NEW ISSUE Standard & Poor’s Corporation … AA OFFICIAL … 2013 Addendum.pdf · 2016 703,489.25...

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NEW ISSUE Investment Rating: Standard & Poor’s Corporation … AA

ADDENDUM DATED JULY 17, 2013

OFFICIAL STATEMENT DATED JULY 9, 2013

$1,489,922.55 CITY OF LOCKPORT

Will County, Illinois General Obligation Capital Appreciation Limited Bonds, Series 2013

Dated Date: August 1, 2013

AMOUNTS, MATURITIES, INTEREST RATES AND YIELDS OR PRICES

Compound Accreted Original Value at Due Principal Stated Reoffering CUSIP Maturity* Jan. 1 Amount Yield Price Number $ 70,000 ........... 2015 $ 69,017.20 1.000% 98.596% 540016 EX6 725,000 ........... 2016 703,489.25 1.250% 97.033% 540016 EY4 755,000 ........... 2017 717,416.10 1.500% 95.022% 540016 EZ1

The Official Statement of the City dated July 9, 2013 (the "Official Statement") with respect to the Bonds is incorporated

by reference herein and made a part hereof. The "Final Official Statement" of the City with respect to the Bonds as that term is defined in Rule 15c2-12 of the Securities and Exchange Commission shall be comprised of the following:

1. Official Statement dated July 9, 2013; and 2. This Addendum dated July 17, 2013.

No dealer, broker, salesman or other person has been authorized by the City to give any information or to make any representations with respect to the Bonds other than as contained in the Final Official Statement and, if given or made, such other information or representations must not be relied upon as having been authorized by the City. Certain information contained in the Final Official Statement may be obtained from sources other than records of the City and, while believed to be reliable, is not guaranteed as to completeness. NEITHER THE DELIVERY OF THE OFFICIAL STATEMENT OR THE FINAL OFFICIAL STATEMENT NOR ANY SALE MADE THEREUNDER SHALL CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CITY SINCE THE DATE THEREOF.

The City has authorized preparation of the Final Official Statement containing pertinent information relative to the Bonds and the City. Copies of that Final Official Statement can be obtained from the Underwriter, as defined herein. Additional information may also be obtained from the City or from the independent public finance consultants to the City:

Established 1954

Speer Financial, Inc. INDEPENDENT PUBLIC FINANCE CONSULTANTS ONE NORTH LASALLE STREET/SUITE 4100 • CHICAGO, ILLINOIS 60602 312-346-3700

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ADDITIONAL INFORMATION

References herein to laws, rules, regulations, ordinances, resolutions, agreements, reports and other documents do not purport to be comprehensive or definitive. All references to such documents are qualified in their entirety by reference to the particular document, the full text of which may contain qualifications of and exceptions to statements made herein. Where full texts have not been included as appendices to the Official Statement or the Final Official Statement, they will be furnished on request.

THE CITY Organization and Services The City has approximately 101.6 full-time equivalent employees. The City has current labor contracts with MAP Number 75 and the International Operating Engineers Number 150, which expire on June 30, 2015. Community Life City residents are served by the White Oaks Library District (the “Library District”) formerly the Des Plaines Valley Public Library District, which has over 159,000 books. The Library District is a member of the Heritage Trail Library System which provides City residents access to materials the Library District may not have in its collection. Economy

During the past two years, there has been renewed interest in vacant commercial space along Ninth Street/Illinois Route 7. A former K-Mart center was renovated to accommodate a Berkot’s Grocery Store, Big Lots retail store, and miscellaneous retail. An addition was constructed on the north end of the building to allow for the development of a Merlin Auto Repair facility. A former retail center west of the K-mart center and on the north side of the street was remodeled and expanded to allow for a Corwin Pharmacy and new retail users. A new façade was constructed on the center, new signage installed, and landscaping placed throughout the site.

Available Non-Referendum Debt Service Extension Base Margin(1) Available Debt Service Series Series Series Series Total Debt Debt Service Year(2) Extension Base 2005A 2008 2009 2013 Service Extension Base Margin 2014 ......... $860,728 $202,995 $175,150 $405,000 $ 0 $ 783,145 $ 77,583 2015 ......... 860,728 0 351,450 435,000 70,000 856,450 4,278 2016 ......... 860,728 0 0 135,000 725,000 860,000 728 2017 ......... 860,728 0 0 0 755,000 755,000 105,728 Total ...... $202,995 $526,600 $975,000 $1,550,000 $3,254,595 Notes: (1) Source: the District. (2) All debt service for 2013 has previously matured.

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DEBT INFORMATION

After issuance of the Bonds, the City will have outstanding $12,765,607 principal amount of general obligation debt and

$515,000 principal amount of debt certificates. As of June 30, 2012, the City had IEPA loans outstanding in the principal amount of $12,092,285 and a note in the principal amount of $1,250,000 with the Illinois State Toll Highway Authority.

The City does not intend to issue additional debt within the next three months.

General Obligation Bonded Debt(1) (Principal Only)

Limited Tax Bonds Cumulative Calendar Series Series Series Series Outstanding The Total Principal Retired Year 2005A 2008 2009 2012(2) Debt Bonds Debt Amount Percent 2014 ..... $195,000 $145,000 $365,541 $1,300,000 $ 2,005,541 $ 0 $ 2,005,541 $ 2,005,541 15.71% 2015 ..... 0 330,000 377,706 1,325,000 2,032,706 0 2,032,706 4,038,247 31.63% 2016 ..... 0 0 112,437 1,350,000 1,462,437 69,017 1,531,455 5,569,702 43.63% 2017 ..... 0 0 0 1,400,000 1,400,000 703,489 2,103,489 7,673,191 60.11% 2018 ..... 0 0 0 1,425,000 1,425,000 717,416 2,142,416 9,815,607 76.89% 2019 ..... 0 0 0 1,450,000 1,450,000 0 1,450,000 11,265,607 88.25% 2020 ..... 0 0 0 1,500,000 1,500,000 0 1,500,000 12,765,607 100.00% Total .. $195,000 $475,000 $855,684 $9,750,000 $11,275,684 $1,489,923 $12,765,607 Notes: (1) Source: the City. (2) Alternate revenue bonds payable from revenues from State Income Taxes and Public Infrastructure Sales Tax.

Statement of Bonded Indebtedness(1)

Ratio To Per Capita Amount Equalized Estimated (2010 Census Applicable Assessed Actual 24,839) City EAV of Taxable Property, 2012 ............... $ 603,967,080 100.00% 33.33% $24,315.27 Estimated Actual Value, 2012 ..................... $1,811,901,240 300.00% 100.00% $72,945.82 Direct Bonded and Certificated Debt(2) ........... $ 13,280,607 2.20% 0.73% $ 534.67 Less: Self-Supporting Debt ...................... (9,750,000) (1.61%) (0.54%) (392.53) Net Direct Bonded and Certificated Debt ....... $ 3,530,607 0.58% 0.19% $ 142.14 Overlapping Bonded Debt(3): Schools .......................................... $ 13,517,620 2.24% 0.75% $ 544.21 Others ........................................... 11,696,384 1.94% 0.65% 470.89 Total Overlapping Bonded Debt .................. $ 25,214,004 4.17% 1.39% $ 1,015.10 Total Direct and Overlapping Debt .............. $ 28,744,611 4.76% 1.59% $ 1,157.24 Notes: (1) Source: the City. (2) Includes $515,000 Series 2005B Debt Certificates and the Bonds. (3) Overlapping bonded debt as of May 14, 2013.

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Legal Debt Margin(1)

2012 City Equalized Assessed Valuation .......................... $603,967,080 Statutory Debt Limitation (8.625%) .............................. $52,092,161 Non-Referendum Debt Limitation (0.5%) ........................... $3,019,835 General Obligation Bonded Debt: Series 2005A(2) ................................................. $ 195,000 $ 195,000 $ 195,000 Series 2008(2) .................................................. 475,000 475,000 475,000 Series 2009(2) .................................................. 855,684 855,684 855,684 Series 2012(ARS)(3) ............................................. 9,750,000 9,750,000 0 The Bonds(2) .................................................... 1,489,923 1,489,923 1,489,923 Total General Obligation Bonded Debt(4) ....................... $ 12,765,607 $12,765,607 $3,015,607 Less: Alternate Revenue Bonds(3) ............................... (9,750,000) Net General Obligation Bonds .................................... $ 3,015,607 Series 2005B Debt Certificates(4) ............................... $ 515,000 $ 515,000 $ 0 Total Applicable Debt ........................................... $ 3,530,607 $3,015,607 Legal Debt Margin ............................................... $48,561,554 $ 4,229 Note: (1) Source: the City. (2) Limited Tax Bonds. (3) The Series 2012 Bonds are issued as general obligation alternate bonds under Illinois statutes and do not count against the 8.625% of EAV debt limit for general obligation debt so long as the debt service levy for such bonds is abated annually and not extended. (4) Payable from Waterworks and Sewerage Revenues.

INVESTMENT RATING

The Bonds have been rated "AA" by Standard & Poor’s Investors Service. The City has supplied certain information and material concerning the Bonds and the City to the rating service shown on the cover page as part of its application for an investment rating on the Bonds. Generally, such rating service bases its rating on such information and material, and also on such investigations, studies and assumptions that it may undertake independently. There is no assurance that such rating will continue for any given period of time or that it may not be lowered or withdrawn entirely by such rating service if, in its judgment, circumstances so warrant. Any such downward change in or withdrawal of such rating may have an adverse effect on the secondary market price of the Bonds. An explanation of the significance of investment ratings may be obtained from the rating agency Standard & Poor’s Investors Service, 55 Water Street, New York, New York 10041, telephone 212-238-2000.

UNDERWRITING

The Bonds were offered for sale by the City at a public, competitive sale on July 17, 2013. The best bid submitted at the sale was submitted by Hutchinson, Shockey, Erley & Co., Chicago, Illinois, (the "Underwriter"). The City awarded the contract for sale of the Bonds to the Underwriter at a price of $1,480,936.66. The Underwriter has represented to the City that the Bonds have been subsequently re-offered to the public initially at the yields set forth in this Addendum.

QUALIFIED TAX-EXEMPT OBLIGATIONS

The City has designated the Bonds as "qualified tax-exempt obligations" pursuant to the small issuer exception provided by Section 265 (b) (3) of the Code.

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AUTHORIZATION

The Official Statement dated July 9, 2013, and this Addendum dated July 17, 2013, for the $1,489,922.55

General Obligation Capital Appreciation Limited Bonds, Series 2013, have been prepared under the authority of the City and have been authorized for distribution by the City. /s/ STEVEN STREIT /s/ FRANK KOEHLER Mayor Interim City Administrator and City Planner CITY OF LOCKPORT CITY OF LOCKPORT Will County, Illinois Will County, Illinois

APPENDIX A

__[Issuance Date]__, 2013

$1,489,922.55 GENERAL OBLIGATION APPRECIATION LIMITED BONDS, SERIES 2013, OF THE CITY OF LOCKPORT

WILL COUNTY, ILLINOIS

Opinion of Bond Counsel We have acted as bond counsel for, and have examined, among other things, certified copies of the proceedings of the City Council of, the City of Lockport, Will County, Illinois (the “Issuer”), in connection with the issuance of $1,489,922.55 ($1,550,000 Compound Accreted Value at Maturity) General Obligation Capital Appreciation Limited Bonds, Series 2013 (the “Bonds”), dated __[Issuance Date]__, 2013 and compounding accreted value at the compounding rates and maturing annually on January 1 of each of the years, as follows:

Year

InitialPrincipal

Amount($)Compound

Accreted Value

At Maturity($)*

Compounding

Rate (%)

2015 69,017.20 70,000.00 1.00 2016 703,489.25 725,000.00 1.25 2017 717,416.10 755,000.00 1.50

*$1,550,000 is the aggregate Compound Accreted Value at Maturity

The Bonds are not subject to call for optional redemption prior to maturity.

The Bonds are issuable in fully registered form in the denomination of $5,000 (based upon Compound Accreted Value at Maturity) each or any authorized integral multiple thereof. The Bank of New York Mellon Trust Company, N.A., Chicago, Illinois, is the registrar (including its successors, the “Bond Registrar”), and the paying agent (including its successors, the “Paying Agent”) in connection with the Bonds. Payment of the maturing principal of the Bonds shall be made to the registered owners upon presentation and surrender to the Paying Agent.

For the prompt payment of the Bonds, the Issuer’s full faith, credit and resources is irrevocably pledged, and the Issuer has levied an ad valorem tax without limit as to rate or amount on all taxable property within the City of Lockport, Illinois to be extended and collected in each year to timely pay the applicable Compound Accreted Value at Maturity on the Bonds as set forth above.

A-1

The Bonds are issued by the Issuer for the purpose of financing all or a part of the costs of the

construction, reconstruction, resurfacing and/or repair of various streets within the Municipality; for replacement, expansion, removal or enhancement of certain infrastructure and facilities; for financing the acquisition (and certain site improvement work, as applicable) of real estate and along South State Street, north and south of 7th Street, and on the east and west sides of South State Street, roads and infrastructure facilities and improvements, and related facilities, improvements and costs, pursuant to and in all respects in compliance with the provisions of the Illinois Municipal Code (Section 5/1-1-1 et seq. of Chapter 65 of the Illinois Compiled Statutes) and the Local Government Debt Reform Act (Section 3.50/1 et. seq. of Chapter 30 of the Illinois Compiled Statutes), and all acts amendatory thereof and supplementary thereto, and in compliance with an authorizing ordinance therefor duly adopted by the Issuer’s City Council on July 17, 2013.

We are of the opinion that the foregoing show lawful authority for the issuance and sale of the Bonds under and pursuant to the Constitution and laws of the State of Illinois, and that the Bonds constitute legal, valid and binding general obligations of the Issuer, in connection with which the Issuer’s full faith, credit and resources, including the power to levy taxes without limitation as to rate or amount, are irrevocably pledged to pay the applicable Compound Accreted Value at Maturity. We are also of the opinion that as of the date of delivery thereof, and assuming the Issuer’s continued compliance with the terms and provisions of the Bond Ordinance, the Bonds are not arbitrage bonds, private activity bonds or hedge bonds, and the interest on the Bonds (i.e., compounded accreted value of the initial principal amount at the applicable compounding rate) is not a specific item of tax preference for individuals and corporations and is excluded from gross income under Section 103 of the Internal Revenue Code of 1986, as amended. However, certain collateral federal income tax consequences include that the interest on the Bonds may be subject to an alternative minimum tax on adjusted current earning and a foreign branch profits tax, on certain corporations, and may be a factor in a computation in connection with which certain social security and railroad pension income recipients may be subject to federal income taxes.

The interest on the Bonds is not exempt from income taxation by the State of Illinois. We are also of the opinion that the Bonds constitute “qualified tax-exempt obligations” under

Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. We express no opinion herein as to the accuracy, adequacy or completeness of the

offering document or any other information furnished in connection with the offer or sale of the Bonds. In rendering this opinion, we have relied upon certifications of the Issuer with respect to

certain material facts within the Issuer’s knowledge. Our opinion represents our legal judgment based upon our review of the law and the facts that we deem relevant to render such opinion and is not a guarantee of a result. This opinion is given as of the date hereof and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur.

Respectfully yours,

A-2

New Issue Investment Rating: Date of Sale: July 17, 2013 Standard & Poor’s … Between 10:00 and 10:15 A.M., C.D.T. (Review Requested) (Closed Speer Auction)

Official Statement

Subject to compliance by the City with certain covenants, in the opinion of Evans, Froehlich, Beth & Chamley, Bond Counsel, under present law, interest on the Bonds is excludable from gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations, but such interest is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. Interest on the Bonds is not exempt from present State of Illinois income taxes. See “TAX EXEMPTION” herein for a more complete discussion. The Bonds are “qualified tax-exempt obligations” under Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. See “QUALIFIED TAX-EXEMPT OBLIGATIONS” herein.

$1,492,900* CITY OF LOCKPORT

Will County, Illinois General Obligation Capital Appreciation Limited Bonds, Series 2013

Dated Date of Delivery Book-Entry Non-Callable Bank Qualified Due Serially January 1, 2015-2017

The $1,492,900* General Obligation Capital Appreciation Limited Bonds, Series 2013 (the “Bonds”), are being issued by the City of Lockport, Will County, Illinois (the “City”). The Bonds will be in fully registered form in the denominations of $5,000 compounded accreted value at maturity and authorized integral multiples thereof in the name of Cede & Company as nominee of The Depository Trust Company (“DTC”), New York, New York, to which principal and interest payments representing the compounded accreted value at maturity on the Bonds will be paid. Individual purchases will be in book-entry only form. Interest on the Bonds will begin to compound from the date of delivery. Interest on the Bonds will be compounded semiannually on January 1 and July 1 of each year on the basis of a 360-day year. Interest will be payable, together with principal, only at maturity. Principal and interest representing the compounded accreted value at maturity are payable by the City’s paying agent (the “Paying Agent” and, as applicable, “Registrar”). The compounded accreted value at maturity of the Bonds shall be payable in lawful money of the United States of America at the designated payment office maintained for the purpose by the Paying Agent.

AMOUNTS*, MATURITIES, YIELDS AND PRICES

Compound Accreted Original Value at Due Principal Stated Reoffering CUSIP Maturity* Jan. 1 Amount Yield Price Number $ 70,000 ...... 2015 $_________ ______% ______% __________ 725,000 ...... 2016 _________ ______% ______% __________ 785,000 ...... 2017 _________ ______% ______% __________

The City reserves the right to increase or decrease any or all maturity values, in multiples of $5,000, in order to result in an original aggregate principal amount of approximately $1,495,000*.

NO OPTIONAL REDEMPTION

The Bonds are not subject to optional redemption prior to maturity.

PURPOSE, LEGALITY AND SECURITY

Bond proceeds will be used to finance roads and infrastructure facilities and improvements, and related facilities, improvements and costs and to pay the costs of issuance. See “THE PROJECT” herein.

In the opinion of Bond Counsel, Evans, Froehlich, Beth & Chamley, Champaign, Illinois, the Bonds are valid and legally binding upon the City and all taxable property of the City is subject to the levy of ad valorem taxes to pay the same without limitation as to rate (the “Levied Taxes”). The amount of the Levied Taxes that may be extended to pay the Bonds is, however, limited as provided by law as applicable to “limited bonds”. The enforceability of the Bonds against the City may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditors’ rights and by equitable principles, whether considered at law or in equity, including the exercise of judicial discretion. See “THE DESCRIPTION OF THE BONDS” herein.

This Official Statement is dated July 9, 2013, and has been prepared in connection with the issuance of the Bonds. An electronic copy of this Official Statement is available from the www.speerfinancial.com web site under “Debt Auction Center/Competitive Official Statement Sales Calendar”. Additional copies may be obtained from Mr. Erik Brown, Finance Director, City of Lockport, 222 East Ninth Street, Lockport, Illinois 60441, or from the Independent Public Finance Consultants to the City:

Established 1954

Speer Financial, Inc. INDEPENDENT PUBLIC FINANCE CONSULTANTS

ONE NORTH LASALLE STREET, SUITE 4100 • CHICAGO, ILLINOIS 60602 Telephone: (312) 346-3700; Facsimile: (312) 346-8833

www.speerfinancial.com *Subject to change.

City of Lockport, Will County, Illinois General Obligation Capital Appreciation Limited Bonds, Series 2013

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TABLE OF CONTENTS

BOND ISSUE SUMMARY ............................................................................................................................................................................................ 4 CITY OF LOCKPORT .................................................................................................................................................................................................. 5 DESCRIPTION OF THE BONDS ................................................................................................................................................................................ 5

Security for the Bonds ................................................................................................................................................................................................. 5 THE CITY ....................................................................................................................................................................................................................... 7

Overview ..................................................................................................................................................................................................................... 7 Organization and Services ........................................................................................................................................................................................... 7 Community Life .......................................................................................................................................................................................................... 7 Education ..................................................................................................................................................................................................................... 7 Transportation ............................................................................................................................................................................................................. 8 Economy ...................................................................................................................................................................................................................... 8

SOCIOECONOMIC INFORMATION ........................................................................................................................................................................ 9 Employment ................................................................................................................................................................................................................. 9 Building Permits ........................................................................................................................................................................................................ 11 Housing...................................................................................................................................................................................................................... 12 Income ....................................................................................................................................................................................................................... 12 Retail Activity ............................................................................................................................................................................................................ 14

THE PROJECT ............................................................................................................................................................................................................ 15 DEBT INFORMATION ............................................................................................................................................................................................... 15 PROPERTY ASSESSMENT AND TAX INFORMATION ...................................................................................................................................... 17 REAL PROPERTY ASSESSMENT, TAX LEVY AND COLLECTION PROCEDURES ................................................................................... 19

Tax Levy and Collection Procedures ......................................................................................................................................................................... 19 Exemptions ................................................................................................................................................................................................................ 19 Property Tax Extension Limitation Law .................................................................................................................................................................... 21 Truth in Taxation Law ............................................................................................................................................................................................... 22

FINANCIAL INFORMATION ................................................................................................................................................................................... 22 Budgeting .................................................................................................................................................................................................................. 22 Investment Policy ...................................................................................................................................................................................................... 22 Financial Reports ....................................................................................................................................................................................................... 22 Summary Financial Information ................................................................................................................................................................................ 23

PENSION AND RETIREMENT OBLIGATIONS .................................................................................................................................................... 28 REGISTRATION, TRANSFER AND EXCHANGE ................................................................................................................................................ 28 TAX EXEMPTION ...................................................................................................................................................................................................... 29 QUALIFIED TAX-EXEMPT OBLIGATIONS ......................................................................................................................................................... 31 CONTINUING DISCLOSURE ................................................................................................................................................................................... 31 THE UNDERTAKING ................................................................................................................................................................................................ 32

Annual Financial Information Disclosure .................................................................................................................................................................. 32 Reportable Events Disclosure .................................................................................................................................................................................... 33 Consequences of Failure of the City to Provide Information ..................................................................................................................................... 33 Amendment; Waiver .................................................................................................................................................................................................. 34 Termination of Undertaking ...................................................................................................................................................................................... 34 Additional Information .............................................................................................................................................................................................. 34 Dissemination of Information; Dissemination Agent ................................................................................................................................................ 34

LITIGATION ............................................................................................................................................................................................................... 35 CERTAIN LEGAL MATTERS .................................................................................................................................................................................. 35 OFFICIAL STATEMENT AUTHORIZATION ....................................................................................................................................................... 35 INVESTMENT RATING ............................................................................................................................................................................................ 35 DEFEASANCE ............................................................................................................................................................................................................. 36 UNDERWRITING ....................................................................................................................................................................................................... 36 FINANCIAL ADVISOR .............................................................................................................................................................................................. 36 CERTIFICATION ....................................................................................................................................................................................................... 36 APPENDIX A - EXCERPTS OF FISCAL YEAR 2012 AUDITED FINANCIAL STATEMENTS APPENDIX B - DESCRIBING BOOK-ENTRY-ONLY ISSUANCE APPENDIX C - PROPOSED FORM OF OPINION OF BOND COUNSEL OFFICIAL BID FORM OFFICIAL NOTICE OF SALE


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For purposes of compliance with Rule 15c2-12 of the Securities and Exchange Commission, this document, as the

same may be supplemented or corrected by the City from time to time (collectively, the “Official Statement”), may be treated as an Official Statement with respect to the Bonds described herein that is deemed near final as of the date hereof (or the date of any such supplement or correction) by the City.

This Official Statement presented in preliminary form, and certain of the information contained herein is in a form

deemed final for purposes of Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (except for the omission of certain information permitted to be omitted under Rule 15c2-12(b)(1)). The information herein is subject to revision, completion or amendment as a final Official Statement. The Bonds may not be sold, nor may an offer to buy be accepted, prior to the time this Official Statement is completed and delivered in final form. Under no circumstances shall this Official Statement constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

This Official Statement, when further supplemented by an addendum or addenda specifying the maturity dates,

principal amounts and interest rates of the Bonds, together with any other information required by law or deemed appropriate by the City, shall constitute a “Final Official Statement” of the City with respect to the Bonds, as that term is defined in Rule 15c2-12. Any such addendum shall, on and after the date thereof, be fully incorporated herein and made a part hereof by reference.

No dealer, broker, salesman or other person has been authorized by the City to give any information or to make any

representations with respect to the Bonds other than as contained in this Official Statement or the Final Official Statement and, if given or made, such other information or representations must not be relied upon as having been authorized by the City. Certain information contained in this Official Statement and the Final Official Statement may have been obtained from sources other than records of the City and, while believed to be reliable, is not guaranteed as to completeness. THE INFORMATION AND EXPRESSIONS OF OPINION IN THIS OFFICIAL STATEMENT AND THE FINAL OFFICIAL STATEMENT ARE SUBJECT TO CHANGE, AND NEITHER THE DELIVERY OF THIS OFFICIAL STATEMENT OR THE FINAL OFFICIAL STATEMENT NOR ANY SALE MADE UNDER EITHER SUCH DOCUMENT SHALL CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CITY SINCE THE RESPECTIVE DATES THEREOF.

References herein to laws, rules, regulations, ordinances, resolutions, agreements, reports and other documents do

not purport to be comprehensive or definitive. All references to such documents are qualified in their entirety by reference to the particular document, the full text of which may contain qualifications of and exceptions to statements made herein. Where full texts have not been included as appendices to this Official Statement or the Final Official Statement, they will be furnished on request. This Official Statement does not constitute an offer to sell, or solicitation of an offer to buy, any securities to any person in any jurisdiction where such offer or solicitation of such offer would be unlawful.

The information contained in this Official Statement has been furnished by the City, DTC and other sources which

are believed to be reliable, but such information is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation of, either the Underwriter or the City. The information and expressions of opinion 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 parties referred to above since the date hereof.

Any statements made in this Official Statement, including the Appendices, involving matters of opinion or estimates,

whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of such estimates will be realized. This Official Statement contains certain forward-looking statements and information that are based on the City’s beliefs as well as assumptions made by and information currently available to the City. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or expected.


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BOND ISSUE SUMMARY

This Bond Issue Summary is expressly qualified by the entire Official Statement, including the Official Notice of Sale and the Official Bid Form, which are provided for the convenience of potential investors and which should be reviewed in their entirety by potential investors. Issuer: City of Lockport, Will County, Illinois. Issue: $1,492,900* General Obligation Capital Appreciation Limited Bonds, Series 2013. Dated Date: Date of delivery, expected to be on or about August 1, 2013. Interest Due: Compounded semiannually on January 1 and July 1. Interest on the Bonds will begin to compound

from the date of delivery. Principal Due: Serially each January 1, commencing January 1, 2015 through January 1, 2017, as detailed on the

front page of this Official Statement. No Optional Redemption: The Bonds are not subject to optional redemption prior to maturity. Authorization: By adoption of an authorizing ordinance (the “Bond Ordinance”) authorized by the Illinois Municipal

Code and the Local Government Debt Reform Act. Security: In the opinion of Bond Counsel, Evans, Froehlich, Beth & Chamley, Champaign, Illinois, the Bonds

are valid and legally binding upon the City and all taxable property of the City is subject to the levy of ad valorem taxes to pay the same without limitation as to rate. The amount of such taxes that may be extended to pay the Bonds is, however, limited as provided by law. The enforceability of the Bonds against the City may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditors’ rights and by equitable principles, whether considered at law or in equity, including the exercise of judicial discretion. See “THE DESCRIPTION OF THE BONDS” herein.

Credit Rating: A rating for the Bonds has been requested from Standard & Poor’s, a Division of the McGraw-Hill

Companies. Purpose: Bond proceeds will be used to finance roads and infrastructure facilities and improvements, and

related facilities, improvements and costs and to pay the costs of issuance. See “THE PROJECT” herein.

Tax Exemption: Evans, Froehlich, Beth & Chamley, Champaign, Illinois, as Bond Counsel, will provide an opinion as

to the tax exemption of the interest on the Bonds as discussed under “TAX EXEMPTION” in this Official Statement. Interest on the Bonds is not exempt from present State of Illinois income taxes. See also APPENDIX C for a proposed form of Bond Counsel opinion.

Bank Qualification: The Bonds are “qualified tax-exempt obligations” under Section 265(b)(3) of the Internal Revenue

Code of 1986, as amended. See “QUALIFIED TAX-EXEMPT OBLIGATIONS” herein. Bond Registrar/Paying Agent: The Bank of New York Mellon Trust Company, N.A., Chicago, Illinois. Delivery: The Bonds are expected to be delivered on or about August 1, 2013. Book-Entry Form: The Bonds will be registered in the name of Cede & Co. as nominee for The Depository Trust

Company (“DTC”), New York, New York. DTC will act as securities depository of the Bonds. See APPENDIX B herein.

Denomination: Original denominations, or integral multiples thereof, which permit such amounts to accrue to a value

at maturity of $5,000 or an authorized integral multiple thereof. Financial Advisor: Speer Financial, Inc., Chicago, Illinois. *Subject to change.


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CITY OF LOCKPORT

Will County, Illinois Steven Streit

Mayor Aldermen

Peter Colarelli Denise Marynowski Brian Smith Darren Deskin Robert Perretta Kelly Turner Kris Capadona Jason Vandermeer

__________________________________ Officials

Alice Matteucci City Clerk

Frank Koehler Interim City Administrator and

City Planner

David Palya City Treasurer

Erik Brown Finance Director

Ronald Caneva, Esq. Corporate Counsel

DESCRIPTION OF THE BONDS

Security for the Bonds In the opinion of Bond Counsel, the Bonds are valid and legally binding upon the City, and all taxable property

in the City is subject to the levy of ad valorem taxes (the “Levied Taxes”) to pay the same without limitation as to rate, except that the rights of the owners of the Bonds and the enforceability of the Bonds may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditors’ rights and by equitable principles, whether considered at law or in equity, including the exercise of judicial discretion. The amount of Levied Taxes that may be extended to pay the Bonds is, however, limited as provided by applicable law related to “limited bonds”.

The Bonds are limited bonds and are issued pursuant to the Illinois Municipal Code, as supplemented and amended (the “Municipal Code”), and particularly as supplemented by the Local Government Debt Reform Act of the State of Illinois, as amended (the “Debt Reform Act”, and together with the Municipal Code, as supplemented and amended, the “Act”). Although the obligation of the City to pay the Bonds is a general obligation under the Act and all taxable property in the City is subject to the levy of taxes to pay the Bonds without limitation as to rate, the amount of Levied Taxes that will be extended to pay the Bonds is limited by the Property Tax Extension Limitation Law of the State of Illinois, as amended (the “Limitation Law”). The Debt Reform Act provides that the Bonds are payable from the debt service extension base of the City (the “Base”), which is an amount equal to that portion of the extension for the City for the 1994 levy year constituting an extension for payment of principal and interest on bonds issued by the City without referendum, but not including alternate bonds issued under Section 15 of the Debt Reform Act or refunding obligations issued to refund or to continue to refund obligations of the City initially issued pursuant to referendum, increased each year, commencing with the 2009 levy year, by the lesser of 5% or the percentage increase in the Consumer Price Index (as defined in the Limitation Law) during the 12-month calendar year preceding the levy year. The Limitation Law further provides that the annual amount of taxes to be extended to pay the Bonds and all other limited bonds heretofore and hereafter issued by the City shall not exceed the Base of the City.


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The City’s outstanding General Obligation Limited Tax Bonds, Series 2005A, General Obligation Limited Tax Bonds, Series 2008 and General Obligation Limited Tax Bonds, Series 2009 (together, the “Outstanding Limited Bonds”), and the Bonds constitute the only series of limited bonds of the City which are payable from the Base. The City is authorized to issue from time to time additional limited bonds payable from the Base, as permitted by law, and to determine the lien priority of payments to be made from the Base to pay the City’s limited bonds. The amount of the Base currently is $860,728. The following chart shows the Base of the City and outstanding non-referendum debt service, including the Bonds:

Available Non-Referendum Debt Service Extension Base Margin(1) Available Debt Service Series Series Series Series Total Debt Debt Service Year(2) Extension Base 2005A 2008 2009 2013(3)(4) Service(4) Extension Base Margin(4) 2014 ......... $860,728 $202,995 $175,150 $405,000 $ 0 $ 783,145 $77,583 2015 ......... 860,728 0 351,450 435,000 70,000 856,450 4,278 2016 ......... 860,728 0 0 135,000 725,000 860,000 728 2017 ......... 860,728 0 0 0 785,000 785,000 75,728 Total ...... $202,995 $526,600 $975,000 $1,580,000 $3,284,595 Notes: (1) Source: the District. (2) All debt service for 2013 has previously matured. (3) Estimated at an average coupon of 2.00%. (4) Subject to change.


