Loading...
TC Ord. No. 1998-08 Authorizing the issuance of certificates of participation in the amount of $7,085,000.00. -11 ORDINANCE NO. 98- 8 SERIES OF 1998 AN ORDINANCE AUTHORIZING THE ISSUANCE OF CERTIFICATES OF PARTICIPATION, SERIES 1998, OF THE TOWN OF AVON, COLORADO, IN THE AGGREGATE PRINCIPAL AMOUNT OF $7,085,000, AUTHORIZING THE EXECUTION AND DELIVERY BY THE TOWN OF A GROUND LEASE AGREEMENT, A LEASE PURCHASE AND SUBLEASE AGREEMENT AND AN OFFICIAL STATEMENT; APPROVING THE FORM OF A MORTGAGE AND INDENTURE OF TRUST; RATIFYING ACTION PREVIOUSLY TAKEN CONCERNING THE CERTIFICATES; AND PROVIDING OTHER MATTERS RELATING THERETO. WHEREAS, the Town of Avon, Eagle County, Colorado (the "Town ") is a duly organized and existing home rule municipality of the State of Colorado, created and operating pursuant to Article XX of the Constitution of the State of Colorado and the home rule charter of the Town (the "Charter "); and . WHEREAS, pursuant to Chapter XIV of the Charter, the Town is authorized to enter into one or more leases or lease- purchase agreements for land, buildings, equipment and other property for governmental or proprietary purposes; and WHEREAS, the Town Council has determined, and hereby deems, it is in the best interest of the Town and its inhabitants that the Town and the Town of Avon Finance Authority (the "Lessor ") enter into a Ground Lease Agreement dated as of July 1, 1998 (the "Ground Lease ") and a Lease Purchase and Sublease Agreement dated as of July 1, 1998 (the "Lease "), which provide for the leasing of a parcel of land (the "Site ") by the Town to the Lessor and the acquisition, construction and equipping thereon of a public works maintenance facility (the "Project ") by the Lessor and the leasing of the Project and the subleasing of the Site by the Lessor to the Town; and WHEREAS, to accomplish the purposes of the Ground Lease and the Lease, the Lessor and The Bank of Cherry Creek, N.A., as Trustee (the "Trustee "), will enter into a Mortgage and Indenture of Trust dated as of July 1, 1998 (the "Indenture "), pursuant to which there will be issued certain Certificates of Participation (Public Works Project), Series 1998, dated July 1, 1998, in the aggregate principal amount of $7,085,000 (the "Certificates "); and WHEREAS, the obligation of the Town to pay Base Rentals and Additional Rentals (both as defined in the Lease) shall be from year to year only; shall constitute currently budgeted expenditures of the Town; shall not constitute a mandatory charge or requirement in any ensuing budget year, and shall not constitute a general obligation or other indebtedness or multiple fiscal year financial obligation of the Town within the meaning of any constitutional, statutory or Charter limitation or requirement concerning the creation of indebtedness or multiple fiscal year financial obligations, nor a mandatory payment obligation of the Town in any ensuing fiscal year beyond any fiscal year during which the Lease shall be in effect; and WHEREAS, the Certificates shall evidence assignments of proportionate undivided interests in the rights to receive certain Revenues (as defined in the Lease), shall be payable solely from the sources therein provided, and shall not constitute a general obligation or other indebtedness or multiple fiscal year financial obligation of the Town within the meaning of any constitutional, statutory or Charter limitation or requirement concerning the creation of indebtedness or multiple fiscal year financial obligations, nor a mandatory payment obligation of the Town in any ensuing fiscal year beyond the current fiscal year; and WHEREAS, neither the Lease nor the issuance of the Certificates shall directly or indirectly obligate the Town to make any payments beyond those appropriated for any fiscal year during which the Lease shall be in effect; and WHEREAS, the Town has determined, and does hereby declare, that the proposal (the "Purchase Agreement ") submitted by Hanifen, Imhoff Inc., Denver, Colorado (the "Purchaser ") for the purchase of the Certificates at the purchase price as set forth, and otherwise upon the terms and provisions provided therein is a responsible proposal to the best advantage of the Town; and WHEREAS, there have been presented to the Town Council at this meeting: (i) the proposed form of the Ground Lease, (ii) the proposed form of the Lease, (iii) the proposed form of the Indenture, (iv) the proposed form of the Continuing Disclosure Certificate (the "Continuing Disclosure Certificate ") to be provided by the Town; (v) the proposed form of the Purchase Agreement; (vi) the Preliminary Official Statement (the "Preliminary Official Statement ") relating to the Certificates; and, (viii) the Letter of Representations with Depository Trust Company dated (the 'Letter of Representations "); and WHEREAS, no member of the Town Council has any conflict of interest or is interested in any pecuniary manner in the issuance of the Certificates; BE IT ORDAINED BY THE TOWN COUNCIL OF THE TOWN OF AVON, COLORADO: Section 1. Short Title. This Ordinance shall be known and may be cited by the short title "Certificates of Participation (Public Works Project), Series 1998 Ordinance." Section 2. Ratification and Approval of Prior Actions. All action heretofore taken (not inconsistent with the provisions of this ordinance) by the Town Council or the officers or agents of the Town Council or the Town relating to the authorization, sale, issuance and delivery of the Certificates (including without limitation, preparation and distribution of the Preliminary Official Statement and qualification of the Certificates for book -entry with DTC), is hereby ratified, approved and confirmed. The designation of the Preliminary Official Statement by the Town's -2- Finance Director as a "nearly final Official Statement" for purposes of Rule 15c2 -12 of the U.S. Securities and Exchange Commission is hereby ratified, approved and confirmed. Section 3. Finding of Best Interests. The Town Council hereby finds and determines, pursuant to the Constitution, the laws of the State of Colorado and the Charter, that the acquisition, construction, equipping and leasing of the Project under the terms and provisions set forth in the Lease, the Indenture and the Ground Lease is necessary, convenient and in furtherance of the Town's purposes and is in the best interests of the inhabitants of the Town; and the Town Council hereby authorizes and approves such acquisition, construction, equipping and leasing of the Project, all under the terms and provisions of the Ground Lease, the Lease and the Indenture. Section 4. Approval of Ground Lease and Lease. The Ground Lease and the Lease, each