FINAL OFFICIAL STATEMENT DATED OCTOBER 17, 2013
NEW ISSUE Rating: Standard & Poor's: AA
Subject to compliance by the City with certain tax-related covenants, in the opinion of Axe & Ecklund, P.C., Bond Counsel, under present law (i) interest on the Bonds is excluded from gross income of the owners of the Bonds for federal income tax purposes, but must be taken into account in computing the alternative minimum tax imposed on certain corporations, as more fully described under the heading "Tax Matters” herein, and (ii) the Bonds and interest thereon are exempt from all taxation provided by the laws of the State of Michigan except inheritance and estate taxes and taxes on gains realized from the sale, payment or other disposition of the Bonds.
$18,775,000
CITY OF WARREN
Macomb County, Michigan
CITY OF WARREN CAPITAL IMPROVEMENT BONDS, SERIES 2013
DATED DATE: OCTOBER 1, 2013 DATE OF DELIVERY: OCTOBER 31, 2013 NOT QUALIFIED TAX-EXEMPT OBLIGATIONS GENERAL OBLIGATION LIMITED TAX BONDS REGISTRATION: Book entry only system
INTEREST: Paid from October 1, 2013 - 1st Paid April 1, 2014 - Semi-Annually Thereafter
REGISTRAR, TRANSFER and PAYING AGENT: The Bank of New York Mellon Trust Company, N.A., Detroit, Michigan DENOMINATIONS: $5,000 or a Multiple of $5,000, Numbered From 1 Upwards
AUTHORITY: Section 517 of Act No. 34, Public Acts of Michigan, 2001, As Amended REDEMPTION PROVISIONS: Maturities on October 1, 2021 or Prior - Non-Callable
Maturities on October 1, 2022 or After as follows:
Bonds called for redemption on or after October 1, 2021 shall be redeemed at par.
PURPOSE AND SECURITY: See "Security for the Bonds" and "Description of the Project" herein BOOK ENTRY DEPOSIT ELIGIBILITY: The Depository Trust Company, New York, N.Y.
THE ABILITY OF THE CITY TO RAISE FUNDS WITH WHICH TO MEET ITS
LIMITED TAX FULL FAITH AND CREDIT PLEDGE IS SUBJECT TO CONSTITUTIONAL AND STATUTORY LIMITATIONS ON THE TAXING POWER OF THE CITY.
MATURITY SCHEDULE
(Base CUSIP: 935324)
$11,675,000 Serial Bonds
Due Due
Oct. 1 Amount Rate Yield CUSIP Oct. 1 Amount Rate Yield CUSIP
2014 $700,000 4.00% 0.48% X 99 2021 $ 825,000 4.00% 2.72% Y 80 2015 700,000 4.00 0.65 Y 23 2022* 875,000 4.00 2.95 Y 98 2016 725,000 4.00 0.95 Y 31 2023* 900,000 4.00 3.15 Z 22 2017 750,000 4.00 1.28 Y 49 2024* 925,000 4.00 3.37 Z 30 2018 750,000 4.00 1.68 Y 56 2025* 950,000 4.00 3.58 Z 48 2019 775,000 4.00 2.05 Y 64 2026* 975,000 4.00 3.74 Z 55 2020 800,000 4.00 2.40 Y 72 2027* 1,025,000 4.00 4.00 Z 63 $7,100,000 Term Bonds **
$2,175,000 - 4.25% Term Bonds due October 1, 2029* - Yield: 4.25% - CUSIP: Z 71 $2,350,000 - 4.50% Term Bonds due October 1, 2031* - Yield: 4.50% - CUSIP: Z 89 $2,575,000 - 4.50% Term Bonds due October 1, 2033* - Yield: 4.625% - CUSIP: Z 97 * Callable-See "Description of the Bonds-Prior Redemption" herein.
** Subect to Mandatory Redemption-See "Description of the Bonds-Serial Bonds and Term Bonds" herein. Information prepared in cooperation with:
Bond Counsel: AXE & ECKLUND, P.C. Grosse Pointe Farms, MI
Underwriter:
THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION.
ROBERT C. MALESZYK Controller
JAMES R. FOUTS Mayor
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TABLE OF CONTENTS
Page
Description of the Bonds ... 1
Security for the Bonds ... 7
Description of the Project ... 7
Project Cost Estimates ... 8
Bond Rating ... 9
Undertaking to Provide Continuing Disclosure ... 10
Tax Matters ... 10
Bond Holders’ Risks ... 13
Litigation ... 13
Approval of Legality ... 14
Financial Advisor ... 14
Responsibilities of Bond Counsel ... 14
General and Economic Information Regarding the City .Exhibit A Population ... 1
Employment Statistics ... 1
Major Taxpayers ... 1
Labor Contracts ... 1
Employment Characteristics ... 1
City Building Permits ... 2
City Tax Rates & Levies ... 2
Tax Collection Record ... 2
Industrial Facilities Tax ... 2
State Equalized Valuation ... 3
Taxable Valuation ... 3
General Fund Revenues and Expenditures ... 4
Revenues from the State of Michigan ... 4
Michigan Property Tax Reform ... 7
Pension and Other Employee Benefit Trust Funds .... 8
Future Financing ... 9
City Debt Statement ... 10
City Bonds with City Credit Pledged ... 11 Financial Information Regarding the City ... Exhibit B Draft Form of Legal Opinion ... Exhibit C Continuing Disclosure Certificate ...Appendix A
NO DEALER, BROKER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED BY THE CITY OF WARREN TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS OFFICIAL STATEMENT, AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CITY.
THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT HAS BEEN PREPARED FROM SOURCES WHICH ARE DEEMED TO BE RELIABLE, BUT IS NOT GUARANTEED AS TO ACCURACY OR COMPLETENESS.
THE INFORMATION AND EXPRESSIONS OF OPINION IN THIS OFFICIAL STATEMENT ARE SUBJECT TO CHANGE WITHOUT NOTICE AND NEITHER THE DELIVERY OF THE OFFICIAL STATEMENT NOR ANY SALE MADE UNDER IT SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CITY SINCE THE DATE OF THIS OFFICIAL STATEMENT.
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OFFICIAL STATEMENT OF THE $18,775,000
CITY OF WARREN MACOMB COUNTY, MICHIGAN
CITY OF WARREN CAPITAL IMPROVEMENT BONDS, SERIES 2013
The purpose of this Official Statement is to set forth information concerning the City of Warren (the "City") and its proposed Capital Improvement Bonds, Series 2013 (the "Bonds"). The information contained herein is presented in connection with the sale of the Bonds and for the information of those who initially became holders of the Bonds. Information describing the Bonds, summarized on the cover page, is part of this Official Statement.
