The URL can be used to link to this page

RES 2004-0340 - Various purpose and refunding bonds series 2004 opt NH A,i,4, CUMIN,- Finance Department s c ,nK Omaha/Douglas Civic Center I", �1��,'J �r ^� • 1819 Farnam Street,Suite 1004 ®' � 4I ,o Omaha,Nebraska 68183-1004 p�ro (402)444-5416 OR�TFD FEBRJrI- Telefax(402)444-5423 Cityof Stanley P.Timm Omaha Director Mike Fahey,Mayor Allen R.Herink Acting City Comptroller Honorable President and Members of the City Council, The City of Omaha authorized the issuance of $31,660,000 Various Purpose and Refunding Bonds, Series of 2004 by Ordinance No. 36515 passed February 10, 2004. Submitted for your consideration is a resolution to approve the form and substance of a Bond Purchase Agreement with respect to the Bonds, authorizes its execution and delivery and is attached as Exhibit "A". It also ratifies the distribution of the Preliminary Official Statement and approves the Official Statement attached as Exhibit "B". This resolution also authorizes and directs the Mayor to execute and deliver the Official Statement on behalf of the City of Omaha. We urge your favorable consideration of this Resolution. Respectfully submitted, Referred to City Council for Consideration: , -T � 3//0% CStanle P. Mim ( : Va i 3'//-e,y4 Finance Director Mayor's Office Date P:\FIN\10423pjm.doc 4 SCHEDULE A Bond Principal And Interest Requirements Period Ending December 31 Principal Coupon Interest Total 2004 -- -- $ 525,387.50 $ 525,387.50 2005 $ 2,025,000 2.000% 1,030,525.00 3,055,525.00 2006 2,670,000 2.000 983,575.00 3,653,575.00 , 2007 2,225,000 2.250 931,843.75 3,156,843.75 2008 2,475,000 2.375 877,421.88 3,352,421.88 2009 1,915,000 2.625 822,896.88 2,737,896.88 2010 1,375,000 2.750 778,856.25 2,153,856.25 2011 1,400,000 3.000 738,950.00 2,138,950.00 2012 1,425,000 3.125 695,684.38 2,120,684.38 2013 1,455,000 3.375 648,865.63 2,103,865.63 2014 1,470,000 3.500 598,587.50 2,068,587.50 2015 1,320,000 4.500 543,162.50 1,863,162.50 2016 1,345,000 4.500 483,200.00 1,828,200.00 2017 1,380,000 4.500 421,887.50 1,801,887.50 2018 1,520,000 4.500 356,637.50 1,876,637.50 2019 1,480,000 4.500 289,137.50 1,769,137.50 2020 1,255,000 4.500 227,600.00 1,482,600.00 2021 1,280,000 4.000 173,762.50 1,453,762.50 2022 1,755,000 4.000 113,062.50 1,868,062.50 2023 1,190,000 4.125 53,418.75 1,243,418.75 2024 700,000 4.125 14,437.50 714,437.50 Total $31,660,000 $11,308,900.02 $42,968,900.02 P:\FIN\10425pjm.doc EXHIBIT "A" $31,660,000 CITY OF OMAHA, NEBRASKA VARIOUS PURPOSE AND REFUNDING BONDS SERIES OF 2004 BOND PURCHASE AGREEMENT March 16, 2004 City of Omaha Omaha-Douglas Civic Center 1819 Farnam Street Omaha, Nebraska 68183 Ladies and Gentlemen: Kirkpatrick Pettis, Bear, Stearns & Co. Inc., Ameritas Investment Corp., Edward D. Jones & Co., L.P. and Loop Capital Markets, LLC (collectively, the "Underwriters"), with Kirkpatrick Pettis acting as the representative of the Underwriters (the "Representative"), offer to enter into the following agreement (the "Agreement") with the City of Omaha, Nebraska (the "City"). The offer made hereby is subject to acceptance thereof by execution of this Agreement and its delivery to the Representative at or prior to 5:00 p.m., Omaha, Nebraska time, on the date hereof, or on such other date as may be agreed upon by the Representative. Upon such acceptance, this Agreement shall be in full force and effect in accordance with its terms and shall be binding upon the City and the Underwriters: If this offer is not so accepted, it is subject to withdrawal by the Underwriters upon written notice delivered to the City at any time prior to such acceptance. 1. Purchase and Sale of Bonds. On the terms and conditions and on the basis of the representations, warranties, covenants and agreements set forth herein, the Underwriters hereby agree to purchase from the City for offering to the public, and the City hereby agrees to sell and deliver to the Underwriters for such purpose, all (but not less than all) of the City's $31,660,000 Various Purpose and Refunding Bonds, Series of 2004 (the "Bonds"). The Bonds are being issued in part, to provide funds to finance the cost of refunding and redeeming certain outstanding general obligation indebtedness of the City, including certain debt assumed by the City as a result of its annexation of five sanitary and improvement districts, ("SIDs") (the "Prior Bonds"), and, in part, to pay the costs of acquiring equipment and constructing improvements relating to the City's streets, sewer system, public safety and other public facilities and parks and recreation system. The Prior Bonds were used for the payment of all or a portion of the costs of acquiring, constructing and improving, certain portions of the infrastructure of developments originally financed by SIDs annexed by the City. The purchase price of the Bonds, net of accrued interest, will be $32,241,299.75 (the par amount of the Bonds, $31,660,000, plus original issue premium, $886,660.10, minus original issue discount, $77,408.35, minus the Underwriters' discount, $227,952.00). The Bonds will mature on the dates and in the amounts and will bear interest and will be subject to redemption prior to maturity as set forth on Exhibit A hereto. The Underwriters herewith deliver to the City a corporate check, payable to the order of the City, in the amount of $300,000 (the "Security Check"), being payment on account of the purchase price of the Bonds and of the purchase price of certain general obligation refunding bonds for the City's Convention Center/Arena facility (the "Convention Center Bonds") to be acquired under a bond purchase agreement of even date herewith (the "Other Agreement") on a pro-rata basis, which check will be held uncashed by the City as security for the performance by the Underwriters of their obligations hereunder and under the Other Agreement. Concurrently with the delivery of any payment for the Bonds upon their delivery, the amount of the Security Check, without interest thereon, shall, at the option of the Underwriters, be applied in partial payment of the purchase price of the Bonds. If the Underwriters shall fail, for a reason not permitted by this Agreement, to pay for and accept delivery of the Bonds and the Convention Center Bonds, the City may retain the Security Check, deposit it and apply it as full liquidated damages hereunder and under the Other Agreement for such failure on the part of the Underwriters, and the retention of the Security Check by the City shall constitute a full release and discharge of all claims and damages for such failure. In such event, the Underwriters and, by the retention and depositing of the Security Check by the City, the City shall have no further obligations or liability hereunder or under the Other Agreement except to pay any expenses each is required to pay under Section 12 hereof and under Section 12 of the Other Agreement. In the event the City does not accept this offer, or fails to deliver the Bonds, or is unable to satisfy the conditions of the obligations of the Underwriters set forth in this Agreement and under the Other Agreement, or if the obligations of the Underwriters shall be terminated for any reason permitted by this Agreement and the Other Agreement, the uncashed Security Check, without interest thereon, shall be returned to the Underwriters. In such event the Underwriters and, upon the return of the Security Check (unless the City is permitted to retain such amount pursuant to the preceding sentence), the City shall have no obligations or liability hereunder except to pay any expenses each is required to pay under Section 12 hereof and under Section 12 of the Other Agreement. 2. Bond Authorization. The Bonds have been authorized in accordance with the Constitution and statutes of the State of Nebraska, the Home Rule Charter of 1956 of the City of Omaha, proceedings of the City Council of the City of Omaha providing for the issuance thereof, including Ordinance No. 36515 (the "Ordinance"), and a Sale Resolution, dated March 16, 2004 (collectively, the "Bond Authorizations"). 3. Closing. At 10:00 a.m. Omaha, Nebraska time on April 1, 2004, or at such other time and date as may be mutually agreed upon by the City and the Underwriters, the City will, subject to the terms and conditions hereof, deliver the Bonds to the Underwriters in definitive form, duly executed and authenticated, together with the other documents hereinafter mentioned, and, subject to the terms and conditions hereof, the 2 Underwriters will accept such delivery and pay the purchase price of the Bonds as set forth in Section 1 hereof in federal funds to the order of the City. Delivery of the Bonds will be made through the facilities of The Depository Trust Company, New York, New York. The closing will occur at the offices of Kutak Rock LLP, 1650 Farnam Street, Omaha, Nebraska 68102 ("Bond Counsel"), or such other place as may be mutually agreed on by the City and the Underwriters. 4. Public Offering of the Bonds. It is a condition of the City's obligation to sell and deliver the Bonds to the Underwriters, and of the obligation of the Underwriters to purchase and accept delivery of the Bonds, that the entire principal amount of the Bonds is sold and delivered by the City and accepted and paid for by the Underwriters as described in Section 3 hereof. The Underwriters intend to make an initial public offering of all of the Bonds at not in excess of the public offering price set forth on the cover page of the Official Statement (hereinafter defined). The Underwriters may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts) at prices lower than the public offering price stated on the cover page of the Official Statement. 5. Official Statement. The form of the Official Statement of the City relating to the Bonds, dated March 16, 2004, including the cover page thereof and Appendices thereto, and any revisions, amendments or supplements thereto (the "Official Statement"), is attached hereto as Exhibit B. The City authorizes, approves, ratifies and confirms the distribution of the Official Statement by the Underwriters on or prior to the date of this Agreement in connection with the public offering and sale of the Bonds. As of its date, the Official Statement was "deemed final" and is hereby deemed final by the City for purposes of Rule 15c2-12 of the Securities and Exchange Commission under the Securities Exchange Act of 1934 ("Rule 15c2-12"). The City agrees to provide to the Underwriters, at such addresses as the Underwriters specify, as many copies of the Official Statement as the Underwriters reasonably request as necessary to comply with paragraph (b)(4) of Rule 15c2-12 and with Rule G-32 and all other applicable rules of the Municipal Securities Rulemaking Board (the "MSRB"). The City agrees to deliver such Official Statement at least three business days prior to the date of delivery of the Bonds and in sufficient time to accompany any confirmation that requests payment from any customer. The Official Statement may be revised, amended, changed or supplemented by the City after the execution of this Agreement only with the permission of the Underwriters. If, during the period from the date hereof to and including the date which is 25 days after the "end of the underwriting period" (as hereinafter defined), there shall exist any event which, in the opinion of the Underwriters and counsel to the Underwriters or in the opinion of the City, requires a supplement or amendment to the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances 3 • under which they were made, not misleading, when it is delivered to a potential investor, the City will supplement or amend or cause to be supplemented or amended the Official Statement in a form and in a manner approved by the Underwriters, and the City and will furnish to the Underwriters such supplement or amendment in sufficient quantity to permit the Underwriters to comply with the requirements of Rule 15c2-12. For the purpose of the preceding paragraph, the City may assume that the "end of the underwriting period" (as defined in such Rule 15c2-12) has occurred 30 days after the date of delivery of the Bonds, unless the Underwriters notify the City in writing prior to such 30th day that any Bonds remain unsold, in which case the end of the underwriting period shall be deemed to be extended for 30 days from the date of such notice. The deemed end of the underwriting period shall be extended for additional periods of 30 days each upon receipt of written notification from the Underwriters that any Bonds remain unsold. The Underwriters agree that, on or prior to the date of delivery of the Bonds, the Underwriters shall deliver two copies of the Official Statement to the MSRB. The Underwriters agree promptly to file a copy of the final Official Statement (with any required forms) with each "nationally recognized municipal securities information repository" within the meaning of Rule 15c2-12 (a "Repository") or any successor Repository thereto, and with the MSRB or its designee pursuant to MSRB Rule G-36 within one business day of delivery of the Bonds to the Underwriters. 6. Representations, Warranties and Covenants of the City. The City hereby represents, warrants, covenants and agrees as follows: (a) The City operates with a Mayor-Council form of government. As a home-rule city, Omaha has all of the powers available to a home-rule city under the Nebraska Constitution. The Mayor and Council, consisting of seven members, are elected for four-year terms. The Mayor is elected in a citywide election while the City Council members are elected by district. The City is a duly created and validly existing government constituted as a body corporate and politic for municipal purposes, organized pursuant to the laws of the State of Nebraska and the Home Rule Charter of 1956 of the City of Omaha, as from time to time amended (the "Charter"). The City has the power to contract and to be contracted with, to sue and to be sued, to plead and to be impleaded, to have a seal and to exercise all other powers of a municipal corporation not inconsistent with the Constitution (the "Constitution") and laws of the State of Nebraska. (b) The City has full legal right, power and authority to (i) adopt the Bond Authorizations; (ii) execute and deliver the Trustee Agreement, dated April 1, 2004 (the "Trustee Agreement"), between the City and First National Bank of Omaha, Omaha, Nebraska, as trustee (the "Trustee"); (iii) send certain financial information and operating data to certain information repositories annually and to provide notice to the MSRB or certain other repositories of certain events, pursuant to the requirements of Section (b)(5)(I) of Rule 15c2-12 (the "Continuing Disclosure Undertaking"); (iv) subject to the approval by the City where required, execute and deliver the foregoing agreements and 4 any other agreements of the City contemplated in connection with the issuance of the Bonds (collectively, with the documents listed in (b)(i) and (b)(ii) above, the "City Documents"); (v) subject to the approval by the City where required, sell, issue and deliver the Bonds to the Underwriters as provided herein; and (vi) subject to the approval by the City where required, carry out and consummate the transactions contemplated by the City Documents and the Official Statement; and the City has complied, and on the date of delivery of the Bonds will be in compliance, in all respects with the Constitution and laws of the State of Nebraska and the Charter and with the obligations on its part in connection with the issuance of the Bonds contained in the Bonds, the Bond Authorizations, the Official Statement and this Agreement. (c) The City (i) has authorized the execution and delivery of the City Documents, (ii) is authorized to execute, issue, sell and deliver the Bonds in book-entry form, (iii) is authorized to appoint the Trustee as paying agent (the "Paying Agent") and as registrar (the "Registrar"), and (iv) has taken or will take, on or before the date of delivery of the Bonds, all action necessary or appropriate to carry out the execution and delivery of the global certificates and the issuance, sale and delivery of the Bonds in book-entry form to the Underwriters. (d) The execution and delivery of the City Documents, the execution and delivery of the global certificates, the issuance, sale and delivery of the Bonds in book- entry form and the performance by the City of its obligations hereunder and thereunder (collectively, the "City Undertakings") are within the corporate powers of the City and are not in conflict with and will not constitute a breach or result in a violation of (i) the Charter, (ii) the Constitution and laws of the State of Nebraska, (iii) any federal constitutional or federal statutory provision, (iv) any agreement or other instrument to which the City is a party, or (v) any order, rule, regulation, decree or ordinance of any court of competent jurisdiction, government or governmental authority having jurisdiction over the City or its property. (e) The Bonds, when issued and delivered to the Underwriters in accordance with the Bond Authorizations and this Agreement, will constitute valid, binding and enforceable obligations of the City, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and subject as to enforceability to general principles of equity. (f) The City is not currently failing to comply and has not failed to comply during the past five years with any continuing disclosure obligation pursuant to Rule 15c2-12. The City will deliver to the Underwriters information required pursuant to its Continuing Disclosure Undertaking with respect to the Bonds that complies with the requirements of Rule 15c2-12. (g) This Agreement constitutes, and upon execution and delivery by the City and the other parties thereto, the other City Documents will constitute, the valid, binding and enforceable obligations of the City, subject to applicable bankruptcy, 5 insolvency, and similar laws affecting creditors' rights generally and subject, as to enforceability, to general principles of equity. (h) The City is not in material breach of or material default under any applicable provision of the Constitution or laws of the State of Nebraska, any applicable constitutional provision or law of the United States, or the Charter, or any applicable judgment or decree, or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which it is a party or to which it or any of its property or assets is otherwise subject, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or event of default under any such instrument; and the execution and delivery of the Bonds, the City Documents and this Agreement and the adoption of the Bond Authorizations, and compliance with the provisions contained therein and herein, do not conflict with or constitute a breach of or default under any constitutional provision, law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement, or other instrument to which the City is a party or any of its property or assets is otherwise subject, nor will any such execution, delivery, adoption, or compliance result in the creation or imposition of any lien, charge, or other security interest or encumbrance of any nature whatsoever upon any of its property or assets or under the terms of any such law, regulation or instrument, except as provided by the Bonds and the Bond Authorizations. (i) All authorizations, approvals, licenses, permits, consents and orders of any governmental district, legislative body, board, agency or commission having jurisdiction of the matter have been duly obtained or, with respect to the issuance of the Bonds, will be obtained prior to the issuance of the Bonds, which are required for the due authorization by or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by the City of its obligations in connection with the issuance of the Bonds and under this Agreement, except for such approvals, consents and orders as may be required under the Blue Sky or securities laws of any state in connection with the offering and sale of the Bonds. (j) There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending or, to the best knowledge of the official of the City executing this Agreement, threatened against the City(i) to restrain or enjoin the issuance or delivery of any of the Bonds or the levy or collection of taxes to pay the Bonds, (ii) in any way contesting or affecting any authority for the issuance of the Bonds or the validity, due authorization, execution or delivery of any documents in connection with the Bonds, including the Bond Authorizations, the City Documents or this Agreement, or in any way contesting the existence or powers of the City, (iv) which may result in any material adverse change in the business or the financial condition or the financial prospects of the City, or (v) asserting that the Official Statement contains any untrue statement of a material fact or omits any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 6 (k) The City will furnish such information, execute such instruments and take such other action in cooperation with the Underwriters as the Underwriters may reasonably request in order to (i) qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriters may designate, and (ii) determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds; provided, however, that the City will not be required to execute a general or special consent to service of process or qualify to do business in connection with any such qualification or determination in any jurisdiction. (I) The audited balance sheet of the City as of December 31, 2002, and the related statements of revenues, expenditures and changes in financial position for the fiscal year ended on such date, as set forth in the Official Statement, are true, complete and correct and fairly present the financial condition of the City as of such date and the results of its operations for such fiscal year. There has been no material adverse change in the financial condition of the City since December 31, 2002, except as described in the Official Statement. (m) As of the date thereof, the Official Statement did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (n) As of the date hereof, and at all times subsequent thereto up to and including the date of delivery of the Bonds, the Official Statement does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. If between the date of the Official Statement and the date of delivery of the Bonds any event shall occur or any pre-existing fact or condition shall become known that might or would cause the Official Statement, as then supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the City shall promptly notify the Underwriters thereof, and if in the reasonable opinion of the Underwriters, such event, fact or condition requires the preparation and publication of a supplement or amendment to the Official Statement, the City will at its expense supplement or amend the Official Statement in a form and in a manner approved by the Underwriters which approval shall not be unreasonably withheld. (o) The obligation of the City to know or provide information within the knowledge of the City is limited to providing information that is in the actual knowledge of, or reasonably should have been in the actual knowledge of, the Executive Officers of the City listed in the Official Statement or their respective successors. 7 (p) The City undertakes that, for a period beginning with the day on which the Bonds are delivered to the Underwriters and ending on the earlier of the 45th day following the end of the underwriting period, as defined in the Paragraph 4, it will apprise the Underwriters of all material developments, if any, occurring with respect to the City, and if requested by the Underwriters, at the City's expense, prepare a supplement to the Official Statement in respect of any such material event. (q) The City has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that the City is a bond issuer whose arbitrage certificates may not be relied upon. (r) Any certificate signed by an authorized officer of the City and delivered to the Underwriters will be deemed a representation, warranty, covenant and agreement by the City to the Underwriters as to the statements made therein. 7. Representations of Underwriters. The Underwriters represent and warrant that they will offer the Bonds only pursuant to the Official Statement and only in states where the offer and sale of the Bonds are legal, either as exempt securities, as exempt transactions or as a result of due registration of the Bonds for sale in any such state. The Underwriters agree to make a public offering of the Bonds at the initial offering price or yield set forth in the Official Statement as they may deem necessary or desirable in connection with the offering and sale of the Bonds and to sell the Bonds to dealers (including dealer banks and dealers depositing Bonds into investment trusts) and others at prices lower than the public offering prices. The Underwriters agree to deliver final Official Statements to all purchasers of the Bonds in accordance with prevailing industry requirements. 8. Rights to Cancellation by Underwriters. The Underwriters will have the right to cancel their obligation to purchase the Bonds if between the date hereof and the date of delivery of the Bonds, (a) legislation has been enacted or a decision by a federal court of the United States or the United States Tax Court has been rendered, or a ruling, regulation or official statement by or on behalf of the Treasury Department of the United States, the Internal Revenue Service or other governmental agency has been made or proposed to be made with respect to federal taxation on revenues or other income to be derived from the operation of the City, or on interest on the Bonds, or other action or events have occurred which have the purpose or effect, directly or indirectly, of materially adversely affecting the federal income tax consequences of any of the transactions contemplated in connection herewith, including the excludability from gross income for federal income tax purposes of interest on bonds issued by the City, any of which, in the reasonable opinion of the Underwriters, materially adversely affects the market for the Bonds or the sale, at the contemplated offering price, by the Underwriters of the Bonds, or (b) legislation has been enacted, or actively considered for enactment with an effective date being prior to the date of the issuance of the Bonds, or a decision by a court of the United States has been rendered, or a ruling or regulation by the Securities and Exchange Commission or other governmental agency having jurisdiction of the subject matter has 8 been made, the effect of which is that the Bonds are not exempt from the registration or other requirements of the Securities Act of 1933, as amended and as then in effect, or that the Ordinance is not exempt from the qualification or other requirements of the Trust Indenture Act of 1939, as amended and as then in effect, or (c) a stop order, ruling or regulation by the Securities and Exchange Commission has been issued or made, the effect of which is that the issuance, offering or sale of the Bonds as contemplated hereby or by the Official Statement is or would be in violation of any provision of the Securities Act of 1933, as amended and as then in effect, or of the Securities Exchange Act of 1934, as amended and as then in effect, or of the Trust Indenture Act of 1939, as amended and as then in effect; or (d) there exists any event which in the reasonable judgment of the Underwriters either (i) makes untrue or incorrect any statement or information of a material fact contained in the Official Statement, or (ii) is not reflected in the Official Statement but should be reflected therein in order to make the statements and information contained therein, in light of the circumstances under which they were made, not misleading, and, in either such event the City refuses to permit the Official Statement to be supplemented to correct or supply such statement or information, or the statement or information as supplemented is such as in the reasonable judgment of the Underwriters would materially adversely affect the market for the Bonds or the sale, at the contemplated offering prices, by the Underwriters of the Bonds, or (e) there has occurred any outbreak of hostilities or any national or international calamity or crisis, including a financial crisis, the effect of which on the financial markets of the United States is such as, in the reasonable judgment of the Underwriters, would materially adversely affect the market for the Bonds, or the sale, at the contemplated offering prices, by the Underwriters of the Bonds, or (f) there is in force a general suspension of trading on the New York Stock Exchange, the effect of which on the financial markets of the United States is such as, in the reasonable judgment of the Underwriters, would materially adversely affect the market for the Bonds or the sale, at the contemplated offering prices, by the Underwriters of the Bonds, or (g) a general banking moratorium has been declared by federal, City or New York authorities, the effect of which on the financial markets of the United States is such as, in the reasonable judgment of the Underwriters, would materially adversely affect the market for the Bonds or the sale, at the contemplated offering prices, by the Underwriters of the Bonds, or (h) there has occurred since December 31, 2002, any material adverse change in the affairs of the City from that reflected in the financial information and data of the City included in or as an appendix to the Official Statement, other than as previously disclosed to the Underwriters. 9. Conditions to Obligations of Underwriters at Closing. The Underwriters have entered into this Agreement in reliance on the representations, warranties, covenants and agreements of the City contained herein, and in reliance on the representations, warranties, covenants and agreements to be contained in the documents and instruments to be delivered on the date of delivery of the Bonds (the "Closing") and on the performance by the City of its obligations hereunder, as of the date of the Closing. Accordingly, the Underwriters' obligations under this Agreement to purchase, to accept delivery of and to pay for the Bonds are conditioned on the performance by the City of its obligations to be performed hereunder and the delivery of such documents and 9 instruments enumerated herein in form and substance reasonably satisfactory to the Underwriters and Stinson Morrison Hecker LLP, counsel to the Underwriters, at or before the Closing, and are also subject to the following additional conditions: (a) The representations, warranties, covenants and agreements of the City contained herein are true, complete and correct on the date hereof and on and as of the date of the Closing, as if made on the date of the Closing; (b) At the time of the Closing, the Bond Authorizations are in full force and effect in accordance with their terms and have not been amended, modified or supplemented, and the Official Statement has not been supplemented or amended, except in any such case as may have been agreed to by the Underwriters; (c) At the time of the Closing, all official action of the City and the other parties thereto relating to this Agreement, the City Documents, including the Bond Authorizations, and the Bonds are in full force and effect in accordance with their respective terms and have not been amended, modified or supplemented in any material respect, except in each case as may have been agreed to by the Underwriters; (d) At the time of the Closing, the City will perform or has performed all of its obligations required under or specified in this Agreement, in the Bond Authorizations and the Trustee Agreement or contemplated by this Agreement, the Bond Authorizations and the Trustee Agreement or the Official Statement, to be performed prior to the Closing; and (e) At or before the Closing, the Underwriters have received (or have expressly waived in writing receipt of) true and correct copies of each of the following documents: (i) The Official Statement and each supplement or amendment, if any, thereto, executed by the City; (ii) Certified copies of the Bond Authorizations; (iii) Counterparts of each of the fully executed City Documents; (iv) The approving opinion of Bond Counsel in substantially the form attached to the Official Statement as part of Appendix E and a supplemental opinion, dated the date of Closing, substantially in the form of Exhibit C hereto, and reliance letters with respect to such opinions addressed to First National Bank of Omaha, as Trustee, Paying Agent and Registrar; (v) An opinion, dated the date of Closing, of the City Attorney, in substantially the form attached as Exhibit D hereto; 10 (vi) An opinion, dated the date of the Closing, of Stinson Morrison Hecker LLP, counsel to the Underwriters, substantially in the form of Exhibit E hereto; (vii) One or more certificates of the City, dated the date of Closing, (A) to the effect that the representations, warranties, covenants and agreements of the City herein are true and correct in all material respects on and as of the date of Closing as if made on the date of Closing, and that the City has performed all obligations to be performed hereunder as of the date of Closing; (B) to the effect that the City Documents, including the Bond Authorizations, this Agreement and the Bonds have not been modified, amended or repealed without the written consent of the Underwriters; and (C) approved by Bond Counsel, (aa) setting forth the facts, estimates and circumstances in existence on the date of Closing which establish that it is not expected that the proceeds of the Bonds will be used in a manner that would cause the Bonds to be "arbitrage bonds" within the meaning of the Code and any Regulations, Temporary Treasury Regulations and Proposed Treasury Regulations issued pursuant to the Code, and (bb) certifying that to the best of the knowledge and belief of the signing officer, there are no other facts, estimates or circumstances that would materially change the conclusions, representations and expectations contained in such certificate; (viii) Evidence that Standard & Poor's Ratings Services and Moody's Investors Service, Inc. have issued ratings of "AAA" and "Aaa", respectively; and (ix) Such additional legal opinions, certificates, instruments and other documents as the Underwriters may reasonably request to evidence the truth and accuracy, as of the date of the Closing, of the City's representations, warranties, covenants and agreements contained herein and of the statements and information contained in the Official Statement and the due performance or satisfaction by the City on or prior to the date of the Closing of all the agreements then to be performed and conditions then to be satisfied by it. All the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Agreement will be deemed to be in compliance with the provisions hereof if, but only if, they are in form and substance satisfactory to the Underwriters. 10. Obligations Upon Cancellation. If the City is unable to satisfy the conditions to the obligations of the Underwriters to purchase, to accept the delivery of and to pay for the Bonds contained in this Agreement, or if the obligations of the Underwriters to purchase, to accept delivery of and to pay for the Bonds are terminated for any reason permitted by this Agreement, this Agreement will terminate and neither the Underwriters nor the City will be under any further obligation hereunder. 11. Certain Information Provided by Underwriters. The Underwriters confirm and the City acknowledges that the statements with respect to the public offering 11 of the Bonds by the Underwriters set forth on page i of the Official Statement, the legend concerning over-allotments in the Official Statement and the text under the caption "UNDERWRITING" in the Official Statement constitute the only information concerning the Underwriters furnished in writing to the City by or on behalf of the Underwriters for inclusion in the Official Statement. 12. Expenses. The City will pay all costs of issuance of the Bonds including, but not limited to (a) the cost of the preparation, printing and delivery of the Official Statement, in the number of copies the Underwriters deem reasonable; (b) the cost of preparation and printing of the Bonds; (c) the fees and disbursements of Bond Counsel; (d) the fees and disbursements of any accountants, consultants, financial advisors or additional legal counsel retained in connection with the issuance -of the Bonds; (e) fees for Bond ratings; (f) the expenses of travel and lodging for City representatives to attend conferences with the rating agencies and investor meetings; (g) all advertising expenses in connection with the public offering of the Bonds; (h) the costs of filing fees required by any of the Blue Sky laws; (i) CUSIP Service Bureau charges; and (j) all out-of-pocket and computer costs associated with the issuance of the Bonds. 13. Notices. Any notice or other communication to be given to the City under this Agreement may be given by delivering the same in writing to the address shown on the first page of this Agreement to the attention of Stanley P. Timm, Finance Director, and any notice or other communication to be given to the Underwriters under this Agreement may be given by delivering the same in writing to Kirkpatrick Pettis, 10250 Regency Circle, Suite 500, Omaha, NE 68114-5701, Attention: Daniel J. Smith, Senior Vice President Public Finance. 14. Parties in Interest: Survival of Representations and Warranties. This Agreement, when accepted in accordance with the provisions hereof, shall constitute the- entire agreement between the City and the Underwriters and is made solely for the benefit of the City and the Underwriters (including the successors or assigns of the City or the Underwriters), and no other person will acquire or have any right hereunder or by virtue hereof. All of the City's and Underwriters' representations, warranties, covenants and agreements contained in this Agreement will remain operative and in full force and effect regardless of (a) any investigations made by or on behalf of the Underwriters; or (b) delivery of and payment for the Bonds pursuant to this Agreement. 15. Effective Date. This Agreement will become effective upon its acceptance by the City, as evidenced by the execution hereof by the appropriate official of the City, and will be valid and enforceable at the time of such acceptance. 16. Execution in Counterparts. This Agreement may be executed in counterparts each of which shall be regarded as an original and all of which shall constitute one and the same document. 17. Finders. The City represents and warrants that no finder or other agent of a finder has been employed or consulted by it in connection with this transaction. 12 18. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Nebraska. 13 [SIGNATURE PAGE TO BOND PURCHASE AGREEMENT] KIRKPATRICK PETTIS SMITH &POLIAN, INC. as Representative for: Kirkpatrick Pettis Bear, Stearns & Co. Inc. Ameritas Investment Corp. Edward D. Jones & Co., L.P. Loop Capital Markets, LLC By: 14 [SIGNATURE PAGE TO BOND PURCHASE AGREEMENT] Accepted: March 16, 2004 CITY OF OMAHA, NEBRASKA Name: Mike Fahey Mayor 15 EXHIBIT A $31,660,000 CITY OF OMAHA, NEBRASKA VARIOUS PURPOSE AND REFUNDING BONDS SERIES OF 2004 TERMS OF THE BONDS Aggregate Principal Amount: $31,660,000.00 Dated Date: April 1, 2004 Interest Payment Dates: April 1 and October 1, commencing October 1, 2004 Purchase Price: $32,241,299.75,which is equal to the aggregate principal amount, plus original issue premium of$886,660.10, less original issue discount of$77,408.35, less Underwriters' discount of$227,952.00. Maturity Interest Rates: Series of 2004 Serial Bonds: Year Principal Interest Rate Yield Price 2005 2,025,000 2.000% 1.120% 100.872 2006 2,670,000 2.000% 1.180% 101.616 2007 2,225,000 2.250% 1.470% 102.280 2008 2,475,000 2.375% 1.820% 102.131 2009 1,915,000 2.625% 2.110% 102.431 2010 1,375,000 2.750% 2.340% 102.282 2011 1,400,000 3.000% 2.600% 102.544 2012 1,425,000 3.125% 2.860% 101.883 2013 1,455,000 3.375% 3.060% 102.461 2014 1,470,000 3.500% 3.220% 102.377 2015 1,320,000 4.500% 3.480% 108.552 2016 1,345,000 4.500% 3.600% 107.502 2017 1,380,000 4.500% 3.710% 106.550 2018 1,520,000 4.500% 3.810% 105.693 2019 1,480,000 4.500% 3.910% 104.844 2020 1,255,000 4.500% 4.010% 104.004 2021 1,280,000 4.000% 4.100% 98.784 2022 1,755,000 4.000% 4.150% 98.111 2023 1,190,000 4.125% 4.220% 98.766 2024 700,000 4.125% 4.290% 97.799 A-1 EXHIBIT B OFFICIAL STATEMENT B-1 EXHIBIT C FORM OF SUPPLEMENTAL OPINION OF BOND COUNSEL April 1, 2004 Kirkpatrick Pettis As the Representative of the Underwriters (as such terms are defined in the within-mentioned Bond Purchase Agreement) 10250 Regency Circle, Suite 500 Omaha, Nebraska $31,660,000 CITY OF OMAHA, NEBRASKA VARIOUS PURPOSE AND REFUNDING BONDS SERIES OF 2004 Ladies and Gentlemen: Reference is made to our opinion delivered today as Bond Counsel (the "Bond Opinion") relating to the issuance by the City of Omaha, Nebraska (the "City"), of its $31,660,000 City of Omaha, Nebraska, Various Purpose and Refunding Bonds, Series of 2004 (the "Bonds"). We hereby advise you that we now deliver the Bond Opinion for your benefit as well as for the benefit of the City, and you are entitled to rely upon the Bond Opinion as if it were addressed to you. Unless otherwise defined herein, terms used herein are as defined in the Bond Opinion or the hereinafter defined Official Statement. At your request, we have undertaken a review of certain other matters pertaining to the Bonds. We have reviewed a Bond Purchase Agreement between the City and you, dated March 16, 2004, with respect to the Bonds (the "Bond Purchase Agreement"). We have reviewed portions of the Official Statement of the City dated March 16, 2004 (the "Official Statement"), and have discussed certain statements therein with representatives of the City and the City Attorney, your representatives and your counsel. Based upon the foregoing, we are of the opinion that: 1. The Bond Purchase Agreement has been duly authorized, executed and delivered by the City and, assuming the due authorization, execution and delivery thereof by the other parties thereto, constitutes the valid and binding obligation of the City, enforceable against the City in accordance with its terms, except as enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally, by principles of equity, whether considered at C-1 law or in equity, and by public policy as expressed in applicable securities laws or otherwise. 2. The statements contained in the Official Statement under the captions "THE BONDS" (other than under the subcaption "Book-Entry Only System") and "TAX EXEMPTION, insofar as such statements summarize the laws of the United States and the terms of the Bonds and certain selected documents, are fair and accurate summaries thereof in all material respects. 3. Except as set forth in paragraph 2, we have not been retained to confirm or to verify, and do not express an opinion as to, the accuracy, completeness or fairness of any information in the Official Statement. 4. The offering, sale and delivery of the Bonds are exempt from registration under the Securities Act of 1933, as amended, and do not require the qualification under the Trust Agreement Act of 1939, as amended, of any"indenture," as defined therein. We are furnishing this letter solely for your benefit. It is not to be relied upon by any other person or firm. Very truly yours, C-2 EXHIBIT D FORM OF OPINION OF THE CITY ATTORNEY April 1, 2004 The Honorable Mike Fahey Mayor of the City of Omaha 1819 Farnam Street Omaha,Nebraska 68183 Kirkpatrick Pettis Smith&Polian, Inc. 10250 Regency Circle, Suite 500 Omaha, Nebraska 68114 As Underwriter As Representative First National Bank of Omaha as Paying Agent, Registrar and Trustee One First National Center 16th and Dodge Streets Omaha,NE 68102-1596 $31,660,000 CITY OF OMAHA,NEBRASKA VARIOUS PURPOSE AND REFUNDING BONDS SERIES OF 2004 Ladies and Gentlemen: This opinion is rendered in connection with the issuance by the City of Omaha, Nebraska (the "City"), of its $31,660,000 Various Purpose and Refunding Bonds Series of 2004 (the "Bonds") issued in accordance with the Constitution and statutes of the State of Nebraska, the Home Rule Charter of 1956 of the City of Omaha, proceedings of the City Council of the City of Omaha providing for the issuance thereof, including Ordinance No. 36515 (the "Ordinance"), and a Sale Resolution, dated March 16, 2004 (collectively, the "Bond Authorizations"). The Office of the City Attorney (the "Office") acts as counsel to the City in connection with the transactions contemplated by the Bond Authorizations. In rendering this opinion, the Office has examined, among other things, the Bond Authorizations pertaining to the issuance of the Bonds; certificates of City officials, public records and proceedings in connection with the organization and establishment of the City; the Trust Agreement; and the Bond Purchase Agreement between Kirkpatrick Pettis Smith & Polian, Inc. for itself and as representative of the underwriters named as underwriters D-1 herein (the "Representative") and the City (the "Bond Purchase Agreement"). In such examination, we have assumed the genuineness of all signatures (other than officials of the City), and the conformity with the original documents of all documents submitted to us as copies. All terms used herein and not otherwise defined are as defined in the Official Statement. The Bonds are issued pursuant to the Bond Authorizations. This opinion is subject to the following qualifications: (a) the opinions regarding enforceability contained in paragraphs 2, 3, 4 and 9 are subject to (i) the effect of insolvency, bankruptcy, reorganization, moratorium or other laws affecting generally the enforcement of creditors rights, (ii) principles of equity, and (iii) the exercise of judicial discretion; and b) no opinion is expressed as to compliance by the City with federal securities or state "Blue Sky" laws or regulations. Based on the foregoing, the Office is of the opinion, as of the date hereof, and under existing laws, that: 1. The City is a body corporate for municipal purposes, organized and validly existing under the Constitution and laws of the State of Nebraska and the Charter. 2. The Bonds are valid and binding general obligations of the City the payment of which the City has pledged its full faith and credit and taxing power and are enforceable in accordance with their terms. The City is obligated to levy real property taxes -on real property located in the City without limitation as to rate or amount. 3. The Bond Authorizations have been duly enacted and are enforceable against the City in accordance with their terms. 4. The City has taken all actions required to be taken by the City to authorize the issuance of the Bonds and the City Documents (as hereinafter defined), that all proceedings and actions of the City relating to the Bonds and the City Documents, and related proceedings, comply with all laws, acts, resolutions, rules and regulations applicable to the City, are in full force and effect, and that none of the actions taken by the City relating to the authorization of the Bonds and the City Documents (as hereinafter defined) and the transactions contemplated thereby has been amended, revised, repealed, revoked or rescinded. In addition, the statements in the Official Statement pertaining to the City under the captions "INTRODUCTORY STATEMENT," "ADDITIONAL BACKGROUND ON THE CITY OF OMAHA," "GOVERNMENT AND FINANCIAL CONTROLS," "SOURCES OF CITY REVENUES" and "CAPITAL PROJECTS," are, in all material respects, accurate statements or summaries of the matters therein set forth and fairly present the information purported to be shown therein. D-2 5. The issuance of the Bonds and the execution, delivery, performance, and approval by the City of (i) the Bonds, (ii) the Bond Authorizations, (iii) the Bond Purchase Agreement, and (iv) the Trust Agreement (collectively, the "City Documents") do not conflict with, or result in any breach of, any of the provisions or constitute a default under, the Bond Authorizations, any loan agreement, bond, note or other agreement, instrument or directive to which the City is bound, which breach, conflict, or default would affect the validity or binding effect of the Bonds, the Bond Authorizations, the City Documents, or the ability of the City to pay the principal of and interest on the Bonds when due. 6. All proceedings and actions of the Council relating to the Bonds, the Bond Authorizations and related proceedings, and the City Documents comply with all laws, acts, resolutions, rules and regulations, including the Charter, applicable to the Council, and are in full force and effect, and none of the actions taken relating to the authorization, execution, and delivery of the Bonds and the transactions contemplated thereby, have been amended, revised, repealed, revoked, or rescinded. 7. Except as may be disclosed in the Official Statement dated as of March 16, 2004 (the "Official Statement"), there is no action, suit, proceeding, hearing or public investigation pending in any court or, to the knowledge of the Office, threatened, against the City which might have the effect of restraining or enjoining the issuance, delivery or payment of the Bonds or the performance of the obligations of the City under the Bonds, the Bond Authorizations or the City Documents, or which in any way contests or calls into question the validity or enforceability of: (a) the Bonds or the pledge of the City's full faith and credit, for their payment, or (b) the Bond Authorizations or the obligations of the City or the Mayor thereunder, or (c) the City Documents; there is no litigation pending or to the knowledge of the Office, threatened, challenging the ability of the City or its agencies to issue debt or contesting in any way the completeness, accuracy, or fairness of the Official Statement, or which might adversely affect the transactions or the ability of the City to comply with the transactions contemplated therein, or which directly challenges the titles of any City official to his or her respective office, or which questions the validity of the indebtedness of any agency of the City, or, except as may be disclosed in the Official Statement, which questions, in any manner, the levy or collection of any material portion of the revenues of the City pledged to the repayment of the Bonds. 8. The City is not eligible to file a petition for an adjustment of debts under Chapter 9 of the United States Bankruptcy Code. 9. The City Documents and the Continuing Disclosure Undertaking (the "Continuing Disclosure Undertaking") have been duly undertaken. No further authorization or approval is required for the City's performance, execution and delivery of and performance of its obligations under the City Documents and the Continuing Disclosure Undertaking, and (assuming the City Documents have been duly authorized, executed and delivered by the other parties thereto), the City Documents and Continuing Disclosure Undertaking constitute the legal, valid and binding obligations of the City, enforceable in accordance with their terms. D-3 10. The statement contained in the Official Statement under the caption "LITIGATION" is a fair and accurate summary in all material respects of the matters intended to be covered thereby. 11. The Office has reviewed the Official Statement and, while the Office has not independently verified the financial and statistical information contained in the Official Statement, based upon this Office's knowledge of the affairs of the City, the Office has no reason to believe that the Official Statement contained as of its date, or contains as of the date hereof, any untrue statement of a material fact or omitted as of its date, or omits as of the date hereof, to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. This opinion and all documents which relate to this opinion are to be construed in accordance with the Constitution and laws of the State of Nebraska, the Charter and applicable federal law as of the date of this opinion. Sincerely, Paul D. Kratz City Attorney City of Omaha D-4 EXHIBIT E FORM OF OPINION OF UNDERWRITERS' COUNSEL April 1, 2004 Kirkpatrick Pettis Smith &Polian, Inc. as Representative of the Underwriters 10250 Regency Circle, Suite 500 Omaha, Nebraska 68114 $31,660,000 CITY OF OMAHA, NEBRASKA VARIOUS PURPOSE AND REFUNDING BONDS SERIES OF 2004 Ladies and Gentlemen: We have acted as counsel to the Underwriters (the "Underwriters") named in the Bond Purchase Agreement, dated March 16, 2004 (the "Bond Purchase Agreement"), between Kirkpatrick Pettis Smith &Polian, Inc. as representative of the Underwriters (the "Representative"), and the City of Omaha, Nebraska (the "City"), under which the Underwriters agreed to purchase from the City $31,660,000 of the City's Various Purpose and Refunding Bonds Series of 2004 (the "Bonds") issued in accordance with the Constitution and statutes of the State of Nebraska, the Home Rule Charter of 1956 of the City of Omaha, proceedings of the City Council of the City of Omaha providing for the issuance thereof, including Ordinance No. 36515 (the "Ordinance"), and a Sale Resolution, dated March 16, 2004 (collectively, the "Bond Authorizations") In connection with the offering of the Bonds, the City has prepared, executed and authorized the distribution of an official statement, dated March 16, 2004 (the "Official Statement"). As your counsel, we participated in the preparation of the Official Statement and examined the originals, or copies thereof certified to our satisfaction, of such corporate records of the City, certificates of public officials, certificates of officers of the City, the Continuing Disclosure Undertaking of the City, Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Rule 15c2-12"), and such other documents, records and papers as we have deemed necessary or appropriate in order to give the opinions expressed herein. We have relied upon such certificates of officers of the City and other certifications with respect to the accuracy of material factual matters contained therein which were not independently established. hi addition, we have, with your approval, assumed that the Bonds have been duly executed on behalf of the City and duly authenticated by the Trustee, and that the signatures on all documents and instruments examined by us are genuine, which E-1 assumptions we have not independently verified. Based upon the foregoing, we are of the opinion that: 1. The offering and sale of the Bonds by the City, and the resale of the Bonds by you as contemplated by the Bond Purchase Agreement and the Official Statement, do not require registration under the Securities Act of 1933, as amended, or qualification of the Trust Agreement under the Trust Indenture Act of 1939, as amended. 2. The Bonds constitute "municipal securities" within the meaning of the Securities Exchange Act of 1934, as amended. 