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THE CITY Overview The City of Lockport (the “City”), is a non-home rule municipality incorporated in 1830. The City is located in east central Will County, approximately 35 miles southwest of Chicago’s “Loop” business district. Neighboring communities include Romeoville and Lemont to the north, Crest Hill, Joliet and New Lenox to the south, Homer Glen to the east, and unincorporated land to the west. The City’s population as of the 2000 U.S. Census was 15,191, a 61% increase over the 1990 Census of 9,401. A special Census conducted in 2007 put the City’s population at 24,059 and at the 2010 Census it was 24,839. Organization and Services The City is governed by a Mayor and an eight member City Council. The Mayor is elected at large for a four year term, and the City Council is elected from four wards for four year terms. The City Clerk and the City Treasurer are also elected at large for four year terms. The City Council appoints an Administrator, Attorney and Police Chief. The City Administrator is responsible for handling the day to day operations of the City. The City has 97.6 full-time equivalent employees. A labor contract expired on June 30, 2011, with the International Operating Engineers Number 150. In addition, the City employees 37 police officers, with a labor contract with the MAP Number 75, which expired June 30, 2011. The City is currently negotiating new agreements with both unions. City services include police protection, street maintenance and repair, and water and sewerage systems. The City has entered into an agreement with the Bonnie Brae-Forest Manor Sanitary District and the Lockport Heights Sanitary District, in which sanitary services are consolidated under the management of the City. Fire protection services are provided by the Lockport Fire District, Northwest Homer Fire Protection District and the Homer Township Fire Protection District. Community Life The Lockport Township Park District (the “Park District”) serves City residents. The Park District owns and maintains dozens of neighborhood parks with picnic areas, sporting fields, indoor/outdoor pools and water parks, racquet and health club, and tennis courts. The Park District’s 18-hole golf course and club house, Prairie Bluff Golf Club, is located at Route 53 and Renwick Road. The Park District offers hundreds of recreational programs for all ages, including sports, swimming, crafts and more. City residents are served by the Des Plaines Valley Public Library District (the “Library District”) which has over 159,000 books. The Library District is a member of the Heritage Trail Library System which provides City residents access to materials the Library District may not have in its collection. Education Elementary education is provided by school districts 33-C, 89, 90, 91 and 92. Secondary education is provided by Lockport Township High School District Number 205. The high school recently completed a $35 million addition and renovation to its east campus. Continuing education, college transfer courses and trade programs are available through Community College District Number 525 in nearby Joliet.


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City residents have access to many colleges and universities throughout the Chicago metropolitan area. Lewis University, located in nearby Romeoville, is a coeducational university with an enrollment of approximately 3,700 students. Lewis University offers more than 60 majors in the humanities, social sciences, and natural sciences, as well as aviation, business, computer science, communications, education, fine arts and nursing. The University of St. Francis, located in Joliet, serves more than 3,300 undergraduate and graduate students. The University of St. Francis offers programming in the areas of the arts and sciences, business and professional studies, nursing and allied health, and baccalaureate completion for health professionals. Transportation City residents can easily commute to both Joliet and Chicago. Archer Avenue (I-171), Joliet Road (I-53) and 159th Street (I-7) run through the City. The new I-355 extension, which runs along the City’s eastern border with six interchanges, provides a regional connection that improves north-south mobility between Interstate 55 and Interstate 80. The extension will reduce travel times by 20 percent and provide a more direct route between the City and the entire Chicagoland region. The “Loop” is a 50-minute drive, Midway Airport is a 40-minute drive and O’Hare International Airport is a 65-minute drive. The Metra/Heritage Corridor takes 53 minutes to reach the “Loop”. The Lewis-Lockport Airport is located just outside the City. Pace bus service is available. Economy

Currently underway is a 228 acres, 2.6 million square foot business park being developed by ML Realty Partners at the southeast corner of 143rd Street and I-355. Bridge Development is working on the extension of utilities to its 50 acre, 800,000 square foot business park, located at the southeast corner of 163rd Street and I-355. New business parks have been suggested at two other location – one at the southwest corner of 143rd Street and I-355, and the other at the southwest corner of 163rd and I-355.

Two major assisted living facilities have been proposed in recent weeks. The first project, located at Cedar and

Victoria Crossings, is in excess of 98,500 square feet and reflects an investment value in excess of $12,500,000. The second facility, located on Prime Blvd, just south of 167th Street and east of I-355, is in excess of 109,000 square foot and reflects an investment value in excess of $20,000,000.

On the site of the former Chevron/Texaco Refinery, the City is reviewing plans for the construction of two

above ground fuel storage tanks, with the prospect of a third storage tank. Oil product would be piped to the site via existing underground pipe lines. The product will then be piped, to barge containers, for shipment along the Sanitary-Ship Canal. Estimated value of this project is in excess of $15 million.

During the past two years, there has been renewed interest in vacant commercial space along Ninth Street/Illinois Route 7. A former K-Mart center was renovated to accommodate a Berkot’s Grocery Store, Big Lots retail store, and miscellaneous retail. An addition was constructed on the north end of the building to allow for the development of a Midas Auto Repair facility. A former retail center west of the K-mart center and on the north side of the street was remodeled and expanded to allow for a Corwin Pharmacy and new retail users. A new façade was constructed on the center, new signage installed, and landscaping placed throughout the site.

Single family home construction, while not at pre-recession levels, remains strong. Thirty new homes were

constructed in 2011, and 32 homes in 2012. The City is on pace for an additional 35-40 homes during 2013.


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SOCIOECONOMIC INFORMATION Employment The following employment data shows a consistently diverse and strong growth trend for employment in Will County. This data is NOT comparable to similar U.S. Census statistics, which would include government employment, and establishments not covered by the Illinois Unemployment Insurance Program, and could classify employment categories differently.

Will County Private, Non-Agricultural Employment Covered by the Illinois Unemployment Insurance Act(1)

(Data as of March for each Year) 2007 2008 2009 2010 2011 Farm and Forestry .................................... 302 269 261 243 233 Mining and Construction .............................. 14,593 14,401 10,997 9,743 9,500 Manufacturing ........................................ 14,295 20,391 19,307 18,185 19,544 Transportation, Communications, Utilities ............ 12,182 13,528 13,320 13,461 14,366 Wholesale Trade ...................................... 11,222 12,121 12,026 12,605 12,854 Retail Trade ......................................... 25,606 27,175 25,863 26,059 26,716 Finance, Insurance, Real Estate ...................... 6,644 6,828 6,754 7,875 7,638 Services(2) .......................................... 69,821 66,058 65,779 67,323 70,479 Total .............................................. 154,665 160,771 154,307 155,494 161,330 Percent Change ..................................... 6.50%(3) 3.95% (4.02%) 0.77% 3.75% Notes: (1) Source: Illinois Department of Employment Security. (2) Includes unclassified establishments. (3) Percent increase based on 145,222 employment in 2006.

Following are lists of large employers located in the City and in the surrounding area. Major City Employers(1)

Approximate

Name Product/Service Employment Grand Prairie Transit, Inc. ............................ School Buses ..................................................... 150 Toyal America, Inc. .................................... Aluminum Powders and Pigments .................................... 110 Paramount Plastics, Inc. ............................... Plastic Injection Molding ........................................ 90 Walco Tool & Engineering Corp. ......................... Precision Surface Grinding and CNC Machine Job Shop .............. 90 Concrete By Wagner, Inc ................................ Concrete Work .................................................... 80 Pyramid Custom Cabinets, Inc. .......................... Custom Kitchen Cabinets .......................................... 75 Bending Specialists LLC ................................ Metal Bending and Fabricating .................................... 73 Century 21/Pro-Team .................................... Real Estate Agents and Managers .................................. 60 Deerfield Construction Group, Inc. ..................... Cellular Communication Tower Construction ........................ 60 Atmi Dynacore .......................................... Precast Concrete Products ........................................ 50 Binzel Industries, Inc. ................................ Architectural Metal Work ......................................... 50 Greif, Inc. ............................................ Polyethylene Shipping Containers ................................. 50 Coldwell Banker Honig-Bell ............................. Real Estate Agency ............................................... 45 Note: (1) Source: 2013 Illinois Manufacturers Directory, 2013 Illinois Services Directory and a selective telephone survey.


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Major Area Employers(1)

Approximate Location Name Product/Service Employment Joliet ..................... Provena Saint Joseph Medical Center . Regional Medical Center ............................... 2,430 Joliet ..................... Caterpillar Inc. .................... Construction Machinery ................................ 2,000 Joliet ..................... Hollywood Casino Joliet ............. Casinos, Hotels, Resorts and Riverboats ............... 2,000 New Lenox .................. Silver Cross Hospital ............... General Hospital ...................................... 1,908 Jolliet .................... CommScope ........................... Communications Systems and Equipment .................. 700 Romeoville ................. Kehe Food Distributors, Inc. ........ Distributor of Frozen Foods ........................... 700 Joliet ..................... Central Grocers Co-Op, Inc. ......... Grocery Wholesaler .................................... 600 Romeoville ................. Lewis University .................... Co-educational University ............................. 600 Lemont ..................... CITGO Petroleum Corp. ............... Petroleum Refining .................................... 500 Joliet ..................... Ecolab, Inc. ........................ Cleaning Compounds .................................... 450 Joliet ..................... Chicago International Trucks, LLC ... Truck Rental and Leasing .............................. 400 Romeoville ................. Kennedy Transportation Co. .......... National Trucking Transportation and Logistics Services 348 Plainfield ................. Diageo North America ................ Gin and Vodka Distilling .............................. 300 Joliet ..................... T.J. Lambrecht Construction, Inc. ... Heavy Highway Construction ............................ 300 Romeoville ................. Great Kitchens, Inc. ................ Frozen Pizzas ......................................... 300 Plainfield ................. CB & I Constructors, Inc. ........... Storage Tank Insulation Equipment ..................... 300 Note: (1) Source: 2013 Illinois Manufacturers Directory, 2013 Illinois Services Directory and a selective telephone survey.

The following tables show employment by industry and by occupation for the City, Will County (the “County”) and the State of Illinois (the “State”) as reported by the U.S. Census Bureau 2007-2011 American Community Survey 5-year estimated values. Employment By Industry(1)

The City Will County State of Illinois Classification Number Percent Number Percent Number Percent Agriculture, Forestry, Fishing and Hunting, and Mining ..... 46 0.4% 1,582 0.5% 63,960 1.1% Construction ............................................... 963 7.7% 22,503 7.0% 343,232 5.7% Manufacturing .............................................. 1,512 12.1% 39,730 12.3% 775,663 12.8% Wholesale Trade ............................................ 434 3.5% 12,263 3.8% 196,738 3.3% Retail Trade ............................................... 1,173 9.4% 38,195 11.8% 659,708 10.9% Transportation and Warehousing, and Utilities .............. 1,253 10.0% 24,374 7.6% 355,486 5.9% Information ................................................ 292 2.3% 6,769 2.1% 135,688 2.2% Finance and Insurance, and Real Estate and Rental and Leasing 855 6.8% 23,402 7.3% 466,468 7.7% Professional, Scientific, and Management, Administrative, and Waste Management Services ............................. 1,346 10.8% 34,027 10.5% 662,987 11.0% Educational Services and Health Care and Social Assistance . 2,644 21.2% 68,300 21.2% 1,337,455 22.1% Arts, Entertainment and Recreation and Accommodation and Food Services ............................................. 993 8.0% 25,377 7.9% 524,925 8.7% Other Services, Except Public Administration ............... 471 3.8% 14,080 4.4% 288,538 4.8% Public Administration ...................................... 504 4.0% 11,991 3.7% 232,923 3.9% Total .................................................... 12,486 100.00% 322,593 100.00% 6,043,771 100.0% Note: (1) Source: U.S. Bureau of the Census, American Community Survey 5-year estimates 2007 to 2011.


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Employment By Occupation(1)

The City Will County State of Illinois Classification Number Percent Number Percent Number Percent Management, Business, Science and Arts ................... 4,689 37.6% 114,459 35.5% 2,167,571 35.9% Service .................................................. 1,624 13.0% 47,282 14.7% 1,007,434 16.7% Sales and Office ........................................ 3,348 26.8% 86,617 26.9% 1,550,202 25.6% Natural Resources, Construction, and Maintenance ......... 1,302 10.4% 30,078 9.3% 474,566 7.9% Production, Transportation, and Material Moving ........... 1,523 12.2% 44,157 13.7% 843,998 14.0% Total ................................................... 12,486 100.00% 322,593 100.00% 6,043,771 100.0% Note: (1) Source: U.S. Bureau of the Census, American Community Survey 5-year estimates 2007 to 2011.

Annual Average Unemployment Rates(1)

Calendar The Will State of Year City County Illinois

2004 ............... 4.0% 6.2% 6.2% 2005 ............... 3.8% 5.8% 5.8% 2006 ............... 2.8% 4.2% 4.6% 2007 ............... 3.0% 4.7% 5.0% 2008 ............... 4.0% 6.1% 6.4% 2009 ............... 6.7% 10.1% 10.0% 2010 ............... 10.6% 10.4% 10.3% 2011 ............... 10.3% 10.1% 9.7% 2012 ............... 9.1% 9.0% 8.9% 2013(2) ............ 9.4% 10.0% 9.4%

Notes: (1) Source: Illinois Department of Employment Security. (2) Preliminary rates for the month of March 2013.

Building Permits

City Building Permits(1) (Excludes the Value of Land)

Calendar Single-Family Multi-Family Miscellaneous Total Year Units Value Number Value Value Value

2003 ..... 512 $ 75,513,064 0 $ 0 $ 3,751,090 $ 79,264,154 2004 ..... 450 71,169,983 48 3,617,460 9,459,914 84,247,357 2005 ..... 580 119,565,538 0 0 6,045,416 125,610,954 2006 ..... 295 63,207,286 16 1,562,854 4,447,341 69,217,481 2007 ..... 150 39,669,229 0 0 6,126,056 45,795,285 2008 ..... 382 33,606,701 0 0 11,497,249 45,103,950 2009 ..... 24 6,491,227 2 858,455 1,803,396 9,153,078 2010 ..... 37 10,934,256 0 0 1,625,294 12,559,550 2011 ..... 26 8,885,520 0 0 2,137,900 11,023,420 2012 ..... 34 11,196,981 0 0 16,450,085 27,647,066 Note: (1) Source: the City.


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Housing

The U.S. Census Bureau 5-year estimated values reported that the median value of the City’s owner-occupied homes was $231,500. This compares to $236,300 for the County and $198,500 for the State. The following table represents the five year average market value of specified owner-occupied units for the City, the County and the State at the time of the 2007-2011 American Community Survey.

Specified Owner-Occupied Units(1)

The City Will County State of Illinois Value Number Percent Number Percent Number Percent Under $50,000 .............. 166 2.2% 4,125 2.2% 218,208 6.7% $50,000 to $99,999 ......... 123 1.6% 6,431 3.4% 451,967 13.8% $100,000 to $149,999 ...... 474 6.2% 19,461 10.4% 464,158 14.2% $150,000 to $199,999 ....... 1,982 25.7% 37,615 20.1% 518,957 15.8% $200,000 to $299,999 ....... 2,825 36.7% 61,761 33.0% 725,004 22.1% $300,000 to $499,999 ....... 2,079 27.0% 45,408 24.2% 613,486 18.7% $500,000 to $999,999 ....... 54 0.7% 11,584 6.2% 234,600 7.2% $1,000,000 or more ......... 0 0.0% 936 0.5% 53,191 1.6% Total .................... 7,703 100.00% 187,321 100.00% 3,279,571 100.0%

Note: (1) Source: U.S. Bureau of the Census, American Community Survey 5-year estimates 2007 to 2011.

Mortgage Status(1)

The City Will County State of Illinois

Value Number Percent Number Percent Number Percent Housing Units with a Mortgage ................... 6,292 81.7% 148,888 79.5% 2,272,745 69.3% Housing Units without a Mortgage ................ 1,411 18.3% 38,433 20.5% 1,006,826 30.7% Total ......................................... 7,703 100.00% 187,321 100.00% 3,279,571 100.0% Note: (1) Source: U.S. Bureau of the Census, American Community Survey 5-year estimates 2007 to 2011.

Income

Per Capita Personal Income for the Ten Highest Income Counties in the State(1) Rank 2007-2011 1 ..................... Lake County ................. $38,512 2 ..................... DuPage County ............... 38,405 3 ..................... McHenry County .............. 32,318 4 ..................... Monroe County ............... 31,570 5 ..................... Kendall County .............. 31,325 6 ..................... Will County ................. 30,199 7 ..................... Cook County ................. 29,920 8 ..................... Woodford County ............. 29,886 9 ..................... Kane County ................. 29,864 10 ..................... Sangamon County ............. 29,167

Note: (1) Source: U.S. Bureau of the Census. 2007-2011

American Community 5-Year Estimates.


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The following shows a ranking of median family income for the Chicago metropolitan area from the 2007-2011 American Community Survey.

Ranking of Median Family Income(1)

Ill. Family Ill. County Income Rank DuPage County ............. $94,049 1 Lake County ............... 93,260 2 Kendall County ............ 90,696 3 McHenry County ............ 87,133 4 Will County ............... 86,372 5 Kane County ............... 79,686 7 Cook County ............... 65,842 20 Note: (1) Source: U.S. Bureau of the Census.

2007-2011 American Community 5-Year Estimates.

The U.S. Census Bureau 5-year estimated values reported that the City had a median family income of

$91,274. This compares to $86,372 for the County and $69,658 for the State. The following table represents the distribution of family incomes for the City, the County and the State at the time of the 2007-2011 American Community Survey.

Family Income(1)

The City Will County State of Illinois Income Number Percent Number Percent Number Percent Under $10,000 .............. 96 1.5% 3,744 2.2% 131,841 4.2% $10,000 to $14,999 ......... 29 0.5% 2,610 1.5% 86,610 2.7% $15,000 to $24,999 ......... 178 2.8% 7,687 4.5% 224,421 7.1% $25,000 to $34,999 ......... 245 3.9% 9,338 5.4% 260,262 8.3% $35,000 to $49,999 ......... 624 9.9% 16,540 9.6% 389,862 12.4% $50,000 to $74,999 ......... 1,097 17.4% 31,353 18.2% 606,737 19.2% $75,000 to $99,999 ......... 1,320 20.9% 30,784 17.9% 486,151 15.4% $100,000 to $149,999 ....... 1,966 31.2% 41,071 23.9% 547,784 17.4% $150,000 to $199,999 ....... 450 7.1% 17,636 10.2% 212,016 6.7% $200,000 or more ........... 304 4.8% 11,401 6.6% 207,841 6.6% Total .................... 6,309 100.00% 172,164 100.00% 3,153,525 100.0% Note: (1) Source: U.S. Bureau of the Census, American Community Survey 5-year estimates 2007 to 2011.


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The U.S. Census Bureau 5-year estimated values reported that the City had a median household income of $79,750. This compares to $76,453 for the County and $56,576 for the State. The following table represents the distribution of household incomes for the City, the County and the State at the time of the 2007-2011 American Community Survey.

Household Income(1)

The City Will County State of Illinois

Income Number Percent Number Percent Number Percent Under $10,000 .............. 197 2.3% 6,843 3.1% 324,506 6.8% $10,000 to $14,999 ......... 165 1.9% 5,971 2.7% 225,927 4.7% $15,000 to $24,999 ......... 448 5.2% 14,933 6.7% 480,204 10.1% $25,000 to $34,999 ......... 501 5.8% 15,413 7.0% 462,115 9.7% $35,000 to $49,999 ......... 873 10.1% 23,687 10.7% 628,998 13.2% $50,000 to $74,999 ......... 1,800 20.9% 41,988 18.9% 884,623 18.5% $75,000 to $99,999 ......... 1,729 20.1% 36,053 16.3% 627,813 13.2% $100,000 to $149,999 ....... 2,097 24.3% 45,933 20.7% 656,199 13.7% $150,000 to $199,999 ....... 500 5.8% 18,757 8.5% 243,765 5.1% $200,000 or more ........... 304 3.5% 12,144 5.5% 238,852 5.0% Total .................... 8,614 100.00% 221,722 100.00% 4,773,002 100.0% Note: (1) Source: U.S. Bureau of the Census, American Community Survey 5-year estimates 2007 to 2011.

Retail Activity

Sales tax receipts exceeded 19% of Governmental Fund Type revenues in fiscal 2012. Following is a summary of the City’s sales tax receipts as collected and disbursed by the State of Illinois.

Retailers’ Occupation, Service Occupation and Use Tax(1) State Fiscal Year State Sales Tax Annual Percent Ending June 30 Distributions(2) Change + (-)

2004 ..................................... $1,320,808 5.31%(3) 2005 ..................................... 1,377,263 4.27% 2006 ..................................... 1,514,238 9.95% 2007 ..................................... 1,638,802 8.23% 2008 ..................................... 1,989,045 21.37% 2009 ..................................... 2,305,280 15.90% 2010 ..................................... 2,333,735 1.23% 2011 ..................................... 2,343,653 0.42% 2012 ..................................... 2,390,938 2.02% 2013 ..................................... 2,438,660 2.00% Growth from 2004 to 2013 ........................................................ 84.63%

Notes: (1) Source: Illinois Department of Revenue.

(2) Tax distributions are based on records of the Illinois Department of Revenue relating to the 1% municipal portion of the Retailers’ Occupation, Service Occupation and Use Tax, collected on behalf of the City, less a State administration fee. The municipal 1% includes tax receipts from the sale of food and drugs which are not taxed by the State.

(3) The 2004 percentage is based on a 2003 sales tax of $1,254,250.

In 2011, a voter-approved referendum was passed for a 1% non-home rule sales tax. Collection began August

2011.


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THE PROJECT

Bond proceeds will be used to finance roads and infrastructure facilities and improvements, and related facilities, improvements and costs and to pay the costs of issuance. The City has budgeted to address various infrastructure projects in Fiscal Year 2014. Work to be completed will include reconstruction of roads and infrastructure, resurfacing, ADA improvements/enhancements, sidewalk replacements, a pedestrian bridge and intersection improvements. These projects will be spread out throughout the City, with the goal being to maintain the best of the City’s infrastructure, while replacing old infrastructure and enhancing the City with other improvements.

DEBT INFORMATION

After issuance of the Bonds, the City will have outstanding $12,768,584 (subject to change) principal amount of general obligation debt and $515,000 principal amount of debt certificates. As of June 30, 2012, the City had IEPA loans outstanding in the principal amount of $12,092,285 and a note in the principal amount of $1,250,000 with the Illinois State Toll Highway Authority.

The City does not intend to issue additional debt within the next three months.

General Obligation Bonded Debt(1) (Principal Only)

Limited Tax Bonds Cumulative Calendar Series Series Series Series Outstanding The Total Principal Retired(3) Year 2005A 2008 2009 2012(2) Debt Bonds(3) Debt(3) Amount Percent 2014 ..... $195,000 $145,000 $365,541 $1,300,000 $ 2,005,541 $ 0 $ 2,005,541 $ 2,005,541 15.71% 2015 ..... 0 330,000 377,706 1,325,000 2,032,706 0 2,032,706 4,038,247 31.63% 2016 ..... 0 0 112,437 1,350,000 1,462,437 68,076 1,530,513 5,568,760 43.61% 2017 ..... 0 0 0 1,400,000 1,400,000 691,186 2,091,186 7,659,946 59.99% 2018 ..... 0 0 0 1,425,000 1,425,000 733,638 2,158,638 9,818,584 76.90% 2019 ..... 0 0 0 1,450,000 1,450,000 0 1,450,000 11,268,584 88.25% 2020 ..... 0 0 0 1,500,000 1,500,000 0 1,500,000 12,768,584 100.00% Total .. $195,000 $475,000 $855,684 $9,750,000 $11,275,684 $1,492,900 $12,768,584 Notes: (1) Source: the City. (2) Alternate revenue bonds payable from revenues from State Income Taxes and Public Infrastructure Sales Tax. (3) Subject to change.

Debt Certificates(1)

(Principal Only)

Cumulative Calendar Series Principal Retired Year 2005B Amount Percent

2014 .......... $165,000 $165,000 32.04% 2015 .......... 170,000 335,000 65.05% 2016 .......... 180,000 515,000 100.00% Total ....... $515,000


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Detailed Overlapping Bonded Debt(1) (As of May 14, 2013)

Outstanding Applicable to City Debt Percent(2) Amount

Schools: School District Number 89 ......................... $ 1,820,000 55.36% $ 1,007,552 School District Number 91 ......................... 4,495,000 85.56% 3,845,922 School District Number 92 ......................... 2,940,000 21.84% 642,096 High School District Number 205 ................... 11,376,508 26.06% 2,964,718 Community College District Number 525 ............. 157,060,000 3.22% 5,057,332 Total Schools ..................................................................... $13,517,620 Others: Will County Forest Preserve District .............. $153,802,604 3.19% $ 4,906,303 Homer Township .................................... 6,745,000 24.34% 1,641,733 Lockport Park District ............................ 4,001,000 39.67% 1,587,197 White Oak Library ................................. 22,990,000 15.49% 3,561,151 Total Others ...................................................................... $11,696,384 Total Schools and Others Overlapping Bonded Debt .................................. $25,214,004 Notes: (1) Source: Will County Clerk. (2) Overlapping debt percentages based on 2012 EAV, the most current available.

Statement of Bonded Indebtedness(1)

Ratio To Per Capita

Amount Equalized Estimated (2010 Census Applicable Assessed Actual 24,839) City EAV of Taxable Property, 2012 ............... $ 603,967,080 100.00% 33.33% $24,315.27 Estimated Actual Value, 2012 ..................... $1,811,901,240 300.00% 100.00% $72,945.82 Direct Bonded and Certificated Debt(2)(3) ........ $ 13,283,585 2.20% 0.73% $ 534.79 Less: Self-Supporting Debt ...................... (9,750,000) (1.61%) (0.54%) (392.53) Net Direct Bonded and Certificated Debt ....... $ 3,533,585 0.59% 0.20% $ 142.26 Overlapping Bonded Debt(4): Schools .......................................... $ 13,517,620 2.24% 0.75% $ 544.21 Others ........................................... 11,696,384 1.94% 0.65% 470.89 Total Overlapping Bonded Debt .................. $ 25,214,004 4.17% 1.39% $ 1,015.10 Total Direct and Overlapping Debt(3) ........... $ 28,747,589 4.76% 1.59% $ 1,157.36 Notes: (1) Source: the City. (2) Includes $515,000 Series 2005B Debt Certificates and the Bonds. (3) Subject to change. (4) Overlapping bonded debt as of May 14, 2013.


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Legal Debt Margin(1)

2012 City Equalized Assessed Valuation .......................... $603,967,080 Statutory Debt Limitation (8.625%) .............................. $52,092,161 Non-Referendum Debt Limitation (0.5%) ........................... $3,019,835 General Obligation Bonded Debt: Series 2005A(2) ................................................. $ 195,000 $ 195,000 $ 195,000 Series 2008(2) .................................................. 475,000 475,000 475,000 Series 2009(2) .................................................. 855,684 855,684 855,684 Series 2012(ARS)(3) ............................................. 9,750,000 9,750,000 0 The Bonds(2)(4) ................................................. 1,492,900 1,492,900 1,492,900 Total General Obligation Bonded Debt(4) ....................... $ 12,768,584 $12,768,585 $3,018,584 Less: Alternate Revenue Bonds(3) ............................... (9,750,000) Net General Obligation Bonds(4) ................................. $ 3,018,585 Series 2005B Debt Certificates(5) ............................... $ 515,000 $ 515,000 $ 0 Total Applicable Debt(4) ........................................ $ 3,533,585 $3,018,584 Legal Debt Margin(4) ............................................ $48,558,576 $ 1,251 Note: (1) Source: the City. (2) Limited Tax Bonds. (3) The Series 2012 Bonds are issued as general obligation alternate bonds under Illinois statutes and do not count against the 8.625% of EAV debt limit for general obligation debt so long as the debt service levy for such bonds is abated annually and not extended. (4) Subject to change. (5) Payable from Waterworks and Sewerage Revenues.

PROPERTY ASSESSMENT AND TAX INFORMATION

For the 2012 levy year, the City’s EAV was comprised of approximately 88% residential, 2% industrial, 10%

commercial, and less than 0.1% farm and railroad property valuations.

Equalized Assessed Valuation(1) Levy Years Property Class 2008 2009 2010 2011 2012 Residential ............. $635,161,645 $643,658,383 $615,396,946 $573,082,193 $530,561,733 Farm .................... 482,647 551,335 667,167 624,755 591,915 Commercial .............. 59,185,845 60,815,369 65,333,391 60,912,785 60,634,535 Industrial .............. 14,507,452 14,512,120 14,382,086 13,764,266 11,641,101 Railroad ................ 366,082 378,096 428,213 510,496 537,796 Total ................. $709,703,671 $719,915,303 $696,207,803 $648,894,495 $603,967,080 Percent Change +(-) .... 7.79%(2) 1.44% (3.29%) (6.80%) (6.92%) Notes: (1) Source: Will County Clerk. (2) Percentage change based on 2007 EAV of $658,428,842.


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Representative Tax Rates(1) (Per $100 EAV) Levy Years 2008 2009 2010 2011 2012

City Rates: Corporate ................................. $0.2705 $0.2790 $0.2935 $0.2860 $0.3082 Street - Bridge ........................... 0.0171 0.0165 0.0142 0.0086 0.0006 Police Protection ......................... 0.0758 0.0766 0.1449 0.1713 0.1841 Civil Defense ............................. 0.0055 0.0038 0.0008 0.0019 0.0020 I.M.R.F ................................... 0.0239 0.0241 0.0287 0.0309 0.0274 Social Security ........................... 0.0460 0.0453 0.0162 0.0309 0.0274 Tort/Liability Insurance .................. 0.0460 0.0460 0.0209 0.0247 0.0332 Police Pension ............................ 0.0635 0.0798 0.1005 0.1078 0.1206 Audit ..................................... 0.0037 0.0042 0.0033 0.0039 0.0042 School Crossing Guard ..................... 0.0032 0.0032 0.0034 0.0041 0.0044 Garbage Disposal .......................... 0.0001 0.0001 0.0002 0.0002 0.0002 Street Lighting ........................... 0.0306 0.0298 0.0327 0.0370 0.0398 Stormwater Management ..................... 0.0233 0.0024 0.0001 0.0001 0.0001 Bond and Interest ......................... 0.1106 0.1093 0.1125 0.1213 0.1297 Total City Rate(2) ...................... $0.7198 $0.7201 $0.7719 $0.8287 $0.8819 .......................................... Will County ............................... 0.4751 0.4833 0.5077 0.5351 0.5696 Will County Forest Preserve ............... 0.1445 0.1519 0.1567 0.1693 0.1859 Will County Building Commission ........... 0.0191 0.0191 0.0197 0.0200 0.0212 Lockport Township ......................... 0.1590 0.1581 0.1621 0.1788 0.2035 City of Lockport Road and Bridge .......... 0.0373 0.0378 0.0413 0.0466 0.0521 Lockport Fire District .................... 0.8029 0.8132 0.8640 0.9644 1.0832 Des Plaines Valley Public Library District 0.1283 0.1315 0.1966 0.2214 0.2422 Lockport Park District .................... 0.3330 0.3351 0.3497 0.3860 0.4328 School District Number 91 ................. 2.7707 2.8026 3.0395 3.3676 3.7469 High School District Number 205 ........... 1.6603 1.6801 1.7606 1.9138 2.1179 Community College District Number 525 ..... 0.1896 0.2144 0.2270 0.2463 0.2768 Total Rate(3) ........................... $7.4396 $7.5472 $8.0968 $8.8780 $9.8140 Notes: (1) Source: Will County Clerk. (2) Statutory tax rate limits for the City are as follows: Corporate $0.4375; Street - Bridge $0.1000; Police Protection $0.6000; Civil Defense $0.0500; School Crossing Guard $0.0200; Garbage Disposal $0.2000; Street Lighting $0.0500; and Stormwater Management $0.0600. All others have no limit. (3) Representative tax rates for other government units are from Lockport Township tax code 1112, which represents approximately 20% of the City’s 2012 EAV.