DESCRIPTION OF THE BONDS
The Bonds, aggregating the principal sum of $18,775,000, shall be issued for the purpose of defraying the cost of acquiring and constructing capital improvements in the City (the "Project"). The Bonds shall be known as "City of Warren Capital Improvement Bonds, Series 2013" and shall be dated October 1, 2013. The Bonds shall be fully registered Bonds, both as to principal and interest, in any one or more denominations of $5,000 or a multiple of $5,000, numbered from 1 upwards. The Bonds shall mature on October 1, 2014 and each October 1 thereafter as provided on the cover page of this Official Statement.
Qualification Under Section 265(b)(3) of the Internal Revenue Code of 1986
The Bonds have not been designated by the City as "Qualified Tax-Exempt Obligations" within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986.
Interest Payment and Date of Record
The Bonds shall bear interest payable April 1, 2014 and each October 1 and April 1 thereafter, until maturity, which interest shall not exceed 6% per annum. Interest shall be paid by check or draft mailed to the registered owner of each Bond as of the applicable date of record. The date of record for each interest payment date shall be the 15th day of the calendar month preceding the date such payment is due.
Serial Bonds and Term Bonds
Bonds maturing in the years 2014-2027 are designated as serial bonds.
Any bond maturing in the year 2029 is a term bond at 4.25%; any bond maturing in the year 2031 is a term at 4.50%; and any bond maturating in the year 2033 is a term at 4.50%. Principal maturities designated as term bonds are subject to mandatory
redemption, in part, by lot, at par and accrued interest on October 1st of the years set forth hereafter. The amounts of the maturities that are now designated as term bonds and the amounts which must be paid as determined by mandatory redemption, by lot, are as follows:
Mandatory Redemption Mandatory Redemption
Year Annual Amounts Year Annual Amounts
2028 $1,075,000 2030 $1,150,000 2029 1,100,000 2031 1,200,000
Total $2,175,000 Total $2,350,000
Mandatory Redemption Year Annual Amounts 2032 $1,250,000 2033 1,325,000
Total $2,575,000
Paying Agent and Bond Registrar
The Bank of New York Mellon Trust Company, N.A., Detroit, Michigan has been selected as bond registrar and paying agent (the "Bond Registrar") for the Bonds. The Bond Registrar will keep records of the registered holders of the Bonds, serve as transfer agent for the Bonds, authenticate the original and any re-issued Bonds and pay interest by check or draft mailed to the registered holders of the Bonds as shown on the records of the City kept by the Bond Registrar on the applicable date of record. Principal of each Bond will be paid to the registered owner upon presentation and surrender of the Bond to the Bond Registrar when such payment is due.
Book-Entry-Only
The Depository Trust Company, New York, New York (“DTC”), will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee). One fully registered Bond certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE BONDS AS NOMINEE OF DTC, REFERENCES HEREIN TO THE BONDHOLDERS, HOLDERS OR REGISTERED OWNERS OF THE BONDS SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE BONDS. DTC 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 securities that its participants (“Participants”) deposit with DTC. DTC also facilitates the transfers and pledges, in deposited securities through electronic
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computerized book-entry changes in Participants’ accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations (“Direct Participants”). DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interest in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. The deposit of Bonds with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Payments made by or on behalf of the City to DTC or its nominee shall satisfy the City’s obligations under the Bond Resolution to the extent of the payments so made.
Principal and interest payments on the Bonds will be made to DTC. DTC’s practice is to credit Direct Participants’ accounts on a payment date in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not receive payment on such payment date. 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 (the “Paying Agent”), or the City subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the City or the Paying Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the City or the Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered.
The City may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, bond certificates will be printed and delivered. 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 NEITHER THE CITY, BOND COUNSEL, FINANCIAL ADVISOR NOR THE UNDERWRITERS ASSUME ANY RESPONSIBILITY FOR THE ACCURACY THEREOF.
THE CITY AND THE CITY’S BOND COUNSEL OR FINANCIAL ADVISOR, THE UNDERWRITERS AND THE PAYING AGENT CANNOT AND DO NOT GIVE ANY ASSURANCES THAT DTC, THE DIRECT PARTICIPANTS OR THE INDIRECT PARTICIPANTS WILL DISTRIBUTE TO THE BENEFICIAL OWNERS OF THE BONDS (i) PAYMENTS OF PRINCIPAL OF OR INTEREST AND PREMIUM, IF ANY, ON THE BONDS (ii) ANY DOCUMENT REPRESENTING OR CONFIRMING BENEFICIAL OWNERSHIP INTERESTS IN BONDS, OR (iii) REDEMPTION OR
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OTHER NOTICES SENT TO DTC OR CEDE & CO., ITS NOMINEE, AS THE REGISTERED OWNER OF THE BONDS, OR THAT THEY WILL DO SO ON A TIMELY BASIS OR THAT DTC, DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. THE CURRENT “RULES” APPLICABLE TO DTC ARE ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION AND THE CURRENT “PROCEDURES” OF DTC TO BE FOLLOWED IN DEALING WITH THE PARTICIPANTS ARE ON FILE WITH DTC.
NEITHER THE CITY, THE UNDERWRITERS NOR THE PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DIRECT PARTICIPANT, INDIRECT PARTICIPANT OR ANY BENEFICIAL OWNER OF ANY OTHER PERSON WITH RESPECT TO: (1) THE BONDS; (2) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT; (3) THE PAYMENT BY DTC TO ANY PARTICIPANT, OR BY ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT TO ANY BENEFICIAL OWNER OF ANY AMOUNT DUE WITH RESPECT TO THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE BONDS; (4) THE DELIVERY BY DTC TO ANY PARTICIPANT, OR BY ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT TO ANY BENEFICIAL OWNER OF ANY NOTICE WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE BOND RESOLUTION TO BE GIVEN TO BONDHOLDERS; (5) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE BONDS; (6) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS BONDHOLDER.
Discontinuation of Book-Entry-Only System
DTC may determine to discontinue providing its service with respect to the Bonds at any time by giving notice to the City and the Transfer/Paying Agent and discharging its responsibilities with respect thereto under applicable law. Upon the giving of such notice, the Transfer/Paying Agent shall attempt to have established a securities depository/book-entry system relationship with another qualified depository. If the Transfer/Paying Agent does not or is unable to do so, the book-entry-only system shall be discontinued.
