of the City which are payable out of or secured by the pledge of amounts which may be withdrawn from the Surplus Account, and which recite on their face that such pledge of said amounts is and shall be in all respects subordinate to the provisions of the Bond Ordinance and the lien and pledge created by the Bond Ordinance. Accounts and Audit

The City shall keep proper books of record and account in which complete and correct entries shall be made of its transactions relating to the System, Revenues and the Revenue Fund, and which, together with all other books and papers of the City, shall at all reasonable times be subject to the inspection of any Bondholder. The City shall cause its books and accounts to be audited annually by an Accountant selected by the City and annually within 210 days after the close of each Fiscal Year, or as soon as practical, copies of the reports of such audits shall be furnished to the City, including statements in reasonable detail, accompanied by a certificate of said Accountant, of the System’s financial condition, of Revenues and Operating Expenses, of all funds held by the City and the security held therefor. Tax Covenants

The City shall not take, or omit to take, any action lawful and within its power to take, which action or omission would cause interest on any Bond to become subject to federal income taxes in addition to federal income taxes to which interest on such Bond is subject on the date of original issuance thereof. The City shall not permit any of the proceeds of the 2012C Bonds, or any facilities financed with such proceeds, to be used in any manner that would cause any 2012C Bond to constitute a “private activity bond” within the meaning of Section 141 of the Internal Revenue Code of 1986. The City shall not permit any of the proceeds of the 2012C Bonds or other moneys to be invested in any manner that would cause any 2012C Bond to constitute an “arbitrage bond” within the meaning of Section 148 of the Internal Revenue Code of 1986 or a “hedge bond” within the meaning of Section 149(g) of said Code. The City shall comply with the provisions of Section 148(f) of the Internal Revenue Code of 1986 relating to the rebate of certain investment earnings at periodic intervals to the United States of America.

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Additional Bonds

Additional First Lien Bonds and Second Lien Bonds may be issued for the purposes of (1) financing additional improvements to the System; (2) refunding First Lien Bonds and (3) refunding Second Lien Bonds, in each case upon satisfaction of the requirements hereinafter described. Proceeds of sale of Additional Bonds may be used to fund any increase in the First Lien Bond Reserve Requirement or the Second Lien Bond Reserve Requirement or the City may elect to fund any such increase from Revenues deposited into the applicable Bond Reserve Account in amounts sufficient to restore the Account to its applicable Bond Reserve Requirement within 12 months following the issuance of the Series of Bonds. Additional First Lien Bonds. The other conditions precedent to the issuance of Additional First Lien Bonds include:

1. If such Additional First Lien Bonds are authorized for the purpose of financing capital

improvements to the System or refunding Second Lien Bonds, either (A) a certificate of a City Officer setting forth (i) the Coverage Revenues, as shown in the audited financial statements of the City audited by an Accountant for the most recently completed Fiscal Year or for the preceding Fiscal Year if the most recently completed Fiscal Year ended within 210 days of the date of delivery of such Additional First Lien Bonds and the audit for the most recent Fiscal Year is not yet available and (ii) First Lien Maximum Annual Debt Service and Aggregate Maximum Annual Debt Service with respect to Bonds Outstanding as of the time immediately following such date of delivery; and stating that the amount of such Coverage Revenues (or adjusted Coverage Revenues) is not less than one hundred fifty per centum (150%) of such First Lien Maximum Annual Debt Service and is not less than one hundred twenty-five per centum (125%) of Aggregate Maximum Annual Debt Service or (B) a certificate of the Consulting Engineer (i) projecting the Coverage Revenues for each of the three Fiscal Years next following the date of delivery of such Additional First Lien Bonds; (ii) setting forth First Lien Maximum Annual Debt Service and Aggregate Maximum Annual Debt Service with respect to Bonds Outstanding as of the time immediately following such date of delivery; and (iii) stating that the amount of such projected Coverage Revenues for each of such three Fiscal Years will not be less than one hundred fifty per centum (150%) of such First Lien Maximum Annual Debt Service and will not be less than one hundred twenty-five per centum (125%) of such Aggregate Maximum Annual Debt Service. With respect to the City Officer’s certificate, Coverage Revenues may be adjusted when there has been an increase in Service Charges from the Service Charges in effect on the first day of the applicable Fiscal Year, which increase remains in effect on the date of delivery of such Additional First Lien Bonds, to reflect the Coverage Revenues for the Fiscal Year had the current schedule of Service Charges been in effect for all of such Fiscal Year. Any such adjustment shall be evidenced by a certificate of the Accountant or of the Consulting Engineer employed for the purpose of determining such adjusted Coverage Revenues, which shall be dated the date of delivery of such Additional First Lien Bonds.

2. If such Additional First Lien Bonds are authorized for the purpose of refunding First Lien

Bonds, (1) a certificate of a City Officer setting forth First Lien Debt Service for the current and each future Bond Year computed (i) as of the time immediately preceding delivery of such Additional First Lien Bonds and (ii) as of the time immediately following such delivery, and stating that First Lien Maximum Annual Debt Service, computed as of the time immediately following such delivery and without regard to First Lien Debt Service on any other Series of Additional First Lien Bonds (issued for financing additional improvements to the System or refunding Second Lien Bonds) delivered on the same date as such Additional First Lien Bonds, will not be greater than First Lien Maximum Annual Debt Service, computed as of the time immediately preceding such delivery, or (2) the certificate of a City Officer described in paragraph 1 above;

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Second Lien Bonds. The other conditions precedent to the issuance of Second Lien Bonds include: A. If such Second Lien Bonds are authorized for the purpose of financing capital improvements to

the System, either (A) a certificate of a City Officer setting forth (i) the Coverage Revenues, each as shown in the audited financial statements of the City audited by an Accountant for the most recently completed Fiscal Year or for the preceding Fiscal Year if the most recently completed Fiscal Year ended within 210 days of the date of delivery of such Second Lien Bonds and the audit for the most recent Fiscal Year is not yet available and (ii) Aggregate Maximum Annual Debt Service with respect to Bonds Outstanding as of the time immediately following such date of delivery; and stating that the amount of such Coverage Revenues (or adjusted Coverage Revenues) is not less than one hundred ten per centum (110%) of such Aggregate Maximum Annual Debt Service or (B) a certificate of the Consulting Engineer (i) projecting the Coverage Revenues for each of the five Fiscal Years next following the date of delivery of such Second Lien Bonds; (ii) setting forth the Aggregate Maximum Annual Debt Service with respect to Bonds Outstanding as of the time immediately following such date of delivery; and (iii) stating that the amount of such projected Coverage Revenues for each of such five Fiscal Years will not be less than one hundred ten per centum (110%) of such Aggregate Maximum Annual Debt Service. With respect to the City Officer’s certificate, Coverage Revenues may be adjusted when there has been an increase in Service Charges from the Service Charges in effect on the first day of the applicable Fiscal Year, which increase remains in effect on the date of delivery of such Second Lien Bonds, to reflect the Coverage Revenues for the Fiscal Year had the current schedule of Service Charges been in effect for all of such Fiscal Year. Any such adjustment shall be evidenced by a certificate of the Accountant or of the Consulting Engineer employed for the purpose of determining such adjusted Coverage Revenues, which shall be dated the date of delivery of such Second Lien Bonds.