Tax Extensions and Collections(1) Levy Coll. Taxes Total Collections Year Year Extended(2) Amount(3) Percent 2007 ............. 2008 ............. 6,105,037 6,097,346 99.87% 2008 ............. 2009 ............. 5,678,787 5,662,770 99.72% 2009 ............. 2010 ............. 5,765,723 5,730,061 99.38% 2010 ............. 2011 ............. 5,961,275 5,952,313 99.85% 2011 ............. 2012 ............. 5,971,014 5,957,694 99.78% 2012 ............. 2013(4) .......... 5,927,098 1,980,197 33.41% Notes: (1) Source: Will County Clerk.

(2) Tax extensions have been adjusted for abatements. (3) Total collections include back taxes, taxpayer refunds,

interest, etc. (4) As of June 3, 2013.


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Principal Taxpayers(1)

Taxpayer Name Business/Service 2012 EAV(2) Wal-Mart Real Estate Business Tr .......... Retail Store ....................................... $ 5,457,855 Equilon Enterprises LLC .................. Environmental Liability Management Services ........ 3,945,861 LCMC Associates LLC ...................... Real Property ...................................... 3,136,895 Panduit Corp ............................. Electric Wiring Components ......................... 2,778,449 Jetco Properties Inc. .................... Real Property ...................................... 2,039,273 Paramount Plastics Inc ................... Plastic Injection Molding .......................... 1,785,316 Lockport Lad LLC ......................... Real Property ...................................... 1,648,039 Lockport Partners I LLC .................. Real Property ...................................... 1,491,811 Baric Retail LLC ......................... Real Property ...................................... 1,487,749 Gator Lockport LLC ....................... Real Property ...................................... 1,400,887 Total .................................. ................................................... $25,172,135 Ten Largest Taxpayers as a Percent of the City's 2012 EAV ($603,967,080) .................... 4.17% Notes: (1) Source: Will County Clerk. (2) Every effort has been made to seek out and report the largest taxpayers. However, many of

the taxpayers listed contain multiple parcels and it is possible that some parcels and their valuations have been overlooked. The 2012 EAV is the most current available.

REAL PROPERTY ASSESSMENT, TAX LEVY AND COLLECTION PROCEDURES Tax Levy and Collection Procedures

Local assessment officers determine the assessed valuation of taxable real property and railroad property not

held or used for railroad operations. The Illinois Department of Revenue (the “Department”) assesses certain other types of taxable property, including railroad property held or used for railroad operations. Local assessment officers’ valuation determinations are subject to review at the county level and then, in general, to equalization by the Department. Such equalization is achieved by applying to each county’s assessments a multiplier determined by the Department. The purpose of equalization is to provide a common basis of assessments among counties by adjusting assessments toward the statutory standard of 33-1/3% of fair cash value. Farmland is assessed according to a statutory formula which takes into account factors such as productivity and crop mix. Taxes are extended against the assessed values after equalization.

Property tax levies of each taxing body are filed in the office of the county clerk of each county in which

territory of that taxing body is located. The county clerk computes the rates and amount of taxes applicable to taxable property subject to the tax levies of each taxing body and determines the dollar amount of taxes attributable to each respective parcel of taxable property. The county clerk then supplies to the appropriate collecting officials within the county the information needed to bill the taxes attributable to the various parcels therein. After the taxes have been collected, the collecting officials distribute to the various taxing bodies their respective shares of the taxes collected. Taxes levied in one calendar year are due and payable in two installments during the next calendar year. Taxes that are not paid when due, or that are not paid by mail and postmarked on or before the due date, are subject to a penalty of 1-1/2% per month until paid. Unpaid property taxes, together with penalties, interest and costs, constitute a lien against the property subject to the tax. Exemptions

An annual General Homestead Exemption (the “General Homestead Exemption”) provides that the Equalized Assessed Valuation (“EAV”) of certain property owned and used for residential purposes (“Residential Property”) may be reduced by the amount of any increase over the 1977 EAV, up to a maximum reduction of $3,500 for assessment years prior to assessment year 2004 in counties with less than 3,000,000 inhabitants, and a maximum reduction of $5,000 for assessment year 2004 through 2007 in all counties. Additionally, the maximum reduction is $5,500 for assessment year 2008 and the maximum reduction is $6,000 for assessment year 2009 and thereafter in all counties.


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The Homestead Improvement Exemption applies to Residential Properties that have been improved or rebuilt in the 2 years following a catastrophic event. The exemption is limited to $45,000 through December 31, 2003, and $75,000 per year beginning January 1, 2004 and thereafter, to the extent the assessed value is attributable solely to such improvements or rebuilding.

Additional exemptions exist for senior citizens. The Senior Citizens Homestead Exemption (“Senior Citizens Homestead Exemption”) operates annually to reduce the EAV on a senior citizen’s home for assessment years prior to 2004 by $2,000 in counties with less than 3,000,000 inhabitants. For assessment years 2004 and 2005, the maximum reduction is $3,000 in all counties. For assessment years 2006 and 2007, the maximum reduction is $3,500 in all counties. In addition, for assessment year 2008 and thereafter, the maximum reduction is $4,000 for all counties. Furthermore, beginning with assessment year 2003, for taxes payable in 2004, property that is first occupied as a residence after January 1 of any assessment year by a person who is eligible for the Senior Citizens Homestead Exemption must be granted a pro rata exemption for the assessment year based on the number of days during the assessment year that the property is occupied as a residence by a person eligible for the exemption.

A Senior Citizens Assessment Freeze Homestead Exemption (“Senior Citizens Assessment Freeze Homestead Exemption”) freezes property tax assessments for homeowners, who are 65 and older and receive a household income not in excess of the maximum income limitation. The maximum income limitation is $35,000 for years prior to 1999, $40,000 for assessment years 1999 through 2003, $45,000 for assessment years 2004 and 2005, $50,000 from assessment years 2006 and 2007 and for assessments year 2008 and after, the maximum income limitation is $55,000. In general, the Senior Citizens Assessment Freeze Homestead Exemption limits the annual real property tax bill of such property by granting to qualifying senior citizens an exemption as to a portion of the valuation of their property. In counties with a population of 3,000,000 or more, the exemption for all assessment years is equal to the EAV of the residence in the assessment year for which application is made less the base amount. Furthermore, for those counties with a population of less than 3,000,000, the Senior Citizens Assessment Freeze Homestead Exemption is as follows: through assessment year 2005 and for assessment year 2007 and later, the exempt amount is the difference between (i) the current EAV of their residence and (ii) the base amount, which is the EAV of a senior citizen’s residence for the year prior to the year in which he or she first qualifies and applies for the Exemption (plus the EAV of improvements since such year). For assessment year 2006, the amount of the Senior Citizens Assessment Freeze Homestead Exemption phases out as the amount of household income increases. The amount of the Senior Citizens Assessment Freeze Homestead Exemption is calculated by using the same formula as above, and then multiplying the resulting value by a ratio that varies according to household income.

Another exemption available to disabled veterans operates annually to exempt up to $70,000 of the Assessed Valuation of property owned and used exclusively by such veterans or their spouses for residential purposes. Also, certain property is exempt from taxation on the basis of ownership and/or use, such as public parks, not-for-profit schools and public schools, churches, and not-for-profit hospitals and public hospitals. However, individuals claiming exemption under the Disabled Persons’ Homestead Exemption (“Disabled Persons’ Homestead Exemption”) or the Disabled Veterans Standard Homestead Exemption (“Disabled Veterans Standard Homestead Exemption”) cannot claim the aforementioned exemption.

Furthermore, beginning with assessment year 2007, the Disabled Persons’ Homestead Exemption provides an annual homestead exemption in the amount of $2,000 for property that is owned and occupied by certain persons with a disability. However, individuals claiming exemption as a disabled veteran or claiming exemption under the Disabled Veterans Standard Homestead Exemption cannot claim the aforementioned exemption.


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In addition, the Disabled Veterans Standard Homestead Exemption provides disabled veterans an annual homestead exemption starting with assessment year 2007 and thereafter. Specifically, (i) those veterans with a service-connected disability of 75% are granted an exemption of $5,000 and (ii) those veterans with a service-connected disability of less than 75%, but at least 50% are granted an exemption of $2,500. Furthermore, the veteran’s surviving spouse is entitled to the benefit of the exemption, provided that the spouse has legal or beneficial title of the homestead, resides permanently on the homestead and does not remarry. Moreover, if the property is sold by the surviving spouse, then an exemption amount not to exceed the amount specified by the current property tax roll may be transferred to the spouse’s new residence, provided that it is the spouse’s primary residence and the spouse does not remarry. However, individuals claiming exemption as a disabled veteran or claiming exemption under the Disabled Persons’ Homestead Exemption cannot claim the aforementioned exemption.

Beginning with assessment year 2007, the Returning Veterans’ Homestead Exemption (“Returning Veterans’ Homestead Exemption”) is available for property owned and occupied as the principal residence of a veteran in the assessment year the veteran returns from an armed conflict while on active duty in the United States armed forces. This provision grants a homestead exemption of $5,000, which is applicable in all counties. In order to apply for the Returning Veterans’ Homestead Exemption, the individual must pay real estate taxes on the property, own the property or have either a legal or an equitable interest in the property, “or a leasehold interest of land on which a single family residence is located, which is occupied as a principle residence of a veteran returning from an armed conflict involving the armed forces of the United States who has an ownership interest therein, legal, equitable or as a lessee, and on which the veteran is liable for the payment of property taxes.” Those individuals eligible for the Returning Veterans’ Homestead Exemption may claim the Returning Veterans’ Homestead Exemption, in addition to other homestead exemptions, unless otherwise noted. Property Tax Extension Limitation Law

The Property Tax Extension Limitation Law, as amended (the “Limitation Law”), limits the annual growth in

the amount of property taxes to be extended for certain Illinois non-home-rule units, including the City. In general, the annual growth permitted under the Limitation Law is the lesser of 5% or the percentage increase in the Consumer Price Index during the calendar year preceding the levy year. Taxes can also be increased due to new construction, referendum approval of tax rate increases, mergers and consolidations.

The effect of the Limitation Law is to limit the amount of property taxes that can be extended for a taxing body.

In addition, general obligation bonds, notes and installment contracts payable from ad valorem taxes unlimited as to rate and amount cannot be issued by the affected taxing bodies unless they are approved by referendum, are alternate bonds or are for certain refunding purposes.

The City has the authority to levy taxes for many different purposes. See the table entitled Representative Tax

Rates under “PROPERTY ASSESSMENT AND TAX INFORMATION” herein. The ceiling at any particular time on the rate at which these taxes may be extended for the City is either (i) unlimited (as provided by statute), (ii) initially set by statute but permitted to be increased by referendum, (iii) capped by statute, or (iv) limited to the rate approved by referendum. Public Act 94-0976, effective June 30, 2006, provides that the only ceiling on a particular tax rate is the ceiling set by statute above, at which the rate is not permitted to be further increased by referendum or otherwise. Therefore, taxing districts (such as the City) will have increased flexibility to levy taxes for the purposes for which they most need the money. The total aggregate tax rate for the various purposes subject to the Limitation Law, however, will not be allowed to exceed the City’s limiting rate computed in accordance with the provisions of the Limitation Law.


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Local governments, including the City, can issue limited tax bonds in lieu of general obligation bonds that have

otherwise been authorized by applicable law.

Truth in Taxation Law Legislation known as the Truth in Taxation Law (the “Law”) limits the aggregate amount of certain taxes which

can be levied by, and extended for, a taxing district to 105% of the amount of taxes extended in the preceding year unless specified notice, hearing and certification requirements are met by the taxing body. The express purpose of the Law is to require published disclosure of, and hearing upon, an intention to adopt a levy in excess of the specified levels.

FINANCIAL INFORMATION Budgeting

The City’s budget development process begins in February of each year with the issuance of budgeting instructions by the Finance Department. These instructions provide detailed guidance to the City Staff on how to prepare departmental/divisional budget requests. Applicable forms are also provided. Department heads must submit their budget requests to the Finance Department in March. During the month of March, the Finance Department compiles a draft City Budget based upon the departmental requests and its projection of revenues for the budget year. In March and April, the City Administrator and Finance Director meet with department heads to review their budget requests. Adjustments are made to achieve budgetary balance and align the spending plan with the City Council’s priorities. During April, the Finance Department revises the draft budget, as directed by the City Council and City Administrator. The City Administrator submits his proposed City budget to the City Council for consideration in early June. The City Council approves the budget in June. Investment Policy

The City's investment policy allows the following investment vehicles:

Instruments of the United States of America or its agencies, instruments which are guaranteed by the full faith and credit of the United States as to principal and interest, and instruments issued by Fannie Mae.

Certain deposits in approved banks secured 110% by securities listed above, held in safekeeping, for all balances in excess of federal deposit insurance limits.

Shares of certain banks, certain commercial paper, repurchase agreements, U.S. Treasury strips, bankers’

acceptances, money market mutual funds, funds sponsored by government associations, municipal securities and the Illinois Funds Investment Pool which is under the oversight of the State of Illinois.

The City is specifically prohibited from investing in Sally Maes, reverse repurchase agreements, guaranteed investment contracts of life insurance companies, financial forwards or futures and writing call or put options.

Financial Reports

The City’s financial statements are audited annually by certified public accountants. The City’s financial statements are completed on a modified accrual basis of accounting consistent with generally accepted accounting principles applicable to governmental entities. See APPENDIX A for more detail.


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No Consent or Updated Information Requested of the Auditor

The tables and excerpts (collectively, the “Excerpted Financial Information”) contained in this “FINANCIAL INFORMATION” section and in APPENDIX A are from the audited financial statements of the City, including the audited financial statements for the fiscal year ended June 30, 2012 (the “2012 Audit”). The 2012 Audit has been prepared by Sikich, LLP, Independent Certified Public Accountant, Naperville, Illinois, (the “Auditor”), and approved by formal action of the City Council. The City has not requested the Auditor to update information contained in the Excerpted Financial Information; nor has the City requested that the Auditor consent to the use of the Excerpted Financial Information in this Official Statement. Other than as expressly set forth in this Official Statement, the financial information contained in the Excerpted Financial Information has not been updated since the date of the 2012 Audit. The inclusion of the Excerpted Financial Information in this Official Statement in and of itself is not intended to demonstrate the fiscal condition of the City since the date of the 2012 Audit. Questions or inquiries relating to financial information of the City since the date of the 2012 Audit should be directed to the City. Summary Financial Information

The following tables are summaries and do not purport to be the complete audits, copies of which are available upon request. See APPENDIX A for excerpts of the City’s 2012 Audit.

Statement of Net Assets Governmental Activities

Audited As of June 30 2008 2009(1) 2010 2011 2012 ASSETS: Cash and Investments ..................................... $ 8,616,897 $ 9,996,377 $ 9,095,076 $ 12,447,544 $ 25,527,407 Receivables: Property Taxes .......................................... 3,087,107 2,857,672 2,886,312 2,969,649 3,177,348 State Sales Tax ......................................... 726,756 707,499 726,557 697,925 1,124,982 State Income Tax ........................................ 216,817 449,493 851,017 853,281 691,155 Other ................................................... 169,496 286,375 464,673 388,697 460,287 Motor Fuel Taxes ........................................ 47,604 34,908 47,722 84,964 59,760 Grants .................................................. 0 0 0 0 74,082 Interfund Balances ....................................... 0 2,432,143 2,574,283 2,636,775 2,575,549 Internal Balances ........................................ 4,583,371 0 0 0 0 Inventory ................................................ 17,683 6,889 9,837 3,622 2,975 Prepaid Expenses ......................................... 142,635 232,769 199,894 194,455 210,772 Deferred Charges ......................................... 0 26,663 22,219 17,775 140,004 Capital Assets, Not Depreciated .......................... 7,667,645 26,825,128 23,706,389 24,393,234 24,823,735 Other Capital Assets, Net of Accumulated Depreciation .... 20,284,748 57,832,030 70,192,670 72,189,695 72,462,279 Total Assets ........................................... $45,560,759 $101,687,946 $110,776,649 $116,877,616 $131,330,335 LIABILITIES: Accounts Payable ......................................... $ 3,151,582 $ 1,466,332 $ 1,030,902 $ 1,503,948 $ 961,170 Accrued Salaries ......................................... 478,559 293,734 261,988 202,361 302,992 Accrued Interest Payable ................................. 70,793 95,565 73,426 56,323 38,273 Unearned Revenue ......................................... 0 2,831,569 2,940,921 3,408,186 3,408,444 Other Liabilities ........................................ 1,057,277 903,066 808,734 803,037 736,216 Noncurrent Liabilities: Due Within One Year ..................................... 1,870,000 1,426,571 1,179,658 1,195,859 1,280,345 Due In More Than One Year ............................... 2,156,280 4,597,604 5,265,916 4,833,509 14,258,257 Unamortized Bond Premium ................................ 0 195,605 163,004 0 0 Total Liabilities ...................................... $ 8,784,491 $ 11,810,046 $ 11,724,549 $ 12,003,223 $ 20,985,697 NET ASSETS: Invested In Capital Assets, Net of Related Debt .......... $23,987,393 $ 81,786,336 $ 90,973,320 $ 93,546,841 $ 94,909,844 Restricted For Debt Service .............................. 1,887,234 54,508 238,939 245,191 262,154 Restricted For Other Purposes ............................ 1,213,027 1,933,652 2,474,161 2,522,831 2,627,359 Unrestricted ............................................. 9,688,614 6,103,404 5,365,680 8,559,530 12,545,281 Total Net Assets ....................................... $36,776,268 $ 89,877,900 $ 99,052,100 $104,874,393 $110,344,638 Note: (1) Capital assets increased due to the inclusion of GASB 34.


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Statement of Activities Governmental Activities

Net (Expense) Revenue and Changes in Net Assets

Audited for the Fiscal Year Ended June 30 2008 2009 2010 2011 2012 NET EXPENSES: General Administration .................... $ (602,798) $ (575,248) $ (535,563) $ (793,164) $ (479,858) Police and Animal Control ................. (4,958,385) (5,004,456) (5,110,317) (4,916,135) (5,342,490) Buildings, Planning and Development ....... (477,177) (894,124) (2,304,082) (472,797) (218,961) Civil Defense ............................. (13,426) (18,084) 0 0 0 Streets and Yard Waste .................... (3,152,818) (1,606,230) 7,632,963 337,122 (2,322,011) Public Works and Special Projects ......... 11,367 (111,556) 392,047 1,038,906 972,724 Interest .................................. (187,652) (151,180) (136,467) (125,556) (79,625) Total Net Expenses ...................... $(9,380,889) $(8,360,878) $ ( 61,419) $ (4,931,624) $ (7,470,221) GENERAL REVENUES: Taxes: Property ................................. $ 6,059,941 $ 5,886,774 $ 5,709,823 $ 5,860,673 $ 5,964,238 State Sales .............................. 2,566,496 2,710,233 2,716,998 2,760,197 2,846,672 Non-Home Rule Sales ...................... 0 0 0 0 1,533,465 State Income ............................. 2,279,778 2,079,374 1,825,913 1,883,347 2,120,329 Motor Fuel ............................... 698,998 0 0 0 0 State Replacement ........................ 88,782 77,649 64,631 79,179 69,834 Earnings on Investments ................... 495,616 114,167 36,691 37,739 39,312 Other Income .............................. 118,895 89,456 100,253 104,719 187,799 Transfers ................................. 200,000 0 183,466 185,976 178,817 Total General Revenues .................. $12,508,506 $10,957,653 $10,637,775 $ 10,911,830 $ 12,940,466 Change in Net Assets ...................... $ 3,127,617 $ 2,596,775 $10,576,356 $ 5,980,206 $ 5,470,245 Net Assets at Beginning of Year ........... $33,648,651(1) $87,281,125(1) $88,475,744(1) $ 98,894,187(1) $104,874,393(1) Net Assets at End of Year ................. $36,776,268 $89,877,900 $99,052,100 $104,874,393 $110,344,638 Note: (1) As restated.


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General Fund Balance Sheet

Audited As of June 30 2008 2009 2010 2011 2012 ASSETS: Cash and Investments ..................................... $ 4,527,021 $ 6,076,968 $ 5,748,523 $ 7,900,910 $ 9,291,367 Receivables: Property Taxes ......................................... 2,259,969 2,462,917 2,492,688 2,579,693 2,758,525 State Sales Tax ........................................ 726,756 707,499 726,557 697,925 721,324 State Income Tax ....................................... 216,817 449,493 851,017 853,281 691,155 Other .................................................. 169,496 286,375 414,673 250,912 284,142 Due From Other Funds ..................................... 4,163,186 2,616,775 2,579,066 2,650,156 2,612,138 Inventory ................................................ 17,683 6,889 9,837 3,622 2,975 Prepaid Items ............................................ 142,635 232,769 199,894 194,455 210,772 Total Assets ........................................... $12,223,563 $12,839,685 $13,022,255 $15,130,954 $16,572,398 LIABILITIES AND FUND BALANCE: Liabilities: Accounts Payable ........................................ $ 1,686,551 $ 930,929 $ 323,788 $ 387,461 $ 304,043 Accrued Salaries ........................................ 478,559 293,734 261,988 202,361 302,992 Deferred Revenues ....................................... 2,465,986 2,441,103 2,484,340 2,593,527 2,591,857 Due to Other Funds ...................................... 0 124,639 3,223 66,596 5,439 Other Liabilities ....................................... 1,057,277 882,631 787,875 664,118 451,999 Total Liabilities ...................................... $ 5,688,373 $ 4,673,036 $ 3,861,214 $ 3,914,063 $ 3,656,330 Fund Balance(1): Reserved for Prepaid Items .............................. $ 142,635 $ 232,769 $ 199,894 $ 0 $ 0 Reserved for Other Purposes ............................. 1,213,027 5,007,208 4,321,155 0 0 Unreserved .............................................. 5,179,528 2,926,672 4,639,992 0 0 Nonspendable ............................................. 0 0 0 2,746,539 2,765,831 Restricted ............................................... 0 0 0 1,266,117 1,184,328 Assigned ................................................. 0 0 0 556,647 2,515,148 Unassigned ............................................... 0 0 0 6,647,588 6,450,761 Total Fund Balance ..................................... $ 6,535,190 $ 8,166,649 $ 9,161,041 $11,216,891 $12,916,068 Total Liabilities and Fund Balance ..................... $12,223,563 $12,839,685 $13,022,255 $15,130,954 $16,572,398 Note: (1) Reporting format change.


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General Fund Revenues and Expenditures

Audited for the Fiscal Year Ended June 30

2008 2009 2010 2011 2012 REVENUES: Taxes: Property Levies ........................................ $ 4,286,802 $ 4,675,785 $ 4,922,339 $ 5,074,065 $ 5,156,535 State Sales ............................................ 2,524,896 2,710,233 2,716,998 2,760,197 2,846,672 State Income ........................................... 2,279,778 2,079,374 1,825,913 1,883,347 2,120,329 Replacement ............................................ 88,782 77,649 64,631 79,179 69,834 Licenses, Permits and Inspections ....................... 1,941,631 1,570,680 1,212,796 833,922 809,188 Fines, Forfeitures and Penalties ........................ 363,788 449,625 537,910 1,321,573 479,341 Interest Income ......................................... 294,069 81,215 28,515 28,361 22,928 Refunds and Reimbursements .............................. 311,688 165,406 256,297 204,901 225,629 Contributions and Donations ............................. 233,850 95,257 102,550 33,400 24,303 Grants .................................................. 281,154 225,919 466,158 198,332 228,421 Other Income ............................................ 118,895 145,966 161,403 188,833 235,315 Total Revenues ........................................ $12,725,333 $12,277,109 $12,295,510 $12,606,110 $12,218,495 EXPENDITURES: General Administration .................................. $ 1,368,361 $ 1,314,144 $ 1,292,234 $ 1,511,873 $ 1,348,174 Police and Animal Control ............................... 5,477,245 5,602,517 5,777,695 6,307,021 6,340,136 Civil Defense ........................................... 11,760 17,189 0 0 0 Buildings, Planning and Development ..................... 1,538,513 1,397,385 948,167 661,361 518,534 Streets and Yard Waste .................................. 1,496,386 1,792,761 1,813,748 1,574,886 1,595,549 Public Works and Special Projects ....................... 428,406 494,491 241,177 195,652 178,679 Capital Outlay .......................................... 1,854,342 1,895,774 1,997,911 248,705 0 Total Expenditures .................................... $12,175,013 $12,514,261 $12,070,932 $10,499,498 $ 9,981,072 Excess (Deficiency) of Revenues Over (Under) Expenditures $ 550,320 $ (237,152) $ 224,578 $ 2,106,612 $ 2,237,423 OTHER FINANCING SOURCES (USES): Proceeds From Bond Issuance ............................. $ 0 $ 2,500,605 $ 855,684 $ 0 $ 0 Proceeds From Capital Lease ............................. 0 222,660 0 0 0 Proceeds From Sale of Capital Assets .................... 0 0 40,496 0 0 Operating Transfers In .................................. 0 404,095 245,170 185,976 179,330 Operating Transfers Out ................................. 0 (1,285,041) (371,536) (236,738) (717,576) Total Other Financing Sources (Uses) .................. $ 0 $ 1,842,319 $ 769,814 $ (50,762) $ (538,246) Excess (Deficiency) of Revenues and Other Financing Sources Over (Under) Expenditures and Other Financing Uses ................. $ 550,320 $ 1,605,167 $ 994,392 $ 2,055,850 $ 1,699,177 Fund Balance-Beginning of Year ......................... 6,246,019 6,535,190 8,166,649 9,161,041 11,216,891 Prior Period Adjustment ................................ (261,149) 26,292 0 0 0 Fund Balance-End of Year ............................... $ 6,535,190 $ 8,166,649 $ 9,161,041 $11,216,891 $12,916,068


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Budget Financial Information(1)

Budgeted Interim Twelve Months Eleven Months Ending Ending 6/30/2013 5/31/2013

GENERAL FUND: REVENUES: Property Taxes ............................. $ 5,116,149 $4,312,909 Replacement Taxes .......................... 65,000 70,230 Municipal Sales Tax ........................ 2,725,000 1,910,023 State Income Tax ........................... 1,892,400 1,532,859 Licenses, Permits, Fees and Fines .......... 658,800 771,077 Interest Income ............................ 20,000 26,325 Governmental Grants ........................ 41,000 50,040 Rents/Fees ................................. 519,000 513,710 Miscellaneous .............................. 615,367 808,547 Total Revenues ........................... $11,652,716 $9,995,721 EXPENDITURES: Administration ............................. $ 1,651,371 $1,120,674 Commuter Lot ............................... 161,541 167,854 Police Department .......................... 6,408,529 5,842,989 Animal Control ............................. 50,600 27,180 Yard Waste ................................. 83,363 123,415 Planning ................................... 182,012 151,478 Building ................................... 467,568 317,353 Engineering ................................ 120,000 71,935 City Maintenance ........................... 105,652 87,987 Prime Blvd - PW Building ................... 56,500 104,573 Heritage and Culture ....................... 530 20 Street Department .......................... 2,002,927 1,482,167 ESDA ....................................... 36,583 27,063 Special Projects ........................... 2,284,041 23,328 Total Expenditures ....................... $13,611,217 $9,548,015 Note: (1) The City’s General Fund maintains a healthy fund balance moving into the 2014

Fiscal Year. In 2013 there was a planned drawdown of $1,958,501. This drawdown was included in a $2,273,041 transfer to the City’s Capital Projects Fund to allow for the completion of additional infrastructure projects. Over $8 million in Infrastructure expenditures were budgeted in Fiscal Year 2013, including: Road Reconstruction, Road Resurfacing, Sidewalk Improvements, and various other improvements. The City’s Fund Balance Policy for the General Fund states “the unrestricted fund balance should be maintained at 120 days (4 months) of estimated operating expenditures.” Even with this drawdown, the City exceeds its fund balance policy of 120 days of estimated operating expenditures.


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PENSION AND RETIREMENT OBLIGATIONS

The latest audited pension information is contained in APPENDIX A herein. The City contributes to two defined benefit pension plans: the Illinois Municipal Retirement Fund (IMRF), an

agent multiple-employer public employee retirement system and the Police Pension Plan which is a single-employer pension plan. The benefits, benefit levels, employee contributions and employer contributions for all plans are governed by Illinois Compiled Statutes and can only be amended by the Illinois General Assembly. None of the pensions plans issue separate reports on the pension plans. However, IMRF does issue a publicly available report that includes financial statements and supplementary information for the plan as a whole, but not for individuals.

In addition to providing the pension benefits above, the City provides postemployment health benefits (OPEB)

for retired employees through a single-employer defined benefit plan. The benefits, benefit levels, employee contributions and employer contributions are governed by the City and can be amended by the City through its personnel manual and union contracts. The plan does not issue a separate report.

REGISTRATION, TRANSFER AND EXCHANGE

See also APPENDIX B for information on registration, transfer and exchange of book-entry bonds. The Bonds will be initially issued as book-entry bonds.

The City shall cause books (the “Bond Register”) for the registration and for the transfer of the Bonds to be kept at the designated corporate trust office maintained for the purpose by the Bond Registrar in Chicago, Illinois. The City will authorize to be prepared, and the Bond Registrar shall keep custody of, multiple bond blanks executed by the City for use in the transfer and exchange of Bonds.

Any Bond may be transferred or exchanged, but only in the manner, subject to the limitations, and upon payment of the charges as set forth in the Bond Ordinance. Upon surrender for transfer or exchange of any Bond at the designated corporate trust office maintained for the purpose by the Bond Registrar, duly endorsed by, or accompanied by a written instrument or instruments of transfer in form satisfactory to the Bond Registrar and duly executed by the registered owner or such owner’s attorney duly authorized in writing, the City shall execute and the Bond Registrar shall authenticate, date and deliver in the name of the registered owner, transferee or transferees (as the case may be) a new fully registered Bond or Bonds of the same maturity and interest rate of authorized denominations, for a like aggregate principal amount.

The execution by the City of any fully registered Bond shall constitute full and due authorization of such Bond, and the Bond Registrar shall thereby be authorized to authenticate, date and deliver such Bond, provided, however, the principal amount of outstanding Bonds of each maturity authenticated by the Bond Registrar shall not exceed the authorized principal amount of Bonds for such maturity less Bonds previously paid. The Bond Registrar shall not be required to transfer or exchange any Bond from the fifteenth (15th) day (whether or not a business day) of the calendar month next preceding an interest payment date on such Bond (known as the record date) and ending on such interest payment date.


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The person in whose name any Bond shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of the principal of or interest on any Bonds shall be made only to or upon the order of the registered owner thereof or such owner’s legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid.

No service charge shall be made for any transfer or exchange of Bonds, but the City or the Bond Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Bonds except in the case of the issuance of a Bond or Bonds for the unredeemed portion of a bond surrendered for redemption.

TAX EXEMPTION

Federal tax law contains a number of requirements and restrictions which apply to the Bonds, including investment restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the proper use of bond proceeds and the facilities financed therewith, and certain other matters. The City has covenanted to comply with all requirements that must be satisfied in order for the interest on the Bonds to be excludable from gross income for federal income tax purposes. Failure to comply with certain of such covenants could cause interest on the Bonds to become includible in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds.

Subject to the City’s compliance with the above-referenced covenants, under present law, in the opinion of Bond Counsel, interest on the Bonds is excludable from the gross income of the owners thereof for federal income tax purposes, and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations, but interest on the Bonds is taken into account, however, in computing an adjustment used in determining the federal alternative minimum tax for certain corporations.

In rendering its opinion, Bond Counsel will rely upon certifications of the City with respect to certain material facts within the City’s knowledge. Bond Counsel’s opinion represents its legal judgment based upon its review of the law and the facts that it deems relevant to render such opinion and is not a guarantee of a result.

The Internal Revenue Code of 1986, as amended (the “Code”), includes provisions for an alternative minimum tax (“AMT”) for corporations in addition to the corporate regular tax in certain cases. The AMT, if any, depends upon the corporation’s alternative minimum taxable income (“AMTI”), which is the corporation’s taxable income with certain adjustments. One of the adjustment items used in computing the AMTI of a corporation (with certain exceptions) is an amount equal to 75% of the excess of such corporation’s “adjusted current earnings” over an amount equal to its AMTI (before such adjustment item and the alternative tax net operating loss deduction). “Adjusted current earnings” would include certain tax-exempt interest, including interest on the Bonds.

Ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, corporations subject to the branch profits tax, financial institutions, certain insurance companies, certain S corporations, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax-exempt obligations. Prospective purchasers of the Bonds should consult their tax advisors as to applicability of any such collateral consequences.


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The issue price (the “Issue Price”) for each maturity of the Bonds is the price at which a substantial amount of such maturity of the Bonds is first sold to the public. The Issue Price of a maturity of the Bonds may be different from the price set forth, or the price corresponding to the yield set forth, on the cover page hereof.

If the Issue Price of a maturity of the Bonds is less than the principal amount payable at maturity, the difference between the Issue Price of each such maturity, if any, of the Bonds (the “OID Bonds”) and the principal amount payable at maturity is original issue discount.

For an investor who purchases an OID Bond in the initial public offering at the Issue Price for such maturity and who holds such OID Bond to its stated maturity, subject to the condition that the City complies with the covenants discussed above, (a) the full amount of original issue discount with respect to such OID Bond constitutes interest which is excludable from the gross income of the owner thereof for federal income tax purposes; (b) such owner will not realize taxable capital gain or market discount upon payment of such OID Bond at its stated maturity; (c) such original issue discount is not included as an item of tax preference in computing the alternative minimum tax for individuals and corporations under the Code, but is taken into account in computing an adjustment used in determining the alternative minimum tax for certain corporations under the Code, as described above; and (d) the accretion of original issue discount in each year may result in an alternative minimum tax liability for corporations or certain other collateral federal income tax consequences in each year even though a corresponding cash payment may not be received until a later year. Based upon the stated position of the Illinois Department of Revenue under Illinois income tax law, accreted original issue discount on such OID Bonds is subject to taxation as it accretes, even though there may not be a corresponding cash payment until a later year. Owners of OID Bonds should consult their own tax advisors with respect to the state and local tax consequences of original issue discount on such OID Bonds.

Owners of Bonds who dispose of Bonds prior to the stated maturity (whether by sale, redemption or otherwise), purchase Bonds in the initial public offering, but at a price different from the Issue Price or purchase Bonds subsequent to the initial public offering should consult their own tax advisors.

If a Bond is purchased at any time for a price that is less than the Bond’s issue price or, in the case of an OID Bond, its Issue Price plus accreted original issue discount (the “Revised Issue Price”), the purchaser will be treated as having purchased a Bond with market discount subject to the market discount rules of the Code (unless a statutory de minimis rule applies). Accrued market discount is treated as taxable ordinary income and is recognized when a Bond is disposed of (to the extent such accrued discount does not exceed gain realized) or, at the purchaser’s election, as it accrues. Such treatment would apply to any purchaser who purchases an OID Bond for a price that is less than its Revised Issue Price. The applicability of the market discount rules may adversely affect the liquidity or secondary market price of such Bond. Purchasers should consult their own tax advisors regarding the potential implications of market discount with respect to the Bonds.

An investor may purchase a Bond at a price in excess of its stated principal amount. Such excess is

characterized for federal income tax purposes as “bond premium” and must be amortized by an investor on a constant yield basis over the remaining term of the Bond in a manner that takes into account potential call dates and call prices. An investor cannot deduct amortized bond premium relating to a tax-exempt bond. The amortized bond premium is treated as a reduction in the tax-exempt interest received. As bond premium is amortized, it reduces the investor’s basis in the Bond. Investors who purchase a Bond at a premium should consult their own tax advisors regarding the amortization of bond premium and its effect on the Bond’s basis for purposes of computing gain or loss in connection with the sale, exchange, redemption or early retirement of the Bond.


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There are or may be pending in the Congress of the United States legislative proposals, including some that

carry retroactive effective dates, that, if enacted, could alter or amend the federal tax matters referred to above or affect the market value of the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, it would apply to bonds issued prior to enactment. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal tax legislation. Bond Counsel expresses no opinion regarding any pending or proposed federal tax legislation.

The Internal Revenue Service (the “Service”) has an ongoing program of auditing tax-exempt obligations to determine whether, in the view of the Service, interest on such tax-exempt obligations is includible in the gross income of the owners thereof for federal income tax purposes. It cannot be predicted whether or not the Service will commence an audit of the Bonds. If an audit is commenced, under current procedures the Service may treat the City as a taxpayer and the Bondholders may have no right to participate in such procedure. The commencement of an audit could adversely affect the market value and liquidity of the Bonds until the audit is concluded, regardless of the ultimate outcome.

Payments of interest on, and proceeds of the sale, redemption or maturity of, tax-exempt obligations, including the Bonds, are in certain cases required to be reported to the Service. Additionally, backup withholding may apply to any such payments to any Bond owner who fails to provide an accurate Form W-9 Request for Taxpayer Identification Number and Certification, or a substantially identical form, or to any Bond owner who is notified by the Service of a failure to report any interest or dividends required to be shown on federal income tax returns. The reporting and backup withholding requirements do not affect the excludability of such interest from gross income for federal tax purposes.

Ownership of the Bonds may result in other federal, state and local tax consequences to certain taxpayers. Bond Counsel expresses no opinion regarding any such collateral tax consequences arising with respect to the Bonds. Prospective purchasers of the Bonds should consult their tax advisors regarding the applicability of any such federal, state and local tax consequences.

Interest on the Bonds is not exempt from present State of Illinois income taxes.

QUALIFIED TAX-EXEMPT OBLIGATIONS Subject to the City’s compliance with certain covenants, in the opinion of Bond Counsel, the Bonds are

“qualified tax-exempt obligations” under the small issuer exception provided under Section 265(b)(3) of the Code, which affords banks and certain other financial institutions more favorable treatment of their deduction for interest expense than would otherwise be allowed under Section 265(b)(2) of the Code.

CONTINUING DISCLOSURE

The City will enter into a Continuing Disclosure Certificate and Agreement (the “Undertaking”) for the benefit of the registered owners and beneficial owners of the Bonds to send certain information annually and to provide notice of certain events to the Municipal Securities Rulemaking Board (the “MSRB”) pursuant to the requirements of Section (b)(5) of Rule 15c2-12 (the “Rule”) adopted by the Securities and Exchange Commission (the “Commission”) under the Securities Exchange Act of 1934. No person, other than the City, has undertaken, or is otherwise expected, to provide continuing disclosure with respect to the Bonds. The information to be provided on an annual basis, the events which will be noticed on an occurrence basis and a summary of other terms of the Undertaking, including termination, amendment and remedies, are set forth below under “THE UNDERTAKING.”


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The City has represented that it has not failed to comply in all material respects with each and every

undertaking previously entered into by it pursuant to the Rule. A failure by the City to comply with the Undertaking will not constitute a default under the Bond Ordinance and registered owners and beneficial owners of the Bonds are limited to the remedies described in the Undertaking. See “THE UNDERTAKING - Consequences of Failure of the City to Provide Information.” The City must report any failure to comply with the Undertaking in accordance with the Rule. Any broker, dealer or municipal securities dealer must consider such report before recommending the purchase or sale of the Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds and their market price.

Bond Counsel expresses no opinion as to whether the Undertaking complies with the requirements of Section

(b)(5) of the Rule.

THE UNDERTAKING

The following is a brief summary of certain provisions of the Undertaking of the City and does not purport to be complete. The statements made under this caption are subject to the detailed provisions of the Undertaking, a copy of which is available upon request from the City.

Annual Financial Information Disclosure

The City covenants that it will disseminate its Annual Financial Information and its Audited Financial Statements, if any (as described below) to the MSRB in such manner and format and accompanied by identifying information as is prescribed by the MSRB or the Commission at the time of delivery of such information within 210 days after the last day of the City’s fiscal year (currently June 30). If Audited Financial Statements are not available when the Annual Financial Information is filed, the City will file unaudited financial statements. The City will submit Audited Financial Statements to the MSRB’s Electronic Municipal Market Access (“EMMA”) system within 30 days after availability to the City. MSRB Rule G-32 requires all EMMA filings to be in word-searchable PDF format. This requirement extends to all documents to be filed with EMMA, including financial statements and other externally prepared reports.

“Annual Financial Information” means:

1. The table under the heading of “Retailers’ Occupation, Service Occupation and Use Tax” within this Official Statement;

2. The table under the heading of “Historical State Income Tax Receipts” within this Official Statement;

3. The table under the heading of “Public Infrastructure Sales Tax” within this Official Statement;

4. All of the tables under the heading “PROPERTY ASSESSMENT AND TAX INFORMATION” within this Official Statement;

5. All of the tables under the heading “DEBT INFORMATION” within this Official Statement; and

6. All of the tables under the heading “FINANCIAL INFORMATION” within this Official Statement.

“Audited Financial Statements” means financial statements of the City as audited annually by independent

certified public accountants. Audited Financial Statements are expected to continue to be prepared according to Generally Accepted Accounting Principles as applicable to governmental units (i.e., as subject to the pronouncements of the Governmental Accounting Standards Board and subject to any express requirements of State law).


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Reportable Events Disclosure

The City covenants that it will disseminate in a timely manner (not in excess of ten business days after the occurrence of the Reportable Event) Reportable Events Disclosure to the MSRB in such manner and format and accompanied by identifying information as is prescribed by the MSRB or the Commission at the time of delivery of such information. MSRB Rule G-32 requires all EMMA filings to be in word-searchable PDF format. This requirement extends to all documents to be filed with EMMA, including financial statements and other externally prepared reports. The “Reportable Events” are:

1. Principal and interest payment delinquencies 2. Non-payment related defaults, if material 3. Unscheduled draws on debt service reserves reflecting financial difficulties 4. Unscheduled draws on credit enhancements reflecting financial difficulties 5. Substitution of credit or liquidity providers, or their failure to perform 6. 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 status of the security, or other material events affecting the tax status of the security

7. Modifications to the rights of security holders, if material 8. Bond calls, if material, and tender offers 9. Defeasances 10. Release, substitution or sale of property securing repayment of the securities, if material 11. Rating changes 12. Bankruptcy, insolvency, receivership or similar event of the City * 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

14. Appointment of a successor or additional trustee or the change of name of a trustee, if material. Consequences of Failure of the City to Provide Information

The City shall give notice in a timely manner to the MSRB of any failure to provide disclosure of Annual Financial Information and Audited Financial Statements when the same are due under the Undertaking.

In the event of a failure of the City to comply with any provision of the Undertaking, the registered owners and beneficial owner of any Bond may seek mandamus or specific performance by court order, to cause the City to comply with its obligations under the Undertaking. A default under the Undertaking shall not be deemed a default under the Bond Ordinance, and the sole remedy under the Undertaking in the event of any failure of the City to comply with the Undertaking shall be an action to compel performance. This event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the City in a

proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City.


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Amendment; Waiver

Notwithstanding any other provision of the Undertaking, the City by resolution or ordinance authorizing such amendment or waiver, may amend the Undertaking, and any provision of the Undertaking may be waived, if:

(a) (i) The amendment or the waiver is made in connection with a change in circumstances that arises from a change in legal requirements, including, without limitation, pursuant to a “no-action” letter issued by the Commission, a change in law, or a change in the identity, nature, or status of the City, or type of business conducted; or

(ii) The Undertaking, as amended, or the provision, as waived, would have complied with the requirements of the Rule at the time of the primary offering, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (b) The amendment or waiver does not materially impair the interests of the beneficial owners of the Bonds, as determined by parties unaffiliated with the City (such as Bond Counsel).

In the event that the Commission or the MSRB or other regulatory authority approves or requires Annual

Financial Information or notices of a Reportable Event to be filed with a central post office, governmental agency or similar entity other than the MSRB or in lieu of the MSRB, the City shall, if required, make such dissemination to such central post office, governmental agency or similar entity without the necessity of amending the Undertaking. Termination of Undertaking

The Undertaking shall be terminated if the City shall no longer have any legal liability for any obligation on or relating to repayment of the Bonds under the Bond Ordinance. The City shall give notice to the MSRB in a timely manner if this paragraph is applicable. Additional Information

Nothing in the Undertaking shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in the Undertaking or any other means of communication, or including any other information in any Annual Financial Information or Audited Financial Statements or notice of occurrence of a Reportable Event, in addition to that which is required by the Undertaking. If the City chooses to include any information from any document or notice of occurrence of a Reportable Event in addition to that which is specifically required by the Undertaking, the City shall have no obligation under the Undertaking to update such information or include it in any future disclosure or notice of occurrence of a Reportable Event. Dissemination of Information; Dissemination Agent

When filings are required to be made with the MSRB in accordance with the Undertaking, such filings are required to be made through its EMMA system for municipal securities disclosure or through any other electronic format or system prescribed by the MSRB for purposes of the Rule.

The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under the Undertaking, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The present Dissemination Agent is Mr. Erik Brown, Finance Director, City of Lockport, 222 East Ninth Street, Lockport, Illinois 60441; telephone (815) 838-0549.


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LITIGATION

There is no litigation of any nature now pending or threatened restraining or enjoining the issuance, sale, execution or delivery of the Bonds, or in any way contesting or affecting the validity of the Bonds or any proceedings of the City taken with respect to the issuance or sale thereof.

CERTAIN LEGAL MATTERS

Certain legal matters incident to the authorization, issuance and sale of the Bonds are subject to the approving legal opinion of Evans, Froehlich, Beth & Chamley, Champaign, Illinois, as Bond Counsel (the “Bond Counsel”), who has been retained by, and acts as, Bond Counsel to the City. Bond Counsel has not been retained or consulted on disclosure matters and has not undertaken to review or verify the accuracy, completeness or sufficiency of this Official Statement or other offering material relating to the Bonds and assumes no responsibility for the statements or information contained in or incorporated by reference in this Official Statement, except that in its capacity as Bond Counsel, Evans, Froehlich, Beth & Chamley has, at the request of the City, reviewed only those sections of the Official Statement involving the description of the Bonds, the security for the Bonds (excluding forecasts, projections, estimates or any other financial or economic information in connection therewith) and the description of the federal tax exemption of interest on the Bonds. This review was undertaken solely at the request and for the benefit of the City and did not include any obligation to establish or confirm factual matters set forth herein.

OFFICIAL STATEMENT AUTHORIZATION

This Official Statement has been prepared for distribution to prospective purchasers of the Bonds. All statements, information, and statistics herein are believed to be correct but are not guaranteed by the consultants or by the City, and all expressions of opinion, whether or not so stated, are intended only as such.

INVESTMENT RATING

The City has supplied certain information and material concerning the Bonds and the City to the rating service

shown on the cover page, including certain information and materials which may not have been included in this Official Statement, as part of its application for an investment rating on the Bonds. A rating reflects only the views of the rating agency assigning such rating and an explanation of the significance of such rating may be obtained from such rating agency. Generally, such rating service bases its rating on such information and material, and also on such investigations, studies and assumptions that it may undertake independently. There is no assurance that such rating will continue for any given period of time or that it may not be lowered or withdrawn entirely by such rating service if, in its judgment, circumstances so warrant. Any such downward change in or withdrawal of such rating may have an adverse effect on the secondary market price of the Bonds. An explanation of the significance of the investment rating may be obtained from the rating agency: Standard & Poor’s Corporation, 55 Water Street, New York, New York 10041, telephone 212-438-2000.


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DEFEASANCE

The Bonds are subject to legal defeasance by the irrevocable deposit of full faith and credit obligations of the United States of America, obligations the timely payment of which are guaranteed by the United States Treasury, or certificates of participation in a trust comprised solely of full faith and credit obligations of the United States of America (collectively, the “Government Obligations”) with a bank or trust company acting as escrow agent. Any such deposit must be of sufficient amount that the receipts from the Government Obligations plus any cash on deposit will be sufficient to pay debt service on the Bonds when due or as called for redemption.

UNDERWRITING

The Bonds were offered for sale by the City at a public, competitive sale on July 17, 2013. The best bid submitted at the sale was submitted by ____________________ (the “Underwriter”). The City awarded the contract for sale of the Bonds to the Underwriter at a price of $___________. The Underwriter has represented to the City that the Bonds have been subsequently re-offered to the public initially at the yields or prices set forth in the addendum to this Official Statement.

FINANCIAL ADVISOR

The City has engaged Speer Financial, Inc. as financial advisor (the “Financial Advisor”) in connection with

the issuance and sale of the Bonds. The Financial Advisor is a Registered Municipal Advisor in accordance with the rules of the Municipal Securities Rulemaking Board (the “MSRB”). The Financial Advisor will not participate in the underwriting of the Bonds. The financial information included in the Official Statement has been compiled by the Financial Advisor. Such information does not purport to be a review, audit or certified forecast of future events and may not conform with accounting principles applicable to compilations of financial information. The Financial Advisor is not a firm of certified public accountants and does not serve in that capacity or provide accounting services in connection with the Bonds. The Financial Advisor is not obligated to undertake any independent verification of or to assume any responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement, nor is the Financial Advisor obligated by the City’s continuing disclosure undertaking.

CERTIFICATION We have examined this Official Statement dated July 9, 2013, for the $1,492,900* General Obligation Capital Appreciation Limited Bonds, Series 2013, believe it to be true and correct and will provide to the purchaser of the Bonds at the time of delivery a certificate confirming to the purchaser that to the best of our knowledge and belief information in the Official Statement was at the time of acceptance of the bid for the Bonds and, including any addenda thereto, was at the time of delivery of the Bonds true and correct in all material respects and does not include any untrue statement of a material fact, nor does it omit the statement of any material fact required to be stated therein, or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. /s/ STEVEN STREIT /s/ FRANK KOEHLER Mayor Interim City Administrator and City Planner CITY OF LOCKPORT CITY OF LOCKPORT Will County, Illinois Will County, Illinois *Subject to change.

APPENDIX A

CITY OF LOCKPORT, WILL COUNTY, ILLINOIS

EXCERPTS OF FISCAL YEAR 2012 AUDITED FINANCIAL STATEMENTS

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308,7

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479,3

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30, 2012

1.

SU

MM

AR

Y O

F S

IGN

IFIC

AN

T A

CC

OU

NT

ING

PO

LIC

IES

T

he

finan

cial

sta

tem

ents

of

the

Cit

y o

f L

ock

port

, Il

linois

(th

e C

ity)

hav

e bee

n p

repar

ed i

n

confo

rmit

y w

ith a

ccounti

ng p

rinci

ple

s gen

eral

ly a

ccep

ted i

n t

he

Unit

ed S

tate

s of

Am

eric

a

as a

ppli

ed t

o g

over

nm

ent

unit

s (h

erei

naf

ter

refe

rred

to a

s gen

eral

ly a

ccep

ted a

ccounti

ng

pri

nci

ple

s (G

AA

P))

. T

he

Gover

nm

enta

l A

ccounti

ng S

tandar

ds

Boar

d (

GA

SB

) is

the

acce

pte

d s

tandar

d-s

etti

ng b

ody f

or

esta

bli

shin

g g

over

nm

enta

l ac

counti

ng a

nd f

inan

cial

repo

rting

prin

cipl

es.

The

mor

e si

gnifi

cant

of t

he C

ity’s

acc

ount

ing

polic

ies a

re d

escr

ibed

bel

ow

.

a.

R

eport

ing E

nti

ty

The

Cit

y, a

non-h

om

e ru

le c

ity, w

as f

ounded

in 1

830.

The

Cit

y i

s gover

ned

by a

may

or-

counci

l fo

rm o

f gover

nm

ent.

A

s re

quir

ed b

y g

ener

ally

acc

epte

d a

ccounti

ng

pri

nci

ple

s, t

hes

e fi

nan

cial

sta

tem

ents

pre

sent

the

Cit

y (

the

pri

mar

y gover

nm

ent)

and

its

com

ponen

t unit

s.

In e

val

uat

ing h

ow

to d

efin

e th

e re

port

ing e

nti

ty, m

anag

emen

t

has

consi

der

ed a

ll p

ote

nti

al c

om

ponen

t unit

s. T

he

dec

isio

n t

o i

ncl

ude

a pote

nti

al

com

ponen

t unit

in t

he

report

ing e

nti

ty w

as b

ased

upon t

he

signif

ican

ce o

f it

s

oper

atio

nal

or

finan

cial

rel

atio

nsh

ip w

ith t

he

pri

mar

y gover

nm

ent.

A

ble

nded

com

ponen

t unit

, al

though l

egal

ly se

para

te, i

s in

subs

tanc

e, p

art o

f the

City

’s

oper

atio

ns

and s

o d

ata

from

this

unit

is

com

bin

ed w

ith t

he

dat

a of

the

pri

mar

y

gover

nm

ent.

A

dis

cret

ely p

rese

nte

d c

om

ponen

t unit

, on t

he

oth

er h

and, is

rep

ort

ed i

n

a se

par

ate

colu

mn o

n t

he

gover

nm

ent-

wid

e fi

nan

cial

sta

tem

ents

to e

mphas

ize

it i

s

legal

ly s

epar

ate

fro

m t

he

Cit

y.

Ble

nd

ed C

om

po

nen

t U

nit

The

City

’s fi

nanc

ial s

tate

men

ts in

clud

e th

e Po

lice

Pens

ion

Syst

em (P

PS) a

s a

Pens

ion

Trus

t Fun

d. T

he C

ity’s

swor

n po

lice

empl

oyee

s par

ticip

ate

in P

PS.

PPS

funct

ions

for

the

ben

efit

of

those

em

plo

yee

s an

d i

s gover

ned

by a

fiv

e-m

ember

Pen

sion B

oar

d. T

wo m

ember

s ap

poin

ted b

y t

he

May

or,

one

elec

ted p

ensi

on

ben

efic

iary

and t

wo e

lect

ed p

oli

ce o

ffic

ers

const

itute

the

Pen

sion B

oar

d.

The

Cit

y

and

PP

S p

arti

cip

ants

are

ob

ligat

ed t

o f

un

d a

ll P

PS

co

sts

bas

ed u

po

n a

ctu

aria

l

val

uat

ion

s.

Th

e S

tate

of

Illi

no

is i

s au

thori

zed t

o e

stab

lish

ben

efit

lev

els

and t

he

Cit

y

is a

uth

ori

zed t

o a

ppro

ve

the

actu

aria

l as

sum

pti

ons

use

d i

n t

he

det

erm

inat

ion o

f th

e

con

trib

uti

on

lev

els.

P

PS

is r

epor

ted

as a

pen

sion

trus

t fun

d be

caus

e of

the

City

’s

fiduci

ary r

esponsi

bil

ity. S

epar

ate

finan

cial

sta

tem

ents

are

not

avai

lable

for

PP

S.

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

1.

SU

MM

AR

Y O

F S

IGN

IFIC

AN

T A

CC

OU

NT

ING

PO

LIC

IES

(C

onti

nued

)

a.

R

epo

rtin

g E

nti

ty (

Co

nti

nu

ed)

Po

ten

tial

Co

mp

on

ent

Un

its

The

Cit

y h

as e

xcl

uded

the

Bonnie

Bra

e F

ore

st M

anor

San

itar

y D

istr

ict

and t

he

Lock

port

Hei

ghts

San

itar

y D

istr

ict

from

the

City

’s re

porti

ng e

ntity

as t

he D

istri

cts a

re

not

fisc

ally

dep

enden

t on t

he

Cit

y a

nd d

o n

ot

pro

vid

e a

finan

cial

ben

efit

or

bu

rden

on

the

Cit

y. T

he

Cit

y a

nd t

he

two s

anit

ary

dis

tric

ts e

nte

red i

nto

an i

nte

rgover

nm

enta

l

agre

emen

t on A

ugust

16, 2000, under

whic

h t

he

Cit

y a

ssum

ed d

ay-t

o-d

ay o

per

atio

n

of

the

two s

anit

ary

dis

tric

ts;

how

ever

, th

e D

istr

icts

are

gover

ned

by t

hei

r ow

n

separ

ate

Bo

ards.

b.

Fund A

ccounti

ng

Th

e C

ity u

ses

fun

ds

to r

epo

rt o

n i

ts f

inan

cial

posi

tion a

nd t

he

chan

ges

in i

ts f

inan

cial

posi

tion. F

und a

ccounti

ng i

s des

igned

to d

emonst

rate

leg

al c

om

pli

ance

and t

o a

id

finan

cial

man

agem

ent

by s

egre

gat

ing t

ransa

ctio

ns

rela

ted t

o c

erta

in c

ity f

unct

ions

or

acti

vit

ies.

A

fund i

s a

separ

ate

acco

unti

ng e

nti

ty w

ith a

sel

f-bal

anci

ng s

et o

f

acco

unts

.

Funds

are

clas

sifi

ed i

nto

the

foll

ow

ing c

ateg

ori

es:

gover

nm

enta

l, p

ropri

etar

y a

nd

fiduci

ary.

Gover

nm

enta

l fu

nds

are

use

d t

o a

ccount

for

all

or

most

of

a C

ity’s

gen

eral

act

iviti

es,

incl

udin

g t

he

coll

ecti

on a

nd d

isburs

emen

t of

rest

rict

ed o

r co

mm

itte

d m

onie

s (s

pec

ial

reven

ue

funds)

, th

e fu

nds

com

mit

ted, re

stri

cted

or

assi

gned

for

the

acquis

itio

n o

r

const

ruct

ion o

f ca

pit

al a

sset

s (c

apit

al p

roje

cts

funds)

, th

e fu

nds

com

mit

ted,

rest

rict

ed

or

assi

gned

for

the

serv

icin

g o

f lo

ng-t

erm

deb

t (d

ebt

serv

ice

funds)

and t

he

man

agem

ent

of

funds

hel

d i

n t

rust

wher

e th

e in

tere

st e

arnin

gs

can b

e use

d f

or

gover

nm

enta

l se

rvic

es (

per

man

ent

fund).

T

he

gen

eral

fund i

s use

d t

o a

ccount

for

all

acti

vit

ies

of

the

gen

eral

gover

nm

ent

not

acco

unte

d f

or

in s

om

e oth

er f

und.

Pro

pri

etar

y fu

nds

are

use

d t

o a

ccount

for

acti

vit

ies

sim

ilar

to t

hose

found i

n t

he

pri

vat

e se

ctor,

wher

e th

e det

erm

inat

ion o

f net

inco

me

is n

eces

sary

or

use

ful

to s

ound

finan

cial

adm

inis

trat

ion. G

oods

or

serv

ices

fro

m s

uch

act

ivit

ies

can b

e pro

vid

ed

eith

er t

o o

uts

ide

par

ties

(en

terp

rise

funds)

or

to o

ther

dep

artm

ents

or

agen

cies

pri

mar

ily w

ith

in t

he

Cit

y (

inte

rnal

ser

vic

e fu

nd

s).

Pu

rsu

ant

to G

AS

B S

tate

men

t

No. 20, Ac

coun

ting

and

Fina

ncia

l Rep

ortin

g fo

r Pro

prie

tary

Fun

ds, th

e C

ity h

as

chose

n t

o a

pply

all

GA

SB

pro

nounce

men

ts a

s w

ell

as t

hose

FA

SB

pro

nounce

men

ts

issu

ed o

n o

r bef

ore

Novem

ber

30, 1989 t

o a

ccount

for

its

ente

rpri

se f

unds.

A-8

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

1.

SU

MM

AR

Y O

F S

IGN

IFIC

AN

T A

CC

OU

NT

ING

PO

LIC

IES

(C

onti

nued

)

b

. F

un

d A

cco

un

tin

g (

Co

nti

nu

ed)

Fid

uci

ary

funds

are

use

d t

o a

ccount

for

asse

ts h

eld o

n b

ehal

f of

outs

ide

par

ties

,

incl

udin

g o

ther

gover

nm

ents

, or

on b

ehal

f of

oth

er f

unds

wit

hin

th

e C

ity.

Th

e C

ity

uti

lize

s pen

sion t

rust

funds

and a

gen

cy f

unds

whic

h a

re g

ener

ally

use

d t

o a

ccount

for

asse

ts t

hat

the

Cit

y h

old

s in

a f

iduci

ary

capac

ity.

c.

G

over

nm

ent-

Wid

e an

d F

und F

inan

cial

Sta

tem

ents

The

gover

nm

ent-

wid

e fi

nan

cial

sta

tem

ents

(i.

e., th

e st

atem

ent

of

net

ass

ets

and t

he

stat

emen

t of

acti

vit

ies)

rep

ort

info

rmat

ion o

n a

ll o

f th

e nonfi

duci

ary

acti

vit

ies

of

the

Cit

y. T

he

effe

ct o

f m

ater

ial

inte

rfund a

ctiv

ity

has

bee

n e

lim

inat

ed f

rom

thes

e

stat

emen

ts. T

he

cost

s fo

r in

terf

und s

ervic

es p

rovid

ed/u

sed b

etw

een f

unds

are

not

elim

inat

ed i

n t

he

pro

cess

of

the

conso

lidat

ion. G

over

nm

enta

l ac

tivit

ies,

whic

h

norm

ally

are

support

ed b

y ta

xes

and i

nte

rgover

nm

enta

l re

ven

ues

, ar

e re

port

ed

separ

atel

y fr

om

busi

nes

s-ty

pe

acti

vit

ies,

whic

h r

ely

to a

sig

nif

ican

t ex

tent

on f

ees

and

char

ges

for

support

.

The

stat

emen

t of

acti

vit

ies

dem

onst

rate

s th

e deg

ree

to w

hic

h t

he

dir

ect

expen

ses

of

a

giv

en f

unct

ion, se

gm

ent

or

pro

gra

m a

re o

ffse

t by

pro

gra

m r

even

ues

. D

irec

t ex

pen

ses

are

those

that

are

cle

arly

iden

tifi

able

wit

h a

spec

ific

funct

ion o

r se

gm

ent.

P

rogra

m

reven

ues

incl

ude

(1)

char

ges

to c

ust

om

ers

or

appli

cants

who p

urc

has

e, u

se o

r dir

ectl

y

ben

efit

fro

m g

oods,

ser

vic

es o

r pri

vil

eges

pro

vid

ed b

y a

giv

en f

unct

ion o

r se

gm

ent

and

(2)

gra

nts

and s

har

ed r

even

ues

that

are

res

tric

ted t

o m

eeti

ng t

he

oper

atio

nal

or

capit

al

requir

emen

ts o

f a

par

ticu

lar

funct

ion o

r se

gm

ent.

T

axes

and o

ther

ite

ms

not

pro

per

ly

incl

uded

am

ong p

rogra

m r

even

ues

are

rep

ort

ed i

nst

ead a

s gen

eral

rev

enues

.

Sep

arat

e fi

nan

cial

sta

tem

ents

are

pro

vid

ed f

or

gover

nm

enta

l fu

nds,

pro

pri

etar

y fu

nds

and f

iduci

ary

funds,

even

though t

he

latt

er a

re e

xcl

uded

fro

m t

he

gover

nm

ent-

wid

e

finan

cial

sta

tem

ents

. M

ajor

indiv

idual

gover

nm

enta

l fu

nds

and m

ajor

indiv

idual

ente

rpri

se f

unds

are

report

ed a

s se

par

ate

colu

mns

in t

he

fund f

inan

cial

sta

tem

ents

.

The

Cit

y re

port

s th

e fo

llow

ing m

ajor

gover

nm

enta

l fu

nd:

Th

e G

ener

al F

und

is th

e Ci

ty’s

prim

ary

oper

atin

g fu

nd.

It ac

coun

ts fo

r all

finan

cial

res

ourc

es o

f th

e gen

eral

gover

nm

ent

exce

pt

those

acc

ounte

d f

or

in

anoth

er f

und.

The

Cap

ital

Pro

ject

s F

und a

ccounts

for

var

ious

capit

al p

roje

cts

that

the

Cit

y

funds

wit

h v

ario

us

rest

rict

ed, co

mm

itte

d a

nd a

ssig

ned

rev

enues

.

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

1.

SU

MM

AR

Y O

F S

IGN

IFIC

AN

T A

CC

OU

NT

ING

PO

LIC

IES

(C

onti

nued

)

c.

G

over

nm

ent-

Wid

e an

d F

und F

inan

cial

Sta

tem

ents

(C

onti

nued

)

The

Cit

y re

port

s th

e fo

llow

ing m

ajor

pro

pri

etar

y fu

nd:

T

he

Wat

erw

ork

s an

d S

ewer

age

Fund, an

ente

rpri

se f

und, is

com

pri

sed o

f th

ree

subfu

nds.