3. The Continuing Disclosure Undertaking complies in all material respects with the requirements of paragraph(b)(5) of Rule 15c2-12 applicable to the primary offering of the Bonds and the Continuing Disclosure Undertaking provides a suitable basis for the Underwriters to reasonably make the determination required by paragraph (b)(5) of Rule 15c2-12, as a condition to purchasing or selling the Bonds in connection with an Offering (as said term is defined in Rule 15c2-12) of the Bonds. In the course of the preparation by the City of the Official Statement, we and you have participated in conferences and conversations with the representatives of the City; the City Attorney; and Bond Counsel, (in each case as defined in the Official Statement); and we have also consulted with you. We are not passing upon the accuracy, completeness or fairness of the information contained in the Official Statement. In this connection, with your concurrence, we did not undertake any independent examination or review of, or otherwise attempt to make any independent verification of, (i) any records of proceedings of, or any factual matters relating to or otherwise involving, the City or any agency or political subdivision thereof or therein, or (ii) any other factual matters contained in the Official Statement. It is our understanding that you are relying upon the preparation of the Official Statement by the City and certifications of various officers and officials of the City as to the accuracy, completeness and fairness of the statements contained therein. Further, we are not in a position to provide, and we hereby expressly disclaim, any commentary or assurances as to any information in the Official Statement regarding the adequacy or accuracy of the financial statements and other financial and statistical data contained in the Official Statement. Subject to the foregoing limitations with respect to our engagement, no information was disclosed to us in connection with the preparation of the Official Statement or in our conferences or conversations referred to above which has caused us to believe that the Official Statement, as of the date thereof, contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. While we have not independently passed upon the validity of the Bonds, we hereby confirm that all proceedings of the City and related matters, including the opinions of Kutak Rock LLP, bond counsel for the City, each of even date herewith and delivered to you today, are satisfactory in form and substance to us and we believe that you are E-2 justified in relying thereon. This opinion is solely for the benefit of, and may be relied upon only by you and is not to be used, circulated, quoted or otherwise referred to for any other purpose, except that reference may be made to it in the Bond Purchase Agreement or in the list of closing documents pertaining to the delivery of the Bonds. Very truly yours, Stinson Morrison Hecker LLP E-3 OMADOCS 684727v2 EXHIBIT "B" NEW ISSUE—Book-Entry Only Ratings:Moody's: "Aaa" Standard&Poor's: "AAA" (See"RATINGS"herein) In the opinion of Bond Counsel, under existing laws, regulations, rulings and judicial decisions, interest on the Convention Center Bonds and the Various Purpose Bonds(Including original issue discount treated as interest)is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, except that such interest must be included in the "adjusted current earnings"of certain corporations for purposes of calculating alternative minimum taxable income. Bond Counsel also is of the opinion that, under existing laws of the State of Nebraska, the Convention Center Bonds and the Various Put pose Bonds, together with interest thereon and income therefrom, are exempt from all Nebraska state income taxes as more fully described under "TAX EXEMPTION"herein. $205,875,000 $31,660,000 City of Omaha,Nebraska City of Omaha,Nebraska General Obligation Refunding Bonds Various Purpose and Refunding Bonds (City of Omaha Convention Center/Arena Project) Series of 2004 Series 2004. Dated:April 1,2004 Due:As shown on inside cover The Convention Center/Arena Project Bonds (the "Convention Center Bonds") and the Series of 2004 Bonds (the "Various Purpose Bonds")will be issued as fully registered bonds in the denominations of$5,000 and integral multiples thereof. Interest payments on the Convention Center Bonds and the Various Purpose Bonds will be payable on each April 1 and October 1, commencing October 1, 2004, by check or draft mailed to the registered owner as of the applicable record date at the address shown on the books of registry maintained by First National Bank of Omaha, as Registrar. Principal of the Convention Center Bonds and the Various Purpose Bonds is payable upon presentation and surrender of the Convention Center Bonds and the Various Purpose Bonds at the principal corporate office of First National Bank of Omaha,as Paying Agent,in Omaha,Nebraska. Other terms of the Convention Center Bonds and the Various Purpose Bonds,including optional(for the Various Purpose Bonds only) and mandatory redemption provisions, are described herein. A detailed schedule of the Convention Center Bonds and the Various Purpose Bonds is set forth inside this cover page. The Convention Center Bonds and the Various Purpose Bonds initially will be registered in the name of Cede&Co.,as nominee for The Depository Trust Company, New York, New York ("DTC"), which will act as securities depository for the Convention Center Bonds. Purchases of the Convention Center Bonds and the Various Purpose Bonds may be made only in book- entry form in authorized denominations by credit to participating broker-dealers and other institutions on the books of DTC as described herein. Purchasers will not receive certificates evidencing the Convention Center Bonds or the Various Purpose Bonds. Principal of,premium,if any,and interest on the Convention Center Bonds and the Various Purpose Bonds will be payable by the paying agent directly to DTC as the registered owner thereof. Disbursement of such payments to the DTC Participants is the responsibility of DTC, and disbursement of such payments to the beneficial owners is the responsibility of the DTC Participants and the Indirect Participants, as more fully described herein. Any purchaser of a beneficial interest in the Convention Center Bonds or the Various Purpose Bonds must maintain an account with a broker or dealer who is,or acts through,a DTC Participant to receive payment of the principal of,premium,if any,and interest on such Convention Center Bonds or Various Purpose Bonds. See"THE BONDS—Book-Entry Only System"herein. This cover page contains limited information for quick reference only. It is not a summary of the matters related to the Convention Center Bonds and the Various Purpose Bonds. Potential investors must read the entire Official Statement to obtain information essential to making an informed investment decision. The Convention Center Bonds and the Various Purpose Bonds are payable from ad valorem taxes,unlimited as to rate and amount,levied by the City against all taxable property in the City. The full faith and credit of the City are pledged to the prompt payment of the principal of and interest on the Convention Center Bonds and the Various Purpose Bonds. Certain revenues received by the City pursuant to the Convention Center Act shall be applied only to that portion of the debt service requirements of the Bonds allocable to the Convention Center. The Convention Center Bonds and the Various Purpose Bonds are being offered when,as and if issued by the City and accepted by the Underwriters,subject to the approval of legality of the Convention Center Bonds and the Various Purpose Bonds by Kutak Rock LLP,Bond Counsel,and to certain other conditions. Certain legal matters will be passed upon for the City by the City Attorney. Certain legal matters will be passed upon for the Underwriters of the Various Purpose Bonds and the Convention Center Bonds by Stinson Morrison Hecker LLP. It is expected that delivery of the Convention Center Bonds and the Various Purpose Bonds will be made on or about April 1,2004,at DTC in New York,New York against payment therefor. KIRKPATRICK PETTIS BEAR, STEARNS & CO. INC AMERITAS INVESTMENT CORP. EDWARD D. JONES&CO.,L.P. LOOP CAPITAL MARKETS,LLC Dated:March 16,2004 $205,875,000 CITY OF OMAHA,NEBRASKA General Obligation Refunding Bonds (City of Omaha Convention Center/Arena Project), Series 2004 MATURITY SCHEDULE Maturity Date Principal Interest Maturity Date Principal Interest (April 1) Amount Rate Yield (April 1) Amount Rate Yield 2012 $8,430,000 5.250% 2.900% 2020 12,830,000 5.250% 3.860% 2013 8,885,000 5.250% 3.070% 2021 13,520,000 5.250% 3.960% 2014 9,365,000 5.250% 3.230% 2022 14,250,000 5.250% 4.040% 2015 9,870,000 5.250% 3.380% 2023 15,020,000 5.250% 4.090% 2016 10,400,000 5.250% 3.480% 2024 15,830,000 5.250% 4.150% 2017 10,960,000 5.250% 3.580% 2025 16,680,000 5.250% 4.200% 2018 11,550,000 5.250% 3.670% 2026 17,580,000 5.250% 4.220% 2019 12,175,000 5.250% 3.770% 2027 18,530,000 5.250% 4.240% 1 (Accrued Interest To Be Added) $31,660,000 CITY OF OMAHA,NEBRASKA Various Purpose and Refunding Bonds Series of 2004 MATURITY SCHEDULE Maturity Date Principal Interest Maturity Date Principal Interest (April 1) Amount Rate Yield (April 1) Amount Rate Yield 2005 $2,025,000 2.000% 1.120% 2015 $1,320,000 4.500% 3.480%* 2006 2,670,000 2.000% 1.180% 2016 1,345,000 4.500% 3.600%* 2007 2,225,000 2.250% 1.470% 2017 1,380,000 4.500% 3.710%* 2008 2,475,000 2.375% 1.820% 2018 1,520,000 4.500% 3.810%* 2009 1,915,000 2.625% 2.110% 2019 1,480,000 4.500% 3.910%* 2010 1,375,000 2.750% 2.340% 2020 1,255,000 4.500% 4.010%* 2011 1,400,000 3.000% 2.600% 2021 1,280,000 4.000% 4.100% 2012 1,425,000 3.125% 2.860% 2022 1,755,000 4.000% 4.150% 2013 1,455,000 3.375% 3.060% 2023 1,190,000 4.125% 4.220% 2014 1,470,000 3.500% 3.220% 2024 700,000 4.125% 4.290% (Accrued Interest To Be Added) *Yield to first call. The yields to maturity are as follows: 3.554%for bonds maturing April 1,2015, 3.719% bonds maturing April 1, 2016, 3.855% bonds maturing April 1,2017, 3.966% bonds maturing April 1,2018, 4.065% bonds maturing April 1,2019 and 4.155% bonds maturing April 1,2020. No dealer,broker,salesperson or other person has been authorized by the City or the original purchasers to give any information or to make any representations in connection with the Bonds or the matters described herein,other than those contained in this Official Statement,and,if given or made,such other information or representations must not be relied upon as having been authorized by the City or the original purchasers. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy,nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer,solicitation or sale. The information and expressions of opinion contained herein are subject to change,without notice,and neither the delivery of this Official Statement,nor any sale made hereunder,shall, under any circumstances,create any implication that there has been no change in the matters described herein since the date hereof. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used,in whole or in part,for any other purpose. The original purchasers may offer and sell Bonds to certain dealers and others at prices lower than the offering prices stated on the cover page hereof. The offering prices may be changed from time to time by the original purchasers. INTRODUCTORY STATEMENT 6 State Turnback Tax,Neb.R.R.S. §13- DOWNTOWN REDEVELOPMENT 7 2601 et seq 21 ADDITIONAL BACKGROUND ON THE THE BONDS 22 CITY OF OMAHA 8 Convention Center Bonds 22 GOVERNMENT AND FINANCIAL Description of the Convention Center CONTROLS 9 Bonds 22 Form of Government 9 Place of Payment 22 City Administration 9 Optional Redemption 22 City Financial Management and Controls...9 Authority for Issuance 22 Financial Reporting Systems and Control Various Purpose Bonds 22 Systems 10 Description of the Bonds 22 SOURCES OF CITY REVENUES 11 Place of Payment 22 Authority to Levy Taxes 11 Optional Redemption 22 Property Taxes 11 Authority for Issuance 23 City Sales and Use Taxes 12 Security 23 City Business Taxes 12 Revision of State Property Tax System....23 Other Revenues 12 Prospective Financial Commitments by Capital Expenditures—Downtown 13 the City 24 Capital Expenditures—Convention Book-Entry Only System 24 Center/Arena Project 14 TAX EXEMPTION 26 CONVENTION CENTER/ARENA Federal and State Tax Exemption 26 PROJECT 14 Future Legislation 27 Project Scope 15 Tax Treatment of Original Issue Discount 27 FUNDING 15 Tax Treatment of Original Issue Premium28 Operations 17 VERIFICATION AGENT 28 The Metropolitan Entertainment& RATINGS 28 Convention Center Authority(MECA)..17 UNDERWRITING 29 THE PRIOR CONVENTION LEGAL OPINIONS 29 CENTER/ARENA BONDS CONTINUING DISCLOSURE REFUNDING PROGRAM 18 UNDERTAKING 30 THE PRIOR BONDS REFUNDING FINANCIAL STATEMENTS 30 PROGRAM 19 LITIGATION 30 DISPOSITION OF BOND PROCEEDS for CERTIFICATION AS TO OFFICIAL various purposes 19 STATEMENT 30 ESTIMATED SOURCES AND USES OF APPENDIX A CITY OF OMAHA— FUNDS 20 SELECTED ECONOMIC INDICATORS. 1 CONVENTION CENTER/ARENA APPENDIX B CITY OF OMAHA PROJECT PLAN OF FINANCING 20 FINANCIAL INFORMATION 2 Plan of Finance 20 Debt Payment Record 15 i But Tax Revenue Bonds and Notes Pa General Obligation Bonds Authorizedable y Unissued 15 for Fiscal Year ended December 31, CASH RESERVE FUND 15 2002(in millions) 10 EMPLOYEE RELATIONS: Economic Factors And Next Year's RETIREMENT SYSTEMS 15 Budgets And Rates 10 CITY OF OMAHA EMPLOYEES' Requests For Information 11 RETIREMENT SYSTEM 15 Notes Payable 39 POLICE AND FIREMEN'S Grant Commitments 39 RETIREMENT SYSTEM 18 Tax Increment Financing Notes and Financial Highlights for Fiscal Year 2002..1 Bonds 40 Overview of the Financial Statements 1 Debt Margin/Covenants 44 Government-Wide Financial Statements 2 In-substance Defeasance 44 Fund Financial Statements 2 Compliance 70 Notes to the Financial Statements 3 Internal Control over Financial Reporting 70 Other Information 3 Compliance 71 City Government-Wide Financial Internal Control over Compliance 71 Analysis 3 APPENDIX C FORM OF CONTINUING Governmental Activities 4 DISCLOSURE UNDERTAKING 1 Business-Type Activities 5 APPENDIX D FORMS OF OPINION OF Financial Analysis of the Government BOND COUNSEL CONVENTION Funds 7 CENTER BONDS 1 Governmental Funds 7 APPENDIX D FORMS OF OPINION OF Proprietary Funds 7 BOND COUNSEL 2 General Fund Budgetary Highlights 8 APPENDIX E FORM OF OPINION OF Capital Asset and Debt Administration 9 BOND COUNSEL VARIOUS PURPOSE Capital Assets 9 BONDS 1 Long-Term Debt 9 APPENDIX F SUMMARY OF City of Omaha's Obligated Debt 10 REFUNDING BOND ORDINANCE 1 General Obligation,Revenue, Special APPENDIX F SUMMARY OF Obligation, Lease Purchase, Special REFUNDING BOND ORDINANCE 2 IN CONNECTION WITH THEIR REOFFERING OF THE BONDS,THE ORIGINAL PURCHASERS OF THE BONDS MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN MARKET PRICES OF THE BONDS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING,IF COMMENCED,MAY BE DISCONTINUED AT ANY TIME. 11 [PAGE INTENTIONALLY LEFT BLANK] CITY OF OMAHA,NEBRASKA MIKE FAHEY,MAYOR CITY COUNCIL James Vokal,Jr.,President Chuck Sigerson,Jr.—Vice President Garry C. Gernandt Frank Brown Franklin T.Thompson Mark Kraft Dan J.Welch MAYOR'S CABINET MEMBERS Stanley P. Timm Finance Director Paul D. Kratz City Attorney Robert Peters Planning Director Gail Kinsey Thompson Human Relations Director Thomas Warren Chief of Police Robert Dahlquist Fire Chief Larry N. Foster Acting Parks,Recreation and Public Property Director Norm Jackman Acting Public Works Director Cecil Hicks,Jr. Personnel Director UNDERWRITERS KIRKPATRICK PETTIS BEAR, STEARNS, &CO INC. AMERITAS INVESTMENT CORP. EDWARD D.JONES&CO., L.P. LOOP CAPITAL MARKETS,LLC AGENCY DIRECTORS Ola Anderson Acting Director,Greater Omaha Workforce Development Rivkah Sass Director, Omaha Public Library Allen Herink, City Comptroller Buster Brown, City Clerk AUDITOR KPMG LLP BOND COUNSEL Kutak Rock LLP UNDERWRITERS'COUNSEL Stinson Morrison Hecker LLP [PAGE INTENTIONALLY LEFT BLANK] OFFICIAL STATEMENT OF THE CITY OF OMAHA,NEBRASKA This Official Statement provides certain information concerning The City of Omaha, Nebraska (the "City") in connection with the sale of$205,875,000 aggregate principal amount of the City's General Obligation Refunding Bonds, Series 2004 (the "Convention Center Bonds") and the sale of$31,660,000 aggregate principal amount of the City's Various Purpose and Refunding Bonds, Series of 2004 (the "Various Purpose Bonds"). The Convention Center Bonds and the Various Purpose Bonds will be issued in strict compliance with the Constitution and laws of the State of Nebraska, the Home Rule Charter of the City of Omaha, 1956, as amended(the "Charter") and the proceedings of the City Council(the "Council") of the City, including Ordinance No. 36535 for the Convention Center Bonds (the "Convention Center Bond Ordinance") and Ordinance No. 36515 for the Various Purpose Bonds (the "Various Purpose Bond Ordinance")(collectively,the "Ordinances"). The Convention Center Bonds and the Various Purpose Bonds are sometimes collectively referred to herein as the "Bonds". The proceeds of the Convention Center Bonds will be used to finance the cost of refunding and redeeming certain outstanding general obligation indebtedness of the City as described in the following paragraph (collectively, the "Prior Convention Center/Arena Bonds"). The City issued the Prior Convention Center/Arena Bonds in December 2000 to provide funds for the payment of all or a portion of the cost of acquiring, constructing, improving, equipping and furnishing a convention center, arena and related public events facilities and infrastructure (the "Convention Center/Arena Project" or the "Project") located in the vicinity of downtown Omaha. See"CONVENTION CENTER/ARENA PROJECT." The Prior Convention Center/Arena Bonds consist of two series of bonds, the $119,210,000 General Obligation Bonds (City of Omaha Convention Center/Arena Project) Series A of 2000 (the "Convention Center/Arena Series A Bonds")relating to the convention center and the$78,790,000 General Obligation Bonds (City of Omaha Convention Center/Arena Project) Series B of 2000 (the "Convention Center/Arena Series B Bonds") relating to the arena. See "CONVENTION CENTER/ARENA PROJECT PLAN OF FINANCING." The Convention Center/Arena Project was completed and the convention center and arena opened to the public in September 2003. The purpose of the Convention Center Bonds is to refund and refinance all of the outstanding Prior Convention Center/Arena Bonds which were issued to finance certain costs incurred in connection with the construction of the Convention Center/Arena Project. As discussed herein the Convention Center Bonds will be general obligation bonds of the City. The Convention Center Bonds will be payable from ad valorem taxes of the City as well as other financing sources described in this official statement. See"CONVENTION CENTER/ARENA PROJECT PLAN OF FINANCING — Plan of Finance," "THE PRIOR CONVENTION CENTER/ARENA BONDS REFUNDING PROGRAM"and"THE BONDS." The proceeds of the Various Purpose Bonds will be used, in part, to finance the cost of refunding certain outstanding general obligation indebtedness of the City, including certain debt assumed by the City as a result of its annexations of five Douglas County, Nebraska sanitary and improvement districts. See "THE PRIOR BOND REFUNDING PROGRAM"herein. The remaining proceeds of the Various Purpose Bonds will be used to pay the costs of acquiring equipment and constructing improvements relating to the City's streets, sewer system, public safety and other public facilities and parks and recreation system. See "DISPOSITION OF BOND PROCEEDS FOR VARIOUS PURPOSES"herein. This Official Statement contains brief descriptions or summaries of, among other matters, the Bonds, the City and the Ordinances. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Ordinances are qualified in their entirety by reference to such documents, and references herein to the Bonds are qualified in their entirety by reference to the form thereof included in the Ordinance. Copies of such documents may be obtained from the City by writing to the attention of the Finance Director, and, during the initial offering period only, from the 5 representative of the Underwriters, Kirkpatrick Pettis, Suite 200, 10250 Regency Circle, Omaha,Nebraska 68114. INTRODUCTORY STATEMENT The City of Omaha, located in the center of the United States, has been a center of commerce since its incorporation. Omaha, which is Nebraska's largest population center, is located on the western bank of the Missouri River, opposite Council Bluffs, Iowa. The City of Omaha was established in 1854. The new city grew rapidly after 1863 when President Lincoln selected Omaha as the location of the eastern terminus of the first transcontinental railroad. Today, Omaha is at the center of several transportation and communication networks leading to all parts of the nation, and thus offers a valuable resource to businesses and industry competing in regional and national markets. As the headquarters for five Fortune 500 companies, Omaha has a diversified economy with a growing emphasis on teletechnology companies. The City has traditionally had a strong telecommunications infrastructure. AT&T has constructed a second Electronic Switching System in Omaha, making it one of the few cities in the country with two physically separated AT&T telephone points of presence. This large digital switching center doubles the capacity for switching long distance calls into and out of the City. In addition, by 1992, Omaha was wired with fiber optic loops and major trunk lines supporting the telemarketing operations located in the City, and Omaha was one of the first metropolitan area to have total ISDN coverage. The City is also innovative in its efforts to train the workforce necessary to support its local economy. For example, the Omaha Work Keys program was started in 1994 as a collaborative effort among American College Testing, the Omaha Public Schools and the Omaha business community. The objective of the program is to compare the skills required for success in the most prevalent jobs in the Omaha area with the skills of area high school students. The information developed from this assessment aids area school districts in modifying their curricula and improving students' career planning. Moreover, the metropolitan Omaha area offers a total of six colleges and universities, including Creighton University ("Creighton") and the University of Nebraska at Omaha ("UNO"), with a combined student enrollment of over 45,000. Creighton established one of the first e-commerce programs of study, which integrates curricula across disciplines such as information systems and technology, marketing, accounting and computer science. UNO constructed the state-of-the-art $70 million Peter Kiewit Institute of Information Science, Technology and Engineering, which was designed to adapt easily to evolving technologies and includes computer and telecommunications labs and a structures lab. Two major medical schools are located in Omaha at the University of Nebraska Medical Center and Creighton University, as well as two pharmacy schools,a school of dentistry and other related health professional schools. The City limits encompass over 100 square miles, with a metropolitan statistical area ("MSA") population of nearly 700,000 people. According to the City's Planning Depaituuent, nearly 1.1 million people reside within a 50-mile radius,and over 1.6 million people live within a 100-mile radius. Moreover, since 1980, the City has added over 27 square miles and nearly 80,000 people through a program of planned annexation. See "APPENDIX B,Part One—Population,Net General Bonded Debt and Per Capita Debt."The City's annexation program starts with an annual review of all sanitary and improvement districts ("SIDs"). Based on the application of an established set of criteria (including, e.g., the degree of SID development,the SID debt ratio and any potential boundary implications), a group of SIDs is selected for a detailed study of the prospective costs and benefits of annexation. Ten-year financial projections are then calculated and an annexation package (or alternative packages) is forwarded first to the Mayor and then to the Planning Board and City Council for review and approval. The stated goal of the City's annexation policy is to create annual, balanced annexation packages that combine higher-debt residential SIDs with others that have sales tax revenue or cash-on-hand to offset such debt. 6 DOWNTOWN REDEVELOPMENT The City, in partnership with the private sector, has embarked upon a variety of redevelopment programs that the City estimates to be over $2 billion, including the Convention Center/Arena Project which was financed in part with the proceeds of the Prior Convention Center/Arena Bonds. The Gallup Organization, one of the world's largest market research and management consulting firms, has developed an office campus in the City,with an initial investment of$35 million to construct a management education facility, Gallup University. This facility, which is located near the Convention Center/Arena opened in August 2003. Union Pacific Corp. is constructing a new, 19-story headquarters building in downtown Omaha,which is scheduled to open in the summer of 2004. In the midst of such redevelopment, downtown Omaha continues to reflect the history of the City. That history has been preserved with the renovation of old warehouses into modern apartments, condominiums, restaurants, shops and artists' lofts. The Old Market, a unique eating, shopping and entertainment area, is centered in Omaha's former fruit and vegetable warehouse and market district. One of Nebraska's most popular tourist attractions, the Old Market is home to numerous specialty shops, cappuccino shops, a brewery, restaurants, taverns and galleries. The City is redeveloping its riverfront area with the construction of a park and restaurant and the development of the Gallup Corporation campus and other commercial projects. Omaha is also home to the Omaha's Henry Doorly Zoo, Joslyn Art Museum, Rosenblatt Stadium(site of the annual NCAA Division I College Baseball World Series since 1950), Girls' and Boys'Town and other popular attractions. The City's past budget and financial results as well as its fiscal year 2004 budget are discussed herein under the caption "SOURCES OF CITY REVENUES". Since 1998, the City's taxable property valuation has increased by 54%from$12.6 billion to$19.4 billion for fiscal year 2004. The Convention Center Bonds and the Various Purpose Bonds will be general obligations of the City, to the payment of which the City will pledge its full faith and credit. All real property subject to taxation by the City will be subject to the levy of ad valorem taxes, without limitation as to rate or amount, to pay the principal of, applicable redemption premium, if any, and interest on the Convention Center Bonds and the Various Purpose Bonds. Funds to pay debt service on the Convention Center Bonds will be derived from the Debt Service Fund, and the Convention Center Bonds are backed by the full faith and credit of the City. The City anticipates that revenues from a number of sources as described herein will be identified to support the indebtedness represented by the Convention Center Bonds. See "CONVENTION CENTER/ARENA PROJECT PLAN OF FINANCING" herein. Under the Nebraska Convention Center Facility Financing Assistance Act(the "Convention Center Act"), assistance received from the State of Nebraska pursuant to the Convention Center Act shall be utilized only for the payment of the Convention Center Bonds allocable to the convention center and meeting facility portion of the Project. Funds to pay debt service on the Various Purpose Bonds will be derived from the Debt Service Fund, and the Various Purpose Bonds are backed by the full faith and credit of the City. An estimated $208,432,186 was made available to and was utilized by the Metropolitan Entertainment&Convention Authority("MECA"), a not-for-profit Nebraska corporation and a corporation described in Section 501(c)(3) of the Internal Revenue Code, to provide the City of Omaha with a new Convention Center and Arena facility together with a parking garage and associated site improvements. An additional $83,000,000 was used by the City for infrastructure for the Convention Center/Arena Project. The Convention Center/Arena Project anchors the new Convention Center Redevelopment Area, creating an active urban front along the extension of 10th Street. The Convention Center consists of a 194,000 square foot Exhibition Hall, a 30,000 square foot Ballroom and 28,000 square feet of meeting rooms, together with 174,000 square feet of support space. These facilities are accommodated by a support structure consisting of kitchen space, service spaces and a loading dock area with tractor-trailer bays. The Arena portion of the Project provides between 14,500 and 16,000 seats depending on the particular events. The Convention Center/Arena Project was constructed by Kiewit Construction Company of Omaha. The design and architectural services for the Project were provided by DLR Group of Omaha. MECA may 7 manage other sports and entertainment facilities in the City, including the Civic Auditorium, for which MECA entered into a Memorandum of Understanding with the City in January 2004.This Memorandum of Understanding provides that the City and MECA will negotiate toward an agreement for MECA to manage the Civic Auditorium. See "CONVENTION CENTER/ARENA PROJECT" herein. Moneys for the Convention Center/Arena and related infrastructure were derived from bond proceeds and private donations. The factors affecting the City's financial condition and the Convention Center Bonds described throughout this Official Statement are complex and are not intended to be summarized in the Introductory Statement. This Official Statement should be read in its entirety. ADDITIONAL BACKGROUND ON THE CITY OF OMAHA Eppley Airfield, Omaha's major commercial airport, is located four miles northeast of downtown Omaha. The airport is five minutes from downtown and approximately a 15 to 30 minute drive from most areas of the metropolitan area. Eppley Airfield is the largest airport between Minneapolis and Kansas City and Chicago and Denver. While nearly 3.7 million passengers, over 138 million pounds of cargo and over 58 million pounds of mail passed through the facility in 2003, the field and terminal facilities are far from saturated. In the last decade, Eppley has made over $110 million in investments in terminal, apron, cargo area and runway expansions. Eppley Airfield offers 180 flights per day and is serviced by eight national air carriers, 12 regional airlines, eight air freight carriers and two full-service general aviation facilities. A total of 161 general aviation aircraft, including 30 executive jets, are based at Eppley Airfield. There are 90 nonstop flights out of Eppley Airfield daily. Omaha's rail service is provided by three rail companies: Union Pacific, Burlington Northern and Chicago Central and Pacific Railroads. Union Pacific Railroad, one of the nation's largest railroads, is headquartered in Omaha. The geographic centrality of Omaha in the United States has encouraged commercial development, and the City is home to five Fortune 500 companies, which represent a diverse array of industries: Berkshire Hathaway, ConAgra, Mutual of Omaha, Peter Kiewit Sons', Inc. and Union Pacific Railroad. The City's economy continues to diversify, although it still remains agriculturally oriented. The Omaha MSA contains more than 860 manufacturing plants, including plants operated by AVAYA (formerly Lucent Technologies), Lozier Corporation and Valmont Industries Inc. In the early 1980's, Omaha began developing as a major participant in the reservation and direct-response center industry. Currently, there are 42 such firms located within the City. In total they employ a labor force in excess of 20,000. Major employers in this group include First Data Resources, Hyatt Reservations, Dial America Marketing Services,Marriott Reservations, Sitel Corporation and West Corporation. Omaha is the home of 21 insurance companies (with over 50 employees), including Mutual of Omaha, the world's largest mutual health and accident company, and Woodmen of the World Life Insurance Society, the largest fraternal life insurance company. The district offices of the Farm Credit System for Nebraska, Iowa, South Dakota and Wyoming are headquartered in Omaha. Commercial development is further supported by relatively inexpensive electricity, abundant water supplies and excess waste water capacity. The Omaha Public Power District ("OPPD") provides electric service to customers in the City and within the 5,000 square-mile area around the City. The rates charged by OPPD are below average retail rates in part because of its competitive cost structure including owned-generation costs that are below regional benchmark averages. The Metropolitan Utilities District ("MUD") operates six reservoirs and 2,207 miles of water mains serving a three-county area. The City's water supply, drawn principally from the Missouri River and a system of wells on the Platte River, is plentiful, and its quality meets or exceeds all current and proposed federal water standards. Finally, Omaha's wastewater treatment plants are operated by the City and have a current treatment capacity of 216 million gallons per day. 8 The education,health care and military sectors of the local economy are also thriving. The City is the location of Creighton University, the University of Nebraska at Omaha and the University of Nebraska Medical Center ("UNMC"). These institutions, together with three additional colleges located in Omaha, offer educational programs at the graduate and undergraduate levels, in law, and in the health professions: medicine, dentistry, nursing and pharmacy. UNMC's Lied Transplant Center has one of the most active liver and bone marrow transplant centers in the United States. The Eppley Cancer Research Center at UNMC is one of only a few centers involved in both chemical and viral cancer research. Public elementary and secondary education are provided by four local school districts: School District of Omaha, Douglas County School District No. 66, School District of Millard, and School District of Ralston. The School District of Omaha has the largest enrollment of pupils residing within the City. The City is also served by a number of private and parochial schools at both the elementary and secondary levels. There are twelve hospitals within the City of Omaha, six of them classified as acute-care community hospitals. Of the remaining six hospitals, two are acute-care hospitals operated by governmental entities (one by the State of Nebraska and one by Douglas County), three are specialized hospitals (pediatrics, maternity care and geriatrics), and one is a major hospital of the Veterans Administration. There are more than 1,200 physicians and more than 300 dentists in Omaha; their services are utilized both by Omaha residents and by persons within the surrounding region. The United States Strategic Command ("USSTRATCOM") is headquartered at Offutt Air Force Base, located just south of Omaha. USSTRATCOM has been assigned planning and targeting responsibility for the nation's strategic nuclear weapons. The City is economically attractive to potential residents. The cost of living in the City in 2002 across all categories was 92% of the national average. Omaha MSA residents enjoy a median effective buying income of $41,216, compared to the national median of $38,365. And as of November 2003, Omaha's unemployment rate was 3.6%,compared to a rate of 5.6%for the United States. GOVERNMENT AND FINANCIAL CONTROLS Form of Government Omaha operates with a strong mayor form of government. The Mayor is the City's full-time Chief Executive Officer. The City has a seven-member City Council. As a home-rule city, Omaha has all of the powers available to a home-rule city under the Nebraska Constitution. The Mayor and Council are elected for four-year terms. The Mayor is elected in a citywide election while the City Council members are elected by district. City Administration The executive and administrative powers of the City are vested in the Mayor, who is popularly elected for four years on a nonpartisan basis. The Honorable Mike Fahey was elected on May 15,2001,his first involvement in an election as a candidate,to a four-year term of office ending June 2005. He officially took office June 12, 2001. In 1978,Mayor Fahey founded American Land Title Company,a title insurance business. In 1990, Mayor Fahey sold the business but remained on as its CEO. He is now retired from the company. For ten years starting in January 1982, Mayor Fahey served on the Omaha Planning Board and was Chairman of the board from January 1986 through December 1991. The Mayor's cabinet consists of the chief officers of ten City Departments. The Mayor appoints each Department head. City Financial Management and Controls City financial management is the responsibility of the Finance Department. The head of the Finance Department is the Finance Director of the City, Stanley P. Timm. Mr. Timm has been with the 9 City of Omaha Finance Department for 32 years. During most of that time he worked in the Budget and Accounting Division, the last five years as Budget and Accounting Manager. He served as City Comptroller for two and one-half years before being named Acting Finance Director on January 17, 2000 and Finance Director on June 28, 2001. Major duties include serving on the Mayor's Cabinet, Mayor's Budget Committee, the City's Annexation Task Force, Capital Improvement Priority Committee, Subdivision Review Committee and Tax Increment Financing Review Committee and serving as administrator of the Police and Fire Pension Board. Mr. Timm holds a Bachelor of Science in Business Administration with a major in Accounting from Creighton University in Omaha,Nebraska. Allen R. Herink, City Comptroller, has 28 years of experience as an Accountant with the City of Omaha. He began his career with the City working in the Grants Accounting Division of the Finance Department. In 1990, he was transferred to the Budget and Accounting Division. In 1997, Mr. Herink was promoted to Division Manager. He became Acting City Comptroller in July 2001 and City Comptroller in August 2003. Mr. Herink holds a Bachelor of Science degree with a major in Accounting from the University of Nebraska at Omaha and has completed numerous computer science courses. Kenneth E. Hofman, Revenue Manager,has 32 years of experience with the City of Omaha. Mr. Hofman also began his career in the Grants Accounting Division of the Finance Department. He transferred to the Budget and Accounting Division and in 1982 was promoted to Accountant III. In 1994, Mr. Hofman was selected to head the Revenue Division and was promoted to Revenue Manager in 1998. As Revenue Manager, Mr. Hofman serves as the investment officer for the City; manages and supervises the Revenue Division, which includes the Central Cashier, Violations Bureau, Centralized Billing Section, Keno Section and Public Events Ticket Office. As a revenue analyst, Mr. Hofman is responsible for analyzing, forecasting, formulating and administering all City revenue sources for the preparation of the "Summary of Revenue." Mr. Hofman holds a Bachelor of Science degree with a major in Business Administration from the University of Nebraska at Lincoln. In total, the Finance Depaitinent consists of 49 employees and is organized by division. The Budget and Accounting Division under the Mayor's direction prepares the annual budget. The Budget and Accounting Division's responsibilities include: maintenance of general accounting records; preparation of all warrants; pre-audit of all purchase orders, invoices and disbursements; accountability of City owned property; Special Assessments; and Enterprise Funds. It is responsible for preparing and maintaining accounting records to comply with provisions of Federal and State grants. The Revenue Division's activity includes budget implementation and the continuous monitoring and internal control of revenue against budget appropriations. It is responsible for the City's centralized billing procedures, the collection and deposit of monies by the Central Cashier and the Violation Bureau, administration of the keno game and the Public Events Ticket Office. Financial Reporting Systems and Control Systems The Budget and Accounting Division of the Finance Department performs significant and ongoing monitoring of the financial performance of the operating departments/divisions after budget adoption. All equipment spending is prioritized, scheduled into semiannual acquisition periods and submitted by department heads to staff accountants for analysis and review prior to any purchasing activity by the City Purchasing Agent. All purchases and contracts in excess of$20,000 must be approved by formal City Council action. A monthly report detailing actual to budget performance is prepared and distributed to all department/division managers. The City Charter requires quarterly budget status reporting. These reports forecast year end revenue and expenditure balances for all operating departments/divisions. Material variances are investigate promptly as they occur. Remedial actions to return a division/department to budget might include, but are not limited to, such actions as (i) staff accountant review and approval of all requisitions prior to receipt by the Purchasing Division, (ii) postponement or reductions in quantity of materials and equipment purchased,or(iii)deferral of major budgeted expenditures. 10 SOURCES OF CITY REVENUES Authority to Levy Taxes Governmental units in Nebraska may not adopt budgets for fiscal years beginning on or after July 1, 1998, in excess of 102.5% of the prior fiscal year's budget plus allowable growth (which includes increases in taxable valuation for such things as new construction and annexations). However, such budgetary limitations do not apply to,among other things,revenue pledged to retire bonded indebtedness or budgeted for capital improvements. Governmental units may exceed the budget limit for a given fiscal year by up to an additional 1% upon the affirmative vote of at least 75% of the governing body or in such amount as is approved by a majority vote of the electorate. Effective July 1, 1998, the property tax levies of incorporated cities and villages, such as the City, are limited to a maximum of 450/$100 of taxable valuation (plus an additional 50/$100 to pay the municipality's share of revenue required under interlocal agreements). The levy limit does not apply to levies for preexisting lease-purchase contracts approved prior to July 1, 1998, to bonded indebtedness approved according to law and secured by a levy on property and to pay judgments. The City's 2004 General Fund levy, exclusive of such unlimited levies, is 24.3120/$100 of taxable valuation. A political subdivision may exceed its levy limitation for a period of up to five years by majority vote of the electorate. The City's tax levy during its current fiscal year ending December 31, 2004, is 24.3120/$100,plus 17.581¢/$100 for payment of the City's general obligation indebtedness, plus 0.6000/$100 for satisfaction of judgments and 0.8940/$100 for payment on the City's Special Redemption Levy, for a total levy of 43.3870/$100. Set forth in the following table is a detailed summary of the property tax levied on real and personal property in the City. Property Taxes Property taxes on tangible property, real and personal, are levied by the City of Omaha, collected by the Douglas County Treasurer and remitted to the City. Real property taxes are levied September 1 of each year and become due December 31. The first half of tax payable becomes delinquent the following April 1 and the second half August 1. Personal property taxes are levied September 1 of each year and become due November 1. The first half of tax payable becomes delinquent December 15 and the second half the following July 1. Taxes for Year Shown % of Total Prior Years' Collections Year Ended Amount % Taxes Total to Current December 31 Certified Collected Collected Collected Collections Year Taxes 1997 $73,785,881 $72,234,650 97.9 $2,404,922 $74,639,572 101.16 1998 68,915,674 67,373,636 97.8 1,604,868 68,978,504 100.09 1999 72,024,257 70,529,609 97.8 1,651,123 72,180,732 I00.22 2000 77,109,264 75,432,998 97.8 1,771,124 77,204,122 100.12 2001 76,293,126 74,827,346 98.1 1,529,927 76,357,273 100.08 2002 80,926,571 78,176,656 97.1 1,061,170 79,237,826 97.91 2003 82,464,501 80,538,622 97.7 1,479,940 82,018,562 99.46 Source: Records of Finance Department,City of Omaha. 11 Property Valuations and Property Tax Levies 2000 2001 2002 2003 2004 Actual Valuation $15,822,153,191 $17,941,614,239 $18,561,619,111 $19,006,730,420 $19,438,092,465 Levy(per$100 actual valuation) 48.7350 42.5230 43.3870 43.3870 43.3870 SOURCE:Records and Projections of Finance Department,City of Omaha. City of Omaha taxable property valuations have increased nearly 23%from 2000 to 2004. During this five year period, the property tax base has been enhanced through orderly annexation of developed sanitary and improvement districts contiguous to the City. City Sales and Use Taxes The City's sales tax rate of 1.5%, authorized under the provisions of the Nebraska Revenue Act of 1967, has remained unchanged since July 1, 1978. It is anticipated that the economy for the balance of 2004 will improve, therefore the sales tax receipts for 2004 are projected to be $115,875,000 or 4.5% higher than those received in 2003. The 2004 sales tax projection was calculated by taking into account actual tax collections and trends which have been experienced over the last ten years. The 2004 sales tax revenue projection for the City ($105,851,000), net of anticipated LB 775 sales tax refunds, reflects an anticipated growth factor of 3.4%over the 2003 revised estimate. Projections for 2004 and thereafter may be affected by, among other things, changes in general economic activity, which cannot be predicted, and changes in economic activity in the City of Omaha. City Business Taxes The Telephone Company Occupation Tax rate is 5.75% of the sales of communications services within the corporate limits of the City of Omaha. Receipts are projected to increase by 8.8% in 2004, primarily due to the expected continued growth of the cellular phone market. The Omaha Public Power District Occupation Tax rate is 5% of revenues resulting from the sale of electricity within the corporate limits of the City of Omaha. Receipts for 2004 are estimated to be 3.0%higher than 2003 revised receipts. This estimate is based upon the assumption that 2004 weather conditions will be average. The Cable Television Franchise Fee rate is 5% of gross receipts generated from the operation of cable television systems within the City of Omaha. The 2004 revenue estimate is that $3,337,200 will be received from Cox Cable and$370,800 will be received from Qwest TeleChoice. Based on the 4%per night occupation tax for hotels/motels, the City estimates that the Hotel/Motel Occupancy Tax will generate $3,910,000 in 2004. Receipts from this occupancy tax will be used to fund the Rosenblatt Stadium Capital Improvement Project Bonds ($750,000), Civic Auditorium renovation ($500,000), Durham Western Heritage Museum ($200,000) and debt service for the Prior Convention Center/Arena Bonds ($2,060,000). Projections for future years may be affected by, among other things, changes in general economic activity, which cannot be predicted, and changes in economic activity in the City of Omaha. Other Revenues The City receives intergovernmental revenues from a number of sources. Federal and state grants- in-aid and matching funds are received by the City to help fund specific programs and projects. State tax distributions are appropriated by the Nebraska Legislature according to a formula comparing its population to the total population of all incorporated municipalities within the State. The Metropolitan Utilities District pays a payment in lieu of taxes equal to two percent of the annual gross revenue derived from all retail sales of water and gas sold within the City. The Omaha Public Power District makes payments in lieu of taxes at the 1957 in-lieu-of-tax levels as dictated by section 70-651.01, Reissue Revised Statutes of Nebraska, 1996, as amended. With respect to the Convention Center portion of the Convention Center/Arena Project, the City will also receive certain additional revenues from the State of Nebraska. See "CONVENTION CENTER/ARENA PROJECT PLAN OF FINANCING—Plan of Finance". 12 Economic Factors and Next Year's Budgets and Rates The increase in the City's property tax base provided by real growth is estimated at 1.0% for 2004. Total growth, including revaluations of current property, is estimated at 2.2%. Sales tax collections have increased by 1.6% and 3.1%, respectively, over each of the past two years, with current collections through January 2004 also showing an increase over the same period in 2003 of 4.9%. The sales tax base has been expanded by the Nebraska Legislature to include certain additional services. Sales tax collection growth has been negatively impacted by slowing economic growth and record high rates of refunds which are part of the business incentives provided by state law. Current overall General Fund revenue growth is projected to decrease by 1.6% compared to 2003. All of these factors were considered in preparing the City's budget for the 2004 fiscal year. CAPITAL PROJECTS Capital Expenditures—Downtown In addition to its substantial annual citywide capital expenditures to reconstruct, rehabilitate and expand the City's infrastructure and physical assets, the City has undertaken many redevelopment projects in the 33 block downtown area of the City in partnership with the private sector and providing for$1 billion in new construction. Downtown Omaha has seen a number of significant redevelopment projects in the past several years, in addition to the Convention Center/Arena Project. The Union Pacific Railroad is constructing a new headquarters building in the downtown area, at an estimated cost of $260 million. This 19 story building will contain 1.2 million square feet and is scheduled to open in summer of 2004. The First National Bank of Omaha and the Omaha World-Herald engaged in separate but coordinated projects. The City approved a redevelopment agreement pursuant to which it agreed to use lease-purchase and other available sources of financing to build two new parking garages serving the First National Bank's existing and new facilities and to provide related street and sewer improvements. Pursuant to the redevelopment agreement, the First National Bank entered into a long-term lease of a substantial portion of the parking stalls. The bank completed construction of its 40 story office tower and separate data center representing at least $265 million in private construction, and the City has completed construction of the parking facilities. The City issued approximately$18,200,000 of special tax and lease-purchase bonds with respect to such parking facilities. The World-Herald has completed construction of its$135 million dollar facility. The City is also committed to redeveloping its riverfront directly east of the Convention Center/Arena redevelopment. The City, pursuant to a redevelopment plan approved by the City Council, developed the remediated site of the former metals refining property owned by Asarco located on the west bank of the Missouri River immediately north of the downtown Heartland of America Park into a public recreational space and restaurant development. Asarco remediated the site pursuant to an agreement with the State of Nebraska Department of Environmental Quality and the redevelopment agreement between the City and Asarco. In addition, the City's agreement with Asarco included a reconveyance provision and provided for the indemnification by Asarco of the City for environmental claims arising from the Asarco property, for a $1.5 million payment by Asarco to the City and for the acquisition by Asarco on behalf of the City of a$10 million insurance policy against future environmental claims. The City took title to the site and the restaurant opened on November 23,2002. The City administration and the Gallup Corporation("Gallup") entered into a $140 million Gallup University Campus Redevelopment Plan, which was approved by the City Council on January 12, 2001. The plan called for the acquisition, clearance, environmental remediation, site preparation and complete redevelopment of an approximately 104-acre area located along the Missouri River immediately north of downtown Omaha, adjacent to the Asarco park development and the City's new Convention Center/Arena 13 Project. The overall Redevelopment Plan consisted of three (3) distinct elements: the Corporate Campus and its expansion area,the Miller Landing Park,and the Future Redevelopment Site. The keystone of this entire redevelopment effort was the commitment of Gallup to relocate and expand its corporate headquarters and management education facilities to this Omaha riverfront site located at the eastern gateway to the State of Nebraska. In a series of phases, Gallup is developing a world class corporate campus on approximately 56 acres in the central portion of the plan area. The campus consists of a series of interconnected buildings including Gallup's corporate offices, Gallup University (The Management Education Complex), an extended stay lodging facility, a printing and mailing facility, and a child development center. Gallup anticipates that its total investment in the new campus facilities will exceed$80 million. Gallup's campus opened on August 18,2003. In addition to creating an open, well-landscaped campus environment along the riverfront, the Gallup campus incorporates a portion of the Missouri Riverfront Trails System, providing a critical link between the Asarco park development on the south through the Campus to the Miller Landing Park on the north. The Miller Landing Park consists of approximately 40 acres,all of which is owned by the City. It is located immediately north of the Gallup Campus and has been developed as a public recreation area. The park provides access to the river and incorporates a number of passive recreation facilities including an extensive trail system and river overlooks. South of the Gallup campus,the National Park Service Midwest Regional Headquarters building is currently under construction. This 60,000 square feet is scheduled for completion in the Spring of 2004. The Future Redevelopment Site, consisting of approximately 6.2 acres, located south of the Gallup Campus, presents another riverfront development opportunity. The City sought Request for Proposals for such area and selected a developer on November 5, 2003. The development contemplates the construction of two residential condominium towers of approximately seventy-eight units, twenty-seven residential townhome units and approximately 13,500 square feet of commercial space. A $17 million federally funded pedestrian bridge across the Missouri River will also be included as part of the redevelopment of this site. The City facilitated and took a lead negotiating position with respect to the construction of a 450 room convention headquarters hotel (the "Convention Center Hotel") immediately adjacent to and connected to the Convention Center/Arena Project in support of the operation of that project. The $71 million Convention Center Hotel is owned by the City of Omaha Convention Hotel Corporation, and will be operated by Hilton Hotels Corporation,pursuant to a 15 year management agreement. The City is working with the Omaha Performing Arts Society in the development of a $90 million Performing Arts Center to be located three blocks from the Convention Center/Arena Project. In connection with this development, the City intends to issue $20 million dollars in Special Tax Revenue Redevelopment Bonds. The Performing Arts Center is presently under construction and is scheduled for completion in the Fall of 2005. Capital Expenditures—Convention Center/Arena Project Capital expenditures with respect to the Convention Center/Arena Project are discussed in detail below. See "CONVENTION CENTER/ARENA PROJECT" and "CONVENTION CENTER/ARENA PROJECT PLAN OF FINANCING—Plan of Finance". CONVENTION CENTER/ARENA PROJECT The Omaha Convention Center and Arena,the official name of which is Qwest Center Omaha,is a state-of-the-art facility intended to attract national and regional conventions, concerts and shows as well as sports events to the Omaha area. The design of the facility allows the Convention Center/Arena to host several different activities at the same time or meet the needs of a national event. 