B. If such Second Lien Bonds are authorized for the purpose of refunding First Lien Bonds or

Second Lien Bonds, (1) a certificate of a City Officer setting forth Second Lien Debt Service for the current and each future Bond Year computed (i) as of the time immediately preceding delivery of such Second Lien Bonds and (ii) as of the time immediately following such delivery, and stating that Second Lien Maximum Annual Debt Service, computed as of the time immediately following such delivery and without regard to Second Lien Debt Service on any other Series of Second Lien Bonds delivered on the same date as such Second Lien Bonds, will not be greater than Second Lien Maximum Annual Debt Service, computed as of the time immediately preceding such delivery, or (2) the certificate of a City Officer described in paragraph A above.

Amendments Without Bondholder Consent

The Bond Ordinance may be amended or supplemented without Bondholder consent, for any one or more of the following purposes:

(1) To close the Bond Ordinance against, or provide limitations and restrictions in addition to the limitations and restrictions contained in the Bond Ordinance on, the issuance in future of Bonds, or of other notes, bonds, obligations or evidences of indebtedness;

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(2) To add to the covenants or agreements of the City contained in the Bond Ordinance other covenants or agreements to be observed by the City which are not contrary to or inconsistent with the Bond Ordinance;

(3) To add to the limitations or restrictions contained in the Bond Ordinance other limitations or

restrictions to be observed by the City which are not contrary to or inconsistent with the Bond Ordinance; (4) To surrender any right, power or privilege reserved to or conferred upon the City by the Bond

Ordinance; (5) To confirm, as further assurance, any pledge under, and the subjection to any lien or pledge

created or to be created by, the Bond Ordinance, of the Revenues or of any other moneys, securities or funds; (6) To specify, determine or authorize any and all matters and things relative to the 2012C Bonds

or the proceeds thereof which are not contrary to or inconsistent with the Bond Ordinance; (7) To authorize Additional First Lien Bonds or Second Lien Bonds; (8) To modify any of the provisions of the Bond Ordinance in any respect whatever, provided that

such modification shall be, and be expressed to be, effective only after all Bonds of any Series Outstanding at the date of the adoption of such Supplemental Ordinance shall cease to be Outstanding;

(9) To cure any ambiguity, supply any omission, or cure or correct any defect or inconsistent

provision in the Bond Ordinance; and (10) To insert such provisions clarifying matters or questions arising under the Bond Ordinance as

are necessary or desirable and are not contrary to or inconsistent with the Bond Ordinance.

Amendments With Bondholder Consent

Any modification or amendment of the provisions of the Bond Ordinance or any ordinance amendatory thereof or supplemental thereto and of the rights and obligations of the City and of the holders of the Bonds thereunder, in any particular, may be made by ordinance of the City as hereinafter specified, with the written consent of the holders of at least a majority in principal amount of the Bonds Outstanding at the time such consent is given, but no such modification or amendment shall permit a change in the maturity or terms of redemption of the principal of any Outstanding Bond or of any installment of interest thereon or a reduction in the amount of principal amount or Redemption Price thereof or in the rate of interest thereon without the consent of the holder of such Bond, or shall reduce the percentages or otherwise affect the description of Bonds the consent of the holders of which is required to effect any such modification or amendment.

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Such ordinance shall not be effective unless and until, and shall take effect in accordance with its terms when, there shall have been filed with the City Clerk (i) the written consents of the holders of a majority of Outstanding Bonds, and (ii) a counsel’s opinion stating that such ordinance has been duly and lawfully adopted by the City Council in accordance with the provisions of the Bond Ordinance, is authorized or permitted by the Bond Ordinance, and will be valid and binding upon the City and enforceable in accordance with its terms upon its becoming effective as provided in the Bond Ordinance and notice shall have been mailed as provided in the Bond Ordinance. Any such consent shall be binding upon the holder of the Bonds giving such consent and upon any subsequent holder of such Bonds and of any Bonds issued in exchange therefor (whether or not such subsequent holder thereof has notice thereof).

At any time after the holders of a majority of Outstanding Bonds shall have filed their consents to the ordinance, the City Clerk shall make and record a written statement that the holders of such a majority of Outstanding Bonds have filed such consents. Such written statement shall be conclusive that such consents have been so filed. Events of Default and Remedies

Each of the following shall constitute an “Event of Default,”:

(1) interest on any of the Bonds of a particular Series shall become due on any date and shall not be paid on said date, or a Principal Installment or the Redemption Price of any of the Bonds of a particular Series shall become due on any date, whether at maturity or upon call for redemption, and shall not be paid on said date; or

(2) a default shall be made in the observance or performance of any covenant, contract or other

provision in the Bonds or the Bond Ordinance contained and such default shall continue for a period of thirty days after written notice to the City from the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds Outstanding of the Series with respect to which such default has happened specifying such default and requiring the same to be remedied; or

(3) there shall be filed by the City a petition seeking an adjustment of indebtedness under any

applicable law or statute of the United States of America or of the State of Illinois.

In determining whether a payment default has occurred or whether a payment on the Bonds has been made under the Bond Ordinance, no effect shall be given to payments under any Bond Insurance Policy. Upon the happening and continuance of an Event of Default or an event which upon sufficient notice may become an Event of Default, any Bondholder, on behalf and for the benefit and protection of the Holders of all Bonds, may proceed, the rights of such Bondholders under the laws of the State of Illinois or under the Bond Ordinance by such suits, actions or proceedings in equity or at law (including mandamus), either for the specific performance of any covenant or contract contained herein or in aid or execution of any power herein granted or for any legal or equitable remedy. Such remedies may include:

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(1) Pursuant to the Bond Ordinance or any law, after the happening of an Event of Default, (a) by suits, actions or proceedings in equity or at law, to enforce all rights of the Bondholders including the right to require the City and the officers thereof to fulfill any covenant or agreement with the Bondholders and to perform its and their duties under the Bond Ordinance, (b) to bring suit upon the Bonds, (c) by appropriate proceedings, to petition for the appointment of a receiver for the System, (d) by action or suit in equity, to require the City to account as if it were a trustee of an express trust for the Bondholders, or (e) by action or suit in equity, to enjoin any acts or things which may be unlawful or in violation of the rights of the Bondholders; and

(2) To make and file in any proceeding for the adjustment of the debts of the City either in the

respective names of the Bondholders or on behalf of all the Bondholders as a class, any proof of debt, amendment of proof of debt, petition or other document, to receive payment of any sums becoming distributable to the Bondholders, and to execute any other papers and documents and do and perform any and all such acts and things as may be necessary or advisable in order to have the respective claims of the Bondholders against the City allowed in any such proceeding.

