official statement series b

8/2/2019 Official Statement Series b

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Draft: May 5, 2005

NEW ISSUE - Book-Entry Only RATINGS: Moodys: Aaa (MBIA Insured) Standard & Poors: AAA (MBIA Insured)(See RATINGS and INSURANCE herein.)

In the opinion of Peck, Shaffer & Williams LLP and Forbes, Fields & Associates Co. L.P.A, Co-Bond Counsel, under existing law,(i) interest on the Series 2005B Bonds will be excludible from gross income of the holders thereof for purposes of federal income taxation,(ii) interest on the Series 2005B Bonds will not be a specific item of tax preference for purposes of the federal alternative minimum taximposed on individuals and corporations, and (iii) the Series 2005B Bonds, the transfer thereof, and the income therefrom, including any

profit made on the sale thereof, will be exempt from taxation within the State of Ohio, all subject to the qualifications described herein underthe headingTax Matters.

OFFICIAL STATEMENTRelating to the Original Issuance of

$30,000,000

CITY OF CINCINNATI, OHIO

WATER SYSTEM REVENUE SUBORDINATED

VARIABLE RATE BONDS, SERIES 2005B

(Auction Rate Securities)

Dated: Date of Delivery Price: 100% Due: As shown on the inside cover

The Series 2005B Bonds are being issued by the City of Cincinnati, Ohio (the City) for the purpose of paying a portion of the cost of theGreater Cincinnati Water Works (the Utility), Capital Improvement Program and paying the costs of issuance. See SERIES 2005B BONDS Authorization and Purpose. In May 2005 the City also expects to issue $80,585,000 City of Cincinnati, Ohio Water System Revenue Bonds,Series 2005A (the Series 2005A Bonds) as Senior Bonds for the same purpose.

The Series 2005B Bonds will be issued in fully registered form in the name of Cede & Co., as nominee of The Depository Trust Company(DTC) under the book-entry-only system maintained by DTC. So long as Cede & Co. is the registered owner of the Series 2005B Bonds,

principal and tender price of, premium, if any, and interest on the Series 2005B Bonds will be payable by the Trustee to DTC, which will in turnremit such payments to its participants for subsequent disbursement to beneficial owners of the Series 2005B Bonds, as more fully describedherein. See TRUST AGREEMENT Book Entry Method.

The Series 2005B Bonds initially will be in the Auction Rate Mode. For a description of the method of determination of interest rates,interest payment dates and certain other terms applicable to the Series 2005B Bonds while in the Auction Rate Mode, see the inside cover hereofand DESCRIPTION OF THE SERIES 2005B BONDS Determination of Auction Period Rate and Auction Period herein. Interest on theSeries 2005B Bonds is payable, so long as the Series 2005B Bonds bear interest at an Auction Rate, on the day following the end of theapplicable Auction Interest Period, and any date on which such Auction Rate becomes subject to conversion to another interest rate mode.

The Series 2005B Bonds are subject to mandatory and optional redemption prior to maturity as more fully described herein.

While bearing interest at an Auction Rate, the Series 2005B Bonds are subject to mandatory tender for purchase in the manner describedherein. At the election of the City, subject to certain conditions, the Series 2005B Bonds may be converted, in whole, to other interest rate modesas described herein. This Official Statement generally describes the Series 2005B Bonds when the Series 2005B Bonds are Auction RateSecurities. Prospective purchasers of the Series 2005B Bonds bearing interest in modes other than Auction Rate modes should not relyon this Official Statement.

The Series 2005B Bonds will be issued under the Master Trust Agreement dated as of March 1, 2001 (the Master Trust Agreement)between the Trustee and the City, as amended, including by a Fourth Supplemental Trust Agreement dated as of May 1, 2005 between theTrustee and the City (together, the Trust Agreement). The Series 2005B Bonds will constitute Subordinate Debt under the Trust Agreement,

payable as to both principal and interest solely from the Net Revenues of the Utility, subject to the prior payment of principal of and interest dueand payable on all Senior Bonds heretofore or hereafter issued or incurred by the City and the funding of certain funds and accounts establishedunder the Trust Agreement, and on a parity with all other Subordinate Debt heretofore hereafter issued or incurred by the City. See SECURITYAND SOURCES OF PAYMENT.

Payment of the regularly scheduled principal of and interest on (but not premium or tender price of) the Series 2005B Bonds when due willbe insured by a bond insurance policy to be issued by MBIA Insurance Corporation simultaneously with the delivery of the Series 2005B Bonds,subject to the terms of each policy as described herein.

THE SERIES 2005B BONDS ARE NOT GENERAL OBLIGATIONS, BUT ARE SPECIAL OBLIGATIONS OF THE CITY,PAYABLE AS SUBORDINATE DEBT SOLELY FROM THE NET REVENUES OF ITS UTILITY AND CERTAIN SPECIALFUNDS CREATED UNDER THE MASTER TRUST AGREEMENT, AND NEITHER THE GENERAL CREDIT NOR TAXINGPOWER OF THE CITY OR OF THE STATE OF OHIO OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TOPAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2005B BONDS.

The Series 2005B Bonds are offered when, as and if issued and received by the Underwriters, subject to prior sale and to withdrawal ormodification of the offer without notice. Certain legal matters relating to the issuance of the Series 2005B Bonds will be subject to the approvinglegal opinions of Peck, Shaffer & Williams LLP and Forbes, Fields & Associates Co. L.P.A, Co-Bond Counsel (See LEGAL OPINION andTAX MATTERS). A.G. Edwards & Sons, Inc. has acted as Financial Advisor to the City in connection with the issuance of the Series 2005BBonds. Certain matters will be passed upon for the City by the City Solicitor, J. Rita McNeil, and for the Underwriters by Squire, Sanders &Dempsey L.L.P. and Wilkerson & Associates Co., L.P.A. The Series 2005B Bonds are expected to be available for delivery in definitive form in

New York, New York on or about May 19, 2005.

MORGAN STANLEY SEASONGOOD & MAYER, LLC


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Draft: May 2, 2005

Underwriters and Broker-Dealers

for the Series 2005B Bonds

The date of this Official Statement is May 6, 2005 and information contained herein speaks only as of that date.

$30,000,000

CITY OF CINCINNATI, OHIOWATER SYSTEM REVENUE SUBORDINATED

VARIABLE RATE BONDS, SERIES 2005B

(Auction Rate Securities)

(CUSIP No. 172311DW9*)

The initial interest rate for the Series 2005B Bonds will apply to the period commencing ontheir date of delivery to and including the initial Auction Date. Thereafter, the Series 2005BBonds will bear interest at an Auction Period Rate resulting from an Auction conducted on eachAuction Date in accordance with the Auction Procedures, described herein, subject to certain

exceptions. Interest on the Series 2005B Bonds will be payable commencing on the initial InterestPayment Date and on each Interest Payment Date thereafter. The initial Auction Date and eachAuction Date thereafter and the initial Interest Payment Date and each Interest Payment Datethereafter for the Series 2005B Bonds are set forth below.

Initial

Auction Date Auction Day(1) Auction Period(2)

Initial Interest

Payment Date

Interest

Payment Day(3)

June 22, 2005 Wednesday 35-day June 23, 2005 Thursday(1) If such day is not a Business Day, an Auction will be held on the Business Day immediately preceding such

day.(2) Subject to change to a different Auction Period and to certain exceptions. See AUCTION PROCEDURES

CHANGES IN AUCTION PERIOD OR AUCTION DATE in APPENDIX B hereto.(3) If such day is not a Business Day, interest will be payable on the Business Day immediately following such day.

The length of the Auction Period for all or a portion of the Series 2005B Bonds may bechanged as described herein. The Series 2005B Bonds will not be subject to mandatory tender forpurchase upon a change in the length of an Auction Period; however, notice of such change isrequired to be given as further described in AUCTION PROCEDURES attached hereto asAPPENDIX B.

Prospective purchasers of the Series 2005B Bonds should carefully review the AuctionProcedures set forth in AUCTION PROCEDURES attached hereto as APPENDIX B and should

note that such procedures provide that (i) a Bid or Sell Order constitutes a commitment to purchaseor sell the Series 2005B Bonds based upon the results of an Auction, (ii) Auctions will beconducted through telephone, facsimile transmission or other similar electronic means ofcommunications, and (iii) settlement for purchases and sales will be made on the Business Dayfollowing an Auction. Beneficial interests in the Series 2005B Bonds may be transferred onlypursuant to a Bid or Sell Order placed in an Auction or to or through a Broker-Dealer. SeeAUCTION PROCEDURES attached hereto as APPENDIX B. The Bank of New York TrustCompany, N.A. will serve as initial Auction Agent, and Morgan Stanley & Co. Incorporated andSeasongood & Mayer, LLC will serve as the initial Broker-Dealers for the Series 2005B Bonds.