T

he

subfu

nds

acco

unt

for

the

pro

vis

ion o

f w

ater

and s

ewer

ser

vic

es t

o

the

resi

den

ts o

f th

e C

ity.

A

ll a

ctiv

itie

s nec

essa

ry t

o p

rovid

e su

ch s

ervic

es a

re

acco

unte

d f

or

in t

hes

e su

bfu

nds

incl

udin

g, but

not

lim

ited

to, ad

min

istr

atio

n,

oper

atio

n, m

ainte

nan

ce, fi

nan

cing a

nd r

elat

ed d

ebt

serv

ice

and b

illi

ng a

nd

coll

ecti

on.

T

he

Gar

bag

e F

und, an

ente

rpri

se f

und, ac

counts

for

the

pro

vis

ion o

f so

lid w

aste

dis

posa

l se

rvic

es t

o t

he

resi

den

ts o

f th

e C

ity.

Addit

ional

ly, th

e C

ity

report

s th

e fo

llow

ing p

ropri

etar

y fu

nd:

T

he

Inte

rnal

Ser

vic

e F

und

acco

unts

for t

he C

ity’s

em

ploy

ee b

enef

its, i

nclu

ding

vac

atio

n a

nd s

ick l

eave

pro

vid

ed t

o o

ther

dep

artm

ents

of

the

Cit

y on a

cost

reim

burs

emen

t bas

is. T

hes

e ar

e re

port

ed a

s par

t of

the

gover

nm

enta

l ac

tivit

ies

on t

he

gover

nm

ent-

wid

e fi

nan

cial

sta

tem

ents

as

the

fund p

rovid

es t

hes

e se

rvic

es

to th

e C

ity’s

gov

ernm

enta

l fun

ds/

acti

vit

ies.

The

Cit

y re

port

s th

e fo

llow

ing f

iduci

ary

fund:

The

Poli

ce P

ensi

on F

und, a

Pen

sion T

rust

Fund, is

use

d t

o a

ccum

ula

te r

esourc

es

for

pen

sion b

enef

it p

aym

ents

to q

ual

ifie

d p

oli

ce p

erso

nnel

.

d.

Mea

sure

men

t F

ocu

s, B

asis

of

Acc

ounti

ng a

nd F

inan

cial

Sta

tem

ent

Pre

senta

tion

The

gover

nm

ent-

wid

e fi

nan

cial

sta

tem

ents

are

rep

ort

ed u

sing t

he

econom

ic r

esourc

es

mea

sure

men

t fo

cus

and t

he

accr

ual

bas

is o

f ac

counti

ng, as

are

the

pro

pri

etar

y fu

nd a

nd

fiduci

ary

fund f

inan

cial

sta

tem

ents

. R

even

ues

and a

ddit

ions

are

reco

rded

when

ear

ned

and e

xpen

ses

and d

educt

ions

are

reco

rded

when

a l

iabil

ity

is i

ncu

rred

. P

roper

ty t

axes

are

reco

gniz

ed a

s re

ven

ues

in t

he

year

for

whic

h t

hey

are

lev

ied (

i.e.

, in

tended

to

finan

ce).

G

rants

and s

imil

ar i

tem

s ar

e re

cogniz

ed a

s re

ven

ue

as s

oon a

s al

l el

igib

ilit

y

requir

emen

ts i

mpose

d b

y th

e pro

vid

er h

ave

bee

n m

et. O

per

atin

g r

even

ues

/expen

ses

incl

ude

all

reven

ues

/ex

pen

ses

dir

ectl

y re

late

d t

o p

rovid

ing e

nte

rpri

se f

und s

ervic

es.

Inci

den

tal

reven

ues

/ex

pen

ses

are

report

ed a

s nonoper

atin

g.

A-9

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

1.

SU

MM

AR

Y O

F S

IGN

IFIC

AN

T A

CC

OU

NT

ING

PO

LIC

IES

(C

onti

nued

)

d.

Mea

sure

men

t F

ocu

s, B

asis

of

Acc

ounti

ng a

nd F

inan

cial

Sta

tem

ent

Pre

senta

tion

(C

onti

nued

)

Gover

nm

enta

l fu

nd f

inan

cial

sta

tem

ents

are

rep

ort

ed u

sing t

he

curr

ent

finan

cial

reso

urc

es m

easu

rem

ent

focu

s an

d t

he

modif

ied a

ccru

al b

asis

of

acco

unti

ng. R

even

ues

are

reco

gniz

ed a

s so

on a

s th

ey a

re b

oth

“m

easu

rable

” an

d “

avai

lable

.” R

even

ues

are

consi

der

ed t

o b

e av

aila

ble

when

they

are

coll

ecti

ble

wit

hin

the

curr

ent

per

iod o

r so

on

enough t

her

eaft

er t

o p

ay l

iabil

itie

s of

the

curr

ent

per

iod. T

he

Cit

y co

nsi

der

s re

ven

ues

to b

e av

aila

ble

if

they

are

coll

ecte

d w

ithin

60 d

ays

of

the

end o

f th

e cu

rren

t fi

scal

per

iod, ex

cept

for

sale

s ta

xes

, te

leco

mm

unic

atio

n t

axes

, an

d i

nco

me

tax

es w

hic

h u

se a

90 t

o 1

20 d

ay p

erio

d. E

xpen

dit

ure

s gen

eral

ly a

re r

ecord

ed w

hen

a f

und l

iabil

ity

is

incu

rred

. H

ow

ever

, deb

t se

rvic

e ex

pen

dit

ure

s ar

e re

cord

ed o

nly

when

pay

men

t is

due,

unle

ss d

ue

the

firs

t day

of

the

foll

ow

ing f

isca

l ye

ar.

Pro

per

ty t

axes

, sa

les

taxes

and t

elec

om

munic

atio

n t

axes

ow

ed t

o t

he

stat

e at

yea

r en

d,

uti

lity

tax

es, fr

anch

ise

tax

es, li

cense

s, c

har

ges

for

serv

ices

and i

nte

rest

ass

oci

ated

wit

h

the

curr

ent

fisc

al p

erio

d a

re a

ll c

onsi

der

ed t

o b

e su

scep

tible

to a

ccru

al a

nd a

re

reco

gniz

ed a

s re

ven

ues

of

the

curr

ent

fisc

al p

erio

d. F

ines

and p

erm

it r

even

ue

are

consi

der

ed t

o b

e m

easu

rable

and a

vai

lable

only

when

cas

h i

s re

ceiv

ed b

y th

e C

ity.

In a

pply

ing t

he

susc

epti

ble

to a

ccru

al c

once

pt

to i

nte

rgover

nm

enta

l re

ven

ues

(i.

e.,

feder

al a

nd s

tate

gra

nts

), t

he

legal

and c

ontr

actu

al r

equir

emen

ts o

f th

e num

erous

indiv

idual

pro

gra

ms

are

use

d a

s guid

ance

. T

her

e ar

e, h

ow

ever

, es

senti

ally

tw

o t

ypes

of

thes

e re

ven

ues

. I

n o

ne,

monie

s m

ust

be

expen

ded

on t

he

spec

ific

purp

ose

or

pro

ject

bef

ore

any a

mounts

wil

l be

pai

d t

o t

he

Cit

y;

ther

efore

, re

ven

ues

are

reco

gniz

ed b

ased

upon t

he

expen

dit

ure

s re

cord

ed. I

n t

he

oth

er, m

onie

s ar

e vir

tual

ly

unre

stri

cted

as

to p

urp

ose

of

expen

dit

ure

and a

re g

ener

ally

rev

oca

ble

only

for

fail

ure

to c

om

ply

wit

h p

resc

ribed

eli

gib

ilit

y r

equir

emen

ts, su

ch a

s eq

ual

em

plo

ym

ent

opport

unit

y. T

hes

e re

sourc

es a

re r

efle

cted

as

reven

ues

at

the

tim

e of

rece

ipt

or

earl

ier

if t

hey

mee

t th

e av

aila

bil

ity c

rite

rion.

The

Cit

y r

eport

s def

erre

d/u

nea

rned

rev

enue

on i

ts f

inan

cial

sta

tem

ents

.

Def

erre

d/u

nea

rned

rev

enues

ari

se w

hen

a p

ote

nti

al r

even

ue

does

not

mee

t both

the

mea

sura

ble

and a

vai

lable

or

earn

ed c

rite

ria

for

reco

gnit

ion i

n t

he

curr

ent

per

iod.

Def

erre

d/u

nea

rned

rev

enues

als

o a

rise

when

res

ourc

es a

re r

ecei

ved

by t

he

Cit

y b

efore

it h

as a

leg

al c

laim

to t

hem

or

pri

or

to t

he

pro

vis

ion o

f se

rvic

es, as

when

gra

nt

monie

s ar

e re

ceiv

ed p

rior

to t

he

incu

rren

ce o

f qual

ifyi

ng e

xpen

dit

ure

s.

In s

ubse

quen

t

per

iods,

when

both

rev

enue

reco

gnit

ion c

rite

ria

are

met

, or

when

the

Cit

y h

as a

leg

al

clai

m t

o t

he

reso

urc

es, th

e li

abil

ity f

or

def

erre

d/u

nea

rned

rev

enue

is r

emoved

fro

m

the

finan

cial

sta

tem

ents

and r

even

ue

is r

ecogniz

ed.

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

1.

SU

MM

AR

Y O

F S

IGN

IFIC

AN

T A

CC

OU

NT

ING

PO

LIC

IES

(C

onti

nued

)

e.

D

eposi

ts a

nd I

nves

tmen

ts

The

City

’s c

ash

and

cash

equ

ival

ents

are

con

side

red

cash

on h

and, dem

and d

eposi

ts

and s

hort

-ter

m i

nves

tmen

ts w

ith a

n o

rigin

al m

aturi

ty o

f th

ree

month

s or

less

fro

m t

he

dat

e of

acquis

itio

n.

Cas

h a

nd i

nves

tmen

ts o

f th

e C

ity

are

poole

d i

nto

a c

om

mon p

oole

d a

ccount

in o

rder

to

max

imiz

e in

ves

tmen

t opport

unit

ies.

E

ach f

und w

hose

monie

s ar

e dep

osi

ted i

nto

the

poole

d a

ccount

has

equit

y her

ein, an

d i

nte

rest

ear

ned

on t

he

inves

tmen

t of

thes

e m

onie

s

is al

loca

ted

base

d up

on re

lativ

e eq

uity

at m

onth

end

. A

n in

divi

dual

fund

’s e

quity

in th

e poole

d a

ccount

is a

vai

lable

upon d

eman

d a

nd i

s co

nsi

der

ed t

o b

e a

cash

equiv

alen

t

whe

n pr

epar

ing

thes

e fin

anci

al st

atem

ents.

Eac

h fu

nd’s

por

tion

of th

e po

ol is

disp

laye

d on i

ts r

espec

tive

bal

ance

shee

t/st

atem

ent

of

net

ass

ets

as c

ash a

nd c

ash e

quiv

alen

ts.

Inves

tmen

ts w

ith a

mat

uri

ty o

f one

year

or

less

when

purc

has

ed a

nd n

onneg

oti

able

cert

ific

ates

of

dep

osi

t ar

e st

ated

at

amort

ized

cost

. I

nves

tmen

ts w

ith a

mat

uri

ty g

reat

er

than

one

year

when

purc

has

ed a

re r

eport

ed a

t fa

ir v

alue.

In

ves

tmen

ts i

n t

he

pen

sion

trust

funds

are

stat

ed a

t fa

ir v

alue.

F

air

val

ue

is b

ased

on q

uote

d m

arket

pri

ces

at

June

30 f

or

deb

t se

curi

ties

, eq

uit

y se

curi

ties

and m

utu

al f

unds

and c

ontr

act

val

ues

for

insu

rance

contr

acts

.

f.

In

terf

und R

ecei

vab

les/

Pay

able

s

Duri

ng t

he

cours

e of

oper

atio

ns,

num

erous

tran

sact

ions

occ

ur

bet

wee

n i

ndiv

idual

funds

for

goods

pro

vid

ed o

r se

rvic

es r

ender

ed. T

hes

e sh

ort

-ter

m r

ecei

vab

les

and

paya

bles

are

cla

ssifi

ed a

s “du

e fr

om o

ther

fund

s” o

r “du

e to

oth

er fu

nds”

on

the

finan

cial

sta

tem

ents

. L

ong-t

erm

port

ions,

if

any, ar

e cl

assi

fied

as “

adva

nces

to o

ther

fu

nds”

or “

adva

nces

from

oth

er fu

nds.”

g.

Inven

tori

es

Inven

tori

es a

re v

alued

at

cost

usi

ng t

he

firs

t-in

, fi

rst-

out

(FIF

O)

met

hod a

nd a

re

acco

unte

d f

or

on t

he

consu

mpti

on m

ethod

.

h.

Pre

pai

d I

tem

s/E

xpen

ses

Pay

men

ts m

ade

to v

endors

for

serv

ices

that

wil

l ben

efit

per

iods

bey

ond t

he

dat

e of

this

rep

ort

are

rec

ord

ed a

s pre

pai

d i

tem

s/ex

pen

ses.

A-10

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

1.

SU

MM

AR

Y O

F S

IGN

IFIC

AN

T A

CC

OU

NT

ING

PO

LIC

IES

(C

onti

nued

)

i.

C

apit

al A

sset

s

Cap

ital

ass

ets,

whic

h i

ncl

ude

pro

per

ty, pla

nt,

equ

ipm

ent

and i

nfr

astr

uct

ure

ass

ets

(e.g

., r

oad

s, b

ridges

, si

dew

alks

and s

imil

ar i

tem

s) a

re r

eport

ed i

n t

he

appli

cable

gover

nm

enta

l or

busi

nes

s-ty

pe

acti

vit

ies

colu

mn

s in

th

e go

ver

nm

ent-

wid

e fi

nan

cial

stat

emen

ts. C

apit

al a

sset

s ar

e def

ined

by t

he

Cit

y a

s as

sets

wit

h a

n i

nit

ial,

in

div

idu

al

cost

in e

xce

ss $

20,0

00 a

nd a

n e

stim

ated

use

ful

life

in e

xce

ss o

f one

yea

r.

Such

ass

ets

are

reco

rded

at

his

tori

cal

cost

or

esti

mat

ed h

isto

rica

l co

st i

f purc

has

ed o

r co

nst

ruct

ed.

Donat

ed c

apit

al a

sset

s ar

e re

cord

ed a

t es

tim

ated

fai

r m

arket

val

ue

at t

he

dat

e of

do

nat

ion

.

The

cost

s of

norm

al m

ainte

nan

ce a

nd r

epai

rs, in

cludin

g s

tree

t over

lays

that

do n

ot

add t

o t

he

val

ue

of

the

asse

t or

mat

eria

lly e

xte

nd a

sset

liv

es a

re n

ot

capit

aliz

ed.

Maj

or

outl

ays

for

capit

al a

sset

s an

d i

mpro

vem

ents

are

cap

ital

ized

as

pro

ject

s ar

e

const

ruct

ed. I

nte

rest

incu

rred

duri

ng t

he

const

ruct

ion p

has

e of

capit

al a

sset

s of

busi

nes

s-ty

pe

acti

vit

ies

is i

ncl

uded

as

par

t of

the

capit

aliz

ed v

alue

of

the

asse

ts

const

ruct

ed. D

onat

ed c

apit

al a

sset

s ar

e re

cord

ed a

t es

tim

ated

fai

r m

arket

val

ue

at t

he

dat

e of

donat

ion. P

roper

ty, pla

nt

and e

quip

men

t is

dep

reci

ated

usi

ng t

he

stra

ight-

line

met

hod o

ver

the

foll

ow

ing e

stim

ated

use

ful

lives

:

Buil

din

g a

nd i

mpro

vem

ents

10-5

0 y

ears

Mac

hin

ery a

nd e

quip

men

t 5-2

0 y

ears

Tra

nsp

ort

atio

n e

quip

men

t 5-1

0 y

ears

Infr

astr

uct

ure

30-5

0 y

ears

j.

C

om

pen

sate

d A

bse

nce

s

Acc

um

ula

ted u

npai

d v

acat

ion, si

ck p

ay a

nd o

ther

em

plo

yee

ben

efit

am

ounts

for

gover

nm

enta

l fu

nd t

ypes

are

acc

rued

in t

hes

e fu

nds

as a

curr

ent

liab

ilit

y t

o t

he

exte

nt

that

em

plo

yee

s hav

e re

tire

d o

r te

rmin

ated

at

yea

r en

d b

ut

hav

e not

bee

n p

aid.

In t

he

gover

nm

ent-

wid

e fi

nan

cial

sta

tem

ents

and t

he

pro

pri

etar

y f

unds

finan

cial

stat

emen

ts a

ccum

ula

ted u

npai

d v

acat

ion, si

ck p

ay a

nd o

ther

em

plo

yee

ben

efit

amounts

are

rec

ord

ed a

s ea

rned

by e

mplo

yee

s.

k.

Long-T

erm

Obli

gat

ions

In t

he

gover

nm

ent-

wid

e fi

nan

cial

sta

tem

ents

, an

d p

ropri

etar

y fu

nds

in t

he

fund

finan

cial

sta

tem

ents

, lo

ng-t

erm

deb

t an

d o

ther

long-t

erm

obli

gat

ions

are

report

ed a

s

liab

ilit

ies

in t

he

appli

cable

gover

nm

enta

l ac

tivit

ies,

busi

nes

s-ty

pe

acti

vit

ies

or

pro

pri

etar

y fu

nd f

inan

cial

sta

tem

ents

. B

ond p

rem

ium

s an

d d

isco

unts

, as

wel

l as

issu

ance

cost

s, a

re d

efer

red a

nd a

mort

ized

over

the

life

of

the

bonds.

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

1.

SU

MM

AR

Y O

F S

IGN

IFIC

AN

T A

CC

OU

NT

ING

PO

LIC

IES

(C

onti

nued

)

k.

Long-T

erm

Obli

gat

ions

(Conti

nued

)

In t

he

fund f

inan

cial

sta

tem

ents

, gover

nm

enta

l fu

nds

reco

gniz

e bond p

rem

ium

s an

d

dis

counts

, as

wel

l as

bond i

ssuan

ce c

ost

s, d

uri

ng t

he

curr

ent

per

iod. T

he

face

am

ount

of

deb

t is

sued

is

report

ed a

s oth

er f

inan

cing s

ourc

es. P

rem

ium

s re

ceiv

ed o

n d

ebt

issu

ance

s ar

e re

port

ed a

s oth

er f

inan

cing s

ourc

es w

hil

e dis

counts

on d

ebt

issu

ance

s ar

e

report

ed a

s oth

er f

inan

cing u

ses.

Is

suan

ce c

ost

s, w

het

her

or

not

wit

hhel

d f

rom

the

actu

al d

ebt

pro

ceed

s re

ceiv

ed, ar

e re

port

ed a

s ex

pen

dit

ure

s.

l.

F

und B

alan

ces/

Net

Ass

ets

In t

he

fund f

inan

cial

sta

tem

ents

, gover

nm

enta

l fu

nds

report

nonsp

endab

le f

und

bal

ance

for

amounts

that

are

eit

her

not

in s

pen

dab

le f

orm

or

legal

ly o

r co

ntr

actu

ally

requir

ed t

o b

e m

ainta

ined

inta

ct. R

estr

icti

ons

of

fund b

alan

ce a

re r

eport

ed f

or

amounts

const

rain

ed b

y l

egal

res

tric

tions

from

outs

ide

par

ties

for

use

fo

r a

spec

ific

purp

ose

, or

exte

rnal

ly i

mpose

d b

y o

uts

ide

enti

ties

or

from

enab

ling l

egis

lati

on

ado

pte

d b

y t

he

Cit

y.

Co

mm

itte

d f

un

d b

alan

ce i

s co

nst

rain

ed b

y f

orm

al a

ctio

ns

of

the

Cit

y C

ou

nci

l, w

hic

h i

s co

nsi

der

ed t

he

Cit

y’s

hig

hest

leve

l of d

ecis

ion

mak

ing

auth

ori

ty.

Fo

rmal

act

ions

incl

ude

reso

luti

ons

and o

rdin

ance

s ap

pro

ved

by t

he

Boar

d.

Ass

igned

fund b

alan

ce r

epre

sen

ts a

mo

un

ts c

on

stra

ined

by t

he

Cit

y’s

inte

nt

to u

se

them

for

a sp

ecif

ic p

urp

ose

. T

he

auth

ori

ty t

o a

ssig

n f

und b

alan

ce h

as b

een d

eleg

ated

to t

he

Cit

y A

dm

inis

trat

or

and F

inan

ce D

irec

tor.

Any r

esid

ual

fund b

alan

ce i

n t

he

Gen

eral

Fund, in

cludin

g f

und b

alan

ce t

arget

s an

d a

ny d

efic

it f

und b

alan

ce o

f an

y

oth

er g

over

nm

enta

l fu

nd i

s re

port

ed a

s unas

signed

.

The

Cit

y h

as e

stab

lish

ed a

fund b

alan

ce p

oli

cy f

or

its

gen

eral

fund t

hat

tar

get

s

unre

stri

cted

fund b

alan

ce a

t 120 d

ays

(4 m

onth

s) o

f es

tim

ated

oper

atin

g

expen

dit

ure

s.

The

Cit

y’s

flow

of

funds

assu

mpti

on p

resc

ribes

that

the

funds

wit

h t

he

hig

hes

t le

vel

of

const

rain

t ar

e ex

pen

ded

fir

st. I

f re

stri

cted

or

unre

stri

cted

funds

are

avai

lable

for

spen

din

g, th

e re

stri

cted

funds

are

spen

t fi

rst.

A

ddit

ional

ly, if

dif

fere

nt

level

s of

unre

stri

cted

funds

are

avai

lable

for

spen

din

g t

he

Cit

y c

on

sid

ers

com

mit

ted

funds

to b

e ex

pen

ded

fir

st f

oll

ow

ed b

y a

ssig

ned

funds

and t

hen

unas

signed

funds.

In t

he

gover

nm

ent-

wid

e fi

nan

cial

sta

tem

ents

, re

stri

cted

net

ass

ets

are

legal

ly r

estr

icte

d

by

outs

ide

par

ties

for

a sp

ecif

ic p

urp

ose

. I

nves

ted i

n c

apit

al a

sset

s, n

et o

f re

late

d d

ebt

is t

he

book v

alue

of

capit

al a

sset

s le

ss a

ny

long-t

erm

deb

t outs

tandin

g t

hat

was

iss

ued

to c

onst

ruct

or

acquir

e th

e ca

pit

al a

sset

s.

Non

e of

the

City

’s n

et a

sset

s or

fund b

alan

ces

resu

lts

from

enab

ling l

egis

lati

on a

dopte

d

by

the

Cit

y.

A-11

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

1.

SU

MM

AR

Y O

F S

IGN

IFIC

AN

T A

CC

OU

NT

ING

PO

LIC

IES

(C

onti

nued

)

m.

Inte

rfund T

ransa

ctio

ns

Inte

rfund s

ervic

e tr

ansa

ctio

ns

are

acco

unte

d f

or

as r

even

ues

, ex

pen

dit

ure

s or

expen

ses.

T

ransa

ctio

ns

that

const

itute

rei

mburs

emen

ts t

o a

fund f

or

expen

dit

ure

s/ex

pen

ses

init

iall

y m

ade

from

it

that

are

pro

per

ly a

ppli

cable

to a

noth

er

fund, ar

e re

cord

ed a

s ex

pen

dit

ure

s/ex

pen

ses

in t

he

reim

burs

ing f

und a

nd a

s re

duct

ions

of

expen

dit

ure

s/ex

pen

ses

in t

he

fun

d t

hat

is

reim

bu

rsed

.

A

ll o

ther

inte

rfund t

ransa

ctio

ns,

ex

cept

inte

rfund s

ervic

e tr

ansa

ctio

ns

and

reim

burs

emen

ts, ar

e re

port

ed a

s tr

ansf

ers.

n.

Use

of

Est

imat

es

The

pre

par

atio

n o

f fi

nan

cial

sta

tem

ents

in

confo

rmit

y w

ith g

ener

ally

acc

epte

d

acco

unti

ng p

rinci

ple

s re

quir

es m

anag

emen

t to

mak

e es

tim

ates

and a

ssum

pti

ons

that

af

fect

the

report

ed a

mounts

of

asse

ts a

nd l

iabil

itie

s an

d d

iscl

osu

re o

f co

nti

ngen

t as

sets

and l

iabil

itie

s at

the

dat

e of

the

finan

cial

sta

tem

ents

and t

he

report

ed a

mounts

of

reven

ues

and e

xpen

dit

ure

s/ex

pen

ses

duri

ng t

he

report

ing p

erio

d. A

ctual

res

ult

s co

uld

dif

fer

from

those

est

imat

es.

2.

DE

PO

SIT

S A

ND

IN

VE

ST

ME

NT

S

T

he

Cit

y m

ainta

ins

a ca

sh a

nd i

nves

tmen

t pool

that

is

avai

lable

for

use

by a

ll f

unds,

ex

clud

ing

the

pens

ion

trust

fund

. Ea

ch fu

nd’s

po

rtio

n o

f th

is p

oo

l is

dis

pla

yed

on

th

e fin

anci

al st

atem

ents

as “

cash

and

inve

stm

ents

.” I

n ad

ditio

n, d

epos

its a

nd in

vest

men

ts a

re

sepa

rate

ly h

eld

by se

vera

l of t

he C

ity’s

fund

s.

Th

e C

ity’s

inve

stm

ent p

olic

y au

thor

izes

the

City

to m

ake

depo

sits

/inve

st i

n i

nsu

red

fi

nan

cial

in

stit

uti

on

s, o

bli

gat

ion

s o

f th

e U

.S.

Tre

asury

and U

.S. ag

enci

es, m

oney

mar

ket

m

utu

al f

unds

wit

h p

ort

foli

os

of

secu

riti

es i

ssued

or

guar

ante

ed b

y t

he

Unit

ed S

tate

s or

agre

emen

ts t

o r

epurc

has

e th

ese

sam

e o

bli

gat

ion

s an

d I

llin

ois

Fu

nd

s.

The

Poli

ce P

ensi

on F

und c

an i

nves

t in

the

sam

e se

curi

ties

as

the

Cit

y, plu

s th

e fo

llow

ing:

cert

ain n

on-U

.S. obli

gat

ions

(corp

ora

te d

ebt

secu

riti

es),

Ill

inois

munic

ipal

cor

pora

tions

’ tax

an

ticip

atio

n w

arra

nts,

vete

ran’

s loa

ns, o

blig

atio

ns o

f the

Sta

te o

f Il

lin

ois

an

d i

ts p

oli

tica

l d

ivis

ion

s (r

ated

Aa

or

bet

ter)

, Il

lin

ois

in

sura

nce

com

pan

y g

ener

al a

nd s

epar

ate

acco

unts

, eq

uit

y m

utu

al f

unds

and e

quit

y s

ecuri

ties

.

It i

s th

e poli

cy o

f th

e C

ity t

o i

nves

t it

s fu

nds

in a

man

ner

whic

h w

ill

pro

vid

e th

e hig

hes

t in

ves

tmen

t re

turn

wit

h t

he

max

imum

sec

uri

ty w

hil

e m

eeti

ng t

he

dai

ly c

ash f

low

dem

ands

of

the

Cit

y a

nd c

onfo

rmin

g t

o a

ll s

tate

and l

oca

l st

atute

s gover

nin

g t

he

inves

tmen

t of

publi

c fu

nds,

usin

g th

e “p

rude

nt p

erso

n” st

anda

rd fo

r man

agin

g th

e ov

eral

l por

tfoli

o. T

he

pri

mar

y obje

ctiv

e of

the

poli

cy i

s sa

fety

(pre

serv

atio

n o

f ca

pit

al a

nd p

rote

ctio

n o

f in

ves

tmen

t pri

nci

pal

), l

iquid

ity a

nd y

ield

.

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

2.

DE

PO

SIT

S A

ND

IN

VE

ST

ME

NT

S (

Conti

nued

)

a.

C

ity D

epo

sits

wit

h F

inan

cial

In

stit

uti

on

s

Cu

sto

dia

l cr

edit

ris

k f

or

dep

osi

ts w

ith

fin

anci

al i

nst

itu

tio

ns

is t

he

risk

th

at i

n t

he

even

t of

a ban

k’s

failu

re, t

he C

ity’s

dep

osits

may

not

be

retu

rned

to it

. Th

e C

ity’s

in

ves

tmen

t poli

cy r

equir

es p

ledgin

g o

f co

llat

eral

wit

h a

fai

r val

ue

of

105%

of

all

ban

k b

alan

ces

in e

xce

ss o

f fe

der

al d

eposi

tory

insu

rance

wit

h t

he

coll

ater

al h

eld b

y

the

City

or t

he C

ity’s

age

nt in

the

City

’s n

ame.

b.

Cit

y I

nv

estm

ents

The

foll

ow

ing t

able

pre

sents

the

inves

tmen

ts a

nd m

aturi

ties

of

the

Cit

y’s

deb

t se

curi

ties

and m

oney

mar

ket

funds

as o

f Ju

ne

30, 2012:

In

ves

tmen

t M

atu

riti

es (

in Y

ears

)

Inves

tmen

t T

yp

e F

air

Val

ue

Les

s th

an 1

1

-5

6-1

0

Gre

ater

th

an 1

0

Illi

no

is M

etro

po

lita

n

In

ves

tmen

t F

un

d

$

1,1

00

,15

4

$

-

$

1,1

00

,15

4

$

-

$

-

TO

TA

L

$

1,1

00

,15

4

$

- $

1

,10

0,1

54

$

-

$

-

In a

ccord

ance

wit

h i

ts i

nves

tmen

t poli

cy, th

e C

ity l

imit

s it

s ex

posu

re t

o i

nte

rest

rat

e

risk

by s

truct

uri

ng t

he

port

foli

o t

o p

rovid

e li

quid

ity f

or

oper

atin

g f

unds

and

max

imiz

ing y

ield

s fo

r fu

nds

not

nee

ded

wit

hin

a t

wo

-yea

r per

iod. T

he

inves

tmen

t

po

licy

lim

its

the

max

imu

m m

atu

rity

len

gth

of

inves

tmen

ts t

wo y

ears

fro

m d

ate

of

purc

has

e, e

xce

pt

for

rese

rve

fun

ds.

In

ves

tmen

ts i

n r

eser

ve

funds

may

be

purc

has

ed

wit

h m

aturi

ties

to m

atch

futu

re p

roje

cts

or

liab

ilit

y r

equir

emen

ts.

Th

e C

ity l

imit

s it

s ex

po

sure

to

cre

dit

ris

k, th

e ri

sk t

hat

the

issu

er o

f a

deb

t se

curi

ty

wil

l not

pay

its

par

val

ue

upon m

aturi

ty, by p

rim

aril

y i

nves

ting i

n c

erti

fica

tes

of

dep

osi

t at

$100,0

00 o

r le

ss e

ach a

nd m

oney

mar

ket

mu

tual

fu

nd

s.

Th

e Il

lin

ois

Met

ropoli

tan I

nves

tmen

t 1-3

Yea

r F

und i

s ra

ted

AA

f b

y S

tan

dar

d a

nd

Po

or’

s.

Cu

sto

dia

l cr

edit

ris

k f

or

inv

estm

ents

is

the

risk

that

, in

the

even

t of

the

fail

ure

of

the

counte

rpar

ty t

o t

he

inves

tmen

t, t

he

Cit

y w

ill

not

be

able

to r

ecover

the

val

ue

of

its

inv

estm

ents

th

at a

re i

n p

oss

essi

on

of

an o

uts

ide

par

ty.

To

lim

it i

ts e

xp

osu

re,

the

City

’s in

vest

men

t pol

icy

requ

ires a

ll se

curit

y tra

nsac

tions

that

are

exp

osed

to

cust

odia

l cr

edit

ris

k t

o b

e pro

cess

ed o

n a

del

iver

y ver

sus

pay

men

t (D

VP

) bas

is w

ith

the

under

lyin

g i

nves

tmen

ts h

eld b

y a

thi

rd p

arty

act

ing

as th

e C

ity’s

age

nt se

para

te

from

wher

e th

e in

ves

tmen

t w

as p

urc

has

ed o

r by t

he

trust

dep

artm

ent

of

the

ban

k

whe

re p

urch

ased

, in

the

City

’s n

ame.