Transfer Outside Book-Entry-Only System
In the event the book-entry-only system is discontinued, the following provisions would apply to the Bonds. The Transfer Agent shall keep the registration books for the Bonds (the “Bond Register”) at its corporate trust office. Subject to the further conditions contained in the Ordinance, the Bonds may be transferred or exchanged for one or more Bonds in different authorized denominations upon surrender thereof at the corporate trust office of the Paying Agent by the registered owners or their duly authorized attorneys; upon surrender of any Bonds to be transferred or exchanged, the Paying Agent shall record the transfer or exchange in the Bond Register and shall authenticate replacement Bonds in authorized denominations; during the 15 days immediately preceding the date of mailing (“Record Date”) of any notice of redemption or any time following the mailing of any
notice of redemption, the Paying Agent shall not be required to effect or register any transfer or exchange of any Bond which has been selected for such redemption, except the Bonds properly surrendered for partial redemption may be exchanged for new Bonds in authorized denominations equal in the aggregate to the unredeemed portion; the City and Paying Agent shall be entitled to treat the registered owners of the Bonds, as their names appear in the Bond Register as of the appropriate dates, as the owner of such Bonds for all purposes under the Ordinance. No transfer or exchange made other than as described above and in the Ordinance shall be valid or effective for any purposes under the Ordinance.
Prior Redemption
Bonds maturing prior to October 1, 2022, shall not be subject to redemption prior to maturity. Bonds maturing on or after October 1, 2022 shall be subject to redemption prior to maturity at the option of the City, in any order, in whole or in part on any date on or after October 1, 2021. Bonds called for redemption shall be redeemed at par, plus accrued interest to the date fixed for redemption.
With respect to partial redemptions, any portion of a bond outstanding in a denomination larger than the minimum authorized denomination may be redeemed provided such portion and the amount not being redeemed each constitutes an authorized denomination. In the event that less than the entire principal amount of a bond is called for redemption, upon surrender of the Bond to the Bond Registrar, the Bond Registrar shall authenticate and deliver to the registered owner of the Bond a new bond or bonds in the principal amount of the principal portion not redeemed.
Notice of redemption shall be sent to the registered holder of each bond being redeemed by first class mail at least thirty (30) days prior to the date fixed for redemption, which notice shall fix the date of record with respect to the redemption if different than otherwise provided in the Ordinance. Any defect in such notice shall not affect the validity of the redemption proceedings. Bonds so called for redemption shall not bear interest after the date fixed for redemption provided funds are on hand with the Bond Registrar to redeem the same.
Transfer or Exchange of Bonds
Any Bond shall be transferable on the bond register maintained by the Bond Registrar with respect to the Bonds at any time prior to the applicable date of record preceding an interest payment date upon the surrender of the Bond together with an assignment executed by the registered owner or his or her duly authorized attorney in form satisfactory to the Bond Registrar. Upon receipt of a properly assigned bond the Bond Registrar shall authenticate and deliver a new bond or bonds in equal aggregate
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principal amount and like interest rate and maturity to the designated transferee or transferees.
Bonds may likewise be exchanged at any time prior to the applicable date of record preceding an interest payment date for one or more other bonds with the same interest rate and maturity in authorized denominations aggregating the same principal amount as the bond or bonds being exchanged. Such exchange shall be effected by surrender of the bond to be exchanged to the Bond Registrar with written instructions signed by the registered owner of the bond or his or her attorney in form satisfactory to the Bond Registrar. Upon receipt of a bond with proper written instructions the Bond Registrar shall authenticate and deliver a new bond or bonds to the registered owner of the Bond or his or her properly designated transferee or transferees or attorney.
The Bond Registrar shall not be required to honor any transfer or exchange of bonds during the period from the applicable date of record preceding an interest payment date to such interest payment date. Any service charge made by the Bond Registrar for any such registration, transfer or exchange shall be paid for by the City. The Bond Registrar may, however, require payment by a bondholder of a sum sufficient to cover any tax or other governmental charge payable in connection with any such registration, transfer or exchange.
CUSIP Numbers
It is anticipated that CUSIP numbers will be printed on the Bonds, but neither the failure to print such numbers nor any improperly printed number shall constitute cause for the purchaser to refuse to accept delivery of, or to pay for, the Bonds. All expenses for printing CUSIP numbers on the Bonds will be paid by the City, except that the CUSIP Service Bureau charge for the assignment of such numbers shall be the responsibility of and shall be paid for by the purchaser.
SECURITY FOR THE BONDS
The City agrees to pledge for the repayment of the Bonds sufficient amounts of City taxes levied each year provided that the amount of taxes necessary to pay the principal and interest on the Bonds, together with the other taxes levied for the same year, shall not exceed the limit authorized by law.
DESCRIPTION OF THE PROJECT Sanitary Relief Sewers
The City of Warren will be constructing the followin new sanitary sewers to relieve collection system surcharging during periods of heavy rainfall or snowmelt.
12 Mile Road Relief Sewer
Location: Within the 12 Mile Road right of way from its
intersection with the centerline of the St. Edmunds Drive right of way, west to its termination point 155 feet west of the centerline of the south Newport Drive right of way.
General Description of Work: Installation of approximately 4,300 linear feet of 21” to 48” diameter sanitary sewer, installation of a double barrel siphon under the Schoenherr Drain, interconnection of the existing sanitary sewers in the work area to the new sanitary sewer, installation of approximately 4,200 linear feet of 12” diameter watermain complete with all service transfers, fire hydrants, and gate wells, and replacement of all affected roadway, driveways and sidewalks, and landscaped areas disturbed by construction, inclusive of all engineering, inspection, testing and permitting costs associated with the execution and completion of the work.
10 Mile Road Relief Sewer
Location: Within the 10 Mile Road right of way from a point 420 linear feet west of its intersection with the centerline of the Hoover Road right of way east to its termination point 860 feet east of the centerline of the Roan Road right of way.
General Description of Work: Installation of approximately
3,400 linear feet of 36” diameter sanitary sewer, interconnection of the existing sanitary sewers in the work area to the new sanitary sewer, installation of approximately 3,400 linear feet of 12” diameter watermain complete with all service transfers, fire hydrants, and gate wells, and replacement of all affected roadway, driveways and sidewalks, and landscaped areas disturbed by construction, inclusive of all engineering, inspection, testing and permitting costs associated with the execution and completion of the work.
PROJECT COST ESTIMATES Estimated Construction Costs,
Administration Costs, Easement Acquisition and Engineering, Inspection, Testing, Permitting Financing Costs (including Bond
Discount) and Contingency Not to Exceed $18,775,000
Period of Usefulness of the Project
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BOND RATING Standard & Poor’s
The City has received a municipal bond rating of AA from Standard & Poor’s Ratings Services. The City furnished to such rating agency certain materials and information in addition to that provided herein. Generally, rating agencies base their ratings on such information and materials and investigations, studies and assumptions made by the rating agencies. There is no assurance that such rating will prevail for any given period of time or that it will not be revised downward or withdrawn entirely by such rating agency if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds.
The definitions of a rating furnished by Standard & Poor’s Ratings Services are as follows:
AAA Debt rated “AAA” has the highest rating to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA Debt rated “AA” has a very strong capacity to pay interest and repay principal and differs from the higher rated issues only in small degree.