*The City is not responsible for the use of the CUSIP number referenced herein nor is any representation made by the City as to itscorrectness; such CUSIP number is included solely for the convenience of the readers of this Official Statement.


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CITY OF CINCINNATI

MAYOR

Charlie Luken

CITY COUNCIL

Alicia Reece, Vice MayorY. Laketa ColeJohn Cranley

David CrowleySam MaloneChris MonzelDavid Pepper

Christopher Smitherman

James R. Tarbell

CITY MANAGER

Valerie A. Lemmie

ASSISTANT CITY MANAGERS

Deborah C. HolstonScott C. Stiles

CITY SOLICITOR

J. Rita McNeil

FINANCE DIRECTOR

William E. Moller

ASSISTANT FINANCE DIRECTOR

Joe Gray

CINCINNATI WATER WORKS

David E. Rager, Director

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REGARDING THIS OFFICIAL STATEMENT

This Official Statement does not constitute an offering of any security other than theoriginal offering of the Series 2005B Bonds of the City identified on the cover. No person, otherthan the City Manager of the City, has been authorized by the City to give any information or tomake any representation other than as contained in this Official Statement. If given or made, suchother information or representation not so authorized should not be relied upon as having beengiven or authorized by the City. This Official Statement does not constitute an offer to sell or thesolicitation of an offer to buy, and there shall not be any sale of the Series 2005B Bonds by anyperson, in any jurisdiction in which it is unlawful to make such offer, solicitation or sale.

Any statements made in this Official Statement involving estimates or matters of opinion,whether or not expressly so stated, are intended merely as estimates or opinions and not asrepresentations of fact. This Official Statement contains statements which, to the extent they arenot recitations of historical fact, constitute forward-looking statements. In this respect, the wordsestimate, project, anticipate, expect, intend, believe and similar expressions areintended to identify forward-looking statements. A number of important factors affecting theCitys financial results could cause actual results to differ materially from those stated in the

forward-looking statements.

A wide variety of other information, including financial information, concerning the City isavailable from the Citys website. Any such information that is inconsistent with the informationset forth in this Official Statement should be disregarded. No such information is a part of orincorporated into this Official Statement, except as expressly noted.

The information and expressions of opinion in this Official Statement are subject to changewithout notice. Neither the delivery of this Official Statement nor any sale made hereunder shall,under any circumstances, give rise to any implication that there has been no change in the affairs ofthe City since its date.

Upon issuance, the Series 2005B Bonds will not be registered by the City under theSecurities Act of 1933, as amended, or any state securities law, and will not be listed on any stockor other securities exchange. Neither the Securities and Exchange Commission nor any otherfederal, state or other governmental entity or agency will have at the request of the City passedupon the accuracy or adequacy of this Official Statement or approved the Series 2005B Bonds forsale.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAYOVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THEMARKET PRICE OF THE SERIES 2005B BONDS AT A LEVEL ABOVE THAT WHICHMIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IFCOMMENCED, MAY BE DISCONTINUED AT ANY TIME, WITHOUT PRIOR NOTICE.

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TABLE OF CONTENTS

Page

Regarding This Official Statement.............................................................................................. 4Table of Contents........................................................................................................................ 5Introductory Statement................................................................................................................ 7Series 2005B Bonds -- Authorization and Purpose..................................................................... 7Sources and Uses of Funds.......................................................................................................... 8Description of the Series 2005B Bonds....................................................................................... 9

General................................................................................................................................. 9Book-Entry Only System..................................................................................................... 9Registration, Transfer and Exchange.................................................................................... 12Interest.................................................................................................................................. 13

Determination of Auction Period Rate and Auction Period.................................................. 13Broker-Dealers..................................................................................................................... 17SEC Inquiries....................................................................................................................... 17Changes in Mode.................................................................................................................. 17Redemption Provisions......................................................................................................... 19Notice and Effect of Redemption......................................................................................... 19Purchase of Bonds in Lieu of Redemption........................................................................... 20Tender for Purchase of the Series 2005B Bonds.................................................................. 20Source of Funds for Purchase of the Series 2005B Bonds.................................................... 21Delivery and Payment for Purchased Series 2005B Bonds;

Undelivered Series 2005B Bonds.................................................................................. 21Security and Sources of Payment................................................................................................ 22

General................................................................................................................................. 22Special and Limited Obligations.......................................................................................... 23Limited Remedies of Holders of Senior Subordinated Debt................................................. 23Rate Covenant...................................................................................................................... 24

Insurance..................................................................................................................................... 25The MBIA Insurance Corporation Insurance Policy............................................................ 25MBIA................................................................................................................................... 26MBIA Information............................................................................................................... 26Financial Strength Ratings of MBIA.................................................................................... 27

The Utility................................................................................................................................... 27Organizational Structure....................................................................................................... 31Employee Relations.............................................................................................................. 33Description of Facilities........................................................................................................ 34System Reliability and Redundancy Features....................................................................... 34Water Pumpage.................................................................................................................... 36Water Loss (Unaccounted for Water)................................................................................. 37Water Quality and Environmental Compliance.................................................................... 37Security................................................................................................................................ 38

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Capital Improvement Program............................................................................................. 38The Utility Service Area.............................................................................................................. 40

Business and Industry........................................................................................................... 40The Existing Service Area.................................................................................................... 43

Contracts for the Sale of Water...................................................................................... 44

Top Ten Retail Customer Data...................................................................................... 45Growth of the Service Area.................................................................................................. 45Financial Operations................................................................................................................... 46

Water Rates.......................................................................................................................... 46History of Rate Increases...................................................................................................... 51Comparative Water User Charges........................................................................................ 52Accounts Receivable............................................................................................................ 53Payment of Bills................................................................................................................... 53Annual Budget Review and Development of Annual Budget.............................................. 55Financial Reports and Examination of Accounts.................................................................. 55Historical and Forecasted Financial Operations................................................................... 56

Senior Bonds and Senior Subordinated Debt Service Requirements........................................... 59Other Obligations Payable from Revenues.................................................................................. 59Trust Agreement......................................................................................................................... 60

Funds and Revenues and Application Thereof..................................................................... 60Construction Fund and the Series 2005B Bond Proceeds Account................................ 60Revenue Fund................................................................................................................ 60Bond Fund and Bond Reserve Fund.............................................................................. 61Water System Reserve Fund.......................................................................................... 62Rebate Fund................................................................................................................... 62Senior Subordinated Debt Service Account................................................................... 62Junior Subordinate Debt Service Account..................................................................... 62

Fund Investments and Income.............................................................................................. 62Additional Senior Bonds...................................................................................................... 65Additional Senior Subordinated Debt................................................................................... 67Covenants of the City........................................................................................................... 68Events of Default and Remedies........................................................................................... 69

Events of Default........................................................................................................... 70Remedies....................................................................................................................... 70Right of Bondholders to Direct Proceedings................................................................. 70Waivers of Events of Default......................................................................................... 71Applications of Moneys Received Pursuant to Remedial Action.................................. 71

Supplemental Trust Agreements.......................................................................................... 71Discharge of Pledge and Lien............................................................................................... 73The Trustee........................................................................................................................... 73

Litigation..................................................................................................................................... 74Underwriting............................................................................................................................... 74Legal Matters.............................................................................................................................. 74Tax Matters................................................................................................................................. 75Transcript and Closing Documents............................................................................................. 76Continuing Disclosure Certificate............................................................................................... 76

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Ratings ....................................................................................................................................... 78Financial Advisor........................................................................................................................ 78Concluding Statement................................................................................................................. 78

Appendix A Summary of Certain Definitions Used in the Trust Agreement

Appendix B Auction ProceduresAppendix C Basic Financial Statements for the Year Ended December 31, 2003Appendix D Text of Legal OpinionsAppendix E Specimen of MBIA Insurance Corporation Insurance Policy

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INTRODUCTORY STATEMENT

This Official Statement, including the cover page hereof and the Appendices hereto, sets forthcertain information in connection with the sale of $30,000,000 principal amount of City of CincinnatiWater Revenue Subordinated Variable Rate Bonds, Series 2005B (Auction Rate Securities) (theSeries 2005B Bonds). The Series 2005B Bonds are special obligations of the City, payable solelyfrom the sources, and that payment secured, as described in this Official Statement. Unless expresslydefined herein, capitalized words and terms used in this Official Statement are defined as set forth inAppendix A - SUMMARY OF CERTAIN DEFINITIONS USED IN THE TRUSTAGREEMENT.

This Official Statement contains descriptions of, among other matters, the Citys Water Workssystem (the Utility), the pledged Revenues, the Series 2005B Bonds and the Trust Agreement.

