PRELIMINARY OFFICIAL STATEMENT DATED JUNE 1, 2020.

New Issue – Bank Qualified S&P Rating: “AA-” (Negative Outlook) In the opinion of Gilmore & Bell, P.C., Bond Counsel to the City, under existing law and assuming

continued compliance with certain requirements of the Internal Revenue Code of 1986, as amended (the “Code”), the interest on the Bonds (including any original issue discount properly allocable to an owner thereof) (1) is excludable from gross income for federal income tax purposes, and is not an item of tax preference for purposes of the federal alternative minimum tax and (2) is exempt from income taxation by the State of Missouri. The Bonds are “qualified tax-exempt obligations” within the meaning of Section 265(b)(3) of the Code. See “TAX MATTERS” in this Official Statement.

$7,000,000*

CITY OF MANCHESTER, MISSOURI GENERAL OBLIGATION BONDS

SERIES 2020

Dated: Date of Original Issuance Due: March 1, as shown below The Bonds will be issued as fully registered bonds as herein described, and, when issued, will be

registered in the name of Cede & Co., as Bondowner and nominee for The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Bonds. Purchases of the Bonds will be made in book-entry only form. The Bonds will be issued in the denomination of $5,000 or any integral multiple thereof. Purchasers will not receive certificates representing their interest in the Bonds purchased. See “APPENDIX B - BOOK-ENTRY ONLY SYSTEM” herein.

Interest on the Bonds will be payable semiannually on March 1 and September 1, commencing

March 1, 2021. So long as DTC or its nominee, Cede & Co., is the Bondowner, such payments will be made by UMB Bank, N.A., Kansas City, Missouri, as paying agent and bond registrar (the “Paying Agent”) directly to such Bondowner. Disbursement of such payments to the DTC Participants is the responsibility of DTC. Distribution of such payments to the Beneficial Owners is the responsibility of the DTC Participants and Indirect Participants, as more fully described herein. (See “APPENDIX B - BOOK-ENTRY ONLY SYSTEM” herein for a definition of Beneficial Owners, DTC Participants and Indirect Participants).

The Bonds are issued pursuant to and in full compliance with the Constitution and statutes of the

State of Missouri and an ordinance expected to be adopted by the City on June 15, 2020. The Bonds will constitute valid and legally binding general obligations of the City payable both as to principal and interest from ad valorem taxes which may be levied without limitation as to the property tax rate or amount on all the taxable, tangible property within the territorial limits of the City.

MATURITY SCHEDULE*

Year Amount Rate Price Year Amount Rate Price 2023 $245,000 % % 2032 $335,000 % % 2024 250,000 2033 345,000 2025 270,000 2034 355,000 2026 275,000 2035 360,000 2027 290,000 2036 370,000 2028 295,000 2037 375,000 2029 305,000 2038 390,000 2030 315,000 2039 935,000 2031 325,000 2040 965,000

The Bonds are offered when, as, and if issued and received by the Underwriter, subject to receipt of an approving opinion of Gilmore & Bell, P.C., St. Louis, Missouri, Bond Counsel. It is expected that the Bonds in definitive form will be available for delivery at The Depository Trust Company in New York, New York on or about June 30, 2020.

This Official Statement is dated ___________, 2020.

* Subject to change as provided in the Notice of Bond Sale under the caption “Adjustment of Principal.”

Back Cover Page

REGARDING USE OF THIS OFFICIAL STATEMENT No dealer, broker, salesperson, or other person has been authorized by the City, Bond Counsel, the

Municipal Advisor, as defined herein, or the Underwriter, as defined herein, to give any information or to make any representations, 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, Bond Counsel, the Municipal Advisor, or the Underwriter. This Official Statement neither constitutes an offer to sell nor 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 set forth herein has been furnished by the City and from other sources which are

believed to be reliable, but it is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by Bond Counsel, the Municipal Advisor or the Underwriter. This Official Statement is not to be construed as a contract or agreement between the City or the Underwriter and the purchasers or owner of any of the Bonds. The information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of the Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof.

This Preliminary Official Statement has been deemed final by the City as of its date, except for the

omission of the information permitted to be omitted under Rule 15c2-12 of the Securities and Exchange Commission.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING

STATEMENTS IN THIS OFFICIAL STATEMENT Certain statements included or incorporated by reference in this Official Statement constitute

“forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “anticipate,” “budget,” “intend” or other similar words.

The achievement of certain results or other expectations contained in such forward-looking

statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Included in such risks and uncertainties are (1) those relating to the possible invalidity of the underlying assumptions and estimates, (2) possible changes or developments in social, economic, business, industry, market, legal and regulatory circumstances, and (3) conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors, and legislative, judicial and other governmental authorities and officials. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately. For these reasons, there can be no assurance that the forward-looking statements included in this Official Statement will prove to be accurate.

UNDUE RELIANCE SHOULD NOT BE PLACED ON FORWARD-LOOKING

STATEMENTS. ALL FORWARD-LOOKING STATEMENTS INCLUDED IN THIS OFFICIAL STATEMENT ARE BASED ON INFORMATION AVAILABLE TO THE CITY ON THE DATE HEREOF, AND THE CITY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS IF OR WHEN THE EXPECTATIONS OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR OR FAIL TO OCCUR, OTHER THAN AS INDICATED UNDER THE CAPTION “CONTINUING DISCLOSURE UNDERTAKING.”

THE CITY OF MANCHESTER

MAYOR Mayor Mike Clement

COUNCIL MEMBERS

Nelson Nolte, Ward 1 Paul Hamill, Ward 1 Marilyn L. Ottenad, Ward 2 Megan Huether, Ward 2

Benjamin Toben, Ward 3 Rich Baumann, Ward 3

CITY ADMINISTRATOR Larry Perney

DIRECTOR OF FINANCE

Donald Yucuis ______________________________

BOND COUNSEL Gilmore & Bell, P.C. St. Louis, Missouri

MUNICIPAL ADVISOR WM Financial Strategies

St. Louis, Missouri

TABLE OF CONTENTS

SUMMARY STATEMENT ......................................................................................................... i INTRODUCTION ....................................................................................................................... 1 THE BONDS ............................................................................................................................... 1 THE CITY OF MANCHESTER ................................................................................................ 2 THE CITY’S FINANCES ........................................................................................................... 7 TAXATION .............................................................................................................................. 13 DEBT OF THE CITY ............................................................................................................... 17 THE PROJECT ......................................................................................................................... 19 RATING .................................................................................................................................... 20 CONTINUING DISCLOSURE UNDERTAKING ................................................................... 20 LEGAL MATTERS .................................................................................................................. 22 TAX MATTERS ....................................................................................................................... 22 MUNICIPAL ADVISOR .......................................................................................................... 24 UNDERWRITING .................................................................................................................... 24 NO LITIGATION CERTIFICATE ........................................................................................... 24 CERTIFICATION OF OFFICIAL STATEMENT ................................................................... 25 MISCELLANEOUS .................................................................................................................. 25 APPENDIX A – FINANCIAL STATEMENTS .................................................................... A-1 APPENDIX B – BOOK-ENTRY ONLY SYSTEM ................................................................ B-1

This Page Left Blank Intentionally

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SUMMARY STATEMENT This Summary Statement is expressly qualified by the entire Official Statement, which is

provided for the convenience of potential investors and which should be reviewed in its entirety by potential investors.

Issuer: The City of Manchester, Missouri. Issue: The Bonds consist of $7,000,000* principal amount of General

Obligation Bonds, Series 2020 (the “Bonds”). Dated Date: The Bonds are dated as of the date of delivery which is expected to be on

or about June 30, 2020. Interest Due: Interest on the Bonds will be payable on March 1 and September 1,

commencing March 1, 2021. Principal Due: Principal will be due annually on March 1 in the years and in the amounts

shown on the cover page of the Official Statement. Optional Redemption: The Bonds maturing on and after March 1, 2029 are subject to redemption

and payment prior to maturity at the option of the City on March 1, 2028 and thereafter, in whole or in part on any date, at the redemption price of 100% of the principal amount thereof, plus accrued interest thereon to the redemption date. See the caption “THE BONDS – Redemption.”

Authorization: The Bonds are authorized pursuant to the Constitution and statutes of the

State of Missouri, and an ordinance expected to be adopted by the City on June 15, 2020.

Security: The Bonds are general obligations of the City, and the full faith, credit

and resources of the City have been irrevocably pledged to the payment of the principal of and interest of the Bonds.

Rating: S&P Global Ratings, a division of S&P Global Inc., has assigned the

Bonds a rating of “AA-” (Negative Outlook). See “RATING” herein. Purpose: The Bonds are being issued for the purpose of constructing,

reconstructing, extending, repairing and improving the City’s streets and sidewalks, including acquiring any land or right-of-way necessary therefor.

City Finances: The City operates on a fiscal year that corresponds to a calendar year (the

“Fiscal Year”). Paying Agent: UMB Bank, N.A., Kansas City, Missouri.

* Subject to Change

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OFFICIAL STATEMENT OF THE

CITY OF MANCHESTER, MISSOURI Relating to $7,000,000*

GENERAL OBLIGATION BONDS SERIES 2020

INTRODUCTION This Official Statement, including the cover page and the Appendices hereto, is provided by

the City of Manchester, Missouri (the “City”) to furnish information in connection with its issuance of $7,000,000* principal amount of General Obligation Bonds, Series 2020 (the “Bonds”).

The Bonds represent the remainder of $16,000,000 of bonds that were authorized at an election

held on April 3, 2018 by a vote of 2,129 in favor and 1,043 opposed to the issuance of general obligation bonds for the purpose of constructing, reconstructing, extending, repairing and improving the City’s streets and sidewalks, including acquiring any land or right-of-way necessary therefor (the “Project”). The use of the proceeds is described in greater detail herein under the caption “THE PROJECT.”

The Bonds are general obligations of the City, and the full faith, credit and resources of the

City have been irrevocably pledged to the payment of the principal of and interest on the Bonds. The principal of and interest on the Bonds are payable from ad valorem taxes which may be levied on all taxable, tangible property within the City, without limitation as to the property tax rate or amount.

The Bonds are authorized pursuant to the Constitution and statutes of the State of Missouri,

and an ordinance expected to be adopted by the City on June 15, 2020 (the “Bond Ordinance”). Brief descriptions of the Bonds, the Project and the City are included in this Official Statement.

Such descriptions and summaries do not purport to be comprehensive or definitive. All references herein to the Bond Ordinance and any other documents 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 Bond Ordinance.

THE BONDS

Authority

The Bonds are being issued pursuant to and in full compliance with the Constitution and

statutes of the State of Missouri, including particularly Article VI, Section 26 of the Missouri Constitution, Section 95.115 et seq. of the Missouri Revised Statutes and the Bond Ordinance.

Security for the Bonds

The Bonds are general obligations of the City, and the full faith, credit and resources of the

City have been irrevocably pledged to the payment of the principal of and interest of the Bonds. The principal of and interest on the Bonds are payable from ad valorem taxes which may be levied on all taxable tangible property, real and personal, within the City, without limitation as to the property tax rate or amount. Said levy shall be in addition to and exclusive of all other taxes authorized to be levied by the City.

* Subject to Change

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Description The Bonds will be issued as fully registered bonds, and, when issued, will be registered in the name

of Cede & Co., as Bondowner and nominee for The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Bonds. Purchases of the Bonds will be made in book-entry only form. The Bonds will be issued in the denomination of $5,000 or any integral multiple thereof. Purchasers will not receive certificates representing their interest in Bonds purchased. See “APPENDIX B - BOOK-ENTRY ONLY SYSTEM” herein.

The Bonds will be dated as of the date of original issuance and will mature in the amounts and

bear interest at the rates shown on the cover page of this Official Statement. Interest on the Bonds will be payable on March 1 and September 1, commencing on March 1, 2021. So long as DTC or its nominee, Cede & Co., is the Bondowner, such payments will be made by the Paying Agent directly to such Bondowner. Disbursement of such payments to DTC Participants is the responsibility of DTC. Distribution of such payments to the Beneficial Owners is the responsibility of the DTC Participants and Indirect Participants, as more fully described in “APPENDIX B - BOOK-ENTRY ONLY SYSTEM” herein. Registration, Transfer and Exchange of Bonds Upon Discontinuance of Book-Entry Only System

Each Bond when issued shall be registered by the Paying Agent in the name of the owner

thereof on the Bond Register. Bonds are transferable only upon the Bond Register upon presentation and surrender of the Bonds, together with instructions for transfer. Bonds may be exchanged for Bonds in the same series, aggregate principal amount and maturity upon presentation to the principal corporate trust office of the Paying Agent, subject to the terms, conditions and limitations set forth in the Bond Ordinance and upon payment of any tax, fee or other governmental charge required to be paid with respect to any such registration, transfer or exchange.

Redemption

The Bonds maturing on or after March 1, 2029 are subject to redemption and payment prior to

maturity at the option of the City on March 1, 2028 and thereafter, in whole or in part on any date, at the redemption price of 100% of the principal amount thereof, plus accrued interest thereon to the redemption date. When less than all of the outstanding Bonds are to be redeemed, such Bonds shall be redeemed in such order of maturity as shall be determined by the City. If Bonds of less than a full maturity are to be redeemed, such Bonds shall be selected by the Paying Agent in $5,000 units of principal amount in such equitable manner as the Paying Agent may determine.

In the event the City elects to exercise its option to redeem the Bonds, written notice shall be

given by first class mail to the registered owner of the Bonds to be redeemed at least 30 days, but not more than 60 days, prior to the redemption date.

THE CITY OF MANCHESTER

General The City is located in St. Louis County approximately 15 miles west of the City of St. Louis.

The City is within the St. Louis Metropolitan Statistical Area (“MSA”). The community known as Manchester is over 200 years old and was incorporated as a Village

in 1950. The City was reincorporated as a fourth-class city in 1959. When incorporated, the City encompassed 2 square miles. As a result of a number of annexations, the City now encompasses approximately 5 square miles. Major annexations occurred in 1997 and in 1999. The 1997 annexation increased the City’s population by an estimated 3,309 residents and the 1999 annexation

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by an estimated 8,813 residents. As a result of normal growth and annexations, the population has grown from 6,191 in 1980 to 18,094 in 2010.

Government

The City is a fourth-class city. The legislative body of the City is the Board of Aldermen,

which is comprised of six aldermen and a mayor. Two aldermen are elected from each of the City's three wards to serve two year terms, one half of which expire annually.

The Mayor, elected at large to serve a two-year term, is the presiding officer of the Board of

Aldermen. The Mayor may vote in the event of a tie vote by the Board of Aldermen. Additionally, the Mayor has veto power.