A Debt rated “A” has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes of circumstances and economic conditions than in debt in higher rated categories.
BBB Debt rated “BBB” is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher debt rated categories.
BB-CC Debt rated “BB”, “B”, “CCC” or “CC” is regarded,
on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. “BB” indicates the lowest degree of speculation and “CC” the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.
C This rating is reserved for income Bonds on which no interest is being paid.
D Debt rated “D” is in default, and payment of interest and/or repayment of principal is in arrears.
Plus (+) or minus (-): The ratings “AA” to “BBB” may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.
UNDERTAKING TO PROVIDE CONTINUING DISCLOSURE
In order to assist the Underwriters in complying with SEC Rule 15c2-12 promulgated by the Securities and Exchange Commission, pursuant to the Securities and Exchange Act of 1934 (the "Rule"), the City shall covenant pursuant to a Resolution to be adopted by the City Council to enter into an undertaking (the "Undertaking") for the benefit of beneficial owners of the Bonds to provide certain financial information and operating data relating to the City to certain information repositories annually, and to provide notices of the occurrence of certain events enumerated in the Rule to certain information repositories or the Municipal Securities Rulemaking Board and to any state information depository. The details and terms of the Undertaking, as well as the information to be contained in the annual report or the notices of material events, are set forth in the Continuing Disclosure Certificate to be executed and delivered by the Issuer at the time the Bonds are delivered. Such Certificate will be in substantially the form attached hereto as Appendix A. The City has never failed to comply in all material respects with any previous undertakings under the Rule to provide annual reports or notices of materials events. A failure by the City to comply with the Undertaking will not constitute an event of default on the Bonds (although beneficial owners will have any available remedy at law or in equity). Nevertheless, such a failure must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer 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.
TAX MATTERS General
In the opinion of Axe & Ecklund, P.C., Grosse Pointe Farms, Michigan (“Bond Counsel”) based on its examination of the documents described in its opinion, under existing law, the interest on the Bonds (a) is excluded from gross income for federal income tax purposes, and (b) is not an item of tax preference and is not taken into account in determining adjusted
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current earnings for purposes of the federal alternative minimum tax imposed on individuals and corporations. The opinion set forth in clause (a) above is subject to the condition that the Authority 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) excluded from gross income for federal income tax purposes. Failure to comply with such requirements could cause the interest on the Bonds to be included in gross income retroactive to the date of issuance of the Bonds. The Authority has covenanted to comply with all such requirements. Bond Counsel will express no opinion regarding other federal tax consequences arising with respect to the Bonds and the interest thereon.
Prospective purchasers of the Bonds should be aware that (i) interest on the Bonds is included in the effectively connected earnings and profits of certain foreign corporations for purposes of calculating the branch profits tax imposed by Section 884 of the Code, (ii) interest on the Bonds may be subject to a tax on excess net passive income of certain S corporations imposed by Section 1375 of the Code, (iii) interest on the Bonds is included in the calculation of modified adjusted gross income for purposes of determining taxability of social security or railroad retirement benefits, (iv) the receipt of interest on the Bonds by life insurance companies may affect the federal tax liability of such companies, (v) in the case of property and casualty insurance companies, the amount of certain loss deductions otherwise allowed is reduced by a specific percentage of, among other things, interest on the Bonds, (vi) holders acquiring the Bonds subsequent to initial issuance will generally be required to treat market discount recognized under Section 1276 of the Code as ordinary taxable income, (vii) the receipt or accrual of interest on the Bonds may cause disallowance of the earned income credit under Section 32 of the Code, (viii) interest on the Bonds is subject to backup withholding under Section 3406 of the Code in the case of registered owners that have not reported a taxpayer identification number and are not otherwise exempt from backup withholding, and (ix) registered owners of the Bonds may not deduct interest on indebtedness incurred or continued to purchase or carry the Bonds, and financial institutions may not deduct that portion of their interest expense allocated to interest on the Bonds.
In the opinion of Bond Counsel, based on its examination of the documents described in its opinion, under existing law, the Bonds and the interest thereon are exempt from all taxation by the State of Michigan or a political subdivision thereof, except estate taxes and taxes on gains realized from the sale, payment or other disposition thereof.
Tax Treatment of Accruals on Original Issue Discount Bonds
For federal income tax purposes, the difference between the initial offering prices to the public (excluding bond houses and brokers) at which a substantial amount of the Bonds initially sold at a discount as shown on the cover page hereof (the “OID Bonds”) is sold and the amount payable at the stated redemption price at maturity thereof constitutes “original issue discount.” Such discount is treated as interest excluded 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 Bond 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 registered owners of the OID Bonds who purchase such bonds after the initial offering of a substantial amount thereof. Registered owners who do not purchase such OID Bonds in the initial offering at the initial offering and purchase prices should consult their own tax advisors with respect to the tax consequences of ownership of such OID Bonds.
Amortizable Bond Premium
For federal income tax purposes, the difference between an original registered owner’s cost basis of the Bonds initially sold at a premium as shown on the cover page hereof (the “Original Premium Bonds”) and the amounts payable on the Original Premium Bonds other than stated interest constitutes an amortizable bond premium. The same applies with respect to any Bond, if a registered owner’s cost basis exceeds the amounts payable thereon other than stated interest (collectively with the Original Premium Bonds held by the original registered owners, "Premium Bonds"). Such amortizable bond premium is not deductible from gross income but is treated for federal income tax purposes as an offset of the amount of stated interest paid on the Premium Bonds, which may affect liability for the branch profits tax imposed by Section 884 of the Code. The amount of amortizable bond premium allocable to each taxable year is generally determined on the basis of the registered owner’s yield to maturity determined by using the registered owner’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 registered owner’s adjusted basis of such Premium Bonds to determine taxable gain upon
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disposition (including sale, redemption or payment at maturity) of such Premium Bonds.
Future Developments
NO ASSURANCE CAN BE GIVEN THAT ANY FUTURE LEGISLATION OR CLARIFICATIONS OR AMENDMENTS TO THE CODE, IF ENACTED INTO LAW, WILL NOT CONTAIN PROPOSALS THAT COULD CAUSE THE INTEREST ON THE BONDS TO BE SUBJECT DIRECTLY OR INDIRECTLY TO FEDERAL OR STATE OF MICHIGAN INCOME TAXATION, ADVERSELY AFFECT THE MARKET PRICE OR MARKETABILITY OF THE BONDS, OR OTHERWISE PREVENT THE REGISTERED OWNERS FROM REALIZING THE FULL CURRENT BENEFIT OF THE STATUS OF THE INTEREST THEREON. FURTHER, NO ASSURANCE CAN BE GIVEN THAT ANY SUCH FUTURE LEGISLATION, OR ANY ACTIONS OF THE INTERNAL REVENUE SERVICE, INCLUDING, BUT NOT LIMITED TO, SELECTION OF THE BONDS FOR AUDIT EXAMINATION, OR THE AUDIT PROCESS OR RESULT OF ANY EXAMINATION OF THE BONDS OR OTHER BONDS THAT PRESENT SIMILAR TAX ISSUES, WILL NOT ADVERSELY 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 AND THE TAX CONSEQUENCES OF THE ORIGINAL ISSUE DISCOUNT OR PREMIUM THEREON, IF ANY.