Nothing in the Bond Ordinance contained shall be deemed to give power to any Bondholder either as such or as attorney in fact of the Bondholder to vote the claims of the Bondholders in any bankruptcy proceeding or to accept or consent to any plan or reorganization, readjustment, arrangement or composition or other like plan, or by other action of any character to waiver or change any right of any Bondholder to any modification or amendment of the Bond Ordinance requiring such consent or to any ordinance requiring such consent pursuant to the provisions of the Bond Ordinance. Limitation on Rights of Bondholders Any Holder of an Outstanding Insured Bond may exercise rights only upon the written consent of the Bond Insurer of such Insured Bond, which consent shall not be required if the rights of such Bond Insurer have ceased and terminated under the Bond Ordinance. Each Bond Insurer shall be deemed to be the Holder of the Insured Bonds entitled to the benefits of its Bond Insurance Policy. For each Insured Bond covered by its Bond Insurance Policy, the Bond Insurer, acting alone, shall have the right to institute any suit, action or proceeding at law or in equity under the same terms as the Holder of the Insured Bond in accordance with the applicable provisions of the Bond Ordinance. Nothing shall affect or impair the right of any Bondholder (1) to enforce the payment of the principal or Redemption Price of and interest on his Bonds, or the obligation of the City to pay the principal or Redemption Price of and interest on each Bond to the Holder thereof at the time and place in said Bond expressed or (2) to take any action concerning the enforcement of the tax covenants contained in the Bond Ordinance. Priority of Payments After Default

In the event that upon the happening and continuance of any Event of Default, the funds held in the Revenue Fund shall be insufficient for the payment of principal or Redemption Price and interest then due on the Bonds, such funds (other than funds held for the payment or redemption of particular Bonds which have theretofore become due at maturity or by call for redemption) and any other moneys received or collected by the City, after making provision for the payment of any expenses necessary to protect the interests of the Holders of the Bonds, shall be applied as follows:

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FIRST: To the payment to the persons entitled thereto of all installments of interest on First Lien

Bonds then due in the order of the due dates of such installments, and, if the amount available shall not be sufficient to pay in full any installment, then to the payment thereof ratably, according to the amounts due on such installment, to the persons entitled thereto, without any discrimination or preference,

SECOND: To the payment to the persons entitled thereto of the unpaid principal or Redemption Price

of any First Lien Bonds which shall have become due, whether at maturity or by call for redemption, in the order of their due dates and, if the amounts available shall not be sufficient to pay in full all the First Lien Bonds due on any date, then to the payment thereof ratably, according to the amounts of principal or Redemption Price due on such date, to the persons entitled thereto, without any discrimination or preference,

THIRD: To the payment to the persons entitled thereto of all installments of interest on Second Lien

Bonds then due in the order of the due dates of such installments, and, if the amount available shall not be sufficient to pay in full any installment, then to the payment thereof ratably, according to the amounts due on such installment, to the persons entitled thereto, without any discrimination or preference, and

FOURTH: To the payment to the persons entitled thereto of the unpaid principal or Redemption Price

of any Second Lien Bonds which shall have become due, whether at maturity or by call for redemption, in the order of their due dates and, if the amounts available shall not be sufficient to pay in full all the Second Lien Bonds due on any date, then to the payment thereof ratably, according to the amounts of principal or Redemption Price due on such date, to the persons entitled thereto, without any discrimination or preference.

Defeasance

(A) If the City shall pay or cause to be paid to the holders of the Bonds, the principal and interest and Redemption Price, if any, to become due thereon, at the times and in the manner required, then, at the option of the City, the pledge of the Revenues and other moneys, securities and funds hereby pledged and the covenants, agreements and other obligations of the City to the Bondholders shall be discharged and satisfied. (B) Any Bonds or interest installments appertaining thereto, whether at or prior to the maturity or the redemption date of such Bonds, shall be deemed to have been paid within the meaning and with the effect expressed in paragraph (A) above if (1) in case any such Bonds are to be redeemed prior to the maturity thereof, there shall have been taken all action necessary to call such Bonds for redemption and notice of such redemption shall have been duly given or provision satisfactory to the Bond Registrar shall have been made for the giving of such notice, (2) there shall have been deposited with an Escrow Agent by or on behalf of the City either (a) moneys in an amount which shall be sufficient, or (b) Defeasance Obligations the principal of and the interest on which when due (without reinvestment thereof) will provide moneys which, together with the moneys, if any, on deposit with the Escrow Agent at the same time, shall be sufficient, to pay when due the principal or Redemption Price, if applicable, and interest due and to become due on said Bonds on and prior to the redemption date or maturity date thereof, as the case may be and (3) in the event said Bonds are not by their terms subject to redemption within the next succeeding 45 days, the City shall have given the Bond Registrar, in form satisfactory to it, irrevocable instructions to mail, as soon as practicable, a notice to the holders of such Bonds that the deposit required by clause (2) above has been made with the Escrow Agent and that said Bonds are deemed to have been paid and stating such maturity or redemption date upon which moneys are to be available for the payment of the principal or Redemption Price, if any, of, and accrued interest on, said Bonds.

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APPENDIX D

GENERAL CITY INFORMATION

After the issuance of the Bonds, the City will have outstanding $87,431,455 principal amount of general obligation debt. The City also has outstanding

$6,010,000 of parking fees and sales tax revenue bonds, $2,275,000 special assessment improvement bonds, $9,940,000 of first lien water and sewer system revenue bonds, and $965,485 of capital leases as of August 1, 2012. The Waukegan Public Library is a component unit of the City and has $3,690,000 general obligation debt certificates. The City has met its previous debt requirements promptly.

