1. Jon G. Wolff, CPA Municipal Finance Services, Inc. 1

2.  General Obligation (GO) Bonds – Full Faith & Credit (Publicly Offered) and Voter Approval  Revenue Bonds\Notes – Payable from Revenue Source such as Utility Revenues, Sales Tax Revenues, Other Special Revenues (Publicly Offered or Direct Bank Loan)  Lease Purchase – Payable from various sources of revenues subject to annual appropriation of funds by Governing Body 2

3.  Legal Authority (Constitutional)  Article 10, Section 26 – Legal Authority availed of by Cities and Towns for GO Bonds where proceeds were mainly used for street, road and bridge projects by cities. Requires 60% voter approval, total net debt is limited to 10% of Net Assessed Valuation of City and bond term is limited to 25 Years. The use of GO Bond proceeds for street, road and bridge projects was later added (1988) to the other authorizing GO Bond Issuance Statute - Article 10, Section 27 3

4.  Legal Authority (Constitutional)  Article 10, Section 27 – Legal Authority availed of by most Cities and Towns for GO Bonds where proceeds can be used for purchase, construction or repair of public utilities that are exclusively owned by the City. Only requires 50% voter approval and there is no debt limitation. Public Utilities is defined broadly to include most government infrastructure projects and capital assets 4

5.  Legal Authority (Constitutional)  Article 10, Section 35 – Legal Authority used by most Cities and Towns for GO Bonds where proceeds can be used for securing and developing industry. Only requires 50% voter approval and there is no debt limitation. Total ad valorem tax levy is limited to 5 mills. The city can also levy a sales tax up to 1% to provide for the payments on bond issued under this provision in addition to other sales tax maximum levy limitations provided by Oklahoma Law. 5

6.  Legal Authority (State Statute) – Bond Sale Requirements  Title 62 Section 351  Net Bond proceeds cannot be less than 99% (discount) of par amount of issue after deducting issuance costs. GO Bonds are typically sold at par or 100% of bond amount.  Title 62 Section 353  First principal payment not due earlier than 2 years nor later than 5 years  Bond Denomination is $1,000 or other multiple thereof  Title 62 Section 354  Section 27 Bonds Requirement - 10 day notice of sale signed by Clerk and shall be published once a week for two (2) consecutive weeks in a legally- qualified newspaper with last publication not less than 10 days prior to election  Section 35 Bonds Requirement - 10 day notice of sale signed by Clerk and shall be published once a week for four (4) consecutive weeks in a legally- qualified newspaper with last publication not less than 10 days prior to election  2% Good faith deposit required of bidder to protect City  Bid Typically awarded based on TIC (True Interest Cost) 6

7.  Legal Authority (State Statute) – Levy Requirements  Title 62 Section 431  It shall be the duty of the officers of the City to levy taxes to make a levy each year for a sinking fund, which shall, with cash actually on hand and lawful investments in such fund, excluding taxes in process of collection, be sufficient to pay:  All the bonded indebtedness of such municipality coming due prior to April 1 of the second ensuing fiscal year for which no prior levy has been made  The interest accrued but unpaid and to accrue on all outstanding bonds of such municipality to April 1 of the second ensuing fiscal year for which no prior levy has been made  A sinking fund to pay any interest payable on the last and final bond maturity coming due after June 30 of the ensuing fiscal year but before the tax levy of the succeeding fiscal year may be made and collected 7

8.  Legal Authority (State Statute) – Use of GO Bond Proceeds  Title 62 Section 572 - Bond Issue Proceeds Act - guarantees to the citizens of the State of Oklahoma that the proceeds of bond issues approved by them will be expended only for the purposes or projects for which any such bond issue was approved.  The governmental entity calling such election shall set forth in each proposition to be voted upon the general purpose for which the bond proceeds will be expended. This shall not require the proposition or the bond to recite specific projects and dollar amounts  The governmental entity calling such election shall set forth in the call of election, in a legally qualified newspaper of general circulation in the area wherein said bond issue proceeds are to be expended, a general statement of all purposes and specific projects for which seventy percent (70%) of the proceeds shall be expended, with a further listing of the dollar amounts to be expended on each specific project. The dollar figure left unlisted as to specific projects shall not exceed thirty percent (30%) of the total amount of the bond issue  All of the proceeds of such bond issue for the purposes set out in the proposition voted upon and shall expend not less than eighty-five percent (85%) of the monies allocated to each specific project, unless such project can be completed for a smaller amount of money on that project. Provided, however, that if any money becomes available from any source outside the bond proceeds for any specific project, the outside funds would be used to reduce the amount of bond funds to be expended on that specific project. In such event, the governmental entity may expend that amount less than the specified eighty-five percent (85%) and may use the surplus funds on other projects within the same general purpose or to reduce the sinking fund 8

9.  Security – Utility Revenue Pledge (Electric, Water, Sewer, Sanitation and Gas) and Sales Tax Pledge  Transaction Nuances  Typically does not require vote of the people  Issued by Public Trust created under O.S. Title 60, Section 176 via Trust Indenture or Declaration of Trust (Powers of Trusts vary)  Bond\Note Indenture that protects bondholder and is enforced by Trustee Bank  Covenants  Additional Bonds Test  Debt Coverage Requirement  Flow of Funds Requirement  Revenue Fund  Debt Service Fund  Debt Service Reserve Fund  Repair & Replacement Fund  Lien Positions against Security 9