Th

e Il

lin

ois

Met

rop

oli

tan

Inves

tmen

t F

und i

s

no

t su

bje

ct t

o c

ust

od

ial

cred

it r

isk

.

A-12

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

2.

DE

PO

SIT

S A

ND

IN

VE

ST

ME

NT

S (

Conti

nued

)

b

. C

ity I

nv

estm

ents

(C

on

tin

ued

)

Conce

ntr

atio

n o

f C

redit

Ris

k -

The

City

’s in

vest

men

t pol

icy

limits

the

amou

nt o

f the

port

foli

o t

hat

can

be

inves

ted i

n a

ny o

ne

inves

tmen

t veh

icle

to 5

0%

of

the

port

foli

o,

excl

udin

g U

.S.

Tre

asury

obli

gat

ions.

The

City

’s in

vest

men

t pol

icy

does

not

spec

ifica

lly p

rohi

bit t

he u

se o

f or t

he

inves

tmen

t in

der

ivat

ives

.

c.

Po

lice

Pens

ion

Fund

’s D

epos

its w

ith F

inan

cial

Inst

itutio

ns

Cust

odia

l cr

edit

ris

k f

or

dep

osi

ts w

ith f

inan

cial

in

stit

uti

on

s is

th

e ri

sk t

hat

in

th

e

even

t of

a ban

k’s

failu

re, t

he P

olic

e Pe

nsio

n Fu

nd’s

dep

osits

may

not

be

retu

rned

to

them

. Th

e Po

lice

Pens

ion

Fund

’s in

vest

men

t pol

icie

s do

not r

equi

re p

ledg

ing

of

coll

ater

al f

or

all

ban

k b

alan

ces

in e

xce

ss o

f fe

der

al d

eposi

tory

insu

rance

, si

nce

flo

w-

thro

ugh

FDIC

insu

ranc

e is

ava

ilabl

e fo

r the

Pol

ice

Pens

ion

Fund

’s d

epos

its w

ith

fin

anci

al i

nst

itu

tio

ns.

d.

Poli

ce P

ensi

on F

und I

nves

tmen

ts

The

foll

ow

ing t

able

pre

sents

the

inves

tmen

ts a

nd m

aturi

ties

of

the

Poli

ce P

ensi

on

Fu

nd’

s deb

t sec

uriti

es a

nd m

oney

mar

ket m

utua

l fun

ds a

s of J

un

e 3

0,

20

12

:

In

ves

tmen

t M

atu

riti

es (

in Y

ears

)

Inves

tmen

t T

yp

e F

air

Val

ue

Les

s th

an 1

1

-5

6-1

0

Gre

ater

th

an 1

0

U.S

. T

reas

ury

ob

ligat

ion

s $

2

,08

7,0

87

$

2

20

,24

5

$

1,0

84

,84

0

$

78

2,0

02

$

-

U.S

. A

gen

cy o

bli

gat

ion

s

4,2

67

,21

2

5

70

,67

5

1

,98

3,6

25

1,6

95

,00

8

1

7,9

04

Sta

te a

nd

lo

cal

ob

ligat

ion

s

30

6,7

76

-

-

10

4,5

22

20

2,2

54

TO

TA

L

$

6,6

61

,07

5

$

79

0,9

20

$

3

,06

8,4

65

$

2

,58

1,5

32

$

2

20

,15

8

In a

ccord

ance

wit

h i

ts i

nves

tmen

t p

oli

cy, th

e P

oli

ce P

ensi

on F

un

d l

imit

s it

s ex

po

sure

to i

nte

rest

rat

e ri

sk b

y s

truct

uri

ng t

he

port

foli

o t

o p

rovid

e li

quid

ity f

or

oper

atin

g

funds

and m

axim

izin

g y

ield

s fo

r fu

nds

not

nee

ded

wit

hin

a o

ne-

yea

r per

iod. T

he

inv

estm

ent

po

licy

do

es n

ot

lim

it t

he

max

imu

m m

atu

rity

len

gth

of

inv

estm

ents

in

th

e

Poli

ce P

ensi

on F

und.

Th

e P

oli

ce P

ensi

on

Fu

nd

lim

its

its

exp

osu

re t

o c

redit

ris

k, th

e ri

sk t

hat

the

issu

er o

f a

deb

t se

curi

ty w

ill

not

pay

its

par

val

ue

upon m

aturi

ty, by p

rim

aril

y i

nves

ting i

n

ob

ligat

ion

s gu

aran

teed

by t

he

Un

ited

Sta

tes

Gover

nm

ent

or

secu

riti

es i

ssued

by

agen

cies

of

the

Unit

ed S

tate

s G

over

nm

ent

that

are

ex

pli

citl

y o

r im

pli

citl

y g

uar

ante

ed

by t

he

Unit

ed S

tate

s G

over

nm

ent.

T

he

U.S

. ag

ency

obli

gat

ions

are

rate

d f

rom

A t

o

AA

A, th

e st

ate

and l

oca

l obli

gat

ions

are

rate

d f

rom

Aa2

to A

2.

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

2.

DE

PO

SIT

S A

ND

IN

VE

ST

ME

NT

S (

Conti

nued

)

d.

Poli

ce P

ensi

on F

und I

nves

tmen

ts (

Conti

nued

)

Cust

odia

l cr

edit

ris

k f

or

inves

tmen

ts i

s th

e ri

sk t

hat

, in

the

even

t of

the

fail

ure

of

the

counte

rpar

ty t

o t

he

inves

tmen

t, t

he

Poli

ce P

ensi

on F

und w

ill

not

be

able

to r

ecover

the

val

ue

of

its

inves

tmen

ts t

hat

are

in p

oss

essi

on

of

an o

uts

ide

par

ty.

To

lim

it i

ts

expo

sure

, the

Pol

ice

Pens

ion

Fund

’s in

vest

men

t pol

icy

requ

ires a

ll se

curit

y tr

ansa

ctio

ns

that

are

ex

pose

d t

o c

ust

odia

l cr

edit

ris

k t

o b

e pro

cess

ed o

n a

del

iver

y

ver

sus

pay

men

t (D

VP

) bas

is w

ith t

he

under

lyin

g i

nves

tmen

ts h

eld b

y a

thir

d p

arty

actin

g as

the

Polic

e Pe

nsio

n Fu

nd’s

age

nt se

para

te fr

om w

here

the

inve

stm

ent w

as

purc

hase

d in

the

Polic

e Pe

nsio

n Fu

nd’s

nam

e. T

he m

oney

mar

ket

mutu

al f

unds

are

no

t su

bje

ct t

o c

ust

od

ial

cred

it r

isk

.

3.

RE

CE

IVA

BL

ES

- P

RO

PE

RT

Y T

AX

ES

Pro

per

ty t

axes

for

the

2011 l

evy y

ear

atta

ch a

s an

enfo

rcea

ble

lie

n o

n J

anuar

y 1

, 2011

, on

pro

per

ty v

alues

ass

esse

d a

s of

the

sam

e dat

e.

Tax

es a

re l

evie

d b

y D

ecem

ber

of

the

sam

e

yea

r by

pas

sage

of

a T

ax L

evy O

rdin

ance

. T

ax b

ills

are

pre

par

ed b

y t

he

County

and i

ssued

on o

r ab

out

May

1, 2012 a

nd A

ugust

1, 2012, an

d a

re p

ayab

le i

n t

wo i

nst

allm

ents

, on o

r

about

June

1, 2012 a

nd S

epte

mber

1,

2012.

The

County

coll

ects

such

tax

es a

nd r

emit

s

them

per

iodic

ally

.

Fo

r gover

nm

enta

l fu

nds,

pro

per

ty t

axes

coll

ecte

d, w

hic

h a

re u

sed t

o f

inan

ce t

he

curr

ent

year

’s o

pera

tions

, are

reco

gniz

ed a

s rev

enue

. Pr

oper

ty ta

xes u

ncol

lect

ed, w

hich

are

to b

e use

d t

o f

inan

ce t

he

subse

quen

t yea

r’s o

pera

tions

, are

repo

rted

as n

et ta

xes

rec

eivab

le a

nd

def

erre

d r

even

ue.

T

he

2012 t

ax l

evy, w

hic

h a

ttac

hed

as

an e

nfo

rcea

ble

lie

n o

n p

roper

ty a

s

of

Januar

y 1

, 2012, has

not

bee

n r

ecord

ed a

s a

rece

ivab

le a

s of

June

30, 2012 a

s th

e ta

x h

as

no

t yet

bee

n l

evie

d b

y t

he

Cit

y a

nd

wil

l n

ot

be

levie

d u

nti

l D

ecem

ber

2012 a

nd, th

eref

ore

,

the

levy i

s not

mea

sura

ble

at

June

30, 2012.

4.

CA

PIT

AL

AS

SE

TS

C

apit

al a

sset

act

ivit

y f

or

the

yea

r en

ded

June

30, 2012 i

s as

foll

ow

s:

Bal

ance

s

July

1

Ad

dit

ion

s

Ret

irem

ents

Bal

ance

s

Jun

e 3

0

GO

VE

RN

ME

NT

AL

AC

TIV

ITIE

S

C

apit

al a

sset

s n

ot

bei

ng d

epre

ciat

ed

Lan

d

$

1,5

21

,32

2

$

- $

-

$

1,5

21

,32

2

Lan

d r

igh

t o

f w

ay

2

0,4

93

,84

4

-

-

2

0,4

93

,84

4

Co

nst

ruct

ion

in

pro

gre

ss

2

,12

8,5

43

42

9,9

49

-

2,5

58

,49

2

Per

man

ent

ease

men

ts

2

49

,52

5

5

52

-

25

0,0

77

T

ota

l ca

pit

al a

sset

s n

ot

bei

ng

d

epre

ciat

ed

2

4,3

93

,23

4

4

30

,50

1

-

2

4,8

23

,73

5

A-13

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

4.

CA

PIT

AL

AS

SE

TS

(C

on

tin

ued

)

Bal

ance

s

July

1

Ad

dit

ion

s

Ret

irem

ents

Bal

ance

s

Jun

e 3

0

GO

VE

RN

ME

NT

AL

AC

TIV

ITIE

S

(C

on

tin

ued

)

C

apit

al a

sset

s b

ein

g d

epre

ciat

ed

Bu

ild

ing a

nd

im

pro

vem

ents

$

1

7,7

68

,03

7

$

- $

-

$

17

,76

8,0

37

Tra

nsp

ort

atio

n e

qu

ipm

ent

1

,84

7,9

22

27

1,4

86

-

2,1

19

,40

8

Infr

astr

uct

ure

78

,93

0,0

31

2,4

82

,63

8

-

8

1,4

12

,66

9

T

ota

l ca

pit

al a

sset

s b

ein

g

dep

reci

ated

9

8,5

45

,99

0

2

,75

4,1

24

-

1

01

,30

0,1

14

L

ess

accu

mu

late

d d

epre

ciat

ion

fo

r

Bu

ild

ing a

nd

im

pro

vem

ents

2,2

57

,91

8

3

75

,22

8

-

2

,63

3,1

46

Tra

nsp

ort

atio

n e

qu

ipm

ent

8

46

,25

2

1

73

,10

7

-

1

,01

9,3

59

Infr

astr

uct

ure

23

,25

2,1

25

1,9

33

,20

5

-

2

5,1

85

,33

0

T

ota

l ac

cum

ula

ted

dep

reci

atio

n

2

6,3

56

,29

5

2

,48

1,5

40

-

28

,83

7,8

35

T

ota

l ca

pit

al a

sset

s b

ein

g

dep

reci

ated

, n

et

7

2,1

89

,69

5

2

72

,58

4

-

7

2,4

62

,27

9

TO

TA

L G

OV

ER

NM

EN

TA

L

A

CT

IVIT

IES

, N

ET

$

96

,58

2,9

29

$

70

3,0

85

$

-

$

97

,28

6,0

14

B

US

INE

SS

-TY

PE

AC

TIV

ITIE

S

C

apit

al a

sset

s n

ot

bei

ng d

epre

ciat

ed

Lan

d

$

30

1,1

15

$

-

$

- $

3

01

,11

5

Co

nst

ruct

ion

in

pro

gre

ss

3

6,2

53

84

2,1

61

36

,25

3

8

42

,16

1

T

ota

l ca

pit

al a

sset

s n

ot

bei

ng

dep

reci

ated

3

37

,36

8

8

42

,16

1

3

6,2

53

1

,14

3,2

76

C

apit

al a

sset

s b

ein

g d

epre

ciat

ed

Bu

ild

ing a

nd

im

pro

vem

ents

11

,98

0,5

49

-

-

11

,98

0,5

49

Tra

nsp

ort

atio

n e

qu

ipm

ent

7

26

,89

5

8

4,6

27

-

81

1,5

22

Wat

er d

istr

ibu

tio

n,

sto

rm a

nd

san

itar

y

sy

stem

in

fras

tru

ctu

re

5

4,7

20

,58

5

9

00

,25

3

-

5

5,6

20

,83

8

T

ota

l ca

pit

al a

sset

s b

ein

g

dep

reci

ated

6

7,4

28

,02

9

9

84

,88

0

-

6

8,4

12

,90

9

L

ess

accu

mu

late

d d

epre

ciat

ion

fo

r

Bu

ild

ing a

nd

im

pro

vem

ents

1,2

60

,42

5

8

,77

0

-

1

,26

9,1

95

Tra

nsp

ort

atio

n e

qu

ipm

ent

3

43

,71

4

5

4,2

62

-

39

7,9

76

Wat

er d

istr

ibu

tio

n,

sto

rm a

nd

san

itar

y

sy

stem

in

fras

tru

ctu

re

1

1,6

96

,12

1

1

,17

3,9

73

-

12

,87

0,0

94

T

ota

l ac

cum

ula

ted

dep

reci

atio

n

1

3,3

00

,26

0

1

,23

7,0

05

-

14

,53

7,2

65

T

ota

l ca

pit

al a

sset

s b

ein

g

dep

reci

ated

, n

et

5

4,1

27

,76

9

(2

52

,12

5)

-

5

3,8

75

,64

4

TO

TA

L B

US

INE

SS

-TY

PE

A

CT

IVIT

IES

, N

ET

$

54

,46

5,1

37

$

59

0,0

36

$

36

,25

3

$

55

,01

8,9

20

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

4.

CA

PIT

AL

AS

SE

TS

(C

on

tin

ued

)

D

epre

ciat

ion e

xpen

se w

as c

har

ged

to f

unct

ions

of

the

pri

mar

y gover

nm

ent

as f

oll

ow

s:

GO

VE

RN

ME

NT

AL

AC

TIV

ITIE

S

G

ener

al a

dm

inis

trat

ion

$

1

3,6

21

P

oli

ce a

nd a

nim

al c

ontr

ol

1

46

,91

4

B

uil

din

gs,

pla

nnin

g a

nd d

evel

opm

ent

2

,04

3

S

tree

ts a

nd y

ard w

aste

2,0

53

,27

1

P

ubli

c w

ork

s

26

5,6

91

TO

TA

L D

EP

RE

CIA

TIO

N E

XP

EN

SE

-

G

OV

ER

NM

EN

TA

L A

CT

IVIT

IES

$

2

,48

1,5

40

BU

SIN

ES

S-T

YP

E A

CT

IVIT

IES

W

ater

work

s an

d s

ewer

age

$

1,2

37

,00

5

5.

RIS

K M

AN

AG

EM

EN

T

The

Cit

y i

s ex

pose

d t

o v

ario

us

risk

s of

loss

rel

ated

to t

ort

s; t

hef

t of,

dam

age

to a

nd

des

truct

ion o

f as

sets

; er

rors

and o

mis

sions;

inju

ries

to e

mplo

yee

s; a

nd n

atura

l dis

aste

rs.

In

resp

on

se t

o t

his

ex

po

sure

, th

e C

ity h

as p

urc

has

ed i

nsu

rance

thro

ugh t

radit

ional

poli

cies

.

Set

tled

ris

ks

hav

e not

exce

eded

com

mer

cial

insu

rance

cover

age

in a

ny o

f th

e pas

t th

ree

fisc

al y

ears

.

T

he

Cit

y i

s a

mem

ber

of

the

South

wes

t A

gen

cy f

or

Hea

lth M

anag

emen

t (S

WA

HM

), a

n

agen

cy c

om

pri

sed o

f ei

gh

t co

mm

unit

ies

form

ed t

o b

e a

single

mem

ber

in t

he

Inte

rgover

nm

enta

l P

erso

nnel

Ben

efit

s C

oo

per

ativ

e (I

PB

C)

wh

ich

ad

min

iste

rs p

erso

nn

el

ben

efit

s (p

rim

aril

y m

edic

al, den

tal

and l

ife

insu

rance

cover

age)

on b

ehal

f of

its

mem

ber

s.

Pre

miu

ms

are

pai

d m

onth

ly t

o a

noth

er m

ember

of

SW

AH

M,

whic

h i

s re

sponsi

ble

for

coll

ecti

ng a

ll m

onie

s an

d r

emit

ting t

hem

to I

PB

C.

IP

BC

is

a publi

c en

tity

ris

k p

ool

esta

bli

shed

by c

erta

in u

nit

s of

loca

l gover

nm

ent

in I

llin

ois

to a

dm

inis

ter

som

e or

all

of

the

per

sonnel

ben

efit

pro

gra

ms

off

ered

by t

hes

e m

ember

s to

thei

r off

icer

s an

d e

mplo

yee

s an

d t

o t

he

off

icer

s an

d e

mplo

yee

s of

cert

ain g

over

nm

enta

l,

quas

i-gover

nm

enta

l an

d n

onpro

fit

publi

c se

rvic

e en

titi

es.

IP

BC

rec

eives

, pro

cess

es a

nd

pay

s su

ch c

laim

s as

may

com

e w

ithin

the

ben

efit

pro

gra

m o

f ea

ch m

ember

. M

anag

emen

t

consi

sts

of

a B

oar

d o

f D

irec

tors

com

pri

sed o

f one

appoin

ted r

epre

senta

tive

from

eac

h

mem

ber

. I

n a

ddit

ion, th

ere

are

two o

ffic

ers;

a B

enef

it A

dm

inis

trat

or

and a

Tre

asure

r.

The

Cit

y,

thro

ugh i

ts m

ember

ship

in S

WA

HM

, does

not

exer

cise

any c

ontr

ol

over

the

acti

vit

ies

of IP

BC

bey

ond

SWA

HM

’s r

epre

senta

tion o

n t

he

Boar

d o

f D

irec

tors

.

A-14

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

6.

LO

NG

-TE

RM

DE

BT

a.

G

ener

al O

bli

gat

ion B

onds

Th

e C

ity i

ssu

es g

ener

al o

bli

gat

ion b

onds

to p

rovid

e fu

nds

for

the

acquis

itio

n a

nd

const

ruct

ion o

f m

ajor

capit

al f

acil

itie

s.

Gen

eral

obli

gat

ion b

onds

are

dir

ect

obli

gat

ions

and p

ledges

the

full

fai

th a

nd c

redit

of

the

Cit

y a

nd a

re p

ayab

le f

rom

gover

nm

enta

l ac

tivit

ies/

funds

and b

usi

nes

s-ty

pe

acti

vit

ies/

ente

rpri

se f

unds.

G

ener

al

ob

ligat

ion

bo

nd

s cu

rren

tly o

uts

tan

din

g a

re a

s fo

llo

ws:

Issu

e

Fu

nd

Deb

t

Ret

ired

by

Bal

ance

s

July

1

Issu

ance

s

Ret

irem

ents

Bal

ance

s

Jun

e 3

0

Cu

rren

t

Po

rtio

n

$1

,50

0,0

00

Gen

eral

Ob

ligat

ion

Lim

ited

Tax

Bo

nd

s o

f 2

00

5A

, an

nu

al

inst

allm

ents

of

$1

65

,00

0

to $

19

5,0

00

th

rou

gh

Jan

uar

y 1

, 2

01

4,

inte

rest

at 3

.55

% t

o 4

.10

%

pay

able

eac

h J

anu

ary 1

and

Ju

ly 1

.

Bo

nd

Sin

kin

g

$

60

5,0

00

$

-

$

20

0,0

00

$

40

5,0

00

$

21

0,0

00

$2

,30

5,0

00

Gen

eral

Ob

ligat

ion

Lim

ited

Tax

Bo

nd

s o

f 2

00

8,

du

e in

ann

ual

in

stal

lmen

ts o

f

$4

15

,00

0 t

o $

33

0,0

00

thro

ugh

Jan

uar

y 1

, 2

01

5,

inte

rest

at

6.0

0%

to

6.5

0%

pay

able

eac

h J

anu

ary 1

and

Ju

ly 1

.

Bo

nd

Sin

kin

g

1

,44

5,0

00

-

4

70

,00

0

9

75

,00

0

5

00

,00

0

TO

TA

L

$

2

,05

0,0

00

$

-

$

67

0,0

00

$

1

,38

0,0

00

$

7

10

,00

0

b

. G

ener

al O

bli

gat

ion

Bo

nd

s (A

lter

nat

e R

even

ue

Sourc

e)

Th

e C

ity i

ssu

es g

ener

al o

bli

gat

ion

bonds

(alt

ernat

e re

ven

ue

sourc

e) t

o p

rovid

e fu

nds

for

the

acquis

itio

n a

nd c

onst

ruct

ion o

f m

ajor

capit

al f

acil

itie

s.

The

alte

rnat

e re

ven

ue

sourc

e bonds

are

issu

ed f

or

whic

h t

he

Cit

y h

ave

ple

dged

futu

re r

even

ue

stre

ams.

T

he

Serie

s 201

2 al

tern

ate

reve

nue

sour

ce b

onds

are

pay

able

for a

ple

dge

of th

e C

ity’s

publi

c in

fras

truct

ure

sal

es t

axes

and r

even

ue

shar

ing r

ecei

pts

. T

he

bonds

hav

e a

tota

l

rem

ainin

g p

ledge

of

$10,8

28,3

23, w

ith t

he

bonds

mat

uri

ng J

anuar

y 1, 20

20. N

o

pay

men

ts w

ere

due

or

mad

e duri

ng t

he

curr

ent

fisc

al y

ear.

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

6.

LO

NG

-TE

RM

DE

BT

(C

onti

nued

)

b.

Gen

eral

Obli

gat

ion B

onds

(Alt

ernat

e R

even

ue

Sourc

e) (

Conti

nued

)

Issu

e

Fu

nd

Deb

t

Ret

ired

by

Bal

ance

s

July

1

Issu

ance

s

Ret

irem

ents

Bal

ance

s

Jun

e 3

0

Cu

rren

t

Po

rtio

n

$9

,75

0,0

00

Gen

eral

Ob

ligat

ion

Bo

nd

s

(Alt

ern

ate

Rev

enu

e

So

urc

e) o

f 2

01

2,

ann

ual

inst

allm

ents

of

$1

,30

0,0

00

to $

1,5

00

,00

0 t

hro

ugh

Jan

uar

y 1

, 2

02

0,

inte

rest

at 2

.00

% t

o 2

.50

%

pay

able

eac

h J

anu

ary 1

and

Ju

ly 1

.

Cap

ital

Pro

ject

s

$

-

$

9,7

50

,00

0

$

-

$

9,7

50

,00

0

$

-

c.

D

ebt

Cer

tifi

cate

s

The

Cit

y i

ssued

deb

t ce

rtif

icat

es t

o p

rovid

e fu

nds

for

the

const

ruct

ion o

f a

publi

c

work

s fa

cili

ty (

Wat

erw

ork

s an

d S

ewer

age

Fund p

ort

ion o

f pro

ject

).

Issu

e

Fu

nd

Deb

t

Ret

ired

by

Bal

ance

s

July

1

Issu

ance

s

Ret

irem

ents

Bal

ance

s

Jun

e 3

0

Cu

rren

t

Po

rtio

n

$1

,50

0,0

00

Deb

t

Cer

tifi

cate

s o

f 2

00

5B

,

ann

ual

in

stal

lmen

ts o

f

$1

25

,00

0 t

o $

18

0,0

00

thro

ugh

Jan

uar

y 1

, 2

01

6,

inte

rest

at

3.5

5%

to

4.2

0%

pay

able

eac

h J

anu

ary 1

and

Ju

ly 1

.

Wat

erw

ork

s

and

Sew

erag

e

$

82

5,0

00

$

-

$

15

0,0

00

$

67

5,0

00

$

16

0,0

00

d.

Gen

eral

Obli

gat

ion C

apit

al A

ppre

ciat

ion B

onds

Th

e C

ity i

ssu

es g

ener

al o

bli

gat

ion c

apit

al a

ppre

ciat

ion b

onds

to p

rovid

e fu

nds

for

var

ious

stre

et p

roje

cts.

A-15

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

6.

LO

NG

-TE

RM

DE

BT

(C

onti

nued

)

d.

Gen

eral

Obli

gat

ion C

apit

al A

ppre

ciat

ion B

onds

(Conti

nued

)

Gen

eral

obli

gat

ion c

apit

al a

ppre

ciat

ion b

onds

are

dir

ect

obli

gat

ions

and p

ledge

the

full

fai

th a

nd

cre

dit

of

the

Cit

y.

Gen

eral

obli

gat

ion c

apit

al a

ppre

ciat

ion b

onds

curr

entl

y o

uts

tandin

g a

re a

s fo

llow

s:

Issu

e

Fu

nd

Deb

t

Ret

ired

by

Bal

ance

s

Jan

uar

y 1

Issu

ance

s*

Ret

irem

ents

Bal

ance

s

Dec

emb

er 3

1

Cu

rren

t

Po

rtio

n

$9

75

,00

0 2

00

9 G

ener

al

Ob

ligat

ion

Cap

ita l

Ap

pre

ciat

ion

Bon

ds

dat

ed D

ecem

ber

9,

20

09

, d

ue

in a

nn

ual

inst

allm

ents

of

$1

35

,00

0 t

o $

43

5,0

00

thro

ugh

20

16

wit

h

inte

rest

ran

gin

g f

rom

2.5

4%

to

3.0

4%

.

Bo

nd

Sin

kin

g

$

88

0,6

24

$

24

,16

3

$

-

$

90

4,7

87

$

-

*Is

suan

ces

incl

ude

$24,1

63 f

or

curr

ent

yea

r ac

cret

ion.

e.

IE

PA

Lo

ans

The

Cit

y, th

rough t

he

Illi

nois

Envir

onm

enta

l P

rote

ctio

n A

gen

cy (

IEP

A),

rec

eived

low

in

tere

st l

oan

s fo

r th

e co

nst

ruct

ion

of

wat

er s

yst

em i

mpro

vem

ents

and w

aste

wat

er

trea

tmen

t fa

cili

ties

pay

able

fro

m w

ater

and s

ewer

fee

s.

IEP

A l

oan

s cu

rren

tly

outs

tandin

g a

re a

s fo

llow

s:

Fu

nd

Deb

t

Ret

ired

by

Bal

ance

s

July

1

Ad

dit

ion

s

Ret

irem

ents

Bal

ance

s

Jun

e 3

0

Cu

rren

t

Po

rtio

n

EP

A L

oan

I

Wat

erw

ork

s

and

Sew

erag

e

$

3,5

63

,64

8

$

-

$

22

4,9

57

$

3,3

38

,69

1

$

23

0,6

17

EP

A L

oan

II

Wat

erw

ork

s

and

Sew

erag

e

9

,16

5,4

44

-

4

11

,85

0

8

,75

3,5

94

4

22

,21

1

TO

TA

L

$

1

2,7

29

,09

2

$

- $

6

36

,80

7

$

12

,09

2,2

85

$

6

52

,82

8

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

6.

LO

NG

-TE

RM

DE

BT

(C

onti

nued

)

f.

In

terg

over

nm

enta

l N

ote

Pay

able

T

he

Cit

y h

as e

nte

red i

nto

a n

ote

pay

able

wit

h t

he

Illi

no

is S

tate

To

ll H

igh

way

Auth

ori

ty f

or

the

const

ruct

ion o

f ce

rtai

n e

ntr

ance

and e

xit

ram

ps.

T

he

note

pay

able

curr

entl

y o

uts

tandin

g i

s as

foll

ow

s:

Issu

e

Fu

nd

Deb

t

Ret

ired

by

Bal

ance

s

July

1,

Res

tate

d

Issu

ance

s

Ret

irem

ents

Bal

ance

s

Jun

e 3

0

Cu

rren

t

Po

rtio

n

$2

,30

0,0

00

no

te p

ayab

le

dat

ed J

uly

5,

20

06

, d

ue

in

var

iou

s an

nu

al i

nst

allm

ents

thro

ugh

Dec

emb

er 3

1,

20

14

.

Deb

t

Ser

vic

e

$

1,3

50

,00

0

$

-

$

10

0,0

00

$

1,2

50

,00

0

$

10

0,0

00

TO

TA

L N

OT

E P

AY

AB

LE

$

1,3

50

,00

0

$

- $

1

00

,00

0

$

1,2

50

,00

0

$

10

0,0

00

g.

Deb

t S

ervic

e R

equir

emen

ts t

o M

aturi

ty

Deb

t se

rvic

e re

quir

emen

ts t

o m

aturi

ty a

re a

s fo

llow

s:

Gover

nm

enta

l A

ctiv

itie

s

F

isca

l Y

ear

Endin

g

No

te P

ayab

le

June

30,

P

rinci

pal

In

tere

st

Tota

l

2013

$

100,0

00

$

- $

100,0

00

2014

100,0

00

-

100,0

00

2015

1,0

50,0

00

-

1,0

50,0

00

TO

TA

L

$

1,2

50,0

00

$

- $

1,2

50,0

00

F

isca

l Y

ear

Endin

g

Gen

eral

Obli

gat

ion L

imit

ed

Tax

Bonds,

Ser

ies

2005A

Gen

eral

Obli

gat

ion L

imit

ed

Tax

Bonds,

Ser

ies

2008

June

30,

Pri

nci

pal

In

tere

st

Tota

l P

rinci

pal

In

tere

st

Tota

l

2013

$

210,0

00

$

16,3

95

$

22

6,3

95

$

500,0

00

$

60

,15

0

$

560,1

50

2014

195,0

00

7,9

95

2

02

,99

5

145,0

00

3

0,1

50

175,1

50

2015

-

-

-

330,0

00

2

1,4

50

351,4

50

TO

TA

L

$

405,0

00

$

24,3

90

$

42

9,3

90

$

975,0

00

$

11

1,7

50

$

1,0

86,7

50

A-16

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

6.

LO

NG

-TE

RM

DE

BT

(C

onti

nued

)

g.

Deb

t S

ervic

e R

equir

emen

ts t

o M

aturi

ty (

Conti

nued

)

Gover

nm

enta

l A

ctiv

itie

s (C

onti

nued

)

Fis

cal

Yea

r

$9,7

50,0

00 D

ebt

Cer

tifi

cate

s of

2012

Gen

eral

Obli

gat

ion C

apit

al

Appre

ciat

ion B

onds,

Ser

ies

2009

Endin

g

June

30,

Pri

nci

pal

Inte

rest

Tota

l

Acc

reti

on

Pri

nci

pal

Rep

aym

ent

2013

$

- $

1

48

,19

8

$

148,1

98

$

24

,82

9

$

-

2014

1,3

00,0

00

2

16

,87

5

1,5

16,8

75

2

5,5

12

405,0

00

2015

1,3

25,0

00

1

90

,87

5

1,5

15,8

75

1

5,8

60

435,0

00

2016

1,3

50,0

00

1

64

,37

5

1,5

14,3

75

4

,01

2

135,0

00

2017

1,4

00,0

00

1

37

,37

5

1,5

37,3

75

-

-

2018

1,4

25,0

00

1

09

,37

5

1,5

34,3

75

-

-

2019

1,4

50,0

00

7

3,7

50

1,5

23,7

50

-

-

2020

1,5

00,0

00

3

7,5

00

1,5

37,5

00

-

-

TO

TA

L

$

9,7

50,0

00

$

1,0

78

,32

3

$ 1

0,8

28,3

23

$

70

,21

3

$

975,0

00

Bu

sin

ess-

Typ

e A

ctiv

itie

s

F

isca

l Y

ear

Endin

g

Deb

t C

erti

fica

tes,

Ser

ies

2005B

IEP

A L

oan

s

June

30,

Pri

nci

pal

In

tere

st

Tota

l P

rinci

pal

In

tere

st

Tota

l

2013

$

160,0

00

$

27,7

80

$

18

7,7

80

$

652,8

28

$

29

8,2

52

$

951,0

80

2014

165,0

00

21,3

80

1

86

,38

0

669,2

50

2

81

,83

0

951,0

80

2015

170,0

00

14,6

15

1

84

,61

5

686,0

85

2

64

,99

5

951,0

80

2016

180,0

00

7,5

60

1

87

,56

0

703,3

45

2

47

,73

5

951,0

80

2017

-

-

-

721,0

39

2

30

,04

1

951,0

80

2018

-

-

-

739,1

77

2

11

,90

3

951,0

80

2019

-

-

-

757,7

72

1

93

,30

8

951,0

80

2020

-

-

-

776,8

35

1

74

,24

5

951,0

80

2021

-

-

-

796,3

78

1

54

,70

2

951,0

80

2022

-

-

-

816,4

11

1

34

,66

9

951,0

80

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

6.