All financial and other information in this Official Statement has been provided by the Cityfrom its records, except for information expressly attributed to other sources and except for certainunderwriting information on the cover. The presentation of information, including tables of receiptsfrom rates, charges and other sources, is intended to show recent historic information, and is notintended to indicate future or continuing trends in the financial position or other affairs of the City orthe Utility. No representation is made that past experience, as is shown by that financial and otherinformation, will necessarily continue or be repeated in the future.

This Official Statement should be considered in its entirety and no one subject considered lessimportant than another by reason of location in the text. Descriptions of instruments are qualified byreference to the entire text of those instruments, and reference should be made to laws, reports ordocuments referred to for more complete information regarding their contents. Until the issuance anddelivery of the Series 2005B Bonds, copies of the Trust Agreement may be obtained from theUnderwriters. Copies will be available for inspection at the principal office of the Trustee after Bonddelivery.

References to provisions of Ohio law or the Ohio Constitution or the Citys Charter (theCharter) are references to those current provisions. Those provisions may be amended, repealed orsupplemented.

As used in this Official Statement debt service means principal, interest and any premiumpayable on the obligations referred to, Utility Fiscal Year means the 12-month period ending onDecember 31, County means Hamilton County, and State or Ohio means the State of Ohio.

SERIES 2005B BONDS -- AUTHORIZATION AND PURPOSE

The Series 2005B Bonds are being issued pursuant to Article XVIII of the Ohio Constitution,an ordinance of the Council of the City passed on March 9, 2005, including the Fiscal OfficersCertificate referred to in that ordinance (collectively, the Bond Legislation), and a Master TrustAgreement dated as of March 1, 2001, as amended and supplemented, including by a FourthSupplemental Trust Agreement dated as of May 1, 2005 (the Trust Agreement), between the City andThe Bank of New York Trust Company, N.A., Cincinnati, Ohio, as Trustee (the Trustee).

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The City is issuing the Series 2005B Bonds for the purpose of paying a portion of the cost ofthe acquisition, construction, renovation and installation of the Improvements (the Project). See THEUTILITY SERVICE AREA Capital Improvement Program.

In 2001, the City issued its $92,685,000 Water System Revenue Bonds, Series 2001 (theSeries 2001 Bonds), and in 2003, the City issued its $112,360,000 Water System Revenue Bonds,Series 2003 (the Series 2003 Bonds). Prior to the issuance of the Series 2001 Bonds, the City hadissued only general obligation bonds to finance improvements to the Utility (Utility GeneralObligations). Currently, the City has outstanding $41,510,000 of Utility General Obligations, withmaturities extending through 2014. The City has paid all debt service on Utility General Obligationsfrom revenues derived from the Utility, but the Utility General Obligations are secured by a pledge ofthe Citys taxing power and by its full faith and credit. By issuing the Series 2001 Bonds, the Series2003 Bonds, the Series 2005A Bonds and the Series 2005B Bonds, the City has not eliminated and isnot eliminating its option to issue Utility General Obligations in the future. Under the TrustAgreement, the Utility General Obligations already outstanding and those that the City may issue inthe future will be payable from Net Revenues in the Junior Subordinated Debt Service Account, butonly after all required deposits to the Bond Fund, the Bond Reserve Fund and the Senior SubordinatedDebt Service Account have been made. (See TRUST AGREEMENT Funds and Flow of

Funds.)

In May 2005, the City also expects to issue its $80,585,000 City of Cincinnati, Ohio WaterSystem Revenue Bonds, Series 2005A (the Series 2005A Bonds), also for the purpose of paying aportion of the cost of the Project. The Series 2005A Bonds will be issued under the Master TrustAgreement, including a Third Supplemental Trust Agreement dated as of May 1, 2005, but as SeniorBonds. (See SECURITY AND SOURCES OF PAYMENT.)

SOURCES AND USES OF FUNDS

The estimated sources and uses of the proceeds of the Series 2005B Bonds are:

Sources of Funds

Principal Amount of Series 2005B Bonds.............................. $ 30,000,000.00

Uses of Funds

Deposit to Construction Fund (a)............................................ $ 29,853,618.29Underwriters Discount.......................................................... 146,381 .71

Total.................................................................................... $ 30,000,000.00_________________________(a) Including $211,573.78 for costs of issuance covering bond insurance premium, legal fees, advertising, printing, and

miscellaneous costs.

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DESCRIPTION OF THE SERIES 2005B BONDS

This Official Statement, in general, describes the terms of the Series 2005B Bonds only duringthe Auction Rate Mode. In the event the Mode is changed, the Series 2005B Bonds will besubject to mandatory tender for purchase on the Mode Change Date (as defined herein) at aPurchase Price equal to the principal amount thereof plus accrued interest, if any.

General

The Series 2005B Bonds will be dated as of their date of delivery, will be issued in fullyregistered form, in the denominations of $25,000 each or integral multiples thereof. The principal ofand interest on the Series 2005B Bonds will be payable in lawful money of the United States ofAmerica. Accrued and unpaid interest on the Series 2005B Bonds will be due on the Interest PaymentDate and payable by wire transfer of immediately available funds to the account specified by theOwner in a written direction received by the Bond Registrar on or prior to a Record Date or, if nosuch account number is furnished, by check mailed by the Bond Registrar to the Owner at the addressappearing on the books required to be kept by the Bond Registrar pursuant to the Trust Agreement.The principal of each Series 2005B Bond will be payable on its Principal Payment Date, uponsurrender thereof at the office of the Bond Registrar. The Series 2005B Bonds will be issued as fullyregistered obligations and will initially be issued as a single bond for each maturity registered in thename of Cede & Co., as nominee for The Depository Trust Company, New York, New York (DTC), anautomated depository for securities and clearinghouse for securities transactions. So long as DTC,or its nominee Cede & Co., is the registered owner of the Series 2005B Bonds, payments of theprincipal of and interest on the Series 2005B Bonds will be mailed directly to DTC or its nominee,Cede & Co., which will remit such payments to the DTC Participants, which, in turn, will remit suchpayments to the Beneficial Owners of the Series 2005B Bonds. See the captionBook-Entry OnlySystem herein.

Book-Entry Only System

DTC will act as the initial securities depository for the Series 2005B Bonds. The Series2005B Bonds will be issued as fully registered securities registered in the name of Cede & Co.(DTCs partnership nominee) or such other name as may be requested by an authorizedrepresentative of DTC. One fully registered bond certificate will be issued for each maturity of theSeries 2005B Bonds, in the aggregate principal amount of such maturity, and will be depositedwith DTC.

DTC, the worlds largest depository, is a limited-purpose trust company organized underthe New York Banking Law, a banking organization within the meaning of the New YorkBanking Law, a member of the Federal Reserve System, a clearing corporation within themeaning of the New York Uniform Commercial Code and a clearing agency registered pursuantto the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and providesasset servicing for over 2 million issues of U.S. and non-U.S. equity, corporate and municipal debtissues, and money market instruments from over 85 countries that DTCs participants (DirectParticipants) deposit with DTC. DTC also facilitates the post-trade settlement among DirectParticipants of sales and other securities transactions in deposited securities through electroniccomputerized book-entry transfers and pledges between Direct Participants accounts. Thiseliminates 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, clearingcorporations and certain other organizations. DTC is a wholly-owned subsidiary of The

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Depository Trust & Clearing Corporation (DTCC). DTCC, in turn, is owned by a number ofDirect Participants of DTC and Members of the National Securities Clearing Corporation,Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging MarketsClearing Corporation (NSCC, GSCC, MBSCC, and EMCC, also subsidiaries of DTCC), as well asby the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the NationalAssociation of Securities Dealers, Inc. Access to the DTC system is also available to others such

as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearingcorporations that clear through or maintain a custodial relationship with a Direct Participant, etherdirectly or indirectly (Indirect Participants). DTC has Standard & Poors highest rating: AAA.The DTC rules applicable to its Participants are on file with the Securities and ExchangeCommission. More information about DTC can be found at www.dtcc.com.

Purchases of Series 2005B Bonds under the Book-Entry System must be made by orthrough Direct Participants, which will receive a credit for the Series 2005B Bonds on DTCsrecords. The ownership interest of each actual purchaser of a Series 2005B Bond (BeneficialOwner) is in turn to be recorded on the Direct and Indirect Participants records. BeneficialOwners 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 theBeneficial Owner entered into the transaction. Transfers of ownership interests in the Series2005B Bonds are to be accomplished by entries made on the books of Direct and IndirectParticipants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificatesrepresenting their ownership interests in the Series 2005B Bonds, except in the event that use ofthe Book-Entry System for the Series 2005B Bonds is discontinued.