BOND HOLDERS’ RISKS
The Federal Bankruptcy Code affects the rights and obligations of municipalities and their creditors. Although State legislative authority is a condition to the filing by municipalities of cases for relief under the Bankruptcy Code, recently-enacted legislation empowers local governments, such as the City, to become a debtor under the Bankruptcy Code. This authorization would be invoked if fiscal circumstances become such an emergency financial manager were appointed for the City. No assurance can be given that future circumstances or legislation will not result in the City filing for relief under the Bankruptcy Code. Should the City file a petition for relief under the Bankruptcy Code, the bankruptcy court could reduce the amount of or extend the time of the City’s legal obligation to pay its outstanding debts.
LITIGATION
To the knowledge of the City Treasurer and the City Clerk, there is no controversy of any nature pending against the City, threatening or seeking to restrain or enjoin, 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, or the pledge or application of any moneys or security provided for the payment of the Bonds.
There are no material legal actions pending or threatened against the City which, in the opinion of the City Attorney, could reasonably be anticipated to result in a final judgment against the City in an amount in excess of one percent (1%) of the City's General Fund budget, after any budgeted surplus, which amount is not completely covered by insurance or for which the City has not set aside an adequate reserve to pay such possible judgment.
APPROVAL OF LEGALITY
The approving opinion of Axe & Ecklund, P.C., attorneys of Grosse Pointe Farms, Michigan, a copy of which opinion will be printed on the reverse side of each Bond, will be furnished without expense to the purchaser of the Bonds at the delivery thereof.
FINANCIAL ADVISOR
Municipal Financial Consultants Incorporated of Grosse Pointe Farms, Michigan has served as financial advisor to the City in connection with the sale of the Bonds. The financial advisor makes no representation as to the completeness or the accuracy of the information set forth in this Official Statement.
Further information concerning the Bonds may be obtained from Municipal Financial Consultants Incorporated, Suite 360, 21 Kercheval Avenue, Grosse Pointe Farms, Michigan 48236 (313-884-1550).
RESPONSIBILITIES OF BOND COUNSEL
Bond Counsel has reviewed the statements made in this Official Statement under the captions "Description of the Bonds", "Security for the Bonds", "Tax Matters", "Approval of Legality" and "Responsibilities of Bond Counsel", but has not been retained to review and has not reviewed any other portion of this Official Statement. Bond Counsel has not made inquiry of any official or employee of the City, or any other person with respect to, or otherwise made any independent verification of, the accuracy or completeness of any statement made in this Official Statement (including those that it has reviewed) and has not expressed and will not express an opinion as to the accuracy or completeness of any statement made herein.
Except as stated in the immediately preceding paragraph and to the extent necessary to render its approving opinion respecting the validity of the Bonds and the exemption of the Bonds and the interest thereon from taxation, Bond Counsel has not been retained to examine or review, and has not examined or reviewed, any financial documents, statements or other materials that have been or may be furnished in connection with the authorization, marketing or issuance of the Bonds and, therefore,
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will not express an opinion with respect to the accuracy or completeness of any such documents, statements or other materials.
The fees of Bond Counsel for services rendered in connection with its approving opinion are expected to be paid from Bond proceeds.
ROBERT C. MALESZYK, CONTROLLER
CITY OF WARREN
EXHIBIT A CITY OF WARREN
GENERAL AND ECONOMIC INFORMATION POPULATION
2010 U.S. Census - 134,056 1990 U.S. Census - 144,864 2000 U.S. Census – 138,247 1980 U.S. Census - 161,134
EMPLOYMENT STATISTICS (provided by MCDC)
Aug. 2013 2012 2011 2010 2009 2008 2007 2006 Work force 69,208 67,009 66,774 69,047 70,144 69,475 69,528 70,181 Unemployment 7,695 7,838 9,007 11,350 12,729 7,125 6,189 5,895 % Unemployed 11.1% 11.7% 13.5% 16.4% 18.1% 10.3% 8.9% 8.4% MAJOR TAXPAYERS 2012
10 Largest Taxpayers Taxable Valuation
General Motors $468,717,081
Chrysler $171,776,406
Detroit Edison $ 35,218,846 U.S. Manufacturing Corporation $ 24,688,688 Art Van Furniture $ 19,824,259 International Transmission $ 19,703,529 Wico Metal Products $ 11,915,080 Consumers Energy $ 11,909,857 VJL Real Estate/Lipari Foods $ 7,986,930 Iroquois Industries $ 7,623,133 TOTAL (represents 19.35% of 2012 TV) $779,363,811
LABOR CONTRACTS
Number of Expiration
Employee Group Positions Date of Contract
General Employees 317 June 30, 2012 Police Officers 202 June 30, 2013 Firefighters 114 June 30, 2013 Police Command Officers 38 June 30, 2013
EMPLOYMENT CHARACTERISTICS
Number
10 Largest Employers Product/Service Employed
General Motors Corporation Automotive 18,535 Government of the U.S. Government 9,621
FIAT SPA Automotive 5,950
Ascension Health Health Care 2,771
City of Warren Government 1,599
Asset Acceptance Holdings LLC Financial 1,125 Van Dyke Public Schools Education 1,114 Guelph Tool, Inc. Tool & Die 900 Warren Consolidated Schools Education 864 Henry Ford Health System Health Care 638
2 CITY BUILDING PERMITS
TOTAL VALUE 2012 TOTAL $ 2,642,000 2011 TOTAL 2,358,000 2010 TOTAL 5,260,000 2009 TOTAL 17,147,400 2008 TOTAL 8,157,523 2007 TOTAL 27,113,121 2006 TOTAL 77,736,892 2005 TOTAL 40,054,496 CITY TAX RATES & LEVIES
2013 2012 2011 2010 2009 2008
City Operating* 27.8656 27.8656 19.8924 17.7924 16.9424 16.9424 TOTAL CITY 27.8656 27.8656 19.8924 17.7924 16.9424 16.9424 *Includes special voter approved millage for library, E.M.S., Recreation, Police & Fire, & Refuse Collection. The City's authorized operating tax rate is 27.8656 mills. TAX COLLECTION RECORD The City taxes are due and payable and a lien created upon the assessed property on July 1 each year. Taxes remaining unpaid on the following March 1st are turned over to the County Treasurer for collection. The county pays the City 100% of the uncollected real property taxes by May 15th of each year. Uncollected personal property taxes are ineligible. Fiscal Year - July 1/June 30 March/1 Collected Year Tax Levy Amount % Collected % 2012 $75,164,889 $70,595,765 93.92% - 2011 75,774,127 71,084,922 93.81 100 2010 81,723,737 76,661,117 93.81 100 2009 84,294,832 79,604,523 94.44 100 2008 85,084,435 80,636,794 94.77 100 2007 82,092,086 78,217,691 95.28 100 2006 78,153,789 74,919,406 95.86 100 2005 72,882,345 69,863,466 95.85 100 2004 70,434,850 67,482,079 95.81 100 INDUSTRIAL FACILITIES TAX
The Michigan Plant Rehabilitation and Industrial Development District Act (Act 198, Public Acts of Michigan, 1974, as amended) ("Act 198"), provides significant tax incentives to industry to renovate and expand aging plants and to build new plants in Michigan. Under the provisions of Act 198, qualifying cities, villages and townships may establish districts in which industrial firms are offered certain property tax incentives to
encourage restoration or replacement of obsolete industrial facilities and to attract new plants to the area. The issuance of any exemption certificate must be approved by the State Treasurer. Firms situated in such districts pay an Industrial Facilities Tax in lieu of property taxes on plant and equipment for a period of up to 12 years. For rehabilitated plant and equipment, the assessed value is frozen at previous levels. New plant and equipment is taxed at one-half the current millage rate. It must be emphasized, however, that ad valorem property taxes on land and inventory are specifically excluded under Act 198. Abatements under Act 198 have been granted to properties in the City with a total 2012 Taxable value of $262,658,350 for real and personal property.