in substantially the form presented to this meeting of the Town Council, are in all respects approved, authorized and confirmed, and the Mayor of the Town is authorized and directed to execute and deliver the Ground Lease and the Lease in substantially the forms and with substantially the same contents as presented to this meeting of the Town Council, for and on behalf of the Town. Section 5. Approval of Indenture. The Town Council hereby approves the execution and delivery by the Lessor and the Trustee of the Indenture in substantially the form and with substantially the same contents as presented to this meeting of the Town Council. Section 6. Approval of Assignment. The Town Council hereby acknowledges and consents to the assignment by the Lessor to the Trustee, pursuant to the Indenture, of all right, title and interest of the Lessor in, to and under the Lease and the Ground Lease. Section 7. Approval of Certificates. The Town Council hereby acknowledges and consents to the issuance and sale of the Certificates pursuant to the Indenture. The Town Council hereby acknowledges and approves the form, terms and provisions, of the Certificates contained in the Indenture, in substantially the form presented to this meeting of the Town Council. The Town Clerk is hereby authorized and directed to affix her signature or a facsimile thereof_ to authenticate the Certificates, as provided in the Indenture. Section 8. Approval of Purchase Agreement. The Town Council does hereby accept and approve the Purchase Agreement as submitted by the Purchaser, and the Certificates shall be sold to the Purchaser upon the terms, conditions and provisions as set forth in the Purchase Agreement. Section 9. Approval of Official Statement. A final Official Statement, in substantially the form of the Preliminary Official Statement presented to this meeting of the Town Council, is in all respects approved and authorized. The Mayor is hereby authorized and directed for and on behalf of the Town to execute and deliver the final Official Statement in substantially the form and with substantially the same content as the Preliminary Official Statement presented to this -3- meeting of the Town Council, with such changes as may be approved by the Finance Director. The distribution by the Purchaser of the Preliminary Official Statement and the final Official Statement to all interested persons in connection with the sale of the Certificates is hereby ratified, approved - and authorized. Section 10. Authorization to Execute Collateral Documents. The Town Clerk is hereby authorized and directed to attest all signatures and acts of any official of the Town in connection with the matters authorized by this ordinance. The Mayor and Town Clerk and other appropriate officials or employees of the Town are hereby authorized to execute and deliver for and on behalf of the Town any and all additional certificates, documents, instruments and other papers, and to perform all other acts that they deem necessary or appropriate, in order to implement and carry out the transactions and other matters authorized by this ordinance, including but not limited to the execution of the Letter of Representations, the Purchase Agreement, the Continuing Disclosure Certificate, the Access Agreement and such other certificates and affidavits as may be reasonably required by the Purchaser. The appropriate officers of the Town are authorized to execute on behalf of the Town agreements concerning the deposit and investment of funds in connection with the transactions contemplated by this ordinance. The execution of any instrument by the aforementioned officers or members of the Town Council shall be conclusive evidence of the approval by the Town of such instrument in accordance with the terms hereof and thereof. Section 11. Approval of Mortgage. The Town Council hereby approves the borrowing by the Lessor evidenced by the Certificates and the mortgaging of the Project pursuant to the terms of the Indenture. Section 12. No General Obligation Debt. No provision of this ordinance, the Ground Lease, the Lease, the Indenture, the Preliminary Official Statement, the final Official Statement or the Certificates shall be construed as creating or constituting a general obligation or other indebtedness or multiple fiscal year financial obligation of the Town within the meaning of any constitutional or statutory provision, nor a mandatory charge or requirement against the Town in any ensuing fiscal year beyond the then current fiscal year. The Town shall not have any obligation to make any payment with respect to the Certificates except in connection with the payment of the Base Rentals (as defined in the Lease) and certain other payments under the Lease, which payments may be terminated by the Town in accordance with the provisions of the Lease. Each Certificate, shall evidence an assignment of a proportionate interest in the right to receive revenues under the Lease. The Certificates shall not constitute a mandatory charge or requirement of the Town in any ensuing fiscal year beyond the then current fiscal year, and shall not constitute or give rise to a general obligation or other indebtedness or multiple fiscal year financial obligation of the Town within the meaning of any constitutional, statutory or Charter debt limitation and shall not constitute a multiple fiscal year direct or indirect Town debt or other financial obligation whatsoever. No provision of the Certificates shall be construed or interpreted as creating an unlawful delegation of governmental powers nor as a donation by or.a lending of the credit of the Town within the meaning of Sections 1 or 2 of Article XI of the Colorado Constitution. The issuance of the Certificates shall not directly ME issuance of the Certificates shall not directly or indirectly obligate the Town to make any payments beyond those budgeted and appropriated for the Town's then current fiscal year. Section 13. - Reasonableness ofRentals. The Town Council hereby determines and declares that the Base Rentals do not exceed a reasonable amount so as to place the Town under an economic compulsion to renew the Lease or to exercise its option to purchase the Project pursuant to the Lease. The Town Council hereby determines and declares that the period during which the Town has an option to purchase the Project (i.e., the entire maximum term of the Lease) does not exceed the useful life of the Project. Section 14. Raealer. All bylaws, orders, resolutions and ordinances of the Town, or parts thereof, inconsistent herewith are hereby repealed to the extent only of such inconsistency. This repealer shall not be construed to revive any other such