GENERAL OBLITATION DEBT INFORMATION

General Obligation Debt(1)

Series Series Series Series Series Series Series Series Calendar 2003A 2005A 2009A 2010A 2010B 2010C 2012A 2012B Cumulative Retirement Year (12-30)(2) (12-30) (12-30) (12-30) (12-30)(3) (12-30) (12-30) (12-30) Total Amount Percent 2012 ........ $1,896,455 $ 1,520,000 $ 2,915,000 $1,125,000 $ 0 $ 0 $ 0 $ 0 $ 7,456,455 $ 7,456,455 8.53% 2013 ........ 0 1,585,000 3,040,000 1,160,000 0 0 2,395,000 0 8,180,000 15,636,455 17.88% 2014 ........ 0 1,650,000 3,170,000 805,000 0 0 1,945,000 0 7,570,000 23,206,455 26.54% 2015 ........ 0 1,715,000 3,305,000 840,000 40,000 0 2,020,000 60,000 7,980,000 31,186,455 35.67% 2016 ........ 0 1,785,000 3,445,000 875,000 160,000 0 2,105,000 145,000 8,515,000 39,701,455 45.41% 2017 ........ 0 1,850,000 3,600,000 0 620,000 0 2,210,000 150,000 8,430,000 48,131,455 55.05% 2018 ........ 0 1,925,000 3,765,000 0 0 0 2,320,000 245,000 8,255,000 56,386,455 64.49% 2019 ........ 0 2,020,000 3,965,000 0 0 0 2,435,000 250,000 8,670,000 65,056,455 74.41% 2020 ........ 0 2,095,000 0 0 0 550,000 2,555,000 265,000 5,465,000 70,521,455 80.66% 2021 ........ 0 2,185,000 0 0 0 550,000 2,685,000 275,000 5,695,000 76,216,455 87.17% 2022 ........ 0 650,000 0 0 0 575,000 2,820,000 285,000 4,330,000 80,546,455 92.13% 2023 ........ 0 675,000 0 0 0 60,000 0 0 735,000 81,281,455 92.97% 2024 ........ 0 705,000 0 0 0 60,000 0 0 765,000 82,046,455 93.84% 2025 ........ 0 0 0 0 0 795,000 0 0 795,000 82,841,455 94.75% 2026 ........ 0 0 0 0 0 835,000 0 0 835,000 83,676,455 95.71% 2027 ........ 0 0 0 0 0 875,000 0 0 875,000 84,551,455 96.71% 2028 ........ 0 0 0 0 0 915,000 0 0 915,000 85,466,455 97.75% 2029 ........ 0 0 0 0 0 960,000 0 0 960,000 86,426,455 98.85% 2030 ........ 0 0 0 0 0 1,005,000 0 0 1,005,000 87,431,455 100.00%

Total $1,896,455 $20,360,000 $27,205,000 $4,805,000 $820,000 $7,180,000 $23,490,000 $1,675,000 $87,431,455 Notes: (1) Source: The City. Mandatory redemption amounts are shown for term bonds. (2) Based on original principal value. The amount shown is after the refunding by Series 2012A. (3) In 2012 the City defeased a portion of the outstanding Series 2010B Bonds in two separate defeasance transactions. The amounts shown represent the amount remaining after both defeasance transactions.

D-1

Detailed Overlapping Bonded Debt(1) (As of March 23, 2012)

Outstanding Applicable to the City Debt Percent(2) Amount

Schools: School District Number 3 ........................................... $ 12,454,784 4.08% $ 508,155 School District Number 50 .......................................... 78,245,000 9.99% 7,816,676 School District Number 56 .......................................... 41,830,000 22.22% 9,294,626 School District Number 70 .......................................... 14,767,098 0.12% 17,721 High School District Number 121 .................................... 72,665,000 13.23% 9,613,580 High School District Number 126 .................................... 6,262,328 2.25% 140,902 High School District Number 128 .................................... 26,230,000 4.35% 1,141,005 Unit School District Number 60 ..................................... 47,776,485 93.15% 44,503,796 Unit School District Number 187 .................................... 45,660,245 8.50% 3,881,121 Community College District Number 532 .............................. 24,350,000 5.07% 1,234,545 Total Schools ................................................................................... $ 78,152,126 Others: Lake County ........................................................ $ 84,770,000 4.81% $ 4,077,437 Lake County Forest Preserve District ............................... 295,270,000 4.81% 14,202,487 North Shore Sanitary District ...................................... 1,165,029 13.99% 162,988 Foss Park District ................................................. 624,465 13.54% 84,553 Gurnee Park District ............................................... 9,075,000 1.43% 129,773 Waukegan Park District ............................................. 23,619,345 97.26% 22,972,175 Total Others .................................................................................... $ 41,629,412 Total Overlapping Debt .......................................................................... $119,781,537 Notes: (1) Source: Lake County Clerk. Excludes maturities through January 1, 2012. (2) Based on 2011 Equalized Assessed Valuations, the most recent available.

Statement of Bonded Indebtedness(1)

Ratio To Per Capita Amount Equalized Estimated (2010 Census Applicable Assessed Actual 89,078)

Assessed Valuation of Taxable Property, 2011 .......... $1,286,902,229 100.00% 33.33% $14,446.91 Estimated Actual Value, 2011 .......................... $3,860,706,687 300.00% 100.00% $43,340.74 Total Direct Bonded Debt(2) ........................... $ 87,431,455 6.79% 2.26% $ 981.52 Overlapping Debt:(3) Schools ............................................... $ 78,152,126 6.07% 2.02% $ 877.34 All Others ............................................ 41,629,412 3.23% 1.08% 467.34 Total Overlapping Bonded Debt ....................... $ 119,781,537 9.31% 3.10% $ 1,344.68 Total Net Direct & Overlapping Debt(2) .............. $ 207,212,992 16.10% 5.37% $ 2,326.20 Notes: (1) Source: The City. (2) Includes the Bonds. Excludes capital leases, special assessment improvement bonds and Waukegan Public

Library General Obligation Debt Certificates, a component unit of the City. (3) As of March 23, 2012.

D-2

PROPERTY ASSESSMENT AND TAX INFORMATION

The City’s 2011 Equalized Assessed Valuation (“EAV”) was comprised of 61.3% residential, 13.7% industrial, 24.7% commercial, and 0.3% farm and railroad property valuations.

Equalized Assessed Valuation(1) Levy Years

Property Class 2007 2008 2009 2010 2011 Residential ..................... $1,056,710,592 $1,088,145,802 $1,042,192,063 $ 922,374,350 $ 788,465,455 Farm ............................ 2,369,933 2,086,700 2,191,507 2,113,728 2,213,433 Commercial ...................... 338,947,988 353,390,712 336,223,441 335,763,213 317,798,692 Industrial ...................... 173,990,252 183,139,143 183,599,170 179,843,319 176,217,472 Railroad ........................ 1,017,239 688,690 1,364,286 1,991,612 2,207,177 Total ......................... $1,573,036,004 $1,627,451,047 $1,565,570,467 $1,442,086,222 $1,286,902,229 Percent change +(-) ............ 7.23%(2) 3.46% (3.80%) (7.89%) (10.76%)

Notes: (1) Source: Lake County Clerk. (2) Percentage based on 2006 Equalized Assessed Valuation of $1,467,006,918.