To facilitate subsequent transfers, all Series 2005B Bonds deposited by Direct Participantswith DTC are registered in the name of DTCs partnership nominee, Cede & Co. or such othername as may be requested by an authorized representative of DTC. The deposit of Series 2005BBonds with DTC and their registration in the name of Cede & Co. or such other nominee do noteffect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial

Owners of the Series 2005B Bonds; DTCs records reflect only the identity of the DirectParticipants to whose accounts such Bonds are credited, which may or may not be the BeneficialOwners. The Direct and Indirect Participants will remain responsible for keeping account of theirholdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by DirectParticipants to Indirect Participants, and by Direct Participants and Indirect Participants toBeneficial Owners will be governed by arrangements among them, subject to any statutory orregulatory requirements as may be in effect from time to time. Beneficial Owners of the Series2005B Bonds may wish to take certain steps to augment transmission to them of notices ofsignificant events with respect to the Series 2005B Bonds, such as redemptions, tenders, defaults,and proposed amendments to security documents. For example, Beneficial Owners of the Series2005B Bonds may wish to ascertain that the nominee holding the Series 2005B Bonds for theirbenefit has agreed to obtain and transmit notices to Beneficial Owners, or in the alternative,Beneficial Owners may wish to provide their names and addresses to the registrar and request thatcopies of the notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Series 2005B Bonds arebeing redeemed, DTCs practice is to determine by lot the amount of the interest of each DirectParticipant in the Series 2005B Bonds to be redeemed.

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Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote withrespect to the Series 2005B Bonds unless authorized by a Direct Participant in accordance withDTCs procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Trustee assoon as possible after the record date. The Omnibus Proxy assigns Cede & Co.s consenting orvoting rights to those Direct Participants to whose accounts the Series 2005B Bonds are creditedon the record date (identified in a listing attached to the Omnibus Proxy).

Principal and interest payments on the Series 2005B Bonds will be made to Cede & Co. orsuch other nominee as may be requested by an authorized representative of DTC. DTCs practiceis to credit Direct Participants accounts, upon DTCs receipt of funds and corresponding detailinformation from the City or the Trustee on the payable date in accordance with their respectiveholdings shown on DTCs records. Payments by Participants to Beneficial Owners will begoverned by standing instructions and customary practices, as is the case with securities held forthe accounts of customers in bearer form or registered in street name, and will be theresponsibility of such Participant and not of DTC, the Trustee or the City, subject to any statutoryor regulatory requirements as may be in effect from time to time. Payments of principal andinterest to Cede & Co. (or such other nominee as may be requested by an authorized representativeof DTC) is the responsibility of the Trustee, disbursement of such payments to Direct Participants

is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will bethe responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as securities depository with respect to Series2005B Bonds at any time by giving notice to the Trustee and the City. Under such circumstances,in the event that a successor securities depository is not obtained, bond certificates are required tobe printed and delivered.

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

Direct Participants and Indirect Participants may impose service charges on book entryinterest owners in certain cases. Purchasers of book entry interests should discuss that possibilitywith their brokers.

The City and the Trustee have no role in the purchases, transfers or sales of book entryinterests. The rights of book entry interest owners to transfer or pledge their interests, and the mannerof transferring or pledging those interests, may be subject to applicable state law. Book entry interestowners may want to discuss with their legal advisers the manner of transferring or pledging their bookentry interests.

The City and Trustee have no responsibility or liability for any aspects of the records ornotices relating to, or payments made on account of, book entry interest ownership, or for

maintaining, supervising or reviewing any records relating to that ownership.

The City can not and does not give any assurances that DTC, Direct Participants, IndirectParticipants or others will distribute to the book entry interest owners payments of debt service on theSeries 2005A Bonds made to DTC as the registered owner, or any redemption or other notices, or thatthey will do so on a timely basis, or that DTC will serve and act in a manner described in this OfficialStatement.

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Revision of Book Entry System; Replacement Bonds

The Trust Agreement provides for issuance of fully registered Series 2005B Bonds(Replacement Series 2005B Bonds) directly to owners of Series 2005B Bonds other than DTC only inthe event that DTC (or a successor securities depository) determines not to continue to act as securitiesdepository for the Series 2005B Bonds. Upon occurrence of this event, the City may in its discretionattempt to have established a securities depository book entry relationship with another securitiesdepository. If the City does not do so, or is unable to do so, and after the Trustee has made provisionfor notification of the owners of book entry interests in the Series 2005B Bonds by appropriate noticeto DTC, the City and the Trustee will authenticate and deliver Replacement Series 2005B Bonds ofany one maturity, in the denomination of $5,000 or any integral multiple of $5,000, to or at thedirection of any persons requesting such issuance, and at their expense (including printing costs) if theevent is not the result of City action or inaction.

Debt service on Replacement Series 2005B Bonds will be payable when due withoutdeduction for the services of the Trustee as paying agent. Principal and any premium will be payableto the registered owner upon presentation and surrender at the principal corporate trust office of theTrustee. Interest will be payable on the interest payment date by the Trustee by check, mailed to the

registered owner of record on the Bond Register as of the 15th day of the month preceding the interestpayment date.

Replacement Series 2005B Bonds will be exchangeable for Replacement Series 2005B Bondsof authorized denominations, and transferable, at the office of the Trustee, as Registrar, withoutcharge (except taxes or governmental fees). Exchange or transfer of then redeemable ReplacementSeries 2005B Bonds is not required to be made (i) between the 15th day preceding the mailing ofnotice of redemption of Replacement Series 2005B Bonds and the date of that mailing, or (ii) of aparticular Replacement Bond selected for redemption (in whole or part).

Registration, Transfer and Exchange

The Series 2005B Bonds will be and have all the qualities and incidents of negotiableinstruments, subject to the provisions for registration, exchange and transfer contained in the TrustAgreement and in the Series 2005B Bonds; however, as long as the Series 2005B Bonds aremaintained under a book-entry only system, transfers of ownership interests in the Series 2005BBonds will be made as described above underBook-Entry Only System. The Series 2005B Bondswill be transferable only upon the registration books maintained for such purpose at the corporate trustoffice of the Bond Registrar. So long as any of the Series 2005B Bonds remain outstanding, the BondRegistrar must maintain and keep the bond registration books.

All Series 2005B Bonds presented for transfer or exchange (if so required by the City or theBond Registrar) shall be accompanied by a written instrument or instruments of transfer orauthorization for exchange, in form and with guaranty of signature satisfactory to the City or the BondRegistrar, duly executed by the registered owner or by his or her duly authorized attorney. TheRegistrar or the City may require payment from the registered owner or his transferee, as the case maybe, of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed inrelation thereto. Such charges and expenses shall be paid before any new Series 2005B Bonds shallbe delivered.

New Series 2005B Bonds delivered upon any transfer or exchange will be valid obligations ofthe City, evidencing the same debt as the Series 2005B Bonds surrendered, will be secured by the

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Trust Agreement, and will be entitled to all of the security and benefits of the Trust Agreement to thesame extent as the Series 2005B Bonds surrendered.

Whenever any Series 2005B Bond shall be delivered to the Bond Registrar for cancellation,upon payment of the principal amount thereof, or for replacement, transfer or exchange, such Series2005B Bond shall either be retained for a period of time specified by the City or, at the option of theCity, be canceled and destroyed by the Bond Registrar as authorized by law, and counterparts of acertificate of destruction evidencing such destruction shall be furnished to the City.

Interest

Interest on the Series 2005B Bonds that are in an Auction Rate Mode with an Auction Periodover 180 days is required to be calculated on the basis of a 360-day year composed of twelve 30-daymonths. Interest on the Series 2005B Bonds that are in an Auction Rate Mode with an Auction RatePeriod of 180 days or less is required to be calculated on the basis of a 360-day year for the actualnumber of days elapsed to the Interest Payment Date. The interest rates for the Series 2005B Bondscontained in the records of the Bond Registrar shall be conclusive and binding upon the City, theTender Agent, if any, the Bond Registrar, the Auction Agent (as defined herein), all Broker-Dealers,the Bond Insurer (as defined herein) and the Owners. No Series 2005B Bond in an Auction RateMode may bear interest at an interest rate higher than the Maximum Auction Rate set under the TrustAgreement.