bylaw, order, resolution or ordinance of the Town, or part thereof, heretofore repealed. Section 15. Severability. If any section, subsection, paragraph, clause or other provision of this ordinance for any reason is invalid or unenforceable, the invalidity or unenforceability of such section, subsection, paragraph, clause or other provision shall not affect any of the remaining provisions of this ordinance, the intent being that the same are severable. Section 16. Effective Date. Recording and Authentication. This ordinance shall be in full force and effect seven days after public notice following final passage. This ordinance shall be numbered and recorded in the official records of the Town kept for that purpose, and shall be authenticated by the signatures of the Mayor or Mayor Pro -Tern and Town Clerk, and published in accordance with law. INTRODUCED, APPROVED ON FIRST READING, AND ORDERED PUBLISHED BY POSTING IN ACCORDANCE WITH THE CHARTER, June 9 1998, and a public hearing on this ordinance shall be held at the regular meeting of the Town Council of the Town of Avon, Colorado on July 14 , 1998, at 5:30 p.m. in the Municipal Building of the Town of Avon, Colorado. (SEAL) ay.,u vavap -5- Mayor w FINALLY PASSED, ADOPTED AND APPROVED, on July 14 , 1998. (SEAL) E-1 Mayor STATE OF COLORADO ) COUNTY OF EAGLE ) ss. TOWN OF AVON ) I, the duly elected, qualified and acting Town Clerk of the Town of Avon, Colorado (the "Town ") do hereby certify: 1. That the foregoing pages are a true, correct, and complete copy of an ordinance adopted by the Town Council (the "Council "19f tth14 own at a regular meeting of the Town held at the Municipal Building of the Town on , 1998. 2. - The Ordinance has been signed by the Mayor, sealed with the corporate seal of the Town, attested by me as Town Clerk, and duly numbered and recorded in the official records of the Town; and that the same remains of record in the official records of the Town. 3. The passage of the Ordinance on first reading was duly moved' and seconded and the Ordinance was approved by a vote of 4 to of the members of the Council, as follows: Those Voting Yes: Jun Benson Bob McIlveeri Buz Reynolds, Sr. Judy Yoder' Those Voting No: Those Abstaining: Those Absent: Richard Carnes, Buz Reynolds, Jr. 4. That on June 19 , 1998, the full text of the ordinance was posted at the office of the Town Clerk and in three public places in the Town. 5. The Ordinance was duly moved and seconded and the Ordinance was finally adopted at the meeting of - July 14 , 1998; by an affirmative vote of a majority of the members of the Board as follows: W Those Voting Yes: Jim Benson Richard,Carnes Bob McIlveen Buz Reynolds Jr. Buz Judy Reynolds Sr. Yoder Those Voting No: Those Abstaining: Those Absent: 6. The members of the board were present at each of the meetings and voted on the passage of such Ordinance as set forth above. 7. There are no bylaws, rules or regulations of the Board which might prohibit the adoption of said Ordinance. 8. That on June 10 ,1998, and .July 21 ,1998 the full text. of the ordinance was posted at the office of the Town Clerk and in three public places in the Town. 9. Notice of the meetings of June .9, 1998 and July 14 , 1998, the forms attached hereto as Exhibit A was posted at the Town Hall not less than 24 hours prior to each meeting in accordance with law. IN WITNESS WHEREOF, I have Town this _2jL day of July , 1998. (SEAL) r-l! set my hand and affixed the seal of said Town Clerk STATE OF COLORADO ) COUNTY OF EAGLE ) SS TOWN OF AVON ) NOTICE IS HEREBY GIVEN OF A PUBLIC HEARING BEFORETHE TOWN COUNCIL " OF THE TOWN OF AVON, COLORADO AT 5:30 P.M. ON THE 14th DAY OF JULY, 1998, AT THE TOWN MUNICIPAL BUILDING FOR THE PURPOSE OF CONSIDERING THE ADOPTION OF ORDINANCE NO. 98-8, SERIES OF 1998: AN ORDINANCE AUTHORIZING THE ISSUANCE OF CERTIFICATES OF PARTICIPATION, SERIES OF 1998, OF THE TOWN OF AVON, COLORADO, IN THE AGGREGATE PRINCIPAL AMOUNT OF $7,000,000, AUTHORIZING THE EXECUTION AND DELIVERY BY THE TOWN OF A GROUND LEASE AGREEMENT, A LEASE PURCHASE AND SUBLEASE AGREEMENT AND AN OFFICIAL STATEMENT; APPROVING THE FORM OF A MORTGAGE AND INDENTURE OF TRUST; RATIFYING ACTION PREVIOUSLY TAKEN CONCERNING THE CERTIFICATES; AND PROVIDING OTHER MATTERS RELATING THERETO A copy of said Ordinance is attached hereto, and is also on file at the office of the Town Clerk, and may be inspected during regular business hours. Following this hearing, the Council may consider final passage of this Ordinance. This notice is given and posted by order of the Town Council of the Town of Avon, Colorado Dated this 19th day of June, 1998. TOWN QF AVON, COLORADO Tawn Clerk POSTED AT THE FOLLOWING PUBLIC PLACES WITHIN THE TOWN OF AVON ON JUNE 19,1998: AVON MUNICIPAL BUILDING IN THE MAIN LOBBY AVON RECREATION CENTER CITY MARKET IN THE MAIN LOBBY; AND EAGLEBEND APARTMENTS - CLUBHOUSE LAUNDRY T = Q N 7 ' E E 3 f N q � r c � c o � c 4. l U c O c_ o iF- E cs O a F L y_ F s o z L r U U -r. = L z �r U LLl r L � � 3 4 U c z U c z L U o� L LL r T � o c a O = c U rs '- O c F r U 'o L L > V r cs c T � as �s y a t U— i` � O t as L O as 8 >: _ c L O o V o c a _ n. c � o U U U T G c J O L L L U O c o c7 L E •w L V•- G O c = o� .. c 0 0 c U PRELIMINARY OFFICIAL STATEMENT DATED JUNE 30, 1998 NEW ISSUE RATINGS: (AppliedFor) BOOK ENTRY ONLY (See "RATINGS ") INSURANCE: (Applied For) In the opinion of Sherman & Howard L. L.C., Special Counsel, assuming continuous compliance with certain covenants described herein, the portion of the Base Rentals which is designated in the Lease and paid b.• the Town of Avon (the "Town ") as interest on the 1998 Certificates is not included in gross income underfederal income tax laws pursuant to Section 103 of the Internal Revenue Code of 1986, as amended to the date ofdelivery of the 1998 Certificates (the "Tax Code"), is not included in alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code except that such interest is required to be included in calculating the "adjusted current earnings" adjustments applicable to corporations for purposes of computing the alternative minimum taxable income of corporations, and is not included in Colorado taxable income or Colorado alternative minimum taxable income under Colorado income tax laws in effect on the date of delivery of the 1998 Certificates. See "TAX MATTERS. " Dated: July 1,1998 /,00®,000* TOWN OF AVON, COLORADO CERTIFICATES OF PARTICIPATION IN A LEASE PURCHASE AND SUBLEASE AGREEMENT SERIES 1998 Due: December 1, as shown below The Town of Avon, Colorado, Certificates of Participation in a Lease Purchase and Sublease Agreement, Series 1998 (the "1998 Certificates ") evidence assignments of proportionate interests in