Representative Tax Rates(1) (Per $100 EAV)

Levy Years

2007 2008 2009 2010 2011 Corporate .............................. $0.5230 $0.5300 $0.5740 $ 0.1650 $ 0.2700 Library ................................ 0.2340 0.2370 0.2460 0.2540 0.2990 Policemen's Pension .................... 0.1850 0.2000 0.2280 0.3930 0.4340 Firemen's Pension ...................... 0.1520 0.1450 0.1680 0.2830 0.2870 Corporate Bond ......................... 0.2750 0.2960 0.4280 0.8610 0.9010 Total Tax Rate ....................... $1.3690 $1.4080 $1.6440 $ 1.9560 $ 2.1910 Lake County ............................ 0.4440 0.4530 0.4640 0.5050 0.5540 Lake County Forest Preserve District. .. 0.2010 0.1990 0.2000 0.1980 0.2010 Waukegan Township (2) .................. 0.3040 0.3080 0.3250 0.3610 0.4020 North Shore Sanitary District. ......... 0.1200 0.1210 0.1240 0.1360 0.1500 Waukegan Park District. ................ 0.6100 0.6160 0.6450 0.7230 0.8330 Unit School District Number 60 ......... 5.6390 5.6910 5.9860 6.9210 8.1750 Community College District Number 532 .. 0.1920 0.1960 0.2000 0.2180 0.2400 Total(3) ............................. $8.8790 $8.9920 $9.5880 $11.0180 $12.7460 Notes: (1) Source Lake County Clerk. (2) Includes Road and Bridge. (3) Representative tax rate is for Tax Code No. 12 which represents 2.83% of the City's

2011 Equalized Assessed Valuation.

Tax Extensions and Collections(1)

Levy Coll. Taxes Total Collections Year Year Extended Amount Percent 2006 ....... 2007 ............ $20,376,726 $20,371,662 99.98% 2007 ....... 2008 ............ 21,534,863 21,459,727 99.65% 2008 ....... 2009 ............ 22,914,511 22,869,585 99.80% 2009 ....... 2010 ............ 25,737,978 25,646,671 99.65% 2010 ....... 2011 ............ 28,207,207 28,079,992 99.55% 2011 ....... 2012(2) ......... 28,196,028 13,958,219 49.50% Notes: (1) Source: Lake County Treasurer. (2) In collection. As of June 30, 2012.

D-3

Principal Taxpayers(1)

Taxpayer Name Business/Service 2011 EAV(2) Colliers B & K Rems ........................... Real Property ................................. $ 24,556,170 Community Health Systems Inc................... Hospital ...................................... 17,080,698 Marquette Enterprises ......................... Real Property ................................. 11,827,098 Allegiance Healthcare Corp. ................... Medical Supplies Distribution Center ........... 8,931,716 Northern Crossing JV LLC. ..................... Real Property ................................. 8,749,282 Deloitte PTS .................................. Real Property ................................. 8,307,011 Health Care Service Corp. ..................... Health Services ............................... 6,951,225 Redwood Lakes at Fountain Square LLC. .......... Apartments .................................... 6,691,576 Abbott Laboratories ........................... Pharmaceutical Company ........................ 6,624,562 Midwest Generation LLC ........................ Electric Utility .............................. 6,363,885 Total ....................................... .............................................. $106,083,223 Ten Largest as a percent of 2011 EAV ($1,286,902,229) ....................................... 8.24% Notes: (1) Source: Lake County.

(2) Every effort has been made to seek out and report the largest taxpayers. However, many of the taxpayers listed contain multiple parcels and it is possible that some parcels and their valuations have been overlooked. The 2011 EAV is the most current available.

D-4

GENERAL FINANCIAL INFORMATION

Statement of Net Assets Primary Government Government Activities

Audited As of April 30 2007 2008 2009 2010 2011 ASSETS: Cash and Cash Equivalents .......................... $ 8,007,820 $ 7,268,323 $ 3,696,748 $ 15,352,958 $ 28,088,578 Investments ....................................... 6,274,529 3,792,269 0 0 0 Property Taxes Receivable .......................... 18,199,415 19,375,520 20,977,162 24,556,446 27,252,647 Other Taxes Receivable ............................. 8,754,650 8,828,436 5,336,472 5,257,312 5,309,087 Intergovernmental .................................. 0 0 3,727,271(1) 4,246,965 3,359,969 Accounts Receivable ................................ 0 0 1,136,111 1,363,417 2,246,891 Special Assessments ................................ 0 0 1,009,153 1,693,811 1,652,964 Other Receivables .................................. 2,265,126 1,733,356 0 0 0 Due from Component Unit ............................ 0 0 0 0 0 Internal Balances .................................. 593,545 1,325,846 5,239,084 5,522,234 1,001,415 Loan to Waukegan Port District ..................... 1,251,800 630,300 0 0 0 Prepaid Expenses ................................... 0 9,852 4,946 342,989 546,077 Inventories ....................................... 867,369 877,884 275,000 275,000 275,000 Deferred Charges ................................... 1,119,341 1,021,589 814,912 703,434 861,348 Restricted Assets .................................. 0 0 0 0 109,286 Capital Assets:(2) Land ............................................. 13,255,507 13,257,571 12,971,120 12,971,120 13,173,319 Construction in Progress .......................... 52,565 86,060 1,503,923 0 111,600 Land Improvements ................................. 0 0 708,631 756,144 1,033,053 Buildings ........................................ 0 0 48,392,657 48,392,657 48,612,016 Machinery and Equipment ........................... 0 0 11,803,101 12,002,191 12,313,955 Infrastructure.................................... 0 0 187,333,993 197,281,111 197,895,630 Vehicles ......................................... 0 0 13,305,149 13,305,149 14,351,623 Less: Accumulated Depreciation ................... 0 0 (150,023,100) (159,344,420) (168,326,289) Capital Assets, Net of Depreciation:(2) Buildings, Improvements and Parking Lots .......... 40,535,373 39,346,834 0 0 0 Other ........................................... 5,800,816 7,792,353 0 0 0 Vehicles, Equipment, and Furnishings ............... 4,837,642 5,200,031 0 0 0 Total Assets .................................... $111,815,498 $110,546,224 $168,212,333 $184,678,518 $189,868,169