14 The downtown Omaha location of the Convention Center/Arena gives convention visitors convenient access to air and interstate transportation, as well as being within easy walking distance of nearby restaurants and lodging. Project Scope The Convention Center/Arena and the associated Infrastructure occupy a portion of the approximately 422 acre redevelopment area bordering on the Missouri River. The net proceeds of the Prior Convention Center/Arena Bonds, after paying certain expenses of issuance, were used to pay or to reimburse the City for, the cost of(i) acquiring a site located directly northeast of downtown Omaha (the "Redevelopment Site") in accordance with a Redevelopment Plan of the City adopted on October 26, 1999 (the "Redevelopment Plan"); (ii) the acquisition and construction of certain site development and infrastructure projects in accordance with the Redevelopment Plan on the Redevelopment Site, including, without limitation, site preparation and remediation,construction and relocation of sewers, water mains and utilities, construction and relocation of all roadways, and the acquisition, construction and equipping of surface parking of approximately 4,000 parking spaces (the "Infrastructure"); and (iii) acquiring, constructing and equipping of a single facility integrating a state of the art convention center, a multipurpose sports arena and a 500 stall parking garage. In addition to the Infrastructure and Convention Center/Arena, the Redevelopment Site includes a site for a convention headquarters hotel(to be connected to the Convention Center/Arena by a skywalk) and additional redevelopment parcels. Construction of the Convention Center Hotel, funded by a separate bond issue, is nearing completion, and it is scheduled to open in April 2004. The Convention Center portion of the Convention Center/Arena has approximately 434,000 square feet of total space. This includes a 194,000 square foot exhibition hall, a 30,000 square foot ballroom, 28,000 square feet of meeting rooms and 182,000 square feet of support and administrative space. The Arena portion of the Convention Center/Arena will accommodate between 14,500 and 16,000 spectator seats depending on the nature of the particular event. It is contemplated that the Arena portion of the Convention Center/Arena will be utilized primarily as a venue for entertainment, cultural and sports events. There is no current arrangement or agreement for the occupation of the Arena by a professional sports team,but such an arrangement is not ruled out. A portion of the Redevelopment Site includes 104 acres of the shops and former rail yard acquired by the City from the Union Pacific Railroad. Pursuant to an Order ("Order") of the United States Environmental Protection Agency (the "EPA"), dated February 16, 2000, and an agreement between the Union Pacific Railroad Company ("Union Pacific") and the City, effective June 13, 2000, Union Pacific was responsible for the environmental investigation and remediation of portions of the Redevelopment Site requiring such remediation. The remediation of the Redevelopment Site was completed in accordance with the Order and accepted by EPA before construction began on the Convention Center/Arena. As between the City and MECA, the City is responsible for the environmental condition and remediation of the Redevelopment Site. The remediation of the portion of the Redevelopment Site necessary to construct, equip and operate the Convention Center/Arena was completed in early 2001. FUNDING The voters of the City approved the issuance of the Prior Convention Center/Arena Bonds for the Infrastructure and Convention Center/Arena and related improvements on May 9, 2000. A public vote is not required for issuance of the Convention Center Bonds. The net proceeds of the Series A Convention Center/Arena Bonds were utilized for costs associated with the Convention Center portion of the Project and the net proceeds of the Series B Convention Center/Arena Bonds were utilized for costs associated with the Arena portion of the Project. The total cost of the project was $291,000,000, of which$216,000,000 represents the proceeds of the Prior Convention Center/Arena Bonds, $50,000,000 represents donations provided by DONORSTrust 15 ("DONORSTrust"), a Nebraska not-for-profit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code (the "Code"), and$25,000,000 is in donations by the Peter Kiewit Foundation(the "Kiewit Foundation"), a Nebraska not-for-profit corporation and an organization described in Section 501(c)(3)of the Code (the donations provided by DONORSTrust and the Kiewit Foundation are sometimes referred to as the "Donations"). The City, MECA, DONORSTrust and the Kiewit Foundation have entered into an Amended and Restated Development Agreement (the "Development Agreement"), dated December 2000. The Development Agreement provides for a total of$75,000,000 in private donations. Under the Development Agreement, DONORSTrust agrees to provide an opinion of counsel and confirm that Deloitte & Touche LLP has satisfactorily performed agreed upon procedures for purposes of verifying and confirming that an aggregate total of $50,000,000 in binding, irrevocable and enforceable pledges have been made to be deposited with the City in a Fiduciary Account(for payment of costs of the Convention Center/Arena), as follows: September 1, 2000 $10,000,000; September 1, 2001 $10,000,000 if the City has expended$98,000,000 on the Convention Center/Arena; September 1,2002 $10,000,000 if the City has expended$168,000,000 on the Convention Center/Arena; September 1,2003 $10,000,000 if the City has expended$198,000,000 on the Convention Center/Arena; September 1,2004 $10,000,000. As of January 1, 2004, the City has received $40,000,000 from DONORSTrust. The donors to DONORSTrust are anonymous but are reported to number fewer than 50. The Kiewit Foundation agrees under the Development Agreement to pay the City for additional deposit into the Fiduciary Account a total of$25,000,000 in$5,000,000 increments on the same dates with the proviso that the final payment will be made when the Convention Center/Arena is 100% complete. As of January 1,2004,the City has received$20,000,000 from the Kiewit Foundation. In accordance with the Agreement and Lease Regarding Omaha Convention Center/Arena, dated August 25, 2000 (the "Lease Agreement"), as amended December 12, 2000, July 11, 2002 and November 20, 2003, between the City and Metropolitan Entertainment & Convention Authority ("MECA"), a Nebraska not-for-profit corporation and an organization described in Section 501(c)(3) of the Code,MECA and the City have respective responsibilities for the Convention Center/Arena. The Convention Center/Arena portion of the Project and some adjacent surface parking are owned by the City and leased to MECA by the City for a period of 99 years. MECA is solely and exclusively responsible for operating, repairing and managing the Convention Center/Arena, and MECA assumes all of the obligations and rights with respect thereto as between MECA and the City. The City is required to provide casualty insurance for the Convention Center/Arena and MECA is required to provide liability insurance. Pursuant to the Lease Agreement, certain parking revenues and seat taxes, to the extent provided in the Ordinance approving the Prior Convention Center/Arena Bonds, are required to be paid to the City by MECA in support of the payment of the debt service on the Convention Center Bonds. The remaining revenues of the Convention Center/Arena are entitled to be kept by MECA, and not the City, for its operating purposes and are not available for or pledged for the payment of the debt service on the Convention Center Bonds. MECA sold naming rights to Qwest, a major telecommunications company, in exchange for naming rights license payments of $12,625,000, payable over 15 years. The donations received from DONORSTrust and the Kiewit Foundation are not pledged as security for or available for 16 payment of the debt service requirements of the Bonds, but these pledges were used in paying the cost of constructing the Convention Center/Arena. The Lease Agreement may be terminated by the City if MECA becomes bankrupt or MECA abandons or discontinues development of the Convention Center/Arena, and MECA may terminate the Lease Agreement if the City shall fail to continue to provide Subvention Amounts (subsidy) after the first 10 years of operation. Either the City or MECA may terminate the Lease Agreement if the other party breaches the Development Agreement(as hereinafter discussed under this heading). All of the risks and obligations (including shortfalls in funds available for construction costs except as hereinafter mentioned) in connection with the design, acquiring, constructing, equipping, operations, management, uninsured casualty, repair, maintenance and management of the Convention Center/Arena were borne by MECA and not the City. The City was not required to provide funds to complete the Convention Center/Arena beyond the$208,432,186 hereinabove mentioned. Commencing in 2004, and for the next nine fiscal years, the City had agreed to support MECA's operating costs in the amount of$2,000,000 per year(this amount to be reduced to$1,000,000 for the year 2013). These amounts (collectively, the "Subvention Amounts") are reduced in certain circumstances by certain excess monies of MECA. MECA may terminate the Lease Agreement if the City fails to agree to extend Subvention Amounts beyond their current contractual expiration. Operations MECA agrees in the Lease Agreement to make all reasonable efforts and to take all reasonable measures to maintain, develop and increase the use of the Convention Center/Arena by the public. MECA has the authority to make changes in or to make additions to the Convention Center/Arena; for the establishing of all schedules of operation and making all contracts with respect to the use of the Convention Center/Arena. MECA controls all concessions, and MECA has the responsibility and authority to fully staff and provide security for the Convention Center/Arena. MECA has projected $17,827,739 in revenues and $18,871,549 in expenses for the Convention Center/Arena for its fiscal year ending June 30, 2004. This fiscal year represents a partial year of operations, as the Convention Center/Arena opened to the public in September 2003. Actual budgets and operations will not be within the control of the City. In addition, there may be significant competition for convention, entertainment and sports events in the region and elsewhere which may affect the operation of the Convention Center/Arena and affect revenues from its operations. MECA and the Greater Omaha Convention and Visitors' Bureau have a marketing program underway for the booking of the convention center portion of the Convention Center/Arena. No assurance can be given that the Subvention Amount (subsidies)described above provided by the City to MECA under the Lease Agreement will be sufficient to meet shortfalls, if any,in revenues available to MECA after expenses. The Metropolitan Entertainment&Convention Center Authority(MECA) MECA is a not-for-profit Nebraska corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code, as amended. The following are the current members of the Board of Directors,and a brief biography with respect to each of them: David Sokol, Chairman—Mr. Sokol is Chairman and Chief Executive Officer of MidAmerican Energy Holding Company(the successor of CalEnergy Company,Inc.). Brad Ashford—Mr.Ashford is the Executive Director of the Omaha Housing Authority. Michael Green—Mr. Green is the Chief Investment Officer of EverGreen Capital Management and is the portfolio manager for tax deferred equity assets. Terry Moore—Mr. Moore is the Chief Executive Officer of the Omaha Federation of Labor. 17 Hal Daub—Mr.Daub is an attorney with the law firm of Blackwell Sanders Peper Martin LLP. Mr.Daub was Mayor of the City of Omaha from 1995-2001. The full time staff of MECA includes Roger Dixon, President and CEO, Christy Harris, Senior Vice President of Administration, Tom Folk, Vice President of Operations, Lea Solis, Vice President of Finance, Kathy Schultheiss, Vice President Convention Center Marketing and Sales and Tim O'Gorman, Vice President of Corporate Sales and Marketing. Under the Lease Agreement, MECA, oversaw construction of, operates and manages the Convention Center/Arena Project. Under the Development Agreement, the private party donations from DONORSTrust and the Peter Kiewit Foundation have been and will be invested in the Convention Center/Arena. MECA and the City entered into a non-binding Memorandum of Understanding in January 2004 under which MECA and the City will negotiate an agreement under which MECA would manage the Civic Auditorium. MECA believes that if an agreement is entered into with the City, its operation of the Civic Auditorium will not materially impact the revenues available to the Qwest Center Omaha. MECA may attempt to secure a minor league sports team, such as a hockey team, to use the Civic Auditorium. This would reduce the likelihood of securing a minor league hockey team to utilize the Qwest Center Omaha. THE PRIOR CONVENTION CENTER/ARENA BONDS REFUNDING PROGRAM The City has issued the Prior Convention Center/Arena Bonds in connection with the Convention Center/Arena Project. The City is refunding such outstanding Prior Convention Center/Area Bonds from the proceeds of the Convention Center Bonds,as follows: Issue Original Outstanding Refunded Prior Convention Center/ Date Amount Amount Amount Arena Bonds December 1,2000 $119,210,000 $119,210,000 $119,210,000 General Obligation Bonds(City of Omaha Convention Center/Arena Project)Series A of 2000 December 1,2000 $78,790,000 $78,790,000 $78,790,000 General Obligation Bonds(City of Omaha Convention Center/Arena Project)Series B of 2000 Pursuant to an Escrow Agreement, dated as of April 1, 2004 (the "Escrow Agreement"), which provides for the refunding of the Prior Convention Center/Arena Bonds, and which is by and between the City and First National Bank of Omaha, as Escrow Agent (the "Escrow Agent"), the City will deposit the net proceeds from the sale of the Convention Center Bonds to the credit of the Escrow Agreement. The moneys deposited by the City to the credit of the Escrow Agreement will be invested in direct obligations of, or obligations the principal and interest of which are guaranteed by, the United States (the "Federal Securities") the interest and principal of which (without reinvesting) will be sufficient to pay all principal of, redemption premium, if any, and interest on the Convention Center/Arena Bonds. See "VERIFICATION OF MATHEMATICAL COMPUTATIONS." 18 THE PRIOR BONDS REFUNDING PROGRAM The City has issued as general obligation indebtedness one issue of its General Obligation Refunding Bonds and has assumed the general obligation indebtedness of five annexed Douglas County sanitary and improvement districts, each as identified below. The City is refunding portions of such outstanding Bonds(the"Prior Bonds")from a portion of the proceeds of the Bonds,as follows: Issue Original Outstanding Refunded Prior Bonds Date Amount Amount Amount General Obligation Refunding Bonds, October 15, 1993 $32,090,000 $5,805,000 $5,805,000 Series of 1993 Sanitary and Improvement District April 15, 1998 930,000 740,000 740,000 No. 306,General Obligation Convention Center Bonds, Series 1998 Sanitary and Improvement District February 15, 1994 2,100,000 1,400,000 1,305,000 No. 361,General Obligation Bonds, Series 1994 Sanitary and Improvement District April 1, 1998 2,100,000 100,000 50,000 No. 363, General Obligation Bonds, Series 1998 Sanitary and Improvement District July 1, 1998 2,000,000 1,715,000 1,715,000 No. 381,General Obligation Bonds, Series 1998 Sanitary and Improvement District October 15,2001 1,800,000 1,740,000 1,670,000 No. 381, General Obligation Bonds, Series 2001 Sanitary and Improvement District May 31,2002 6,690,000 6,465,000 5,750,000 No.457, General Obligation Bonds, Series 2002 Pursuant to an Escrow and Agency Agreement, dated as of March 1, 2004 (the "Escrow Agreement"), which provides for the refunding of the Prior Bonds, and which is by and between the City and First National Bank of Omaha, as Escrow Agent (the "Escrow Agent"), the City will deposit the net proceeds from the sale of the Various Purpose Bonds to the credit of the Escrow Agreement. The moneys deposited by the City to the credit of the Escrow Agreement will be invested in direct obligations of, or obligations the principal of and interest on which are guaranteed by, the United States of America (the "Federal Securities"), the interest and principal of which (without reinvesting) will be sufficient to pay all principal of, redemption premium, if any, and interest on the Prior Bonds. See "VERIFICATION OF MATHEMATICAL COMPUTATIONS." DISPOSITION OF BOND PROCEEDS FOR VARIOUS PURPOSES The amount of$9,500,000 of the proceeds of the Various Purpose Bonds will be applied to pay the cost of constructing streets and highways; $1,500,000 of the proceeds of the Various Purpose Bonds will be applied to pay the cost of constructing sewers; $500,000 of the proceeds of the Various Purpose Bonds will be applied to pay for certain public facilities; $1,000,000 of the proceeds of the Various Purpose Bonds will be used to pay for certain public safety facilities and equipment; and$1,500,000 of the proceeds of the Various Purpose Bonds will be applied to pay for parks and recreation facilities. 19 SOURCES AND USES OF FUNDS The following table shows the sources and uses of Bond proceeds:1 Sources: Par Amount of Convention Center Bonds $205,875,000 Plus: Original Issue Premium $ 32,746,907 Par Amount of Various Purpose Bonds $ 31,660,000 Less: Original Issue Discount $ 77,408 Plus: Original Issue Premium $ 886,660 Total Sources: $271,091,159 Uses: Escrow Fund for Refunding of Prior Convention Center/Arena Bonds $236,810,230 Various Purpose Projects $ 14,000,000 Escrow Fund for Refunding Prior Bonds $ 17,949,724 Costs of Issuance,including Underwriters'discount $ 2,328,553 Contingency $ 2,652 Total Uses: $271,091,159 CONVENTION CENTER/ARENA PROJECT PLAN OF FINANCING Plan of Finance The City has routinely issued its various purpose bonds and its refunding bonds (including the Convention Center Bonds and the Various Purpose Bonds described herein) on an annual or regular frequent basis to meet a portion of the capital projects needs of the City. This current pattern of meeting the capital financing needs of the City is expected to continue into the future. The City's Redevelopment Plan for the area along the Missouri River, which area includes the Convention Center/Arena, requires financing outside of the annual financing plan for general infrastructure and capital projects (and which is in addition to the infrastructure development envisaged by the Redevelopment Plan and the Convention Center/Arena) which the City has heretofore followed and will continue to follow. Convention Center Bonds are each and all general obligations of the City backed by the full faith and credit of the City. In addition, certain Convention Center Act Funds, will be available for application only to the debt service for "eligible facilities" under the Convention Center Act(the "State Turnback Tax"hereinafter described); that is to say, the Convention Center portion of the Convention Center/Arena Project,herein also defined as the Series A Project, for which the Convention Center/Arena Series A Bonds were issued. In order to provide funds to pay for a portion of the cost of the Convention Center/Arena and the infrastructure associated therewith, and certain substantial costs of the capital projects contained in the Redevelopment Plan, in December 2000 the City issued its $198,000,000 General Obligation Convention Center/Arena Bonds, which taken together with private donations by the DONORSTrust and the Peter Kiewit Foundation, were intended to pay for the cost of these facilities and projects together with certain moneys from currently available funds of the City paid by the City to MECA for operational, start-up and project costs. However, the net proceeds of the Convention Center/Arena Bonds were not sufficient to pay Sources and uses are net of accrued interest and have been rounded to the nearest dollar. 20 for additional Redevelopment Plan infrastructure which was not directly necessary for the construction and operation of the Convention Center/Arena, but is desirable and consistent with the fulfillment of the Redevelopment Plan. Additional costs were paid for by the net proceeds of$22,700,000 revenue bonds issued by the City in 2001. Traditionally, general obligation debt of the City, although the full faith and credit of the City has been and is pledged to the payment of the debt service thereon and all the general fund revenues of the City are available and pledged for that purpose, has been internally allocated and appropriated from property taxes. However, in addition to funds derived from the annual property tax assessments and levies, additional revenues in addition to the property tax are available to the City for the payment of its general obligation debt, including the Convention Center Bonds described herein. The following paragraphs describe the revenue sources of the City which are available to pay the necessary debt service requirements on the City's general obligations debt,including the Convention Center Bonds: In addition to the City Property Tax, City Sales and Use Tax and City Business Taxes (See "SOURCES OF CITY REVENUES"), there are certain additional revenue sources that will be available to the City, at its option, for debt service. Based upon the estimated attendance, there will be parking revenue available to the City. The City Facility Ticket Surcharge (seat tax) which is currently set by the City at a rate ranging from $.50 to $2.00 per ticket will also be collected at the facility and made available to the City. Land in the redevelopment area, in excess of the space needed for the Convention Center/Arena facility, will be available for redevelopment. The increase in property tax revenue generated by the estimated redevelopment would support tax increment financing. Funds received by the City from tax increment financing or from the sale of excess land could be available for project financings. State Turnback Tax,Neb.R.R.S. §13-2601 et seq The following discussion applies only to the portion of the Convention Center Bonds that refinance the Series A Convention Center/Arena Bonds. The City applied for State turn-back financing (Convention Center Act Funds — the "State Turnback Tax") for the Series A Convention Center/Arena Bonds and to pay a portion of the debt service on the Series A Convention Center/Arena Bonds. The City made application to the State of Nebraska to receive Convention Center Act Funds — the State Turnback Tax under the Convention Center Act. This Act was enacted in 1999 for the purpose of returning to the municipalities of the State a portion of the sales tax revenues generated directly and indirectly by the convention center projects constructed and operated in the State; and the proposed Convention Center in the City was a major impetus and consideration for this legislation. The City's application for Convention Center Act Funds was the first such application made (and is the only application and eligible project known to the City at this time). Under the Convention Center Act, the City recommends to the State a formula for the determination of sales tax revenues generated directly and indirectly by the Series A Project, and the State must then agree with the formula and in each year separately approve the appropriate amount of the State Turnback Tax to be returned to the City based upon actual operating data from the Series A Project. Therefore, the payment by the State of the State Turnback Tax each year is subject to the risk of annual appropriation and the level of operation of the Series A Project. Further, the Convention Center Act specifically provides that it may be repealed by the State (although no such repeal is expected by the City). The Convention Center Act provides for a maximum cap of$75 million which may be paid in State Turnback Tax by the State to the City. While the Act allows the City to receive up to 70%of audited State-generated revenues from new events solicited for the Convention Center (based on the formula described), the City has taken a more conservative approach and anticipates the cap being reached in 2024. As has been stated, estimates made by the City with respect to the timing and amount of State Turnback Tax to be received are subject to the acceptance and action of the State as well as the uncertainty of the degree of revenues generated by the Series A Project; and, therefore, no assurance can be given that any estimates made are accurate or correct. The City received from the State the return of the State Turnback Tax in the amount of$909,566 in 2003, which represents payments for the years 2000-2002. The City estimates it will receive$250,000 in 2004 in the return of the State Turnback Tax for 2003. 21 THE BONDS Convention Center Bonds Description of the Convention Center Bonds The Convention Center Bonds,in aggregate principal amount of$205,875,000, will be dated April 1,2004,will be issued in fully registered form, and will mature as set forth on the reverse of the cover page of this Official Statement. Interest is payable semiannually on June 1 and December 1 of each year. Place of Payment The principal of the Convention Center Bonds will be payable in lawful money of the United States of America at the corporate trust office of the First National Bank of Omaha, as paying agent and registrar (the "Paying Agent" and "Registrar"), in Omaha, Nebraska. Interest on the Convention Center Bonds will be paid by wire transfer, check or draft mailed to the person in whose name a Bond is registered as of the date 15 days next preceding each interest payment date. Optional Redemption The Convention Center Bonds are not subject to optional redemption prior to maturity. Authority for Issuance The Convention Center Bonds are authorized in accordance with the Constitution and the statutes of the state of Nebraska, the Charter of the City of Omaha and proceedings of the City Council of the City of Omaha providing for the issuance thereof, including Ordinance No. 36535. Various Purpose Bonds Description of the Bonds The Various Purpose Bonds in aggregate principal amount of$31,660,000 will be dated April 1, 2004,will be issued in fully registered form and will mature as set forth on the reverse of the cover page of this Official Statement. Interest on the Various Purpose Bonds is payable semiannually on April 1 and October 1 of each year,commencing October 1,2004. Place of Payment The principal of the Bonds will be payable in lawful money of the United States of America at the corporate trust office of the First National Bank of Omaha, as paying agent and registrar (the "Paying Agent"and"Registrar"),in Omaha,Nebraska. Interest on the Bonds will be paid by wire transfer, check or draft mailed to the person in whose name a Bond is registered as of the date 15 days next preceding each interest payment date. Optional Redemption The Bonds maturing April 1, 2015 and thereafter are subject to redemption at the option of the City at any time on or after April 1, 2014, in whole or in part in inverse order of maturities of the Bonds, and in such manner as the Paying Agent deems fair within a maturity, at a price of par, without premium, plus accrued interest to the date of redemption. At least 30 days' notice of redemption will be mailed to the person whose name appears in the bond registration books as the registered owner of a Bond as of the close of business on the forty-fifth day next preceding the date fixed for redemption. 22 Authority for Issuance The Various Purpose Bonds are authorized in accordance with the Constitution and the statutes of the state of Nebraska, the Charter of the City of Omaha and proceedings of the City Council of the City of Omaha providing for the issuance thereof, including Ordinance No. 36515. Security The Convention Center Bonds and the Various Purpose Bonds are general obligations of the City, and the City is obligated to levy ad valorem taxes for the payment of said Convention Center Bonds and Various Purpose Bonds and the interest thereon upon all property within the City subject to taxation by the City without limitation as to rate or amount. The full faith and credit of the City shall be pledged to the prompt payment of the principal of and interest on the Bonds. See "SOURCES OF CITY REVENUES— Authority to Levy Taxes". A portion of the debt service on that portion of the Convention Center Bonds allocable to the Convention Center part of the Project may be paid from funds, if any, received by the City pursuant to the Convention Center Act. See "CONVENTION CENTER/ARENA PROJECT PLAN OF FINANCING—Plan of Finance". The Convention Center Act provides for a maximum cap of$75 million with respect to such financing from the State. Revision of State Property Tax System The State of Nebraska's system of assessing and taxing personal property for purposes of local ad valorem taxation for support of local political subdivisions, including the City, has been the subject in recent years of constitutional amendment, legislation and litigation the result of which has been to substantially resolve certain challenges to the validity of the tax system. However, the State of Nebraska's system of assessing and taxing real and personal property has continued to be the subject of considerable controversy,legal challenges and legislative action. Governmental units in Nebraska may not adopt budgets for fiscal years beginning on or after July 1, 1998, in excess of 102.5% of the prior fiscal year's budget plus allowable growth (which includes increases in taxable valuation for such things as new construction and annexations). However, such budgetary limitations do not apply to,among other things,revenue pledged to retire bonded indebtedness or budgeted for capital improvements. Governmental units may exceed the budget limit for a given fiscal year by up to an additional 1% upon the affirmative vote of at least 75% of the governing body or in such amount as is approved by a majority vote of the electorate. Effective July 1, 1998, the property tax levies of incorporated cities and villages, such as the City, are limited to a maximum of 450/$100 of taxable valuation (plus an additional 50/$100 to pay the municipality's share of revenue required under interlocal agreements). The levy limit does not apply to levies for preexisting lease-purchase contracts approved prior to July 1, 1998, to bonded indebtedness approved according to law and secured by a levy on property and to pay judgments. The City's 2003 General Fund levy, exclusive of such unlimited levies, is 24.3120/$100 of taxable valuation. A political subdivision may exceed its levy limitation for a period of up to five years by majority vote of the electorate. The City's tax levy during its current fiscal year ending December 31, 2004 is 24.3120/$100, plus 17.5810/$100 for payment of the City's general obligation indebtedness, plus 0.6000/$100 for satisfaction of judgments and 0.8940/$100 for payment on the City's Special Redemption Levy, for a total levy of 43.3870/$100. Set forth in Appendix B is a detailed summary of the property tax levied on real and personal property in the City. There can be no assurance that Nebraska's system of assessing and taxing real and personal property will remain substantially unchanged, given the possibility of additional legislation, constitutional initiatives and referendums and litigation. Such changes could materially and adversely affect the amount of property tax and other revenues the City could collect in future years. The City does not believe, however, that the Nebraska Legislature, subject to any constitutional restrictions, would leave the City without adequate taxing resources to pay for its programs and meet its financial obligations, including the repayment of its bonds, lease-purchase obligations and other obligations. The opinion of Bond Counsel will be rendered based on the law existing as of the date of issuance of the Bonds and in reliance upon 23 general legal presumptions in favor of the constitutionality of statutes and upon the holdings of existing case law. Prospective Financial Commitments by the City The City anticipates that it will issue in late 2004 or early 2005 (i) various purpose (general obligation) bonds in an amount yet to be determined, but expected to be not less than$14 million, and(ii) redevelopment special tax bonds for a new performing arts center in the amount of approximately $20 million. Book-Entry Only System The Depository Trust Company("DTC"),New York, New York, will act as securities depository for the Bonds. The Bonds will be initially issued as fully registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully registered Bond certificate will be issued for each maturity of the Bonds and will be deposited with DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants ("Direct Participants") deposit with DTC. DTC also facilitates the settlement among Participants (as defined hereinafter) of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants'accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant either directly or indirectly ("Indirect Participants"). (Direct Participants and Indirect Participants are referred to herein collectively as the "Participants.") The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Purchases of the Bonds under the DTC system must be made in authorized denominations by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond (a "Beneficial Owner") is in turn to be recorded on the Direct Participants' and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written 1 confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of beneficial ownership interest in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. For every transfer and exchange of beneficial ownership interests in the Bonds, DTC and the Participants may charge the Beneficial Owner a sum sufficient to pay any tax, fee or other governmental charge that may be imposed in relation thereto. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book entry for the Bonds is discontinued. SO LONG AS CEDE & CO., AS NOMINEE FOR DTC, IS THE REGISTERED OWNER OF THE BONDS, THE CITY AND THE PAYING AGENT WILL TREAT CEDE & CO. AS THE ONLY OWNER OF THE BONDS FOR ALL PURPOSES UNDER THE ORDINANCE (AS HEREINAFTER DEFINED), INCLUDING RECEIPT OF ALL PAYMENTS OF PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE BONDS,RECEIPT OF NOTICES AND VOTING. To facilitate subsequent transfers, the Bonds deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of the Bonds with DTC and their 24 registration in the name of Cede & Co. effect no change in beneficial ownership. DTC will have no knowledge of the actual Beneficial Owners of the Bonds. DTC's records will reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants and by Direct Participants and Indirect Participants to Beneficial Owners,will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. If allowed, redemption notices will be sent to Cede & Co. If less than all of the Bonds are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the City, as issuer of the Bonds, as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date(identified in a listing attached to the Omnibus Proxy). Principal,premium,if any, and interest payments on the Bonds will be made by the Paying Agent to DTC. DTC's practice is to credit Direct Participants'accounts on payment dates in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on a payment date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Paying Agent, the City or any other party under the Ordinance, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, premium, if any, and interest to DTC is the responsibility of the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the City and the Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained,Bond certificates are required to be delivered as described in the Ordinance. Upon (i)the written direction of the City or (ii)the written consent of 100% of the Bondholders, the Paying Agent shall withdraw the Bonds from DTC and authenticate and deliver Bond certificates fully registered to the assignees of DTC or its nominee. If the request for such withdrawal is not the result of any City action or inaction, such withdrawal, authorization and delivery shall be at the cost and expense of the persons requesting such withdrawal, authentication and delivery. According to DTC, the foregoing information with respect to DTC has been provided to the Industry for informational purposes only and is not intended to serve as a representation, warranty or contract modification of any kind. The information in this section concerning DTC and DTC's book-entry system has been obtained from DTC. The City does not take any responsibility for its accuracy. THE CITY AND THE PAYING AGENT CANNOT AND DO NOT GIVE ANY ASSURANCES THAT THE DIRECT PARTICIPANTS OR THE INDIRECT PARTICIPANTS WILL DISTRIBUTE TO THE BENEFICIAL OWNERS OF THE BONDS (i)PAYMENTS OF PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE BONDS, (ii)CERTIFICATES REPRESENTING AN OWNERSHIP 25 INTEREST OR OTHER CONFIRMATION OF BENEFICIAL OWNERSHIP INTERESTS IN THE BONDS OR (iii)REDEMPTION OR OTHER NOTICES SENT TO DTC OR CEDE & CO., ITS NOMINEE,AS THE REGISTERED OWNERS OF THE BONDS,OR THAT THEY WILL DO SO ON A TIMELY BASIS OR THAT DTC, DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. THE CURRENT "RULES" APPLICABLE TO DTC ARE ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION AND THE CURRENT"PROCEDURES" OF DTC TO BE FOLLOWED IN DEALING WITH DIRECT PARTICIPANTS ARE ON FILE WITH DTC. NEITHER THE CITY NOR THE PAYING AGENT HAS ANY RESPONSIBILITY OR OBLIGATIONS TO THE DIRECT PARTICIPANTS OR THE BENEFICIAL OWNERS WITH RESPECT TO(A)THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT PARTICIPANT; (B)THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNERS IN RESPECT OF THE PRINCIPAL, PREMIUM, IF ANY, AND INTEREST ON THE BONDS; (C)THE DELIVERY OR TIMELINESS OF DELIVERY BY DTC OR ANY DIRECT PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE INDENTURE TO BE GIVEN TO BONDHOLDERS; (D)THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENTS IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE BONDS; OR (E)ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC OR ITS NOMINEE, CEDE & CO., AS BONDHOLDER. TAX EXEMPTION Federal and State Tax Exemption In the opinion of Kutak Rock LLP, Bond Counsel, to be delivered at the time of original issuance of the Convention Center Bonds and the Various Purpose Bonds, under existing laws, regulations, rulings and judicial decisions, interest on the Convention Center Bonds and the Various Purpose Bonds is (a)excluded from gross income for federal income tax purposes and (b)is not a specific item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. Interest on the Convention Center Bonds of each issue and the Various Purpose Bonds of each issue, however, will be included in the "adjusted current earnings" (i.e., alternative minimum taxable income as adjusted for certain items,including those items that would be included in the calculation of a corporation's earnings and profits under Subchapter C of the Internal Revenue Code of 1986, as amended (the "Code")) of certain corporations and such corporations are required to include in the calculation of alternative minimum taxable income 75% of the excess of each such corporation's adjusted current earnings over its alternative minimum taxable income (determined without regard to this adjustment and prior to reduction for certain net operating losses). The opinions set forth above are subject to continuing compliance by the City and MECA with their respective covenants regarding federal tax laws in the corresponding Convention Center Bond Ordinance and Lease Agreement, and to continuing compliance by the City with its covenants regarding federal tax laws in the Various Purpose Bond Ordinance. Failure to comply with such covenants could cause interest on the Bonds of the affected issue to be included in gross income retroactive to the date of issue of the Bonds of such issue. In rendering the foregoing opinion with respect to the Convention Center Bonds, Bond Counsel will rely upon certificates as to facts, estimates and expectations furnished by MECA which are material to a determination of such tax exemption and are within the exclusive knowledge of MECA. The accrual or receipt of interest on the Convention Center Bonds and the Various Purpose Bonds may otherwise affect the federal income tax liability of certain recipients such as banks, thrift institutions, property and casualty insurance companies, corporations (including S corporations and foreign corporations operating branches in the United States), Social Security or Railroad Retirement benefit recipients,taxpayers otherwise entitled to claim the earned income credit or taxpayers who may be deemed 26 to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, among others. The extent of these other tax consequences will depend upon the recipients' particular tax status or other items of income or deduction. Bond Counsel expresses no opinion regarding any such consequences and investors should consult their own tax advisors regarding the tax consequences of purchasing or holding the Bonds of each issue. In Bond Counsel's further opinion, under the existing laws of the State of Nebraska, (i) the interest on the Various Purpose Bonds is exempt from Nebraska state income taxation so long as it is exempt for purposes of the federal income tax and(ii)the Convention Center Bonds,together with interest thereon and income therefrom,are exempt from all Nebraska state income taxes. Future Legislation From time to time,there are legislative proposals in Congress that,if enacted, could alter or amend the federal tax matters referred to above or adversely affect the market value of the Convention Center Bonds and the Various Purpose Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted, it would apply to bonds issued prior to enactment. Each purchaser of the Convention Center Bonds and the Various Purpose Bonds should consult his or her own tax advisor regarding any pending or proposed federal tax legislation. Bond Counsel expresses no opinion regarding any pending or proposed federal tax legislation. Tax Treatment of Original Issue Discount The Various Purpose Bonds maturing on April 1, 2021 through April 1, 2024 are being sold at a discount (the "Discounted Obligations"). The difference between the initial public offering prices, as set forth on the inside cover page hereof, of the Discounted Obligations and their stated amounts to be paid at maturity or upon prior redemption, constitutes original issue discount treated as interest which is not includible in gross income for federal income tax purposes. In the case of an owner of a Discounted Obligation,the amount of original issue discount which is treated as having accrued with respect to such Discounted Obligation is added to the cost basis of the owner in determining, for federal income tax purposes, gain or loss upon disposition of a Discounted Obligation (including its sale, redemption or payment at maturity). Amounts received upon disposition of a Discounted Obligation which are attributable to accrued original issue discount will be treated as tax- exempt interest,rather than as taxable gain, for federal income tax purposes. Original issue discount is treated as compounding semiannually, at a rate determined by reference to the yield to maturity of each individual Discounted Obligation, on days which are determined by reference to the maturity date of such Discounted Obligation. The amount treated as original issue discount on a Discounted Obligation for a particular semiannual accrual period is equal to (a)the product of(i)the yield to maturity for such Discounted Obligation(determined by compounding at the close of each accrual period) and (ii)the amount which would have been the tax basis of such Discounted Obligation at the beginning of the particular accrual period if held by the original purchaser, (b) less the amount of any interest payable for such Discounted Obligation during the accrual period. The tax basis is determined by adding to the initial public offering price on such Discounted Obligation the sum of the amounts which have been treated as original issue discount for such purposes during all prior periods. If a Discounted Obligation is sold between semiannual compounding dates, original issue discount which would have been accrued for that semiannual compounding period for federal income tax purposes is to be apportioned in equal amounts among the days in such compounding period. The Code contains additional provisions relating to the accrual of original issue discount in the case of owners of a Discounted Obligation who purchase such Discounted Obligations after the initial offering. Owners of Discounted Obligations including purchasers of the Discounted Obligations in the secondary market should consult their own tax advisors with respect to the determination for federal income tax purposes of original issue discount accrued with respect to such obligations as of any date and with respect to the state and local tax consequences of owning a Discounted Obligation. 27 Tax Treatment of Original Issue Premium All of the Convention Center Bonds and the Various Purpose Bonds maturing on April 1, 2005 through April 1, 2020 are being sold at a premium(collectively, the "Premium Obligations"). An amount equal to the excess of the issue price of a Premium Obligation over its stated redemption price at maturity constitutes premium on such Premium Obligation. An initial purchaser of such Premium Obligation must amortize any premium over such Premium Obligation's term using constant yield principles, based on the purchaser's yield to maturity (or, in the case of Premium Obligations callable prior to their maturity, by amortizing the premium to the call date, based upon the purchaser's yield to the call date and giving effect to any call premium). As premium is amortized, it offsets the interest allocable to the corresponding payment period and the purchaser's basis in such Premium Obligation is reduced by a corresponding amount resulting in an increase in the gain(or decrease in the loss) to be recognized for federal income tax purposes upon a sale or disposition of such Premium Obligation prior to its maturity. Even though the purchaser's basis may be reduced, no federal income tax deduction is allowed. Purchasers of Premium Obligations should consult with their own tax advisors with respect to the determination and treatment of amortizable premium for federal income tax purposes and with respect to the state and local tax consequences of owning such Premium Obligations. VERIFICATION AGENT Chris D. Berens, CPA, P.C., will verify the mathematical accuracy of certain computations (1)as to the sufficiency of the money and investments deposited (a)to pay, when due, the interest on the Convention Center/Arena Bonds from their last payment dates to the respective dates on which they have been called for redemption or will mature, and(b)to pay the principal of and redemption premium, if any, on the Convention Center/Arena Bonds on their respective dates of redemption or maturity; and (2)as to the actuarial yield on the Convention Center Bonds and on the federal securities to be purchased with proceeds of the Convention Center Bonds, which yields will be relied upon by Bond Counsel in their opinion that interest on the Convention Center Bonds will not be included in gross income for federal income tax purposes and its opinion that the Convention Center Bonds are not "arbitrage bonds" under Section 148 of the Code. Chris D.Berens,CPA,P.C.,will express no opinion on the assumptions provided to them nor as to the excludability from gross income for federal income tax purposes of interest on the Convention Center Bonds. Chris D. Berens, CPA, P.C., will verify the mathematical accuracy of certain computations (1)as to the sufficiency of the money and investments deposited (a)to pay, when due, the interest on the Prior Bonds from their last payment dates to the respective dates on which they have been called for redemption or will mature, and(b)to pay the principal of and redemption premium, if any, on the Prior Bonds on their respective dates of redemption or maturity; and (2)as to the actuarial yield on the Various Purpose Bonds and on the federal securities to be purchased with proceeds of the Various Purpose Bonds, which yields will be relied upon by Bond Counsel in their opinion that interest on the Various Purpose Bonds will not be included in gross income for federal income tax purposes and its opinion that the Various Purpose Bonds are not "arbitrage bonds" under Section 148 of the Code. Chris D. Berens, CPA, P.C., will express no opinion on the assumptions provided to them nor as to the excludability from gross income for federal income tax purposes of interest on the Various Purpose Bonds. RATINGS Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P"), has given the Convention Center Bonds a rating of"AAA" and Moody's Investors Service("Moody's")has given the Convention Center Bonds a rating of"Aaa". S &P has given the Various Purpose Bonds a rating of"AAA", and Moody's has given the Various Purpose Bonds a rating of"Aaa". Any desired explanation of the significance of such ratings should be obtained from S&P and from Moody's. The City furnished the rating agencies with certain information and materials relating to the Convention Center Bonds and the Various Purpose Bonds and the City which have not been included in this Official Statement. Generally,a rating agency bases its rating on the information and materials so furnished and on investigations, studies 28 and assumptions made by such rating agency. There is no assurance that a particular rating will be maintained for any given period of time or that it will not be lowered or withdrawn entirely if, in the judgment of the agency originally establishing the rating, circumstances so warrant. The City has undertaken no responsibility either to bring to the attention of the owners of the Convention Center Bonds or the Various Purpose Bonds any proposed revision or withdrawal of the rating of the Convention Center Bonds or the Various Purpose Bonds or to oppose any such proposed revision or withdrawal. Any such change in or withdrawal of such rating could have an adverse effect on the market price of the Convention Center Bonds or the Various Purpose Bonds. Any explanation of the significance of such ratings should be obtained from the rating agency furnishing such rating. UNDERWRITING The Convention Center Bonds and the Various Purpose Bonds are being purchased for reoffering by the underwriters named on the Cover Page hereof(the "Underwriters"), for whom Kirkpatrick Pettis Smith & Polian, Inc. and Bear, Stearns & Co., Inc. are acting as senior managers. The Underwriters have agreed to purchase the Convention Center Bonds at an aggregate purchase price of$237,139,607.40(which takes into account Underwriters'discount of$1,482,300 and an original issue premium of$32,746,907.40). The Underwriters have agreed to purchase the Various Purpose Bonds at a price of$32,241,299.75 (which takes into account Underwriters' discount of$227,952.00 and an original issue premium net of original discount of$809,251.75). The Bond Purchase Agreements with respect to the Convention Center Bonds and the Various Purpose Bonds provide that the Underwriters will purchase all of the Convention Center Bonds and the Various Purpose Bonds, respectively, if any are purchased. The obligation of the Underwriters to accept delivery of the Convention Center Bonds and the Various Purpose Bonds is subject to various conditions contained in the Bond Purchase Agreements, including the absence of pending or threatened litigation questioning the validity of the Convention Center Bonds or the Various Purpose Bonds or any proceedings in connection with the issuance thereof and the absence of material adverse changes in the financial or business condition of the City. The Underwriters intend to offer the Convention Center Bonds and the Various Purpose Bonds to the public initially at the offering prices set forth on the inside Cover Page of this Official Statement,which may subsequently change without any requirement of prior notice. The Underwriters reserve the right to join with dealers and other underwriters in offering the Convention Center Bonds and the Various Purpose Bonds to the public. The Underwriters may offer and sell Convention Center Bonds or the Various Purpose Bonds to certain dealers (including dealers depositing Convention Center Bonds or the Various Purpose Bonds into investment trusts) at prices lower than the public offering prices. In connection with this offering, the Underwriters may over allot or effect transactions which stabilize or maintain the market price of the Convention Center Bonds or the Various Purpose Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing,if commenced,may be discontinued at any time. LEGAL OPINIONS The approving opinions of Kutak Rock LLP ("Bond Counsel") will affirm, among other things, that the Convention Center Bonds and the Various Purpose Bonds have been authorized and issued in accordance with the Constitution and statutes of the State of Nebraska and the Charter of the City of Omaha, and constitute valid and legally binding obligations of the City, and that the City has the power and is obligated to levy ad valorem taxes for the payment of the Convention Center Bonds and the Various Purpose Bonds and the interest thereon upon all the property within the City subject to taxation by the City without limitation as to rate or amount. The rights of the holders of the Convention Center Bonds and the Various Purpose Bonds and the enforceability thereof may be subject to valid bankruptcy, insolvency, reorganization, moratorium and other laws for the relief of debtors. See "APPENDIX D—FORM OF OPINION OF BOND COUNSEL REGARDING CONVENTION CENTER BONDS AND APPENDIX E — FORM OF OPINION OF BOND COUNSEL REGARDING VARIOUS PURPOSE BONDS". Certain legal matters will be passed upon for the City by Paul D. Kratz, the City Attorney. Certain legal matters will be passed upon for the Underwriters of the Convention Center Bonds and the Variable Purpose Bonds by Stinson Morrison Hecker LLP. 29 CONTINUING DISCLOSURE UNDERTAKING The Convention Center Bond Ordinance and the Various Purpose Bond Ordinance include the City's undertakings (the "Undertakings") for the benefit of the holders and beneficial owners of the Convention Center Bonds and the Various Purpose Bonds to send certain financial information and operating data to certain information repositories annually and to provide notice to the Municipal Securities Rulemaking Board or certain other repositories of certain events, pursuant to the requirements of Section (b)(5)(i) of Securities and Exchange Commission Rule 15c2-12 (17 C.F.R. § 240.15c2-12) (the "Rule"). The Undertakings in the two Ordinances are substantially identical. See "APPENDIX C—FORM OF CONTINUING DISCLOSURE UNDERTAKING". A failure by the City to comply with the Undertakings will not constitute an event of default with respect to the Convention Center Bonds or the Various Purpose Bonds, although any holder will have any available remedy at law or in equity, including seeking specific performance by court order, to cause the City to comply with its obligations under the Undertakings. Any such failure must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Convention Center Bonds or the Various Purpose Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Convention Center Bonds or the Various Purpose Bonds and their market price. FINANCIAL STATEMENTS The general purpose financial statements of the City as of and for the year ended December 31, 2002,included as Part Two of Appendix B, have been audited by KPMG LLP, independent certified public accountants,as stated in their report appearing therein. LITIGATION The City is party to legal proceedings which occur in government operations and include claims for property damage and personal injury, contract disputes, discrimination claims and property condemnation proceedings. The legal proceedings, in the opinion of the City management, based on the advice of the City Attorney, are not expected to have a materially adverse effect on the City's financial position at December 31, 2003, after giving effect to available funds provided for such contingencies in the Judgment, Cash Reserve and Contingent Liability Reserve Funds and alternative methods of satisfying judgments,these being identified as: —City's authority to levy under Judgment Fund set by Home Rule Charter. —State Statute, Section 77-1620 R.R.S. 1943, as amended, which authorizes a special levy for payment of judgments. —State Statute, Section 13-918 R.R.S. 1997, as amended, which authorizes the City to borrow money from the State to satisfy judgments. In addition to amounts recorded by the City as other accrued liabilities, as of the date of this Official Statement,the City Attorney is of the opinion that there is a reasonable possibility that the City will incur additional losses on these lawsuits not to exceed$6,700,000. CERTIFICATION AS TO OFFICIAL STATEMENT The City of Omaha, Nebraska, will furnish certificates signed on its behalf by Stanley P. Timm, Finance Director of the City of Omaha, and delivered concurrently with the delivery of the Convention Center Bonds and the Various Purpose Bonds, to the effect that at the date of this Official Statement and at the date of delivery of the Convention Center Bonds and the Various Purpose Bonds, (i)the information and statements, including financial statements, of or pertaining to the City, contained in this Official 30 Statement were and are correct in all material respects; and(ii)insofar as the City and its affairs, including its financial affairs, are concerned, this Official Statement did not and does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The City, by such certificate, will further confirm to the effect that insofar as the descriptions and statements, including financial data, contained in the Official Statement of or pertaining to nongovernmental bodies or governmental bodies other than the City are concerned, such descriptions, statements and data have been obtained from sources believed by the City to be reliable, and that the City has no reason to believe that they are untrue or incomplete in any material respect. The execution and delivery of the foregoing certificate will be authorized by the City Council of the City of Omaha,Nebraska. The address of the Finance Department of the City of Omaha is 1819 Farnam Street, Tenth Floor, Omaha Nebraska, 68183, and its telephone number is (402) 444-5478. The execution and delivery of this Official Statement by the Mayor and Finance Director of the City of Omaha, Nebraska have been duly authorized by, and the statements and information contained herein have been deemed final by, the City Council of the City of Omaha,Nebraska. THE CITY OF OMAHA,NEBRASKA By: Title: Mayor By: Title: Finance Director 31 APPENDIX A CITY OF OMAHA-SELECTED ECONOMIC INDICATORS A-1 SELECTED ECONOMIC INDICATORS Omaha MSA Population and Employment Year Population Employment' 1950 366,395' 163,050 1960 457,873' 188,950 1970 542,646' 214,650 1980 569,614' 261,532 1990 618,262' 331,953 1991 624,2003 326,360 1992 634,9003 333,887 1993 656,4343 335,540 1994 662,8013 368,772 1995 670,3223 357,190 1996 696,4003 385,988 1997 703,9003 398,269 1998 693,9003 404,014 1999 697,4004 415,486 2000 716,998' 424,400 2001 723,2103 424,151 2002 734,270 430,667 2003 784,463* 431,035** 'Source: United States Bureau of Census. 