rights to receive payments pursuant to an annually terminable Lease Purchase and Sublease Agreement, dated as of July 1, 1998 (the "Lease "), entered into between the Town of Avon Finance Authority, as lessor (the "Authority "), and the Town of Avon, Colorado, as lessee (the "Town "). See "APPENDIX B - The Lease." The 1998 Certificates are issued pursuant to a Mortgage and Indenture of Trust dated as of July 1, 1998 (the "Indenture "), between The Bank of Cherry Creek, N.A., Denver, Colorado, as trustee (the "Trustee ") and the Authority. The 1998 Certificates will be issued as fully registered certificates and are initially to be registered in the name of "Cede & Co." as nominee for The Depository Trust Company ( "DTC "), the securities depository for the 1998 Certificates. Purchases by beneficial owners are to be made in book -entry form in denominations of $5,000 or any integral multiple thereof. Beneficial owners will not receive certificates evidencing their interest in the 1998 Certificates. See "THE 1998 CERTIFICATES — Book -Entry Only Form." Interest on the 1998 Certificates (payable semiannually on June 1 and December 1, commencing December 1, 1998) is payable by check or draft mailed to the registered owners of the 1998 Certificates (i.e., to Cede & Co.). Principal on the 1998 Certificates is payable at the operations center of the Trustee, currently located in Denver, Colorado, on the dates shown in the following maturity schedule, unless the 1998 Certificates are redeemed prior thereto as more fully described in this Official Statement. Maturity Schedule* Maturing Principal Interest Price or Maturing Principal Interest Price or (December 1) Amount Rate Yield (December 1) Amount Rate Yield 1999 $210,000 2006 $290,000 2000 220,000 2007 305,000 2001 230,000 2008 325,000 2002 240,000 2009 340,000 2003 250,000 2010 360,000 2004 265,000 2011 380,000 2005 275,000 2012 400,000 $2,910,000 Term Certificates, Due December 1, 2018 - Price: (Plus accrued interest from July 1,1998) THE 1998 CERTIFICATES ARE SUBJECT TO REDEMPTION PRIOR TO MATURITY UNDER THE CIRCUMSTANCES AND AT THE PRICES DESCRIBED IN "THE 1998 CERTIFICATES — REDEMPTION PROVISIONS." The net proceeds from the issuance of the 1998 Certificates, together with certain other available moneys, will be used to finance (i) the cost of acquiring, constructing, equipping and installing a public works facility, (ii) a reserve fund, and (iii) the costs of issuing the 1998 Certificates. See "THE 1998 CERTIFICATES— Sources and Uses of Funds" and "THE PROJECT." Neither the Lease nor the 1998 Certificates constitute a general obligation, a multiple fiscal year direct or indirect debt or other financial obligation or indebtedness of the Town within the meaning of any constitutional, statutory or charter debt limitation. Neither the Lease, the Indenture nor the 1998 Certificates directly or indirectly obligate the Town to make any payments beyond those appropriated for any fiscal year in which the Lease may be in effect: Except to the extent payable from the proceeds of the 1998 Certificates and income from the investment thereof, from the net proceeds of certain insurance policies, performance bonds and condemnation awards, from the net proceeds received as a result of defaults under construction contracts, from net proceeds from the foreclosure and leasing or sale of the Project or from other amounts made available under the Indenture, the 1998 Certificates are payable during the lease term solely from Base Rentals to be paid by the Town under the Lease and the income from certain investments under the Indenture. All payment obligations of the Town under the Lease are from year to year only. The Lease is subject to annual termination by the Town. See "RISK FACTORS" and "SECURITY FOR THE CERTIFICATES." Upon termination of the Lease, the 1998 Certificates will be payable solely from moneys, if any, held by the Trustee under the Indenture and any amounts resulting from a foreclosure on and subleasing of the Site and any buildings thereon, sale of an assignment of the Trustee's interest in any Ground Lease, or sale of the Equipment, all as more fully described herein. This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement to obtain information essential to the making an informed investment decision and should give particular attention to the section entitled "RISK FACTORS. The 1998 Certificates are offered when, as, and if issued by the Town, subject to the approval of validity by Sherman & Howard L.L.C., Denver, Colorado, Spec ial Counsel, and certain other conditions. Sherman & Howard L.L.C. also has acted as special counsel to the Town in connection wit ;i the preparation of this Official Statement. Dunn Abplanalp & Christensen, P.C., Vail, Colorado, has acted as counsel to the Town. It is expected that the 1998 Certificates will be available for delivery in New York, New York through the facilities of DTC on or about August 14, 1998. * Subject to change Hanifen, Imhoff Inc. Investment Bankers This Official Statement is dated , M8. USE OF INFORMATION IN THIS OFFICIAL STATEMENT This Official Statement, which includes the cover page and the appendices, does not constitute an offer to sell or solicitation of an offer to buy any of the 1998 Certificates in any jurisdiction to any person to whom it is unlawful to make such offer, solicitation or sales in such jurisdiction. No dealer, salesman, or any other person has been authorized to give any information or to make any representations, other than the information and representations contained in this Official Statement, in connection with the offering of the 1998 Certificates, -and, if given or made, such information or representations must not be relied upon as having been authorized by the Town or the Underwriter. The information set forth in this Official Statement has been obtained from the Town and from the sources referenced throughout this Official Statement and from other sources believed to be reliable. No representation,or warranty is made, however, as to the accuracy or completeness of such information, and nothing contained herein, is or shall be relied upon as a guarantee of the Town or of the Underwriter. This Official Statement contains, in part, estimates and matters of opinion which are not intended as statements of fact, and no representation or warranty is made as to the correctness of such estimates and opinions, or that they will be realized. The information, estimates, and expressions of opinion contained in this Official Statement are subject to change without notice, and neither the delivery of this Official Statement nor any sale of the 1998 Certificates shall, under any