The City Administrator is appointed by the Mayor with the advice and consent of the Board of

Aldermen. The City Administrator is the chief assistant to the Mayor and is responsible for the day-to-day management of the City's government business and staff.

City services and functions are divided into the following departments: Administration,

Finance, Police, Aquatic Center, Public Works, Parks and Recreation, Planning and Zoning and Legal/Municipal Court.

Employees

The City has 83 full-time, 7 permanent part-time and approximately 47 seasonal employees.

City employees are not represented by any collective bargaining unit.

Retirement Plan

The City’s retirement plan is the City of Manchester, Missouri Profit Sharing Plan and Trust (the “Plan”) which is a single-employer defined contribution retirement plan currently administered by ICMA Retirement Corp. The Plan began on October 1, 1990 after passage of an ordinance by the Board of Aldermen. The City pays for the full cost of the Plan by contributing up to 5% of eligible participating employees’ annual compensation. On January 1, 2019 the City added an additional option to the Plan. If an employee contributes 4%, then the City contributes 7%. All full-time employees are eligible to participate in the Plan when they have been credited with at least 1,000 hours of service during the period of 6 consecutive months measured from the anniversary date of their employment.

Employees vest at a graduated rate over a five-year period. The City contributed $280,536 to

the Plan during 2019.

Insurance The City is exposed to various risks of loss related to tort; theft of, damage to, and destruction

of assets: errors and omissions; injuries to employees: and natural disasters. The City is a member of the St. Louis Area Insurance Trust (“SLAIT”), a non-for-profit, self-

insurance risk pool, formed by various St. Louis County municipalities. SLAIT was formed in 1986 in order to operate as a group self-insurer of workers’ compensation. In addition to insurance protection, the program provides risk management services with emphasis on loss control, claims administration, and management information services. SLAIT is fully funded by its member participants and employs an outside service company to process all claims.

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Coverage is provided by the trust for general and auto liability subject to a $500 deductible per occurrence for third party property damage and for law enforcement liability subject to a $2,500 deductible per occurrence. Any damage to City property caries a $5,000 deductible.

The City also purchases commercial insurance to cover risks related to building and other City

property, crimes, business, travel, public official liability, earthquakes and employee blanket bonds. Settled claims resulting from these risks have not exceeded coverage in any of the past three years.

Community Services

Utilities

Stormwater drainage and sewage collection and disposal within the City are provided by the

Metropolitan St. Louis Sewer District, a separate taxing authority established under Section 30 of Article VI of the Constitution of Missouri and financed by ad valorem taxes and user fees. Gas is provided by Spire Inc. and electricity is provided by AmerenUE (formerly Union Electric Company). Water is provided by Missouri American Water Company.

Communications and Media

Telecommunication services are provided by AT&T. The City receives all St. Louis radio

stations and television channels. Local newspapers include The St. Louis Post Dispatch, The West County Journal and the St. Louis Countian, a legal publication. The City receives cable television service from Charter Communications.

Fire Protection

Fire protection is provided by the West County EMS and Fire Protection District (the “West

County Fire District”) and a small portion of the City is served by the Valley Park Fire Protection District. These districts are independent of the City, having their own officials, budgets, and powers of taxation. The West County Fire District operates 3 fire stations and is rated “3” by the Insurance Services Organization, among ratings ranging from 1 to 10 with 1 as the highest. This rating is based on several factors including the number of firefighters and their training, response time, firefighting equipment and fire prevention programs of the West County Fire District.

Police Protection

The City's Police Department provides police protection throughout the corporate limits of the

City. Services are provided by 38 full-time officers. The Police Department sponsors several community service programs including the Drug Abuse Resistance Education ("D.A.R.E."), Citizen Police Academy, Coffee with a Cop, Child Identification, Home/Business Security audits, safety lectures, "Neighborhood Watch," Camera Program, Clean up for Special Olympics (officers team up with local vendors to raise money for the Special Olympics) and vacation checks, among other programs.

Recreation Activities

The City owns six parks encompassing 63 acres. The largest is Paul A. Schroeder Park,

encompassing 44 acres. Facilities at this park include the park department office, an aquatic center, tennis courts, ball diamonds, nature path, playground, soccer field, disc golf course, a nature path and picnic pavilions. The other four parks offer pavilions, picnic sites, and playgrounds.

Residents of the City are also within easy commuting distance of the numerous other St. Louis

City and St. Louis County attractions, including the St. Louis Zoological Park, the Missouri Botanical Garden, and the St. Louis Symphony.

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Solid Waste Collection The State of Missouri Solid Waste Management Law requires cities with a population over 500

to develop, adopt and implement a solid waste management plan to ensure that all solid wastes in the community are stored, collected, transported and disposed of properly. The City contracts with a private hauler for the collection of solid waste. Prior to the 2018 Fiscal Year, trash collection was free to City residents. Beginning in 2018, residents pay $6 per month.

Medical

There are five hospitals within 5 miles of the City’s limits. In addition, numerous dentists,

chiropractors and doctors provide medical services from offices and clinics located in the City.

Education

Primary and secondary education within the City is provided by the Parkway School District and a small portion of the City is served by the Valley Park School District. These districts are independent of the City, having their own elected or appointed officials, budgets and administrators. The districts are empowered to levy taxes, separate and distinct from those levied by the City.

Higher education is provided by the St. Louis Community College which is part of the tax

supported Missouri junior college system. The College operates four campuses. The campus closest to Manchester is in Kirkwood, approximately 3 miles from the City’s corporate limits. The Community College offers associates degrees and adult education. In addition to the Community College, numerous other institutions of higher education are located in the St. Louis metropolitan area and are easily accessible to City residents, including St. Louis University, Washington University, Webster University and the University of Missouri-St. Louis. Economic and Demographic Data

Population

The following table sets forth population statistics for Manchester:

Year Population 1980 6,191 1990 6,581 2000 19,161 2010 18,094 2018 18,172 __________ Source: United States Department of Commerce, Bureau of Census official census counts except for 2018

which is a July 1, 2018 estimate.

Transportation The City is traversed by Highway 141 and Manchester Road. Highway 141 intersects

Highway 40 approximately 2 miles north of the City and Manchester Road intersects Interstate 270 approximately 3 miles east of the City, a hub surrounding much of the St. Louis metropolitan area. Together, they provide residents access to all parts of the St. Louis metropolitan area.

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Regularly scheduled air passenger and freight service is available at St. Louis Lambert International Airport located approximately 15 miles northeast of the City. Private commercial service is available at the Spirit of St. Louis Airport located approximately 13 miles from the City.

Economy

The City is a suburban residential community with an economic base represented primarily by

commercial and service businesses. Commercial enterprises, including three car dealerships, are concentrated along Manchester Road which is the City’s major thoroughfare. The City estimates that there are approximately 305 businesses in the City.

Major Employers

The following is a list of the largest employers located within the City: Number of Name Product or Service Employees

Parkway School District Education 295 Walmart Retail Store 377 Costco Retail Store 212 Veterinary Specialty Services Veterinary Services 176 Joey B’s Food & Drink Restaurant 120 Dierberg’s Supermarket Grocery Store 124 Kohl’s Department Store 90 City of Manchester Government 83 Best Buy Electronics Retail Store 81 Academy Sports Sporting Goods 47 __________ Source: Figures are from the 2018 CAFR. Except for the City of Manchester, the figures do not reflect any

changes that occurred since that date including layoffs or closures due to the COVID-19 virus pandemic.

Employment

According to the US Bureau of Census, 2013-2017 American Community Survey, 5-Year

Estimates, the City had a civilian labor force of 10,017 people. 458 people were unemployed which represented an unemployment rate of 4.6%. The numbers above do not reflect ongoing changes in employment relating to the COVID-19 virus.

Housing

The following table sets forth statistics relating to housing for the City and, for comparative purposes, St. Louis County, St. Louis MSA, and the State of Missouri:

Median Value of Owner % Built in Units Built Occupied Housing 2000 or Later Before 1940 The City $219,100 6.4% 0.5% Other Entities: St. Louis County 181,100 7.0 9.7 St. Louis MSA 162,600 14.4 16.7 State of Missouri 145,400 16.9 14.0 ___________ Source: U.S. Bureau of Census, 2013-2017 American Community Survey, 5 year estimates.

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Income The following table sets forth certain income statistics for the City and, for comparative

purposes, St. Louis County, St. Louis MSA, and the State of Missouri:

% People Per Capita Median Family Below Income Income Poverty Level The City $39,054 $92,432 7.2% Other Entities: St. Louis County 38,081 81,817 9.8 St. Louis MSA 32,709 75,382 12.2 State of Missouri 28,282 64,776 14.6 __________ Source: U.S. Bureau of Census, 2013-2017 American Community Survey, 5 year estimates.

THE CITY’S FINANCES

Accounting and Reporting Practices The City operates on a fiscal year which corresponds to a calendar year (the “Fiscal Year”). Since 1991, the City has been awarded the Government Finance Officers Association’s

(“GFOA”) Certificate of Achievement for Excellence in Financial Reporting for its Comprehensive Annual Financial Report. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report, the content of which must conform to GFOA’s program standards. The report must also satisfy both generally accepted accounting principles and applicable legal requirements.

The accounts of the City are organized on the basis of funds and account groups, in

conformance with accounting principles generally accepted in the United States of America (commonly referred to as GAAP) applicable to governments.

The Board of Aldermen annually engages an independent certified public accountant for the

purpose of performing an audit of the books of accounts, financial records, and transactions of the City.

Budget Process

The City Administrator prepares an annual budget for the ensuing fiscal year. The budget is

based upon information provided by the various City department heads and other City employees. After a proposed budget is prepared, it is submitted by the City Administrator to the Mayor and the Board of Aldermen for review. The Board of Aldermen holds work sessions to determine revisions to the City Administrator’s recommended budget. The budget is legally enacted by ordinance following a public hearing on the proposed budget.

By Statute, the annual budget must set forth a complete financial plan for the ensuing fiscal

year, and must include at least the following information:

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(1) A budget message describing the important features of the budget and major changes from the preceding year;

(2) Estimated revenues to be received from all sources for the budget year, with a

comparative statement of actual or estimated revenues for the two years next preceding, itemized by year, fund and source;

(3) Proposed expenditures for each department, office, commission, and other

classifications for the budget year, together with a comparative statement of actual or estimated expenditures for the two years next preceding, itemized by year, fund, activity and object;

(4) The amount required for the payment of interest, amortization and redemption charges

on debt; and (5) A general budget summary.

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The General Fund In accordance with established accounting procedures for governmental units, the City records

its financial transactions under various funds. The largest is the General Fund, from which all general operating expenses are paid and to which taxes and all other revenues not specifically allocated by law or contractual agreement to other funds are deposited.

The following table indicates the City’s General Fund revenues, expenditures and changes in

fund balance for the 2016 through 2018 Fiscal Years and unaudited results for the 2019 Fiscal Year:

SUMMARY OF OPERATIONS GENERAL FUND

Fiscal Year Ended December 31

Audited Audited Audited Unaudited 2016 2017 2018 2019 REVENUES Property taxes(1) $ 154,184 $ 65,041 $ 542,157 $ 543,905 Taxes – other 7,367,957 7,671,264 8,087,188 (2) 8,296,539 Grants 119,678 141,217 155,743 148,324 Licenses and permits 332,961 369,190 378,596 537,450 Fines and forfeitures 329,219 255,810 231,684 280,525 Charges for services 385,221 404,090 489,799 428,921 Investment income (20,455) 33,217 36,003 86,841 Miscellaneous 58,246 77,333 50,883 358,250(3) Total Revenues 8,727,011 9,017,162 9,972,053 10,680,755 EXPENDITURES General government 1,222,625 1,278,574 1,578,589 2,040,141(4) Police department 3,380,083 3,266,323 3,490,019 3,780,321(5) Public works 2,684,809 2,675,543 2,410,385 2,634,759 Community development 242,798 257,812 293,267 298,283 Aquatic center 307,569 313,447 328,817 308,314 Recreation 744,256 799,360 919,307 1,032,562 Legal/court 212,173 200,750 228,985 249,413 Capital Expenditures − 74,519 − − Total Expenditures 8,794,313 8,866,328 9,249,369 10,343,793 REVENUE OVER (UNDER) EXPENDITURES (67,302) 150,834 722,684 336,963 OTHER FINANCING SOURCES (USES) Transfers in(6) 300,000 240,000 240,000 500,000 Transfers out(7) (327,292) (406,849) (421,865) (308,725) Total Other financing sources (uses) (27,292) (166,849) (181,865) 191,275 NET CHANGE IN FUND BALANCE (94,594) (16,015) 540,819 528,238 FUND BALANCE BEGINNING OF YEAR 2,601,356 2,506,762 2,498,410 (8) 3,039,229 FUND BALANCE END OF YEAR $2,506,762 $2,490,747 $3,039,229 $3,5267,467

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Footnotes to Prior Page (1) A portion of the taxes levied for general purposes in the 2017 Fiscal Year were allocated to the debt

service fund for the final payment of principal and interest on outstanding bonds. Beginning with the 2018 Fiscal Year, property taxes include railroad/utility and road and bridge taxes that were previously included in “Taxes – Other”.

(2) The large increase in “Taxes – Other” is primarily attributed to revenue from a new law enforcement sales tax that the City began collecting in 2018 and is described under the subcaption “Sales Taxes – Proposition P Sales Taxes.”

(3) The increase in “Miscellaneous” is related to two one-time insurance settlements. (4) The large increase in “General Government” is related to an increase in legal fees and payout of an

insurance settlement. (5) The increase in “Police department” is related to several retirement payouts and maintaining a better

staffing level. (6) “Transfers In” relate to repayment of funds loaned to the Capital Projects Fund. (7) “Transfers Out” are principally due to a contribution of General Sales to the Special Allocation Fund

referred to in the City’s financial statements as the Tax Increment Financing Fund. See the caption “TAXATION – Tax Increment Financing.”

(8) Reflects a prior period adjustment. Source: Derived from audited financial statements of the City for the 2016 through 2018 Fiscal Years and

unaudited financial records of the City.

General Fund 2019 Unaudited Results and Projected 2020 Results The City’s 2019 Fiscal Year ended on December 31, 2019. Based on unaudited financial

records the City’s expects the ending fund balance to equal $3,569,467 compared to $3,039,229 for the 2018 Fiscal Year.

For the 2020 Fiscal Year, the City budgeted a $76,988 surplus. On January 7, 2020, the Centers for Disease Control and Prevention established an incident

management system for, and has since responded to, an outbreak of respiratory disease caused by a novel (new) coronavirus that was first detected in China and which has been detected globally and throughout the United States. The virus has been named “SARS-CoV-2” and the disease it causes has been named “coronavirus disease 2019” (“COVID-19”). On January 30, 2020, the International Health Regulations Emergency Committee of the World Health Organization declared the COVID-19 outbreak a “public health emergency of international concern.” On January 31, 2020, Health and Human Services Secretary Alex M. Azar II declared a public health emergency (PHE) for the United States to aid the nation’s healthcare community in responding to COVID-19.