LO

NG

-TE

RM

DE

BT

(C

onti

nued

)

g.

Deb

t S

ervic

e R

equir

emen

ts t

o M

aturi

ty (

Conti

nued

)

Busi

nes

s-T

ype

Act

ivit

ies

(Conti

nued

)

F

isca

l Y

ear

Endin

g

Deb

t C

erti

fica

tes,

Ser

ies

2005B

IEP

A L

oan

s

June

30,

Pri

nci

pal

In

tere

st

Tota

l P

rinci

pal

In

tere

st

Tota

l

2023

$

- $

- $

- $

836,9

49

$

11

4,1

31

$

951,0

80

2024

-

-

-

858,0

04

9

3,0

76

951,0

80

2025

-

-

-

723,2

63

7

1,4

92

794,7

55

2026

-

-

-

583,1

77

5

5,2

51

638,4

28

2027

-

-

-

597,8

47

4

0,5

81

638,4

28

2028

-

-

-

612,8

87

2

5,5

41

638,4

28

2029

-

-

-

561,0

38

1

0,1

27

571,1

65

TO

TA

L

$

675,0

00

$

71,3

35

$

74

6,3

35

$ 1

2,0

92,2

85

$

2,6

01

,87

9

$ 1

4,6

94,1

64

h.

Chan

ges

in L

ong-T

erm

Lia

bil

itie

s

Duri

ng t

he

fisc

al y

ear

the

foll

ow

ing c

han

ges

occ

urr

ed i

n l

iabil

itie

s re

port

ed i

n t

he

gover

nm

enta

l ac

tivit

ies:

Bal

ance

July

1

Issu

ance

s**

Ret

ired

Bal

ance

June

30

Curr

ent

Po

rtio

n

Gen

eral

ob

ligat

ion b

ond

s

p

ayab

le

$

2,0

50

,00

0

$

-

$

67

0,0

00

$

1,3

80

,00

0

$

71

0,0

00

Gen

eral

ob

ligat

ion

alt

ernat

e

re

ven

ue

sourc

e b

ond

s

-

9

,75

0,0

00

-

9

,75

0,0

00

-

Gen

eral

ob

ligat

ion c

apit

al

ap

pre

ciat

ion b

ond

s

88

0,6

24

24

,16

3

-

9

04

,78

7

-

No

te p

ayab

le

1

,35

0,0

00

-

10

0,0

00

1,2

50

,00

0

1

00

,00

0

Un

amo

rtiz

ed p

rem

ium

13

0,4

04

33

9,1

56

39

,66

7

4

29

,89

3

-

*N

et o

ther

po

stem

plo

ym

ent

b

enef

it o

bli

gat

ion

5

16

,43

0

1

53

,41

1

-

6

69

,84

1

-

*N

et p

ensi

on o

bli

gat

ion

62

4,1

51

11

,85

0

-

6

36

,00

1

-

*C

om

pen

sate

d a

bse

nce

s

47

7,7

59

46

6,1

80

42

5,8

59

51

8,0

80

47

0,3

45

TO

TA

L G

OV

ER

NM

EN

TA

L

A

CT

IVIT

IES

$

6,0

29

,36

8

$ 1

0,7

44

,76

0

$

1,2

35

,52

6

$ 1

5,5

38

,60

2

$

1,2

80

,34

5

*T

hes

e li

abil

itie

s ar

e gen

eral

ly l

iquid

ated

by t

he

gen

eral

fund

and t

he

inte

rnal

ser

vic

e

fund.

**Is

suan

ces

incl

ude

$24,1

63 f

or

curr

ent

yea

r ac

cret

ion.

A-17

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

6.

LO

NG

-TE

RM

DE

BT

(C

onti

nued

)

h.

Chan

ges

in L

ong-T

erm

Lia

bil

itie

s (C

onti

nued

)

Duri

ng t

he

fisc

al y

ear

the

foll

ow

ing c

han

ges

occ

urr

ed i

n l

iabil

itie

s re

port

ed i

n t

he

busi

nes

s-ty

pe

acti

vit

ies:

Bal

ance

July

1

Issu

ance

s

Ret

ired

Bal

ance

June

30

Curr

ent

Po

rtio

n

Deb

t ce

rtif

icat

es p

ayab

le

$

82

5,0

00

$

-

$

15

0,0

00

$

6

75

,00

0

$

16

0,0

00

IEP

A l

oan

s

12

,72

9,0

92

-

63

6,8

08

12

,09

2,2

84

65

2,8

27

Net

oth

er p

ost

emp

loym

ent

b

enef

it o

bli

gat

ion

1

13

,91

8

5

8,6

17

-

1

72

,53

5

-

Com

pen

sate

d a

bse

nce

s

14

7,1

13

10

7,9

60

11

7,5

17

13

7,5

56

10

8,6

65

TO

TA

L B

US

INE

SS

-TY

PE

A

CT

IVIT

IES

$ 1

3,8

15

,12

3

$

16

6,5

77

$

90

4,3

25

$ 1

3,0

77

,37

5

$

92

1,4

92

i.

L

egal

Deb

t M

argin

The

sched

ule

of

the

City

’s le

gal

deb

t m

argin

as

of

June

30, 2012 i

s as

foll

ow

s:

A

SS

ES

SE

D V

AL

UA

TIO

N -

2011

(L

ates

t In

form

atio

n A

vai

lab

le)

$

64

8,8

94

,49

5

Sta

tuto

ry D

ebt

Lim

itat

ion

(8

.62

5%

of

Ass

esse

d V

alu

atio

n)

$

55

,96

7,1

50

Les

s G

ener

al O

bli

gat

ion

Bo

nd

s

(1,3

80

,00

0)

Les

s G

ener

al O

bli

gat

ion

Cap

ital

Ap

pre

ciat

ion

Bo

nd

s

(90

4,7

87

)

LE

GA

L D

EB

T M

AR

GIN

$

5

3,6

82

,36

3

j.

C

on

du

it D

ebt

The

Cit

y,

thro

ugh p

arti

cipat

ion i

n a

n i

nte

rgover

nm

enta

l ag

reem

ent

wit

h s

ever

al o

ther

Illi

no

is m

un

icip

alit

ies,

has

iss

ued

$2

50

,00

0,0

00

in

Co

llat

eral

ized

Sin

gle

Fam

ily

Mort

gag

e R

even

ue

Bonds

to p

rovid

e fi

nan

cial

ass

ista

nce

to l

ow

and m

oder

ate

inco

me

resi

den

ts f

or

the

purc

has

e of

single

fam

ily h

om

es. T

he

bonds

are

secu

red b

y

the

pro

per

ty f

inan

ced a

nd a

re p

ayab

le s

ole

ly f

rom

the

pay

men

ts r

ecei

ved

on t

he

under

lyin

g m

ort

gag

e lo

ans.

U

pon r

epay

men

t of

the

bonds,

ow

ner

ship

of

the

subje

ct

pro

per

ty i

s tr

ansf

erre

d t

o t

he

purc

has

er.

None

of

the

par

tici

pat

ing m

unic

ipal

itie

s ar

e

obli

gat

ed i

n a

ny m

anner

for

the

repay

men

t of

the

bonds

and, ac

cord

ingly

, no l

iabil

ity

is r

ecord

ed i

n t

he

acco

mpan

yin

g f

inan

cial

sta

tem

ents

.

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

7.

INT

ER

FU

ND

AC

CO

UN

TS

Due

from

/to o

ther

funds

at J

une

30

, 2

01

2 c

on

sist

of

the

foll

ow

ing:

D

ue

Fro

m

Due

To

Gen

eral

N

on

maj

or

Go

ver

nm

enta

l $

3

6,5

89

$

-

N

on

maj

or

Go

ver

nm

enta

l

G

ener

al

-

3

6,5

89

T

OT

AL

$

3

6,5

89

$

3

6,5

89

T

he

purp

ose

s of

signif

ican

t due

from

/to o

ther

funds

are

as f

oll

ow

s:

•

$36,5

89 d

ue

to t

he

Gen

eral

Fund f

rom

a N

onm

ajor

Gover

nm

enta

l F

und t

o c

over

TIF

ex

pen

dit

ure

s pai

d f

rom

the

Gen

eral

Fund.

A

dvan

ces

to/f

rom

oth

er f

unds

at J

une

30, 20

12 c

onsi

sted

of

the

foll

ow

ing:

Advan

ce

Fro

m

Ad

van

ce

To

Gen

eral

W

ater

wo

rks

and

Sew

erag

e

$

- $

2

,55

2,0

84

Wat

erw

ork

s an

d S

ewer

age

Gen

eral

2

,55

2,0

84

-

T

OT

AL

$

2

,55

2,0

84

$

2

,55

2,0

84

The

purp

ose

of

the

advan

ce t

o/f

rom

oth

er f

un

ds

is a

s fo

llo

ws:

•

$2,5

52,0

84 a

dvan

ce b

etw

een t

he

Gen

eral

Fund a

nd t

he

Wat

erw

ork

s an

d S

ewer

age

Fund. T

his

advan

ce r

epre

sents

a l

oan

giv

en b

y t

he

Gen

eral

Fund t

o s

upple

men

t th

e W

ater

work

s an

d S

ewer

age

Fund d

ue

to e

xpen

ses

exce

edin

g r

even

ues

.

Inte

rfund t

ransf

ers

duri

ng t

he

yea

r en

ded

June

30, 2012 c

onsi

sted

of

the

foll

ow

ing:

Tra

nsf

er I

n

Tra

nsf

er O

ut

G

ener

al

$

179,3

30

$

717,5

76

Cap

ital

Pro

ject

s F

un

d

1,1

06,2

68

-

No

nm

ajo

r G

over

nm

enta

l F

un

ds

-

389,2

05

Wat

erw

ork

s an

d S

ewer

age

-

178,8

17

T

OT

AL

$

1,2

85,5

98

$

1,2

85,5

98

A-18

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

7.

INT

ER

FU

ND

AC

CO

UN

TS

(C

onti

nued

)

T

he

purp

ose

s of

signif

ican

t in

terf

und t

ransf

ers

are

as f

oll

ow

s:

•

$388,6

92 t

ransf

erre

d t

o t

he

Cap

ital

Pro

ject

s F

und f

rom

a N

onm

ajor

Gover

nm

enta

l

Fund t

o c

lose

out

the

fund.

•

$100,0

00 t

ransf

erre

d t

o t

he

Cap

ital

Pro

ject

s F

und f

rom

the

Gen

eral

Fund f

or

a

pay

men

t on a

note

pay

able

.

•

$617,5

76 t

ransf

erre

d t

o t

he

Cap

ital

Pro

ject

s F

und f

rom

the

Gen

eral

Fund f

or

upco

min

g c

apit

al p

roje

cts.

•

$178,8

17 t

ransf

erre

d t

o t

he

Gen

eral

Fund f

rom

the

Wat

erw

ork

s an

d S

ewer

age

Fund.

This

tra

nsf

er w

as m

ade

to c

over

adm

inis

trat

ive

expen

dit

ure

s th

at p

rovid

ed b

enef

its

to

all

city

dep

artm

ents

.

8.

DE

FIN

ED

BE

NE

FIT

PE

NS

ION

PL

AN

S

T

he

Cit

y c

ontr

ibute

s to

tw

o d

efin

ed b

enef

it p

ensi

on p

lans:

the

Illi

nois

Munic

ipal

Ret

irem

ent

Fund (

IMR

F),

an a

gen

t m

ult

iple

-em

plo

yer

publi

c em

plo

yee

ret

irem

ent

syst

em

and t

he

Poli

ce P

ensi

on

Pla

n w

hic

h i

s a

single

-em

plo

yer

pen

sion p

lan. T

he

ben

efit

s, b

enef

it

level

s, e

mplo

yee

contr

ibuti

ons

and e

mplo

yer

contr

ibuti

ons

for

all

pla

ns

are

gover

ned

by

Illi

no

is C

om

pil

ed S

tatu

tes

and

can

on

ly b

e am

ended

by t

he

Illi

nois

Gen

eral

Ass

embly

.

None

of

the

pen

sion p

lans

issu

e se

par

ate

rep

ort

s o

n t

he

pen

sio

n p

lan

s.

Ho

wev

er,

IMR

F

does

iss

ue

a publi

cly a

vai

lable

rep

ort

that

incl

udes

fin

anci

al s

tate

men

ts a

nd s

upple

men

tary

info

rmat

ion f

or

the

pla

n a

s a

whole

, but

not

for

indiv

idual

em

plo

yer

s.

That

rep

ort

can

be

ob

tain

ed f

rom

IM

RF

, 2

21

1 Y

ork

Ro

ad,

Su

ite

50

0,

Oak

Bro

ok

, Il

lin

ois

60

52

3.

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

8.

DE

FIN

ED

BE

NE

FIT

PE

NS

ION

PL

AN

S (

Conti

nued

)

a.

P

lan D

escr

ipti

ons

Illi

no

is M

un

icip

al R

etir

emen

t F

un

d

All

em

plo

yee

s (o

ther

than

those

cover

ed b

y t

he

Po

lice

Pen

sio

n P

lan

) h

ired

in

posi

tions

that

mee

t or

exce

ed t

he

pre

scri

bed

annual

hourl

y s

tandar

d m

ust

be

enro

lled

in I

MR

F a

s p

arti

cip

atin

g m

emb

ers.

IM

RF

pro

vid

es t

wo t

iers

of

pen

sion b

enef

its.

Em

plo

yee

s hir

ed p

rior

to J

anuar

y 1, 2011, ar

e el

igib

le f

or

Tie

r 1 b

enef

its.

F

or

Tie

r 1

emplo

yee

s, p

ensi

on b

enef

its

ves

t af

ter

eight

yea

rs o

f se

rvic

e.

Par

tici

pat

ing m

ember

s

who r

etir

e at

age

55 (

reduce

d b

enef

its)

or

afte

r ag

e 60 (

full

ben

efit

s) w

ith e

ight

yea

rs

of

cred

ited

ser

vic

e ar

e en

titl

ed t

o a

n a

nnual

ret

irem

ent

ben

efit

, pay

able

month

ly f

or

life

, in

an a

mount

equal

to 1

2/3

% o

f th

eir

final

rat

e of

earn

ings,

for

each

yea

r of

cred

ited

ser

vic

e up t

o 1

5 y

ears

, an

d 2

% f

or

each

yea

r th

erea

fter

. E

mplo

yee

s hir

ed o

n

or

afte

r Ja

nuar

y 1

, 2011, ar

e el

igib

le f

or

Tie

r 2 b

enef

its.

F

or

Tie

r 2 e

mplo

yee

s,

pen

sion b

enef

its

ves

t af

ter

ten y

ears

of

serv

ice.

P

arti

cipat

ing m

ember

s w

ho r

etir

e at

age

62 (

reduce

d b

enef

its)

or

afte

r ag

e 67 (

full

ben

efit

s) w

ith t

en y

ears

of

cred

ited

serv

ice

are

enti

tled

to a

n a

nnual

ret

irem

ent

ben

efit

, pay

able

month

ly f

or

life

, in

an

amount

equal

to 1

2/3

% o

f th

eir

final

rat

e of

earn

ings,

for

each

yea

r of

cred

ited

serv

ice

up t

o 1

5 y

ears

, an

d 2

% f

or

each

yea

r th

erea

fter

. I

MR

F a

lso p

rovid

es d

eath

and d

isab

ilit

y b

enef

its.

T

hes

e ben

efit

pro

vis

ions

and a

ll o

ther

req

uir

emen

ts a

re

esta

bli

shed

by s

tate

sta

tute

. P

arti

cipat

ing m

ember

s ar

e re

quir

ed t

o c

ontr

ibute

4.5

% o

f

thei

r an

nual

sal

ary

to I

MR

F. T

he

Cit

y i

s re

quir

ed t

o c

ontr

ibute

the

rem

ainin

g

amounts

nec

essa

ry t

o f

und I

MR

F a

s sp

ecif

ied b

y s

tatu

te.

The

emplo

yer

contr

ibuti

on

rate

for

the

cale

ndar

yea

r en

ded

2011 w

as 1

1.6

4%

of

cover

ed p

ayro

ll.

Poli

ce P

ensi

on P

lan

Poli

ce s

worn

per

sonnel

are

cover

ed b

y t

he

Po

lice

Pen

sio

n P

lan

. A

lth

ou

gh

th

is i

s a

single

-em

plo

yer

pen

sion p

lan, th

e def

ined

ben

efit

s an

d e

mplo

yee

and e

mplo

yer

contr

ibuti

on l

evel

s ar

e gover

ned

by I

llin

ois

Com

pil

ed S

tatu

tes

(40 I

LC

S 5

/3-1

) an

d

may

be

amen

ded

only

by t

he

Illi

nois

leg

isla

ture

. T

he

Cit

y a

ccounts

for

the

Poli

ce

Pen

sio

n P

lan

as

a p

ensi

on

tru

st f

un

d.

A-19

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

8.

DE

FIN

ED

BE

NE

FIT

PE

NS

ION

PL

AN

S (

Conti

nued

)

a.

P

lan

Des

crip

tio

ns

(Co

nti

nu

ed)

Poli

ce P

ensi

on P

lan

(C

onti

nued

)

At

Jun

e 3

0,

20

11

, th

e P

oli

ce P

ensi

on P

lan m

ember

ship

consi

sted

of:

R

etir

ees

and

ben

efic

iari

es c

urr

entl

y r

ecei

vin

g b

enef

its

an

d t

erm

inat

ed e

mp

loyee

s en

titl

ed t

o b

enef

its

bu

t n

ot

yet

rec

eivin

g t

hem

12

Cu

rren

t em

plo

yee

s

V

este

d

2

4

N

on

ves

ted

13

TO

TA

L

4

9

N

um

ber

of

par

tici

pat

ing e

mp

loyer

s

1

The

Poli

ce P

ensi

on P

lan p

rovid

es r

etir

emen

t ben

efit

s as

wel

l as

dea

th a

nd d

isab

ilit

y

ben

efit

s.

Tie

r 1 e

mplo

yee

s (t

hose

hir

ed a

s a

poli

ce o

ffic

er p

rior

to J

anuar

y 1, 2011)

atta

inin

g t

he

age

of

50 o

r old

er w

ith 2

0 o

r m

ore

yea

rs o

f cr

edit

able

ser

vic

e ar

e

enti

tled

to r

ecei

ve

an a

nnual

ret

irem

ent

ben

efit

equal

to o

ne-

hal

f of

the

sala

ry

atta

ched

to t

he

rank h

eld o

n t

he

last

day

of

serv

ice,

or

for

one

yea

r pri

or

to t

he

last

day

, w

hic

hev

er i

s gre

ater

. T

he

annual

ben

efit

shal

l be

incr

ease

d b

y 2

.50%

of

such

sala

ry f

or

each

addit

ional

yea

r of

serv

ice

over

20 y

ears

up t

o 3

0 y

ears

to a

max

imum

of

75.0

0%

of

such

sal

ary.

E

mplo

yee

s w

ith a

t le

ast

eight

yea

rs b

ut

less

than

20 y

ears

of

cred

ited

ser

vic

e m

ay r

etir

e at

or

afte

r ag

e 60 a

nd r

ecei

ve

a re

duce

d b

enef

it. T

he

month

ly b

enef

it o

f a

poli

ce o

ffic

er w

ho r

etir

ed w

ith 2

0 o

r m

ore

yea

rs o

f se

rvic

e af

ter

Januar

y 1

, 1977 s

hal

l be

incr

ease

d a

nnual

ly, fo

llow

ing t

he

firs

t an

niv

ersa

ry d

ate

of

reti

rem

ent

and b

e pai

d u

pon r

each

ing t

he

age

of

at l

east

55 y

ears

, by 3

.00%

of

the

ori

gin

al p

ensi

on a

nd 3

.00%

com

pounded

annual

ly t

her

eaft

er.

Tie

r 2 e

mplo

yee

s (t

hose

hir

ed o

n o

r af

ter

Januar

y 1

, 2011)

atta

inin

g t

he

age

of

55 o

r

old

er w

ith t

en o

r m

ore

yea

rs o

f cr

edit

able

ser

vic

e ar

e en

titl

ed t

o r

ecei

ve

an a

nnual

reti

rem

ent

ben

efit

equal

to t

he

aver

age

month

ly s

alar

y obta

ined

by d

ivid

ing t

he

tota

l

sala

ry o

f th

e poli

ce o

ffic

er d

uri

ng t

he

96 c

on

secu

tiv

e m

on

ths

of

serv

ice

wit

hin

th

e

last

120 m

onth

s of

serv

ice

in w

hic

h t

he

tota

l sa

lary

was

the

hig

hes

t by t

he

num

ber

of

mon

ths o

f ser

vice

in th

at p

erio

d. P

olic

e of

ficer

s’ sa

lary

for p

ensi

on p

urpo

ses i

s ca

pped

at

$106,8

00, plu

s th

e le

sser

of

½ o

f th

e an

nual

chan

ge

in t

he

Con

sum

er P

rice

Index

or

3.0

0%

com

pounded

. T

he

annual

ben

efit

shal

l be

incr

ease

d b

y 2

.50%

of

such

sal

ary f

or

each

addit

ional

yea

r of

serv

ice

over

20 y

ears

up t

o 3

0 y

ears

to a

max

imum

of

75.0

0%

of

such

sal

ary.

E

mplo

yee

s w

ith a

t le

ast

ten y

ears

may

ret

ire

at

or

afte

r ag

e 50 a

nd r

ecei

ve

a re

duce

d b

enef

it (

i.e.

, ½

% f

or

each

month

under

55).

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

8.

DE

FIN

ED

BE

NE

FIT

PE

NS

ION

PL

AN

S (

Conti

nued

)

a.

P

lan D

escr

ipti

ons

(Conti

nued

)

Poli

ce P

ensi

on P

lan

(C

onti

nued

)

The

month

ly b

enef

it o

f a

Tie

r 2 p

oli

ce o

ffic

er s

hal

l b

e in

crea

sed a

nnual

ly a

t ag

e 60

on t

he

Januar

y 1

st a

fter

the

poli

ce o

ffic

er r

etir

es, or

the

firs

t an

niv

ersa

ry o

f th

e

pen

sion s

tart

ing d

ate,

whic

hev

er i

s la

ter.

N

onco

mpoundin

g i

ncr

ease

s occ

ur

annual

ly,

each

Jan

uar

y t

her

eaft

er. T

he

incr

ease

is

the

less

er o

f 3.0

0%

or

½ o

f th

e ch

ange

in t

he

Consu

mer

Pri

ce I

ndex

for

the

pro

ceed

ing c

alen

dar

yea

r.

Em

plo

yee

s ar

e re

quir

ed b

y I

LC

S t

o c

ontr

ibute

9.9

1%

of

thei

r bas

e sa

lary

to t

he

Poli

ce P

ensi

on P

lan. I

f an

em

plo

yee

lea

ves

cover

ed e

mplo

ym

ent

wit

h l

ess

than

20

yea

rs o

f se

rvic

e, a

ccum

ula

ted e

mplo

yee

contr

ibuti

ons

may

be

refu

nded

wit

hout

accu

mula

ted i

nte

rest

. T

he

Cit

y i

s re

quir

ed t

o c

ontr

ibute

the

rem

ainin

g a

mounts

nec

essa

ry t

o f

inan

ce t

he

Poli

ce P

ensi

on P

lan

, in

clu

din

g t

he

cost

s o

f ad

min

iste

rin

g t

he

pla

n, as

act

uar

iall

y d

eter

min

ed b

y a

n e

nro

lled

act

uar

y.

Eff

ecti

ve

Januar

y 1

, 2011, th

e

Cit

y h

as u

nti

l th

e yea

r 2

04

0 t

o f

un

d 9

0%

the

pas

t se

rvic

e co

st f

or

the

Po

lice

Pen

sio

n

Pla

n. F

or

the

yea

r en

ded

June

30, 2012, th

e C

ity’s

con

tribu

tion

was

25.2

9%

of

cover

ed p

ayro

ll.

The

pla

n i

s ac

counte

d f

or

on t

he

econom

ic r

esourc

es m

easu

rem

ent

focu

s an

d t

he

accr

ual

bas

is o

f ac

counti

ng. E

mplo

yer

and e

mplo

yee

contr

ibuti

ons

are

reco

gniz

ed

when

ear

ned

in t

he

yea

r th

at t

he

contr

ibuti

ons

are

requir

ed, ben

efit

s an

d r

efunds

are

reco

gniz

ed a

s an

ex

pen

se a

nd l

iabil

ity w

hen

due

and p

ayab

le.

b.

Sig

nif

ican

t In

ves

tmen

ts

Ther

e w

ere

no i

nves

tmen

ts (

oth

er t

han

U.S

. G

over

nm

ent

guar

ante

ed o

bli

gat

ions

and

mutu

al f

unds)

in a

ny o

ne

org

aniz

atio

n t

hat

rep

rese

nt

5.0

0%

or

more

of

pla

n n

et a

sset

s

for

the

Po

lice

Pen

sio

n P

lan

. I

nfo

rmat

ion

fo

r IM

RF

is

no

t av

aila

ble

.

A-20

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

8.

DE

FIN

ED

BE

NE

FIT

PE

NS

ION

PL

AN

S (

Conti

nued

)

c.

A

nn

ual

Pen

sio

n C

ost

s

Em

plo

yer

contr

ibuti

ons

hav

e bee

n d

eter

min

ed a

s fo

llow

s:

Illi

no

is

Mu

nic

ipal

Ret

irem

ent

Po

lice

Pen

sio

n

Act

uar

ial

val

uat

ion

dat

e D

ecem

ber

31

,

20

09

Jun

e 3

0,

20

11

Act

uar

ial

cost

met

ho

d

En

try-a

ge

No

rmal

En

try-a

ge

No

rmal

Ass

et v

alu

atio

n m

eth

od

5

Yea

r

Sm

oo

thed

Mar

ket

Mar

ket

Am

ort

izat

ion

met

ho

d

Lev

el

Per

cen

tage

of

Pay

roll

Lev

el

Per

cen

tage

of

Pay

roll

Am

ort

izat

ion

per

iod

3

0 Y

ears

,

Open

22

Yea

rs,

Clo

sed

Sig

nif

ican

t ac

tuar

ial

assu

mp

tio

ns

a)

R

ate

of

retu

rn o

n p

rese

nt

7

.50

%

7.5

0%

an

d f

utu

re a

sset

s C

om

pounded

An

nu

ally

Com

pounded

An

nu

ally

b

) P

roje

cted

sal

ary i

ncr

ease

4

.00

%

5.5

0%

at

trib

uta

ble

to

in

flat

ion

C

om

pounded

C

om

pounded

A

nn

ual

ly

An

nu

ally

c)

A

dd

itio

nal

pro

ject

ed

.4

0%

to

10

.00

%

No

t A

vai

lab

le

sa

lary

in

crea

ses

for

sen

iori

ty/m

erit

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

8.

DE

FIN

ED

BE

NE

FIT

PE

NS

ION

PL

AN

S (

Conti

nued

)

c.

A

nnual

Pen

sion C

ost

s (C

onti

nued

)

Em

plo

yer

annual

pen

sion c

ost

s (A

PC

), a

ctual

contr

ibuti

ons

and t

he

net

pen

sion

obli

gat

ion (

NP

O)

are

as f

oll

ow

s.

The

NP

O i

s th

e cu

mula

tive

dif

fere

nce

bet

wee

n t

he

AP

C a

nd

th

e co

ntr

ibu

tio

ns

actu

ally

mad

e.

Fis

cal

Yea

r

Illi

no

is

Mu

nic

ipal

Ret

irem

ent

Po

lice

Pen

sion

An

nu

al p

ensi

on

co

sts

2012

$

35

7,3

19

$

759,7

93

(A

PC

) 2011

3

74

,10

4

712,0

53

2010

3

53

,90

2

586,9

54

Act

ual

co

ntr

ibu

tio

n

2012

$

35

7,3

19

$

747,9

43

2011

3

74

,10

4

703,4

15

2010

3

53

,90

2

531,5

59

Per

cen

tage

of

AP

C

2012

10

0.0

%

98

.4%

co

ntr

ibu

ted

2011

10

0.0

%

98

.8%

2010

10

0.0

%

90

.6%

NP

O (

asse

t)

2012

$

- $

636,0

01

2011

-

624,1

51

2010

-

615,5

13

T

he

NP

O a

t Ju

ne

30,

2012 f

or

the

Poli

ce P

ensi

on

Pla

n h

as b

een c

alcu

late

d a

s

foll

ow

s:

Po

lice

Pen

sion

An

nu

al r

equ

ired

co

ntr

ibu

tio

n

$

747,9

43

Inte

rest

on

net

pen

sio

n o

bli

gat

ion

46,8

11

Ad

just

men

t to

an

nu

al r

equ

ired

co

ntr

ibu

tio

n

(3

4,9

61

)

An

nu

al p

ensi

on

co

st

759,7

93

Co

ntr

ibu

tio

ns

mad

e

747,9

43

Incr

ease

in

net

pen

sio

n o

bli

gat

ion

(as

set)

11,8

50

Net

pen

sio

n o

bli

gat

ion

(as

set)

, b

egin

nin

g o

f yea

r

624,1

51

NE

T P

EN

SIO

N O

BL

IGA

TIO

N (

AS

SE

T),

EN

D O

F Y

EA

R

$

636,0

01

A-21

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

8.

DE

FIN

ED

BE

NE

FIT

PE

NS

ION

PL

AN

S (

Conti

nued

)

d.

Funded

Sta

tus

T

he

funded

sta

tus

of

the

pla

ns

as o

f Ju

ne

30, 2012, bas

ed o

n a

ctuar

ial

val

uat

ions

per

form

ed a

s of

Dec

ember

31, 2011 a

nd J

une

30, 2012, is

as

foll

ow

s.

The

actu

aria

l as

sum

pti

ons

use

d t

o d

eter

min

e th

e fu

nded

sta

tus

of

the

pla

ns

are

the

sam

e ac

tuar

ial

assu

mpti

ons

use

d t

o d

eter

min

e th

e em

plo

yer

AP

C o

f th

e pla

ns

as d

iscl

ose

d i

n N

ote

9-c

:

Il

lin

ois

M

un

icip

al

Ret

irem

ent

P

oli

ce

Pen

sio

n

A

ctu

aria

l ac

cru

ed l

iab

ilit

y (

AA

L)

$

6,9

94

,10

2

$

20

,58

0,9

31

A

ctu

aria

l val

ue

of

pla

n a

sset

s

4,9

98

,54

1

1

3,3

41

,34

0

Un

fun

ded

act

uar

ial

accr

ued

lia

bil

ity (

UA

AL

)

1,9

95

,56

1

7

,23

9,5

91

F

un

ded

rat

io (

actu

aria

l val

ue

of

pla

n a

sset

s/A

AL

)

71

.47

%

6

4.8

2%

C

over

ed p

ayro

ll (

acti

ve

pla

n m

emb

ers)

$

3

,12

5,2

26

$

2

,95

7,3

17

U

AA

L a

s a

per

centa

ge

of

cover

ed p

ayro

ll

6

3.8

5%

24

4.8

0%

See

the

sched

ule

s of

fundin

g p

rogre

ss i

n t

he

requir

ed s

upple

men

tary

info

rmat

ion

imm

edia

tely

foll

ow

ing t

he

note

s to

fin

anci

al s

tate

men

ts f

or

addit

ional

info

rmat

ion

rela

ted t

o t

he

funded

sta

tus

of

the

pla

ns.