New Facility Roll - $197,815,720 STATE EQUALIZED VALUATION
(50% of True Value) 2013 - $3,256,946,387 2012 - $3,361,170,897 2011 - $3,754,661,103 2010 - $4,181,441,402 2009 - $4,816,533,009 2008 - $5,278,292,319 2007 - $5,567,504,542 2006 - $5,491,244,899 2005 - $5,318,377,988 2004 - $5,236,119,198 TAXABLE VALUATION 2013 - $3,255,024,283 2012 - $3,321,788,868 2011 - $3,700,391,823 2010 - $4,071,119,156 2009 - $4,583,347,443 2008 - $4,708,677,833 2007 - $4,747,102,766 2006 - $4,585,334,343 2005 - $4,374,861,193 2004 - $4,276,625,315 Per Capita TV (13) $24,281
2013 Breakdown by Use 2013 Breakdown by Class
Residential 52.20% Real 80.3% Personal 19.67 Personal 19.67% Commercial 14.23 TOTAL 100.00% Industrial 13.90%
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GENERAL FUND REVENUES AND EXPENDITURES
2012 2011 2010 2009 Revenues & Other Sources $76,902,269 $87,927,131 $ 92,217,775 $94,086,681
Expenses & Other Uses 82,225,749 93,136,289 102,912,855 96,208,659 Revenues Over
(Under) Expense $(5,323,480) $(5,209,158) $(10,695,080) $(3,360,381)
Beginning Balance $37,624,899 $43,502,328 $54,197,408 $57,557,789 Ending Balance $32,301,419 $38,293,170 $43,502,328 $54,197,408
REVENUES FROM THE STATE OF MICHIGAN
The City receives revenue sharing payments from the State of Michigan under the State Constitution and the State Revenue Sharing Act of 1971, as amended (the “Revenue Sharing Act”). The table appearing at the end of this section shows State revenue sharing distributions received by the City during the City’s past six fiscal years, and the estimated receipts for the City’s 2005-06 fiscal year.
The State’s fiscal year begins October 1 of each year and ends September 30 of the following calendar year. Before the State’s 1996-97 fiscal year, the State shared revenues received from personal income tax, intangibles tax, sales tax and single business tax collections with counties, cities, townships and villages. In 1996, the State legislature began reform of both the formula for distribution of State revenue sharing and the designated sources of revenue to be shared. At that time, the State expressly designated the revenues of the sales tax as the sole source for revenue sharing.
At the end of calendar year 1998, the Legislature again amended the Revenue Sharing Act to accomplish the following:
To freeze payments to the city of Detroit for 8.5 years at 1997-98 levels.
To create a three-part formula for distribution to all other cities, villages and townships.
To re-adjust the percent share of statutory distributions from 24.5% for counties and 75.5% to cities, villages and townships, to 25.06% for counties and 74.94% to cities, villages and townships.
To limit the annual increase in distributions to any one city, village or township to 8% of the previous year’s distribution. To provide for an 8.5 year phase-in of the new formulas,
beginning in the State’s fiscal year ending September 30, 1999.
To create an artificial sunset of the statute by including language that revenue sharing after June 30, 2007 will be distributed “as provided by law”.
The sales tax revenues come from a 6% State levy on retail sales (other than sales of items such as food and drugs). The State Constitution limits the rate of sales tax to 6%, and dedicates 100% of the revenue of sales tax imposed at a rate of 2% to the State School Aid Fund. The State Constitution further mandates that 15% of the total revenues collected from sales taxes levied at the remaining 4% be distributed to townships, cities and villages. The Revenue Sharing Act distributes an additional 21.3% of those revenues to Michigan municipalities. The State’s ability to make revenue sharing payments to the City in the amounts and at the times specified in the Revenue Sharing Act is subject to the State’s overall financial condition and its ability to finance any temporary cash flow deficiencies.
Under the revised formula for distribution of revenue sharing moneys, the City will receive a payment based on a combination of three equally weighted components:
Taxable value per capita
Unit type (i.e., city, village or township) and population
Yield equalization (to protect all recipients of revenue sharing moneys against unequal taxable value per capita)
The City’s receipts could therefore vary depending on the population of the City and the City’s taxable value per capita compared to the population and taxable value per capita in the State as a whole.
In addition to payments of revenue sharing moneys, the State pays the City to support judges’ salaries, as well as other miscellaneous state grants.
Revenue sharing payments and other monies paid to municipalities (other than the portion which is mandated by the State constitution) are subject to annual appropriation by the State legislature, and may be reduced or delayed by Executive Order during any fiscal year in which the Governor, with the approval of the legislature’s appropriation committees, determines that actual revenues will be less than the revenue estimates on which appropriations were based.