If COVID-19 persists as public health emergency, it will impact the City’s businesses and

individuals and may negatively impact the City’s finances. The extent of the impact on the City’s finances is unknown at this time.

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General Fund Sources of Revenue The City derives its revenues from a variety of sources. The following list sets forth the

primary sources of City revenues for its General Fund.

Revenue Percentage Taxes Other than Property:

Sales Taxes $ 5,955,356 55.76 Gross Receipts Taxes 1,339,738 12.54 Cable Franchise Taxes 224,040 2.10 Gasoline and motor fuel tax 490,116 4.59 Vehicle Sales Tax 166,428 1.56 Other Government Taxes 120,861 1.13 Total 8,296,539 77.68

Property Taxes 543,905 5.09 Grants 148,324 1.39 Licenses and permits 537,450 5.03 Fines and Forfeitures 280,525 2.63 Charges for services 428,921 4.02 Investment Income 86,841 0.81 Miscellaneous 358,250 3.35

Total $10,680,755 100.00% __________ Source: Revenues are derived from the City’s 2019 unaudited financial records.

Sales Taxes

Sales Taxes Subject to voter approval, cities in St. Louis County may impose a sales tax of up to 1¼% for

general purposes, a sales tax for fire protection not exceeding ¼% and sales taxes not exceeding ½% for each of the following purposes: capital improvements, parks and storm water, and economic development. The City levies a general sales tax at the rate of 1¼%, a ½% capital improvement sales tax and a ½% park and stormwater sales tax.

General Sales Tax

The sales tax receipts for general purposes are derived from a 1¼% City sales tax. A 1% sales

tax was authorized by special election in 1972. The remaining ¼% of the sales tax was authorized by special election in 1994.

In St. Louis County, local sales taxes are collected by the State and remitted to St. Louis

County for distribution. Within St. Louis County, some cities are “pool” cities and some cities are “point-of-sale” cities. The City is a point-of-sale city except for a portion of the City that was annexed following the statutory date in which cities were no longer able to become a point-of-sale city. A portion of the City’s general sales taxes are contributed to the pool based on a complicated formula that varies from city to city depending upon per capita sales tax for the city compared to the per capita countywide average. Point-of-sale cities, including the City, that have a capital improvement sales tax contribute 15% of revenue to a county capital improvement sales tax pool for pool cities. Point-of-sale cities receive the balance of sales tax revenues generated within their borders.

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The following table sets forth the general sales tax receipts of the City from the 1% General Sales Tax approved in 1972 for the Fiscal Years 2015 through 2019:

1% General Year Sales Tax 2015 $3,717,673 2016 3,807,709 2017 3,899,725 2018 3,789,891 2019 4,096,212

__________ Source: Office of the Director of Finance.

Proposition P Sales Taxes.

In April 2017, the County passed a new public safety sales tax, referred to as “Prop P,” at the

rate of ½% for the purpose of providing funds for police and public safety. Pursuant to a formula, approximately 42.4% is distributed to incorporated places in the County on a per capita basis. The City began receiving these funds in November 2017. For the 2019 Fiscal Year, the City received $1,003,663.

Capital Improvement Sales Tax

In 1994, voters approved a ½% capital improvements sales tax. By statute the tax may be used

only for capital improvements. The following table sets forth the total capital improvement sales tax receipts of the City for the Fiscal Years 2015 through 2019:

Year Sales Tax 2015 $1,309,590 2016 1,361,207 2017 1,440,930 2018 1,451,916 2019 1,608,157

__________ Source: Audited financial statements for the 2015 through 2018 Fiscal Year and unaudited financial records of

the City for the 2019 Fiscal Year.

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Park and Stormwater Sales Tax In August 2000, voters approved a ½% sales tax for parks and stormwater projects (the “Park

and Stormwater Sales Tax”). Collection of this tax began on January 1, 2001. The tax is a point-of-sale tax with 100% of the revenues distributed to the City other than collection fees. The following table sets forth the total park and stormwater sales tax receipts of the City for the Fiscal Years 2015 through 2019:

Year Sales Tax 2015 $1,531,881 2016 1,592,289 2017 1,685,935 2018 1,698,993 2019 1,882,807

__________ Source: Audited financial statements for the 2015 through 2018 Fiscal Year and unaudited financial records of

the City for the 2019 Fiscal Year.

TAXATION

Property Taxation Not later than September 30 of each year, the Board of Aldermen sets the rate of tax for the

City and files the tax rate with St. Louis County (the “County”) by October 1. The Missouri State Auditor is responsible for reviewing the rate of tax to insure that it does not exceed constitutional rate limits.

Taxes are levied on all taxable real and personal property owned as of January 1 in each year.

Certain properties, such as those used for charitable, education, and religious purposes, or owned by political subdivisions are excluded from ad valorem taxes on both real and personal property.

Real property within the City is assessed by the County Assessor. The County Assessor is

responsible for preparing the tax rolls each year and for submitting tax rolls to the County Board of Equalization. The Board of Equalization has the authority to question and determine the proper value of property and then adjust and equalize individual properties appearing on the tax rolls. By statute, tax bills are to be mailed in October. However, the volume of assessment complaints required to be reviewed by the County Board of Equalization can affect the date on which bills are actually mailed.

Payment of taxes levied on real and personal property is due by December 31 after which date

they become delinquent and accrue a penalty of one percent per month. Billing and collection of property taxes is performed by the County Collector of Revenue. The

County Collector of Revenue deducts a commission equal to 1.5% of the taxes collected for his services. After such collections and deductions of commission, taxes are distributed to the City.

The Hancock Amendment

An amendment to the Missouri Constitution limiting taxation and government spending was

approved by Missouri voters on November 4, 1980. This amendment limits the ability of the City to impose new or increased taxes to provide funding for the payment of governmental purposes of the City, without voter approval. The amendment (popularly known as the Hancock Amendment) limits the rate of increase and the total amount of taxes which may be imposed in any Fiscal Year, and the limit may not be exceeded without voter approval. Provisions are included in the amendment for rolling back property tax rates to produce an amount of revenue equal to that of the previous year if the definition of tax base is changed or if property is reassessed. The tax levy on the assessed

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valuation of new construction is exempt from this limitation. The limitation on local governmental units does not apply to taxes imposed for the payment of principal of and interest on general obligation bonds approved by the requisite percentage of voters.

The Hancock Amendment also requires political subdivisions of the State to obtain voter

approval in order to increase any “tax, license or fee.” The precise meaning and application of the phrase “tax, license or fee” is unclear, but decisions of the Missouri Supreme Court have indicated that it does not apply to traditionally set user fees. The limitations imposed by the Hancock Amendment restrict the City’s ability to increase many but not all taxes, licenses and certain fees without obtaining voter approval.

In 2008, through the enactment of Senate Bill 711 (“SB 711”), the Missouri General Assembly

approved further limitations on the amount of property taxes that can be imposed by a political subdivision such as the City. Prior to the enactment of SB 711, a Hancock rollback would not necessarily result in a reduction of the City’s property tax levy if its current tax levy was less than its current tax levy ceiling, due to the City’s voluntary rollback from the maximum authorized tax levy. The property tax levy is the levy actually imposed by a political subdivision while the tax rate ceiling is the maximum levy the political subdivision may impose under the provisions of the Hancock Amendment. Under SB 711, in reassessment years (odd-numbered years), the Hancock rollback is applied to a political subdivision’s actual property tax levy, regardless of whether that levy is at the political subdivision’s tax levy ceiling. This further reduction is sometimes referred to as an “SB 711 rollback.” In non-reassessment years (even-numbered years), the property tax levy may be increased to the political subdivision’s tax levy ceiling (as adjusted by the Hancock rollback), only after a public hearing and adoption of a resolution or policy statement justifying the action.

Tax Increment Financing

The Real Property Tax Increment Allocation Redevelopment Act, Sections 99.800 to 99.865.

Revised Statutes of Missouri, as amended, (the “Act”) makes available tax increment financing (“TIF”) for redevelopment projects in certain areas determined by the governing body of a city to be a “blighted area conservation area,” or “economic development area,” each as defined in such Act.

Currently, the City has a TIF district encompassing a retail development located within the

City, known as “Manchester Highlands,” that is anchored by a Costco and a Walmart Supercenter, developed by Pace-Highlands Corporation (the “Developer”). The TIF district encompassing Manchester Highlands is scheduled to terminate on November 20, 2028, unless the obligations issued for such district are retired earlier.

During the time in which TIF is in effect, the City will not realize increases in ad valorem taxes

attributable to any increases in assessed valuation in the area comprising the TIF district (the “Redevelopment Area”); provided that, due to a recent change in the Act, a portion of the taxes levied in connection with the Bonds against the property in the Redevelopment Area will be available for payment of the Bonds. By statute, taxes collected by applying the tax rate of all taxing bodies having the power to tax real property in the Redevelopment Area upon any increase in the equalized assessed valuation over the initial equalized assessed valuation is deposited in a special allocation fund for the redevelopment area. Such incremental taxes are referred to as “Payments in Lieu of Taxes.” The City declared 25% of the Payments in Lieu of Taxes as a surplus to be returned annually to the taxing bodies. In addition, under the Act, 50% of the increase in economic activity taxes are incremental revenues allocated to payment of redevelopment project costs. Pursuant to a development agreement between the City and the Developer, the City agreed, subject to annual appropriation, to deposit in the special allocation fund an amount equal to the 25% surplus with a portion of the City’s incremental 1% general sales tax (a portion of the remaining 50% of the economic activity taxes). The City realizes the balance of any other additional new sales tax revenues attributable to Manchester Highlands.

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The City’s Tax Increment and Transportation Refunding Revenue Bonds (Highway 141/ Manchester Road Project), Series 2019, are currently outstanding in the principal amount of $24,195,000. These obligations are special limited obligations and are payable solely from tax increment revenues generated within the TIF district encompassing Manchester Highlands.

Assessed Valuation

Under the Missouri Constitution, real property is classified for assessment purposes in

subclasses consisting of agricultural, residential or commercial; permits different assessment ratios for each subclass; and requires uniformity in taxation of real property within each subclass. Pursuant to the constitution, agricultural property is assessed at 12% of its productivity value, residential property is assessed at 19% of true value, and commercial property is assessed at 32% of true value. Personal property is assessed at 1/3 (approximately 33.3%) of true value. In 1986, the State Legislature passed a bill requiring reassessment of all real properties every two years, beginning in 1987.

During 1995, legislation was adopted reclassifying apartments from commercial to residential.

As previously mentioned, commercial property is assessed at 32% and residential property is assessed at 19%. Since the change resulted in a reduction of taxes from apartments, the legislation also allowed cities to raise their tax rates, without voter approval, to offset the revenue reduction.

The following table indicates the assessed valuation for tangible property in the City as deemed

final for state and local government purposes for the tax years 2015 through 2019:

Total Real Estate Real Estate Personal Less TIF Valuation Year Residential Commercial Property Valuation Excluding TIF 2015 $246,310,040 $68,253,221 $41,863,128 $(14,058,960) $342,367,429 2016 246,769,700 68,503,716 42,398,947 (14,059,280) 343,613,083 2017 276,181,900 73,617,044 41,690,629 (15,749,240) 375,740,333 2018 276,233,890 69,965,973 42,646,186 (14,439,970) 374,406,079 2019 310,619,110 74,868,430 44,381,939 (14,837,130) 415,032,349 __________ Source: Assessment Reports from the St. Louis County Department of Revenue Website (Revenue.Stlouisco.com).

The following table sets forth the estimated market value of taxable property for 2019 based on the 2019 assessed valuation and the assessment ratios described hereinbefore:

Assessed Assessment Estimated

Subclass Valuation Ratio Market Value Residential Property $311,957,460 19.0% $1,641,881,368 Commercial Property 58,692,950 32.0 183,415,469 Personal Property 44,381,939 33.3 133,145,817 Agricultural Property -0- 12.0 -0- Total Taxable AV $415,032,349 $1,958,442,654 Incremental Value from TIFs: Commercial 16,175,480 32.0 50,548,375 Residential (1,338,350) 19.0 (7,043,947) Total $429,869,479 $2,001,947,082

__________ Source: Assessment Reports from the St. Louis County Department of Revenue Website (Revenue.Stlouisco.com).

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Tax Rates Political subdivisions in St. Louis County must establish separate tax rates for residential,

commercial, agricultural and personal property, except for the tax rate for payment of general obligation bonds. The purpose of the law is to help reduce the property tax burden on homeowners in areas where residential assessments are increasing at a faster rate than commercial assessments. The following table sets forth the tax rates for 2019 based on the assessment categories:

Residential Commercial Personal General $ .037 $ .037 $ .050 Debt Service .280 .280 .280 Total $ .317 $ .317 $ .330 __________ Source: Missouri State Auditor’s Reports of Property Tax Rates for 2019.

The following table sets forth residential tax rates for the 2015 through 2019 tax years: 2015 2016 2017 2018 2019

General Fund $ .044 $ .045 $ .042 $ .041 $ .037 Debt Service .193 .193 .024 .280 .280 Total $ .237 $ .238 $ .066 $ .321 $ .317 __________ Source: Missouri State Auditor’s Reports of Property Tax Rates for 2015 through 2019.

Tax Levies and Collection

Billing and collection of property taxes are performed by the County. The following table sets

forth information regarding tax collections for the City for the past five Fiscal Years:

Fiscal Total Taxes Current Taxes Current & Back Taxes Year Levied Collected % Collected Collected % Collected 2014 $ 788,131 $ 719,074 91.2% $ 789,022 100.1% 2015 811,820 744,793 91.7 812,862 100.1 2016 820,269 730,423 89.0 789,166 96.2 2017(1) 252,897 209,442 82.8 244,514 96.7 2018 1,208,124 1,066,189 88.3 1,153,652 95.5 __________ (1) The City’s last payment on its General Obligation Bonds, Series 2012 was on March 1, 2018 and was

paid with funds from taxes levied during 2017 as well as funds from a reserve balance in the debt service fund.

Source: City’s 2018 Comprehensive Annual Financial Report.