'Estimated annual averages based on place of employment,from Reports of Nebraska Department of Labor,Division of Employment Research and Statistics. 'Estimate from the Consumer Preference Survey published by the Omaha World-Herald. 40maha Chamber of Commerce estimate of January 1999. *Population for the new eight-county MSA **Employment is for the five county MSA Largest Employers—City of Omaha January 2004 Employer Nature of Business Number of Employees Offutt Air Force Base/USSTRATCOM* Department of Defense 10,500 Omaha Public Schools School System 7,035 First Data Corp Credit Car Processors 7,000 Alegent Health Health Care 5,500 Methodist Health System Medical Services 4,687 Mutual of Omaha Companies Insurance 4,596 Oriental Trading Co. Wholesale 4,200 First National Bank of Omaha Commercial Bank 4,091 Union Pacific Railroad Railroad 3,629 ConAgra Foodservice Mfg. 3,104 Nebraska Health System Hospital,Medical Services 3,072 University of Nebraska Medical Center Health Science/Education 3,058 *Located in Sarpy County(immediately south of Omaha) Source: Greater Omaha Chamber of Commerce&Midlands Business Journal(Ranked by Number of Omaha Employees) A-2 Omaha MSA Nonagricultural Wage and Salary Employment October 2003 Average for 2002 WORK FORCE(Place of Work) WORK FORCE(Place of Work) Industry Industry Manufacturing 32,015 7.4% Manufacturing 33,040 7.7% Nat Res,Min&Const 26,050 6.0% Nat Res,Min&Const 23,620 5.5% Trade,Trans,Warehous,Util 99,763 23.0% Trade,Trans,Warehous,Util 99,526 23.1% Information 17,384 4.0% Information 16,988 3.9% Financial Activities 36,476 8.4% Financial Activities 37,123 8.6% Prof&Bus Sery 60,008 13.8% Prof&Bus Sery 59,428 13.8% Ed&Health Sery 56,285 13.0% Ed&Health Sery 53,938 12.5% Leisure&Hosp 38,638 8.9% Leisure&Hosp 39,164 9.1% Other Services 13,599 3.1% Other Services 14,717 3.4% Tot Government(Pub Admin) 54,257 12.5% Tot Government(Pub Admin) 53,123 12.3% Non-Farm Employment 434,475 100.00% Non-Farm Employment 430,667 100.0% Omaha MSA Effective Buying Income* Year Total(000) Per Household 1950 $ 558,006 $ 4,978 1960 966,698 6,856 1970 1,956,095 11,734 1980 4,991,836 21,524 1990 9,527,248 31,166 1995 11,813,171 38,825 1996 12,672,246 39,389 1997 13,547,027 41,365 1998 14,172,379 44,053 1999 14,990,549 46,575 2000 15,910,949 49,098 2001 14,202,201 41,216 2002 14,145,516 40,430 *Effective Buying Income: personal income(wages,salaries,interest,dividends,profits and property income)minus federal, state and local taxes. Source: Annual surveys of buying power,Sales and Marketing Management. Retail Sales-Douglas County Retail Year Sales(000) 1980 $ 1,873,004 1990 3,717,333 1991 3,567,814 1992 4,266,146 1993 4,739,758 1994 5,058,311 1995 5,248,178 1996 5,203,261 1997 5,558,533 1998 6,005,705 1999 7,464,680 2000 7,574,648 A-3 2001 7,467,307 2002 7,861,940 Source: Sales and Marketing Management Annual Survey of Buying Power. Value of Building Permits—City of Omaha Year Amount 1950 $ 24,105,401 1960 46,927,523 1970 61,626,242 1980 136,736,312 1990 318,473,517 2000 473,849,942 2001 1,558,867,305 2002 701,502,687 2003 633,542,187 Source: Department of Permits and Inspections,City of Omaha. A-4 APPENDIX B CITY OF OMAHA-FINANCIAL INFORMATION B-1 APPENDIX B CITY OF OMAHA FINANCIAL INFORMATION PART ONE SELECTED CITY OF OMAHA FINANCIAL INFORMATION CITY OF OMAHA,NEBRASKA Statement of Net Assets December 31,2002 Component Primary government unit Governmental Business-type Assets activities activities Total MECA Cash and pooled investments S 53,172,638 17,138,872 70,311,510 840,550 Investments 4,953.010 3,189,505 8,142,515 — Assets held for resale 6,343,045 — 6,343,045 — Receivables(net of allowance for uncollectibles) 100,294,054 3,139,308 103,433,362 111,033 Internal balances 6,742,591 (6,742,591) — — Due from other governments 34,730,440 — 34,730,440 — Accrued interest 2,017,697 172,973 2,190,670 — Inventories 1,128,824 953,559 2,082,383 — Deferred charges and other assets 1,146,569 7,578,550 8,725,119 27,532 Restricted assets: Cash and cash equivalents • — 945,000 945,000 — Accoutts receivable 436,667 — 436,667 — Deposits with trustee 89,359,947 86,338,320 175,698,267 — Capital assets: Nondepreciable 295,239,710 69,459,699 364,699,409 — Depreciable 356,492,937 275,515,526 632,008,463 142,871 Total assets S 952,058,129 457,688,721 1,409,746,850 1,121,986 Liabilities and Net Assets Liabilities: Accounts payable $ 21,052,960 3,276,881 24,329,841 99,339 Retainage payable 353,466 1,716,254 2,069,720 — Accrued interest payable 5,188,281 1,998,024 7,186,305 — Due to other governments 515,681 -- 515,681 — Unearned revenue 1,673,301 — 1,673,301 115,567 Matured bonds payable 39,232 — 39,232 — Deposits — — — 50,000 Long-term liabilities Net pension obligation 2,331,306 — 2,331,306 — Compensated absences: Due within one year 1,562,163 117,195 1,679,358 — Due in more than one year 29,681,102 1,866,827 31,547,929 — Grant commitments: Due within one year 9,330,000 — 9,330,000 — Due in more than one year 19,370,000 — 19,370,000 — Claims and judgments: Due within one year 1,812,486 — 1,812,486 — Workers'compensation: Due within one year 9,574,725 661,176 10,235,901 — Duc in store than one year 12,851,299 887,436 13,738,735 — Bonds,notes,and leases payable: Doc within one year 25,418,445 3,250,631 28.669,076 — Due in store than one year 533,967,930 159,338,946 693,306,876 — Total liabilities 674,722,377 173,113,370 847,835,747 264,906 Net assets: Invested in capital assets,net of related deb, 92.346,272 274,988,337 367,334,609 142,871 Restricted for: Highway and streets 3,250,028 — 3,250,028 — Capital projects 78,543,331 1,272.420 79,815,751 — Debt service 26,031,579 945,000 26,976,579 — Perpetual care 5,563,918 — 5,563,918 — Other purposes — — — 2,500 Unrestricted 71,600,624 7,369.594 78,970,218 711,709 Total net assets 277,335,752 284,575,351 561,911,103 857,080 Total liabilities and net assets S 952,058.129 457.688,721 1,409,746,850 1.121,986 Sec accompanying notes to financial statements. B-2 I I I I I 1 I I I l l l i l i l l i I I I I I I I I I I ! I I Q e o C.. M M pOp r r] ,av O� G O tU ur C ^ ^ ^rN^^--o-O - r r V o O h 0-N M1 tO -N c o 0 Cl..N- cos 00 N N,O .O-^0 00 0 ! a'COoo -- v N 00 ! o. to. o - O h-O Nrn x•�?-rD`00-M cos, O rO V'•Vr VIO aO•.N 00 M en f- •.. N r r Vl v R'C o0 M N M M 0. C.._.. o.f o•. N 'n'n N N r N N M M O O r '/l N - v O so O rsn N N en M r`. - C i O N-0 r o 0 N Cs N N h N N r,v n 0' 'O N - C 1- r 0 oo ONO oo ON C ONN0, NN- Os -,O:ON Q•^ N,O W'.-- O . N 00 0 Vr O N Vc N r- O ,O V' -N Cs 00 N r31 N-'O o0-M N- ON 0 --i v--i t vvv� N co N 0 v .� v 9 C A C C C a Cc."N--N-V'0-p `O N N r M o 0 - I I I III ooCO0--^ct r-ao, I III I I I I I CO , en ar i. -T-rO0 VN N co M `O rat 0 CO 00 Lei J,•� oO M N oo Ni N O-v.0 v N 00 N so.- s. vri C �+ �./ v M - N r OO N E N N CV. _ 1' 7 A OR'r%i R. O. N 0 J0O N O O CO C a'O.�..I n h CO N 0 CO �O o5-o0 Nrn- i ! I I I ! ! ! O. I YO0�O,,.0-O).N O•W - r E." N r"r vi N o'c Oo Oo` flN N r Nv MO M so co` N _ OON 0NNNN'Ci'O MnO M - G N M r N CO ONO 00 N - P O N O0 N N O N O\N 0 t^ `O ON R N O co"I N r- O O ��NM N-VO 00-N en v N N N N O .�iM vv�v O' N N N 64 60 on IIIIIII ;; 1l111111110 1 AN sO .0.y an NO 0 N r roc"•L N N N NO A C oO 'O V N 00 O 4a u N Gel Oo u g ElN = I � IIgII a Illlllilll ti {i > M L UI O`oo - rn a 3M Q O V u L N , N c M i W t. V Co C N O O V1 0 ` N O N C`C`N 1 O` I G r b M,10 NO op•CC N 2 I r` rE 5 'y U 4 y NOVM 00 M1 so 'O IC NON�O V N N 00 V N N r•i N 00 CO00 NO M--"oO O m o: - ›- 00•i M<.—�O—— 00 N-v» N M Os - E C A U -M V I so.V N V N N N N OS I-M N .0 E 0 L n AN N00--'0a N M MN 0 G0 U X m 0 E G rn ._. V - -^-^ O t o0 u c w -'CNN N r^. N :O N N N N N 8 NOV N N o O 5+ r, d M M-O CI',r^.- P �O O rn N M1N�O O��O M1 - U '� E-0 E'•pG E N M 70..O.N- W M vt v,0:0�C OOr O r C . 0 O yy.0 y 0 C C E o. .0 0 C V rNOOM R s.O r MOt o:N CO'N NNM a r 0"t w cr""r" 0 O _ MV N P.N N 0 r.n N 0)M V N oo ,In,O, 0 W `C > o c V•0 000= 0 a 0 I -I• a) I N NNn'rNn rrnN N (Nn M M O F CO U.` T.n• 0 0 0 e.0 0 0 0i v0i ci2ri=a D ULL :).,E,7 C n n IA cif u V F z z c u 5 U U 1 ' 0 J E N a C. G - U j 0 j % v a C . ua Euirz- .: n E . J E _ c rey _ ? c ii C 0 C H-0. G,C a n U ^ 0 OC ' O Ec. 9.nc - c 2. o..auh 3 c 7, o _ E.cn i u i o o.a F •.�.- F 7•O.�' c o`-' oa.5 F' F. ."O CE- u� `2- o=' c o o 33 c c.- o f v Z`>C .E-0005 '7,U001-C 0 <U0 �+< 0 0 u P 0 Ito U N 1 CITY OF OMAHA GENERAL FUND STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE Five Years Ended December 31,2002 1998 1999 2000 2001 2002 Revenue: Property taxes $40,710,597 $41,997,844 $44,432,606 $42,679,398 $44,514,709 Motor vehicle taxes 7,166,159 7,381,988 7,836,953 8,297,315 8,575,697 City sales and use tax 84,399,858 91,397,112 92,161,421 94,847,848 95,819,855 Business taxes 21,906,779 23,656,030 25,047,608 27,385,618 28,069,611 Licenses and permits 6,143,824 6,134,793 6,197,542 6,650,288 6,808,871 Intergovernmental revenue 9,617,778 7,760,343 10,394,336 11,071,626 8,169,162 Charges for services 10,398,039 14,899,478 13,240,889 13,810,322 17,055,377 Investment income 4,377,288 3,758,568 5,656,143 5,278,392 3,448,653 Rents and royalties 362,762 189,992 124,276 131,239 129,836 Miscellaneous 817,146 927,132 605,358 815,097 462,327 Total revenue $185,900,230 $198,103,280 $205,697,132 $210,967,143 $213,054,098 Expenditures: Legislative&Executive 2,233,239 2,190,979 2,331,937 2,577,118 2,522,655 Law,Personnel&Human Relations 4,871,260 5,085,465 5,229,767 5,416,770 5,683,583 Finance 2,584,522 2,662,272 2,683,064 2,886,329 2,909,612 Administrative Services 7,449,428 7,872,237 7,609,990 7,742,600 8,944,247 Planning 4,151,200 4,485,504 5,087,892 5,049,797 5,045,255 Parks,Recreation&Public Property 16,145,042 18,204,601 18,648,608 18,943,118 17,677,187 Public Safety 100,347,854 106,719,236 112,261,614 117,396,525 125,885,081 Public Works 14,212,339 14,748,601 16,334,032 16,020,666 14,163,036 Public Library 6,477,377 6,973,834 7,064,266 7,959,711 7,510,631 Retiree Benefits 8,210,338 8,655,243 9,541,350 11,194,222 11,531,291 Agency&Other Accounts 14,780,844 15,782,103 14,931,732 20,381,519 15,908,664 Total expenditures 181,463,433 193,380,075 201,724,252 215,568,375 217,781,242 Excess(deficiency)of revenues over expenditures 4,436,787 4,723,205 3,972,880 (4,601,232) (4,727,144) Other sources(uses)of financial resources: Initial credit 1,690,038 3,871,604 2,213,827 7,917,332 3,730,851 Operating transfers(net) (3,912,998) (677,477) (2,445,856) (1,092,559) 997,626 Net other sources(uses) of financial resources (2,222,960) 3,194,127 (242,029) 6,824,773 4,728,477 Excess(deficiency)of revenues over expenditures and other sources(uses)of financial resources' 2,213,827 7,917,332 3,703,851 2,223,541 1,333 Fund balance,beginning of year 5,561,642 6,085,431 10,131,159 11,648,183 5,954,392 Less—initial credit (1,690,038) (3,871,604) (2,213,827) (7,917,332) (3,730,851) Fund balance,end of year $ 6.085.431 $10.131.159 $11.648.183 $ 5.954.392 $ 2.224.874 City of Omaha procedure in General Fund budgeting is as follows:at the end of each fiscal year the excess,if any,of revenues and adjustments over expenditures and encumbrances is determined. Any such excess,less extraordinary transfers out,if any,is used as the initial credit to the General Fund Budget for the second year following the year in which the excess has arisen. Source: Records of Finance Department,City of Omaha. B-4 CITY OF OMAHA GENERAL DEBT SERVICE FUND STATEMENT OF REVENUE,EXPENDITURES AND CHANGES IN FUND BALANCE Five Years Ended December 31,2002 1998 1999 2000 2001 2002 Revenue: Taxes $25,096,049 $26,806,276 $29,900,936 $30,612,229 $31,621,319 Receipts in lieu of taxes 85,867 50,147 71,754 73,812 72,144 Interest income 305,542 588,847 1,073,999 9,931,029 6,150,480 Total revenue 25,508,366 27,445,270 31,046,689 40,617,070 37,843,943 Contributions from annexed areas—net 4,472,083 10,397,638 995,394 800,597 2,274,320 Total revenue and contributions 29,959,541 37,842,908 32,042,083 41,417,667 40,118,263 Expenditures: Outside services: Professional fees&liabilities 865,671 1,117,630 828,603 1,064,823 1,930,519 Collection fees 251,866 264,780 323,922 321,807 337,435 Total outside services 1,117,537 1,382,410 1,152,525 1,386,630 2,267,954 General obligation bonds: Interest expense 9,578,154 10,198,965 12,482,937 21,376,301 23,753,114 Bonds retired 55,870,000 27,955,000 40,995,000 31,025,000 21,635,000 Total general obligation bonds 65,448,154 38,153,965 53,477,937 52,401,301 45,388,114 Total expenditures 66,565,691 39,536,375 54,630,462 53,787,931 47,656,068 Excess of revenues and (36,585,242) (1,693,467) (22,588,379) (12,370,264) (7,537,805) contributions over(under) expenditures Other financing sources(uses): Convention Center Bonds 36,779,452 20,570,000 11,247,880 Excess of revenues and contributions over(under) expenditures and other financing 194,210 18,876,533 (11,340,499) (12,370,264) (7,537,805) sources) Fund balance at beginning of year 30,557,557 30,751,767 49,628,300 38,287,801 25,917,537 Fund balance at end of year $30,751.767 $49,628,300 $38,287,801 $25,917,537 $18,379,732 Source: Records of Finance Department,City of Omaha. B-5 General Fund Preliminary Year-end Projections 12/31/2003 2003 PROJECTED PROJECTED OVER Budget 12/31/03 (UNDER) BUDGET Revenues: Property Tax 46,110,509 45,861,914 (248,595) Motor vehicle Taxes 8,802,600 8,637,101 (165,499) City sales and use tax (net of refunds) 103,730,700 102,413,935 (1,316,765) Business taxes 29,720,600 26,842,091 (2,878,509) Licenses and permits 6,916,100 7,859,272 943,172 Intergovernmental Revenues 7,404,588 8,224,072 819,484 Charges for services 16,515,056 16,382,207 (132,849) Interest Income 3,500,000 2,040,245 (1,459,755) Rent and royalties 158,000 94,816 (63,184) Miscellaneous 673,800 1,177,490 503,690 Reserve for Revenue Variance 1,500,000 - (1,500,000) Prior Year General Fund Balance 2,223,541 2,223,541 - Total Revenues 227,255,494 221,756,684 (5,498,810) Expenditures Legislative & Executive 2,437,279 2,333,388 103,891 Law, Personnel & Human Relation 5,463,013 5,215,843 247,170 Finance 2,788,128 2,726,494 61,634 Administrative Service 2,752,455 2,865,541 (113,086) Planning Department 5,188,391 5,108,463 79,928 Parks and Recreation 16,692,840 15,548,605 1,144,235 Public Safety 130,242,042 133,243,252 (3,001,210) Public Works 15,739,896 13,220,836 2,519,060 Public Library 7,846,953 7,621,550 225,403 Benefits 12,948,798 13,760,574 (811,776) Agencies & Other Accounts 25,155,699 20,371,691 4,784,008 Total General Fund Expenditures 227,255,494 222,016,237 5,239,257 General Fund Balance - (259,553) Prior Year Expenditure Reduction 450,000 Projected 2003 General Fund Balance 190,447 Source: Unaudited records and projections of the Finance Department, City of Omaha as at December 31, 2003. These records and projections have not been reviewed by the City's outside auditors: projections are projections only. Actual results as the result of the Year 2003 year-end audit may differ significantly. Lower than budgeted sales tax receipt accounted for$1.3 million of the revenue shortfall. The Reserve for Revenue Variance Account budgeted at$1.5 million was established to account for possible excess revenue collections. No departmental appropriations were budgeted or funded by this revenue source. B-6 General Fund Fiscal Year 2003 Budget and 2004 Budget 2003 2004 Budget Budgeted Revenues: General Property Tax $ 46,110,509 $46,535,600 Motor Vehicle Taxes 8,802,600 8,834,900 City Sales and Use Tax 115,730,700 115,875,000 Less:LB 775 Refunds (12,000,000) (10,000,000) Business Taxes 29,720,600 27,986,800 Licenses and Permits 6,916,100 7,050,369 Intergovernmental Revenues 7,404,588 7,283,600 Charges for Services 16,515,056 16,291,106 Investment Income 3,500,000 1,500,000 Rents and Royalties 158,000 119,000 Miscellaneous 673,800 726,700 Reserve for Variance in Revenue Estimates 1,500,000 1,500,000 Prior Year Balance 2,223,541 1,334 Total Revenue 227,255,494 223,704,409 Expenditures: Legislative&Executive 2,437,279 2,478,566 Law,Personnel&Human Relations 5,463,013 5,513,318 Finance 2,788,128 3,065,754 Administrative Services 4,431,842 3,165,156 Planning 5,234,331 4,980,769 Parks,Recreation and Public Property 16,862,543 14,930,732 Public Safety 128,549,109 132,231,693 Public Works 15,739,896 12,539,825 Public Library 7,846,953 7,954,472 Benefits 11,223,170 14,732,685 Agency and Other Accounts 26,679,230 22,111,439 Total Expenditures $227,255,494 $223,704,409 Source: Finance Department,City of Omaha. The major portion of the City's day-to-day operations, some annual capital improvements and various lease-purchase agreements are financed by the General Fund. Appropriations are also made from the General Fund for operating the Public Library System. Further appropriations provide for the City's contribution to employee benefit plans including pension systems,hospitalization and life insurance and social security taxes. The 2004 Budget was formulated from revised projections for budget year 2003. B-7 Property Valuations and Debt Ratios as of December 31 1999 2000 2001 2002 Actual Valuation' $13,528,222,529 $15,822,153,191 $17,941,614,239 $18,561,619,111 Net Direct General Obligation Bonded Debt 208,478,172 408,103,671 423,338,935 417,421,740 %of Net Direct General Obligation Bonded Debt to Actual Valuation 1.54% 2.58% 2.36% 2.25% Source: Records of Accounting Department,Office of the Douglas County Clerk. 2 The City has a property valuation of$19,006,730,420 for the year beginning on January 1,2003,and a property valuation of $19,438,092,465 for the year beginning on January 1,2004. Population,Net General Bonded Debt and Per Capita Debt Per Capita Net Direct Net Direct General Obligation General Obligation Year Population' Bonded Debt2'3 Bonded Debt 1950 251,117 $ 11,100,500 $ 44.20 1960 301,598 30,697,871 101.78 1970 346,929 71,586,248 206.34 1980 313,911 73,939,298 235.54 1990 335,795 115,435,013 343.77 2000 390,007 408,103,671 1,046.40 2001 390,153 423,338,935 1,085.06 2002 399,357 417,421,740 1,045.23 'Source: United States Census and City Planning Department. 2Records of the Finance Department,City of Omaha. 3In 1982,the City of Omaha inaugurated a new annexation policy. The current annexation policy is designed to create annual,balanced annexation packages and establish consistency from year to year. Such annexation packages combine areas with relatively high outstanding indebtedness in relation to assessed valuation with other areas that have a more positive financial picture. These balanced packages can then be added to the City without tax increase to cover retirement of the additional debt assumed by the City. Under this approach, Omaha has grown by approximately 80,000 people and 27 square miles as a result of annexations since 1980. B-8 OVERLAPPING DEBT Listed below are the political subdivisions which have the power to levy taxes and the amount of net bonded indebtedness of each,as of September 30,2003,applicable to the taxable property within the City of Omaha: % Applicable to $Amount Bonds Outstanding City of Omaha Applicable Douglas County' $76,215,000 76.18% $58,060,587 Omaha-Douglas Public Building Commission2 31,640,000 76.18 24,103,352 School District of Omaha' 198,172,160 86.12 170,665,720 School District of Ralston' 33,520,000 72.25 24,218,200 School District of Millard' 126,935,000 68.38 86,798,153 School District of Elkhorn' 42,320,000 8.20 3,470,240 School District No.66 of Douglas County' 25,025,000 100.00 25,025,000 Net Overlapping Bonded Debt $533,827,160 $392,341,252 Douglas County, under a lease purchase agreement,is obligated to provide for annual rental payments. The annual payment is$800,000 in 2003/2004 and approximately$414,315 in the 2004/2005 fiscal year. Payable from certain property tax revenues and payments to be made to it by the City of Omaha and Douglas County under certain contractual agreements. Actual rental payments by the City for 2003 were$1,080,000. The Act authorizing issuance of bonds by the Omaha-Douglas Public Building Commission(the"Commission")permits the Commission to levy a tax of$.0175 per$100 of actual valuation on all the taxable property in Douglas County;the levy for 2003/04 is $0.01096 per$100 of actual valuation. However,although the same Act authorizes the City to levy a tax on all the taxable property in the City,except intangible property,of$.0175 per$100 of actual valuation in excess of the Charter limitation described under"AUTHORITY TO LEVY TAXES,"if and to the extent necessary to make the City's payments to the Commission,no such levy has ever been made by the City for such purpose. 'Tax levies for general obligation bond sinking fund purposes are unlimited as to amount. Residents of the City reside in one of the five school districts and pay taxes only to that school district. B-9 LONG-TERM CONTRACTUAL AGREEMENTS The City of Omaha, under certain existing contractual agreements (including lease purchase agreements), is obligated to provide for annual payments which are a charge on the General Fund and Special Revenue Funds. From 2003 to 2033, the highest annual payment is$7,381,193 (in 2005), the lowest is $1,829,585 (in 2033), and the average annual payment is $4,128,721. Such annual payments are included as General Fund budgetary items for which annual appropriations are required. Under the Charter of the City of Omaha, the outstanding amount of any lease purchase agreements executed by the City as vendee or as lessee is not chargeable against the City debt limit. City of Omaha and Local Authorities and Districts Revenue and Special Obligation Bonds Outstanding' as of December 31, 2002 City of Omaha: Sanitary Sewerage System Revenue Bonds $ 945,000 Tax Increment Bonds and Notes 88,591,517 Special Tax Revenue Bonds 22,095,000 Convention Center Hotel Revenue Bonds 108,973,211 Special Obligation Bonds 84,000,000 Dodge Park Marina Revenue Bonds 845,000 Omaha Public Power District(1) 872,975,000 Airport Authority of the City of Omaha(I) 43,250,000 Omaha Housing Authority(1) 5,380,000 (1)as of December 31,2003 *Revenue bond indebtedness is not general obligation debt of the City. Principal and interest are paid solely from revenues arising from operations of the respective City facilities or of the Authority or District issuing such revenue bonds. No taxes are levied for payment of either principal or interest. Nor are the Tax Increment Bonds and Notes and Special Tax Revenue Bonds referred to above general obligations of the City. Principal and interest are paid (1)either from that portion of the ad valorem tax on real property in a redevelopment project which is in excess of that portion of the ad valorem tax upon real property in such redevelopment project produced by the levy at the rate fixed each year by or for each public body levying a tax in such redevelopment project on the valuation for assessment of the taxable real property as last certified for the year prior to the providing for division of such taxes pursuant to the redevelopment plan or(2)from special tax revenues collected pursuant to redevelopment laws. AUTHORITY TO LEVY TAXES Under the City Charter, the tax levy of the City in any year for all purposes shall not exceed the total of(i)$.6125 per $100 of actual taxable value plus (ii)whatever tax levy is necessary to provide for principal and interest payments on the indebtedness of the City, for the administrative expenses incurred in issuing and maintaining bonds, and for the satisfaction of judgments and litigation expenses in connection therewith, plus (iii)whatever amount is required to finance certain overtime and holiday pay for members of the police force. In addition, the Omaha-Douglas Public Building Commission Act pursuant to which the Commission issues bonds empowers the City to levy a tax on all the taxable property in the City, except intangible property, of$.0175 per $100 of actual valuation in excess of the Charter limitation if and to the extent necessary to make the City's payments to the Commission. Effective July 1, 1998, the tax levy of the City (exclusive of levies for preexisting lease-purchase contracts and bonded indebtedness approved according to law and secured by a levy on property) will be limited by state law to 450/$100 of taxable valuation. See "THE BONDS—Revision of State Property Tax System" in the Official Statement. B-10 The City's tax levy during its current fiscal year ending December 31, 2004, is 24.312 cents per $100, plus 17.581 cents per $100 for payment of the City's general obligation indebtedness, plus 0.600 cents per $100 for satisfaction of judgments and 0.894 cents per $100 for payment on the City's Special Redemption Levy, for a total levy of 43.387 cents per$100. Set forth in the following table is a detailed summary of the property tax levied on real and personal property in the City. [Remainder of page intentionally left blank] B-11 Total Property Tax Levies in the City of Omaha (Levied on Real and Tangible Personal Property) 1999 2000 2001 2002 2003 2004 (amount per$100 of actual valuation) City of Omaha General Fund $.3098 $.2805 $.2377 $.2431 $.2431 $.2431 Debt Service Fund .1976 .1887 .1705 .1737 .1759 .1759 Judgment Fund .0149 .0091 .0082 .0082 .0060 .0060 Riverfront Redevelopment .0101 .0090 .0089 .0089 .0089 .0089 Fund Total for City of Omaha $.5324 $.4873 $.4253 $.4339 $.4339 $.4339 1998-99 1999-00 2000-01 2001-02 2002-03 2004 (amount per$100 of actual valuation) Other Taxing Units M.U.D.-Water Hydrants $.0089 $.0088 $.0077 $.0075 $.0074 $.00722 Douglas County .2476 .2020 .2020 .2310 .2480 .26801 Library-(Unincorporated Areas Only) .0435 .0440 .0366 .0366 .0285 .02727 School District of Omaha' 1.2052 1.0771 1.1265 1.1729 1.2258 1.27698 School District No.66 of Douglas County' 1.3523 1.2988 1.2536 1.2842 1.2645 1.25990 School District of Ralston' 1.2634 1.2285 1.2149 1.2817 1.3099 1.33873 School District of Millard' 1.3950 1.3128 1.2660 1.2567 1.2775 1.32119 School District of Elkhorn' 1.3890 1.2368 1.2523 1.2409 1.2393 1.29935 State Educational Service Units .0150 .0149 .0117 .01502 .01502 .01499 Omaha-Douglas Public Building Commission .0122 .0122 .0110 .0110 .0110 .0196 Papio Missouri River Natural Resources District .0326 .0305 .0299 .0307 .0307 .03064 Metropolitan Technical Community College .0740 .0361 .0282 .0621 .0640 .05640 Omaha Transit Authority .0435 .0375 .0398 .0492 .0505 .0505 1 Residents in Omaha reside in one of the above five school districts and pay taxes only to that school district. ?Residents residing in school districts other than the School District of Omaha pay$.0174 for years 2001-02 and 2002-03. B-12 Major Taxpayers The following are firms located within the City of Omaha with the greatest real estate valuations as of August 20, 2003. Value of Taxpayer Real Property Oak View Mall LLC $102,718,100 Westroads Mall LLC 70,114,500 Connecticut National Bank Trustee 63,155,500 United of Omaha Life Insurance 60,549,100 Prefco Onze LLC 50,636,200 First Data Resources,Inc. 46,209,800 Simon Property Group 46,000,000 Creighton St Joseph Regional 39,010,300 Seldin Development &Management Co 33,141,800 Wachovia Development Corporation 31,991,400 West Teleservices Corp. 31,520,500 Avaya Inc 31,151,000 First National Bank Omaha 30,578,100 VK Blondo Properties 30,462,900 Bristol Omaha Hotel Company 26,900,000 W 0 W Life Insurance Society 26,500,000 PDM Inc. 26,150,800 Guarantee Mutual Life 26,136,100 Regency Lakeside Assoc.LLC 25,189,200 Wachovia Development Corporation 24,407,500 Wells Fargo Bank Nebraska 24,199,300 Vanderbilt Ltd. 22,300,000 Broadmoor Apartments Limited 21,103,000 B-13 PROPERTY TAX COLLECTIONS Property taxes on tangible property, real and personal, are levied by the City of Omaha, collected by the Douglas County Treasurer and remitted to the City. Real property taxes are levied September 1 of each year and become due December 31. The first half of tax payable becomes delinquent the following April 1 and the second half August 1. Personal property taxes are levied September 1 of each year and become due November 1. The first half of tax payable becomes delinquent December 15 and the second half the following July 1. Taxes for Year Shown % of Total Prior Years' Collections Year Ended Amount % Taxes Total to Current December 31 Certified Collected Collected Collected Collections Year Taxes 1997 $73,785,881 $72,234,650 97.9 $2,404,922 $74,639,572 101.16 1998 68,915,674 67,373,636 97.8 1,604,868 68,978,504 100.09 1999 72,024,257 70,529,609 97.8 1,651,123 72,180,732 100.22 2000 77,109,264 75,432,998 97.8 1,771,124 77,204,122 100.12 2001 76,293,126 74,827,346 98.1 1,529,927 76,357,273 100.08 2002 80,926,571 78,176,656 97.1 1,061,170 79,237,826 97.91 Source: Records of Finance Department,City of Omaha. DEBT MANAGEMENT General Obligation Debt Margin Article V, Section 5.27,Home Rule Charter of the City of Omaha, 1956,as amended,provides: The total amount of general obligation indebtedness outstanding at any time, which shall include bonds issued but shall not include bonds authorized until they are issued, shall not exceed 3.5 per cent of the actual value of taxable real and personal property in the city. Computation of the general obligation debt margin as defined in the Home Rule Charter, based upon 2002 valuations,reflects the following: Maximum debt limit(3.5%of total assessed valuation) $649,656,669 General obligation bonds outstanding $435,801,472 Less balance in General Obligation Debt (18,379,732) (417,421,740) Service Fund December 31,2002 General obligation debt margin $232,234,929 Revenue bond indebtedness, special obligation bonds, general obligation notes and lease-purchase agreements are not chargeable against the general obligation debt margin. The City of Omaha has no general obligation notes outstanding. Revenue and special obligation bond indebtedness and lease purchase agreement obligations are set forth herein under the captions "OVERLAPPING DEBT" and "LONG-TERM CONTRACTUAL AGREEMENTS—City of Omaha and Local Authorities and Districts Revenue and Special Obligation Bonds Outstanding." B-14 Debt Payment Record The City of Omaha has never defaulted on its obligations to pay principal of or interest on its indebtedness. General Obligation Bonds Authorized But Unissued Upon the issuance of the Bonds, the City will have$42,800,000 of general obligation bonds authorized but unissued. The City anticipates that these bonds will be issued in varying amounts annually through 2008. CASH RESERVE FUND At a special City election held on November 6, 1984, voters of the City approved an amendment to Section 5.03 of the City Charter to provide in subsection(10) for the establishment of a cash reserve fund ("Cash Reserve Fund") for the purpose of meeting emergencies arising from: (a) the loss or partial loss of a revenue source; (b) an unanticipated expenditure demand due to a natural disaster, casualty loss or act of God; (c) expenditure demand for the satisfaction of judgments and litigation expenses when the Judgment Levy Fund balance is inadequate;or (d) conditions wherein serious loss of life,health or property is threatened or has occurred. The 1984 amendment to the City Charter authorized the appropriation at the close of any fiscal year for credit to the Cash Reserve Fund of any amount, or portion thereof, held as General Fund surplus. Income earned on amounts credited to the Cash Reserve Fund is retained in the fund. The maximum size of the Cash Reserve Fund was established at an amount equal to 4%of General Fund appropriations. The ordinance adopted by the City Council to close Fiscal 1984 Accounts provided that the sum of$1,600,000 be transferred from 1984 available budgetary balances as the initial credit to the Cash Reserve Fund to be held as provided in Section 5.03(10) of the City Charter. 2002 interest earnings of$155,855 increased the balance as of December 31,2002 to$4,737,235. EMPLOYEE RELATIONS: RETIREMENT SYSTEMS The City of Omaha negotiates with four major unions: The Civilian Management Professional and Technical Employees Council; The Omaha City Employees, Local No. 251; The Omaha Association of Firefighters, Local No. 385; and The Omaha Police Union, Local No. 1. Current agreements with the four unions expire as follows: The Civilian Management Professional and Technical Employees Council—December 31, 2005; Omaha Association of Firefighters, Local No. 385—December 29, 2007; Omaha City Employees, Local No. 251— December 31,2005;and Omaha Police Union,Local No. 1—expired December 20,2003. The negotiating procedure involves meeting with the designated union representatives and discussing economic and noneconomic items regarding contractual agreements. At any time, should an impasse be reached, Nebraska law provides that either party may appeal to the Nebraska Commission of Industrial Relations. Either party may appeal the decision of such Commission to the Nebraska Supreme Court,whose decision is final. CITY OF OMAHA EMPLOYEES'RETIREMENT SYSTEM The City of Omaha Employees' Retirement System became effective on January 1, 1949. Certain of its provisions, which are governed by Chapter 22.21 of the Omaha Municipal Code,are summarized herein. B-15 All city employees except the following are covered by the plan: police; firefighters; persons paid on a contractual or fee basis; seasonal,temporary and part-time employees; and elected officials who do not make written application to the plan. The historical and negotiated employee and City contributions rates based on an employee's compensation are as follows: Period Employee Rate City Rate 07/01/72-01/31/98 4.00% 5.20% 02/01/98-06/18/01 4.85 6.05 06/19/01-12/23/01 4.98 6.18 12/24/01-12/21/02 5.33 6.53 12/22/02-12/20/03 5.70 6.90 12/21/03-12/22/04 6.825 8.025 Prior service credit is granted for employment with the City before January 1, 1949, and membership service credit is granted for employment thereafter. Compulsory military duty and voluntary military duty in time of war count as service. Early retirement is permitted at age 50 with five years of service, with the accrued benefit reduced 8%per year for retirement prior to age 60. For employees whose age plus service equals or exceeds 80,the 8%per year reduction is eliminated. An employee's monthly pension is equal to 2.25%of average final monthly compensation for each year of service. Following is a cash flow analysis of the System for the last five fiscal years: Receipts 1998 1999 2000 2001 2002 Employee Contributions $2,500,935 $2,510,017 $ 2,721,333 $ 2,741,310 $ 3,051,614 Employer Contributions 3,129,610 3,129,693 4,947,868 3,415,120 3,653,704 Investment Income 14,676,637 14,410,702 17,734,825 (10,950,374) (10,695,156) Security Lending Income 75,217 85,312 119,012 109,841 139,766 Total Receipts 20,382,399 20,135,724 25,523,038 (4,684,103) (3,850,072) Disbursements Retirement Pensions 7,671,414 8,545,757 9,482,791 10,887,007 12,024,914 Death Benefits 165,000 160,000 110,000 148,333 187,500 Refunds 3,045,648 534,535 337,799 347,665 257,941 Other Disbursements 1,287,006 1,251,346 1,618,516 1,408,962 1,387,301 Total Disbursements 12,169,068 10,491,638 11,549,106 12,791,967 13,857,656 Excess of Receipts Over Disbursements $ 8,213,331 $9,644,086 $13,973,932 $(17,476,070) $(17,707,728) Source:Records of Finance Department,City of Omaha. Contributions to the System are determined on an actuarial basis by the firm of Milliman& Robertson,Inc. and include rates that provide for both normal and accrued liability funding: The latest actuarial study by independent B-16 actuary was for the period ended January 1, 2002 and included a 7.5% investment assumption. Summarized below is financial information concerning the System for the last five fiscal years. 1998 1999 2000 2001 2002 System Total Assets' $228,636,004 $238,280,090 $250,588,356 $234,777,950 $217,070,222 Employee Contributions' 2,500,935 2,510,017 2,721,333 2,741,310 3,051,614 Employer Contributions' 3,129,610 3,129,693 3,282,203 3,471,310 3,653,704 Net Pension Asset' 549,408 622,395 865,924 1,016,227 (1,585,196) Unfunded Actuarial (10,400,000) (12,500,000) (21,000,000) 9,500,000 79,800,000 Accrued Liability 'System Total Assets,Employee Contributions and Employer Contributions figures are taken from City of Omaha records as of December 31 of each year. 'Complete Actuarial Valuations are performed every other year,the last being for the period ended January 1,2002. The net pension asset and unfunded accrued liability figures are from the report of Milliman&Robertson,Inc. B-17 City of Omaha Employees' Retirement System Annual Pension Cost and Net Pension Obligation December 31, 2002 The City's annual pension cost and net pension obligation to the Civilian Plan for the fiscal year ended December 31,2002 are as follows: Annual required contribution $6,245,294 Interest on net pension asset (76,217) Adjustment to annual required contribution 86,045 Annual pension cost 6,255,127 Contributions made 3,653,704 Decrease in net pension asset (2,601,423) Net pension asset,beginning of year 1,016,227 Net pension liability,end of year $(1,585,196) Three-year trend information is as follows: Fiscal Annual Percentage Net year pension of APC pension ending cost(APC) contributed asset 12/31/2002 $6,255,127 58% $(1,585,196) 12/31/2001 3,264,816 105 1,016,227 12/31/2000 3,038,674 108 865,924 POLICE AND FIREMEN'S RETIREMENT SYSTEM The City of Omaha Police and Firemen's Retirement System became effective on July 1, 1961. Certain of its provisions,which are governed by Chapter 22.61 of the Omaha Municipal Code,are summarized herein. Membership in the System is limited to and shall include only probationary and regular uniformed personnel of the Police and Fire Departments. Beginning in 1999, both police and fire employees contribute,by payroll deduction, 10.885% of their total monthly salary. The City contributes 16.5% of each member's total monthly salary and$1,327,600 per annum in liquidation of the accrued liability for prior service credit. Effective in 2003, Fire employees contribute, by payroll deduction, 13.05%of their total monthly salary. The City contributes 18.755%of each member's total salary. Retirement is optional at age 50 with 20 to 24 years of service or 25 years of service with a lifetime monthly service retirement benefit equal to 49% of average final monthly compensation. With 25 years of service or more, an employee can retire at the minimum age of 45 with a lifetime monthly retirement benefit equal to 69% of average final monthly compensation. B-18 Following is a cash flow analysis of the system for the last five fiscal years: Receipts 1998 1999 2000 2001 2002 Employee Contributions $6,925,198 $7,765,986 $ 8,107,703 $ 8,348,709 $ 9,354,507 Employer Contributions 11,372,223 11,683,051 12,285,963 12,649,712 13,994,601 Prior Service Contributions 1,327,600 1,327,600 1,327,600 1,327,600 1,327,600 Investment Income 38,762,264 901,528 6,498,294 (9,039,016) (34,178,271) Security Lending Income 269,496 216,277 122,701 233,510 132,391 58,656,781 21,894,342 28,342,261 13,520,515 (9,369,172) Disbursements Retirement Pensions 15,327,991 18,610,507 20,681,738 22,421,242 24,112,441 Death Benefits 16,000 15,500 7,000 152,502 66,824 Refunds 217,279 251,704 70,201 12,502 149,820 Other Disbursements 2,059,598 1,956,145 3,004,265 1,986,029 2,626,479 17,620,868 20,833,856 23,763,204 24,572,275 26,955,564 Excess of Receipts $41,035,913 $ 1,060,486 $ 4,579,057 $11,051,760 $(36,324,736) Over Disbursements Source: Records of Finance Department,City of Omaha. Contributions to the System are determined on an actuarial basis and include rates that provide for normal funding. Contributions are determined by Milliman&Robertson,Inc. 1998 1999 2000 2001 2002 System Total Assets(at cost)' $322,938,940 $356,916,162 $361,495,219 $350,443,459 $314,118,723 Employee Contributions' 6,925,198 7,765,886 8,107,703 8,348,708 9,354,507 Employer Contributions' 12,699,823 13,011,101 13,613,563 13,977,312 15,322,201 Net Pension Obligation2 7,781,283 5,427,156 3,053,033 701,976 746,110 Unfunded Actuarial Accrued Liability2 29,400,000 54,200,000 63,600,000 101,900,000 167,500,000 'System Total Assets,Employee Contributions and Employer Contributions figures are taken from City of Omaha records as of December 31 of each year. 2Complete Actuarial Valuations are performed every other year. The Net Pension Obligation and Unfunded Actuarial Accrued Liability figures are taken from reports of Milliman&Robertson,Inc.and annual City audits. During 1977, on the basis of an actuarial balance sheet prepared as of January 1, 1977,the District Court of Douglas County, Nebraska made a determination relative to the unfunded liability for past service credits and the method of funding such amount. The City had adopted a policy whereby the employer contributions each year exceeded the matching requirements and served to amortize in part the past service costs. Commencing in 1979, the City contributes to the Police and Firemen's Retirement System the sum of$1,327,600 per year for 50 years to provide for the amortization of the prior service cost. • B-19 Police and Firemen's Retirement System Annual Pension Cost and Net Pension Obligation December 31,2002 The City's annual pension cost and net pension obligation to the Uniform Plan for the year ended December 31, 2002 are as follows: Annual required contribution $15,392,189 Interest on net pension obligation 56,158 Adjustment to annual required contribution (82,012) Annual pension cost 15,366,335 Contributions made 15,322,201 Increase in net pension obligation 44,134 Net pension obligation,beginning of year 701,976 Net pension obligation,end of year $ 746,110 Three-year trend information is as follows: Fiscal Annual Percentage Net year pension of APC pension ending cost(APC) contributed obligation 12/31/2002 $15,366,335 99% $ 746,110 12/31/2001 11,626,255 120 701,976 12/31/2000 11,239,440 121 3,053,033 B-20 APPENDIX B—CITY OF OMAHA FINANCIAL INFORMATION PART TWO Independent Auditors'Report and General Purpose Financial Statements CITY OF OMAHA,NEBRASKA Financial Statements December 31,2002 (With Independent Auditors' Reports Thereon) CITY OF OMAHA,NEBRASKA Table of Contents Page Independent Auditors'Report Management's Discussion and Analysis 1 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets 12 Statement of Activities 13 Fund Financial Statements: Governmental Funds: Balance Sheet 14 Statement of Revenues,Expenditures,and Changes in Fund Balances 15 Reconciliation of the Statement of Revenues,Expenditures,and Changes in Fund Balances to the Government-wide Statement of Activities—Governmental Activities 16 Proprietary Funds: Statement of Fund Net Assets 17 Statement of Revenues,Expenses,and Changes in Fund Net Assets 18 Statement of Cash Flows 19 Fiduciary Funds: Statement of Fiduciary Net Assets—Fiduciary Funds 20 Statement of Changes in Fiduciary Net Assets—Pension Trust Funds 21 Notes to the Basic Financial Statements 22 Budgetary Comparison Information—Required Supplemental Information(Other than MD&A): Schedule of Revenues,Expenditures, and Changes in Fund Balances—Budget and Actual: Schedule 1 —General Fund 63 Notes to Schedules of Revenues,Expenditures,and Changes in Fund Balances—Budget and Actual—General Fund 64 Single Audit Section: Independent Auditors'Report on Schedule of Expenditures of Federal Awards 66 Schedule of Expenditures of Federal Awards 67 Notes to Schedule of Expenditures of Federal Awards 69 Independent Auditors'Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of Basic Financial Statements Performed in Accordance with Governmental Auditing Standards 70 Independent Auditors'Report on Compliance with Requirements Applicable to Each Major Program and Internal Control over Compliance in Accordance with OMB Circular A-133 71 Schedule of Findings and Questioned Costs 73 Independent Auditors'Report The Honorable Mayor and Members of the City Council City of Omaha,Nebraska: We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Omaha, Nebraska (the City) as of and for the year ended December 31, 2002, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the management of the City. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of Metropolitan Entertainment and Convention Authority(MECA), which represents 100%of the total assets and revenues of the discretely presented component unit. Those fmancial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion on the basic financial statements, insofar as it relates to the amounts included for MECA, is based on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the report of other auditors provide a reasonable basis for our opinions. In our opinion, based on our audit and the report of other auditors,the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Omaha, Nebraska as of December 31, 2002 and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended, in conformity with accounting principles generally accepted in the United States of America. As described in note 1, the City adopted on January 1, 2002 the provisions of Governmental Accounting Standards Board(GASB) Statements No. 34,Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments; GASB No. 37, Basic Financial Statements—Management's Discussion and Analysis —For State and Local Governments: Omnibus, GASB No. 38, Certain Financial Statement Note Disclosures, and GASB Interpretation No. 6, Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial Statements. CITY OF OMAHA,NEBRASKA In accordance with Government Auditing Standards, we have also issued a report dated May 2, 2003 on our consideration of the City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Management's discussion and analysis on pages 3 through 13, the Budgetary Comparison Information on page 67 and the Schedules of Funding Progress on pages 54 and 57 are not a required part of the basic financial statements, but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. KPMG, LLP Omaha,Nebraska May 2,2003 ii CITY OF OMAHA,NEBRASKA Management's Discussion and Analysis Year ended December 31,2002 (Unaudited) The discussion and analysis of the City of Omaha's (the City) financial performance provides an overall review of the City's financial activities for the fiscal year ended December 31, 2002. The intent of this discussion and analysis is to look at the City's financial performance as a whole. Readers should also review the basic financial statements to enhance their understanding of the City's financial performance. Financial Highlights for Fiscal Year 2002 • The assets of the City of Omaha, on a government-wide basis excluding component units, exceeded its liabilities at the close of fiscal year 2002 by $561,911,103 (net assets). Of this amount, $78,970,218 (unrestricted net assets) may be used to meet the government's ongoing obligations to citizens and creditors. • The City's total net assets increased by$10,465,397 from the prior year. Of this amount$4,708,554 or 45%, was an increase in governmental activities and $5,756,843, or 55%, related to business-type activities. • As of December 31, 2002, the City's governmental funds reported combined ending fund balances of$185,431,810, a decrease of$56,575,641 in comparison with the prior year. Approximately 18% or $34,195,298 is unreserved. • The General Fund,on a budget basis,reported a year-end fund balance of$1,333. • At the end of the current fiscal year, undesignated fund balance for the general fund was $29,233,927,or 12.4%of general fund expenditures. • The City's total bonded debt increased by$183,868,211 (39%) during the current fiscal year. Three issuances 1) Riverfront Redevelopment $84,000,000, 2) Various Projects Redevelopment $10,500,000, 3) Convention Center Hotel$108,973,211 primarily account for the increase. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City of Omaha's basic financial statements. The City's basic financial statements comprise of three components. 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. The basic financial statements include two kinds of statements that present different views of the City: • The first two statements are government-wide statements that provide both long-term and short- term information about the City's overall financial status. • The remaining statements are fund financial statements that focus on individual parts of the City's Government,reporting the City's operations in more detail than the government-wide statements. - The governmental fund statements tell how general government services like public safety were financed in the short term as well as what amounts remain for future spending. - Proprietary fund statements offer short and long term financial information about the activities the government operates like business,such as the City's sewage treatment plants or golf courses. 1 CITY OF OMAHA,NEBRASKA Management's Discussion and Analysis Year ended December 31,2002 (Unaudited) Fiduciary fund statements provide information about financial relationships in which the City acts solely as a trustee or agent for the benefit of others,to whom the pertaining resources belong. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. In the past, the primary focus of local government financial statements has been summarized fund type information on a current financial resources basis. However, with the implementation of Statement No. 34 of the Governmental Accounting Standards Board(GASB Statement No. 34)for December 31,2002,the new focus is on both the City as a whole(government-wide) and the fund financial statements. Each view provides a different snapshot of the City's finances. The government-wide financial statements, which are new for fiscal year 2002, provide both long-term and short-term information about the City's overall status. The fund financial statements, which have been provided in the past, focus on the individual part of the City government, reporting the City's operations in more detail than the government-wide statements. Both perspectives (government-wide and fund) allow the user to address relevant questions, broaden the basis of comparisons (year to year or government to government) and enhance the City's accountability. Government-Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the City of Omaha finances,using accounting methods similar to those used by private-sector companies. The Statement of Net Assets and the Statement of Activities, which are the government-wide statements, include City's assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). In the Statement of Net Assets and the Statement of Activities,the City is divided into three categories: Governmental Activities — Most of the City's basic services are included here, such as the police, fire, public works, park and recreation and general administration departments. Taxes and intergovernmental revenues principally support these functions. Business-Type Activities — The City charges fees to customers to help it cover the costs of certain services it provides. The City's sewer system, air quality control enforcement, compost operation, marina, golf courses, tennis operation,parking facilities,printing services, city wide sports and hotel are included here. Component Units — The City includes one separate legal entity in its report— The Metropolitan Entertainment and Convention Authority. Although legally separate, this "component unit" is important because the City is financially accountable for them, and provides operating funds. The government-wide financial statements can be found on pages 14-15 of this report. Fund Financial Statements The format of the fund financial statements will be more familiar to traditional users of government financial statements. The fund financial statements provide more detailed information about the City's most significant funds —not the City as a whole. The City Charter, State law and bond covenants require some funds. The City Council 2 CITY OF OMAHA,NEBRASKA Management's Discussion and Analysis Year ended December 31,2002 (Unaudited) or Administration establishes other funds to control and manage money for particular purpose or to show that it is properly using certain taxes and grants. The City has three kinds of funds: Governmental Funds—Most of the City's basis services are included in governmental funds, which focus on(1) how cash and other financial assets that can readily be converted to cash flow in and out and (2) the balances remaining at year-end that are available for spending. Consequently, the governmental fund statements provide a detailed short-term view that helps the reader determine whether there are more or fewer financial resources that can be spent in the near future to finance the City's programs. Because this information does not encompass the additional long-term focus of the government-wide statements, additional information is provided on a subsequent page that explains the relationship(or differences)between the government-wide and fund statements. The basic governmental fund financial statements can be found on pages 15-17 of this report. Proprietary Funds — Services for which the City charges customers a fee are generally reported in propriety funds. Proprietary funds, like the government-wide statements, provide both short- and long-term financial information. The City maintains eleven enterprise funds, which are a type of proprietary fund. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its sewer system, air quality control enforcement, compost operation, marina, golf courses,tennis operation,parking facilities,printing services,city-wide sports and hotel. The basic proprietary fund financial statements can be found on pages 18-20 of this report. Fiduciary Funds — Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City' own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The fiduciary fund financial statements can be found on pages 21-22 of this report. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 23-63 of this report. Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City's 2002 budget information. Required supplementary information can be found beginning on page 63 of this report. City Government-Wide Financial Analysis This discussion and analysis requires focus on the current-year results in comparison with the prior year and the positive and negative aspects of this companion. Since 2002 is the first year to report government-wide activities on the accrual basis of accounting, a comparison to the prior year is not possible in all areas of analysis. In subsequent years'reports,the current year/prior year comparisons will be displayed to enhance the reader's understanding of the City's financial position and results of operations. 3 CITY OF OMAHA,NEBRASKA Management's Discussion and Analysis Year ended December 31,2002 (Unaudited) The following table reflects the condensed net assets: City of Omaha Summary of Net Assets December 31,2002 Business-type Total primary Governmental activities government activities Current and other assets $ 300,325,482 112,713,496 413,038,978 Capital assets 651,732,647 344,975,225 996,707,872 Total assets 952,058,129 457,688,721 1,409,746,850 Current and other liabilities 28,822,921 6,991,159 35,814,080 Long-term liabilities 645,899,456 166,122,211 812,021,667 Total liabilities 674,722,377 173,113,370 847,835,747 Net assets: Invested in capital assets net of 92,346,272 274,988,337 367,334,609 related debt Restricted net assets 113,388,856 2,217,420 115,606,276 Unrestricted net assets 71,600,624 7,369,594 78,970,218 Total net assets 277,335,752 284,575,351 561,911,103 Total liabilities and net assets $ 952,058,129 457,688,721 1,409,746,850 Net assets (assets over liabilities) may serve over time as a useful indicator of a government's financial position. In the case of the City of Omaha, assets exceeded liabilities by$561,911,103 at the close of fiscal year 2002. Half of the City's net assets(50%)reflects its investment in capital assets(e.g.,land,buildings, improvements, sewer plants, infrastructure, and machinery and equipment), less accumulated depreciation and less any related debt used to acquire those assets. The City uses these capital assets to provide services to citizens;and consequently,these assets are not available for future spending. The resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Approximately, 21% or $116 million of the City's net assets represents resources that are subject to external restrictions on their use. The remaining balance of unrestricted net assets, 14% or $78.9 million may be used to meet the government's ongoing obligations to citizens and creditors. At December 31, 2002, the City is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. Governmental Activities Governmental activities increased the City's net assets by$4,708,554 accounting for 45% of the total growth in the net assets of the City of Omaha. Key elements of this increase are as follows: 4 CITY OF OMAHA,NEBRASKA Management's Discussion and Analysis Year ended December 31,2002 (Unaudited) • A capital donation in the amount of$15 million for construction of the Convention Center was received in fiscal year 2002. • The City amortizes its long-term debt at a faster rate than the expected depreciated life of its assets. • A capital contribution by the City in the amount of$10,009,943 to the Riverfront Business Park decreased net assets in 2002. Business-Type Activities Business-type activities increased the City's net assets by approximately$5,757,000,accounting for 25%of the total growth in the government's net assets. Key elements of this increase are as follows: • The Sewer Revenue Fund's operating income of$2.3 million accounts for a significant portion of this increase. Reducing operating expenses from $32.2 million in 2001 to $31.9 million in 2002 help maintain this funds profitable position. • Capital Contributions were an increased revenue source for the Sewer Revenue Fund as the result of annexation activity during the year. The City acquires the Sanitary Improvement Districts' assets when annexed. 5 CITY OF OMAHA,NEBRASKA Management's Discussion and Analysis Year ended December 31,2002 (Unaudited) The following table shows the revenue and expense of the governmental and business-type activities: City of Omaha Activities and Changes in Net assets Year ended December 31,2002 Governmental Business-type Total primary activities activities government Revenues: Program revenues: Charges for services $ 27,486,698 42,432,562 69,919,260 Operating grants and contributions 29,611,443 --- 29,611,443 Capital grants and contributions 16,420,854 4,255,516 20,676,370 General revenues: Property taxes 91,185,751 --- 91,185,751 Other taxes 139,894,946 --- 139,894,946 Unrestricted investment earnings 12,903,968 286,835 13,190,803 Other 48,211,388 --- 48,211,388 Unrestricted grants and contributions 4,954,510 --- 4,954,510 Total revenues 370,669,558 46,974,913 417,644,471 Expenses: General government 50,494,231 --- 50,494,231 Public safety 147,197,336 --- 147,197,336 Transportation services 39,992,416 --- 39,992,416 Other public services 17,698,906 --- 17,698,906 Community development 39,943,953 --- 39,943,953 Culture and parks 37,934,237 --- 37,934,237 Interest on long-term debt 31,066,113 --- 31,066,113 Convention Center Hotel --- 213,866 213,866 Sewage treatment --- 32,450,304 32,450,304 Other --- 10,187,712 10,187,712 Total expenses 364,327,192 42,851,882 407,179,074 Increase in net assets before transfers 6,342,366 4,123,031 10,465,397 Transfers (1,633,812) 1,633,812 --- Increase in net assets 4,708,554 5,756,843 10,465,397 Net assets at December 31,2001 272,627,198 278,818,508 551,445,706 Net assets at December 31,2002 $ 277,335,752 284,575,351 561,911,103 6 CITY OF OMAHA,NEBRASKA Management's Discussion and Analysis Year ended December 31,2002 (Unaudited) Financial Analysis of the Government Funds As noted earlier, the City of Omaha uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental Funds The focus of the Omaha's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year, except where prohibited by Charter. For the fiscal year ended December 31, 2002, the governmental funds reported combined ending fund balances of $185.4 million, a decrease of $56.6 million in comparison with the prior year. Approximately $34.2 million of the combined fund balances constitutes unreserved fund balance, which generally is available for spending at the City's discretion. The remainder of fund balance is reserved to indicate that it is not available for new spending because it has already been committed to: • liquidate contracts and purchase orders of the prior period($35,850,645) • pay debt service($26,031,579) • provide income for the purpose of maintaining the City's coin collection and a variety of other restricted purposes($6,432,105) • Fund capital projects($78,543,331) The total of$34.2 million of unreserved fund balance at December 31, 2002, not designated for a specific purpose, includes$25.2 million unreserved in the General Fund,the City's chief operating fund. This amount represents 12% of total General Fund expenditures, as a measure of the General Fund's liquidity. Total fund balance of the General Fund increased by$9.8 million for fiscal year 2002. A key factor that contributed to this increase was a reduction in workmen's compensation claims recognized in 2002. For budgeting purposes only the 2001 and 2002 budget surpluses of$2,223,541 and$1,333 are available for appropriation for governmental use. Proprietary Funds The City's proprietary funds provide the same type of information found in the Government-wide financial statements,but in more detail. Net assets of the Convention Center Hotel, Sewer Revenue Fund and other enterprise funds amounted to($213,866), $279,058,965 and$5,730,252,respectively, at December 31, 2002. The Convention Center Hotel is currently under construction with an opening date of April 2004. Additional discussion concerning the finances of these funds has already been addressed in the discussion of the City's business-type activities. 7 • CITY OF OMAHA,NEBRASKA Management's Discussion and Analysis Year ended December 31,2002 (Unaudited) General Fund Budgetary Highlights General Fund December 31,2002 Original Amended budget budget Actual Revenues: Taxes $ 118.6 118.6 123.2 Intergovernmental 8.9 8.9 8.2 Other 91.6 91.6 81.7 Total 219.1 219.1 213.1 Expenditures and transfers: Expenditures and transfers 223.0 223.0 216.8 Total 223.0 223.0 216.8 * * Changes in Fund Balance $ (3.9) (3.9) (3.7) * equates to the carry forward from 2000 Differences between the original budget and the final amended budget were relatively minor. Total appropriation did not change. The appropriation transfers can be briefly summarized as follows: • $(142,901)in decreases allocated to the contingency account. • $94,509 in increases allocated to vehicle maintenance. • $48,392 in increases allocated to the planning depaittuent. Significant variances between actual General Fund revenues and expenditures and the final amended budget are summarized as follows: • Sales Tax Revenue was$3.6 million below budget. • The Reserve for Variance in Revenue Estimates of$1.5 million was not realized. • The Mayor's Office, City Council, City Clerk, Law, Personnel, Human Relations, Finance, Planning, Parks, Recreation and Public Property, Public Works, Library, Outside Agency and Contingency accounts collectively were S7.9 million over budget. • The Fire Department was $2.4 million over budget due principally to wage settlements and call back requirements prior to adoption of the current labor agreement. • Administrative Services and Retiree Benefits are $1.1 million and $1.5 million respectively over budget. 8 CITY OF OMAHA,NEBRASKA Management's Discussion and Analysis Year ended December 31,2002 (Unaudited) • The Contingency Account's appropriation of $1.5 million from the Reserve for Variation in Revenue Estimates lapsed at year-end. • The Debt Service account is $2.9 million under budget. All 2002 debt service expenditures were paid from the Debt Service Fund. Capital Asset and Debt Administration Capital Assets The City of Omaha's investment in capital assets for its governmental and business-type activities as of December 31, 2002 is $1 billion(net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements, machinery and equipment, streets, bridges, storm sewers, sanitary sewers, event facilities and wastewater treatment plants. Major capital asset events during 2002 included the following: • , Construction continued on the Convention Center/Arena; current year expenditures were $99,960,110; • Construction continued on the Riverfront Business Park; current year expenditures were $13,224,751. • Construction continued on Omaha Park Eight;current year expenditures were$5,353,134. • Construction continued on the City's sewer system with capital outlays of$26,228,194. • Construction continued on the Convention Center Hotel; current year expenditures were $15,986,232. • Construction was completed on expansion and improvements at Rosenblatt Stadium; current year expenditures were$3,821,487. • Construction in progress citywide totaled$239,311,478. Additional information on the City's capital assets can be found in note 12 of the notes to the financial statements on pages 58-60 of this report. Long-Term Debt At December 31, 2002, the City of Omaha had total bonded debt outstanding of$721.1 million (including notes payable). Of this amount $435.8 million is general obligation debt backed by the full faith and credit of the City; $110.8 million of revenue bonds secured solely by specified revenue sources; $84 million of special obligation bonds backed by a variety of revenue sources including sales tax and property tax; $22.1 million of special tax revenue bonds backed by a redevelopment property tax levy; $61.4 million of lease purchase bonds backed by annual General Fund appropriations; $7 million of notes payable backed by a variety of revenue sources. 9 CITY OF OMAHA,NEBRASKA Management's Discussion and Analysis Year ended December 31,2002 (Unaudited) City of Omaha's Obligated Debt General Obligation,Revenue,Special Obligation,Lease Purchase,Special Tax Revenue Bonds and Notes Payable for Fiscal Year ended December 31,2002(in millions) Governmental Business-type activities activities Total 2001 2002 2001 2002 2001 2002 General obligation bonds $ 449.2 435.8 --- --- 449.2 435.8 Revenue Bonds --- --- 5.7 110.8 5.7 110.8 Special obligation bonds 61.8 --- 22.2 --- 84.0 Special tax revenue bonds 13.8 22.1 --- --- 13.8 22.1 Lease purchase bonds 37.2 35.7 26.7 25.7 63.9 61.4 Notes payable 1.5 2.3 2.8 4.7 4.3 7.0 Total $ 501.7 557.7 35.2 163.4 536.9 721.1 During 2002,the City's total debt increased by$184.2 million(37%). Three issuances 1)Riverfront Redevelopment $84,000,000 2) Various Projects Redevelopment $10,500,000 and 3) Convention Center Hotel $108,973,211 primarily account for the increase. The City maintains a AAA rating from Standard& Poor's Corporation and a Aaa rating from Moody's Investment Service on general obligation bonds. The Special Obligation Bonds/Riverfront Redevelopment were rated AA by Standard & Poor's Corporation and Aa2 by Moody's Investment Service. The Omaha Convention Hotel Bonds were rated AAA rating from Standard&Poor's Corporation and a Aaa rating from Moody's Investment Service. Under the City's Home Rule Charter, the total amount of general obligation indebtedness outstanding at any time shall not exceed 3.5% of the actual value of taxable real and personal property in the City. The debt margin as of December 31,2002 is$232,234,928. Additional information on the City's long-term debt can be found in Note 9 of the notes to the financial statements on pages 46-51 of this report. Economic Factors And Next Year's Budgets And Rates • The increase in the City's property tax base provided by real growth is estimated at 0.3%for 2003. Total growth,including revaluations of current property,is estimated at 2.3%. • Sales tax collections have increased by 1.1% and 1.6%, respectively, over each of the past two years, with current collections through July 2003 also showing an increase over the same period in 2002 of 2.6%. The sales tax base has been expanded by the Nebraska Legislature to include certain additional services. Sales tax collection growth has been negatively impacted by slowing economic growth and record high rate of refunds which are part of the business incentives provided by State law. • Current overall General Fund revenue growth is projected to slow to less than 2.0%. All of these factors were considered in preparing the City's budget for the 2003 fiscal year. 10 CITY OF OMAHA,NEBRASKA Management's Discussion and Analysis Year ended December 31,2002 (Unaudited) During 2002, unreserved fund balance in the general fund increased to $26,164,268.• The City of Omaha appropriated $2,223,541 of this amount for spending in the 2003 fiscal year budget. This amount represents the 2001 Budget Balance Carried Forward. The City Charter allows that the General Fund budget balance as of the close of any particular fiscal year shall be applied as General Fund revenue in the budget for the fiscal year two years subsequent to that fiscal year. Requests For Information This financial report is designed to provide citizens, taxpayers, customers, investors and creditors with a general overview of the City's finances and to demonstrate the City's accountability for the funds it receives. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of Omaha,Finance Department, Suite 1004, 1819 Farnam Street,Omaha,NE 68183. 11 CITY OF OMAHA,NEBRASKA Statement of Net Assets December 31,2002 Component Primary government unit Governmental Business-type Assets activities activities Total MECA Cash and pooled investments $ 53,172,638 17,138,872 70,311,510 840,550 Investments 4,953,010 3,189,505 8,142,515 --- Assets held for resale 6,343,045 --- 6,343,045 --- Receivables(net of allowance for 100,294,054 3,139,308 103,433,362 111,033 uncollectibles) Internal balances 6,742,591 (6,742,591) --- --- Due from other governments 34,730,440 --- 34,730,440 --- Accrued interest 2,017,697 172,973 2,190,670 --- Inventories 1,128,824 953,559 2,082,383 --- Deferred charges and other assets 1,146,569 7,578,550 8,725,119 27,532 Restricted assets: Cash and cash equivalents --- 945,000 945,000 --- Accounts receivable 436,667 --- 436,667 --- Deposits with trustee 89,359,947 86,338,320 175,698,267 --- Capital assets: Nondepreciable 295,239,710 69,459,699 364,699,409 --- Depreciable 356,492,937 275,515,526 632,008,463 142,871 Total assets $ 952,058,129 457,688,721 1,409,746,85 1,121,986 Liabilities and Net Assets Liabilities: Accounts payable $ 21,052,960 3,276,881 24,329,841 99,339 Retainage payable 353,466 1,716,254 2,069,720 --- Accrued interest payable 5,188,281 1,998,024 7,186,305 --- Due to other governments 515,681 --- 515,681 --- Unearned revenue 1,673,301 --- 1,673,301 115,567 Matured bonds payable 39,232 --- 39,232 --- Deposits --- --- --- 50,000 Long-term liabilities Net pension obligation 2,331,306 --- 2,331,306 --- Compensated absences: Due within one year 1,562,163 117,195 1,679,358 --- Due in more than one year 29,681,102 1,866,827 31,547,929 --- Grant commitments: Due within one year 9,330,000 --- 9,330,000 --- Due in more than one year 19,370,000 --- 19,370,000 --- Claims and judgments: Due within one year 1,812,486 --- 1,812,486 --- Workers'compensation: Due within one year 9,574,725 661,176 10,235,901 --- Due in more than one year 12,851,299 887,436 13,738,735 --- Bonds,notes,and leases payable Due within one year 25,418,445 3,250,631 28,669,076 --- Due in more than one year 533,967,930 159,338,946 693,306,876 --- Total liabilities 674,722,377 173,113,370 847,835,747 264,906 Net assets: Invested in capital assets,net of related debt 92,346,272 274,988,337 367,334,609 142,871 Restricted for: Highway and streets 3,250,028 --- 3,250,028 --- Capital projects 78,543,331 1,272,420 79,815,751 --- Debt service 26,031,579 945,000 26,976,579 --- Perpetual care 5,563,918 --- 5,563,918 --- Other purposes --- --- --- 2,500 Unrestricted 71,600,624 7,369,594 78,970,218 711,709 Total net assets 277,335,752 284,575,351 561,911,103 857,080 Total liabilities and net assets $ 952,058,129 457,688,721 1,409,746,850 1,121,986 See accompanying notes to financial statements. 12 . 11111111 C co 0 Q 1 1 1 1 1 1 1 1 , i i . i . i , i i i i i i i i i i i co V V71^O o C.) M M C. t� d c W v. 72,a 000 E = 2 0 U h d R .-. .-. .. _ .-. I _ N ^ O e"` _ v) r f� N O O _� V1 ^ (� M o0 ` M -. a\ N_ 7 t� 1� 'O N N d' V O I v'� O,, 00 v1 0o C 7 O i O, O,O O C 400 M O1 100O O10 M 7 07 0 r O10 Vl ulO ^C) N w M M h 1O V1 O N V1 ^ 00 ^ r O1 0\0 M 0 O ^ C M M V1 V) N O7 r- 7 7 M M 0 O r V1 V1 ^ R N r r Vl V1 7 00 rl D\ M Q\ 7 N 01 N 00 r C1 10 M +l M 10 7 10 M t` M M 01 •0 O ^ c) t` GN O (....1 O r h O N aw b N 10 10 7 7 4♦ F V1 O DD ON N O O vl0 v �7.+�^../'C 00 C�00 M 7 \)00 r) t`O^ C 7 M M M 01 00 Q\ N M N ^ V1 V) .0 v u 9 C R G a) E _ __ _ _ C E i i i . i ,0 N N 7 ^� _.^O O1 i i i . i i i i i i i N -N• tcr` M CO ^ d L . = l0 00 O 10 M 7 O 7 0M0 CO 0000 rn I > Q O da i 00 M I"- 01,,00 'M C, >0 Vr M O 'C 00 V1 yC„ > C d•� M M C1 10 7 N C\ M 00 M N V) N O •y ate' > N p N VD D; N v O^ oo N 'C O, N 00 ul 0) 0 tJ '- 10 v M .-. - V)0000 i, C L CO CI N N 0) el K E a 1. a a _ Z ^ N N N_ o O V1 V1 ^ N 00 ^ 7 00 N Ca '-' N 00 N M M-' r- ' a . V1 0, 00 Vl 00 7 7 10 - VI Vl C1 $ll srr. C d 10 V1 .--' O N ul --� _ _ r b O 10 N v' O ^ N O:00 r 00^ r y .� V1 N N O1 r V cj M M O M `J co N V1 N r r Vl V1 7 16 00 00 00 r O1 b V1 Vl co co M V1 O M O N M E z so M t- M M C.,10 O O V1 01 O N O1 10 N 10 10 0,M V1 r,0,, - C > M r'{ w. O N O 00 00 'V _ -• 00 C1 00 M 7 ^ 'V 00 ^ N V1 7 N 0- L O W -, N .t`- M 01 01 > CC vvv 01 01 N M ^ ^^- 01 r r N N N O v.N,,. .Ni Vv V1 © 0000^ 00., v W 'j M U R 'i 10 10 7 co Z a) O O0 U 10 C) Q x O 0) h .--i 0 G a = w ,,,C G 0 ' M ' - M , CA 0 G I O i i 7 $ i 7 1 1 1 1 1 1 1 1 7 7 O a) -0 CU> C_ C •C V1 C, 7 T N ea CZ G L CO ^ M 7 O O v, E L i a - Ti-,, co- 'C C CC Cc 'L 00 -• 0 1 - 0 CO aa)) - d L Cla g N N N N U 6 O " aci . H P. > H of 0 7 Vl 7 Q1 10 00 O V1 M 00 10 O O 01 O Cl.) C en CV O M C1 01 7 $ 01 i N,C, M 00 V1 O 10 N ‘..0 . 0) C 01 cI . •C M N 00 N 00 b 10 V1 M N O N 10 Vl N N - a0... 8 W 0 y0 L .J N V1 rl 7 00 10 00 00 10 M 00 O r)0, a) O N tO > M 7 ^' 10 00 00 N - V1 7 t- r1 T x C .^C.. >> '"" L M Vl 00 V N 7 N 7 N N. 01 t- -• M 01 .5 ..'G N O _ U V0, V100 1O7 N 7 ri N o v1 w N 0•C CO E H Uw N M co K d C 0 E CC .0 O N C .C. .CX 3 t>. .�. O C > y 0- 0 C C w O V 0 E E � C O G .0,. _ C .C+ N W W Cd E O 0— 0 M M 10 O V1 M M C, 10 O V1 N N N co o) 1D - N 0o > >' > •G rn C 0 y Oj 0) > 'C I I h N M 7 C c'N ^ ^ 00 M V1 V1 01 O V) 7 00 r O t. ` C CO O N 0p C 00 O - 00 Y 7 N N 00 M 7 `O r M O Vl D, N 00 N N N M Ci N 0d 0 .0 ° C a) C , yNO., N" - y y C, O1 a, a1 7 M 10 N — 0) - 0o C) 7 M 7 O N 10 A 0 0 0 o � O 0c a>) 0 a) C w `� •vi 7 — p1 10 0,C1 O el N 7 M 7 OC 00 V1 V) V) ^ 00 CO R3 N rde orelrolr -• 7 N MM r- a) a. '4cncoa. t] UCK ..I � '� 0 0 C k] V> 7 M M M M 10 M C> y 0) 6) ,flH ZZ CO a) 0 E C E � ' E c 5 E 'O <,. O a) G=. O 0. �i ',� 'O > p vi C O O c Y C C .5 E C t, 0 C E V 0 3 00 Oq C {._ E C OA Ca 7 0 ca O �,.�, 0.. a_ « >> o2 o f b 'a-) a .- E ? o N > oo..) E , 5.. •u ao..G o c a G. 00 E c . 5 _ E _ " - 0 c 3 -a c 0 CO 0 . E c F- c E > C7ocHOuu E EU nO Chi QU0 g < 0 EEc� m aU u 7M. U a) L.T. `n CITY OF OMAHA,NEBRASKA Balance Sheet Governmental Funds December 31,2002 Gallup Convention Debt Other Total Construction Center Service governmental governmental Assets General Fund Fund Fund funds funds Cash and cash equivalents 3,842,382 17,443,767 230,643 18,825,746 12,830,100 53,172,638 Investments --- --- --- 489,530 4,463,480 4,953,010 Assets held for resale --- 6,343,045 --- --- --- 6,343,045 Receivables,net of allowance for 53,672,441 --- --- 34,899,628 11,721,985 100,294,054 uncollectibles Due from other funds 6,742,591 --- --- --- 51,432 6,794,023 Due from other governments 21,392,251 --- --- --- 13,338,189 34,730,440 Accrued interest 1,940,835 --- --- --- 76,862 2,017,697 Inventories 1,128,824 --- --- --- --- 1,128,824 Other assets 23,267 --- --- --- --- 23,267 Restricted assets: Receivables --- --- 436,667 436,667 Deposits with trustee --- --- 87,450,406 293,644 1,615,897 89,359,947 Total assets 88,742,591 23,786,812 87,681,049 54,508,548 44,534,612 299,253,612 I Liabilities and Fund Balances Liabilities: Accounts payable 12,276,383 590,976 458,600 1,321,099 6,405,902 21,052,960 Construction deposits --- --- --- --- 353,466 353,466 Due to other funds 51,432 --- --- --- --- 51,432 Due to other governments 515,681 --- --- --- --- 515,681 Deferred revenue 46,665,168 --- --- 34,779,487 10,364,376 91,809,031 I Matured bonds and interest payable --- --- --- 28,231 11,001 39,232 Total liabilities 59,508,664 590,976 458,600 36,128,817 17,134,745 113,821,802 Fund balances: Reserved for: Encumbrances 2,865,736 7,750,436 7,654,928 78 17,579,467 35,850,645 Inventories 1,128,824 --- --- --- --- 1,128,824 Highways and streets --- --- --- --- 3,250,028 3,250,028 Capital projects --- --- 79,567,521 --- (1,024,190) 78,543,331 Debt service --- --- --- 18,379,653 7,651,926 26,031,579 Perpetual care: Expendable --- --- --- --- (82,010) (82,010) Nonexpendable --- --- --- --- 5,645,928 5,645,928 Other --- --- --- --- 868,187 868,187 Unreserved,reported in: I General Fund 25,239,367 --- --- --- --- 25,239,367 Special Revenue Funds --- --- --- --- 6,630,044 6,630,044 Capital Projects Funds --- 15,445,400 --- --- (14,690,686) 754,714 Permanent Funds --- --- --- --- 1,571,173 1,571,173 Total fund balances 29,233,927 23,195,836 87,222,449 18,379,731 27,399,867 185,431,810 Total liabilities and fund balances 88,742,591 23,786,812 87,681,049 54,508,548 44,534,612 299,253,612 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and,therefore,are not reported in the funds 651,732,647 Other long-term assets are not available to pay for current-period expenditures and,therefore,are deferred in the funds 1,437,553 Revenues earned during the current period are not available as resources and,therefore,are recognized as deferred revenue in the funds 90,135,730 Long-term liabilities,including bonds payable,are not due and payable in the current period and, therefore,are not reported in the funds (651,401,988) Net assets of governmental activities 277,335,752 See accompanying notes to financial statements. 14 O I-- r N O — M 00 Vl M N 01 O I- M Vl 10 'O N N. 'O CO 10 7 7 00 0 O ' O 3 O 00 ^ V1 7 0, 000 •-• N N O 01 7 7 N O •— Vl O V1 Q\ 0 r CT I-- Vl V1 — c : VOCv'. o;Oc`. ^ I- ^ 1Qri 7 I- tnrornco ^ rnlnoo ,n o °N°r° Moo v Iv o0 E 0'et ckx O V1 N VD r M V M M O 7 V- N ifl M 0 00 V•-. 00 Ir t` O V1 7 N N 0 en 0 'O t` Q\ V1 M 7 O 10 V1 h M -• 0. '0 00 O 01 N V1 N NO ao I M N N '- O M O C C 'V vi On0N1O Na, N ^ 71- tV'^ CCaDr?C1 OriN N 5 O� I� CO 7O7 [.n L F 01 00 01 00 M 00\O N 'O 01 O 7 M 7 N 01 N 10 00 O V1 7 M ^ 7 N Vl d I` 01 N 'O ^ N N '0 M 7 M -- M M N N 7 01 O v r- r- 10 7 00 > M -• 7 , N ^ b00 10 ' O N ' V1 1O N V1 M en N N N 7 Co CO O 7 7 I-- O '�1 ^ I- I O . . . . '0 O Vl 0o O N N M 7 0o M M Co•--- O N O I-- '0 C I- 'O ^ I- N 7 -. ‘o c N 7 M I- -• 00 -- O M N U oo I^00 N 0 Vl r- 7 N 0 01 0 7 00 7 7 00 L Y x O ul•--' M M V1 7 N 00 en-• Co V) N - M 00 00 N Vl M - ^- Co aJ E 0 N M 10 'O 00 Vl 7 N 0 CO 00 M O O I- '0 N N V1 Co M N N M 01 .02 .0 r co O O N Vl 7 -• 00 0^ 01 V1 Co Vo OO M 00 N M 7, O M 01 01 r M M O L O Nl 1O O M o0 10 I� l0 N 00 N N v1 V1 7 ^Co O en N �"' -. 10 -- 00 M N M N M N v 7 N O b0 7 1 1 1 1 00 O O N N O 1O 00 N ^ CO ^ i en i i Co en V'1 i . i i • O i 10 - i i i i ' en V ,� V1 N v1 I n 0� O -- O rn ,0 r 0 O 10 D; 7 ^ I0 l M 10en 7 Co A aJ w 10 V1 kn. 10 -N- N 1O N 10 VM'1 01 r1 V1 1O O N .- en N Vi CO M 7 N N 7 �N ^ ti a> U ^d� 0 00 O 00 00 M ^ M M N Co fC O i i i i i v1 i i 1041 i i i i i 7 ^ i i i s 1 v1 0 7 o L 1O O 10 ' Vl V1 -. 7ni^7 C y 7 ,b c O O O V1 7 0 01 01 - N 0 i O = M O M M 01 01 V1 V1 Co N 0 a C w W O Co Co 0 00 ^N- 00 U rn o, 00 00 N N ON 0o . . • i i i 1 i . 1 i i N N 1 , i , N i i : 7 I- ^1O WW 7 . co . co O M U � L 'O'0 r t` 7 0 o 01 N V) i_ ❑ M c u _ W . C N N '0 '0 N Co 0000 CO0 O Co- y w h F. �.i rrR h W .- .- M a7 M M 00 M -0 V C N Vl Vl 7 N Q E o O -N O N I- N_ O 10 1 I- ' 7 ' V1 7 M_ 7 N_ 7 M N Co7 O V) V1 N N a) > b C CO 00 V1 00 01 M i N 1 V1 i 00 O N V1 00 00 00 M O 00 i O i 1 0 00 7 N k,i eq" sa.frro� = 00 sc,O 10 Vl 7 I-- M M V1 N 00 0: O O N 10 M 00 7 7 00 0 0 00 O 0, 0 (1 V L ' N 01 10 Vl O Co Vl Co NO O Co ON Co Co C OM N 01 '0 V1 0 0 V1 N M 3"' C N V'^01 O N 00 N N O V1 ^ V M Q1 -• O V'1 00 O O O 1� 7 N N y V C 00 01 00 M V V V - CoN<7•1 N— V N ^ M Co O 0 Co N 1. �+ �, fJ ^ N U 0 a) w 0 0 a> C/p G 0 a o c > $ E o a.) v ;a ct I N ut al 0 00 D > C G 2 T 0 U G p W U 0 y v ..0. M y — N a G G C T V) ccl ° E VOi O Y o o o O G O o 'c E cya>i a av t o s 0 •0 00 +mac- Y G Y 'o > �` y•o T s C Q. G 0 0 �L E 7y cod o°n cw�y VI A•E ci :° cOi 00 O.=° 0 c' 00 00 A a' O RS O x G O •o E oo E y h o c y a 0. = ` .- a ti o f W `� ca F. Z � U c Y i m a1 O aEi w O N 'O . (-0 C C p 0 cu E Y v G a'ri A O w w E'w c5a c2a a 0 O y 0 N > 0 7 4.• cd g .o _ u a) 0 F- ... 0 0 I.. 2 W C C U 0 o id E o o - 0 — c to E 5 - w.E 5 0 C7 a F- O D U 0 a 0 - L F o .0 -0 a c x a U W > a>i � p aGi E x U f� U s F• E-• n vD C C c > F a55u UcncXU w 0 wu. 0 w CITY OF OMAHA,NEBRASKA Reconciliation of the Statement of Revenues,Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities—Governmental Activities Year ended December 31,2002 Amounts reported for governmental activities in the statement of activities(page 17)are different because: Net change in fund balances—total governmental funds(page 17) $ (56,575,641) Governmental funds report capital outlays as expenditures. However,in the statement of activities,the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation expense in the current period. 122,659,847 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 8,794,334 The issuance of long-term debt(for example:bonds,leases)provides current financial resources to governmental funds,while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction,however,has any effect on net assets. Also,governmental funds report the effect of issuance costs,premiums,discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. (47,950,410) Some expenses reported in the statement of activities do not require the use of current financial resources and,therefore,are not reported as expenditures in the governmental funds. (22,219,576) Change in net assets of governmental activities(page 15) $ 4,708,554 See accompanying notes to financial statements. 16 CITY OF OMAHA,NEBRASKA Statement of Fund Net Assets- Proprietary Funds December 31,2002 Other Total Convention Sewer Revenue enterprise proprietary Assets Center Hotel Fund Funds funds Current Assets: --- Cash and cash equivalents $ --- 15,390,291 1,748,581 17,138,872 Investments --- 2,957,450 232,055 3,189,505 Accounts receivable(net of allowance for --- 2,991,520 147,788 3,139,308 uncollectibles 1 Due from other funds --- 219,432 --- 219,432 Accrued interest --- 170,070 2,903 172,973 Inventories --- 948,045 5,514 953,559 Total current assets --- 22,676,808 2,136,841 24,813,649 Noncurrent assets: Restricted assets: Cash and cash equivalents --- 945,000 --- 945,000 Deposits with trustee 86,296,558 --- 41,762 86,338,320 Bond issuance costs 7,288,564 --- --- 7,288,564 Other assets --- 289,986 --- 289,986 Total noncurrent assets 93,585,122 1,234,986 41,762 94,861,870 Capital assets: Land --- 1,306,857 917,785 2,224,642 Buildings and systems --- 418,922,532 35,694,544 454,617,076 Machinery and equipment --- 12,524,856 8,021,055 20,545,911 Construction in progress 15,608,314 44,907,426 6,719,317 67,235,057 15,608,314 477,661,671 51,352,701 544,622,686 Less accumulated depreciation --- 186,367,952 13,279,509 199,647,461 Capital assets,net 15,608,314 291,293,719 38,073,192 344,975,225 Total noncurrent assets 109,193,436 292,528,705 38,114,954 439,837,095 Total assets $ 109,193,436 315,205,513 40,251,795 464,650,744 Liabilities and Net Assets Current liabilities: Account payable $ --- 2,982,992 293,889 3,276,881 Current installments of long-term debt --- 2,105,631 1,145,000 3,250,631 Retainage payable --- 1,716,254 --- 1,716,254 Claims payable --- 478,878 182,298 661,176 Accrued interest payable 1,472,239 482,012 43,773 1,998,024 Due to other funds 14,046 305,248 6,642,729 6,962,023 Compensated absences --- 66,566 50,629 117,195 Total current liabilities 1,486,285 8,137,581 8,358,318 17,982,184 Noncurrent liabilities Long-term debt,excluding current installments 107,921,017 25,992,929 25,425,000 159,338,946 Claims payable --- 642,755 244,681 887,436 Compensated absences --- 1,373,283 493,544 1,866,827 Total noncurrent liabilities 107,921,017 28,008,967 26,163,225 162,093,209 Total liabilities 109,407,302 36,146,548 34,521,543 180,075,393 Net assets: Invested in capital assets,net of related debt --- 263,485,145 11,503,192 274,988,337 Restricted for capital projects 1,272,420 --- --- 1,272,420 Restricted for debt service --- 945,000 --- 945,000 Unrestricted (1,486,286) 14,628,820 (5,772,940) 7,369,594 Total net assets (213,866) 279,058,965 5,730,252 284,575,351 Total liabilities and net assets $ 109,193,436 315,205,513 40,251,795 464,650,744 See accompanying notes to financial statements 17 CITY OF OMAHA,NEBRASKA Statement of Revenues,Expenses,and Changes in Fund Net Assets— Proprietary Funds Year ended December 31,2002 Other Total Convention Sewer Revenue enterprise proprietary Assets Center Hotel Fund Funds funds Operating revenues: Charges for services $ --- 34,288,610 8,074,613 42,363,223 Other --- --- 69,339 69,339 Total operating revenues --- 34,288,610 8,143,952 42,432,562 Operating expenses: Personal services --- 10,294,792 3,883,329 14,178,121 Outside services --- 8,337,294 2,937,803 11,275,097 Operation and maintenance --- --- 187,013 187,013 Cost of sales and services --- 2,173,701 835,038 3,008,739 Administration --- --- 36,982 36,982 Depreciation and amortization 213,866 11,133,329 2,307,547 13,654,742 Total operating expenses 213,866 31,939,116 10,187,712 42,340,694 Operating income(loss) (213,866) 2,349,494 (2,043,760) 91,868 Nonoperating revenues(expenses): Investment earnings --- 230,090 56,745 286,835 Interest expense --- (464,130) (41,355) (505,485) Loss on sale of fixed assets --- --- (5,703) (5,703) Total nonoperating revenues --- (234,040) 9,687 (224,353) (expenses) Income(loss)before contributions (213,866) 2,115,454 (2,034,073) (132,485) and transfers Capital contributions --- 4,255,516 --- 4,255,516 Transfers in --- 1,180,562 503,250 1,683,812 Transfers out --- (50,000) --- (50,000) Change in net assets (213,866) 7,501,532 (1,530,823) 5,756,843 Net assets at beginning of year --- 271,557,433 7,261,075 278,818,508 Net assets at end of year $ (213,866) 279,058,965 5,730,252 284,575,351 See accompanying notes to financial statements. 18 CITY OF OMAHA,NEBRASKA Statement of Cash Flows— Proprietary Funds Year ended December 31,2002 Convention Sewer Other Total Center Revenue enterprise proprietary Hotel Fund Funds funds Cash flows from operating activities: Receipts from customers $ --- 34,944,028 8,109,546 43,053,574 Payments to suppliers 14,046 (6,082,915) 1,289,563 (4,779,306) Payments to employees --- (12,857,373) (4,027,585) (16,884,958) Payments of commodities --- (1,879,150) --- (1,879,150) Net cash provided by operating activities 14,046 14,124,590 5,371,524 19,510,160 Cash flows from noncapital financing activities: Transfers in/out --- 1,130,562 503,250 1,633,812 Cash flows from capital and related financing activities: Capital expenditures (15,822,180) (26,228,194) (5,803,118) (47,853,492) Payments on long-term debt --- (3,820,000) (1,080,000) (4,900,000) Issuance of long-term debt 109,393,256 22,412,722 --- 131,805,978 Payments on notes payable --- (565,710) --- (565,710) Issuance of notes payable --- 2,534,632 --- 2,534,632 Bond issue costs paid (7,288,564) --- --- (7,288,564) Interest paid --- (95,900) --- (95,900) Net cash provided by(used in)capital and related financing activities 86,282,512 (5,762,450) (6,883,118) 73,636,944 Cash flows from investing activities: Sale(purchase)of investment securities (86,296,558) 3,026,605 761,197 (82,508,756) Interest received --- 282,945 53,842 336,787 Net cash provided by(used in) investing activities (86,296,558) 3,309,550 815,039 (82,171,969) Net increase(decrease)in cash and cash equivalents --- 12,802,252 (193,305) 12,608,947 Cash and cash equivalents,beginning of year --- 3,533,039 1,941,886 5,474,925 Cash and cash equivalents,end of year --- 16,335,291 1,748,581 18,083,872 Reconciliation of operating income(loss)to net cash provided by(used in)operating activities: Operating income(loss) (213,866) 2,349,494 (2,043,760) 91,868 Adjustments to reconcile operating income to net cash used in operating activities: Depreciation and amortization 213,866 11,133,329 2,307,547 13,654,742 Loss on sale of capital assets --- --- 5,703 5,703 Cash flows impacted by changes in: Amounts due from customers and others --- 655,418 (34,406) 621,012 Inventories --- (50,053) (2,667) (52,720) Due from other funds --- (219,432) --- (219,432) Other assets --- (289,986) --- (289,986) Accounts payable --- (583,545) 79,022 (504,523) Retainage payable --- 975,778 --- 975,778 Claims payable --- (73,243) 513,781 440,538 Due to other funds 14,046 305,248 4,691,694 5,010,988 Accrued expenses --- (78,418) (145,390) (223,808) Net cash provided by operating activities $ 14,046 14,124,590 5,371,524 19,510,160 See accompanying notes to financial statements. 19 CITY OF OMAHA,NEBRASKA Statement of Fiduciary Net Assets— Fiduciary Funds December 31,2002 Pension Trust Funds Assets Agency Total Cash and cash equivalents $ 32,258 1,578,216 1,610,474 Receivables: Contributions --- 28,738 28,738 Accrued interest 2,820,720 36,188 2,856,908 Due from other funds 178,043 178,043 Investments, at fair value 528,993,172 635,740 529,628,912 Total assets $ 532,024,193 2,278,882 534,303,075 Liabilities Warrants payable $ 5,000 800 5,800 Accounts payable 652,206 296,580 948,786 Due to other funds 178,043 178,043 Deposits payable - 1,981,502 1,981,502 Total liabilities 835,249 2,278,882 3,114,131 Net Assets Net assets: Held in trust for pension benefits 531,188,944 --- 531,188,944 Total liabilities and net assets $ 532,024,193 2,278,882 534,303,075 See accompanying notes to financial statements. 20 • CITY OF OMAHA,NEBRASKA Statement of Changes in Fiduciary Net Assets— Pension Trust Funds Year ended December 31,2002 Additions: Contributions: Employer $ 18,975,904 Employee 12,406,121 Total contributions 31,382,025 Investment income(loss): Dividends and interest 15,735,508 Net depreciation in fair value of investments (60,336,779) Investment expenses (3,350,807) Net investment loss (47,952,078) Total deductions (16,570,053) Deductions: Benefit payments 37,462,412 Change in net assets (54,032,465) Net assets held in trust for pension benefits,beginning of year 585,221,409 Net assets held in trust for pension benefits, end of year $ 531,188,944 See accompanying notes to financial statements. 21 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 (1) Summary of Significant Accounting Policies (a) Reporting Entity The City of Omaha,Nebraska(the City) was incorporated on February 2, 1857. The City operates under a Home Rule Charter and has a mayor-council form of government with an elected full-time chief executive, the mayor, and an elected legislative body, the council, composed of seven members. The seven council members each represent one of the City's seven districts. The mayor and members of the council are elected through popular vote to four-year terms. The City is a political subdivision of the State of Nebraska and is exempt from state and Federal income taxes. The governmental reporting entity consists of the City (the primary government) and its component units. Component units are legally separate organizations for which the council is financially accountable or other organizations whose nature and significant relationship with the City are such that exclusion would cause the City's financial statements to be misleading or incomplete. Financial accountability is defined as the appointment of a voting majority of the component unit's board, and(i) either the City's ability to impose its will on the organization, or (ii) there is potential for the organization to provide financial benefit to or impose a financial burden on the City. The basic financial statements include both blended component units and the City's discretely presented component unit. The blended component units,although legally separate entities, are,in substance, part of the City's operations, and so data from these units are basic with data of the primary government. The City's basic financial statements blend the activity of the City of Omaha Parking Facilities Corporation, the City of Omaha Impound Facilities Corporation, the City of Omaha Stadium Facilities Corporation, and the City of Omaha Northwest Library Facilities Corporation. The City is financially accountable for these organizations. The discretely presented component unit, on the other hand, is reported in a separate column in the government- wide financial statements to emphasize it is legally separate from the government. The City's basic financial statements discretely present the financial position and activities of Metropolitan Entertainment and Convention Authority(MECA). MECA MECA is a separate nonprofit corporation and is responsible for the design, construction, and operation of the Omaha Convention Center/Arena. MECA began operations on August 25, 2000. Title to the facility and all related infrastructure assets are vested with the City. Construction activities are principally funded by private donations and general obligation bonds of the City. Board members of MECA are appointed by the City. During the year ended December 31, 2002, MECA changed its year end from December 31 to June 30. The financial statements for MECA included herein are for the six-month period ended June 30, 2002. MECA's separate financial statements are available at 1819 Farnam Street, Omaha,Nebraska 68183. Related Organizations The City's officials are responsible for appointing members of the boards of other organizations, but the City's accountability for these organizations does not extend beyond making the appointments. The mayor or City Council appoints board members of the Omaha Housing 22 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Authority, the Omaha Airport Authority, and the Metro Area Transit Authority. The City is not financially accountable for these organizations. (b) Basis of Presentation Implementation of Governmental Accounting Standards Board(GASB)Statements In June 1999 and in June 2001,the GASB issued Statement No. 34,Basic Financial Statements— and Management's Discussion and Analysis —for State and Local Governments, and GASB Statement No. 37, Basic Financial Statements—and Management's Discussion and Analysis— for State and Local Governments, Omnibus, respectively. These statements establish financial reporting requirements for state and local governments. GASB Interpretation No. 6, Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial Statements, was issued in March 2000. This interpretation clarifies the application of standards for modified accrual recognition of certain liabilities and expenditures, including compensated absences. In June 2001, the GASB issued Statement No. 38, Certain Financial Statement Note Disclosures. These standards were implemented on January 1, 2002. GASB No. 34 (as amended by GASB No. 37) represents a very significant change in the financial reporting model used by state and local governments. GASB No. 34 requires government-wide financial statements to be prepared using the accrual basis of accounting. Government-wide financial statements do not provide information by fund or account group,but distinguish between the City's governmental activities,business-type activities, and activities of its discretely presented component unit on the government-wide statement of net assets and statement of activities. Additionally, the City's statement of net assets includes capital assets and long-term liabilities of the City, which were previously recorded in the general fixed assets account group and the general long-term debt account group, respectively. In addition to the fixed assets previously recorded in the general fixed assets account group, the City retroactively capitalized infrastructure assets that were acquired beginning with fiscal year ended December 31, 1980. In addition,the government-wide statement of activities reflects depreciation expense on the City's capital assets, including infrastructure. In addition, the city eliminated all internal service funds as a result of adopting GASB No. 34. In addition to the government-wide financial statements, the City has prepared fund financial statements, which continue to use the modified accrual basis of accounting for the City's general fund, capital projects funds, debt service funds, other governmental funds, and agency funds, which is similar to that previously presented for these funds in the City's financial statements, although the format of financial statements has been modified by GASB No. 34. Additionally, the proprietary funds and fiduciary funds' financial statements continue to focus on the determination of net income and capital maintenance. GASB No. 34 also includes,as required supplementary information,management's discussion and analysis, which provides an analytical overview of the financial activities. In addition, a budgetary comparison schedule is presented that compares the original and final revised general fund budget with actual results and certain pension information is presented. GASB No. 38 requires certain disclosures to be made in the notes to the basic financial statements concurrent with the implementation of GASB No. 34. While this statement did not affect amounts reported in the financial statements of the City, certain note disclosures have been added and amended, including descriptions of activities of major funds, future debt service and lease obligations in five-year increments, short-term obligations, and interfund balances and transactions. 23 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 These statements had a significant effect on the City's financial reporting model. All statements were retroactively applied to January 1, 2002. Restatement of net assets within the government- wide financial statements is as follows: General Fund $ 19,475,957 Special Revenue Funds 25,546,045 Debt Service Fund 28,535,351 Capital Projects Fund 164,898,101 Internal Service Funds (85,590) Total fund equity,December 31,2001 238,369,864 Required GASB 34 adjustments: Capital assets,net of accumulated depreciation 534,211,231 Long-term and other liabilities (566,481,783) Revenue recognition 66,527,886 Total net assets,December 31,2001 $ 272,627,198 Government-Wide Financial Statements The statement of net assets and statement of activities display information about the primary government and its component unit. These statements include the financial activities of the overall government, except for fiduciary activities. Eliminations have been made to minimize interfund activities. These statements distinguish between the governmental and business-type activities of the City and between the City and its discretely presented component unit. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees charged to external parties. The statement of activities presents a comparison between direct expenses and program revenues for the business-type activities of the City and for each function of the City's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include (1) charges paid by the recipients of goods or services offered by the programs, and (2) grants and contributions that are restricted to meeting the operation or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements The fund financial statements provide information about the City's funds, including fiduciary funds. Separate statements for each fund category—governmental, proprietary, and fiduciary— are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental funds are separately aggregated and reported as nonmajor funds. Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as investment earnings,result from nonexchange transactions or ancillary activities. The City reports the following major governmental funds: 24 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31, 2002 • The General Fund is used to account for all revenues and expenditures necessary to carry out basic governmental activities of the City that are not accounted for through other funds. • The Gallup Construction Fund, a capital projects fund, is used to account for costs associated with the construction of Gallup Corporation's research, development, and support facilities. • The Convention Center Fund, a capital projects fund, is used to account for the expenditures necessary to purchase land and construct a multipurpose convention center and arena in the downtown area of Omaha. The funding consists of a bond issuance of $198,000,000 approved by voters in May 2000. • The Debt Service Fund is used to account for the resources for, and the payment of,general long-term debt principal,interest,and related costs. The City reports the following major enterprise funds: • The Convention Hotel Fund is used to account for costs associated with the construction of the Convention Center hotel. • The Sewer Revenue Fund accounts for activity from sewer service charges, construction grants, and related expenditures for operation, maintenance, and capital improvements of the sanitary sewerage system and wastewater treatment plants. The City reports the following additional fund types: • The Pension Trust Funds accumulate contributions from the City and its employees and earnings from the fund's investments. Disbursements are made from the funds for retirement. • The Agency Funds account for assets held by the City as an agent for various local governments. • The Permanent Funds are used to report resources that are legally restricted to the extent that earnings, and not principal, may be used for purposes that support the City's programs for the benefit of the City or its citizenry. • The Special Revenue Funds account for the proceeds from specific revenue sources that are restricted to expenditures for specified purposes. • The Capital Projects Funds account for all resources received and used for the acquisition or development of major capital improvements (other than those financed by proprietary funds and trust funds). • The Enterprise Funds account for operations that are financed and operated in a manner similar to private business enterprises: (a) where the intent of the governing body is that the costs of providing goods or services to the general public on a continuing basis is financed or recovered primarily through user charges; or(b)where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability,or other purposes. 25 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 (c) Basis of Accounting The government-wide, proprietary, and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the City gives (or receives) value without directly receiving (or giving) equal value in exchange, include property and sales taxes, grants, entitlements, and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenues from grants, entitlements, and donations are recognized in the fiscal year in which all eligible requirements have been met. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. Property and sales taxes, interest, and charges for services are accrued when their receipt occurs within 60 days after the end of the accounting period so as to be both measurable and available. Property and sales taxes, interest, certain state and federal grants, and charges for services are accrued when their receipt occurs within 60 days after the end of the accounting period so as to be both measurable and available. Expenditures are generally recorded when a liability is incurred except for debt service expenditures and other long-term liabilities, which are recorded only when due. General capital assets acquisitions are reported as expenditures in governmental funds. Proceeds and payments of long-term debt are reported as other financing sources and uses. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989 generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private- sector guidance for their business-type activities and their enterprise funds, subject to this same limitation.The City has elected not to follow subsequent private-sector guidance. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the enterprise funds are charges to customers for goods and services. Operating expenses include the cost of sales and service, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. The discretely presented component unit, MECA, an enterprise fund, is recorded on the accrual basis of accounting. (d) Encumbrances Encumbrance accounting is employed in the governmental funds.Under encumbrance accounting, purchase orders, contracts, and other commitments for the expenditures of funds are recorded in order to reserve that portion of the applicable appropriation. Encumbrances are reported as reservations of net assets since they do not constitute liability. Encumbrances are reported as expenditures on the budget-basis schedule. (e) Pooled Cash and Investments The City maintains a pooled cash and investment account for all funds. These funds are placed in the custody of the City Treasurer. Each fund reports its undistributed interest in the principal 26 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 balance of the pool. Interest earned on the City's pooled cash and investments are credited to the General Fund of the City, except for the Don Hayes Memorial Fund, Ralph Anderson Memorial Fund, Cash Reserve Fund, Debt Service Fund, Dodge Park Marina Fund, Municipal Dock Fund, Aksarben Bond Fund, and Sewer Revenue Fund, which are credited directly to the respective funds. Interest is imputed and transferred to Keno Reserve Fund,Keno Fund,Police Seized Assets Funds,Law Enforcement Block Grant Funds,and Western Heritage Fund. Cash and Cash Equivalents For purposes of the accompanying statement of cash flows, the City enterprise funds consider all highly liquid debt instruments with a maturity of three months or less when purchased to be cash equivalents. (g) Investments Investments are stated at fair value. Securities traded on a national or international exchange are valued at the last reported sales prices at current exchange rates. Income from investments not included in pooled cash and investments that are held by the individual funds is recorded in the respective funds as it is earned. (h) Inventories Inventories of materials and supplies are stated at the lower of cost or market using the first-in, first-out method. The costs of governmental fund inventories are recorded as expenditures when purchased. (i) Property Taxes Nebraska LB-1114 imposes a tax ceiling for general revenue purposes. The tax levy certified in any year shall not exceed $45 per $100 of actual valuation. The 2002 general tax levy ($.24312 per$100 of assessed valuation)was below the legal limit by$.20688 or$39,267,179. The Home Rule Charter of the City imposes a tax ceiling for general revenue purposes. The tax levy certified in any year shall not exceed $.6125 per $100 of actual valuation plus whatever tax levy is necessary to provide for principal and interest payments on the indebtedness of the City, for administrative expenses incurred in issuing and maintaining bonds, and for satisfaction of judgments and litigation expenses in connection therewith. The 2002 general tax levy($.24312 per $100 of assessed valuation) was below the legal limit by $.36938 or $70,110,743. The assessed value upon which the 2002 levy was based was$18,980,654,935. The tax levies for all political subdivisions in Douglas County are certified by the county board on or before October 15. Real estate taxes are due and become an enforceable lien on property on December 31. The first half of real estate taxes becomes delinquent on April 1 and the second half becomes delinquent on August 1 following the levy date. Personal property taxes are due on December 31 and become delinquent on April 1 and August 1 following the levy date.Delinquent taxes bear 14%interest. Motor vehicle taxes are due when an application is made for registration of a motor vehicle. (I) Unbilled Sewer Revenues 27 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Sanitary sewer charges are billed to customers by the Metropolitan Utilities District for the City. Unbilled revenues, representing estimated consumer usage for the period between the last billing date and the end of the period,are not recorded by the City. The City Council sets the rate schedule for the sewer charges. A revised rate structure was developed and approved in June 1990 establishing the sewer service charges for the period September 1990 through December 1994. In the absence of subsequent revisions, the 1994 rate structure has remained in effect. (k) Deferred Charges For government-wide financial statements and proprietary fund financial statements, charges resulting from the issuance of revenue and general obligation bonds are deferred and amortized over the remaining life of the bonds on a straight-line basis. (l) Capital Assets Within the government-wide and proprietary fund financial statements, capital assets, including infrastructure, are recorded at historical cost or at estimated historical cost if actual historical cost is not available. Contributed fixed assets are valued at their estimated fair market value on the date of donation. Capital assets include public domain infrastructure, including roads and bridges. The City defines capital assets as assets with individual cost of more than$5,000 and estimated useful life in excess of one year. Capital assets used in operations are depreciated or amortized using the straight-line method over the lesser of the capital lease period or their estimated useful lives in the government-wide and proprietary fund financial statements. The estimated useful lives are as follows: Buildings and systems 15 -40 years Improvements 15 -30 years Machinery and equipment 5 -20 years Infrastructure 15 -50 years Vehicles 5 - 15 years (m) Capitalized Interest Interest costs incurred on specific construction of proprietary plant and equipment is capitalized. The rate used in determining the capitalized interest amount is the effective rate during the year of the outstanding debt (3.5% in 2002). Interest costs of approximately $381,000 were capitalized during 2002. (n) Compensated Absences Employees earn annual vacation and sick leave at various specific rates during their period of employment. In the event of termination, an employee is reimbursed for accumulated vacation time up to a maximum allowed carryover of 280 hours for civilian bargaining and civilian management employees plus the current year's leave balance. A civilian bargaining employee is reimbursed for a percentage of accumulated sick leave up to a maximum of 2,500 hours (400 hours). A civilian management employee is reimbursed for a percentage of accumulated sick leave to a maximum of 2,500 hours (525 hours). Civilian and management employees have the option of accruing compensatory leave time at a rate of one and one-half times the actual hours worked in lieu of the payment of overtime. Employees may accrue a maximum of 120 hours of compensatory time. The compensatory time must be taken within three months after the end of the 28 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 calendar year in which it is earned, and any remaining amounts are paid out in cash. However, the employee retains the right to cash out the compensatory leave balance at any time. In the event of termination,police employees are reimbursed for accumulated vacation time up to a maximum of 280 hours. Upon retirement, death, or resignation after 20 years, police employees receive three-eighths of accumulated sick leave up to a maximum of 2,000 hours (750 hours). In the event of termination,Fire Department 24-hour shift employees are reimbursed for accumulated vacation time up to a maximum of 360 hours plus current year accumulation. Upon retirement, Fire Depaitinent 24-hour shift employees are reimbursed for accumulated sick leave up to a maximum of 1,200 hours (300 hours). In the event of termination, Fire Department 40-hour shift employees are reimbursed for accumulated vacation time up to a maximum of 240 hours plus current year accumulation. Upon retirement, 40-hour shift employees are reimbursed for accumulated sick leave up to a maximum of 800 hours(200 hours). For the government-wide,proprietary, and fiduciary fund financial statements, vacation leave and other compensated absences with similar characteristics are accrued as the benefits are earned if the leave is attributable to past service and it is probable that the City will compensate the employees for such benefits. Such accruals are based on current salary rates and include salary related payments directly and incrementally associated with payments made for compensated absences on termination. In the governmental funds, a liability for these amounts is reported only if they have matured. (o) Self-Insurance The City self-insures all claims related to personal liability and property damage for City-owned vehicles, medical, dental, and workers' compensation, and the first $100,000 of buildings and contents coverage. The City has purchased separate commercial insurance to cover losses in excess of $100,000 on buildings and contents. The City has purchased separate commercial insurance to cover helicopters used by the Police Department. (p) Long-Term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund-type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources, while discounts on debt issuances are reported as financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as current expenditures. (q) Interfund Transactions Interfund transactions are reflected as either loans, services provided, reimbursements, or transfers. Loans, which are reported as receivables and payables, are subject to elimination upon consolidation and are referred to as either "due to/from other funds" or "advances to/from other funds." 