Determination of Auction Period Rate and Auction Period

Auction Period Rates and Auction Period. The initial Auction Period for the Series 2005BBonds will apply to the period commencing on the Closing Date to and including the initial AuctionDate specified below. The initial Auction Period Rate applicable to the Series 2005B Bonds will beestablished by the Underwriters prior to the Closing Date. Thereafter, the Series 2005B Bonds willbear interest at an Auction Period Rate determined on each Auction Date for each Auction Period

pursuant to the Auction Procedures described in AUCTION PROCEDURES attached hereto asAPPENDIX B. All Series 2005B Bonds will initially be in the same Auction Period, provided thatless than all of the Series 2005B Bonds may be converted to another Mode or to a different AuctionPeriod. See Change in Length of Auction Period below and DESCRIPTION OF SERIES 2005BBONDS Changes in Mode Partial Mode Changes and Subseries Designations herein. TheAuction Period and Auction Date applicable to the Series 2005B Bonds will be the Auction Periodand Auction Date set forth below until the length of such Auction Period is changed in accordancewith the Auction Procedures. See AUCTION PROCEDURES attached hereto as APPENDIX B.

Initial

Auction Date Auction Day(1) Auction Period(2)

Initial Interest

Payment Date

Interest

Payment Day(3)

June 22, 2005 Wednesday 35-day June 23, 2005 Thursday

(1) If such day is not a Business Day, an Auction will be held on the Business Day immediatelypreceding such day.

(2) Subject to change to a different Auction Period and to certain exceptions. See AUCTIONPROCEDURES CHANGES IN AUCTION PERIOD OR AUCTION DATE attachedhereto as APPENDIX B.

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(3) If such day is not a Business Day, interest will be payable on the Business Day immediatelyfollowing such day.

Auction Period Rate. The Auction Period Rate means the rate of interest to be borne by theSeries 2005B Bonds during each Auction Period. The Auction Period Rate is based on the AuctionRate which is determined by the Auction Agent in accordance with the Auction Procedures describedin AUCTION PROCEDURES attached hereto as APPENDIX B; provided, however, that if theAuction Agent fails to determine the Auction Rate for any Auction Period or if no Auction is held onthe Auction Date, the Auction Period Rate for such Auction Period will be the No Auction Rate.Notwithstanding the foregoing, if an Event of Default resulting from a failure to pay principal of orinterest on any Series 2005B Bonds when due has occurred and is continuing and the Bond Insurerhas not cured such default pursuant to the terms of the Credit Facility securing the Series 2005BBonds, the Auction Period Rate for the next succeeding Auction Period shall be the Default Rate. Inthe event that all conditions for a change in the Mode from an Auction Rate Mode to another Mode orthe conversion from one Auction Period to another Auction Period have not been met the Series2005B Bonds will bear interest at the Maximum Auction Rate for the next Auction Period, whichAuction Period will be seven days. In no event may the Auction Period Rate exceed the MaximumAuction Rate set under the Trust Agreement.

Interest Payment Date. Interest on the Series 2005B Bonds will be payable on the initialInterest Payment Date and on each Interest Payment Date thereafter. The initial Interest PaymentDate and each Interest Payment Date thereafter are those set forth above for the Series 2005B Bondsso long as the Auction Period set forth above for the Series 2005B Bonds is not converted to anotherAuction Period. In the event of a conversion from the Auction Period applicable to all or a portion ofthe Series 2005B Bonds to another Auction Period, interest on such converted portion of the Series2005B Bonds will be payable on each Interest Payment Date (as defined in AUCTIONPROCEDURES attached hereto as APPENDIX B) for such new Auction Period.

Auction Date. An Auction to determine the interest rate of the Series 2005B Bonds for eachAuction Period will be held on the initial Auction Date and each Auction Date thereafter. The initial

Auction Date and each Auction Date thereafter are set forth above for the Series 2005B Bonds so longas the Auction Period set forth above for the Series 2005B Bonds is not converted to another AuctionPeriod. In the event of a conversion from an Auction Period applicable to all or a portion of the Series2005B Bonds to another Auction Period, Auctions will be held on each Auction Date for all or aportion of the Series 2005B Bonds converted to such new Auction Period. The day of the week onwhich Auctions are held may be changed by the Auction Agent. See AUCTION PROCEDURES CHANGES IN AUCTION PERIOD OR AUCTION DATE in AUCTION PROCEDURESattached hereto as APPENDIX B.

Auction Agent. The City will enter into the Auction Agreement initially with The Bank ofNew York Trust Company, N.A. (the Auction Agent), pursuant to which the Auction Agent, as agentfor the Bond Registrar, will agree to perform the duties of Auction Agent. The Auction Agreement

will provide, among other things, that the Auction Agent will determine the Auction Rate for eachAuction in accordance with the Auction Procedures.

Orders by Existing Owners and Potential Owners. The procedure for submitting orders priorto the Submission Deadline on each Auction Date, and the particulars with regard to the determinationof the Auction Period Rate (collectively, the Auction Procedures), are described in APPENDIX BAUCTION PROCEDURES in APPENDIX B hereto.

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Amendment of Auction Procedures. The provisions of the Trust Agreement concerning theAuction Rate Mode with respect to the Series 2005B Bonds, including without limitation thedefinitions of Auction Rate, All Hold Rate, Maximum Auction Rate, Minimum Auction Rate, NoAuction Rate, Index, Auction Multiple, Default Rate and Auction Period Rate, may be amended byobtaining the consent of the Owners of all the Series 2005B Bonds and the Bond Insurer. All Ownerswill be deemed to have consented to such an amendment if on the first Auction Date occurring at least

20 days after the Bond Registrar mailed notice to such Owners (i) the Auction Period Rate determinedfor such date is the Winning Bid Rate and (ii) there has been delivered to the City and the BondRegistrar a Favorable Opinion of Bond Counsel. See AUCTION PROCEDURES MISCELLANEOUS PROVISIONS REGARDING AUCTIONS in APPENDIX B hereto.

Changes in Auction Periods and Auction Dates do not require the amendment of the AuctionProcedures or receipt of any consents. See AUCTION PROCEDURES CHANGES INAUCTION PERIOD OR AUCTION DATE in APPENDIX B hereto.

Change in Length of Auction Period. The City may from time to time with the consent of theBond Insurer, or, during an Event of Default, the Bond Insurer, on any Interest Payment Date for anAuction Period, change the length of the Auction Period with respect to all or a portion of the Series

2005B Bonds. The City shall initiate the change in the length of the Auction Period by giving writtennotice to the Bond Insurer, the Auction Agent, the Broker-Dealers and DTC and the proposedeffective date of the change, at least 10 Business Days prior to the Auction Date for such AuctionPeriod, provided however, that in the case of a change from a Special Auction Period of 92 or moredays, the date of such change shall be the Interest Payment Date immediately following the last day ofsuch Special Auction Period. In the event of change of the Auction Period for a portion of the Series2005B Bonds, the Bond Registrar, in its discretion, may select the particular Series 2005B Bonds orportion thereof as to which the Auction Period is to be changed and the Series 2005B Bonds may beredesignated into one or more subseries for each separate Auction Period with a new CUSIP numberfor each subseries.

No change in the length of an Auction Period will be effective unless Sufficient Clearing Bids

existed at both the Auction before the date on which the notice of the proposed change was given andthe Auction immediately preceding the proposed change. On the date of the conversion of all or aportion of the Series 2005B Bonds from one Auction Period to another Auction Period, the Series2005B Bonds which are not the subject of a specific Hold Order or Bid will be deemed to be subjectto a Sell Order. In the event of a failed conversion to another Auction Period due to the lack ofSufficient Clearing Bids, the Series 2005B Bonds will automatically convert to a seven-day AuctionPeriod and will bear interest for the next Auction Period at the Maximum Auction Rate. Inconnection with a full or partial conversion from one Auction Period to another Auction Period,written notice of such conversion is required to be given in accordance with the Auction Procedures;however, the Series 2005B Bonds will not be subject to mandatory tender on such conversion date.See AUCTION PROCEDURES CHANGES IN AUCTION PERIOD OR AUCTION DATEin APPENDIX B hereto.

Special Considerations Relating to the Series 2005B Bonds Bearing Interest at an

Auction Period Rate. The Auction Agreements each will provide that the Auction Agent mayresign from its duties as Auction Agent by giving at least 90 days notice or 45 days notice, if it hasnot been paid, to the Authority, the City, the Bond Insurer and the Trustee and does not require, asa condition to the effectiveness of such resignation, that a replacement Auction Agent be in place ifits fee has not been paid provided that its fee remains unpaid. The Broker-Dealer Agreements eachwill provide that the Broker-Dealer thereunder may resign upon 30 business days notice or 5 days

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notice, in certain circumstances, and does not require, as a condition to the effectiveness of suchresignation, that a replacement Broker-Dealer be in place. For any Auction Period during whichthere is no duly appointed Auction Agent, or during which there is no duly appointed Broker-Dealer, it will not be possible to hold Auctions, with the result that the interest rate on the AuctionRate Bonds will be determined as follows: (i) if the preceding Auction Period was a period of 35

days or less, the new Auction Period will be the same as the preceding Auction Period and theAuction Rate for the new Auction Period will be the same as the Auction Rate for the precedingAuction Period, and (ii) if the preceding Auction Period uses a period of greater than 35 days, thenew Auction Period will be a seven-day Auction Period and the Auction Rate for the new AuctionPeriod will be the same as the Auction Rate for the preceding Auction Period.