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Major Taxpayers The following table sets forth information regarding the top ten taxpayers in the City based on

the 2019 real and personal property tax assessment including properties in the TIF Redevelopment Area:

% of Total

Assessed Assessed Taxpayer Valuation Valuation TKG Manchester Highlands Shopping Center $11,576,220 2.69 % Kemp Waterford West LLC 5,029,130 1.17 UE Manchester LLC 4,367,420 1.02 Caplaco Six Inc A Missouri Corp 4,193,310 0.98 Park Meadow Apartments LLC 4,043,740 0.94 Costco Wholesale Corporation 4,032,040 0.94 Big Ben Apartments LLC 3,908,770 0.91 HDX Acquisition LLC 2,628,060 0.61 Meramec Station – Big Bend Investors LLC 2,372,280 0.55 Spirit Master Fund VIII LLC 2,265,500 0.55 __________ Source: St. Louis County Assessor’s 2019 Report “Top 100 Assessments by Taxing Authority.”

DEBT OF THE CITY

General

On August 2, 1988, an amendment to the Missouri Constitution was approved which decreased

the vote required to authorize the issuance of general obligation bonds payable from unlimited ad valorem taxes from two-thirds (2/3) to four-sevenths (4/7) of the qualified voters voting thereon for elections held at the general municipal, primary or general elections. A vote of two-thirds (2/3) of the qualified voters voting on the specific general obligation bond proposition is required at all other elections.

The Missouri Constitution provides that the amount of bonds a city may issue payable out of

tax receipts may not exceed 10% of the total assessed valuation of the taxable tangible property. The Missouri Constitution permits cities to become indebted for an additional 10% of the value of taxable, tangible property for the purpose of acquiring rights-of-way; constructing, extending, and improving streets and avenues; and constructing, extending and improving a sanitary or storm sewer system. Outstanding Bonds*

Following the issuance of the Bonds, the City’s outstanding general obligation bonds will consist of the following:

Amount Issue Outstanding General Obligation Bonds, Series 2018 $ 7,790,000 General Obligation Bonds, Series 2020 7,000,000 Total $14,790,000

* Subject to Change

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Legal Debt Limit and Debt Margin* City Purposes Street and Sewer

Basic Limit Additional Limit 2019 Assessed Value $429,869,479 $429,869,479 Debt Limit - 10% of Assessed Value $ 42,986,948 $ 42,986,948 Less: Bonds Counting Against Limit 14,790,000 — Legal Debt Margin $ 28,196,948 $ 42,986,948

General Obligation Bonds Debt Service Requirements

The following table sets forth the debt service requirements on the City’s outstanding General

Obligation Bonds, Series 2018 (the “Outstanding Bonds”) and the Bonds as of the date of this Official Statement:

Outstanding Bonds The Bonds* Total Debt

Year Principal Interest Principal Interest Service * 2020 $ 130,681 $ 130,681 2021 $ 640,000 248,563 $ 250,030 1,138,593 2022 550,000 224,763 213,803 988,565 2023 335,000 207,063 $ 245,000 210,250 997,313 2024 340,000 193,563 250,000 203,073 986,635 2025 350,000 179,763 270,000 195,533 995,295 2026 360,000 165,563 275,000 187,630 988,193 2027 370,000 152,813 290,000 179,438 992,250 2028 380,000 141,563 295,000 170,955 987,518 2029 390,000 130,013 305,000 162,103 987,115 2030 400,000 118,163 315,000 152,803 985,965 2031 410,000 106,013 325,000 143,203 984,215 2032 420,000 93,563 335,000 133,303 981,865 2033 435,000 80,738 345,000 123,103 983,840 2034 450,000 67,463 355,000 112,603 985,065 2035 465,000 53,738 360,000 101,878 980,615 2036 480,000 39,563 370,000 90,835 980,398 2037 500,000 24,550 375,000 79,380 978,930 2038 515,000 8,369 390,000 67,425 980,794 2039 − − 935,000 46,323 981,323 2040 − − 965,000 15,681 980,681 Total $7,790,000 $2,366,508 $7,000,000 $2,839,352 $19,995,849

* Subject to Change

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Direct and Overlapping Debt* The following table sets forth information relating to the outstanding general obligation debt of

the City and overlapping taxing entities (“direct and overlapping debt”): Percent City’s Direct Outstanding Applicable to and Overlapping Bonds(1) The City(2) Debt

City of Manchester $ 14,790,000 100.00% $14,790,000 St. Louis County 82,330,000 1.56 1,284,348 Parkway C-2 School District 203,435,000 7.50 15,257,625 Valley Park School District 19,135,000 16.17 3,094,130 West County EMS & Fire Protection District 11,620,000 45.91 5,334,742

$331,310,000 $39,760,845 __________ (1) Excludes lease obligations, Neighborhood Improvement District Bonds that are paid from special

assessments, and overlapping taxing entities that have no outstanding general obligation bonds. (2) Estimate based on 2019 real and personal property assessed valuation except for the ratio for the

school districts which is based on 2018 real and personal property assessed valuation due to the inability of St. Louis County to provide the 2019 figures at this time.

Source: Bond amounts were provided by the respective taxing districts or from records available through the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system (“EMMA”). The applicable percentages were derived from the data provided by the St. Louis County Collector’s office.

Debt Ratios and Related Information*

Population, 2018 (estimate) ................................................................. 18,172 Assessed Value, 2019 .......................................................................... $429,869,479 Estimated Market Value, 2019 ............................................................ $2,001,947,082 Direct Bonded Debt ............................................................................. $14,790,000 Direct and Overlapping Bonded Debt ................................................. $39,760,845 Per Capita 2019 Assessed Valuation ................................................... $23,656 Per Capita 2019 Estimated Market Value ........................................... $110,167 Per Capita Direct Bonded Debt ........................................................... $814 Per Capita Combined Net Direct and Overlapping Debt ....................................................................... $2,188 Direct Bonded Debt as a Percentage of 2019 Assessed Valuation ..................................................................... 3.44% Direct and Overlapping Bonded Debt as a Percentage of 2019 Assessed Valuation ..................................... 9.25% Direct Bonded Debt as a Percentage of 2019 Estimated Market Value ............................................................. 0.74% Direct and Overlapping Bonded Debt as a Percentage of 2019 Estimated Market Value ............................. 1.99%

Future Debt The City has no plans for the issuance of additional bonds or lease obligations.

* Subject to Change

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THE PROJECT

Description In 2017, a street assessment was completed by the City’s consulting engineer for the Project,

Horner Shirfrin, identifying and rating repairs needed throughout the City, identifying the type of repairs needed (e.g., ranging from crack sealing to concrete slab replacement) and identifying the cost. The total cost of repairing all streets, without regard to inflation, was estimated at $15,089,481. The Bonds represent the final series of $16,000,000 of bonds that were authorized on April 3, 2018 for the purpose of constructing, reconstructing, extending, repairing and improving the City’s streets and sidewalks, including acquiring any land or right-of-way necessary therefor.

Estimated Sources and Uses of Funds*

The estimated sources and uses of funds are set forth below: Sources of Funds Net Proceeds from the Bonds(1) $7,025,000 Interest During Construction(2) 36,400

Total $7,061,400 Uses of Funds

Costs of the Project $7,007,077 Costs of Issuance 54,323 Total $7,061,400

__________ (1) Represents the principal amount of the Bonds, plus the estimated net original issue premium, less the

estimated underwriter’s discount. (2) Based on an assumed rate of .25% and a 3-year construction period.

RATING

S&P Global Ratings, a division of S&P Global, Inc. has assigned the rating of “AA-”

(Negative Outlook) to the Bonds. The rating reflects only the view of the rating agency and any desired explanation of the significance of the rating should be obtained from the rating agency. Generally, a rating agency bases its rating on the information and material furnished to it and on investigations, studies and assumptions of its own. There is no assurance that a rating will continue for any given period of time or that it may not be lowered or withdrawn entirely by the rating agency. Such lowering or withdrawal may have an adverse effect on the market price of the Bonds.

CONTINUING DISCLOSURE UNDERTAKING

The Undertaking

The City will covenant in a Continuing Disclosure Undertaking to provide certain financial

information and operating data relating to the City as described below (the “Annual Report”) and to provide notices of the occurrence of certain enumerated events. The City shall file the Annual Reports with the Municipal Securities Rulemaking Board (the “MSRB”) via the Electronic Municipal Market Access system (“EMMA”) as follows:

(i) On or before July 1 of each year, commencing with July 1, 2020 (for the Fiscal Year

ending December 31, 2019), audited financial statements and updates as of the end of each Fiscal Year of the financial information and operating data contained in this Official Statement under the captions “THE CITY’S FINANCES,” “TAXATION,” and “DEBT OF THE CITY” (excluding “Debt Ratios and Related Information”).

* Subject to Change

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(ii) No later than 10 Business Days after the occurrence of any of the following events, the City shall give, or cause to be given to the MSRB, through EMMA, notice of the occurrence of any of the following events with respect to the Bonds (“Events”):

(1) principal and interest payment delinquencies;

(2) non-payment related defaults, if material;

(3) modifications to rights of Bond holders, if material;

(4) Bond calls, if material, and tender offers;

(5) defeasances;

(6) rating changes; (7) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or

final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax-exempt status of the Bonds, or other material events affecting the tax-exempt status of the Bonds;

(8) unscheduled draws on debt service reserves reflecting financial difficulties;

(9) unscheduled draws on credit enhancements reflecting financial difficulties;

(10) substitution of credit or liquidity providers, or their failure to perform;

(11) release, substitution or sale of property securing repayment of the Bonds, if material;

(12) bankruptcy, insolvency, receivership or similar event of the City (which shall be deemed to occur as provided in Rule 15c2-12);

(13) the consummation of a merger, consolidation or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and

(14) appointment of a successor or additional trustee or the change of name of the trustee, if material.

(15) incurrence of a financial obligation of the City, if material, or agreement to covenants, events of default, remedies, priority rights or other similar terms of a financial obligation of the City, any of which affect security holders, if material; and

(16) default, event of acceleration, termination event, modification of terms or other similar events under the terms of a financial obligation of the City, any of which reflect financial difficulties.

For purposes of (15) and (16) above, “financial obligation” means a (a) debt obligation; (b) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (c) guarantee of (a) or (b) in this definition; provided however, the term financial obligation shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with Rule 15c-12.

(iii) timely notice of a failure to provide the required annual financial information on or

before the date specified in its written Continuing Disclosure Undertaking.

Notwithstanding any other provision of the Continuing Disclosure Undertaking, the City may amend the Continuing Disclosure Undertaking and any provision of the Continuing Disclosure Undertaking may be waived, provided that Bond Counsel or other counsel experienced in federal

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securities law matters provides the City with its written opinion that the undertaking of the City contained herein, as so amended or after giving effect to such waiver, is in compliance with Rule 15c2-12 of the Securities and Exchange Commission and all current amendments thereto and interpretations thereof that are applicable to the Continuing Disclosure Undertaking.

The City may, from time to time, choose to provide notice of the occurrence of certain other

events, in addition to those listed above, if, in the judgment of the City, such other event is material with respect to the Bonds; however, the City does not undertake to commit to provide any such notice of the occurrence of any material event except those indicated herein.

The City reserves the right to terminate its obligation to provide annual financial information

and notices of material events, as set forth above, if and when the City no longer remains an “Obligated Person” with respect to the Bonds within the meaning of the Rule. The City acknowledges that its undertaking pursuant to the Rule described under this heading is intended to be for the benefit of the holders of the Bonds and shall be enforceable by the owners of the Bonds provided that the right to enforce the provisions of this undertaking shall be limited to a right to obtain specific enforcement of the City’s obligations hereunder and any failure by the City to comply with the provisions of this undertaking shall not be an event of default with respect to the Bonds.

Prior Compliance

The City is presently in compliance with its continuing disclosure obligations for its

outstanding General Obligation Bonds, Series 2018. In connection with certain outstanding tax increment revenue bonds, which are no longer

outstanding, the audit for the 2015 Fiscal Year was filed several days late and a notice regarding the late filing of the 2015 Fiscal Year audit was not filed. In addition, semiannual reports that were to be filed for such tax increment revenue bonds did not include all of the required data including, in particular, information relating to the application of certain transportation development district revenues.

LEGAL MATTERS

All matters incident to the authorization and issuance of the Bonds are subject to the approval

of Gilmore & Bell, P.C., St. Louis, Missouri, Bond Counsel. The approving opinion of Bond Counsel will be furnished at the time the Bonds are paid for and delivered. Bond Counsel has participated only in the preparation of the cover page of this Official Statement and of those portions of this Official Statement captioned “THE BONDS (except references to information in APPENDIX B – BOOK-ENTRY ONLY SYSTEM),” “CONTINUING DISCLOSURE UNDERTAKING – The Undertaking,” “LEGAL MATTERS,” and “TAX MATTERS.” Bond Counsel accordingly expresses no opinion as to the accuracy or sufficiency of other portions of this Official Statement.

TAX MATTERS

The following is a summary of the material federal and State of Missouri income tax

consequences of holding and disposing of the Bonds. This summary is based upon laws, regulations, rulings and judicial decisions now in effect, all of which are subject to change (possibly on a retroactive basis). This summary does not discuss all aspects of federal income taxation that may be relevant to investors in light of their personal investment circumstances or describe the tax consequences to certain types of owners subject to special treatment under the federal income tax laws (for example, dealers in securities or other persons who do not hold the Bonds as a capital asset, tax-exempt organizations, individual retirement accounts and other tax deferred accounts, and foreign taxpayers), and, except for the income tax laws of the State of Missouri, does not discuss the consequences to an owner under any state, local or foreign tax laws. The summary does not deal with the tax treatment of persons who purchase the Bonds in the secondary market. Prospective investors

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are advised to consult their own tax advisors regarding federal, state, local and other tax considerations of holding and disposing of the Bonds.

Opinion of Bond Counsel

In the opinion of Gilmore & Bell, P.C., Bond Counsel to the City, under the law existing as of

the issue date of the Bonds: Federal and State of Missouri Tax Exemption. The interest on the Bonds (including any

original issue discount properly allocable to an owner thereof) is excludable from gross income for federal income tax purposes and is exempt from income taxation by the State of Missouri.

Alternative Minimum Tax. The interest on the Bonds is not an item of tax preference for

purposes of computing the federal alternative minimum tax. Bank Qualification. The Bonds are “qualified tax-exempt obligations” within the meaning

of Section 265(b)(3) of the Code.

Bond Counsel’s opinions are provided as of the date of the original issue of the Bonds, subject to the condition that the City comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The City has covenanted to comply with all such requirements. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal and State of Missouri income tax purposes retroactive to the date of issuance of the Bonds. Bond Counsel is expressing no opinion regarding other federal, state or local tax consequences arising with respect to the Bonds, but has reviewed the discussion under the heading “TAX MATTERS.”