LIABILITIES: Accounts Payable and Accrued Expenses .............. $ 3,073,593 $ 2,859,502 $ 7,975,129 $ 461,111 $ 1,644,652 Accrued Payroll.................................... 0 0 1,506,205 2,014,353 1,467,710 Other Liabilities .................................. 0 0 1,077,814 348,269 857,880 Accrued Interest Payable ........................... 761,134 726,602 820,655 750,581 1,125,175 Claims and Judgments Payable ....................... 2,193,564 2,715,000 0 0 94,742 Deferred Revenue/Unearned Revenue .................. 19,404,200 20,733,838 20,977,162 25,250,299 27,733,166 Short Term Debt.................................... 0 0 0 11,452,000 0 Deposits .......................................... 834,000 985,845 0 0 183,588 Noncurrent Liabilities: Due Within One Year ............................... 17,977,110 15,350,934 45,694,892 20,803,456 22,197,701 Due in More Than One Year ......................... 78,688,413 75,878,992 68,881,828 105,146,462 120,741,729 Total Liabilities ................................ $122,932,014 $119,250,713 $146,933,685 $166,226,531 $176,046,343

NET ASSETS: Invested in Capital Assets, Net of Related Debt .... $ 13,818,786 $ 19,303,795 $ 52,966,924 $ 57,217,858 $ 52,654,364 Restricted For: Public Works ..................................... 2,471,515 1,856,387 0 0 0 Economic Development/Community Development ........ 2,031,775 3,370,028 3,096,482 4,966,087 5,978,929 Permanent Funds ................................... 965,338 0 0 0 0 Expendable ...................................... 0 968,387 0 0 0 Non-Expendable ................................... 0 43,021 0 0 0 Public Safety .................................... 648,189 1,644,137 750,900 1,713,160 1,799,812 Debt service ..................................... 2,544,493 2,106,120 2,465,782 5,149,446 2,941,657 Cemetery Care .................................... 0 0 43,025 43,025 477 Highways and Streets .............................. 0 0 0 0 488,353 Grants ........................................... 0 0 0 0 536,667 Capital Projects .................................. 2,244,134 169,145 0 0 0 Other Purposes.................................... (1,671,414) 4,041,593 0 0 0 Unrestricted ...................................... (34,169,332) (42,207,102) (38,044,465) (50,637,680) (50,578,433) Total Fund Balances .............................. $(11,116,516) $ (8,704,489) 0 0 0 Total Liabilities and Fund Balances .............. $111,815,498 $110,546,224 0 0 0 Total Net Assets ................................. $21,278,648 $ 18,451,896 $ 13,821,826

Notes: (1) Included in Other Taxes Receivable in prior years. (2) For fiscal years 2007 through 2008 capital assets were divided between capital assets not being depreciated and capital assets net of

depreciation. For fiscal year 2009 and subsequent years capital assets are represented before depreciation with a line item for accumulated depreciation.

D-5

General Fund Balance Sheet

Audited As of April 30 2007 2008 2009 2010 2011_ _ ASSETS: Cash and Cash Equivalents .................. $ 1,568,408 $ 1,394,580 $ 880,391 $ 1,784,405 $ 9,158,700 Taxes Receivable, Net for Uncollectibles: Property Taxes ............................ 13,082,086 13,785,954 14,529,548 15,444,787 12,406,916 Other Taxes ............................... 4,400,315(1) 5,195,710(1) 5,309,087 Sales Tax ................................. 7,111,299(2) 3,237,347 0(3) 0(3) 0 Income Tax ............................... 0 2,185,087 0 0 0 Utility and Telecommunications Taxes ...... 0 1,865,834 0 0 0 Other Receivables: Fees, Fines, and Charges for Services ..... 1,946,196 1,144,782 0 0 0 Intergovernmental ......................... 92,189 191,052 3,038,771(4) 3,854,485 3,170,167 Accounts .................................. 0 0 896,399 922,411 1,553,390 Advanced to Other Funds (Long-Term) ........ 3,781,141 2,691,476 0 0 0 Due From Other Funds ....................... 2,552,035 5,039,384 8,386,870 2,143,982 2,390,665 Prepaid Expenses ........................... 0 3,403 4,946 59,333 461,893 Inventory .................................. 700,649 827,964 0 0 0 Total Assets ............................. $30,834,003 $32,366,863 $32,137,240 $29,405,113 $34,450,818 LIABILITIES: Accounts Payable ........................... $ 861,319 $ 645,725 $ 3,605,022 $ 231,260 $ 1,009,912 Accrued Salaries ........................... 1,027,030 1,284,335 1,413,504 1,380,246 1,412,267 Other Current Liabilities .................. 0 0 394,558 179,459 400,532 Due to Other Funds ......................... 254,787 1,599,806 2,145,878 6,901,523 10,176,604 Deferred Revenue ........................... 0 0 16,312,274(3) 20,379,017(3) 16,245,386(3) Property Taxes ............................ 13,082,086 13,785,954 0 0 0 Vehicle Licenses ......................... 2,306,113(4) 622,726 0 0 0 Other ..................................... 0 1,514,041 0 0 0 Intergovernmental ......................... 78,971 75,322 0 0 0 Deposits ................................... 319,303 266,604 203,660 228,360 183,588 Total Liabilities ........................ $17,929,609 $19,794,513 $24,074,896 $29,299,865 $29,428,289 FUND BALANCE: Reserved .................................. 4,481,790 5,867,348 4,940 1,705,883 2,061,135 Unreserved - Undesignated .................. 8,422,604 6,705,002 0 (1,600,635) 2,961,394 Reserved for Non-Current Interfunds ........ 0 0 8,057,398 0 0 Total Fund Balance ....................... $12,904,394 $12,572,350 $ 8,062,344 $ 105,248 $ 5,022,529 Total Liabilities and Fund Balance ....... $30,834,003 $32,366,863 $32,137,240 $29,405,113 $34,450,818 Notes: (1) Includes Franchise Fees in prior years. (2) Represents Sales Tax, Income Tax, and Utility Taxes. (3) Not detailed separately for 2009 and subsequent years. (4) Represents Other Taxes, Licenses and Fees.

D-6

Statement of Activities Government Activities

Net (Expenses) Revenues and Changes in Net Assets Audited Fiscal Year Ended April 30 2007 2008 2009 2010 2011_ __