The Broker-Dealer Agreements each will provide that a Broker-Dealer may submit Ordersin Auctions for its own account. In the Broker-Dealer Agreements, each Broker-Dealer will agreeto handle customers orders in accordance with its duties under applicable securities laws andrules.

Any Broker-Dealer submitting an Order for its own account in any Auction could have anadvantage over other Potential or Existing Holders in that it would have knowledge of other Ordersplaced through it in that Auction. A Broker Dealer would not, however, have specific knowledgeof Orders submitted by other non-affiliated Broker-Dealers, if any. Also, a Broker-Dealer mayexercise discretion regarding client orders which could be an advantage to those clients because thebroker-dealer exercising discretion would have knowledge of other orders placed through it in theauction. In addition, as a result of bidding by a Broker-Dealer in an Auction, the Auction Ratemay be higher or lower than the rate that would have prevailed had the Broker-Dealer not bid. ABroker-Dealer may also bid in an Auction in order to prevent what would otherwise be (a) a failedAuction, (b) an all-hold Auction, or (c) the implementation of an Auction Rate that the Broker-Dealer believes, in its sole judgment, does not reflect the market for such securities at the time ofthe Auction. A Broker-Dealer may also encourage additional or revised investor bidding in order

to prevent an all-hold Auction.

The initial Broker-Dealers for the Series 2005B Bonds have advised the City that they intendinitially to make a market in the Series 2005B Bonds between Auctions; however, the Broker-Dealersare not obligated to make such markets, and no assurance can be given that any secondary markettherefor will develop.

During an Auction Rate Period a beneficial owner of an Auction Rate Bond may sell, transferor dispose of an Auction Rate Bond only pursuant to a Bid or Sell Order in accordance with theAuction Procedures (see APPENDIX B) or through a Broker-Dealer. A beneficial owner of theAuction Rate Bonds may not be able to sell some or all of such Auction Rate Bonds at an Auction ifthe Auction fails; that is, if there are more Auction Rate Bonds offered for sale than there are buyersfor such Auction Rate Bonds. Also, a beneficial owner of the Auction Rate Bonds that places HoldOrders (orders to retain Auction Rate Bonds) at an Auction only at a specified rate will not retain theirAuction Rate Bonds if that specified rate exceeds the rate set at the Auction. Finally, a beneficialowner of the Auction Rate Bonds that places a Bid for Auction Rate Bonds or submits a Hold Orderfor Auction Rate Bonds, in either case without specifying a minimum rate, may receive a rate lowerthan the expected market rate for the Auction Rate Bonds. Any number of factors may have an effecton the level of interest from time to time in Auctions for the Auction Rate Bonds or in auction ratesecurities in general, including, among other things, the availability and attractiveness of alternative

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investments, the perceived risk of owning the security (whether related to credit, liquidity or any otherrisk), uncertainties related to regulatory inquiries and actions, changes in tax or accounting treatmentsavailable to potential investors and market sentiment generally. For example, recent clarifications ofU.S. generally accepted accounting principles relating to the treatment of auction rate securities mayaffect demand for the Auction Rate Bonds and auction rate securities generally among certaincorporate investors. Neither the Underwriters, the Company nor the Authority can predict the extent

to which any of these or other factors may affect the market for the Auction Rate Bonds or Auctionsfrom time to time.

Changes in Auction Periods and Auction Dates do not require the amendment of the AuctionProcedures.

Broker-Dealers

The initial Broker-Dealers for each series of the Bonds are Morgan Stanley & Co.Incorporated and Seasongood & Mayer, LLC. The City and the Auction Agent will enter into anagreement with each Broker-Dealer with respect to the Series 2005B Bonds and may enter intosimilar agreements (each, a Broker-Dealer Agreement, and collectively, the Broker-DealerAgreements) with one or more additional broker-dealers (collectively, the Broker-Dealers) selected bythe City and the Auction Agent with the consent of the Authority and the Bond Insurer which providefor their participation in Auctions. The Auction Agent will pay to each Broker-Dealer after eachauction, from funds provided by the City, a service charge that will be based on a rate equal to thepercentage of the stated value of the Series 2005B Bonds held by such Broker Dealer and suchBroker-Dealers customers upon settlement in an Auction calculated on an annualized basis. ABroker-Dealer may share a portion of such fee with non-participating broker-dealers that submit Bidsto the Broker-Dealer that are fulfilled at an Auction.

SEC Inquiries

The Securities and Exchange Commission (the Commission) has requested information froma number of broker-dealers regarding certain of their practices in connection with auction ratesecurities. Morgan Stanley & Co. Incorporated has advised the City that (i) it, as a participant in theauction rate securities markets, has received a letter from the Commission requesting that itvoluntarily conduct an investigation regarding certain of its practices and procedures in connectionwith those markets and (ii) Morgan Stanley & Co. Incorporated is cooperating and expects to continueto cooperate with the Commission in providing the requested information. No assurance can be givenas to whether the results of this process will affect the market for the Series 2005B Bonds or theAuctions therefor.

Changes in Mode

Subject to the consent of the Bond Insurer, the Series 2005B Bonds may be changed to anyother Mode at the times and in the manner summarized herein. In addition, the Bond Insurer shallhave the right to direct a change in Mode if the City is then in default in performing any of itscovenants and obligations under the Trust Agreement.

In the event that the No Auction Rate has been in effect continuously for 90 days or theAuction Period Rate has been the Maximum Auction Rate for the lesser of (i) three consecutiveauction periods or (ii) 70 days, then the City shall promptly commence the process of converting theinterest rate on the Series 2005B Bonds to another interest rate acceptable to the Bond Insurer.

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Notice of Intention to Change Mode. The City is to give written notice to the Notice Partiesand each Rating Agency of its intention to effect a change in the Mode from the Mode then prevailingto another Mode (the New Mode) specified in such written notice, together with the proposedeffective date of such change in the Mode (the Mode Change Date). Such notice is to be given at least15 days prior to the Mode Change Date.

General Provisions Applying to Changes from One Mode to Another.

(i) Any change in Mode from the Auction Rate Mode to a Mode other than the FixedRate Mode requires the Bond Insurers consent to the proposed Liquidity Facility Provider and theproposed Liquidity Facility itself, provided that such consent is not unreasonably withheld.

(ii) The Mode Change Date must be a Business Day.

(iii) Additionally, the Mode Change Date must be an Interest Payment Date; provided,however, in the case of a Special Auction Period of 92 or more days such date will be the Interest

Payment Date following the last day of such Special Auction Period.

(iv) On or prior to the date the City provides the notice to the Notice Parties, the City is todeliver to the Bond Registrar (with a copy to all other Notice Parties) a letter from counsel acceptableto the Bond Registrar and addressed to the Bond Registrar to the effect that it expects to be able todeliver a Favorable Opinion of Bond Counsel on the Mode Change Date.

(v) No change in Mode will become effective unless all conditions precedent thereto havebeen met and the following items have been delivered to the Bond Registrar, the Bond Insurer and theRemarketing Agent or Broker-Dealer by 2:30 p.m., or such later time as is acceptable to the City, theBond Registrar, and the Remarketing Agent or Broker-Dealer, on the Mode Change Date: (a) exceptas otherwise provided in the Trust Agreement, a Favorable Opinion of Bond Counsel dated the Mode

Change Date, and (b) a certificate of an authorized officer of the Tender Agent designated to act inconnection with the mandatory purchase of the Series 2005B Bonds upon change of the Mode ChangeDate, to the effect that all of the Series 2005B Bonds tendered or deemed tendered have beenpurchased at a price equal to the Purchase Price thereof, which Purchase Price will be paid solely fromthe proceeds of remarketing and will not be payable by the City.

(vi) If all conditions to the Mode Change are met, the Interest Period(s) or the AuctionPeriod for the New Mode will commence on the Mode Change Date and the Interest Rate(s)(together, in the case of a change to the Commercial Paper Mode, with the Interest Period(s)) will bedetermined by the Remarketing Agent pursuant to the Trust Agreement.

(vii) In the event the foregoing conditions have not been satisfied by the Mode Change

Date, the New Mode will not take effect and the Series 2005B Bonds that are the subject of the ModeChange Notice will continue to be in the Auction Rate Mode and the Auction Period Rate for the nextsucceeding Auction Period will be determined pursuant to the Auction Procedures; provided,however, that the Auction Period Rate for the Auction Period commencing on the failed ModeChange Date will be the Maximum Auction Rate and the Auction Period will be a seven-day AuctionPeriod.