Other Tax Consequences

Original Issue Discount. For federal income tax purposes, original issue discount is the

excess of the stated redemption price at maturity of a Bond over its issue price. The issue price of a Bond is generally the first price at which a substantial amount of the Bonds of that maturity have been sold to the public. Under Section 1288 of the Code, original issue discount on tax-exempt bonds accrues on a compound basis. The amount of original issue discount that accrues to an owner of a Bond during any accrual period generally equals (1) the issue price of that Bond, plus the amount of original issue discount accrued in all prior accrual periods, multiplied by (2) the yield to maturity on that Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), minus (3) any interest payable on that Bond during that accrual period. The amount of original issue discount accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excludable from gross income for federal income tax purposes, and will increase the owner’s tax basis in that Bond. Prospective investors should consult their own tax advisors concerning the calculation and accrual of original issue discount.

Original Issue Premium. For federal income tax purposes, premium is the excess of the

issue price of a Bond over its stated redemption price at maturity. The issue price of a Bond is generally the first price at which a substantial amount of the Bonds of that maturity have been sold to the public. Under Section 171 of the Code, premium on tax-exempt bonds amortizes over the term of the Bond using constant yield principles, based on the purchaser’s yield to maturity. As premium is amortized, the owner’s basis in the Bond and the amount of tax-exempt interest received will be reduced by the amount of amortizable premium properly allocable to the owner, which will result in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes on sale or disposition of the Bond prior to its maturity. Even though the owner’s basis is reduced, no

24

federal income tax deduction is allowed. Prospective investors should consult their own tax advisors concerning the calculation and accrual of bond premium.

Sale, Exchange or Retirement of Bonds. Upon the sale, exchange or retirement (including

redemption) of a Bond, an owner of the Bond generally will recognize gain or loss in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale, exchange or retirement of the Bond (other than in respect of accrued and unpaid interest) and such owner’s adjusted tax basis in the Bond. To the extent a Bond is held as a capital asset, such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the Bond has been held for more than 12 months at the time of sale, exchange or retirement.

Reporting Requirements. In general, information reporting requirements will apply to

certain payments of principal, interest and premium paid on the Bonds, and to the proceeds paid on the sale of the Bonds, other than certain exempt recipients (such as corporations and foreign entities). A backup withholding tax will apply to such payments if the owner fails to provide a taxpayer identification number or certification of foreign or other exempt status or fails to report in full dividend and interest income. The amount of any backup withholding from a payment to an owner will be allowed as a credit against the owner’s federal income tax liability.

Collateral Federal Income Tax Consequences. Prospective purchasers of the Bonds should

be aware that ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with “excess net passive income,” foreign corporations subject to the branch profits tax, life insurance companies, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Bonds. Bond Counsel expresses no opinion regarding these tax consequences. Purchasers of Bonds should consult their tax advisors as to the applicability of these tax consequences and other federal income tax consequences of the purchase, ownership and disposition of the Bonds, including the possible application of state, local, foreign and other tax laws.

MUNICIPAL ADVISOR

WM Financial Strategies, St. Louis, Missouri (the “Municipal Advisor”), is a registered

municipal advisor with the Securities and Exchange Commission and the Municipal Securities Rulemaking Board. The Municipal Advisor is employed by the City to render certain professional services, including advising the City on a plan of financing and assisting in preparing the Official Statement for the sale of the Bonds. The Municipal Advisor does not guaranty, warrant or represent the accuracy or completeness of the information contained in this Official Statement.

UNDERWRITING

______________________ (the “Underwriter”) has agreed to purchase the Bonds from the City

at a price equal to $____________________. The price is net of the underwriter’s discount of $_________________ and a net original issue premium of ___________________. The Bonds may be offered and sold to certain dealers and others at prices lower than the initial public offering price and such initial offering price may be changed from time to time.

NO LITIGATION CERTIFICATE

Simultaneously with the delivery of and payment for the Bonds, the City Administrator, acting

on behalf of the City, will furnish to the Underwriter a certificate which shall state, among other things, that there is no controversy, suit or other proceeding of any kind pending or to his knowledge, threatened in any court (either State or federal) restraining or enjoining the issuance or delivery of the Bonds or questioning (i) the proceedings under which the Bonds are to be issued, (ii) the validity of

25

the Bonds, (iii) the pledge of the City of the moneys under the Bond Ordinance, or (iv) the legal existence of the City or the title to office of the present officials of the City.

CERTIFICATION OF OFFICIAL STATEMENT

Simultaneously with the delivery of the Bonds, the City Administrator, acting on behalf of the

City, will furnish to the Underwriter a certificate which shall state, among other things, that to the best of his knowledge and belief, this Official Statement (and any amendment or supplement hereto) as of the date of sale and as of the date of delivery of the Bonds does not contain any untrue statement of a material fact and does not omit to state a material fact required to be stated therein or necessary to make the statements herein, in light of the circumstances under which they were made, not misleading in any material respect. Notwithstanding the foregoing, the City makes no representations with respect to disclosures provided by the Municipal Advisor included under the caption “MUNICIPAL ADVISOR” or disclosures included in “APPENDIX C – BOOK-ENTRY ONLY SYSTEM.”

MISCELLANEOUS

This Official Statement is not to be construed as a contract or agreement between the City and

the purchasers or holders of any of the Bonds. Any statement made in this Official Statement involving matters of opinion is intended merely as an opinion and not as a representation of fact. 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 affairs of the City since the date hereof.

CITY OF MANCHESTER, MISSOURI BY: _______________________________ City Administrator

This Page Left Blank Intentionally

A-1

APPENDIX A

CITY OF MANCHESTER, MISSOURI FINANCIAL STATEMENTS

December 31, 2018

The financial statements presented within this Appendix have been extracted from the City’s

comprehensive annual financial report for the fiscal year ended December 31, 2018. The comprehensive annual financial report includes supplemental information and the auditor’s report which are not included herein. Copies of the comprehensive annual financial report, in its entirety, are available online at https://www.manchestermo.gov/600/CAFR. Additionally, financial statements for prior years and the City’s budget for the fiscal year ending December 31, 2020 are available from https://www.manchestermo.gov/153/Finance.

INDEX

Statement of Net Position .......................................................................................... A-2 Statement of Activities .............................................................................................. A-3 Balance Sheet – Governmental Funds ....................................................................... A-4 Reconciliation of The Governmental Funds Balance Sheet To the Statement of Net Position ........................................................................ A-5 Statement of Revenues, Expenditures and Changes In Fund Balances - Governmental Funds ........................................................... A-6 Reconciliation of the Statement of Revenues, Expenditures And Changes in Fund Balances of Governmental Funds to the Statement of Activities ........................................................................................ A-7 Notes to Financial Statements ................................................................................... A-8

Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual – General Fund ........................................................................... A-22

Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - Parks and Storm Water Projects Fund ...................................... A-23

Schedule of Revenues, Expenditures and Changes in Fund Balance -

Budget and Actual – Capital Projects Fund ............................................................... A-24 Schedule of Revenues, Expenditures and Changes in Fund Balance -

Budget and Actual - TIF Fund ................................................................................... A-25

Notes to the Required Supplementary Information ................................................... A-26

Assets

Current Assets: Cash and cash equivalents

Investments

Restricted cash and equivalents

Restricted investments

Receivables, net:

Taxes

Interest

Other

Prepaid expenses

Total Current Assets

Noncurrent Assets:

Land and construction in progress

Other capital assets, net

Total Noncurrent Assets

Total Assets

Deferred Outflows of Resources

Liabilities

Current Liabilities:

Accounts payable

Accrued wages

Accrued compensated absences

Escrow payable

Court bonds payable

Accrued interest payable

City of Manchester, Missouri

Statement of Net Position

December 31, 2018

Current portion of General Obligation Bonds payable

Current portion of postretirement benefits payable

Total Current Liabilities

Noncurrent Liabilities:

General Obligation Bonds payable, net - long-term portion

Tax Increment Revenue Bonds payable, net

Postretirement benefits - long-term portion

Total Noncurrent Liabilities

Total Liabilities

Deferred Inflows of Resources

Net Position

Net investment in capital assets

Restricted:

Enabling legislation

Capital projects

Unrestricted

Total Net Position

See Notes to the Financial Statements

$

$

Governmental

Activities

3,305,375

1,956,272

1,750,931

13,186,672

4,637,909

46,693

550,290

139,519

25,573,661

2,876,799

30,124,935

33,001,734

58,575,395

487,613

215,738

102.187

35,909

2,416

539,378

585,000

28,401

1,996,642

8,645,000

33,819,539

544,342

43,008,881

45,005,523

32,151,101

12,364,791

8,379,367

(39,325,387) 13,569,872

A-2

Fun

ctio

ns/P

rogr

ams

Governm

enta

l Act

ivit

ies:

Gen

eral

govern

men

t

Po

lice

dep

artm

ent

Pu

blic

work

s

Com

mun

ity d

evel

opm

ent

Aq

uat

ic c

ente

r

Rec

reat

ion

Legal

and c

ourt

Inte

rest

and

fisc

al c

har

ges

Cit

y of

Man

ches

ter,

Mis

sour

i S

tate

men

t of A

ctiv

itie

s F

or th

e r

ear

ende

d D

ecem

ber

31, 2

018

Exp_

ense

s

$ 2,

066,

946

3,81

1,17

4 3,

577,

146

311,

376

714,

558

1,17

6,62

3 23

0,73

9 2,

633,

419

14,5

21,9

81

$

Char

ges

for

Ser

vic

e 95,

155

242,

579

28,0

51

14,0

50

265,

366

126,

560

771,

761

See

Note

s to

the

Fin

anci

al S

tate

men

ts

Pro

!:l:ra

m R

even

ue

Oper

atin

g G

rants

C

apit

al G

rants

and C

ontr

ibuti

ons

and C

ontr

ibuti

ons

$ $

150,

321

1,00

0

151,

321

Gen

eral

Rev

enue

s:

Tax

es:

Sal

es

Uti

lity

Pro

per

ty

Fra

nchis

e and o

ther

tax

es

Lic

ense

s an

d p

erm

its

Inves

tmen

t in

com

e

Gai

n o

n dis

posa

l of ass

ets

Oth

er m

isce

llan

eous

reven

ue

Tota

l G

ener

al R

even

ues

Chan

ge

in N

et P

osi

tion

617,

300

617,

300

Net

Posi

tion -

Beg

innin

g o

f Y

ear

(res

tate

d)

Net

Posi

tion -

En

d o

f Y

ear

Net

(E

xpen

se)

Rev

enu

e an

d

Chan

ge

in N

et

Po

siti

on

Governm

enta

l

Act

ivitie

s

$ (1

,971

,791

)

$ $ $ $

(3,4

18,2

74)

(2,9

31,7

95)

(297

,326

) (4

49,1

92)

(1,0

49,0

63)

(230

,739

) (2

,633

,419

) (1

2,98

1,59

9)

14,5

17,1

38

1,53

2,92

7

2,82

1,90

2 39

9,58

9 36

4,54

6 20

4,06

0 16

,000

51

,902

19

,908

,064

6,92

6,4

65

6,64

3,4

07

13,5

69,8

72

A-3

City

of

Man

ch

este

r, M

isso

uri

Bal

ance

Sh

eet

-G

ov

ernm

enta

l F

un

ds

Dec

emb

er 3

1, 2

018

Park

s and

Sto

rm

Prop

S C

apita

l N

onm

ajor

G

ener

al

Wat

er P

roje

cts

Cap

ital P

roje

cts

Impr

ovem

ent

Gov

ernm

enta

l Fu

nd

Fund

Fu

nd

Fund

T

IF F

und

Fund

s To

tal

Ass

ets

Cas

h an

d ca

sh e

quiv

alen

ts

$

447,

198

$

1,77

7,58

9 $

$

$

40

8,61

6 $

67

1,97

2 $

3,

305,

375

Inve

stmen

ts

1,95

6,27

2 1,

956,

272

Res

trict

ed c

ash

and

cash

equ

ival

ents

70

7,74

2 1,

026,

491

16,6

98

1,75

0,93

I R

estri

cted

inve

stm

ents

7,

708,

613

5,47

8,05

9 13

,186

,672

R

ecei

vabl

es, n

et:

Taxes

1,

608,

208

286,

652

251,

425

1,98

3,83

4 50

7,79

0 4,

637,

909

Inte

rest

3,

477

43,2

16

46,6

93

Oth

er

71,3

09

478,

981

550,

290

Prep

aid

item

s 13

4,51

9 5,

000

139,

519

Due

from

oth

er fu

nds

912,

419

912,

419

Tota

l Ass

ets

4,22

0,98

3 2,

976,

660

735,

406

8,45

9,57

1 8,

897,

000

1,19

6,46

0 26

,486

,080

Def

erre

d O

utfl

ow

s of

Res

ou

rces

Tota

l Ass

ets

and

Defe

rred

O

utflo

ws o

f Res

ourc

es

$

4 22

0,98

3 $

2

976

660

$

735

406

$

8 45

9 57

1 $

8

�97

000

�

1,19

6,46

0 $

26

,486

,080

Lia

bil

itie

s

Acc

ount

s pa

yabl

e $

18

3,24

2 $

56

,441

$

22

6,48

9 $

16

,543

$

$

4,

898

$

487,

613

Acc

rued

wag

es

215,

738

215,

738

Escr

ow p

ayab

le

35,9

09

35,9

09

Due

to o

ther

fund

s 72

5,86

1 18

6,55

8 91

2,41

9 C

ourt

bond

s pa

yabl

e 2,

416

2,4

16

Tota

l Lia

bilit

ies

1,16

3,16

6 56

,441

41

3,04

7 16

,543

4,

898

1,65

4,09

5

Def

erre

d I

nfl

ow

s o

f R

esou

rces

Una

vaila

ble

reve

nue

-pro

perty

taxes

18

,588

50

0,43

8 12

1,15

5 64

0,18

1 U

nava

ilabl

e re

venu

e -gr

ants

34

4,7'i

6 34

4,75

6 18

,588

34

4,75

6 50

0,43

8 12

1,15

5 98

4,93

7

Fu

nd

Bal

ance

s

Non

spen

dabl

e:

Prep

aid

item

s 13

4,51

9 5,

000

139,

519

Res

trict

ed:

Spec

ial r

even

ue f

und

2,92

0,21

9 8,

396,

562

1,07

0,40

7 12

,387

,188

C

apita

l pro

jects

fun

d 8,

443,

028

8,44

3,02

8 C

omm

itted

: C

ontin

genc

y 1,

981,

235

1,98

1,23

5 U

nass

igne

d 92

3,47

5 !2

7,39

7)

896,

078

Tota

l Fun

d B

alan

ces

3,03

9,22

<; 2,

920,

219

(22,

397)