9.

OT

HE

R P

OS

TE

MP

LO

YM

EN

T B

EN

EF

ITS

Pla

n D

escr

ipti

on

In

ad

dit

ion

to

pro

vid

ing t

he

pen

sio

n b

enef

its

des

crib

ed, th

e C

ity p

rovid

es p

ost

emplo

ym

ent

hea

lth b

enef

its

(OP

EB

) fo

r re

tire

d e

mplo

yee

s th

rough a

sin

gle

-em

plo

yer

def

ined

ben

efit

pla

n. T

he

ben

efit

s, b

enef

it l

evel

s, e

mplo

yee

contr

ibuti

ons

and e

mplo

yer

contr

ibuti

ons

are

gover

ned

by t

he

Cit

y a

nd c

an b

e am

ended

by t

he

Cit

y t

hro

ugh i

ts p

erso

nnel

man

ual

and

unio

n c

ontr

acts

. T

he

pla

n d

oes

not

issu

e a

separ

ate

report

.

B

enef

its

Pro

vid

ed

T

he

Cit

y p

rovid

es p

ost

emplo

ym

ent

hea

lth c

are

ben

efit

s to

its

ret

iree

s.

To b

e el

igib

le f

or

ben

efit

s, a

n e

mplo

yee

must

qual

ify fo

r ret

irem

ent u

nder

one

of t

he C

ity’s

retir

emen

t pla

ns

or

mee

t C

OB

RA

req

uir

emen

ts.

A

ll h

ealt

h c

are

ben

efit

s ar

e pro

vid

ed th

roug

h th

e C

ity’s

hea

lth i

nsu

rance

pla

n. T

he

ben

efit

le

vel

s ar

e th

e sa

me

as t

hose

aff

ord

ed t

o a

ctiv

e em

plo

yee

s.

Ben

efit

s in

clude

gen

eral

in

pat

ient

and o

utp

atie

nt

med

ical

ser

vic

es;

men

tal,

ner

vous

and s

ubst

ance

abuse

car

e; v

isio

n

care

; den

tal

care

and p

resc

ripti

ons.

U

pon a

ret

iree

rea

chin

g a

ge

65 y

ears

of

age,

Med

icar

e be

com

es th

e pr

imar

y in

sure

r and

the

City

’s p

lan

beco

mes

seco

ndar

y.

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

9.

OT

HE

R P

OS

TE

MP

LO

YM

EN

T B

EN

EF

ITS

(C

onti

nued

)

M

ember

ship

A

t Ju

ne

30, 2012, m

ember

ship

consi

sted

of:

Ret

iree

s an

d b

enef

icia

ries

curr

entl

y r

ecei

vin

g

ben

efit

s

8

Ter

min

ated

em

plo

yee

s en

titl

ed

to

ben

efit

s but

not

yet

rec

eivin

g t

hem

-

Act

ive

emplo

yee

s

13

3

TO

TA

L

1

41

Par

tici

pat

ing e

mp

loyer

s

1

F

undin

g P

oli

cy

T

he

Cit

y n

egoti

ates

the

contr

ibuti

on p

erce

nta

ges

bet

wee

n t

he

Cit

y a

nd e

mplo

yee

s th

rough

the

unio

n c

ontr

acts

and p

erso

nnel

poli

cy. R

etir

ees

contr

ibute

0%

-100%

of

the

pre

miu

m

and t

he

Cit

y c

ontr

ibute

s an

y r

emai

nder

to c

over

the

cost

of

pro

vid

ing t

he

ben

efit

s to

the

reti

rees

via

the

insu

red p

lan.

Ret

iree

s ar

e re

sponsi

ble

for

any p

rem

ium

incr

ease

s af

ter

reti

rem

ent.

O

nce

eli

gib

le f

or

Med

icar

e, r

etir

ees

pay

the

full

am

ount

of

the

Med

icar

e

supple

men

t pre

miu

m. F

or

the

fisc

al y

ear

ended

June

30, 2012, re

tire

es c

ontr

ibute

d

$3

4,8

93

an

d t

he

Cit

y c

on

trib

ute

d $

11

1,4

83

. A

ctiv

e em

plo

yee

s do n

ot

contr

ibute

to t

he

pla

n u

nti

l re

tire

men

t.

A

nn

ual

OP

EB

Co

sts

and

Net

OP

EB

Ob

ligat

ion

Th

e C

ity’s

ann

ual O

PEB

cos

t, th

e pe

rcen

tage

of a

nnua

l OPE

B c

ost c

ontri

bute

d to

the

plan

an

d t

he

net

OP

EB

obli

gat

ion w

as a

s fo

llow

s:

F

isca

l

Yea

r

Ended

Annual

OP

EB

Cost

Em

plo

yer

Co

ntr

ibu

tio

ns

Per

cen

tage

of

Annual

OP

EB

Cost

Co

ntr

ibu

ted

Net

OP

EB

Obli

gat

ion

Jun

e 3

0,

20

10

$

3

20

,68

5

$

11

1,4

83

34

.76

%

$

41

5,5

95

Jun

e 3

0,

20

11

32

6,2

36

11

1,4

83

34

.17

%

6

30

,34

8

Jun

e 3

0,

20

12

32

3,5

11

11

1,4

83

34

.46

%

8

42

,37

6

A-22

CIT

Y O

F L

OC

KP

OR

T, IL

LIN

OIS

NO

TE

S T

O F

INA

NC

IAL

ST

AT

EM

EN

TS

(C

onti

nued

)

9.

OT

HE

R P

OS

TE

MP

LO

YM

EN

T B

EN

EF

ITS

(C

onti

nued

)

An

nu

al O

PE

B C

ost

s an

d N

et O

PE

B O

bli

gat

ion

(C

on

tin

ued

)

The

net

OP

EB

obli

gat

ion (

NO

PE

BO

) as

June

30, 20

12 w

as c

alcu

late

d a

s fo

llow

s:

A

nnual

req

uir

ed c

ontr

ibuti

on

$

3

19

,30

9

Inte

rest

on n

et O

PE

B o

bli

gat

ion

25

,21

4

Adju

stm

ent

to a

nnual

req

uir

ed c

ontr

ibuti

on

(21,0

12)

An

nu

al O

PE

B c

ost

32

3,5

11

C

on

trib

uti

on

s m

ade

1

11

,48

3

Incr

ease

in

net

OP

EB

ob

ligat

ion

21

2,0

28

N

et O

PE

B o

bli

gat

ion

, beg

innin

g o

f ye

ar

6

30

,34

8

NE

T O

PE

B O

BL

IGA

TIO

N, E

ND

OF

YE

AR

$

8

42

,37

6

F

unded

Sta

tus

and F

undin

g P

rogre

ss. T

he

funded

sta

tus

of

the

pla

n a

s of

June

30, 2012,

was

as

foll

ow

s:

A

ctuar

ial

accr

ued

lia

bil

ity (

AA

L)

$

7,3

91

,15

6

Act

uar

ial

val

ue

of

pla

n a

sset

s

- U

nfu

nded

act

uar

ial

accr

ued

lia

bil

ity (

UA

AL

)

7,3

91

,15

6

Funded

rat

io (

actu

aria

l val

ue

of

pla

n a

sset

s/A

AL

)

0.0

0%

C

over

ed p

ayro

ll (

acti

ve

pla

n m

ember

s)

$

5,8

84

,32

7

UA

AL

as

a per

centa

ge

of

cover

ed p

ayro

ll

125.6

1%

Act

uar

ial

val

uat

ions

of

an o

ngoin

g p

lan i

nvolv

e es

tim

ates

of

the

val

ue

of

report

ed a

mounts

an

d a

ssum

pti

ons

about

the

pro

bab

ilit

y o

f occ

urr

ence

of

even

ts f

ar i

nto

the

futu

re.

Ex

ample

s in

clude

assu

mpti

ons

about

futu

re e

mplo

ym

ent,

mort

alit

y a

nd t

he

hea

lthca

re c

ost

tr

end. A

mounts

det

erm

ined

reg

ardin

g t

he

funded

sta

tus

of

the

pla

n a

nd t

he

annual

req

uir

ed

contr

ibuti

ons

of

the

emplo

yer

are

subje

ct t

o c

onti

nual

rev

isio

n a

s ac

tual

res

ult

s ar

e co

mpar

ed w

ith p

ast

expec

tati

ons

and n

ew e

stim

ates

are

mad

e ab

out

the

futu

re. T

he

sched

ule

of

fundin

g p

rogre

ss, pre

sente

d a

s re

quir

ed s

upple

men

tary

info

rmat

ion f

oll

ow

ing

the

note

s to

fin

anci

al s

tate

men

ts, pre

sents

mult

i-yea

r tr

end i

nfo

rmat

ion t

hat

show

s w

het

her

th

e ac

tuar

ial

val

ue

of

pla

n a

sset

s is

incr

easi

ng o

r dec

reas

ing o

ver

tim

e re

lati

ve

to t

he

actu

aria

l ac

crued

lia

bil

itie

s fo

r ben

efit

s.

A

ctuar

ial

Met

hods

and A

ssum

pti

ons.

P

roje

ctio

ns

of

ben

efit

s fo

r fi

nan

cial

rep

ort

ing

purp

ose

s ar

e bas

ed o

n t

he

subst

anti

ve

pla

n (

the

pla

n a

s under

stood b

y t

he

emplo

yer

and

pla

n m

ember

s) a

nd i

ncl

ude

the

types

of

ben

efit

s pro

vid

ed a

t th

e ti

me

of

each

val

uat

ion a

nd

the

his

tori

cal

pat

tern

of

shar

ing o

f ben

efit

cost

s bet

wee

n t

he

emplo

yer

and p

lan m

ember

s to

th

at p

oin

t.

The

actu

aria

l m

ethods

and a

ssum

pti

ons

use

d i

ncl

ude

tech

niq

ues

that

are

des

igned

to r

educe

short

-ter

m v

ola

tili

ty i

n a

ctuar

ial

accr

ued

lia

bil

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A-26

APPENDIX B DESCRIBING BOOK-ENTRY-ONLY ISSUANCE

1. The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for

the Bonds (the “Securities”). The Securities 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 Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, 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 Securities under the DTC system must be made by or through Direct Participants, which

will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“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 Securities 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 Securities, except in the event that use of the book-entry system for the Securities is discontinued.

4. To facilitate subsequent transfers, all Securities 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 Securities 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 Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities 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.

B-1

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. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).

8. Redemption proceeds, distributions, and dividend payments on the Securities 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 City or the Paying Agent, on payable 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 City, 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 City 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. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to any Tender/Remarketing Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant’s interest in the Securities, on DTC’s records, to any Tender/Remarketing Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Securities to any Tender/Remarketing Agent’s DTC account.

10. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to the City or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.

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

12. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof.

B-2

APPENDIX C __[Issuance Date]__, 2013

$__________ GENERAL OBLIGATION APPRECIATION LIMITED BONDS, SERIES 2013,

OF THE CITY OF LOCKPORT WILL COUNTY, ILLINOIS

Opinion of Bond Counsel

We have acted as bond counsel for, and have examined, among other things, certified copies of the proceedings of the City Council of, the City of Lockport, Will County, Illinois (the “Issuer”), in connection with the issuance of $__________ ($__________ Compound Accreted Value at Maturity) General Obligation Capital Appreciation Limited Bonds, Series 2013 (the “Bonds”), dated __[Issuance date]__, 2013 and compounding accreted value at the compounding rates and maturing annually on January 1 of each of the years, as follows: Year

Initial Principal

Amount($)

Compound Accreted Value

At Maturity($)

Compounding

Rate (%)

2016 2017 2018

*$__________ is the aggregate Compound Accreted Value at Maturity

The Bonds are not subject to call for optional redemption prior to maturity.

The Bonds are issuable in fully registered form in the denomination of $5,000 (Compound Accreted Value at Maturity) each or any authorized integral multiple thereof. The Bank of New York Mellon Trust Company, N.A., Chicago, Illinois, is the registrar (including its successors, the “Bond Registrar”), and the paying agent (including its successors, the “Paying Agent”) in connection with the Bonds. Payment of the maturing principal of the Bonds shall be made to the registered owners upon presentation and surrender to the Paying Agent.

For the prompt payment of the Bonds, the Issuer’s full faith, credit and resources is irrevocably pledged, and the Issuer has levied an ad valorem tax without limit as to rate or amount on all taxable property within the City of Lockport, Illinois to be extended and collected in each year to timely pay the applicable Compound Accreted Value at Maturity on the Bonds as set forth above.

The Bonds are issued by the Issuer for the purpose of financing all or a part of the costs of the construction, reconstruction, resurfacing and/or repair of various streets within the Municipality; for replacement, expansion, removal or enhancement of certain infrastructure and facilities; for financing the acquisition (and certain site improvement work, as applicable) of real estate and along South State Street, north and south of 7th Street, and on the east and west sides of South State Street, for resale or other disposition for construction retail, office or medium density residential uses, roads and infrastructure facilities and improvements, and related facilities, improvements and costs, pursuant to and in all respects in compliance with the provisions of the Illinois Municipal Code (Section 5/1-1-1 et seq. of Chapter 65 of the Illinois Compiled Statutes) and the Local Government Debt Reform Act (Section 3.50/1 et. seq. of Chapter 30 of the Illinois Compiled Statutes), and all acts amendatory thereof and supplementary thereto, and in compliance with an authorizing ordinance therefor duly adopted by the Issuer’s City Council on ___________, 2013 (the “Bond Ordinance”).

C-1

We are of the opinion that the foregoing show lawful authority for the issuance and sale of the Bonds under and pursuant to the Constitution and laws of the State of Illinois, and that the Bonds constitute legal, valid and binding general obligations of the Issuer, in connection with which the Issuer’s full faith, credit and resources, including the power to levy taxes without limitation as to rate or amount, are irrevocably pledged to pay the applicable Compound Accreted Value at Maturity. We are also of the opinion that as of the date of delivery thereof, and assuming the Issuer’s continued compliance with the terms and provisions of the Bond Ordinance, the Bonds are not arbitrage bonds, private activity bonds or hedge bonds, and the interest on the Bonds (i.e., compounded accreted value of the initial principal amount at the applicable compounding rate) is not a specific item of tax preference for individuals and corporations and is excluded from gross income under Section 103 of the Internal Revenue Code of 1986, as amended. However, certain collateral federal income tax consequences include that the interest on the Bonds may be subject to an alternative minimum tax on adjusted current earning and a foreign branch profits tax, on certain corporations, and may be a factor in a computation in connection with which certain social security and railroad pension income recipients may be subject to federal income taxes.

The interest on the Bonds is not exempt from income taxation by the State of Illinois. We are also of the opinion that the Bonds constitute “qualified tax-exempt obligations” under

Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. We express no opinion herein as to the accuracy, adequacy or completeness of the

offering document or any other information furnished in connection with the offer or sale of the Bonds. In rendering this opinion, we have relied upon certifications of the Issuer with respect to

certain material facts within the Issuer’s knowledge. Our opinion represents our legal judgment based upon our review of the law and the facts that we deem relevant to render such opinion and is not a guarantee of a result. This opinion is given as of the date hereof and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur.

Respectfully yours,

C-2

OFFICIAL BID FORM City of Lockport July 17, 2013 222 East Ninth Street (CLOSED SPEER AUCTION) Speer Financial, Inc. Lockport, Illinois 60441

Council Members:

For the $1,492,900* General Obligation Capital Appreciation Limited Bonds, Series 2013 of the City of Lockport, Will County, Illinois, as described in the annexed Official Notice of Sale, which is expressly made a part of this bid, we will pay you $_______________________ for Bonds bearing interest as follows (each rate a multiple of 1/8 or 1/100 of 1%).

COMPUTATION OF PRICE BID FOR CAPITAL APPRECIATION BONDS Compound Compound Due Accreted Value Reoffering Due Accreted Value Reoffering Jan. 1 At Maturity*(1) Yield(2) Jan. 1 At Maturity*(1) Yield(2) 2015 ......... $ 70,000 ________% 2017 ......... $785,000 ________% 2016 ......... $725,000 ________% Discount............................................ $_______________ Price Bid for the Series 2013A Bonds................ $_______________ True Interest Rate(3)............................... _______________% Notes: (1) The District reserves the right to increase or decrease any or all maturity values, in multiples of $5,000, in order to result in an original

principal amount of approximately $1,495,000*. (2) State interest rate for Compounded Amount At Maturity. (3) True interest rate assuming a August 1, 2013 delivery date.

The Bonds are to be executed and delivered to us in accordance with the terms of this bid accompanied by the approving legal opinion of

Evans, Froehlich, Beth & Chamley, Champaign, Illinois. The City will pay for the legal opinion. The underwriter agrees to apply for CUSIP numbers within 24 hours and pay the fee charged by the CUSIP Service Bureau and will accept the Bonds with the CUSIP numbers as entered on the Bonds.

As evidence of our good faith, we have wire transferred or enclosed herewith a check or Surety Bond payable to the order of the

Treasurer of the City in the amount of TWO PERCENT OF PAR (the “Deposit”) under the terms provided in your Official Notice of Sale. Attached hereto is a list of members of our account on whose behalf this bid is made.

Form of Deposit Account Manager Information Bidders Option Insurance Check One: Name Certified/Cashier’s Check [ ] Financial Surety Bond [ ] Address Wire Transfer [ ] By Amount: $29,858 City State/Zip

Direct Phone ( ) FAX Number ( ) E-Mail Address

The foregoing bid was accepted and the Bonds sold by ordinance of the City on July 17, 2013, and receipt is hereby acknowledged of the good faith Deposit which is being held in accordance with the terms of the annexed Official Notice of Sale.

CITY OF LOCKPORT, WILL COUNTY, ILLINOIS

Mayor *Subject to change.

----------------------- NOT PART OF THE BID ----------------------- (Calculation of true interest cost)

Gross Interest $

Plus Discount $

True Interest Cost $

True Interest Rate %

TOTAL BOND YEARS 4,248.52

AVERAGE LIFE 2.846 Years

We have purchased insurance from:

Name of Insurer

(Please fill in)

_____________________ Premium: _____________ Maturities: (Check One) [__] ______________Years [__] All

OFFICIAL NOTICE OF SALE

$1,492,900*

CITY OF LOCKPORT Will County, Illinois

General Obligation Capital Appreciation Limited Bonds, Series 2013

(Closed Speer Auction) The City of Lockport, Will County, Illinois (the “City”), will receive electronic bids on the SpeerAuction (“SpeerAuction”) website address “www.SpeerAuction.com” for its $1,492,900* General Obligation Capital Appreciation Limited Bonds, Series 2013 (the “Bonds”), on an all or none basis between 10:00 A.M. and 10:15 A.M., C.D.T., July 17, 2013. To bid, bidders must have: (1) completed the registration form on the SpeerAuction website, and (2) requested and received admission to the City’s sale (as described below). Award will be made or all bids rejected at a meeting of the City on that date. The City reserves the right to change the date or time for receipt of bids. Any such change shall be made not less than twenty-four (24) hours prior to the revised date and time for receipt of the bids for the Bonds and shall be communicated by publishing the changes in the Amendments Page of the SpeerAuction webpage and through Thompson Municipal News.

The Bonds are valid and legally binding upon the City and all taxable property of the City is subject to the levy of ad valorem taxes to pay the same (the “Levied Taxes”) without limitation as to rate. The amount of Levied Taxes that may be extended to pay the Bonds is, however, limited as provided by applicable law as to “limited bonds”. The enforceability of the Bonds against the City may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditors’ rights and by equitable principles, whether considered at law or in equity, including the exercise of judicial discretion.

Method of bidding: All-or-none bids must be submitted via internet address www.SpeerAuction.com. No telephone, telefax or personal delivery bids will be accepted. The use of SpeerAuction shall be at the bidder’s risk and expense and the City shall have no liability with respect thereto, including (without limitation) liability with respect to incomplete, late arriving and non-arriving bids. To bid via the SpeerAuction webpage, bidders must first visit the SpeerAuction webpage where, if they have not previously registered with either SpeerAuction, Grant Street Group (the “Auction Administrator”) or any other website administered by the Auction Administrator, they may register and then request admission to bid on the Bonds. Bidders will be notified prior to the scheduled bidding time of their eligibility to bid. Only FINRA registered broker-dealers and dealer banks with DTC clearing arrangements will be eligible to bid. The “Rules” of the SpeerAuction bidding process may be viewed on the SpeerAuction webpage and are incorporated herein by reference. Bidders must comply with the Rules of SpeerAuction in addition to the requirements of the City’s Official Notice of Sale. In the event the Rules of SpeerAuction and this Official Notice of Sale conflict, this Official Notice of Sale shall be controlling. All bids must be submitted on the SpeerAuction webpage. Bidders may change and submit bids as many times as they choose during the sale period but may not delete a submitted bid. The last bid submitted by a bidder before the deadline for receipt of bids will be compared to all other final bids to determine the winning bidder. During the bidding, no bidder will see any other bidder’s bid nor the status of their bid relative to other bids (e.g., whether their bid is a leading bid). The bidder bears all risk of transmission failure. Any questions regarding bidding on the SpeerAuction website should be directed to Grant Street Group at (412) 391-5555 x370. The City reserves the right to reject all bids, to reject any bid not conforming to this Official Notice of Sale, and to waive any irregularity or informality with respect to any bid. Additionally, the City reserves the right to modify or amend this Official Notice of Sale; however, any such modification or amendment shall not be made less than twenty-four (24) hours prior to the date and time for receipt of bids on the Bonds and any such modification or amendment will be announced on the Amendments Page of the SpeerAuction webpage and through Thompson Municipal News.

The Bonds will be in fully registered form in the denominations of $5,000 compound accreted value at maturity and integral multiples thereof registered in the name of Cede & Co. as nominee of The Depository Trust Company (“DTC”), New York, New York, to which principal and interest payments representing the compound accreted value at maturity on the Bonds will be paid. Individual purchases will be in book-entry form only. Interest on the Bonds will be compounded on January 1 and July 1 of each year on the basis of a 360-day year of twelve 30-day months. Interest will be payable, together with principal, only at maturity. Principal and interest representing the compound accreted value at maturity are payable by the City’s registration and paying agent The Bank of New York Mellon Trust Company, N.A., Chicago, Illinois (the “Paying Agent”). The compound accreted value at maturity of the Bonds shall be payable in lawful money of the United States of America at the designated corporate trust office of the Paying Agent.

*Subject to change.

City of Lockport, Will County, Illinois General Obligation Capital Appreciation Limited Bonds, Series 2013 Notice of Sale Page 2 of 4

COMPOUNDED AMOUNT AT MATURITY – JANUARY 1

Amount at Due Amount at Due Maturity* Jan. 1 Maturity* Jan. 1 $ 70,000 ........ 2015 $785,000 ....... 2017 $725,000 ........ 2016

The City reserves the right to increase or decrease any or all maturity values, in multiples of $5,000, in order to result in an original principal amount of approximately $1,495,000*.

The Bonds are not subject to optional redemption prior to maturity. The bids must state a reoffering price or yield (stated interest rate for each compound accreted value at maturity). The Bonds will be awarded on the basis of true interest cost, determined in the following manner. The lowest true interest cost will be the annual interest rate (compounded on January 1 and July 1) necessary to discount the debt service payments on the Bonds from the payment dates thereof to the dated date (assumed to be August 1, 2013) and to the bid price. For the purpose of calculating true interest cost, the Bonds shall be deemed to become due in the compound accreted values at maturity and at the times set forth in the table of maturities set forth above. In the event two or more qualifying bids produce the identical lowest true interest cost, the winning bid shall be the bid that was submitted first in time on the SpeerAuction webpage. The Bonds will be awarded to the bidder complying with the terms of this Official Notice of Sale whose bid produces the lowest true interest cost rate to the City as determined by the City’s Financial Advisor, which determination shall be conclusive and binding on all bidders; provided, that the City reserves the right to reject all bids or any non-conforming bid and reserves the right to waive any informality in any bid. Bidders should verify the accuracy of their final bids and compare them to the winning bids reported on the SpeerAuction Observation Page immediately after the bidding. The true interest cost of each bid will be computed by SpeerAuction and reported on the Observation Page of the SpeerAuction webpage immediately following the date and time for receipt of bids. These true interest costs are subject to verification by the City’s Financial Advisor, will be posted for information purposes only and will not signify an actual award of any bid or an official declaration of the winning bid. The City or its Financial Advisor will notify the bidder to whom the Bonds will be awarded, if and when such award is made. The winning bidder will be required to make the standard filings and maintain the appropriate records routinely required pursuant to MSRB Rules G-8, G-11 and G-32. The winning bidder will be required to pay the standard MSRB charge for Bonds purchased. In addition, the winning bidder who is a member of the Securities Industry and Financial Markets Association (“SIFMA”) will be required to pay SIFMA’s standard charge per bond.

Each bid shall be accompanied by a certified or cashier’s check on, or a wire transfer from, a solvent bank or trust company or a Financial Surety Bond for TWO PERCENT OF PAR payable to the Treasurer of the City as evidence of good faith of the bidder (the “Deposit”). The Deposit of the successful bidder will be retained by the City pending delivery of the Bonds and all others will be promptly returned. Should the successful bidder fail to take up and pay for the Bonds when tendered in accordance with this Notice of Sale and said bid, said Deposit shall be retained as full and liquidated damages to the City caused by failure of the bidder to carry out the offer of purchase. Such Deposit will otherwise be applied on the purchase price upon delivery of the Bonds. No interest on the Deposit will accrue to the purchaser.

If a wire transfer is used for the Deposit, it must be sent according to the following wire instructions:

Amalgamated Bank of Chicago Corporate Trust

One West Monroe Chicago, IL 60603 ABA # 071003405

Credit To: 3281 Speer Bidding Escrow RE: City of Lockport, Will County, Illinois

bid for $1,492,900* General Obligation Capital Appreciation Limited Bonds, Series 2013

*Subject to change.

City of Lockport, Will County, Illinois General Obligation Capital Appreciation Limited Bonds, Series 2013 Notice of Sale Page 3 of 4

The wire shall arrive in such account no later than 30 minutes prior to the date and time of the sale of the Bonds. Contemporaneously with such wire transfer, the bidder shall send an email to [email protected] with the following information: (1) indication that a wire transfer has been made, (2) the amount of the wire transfer, (3) the issue to which it applies, and (4) the return wire instructions if such bidder is not awarded the Bonds. The City and any bidder who chooses to wire the Deposit hereby agree irrevocably that Speer Financial, Inc. (“Speer”) shall be the escrow holder of the Deposit wired to such account subject only to these conditions and duties: (i) if the bid is not accepted, Speer shall, at its expense, promptly return the Deposit amount to the unsuccessful bidder; (ii) if the bid is accepted, the Deposit shall be forwarded to the City; (iii) Speer shall bear all costs of maintaining the escrow account and returning the funds to the bidder; (iv) Speer shall not be an insurer of the Deposit amount and shall have no liability except if it willfully fails to perform, or recklessly disregards, its duties specified herein; and (v) income earned on the Deposit, if any, shall be retained by Speer.

If a Financial Surety Bond is used for the Deposit, it must be from an insurance company licensed to issue such a bond in the State of

Illinois and such bond must be submitted to Speer prior to the opening of the bids. The Financial Surety Bond must identify each bidder whose deposit is guaranteed by such Financial Surety Bond. If the Bonds are awarded to a bidder using a Financial Surety Bond, then that purchaser is required to submit its Deposit to the City in the form of a certified or cashier’s check or wire transfer as instructed by Speer, or the City not later than 3:00 P.M. on the next business day following the award. If such Deposit is not received by that time, the Financial Surety Bond may be drawn by the City to satisfy the Deposit requirement.

The City covenants and agrees to enter into a written agreement or contract, constituting an undertaking (the “Undertaking”) to provide ongoing disclosure about the City for the benefit of the beneficial owners of the Bonds on or before the date of delivery of the Bonds as required under Section (b)(5) of Rule 15c2-12 (the “Rule”) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934. The Undertaking shall be as described in the Official Statement, with such changes as may be agreed in writing by the Underwriter. The City represents that it is in compliance with each and every undertaking previously entered into it pursuant to the Rule. The Underwriter’s obligation to purchase the Bonds shall be conditioned upon the City delivering the Undertaking on or before the date of delivery of the Bonds.

By submitting a bid, any bidder makes the representation that it understands Bond Counsel represents the City in the Bond transaction and, if such bidder has retained Bond Counsel in an unrelated matter, such bidder represents that the signatory to the bid is duly authorized to, and does consent to and waive of and on behalf of such bidder any conflict of interest of Bond Counsel arising from any adverse position to the City in this matter; such consent and waiver shall supersede any formalities otherwise required in any separate understandings, guidelines or contractual arrangements between the bidder and Bond Counsel. Bonds will be delivered to the successful purchaser against full payment in immediately available funds as soon as they can be prepared and executed, which is expected to be on or about August 1, 2013. Should delivery be delayed beyond sixty (60) days from the date of sale for any reason beyond the control of the City except failure of performance by the purchaser, the City may cancel the award or the purchaser may withdraw the good faith deposit and thereafter the purchaser’s interest in and liability for the Bonds will cease. The Official Statement, when further supplemented by an addendum or addenda specifying the maturity dates, principal amounts, and interest rates of the Bonds, and any other information required by law or deemed appropriate by the City, shall constitute a “Final Official Statement” of the City with respect to the Bonds, as that term is defined in the Rule. By awarding the Bonds to any underwriter or underwriting syndicate, the City agrees that, no more than seven (7) business days after the date of such award, it shall provide, without cost to the senior managing underwriter of the syndicate to which the Bonds are awarded, up to 100 copies of the Final Official Statement to permit each “Participating Underwriter” (as that term is defined in the Rule) to comply with the provisions of such Rule. The City shall treat the senior managing underwriter of the syndicate to which the Bonds are awarded as its designated agent for purposes of distributing copies of the Final Official Statement to each Participating Underwriter. Any underwriter executing and delivering an Official Bid Form with respect to the Bonds agrees thereby that if its bid is accepted by the City it shall enter into a contractual relationship with all Participating Underwriters of the Bonds for purposes of assuring the receipt by each such Participating Underwriter of the Final Official Statement. By submission of its bid, the senior managing underwriter of the successful bidder agrees to supply all necessary pricing information and any Participating Underwriter identification necessary to complete the Official Statement within 24 hours after award of the Bonds. Additional copies of the Final Official Statement may be obtained by Participating Underwriters from the printer at cost. The City will, at its expense, deliver the Bonds to the purchaser in New York, New York, through the facilities of DTC and will pay for the bond attorney’s opinion. At the time of closing, the City will also furnish to the purchaser the following documents, each dated as of the date of delivery of the Bonds: (1) the unqualified opinion of Evans, Froehlich, Beth & Chamley, Champaign, Illinois, that the Bonds are lawful and enforceable lawful and enforceable obligations of the City in accordance with their terms (2) the opinion of said attorneys that the interest on the Bonds is exempt from federal income taxes as and to the extent set forth in the Official Statement for the Bonds; and (3) a no litigation certificate by the City.

City of Lockport, Will County, Illinois General Obligation Capital Appreciation Limited Bonds, Series 2013 Notice of Sale Page 4 of 4 The City intends to designate the Bonds as “qualified tax-exempt obligations” pursuant to the small issuer exception provided by Section 265(b) (3) of the Internal Revenue Code of 1986, as amended.

The City has authorized the printing and distribution of an Official Statement containing pertinent information relative to the City and the Bonds. Copies of such Official Statement or additional information may be obtained from Mr. Erik Brown, Finance Director, City of Lockport, 222 East Ninth Street, Lockport, Illinois 60441 or an electronic copy of this Official Statement is available from the www.speerfinancial.com web site under “Debt Auction Center/Competitive Sales Calendar” from the Independent Public Finance Consultants to the City, Speer Financial, Inc., One North LaSalle Street, Suite 4100, Chicago, Illinois 60602, telephone (312) 346-3700. /s/ STEVEN STREIT /s/ FRANK KOEHLER Mayor Interim City Administrator and City Planner CITY OF LOCKPORT CITY OF LOCKPORT Will County, Illinois Will County, Illinois

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