29 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements are when one fund incurs a cost, charges the appropriate benefiting fund, and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers between governmental or proprietary funds are netted as part of the reconciliation to the government-wide presentation. (r) Restricted Assets Restricted assets include cash, accounts receivable and deposits with trustee of various enterprise funds and capital projects. (s) Use of Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. (2) Interfund Receivables,Payables,and Transfers Individual interfund receivables and payables at December 31,2002 are as follows: Receivable fund Amount Payable fund General fund $ 6,642,729 Parking Facilities General fund 85,816 Sewer Revenue Fund General fund 14,046 Convention Center Hotel All remaining balances result from the time lag between the dates that(1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3)payments between funds are made.All amounts are expected to be paid within one year. Transfers are related to funding for capital projects,lease payments, debt service,or reallocations of special revenues. The following schedule briefly summarizes the City's transfer activity: Interfund transfers: Transfer out Transfer in Governmental Business- Nonmajor funds type activities governmental Total General fund $ (300,000) 300,000 Nonmaj or governmental funds (5,349,786) 1,333,812 4,015,974 --- $ (5,649,786) 1,633,812 4,015,974 (3) Cash and Investments 30 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Statute and bond covenants authorize the City to invest in "investments of the nature which individuals of prudence, discretion, and intelligence acquire or retain in dealing with the property of another." Investments throughout the year were substantially the same as those held at year end. (a) Deposits At December 31, 2002, the City had pooled cash of$3,989,802, which approximates the bank balance. The City's cash accounts were entirely covered by insurance or by collateral held in joint custody by the pledging bank in the City's name. The collaterization of MECA's deposits at June 30,2002 is as follows: Deposits per bank $ 14,387 Money market 826,113 Total deposits 840,500 FDIC coverage 100,000 Uncollatoralized $ 740,500 Investments made by the City are categorized into these three categories of custodial risk: (1) Insured or registered,or securities held by the City or its agent in the City's name. (2) Uninsured and unregistered, with securities held by the counter party's trust department or agent in the City's name. Under this category, the City's investments consist of U.S. Treasury securities backed by the full faith and credit of the U.S. Government, commercial paper, repurchase agreements, and certificates of deposits. These securities are held by the City's trustee in accordance with the terms of the trust agreement. (3) Uninsured and unregistered, with securities held by the counter party or by its trust depaitnient or agent,but not in the City's name. (b) Investments At year end,the City's investment balances, other than those held by the Pension Trust Funds and the discretely presented component unit,are as follows: Category l 2 3 Uncategorized Fair value U.S.Government securities $ 245,599,450 245,599,450 Certificates of deposit 5,757,471 5,757,471 Money market funds 2,290,272 2,290,272 Total investment $ 5,757,471 245,599,450 2,290,272 253,647,193 Investments of the Idle Fund Investment Pool are made from available cash of all City funds and are not identified with any specific fund. The equity in pooled cash and investments account at December 31,2002 consists of: 31 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Fair value U.S. Government and government agency securities $ 63,177,182 Bank deposits(book balance) 3,989,802 Certificates of deposit 5,700,000 72,866,984 Less: Restricted assets 945,000 Pension 32,258 Agency 1,578,216 Cash and pooled investments $ 70,311,510 Reconciliation of Investments Fair value U.S.Government and government agency securities $ 182,422,268 Certificates of deposit 57,471 Money market 2,290,272 184,770,011 Less investments: Agency investments 929,229 Held by trustee 175,698,267 Investments $ 8,142,515 Investments of the Pension Trust Funds for the civilian plan and uniformed plan consist of the following at December 31,2002 and are considered Category 3. Civilian Uniformed plan plan Fair value Fair value Short-term investments 1,969,894 2,861,609 U.S. Government and government agency securities 34,860,178 41,879,515 Corporate bonds 47,888,610 92,545,973 Corporate stocks 117,162,052 146,799,825 Real estate 14,491,594 28,533,922 216,372,328 312,620,844 (4) Net Assets/Fund Balances The government-wide and business-type activities fund financial statements utilize a net assets presentation. Net assets are categorized as invested capital assets (net of related debt), restricted, and unrestricted. • Invested in Capital Assets, Net of Related Debt — This category groups all capital assets, including infrastructure, into one component of net assets. Accumulated depreciation and outstanding balances of debt that are attributable to the acquisition, construction, or improvement of these assets reduce the balance in this category. • Restricted Net Assets — This category presents external restrictions imposed by creditors, grantors,contributors or laws or regulations of other governments,and restrictions imposed by law through constitutional provisions or enabling legislation. 32 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 • Unrestricted Net Assets — This category represents net assets of the City not restricted for any project or other purpose. In the fund financial statements,reserves and designations segregate portions of fund balance that are either not available or have been earmarked for specific purposes. The various reserves and designations are established by actions of the Council and management, and can be increased, reduced, or eliminated by similar actions.As of December 31,2002,reservations of fund balance are described below: • Encumbrances— to reflect the outstanding contractual obligations for which goods and services have not been received. • Inventories—to reflect the portion of assets that do not represent available spendable resources. • Prepaid items — to reflect the portion of assets that do not represent available spendable resources. • Debt service—to reflect the portion of assets that are held for payment of debt service. • Highways and Streets — to reflect the portion of assets that are held for highways and streets construction projects. • Capital Projects—to reflect the portion of assets that are held for other construction projects. (5) Special Assessment Note Payable The City has obtained a short-term note dated December 26, 2002 to fund the current requirements in the Special Assessment Fund for the purpose of meeting obligations to contractors for work in place that will ultimately be assessed to the benefited property owners. The term of the note is one year, in the amount of $1,260,000, at an interest rate of 2.5%.The note will be repaid from collections of special assessments. (6) Bonds Payable and Other Long-term Obligations The following is a summary of long-term liability transactions for the year ended December 31,2002: Balances at Issuances Retirements Balances at Amount due January 1, or other or other December 31, within one 2002 additions reductions 2002 year Governmental activities: General obligations bonds $ 429,945,000 --- 20,235,000 409,710,000 20,185,000 Special assessment notes 1,750,000 1,260,000 1,750,000 1,260,000 1,260,000 payable Annexed general obligation 19,311,472 8,180,000 1,400,000 26,091,472 --- bonds Special tax revenue bonds 13,805,000 10,500,000 2,210,000 22,095,000 855,000 Unamortized premium 404,968 --- 12,374 392,594 12,374 Special obligation bonds --- 61,800,000 --- 61,800,000 613,217 Lease—purchase contracts 37,189,652 --- 1,439,928 35,749,724 2,268,784 payable Notes payable 1,530,807 898,294 141,516 2,287,585 224,070 Grant commitments 15,405,000 15,000,000 1,705,000 28,700,000 9,330,000 Accrued compensated 29,169,192 2,074,073 --- 31,243,265 1,562,163 absences Workers'compensation 16,544,395 5,881,629 --- 22,426,024 9,574,725 Judgments payable 724,321 1,088,165 --- 1,812,486 1,812,486 Pension obligation 701,976 1,629,330 --- 2,331,306 --- Total governmental long-term activities 33 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Balances at Issuances Retirements Balances at Amount due January 1, or other or other December 31, within one 2002 additions reductions 2002 year liabilities 566,481,783 108,311,491 28,893,818 645,899,456 47,697,819 Business-type activities: Convention Center Hotel: Revenue bonds --- 108,973,211 --- 108,973,211 --- Less unamortized discount --- (1,079,173) 26,979 (1,052,194) --- --- 107,894,038 26,979 107,921,017 --- Sewer Revenue Fund: Revenue bonds 4,765,000 --- 3,820,000 945,000 945,000 Less unamortized discount (44,142) --- (44,142) --- --- Notes payable 2,771,916 2,534,632 565,710 4,740,838 703,848 Special obligations bonds --- 22,200,000 --- 22,200,000 456,783 Accrued compensated absences 1,518,267 --- 78,418 1,439,849 66,566 Workers'compensation 1,194,876 --- 73,243 1,121,633 478,878 10,205,917 24,734,632 4,493,229 30,447,320 2,651,075 Nonmajor business-type $ activities: Revenue bonds 965,000 --- 120,000 845,000 130,000 Lease purchase contract payable 26,685,000 --- 960,000 25,725,000 1,015,000 Accrued compensated absences 283,615 260,558 --- 544,173 50,629 Workers'compensation 259,424 167,555 --- 426,979 182,298 28,193,039 428,113 1,080,000 27,541,152 1,377,927 Total business-type activities 38,398,956 133,056,783 5,600,208 165,855,531 4,029,002 Total all funds $ 604,880,739 241,368,274 34,494,026 811,754,987 51,726,821 34 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Long-term debt at December 31,2002 is comprised of the following individual issues: General Obligation Bonds Effective interest rate First Original payable Series date December 31, Amount issued Issue semiannually due callable 2002 $ 18,270,000 9-15-91 G.O.-defeasance bonds 6.00-6.45 % 1992-2009 2002 $ 3,705,000 13,660,000 11-1-92 G.O.-defeasance bonds 5.25-6.20 1993-2010 2002 3,505,000 16,895,000 10-1-93 Various purpose-refund series 4.30-4.75 1994-2013 2003 6,600,000 32,090,000 10-15-93 Various purpose-refund series 4.20-4.80 1994-2008 2003 7,345,000 13,000,000 12-1-94 Various purpose 5.90-6.00 1995-2004 2004 1,300,000 17,315,000 11-1-95 Various purpose-refund series 4.875-5.00 1996-2015 2005 10,125,000 14,470,000 12-1-95 G.O.-defeasance bonds 4.75-5.00 1996-2013 2005 6,730,000 16,755,000 12-1-96 Various purpose-refund series 5.125-5.25 1997-2016 2007 10,750,000 12,075,000 3-1-97 G.O.-defeasance bonds 4.70-4.95 1998-2009 2006 6,640,000 26,475,000 12-15-97 Various purpose-refund series 4.50-5.00 1998-2017 2007 18,600,000 27,120,000 12-1-98 G.O.-defeasance bonds 4.10-5.00 2000-2015 2008 23,835,000 25,445,000 12-15-98 Various purpose-refund series 4.20-4.50 1999-2018 2008 18,480,000 36,570,000 11-15-99 Various purpose-refund series 5.00-5.125 2000-2019 2009 30,830,000 21,000,000 12-1-00 Various purpose 4.10-5.50 2001-2020 2010 20,000,000 24,165,000 12-1-00 G.O.-defeasance bonds 4.10-5.75 2001-2017 2010 23,315,000 119,210,000 12-1-00 Convention Center/Arena-Series A 5.00-6.50 2001-2030 None 119,210,000 78,790,000 12-1-00 Convention Center/Arena-Series B 5.25 2001-2025 2003 78,790,000 21,000,000 11-15-01 Various purpose 3.00-4.75 2002-2021 2011 19,950,000 Total general obligation bonds 409,710,000 Annexed Area Bonds 652,852 3-15-91 S.I.D.#235 1.00 1995-2010 None 645,963 285,509 3-15-91 S.I.D.#235 0.00 2010 None 285,509 465,000 3-1-98 S.I.D.#247 4.30-4.50 2002-2004 2002 360,000 245,000 1-1-93 S.1.D.#266 5.75-6.00 1994-2003 1993 30,000 450,000 10-5-98 S.I.D.#278 4.20-4.60 1999-2005 2001 215,000 3,425,000 1-1-99 S.I.D.#328 4.10-5.25 2001-2016 2002 3,225,000 1 1,000,000 5-1-98 S.1.D.#349 4.25-4.65 1999-2005 2001 170,000 1,675,000 5-15-98 S.I.D.#360 4.25-4.65 1999-2005 2001 300,000 2,715,000 11-1-93 S.1.D.#363 5.00-5.20 1994-2003 1996 125,000 2,100,000 4-1-98 S.I.D.#363 4.25-4.65 2000-2005 2002 150,000 750,000 1-1-98 S.I.D.#377 4.70-5.00 1999-2004 2003 55,000 700,000 7-1-98 S.I.D.#396 4.35-4.65 2001-2004 2001 45,000 1,615,000 2-1-01 S.I.D.#409 4.80-6.10 2001-2021 2005 1,580,000 1,500,000 11-15-99 S.I.D.#411 4.25-6.20 2000-2019 2004 1,360,000 4,245,000 7-15-01 S.I.D.#411 4.00-6.00 2002-2021 2006 4,1 15,000 5,420,000 7-15-01 S.I.D.#450 4.00-6.00 2002-2021 2006 5,250,000 2,100,000 2-15-94 S.1.D.#351 3.00-6.00 1994-2014 1999 1,490,000 6,690,000 6-1-02 S.1.D.#457 2.80-5.20 2002-2022 2006 6,690,000 Total annexed area bonds 26,091,472 Total general obligation and annexed area bonds $ 435,801,472 35 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Special Tax Revenue Bonds Effective interest rate First Original payable Series date December 31, Amount issued Issue semiannually due callable 2002 $ 8,500,000 8-1-97 Aksarben Redevelopment Bonds 4.5—5.25% 1998—2015 2007 $ 3,980,000 6,195,000 11-2-99 Downtown Northeast Redevelopment Project 4.0—6.25 2000-2019 2009 5,605,000 3,115,000 12-1-98 Riverfront Redevelopment Project Series 1998 3.75—4.55 1999—2008 2003 2,010,000 8,670,000 2-1-02 Riverfront Redevelopment Project Series 2002A 5.06—5.20 2029—2032 2026 8,670,000 1,830,000 2-1-02 Riverfront Redevelopment Project Series 2002B various 2013 2009 1,830,000 $ 22,095,000 1 Enterprise Funds Revenue Bonds Effective interest rate at issuance- First Original payable Series date December 31, Amount issued Issue semiannually due callable 2002 $ 26,800,000 8-1-94 Regular Sanitary Sewer Revenue 3.5—5.25% 1995—2003 --- $ 945,000 1,250,000 3-1-99 Dodge Park Marina 4.0 1999—2008 --- 845,000 102,970,000 4-1-02 Convention Center Hotel Revenue,Series 2002A 3.72—5.14 2007—2032 2012 102,970,000 6,003,211 4-1-02 Convention Center Hotel Revenue,Series 2002B 9.5 2004-2032 2007 6,003,211 $ 110,763,211 36 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Special Obligations Bonds—Government Activities Effective interest rate First Original payable Series date December 31, Amount issued Issue semiannually due callable 2002 $ 29,800,000 2-1-02 Riverfront Redevelopment Project Series 2002A 1.65—5.50% 2003—2032 2026 $ 29,800,000 32,000,000 2-1-02 Riverfront Redevelopment Project Series 2002B various 2026 2014 32,000,000 $ 61,800,000 Special Obligation Bonds—Business-Type Activities Effective interest rate at issuance- First Original payable Series date December 31, Amount issued Issue semiannually due callable 2002 $ 22,200,000 2-1-02 Riverfront Redevelopment Project Series 2002A 1.65—5.50% 2003—2032 2026 $ 22,200,000 As of December 31, 2002, the debt service requirements of the City for principal and interest in future years are as follows: Government activities Principal Interest Total Year ended December 31: 2003 $ 21,653,217 31,435,382 53,088,599 2004 21,461,024 30,460,831 51,921,855 2005 21,601,813 29,512,345 51,114,158 2006 22,519,737 28,551,602 51,071,339 2007 22,555,527 27,529,053 50,084,580 2008—2012 108,666,124 121,865,042 230,531,166 2013—2017 89,556,172 94,636,437 184,192,609 2018—2022 82,820,000 68,052,090 150,872,090 2023—2027 72,243,162 40,078,029 112,321,191 2028—2032 56,619,696 12,887,344 69,507,040 $ 519,696,472 485,008,155 1,004,704,627 37 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Business-type activities Principal Interest Total Year ended December 31: 2003 $ 1,531,783 6,472,890 8,004,673 2004 573,976 7,850,047 8,424,023 2005 653,318 6,968,168 7,621,486 2006 674,572 6,938,108 7,612,680 2007 952,960 6,901,896 7,854,856 2008—2012 7,244,686 33,660,452 40,905,138 2013-2017 13,138,758 31,117,812 44,256,570 2018—2022 17,300,848 26,823,471 44,124,319 2023—2027 31,314,952 20,486,292 51,801,244 2028—2032 59,577,358 9,046,861 68,624,219 $ 132,963,211 156,265,997 289,229,208 General obligation bonds have been approved by the voters and issued by the City for various municipal improvements. These bonds represent indebtedness supported by the full faith and credit of the City. 38 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Notes Payable Notes payable consist of four loan contracts between the City and the Nebraska Department of Environmental Quality(NDEQ)with interest rates ranging from 3%-3.8%. Maturities of the NDEQ notes payable are as follows: Government activities Principal Interest Total Year ended December 31: 2003 $ 224,070 66,960 291,030 2004 230,843 60,187 291,030 2005 237,820 53,210 291,030 2006 245,008 46,022 291,030 2007 252,414 38,616 291,030 2008-2012 1,097,430 78,140 1,175,570 $ 2,287,585 343,135 2,630,720 Business-type activities Principal Interest Total Year ended December 31: 2003 $ 703,848 115,164 819,012 2004 833,099 126,224 959,323 2005 772,031 96,620 868,651 2006 707,236 70,742 777,978 2007 245,130 50,134 295,264 2008-2012 1,341,365 134,951 1,476,316 2013-2016 138,129 2,183 140,312 $ 4,740,838 596,018 5,336,856 Grant Commitments The City has entered into various agreements with not-for-profit organizations to provide grant funds as follows. 2003 $ 9,330,000 2004 9,480,000 2005 1,780,000 2006 1,730,000 2007 1,550,000 2008-2010 4,830,000 $ 28,700,000 39 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Tax Increment Financing Notes and Bonds At December 31, 2002, $93,568,835 of tax increment financing notes and bonds were outstanding. The related tax increment districts are not component units of the City; therefore, the City is not liable for the outstanding debt.The City's responsibility for this liability is limited only to remittance of paid taxes to the lenders. Tax increment notes and bonds outstanding at December 31, 2002 are comprised of the following individual issues listed below and on the following pages: Tax Increment Notes and Bonds Effective Original interest rate December 31, amount Issue at issuance 2002 $ 400,000 McKesson Robbins 13.00% $ 442,050 12,480,000 Beta West 8.85 6,615,722 700,000 Scoular Redevelopment 10.25 1,091,866 160,000 New Idea Building 9.25 400,149 700,000 First National Bank Building-RPI Services 10.38 1,103,085 760,000 Stockyards-Phase I 9.00 286,492 80,000 Roseland Theater 10.50 120,379 140,000 Mason School 10.50 75,746 95,000 Jackson Street Partnership 8.00 98,177 70,016 Vinton School 11.25 2,351 87,520 Park School 11.25 5,345 61,500 McCarthy Printing 10.00 45,721 702,250 Spring Valley#2,Phase II 10.25 348,639 42,000 Hanighen Square 8.00 17,339 387,027 Millard Refrigerated Services 11.00 448,171 280,000 Stockyards-Phase II 9.30 23,094 500,000 Hill Hotel 10.75 737,677 200,000 Sleepy Partnership/Sleep Inn 10.00 84,565 225,290 Columbian School 10.25 89,069 210,000 Aspen Ridge Apartments 9.50 245,360 246,250 Eggress-O'Flying Building 10.00 1,118 180,015 National Building 7.50 184,804 Carried forward $ 12,466,919 40 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Tax Increment Notes and Bonds(continued) Effective Original interest rate December 31, amount Issue at issuance 2002 Brought forward $ 12,466,919 $ 75,000 Hamilton Terrace Apts. 10.00% 52,291 40,000 Bakers Supply Building 10.00 16,833 200,000 Union Plaza --- 19,917 200,000 Cannonball Express II 7.25 15,568 561,000 Lozier Corp.II 7.00 191,798 581,820 Farnam Park Investments 8.00 474,222 167,600 Kellom Heights 10.00 137,218 1,135,000 Food Services of America 8.00 1,395,195 30,000 Kohlls Drug 9.75 36,373 235,000 Millard Recycling 7.25 282,239 181,500 1115 Harney LLP 9.00 214,509 550,000 1101 Harney LLC 8.00 391,151 2,650,000 First Data Resources 8.00 2,947,505 479,000 Lozier III 7.00 319,464 758,000 Greater Omaha Packing 8.00 584,984 290,000 Orchard Manor 9.50 289,509 1,725,000 Millard Refrigeration Svc/NE Beef 6.00 1,731,435 1,224,000 Westin Aquila 7.00 999,782 377,000 Drake Williams Steel 9.25 509,902 1 200,000 Upstream Brewing Co. 10.13 224,821 374,000 Securities Building Ltd.Partnership 8.50 359,551 540,000 Rivergate Apartments 8.75 513,712 94,140 Caldwell Limited Partnership 10.00 100,221 271,000 BSDL Investments 9.00 164,586 90,000 Packers Engineering and Equipment 9.25 726,810 88,830 Kellom Plaza 10.00 87,324 500,000 Premier Place Development 9.25 692,297 42,885 Ames/Fontenelle LLC 9.00 50,984 1,519,000 Downtown Northeast 8.00 1,844,484 Carried forward $ 27,841,604 41 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Tax Increment Notes and Bonds(continued) Effective Original interest rate December 31, amount Issue at issuance 2002 Brought forward $ 27,841,604 $ 424,000 Bull Durham 9.00% 435,591 110,000 Grace Plaza/Twentieth Plaza 8.50 136,677 139,000 Riverview Meadows 9.00 196,644 195,000 Campus for Hope 2.71 174,274 400,000 American Laboratories 9.00 484,271 655,000 Ford Warehouse Apartments 9.00 695,275 419,000 Spaghetti Building 9.00 498,721 260,000 Quality Refrigerated Services 8.50 281,852 202,000 Riley Building LLC 9.00 278,413 273,000 Cannonball Express#3 8.00 258,709 243,600 Village Development 8.00 306,752 175,000 Immaculate Conception School 8.00 199,888 180,225 Robbins School LLP 9.00 197,541 76,000 L&R Holdings LLC 9.00 75,549 790,000 Bemis Company,Inc. 8.50 1,036,394 378,000 Joslyn Lofts Limited Partnership 8.00 446,735 918,400 St. Joseph Terrace Apts. LLC 8.00 1,139,456 118,000 South Omaha Affordable Housing Corp. 8.50 139,532 894,600 707 South 11th Street Limited Partner 7.25 1,190,806 2,087,400 1023 Jones Street LLP 7.25 2,477,314 186,000 E.A.Pedersen Redevelopment 8.00 221,638 180,000 1234 South 13th Street 8.78 224,711 Ames Center/Benson Plaza 5,285,475 Development 8.00 6,535,197 2,098,000 Airlite Plastics Company 7.75 2,512,999 1,553,000 Hilton Garden Inn 9.00 1,961,016 77,950 Roman Marble Products 8.00 87,081 495,000 Abbot Drive Plaza Redevelopment 8.00 599,045 100,000 Meredith Manor 10.00 120,340 285,000 1613 Farnam Street LLC 8.50 334,346 128,000 Maple Street Grocery 8.25 150,484 Carried forward $ 51,238,855 42 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Tax Increment Notes and Bonds(continued) Effective Original interest rate December 31, amount Issue at issuance 2002 Brought forward $ 51,238,855 $ 580,000 Miami Heights Area Redevelopment 8.50% 699,130 100,000 Cox/Suburban Electric Redevelopment 8.50 109,697 527,000 Central Market Inc. 8.00 622,718 50,000 T&B Properties LLC 9.50 60,869 100,000 Kellom North 9.00 97,950 71,000 Big Jim's Plus Gas &Convenience Store 9.38 81,829 2,105,000 Harney Street Redevelopment LLC 9.00 2,417,113 202,000 Channel Construction 8.00 228,919 238,000 Cohen Squared LLC 8.75 270,281 Fullwood Square Apartments Ltd. 150,000 Partnership 8.75 168,627 O'Keefe Elevator Company Inc. 285,000 Redevelopment 8.50 314,690 307,200 Ames Avenue LLC 8.00 337,769 355,000 Village Development 8.00 393,145 438,000 Turner Park LLC Redevelopment 8.00 476,304 4,100,000 Omaha World Herald 9.00 4,811,634 106,800 Bradford Investment Group 9.00 123,944 553,000 Cintas Group 8.50 634,905 1,600,000 Drake Court Apartments 7.00 1,692,362 330,000 Mercer Management 8.00 358,281 125,000 Kellom Villa Limited 7.25 128,476 120,000 Kellom Garden Limited 7.25 123,337 Total tax increment notes $ 65,390,835 43 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Tax Increment Notes and Bonds(continued) Effective interest rate at issuance— Original payable Series due December 31, amount Issued Issue semiannually 2002 Brought forward $ 65,390,835 $ 3,510,000 5-23-97 Riverfront Hotel Redevelopment Project 6.00 % 1998— 2010 2,463,000 1,210,000 5-23-97 Riverfront Hotel Redevelopment Project 4.00 1998—2010 817,000 3,440,000 12-1-98 Downtown Northeast- Redevelopment Project No. 1 6.25 2001—2013 3,073,000 14,515,000 5-1-99 FNB Tower Project-Series 1999A 6.965—7.675 2004—2015 14,515,000 3,500,000 5-1-99 FNB Tower Project-Series 1999B 6.965—7.675 2004—2015 3,500,000 4,649,620 10-15-01 Riverfront Redevelopment ConAgra Series 2A 6.5 2001—2013 2,918,460 1,420,380 10-15-01 Riverfront Redevelopment ConAgra Series 2B 6.5 2001—2013 891,540 Total tax increment bonds 28,178,000 Total tax increment notes and bonds $ 93,568,835 Debt Margin/Covenants According to the City charter, the total amount of general obligation indebtedness outstanding at any time, which shall include bonds issued but shall not include bonds authorized until they are issued, shall not exceed 3.5%of the actual value of taxable real and personal property in the City. Debt margin as of December 31, 2002 is calculated as follows: Debt limit $ 649,656,669 General obligation debt 435,801,472 General debt service fund balance 18,379,731 417,421,741 Debt margin $ 232,234,928 Revenue bonds and certain other long-term obligations are the obligation of specific Enterprise funds and are payable solely from the revenues of the respective funds. Provisions in the revenue bond ordinances contain limitations and restrictions on annual debt service requirements,maintenance of and flow of monies through various restricted accounts, and minimum amounts to be maintained in various accounts. It is management's opinion the City is in compliance with all such significant provisions. In-substance Defeasance In prior years, the City defeased certain general obligation and other bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's basic financial statements. The amount of in-substance defeased debt outstanding at December 31, 2002 is shown below: 44 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 General Obligation Bonds 1994 Various Purpose $ 6,500,000 Annexed Area Bonds S.I.D. #377 $ 600,000 Special Tax Revenue Bond Aksarben Redevelopment Bonds $ 3,200,000 (7) Leases The City is leasing libraries and other facilities under noncancelable lease-purchase agreements expiring at various times through 2016, at which time title will be conveyed to the City. The rental payments are designed to equal the debt service requirements of certain nonprofit organizations that financed the construction of the facilities. The City has an option to purchase the facilities at any time by paying an amount equal to the total of all remaining unpaid lease obligations to the lessor at that time. 45 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 The following schedule reflects future minimum lease payments under the lease-purchase agreements together with the present value of the net minimum lease payments as of December 31, 2002: Governmental Business-type activities activities Fiscal year ending: 2003 $ 3,538,272 2,631,058 2004 3,512,208 2,622,458 2005 3,483,504 2,624,680 2006 3,379,227 2,622,661 2007 2,982,461 2,625,922 2008—2012 14,337,141 13,108,588 2013—2017 11,777,711 11,741,219 2018—2022 4,457,191 3,667,236 Total minimum lease payments 47,467,715 41,643,822 Less amount representing interest 11,717,991 15,918,822 Total principal obligation under capital leases with rates of interest from 3.55%to 7.00% $ 35,749,724 25,725,000 The City leases space in the Omaha-Douglas Civic Center and the adjoining Hall of Justice under a lease that expires only upon payment of all outstanding bonds of the Commission. The annual rental payments are determined based upon actual space occupied by the City for operation and maintenance. Actual rental payments for 2002 were approximately$1,080,000. (8) Operating Lease Commitments The City has several operating leases for office and hanger space at various locations. Future annual minimum lease payments due under these operating leases as of December 31, 2002 are as follows: Amount Year ending December 31: 2003 $ 12,960 2004 12,960 2005 12,960 2006 12,960 2007 12,960 $ 64,800 Rental expense for operating leases for the year ended December 31,2002 is approximately$60,300. 46 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 (9) Due From Other Governments The total due from other governments includes the following items: Fund/fund type Due from/source Amount Major funds: General State of Nebraska,state aid distribution $ 1,381,916 General State of Nebraska,sales and use tax 19,348,385 General Douglas County,motor vehicle tax collections 661,951 21,392,252 Nonmajor funds: Lead Based Paint Hazard Fund/Special Revenue U.S.Dept.of Housing and Urban Development 213,771 Special Assessments Capital Projects Douglas County,Special Assessment Collections 23,145 Domestic Preparedness/Wellness U.S.Dept.of Housing and Urban Development 460,820 Metro Drug Task Force Special Revenue 423,263 USDA Summer Food Program U.S.Dept.of Agriculture 65,090 Cops More/Special Revenue U.S.Dept.of Justice 623,864 Historical Preservation/Special Revenue U.S.Dept.of Interior 874 Economic Development Initiative Special Revenue State of Nebraska 140,962 Juvenile Detention/Special Revenue State of Nebraska/Nebraska Crime Commission 162,487 HUD HOME Program/Special Revenue U.S. Dept.of Housing and Urban Development 1,162,682 HUD Supportive Housing/Special U.S. Dept.of Housing and Urban Development 181,863 Revenue Nebraska Affordable/Special Revenue U.S.Dept.of Housing and Urban Development 157,639 Emergency Shelter/Special Revenue U.S.Dept.of Housing and Urban Development 105,873 Community Development Block Grant/ 2,562,783 Special Revenue U.S. Dept.of Housing and Urban Development Workforce Investment Act/Special State of Nebraska 581,642 Revenue Riverfront Redevelopment Debt Service State of Nebraska 374,999 Street and Highway Special Revenue State of Nebraska,gasoline taxes 2,210,347 City Street Maintenance Special Revenue Douglas County,wheel tax 671,928 Federal Assistance Fund Special Revenue State of Nebraska 167,821 Back to the River Project/Capital Projects State of Nebraska Department of Roads 535,669 Street and Highway Capital Projects State of Nebraska 1,917,744 Missouri River Pedestrian Bridge/ Capital Projects State of Nebraska Department of Roads 592,922 13,338,188 $ 34,730,440 47 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 (10) Receivables Receivables at December 31, 2002 of the City's major individual funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: Total Total Debt governmental Sewer business-type General service Nonmajor activities fund Nonmajor activities Total Receivables: Property taxes S 47,197,090 33.445,417 2.839,400 83.481.907 --- --- --- 83,481.907 Telephoneup o -- 3,304,980 --- 3,304,980 occupation tax 3J04,960 --- --- --- Hotel motel occupation lax 217.394 --- --- 217.394 --- --- --- 217.394 Vehicle renal occupation tax 233.744 233,344 --- --- 233,344 --- --- --- Cable TV franchise fee 941.877 --- --- 941.877 --- --- --- 941.877 Special assessment --- 1,911,245 4,836,535 6,747,780 --- --- --- 6,747,780 Keno collection --- --- 553,628 553,628 --- 5,986 5,986 559.614 1 Charges for service 2.431,091 43,498 3,534,915 6,009,504 2,991,520 141,802 3,133,322 9.142,826 Gross receivables 54,325,776 35,400,160 11,764.478 101,490,414 2,991,520 147,788 3,139.308 104,629,722 Less allowance for mhcollectables 653,335 500,532 42,493 1,196,360 --- -- --- 1,196,360 Net total receivables S 53,672,441 34,899,628 11,721,985 100.294,054 2,991,520 147,788 3,139.308 103.433,362 Governmental funds report deferred revenues in connection with receivables for revenues not considered available to liquidate liabilities of the current period. Governmental and enterprise funds also defer revenues not considered available to liquidate liabilities of the current period. At December 31, 2002, the various components of deferred revenue and unearned revenue are as follows: Unavailable Unearned Property tax receivable(General Fund) $ 46,665,168 --- Property tax receivable(Debt Service Fund) 32,868,242 --- Special assessments(Debt Service Fund) 1,911,245 --- Property tax receivable(governmental nonmajor) 2,790,393 --- Special assessments(governmental nonmajor) 5,900,682 --- Grants(governmental nonmajor) --- 1,673,301 $ 90,135,730 1,673,301 (11) Employees' Retirement Plans The employees of the City are covered by two single-employer retirement plans. The City of Omaha Employees' Retirement System(Civilian Plan) and the City of Omaha Police and Firefighters Retirement System(Uniformed Plan),as described below, are accounted for by the City as Pension Trust Funds. (a) Civilian Plan Plan Description — The Civilian Plan is a single-employer defined benefit pension plan. The Civilian Plan provides retirement benefits to plan members and beneficiaries. All City employees except the following are covered by the plan: police; firefighters;persons paid on a contractual or fee basis; seasonal, temporary, and part-time employees; and elected officials who do not make written application. Cost-of-living adjustments are provided to members and beneficiaries at the discretion of the City in accordance with plan provisions. A cost-of-living adjustment currently is provided for members who retired prior to January 28, 1998 after a five-year waiting period. The Civilian Plan does not issue separate financial statements. Funding Policy-Effective December 22, 2002, Civilian Plan members are required to contribute, by payroll deduction, 5.7%of their annual covered salary and increases to 6.825% on December 48 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 21, 2003. The City is required to contribute at a rate of 6.90% of annual covered salary and increases to 8.025%on December 21, 2003. Administrative costs for management of the funds are financed through investment earnings. Other administrative costs of the Civilian Plan are paid by the City's General Fund. Annual Pension Cost and Net Pension Obligation - The City's annual pension cost and net pension obligation to the Civilian Plan for the fiscal year ended December 31, 2002 are as follows: Annual required contribution $ 6,245,299 Interest on net pension asset (76,217) Adjustment to annual required contribution 86,045 Annual pension cost 6,255,127 Contributions made (3,653,704) Increase in net pension obligation 2,601,423 Net pension asset,beginning of year 1,016,227 Net pension obligation,end of year $ (1,585,196) Historical trend information about the City's participation in the Civilian Plan is presented below to help readers access the Civilian Plan's funding status on a going-concern basis and assess progress being made in accumulating assets to pay benefits when due. Three-Year Trend Information (Dollar amounts in millions) Net Annual Percentage pension pension of APC asset Fiscal year ending cost(APC) contributed (obligation) 1/2002 $ 6,255,127 58% $ (1,585,196) 1/2001 3,264,816 105 1,016,227 1/2000 3,038,674 108 865,924 49 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31, 2002 Required Supplementary Information Schedule of Funding Progress(Unaudited) (Dollar amounts in millions) Actuarial accrued UAAL as a Actuarial liability Unfunded percentage value of (AAL) AAL Funded Covered of covered Actuarial assets entry age (UAAL) ratio payroll payroll valuation date (a) (b) (b-a) (a/b) (c) ((b-a)/c) 2002 $ 217.1 296.9 79.8 73.1 $ 55.4 144.0% 2001 234.8 244.3 9.5 96.1 56.4 16.8 2000 252.3 231.3 (21.0) 109.1 52.7 (39.8) The information presented in the required supplementary information was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation follows: Valuation date January 1,2002 Actuarial cost method Entry age—normal cost Amortization method Level percent closed Remaining amortization period 30 years Asset valuation method Adjusted value of plan assets 25%of the excess of market value of the adjusted value of plan assets Actuarial assumptions: Investment rate of return 1.3%for 2002 and 2003;7.5%thereafter Projected salary increases 4.5%per year Cost-of-living adjustments Lesser of 3%or$50 per month 50 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Basis of Accounting-The Civilian Plan's financial statements are prepared using the accrual basis of accounting and are presented as a pension trust fund in the accompanying basic financial statements of the City. Separate audited financial statements for the Civilian Plan are not available. Plan member and employer contributions are recognized in the period in which the contributions are due. Benefits are provided based on a percentage of the member's fmal average compensation and are recognized when due and payable. Summary financial information for the Civil Plan is as follows: Assets Receivables: Accrued interest $ 1,211,280 Investments,at fair value 216,372,328 Total assets $ 217,583,608 Liabilities Warrants payable $ 5,000 Accounts payable 330,343 Due to other funds 178,043 Total liabilities 513,386 Net Assets Net assets: Held in trust for pension benefits 217,070,222 Total liabilities and net assets $ 217,583,608 51 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Additions: Contributions: Employer $ 3,653,703 Employee 3,051,614 Total contributions 6,705,317 Investment income(loss): Dividends and interest 7,219,700 Net depreciation in fair value of investments (17,775,090) Investment expenses (1,381,969) Net investment loss (11,937,359) Total deductions (5,232,042) Deductions: Benefit payments 12,475,686 Change in net assets (17,707,728) Net assets held in trust for pension benefits,beginning of year 234,777,950 Net assets held in trust for pension benefits,end of year $ 217,070,222 Method Used to Value Investments Civilianinvested in Plan assets arereadily marketable securities and are carried at fair value. Investments in securities traded on a national securities exchange are valued at the latest quoted market prices. Unlisted investments are valued at latest quoted market prices. (b) Uniformed Plan Plan Description —The Uniformed Plan is a single-employer defined benefit pension plan. The Uniformed Plan covers all probationary and regular uniformed personnel of the Police and Fire depaitments of the City. The Uniformed Plan provides retirement, disability, and death benefits to plan members and beneficiaries. Cost of living adjustments are provided to members and beneficiaries at the discretion of the City in accordance with plan provisions. Funding Policy — Uniformed Plan members are required to contribute, by payroll deduction, 10.885% of their annual covered salary. The City is required to contribute at a rate of 16.5% of annual covered salary. In addition, the City will make contributions of $1,327,600 annually through 2028. Administrative costs for management of the funds are financed through investment earnings. Other administrative costs of the Uniformed Plan are paid by the City's General Fund. 52 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Annual Pension Cost and Net Pension Obligation — The City's annual pension cost and net pension obligation to the Uniformed Plan for the year ended December 31, 2002 are as follows: Annual required contribution $ 15,392,189 Interest on net pension obligation 56,158 Adjustment to annual required contribution (82,012) Annual pension cost 15,366,335 Contributions made (15,322,201) Increase in net pension obligation 44,134 Net pension obligation,beginning of year (701,976) Net pension obligation,end of year $ (746,110) Historical trend information about the City's participation in the Uniformed Plan is presented below to help readers access the Uniformed Plan's funding status on a going-concern basis and assess progress being made on accumulating assets to pay benefits when due. Three-Year Trend Information Annual Percentage Net pension of APC pension Fiscal year ending cost(APC) contributed obligation 1/2002 $ 15,366,335 99% $ 746,110 1/2001 11,626,255 120 701,976 1/2000 11,239,440 121 3,053,033 Required Supplementary Information Schedule of Funding Progress(Unaudited) (Dollar amounts in millions) Actuarial UAAL as a Actuarial accrued Unfunded percentage Actuarial value of liability(AAL) AAL Funded Covered of covered valuation assets entry age (UAAL) ratio payroll payroll date (a) (b) (b-a) (a/b) (c) ((b-a)/c) 2002 $ 314.1 481.6 167.5 65.2% $ 79.7 210.2% 2001 350.4 452.3 101.9 77.5 76.7 132.9 2000 361.5 425.1 63.6 85.0 74.5 85.4 53 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 The information presented in the required supplementary information was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation follows: Valuation date January 1,2002 Actuarial cost method Project unit credit Amortization method Level percent closed Remaining amortization period 30 years Asset valuation method Adjusted value of plan assets One-half of the excess of market value of the adjusted value of plan assets Actuarial assumptions: Investment rate of return 8%per year Projected salary increases 4.5%per year Cost-of-living adjustments Lesser of 3%or$50 per month 54 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Basis of Accounting—The Uniformed Plan's financial statements are prepared using the accrual basis of accounting and are presented as a pension trust fund in the accompanying basic financial statements of the City. Separate audited financial statements for the Uniformed Plan are not available. Plan member and employer contributions are recognized in the period in which the contributions are due. Benefits are provided based on a percentage of the member's final average compensation and are recognized when due and payable. Summary financial information for the Uniformed Plan is as follows: Assets Cash and cash equivalents $ 32,258 Receivables: Accrued interest 1,609,440 Due from other funds 178,043 Investments, at fair value 312,620,844 Total assets $ 314,440,585 Liabilities Accounts payable $ 321,863 Total liabilities 321,863 Net Assets Net assets: Held in trust for pension benefits 314,118,722 Total liabilities and net assets $ 314,440,585 55 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Additions: Contributions: Employer $ 15,322,201 Employee 9,354,507 Total contributions 24,676,708 Investment income(loss): Dividends and interest 8,515,808 Net depreciation in fair value of investments (42,561,689) Investment expenses (1,968,838) Net investment loss (36,014,719) Total deductions (11,338,011) Deductions: Benefit payments 24,986,726 Change in net assets (36,324,737) Net assets held in trust for pension benefits,beginning of year 350,443,459 Net assets held in trust for pension benefits,end of year $ 314,118,722 Method Used to Value Investments — Uniformed Plan assets are invested in readily marketable securities and are carried at fair value. Investments in securities traded on a national securities exchange are valued at the latest quoted market prices. Unlisted investments are valued at latest quoted market prices. (c) 401(k)Plan MECA has established a new 401(k)plan for all of its employees. Participants can contribute up to 15% of their pretax compensation, subject to IRS limitations. MECA, at its discretion, may make matching contributions equal to a discretionary percentage to be determined by MECA of the participant's elective deferrals.MECA has currently elected not to contribute to the plan. 56 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31, 2002 (12) Capital Assets Capital asset activity for the year ended December 31,2002 is as follows: Beginning Ending balances Increases Decreases balances Governmental activities: Capital assets,not being depreciated: Land $ 114,004,162 3,830,376 504,850 117,329,688 Cultural assets 5,833,600 --- --- 5,833,600 Construction in progress 63,307,982 113,229,937 4,461,497 172,076,422 Total capital assets, not being depreciated 183,145,744 117,060,313 4,966,347 295,239,710 Capital assets,being depreciated: Buildings 149,052,823 5,463,119 944,549 153,571,393 Machinery and equipment 56,783,879 4,676,155 1,784,985 59,675,049 Infrastructure 268,212,962 9,068,266 --- 277,281,228 Lease purchases 46,222,659 3,940,003 --- 50,162,662 Total capital assets, being depreciated 520,272,323 23,147,543 2,729,534 540,690,332 Less accumulated depreciation for: Buildings 89,933,714 3,305,063 772,465 92,466,312 Machinery and equipment 31,092,220 6,789,553 1,784,985 36,096,788 Infrastructure 44,465,716 5,568,874 --- 50,033,590 Lease purchases 3,716,186 1,884,519 --- 5,600,705 Total accumulated depreciation 169,206,836 17,548,009 2,557,450 184,197,395 Total capital assets being depreciated,net 351,065,487 5,599,534 172,084 356,492,937 Governmental activities capital assets,net $ 534,211,231 122,659,847 5,138,431 651,732,647 57 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Capital asset activity of each major enterprise fund is as follows: Beginning Ending balances Increases Decreases balances Sewer Revenue Fund: Capital assets,not being depreciated: Land $ 1,306,857 1,306,857 Construction in progress 22,864,546 26,658,159 4,615,279 44,907,426 Total capital assets, not being depreciated 24,171,403 26,658,159 4,615,279 46,214,283 Capital assets,being depreciated: Utility plant 410,885,854 8,036,678 418,922,532 Machinery and equipment 12,120,703 404,153 12,524,856 Total capital assets, being depreciated 423,006,557 8,440,831 431,447,388 Less accumulated depreciation for: Utility plant 165,157,718 10,481,757 --- 175,639,475 Machinery and equipment 10,121,047 607,430 10,728,477 Total accumulated depreciation 175,278,765 11,089,187 186,367,952 Total capital assets being depreciated,net 247,727,792 (2,648,356) --- 245,079,436 Sewer Revenue Fund capital assets,net $ 271,899,195 24,009,803 4,615,279 291,293,719 Beginning Ending balances Increases Decreases balances Convention Center Hotel: Capital assets,not being depreciated: Construction in progress $ 15,608,314 15,608,314 Total capital assets, not being depreciated 15,608,314 15,608,314 58 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Depreciation expense was charged to functions/programs as follows: Governmental activities: General government $ 2,724,764 Public safety 3,395,566 Community development 350,868 Ecological services 129,935 Culture and parks 4,898,396 Transportation services 6,048,480 Total depreciation expense—governmental $ 17,548,009 Business-type activities: Convention Center Hotel $ 213,866 Sewer Revenue Fund 11,133,329 Other 2,307,547 $ 13,654,742 The City has entered into a number of agreements relating to the design, construction, and operation of the Omaha Convention Center/Arena. The total cost of such commitments is estimated not to exceed approximately$137,680,000 and will be paid from project funds. MECA At June 30,2002,property and equipment and accumulated depreciation for MECA are as follows: Balance Balance January 1, June 30, 2002 Additions Disposals 2002 Leasehold improvements $ 10,150 2,610 - 12,760 Furniture, fixtures,and equipment 136,019 32,351 --- 168,370 146,169 34,961 --- 181,130 Accumulated depreciation and amortization (21,721) (16,538) --- (38,259) $ 124,448 18,423 --- 142,871 (13) Postretirement Health Care Benefits In addition to providing the pension benefits described in note 11, the City provides health insurance coverage, in accordance with the City's Municipal Code and the City's contracts, with the Omaha Police Union Local No. 101, the Professional Firefighters Association of Omaha Local No. 385, and the Omaha City Employees Local No. 251 and other classified civilian and sworn employees. Currently, 636 individuals meet these eligibility requirements. The cost of health insurance coverage is recognized as an expense as claims are paid.For 2002,these costs approximated$7.7 million. 59 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 (14) Self-Insurance It is the policy of the City not to purchase commercial insurance for the risks of losses to which it is exposed. Instead, the City management believes it is more economical to manage its risks internally and set aside assets for claim settlement in the General Fund. This fund services all claims for risk of loss to which the City is exposed, including general liability, property, and casualty up to $100,000 per occurrence, workers' compensation, employee health and accident, environmental, and antitrust. Change in the balance of claims liabilities during the fiscal year 2002 and 2001 are as follows: Beginning Current End of year year Claim of year liability claims payment liability 2002 $ 18,495,430 32,962,842 27,483,636 23,974,636 2001 19,350,935 23,118,987 23,974,492 18,495,430 (15) Commitments The City is a defendant in a number of lawsuits in its normal course of operations. In addition to the $1,812,486 recorded by the City as judgments payable, the City attorney is of the opinion that there is a possibility that the City will incur additional losses on these lawsuits, not to exceed approximately $3.1 million. The City participates in a number of federally assisted grant programs, principally Federal Highway Construction Grants, Community Development Block Grant, Job Training Partnership Act, and other local improvement programs. The programs are subject to financial and compliance audits. The amount of expenditures, if any, that may be disallowed by granting agencies is not determinable at this time;however, City management does not believe that such amounts,if any,would be significant. MECA entered into a long-term contract for food service operations in November 2001. The terms of the contract commit MECA to a 10-year annual fixed payment to the contractor of $600,000 beginning approximately in September 2003. There are incentive provisions in the contract that may result in additional payments to the contractor. In addition, MECA. is committed to reimburse the contractor for preopening expenses of $324,300 over a three-year period beginning October 2003. The contractor is committed to an interest-free$4,000,000 advance to MECA for the purchase of food service equipment and leasehold improvements. MECA will repay the advance over the 10-year period of the contract beginning in July 2003. No equipment has been purchased nor any amount paid under this agreement during the six- month period ended June 30,2002. 60 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 On August 25, 2000, the City entered into an agreement and lease with MECA that requires the City to make annual subventions to MECA, initially to fund start-up, preconstruction, planning, and other pre- operational activities, and thereafter to help offset anticipated annual operating losses. This annual subvention will be required of the City unless, as of June 30 of any fiscal year, the accumulated residual money for such subvention or from operating profits shall exceed $5 million. The amount of the City subvention for the following fiscal year shall be reduced in an amount equal to the subvention accumulated fund and the net operating surplus that exceeds $5 million. The City agrees to transfer to MECA a annual subvention of: Amount Year: 2003 $ 2,000,000 2004 2,000,000 2005 2,000,000 2006 2,000,000 2007 2,000,000 2008 2,000,000 2009 2,000,000 2010 2,000,000 2011 2,000,000 2012 2,000,000 2013 1,000,000 $ 21,000,000 (16) Subsequent Events On March 1, 2003, the City issued General Obligation Bonds in the amount of$30,175,000 of Convention Center Bonds bearing interest at 3.7%. Bond proceeds will be used to refund previously issued bonds. Present value savings as a result of this transaction are projected at $1.8 million. The bonds provide for annual principal payments ranging from $790,000 to $2,610,000 and semiannual interest payments each May I and November 1 through 2021. On March 1, 2003, the City issued General Obligation Bonds in the amount of$16,000,000 of Various Purpose Bonds bearing interest at 3.9%. Bonds proceeds will be used to fund the City's Capital Improvement Program. The bonds provide for annual principal payments ranging from $840,000 to $845,000 and semiannual interest payments each May 1 and November 1 through 2022. 61 CITY OF OMAHA,NEBRASKA Notes to Basic Financial Statements December 31,2002 Also on March 1, 2003, the City issued City of Omaha Parking Facilities Corporation Lease Purchase Bonds in the amounts of $2,400,000 of 2003 Series A tax-exempt bonds bearing interest at 4.4%, 524,840,000 of 2003 Series B taxable bonds bearing interest at 5.9%, $395,000 of Series C tax-exempt bonds bearing interest at 3.8% and $115,000 of Series D taxable bonds bearing interest at 3.8%. Bond proceeds will be used to build OmahaPark Eight, a 1290 space parking facility and to rehabilitate several existing facilities. The City is required to annually include in its General Fund budget appropriations for paying these lease purchase obligations. Revenues from the General Fund and parking fees are the primary revenue sources for the repayment of these bonds. The bonds provide for annual principal payments ranging from $55,000 to $1,695,000 and semiannual interest payments each March 1 and September 1 through 2033. (17) Joint Venture The City, in conjunction with Douglas County, Nebraska. has created the Omaha-Douglas Public Building Commission (the Commission). The Commission's board is composed of two members from each of the City and Douglas County boards and one nonmember of either entity. The Commission has entered into lease agreements with the City and Douglas County to provide adequate funding for operation of the Civic Center and, with taxes to be levied by the Commission, to provide for the retirement of principal and interest on the debt. Complete audited financial statements for the Commission can be obtained from their office at Suite 1200,Omaha-Douglas Civic Center, Omaha,Nebraska 68183. 