8,

443,

028

8,39

6,56

2 1,

070,

407

23,8

47,0

48

Tota

l Lia

bilit

ies,

Defe

rred

Infl

ows

of R

esou

rces

, and

Fund

Bal

ance

s $

4,

220

983

$

2,97

6,66

0 $

73

5,40

6 $

8,

459,

57 I

$

8,89

7 00

0 $

1,

196

460

$

26,4

86,0

80

See

Not

es to

the

Fina

ncia

l Sta

tem

ents

A-4

City of Manchester, Missouri

Reconciliation of the Balance Sheet - Governmental Funds to the Statement of Net Position

December 31, 2018

Total Governmental Fund Balances

Amounts reported for governmental activities in the statement

of net position are different because:

Capital assets used in governmental activities are not

financial resources and, therefore, are not reported in the funds

Receivables not collected in the current period are not available to pay current expenditures and, therefore, are not reported in the funds

Interest payable recorded in the Statement of Net Position does not require

the use of current financial resources and, therefore, is not reported in the funds

Long-term liabilities, including bonds payable, compensated absences and postretirement benefits, are not due and payable in the current period and, therefore, are not reported in the funds:

General Obligation Bonds Tax Increment Revenue Bonds Compensated absences Postretirement benefits

Total Net Position of Governmental Activities

See Notes to the Financial Statements

$

$

23,847,048

33,001,734

984,937

(539,378)

(9,230,000) (33,819,539)

(102,187) (572,743)

13,569,872

A-5

Cil

y o

f M

anch

este

r, M

isso

uri

C

omb

ined

Sta

tem

ent

of R

even

ue,

Ex

pen

ditu

res

an

d C

han

ges

in F

un

d B

ala

nce

s G

over

nm

enta

l Fu

nds

F

or t

he r

ear e

nded

Dec

emb

er 3

1, 2

018

Par

ks a

nd S

ten

n P

rop

S C

apita

l N

onm

ajor

G

ener

al

Wat

er P

roje

cts

Cap

ital

Pro

ject

s Im

prov

emen

t T

ax I

ncre

men

t G

overnm

enta

l Fu

nd

Fund

Fu

nd

Fund

Fi

nanc

in!l

Fun

d Fu

nds

Tot

al

Rev

enu

es

Pro

perl

y ta

xes

$

542,

157

$

$ $

$

1,27

9,59

9 $

93

1,89

6 $

2,75

3,65

2 T

axes

-ot

her

8,08

7,18

8 1,

698,

993

1,45

1,91

6 5,

045,

071

166,

486

16,4

49,6

54

Gra

nts

155,

743

272,

544

3,75

5 43

2,04

2 L

icen

ses

and

pen

nits

37

8,59

6 37

8,59

6 Fi

nes

and

forf

eitu

res

231,

684

231,

684

Cha

rges

for s

ervi

ces

489,

799

28,0

51

517,

850

Inve

stmen

t inc

ome

36,0

03

63,6

61

104,

396

204,

060

Oth

er

50,8

83

1,01

9 51

,902

9,

972,

053

1,69

8,99

3 1,

724,

460

63,6

61

6,43

0,08

5 I,

130,

188

21,0

19,4

40

Ex

pen

ditu

res

C

urre

nt:

Gen

eral

gov

ernm

ent

1,57

8,58

9 40

1,38

2 1,

979,

971

Pol

ice

depa

rtm

ent

3,49

0,01

9 3,

490,

019

Publ

ic w

orks

2,

410,

385

79,1

06

2,48

9,49

1 C

omm

unity

dev

elop

men

t 29

3,26

7 17

,161

31

0,42

8 A

quat

ic c

ente

r 32

8,81

7 32

8,81

7 R

ecre

atio

n 91

9,30

7 91

9,30

7 L

egal

/cou

rt 22

8,98

5 22

8,98

5 C

apita

l out

lay

743,

578

1,59

6,38

8 73

1,80

4 15

9,98

5 3,

231,

755

Deb

t ser

vice

: P

rinci

pal

4,01

0,00

0 57

0,00

0 4,

580,

000

Inte

rest

and

fisc

al c

harg

es

2,49

2,93

1 6,

510

2,49

9,44

1 B

ond

issu

ance

cos

ts

123,

723

123,

723

9,24

9,36

9 74

3,57

8 1,

596,

388

855,

527

6,92

1,47

4 81

5,60

L

20,1

81,9

37

Ex

cess

(D

ef'ic

ien

cy)

of

Rev

enu

es

ov

er E

xpen

ditu

res

722,

684

955,

415

128,

072

(7

91,8

66)

(491

,389

) 31

4,58

7 83

7,50

3

Oth

er F

inan

cin

g S

ou

rces

(U

ses)

Pro

ceeds

from

sal

e of

cap

ital a

sset

s 51

,455

51

,455

P

rocee

ds fr

om g

ener

al o

blig

atio

n bo

nds

9,00

0,00

0 9,

000,

000

Pro

ceeds

from

gen

eral

obl

igat

ion

bond

s -

prem

iwn

234,

894

234,

894

Tra

nsfe

rs in

24

0,00

0 35

2,15

6 69

,709

66

1,86

5 T

rans

fers

out

(4

21,8

65)

(240

,000)

(6

61,8

65)

(18

1,86

5)

(188

545

) 9

234,

894

352,

156

69,7

09

9 28

6,34

9

Net

Ch

ang

e in

Fu

nd

Ba

lan

ce

$

54(),

819

$

955,

415

$ (6

0,47

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,076

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,723

,196

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A-6

City of Manchester, Missouri Reconciliation of the Combined Statement of Revenue, Expenditures,

and Changes in Fund Balances - Governmental Funds to the Statement of Activities For the year ended December 31, 2018

Change in fund balance-total governmental funds

Amounts reported for governmental activities in the statement

of activities are different because:

Revenues that do not provide current financial resources are not

included in the fund financial statements.

The acquisition of capital assets requires the use of current financial

resources but has no effect on net position

The cost of capital assets is allocated over their estimated useful lives

and are reported as depreciation expense in the statement of activities

In the statement of activities, only the gain or loss on the sale of capital assets is reported, whereas in the governmental funds, the proceeds from the sale increases financial resources.

The increase in interest payable and the amortization of bond premium/discount do not require the use of current financial resources and, therefore, are not reported as an expenditure in governmental funds

Repayment of bonds principal is an expenditure in the governmental

funds, but the repayment reduces long-term liabilities in the statement ofnet position

Issuances of bonds, principal and premiums, are revenues in the governmental funds, but the issuance increases long-term liabilities in the statement of net position

Increase in compensated absences and accumulated post retirement benefits are recorded when earned in the statement of activities

Change in net position of governmental activities

See Notes to the Financial Statements

$ 10,123,852

413,006

3,029,824

(1,836,176)

(38,370)

(134,788)

4,580,000

(9,234,894)

24,011

$ 6,926,465

A-7

City of Manchester, Missouri Notes to Financial Statements

For the year ended December 31, 2018

Note 1 - Summary of Significant Accounting Policies

The City of Manchester, Missouri (the City) was incorporated as a city within St. Louis County, Missouri on August 17, 1959.

The residents voted to approve the Village of Manchester becoming a fourth class city as provided by Missouri state statutes, and

established a Mayor/City Administrator/Board of Alderman form of government. The City's major operations include police

protection, street maintenance and improvements, parks and recreation, community development, and general administrative

services. The basic financial statements have been prepared in conformity with generally accepted accounting principles as

applied to governmental agencies. The significant accounting policies applied by the City in the preparation of the accompanying

financial statements are summarized below:

Reporting Entity

The City applies the criteria set forth in Statement No. 61 of the Governmental Accounting Standards Board, The Financial

Reporting Entity: Omnibus, an amendment of GASE Statements No. 14 and No. 34 (GASB 61), to determine which

governmental organizations should be included in the reporting entity. The inclusion or exclusion of component units is based on

the elected officials accountability to their constituents. The financial reporting entity follows the same accountability. In

addition, the financial statements of the reporting entity should allow the user to distinguish between the primary government

(including its blended component units, which are, in substance, part of the primary government) and discretely presented

component units. Criteria for inclusion of an entity into the primary governmental unit (in blended or discrete presentation)

includes, but is not limited to, legal standing, fiscal dependency, imposition of will, and the primary recipient of services. The

City presently has no component units included within its reporting entity.

Basic Financial Statements

Basic financial statements consist of the following:

- Government-wide financial statements

- Fund financial statements, and

- Notes to the basic financial statements

The government-wide financial statements consist of the Statement of Net Position and the Statement of Activities, and reports

information on all of the activities of the Primary Government. As a general rule, the effect of interfund activity has been

eliminated from the government-wide financial statements. Exceptions to this general rule are charges that would distort direct

costs and program revenues reported for the various functions concerned.

The Statement of Activities demonstrates the degree to which the direct and indirect expenses of a given function are offset by

program revenues. Direct expenses are those that are clearly identifiable with a specific function or activity. Indirect expenses are

allocated based on the annual cost allocation plan. Program revenue includes: charges to customers or applicants who purchase,

use, or directly benefit from goods, services, or privileges provided by a given function or activity and grants and contributions.

Taxes and other items not properly included among program revenues are reported instead as general revenues.

Separate fund based financial statements are provided for governmental funds. M�jor individual governmental funds are reported

as separate columns in the fund financial statements. GASB Statement No. 34 sets forth minimum criteria (percentage of assets,

deferred outflows, liabilities, deferred inflows, revenues or expenditures/expenses of either fund category for the governmental

and enterprise combined) for the determination of major funds. The nonm�jor funds are combined in a column in the fund

financial statements.

A-8

City of Manchester, Missouri

Notes to Financial Statements For the year ended December 31, 2018

Note 1 - Summary of Significant Accounting Policies (continued)

Measurement Focus, Basis of Accounting and Financial Statement Presentation

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned or, for property tax revenues, in the period for which levied. Expenses are recorded when a liability is incurred, regardless of the timing of related cash flows.

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. The City considers revenues available if they are collected within 60 days after year-end.

Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on general long-term debt which is recognized when due.

For the governmental fund financial statements, the City considers all revenues susceptible to accrual and recognizes revenue if the accrual criteria are met. Specifically, sales taxes, franchise taxes, licenses, interest, special assessments, charges for services, and other miscellaneous revenue are considered to be susceptible to accrual and have been recognized as revenue in the current fiscal period.

The accounts of the City are organized on the basis of funds. A fund is an independent fiscal and accounting entity with a self­balancing set of accounts. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance related legal and contractual provisions.

The City reports the following major governmental funds:

The General Fund - The City's primary operating fund, which accounts for all the financial resources and the legally

authorized activities of the City except those required to be accounted for in other specialized funds.

The Parks and Storm Water Projects Fund - The City uses this fund to account for sales tax revenue restricted for parks and storm water projects.

The Capital Projects Fund - The City uses this fund to account for sales tax revenue and proceeds from the issuance of debt restricted for capital improvements.

The Prop S Capital Improvement Fund - The City uses this fund to account for the proceeds from the issuance of debt and

capital project activity related to Proposition S.

The TIF Fund - The City uses this fund to account for the activity from the Tax Increment Financing Commission for the

Manchester Highlands.

The other governmental funds of the City are considered nonmajor. They are special revenue funds which account for specific revenue sources that are legally restricted to expenditures for specific purposes.

A-9

City of Manchester, Missouri Notes to Financial Statements

For the year ended December 31, 2018

Note 1 - Summary of Significant Accounting Policies ( continued)

Capital Assets

Capital assets, which include land, buildings and improvements, equipment, and infrastructure assets (e.g., roads, sidewalks, traffic lights, street lights, sewer lines, and similar items), are reported in the government-wide financial statements. Capital assets are defined by the City as assets with an initial individual cost of $2,000 or more and an estimated useful life in excess of one year. Infrastructure assets with an initial cost of $50,000 or more are also capitalized and depreciated. Donated capital assets, donated works of art and smiliar items, and capital assets received in a service concession arrangement are reported at acquisition value. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized.

Capital assets of the City are depreciated using a straight-line method over the following estimated useful lives:

Major Group Buildings and improvements Machinery and equipment Vehicles Infrastructure

Life 5 - 40 years 5 - 20 years 5 years 10 - 50 years

The government-wide financial statements do not reflect those infrastructure assets completed prior to January 1, 2004. From that point forward, new infrastructure is added to the records, while the retroactive historical value of the City's infrastructure assets has not been added.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles require� the City to make estimates and assumptions that affect the reported amounts of assets and liabilities at fiscal year-end and revenues and expenditures during the reporting period. Actual results could vary from the estimates that management uses.

Restricted Cash and Investments

Certain cash and investments are restricted for the construction or purchase of assets, the repayment of special revenue bonds, and the activities of special revenue funds.

Interfund Transactions

Transactions that constitute reimbursements to a fund for expenditures initially made from it that are applicable to another fund are recorded as expenditures in the reimbursing fund and as reductions of expenditures in the fund that is reimbursed.

Compensated Absences

The policy for vacation pay allows employees to take time off with pay. The policy allows employees to carry forward up to one­half of the days earned in that particular year. Any days carried forward must be used in the following year. Since all days carried forward must be used in the following year, it is reflected as a current liability. Sick leave is accumulated based upon hours worked and is available only to provide compensation during periods of illness or injury.

A-10

City of Manchester, Missouri Notes to Financial Statements

For the year ended December 31, 2018

Note 1 - Summary of Significant Accounting Policies (continued)

Compensated Absences (continued)

The City instituted a Catastrophic Leave Policy during the year ended December 31, 2008, which provides employees the

opportunity to donate sick leave, vacation, and/or compensatory time so that other employees may remain in paid status, and thus,

partially reduce the financial impact of a serious illness or injury. No portion of sick or catastrophic leave is payable to the

employee upon termination of employment. Therefore, no liability for sick or catastrophic leave has been accrued by the City.

Liabilities for compensated absences are generally liquidated by the General Fund.

Long-Term Liabilities

In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the

Statement of Net Position. Initial-issue bond premiums and discounts are deferred and amortized over the life of the bonds using

the straight-line method. The difference between the reacquisition price of refunding bonds and the net carrying amount of

refunded debt (deferred amount on refunding) is amortized over the shorter of the lives of the refunding debt or remaining life of

the refunded debt. Bonds payable are reported net of the unamortized portion of applicable premium, discount, or deferred

amount on refunding. Bond issuance costs, including underwriters' discount, are included as an expense. Amortization of bond

premiums or discounts and deferred amounts on refunding are included in interest expense.

Also recorded in long-term liabilities is the City's severance package liability. The City pays to each employee with 20 years of

service upon retirement an amount equal to three months salary. The City records in long-term liabilities an amount equal to the

estimated liability at year end based on the length of service of each employee. The change in this liability is recorded in the

government-wide statements to match the expense of providing this benefit to the period it is earned by the employee.

Net Position and Fund Balance/Equity

In the government-wide financial statements, net position is reported in three categories: net investment in capital assets;

restricted; and unrestricted. Net investment in capital assets represents capital assets less accumulated depreciation less

outstanding principal on related debt. Net investment in capital assets does not include the unspent proceeds of capital debt.