circumstances, create any implication that there has been no change in the affairs of the Town in the information, estimates, or opinions set forth herein, since. the date of this Official Statement. THE PRICES AT WHICH THE 1998 CERTIFICATES ARE OFFERED TO THE PUBLIC BY THE UNDERWRITER (AND THE YIELDS RESULTING THEREFROM) MAY VARY FROM THE INITIAL PUBLIC OFFERING PRICES APPEARING ON THE COVER PAGE HEREOF. IN ADDITION, THE UNDERWRITER MAY ALLOW CONCESSIONS OR DISCOUNTS FROM SUCH INITIAL PUBLIC OFFERING PRICES TO DEALERS AND OTHERS. IN CONNECTION WITH THE OFFERING OF THE 1998 CERTIFICATES, THE UNDERWRITER MAY EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 1998 CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET, WHICH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. ( This Page Intentionally Left Blank ) TOWN. OF AVON Eagle County, Colorado Town Council Jack Fawcett, Mayor Judy Yoder, Mayor Pro Tem / Councilmember Jim Benson, Councilmember Richard Carnes, Councilmember Albert J. Reynolds, Jr., Councilmember, Albert J. Reynolds, Sr., Councilmember Bob McIlveen, Councilmember Town Administrative Officials Bill Efting, Town Manager Larry Brooks, Assistant Town Manager /Public Works Division John Dunn, Town Attorney Scott Wright, Finance Director Kristen Nash, Town Clerk Trustee, Registrar and Paying Agent The Bank of Cherry Creek, N.A., Denver, Colorado Special Counsel and Disclosure Counsel Sherman & Howard L.L.C. Denver, Colorado - Underwriter Hanifen, Imhoff Inc. Denver, Colorado i TABLE OF CONTENTS Page INTRODUCTION............................... ..............................1 General..............................:... ..............................1 TheTown ....... ............................... ......................1 Purpose.................................. ..............................2 Authority for Issuance .......... .......... ............................... 2 The 1998 Certificates; Prior Redemption ...... ............................... 2 Insurance................................. ..............................3 Security for the Certificates; Termination of Lease .............................. 3 TaxExemption ...................; ....... ..............................4 Professionals ................. .. ............ ............................5 Continuing Disclosure Undertaking ................. , ....................... 5 Additional Information ..................... ..............................5 RISKFACTORS ................................ ..............................6 Nonappropriation .......... .............. ..............................6 Sources of Base Rental and Additional Rental Payments ......................... 7 Effect of a Termination of the Lease Term ..... ............................... 7 Condemnation Risk ......... ............. ..............................8 Enforceability of Remedies; Liquidation Delays . ............................... 9 Effect of Termination on Exemption from Taxation and on Exemption from Registration .......... ............................... 9 CasualtyRisk ............................... ..........................9 No Secondary Market ...................... .............................10 THECERTIFICATES ............................ .............................10 General.................................. .............................10 Sources and Uses of Funds .................. .............................10 Payment Provisions ........................ .............................11 Redemption Provisions ..................... .............................12 Additional Certificates .................... ............................... 15 Book -Entry Only Form ..................... .............................16 SECURITY FOR THE CERTIFICATES ........... ............................... 16 General.................................. .............................16 The Reserve Fund ......................... .............................17 Insurance on the 1998 Certificates ........... ............................... 17 THEPROJECT ................................. .............................19 General Description ......................... .............................19 Design and Construction .................. ............................... 19 Zoning Information ........................ .............................20 ii ae BASE RENTALS SCHEDULE ................... ............................... 21 THE AUTHORITY .............................. .............................22 General.................................. .............................22 Board of Directors ......................... .............................22 The Authority's Limited Liability ........... ............................... 22 THETOWN .................................... .............................23 Overview................................ .............................23 Town Powers .............................. .............................23 Governing Body ........................... .............................23 Enactment of Ordinances .................. ..................... ........... 24 Administration and Management ............ ............................... 24 Legal Matters Affecting the Town ........... ............................... 26 Town Insurance Coverage ................. ............................... 27 Intergovernmental Agreements .............................. ....:.. .... 28 Services Available to Town Residents ....... ............................... 29 Capital Improvement Plan ............ ............................... .. 30 TOWN DEBT STRUCTURE ...................... ............................... 31 General Obligation Debt .................. ............................... 31 Estimated Overlapping General Obligation Debt ........................... 33 Contracts and Leases ....................... .......... ....................33 Revenue Obligations ....................... .............................34 Special Assessments ........:............ ............................... 34 Short-Term Borrowing and Other Obligations ............................ _ . 34 TOWN FINANCIAL OPERATIONS ................. .............................35 Town's Budget and Appropriation Process .... ............................... 35 General Fund Budget Summary .... ............................... ........135 Sources of General Fund Revenues ............ .............................36 Financial Statements ..................... ............................... 36 History of General Fund Revenues and Expenditures ........................... 37 Comparison of Budget Information .......... ............................... 