62 REQUIRED SUPPLEMENTARY INFORMATION (other than MD&A) Schedule l CITY OF OMAHA,NEBRASKA Schedule of Revenues,Expenditures and Changes in Fund Balances-Budget and Actual-General Fund Year ended December 31,2002 Variance with final budget Budgeted amounts positive Original Final Actual (negative) Revenues: Property tax $ 45,174,843 45,174,843 44,514,709 (660,134) Motor vehicle tax 8,803,524 8,803,524 8,575,697 (227,827) City sales and use tax 99,446,201 99,446,201 95,819,855 (3,626,346) Business tax 27,514,064 27,514,064 27,429,929 (84,135) Licenses and permits 6,199,995 6,199,995 6,808,480 608,485 Intergovernmental revenues 8,978,103 8,978,103 8,170,438 (807,665) Charges for services 16,338,285 16,338.285 17,196,596 858,311 Interest income 3,935,000 3,935,000 3,448,653 (486,347) Rent and royalties 126,000 126,000 129,836 3,836 Revenue from keno 454,730 454,730 498,463 43,733 Miscellaneous 2,130,100 2,130,100 461,442 (1,668,658) Total revenues 219,100,845 219,100,845 213,054,098 (6,046,747) Expenditures: General government: Mayor's office 1,125,624 1,125,624 1,068,272 57,352 City clerks 498,900 498,900 476,446 22,454 City council 958,794 958,794 914,009 44,785 Law 3,232,055 3,232,055 3,134,775 97,280 Personnel 1,809,076 1,809,076 1,715,397 93,679 Human relations 812,140 812,140 762,541 49,599 Finance 3,009,627 3,009,627 2,896,489 113,138 Administrative service 7,743,206 7,837,715 8,907,406 (1,069,691) Planning department 5,452,597 5,500,989 5,225,896 275,093 Employee benefits 11,645.880 11,645,880 13,091,188 (1,445,308) Other agencies 21,415,805 20,016,535 14,565,438 5,451.097 i Total general government 57,703,704 56,447,335 52,757,857 3,689,478 Public safety: Fire 50,722,233 51,978,602 54,370,776 (2,392,174) Police 71,200,487 71,200,487 71,582,912 (382,425) Total public safety 121,922,720 123,179,089 125,953,688 (2,774,599) Public works: General 325,441 325,441 301,308 24,133 Environmental 12,014,442 12,014,442 11,120,328 894,114 Street and highway 4,694,528 4,694,528 2,659,916 2,034,612 Total public works 17,034,411 17,034,411 14,081,552 2,952,859 Culture and recreation: Parks and recreation 18,143,559 18,143,559 17,209,531 934,028 Libraries 8,199,452 8,1 99,452 7,464,691 734,761 Total culture and recreation 26,343,011 26,343,011 24 674,222 1,668,789 Total expenditures 223,003,846 223,003,846 217,467,319 5,536 527 Deficiency of revenues over expenditures (3,903,001) (3,903,001) (4,413,221) (510,220) Other financing sources(uses): Transfers in - - - - Transfers out - - - - Lapsed encumbrances-prior year - - 683,703 683,703 Total other financing sources(uses) - - 683,703 683,703 Net change in fund balance (3,903,001) (3,903,001) (3,729,518) 173,483 Fund balances-beginning of year 3,903,001 3,903,001 3,730,851 (172,150) Fund balances-end of year $ - - 1,333 1,333 See accompanying notes to schedule of revenues,expenditures and changes in fund balance-budget and actual-general fund. 63 CITY OF OMAHA,NEBRASKA Notes to Schedule of Revenues,Expenditures, and Changes in Fund Balance—Budget and Actual—General Fund Year ended December 31,2002 (1) Budget and Budgetary Accounting The mayor is required by City charter to prepare and submit an annual budget to the City Council. A budget is prepared for the General Fund and all Special Revenue Funds,exclusive of all grant funds and the service type special assessments fund. These budgets are prepared primarily on a cash basis for revenues, and modified accrual basis for expenditures. The budget presented reflects the original budget and the revised budget prior to the closing ordinance. In addition, encumbrances are reported as expenditures for budgetary purposes. Under this system, purchase orders, contracts, and other commitments for the expenditure of funds are recorded as encumbrances in order to reserve a portion of the applicable appropriation. The legal level of control(the level on which expenditures may not legally exceed appropriations) is at the department level. Budgetary control is maintained by depailiuent/division and by the following category of expenditures: personnel services, nonpersonnel services, capital outlay, and debt service. All budget amendments must be approved by the mayor and/or City Council. Unencumbered appropriations lapse at the end of the fiscal year. Encumbered funds are carried over to the ensuing fiscal year until utilized or canceled. The City charter also requires the City Council each year to make an ad valorem tax levy for a sinking fund (Debt Service Fund)that shall provide for principal and interest payments on the general obligation bonded indebtedness of the City. Appropriations for certain Special Revenue Funds and Capital Projects Funds are controlled on a project basis and are carried forward each year until the project is completed or grant funds are expended. Budgets are also prepared for the proprietary funds as a management control device. The budgets for these funds are prepared on a revenue and expenditure basis similar to the budgets for the governmental fund types. (2) Reconciliation of Budget Basis Revenues and Expenditures to GAAP Revenue and expenditures presented on a non-GAAP budget basis of accounting differ from the revenues and expenditures presented in accordance with GAAP because of the different treatment of encumbrances and accruals(revenue recognition). In addition, Section 5.14 of the City of Omaha's Home Rule Charter requires, in relevant part,that the year end General Fund balance .... . be applied as General Fund revenue in the budget for the fiscal year two years subsequent to that fiscal year." Therefore, the amount of the General Fund carryover coming into a particular fiscal year has already been determined. Any General Fund encumbrances at the end of a fiscal year are not included in the year end General Fund balance because those encumbrances will normally need to be paid in the following fiscal year and cannot be held until the fiscal year two years subsequent to the fiscal year when the encumbrance was incurred. 64 CITY OF OMAHA,NEBRASKA Notes to Schedule of Revenues,Expenditures, and Changes in Fund Balance—Budget and Actual—General Fund Year ended December 31,2002 All General Fund encumbrances are charged to the appropriate accounts at the end of the fiscal year. This allows those funds to be kept separate from the year end General Fund balance, Therefore, when the actual payments to the vendors are required in the following fiscal year,there are General Fund monies available. A reconciliation of the differences between the budgetary versus GAAP is presented below: General Fund Budget basis: 2001 carryover to 2003 $ 2,223,541 2002 carryover to 2004 1,333 Total budget basis 2,224,874 Budget differences: Tax accrued 20,392,769 Encumbrances 2,865,736 Investment market adjustment 680,889 GAAP basis $ 26,164,268 (3) Expenditures in Excess of Budget Budgeted expenditures were exceeded in the following departments/divisions: Department/division Amount General fund: Administrative services department: Building services $ (365,442) Vehicle impound facility (80,576) Management information systems (623,673) Public safety: Fire (2,392,174) Police (382,425) Employee benefits: Fire and police pensions unfunded (144,535) Fire and police supplemental pension (115,120) Retiree health insurance (987,296) Workers'compensation claims (225.315) 65 SINGLE AUDIT SECTION Independent Auditors'Report on the Schedule of Expenditures of Federal Awards The Honorable Mayor and Members of the City Council City of Omaha,Nebraska: We have audited the basic financial statements of the City of Omaha, Nebraska (the City) as of and for the year ended December 31, 2002, as listed in the table of contents, and have issued our report thereon dated May 2, 2003 Our report on the basic financial statements was modified because during the year ended December 31, 2002, the City adopted the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements — and Management's Discussion and Analysis —for State and Local Governments, GASB No. 37.Basic Financial Statements—Management's Discussion and Analysis—for State and Local Governments: Omnibus, GASB Statement No. 38, Certain Financial Statement Note Disclosures, and GASB Interpretation No. 6, Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial Statements. These basic financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these basic financial statements based on our audit. We did not audit the financial statements of Metropolitan Entertainment and Convention Authority (MECA). Those financial statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for MECA,is based solely on the reports of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the reports of other auditors provide a reasonable basis for our opinion. Our audit was performed for the purpose of forming an opinion on the financial statements of the City taken as a whole. The accompanying schedule of expenditures of federal awards is presented for the purposes of additional analysis, as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated,in all material respects,in relation to the basic fmancial statements taken as a whole. KPMG, LLP Omaha,Nebraska May 2,2003 66 CITY OF OMAHA,NEBRASKA Schedule of Expenditures of Federal Awards Year ended December 31,2002 Federal grantor/pass-through CFDA 2002 grantor/program title Grant number number expenditures U.S.Department of Agriculture: Passed Through Nebraska Department of Education— Summer Food Service Program for Children 283002 10.559 $ 80,134 U.S.Department of Housing and Urban Development: Direct programs: Community Development Block Grants/Entitlement Grants B-99/00/0 I-MC-3 1-0002 14.218 13,686,098 Emergency Shelter Grants Program S-00/01-MC-3 1-0001 14.231 226,702 Supportive Housing Program NE 268/97/98/99/00 14.235 1,881,634 HOME Investment Partnerships Program M-95!0 I-MC/DC-31-0208 14.239 2,756,062 Economic Development Incentive B-0 I-SP-NE-0367 14.246 512,406 Lead Based Paint Hazard Control NELHB0142-999 14.900 594,472 Passed Through Nebraska Department of Education— Disaster Recovery Initiative 98-DM-002 14.218 785,878 Total U.S.Department of Housing and Urban Development 20,443,252 U.S.Department of Interior: Passed Through Nebraska State Historical Society— Historic Preservation Fund Grants-in-Aid 2000/2002 15.904 $ 47,762 U.S.Department of Justice: Direct programs: FBI,Weed&Seed — 16.000 7,233 COPS more — 16.580 574,788 Grants to Encourage Arrest Policies 97-WE-VX-0104 16.590 288,445 Local Law Enforcement Block Grants Program — 16.592 1,559,509 Public Safety Partnership and Community Policing Grants(COPS) — 16.710 1,691,423 Weed&Seed Phase VIII 1999-WS-QX-0054 16.725 17,695 Passed Through State of Nebraska Commission on Law Enforcement and Criminal Justice: 17,695 Juvenile Accountability Incentive Block Grants 01-JA-600/00-JA-602 16.523 694,526 1 Metro Drug Task Force 02 DA 312/01DA312 16.595 619,266 Total U.S.Department of Justice 5,452,885 U.S.Department of Labor: Youth Opportunity Grant AF-10550-00-60 17.249 75,392 Homeless Veterans Reintegration Project E-9-5-0-0021 17.805 58,000 Passed through State of Nebraska Department of Labor: Welfare-to-Work Grants to States and Localities A70528008150 17.253 358,068 Workforce Investment Act cluster: Passed through State of Nebraska Department of Labor: Workforce Investment/Development Act—Adult 17.258 1,572,164 Workforce Investment/Development Act—Youth 17.259 2,443,333 Workforce Investment/Development Act—Dislocated Worker 17.260 942,218 Workforce Investment/Development Act—National Emergency 17.260 411,874 Total WIA cluster 5,369,589 Total U.S.Department of Labor 5,861,049 U.S.Department of Transportation: Passed through State of Nebraska Department of Roads: Highway Planning and Construction Various 20.205 6,455,888 67 CITY OF OMAHA,NEBRASKA Schedule of Expenditures of Federal Awards Year ended December 31,2002 U.S.Environmental Protection Agency: Passed through State of Nebraska Department of Environmental Quality: Air Pollution Control Program Support BG997732A1 66.001 78,107 Federal Emergency Management Agency: Direct Program—Public Assistance Grants 83.544 560,254 Passed Through State Department of Military--- Public Assistance Grants 1190 83.544 8,626 Total Federal Emergency Management Agency 568,880 U.S.Department of Health and Human Services: Direct Program—Metropolitan Medical Response System G-9501-NE-ECUR 93.585 335,217 Office of National Drug Control Policy: Direct Programs—High Intensity Drug Trafficking Area --- 93,000 208,282 Total expenditures of federal awards 39,531,456 See accompanying independent auditors'report and notes to schedule of expenditures of federal awards. 68 CITY OF OMAHA,NEBRASKA Notes to Schedule of Expenditures of Federal Awards Year ended December 31,2002 (1) The reporting entity for the schedule of expenditures of federal awards(SEFA)is the same as that disclosed in note 1 of the notes to the financial statements. (2) The following is a list of the outstanding principal balances of Community Development Block Grant and related program loans due at December 31,2002: Target Area Program, Elderly/Handicapped, Conestoga Economic Development Fund, Rental Rehabilitation, Commercial Revitalization and Homestead: Deferred $ 20,882,945 * Repayable 4,617,146 25,500,091 Omaha Small Business Network,Inc. Small Business Expansion Program and Contractors Assistance program 578,218 * Total $ 26,078,309 The following is the outstanding principal balance of the HOME Investment Partnership Program at December 31,2002: HOME Investment Partnership Program: Deferred $ 8,806,640 * Repayable 987,315 * Total $ 9,793,955 The following is the outstanding principal balance of the HOME Investment Partnership Program at December 31,2002: Schering—Plough Animal Health Corporation $ 1,389,291 * Geographical Information System 430,502 * Monroe Lift Station 1,775,704 * Total $ 3,595,497 * The City has no continuing compliance requirements for these loans outstanding and are presented for information purposes only. (3) The City granted federal awards in the form of pass-through awards to various subrecipients during the year in the amount of$7,436,269. (4) Amounts reported in the SEFA are on the accrual basis, while the amounts reported on federal financial reports are primarily on a cash basis. 69 Independent Auditors'Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of Basic Financial Statements Performed in Accordance with Government Auditing Standards The Honorable Mayor and Members of the City Council City of Omaha,Nebraska: We have audited the basic financial statements of the City of Omaha, Nebraska (the City) as of and for the year ended December 31, 2002 and have issued our report thereon dated May 2, 2003. Our report on the basic financial statements was modified because during the year ended December 31, 2002, the City adopted the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements — and Management's Discussion and Analysis —for State and Local Governments GASB, No. 37, Basic Financial Statements — Management's Discussion and Analysis —for State and Local Governments. Omnibus; GASB Statement No. 38, Certain Financial Statement Note Disclosures, and GASB Interpretation No. 6, Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial Statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards,issued by the Comptroller General of the United States. We did not audit the financial statements of Metropolitan Entertainment and Convention Authority (MECA), which represents 100% of the total assets and revenues of the discretely presented component unit. Those financial statements were audited by other auditors whose report has been furnished to us, and our opinion on the financial statements, insofar as it relates to the amounts included for MECA, is based solely on the reports of the other auditors. Compliance As part of obtaining reasonable assurance about whether the City's basic financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants, noncompliance with which could have a direct and material effect on the determination of basic financial statement amounts. However,providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that is required to be reported under Government Auditing Standards. Internal Control over Financial Reporting In planning and performing our audit, we considered the City's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the basic financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses and, accordingly, would not necessarily disclose all reportable conditions. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no items which are considered to be material weaknesses. We noted other matters involving the internal control over financial reporting, which we have reported to management of the City in a separate letter dated May 2,2003. This report is intended solely for the information and use of the mayor, members of the City Council, management, and federal awarding agencies and pass-through entities, and is not intended to be, and should not be, used by anyone other than these specified parties. KPMG, LLP Omaha,Nebraska May 2,2003 70 Independent Auditors' Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A-133 The Honorable Mayor and Members of the City Council City of Omaha,Nebraska: Compliance We have audited the compliance of the City of Omaha, Nebraska (the City) with the types of compliance requirements described in the US. Office of Management and Budget (OMB) Circular A J33 Compliance Supplement that are applicable to its major federal programs for the year ended December 31, 2002. The City's major federal programs are identified in the summary of auditors' results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to its major federal programs is the responsibility of the City's management. Our responsibility is to express an opinion on the City's compliance based on our audit. The City's financial statements include the operations of Metropolitan Entertainment and Convention Authority (MECA). Our audit, described below,did not include the operations of MECA. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A- 133,Audits of States, Local Governments, and Non- Profit Organizations. Those standards and OMB Circular A-I 33 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the City's compliance with those requirements. As described in item 02-0 1 in the accompanying schedule of findings and questioned costs, the City did not comply with the requirements regarding eligibility and allowable costs/cost principles for Workforce Investment Act. In our opinion, except for the noncompliance described in the preceding paragraph, the City complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended December 31,2002. Internal Control over Compliance The management of the City is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the City's internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A- 133. We noted certain matters involving the internal control over compliance and operations that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to deficiencies in the design or operation of the internal control over compliance, in our judgment,could adversely affect the City's ability 71 to administer a major federal program in accordance with the applicable requirements of laws,regulations,contracts, and grants. Reportable conditions are described in the accompanying schedule of findings and questioned costs as finding 02-01. A material weakness is a condition in which the design or operation of one or more internal control components does not reduce to a relatively low level the risk that noncompliance with the applicable requirements of laws, regulations, contracts, and grants that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over compliance would not necessarily disclose all mailers in the internal control that might be material weaknesses.However,we consider finding 02-01 to be a material weakness. This report is intended solely for the information and use of the mayor, members of the City Council, management, and federal awarding agencies and pass-through entities, and is not intended to be and should not be used by anyone other than these specified parties. KPMG, LLP Omaha,Nebraska May 2,2003 72 CITY OF OMAHA,NEBRASKA Schedule of Findings and Questioned Costs Year ended December 31,2002 (1) Summary of Auditors' Results (a) The type of report issued on the financial statements: Unqualified opinion (b) Reportable conditions in internal control were disclosed by the audit of the financial statements: None reported Material weaknesses:No (c) Noncompliance which is material to the financial statements: No (d) Reportable conditions in internal control over major programs: Yes Material weaknesses: Yes (e) The type of report issued on compliance for major programs: Qualified opinion (f) Any audit findings which are required to be reported under Section 510(a) of OMB Circular A- 133: Yes (g) Major programs: Community Development Block Grant (14.218); Home Program (1 4.239) Juvenile Accountability Incentive Block Grant(16.523); Work Force Investment Act Cluster(1 7.258, 1 7.259,and 17.260) (h) Dollar threshold used to distinguish between Type A and Type B programs: $1,017,954 (i) Auditee qualified as a low-risk auditee under Section 530 of OMB Circular A-133:No (2) Findings Related to the Financial Statements Reported in Accordance with Government Auditing Standards None (3) Findings and Questioned Costs Relating to Federal Awards Finding No. 02-01 U.S.Department of Labor Workforce Investment Act Cluster(CFDA 17.258, 17.259, and 17.260). Compliance Requirements Allowable costs/Allowable activities and eligibility Criteria According to OMB Circular A-I 33, the City has the responsibility to ensure compliance with federal requirements through the use of sound internal controls. CITY OF OMAHA,NEBRASKA Schedule of Findings and Questioned Costs Year ended December 31,2002 Situation Payments were made for unallowable activities and noneligible participants. Condition During 2002, the Workforce Development office noted that there was not supporting information for participants working in the program. The City performed procedures to determine if participants were actually in the program. It was believed that a career specialist was forging signatures and paying fictitious participants. Context The program did not have segregation of duties in place to monitor the payment of payroll checks for the Welfare-to-Work program. Cause Individual responsible for program activities had access to cash payments. Effect The program is not in compliance and does not have internal controls over allowable costs/activities and eligibility. Questioned Costs: $36,000 Recommendation We recommend Workforce Development implement segregation of duties with regards to the collection of timecards and the payment of payroll checks to participants. 74 [THIS PAGE LEFT BLANK INTENTIONALLY.] APPENDIX C FORM OF CONTINUING DISCLOSURE UNDERTAKING c-i FORM OF CONTINUING DISCLOSURE UNDERTAKING Following is the text of Article XII of the Convention Center Bonds Ordinance, comprising the City's continuing disclosure undertaking pursuant to Securities and Exchange Commission Rule 15c-2-12(b)(5)(i). The City's undertaking with respect to the Various Purpose Bonds, set forth in Section 11 of the Various Purpose Bond Ordinance, is substantially identical. The City does hereby covenant and agree and enter into a written undertaking for the benefit of the holders and Beneficial Owners of the Bonds in accordance with Section(b)(5)(i) of Securities and Exchange Commission Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (17 C.F.R. § 240.15c2-12) (the "Rule"). Capitalized terms used in this Article XII and not otherwise defined in this Ordinance shall have the meanings assigned such terms below. It being the intention of the City that there be full and complete compliance with the Rule, this Article XII shall be construed in accordance with the written interpretative guidance and no-action letters published from time to time by the Securities and Exchange Commission and its staff with respect to the Rule. The City undertakes to provide the following information as provided in this Article XII: (a) Annual Financial Information; (b) Audited Financial Statements, if any;and (c) Material Event Notices. The City shall while any Bonds are outstanding provide the Annual Financial Information on or before the date which is 270 days after the end of each fiscal year of the City(the "Report Date") to each then existing NRMSIR and the SID, if any. The City shall include with each submission of Annual Financial Information a written representation to the effect that the Annual Financial Information is the Annual Financial Information required by this Article XII and that it complies with the applicable requirements of this Article XII and that it has been provided to each then existing NRMSIR and the SID, if any. If the City changes its fiscal year, it shall provide written notice of the change of fiscal year to each then existing NRMSIR or the Municipal Securities Rulemaking Board (the "MSRB") and the SID, if any. It shall be sufficient if the City provides to each then existing NRMSIR and the SID, if any, any or all of the Annual Financial Information by specific reference to documents previously provided to each NRMSIR and the SID, if any, or filed with the Securities and Exchange Commission and, if such a document is a final official statement within the meaning of the Rule,available from the MSRB. If not provided as part of the Annual Financial Information, the City shall provide the Audited Financial Statements when and if available while any Bonds are outstanding to each then existing NRMSIR and the SID,if any. If a Material Event occurs while any Bonds are Outstanding, the City shall provide a Material Event Notice in a timely manner to each then existing NRMSIR or the MSRB and the SID, if any. Each Material Event Notice shall be so captioned and shall prominently state the date, title and CUSIP numbers of the Bonds. The City shall provide in a timely manner to each then existing NRMSIR or the MSRB and to the SID, if any, notice of any failure by the City while any Bonds are outstanding to provide to the NRMSIRs and the SID, if any,Annual Financial Information on or before the Report Date. The following are the definitions of the capitalized terms used in this Article XII and not otherwise defined in this Ordinance: C-2 "Annual Financial Information" means the financial information or operating data with respect to the City,provided at least annually, of the type included in Appendix B of the final official statement with respect to the Bonds. The financial statements included in the Annual Financial Information shall be prepared in accordance with generally accepted accounting principles ("GAAP") for governmental units as prescribed by the Government Accounting Standards Board("GASB"). Such financial statements may,but are not required to be,Audited Financial Statements. "Audited Financial Statements" means the City's annual financial statements, prepared in accordance with GAAP for governmental units as prescribed by GASB, which financial statements shall have been audited by such auditor as shall be then required or permitted by the laws of the State of Nebraska. "Material Event"means any of the following events,if material,with respect to the Bonds: (a) Principal and interest payment delinquencies; (b) Non-payment related defaults; (c) Unscheduled draws on debt service reserves reflecting financial difficulties; (d) Unscheduled draws on credit enhancements reflecting financial difficulties; (e) Substitution of credit or liquidity providers, or their failure to perform; (f) Adverse tax opinions or events affecting the tax-exempt status of the Bonds; (g) Modifications to rights of Bondholders; (h) Bond calls; (i) Defeasances; (j) Release,substitution or sale of property securing repayment of the Bonds;and (k) Rating changes. "Material Event Notice"means written or electronic notice of a Material Event. "NRMSIR" means a nationally recognized municipal securities information repository, as recognized from time to time by the Securities and Exchange Commission by no-action letter for the purposes refereed to in the Rule the NRMSIRs as of the date of this Ordinance are: Bloomberg Municipal Repository 100 Business Park Drive Skillman,NJ 08558 Internet: www.bloomberg.com/markets/muni_contactinfo.html E-mail: Munis@Bloomberg.com Telephone: (609)279-3225 Facsimile: (609)279-5962 C-3 DPC Data Inc. One Executive Drive Fort Lee,NJ 07024 Internet: www.dpcdata.com E-mail: nrmsir@dpcdata.com Telephone: (201)346-0701 Facsimile: (201)947-0107 FT Interactive Data Attention: NRMSIR 100 William Street New York,NY 10038 Internet: www.interactivedata.com E-mail: NRMSIR@FTID.com Telephone: (212)771-6999 Facsimile: (212)771-7390(Secondary Market Information) Facsimile: (212)771-7391 (Primary Market Information) Standard&Poor's Securities Evaluations,Inc. 45th Floor 55 Water Street New York,NY 10041 Internet: www.jjkenny.com/jjkenny/pser_descrip_data_rep.html E-mail: nrmsir_repository@sandp.com Telephone: (212)438-4595 Facsimile: (212)438-3975 The current listing of NRMSIRs may be found on the S.E.C. website at http://www.sec.gov/info/municipal/nrmsir.html. "SID" means a state information depository as operated or designated by the State of Nebraska and recognized by the Securities and Exchange Commission by no-action letter as such for the purposes referred to in the Rule. As of the date of this Ordinance,there is not a SID in the State of Nebraska. Unless otherwise required by law and subject to technical and economic feasibility, the City shall employ such methods of information transmission as shall be requested or recommended by the designated recipients of the City's information. The continuing obligation hereunder of the City to provide Annual Financial Information,Audited Financial Statements, if any, and Material Event Notices shall terminate immediately once the Bonds no longer are outstanding. This Article XII, or any provision hereof, shall be null and void in the event that the City obtains an opinion of nationally recognized bond counsel to the effect that those portions of the Rule which require this Article XII, or any such provision, are invalid, have been repealed retroactively or otherwise do not apply to the Bonds,provided that the City shall have provided notice of such delivery and the cancellation of this Article XII to each then existing NRMSIR or the MSRB and the SID, if any. This Article XII may be amended,without the consent of the Bondholders, but only upon the City obtaining an opinion of nationally recognized bond counsel to the effect that such amendment, and giving effect thereto, will not adversely affect the compliance of this Article XII and by the City with the Rule, provided that the City shall have provided notice of such delivery and of the amendment to each then existing NRMSIR or the MSRB and the SID, if any. Any such amendment shall satisfy, unless otherwise permitted by the Rule,the following conditions: (a) The amendment may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law or change in the identity, nature or status of the obligated person or type of business conducted; C-4 (b) This Article XII, as amended, would have complied with the requirements of the Rule at the time of the primary offering,after taking into account any amendments or interpretations of the Rule,as well as any change in circumstances; and (c) The amendment does not materially impair the interests of Bondholders, as determined either by parties unaffiliated with the City (such as nationally recognized bond counsel), or by approving vote of Bondholders pursuant to the terms of the Ordinance at the time of the amendment. The initial Annual Financial Information after the amendment shall explain, in narrative form, the reasons for the amendment and the effect of the change, if any, in the type of operating data or financial information being provided. Any failure by the City to perform in accordance with this Article XII shall not constitute an Event of Default with respect to the Bonds. If the City fails to comply herewith, any Bondholder or beneficial owner may take such actions as may be necessary and appropriate, including seeking specific performance by court order, to cause the City to comply with its obligations hereunder. C-5 APPENDIX D FORM OF OPINION OF BOND COUNSEL REGARDING CONVENTION CENTER BONDS D-1 APPENDIX D KUTAK ROCK LLP FORM OF OPINION OF BOND COUNSEL DRAFT 02/12/2004 [CLOSING DATE] City Council of the City Kirkpatrick,Pettis, Smith,Polian Inc. of Omaha,Nebraska Suite 400 Omaha/Douglas Civic Center 10250 Regency Circle 1819 Farnam Street Omaha,NE 68114 Omaha,NE 68183 Bear, Stearns &Co. Inc. 245 Park Avenue, 10th Floor New York,NY 10167 $205,875,000 City of Omaha,Nebraska General Obligation Refunding Bonds (City of Omaha Convention Center Project) Series 2004 Ladies and Gentlemen: We have acted as Bond Counsel in connection with the issuance and sale by the City of Omaha, a municipal corporation in the State of Nebraska, of $205,875,000 aggregate principal amount of General Obligation Refunding Bonds (City of Omaha Convention Center Project), Series 2004 (the "Bonds"). The Bonds are issuable as fully registered Bonds without coupons dated as of April 1, 2004 in the denomination of$5,000 or any integral multiple thereof, bearing interest payable semiannually on April 1 and October 1 of each year commencing October 1, 2004, at the rates per annum set forth in the schedule below and maturing on April 1, in each of the years and in the principal amounts as follows: Maturity Date Principal Interest Maturity Date Principal Interest (April 1) Amount Rate (April 1) Amount Rate 2012 $8,430,000 5.25% 2020 $12,830,000 5.25% 2013 8,885,000 5.25% 2021 13,520,000 5.25% 2014 9,365,000 5.25% 2022 14,250,000 5.25% 2015 9,870,000 5.25% 2023 15,020,000 5.25% 2016 10,400,000 5.25% 2024 15,830,000 5.25% 2017 10,960,000 5.25% 2025 16,680,000 5.25% 2018 11,550,000 5.25% 2026 17,580,000 5.25% 2019 12,175,000 5.25% 2027 18,530,000 5.25% The Bonds recite that they are issued, and the Ordinance (the "Ordinance") pursuant to which the Bonds are issued was passed, by the City of Omaha, under and pursuant to the Constitution and laws of the State of Nebraska, including in particular Sections 10-142 and 13- D-2 an d Reissue Revised Statutes of Nebraska, as amended, a d the Home Rule Charter of 1956 of the City of Omaha, as amended (the "Charter") for the purpose of refunding the $198,000,000 outstanding aggregate principal amount City of Omaha, Nebraska General Obligation Bonds (City of Omaha Convention Center/Arena Project) Series A of 2000 and Series B of 2000 the proceeds of which were applied for the purpose of paying all or a part of the cost of certain capital items relating to the acquisition, constructing, improving, equipping and furnishing of the convention center and arena facilities and appurtenant public facilities (the "Project") located in downtown Omaha,Nebraska. We have examined the Constitution and laws of the State of Nebraska, the Charter, the Ordinance, the Agreement and Lease Regarding Omaha Convention Center/Arena dated August 25, 2000, as amended (the "Lease Agreement") between the City and Metropolitan Entertainment Convention Authority ("MECA"), a Nebraska nonprofit corporation qualified under the Internal Revenue Code of 1986, as amended (the "Code") as a Section 501(c)(3) organization, certified copies of proceedings of the City Council of the City of Omaha authorizing the issuance of the Bonds, a copy of an executed bond of said issue and such other documents, records, certificates and opinions as we have deemed relevant and necessary in rendering this opinion. The City has covenanted in the Ordinance, and MECA has covenanted in the Lease Agreement, to comply with all necessary provisions of the Code, to preserve the exclusion of interest on the Bonds from gross income for federal income tax purposes. Noncompliance by the City or by MECA with such restrictions may cause the interest on the Bonds to be subject to federal income taxation retroactive to their date of issue. In our opinion the Bonds have been authorized and issued in accordance with the Constitution and laws of the State of Nebraska and the Charter of the City of Omaha, and constitute valid and legally binding obligations of the City, and the City has the power and is obligated to levy ad valorem taxes for the payment of the Bonds and the interest thereon upon all the property within the City of Omaha subject to taxation by the City of Omaha without limitation as to rate or amount. The Bonds and the interest thereon shall not constitute nor give rise to an indebtedness, obligation or pecuniary liability of the State of Nebraska nor a charge against the general credit,revenue or taxing power of the State of Nebraska. The rights of the owners of the Bonds and the enforceability thereof may be subject to valid bankruptcy, insolvency,reorganization,moratorium and other laws for the relief of debtors. It is also our opinion that, assumingcompliance bythe Cityof Omaha and MECA with p p of this letter,covenants referred to in the fifth paragraph the interest on the Bonds is excluded from gross income for federal income tax purposes and is not a special preference item for purposes of the federal alternative minimum tax imposed on individuals and corporations. Interest on the Bonds, however, must be included in the "adjusted current earnings" of certain corporations (i.e., alternative minimum taxable income as adjusted for certain items, including those items that would be included in the calculation of a corporation's earnings and profits under Subchapter C of the Code) and such corporations are required to include in the calculation of alternative minimum taxable income 75% of the excess of each such corporation's adjusted current earnings (which includes tax-exempt interest) over its alternative minimum taxable income (determined without regard to this adjustment and prior to reduction for certain net operating losses). D-3 The accrual or receipt of interest on the Bonds may otherwise affect the federal income tax liability of the recipient. The extent of these other tax consequences will depend upon the recipient's particular tax status or other items of income or deduction. We express no opinion regarding any such consequences. Purchasers of the Bonds, particularly purchasers that are corporations (including S corporations and foreign corporations operating branches in the United States), property or casualty insurance companies, banks, thrifts or other financial institutions or certain recipients of Social Security or Railroad Retirement benefits, individuals who itemize deductions or taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax-exempt obligations are advised to consult their tax advisors as to the tax consequences of purchasing or holding the Bonds. It is further our opinion that, under the existing laws of the State of Nebraska, the Bonds, together with interest thereon and income therefrom, are exempt from all Nebraska state income taxes. We express no opinion as to the title to, or the sufficiency in the Ordinance or otherwise of the description of, the Project, or the priority of any liens, charges or encumbrances on the Project. Very truly yours, [To be signed and delivered on the closing date by Kutak Rock LLP] D-4 APPENDIX E FORM OF OPINION OF BOND COUNSEL REGARDING VARIOUS PURPOSE BONDS E-1 APPENDIX E FORM OF OPINION OF BOND COUNSEL [Letterhead of Kutak Rock LLP] , 2004 City Council of the City of Omaha,Nebraska Omaha/Douglas Civic Center 1819 Farnam Street Omaha,NE 68183 $31,660,000 City of Omaha,Nebraska Various Purpose and Refunding Bonds Series of 2004 Ladies and Gentlemen: We have acted as Bond Counsel in connection with the issuance and sale by the City of Omaha, a municipal corporation in the State of Nebraska, of$31,660,000 aggregate principal amount of Various Purpose and Refunding Bonds, Series of 2004 (the "Bonds"). The Bonds are issuable as fully registered Bonds without coupons dated as of April 1, 2004 in the denomination of$5,000 or any integral multiple thereof, bearing interest payable semiannually on April 1 and October 1 of each year, commencing October 1, 2004, at the rates per annum set forth in the schedule below. The Bonds mature serially in numerical order on April 1, in each of the years and in the principal amounts as follows: Maturity Date Principal Interest Maturity Date Principal Interest (April 1) Amount Rate (April 1) Amount Rate 2005 $2,025,000 2.000% 2015 $ 1,320,000 4.500% 2006 2,670,000 2.000% 2016 1,345,000 4.500% 2007 2,225,000 2.250% 2017 1,380,000 4.500% 2008 2,475,000 2.375% 2018 1,520,000 4.500% 2009 1,915,000 2.625% 2019 1,480,000 4.500% 2010 1,375,000 2.750% 2020 1,255,000 4.500% 2011 1,400,000 3.000% 2021 1,280,000 4.000% 2012 1,425,000 3.125% 2022 1,755,000 4.000% 2013 1,455,000 3.375% 2023 1,190,000 4.125% 2014 1,470,000 3.500% 2024 700,000 4.125% The Bonds maturing April 1, 2015 and thereafter are subject to redemption at the option of the City of Omaha at any time on or after April 1, 2014, upon the terms and at the prices set forth therein. The Bonds recite that they are issued by the City of Omaha to provide for (a)payment of the cost of E-2 refunding certain outstanding general obligation indebtedness of the City, and (b)payment of the cost of certain (i) streets and highways, (ii) sewers, (iii)public facilities, (iv)public safety equipment and facilities and (v)parks and recreation facilities, in each case under and pursuant to and in full conformity with the Constitution and Statutes of the State of Nebraska and the Charter of the City of Omaha, and pursuant to and in full compliance with the proceedings of the City Council of the City of Omaha duly enacted and adopted. The City has covenanted in the ordinance pursuant to which the Bonds have been issued to comply with all necessary provisions of the Internal Revenue Code of 1986, as amended (the "Code"), to preserve the exclusion of interest on the Bonds from gross income for federal income tax purposes. Noncompliance by the City with such restrictions may cause the interest on the Bonds to be subject to federal income taxation retroactive to their date of issue. We have examined the Constitution and Statutes of the State of Nebraska, the Charter of the City of Omaha, certified copies of proceedings of the City Council of the City of Omaha authorizing the issuance of the Bonds, and an executed bond of said issue. In our opinion the Bonds have been authorized and issued in accordance with the Constitution and Statutes of the State of Nebraska and the Charter of the City of Omaha, and constitute valid and legally binding obligations of the City, and the City has the power and is obligated to levy ad valorem taxes for the payment of the Bonds and the interest thereon upon all the property within the City of Omaha subject to taxation by the City of Omaha without limitation as to rate or amount. The rights of the owners of the Bonds and the enforceability thereof may be subject to valid bankruptcy, insolvency,reorganization,moratorium and other laws for the relief of debtors. It is also our opinion that, assuming compliance by the City of Omaha with the covenant referred to in the third paragraph of this letter, the interest on the Bonds is excluded from gross income for federal income tax purposes and is not a special preference item for purposes of the federal alternative minimum tax imposed on individuals and corporations. Interest on the Bonds, however, must be included in the "adjusted current earnings" of certain corporations (i.e., alternative minimum taxable income as adjusted for certain items, including those items that would be included in the calculation of a corporation's earnings and profits under Subchapter C of the Code) and such corporations are required to include in the calculation of alternative minimum taxable income 75% of the excess of each such corporation's adjusted current earnings (which includes tax-exempt interest) over its alternative minimum taxable income (determined without regard to this adjustment and prior to reduction for certain net operating losses). The accrual or receipt of interest on the Bonds may otherwise affect the federal income tax liability of the recipient. The extent of these other tax consequences will depend upon the recipient's particular tax status or other items of income or deduction. We express no opinion regarding any such consequences. Purchasers of the Bonds, particularly purchasers that are corporations (including S corporations and foreign corporations operating branches in the United States), property or casualty insurance companies, banks, thrifts or other financial institutions, certain recipients of Social Security or Railroad Retirement benefits, taxpayers otherwise entitled to claim the earned income credit or taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax-exempt obligations are advised to consult their tax advisors as to the tax consequences of purchasing or holding the Bonds. It is further our opinion that, under the existing laws of the State of Nebraska, interest income on the Bonds is exempt from Nebraska state income taxation as long as it is exempt for purposes of the federal income tax. Very truly yours, E-3 [To be signed and delivered at closing by Kutak Rock LLP.] E-4 APPENDIX F SUMMARY OF REFUNDING BOND ORDINANCE F-1 APPENDIX F SUMMARY OF REFUNDING BOND ORDINANCE The following is a general summary of certain provisions in the ordinance of the City of Omaha under which the Convention Center Bonds (referred to in this summary as the "Bonds) will be issued (the "Ordinance"). Such summary is not to be considered a full statement of the terms of the Ordinance and, accordingly, is qualified by reference thereto and is subject to the full text thereof Copies of the Ordinance may be obtained from the City. DEFINITIONS As used herein,unless the context otherwise requires: "Act" means, collectively, the Home Rule Charter, the Convention Center Act and the general obligation bond ballot proposition approved at the Special City Election of May 9,2000,by the electors of the City. "Amortization Requirements" means, for any Bond Year with respect to any Term Bonds, the respective amounts which are required to be deposited to the credit of the Redemption Account in each Bond Year for redeeming and paying at maturity such Term Bonds as determined by the Council in the Bond Resolution. The Amortization Requirements for the Term Bonds shall begin in the Bond Year designated by the Bond Resolution and shall end not later than the Bond Year immediately preceding the Bond Year in which such Term Bonds are stated to mature. If during any Bond Year the total principal amount of Term Bonds retired by redemption or called for redemption under the provisions of Section 5.03 of the Ordinance shall be in excess of the Amortization Requirements for the Term Bonds for such Bond Year, then at the close of such Bond Year the amount of the Amortization Requirements for the Term Bonds shall be reduced for any subsequent Bond Year or Bond Years in amounts aggregating the amount of such excess, as shall be determined by the Trustee. "Bond Counsel" means counsel nationally recognized on the subject of, and qualified to render approving legal opinions on the issuance of,municipal bonds. "Bond Registrar" means First National Bank of Omaha, its successors or assigns, which shall perform such functions required of the Bond Registrar by Article II of the Ordinance and the Trustee Agreement attached thereto as Exhibit B. "Bond Resolution" means the resolution of the Council adopted to implement the Ordinance by approving the final interest rate or rates, redemption, maturity and other terms of the Bonds, the redemption, defeasance and refunding of the Prior Bonds,and the sale thereof to the original purchasers thereof. "Bonds" means, collectively, the refunding bonds issued under the provisions of Section 2.06 of the Ordinance and the Bond Resolution, and shall be in substantially the form attached thereto as Exhibit A, as such may be modified by the Bond Resolution. "Bond Service Account" means the Bond Service Account, a special account created and designated by Section 5.01 of the Ordinance. "Bond Year"means the 12-month period designated by the Bond Resolution. "Charter" means the Home Rule Charter of 1956 of the City of Omaha,as amended. "City" means the City of Omaha,Nebraska, a municipal corporation of the State of Nebraska. F-2 "City Attorney" means the City Attorney of the City, or his or her designee, or the officer or officers succeeding to his or her principal functions. "Clerk" means the City Clerk of the City or any Deputy Clerk of the City or his or her designee or the officer or officers succeeding to his or her principal functions. "Code" means the Internal Revenue Code of 1986, as amended, and any regulations of the United States Treasury Department promulgated thereunder. "Convention Center" means that portion of the Project that is an "eligible facility", as defined by the Convention Center Act. "Convention Center Act" means the Convention Center Facility Financing Assistance Act, Sections 13- 2601 to 13-2612, inclusive,Reissue Revised Statutes of Nebraska, 2002 Supp., as amended from time to time. "Convention Center Support Fund" means the Convention Center Support Fund created pursuant to the Convention Center Act. "Council" means the City Council of the City of Omaha, Nebraska or the council or body in which the general legislative powers of the City shall, from time to time,be vested. "Daily Newspaper" means a newspaper published in the English language on at least five business days in each calendar week. "Determination of Taxability" means (a) a final decree or judgment of any federal court or a final action of the Internal Revenue Service or the United States Treasury Department determining or (b) an opinion of Bond Counsel concluding,that interest paid or payable on any Bonds is or was includible in the gross income of an owner of the Bonds for federal income tax purposes under the Code (other than an owner who is a Substantial User or Related Person. No such decree,judgment, action or opinion under(a)or(b) above will be considered final for this purpose,however,until the City has been afforded the opportunity to contest the same, either directly or in the name of any owner of the Bonds, and until conclusion of any appellate review if sought. "Determination of Taxability" shall not include the application of any alternative minimum tax, any branch profits tax or any collateral governmental tax on an owner due to interest received from any of the Bonds. "Escrow Agent" means First National Bank of Omaha, or its successor or assigns, which shall perform such functions required of the Escrow Agent by the Ordinance and the Escrow Agreement attached thereto as Exhibit C. "Escrow Agreement" means the escrow agreement between the City and First National Bank of Omaha, as Escrow Agent,in substantially the form attached thereto as Exhibit C. "Finance Director" or"Director"means the Finance Director or the Acting Finance Director of the City, or his or her designee,or the officer or officers succeeding to his or her principal functions. "Government Obligations" means direct obligations of, or obligations the full and timely payment of the principal of and the interest on which are unconditionally guaranteed by,the United States of America. "Holder," "owner," "Bondholder" or "registered owner" means the person who shall appear from time to time on the registration books of the City maintained with the Bond Registrar as the owner of a particular Bond. "Insurer" means the issuer of a municipal bond new issue insurance policy, if any, and all assignees and all successors thereto,with regard to the Bonds as designated by the Bond Resolution. "Investment Instructions" means instructions pursuant to Section 149 of the Code prepared by Bond Counsel addressed to the City with regard to the investment of funds held in the funds and accounts created by the Ordinance. F-3 "Investments" means any of the following which at the time are legal investments under the laws of the State of Nebraska and the Charter of the City for the moneys held hereunder then proposed to be invested therein: (a)Government Obligations; (b) obligations of the Federal Land Bank,Federal Home Loan Banks,Federal National Mortgage Association, Federal Intermediate Credit Banks, Federal Banks for Cooperatives, Government National Mortgage Association, International Bank for Reconstruction and Development and Asian Development Bank and direct and general obligations of any agencies of the United States of America not included in the foregoing listing; (c) direct and general full faith and credit obligations of the State of Nebraska or any political unit in the State of Nebraska, provided that at the time of purchase, such obligations are rated in either of the two highest rating categories (without regard to gradation or numerical modifier) by two nationally recognized bond rating agencies and are legal investments for fiduciaries in Nebraska; (d) obligations of savings and loan associations to the extent that the same are insured by the Federal Deposit Insurance Corporation; (e) shares of open-end, diversified investment companies which invest solely in securities described in clause (a) above; and (f) certificates of deposit of, or guaranteed investment contracts with, any bank, trust company or savings and loan association, if such certificates of deposit or guaranteed investment contracts are collaterally secured by securities of the type described in clauses (a), (b)and(c)above held by another bank(including a Federal Reserve Bank), trust company or savings and loan association, as escrow agent or custodian, of a market value not less than the amount of the certificates of deposit or guaranteed investment contracts so secured,including interest. "Mayor" means the Mayor or Acting Mayor of the City, or his or her designee, or the officer or officers succeeding to his or her principal functions. "MECA" means Metropolitan Entertainment & Convention Authority, a Nebraska nonprofit corporation qualified under the Code as a Section 501(c)(3)organization. "MECA Agreement" means that certain Agreement and Lease Regarding Omaha Convention Center/Arena dated August 25,2000,as amended,between the City and MECA. "Outstanding"means, when used with respect to the Bonds, all Bonds theretofore delivered except: (a) Bonds theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (b) Bonds deemed to have been paid in accordance with Articles III or XI of the Ordinance;and (c) Bonds in exchange for or in lieu of which other Bonds have been executed and delivered under the Ordinance. "Paying Agent" means First National Bank of Omaha, its successors or assigns, which shall perform the functions of Paying Agent specified by the Ordinance pursuant to the Ordinance and the Trustee Agreement attached thereto as Exhibit B. "Principal and Interest Requirements," as applied to the Bonds, means, for any particular Bond Year, the respective amounts which are required by the Ordinance or the Bond Resolution to provide: (a) for paying the interest due during such Bond Year on all such Bonds then Outstanding (which amount shall be calculated at a maximum interest rate if so provided by the Ordinance or the Bond Resolution); (b) for paying the principal of Bonds then Outstanding and maturing in such Bond Year; and (c) the Amortization Requirements, if any, for all Term Bonds, if any, then Outstanding for such Bond Year. "Principal Office" of the Trustee,the Bond Registrar or any Paying Agent means the office at which,at the time in question, its corporate trust business is principally conducted. F-4 "Prior Bonds" means, collectively, the $119,210,000 City of Omaha, Nebraska General Obligation Bonds (City of Omaha Convention Center/Arena Project) Series A of 2000 and the $78,790,000 City of Omaha, Nebraska General Obligation Bonds(City of Omaha Convention Center/Arena Project)Series B of 2000. "Prior Ordinance"means Ordinance No. 35397 of the City. "Project" means the design, acquisition, construction, extension, enlargement, remodeling, repair, improvement, installation, equipping and furnishing of the real and personal property, facilities, machinery and equipment of the convention center and the arena