Restricted net position represents amounts restricted by parties outside of the City (such as creditors, grantors, contributors, laws

and regulations of other governments) and includes unspent proceeds of bonds issued to acquire or construct capital assets. All

remaining net position is considered unrestricted.

When both restricted and unrestricted sources are available for use, it is the City's policy to use restricted first, then unrestricted

resources as they are needed. The government-wide Statement of Net Position reports a restricted portion of $20,744,158, of

which $12,364,791 is restricted by enabling legislation.

Fund Balance Classification - The governmental fund financial statements present fund balances based on classifications that

comprise a hierarchy that is based primarily on the extent to which the City is bound to honor constraints on the specific purposes

for which amounts in the respective governmental funds can be spent. The classifications used in the governmental fund financial

statements are as follows:

Nonspendable - Resources which cannot be spent because they are either a) not in spendable form or b) legally or

contractually required to be maintained intact.

A-11

City of Manchester, Missouri Notes to Financial Statements

For the year ended December 31, 2018

Note 1 - Summary of Significant Accounting Policies ( continued)

Net Position and Fund Balance/Equity (continued)

Restricted - Resources with constraints placed on the use of resources are either a) externally imposed by creditors (such as

through debt covenants), grantors, contributors, or laws or regulations of other governments or b) imposed by law through

constitutional provisions or enabling legislation.

Committed - Resources which are subject to limitations the government imposes upon itself by passing a resolution by the

Board of Aldermen, and that remain binding unless removed in the same manner. The City currently has a policy which

requires commitment of General Fund Balance equal to twenty percent of the future year budgeted expenditures.

Assigned - Resources neither restricted nor committed for which a government has a stated intended use as established by the

Board of Aldermen or an official to which the Board of Aldermen has delegated the authority to assign amounts for specific

purposes.

Unassigned - Resources which cannot be properly classified in one of the other four categories. The General Fund is the only

fund that reports a positive unassigned fund balance amount. Unassigned balances also include negative balances in the

governmental funds reporting resources restricted for specific programs.

The City would typically use Restricted fund balances first, followed by Committed resources and Assigned resources, as

appropriate opportunities arise, but reserves the right to selectively spend Unassigned resources first.

Investments

The City pools the cash of all funds, except for monies deposited with fiscal agents in accordance with related bond indentures.

The cash and investments balance in each fund represents that fund's equity share of the City's cash and investment pool. The

City's investments are carried at fair value or cost, as applicable per investment type. Interest income earned on pooled cash and

investments is allocated to the various funds. Interest income on restricted cash and investments is credited directly to the related

fund.

The City is authorized to invest funds not immediately needed for the purposes to which the funds are applicable in obligations of

the United States Treasury, United States Government Agencies, Repurchase Agreements, Certificates of Deposit, Banker's

Acceptance and Commercial Paper.

Budgets and Budgetary Accounting

The Board of Alderman adopts an annual budget on the modified accrual basis of accounting for its general, debt service, capital

projects, and special revenue funds. The procedures outlined below are followed in establishing the budgetary data reflected in

the general purpose financial statements:

1. The Director of Finance, with the assistance of the various department heads, prepares a budget of estimated revenues and

expenditures for the forthcoming year and delivers to the City Administrator.

2. The City Administrator reviews the proposed expenditures with the Director of Finance and the department heads, and, after

the necessary revisions have been made, submits the budget to the Mayor and the Board of Aldermen in September of each year.

A-12

City of Manchester, Missouri

Notes to Financial Statements For the year ended December 31, 2018

Note 1 - Summary of Significant Accounting Policies ( continued)

Budgets and Budgetary Accounting (continued)

3. The Board of Aldermen will then hold budget work sessions with the City Administrator and staff to make final revisions tothe proposed budget.

4. The budget is legally enacted by ordinance prior to January 1 of the year to which it applies.

5. The City Administrntor is authorized to transfer within a fund any unexpended balances. The Board of Aldermen must approveall fund transfers.

6. The Board of Aldermen may make supplemental appmpriations for revenues in excess of original budget estimates or reduceappropriations should revenues be insutlicient to meet the amount appropriated.

7. At the end of each budget period, all appropriated balances lapse and may be reappropriated in the next budget period.

The legal level of budgetary control for the City is at the fund level.

Note 2 - Deposits and Investments

Deposits and investments held by at the City at December 31, 2018 consisted of the following:

Type Unrestricted Deposits:

Petty cash Demand deposits

Total Unrestricted Deposits

Restricted Deposits: Demand deposits

Total Restricted Deposits

Unrestricted Investments: Government sponsored enterprise (GSE) bond Government sponsored enterprise (GSE) bond Government sponsored enterprise (GSE) bond Government sponsored enterprise (GSE) bond Government sponsored enterprise (GSE) bond Government sponsored enterprise (GSE) bond

Total Unrestricted lnvestments

Maturities

n/a n/a

n/a

10/03/19 03/30/20 11/25/20 05/07/21 05/17/2 l 06/30/21

$

Balance

800 3,304,575 3,305,375

724,440 724,440

198,202 294,977 194,538 292,846 488,736 486,973

1,956,272

A-13

City of Manchester, Missouri

Notes to Financial Statements

For the year ended December 31, 2018

Note 2 - Deposits and Investments (continued)

Restricted Investments: Money market funds U.S. Treasury bills U.S. Treasury notes Corporate bonds Government and GSE bonds

Total Restricted Investments

n/a Various Various Various Various

1,347,644 3,538,090 4,349,721

318,908 4,658,800

$ 14,213,163

At December 31, 2018, all deposits were covered by the Federal Deposit Insurance Corporation (FDIC) or pledged securities.

Credit Risk

The City has no formal policy regarding credit risk. In general, the City invests only in instruments with a minimum AA rating.

Interest Rate Risk

The City has no formal policy in regards to interest rate risk. As a means of limiting its exposure to fair value losses arising from rising interest rates, the City limits its exposure to investments with maturities greater than one year.

Maturity Investment Type Balance 0-3 Years 3-6 Years 6+ Years Rating

Money market funds $ 1,347,644 $ 1,347,644 $ $ n/a U.S. Treasury bills 3,538,090 3,538,090 AAA U.S. Treasury notes 4,349,721 4,349,721 AAA Corporate bonds 318,908 169,100 149,808 AA Government and GSE bonds 6,615,072 4,255,410 92,373 2,267,289 AAA

Total Investments $ 16,169,435 $ 13,490,865 $ 261 473 $ 2,417,097

Concentration of Credit Risk

The City places no limit on the amount that the City may invest in any one issuer. Investments in any one issuer (other than U.S. Treasury Securities, mutual funds, and external investment pools) that represent 5% or more of total City investments are as follows:

Issuer FHLB FNMA

Investment Type GSE agency bonds GSE agency bonds

$

Reported Percent of Amount Portfolio 2,453,853 15.18% 1,813,076 11.21%

A-14

City of Manchester, Missouri Notes to Financial Statements

For the year ended December 31, 2018

Note 2 - Cash and Investments (continued)

Custodial Credit Risk

For deposits and investments, the custodial credit risk is the risk that in the event of the failure of the counterparty, the City will

not be able to recover the value of its investments or collateral securities that are in the possession of an outside party.

Investments of the City are either insured, collateralized, or invested in securities of the United States or its agencies.

Fair Value Measurements

The City categorizes its fair value measurements within the fair value heirarchy established by generally accepted accounting

principles. The hierarchy is based on the valuation inputs used to measure the fair value of the assets. Level l inputs are quoted

prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant

unobservable inputs. The City has the following recurring fair value mesurements as of December 31, 2018:

Money market funds

U.S. Treasury bills U.S. Treasury notes

Corporate bonds

Government and GSE bonds

Total

$ 1,347,644

273,627

4,349,721

318,908

6,615,072 $ 12,904,972

Quoted

Prices in

Active Markets

for Identical

Assets (Level 1)

$ 1,347,644

$ 1,347,644

Significant

Other

Observable

Inputs (Level 2)

$

273,627

4,349,721

318,908

6,615,072 $ 11,557,328

Significant

Unobservable

Inputs (Level 3)

$

$

The City values level 2 inputs based on quoted prices in active markets for similiar assets. All other investments are reported

using a cost-based measure in accordance with the requirements of GASB Statement No. 31, Accounting and Financial

Reporting_for Certain Investments and.for External Investment Pools.

Note 3 - Property Taxes

The City's property tax is levied each year on the assessed value listed as of the prior January 1 for all real and personal property

located in the City. Taxes are levied on September 1 and payable by December 31. A lien is placed on the property on January 1

and is then subject to interest and penalties. The assessed value at January I, 2018, upon which the 2018 levy was based for real,

personal and public utility property, was $375,777,609. The City's tax rate was levied at $.0410 (residential real estate), $.0410

(commercial real estate), and $0.0500 (personal property) per $100 of assessed valuation for the General Fund, and $.0280 per

$100 of assessed valuation of all property types for the Debt Service Fund.

A-15

City of Manchester, Missouri

Notes to Financial Statements For the year ended December 31, 2018

Note 4 - lnterfund Transactions

Interfund receivables/payables at December 31, 2018 consists of the following:

Due From:

General Fund $

Parks and Storm Water Fund 912,419

Capital Projects Fund $ 912,419

The following transfers were made during the fiscal year ending December 31, 2018:

General Fund

Capital Projects Fund

TIF Fund

Nonmajor Funds

Transfers In

$ 240,000

$

352,156

69,709 661,865

Due To:

$ 725,861

186,558

$ 912,419

Transfers Out

$ 421,865

240,000

$ 661,865

Interfund transfers were used to 1) move revenues from the fund that ordinance or budget requires to collect them to the fund that

ordinance or budget requires to expend them, 2) use restricted revenues collected in the General Fund to finance capital

improvements and other funds in accordance with budgetary authorization, or 3) move revenues in excess of current year expenditures to other funds.

Note 5 • Capital Assets

Capital asset activity for the primary government for the year ended December 31, 2018 is as follows:

Balance at Balance at 12/31/17 Additions Deletions 12/31/18

Governmental activities: Non-depreciable capital assets

Land $ 1,580,963 $ 14,810 $ $ 1,595,773 Construction in process 4,345,269 1,193,761 (4,258,004) 1,281,026

Total non-depreciable capital assets 5,926,232 1,208,571 (4,258,004) 2,876,799

Depreciable capital assets

Buildings and improvements 18,538,314 3,724,305 22,262,619 Machinery and equipment 2,128,662 40,081 2,168,743

Infrastructure 16,385,567 2,206,607 18,592,174

Vehicles 2,149,574 108,265 (140,720) 2,117,119 Total depreciable capital assets 39,202,117 6,079,258 (140,720) 45,140,655

A-16

Note 5 - Capital Assets (continued)

Less: accumulated depreciation Buildings and improvements Machinery and equipment Infrastructure Vehicles

Total accumulated depreciation

Total depreciable capital assets, net

City of Manchester, Missouri

Notes to Financial Statements

For the year ended December 31, 2018

(6,166,801) (664,155) (1,454,769) (147,672) (4,099,315) (835,0 I 0) (1,561,008) (189,339)

(13,281,893) (1,836,176)

$ 25,920,224 $ 4,243,082

(6,830,956) (1,602,441) (4,934,325)

102,350 (1,647,998) 102,350 (15,015,720)

$ (38,370) $ 30,124,935

Depreciation expense was charged to functions/programs of the Primary Government for the year ended December 31, 2018 as follows:

General government Police department Public works Aquatic center Recreation

Note 6 - Long-Term Debt

General Obligation Bonds

$

$

51,397 332,095 979,036 274,569 199,079

1,836,176

The City issued general obligation bonds for the purpose of acquiring land and constructing, furnishing and equipping a new police station, including public meeting space therein. Funds from a dedicated property tax are accumulated in the Debt Service Fund to make future principal and interest payments. The original amount of general obligation bonds issued in prior years was $6,500,000. During 2012, general obligation bonds of $3,185,000 were issued to refund the outstanding balance. The refunding bonds had interest payable at 2.0% and matured in March 2018.

In 2018, the City issued $9,000,000 in general obligation bonds for the purpose of repairing and replacing streets within City limits. Funds from a dedicated property tax are accumulated in the Debt Service Fund to make future principal and interest payments. The general obligation bonds bear interest at 3.25% - 4.00% and mature March 2038.

Special Revenue Bonds

The bonds were issued in March 2010 for the Highway 141/Manchester Road Project. The bonds are special, limited obligations of the City, payable solely from the incremental sales and property taxes generated by the development along with the revenues pledged by the Manchester Highlands Transportation Development District. The annual debt service payments are contingent upon the revenues collected. The bonds bear interest at 6.0% on balances due November 1, 2025 and 6.875% on balances due November 1, 2039. The obligations of the City and the District to transfer payments for the repayment of the bonds expires in accordance with State statute whether or not the principal and interest thereon have been paid in full. These bonds are only required to make principal payments when excess funds are available after the payment of interest.

A-17

Note 6 - Long-Term Debt (continued)

Postretirement Benefits

City of Manchester, Missouri

Notes to Financial Statements

For the year ended December 31, 2018

As a benefit to employees who have served the City for an extended period of time, the City provides certain benefits upon retirement. Upon retirement full time employees who have been employed by the City for 20 years or more are entitled to receive three months of salary. At December 3 I, 2018, there were 77 employees eligible to receive benefits upon meeting the service requirements. The City has accrued this liability in the government-wide statements.

General obligation bonds Add: Issuance premiums

Tax Increment Revenue Bonds Less: Issuance discounts

Postretirement benefits Total Long-Term Debt

Balance at 12/31/17

$ 570,000 18,774

38,075,000 (294,554) 573,643

$ 38,942,863

Additions

$ 9,000,000 234,894

$ 9,234,894

Reductions

$ (570,000) (23,668)

(4,010,000) 49,093

(900) $ (4,555,475)

Annual debt-service payments for long-term debt with scheduled payments are as follows:

Year ended, Princieal Interest 2019 $ 585,000 $ 324,736 2020 625,000 273,862 2021 640,000 248,563 2022 550,000 224,762 2023 335,000 207,063

2024-2028 1,800,000 833,263 2029-2033 2,055,000 528,488 2034-2038 2,410,000 193,681

$ 9,000,000 $ 2,834,418

Note 7 - Retirement Plan

Balance at 12/31/18

$ 9,000,000 230,000

34,065,000 (245,461) 572,743

$ 43,622,282

Total $ 909,736

898,862 888,563 774,762 542,063

2,633,263 2,583,488 2,603,681

$ 11,834,418

Due Within One Year

$ 585,000

28,401 $ 613,401

The City of Manchester, Missouri Profit Sharing Plan and Trust (a single-employer defined contribution retirement plan currently administered by ICMA Retirement Corp.) became effective October 1, 1990 upon the passage of an ordinance by the Board of Aldermen. The City pays for the full cost of the Plan by contributing up to 5% of eligible participating employees' annual compensation. All employees are eligible to participate in the Plan when they have been credited with at least 1,000 hours of service during the period of 6 consecutive months measured from the anniversary date of their employment.