Functions/Programs(1): Primary Government: General Government ................... $ (3,586,699) $ (2,981,041) $ (1,814,627) $ (387,783) $ 140,668 Public Safety ........................ (34,713,965) (35,150,850) (59,988,770) (44,236,583) (42,020,599) Building and Zoning .................. 0 0 (3,621,627) (1,624,156) (1,359,385) Streets Bridges and Other Public Works (8,625,443) (9,850,549) (22,547,593) (7,302,529) (13,009,771) Sanitation and Environment ........... (3,372,822) (3,205,997) (4,272,468) (4,267,961) (4,152,462) Economic Development ................. (2,861,854) (4,388,043) (4,877,822) (1,220,931) (1,385,731) Community Development ................ 170,418 354,593 (1,293,479) (1,471,535) 284,056 Culture and Recreation ............... (1,722,746) (1,736,322) 5,178 (95,343) (89,386) Interest on Long Term Debt ........... (3,798,346) (3,656,405) (3,945,701) (3,597,236) (5,095,367) Total Governmental Activities ........ $(58,511,457) $(60,614,614) $(102,356,909) $(64,204,057) $(66,687,977) General Revenues(2): Property Taxes ...................... $ 16,632,724 $ 17,356,638 $ 19,437,810 $ 20,963,153 $ 24,650,456 Sales Taxes ......................... 0 0 13,295,674 13,778,808 13,207,602 Telecommunication Taxes ............. 0 0 3,344,177 3,285,588 3,050,354 Local Use Taxes ..................... 0 0 1,297,715 1,085,212 1,327,252 Utility Taxes ....................... 0 0 4,895,372 4,113,397 4,234,627 Other Taxes ......................... 0 0 966,079 972,987 979,943 Intergovenmental: Intergovenmental .................... 0 0 2,457,956(3) 2,558,349 0 Income Taxes ........................ 0 0 8,098,684 7,092,738 7,116,665 Personal Property Replacement Taxes . 0 0 3,471,610 2,882,546 3,555,917 Motor Fuel Taxes .................... 2,726,393 2,639,021 2,444,393 2,329,992 2,599,764 Investment Income .................... 909,613 981,438 381,911 194,714 323,368 Miscellaneous ........................ 0 0 839,615 28,770 864,911 Sales and Utility Taxes .............. 25,493,820 26,718,158 0 0 0 Income Taxes and Franchise Fees ...... 12,367,293 13,863,835 0 0 0 Gain (Loss) on Sales of Fixed Assets . (40,938) 22,128 0 0 0 Total General Revenues and Transfers $ 58,088,905 $ 61,581,218 $ 60,930,996 $ 59,286,254 $ 61,910,859 Transfers(4) ......................... 2,686,658 1,445,423 753,018 $ 2,091,051 $ 147,048 Change in Net Assets ................. $ 2,264,106 $ 2,412,027 $(40,672,895) $ (2,826,752) $ (4,630,070) Net Assets Beginning ................. $(13,380,622)(4) $(11,116,516) $ 61,951,543(4) $ 21,278,648 $ 18,451,896 Net Assets Ending .................... $(11,116,516) $ (8,704,489) $ 21,278,648 $ 18,451,896 $ 13,821,826 Note: (1) Direct Expenses are those that are clearly identifiable with a specific function or segment.

(2) For fiscal year 2009 and subsequent years, revenues have been re-categorized according to General Revenues and Intergovernmental Revenues. In addition, categories of revenue were combined in 2006 through 2008. The presentation follows the most current format as of fiscal year 2009.

(3) In fiscal years ended April 30, 2007 through 2008 transfers were combined with General Revenues. In Fiscal year ended April 30, 2009 transfers were treated as a separate line item. The prior year's transfers have been displayed to conform to the 2009 presentation.

(4) As restated.

D-7

General Fund Revenues and Expenditures

Audited Fiscal Year Ended April 30 2007 2008 2009 2010 2011 REVENUES: Property Taxes ................................. $12,479,998 $13,187,098 $13,863,171 $ 14,693,019 $15,559,470 Sales Taxes ..................................... 11,391,892 12,128,982 9,298,615 10,276,904(5) 13,207,602(5) Local Use Tax ................................... 0 0 1,305,306 1,101,492 1,306,726 Utility Taxes ................................... 8,171,306 8,226,127 4,895,372 4,113,397 4,234,627 Income Taxes .................................... 11,400,726 12,624,396 8,098,684 4,324,451 7,970,572 Replacement Tax ................................. 0 0 3,471,610(1) 2,882,546(1) 3,555,917(1) Other Taxes .................................... 0 0 966,079(2) 972,987(2) 979,943(2) Permits and Licenses ............................ 3,591,778 3,803,051 3,789,391 3,402,391 3,763,147 Charges For Services ............................ 2,032,080 2,294,598 1,846,116 2,242,592 2,624,865 Franchise Fees .................................. 962,122 1,241,373 959,485 872,828 944,549 Telecommunications Infrastructure Maintenance Fee 0 0 3,413,590 3,300,942 3,050,354 Fines and Forfeitures ........................... 3,253,107 3,533,337 4,157,576 3,059,656 3,347,578 Other Intergovernmental Revenue ................. 517,576 705,814 201,407 197,341 258,160 Interest Earned ................................. 546,912 432,735 70,060 56,709 6,067 Miscellaneous Revenue ........................... 1,083,903 1,422,729 1,091,887 780,842 950,184 Total Revenues ................................ $55,431,400 $59,600,240 $57,428,349 $ 52,278,097 $61,759,761 EXPENDITURES: Current: General Government/Central Services ............ $ 5,373,297 $ 5,751,897 $ 6,595,038 $ 5,949,757 $ 3,965,921 Economic Development ........................... 847,659 991,695 920,883 475,612 458,320 Building and Zoning ............................ 0 0 2,224,094 1,786,665 1,346,692 Public Safety (Police, Fire and Emergency) .... 40,487,295 42,413,583 42,250,652 42,231,297 42,309,467 Streets, Bridges and Other Public Works ........ 6,300,139 7,005,979 7,310,980 5,545,398 5,387,188 Sanitation and Environment - Refuse Collection . 3,403,794 3,560,623 3,888,639 4,361,885 4,701,891 Culture and Recreation ......................... 528,974 641,953 0 0 0 Capital Outlay .................................. 718,560 1,518,073 136,653 104,307 269,612 Debt Service: Principal Retirement ........................... 265,037 296,093 365,646 7,254,947 306,989 Interest and Fiscal Charges .................... 46,522 684,126 509,721 386,123 43,305 Total Expenditures ............................ $57,971,277 $62,864,022 $64,202,306 $ 68,095,991 $58,789,385 Excess(Deficiency) of Revenues Over Expenditures $(2,539,877) $(3,263,782) $(6,773,957) $(15,817,894) $ 2,970,376 Other Financing Sources(Uses): Proceeds - General Fixed Assets Sales & Trade-Ins $ 96,024 $ 25,436 $ 27,523 $ 0 $ 39,162 Proceeds - Capital Lease ........................ 0 748,043 112,765 2,976 0 General Obligation Bonds/Capital Lease Proceeds . 0 0 0 0 0 Operating Transfers In .......................... 2,649,231 2,264,273 2,434,152 7,966,652 2,058,829 Operating Transfers Out(3) ...................... (280,055) (106,014) (1,571) (108,830) (151,086) Total Other Financing Sources (Uses) .......... $ 2,465,200 $ 2,931,738 $ 2,572,869 $ 7,860,798 $ 1,946,905 Excess (Deficiency) Of Revenues and Other Financial Sources Over Expenditures and Other Uses ....... $ (74,677) $ (332,044) $(4,201,088) $ (7,957,096) $ 4,917,281 Fund Balance - Beginning of the Year ............ $12,979,071(4) $12,904,394 $12,263,432(4) $ 8,062,344 $ 105,248 Fund Balance - End of the Year .................. $12,904,394 $12,572,350 $ 8,062,344 $ 105,248 $ 5,022,529 Notes: (1) Included with Income Taxes in prior years. (2) Includes Hotel/Motel Taxes, Municipal Auto Rental Taxes and Amusement Taxes (3) Transfers out by the City have been for street capital projects and abatement of debt service levies on selected bond

issues. (4) As restated. (5) Includes Home Rule Sales Taxes. Beginning in 2010, 100% of Home Rule Sales Taxes are deposited in the General Fund.