39 Sales Tax Information ...................... .............................40 Selected Ad Valorem Property Tax Information ............................... 42 CONSTITUTIONAL LIMITATIONS .............. ............................... 45 ECONOMIC AND DEMOGRAPHIC INFORMATION ......................... 6 .... 47 General.................................. .............................47 Population and Age Distribution ............ ............................... 47 Income.................................. .............................49 Employment.............................. .............................50 iii age RetailSales ............................... .............................54 Recreation and Tourism ..................... .............................55 Development in Eagle County ............. ............................... 59 Building Permits .......................... .............................60 Construction in the Town .................. ............................... 60 Foreclosure Activity in Eagle County ........................................ 61 LEGALMATTERS ............................... .............................62 TAX - MATTERS ................................. .............................62 INDEPENDENT AUDITORS ..................... ............................... 64 RATINGS..................................... .............................64 UNDERWRITING............................... .............................64 OFFICIAL STATEMENT CERTIFICATION ........ .............................. 64 APPENDIX A - Audited General Purpose Financial Statements of the Town for the Fiscal Year Ended December 31, 1997 ............................ A -1 APPENDIX B - Certain Definitions and Summaries of Certain Provisions of the Lease, . the Indenture and the Ground Lease ..............:................ B -1 APPENDIX C - Book -Entry Only System ........ ............................... C -1 APPENDIX D - Form of Continuing Disclosure Certificate ......................... D-1 APPENDIX E - Specimen of Municipal Bond Insurance Policy ..................... E -1 iv INDEX OF TABLES NOTE: Tables marked with an ( *) indicate. Annual Financial Information to be updated pursuant to SEC Rule 15c2 -12, as amended. See APPENDIX D - Form of Continuing Disclosure Certificate. Rage Schedule of Base Rentals ........................ ............................... 21 Legal Debt Limit ........... ..................... .............................32 * Selected Debt Ratios of the Town as of December 31, 1997 .......................... 32 Estimated Overlapping General Obligation Debt ..... ............................... 33 * Five -Year History of General Fund Revenues, Expenditures, and Changes in Fund Balance - GAAP Basis ............... ............................... 38 * Budget Summary and Comparison Town's General Fund Budgets for 1997 and 1998 Actual 1996 and 1997 Results .............. ............................... 39 * Annual History of Sales Tax Collections .......................................... 41 * History of Assessed Valuation and Mill Levies for the Town ......................... 42 * History of Property Tax Collections for the Town ...... ................. ...... 43 * Ten Largest Taxpayers Within the Town .......... ............................... 44 * Estimated Assessed Valuation of Classes of Property in the Town .................. .... 4.4 Population.... ...................... ............................... ........48 Age Distribution.... .... ..................... .............................48 Per Capita Personal Income ............................. ..................:.... 49 Median Household Effective Buying Income ......... ........................... 50 Percent of Households by Effective Buying Income Groups = -1996 ................:..... 50 Labor Force and Percent Unemployed .............................................. 51. Average Number of Employees Within Selected Industries- Eagle County ........ :........ 52 Selected Major Employers in Eagle County ........... ................. ..... _ Selected Major Employers in Town of Avon ........ ....................... ...: 54 Retail Sales (in thousands) ........................ ............................... 'S4 SkierVisits ..................................... .......................... ....56 Estimated Golf Rounds Played ....................... .............................. 59 History of Building Permits Issued in Unincorporated Eagle County ........ ......... . 60 History of Building Permits Issued in the Town of Avon . .......... .................. 61 History of Foreclosures - Eagle County ................. :..... ' ............ ...... 61 REGIONAL MAP - o f 'S Y , N i � our a! _ .. ~ .. • y pIp u y►s� :� -�: t l / /•c�� �� des .t• '` r %.,.x`,� i�•I /��j; .�i��s� �g-' -:�.� !►I• ,j� j `p (` ` � • � b � ' �� �� 1�' �� a ,, , r "`r i �,� ��`(�'• ... ,.___...----------- _- _.�. �I m a = — ir m � vi OFFICIAL STATEMENT $7,000,000* TOWN OF AVON, COLORADO CERTIFICATES OF PARTICIPATION IN A LEASE PURCHASE AND SUBLEASE AGREEMENT SERIES 1998 INTRODUCTION General This Official Statement, including the cover page and appendices, is furnished in connection with the issuance and sale of $7,000,000* aggregate principal amount of Certificates of Participation in a Lease. Purchase and Sublease Agreement, Series 1998 (the "1998 Certificates ") evidencing assignments of proportionate interests in rights to receive payments,pursuant to a Lease Purchase and Sublease Agreement, dated as of July 1, 1998 (the "Lease "), between the Town of Avon Finance Authority, as lessor (the "Authority ") and the Town of Avon,- Colorado, as lessee (the "Town "). The 1998 Certificates are issued pursuant- to a Mortgage and Indenture, of Trust dated as of July 1, 1998 (the "Indenture "), between the Authority and The Bank of Cherry Creek, N.A. (the "Trustee "). The Town The Town was incorporated on August 14,4 978, as a home rule town under Article XX of the Colorado Constitution and the laws of the State of Colorado. Because Avon is a home rule town, except to the extent otherwise governed by the Constitution of the State, its Charter governs all local and municipal matters. The Town is ,located in Eagle County, Colorado, on Interstate Highway 70 at the Avon interchange, and is situated at the base of the Beaver'Creek Valley where Beaver Creek Ski Resort is located. It is 8 miles west of the Town of Vail and the Vail Ski Resort, 114 miles west of Denver, and 23 miles east of the Town, of Eagle. The Town encompasses approximately five and one -half square miles of land. See "REGIONAL MAP." In addition to the Town's role as a center of commercial and retail development for the area, the Town serves