Partial Mode Changes and Subseries Designations. With the consent of the Bond Insurer,less than all of the Series 2005B Bonds may be converted to another Mode, provided, however, that in

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such event the Series 2005B Bonds shall be redesignated into one or more subseries for each separateMode with a new CUSIP number for each subseries. If less than all of the Series 2005B Bondssubject to a particular Mode are converted to another Mode, the particular Series 2005B Bonds orportions thereof which are to be converted to a New Mode are to be selected by the Bond Registrar inits discretion subject to the Authorized Denominations provisions of the Trust Agreement.

Redemption Provisions

Optional Redemption. The Series 2005B Bonds are subject to optional redemption prior tomaturity, at the option of the City, in whole or in part, on any Interest Payment Date immediatelyfollowing an Auction Period, at a redemption price equal to the principal amount thereof, plus accruedinterest, if any, to the Redemption Date.

Sinking Fund Installments. The Series 2005B Bonds are subject to mandatory redemption bylot from sinking fund installments on December 1, 2022 and each December 1 thereafter, at aRedemption Price equal to 100% of their principal amounts, plus accrued interest only to the date ofredemption, in the following years and principal amounts:

Year Amount

December 1, 2022 $6,575,000December 1, 2023 7,525,000December 1, 2024 7,825,000December 1, 2025 8,075,000

Notice and Effect of Redemption

Notice of such redemption shall, at least 30 days prior to the redemption date, be filed with theBond Registrar and be mailed, postage prepaid, by the Bond Registrar to the Bond Insurer and allregistered owners of Series 2005B Bonds to be redeemed at their addresses as they appear of recordon the books of the Bond Registrar prior to the date fixed for redemption; provided, however, thatfailure to mail such notice of redemption to a registered owner shall not render ineffective anyproceedings for redemption with respect to Series 2005B Bonds held by registered owners to whomnotice was properly mailed. No default affecting any Series 2005B Bond, whether in the notice ofredemption or the mailing thereof, shall affect the validity of the redemption proceedings for any otherSeries 2005B Bonds. Interest shall cease to accrue on any Series 2005B Bond duly called for priorredemption on the redemption date, if payment thereof has been duly provided. The privilege oftransfer or exchange of any of the Series 2005B Bonds selected for redemption shall be suspended.

At least two business days in advance of mailing the notice of redemption as specified above,the Bond Registrar shall send such notice of redemption by certified mail, overnight mail/delivery

service or telecopy to DTC; and at least 30 days prior to the redemption date, mail such notice ofredemption to one or more national information services which disseminate notices of redemption ofobligations such as the Series 2005B Bonds; provided, however, that failure to distribute such noticeof redemption to such depositories and national information services shall not render ineffective anycalling of Series 2005B Bonds for prior redemption.

Each notice of redemption shall state the date of dissemination of such notice; the date of issueof the Series 2005B Bonds; the redemption date; the redemption price; the place or places of

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redemption (including the name and appropriate address or addresses of the paying agent); the datesof maturity and interest rates borne by the Series 2005B Bonds to be redeemed; the CUSIP number (ifany) of the maturity or maturities to be redeemed; and, if less than all of any such maturity, thedistinctive certificate numbers of the Series 2005B Bonds of such maturity to be redeemed, and, in thecase of Series 2005B Bonds to be redeemed in part only, the respective portions of the principalamount thereof to be redeemed. Each such notice shall also state that on such date there will become

due and payable on each of such Series 2005B Bonds, the redemption price thereof, or of suchspecified portion of the principal amount thereof in the case of a Series 2005B Bond to be redeemedin part only, together with interest accrued thereon to the redemption date; and that from and aftersuch redemption date, interest thereon shall cease to accrue, and shall require that such Series 2005BBonds be then surrendered at the address or addresses of the paying agent specified in the redemptionnotice. Failure to include in such notice of redemption all of the information specified in thisparagraph, shall not render ineffective any proceedings for the redemption of the Series 2005B Bonds.

Purchase of Bonds in Lieu of Redemption

The City may elect to purchase any Series 2005B Bonds that have been called for redemptionon the redemption date by giving the Bond Registrar, the Remarketing Agent, the Liquidity Facility

Provider and the Bond Insurer written notice at least two Business Days prior to the date the Series2005B Bonds are to be redeemed. Any Series 2005B Bonds so purchased by the City cannot be soldor transferred by the City (or any person acting on its behalf) or remarketed by the Remarketing Agentand must be immediately cancelled without the delivery by the City to the Bond Registrar of aFavorable Opinion of Bond Counsel and the written consent of the Bond Insurer. The City may notenter into any agreement or consent to or participate in any arrangement pursuant to which Series2005B Bonds are tendered to or purchased by it for any purpose other than cancellation or legaldefeasance of such Series 2005B Bonds in lieu of redemption without the prior written consent of theBond Insurer.

Tender for Purchase of the Series 2005B Bonds

Mandatory Purchase of all Series 2005B Bonds on Any Mode Change Date. The Series2005B Bonds to be changed to any Mode from any other Mode are subject to mandatory tender forpurchase on the Mode Change Date at the Purchase Price. Any Mode Change Date is also an InterestPayment Date. For a discussion of circumstances under which the Bond Insurer could require a Modechange to occur, see DESCRIPTION OF THE SERIES 2005B BONDS Changes in Modeherein and AUCTION PROCEDURES DETERMINATION OF AUCTION PERIOD RATEin APPENDIX B hereto.

If all of the Series 2005B Bonds subject to mandatory tender for purchase on a Mode ChangeDate are not remarketed, then the Existing Owners of all of the Series 2005B Bonds will continue tohold the Series 2005B Bonds in a seven-day Auction Period at the Maximum Auction Rate until thenext Auction.

Notice of Mandatory Tender for Purchase. The Bond Registrar, at least 15 days prior to anyMode Change Date for the Series 2005B Bonds, is to give notice of the mandatory tender for purchaseof the Series 2005B Bonds on such Mode Change Date.

Except as otherwise provided in the Trust Agreement, notice of any mandatory tender ofSeries 2005B Bonds stating that such Series 2005B Bonds are to be purchased is to be provided by theBond Registrar or caused to be provided by the Bond Registrar by mailing a copy of the notice of

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mandatory tender by first-class mail to each Owner of Series 2005B Bonds at the respective addressesshown on the registry books. Each notice of mandatory tender for purchase is required to identify thereason for the mandatory tender for purchase, and specify the Mandatory Purchase Date, the PurchasePrice, the place and manner of payment, that the Owner has no right to retain such Series 2005BBonds and that no further interest will accrue from and after the Mandatory Purchase Date to suchOwner. Each notice of mandatory tender for purchase caused by a change in the Mode applicable to

the Series 2005B Bonds is required in addition to specify the conditions that have to be satisfied pursuant to the Trust Agreement in order for the New Mode to become effective and theconsequences that the failure to satisfy any of such conditions would have. In the event a mandatorytender of Series 2005B Bonds occurs at or prior to the same date on which an optional tender forpurchase is scheduled to occur, the terms and conditions of the applicable mandatory tender forpurchase is to control. Any notice mailed as described above will be conclusively presumed to havebeen duly given, whether or not the Owner of any Series 2005B Bond receives the notice, and thefailure of such Owner to receive any such notice will not affect the validity of the action described insuch notice. Failure by the Bond Registrar to give a notice as provided under this caption would notaffect the obligation of the Tender Agent to purchase the Series 2005B Bonds subject to mandatorytender for purchase on the Mandatory Purchase Date.

Source of Funds for Purchase of the Series 2005B Bonds

On or before the close of business on the Mode Change Date with respect to the Series 2005BBonds, the Tender Agent is to purchase the Series 2005B Bonds from the Owners at the PurchasePrice. Funds for the payment of such Purchase Price are to be derived only from proceeds ofremarketing and not from City funds, and the City has no obligation to provide funds from any othersource for the purchase of the Series 2005B Bonds.