Employees vest at a graduated rate over a five year period. The City contributed $220,671 to the Plan during the year ended December 31, 2018.

A-18

Note 8 - Deferred Compensation Plan

City of Manchester, Missouri

Notes to Financial Statements

For the year ended December 31, 2018

The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The

Plan, available to all City employees, permits them to defer a portion of their salary until future years. The deferred compensation

is not available to employees until termination, retirement, death, or unforeseeable emergency. The City makes no contribution to

the Plan.

ICMA .Retirement Corporation administers the City's Deferred Compensation Plan. The City does not have significant

administrative involvement in the Plan. With the adoption of Governmental Accounting Standards Board (GASB) No. 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans, the City's Deferred

Compensation Plan is not included in the general purpose financial statements. The City's Plan does not meet the criteria for

reporting the Deferred Compensation Plan in a fiduciary fund.

Note 9 - Risk Management

The City is exposed to various risks of loss related to tort; theft of, damage to, and destruction of assets; errors and omissions;

injuries to employees; and natural disasters.

The City is a member of the St. Louis Area Insurance Trust (SLAIT), a non-for-profit, self insurance risk pool, formed by various

St. Louis County municipalities.

In order to operate as a group self-insurer of workers' compensation, SLAIT was formed in August 1986. In addition to insurance protection, the program provides risk management services with emphasis on loss control, claims administration, and

management information services. SLAIT is fully funded by its member participants and employs an outside service company to

process all claims.

Coverage is provided by the trust for general and auto liability subject to a $500 deductible per occurrence for third party property damage and for law enforcement liability subject to a $2,500 deductible per occurrence. Any damage to city property

carries a $5,000 deductible. This trust also employs an outside service company to process all claims.

The trust requires an annual premium payment by members to cover estimated claims payable and reserves for claims. The members of the trust have no legal interest in assets, liabilities, or fund balances of the insurance trust. However, the City is contingently liable to fund its pro rata share of any deficit incurred by the trust should the trust cease operation at some future date. The City's 2018 premium payments to the trust totaled $217,394.

The City also purchases commercial insurance to cover risks related to building and other City property, crimes, business, travel, public official liability, earthquakes, and employee blanket bonds. Settled claims resulting from these risks have not exceeded

coverage in any of the past three years.

Note 10 - Commitments and Concentrations

In 2018, the City signed a contract for single-family residential household trash, recycle and yard waste collection service. The

contract is for 5 years and increases for each subsequent year are equal to the consumer price index. During the year ended December 31, 2018, expenditures for waste removal totaled $928,191.

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Note 11 - Claims and Contingencies

Litigation

City of Manchester, Missouri Notes to Financial Statements

For the year ended December 31, 2018

The City generally follows the practice of recording liabilities resulting from claims and legal actions only when they become

fixed and determinable in amount. At this time, a reasonable estimate as to the amount or range of potential loss and/or gain

cannot be provided.

Federal and State Assisted Programs

The City has received proceeds from several federal and state grants. Periodic audits of these grants are required and certain

costs may be questioned as inappropriate expenditures under the grant agreements. Such audits could result in the refund of grant

monies to the grantor agencies. Management believes that any required refunds, if determined necessary, will be immaterial. No

provision has been made in the accompanying financial statements for the potential refund of grant monies.

Note 12 - Missouri Legislation

House Bill 103 amending Section 302.341.2 RSMo became effective on August 28, 2013. The amendments to the statute now

require municipalities to report an accounting of the percent of annual general operating revenue from fines and court costs for

traffic violations. The City was not required to and did not account for the fines and court costs for traffic violations separately from the total fines and court costs prior to August 28, 2013. In 2018, total fines and court costs revenues for the fiscal year,

which include fines and court costs related to tratlic violations, summed to $230,744. "Annual general operating revenue of the city" is not defined in the amended statute and may or may not include various sources of the City's revenaes. However, the

City's general revenue fund tax revenue alone totaled $8,629,435. Using general fund tax revenue and total fines and court costs

as the "annual general operating revenue", the City's total fines and court costs revenues are only 2.60% of this total "annual

general operating revenue", which is substantially below the 30% threshold requirement of the amended statute. This clearly

demonstrates at a minimum that the City in no way exceeded the percentage requirement regardless of how "annual general

operating revenue" is calculated.

Note 13 - Tax Abatements

During the year ended December 31, 2016, the City adopted GASB Statement No. 77, Tax Abatement Disclosure which seeks to assist users of the financial statements in assessing (1) whether a government's current-year revenues were sufficient to pay for current-year services (known as interperiod equity), (2) whether a government complied with finance-related legal and

contractual obligations, (3) where a government's financial resources come from and how it uses them, and (4) a government's

financial position and economic condition and how they have changed over time. The City has determined that there are no tax

abatement agreements which require disclosure for the year ended December 31, 2018.

Note 14 - Subsequent Events

In preparing these financial statements, management has evaluated events and transactions for potential recognition or disclosure through April 29, 2019, the date the financial statements were available to be issued.

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City of Manchester, Missouri

Notes to Financial Statements

For the year ended December 31, 2018

Note 15 - New Accounting Pronouncements

GASB Statement No. 87, leases, increases the usefulness of governments' financial statements by requiring recognition of

certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of

resources and outflows of resources based on the payment provisions of the contract. Under this Statement, a lessee is required to

recognized a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a

deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments' leasing

activities. This statement will be effective for the year ended December 31, 2020.

GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements, improves

the information that is disclosed in notes to the government financial statements related to debt, including direct borrowings and

direct placements. It also clarifies which liabilities governments should include when disclosing information related to debt. This

statement will be effective for the year ended December 31, 2019.

GASB Statement No. 89, Accounting for interest Cost Incurred Before the End of a Constn1ction Period, enhances the

relevance and comparability of information about capital assets and the cost of borrowing for a reporting period and simplifies

accounting for interest cost incurred before the end of a construction period. This statement will be effective for the year ended

December 31, 2020.

Note 16 - Prior Period Adjustment

In order to correct previous errors in capital assets, the previously stated net position has been restated. These corrections will

have no material effect on operations of the City.

Net position, as previously stated on December 31, 2017

Prior Period Adjustment - correction 1 Prior Period Adjustment - co-rrection 2

Net position, as restated on December 31, 2017

Governmental

Activities

$ 6,702,168

(97,131)

38;370

$ 6,643,407

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City of Manchester, Missouri Schedule of Revenue, Expenditures and Changes in Fund Balance - Budget and Actual

General Fund For the year ended December 31, 2018

Variance with Final Budget

Budgeted Amounts Over Original Final Actual (Under)

Revenues Property taxes $ 495,500 $ 495,500 $ 542,157 $ 46,657

Taxes - other 7,736,000 7,736,000 8,087,188 351,188 Grants 144,500 144,500 155,743 11,243 Licenses and permits 362,650 362,650 378,596 15,946 Fines and forfeitures 220,000 220,000 231,684 11,684 Charges for services 532,550 532,550 489,799 (42,751) Investment income 41,800 41,800 36,003 (5,797) Other 62,500 62,500 50,883 (11,617)

Total Revenues 9,595,500 9,595,500 9,972,053 376,553

Expenditures Current:

General government 1,386,714 1,386,714 1,578,589 191,875 Police department 3,846,793 3,846,793 3,490,019 (356,774) Public works 2,423,279 2,423,279 2,410,385 (12,894) Community development 308,885 308,885 293,267 (15,618) Aquatic center 343,130 343,130 328,817 (14,313) Recreation 935,749 935,749 919,307 (16,442) Legal/court 243,555 243,555 228,985 (14,570) Capital outlay

Debt service: Principal Interest and fiscal charges

Total Expenditures 9,488,105 9,488,105 9,249,369 (238,736)

Excess (Deficiency) of Revenues over Expenditures 107,395 107,395 722,684 615,289

Other Financing Sources (Uses) Proceeds from sale of capital assets Transfers in 265,000 265,000 240,000 (25,000) Transfers out p85,000) p85,000) (421,865) 36,865

Total Other Financing Sources (Uses) (120,000) (120,000) (I 81,865) 11,865

Net Change in Fund Balance $ (12,605) $ (12,605) $ 540,819 $ 553,424

Fund Balance, January 1 2,498,410

Fund Balance, December 31 $ 3,039,229

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City of Manchester, Missouri Schedule of Revenue, Expenditures and Changes in Fund Balance - Budget and Actual

Parks and Storm Water Projects Fund For the year ended December 31, 2018

Variance with Final Budget

Bud�eted Amounts Over Original Final Actual (Under)

Revenues Property taxes $ $ $ $

Taxes - other 1,600,000 1,600,000 1,698,993 98,993 Grants Licenses and permits Fines and forfeitures Charges for services Investment income Other

Total Revenues 1,600,000 1,600,000 1,698,993 98,993

Expenditures Current:

General government Police department Public works Community development Aquatic center Recreation Legal/court Capital outlay 1,091,575 1,091,575 743,578 (347,997)

Debt service: Principal Interest and fiscal charges

Total Expenditures 1,091,575 1,091,575 743,578 (347,997)

Excess (Deficiency) of Revenues over Expenditures 508,425 508,425 955,415 446,990

Other Financing Sources (Uses) Proceeds from sale of capital assets Transfers in Transfers out

Total Other Financing Sources (Uses)

Net Change in Fund Balance $ 508,425 $ 508,425 $ 955,415 $ 446,990

Fund Balance, January 1 1,964,804

Fund Balance, December 31 $ 2,920,219

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City of Manchester, Missouri Schedule of Revenue, Expenditures and Changes in Fund Balance - Budget and Actual

Capital Projects Fund For the year ended December 31, 2018

Variance with Final Budget

Bud�eted Amounts Over Ori�inal Final Actual (Under)

Revenues Property taxes $ $ $ $

Taxes - other 1,550,000 1,550,000 1,451,916 (98,084) Grants 640,000 640,000 272,544 (367,456) Licenses and permits Fines and forfeitures Charges for services Investment income Other

Total Revenues 2,190,000 2,190,000 1,724,460 (465,540)

Expenditures Current:

General government Police department Public works Community development Aquatic center Recreation Legal/court Capital outlay 2,020,659 2,020,659 1,596,388 (424,27 I)

Debt service: Principal Interest and fiscal charges

Total Expenditures 2,020,659 2,020,659 1,596,388 (424,271)

Excess (Deficiency) of Revenues over Expenditures 169,341 169,341 128,072 (41,269)

Other Financing Sources (Uses) Proceeds from sale of capital assets 25,000 25,000 51,455 26,455 Transfers in Transfers out �240,000) �240,0001 (240,0001

Total Other Financing Sources (Uses) (215,000) (215,000) (188,5451 26,455

Net Change in Fund Balance $ (45,659) $ (45,659) $ (60,473) $ (14,814)

Fund Balance, January 1 38,076

Fund Balance, December 31 $ (22,397)

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City of Manchester, Missouri Schedule of Revenue, Expenditures and Changes in Fund Balance - Budget and Actual

Tax Increment Financing Fund For the year ended December 31, 2018

Variance with Final Budget

Bud�eted Amounts Over Ori�inal Final Actual (Under2

Revenues Property taxes $ 1,250,000 $ 1,250,000 $ 1,279,599 $ 29,599

Taxes - other 5,100,000 5,100,000 5,045,071 (54,929)

Grants Licenses and permits Fines and forfeitures Charges for services Investment income 150,000 150,000 104,396 (45,604)

Other 1,019 1,019

Total Revenues 6,500,000 6,500,000 6,430,085 (69,915)

Expenditures Current:

General government 360,000 360,000 401,382 41,382

Police department Public works Community development 19,660 19,660 17,161 (2,499)

Aquatic center Recreation Legal/court Capital outlay

Debt service: Principal 3,700,000 3,950,000 4,010,000 60,000

Interest and fiscal charges 2,700,000 2,700,000 2,492,931 (207,069)

Total Expenditures 6,779,660 7,029,660 6,921,474 (108,186)

Excess (Deficiency) of Revenues over Expenditures (279,660) (529,660) (491,389) 38,271

Other Financing Sources (Uses) Proceeds from sale of capital assets Transfers in 360,000 360,000 352,156 (7,844)

Transfers out Total Other Financing Sources (Uses) 360,000 360,000 352,156 (7,844)

Net Change in Fund Balance $ 80,340 $ (169,660) $ (139,233) $ 30,427

Fund Balance, January 1 8,535,795

Fund Balance, December 31 $ 8,396,562

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City of Manchester, Missouri

Notes to the Required Supplementary Information

For the year ended December 31, 2018

Note 1 - Explanation of Budgetary Process

The City prepares its budget on a basis consistent with generally accepted accounting principles. The budget process is detailed in Note I of the notes to the financial statements.

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B-1

APPENDIX B

BOOK-ENTRY ONLY SYSTEM

General. The Bonds are available in book-entry only form. Purchasers of the Bonds will not

receive certificates representing their interests in the Bonds. Ownership interests in the Bonds will be available to purchasers only through a book-entry system (the “Book-Entry System”) maintained by The Depository Trust Company (“DTC”), New York, New York.

The following information concerning DTC and DTC’s book-entry system has been obtained

from DTC. `The City (defined in this section as the “Issuer”) takes no responsibility for the accuracy or completeness thereof and neither the Indirect Participants nor the Beneficial Owners should rely on the following information with respect to such matters, but should instead confirm the same with DTC or the Direct Participants, as the case may be. There can be no assurance that DTC will abide by its procedures or that such procedures will not be changed from time to time.

1. DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-

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

2. DTC, the world’s largest securities depository, is a limited-purpose trust company

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

3. Purchases of Bonds under the DTC system must be made by or through Direct

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

B-2

4. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC

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

5. Conveyance of notices and other communications by DTC to Direct Participants, by

Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

6. Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity

are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with

respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer 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 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

8. Redemption proceeds, distributions, and dividend payments on the Bonds will be made to

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

9. DTC may discontinue providing its services as depository with respect to the Bonds at

any time by giving reasonable notice to the Issuer or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered.

10. The Participants holding a majority interest in the Bonds may decide to discontinue use

of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC.

11. The information in this section concerning DTC and DTC’s book-entry system has been

obtained from sources that Issuer believes to be reliable, but the Issuer takes no responsibility for the accuracy thereof.