as a support base for the Vail, Beaver Creek and Arrowhead resorts, with a number of various types of accommodations for visitors to the area The Town also is a major residential community, within the Eagle County. Based upon Colorado Division of Local Government estimates, the Town's current full -time population is approximately 2,706. Its 1997 assessed valuation (for collection of taxes in 1998) is $95,534,550. *Subject to change Purpose The 1998 Certificates are being issued for the purpose of financing (i) the cost of constructing a public works maintenance facility (the "Project "), (ii) a reserve fund, and (iii) the costs of issuing the 1998 Certificates. Authority for Issuance The 1998 Certificates will be issued pursuant to the Town's powers as a home rule town under Article XX of the Colorado Constitution, and pursuant to Article XIV of the Charter. The 1998 Certificates also are being issued pursuant to an ordinance (the "Bond Ordinance") to be adopted by the Town Council (the "Town Council') prior to issuance of 'the 1998 Certificates. The 1998 Certificates; -Prior Redemption The 1998 Certificates are issuable solely as fully registered certificates in the denomination of $5,000 and integral multiples thereof. The 1998 Certificates are initially to be registered in the name of "Cede & Co.," as nominee for The Depository Trust Company ( "DTC "), as securities depository for the 1998 Certificates. See "THE 1998 CERTIFICATES -- Book -Entry Only Form. The 1998 Certificates will be dated July 1, 1998. The 1998 Certificates mature and bear interest as 'set forth on the cover page hereof. Interest on the 1998 Certificates (calculated based on a 360 -day year consisting of twelve 30 -day months) is payable semiannually on January 1 and July 1, commencing January 1, 1999. Interest on the 1998 Certificates is payable by check or draft mailed by the operations center of the Trustee, on or before the interest payment date (or if such day is not a business day, on the next succeeding business day) to the person in whose name each Certificate is registered, i.e. to Cede & Co., on the fifteenth day of the calendar month preceding the interest payment date, or if the fifteenth day is not a business day, the business day next preceding the fifteenth day (the "Regular Record Date ") as described below, at the address shown on the registration records maintained by the Registrar as of the close of business on the Regular Record Date. Principal due on the 1998 Certificates will be payable at maturity or upon prior redemption at the operations center of the Trustee, currently located in Denver, Colorado, upon presentation and surrender thereof. If any 1998 Certificates shall not be paid upon presentation at maturity or upon prior redemption, it shall continue to draw interest at the interest rate borne by the Certificate prior to maturity until the principal and interest thereof is paid in full. All-such payments shall be made iri lawful money in the United States of America without deduction for, any service charges of the Trustee. -See "THE 1998 CERTIFICATES." The 1998 Certificates are subject to redemption prior to maturity at the option of the Town and also are subject to mandatory sinking fund redemption as described in "THE 1998 CERTIFICATES -- Redemption Provisions." Under certain circumstances, the 1998 Certificates also are subject to extraordinary redemption as described in "THE 1998 CERTIFICATES -- Redemption Provisions." 6 Insurance The Town. has applied for insurance for the 1998 Certificates. Accordingly, the definitions herein of the "Policy" and the "Certificate Insurer" are subject to change, and the terms of the Policy and the rights of the Certificate Insurer are subject to modification. Final information regarding the Policy and the Certificate Insurer will be provided in the final Official Statement. The scheduled municipal payment of the principal and interest on the 1998 Certificates when due will be guaranteed under a financial guaranty insurance policy (the "Policy ") to be issued by (the "Certificate Insurer ") simultaneously with the delivery of the 1998 Certificates. See "SECURITY FOR THE CERTIFICATES -- Insurance on the 1998 Certificates" and "APPENDIX E." Owners of the 1998 Certificates should be aware that issuance of the Policy gives the Certificate Insurer certain rights, including the right to direct remedies with:respect'to the 1998 Certificates in the event of a default under the Lease and/or the Indenture and the right to direct the Trustee's actions if an Event of Nonappropriation occurs. See "APPENDIX -B - The Lease - Nonappropriation by the Town," "THE LEASE - Events of Default and- Remedies," "THE INDENTURE - Events of Default and Remedies under the Indenture" and "THE INDENTURE - Miscellaneous Provisions Regarding the Certificate Insurer." Security for the Certificates; Termination of Lease The 1998 Certificates and any additional certificates which may be subsequently issued under the Indenture (the" "Additional Certificates ") are collectively 'referred to in this Official Statement as the "Certificates." The 1998 Certificates and any Additional Certificates will be equally secured by the Indenture. The public works facility is referred to in this Official Statement as the "Project." The Project is located on a 4.189 acre parcel of real estate acquired by the Town and leased by the Town to the Authority under the Ground Lease, and subleased to the Town by the Authority under the Lease; such real estate is referred.to herein as the "Site." The Lease and the Indenture allow the Authority to acquire, equipment, machinery and related property and install it in the Project; such equipment, machinery and related property, if any is acquired, is ' collectively referred to as the "Equipment." See "THE PROJECT." Additional. capitalized terms used in this Official Statement have the definitions set forth under "APPENDIX B. - DEF NITIONS." To the extent that the Certificate Insurer is in default in its payment obligations under the Policy, the Certificates and the interest on the Certificates are payable solely from amounts which may be appropriated annually by the Town, from certain Net Proceeds of insurance policies or condemnation awards, from interest earnings on moneys in- certain funds and accounts or from Net Proceeds from the subleasing of or a liquidation of the Trustee's interest in the Project. See "SECURITY FOR THE CERTIFICATES." 