Recent Developments
Revenue sharing payments were distributed in accordance with the 1998 Amendments until December 2002. Consistent with the downturn in the national economy, however, the State began experiencing an economic slowdown, resulting in reductions in anticipated and actual sales tax revenues for State fiscal year 2003. In response, outgoing Governor John Engler issued Executive Order No. 2002-22 implementing certain spending reductions in order to bring the State’s fiscal year 2003 general fund budget into balance. The Executive Order included a $53.1 million reduction in revenue sharing payments to local governments, including a 3.5% reduction in previously
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appropriated revenue sharing payments, as well as an additional $9.9 million reduction in certain grants to local governments in respect of statutory revenue sharing shortfalls. On December 31, 2002, Governor Engler signed into law Act 679, Public Acts of Michigan, 2002 (“Act 679”), a corresponding amendment to the Revenue Sharing Act to codify the reduction in statutory revenue sharing payments to local governments otherwise established by the 1998 Amendments. Act 679 resulted in the following:
Adjusted the distribution to be received by the city of Detroit in State fiscal year 2002-03 only, from a combined constitutional and statutory payment of $333.9 million (the 1997-98 levels) to a combined payment of $322.2 million. Combined distributions for each fiscal year thereafter until September 30, 2007 were frozen at $333.9 million.
For State fiscal year 2002-03 only, adjusted the distribution to be received by all other cities, villages, townships and counties to 96.5% of the amount local units would have received if the 1998 formula were applied to calculate the 2002-03 distributions.
Capped the total amount of revenue sharing payments available for distributions to cities, villages and townships at $936.2 million, and the total amount available for distribution to all counties at $204.1 million.
Extended the sunset of the statute from June 30, 2007 until September 30, 2007, so as to make it consistent with the end of the State’s fiscal year.
Did not otherwise adjust formulas for distribution approved under the 1998 Amendments.
One February 19, 2003, in response to continuing declines in the State’s revenue estimates, Governor Jennifer Granholm issued Executive Order No. 2003-03 which approved of a further $145 million in spending reductions in order to again bring the State’s fiscal year 2003 general fund budget into balance. No further reductions to payments to local governments were included within Executive Order No. 2003-03.
On August 11, 2003, the Revenue Sharing Act was further amended by enactment of Act 168, Public Acts of Michigan, 2003 (“Act 168”). Act 168 re-adjusted the 2002-03 distributions formula approved by Act 679. The reductions enacted in Act 679 contemplated uniform reductions for all local units of approximately 3.5%; based upon lower-than-estimated sales tax receipts, however, the actual payments reflected a 3.5% reduction for the city of Detroit and a larger than 3.5% reduction for all other local units. Act 168 marginally reduced the combined constitutional and statutory payment for the city of Detroit for State fiscal year 2002-03 from $322.2 million to $319.7 million, and increased payments to all other local units by 0.2%. For
State fiscal year 2003-04, based on then-current estimates, Act 168 further provided for a 3.0% reduction in the combined constitutional and statutory payments for the city of Detroit and all other local units from the statutory payment the city of Detroit and each local unit received in State fiscal year 2002-03. Act 168 further provided for a reduction in payments by more than 3.0% should State sales tax receipts fall below forecasts.
State estimates for actual revenues for fiscal year 2003-04 continue to fall below the revenue estimates upon which the appropriations for the fiscal year were based. As a result, on December 10, 2003, Governor Granholm issued Executive Order No. 2003-23 implementing additional spending reductions in order to bring the State’s fiscal year 2004 general fund budget into balance. The Executive Order included an additional $72 million reduction in payments to local governments, including a 3.0% reduction in revenue sharing payments previously appropriated by the Legislature in respect of statutory revenue sharing shortfalls. Governor Granholm indicated that the Executive Order was predicated on enactment of proposed Senate Bill 852 that would amend Act 281, Public Acts of Michigan, 1967, as amended (the “Income Tax Act”), to delay until July 1, 2004, a previously authorized rollback of the State’s income tax from 4% to 3.9% scheduled to take effect on January 1, 2004. On December 18, 2003, the Legislature approved of Senate Bill 852 which together with the Executive Order, bring the State’s fiscal year 2004 general fund budget back into balance.
Purchasers of the Bonds offered herein should be alert to further modifications to revenue sharing payments to Michigan local government units, to the potential consequent impact upon the City’s general fund condition, and to the potential impact upon the market price or marketability of the Bonds resulting from changes in revenues received by the City from the State.
The following table sets forth the annual revenue sharing payments and other monies received by the City for the fiscal years ended June 30, 2007 through June 30, 2012.
Fiscal Year Ended/Ending June 30, 2012 June 30, 2011 June 30, 2010 June 30, 2009 June 30, 2008
Revenue Sharing Payments $11,895,230 - Actual 12,125,928 - Actual 12,051,133 - Actual 13,559,035 - Actual 14,105,387 - Actual
MICHIGAN PROPERTY TAX REFORM
On December 20, 2012, Governor Snyder signed into law a package of bills reforming personal property tax in Michigan. The legislation exempts commercial and industrial personal
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property of each owner with a combined taxable value in a local taxing unit of less than $40,000 from ad valorem taxes beginning in 2014. All industrial personal property purchased or put into service beginning in 2013 and industrial personal property that has been in use for ten (10) years or more becomes exempt beginning in 2016. The legislation extends certain personal property tax exemptions and tax abatements for technology parks, industrial facilities and enterprise zones that were to expire after 2012, until the newly enacted personal property tax exemptions take effect. The legislation authorizes local units to specially assess commercial and industrial real property to replace revenue lost due to the personal property tax exemptions for police, fire, ambulance and jail operations. The legislation also includes a formula to reimburse certain local governments for a portion of lost personal property tax revenue from use tax moneys to the extent the local unit has a reduction in taxable value of more than 2.3% as a result of the personal property tax exemption. However, voters would need to approve a change in the state distribution of use tax in the August 2014 primary election for such reimbursement provisions to become effective. If voters approve the redistribution, a portion of the use tax would be directed to a newly created statewide Metropolitan Areas Metropolitan Authority and redistributed to qualifying local units. If voters fail to approve the use tax redistribution, the above personal property tax reform acts will be repealed and the local reimbursement act and the special assessment act will not go into effect. The final impact of this legislation, pending the outcome of the August 2014 election, cannot be determined at this time.
The ultimate nature, extent and impact of any other future amendments to Michigan’s property tax laws on the City’s finances cannot be predicted. Purchasers of the Bonds should consult with their legal counsel and financial advisors as to the consequences of any such legislation on the market price or marketability of the Bonds, the security therefor and the operations of the County.
PENSION AND OTHER EMPLOYEE BENEFIT TRUST FUNDS
The City of Warren sponsors two separate defined benefit single employer pension plans; the first covering policemen and firemen under Act 345 of the State of Michigan, while the second system covers all other elected and general "full-time" employees. For the fiscal year ended December 31, 2010, the City contributed 35.91% and 73.29% respectively of earned payroll as determined by the City's actuary. Please refer to the notes to the financial statements for a detailed discussion of the plans.