D-8

Budget Information General Fund

Budget Budget 2012 2013

REVENUES: Tax Collection ..................... $46,251,514 $47,038,030 Permits ............................ 1,258,550 1,422,850 Licenses ........................... 2,673,900 3,068,920 Fees ............................... 3,426,450 3,550,820 Franchise Fees ..................... 681,000 1,125,000 Fines .............................. 2,483,700 2,702,700 Intergovernmental Revenue .......... 307,750 327,800 Interest Earned .................... 50,000 50,000 Donations .......................... 11,000 18,200 Quasi-External Transaction ......... 75,000 50,000 Miscellaneous Revenue .............. 605,746 690,430 Other Financing Sources ............ 5,000 35,000 Transfers - In ..................... 3,920,000 1,500,000 Total Revenues ................... $61,749,610 $61,579,750 EXPENDITURES: Personnel Services ................. $30,722,355 $29,733,249 Personnel Benefits ................. 19,139,781 20,131,811 Contractual Services ............... 9,535,961 9,447,065 Commodities ........................ 2,292,964 2,267,625 Capital Outlay ..................... 58,550 0 Transfers - Out .................... 0 100,000 Total Expenditures ............... $61,749,610 $61,679,750 Revenues Over (Under) Expenditures . $ (0) $ (100,000)

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APPENDIX E Founded in 1852 by Sidney Davy Miller

Miller, Canfield, Paddock and Stone, P.L.C. 225 W. Washington, Suite 2600

Chicago, Illinois 60606 TEL (312) 460-4200 FAX (312) 460-4201

www.millercanfield.com

MICHIGAN: Ann Arbor Detroit Grand Rapids

Kalamazoo Lansing Saginaw Troy

FLORIDA: Naples ILLINOIS: Chicago

NEW YORK: New York OHIO: Cincinnati

CANADA: Toronto Windsor CHINA: Shanghai

MEXICO: Monterrey POLAND: Gdynia

Warsaw Wrocław October 15, 2012

We hereby certify that we have examined a certified copy of the proceedings of the City Council

(“Corporate Authorities”) of the City of Waukegan, Lake County, Illinois (the “City”), passed preliminary to the issue by the City of its fully registered First Lien Water and Sewer System Revenue Bonds, Series 2012C (the “Bonds”), to the amount of $8,180,000, dated October 15, 2012 and maturing on December 30 of each of the years, in the amounts and bearing interest at the rates per cent per annum as follows:

Year Principal Amount Interest Rate

2013 $245,000 2.000%2014 300,000 2.0002015 310,000 2.0002016 315,000 2.0002017 325,000 2.0002018 325,000 2.0002019 335,000 2.0002020 340,000 2.2502021 350,000 3.0002022 360,000 3.0002023 370,000 3.0002024 385,000 3.0002025 395,000 3.0002026 405,000 3.0002027 420,000 3.1252032 3,000,000 3.250

The Bonds due on or after December 30, 2021 are callable in whole or in part on any date on or after December 30, 2020, at a price of par and accrued interest. If less than all of the Bonds are called, they shall be redeemed in such principal amounts and from such maturities as determined by the City and within any maturity by lot.

The Bond maturing on December 30, 2032 (the “Term Bond”) is also subject to mandatory sinking fund redemption on December 30 of each of the years and in the amounts set forth below at a redemption price equal to 100% of the principal amount plus accrued interest to the redemption date. As and for a sinking fund for the redemption of the Term Bond, the City shall cause to be deposited in the Bond Fund a sum that is sufficient to redeem the following principal amounts of such Term Bonds plus accrued interest to the redemption date:

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Redemption Dates Principal December 30, 2028 $510,000December 30, 2029 525,000December 30, 2030 540,000December 30, 2031 700,000

December 30, 2032* 725,000*Final Maturity

We are of the opinion that such proceedings show lawful authority for said issue under the laws of the State of Illinois now in force.

The Bonds are authorized and issued pursuant to Section 6 of Article VII of the Illinois Constitution of 1970 and under and in accordance with an ordinance adopted by the Corporate Authorities on September 17, 2012 and a Bond Order executed in connection therewith (collectively, the “Bond Ordinance”). All terms used but not defined herein have the meanings given them in the Bond Ordinance. We further certify that we have examined the form of bond prescribed for said issue and find the same in due form of law, and in our opinion said issue, to the amount named, is a valid and legally binding limited obligation of the City, and is payable from the Net Revenues of the Waterworks and Sewerage System of the City and the moneys, securities and funds pledged therefor under the Bond Ordinance, subject to the withdrawal and application of such moneys, securities and funds in accordance with the provisions of the Bond Ordinance. The Bonds are issued as Additional First Lien Bonds to the City’s outstanding First Lien Water and Sewer System Revenue Bonds, Series 2010D. Neither the full faith and credit nor the taxing power of the City is pledged for the payment of the Bonds.

We are of the opinion, under existing law, that the interest on the Bonds (a) is excludable from gross income for federal income tax purposes and (b) is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. Further, with respect to corporations (as defined for federal income tax purposes), the interest is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on such corporations. The opinion set forth in clause (a) above is subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”), that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be (or continue to be) excludable from gross income for federal income tax purposes. The City has covenanted to comply with all such requirements. Failure to comply with certain of such requirements could cause the interest on the Bonds to be included in gross income retroactively to the date of issuance of the Bonds.

Except as stated in the preceding paragraph, we express no opinion regarding other federal or state tax consequences arising with respect to the Bonds and the interest thereon.

The rights or remedies of bondholders may be affected by bankruptcy, insolvency, fraudulent conveyance or other laws affecting creditors’ rights generally, now existing or hereafter enacted, and by the application of general principles of equity, including those relating to equitable subordination.

This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur.

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notice of correction - speerfinancial.com 2012c ws... · notice of correction for $8,260,000* city...

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