Delivery and Payment for Purchased Series 2005B Bonds; Undelivered Series 2005B Bonds

Except as otherwise required or permitted by the book-entry only system of the SecuritiesDepository, Series 2005B Bonds purchased as set forth above are required to be delivered (with allnecessary endorsements) at or before 12:00 noon on the Purchase Date or Mandatory Purchase Date,at the office of the Tender Agent; provided, however, that payment of the Purchase Price of any Series2005B Bond purchased will be made only if such Series 2005B Bond so delivered to the TenderAgent conforms in all respects to the description thereof in the notice of tender. Payment of thePurchase Price is to be made by wire transfer in immediately available funds by the Tender Agent bythe close of business on the Purchase Date or Mandatory Purchase Date, or, if the Owner has notprovided or caused to be provided wire transfer instructions, by check mailed to the Owner at theaddress appearing in the books required to be kept by the Bond Registrar pursuant to the TrustAgreement. If Series 2005B Bonds to be purchased are not delivered by the Owners to the TenderAgent by 12:00 noon on the Purchase Date or Mandatory Purchase Date, the Tender Agent is requiredto hold any funds received for the purchase of those Series 2005B Bonds in trust uninvested in aseparate account and pay such funds to the former Owners upon presentation of the Series 2005B

Bonds subject to tender. Such undelivered Series 2005B Bonds will be deemed tendered and cease toaccrue interest as to the former Owners on the Purchase Date or Mandatory Purchase Date, andmoneys representing the Purchase Price will be available against delivery of those Series 2005BBonds at the Principal Office of the Tender Agent; provided, however, that any funds which are soheld by the Tender Agent and which remain unclaimed by the former Owners of any such Series2005B Bond not presented for purchase for a period of two years after delivery of such funds to theTender Agent will, to the extent permitted by law, upon request in writing by the City and thefurnishing of security or indemnity to the Tender Agents satisfaction, be paid to the City free of anytrust or lien and thereafter the former Owner of such Series 2005B Bond will look only to the City and

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then only to the extent of the amounts so received by the City without any interest thereon and theTender Agent will have no further responsibility with respect to such moneys or payment of thePurchase Price of such Series 2005B Bonds. The Tender Agent will authenticate a replacement Series2005B Bond for any undelivered Series 2005B Bond which may then be remarketed by theRemarketing Agent.

SECURITY AND SOURCES OF PAYMENT

General

The Series 2005B Bonds are special obligations of the City, payable solely from the sourcesdescribed, subject to bankruptcy laws and other laws affecting creditors rights and to the exercise ofjudicial discretion.

The Trust Agreement requires that all Revenues be deposited in the Revenue Fund andspecifies the required use and deposit of moneys in the Revenue Fund. In general, the Trust

Agreement requires that the Revenues on deposit in the Revenue Fund be applied first for the paymentof the Utilitys operating and maintenance expenses, then for the funding of the payments of principalof and interest on the Senior Bonds payable from the Bond Fund, then for any required deposits to theBond Reserve Fund (which secures Senior Bonds but does not secure the Series 2005B Bonds or anyother Subordinate Debt) to cause the balance in that Fund to equal the Bond Reserve Requirement,then for the funding of payments of principal of and interest on Senior Subordinated Debt, then for thefunding of payment of principal of and interest on other Subordinate Debt, with any balanceremaining at the end of each calendar year eligible to be transferred to the Water System ReserveFund, after provisions have been made for an adequate working capital reserve. For a more detaileddescription of the Trust Agreements requirements regarding the use and deposit of the Revenues andthe required and permitted uses of moneys in the various Special Funds. See TRUSTAGREEMENT Funds and Flow of Funds.

The payment of debt service on the Series 2005B Bonds and any other Senior SubordinatedDebt is secured by a pledge of Net Revenues, but subordinate to the pledge of Net Revenues securingSenior Bonds, and by a lien on the Senior Subordinated Debt Service Fund. The Trust Agreementrequires the payment of the principal of and interest on Senior Subordinated Debt from the SeniorSubordinated Debt Service Fund, but only if and to the extent that the City has made all requireddeposits to and payments from the Bond Fund and Bond Reserve Fund. The Series 2005B Bonds arenot secured by any lien on the Bond Fund or the Bond Reserve Fund, which are pledged solely for thepayment of debt service on Senior Bonds. Any pledge of or lien on any account, revenue, money orother intangible property not in the custody of the Trustee will be valid and enforceable only to theextent permitted by law.

Nothing in the Trust Agreement is to be construed as requiring the City to use moneys orrevenues from any City source other than Net Revenues and Special Funds under the TrustAgreement. The general credit of the City is not pledged to the payment of debt service on the SeniorBonds, the Series 2005B Bonds or on any other Senior Subordinated Debt, and the holders thereof aregiven no right to have any excises or taxes levied by the City for the payment of debt service.

The Series 2005B Bonds, the Senior Bonds and any other Senior Subordinated Debt arenot secured by a mortgage on or any other interest in the Utility property.

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The City agrees in the Trust Agreement (i) not to issue any bonds or other obligations payablefrom the revenues and properties of the Utility with a priority over or on a parity with the pledge to theSenior Bonds, except as described underTRUST AGREEMENT Additional Senior Bonds; (ii)not to issue any bonds or other obligations, other than Senior Bonds, payable from the revenues andproperties of the Utility with a priority over or on a parity with the pledge to the Senior SubordinatedDebt, except as described underTRUST AGREEMENT Additional Senior Subordinated Debt.

The City may issue other Subordinate Debt without limitation; however, to comply with the ratecovenant that the City makes in the Trust Agreement, the City must include debt service on SeniorSubordinated Debt and all other Subordinated Debt in computing the amount required to be covered atleast 100% by Net Revenues. See SECURITY AND SOURCES OF PAYMENT RateCovenant.

Special and Limited Obligations

The Series 2005B Bonds are special and limited obligations of the City, are secured andpayable on a basis subordinate to all Senior Bonds (i.e., the Series 2001 Bonds, the Series 2003Bonds, the Series 2005A Bonds and any other Senior Bonds hereafter issued or incurred by the City),and are secured and payable on a parity with other Senior Subordinated Debt hereafter issued or

incurred by the City. The Series 2005B Bonds will be secured as Senior Subordinated Debt under theTrust Agreement, including, without limitation, by a pledge of (i) Net Revenues subordinate to thepledge of Net Revenues that secures Senior Bonds and on a parity with the pledge of Net Revenuesthat secures other Senior Subordinated Debt, including, without limitation, any other SeniorSubordinated Debt that the City may issue in the future, without preference, priority or distinction ofany Series 2005B Bond over any other Series 2005B Bond or of any Senior Subordinated Debt overany other Senior Subordinated Debt, as provided in the Trust Agreement; and (ii) the moneys andEligible Investments in the Senior Subordinated Debt Service Fund on a parity with the pledge thereofthat secures other Senior Subordinated Debt, including, without limitation, any other SeniorSubordinated Debt that the City may issue in the future, without preference, priority or distinction ofany Series 2005B Bond over any other Series 2005B Bond or of any Senior Subordinated Debt overany other Senior Subordinated Debt, as provided in the Trust Agreement.

THE SERIES 2005B BONDS ARE NOT GENERAL OBLIGATIONS, BUT ARESPECIAL OBLIGATIONS OF THE CITY, PAYABLE AS SUBORDINATE DEBT SOLELYFROM THE NET REVENUES OF ITS UTILITY AND CERTAIN SPECIAL FUNDSCREATED UNDER THE MASTER TRUST AGREEMENT AS AMENDED ANDSUPPLEMENTED, AND NEITHER THE GENERAL CREDIT NOR TAXING POWER OFTHE CITY OR OF THE STATE OF OHIO OR ANY POLITICAL SUBDIVISIONTHEREOF IS PLEDGED TO PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY,OR INTEREST ON THE SERIES 2005B BONDS.

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Limited Remedies of Holders of Senior Subordinated Debt

The Trust Agreement confers certain rights and remedies on the holders of Bonds under theTrust Agreement, which are referred to herein as Senior Bonds. Bonds include the Series 2001Bonds, the Series 2003 Bonds, the Series 2005A Bonds and any Additional Bonds that the TrustAgreement permits the City to issue on a parity with the Senior Bonds, but does not include SeniorSubordinated Debt, including the Series 2005B Bonds, or any other Subordinate Debt. The TrustAgreement prohibits the acceleration of Subordinate Debt if any Senior Bonds are outstanding. Theright of acceleration of the Series 2005B Bonds shall also be subject to the requirement thatacceleration of the Series 2005B Bonds may occur only in connection with the acceleration of allSenior Subordinated Debt and accordingly shall be subject to the rights of the holders of other SeniorSubordinated Debt (or other parties on their behalf or in their place) to request, direct or prevent theacceleration of such Senior Subordinated Debt. As long as the MBIA Insurance Policy is in full forceand effect, the Bond Insurer shall be deemed to be the holder of 100% of the aggregate principalamount of outstanding Series 2005B Bonds.

The Trust Agreement confers upon the holders of not less than 25% of the aggregate principalamount of Outstanding Senior Bonds the right to direct the Trustee to protect and enforce their rights

by mandamus or other suit, action or proceeding, and confers upon the holders of not less