The latest collective bargaining agreement for employees who were members of the City Employees' Retirement System Defined Benefit Plan, included a provision for participation in a Defined Contribution Plan. Employees at the time of ratification were
given the option of transferring to the Defined Contribution Plan or remain in the Defined Benefit Plan. For employees electing to transfer, the City will contribute fifteen percent (15%) of wages to the employees' account. The employee will be required to make a contribution of three percent (3%). Employees hired after the ratification date of their respective contract will automatically be enrolled in the Defined Contribution Plan. The City will contribute ten percent (10%) of wages on behalf of these employees and the employee will be required to make a contribution of four percent (4%).
These collective bargaining agreements also address the issue of retiree health insurance. Prior to these agreements, the City generally paid 100 percent of the cost of retiree health insurance when an employee was eligible to receive regular service or deferred retirement benefits. Effective with these contracts, employees hired after ratification may be responsible for payment of a share of their retiree health insurance dependent upon meeting certain age and service time requirements.
In an effort to fund the accrued liability for post-employment healthcare benefits, the City established a Voluntary Employee Benefit Association (VEBA) Trust. The trust is administered by the City Employees' Retirement System for the benefit of its members. It is the City's intention to establish a similar trust to be administered by the Police and Fire Retirement System. The trust is deigned to accumulate sufficient assets to fund the payment of post retirement health benefits as they become due. Contributions to the trust are actuarially determined. For calendar year 2010, contribution rates for the City Employees VEBA Trust and Police and Fire VEBA Trust were 40% and 34.63%, respectively.
FUTURE FINANCING
The City does not anticipate the issuance of any additional bonds or notes within the next two months.
CITY OF WARREN
DEBT STATEMENT - SEPTEMBER 20, 2013 (Including this Issue)
--- --- --- --- -- -- ---DIRECT DEBT OF CITY:
Authority Bonds $ 75,580,000
Capital Improvement Bonds 94,885,000
Transportation Fund Bonds 3,960,000
---Total $ 174,425,000
Less: Transportation Bonds 3,960,000
---Net City Debt $ 170,465,000
==============
Per Capita City Net Direct Debt $ 1,271.60
Percent City Net Direct Debt to 2013 TV 5.24%
OVERLAPPING DEBT OF CITY: School District 61.79% Center Line 15,755,000 $ 9,735,015 22.68% East Detroit 31,265,000 7,090,902 100.00% Fitzgerald 29,977,000 29,977,000 97.85% Van Dyke 63,472,306 62,107,651 46.57% Warren 152,060,000 70,814,342 100.00% Warren Woods 41,625,000 41,625,000 County 13.36% Macomb 50,943,932 6,806,109
Intermediate School District
13.08% Macomb I/S/D - -Community College
13.36% Macomb Community College 8,895,000 1,188,372
---Net Overlapping Debt $ 229,344,391
Net City and Overlapping Debt $ 399,809,391
============== Per Capita City Net Direct and Overlapping Debt $ 2,982.41 Percent Net Direct and Overlapping Debt to 2013 TV 12.28% Source: City of Warren and Municipal Advisory
Council of Michigan mas 9/20/13
las.exl.WARDEBT
CITY OF WARREN
BONDS WITH CITY CREDIT PLEDGED (As of September 20, 2013) (Including this Issue)
Capital
Year Authority Improvement MTF Total
--- ---2013 $ 2,510,000 $ 2,240,000 $ - $ 4,750,000 2014 3,515,000 6,000,000 1,000,000 10,515,000 2015 4,035,000 6,150,000 985,000 11,170,000 2016 3,940,000 6,465,000 975,000 11,380,000 2017 4,465,000 5,860,000 500,000 10,825,000 2018 4,965,000 6,000,000 500,000 11,465,000 2019 5,715,000 6,110,000 11,825,000 2020 5,950,000 6,285,000 12,235,000 2021 6,180,000 6,150,000 12,330,000 2022 6,190,000 4,865,000 11,055,000 2023 6,425,000 4,805,000 11,230,000 2024 6,425,000 4,740,000 11,165,000 2025 6,430,000 4,370,000 10,800,000 2026 4,835,000 3,665,000 8,500,000 2027 2,750,000 2,580,000 5,330,000 2028 1,250,000 2,710,000 3,960,000 2029 2,630,000 2,630,000 2030 2,760,000 2,760,000 2031 2,665,000 2,665,000 2032 2,030,000 2,030,000 2033 2,140,000 2,140,000 2034 855,000 855,000 2035 895,000 895,000 2036 935,000 935,000 2037 980,000 980,000 --- Total $ 75,580,000 $ 94,885,000 $ 3,960,000 $ 174,425,000 las.exl.WARCCP mas 9/20/13
EXHIBIT B
FINANCIAL INFORMATION REGARDING THE CITY OF WARREN
The following section of the audited financial statements of the City of Warren for the Fiscal Year ended June 30, 2012 have been extracted from the audit:
Page INDEPENDENT AUDITOR’S REPORT ... 1
Statement of Net Assets ... 9 Statement of Activities ... 11 Governmental Funds - Balance Sheet ... 13 Governmental Funds - Reconciliation of the Balance
Sheet to the Statement of Net Assets ... 14 Governmental Funds - Statement of Revenue,
Expenditures and Changes in Fund Balances ... 15 Governmental Funds - Reconciliation of the Statement
of Revenue, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement
Of Activities ... 16 Proprietary Funds - Statement of Net Assets ... 17 Proprietary Funds - Statement of Revenue, Expenses
and Changes in Net Assets ... 18 Proprietary Funds - Statement of Cash Flows ... 19 Fiduciary Funds - Statement of Fiduciary Net Assets 20 Fiduciary Funds - Statement of Changes in Fiduciary
Net Assets – Pension and Other Employee Benefits 21 Component Units – State of Net Assets ... 22 Component Units – State of Activities ... 24 NOTES TO FINANCIAL STATEMENTS ... 25
The financial statements of individual funds and the Statistical Section have not been included in this Official Statement, but will be provided upon request.
*Note: The City’s auditors have not been asked to consent to the use of the audited financial statements provided herein and have not conducted any subsequent review of such audited financial statements or the information presented in this Exhibit B.
Independent Auditor's Report To the City Council
City of Warren, Michigan
We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Warren, Michigan (the "City") as of and for the year ended June 30, 2012, which collectively comprise the City’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Warren, Michigan’s management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Warren, Michigan as of June 30, 2012 and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the City of Warren, Michigan's basic financial statements. Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, retirement system schedules of funding progress, and the budgetary comparison schedules for the General Fund and each major special revenue fund on pages 66-70 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, which considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the management's discussion and analysis and the retirement system schedules of funding progress in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us