10.  Legal Authority (State Statute) – Authorization to Incur Debt - Title 60 Section 176  Express trusts may be created to issue obligations, enter into financing arrangements including, but not limited to, lease-leaseback, sale-leaseback, interest rate swaps and other similar transactions and to provide funds for the furtherance and accomplishment of any authorized and proper public function or purpose of the state or of any county or municipality or any and all combinations thereof, in real or personal property, or either or both, or in any estate or interest in either or both, with the state, or any county or municipality or any and all combinations thereof, as the beneficiary thereof by  The express approval of two-thirds (2/3) of the membership of the governing body of the beneficiary if a county is a beneficiary  The express approval of two-thirds (2/3) of the membership of the governing body of the beneficiary if a municipality is a beneficiary  All bonds except bonds sold to the federal government or any agency thereof or to any agency of the State of Oklahoma, shall be awarded to the lowest and best bidder based upon open competitive public offering, advertised at least once a week for two (2) successive weeks in a newspaper of general circulation in the county where the principal office of the trust is located prior to the date on which bids are received and opened; provided, competitive bidding may be waived on bond issues with the approval of three-fourths (3/4) of the trustees, and a three-fourths (3/4) vote of the governing body of the beneficiary, unless the beneficiary is a county in which case a two-thirds (2/3) vote of the members of the governing body shall be required, or three-fourths (3/4) vote of the governing bodies of each of the beneficiaries of the trust 10

11.  Legal Authority (State Statute) – Authorization to Rent Equipment - Title 62 Section 430.1  A. The governing board of any county, city or town, or school district is authorized to rent on a monthly basis real or personal property as authorized by the governing board and to pay the rental charges thereon for usage during any fiscal period, or portion thereof, out of appropriations made and approved for such purposes for, or during, such fiscal year. Any such rental contract extending beyond June 30 of the fiscal year shall contain provisions for mutual ratification of renewal under the conditions provided in this section.  B. As used in this section, the term "personal property" shall include, but not be limited to:  Portable, or otherwise moveable, buildings and structures  Prefabricated metal buildings and structures, along with necessary utility services for such buildings or structures  Roofs placed over existing roof structures; provided, lease-purchase of retrofit metal roofs shall be awarded by competitive bids and the governing board of any county, city or town, or school district shall comply with the Public Competitive Bidding Act of 1974 where total payments of principle and interest provided by the lease- purchase contract are anticipated to exceed Twenty-five Thousand Dollars ($25,000.00)  Other structures or property that can be disassembled after installation and removed without permanent physical damage to existing property.  Notwithstanding the provisions of Section 7 of Title 60 of the Oklahoma Statutes, such personal property shall retain its status as personal property and shall not be deemed to become attached to the real estate for the duration of the lease-purchase agreement. 11

12.  Legal Authority (State Statute) – Authorization to Rent Equipment - Title 62 Section 430.1 (continued)  C. It is the purpose of this section to authorize such governing boards to enter into lease and lease- purchase contracts but not to incur any obligation upon the part of their respective municipal or governmental subdivisions in excess of the income and revenue thereof provided for such purposes for the fiscal year in which the lease contract is effectively operative  D. Any agreement to lease and purchase real or personal property, where title is to be acquired by the municipal or governmental subdivision, shall state the purchase price of the real or personal property so leased and in no event shall the lease be extended so as to cause payment of more than the stated purchase price of the real or personal property plus interest not to exceed ten percent (10%) simple interest on the unpaid balance due as of each payment date. When the purchase price plus interest has been paid, the property shall belong to the lessee and the lessor shall deliver a bill of sale to the property to the lessee. Any lease-purchase agreement may include an option to purchase, transfer and acquire title during the term of the lease upon payment of the balance of the agreed purchase price, and each agreement shall include a provision to transfer title to the lessee at the end of the completed lease term for nominal or no additional consideration.  E. The payment for the lease or rental of real or personal property shall be made only from annual and supplemental appropriations specifically designated for such purpose, and no appropriation for the purpose of paying rentals on real or personal property shall be transferred or diverted to any other purpose, except as may be authorized by the terms of the agreement or by law 12

13.  Legal Authority (State Statute) – Authorization to Rent Equipment - Title 62 Section 430.1 (continued)  F. When any real or personal property has been leased or rented during any fiscal year under any contract which permits continuance of such rental for the remainder of the fiscal year, the renting or leasing thereof shall be continued for the remainder of the fiscal year unless the governing body renting or leasing the same, by proper resolution entered in the minutes of the governing body, shall certify that the continuance of such rental is unnecessary and contrary to the public interest. However, to affect a contract termination of lease or lease-purchase equipment, written notice shall be sent by certified mail to the vendor thirty (30) days prior to the termination of the contract. Such notice shall be accompanied by payment of all sums then owed up to the date of the termination of the contract and shall certify that the canceled equipment is not being replaced by equipment performing similar functions. All equipment covered by such contract termination shall be returned to the vendor at the expense of the governmental agency terminating such contract. Such equipment shall be returned in good condition to a location designated by the vendor and the equipment, when returned, shall be free of all liens and encumbrances. Satisfaction of all of the requirements of this section shall release the governmental agency terminating such contract from any further obligation to make any further payments to the vendor 13