facilities, including public facilities appurtenant thereto,located in or near downtown Omaha,Nebraska. "Project Manager"means MECA. "Rebate Fund" means that special fund required to be established and maintained by the City pursuant to Section 5.08 of the Ordinance. "Redemption Account" means the Redemption Account, a special account created and designated by Section 5.01 of the Ordinance. "Related Person"means "related person" as defined in Section 147(a)(2)of the Code. "Serial Bonds" means the Bonds which shall be stated to mature in annual installments so designated in the Bond Resolution. "Series"means the each individual series of the Bonds or the Prior Bonds, as the case may be, including,in particular,the Series A Prior Bonds and the Series B Prior Bonds. "Series A Prior Bonds" means the City of Omaha, Nebraska General Obligation Bonds (City of Omaha Convention Center/Arena Project) Series A of 2000, to be advance refunded with a portion of the proceeds of the Bonds. "Series A Project" means that portion of the Project which is "eligible facilities" as defined by the Convention Center Act,to which the net proceeds of the Series A Prior Bonds were allocated. "Series B Prior Bonds" means the City of Omaha, Nebraska General Obligation Bonds (City of Omaha Convention Center/Arena Project) Series B of 2000, to be current refunded and redeemed with a portion of the proceeds of the Bonds. "Series B Project" means that portion of the Project, which is not eligible facilities as defined by the Convention Center Act,to which the net proceeds of the Series B Prior Bonds were allocated. "Sinking Fund" means that special fund required to be established and maintained by the City pursuant to Section 5.01 of the Ordinance. "Substantial User"means "substantial user"as that term is used in Section 147(a)(1)of the Code. "Term Bonds"means Bonds, if any,so designated in the Bond Resolution. "Trustee" means First National Bank of Omaha, or its successor or assigns, which shall perform such functions required of the Trustee by the Ordinance and the Trustee Agreement attached thereto as Exhibit B. "Trustee Agreement" means the agreement between the City and First National Bank of Omaha, as Trustee, Paying Agent and Bond Registrar,in substantially the form attached thereto as Exhibit B. F-5 SUMMARY OF CERTAIN PROVISIONS OF THE ORDINANCE PLEDGE OF SECURITY The principal of, premium, if any, and the interest on all Bonds are payable solely from the Sinking Fund, and all of the covenants, agreements and provisions of the Ordinance are for the benefit and security of all and singular the present and future registered owners of the Bonds so issued or to be issued, without preference, priority or distinction as to lien or otherwise, except as otherwise provided in the Ordinance, of any one Bond over any other Bond by reason of priority in the issue, sale or negotiation thereof,or otherwise. The City covenants in the Ordinance that the City is held and firmly bound, that its full faith and credit and taxing power are thereby pledged for the prompt payment of the principal sum of each Bond thereby authorized and the interest accruing thereon at the times and in the amounts required and that the City of Omaha will levy and collect such taxes as may be necessary for the payment of the principal of and interest on the Bonds as the same respectively become due. The Bonds and the interest thereon shall not constitute nor give rise to an indebtedness, obligation or pecuniary liability of the State of Nebraska nor a charge against the general credit, revenue or taxing power of the State of Nebraska. The City covenants in the Ordinance that, except as otherwise permitted by the Ordinance, it will not create or permit to be created any pledge (other than pledges existing on the date thereof)ranking equally with or prior to the pledge securing the Bonds made by the next preceding sentence. The City is authorized and directed by the Ordinance to (i)take such actions in accordance with the Convention Center Act to qualify for and receive disbursements thereunder from the Convention Center Support Fund in the maximum aggregate principal amount as provided by the Convention Center Act and to deposit any such disbursements as provided by the Ordinance, and(ii)assess, charge, collect and receive such hotel tax,parking fees and other fees, taxes and charges as are contemplated by the Act and the MECA Agreement and to deposit any such fees, taxes and charges into the Sinking Fund for application to the Principal and Interest Requirements of the Bonds. SINKING FUND There are two separate accounts created in the Sinking Fund designated the "Bond Service Account" and"Redemption Account,"respectively. Within the Bond Service Account and the Redemption Account there are created two subaccounts, respectively: the "Convention Center Bond Service Subaccount" and the "Convention Center Redemption Subaccount". The Sinking Fund, including the Accounts and Subaccounts therein, are to be established with and held by the Trustee. The moneys in each of said Fund and Accounts shall be held by the Trustee in trust and applied as provided in the Ordinance with regard to each such Fund and Account and, pending such application, shall be subject to a pledge in favor of the registered owners of the Bonds issued and Outstanding under the Ordinance and for the further security of such holders until paid out or transferred as herein provided. On or before the twenty-fifth day of each month, commencing with the first month after the delivery of Bonds under the provisions of the Ordinance, the Finance Director shall deposit with the Trustee for deposit in the Sinking Fund, from moneys held in the City of Omaha Bond Sinking Fund, an amount sufficient, together with amounts previously deposited, to meet the amounts required to be deposited by the Trustee in clauses (a)and(b)of this Paragraph,to the credit of the following Accounts in the following order: (a) To the credit of the Bond Service Account, one-sixth of the amount of interest payable on the Bonds on the interest payment date next succeeding the deposit date (less any amount of accrued interest from the proceeds of any Bonds which is available for such interest payment), and, beginning in the year designated in the Bond Resolution, one-twelfth of the next maturing installment of principal on all Serial Bonds then Outstanding;and F-6 (b) To the credit of the Redemption Account, pro rata in proportion to the respective Amortization Requirement, one-twelfth of the amount equal to the principal amount of the Term Bonds, respectively, then Outstanding required to be retired, in satisfaction of the Amortization Requirements, if any, on the next succeeding principal payment dates, plus the premiums, if any, on the principal amount of Term Bonds which would be payable on the next succeeding principal payment dates, if such principal amount of Term Bonds were to be redeemed prior to their respective maturities from moneys held for the credit of the Sinking Fund; provided that a shortfall in any monthly payment contemplated by clauses (a) and(b) shall not constitute a default under the Ordinance by the City if there is on deposit in each such Account on or before the twenty-fifth day of each month next preceding the month in which occurs an interest or principal payment date the full amount of interest, principal and redemption price due and payable from such Subaccount on such interest or principal payment date. APPLICATION OF MONEYS IN BOND SERVICE ACCOUNT. On each Bond interest or principal payment date, the Trustee shall withdraw from the Bond Service Account and deposit with the Paying Agent in trust (a)the amount required for paying interest upon such Bonds as such interest becomes due and(b)the amount of the principal of all Bonds as such principal becomes due. If the balance in the Bond Service Account on the twenty-fifth day of the month next preceding a payment date is insufficient to pay interest or principal becoming due on the Bonds on such payment date, the Trustee shall notify the Finance Director of the amount of the deficiency, and the City shall transfer to the Trustee for deposit into the Bond Service Account such amount as may be necessary to remedy such deficiency. APPLICATION OF MONEYS IN REDEMPTION ACCOUNT. Moneys held for the credit of the Redemption Account shall be applied to the retirement of the Term Bonds of the related Series issued under the provisions of the Ordinance as follows: (a) Subject to the provisions of Article III of the Ordinance and paragraph(b)below,the Trustee shall pay or call for redemption on each interest payment date on which Term Bonds are subject to redemption such amount of such Term Bonds as, with the redemption premium, if any, will exhaust the moneys which will be held for the credit of the Redemption Account on said interest payment date; provided, however, that not less than $50,000 principal amount of Term Bonds shall be called for redemption at any one time unless a lesser amount shall be required to satisfy the Amortization Requirement for any Bond Year. Such redemptions shall be made pursuant to the provisions of Article III of the Ordinance. The Trustee shall, during the period of two business days prior to the redemption date, withdraw from the Bond Service Account and the Redemption Account and set aside in separate accounts or deposit with the Paying Agent the respective amounts required for paying the interest on, and the principal and premium of, the Term Bonds so called for redemption. (b) Moneys, if any, in the Redemption Account shall be applied by the Trustee each Bond Year to the retirement of the related Series of Bonds then Outstanding in the following order: FIRST: The Term Bonds, to the extent of the Amortization Requirement, if any, for such Bond Year for such Term Bonds, plus the applicable premium, if any, and any deficiency in any preceding Bond Years in the redemption of such Term Bonds under the provisions of this subclause and, if the amount available in such Bond Year shall not be sufficient therefor, then in proportion to the Amortization Requirement, if any, for such Bond Year for the Term Bonds then Outstanding,plus the applicable premium, if any,and any such deficiency; SECOND: The Term Bonds, if any, in such manner as the Finance Director shall determine and direct the Trustee in writing; and THIRD:After the retirement of all Term Bonds, if any,the Serial Bonds issued under the provisions of the Ordinance in the inverse order of their maturities. F-7 If the balance in the Redemption Account on the twenty-fifth day of the month next preceding a redemption date upon which the related Series of Term Bonds are to be paid at maturity or redeemed in accordance with the Amortization Requirements therefor is insufficient to make such payment or satisfy such Amortization Requirement, the Trustee shall notify the Finance Director of the amount of the deficiency, and the City shall transfer moneys to the Trustee for deposit to the Redemption Account in such amount as may be necessary to remedy such deficiency. Upon the retirement of any Bonds by redemption,the Trustee shall file with the Finance Director a statement briefly describing such Bonds and setting forth the date of their redemption,the amount of the redemption price of such bonds and the amount paid as interest thereon. APPLICATION OF MONEYS IN SINKING FUND Subject to the terms and conditions set forth in the Ordinance, moneys to the credit of the Bond Service Account and the Redemption Account shall be held in trust and disbursed by the Trustee for(a)the payment of interest upon the Bonds issued hereunder as such interest becomes due, (b)the payment of the principal of such Bonds at their respective maturities or (c) the payment of the redemption price, including premium, if any, of such Bonds before maturity, and such moneys are hereby pledged to and charged with the payments mentioned above; provided, however, that monies to the credit of the Convention Center Bond Service Subaccount and Convention Center Redemption Subaccount shall be disbursed only for such payments with respect to that portion of the Bonds allocable to the Convention Center. CANCELLATION OF BONDS All Bonds paid or redeemed, either at or before maturity, shall be delivered to the Trustee when such payment or redemption is made, and such bonds shall thereupon be cancelled. All Bonds cancelled under any of the provisions of the Ordinance shall be cremated or otherwise destroyed by the Trustee, who shall execute a certificate of destruction in duplicate describing the Bonds so destroyed, and one executed certificate shall be filed with the Finance Director, and the other executed certificates shall be retained by the Trustee. DEPOSIT OF OTHER MONEYS Except as provided in the Ordinance, nothing contained therein shall be construed as preventing the City from depositing to the credit of the Sinking Fund moneys received from any source. REBATE FUND The Ordinance creates a special fund designated "City of Omaha General Obligation Refunding Bond(City of Omaha Convention Center/Arena Project)Rebate Fund" (hereinafter called the "Rebate Fund"). The moneys deposited and held in the Rebate Fund are not subject to the lien of the Ordinance or to any claim by any owner and are not to be applied to the payment of the principal, premium, if any, or interest on the Bonds. Investment earnings from the Bond Service Account and the Redemption Account shall be deposited in the Rebate Fund by the City in accordance with the Investment Instructions. No later than 30 days after the fifth anniversary of the date of the Bonds and within 30 days from each fifth anniversary date thereafter,the City is to withdraw 90%of the moneys on deposit in the Rebate Fund and 100% of the investment earnings on said deposits, and pay such moneys and earnings directly to the United States Treasury. Not later than 60 days after the final retirement of the Bonds, the City is to pay 100% of the remaining balance of said Rebate Fund to the United States. All payments to the United States are to be made in accordance with the Investment Instructions. CONVENTION CENTER SUPPORT FUND PAYMENTS The Bond Resolution shall designate the principal amount of the Bonds allocable to the Convention Center. Moneys received by the City as payments by the State of Nebraska from the Convention Center F-8 Support Fund shall be deposited as and when received into the City of Omaha Bond Sinking Fund. In conjunction with each deposit of moneys made by the Finance Director pursuant to Section 5.01 of the Ordinance, the Finance Director shall specify in writing the amount of such deposit having as its source Convention Center Support Fund payments. The Trustee shall deposit such moneys to the credit of the Convention Center Bond Service Subaccount and Convention Center Redemption Subaccount, as the case may be, on or before the twenty-fifth day of each month next preceding the month in which occurs an interest or principal payment date,but only if and to the extent that the respective amounts then on deposit in such Subaccounts do not in the aggregate equal the aggregate amount due and payable with respect to the portion of the Bonds allocable to the Convention Center on such interest or principal payment date. If there remains in the City of Omaha Bond Sinking Fund a positive balance of Convention Center Support Fund payments following any June 1 payment of principal, interest or redemption price, the Trustee shall so notify the Finance Director and the Finance Director may in his discretion on behalf of the City, instruct the Trustee to deposit into escrow all or a portion of such balance for the purpose of defeasing, in accordance with the procedures described at the caption "Defeasance" below, that portion of the portion of the Bonds allocable to the Convention Center designated by the Finance Director in multiples of$5,000 and in inverse order of maturity(and within a maturity as selected by lot by the Trustee in such manner as the Trustee in its discretion may determine). ISSUANCE OF COMPLETION,ADDITIONAL AND REFUNDING BONDS The Ordinance provides that the City will not thereafter create or permit the creation of or issue any bonds, notes, warrants or other debt obligations, or create any additional indebtedness, which are secured by a pledge senior to or on a parity with that pledge securing the Bonds,except: (a) one or more series of additional or completion bonds may be issued from time to time by the City under a separate ordinance of the City and secured in the sole discretion of the City on a parity with the Bonds in such principal amount as may have been duly authorized by the electors of the City for the purpose of paying Costs of the Project as defined by the Prior Ordinance; (b) the City may, in its sole discretion, issue bonds under a separate ordinance on a parity with the Bonds for the purpose of refunding,prior to maturity,any Bonds then Outstanding; and (c) the City may, in its sole discretion, issue its general obligation bonds under a separate ordinance on a parity with the Bonds in any amount and for any purpose duly authorized by a majority vote of the City's electors. Nothing under the Ordinance shall prevent the City, in its sole discretion, from authorizing the issuance of general obligation bonds or revenue bonds which are a charge upon the City's full faith and credit and taxing power or upon any designated revenues of the City,junior or inferior to the payments to be made into the Sinking Fund for the payment of Bonds issued under the Ordinance, either before or after the issuance of such junior lien bonds. The City may, in its sole discretion, issue bond anticipation notes under and secured by a separate resolution and use the proceeds of Bonds issued under the Ordinance to repay such bond anticipation notes in accordance with the Bond Resolution relating to such Bonds. INVESTMENT OF MONEYS Moneys held for the credit of the Bond Service Account and the Redemption Account,as nearly as may be practicable,be invested and reinvested by the Trustee at the direction of the Finance Director or his designee in accordance with the Investment Instructions in Investments which shall mature, or which shall be subject to redemption by the holder thereof at the option of such holder, not later than the date when the moneys held for the credit of said Accounts or Funds will be required for the purposes intended. Obligations so purchased as an investment of moneys in any Fund or Account and any time deposits made with respect to such moneys shall be deemed at all times to be a part of such Fund or Account. The interest accruing on obligations so purchased or on such time deposits as an investment of moneys in the Bond Service Account and the Redemption Account, and any profit realized from such investment, shall be credited to the Bond Service Account and the Redemption Account, respectively, at the option of the City, and any loss resulting from such investment shall be charged to the Bond Service Account. The Trustee shall sell at the best competitive F-9 price obtainable or present for redemption any obligation so purchased whenever it shall be necessary so to do in order to provide moneys to meet any payment or transfer from such Funds or Accounts. The Trustee shall not be liable or responsible for any loss resulting from any such investment. The credits directed by this paragraph shall be subject in each instance to any deposits into the Rebate Fund in accordance with the Investment Instructions. In computing the amount in any Fund or Account created pursuant to the provisions of the Ordinance, obligations purchased as an investment of moneys therein are to be valued at least quarterly at the amortized cost or market value thereof, whichever is lower, exclusive of accrued interest. The City acknowledges in the Ordinance that the exclusion of interest with respect to the Bonds from gross income of the recipients thereof for purposes of federal income taxation depends, in part, upon compliance with the arbitrage limitations imposed by Section 148 of the Code, including the rebate requirements described in Section 148(f) of the Code. The City agrees and covenants in the Ordinance that it shall not permit at any time or times any of the proceeds of the Bonds or other funds of the City to be used, directly or indirectly, to acquire any investment, asset or obligation the acquisition of which would cause the Bonds to be "arbitrage bonds" for purposes of Section 148 of the Code. The City further agrees and covenants in the Ordinance that it shall do and perform all acts and things necessary, including the retention of a rebate analyst and the deposit of all Bond proceeds in a segregated escrow or trust account with a commercial bank pending the requisition thereof by the Finance Director on behalf of the City, in order to ensure that the requirements of Section 148 of the Code and the related United States Treasury Regulations are met, including the payment to the United States of America of the required portion of any rebate amount as of each computation date determined as provided by the Code and Regulations. SPECIAL TAX COVENANTS,REPRESENTATIONS AND WARRANTIES The City covenants in the Ordinance that so long as the Bonds and the Prior Bonds are Outstanding it will comply with the requirements of the Code set forth under this heading and in the immediately preceding paragraph. In the MECA Agreement, the City and the Project Manager represent, warrant, covenant and agree that they, individually and collectively, will not take or permit to be taken any action which would have the effect, directly or indirectly, of subjecting interest on any of the Bonds to federal income taxation, or that would constitute a violation of any applicable federal or state securities laws, rules and regulations, and that they, individually or collectively, will take such actions and enter into such agreements relating to federal income tax matters and federal and state securities laws matters as shall, upon the advice of Bond Counsel, be reasonable, necessary and customary in conjunction with each issuance and sale of the Bonds, and the City, in the Ordinance, affirms and ratifies such representation, warranty, covenant and agreement. The MECA Agreement provides, and the City affirms,represents,warrants and covenants in the Ordinance, as follows: (a) The proceeds of the Bonds and the Prior Bonds will be used to provide the Project(except those limited amounts which are used to pay costs of issuance) and that all of the Project will be owned by the City or MECA. (b) The City and MECA will not change the use, ownership or nature of any portion of the Project so long as any of the Bonds or the Prior Bonds are outstanding, unless, in the written opinion of Bond Counsel, such change will not result in the inclusion of interest on the Bonds in the gross income of the recipient for purposes of federal income taxation. (c) All of the Project financed with the proceeds of the Bonds and the Prior Bonds, including investment earnings, will be owned by the City or MECA, and less than 10%of such proceeds will be used in an "unrelated trade or business" of MECA, as that term is defined in Section 513(a) of the Code, or by any other person in any"private business use," as that term is defined in Section 141 of the Code. (d) The City and MECA shall keep or cause to be kept records of the expenditure of the proceeds of each issue of the Bonds and the Prior Bonds on the Project,including the refunding of the Prior Bonds, and of each investment of such proceeds for the term of such issue of Bonds and Prior Bonds plus six years. REPRESENTATIONS BY MECA F-10 The MECA Agreement contains the following representations by MECA: (a) MECA is an organization described in Section 501(c)(3) of the Code and is named in an exemption letter from the Internal Revenue Service to that effect. Such letter has not been modified, limited or revoked, and MECA is in compliance with all terms,conditions and limitations,if any, which are applicable to it and which are contained in such letter. The facts and circumstances which form the basis of such letter as represented to the Internal Revenue Service continue substantially to exist, and MECA was and is exempt from federal income taxation under Section 501(a) and Section 501(c)(3) of the Code and agrees that it shall not perform any acts or enter into any agreements which shall adversely affect such federal income tax status, nor shall it carry on or permit to be carried on in the facilities financed with the proceeds of the Bonds or the Prior Bonds or permit the facilities financed with the proceeds of the Bonds or the Prior Bonds to be used in or for any trade or business or by any person if such activity would adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds and the Prior Bonds or if such activity would adversely affect MECA's federal income tax status under Section 501(c)(3)of the Code. (b) MECA agrees that during the term of the MECA Agreement and so long as the bonds of any issue remain outstanding it will maintain its legal existence, will continue to be a nonprofit corporation in good standing in the State of Nebraska, will not dissolve or otherwise dispose of all or substantially all of its assets and will not consolidate with or merge into another legal entity or permit one or more other legal entities to consolidate with or merge into it, provided that MECA may, without violating the agreement contained in this paragraph,consolidate with or merge into another legal entity, or permit one or more legal entities to consolidate with or merge into it, or sell or otherwise transfer to another legal entity all or substantially all of its assets as an entirety and thereafter dissolve, provided(i)that the surviving,resulting or transferee legal entity, as the case may be,shall be a legal entity organized and existing under the laws of one of the states of the United States of America, shall be qualified to do business in the State and shall assume in writing all of the obligations of MECA under the MECA Agreement and relating to any bonds; (ii)that, in the opinion of Bond Counsel addressed and delivered to the City, MECA and any trustee or other fiduciary with respect to the Bonds, such acquisition, consolidation, merger or transfer will not affect the exclusion from gross income for federal income tax purposes of the interest on the Bonds; (iii)that prior to such acquisition, consolidation, merger or transfer the City, Bond Counsel and any trustee or other fiduciary with respect to the Bonds shall be furnished a certificate from an authorized officer of MECA stating that in the opinion of such officer none of the covenants contained in the MECA Agreement will be violated as a result of such acquisition, consolidation, merger or transfer; and (iv)that prior to such acquisition, consolidation, merger or transfer, such action shall be approved by an affirmative vote of the City Council of the City. EVENTS OF DEFAULT; REMEDIES In case the time for the payment of the interest on any Bond shall be extended,whether or not such extension be by or with the consent of the City, such interest so extended shall not be entitled, in case of default hereunder, to the benefit or security of the Ordinance except subject to the prior payment in full of the principal of all Bonds then Outstanding and of all interest the time for payment of which shall not have been extended. Each of the following events is declared an "event of default" under the Ordinance, that is to say, if: (a) payment of the principal and premium, if any, of any of the Bonds shall not be made by the City when the same shall become due and payable, either at maturity or by proceedings for redemption or otherwise; (b) payment of any installment of interest on any of the Bonds shall not be made by the City when the same shall become due and payable; (c) payment of any amount required to satisfy an Amortization Requirement shall not be made by the City if required herein; F-11 (d) any proceeding shall be instituted, with the consent or acquiescence of the City, for the purpose of effecting a composition between the City and its creditors or for the purpose of adjusting the claims of such creditors,pursuant to any federal or state statute now or hereafter enacted, if the claim of such creditors are under any circumstances payable from the City's tax revenues; or (e) the City shall default in the due and punctual performance of any covenant, condition, agreement or provision contained in the Bonds or in the Ordinance on the part of the City to be performed, and such default shall continue for 30 days after written notice which may be given by the Insurer, if any, specifying such default and requiring same to be remedied shall have been given to the City by the Bondholders of not less than 25%in aggregate principal amount of the Bonds then Outstanding. Upon the happening and continuance of any event of default specified in clauses (a) through (e) above, then and in every such case the Trustee may, and upon the written request of the Bondholders (the Insurer, if any, shall be deemed for this purpose to be the holder and owner of all of the Bonds) of not less than 25% in aggregate principal amount of the Bonds then Outstanding shall, by a notice in writing to the Clerk, declare the principal of all of the Bonds then Outstanding(if not then due and payable)to be due and payable immediately, and upon such declaration the same shall become and be immediately due and payable, anything contained in the Bonds or in the Ordinance to the contrary notwithstanding; provided, however, that if at any time after the principal of the Bonds shall have been so declared to be due and payable, and before the entry of fmal judgment or decree in any suit, action or proceeding instituted on account of such default, or before the completion of the enforcement of any other remedy under the Ordinance, moneys shall have accumulated in the Sinking Fund sufficient to pay the principal of all matured Bonds and all arrears of interest, if any, upon all Bonds then Outstanding (except the principal of any Bonds not then due except by virtue of such declaration and the interest accrued on such Bonds since the last interest payment date), and all amounts then payable by the City under the Ordinance shall have been paid or a sum sufficient to pay the same shall have been deposited by the Finance Director with the Trustee and the Paying Agent, and every other default in the observance or performance of any covenant, condition, agreement or provision contained in the Bonds or in the Ordinance (other than a default in the payment of the principal of such bonds then due only because of a declaration under this Section) shall have been remedied, then and in every such case, the Trustee shall, and upon written request of the Bondholders (the Insurer, if any, shall be deemed for this purpose to be the holder and owner of all of the Bonds) of not less than 25% in aggregate principal amount of the Bonds not then due except by virtue of such declaration and then Outstanding shall, by written notice to the Clerk, rescind and annul such declaration and its consequences, but no such rescission or annulment shall extend to or affect any subsequent default or impair any right consequent thereon. Notwithstanding the foregoing, the Trustee shall not accelerate the Bonds, if any, which are insured without the consent of the Insurer. Upon the happening and continuance of any event of default specified in clauses (a) through (e) above, then and in every such case the Trustee may, and upon the written request of the Bondholders (the Insurer, if any, shall be deemed for this purpose to be the holder and owner of all of the Bonds) of not less than 25% in aggregate principal amount of the Bonds then Outstanding hereunder shall,proceed to protect and enforce the rights of the Bondholders under the Ordinance by such suits, actions or special proceedings in equity or at law, either for the specific performance of any covenant or agreement contained herein or in aid or execution of any power herein granted or for the enforcement of any proper legal or equitable rights as the Trustee shall deem most effectual to protect and enforce such rights. Except as otherwise provided therein, no holder shall have any right under the Ordinance to institute any suit,action or proceeding in equity or at law on any Bond or for the execution of any trust thereunder or for any other remedy thereunder unless such holder previously shall (a)have given to the Trustee written notice of the event of default on account of which such suit, action or proceeding is to be instituted, (b)have requested the Trustee to take action after the right to exercise such powers or right of action, as the case may be, shall have accrued, (c)have afforded the Trustee a reasonable opportunity either to proceed to exercise the powers hereinabove granted or to institute such action, suit or proceedings in its or their name and (d)have offered to the Trustee reasonable security and indemnity against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee shall have refused or neglected to comply with such request within a reasonable time. Such notification, F-12 request and offer of indemnity are hereby declared in every such case, at the option of the Trustee,to be conditions precedent to the execution of the powers and trusts of the Ordinance or to any other remedy hereunder. Notwithstanding the foregoing provisions of the Ordinance and without complying therewith, the holders (the Insurer, if any, shall be deemed for this purpose to be the owner and holder of all of the Bonds)of not less than 25% in aggregate principal amount of Bonds then Outstanding may institute with consent of the Insurer, if any, any such suit, action, action or proceeding in their own names for the benefit of all holders hereunder. It is understood and intended that, except as otherwise above provided, no one or more Bondholders of the Bonds issued and Outstanding under the Ordinance shall have any right in any manner whatever by his or their action to affect,disturb or prejudice the security of such ordinance, or to enforce any right under the Ordinance except in the manner therein provided, and all proceedings at law or in equity shall be instituted, had and maintained in the manner therein provided and for the benefit of all Bondholders of such Outstanding Bonds, and any individual rights of action or other right given to one or more of such Bondholders by law are restricted by the Ordinance to the rights and remedies therein provided. SUPPLEMENTAL ORDINANCE WITHOUT BONDHOLDERS' CONSENT The City may, from time to time and at any time, with the consent of the Trustee, adopt such ordinances supplemental to the Ordinance as are consistent with the terms and provisions thereof (which supplemental ordinances shall thereafter form a part thereof) and do not adversely affect the interests of the Bondholders: (a) to cure any ambiguity or formal defect or omission or to correct any inconsistent provisions in the Ordinance or in any supplemental ordinance; (b) to grant to or confer upon the Trustee, for the benefit of the Bondholders, any additional rights, remedies,powers,authority or security that may lawfully be granted to or conferred upon the Trustee or the Bondholders; (c) to add to the conditions, limitations and restrictions on the issuance of Bonds under the provisions of the Ordinance other conditions,limitations and restrictions thereafter to be observed; (d) to add to the covenants and agreements of the City in the Ordinance other covenants and agreements thereafter to be observed by the City or to surrender any right or power herein reserved to or conferred upon the City;or (e) to comply with the requirements of the Code such that interest on the Bonds shall be excluded from gross income for federal income tax purposes. SUPPLEMENTAL ORDINANCE WITH BONDHOLDERS' CONSENT Subject to the terms and provisions of the Ordinance described in this Paragraph, and not otherwise, the Insurer, if any, and the Bondholders of not less than two-thirds in aggregate principal amount of the Bonds then Outstanding shall have the right, from time to time, anything contained in the Ordinance to the contrary notwithstanding, to consent to and approve the adoption of such ordinance or ordinances supplemental to the Ordinance as shall be deemed necessary or desirable by the City for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Ordinance or in any supplemental ordinance;provided,however, that nothing contained in the Ordinance shall permit, or be constructed as permitting,(a)an extension of the maturity of the principal of or the interest on any Bond issued thereunder;(b)a reduction in the principal amount of any Bond or the redemption premium or the rate of interest thereon; (c)the creation of a pledge of any City revenues pledged as security for the Bonds other than the pledge created by the Ordinance;(d)a preference or priority of any Bond or Bonds over any other Bond or Bonds; or(e)a reduction in the aggregate principal amount of the Bonds required for consent to such supplemental ordinance. If at the time of any such amendment any of the Bonds shall be insured as to payment or principal and interest by an Insurer, no such amendment shall be made except with the consent of such Insurer. Nothing contained in the Ordinance, however, shall be construed as making necessary the approval by Bondholders of the adoption of any supplemental ordinance as described at the caption"Supplemental Ordinance Without Bondholders'Consent" above. F-13 1 DEFEASANCE If, when the Bonds shall have become due and payable in accordance with their terms or shall have been duly called for redemption or either irrevocable instructions to call the Bonds for redemption or to pay the Bonds at their respective maturities or redemption dates or any combination of such payment and redemption shall have been given by the City to the Trustee and the Paying Agent or an appropriate fiduciary institution acting as escrow agent, the whole amount of the principal, interest and premium, if any, so due and payable upon all of the Bonds then Outstanding shall be paid or sufficient moneys, or Government Obligations the principal of and the interest on which when due will provide sufficient moneys, to pay at maturity or to redeem all of the Bonds together with all interest accrued and to accrue thereon to dates of maturity, or redemption, shall be held by such escrow agent or the Trustee and the Paying Agent for such purpose under the provisions of the Ordinance, and provision shall also be made for paying all other sums payable hereunder by the City, then and in that case the right, title and interest of the Trustee and the Bondholders of the Bonds secured hereby in the pledge, funds and accounts mentioned in the Ordinance shall thereupon cease, determine and become void on that date without further action of the Council,and the Trustee may apply any surplus in any account in the Sinking Fund and all balances remaining in any other funds or accounts, other than moneys held for the redemption or payment of Bonds, as provided in the Ordinance, and moneys held in the Rebate Fund; otherwise the Ordinance shall be, continue and remain in full force and effect. OMADOCS 684955v2 C-25A CITY OF OMAHA LEGISLATIVE CHAMBER Omaha,Nebraska • RESOLVED BY THE CITY COUNCIL OF THE CITY OF OMAHA: WHEREAS, the City of Omaha, Nebraska (the "City") is authorized to issue $31,660,000 aggregate principal amount of its Various Purpose and Refunding Bonds, Series of 2004 (the "Bonds"), pursuant to Ordinance No. 36515, duly enacted on February 10, 2004 (the "Ordinance"), for the purpose of providing funds, together with other available moneys, to refund all or a portion of certain of the City's outstanding general obligation indebtedness, including certain debt assumed by the City as a result of its annexations of five sanitary and improvement districts (the "Outstanding Bonds"); and, WHEREAS, as contemplated by the Ordinance, the City Council desires to designate a portion of the Outstanding Bonds to be currently refunded and a portion of the Outstanding Bonds to be advance refunded, to designate the aggregate principal amount of the Bonds, to fix the years and amounts in which the Bonds will mature, to sell the Bonds by private, negotiated sale, to award the Bonds, to specify the interest rate of each such Bond, to specify the redemption provisions of the Bonds, to direct that the Bonds be delivered to or upon the order of the original purchasers thereof upon payment of the purchase price, to direct the Finance Director of the City to give notice of the defeasance and redemption of the Outstanding Bonds and to make other necessary determinations as hereinafter set forth; and, WHEREAS, as further contemplated by the Ordinance, the City Council desires to approve the form and substance of a Bond Purchase Agreement (as hereinafter defined) with respect to the Bonds and authorize its execution and delivery; and, WHEREAS, the City desires to ratify the distribution of the Preliminary Official Statement for the Bonds and to authorize the execution and distribution of the final Official Statement for the Bonds. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF OMAHA: Section 1. The Bonds shall be issued in a single series of serial Bonds in the aggregate principal amount of Thirty-One Million Six Hundred Sixty Thousand Dollars ($31,660,000), bear interest from their date payable April 1 and October 1 of each year (the record date for which shall be the date 15 days next preceding each interest payment date), commencing October 1, 2004, until maturity at the rates, mature on the dates and in the amounts, and be sold at the yields set forth below: By Councilmember Adopted City Clerk Approved Mayor C-25A CITY OF OMAHA LEGISLATIVE CHAMBER Omaha,Nebraska PAGE 2 Serial Bonds Maturity Principal Interest (April 1) Amount Rate Yield 2005 $ 2,025,000 2.000% 1.120% 2006 2,670,000 2.000 1.180 2007 2,225,000 2.250 1.470 2008 2,475,000 2.375 1.820 2009 1,915,000 2.625 2.110 I 2010 1,375,000 2.750 2.340 2011 1,400,000 3.000 2.600 2012 1,425,000 3.125 2.860 2013 1,455,000 3.375 3.060 2014 1,470,000 3.500 3.220 2015 1,320,000 4.500 3.480* 2016 1,345,000 4.500 3.600* 2017 1,380,000 4.500 3.710* 2018 1,520,000 4.500 3.810* 2019 1,480,000 4.500 3.910* 2020 1,255,000 4.500 4.010* 2021 1,280,000 4.000 4.100 2022 1,755,000 4.000 4.150 2023 1,190,000 4.125 4.220 2024 700,000 4.125 4.290 Total $31,660,000 *Yield to first call(April 1,2014). Section 2. The City Council has received a proposed purchase contract for the Bonds (the "Bond Purchase Agreement"), dated March 16, 2004, accompanied by a corporate check in the amount of$300,000, as the good faith deposit with respect to the Bonds, with respect to the purchase of the Bonds by Kirkpatrick, Pettis, Smith, Polian Inc. and Bear, Stearns & Co. Inc., as representatives of themselves and Ameritas Investment Corp., Edward D. Jones & Co., L.P. and Loop Capital Markets, LLC (collectively, the "Underwriters"). The Bond Purchase Agreement has been reviewed by the City Council, the City Attorney and the Finance Director. After having carefully considered the matter, the City Council hereby finds and determines that the Bond Purchase Agreement is in the best interests of the City. The City Council hereby authorizes and By Councilmember Adopted City Clerk Approved Mayor C-25A CITY OF OMAHA LEGISLATIVE CHAMBER Omaha,Nebraska PAGE 3 approves the Bond Purchase Agreement and directs that it shall be executed by and on behalf of the City by the Mayor of the City, with the official seal of the City impressed or imprinted thereon and attested by the City Clerk in substantially the form presented to the City Council at the meeting of the City Council at which this Resolution is adopted and as attached hereto as Exhibit A, subject to such changes, insertions and omissions and such filling-in of blanks therein as may be approved by the Officers of the City executing the same pursuant to this Section. The execution and delivery of such Bond Purchase Agreement for and on behalf of the City Council by such officers is conclusive evidence of the approval of such officers of any such changes, insertions, omissions or filling-in of blanks. Section 3. The City Council hereby awards the Bonds to the Underwriters in accordance with the provisions of the Bond Purchase Agreement for a purchase price of$32,241,299.75 (par plus $809,251.75 of premium minus $227,952.00 of Underwriters' discount) of the aggregate principal amount of the Bonds, plus accrued interest from April 1, 2004 tothe date of delivery. Section 4. The Bonds, upon their execution and registration, shall be delivered to the Underwriters upon payment of the purchase price thereof, all as more fully provided in and subject to the terms and conditions of the Bond Purchase Agreement. Section 5. The City Council has examined and considered the Preliminary Official Statement and the final Official Statement prepared by the Underwriters, counsel for the Underwriters and various officers of the City. The City Council hereby ratifies the distribution of the Preliminary Official Statement, authorizes the distribution of the final Official Statement by the Underwriters in connection with the offering and sale of the Bonds and directs the Mayor and the Finance Director to execute by manual or facsimile signature such final Official Statement for and on behalf of the City substantially in the form attached hereto as Exhibit B with such changes, insertions, omissions and such filling-in of blanks therein as may be approved and made in such Official Statement by the officer of the City executing the same pursuant to this Section. Section 6. The City Council hereby fixes and determines that the principal and interest requirements for the Bonds shall be the amounts set forth in Schedule A attached hereto and made a part of this Resolution as fully and completely as if herein set out in full. By Councilmember Adopted City Clerk Approved Mayor C-25A CITY OF OMAHA LEGISLATIVE CHAMBER Omaha,Nebraska PAGE 4 Section 7. (a) The City Council hereby designates a portion of the following outstanding general obligation indebtedness of the City for current refunding and a portion for advance refunding, as indicated, and defeasance with the proceeds of the Bonds and moneys available for such purpose in the Debt Service Fund of the City: Redemption Date Amount Maturity and Outstanding Dates of Price(expressed as a Issue (January 31, Refunded Refunded percentage of Date 2004)1 Bonds Amount Principal amount) City of Omaha General Obligation Refunding 10/15/93 $5,805,000 10/15/04- $5,805,000 5/1/04 @102% Bonds,Series of 19932 10/15/08 Douglas County Sanitary and Improvement District No. 306,General Obligation 4/15/98 740,000 12/15/04- 740,000 5/1/04 @100% Refunding Bonds,Series 19982 12/15/17 No. 361,General Obligation 2/15/94 1,400,000 2/15/05- 1,305,000 5/1/04 @100% Bonds,Series 19942 2/15/14 No. 363,General Obligation 4/1/98 100,000 4/1/05 50,000 5/1/04 @100% Bonds,Series 19982 No. 381,General Obligation 7/1/98 1.715,000 7/1/04- 1,715,000 5/1/04 @100% Bonds,Series 19982 7/1/18 No. 381,General Obligation 10/15/01 1,740,000 10/15/06- 1,670,000 10/15/05 @100% Bonds,Series 20013 10/15/21 No.457,General Obligation 5/31/02 6,465,000 6/1/07- 5,750,000 6/1/06 @100% Bonds,Series 20023 6/1/22 1 Includes unrefunded indebtedness. 2 Current refunding. 3 Advance refunding. By Councilmember ' Adopted City Clerk Approved Mayor C-25A CITY OF OMAHA LEGISLATIVE CHAMBER Omaha,Nebraska PAGE 5 (b)(1) The City Council hereby authorizes and directs the Finance Director, within thirty (30) days after the deposit of moneys required by Section 9 hereof shall have been made, to cause a notice signed by the Finance Director in substantially the following form to be filed with regard to those Outstanding Bonds to be advance refunded with First National Bank of Omaha, as Escrow Agent under the Escrow and Agency Agreement authorized by the Ordinance, and with the respective paying agents for such Outstanding Bonds, and, together with a certified copy of this Resolution, with the Nebraska State Auditor of Public Accounts, to be published once in The Daily Record, and to be mailed, postage prepaid, to each holder of record of such Outstanding Bonds: NOTICE OF DEFEASANCE CITY OF OMAHA, NEBRASKA DOUGLAS COUNTY SANITARY AND IMPROVEMENT DISTRICT NOS. 381 AND 457 GENERAL OBLIGATION BONDS NOTICE IS HEREBY given that the following general obligation indebtedness, including certain debt assumed by the City of Omaha, Nebraska upon its annexations of Douglas County Sanitary and Improvement District Nos. 381 and 457, of the City of Omaha, Nebraska, redeemable on the dates shown at the option of the City of Omaha, Nebraska at the principal amounts thereof, together with the premiums shown, plus the interest accrued and unpaid to such dates, will be irrevocably called for redemption on the dates shown. By Councilmember Adopted City Clerk Approved Mayor 1 C-25A CITY OF OMAHA LEGISLATIVE CHAMBER Omaha,Nebraska PAGE 6 Maturity Redemption Date and Dates of Price(expressed as a Issue Defeased percentage of Date Bonds Principal amount) CUSIP* Douglas County Sanitary and Improvement District No. 381,General Obligation Bonds, 10/15/01 10/15/06- 10/15/05 @100% Series 2001 10/15/21 No.457,General Obligation Bonds, 5/31/02 6/1/07- 6/1/06 @100% Series 2002 6/1/22 Direct obligations of, or obligations the principal of and interest on which are guaranteed by, the United States of America, the principal of and the interest on which when due will provide sufficient moneys (i)to pay the respective regularly scheduled payments of principal of and interest on the listed bonds when due on or before the respective redemption dates and (ii) on the respective redemption dates, to pay the respective redemption prices of the listed bonds consisting of the principal of, premium, if any, and interest thereon, are held in trust by First National Bank of Omaha, as Escrow Agent for such purpose. The respective resolutions and ordinances pursuant to which the listed bonds were issued are fully discharged, satisfied and defeased in accordance with their terms and Ordinance No. 36515 of the City of Omaha,Nebraska. Date: April ,2004 CITY OF OMAHA,NEBRASKA By Finance Director of the City of Omaha,Nebraska By Councilmember Adopted City Clerk Approved Mayor C-25A CITY OF OMAHA LEGISLATIVE CHAMBER , Omaha,Nebraska PAGE 7 The City of Omaha shall not be responsible for the use of the CUSIP numbers selected, nor is any representation made as to their correctness indicated in the notice or as printed on any bond. They are included solely for the convenience of the holders. (2) The City Council hereby authorizes and directs the Finance Director (i) at least thirty (30) days before each respective redemption date listed in (a) above for Outstanding Bonds to be advance refunded and (ii) not later than April 1, 2004 for each series of Outstanding Bonds to be currently refunded, to sign a notice of redemption with respect to the series of Outstanding Bonds to be redeemed, file said signed notice with the Escrow Agent, with the paying agent for such Outstanding Bonds and with the Nebraska State Auditor of Public Accounts, publish said signed notice at least once in The Daily Record (or another newspaper of general circulation published in Douglas County, Nebraska if either named newspaper is not then published), and mail said signed notice, postage prepaid, to all registered owners of Outstanding Bonds to be redeemed at the addresses which appear on the registration books for such Outstanding Bonds. The redemption notice hereinabove authorized shall be in substantially the following form: NOTICE OF REDEMPTION CITY OF OMAHA, NEBRASKA (DESIGNATION OF BOND ISSUE) DATED AS OF , CUSIP NOTICE IS HEREBY GIVEN that the (Designation of Bond Issue) of the City of Omaha, Nebraska, dated as of , _, then outstanding, scheduled to mature on _to , , inclusive, and redeemable on , _ at the option of the City of Omaha, Nebraska at the principal amount thereof, together with a premium of percent (_%) of such principal amount, plus the interest accrued and unpaid thereof to , _, will be irrevocably called in whole for redemption on By Councilmember Adopted City Clerk Approved Mayor • C-25A CITY OF OMAHA LEGISLATIVE CHAMBER Omaha,Nebraska PAGE 8 Payment of the principal amount of said bonds plus a premium of percent ( %) of such principal amount will be made on or after said redemption date of , upon the presentation of said bonds at . Interest on said bonds accruing to or prior to said redemption date will be paid in the usual manner. Interest on all bonds will cease to accrue from and after ,_. Date: CITY OF OMAHA,NEBRASKA By Finance Director of the City of Omaha,Nebraska *The City of Omaha shall not be responsible for the use of the CUSIP numbers selected, nor is any representation made as to their correctness indicated in the notice or as printed on any bond. They are included solely for the convenience of the holders. **Withholding of 30% of gross redemption proceeds of any payment made within the United States may be required by the Interest and Dividend Tax Compliance Act of 1983 unless the paying agent has the correct taxpayer identification number (social security or employer identification number) or exemption certificate of the payee. Please furnish a properly completed Form W-9 or exemption certificate or equivalent when presenting your securities. Section 8. The City Council hereby fixes and determines the following terms of the Bonds: The Bonds maturing on or prior to April 1, 2014 shall not be subject to redemption prior to their stated maturities. The Bonds maturing on or after April 1, 2015 shall be subject to redemption at the option of the City of Omaha prior to their stated maturities at any time on and after April 1, 2014, in whole or in part, from time to time, in the inverse order of maturities and in such manner as the Paying Agent deems fair within a maturity, at the principal amount thereof, without premium, plus the interest accrued to the redemption date. By Councilmember Adopted City Clerk Approved Mayor c-25a caw OF OMAHA LEGISLATIVE CHAMBER Omaha,Nebraska PAGE 9 The record dates for the Bonds shall be the fifteenth day of each month next preceding a month in which occurs an interest payment date for the Bonds. Section 9. The City Council hereby fixes and determines that$17,949,724.10 shall be the amount deposited in trust with the Escrow Agent for credit to the escrow fund established by the Escrow and Agency Agreement authorized by the Ordinance. Such amount shall consist of$-0- transferred from the Debt Service Fund of the City and $17,949,724.10 from the proceeds of the Bonds. The City Council hereby directs the Finance Director, upon the closing of the initial sale of the Bonds, to transfer such amounts from such sources to First National Bank of Omaha, as Escrow Agent, for application in accordance with the Escrow and Agency Agreement. Section 10. The City Council hereby reaffirms that the issuance of the Bonds is authorized for the purpose of providing funds, together with other available moneys, to accomplish a current refunding of a portion of the Outstanding Bonds and an advance refunding of the remaining portion of the Outstanding Bonds identified in Section 7 hereof. Section 11. The Mayor, City Clerk and the Finance Director (or any officer of the City authorized to act in the capacity of the Mayor, City Clerk or Finance Director) are hereby authorized and directed punctually to execute such instruments, certificates and documents as may be necessary and appropriate and to do all acts and things required therein by the terms, covenants, provisions and agreements of this Resolution, the Bonds, the Ordinance, the Escrow and Agency Agreement and the Bond Purchase Agreement. P:\FIN\10424pjm.doc APPROV AS • 3 ► / oy CITY A ORNEY DATE By thM • Councilmember Adopted • MAR 1 6 2004 7-0 ° y3/I- 4 z4 City Clerk Approve a.- . 49y = _ Mayor CD O O c' D C -+'0a 0 .P. a' Cc0C A cD0p ` U O 5-is Olac? p> rr * p : 0• tdC, CD StS, tt O � N U4 CDPva � � CD p 0 CD ^ � CDo xC � r CDC 1� ' 0 CD `C C ~ cr � „D p, Z U. CD C1nOCD £ , En( Ot G r A 0 O VN v _JAOAn' N ¢ O C • g O C C CD P. 0 R e O CDO c c co r• � • N n L.,..)R. O O n � C v '0 CD "' O O, cr O 0 O, N O CD <-+ 7 C r. CD p� b (i 0 '-! X V CD N cD p 0-' 0' AD 1CDs 0' 0 S' 0 CD CD i-s CD CD CD vn tC CD Q. O CD CD • 4 , GI