3 Neither the Certificates nor any payments required under the Lease constitute an indebtedness of the Town within the meaning of any provision or limitation of the Constitution or statutes of the Town. Neither the Certificates nor the Lease will directly or indirectly obligate the Town to make any payments other than those which may be appropriated by the Town for each Town fiscal year. If on or before the December 31 prior to the beginning of any fiscal year of the- Town (a "Fiscal Year "), the Town fails to appropriate, by specific line -item reference, sufficient funds authorized and directed to be used to pay all Base Rentals and Additional Rentals, the Town will be considered to have terminated the Lease (subject to certain waiver and cure provisions thereof). Upon termination.of the Town's obligations under the Lease, the Trustee may proceed to foreclose on and sell, lease or assign its interest in the Project or any portion thereof, sublease the Site and exercise the rights and remedies of a secured party under the Colorado Uniform Commercial Code with respect to the Equipment, as provided in the Indenture, or take one or any combination of steps described in the Lease. See "APPENDIX B - THE LEASE - Noriappropriation by Town." The net proceeds of such dispositions will be applied toward the payment, of the Certificates. The Town has the option to pay the Purchase Option Price and to terminate the Lease and the Ground Lease; upon 15 days written notice to the Trustee, as provided in the Lease. The Trustee is required to use the Purchase Option Price to pay the principal, interest, and any premium on the Certificates. See "THE 1998 CERTIFICATES -- Redemption Provisions." The Indenture permits the issuance of Additional Certificates without notice to or approval of the owners of the outstanding 1998 Certificates to pay for- one or more of the following: (i) the costs of refunding all or any of the Outstanding Certificates for purposes of reducing the Base Rentals; (ii) the costs of the Project (and costs reasonably related thereto); and (iii) the costs of the issuance and sale of the Additional Certificates, any deposit to the Reserve Fund necessary for the amount therein to equal the Reserve Fund Requirement and capitalized interest for such period, and such other costs reasonably related to the financing as are agreed upon by the Town, the Authority and the Trustee. Tax Exemption In the opinion of Sherman & Howard L.L.C., Special Counsel, assuming continuous compliance with certain covenants described herein, the portion of the Base Rentals which is designated in the Lease and paid by the Town as interest on the 1998 Certificates, (i) -is not included in gross income under federal income tax laws pursuant to Section 103 of the Internal Revenue Code of 1986, as amended to the date of delivery of the 1998 Certificates (the "Tax Code "), (ii) is not included in alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code except that such interest is required to be included in calculating the "adjusted current earnings" adjustment applicable to corporations for purposes of computing the alternative minimum taxable income of corporations, and (iii) is not included in Colorado taxable income or Colorado alternative minimum taxable income under Colorado income tax laws in effect on the date of delivery of the 1998 Certificates. See "TAX MATTERS." 4 However, Special Counsel has disclaimed any opinion with respect to termination of the Lease. See "RISK FACTORS- =Effect of Termination on-Exemption from Taxation and on Exemption from Registration" and "TAX MATTERS." Professionals Sherman & Howard L.L.C., Denver, Colorado, has acted as Special Counsel to the Town in connection with issuance of the 1998 Certificates and also has acted as special counsel to the Town in connection, with preparation of this Official Statement. The fees of Sherman & Howard L.L.C. will be paid only from Certificate proceeds at closing. The Town's audited financial statements as of and for the year ended December 31, 1997, including the report thereon of Van Schooneveld and Co., Inc., certified public accountants, Greenwood Village, Colorado, are attached hereto as Appendix A. See "INDEPENDENT AUDITORS." The Bank of Cherry Creek, N.A., Denver, Colorado will act as Trustee. Hanifen, Imhoff Inc., Denver, Colorado, will act as the underwriter (the "Underwriter ") for the 1998 Certificates. See "UNDERWRITING." The Trustee, by acceptance of its duties under the Indenture, is not indicating that it has reviewed this Official Statement; the Trustee has not reviewed this Official Statement and has made no representations as to the information contained herein, including but not limited to, any representations as to the financial feasibility of the Project or related activities. Continuing Disclosure Undertaking The Town will execute a continuing disclosure certificate (the "Disclosure Certificate ") at the time of the closing for the 1998 Certificates. The Disclosure Certificate will be executed for the benefit of the beneficial owners of the 1998 Certificates and the Town will covenant in the Indenture to comply with its terms. The Disclosure Certificate will provide that so long as the 1998 Certificates remain outstanding, the Town will annually provide certain financial information and operating data to each nationally recognized municipal securities information repository ('WRMSIR ") approved in accordance with Rule 15c2 -12 promulgated under the Securities Exchange Act of 1934 (the "Rule "), and will provide notice of certain material events to the Municipal Securities Rulemaking Board ( "MSRB "), in compliance with the Disclosure Certificate. The form of the Disclosure Certificate is attached hereto as Appendix D. The Town previously entered into a continuing disclosure undertaking pursuant to the Rule at the time it issued its General Obligation Bonds, Series 1997, and has never defaulted on its obligations pursuant to this undertaking. _ . _ Additional Information This introduction is only a brief summary of the provisions of the Certificates, the Lease, the Ground Lease, the Indenture, the Project and the Town, a full review of the entire Official Statement should be made by potential investors. Brief descriptions of the Certificates, the Lease, the Indenture, the Ground Lease and the Town are included in this Official Statement. All references herein to the Certificates, the Lease, the Indenture and the Ground Lease and other documents are k, qualified in their entirety by reference to such documents. This Official Statement speaks only as of its date and the information contained herein is subject to change. Additional. information and copies of the documents referred to above are available from: Town of Avon, Colorado Attention: Finance Director P.O. Box 975 Avon, Colorado 81620 Telephone: (970) 748 -4020 Further information may be obtained from the Underwriter: Hanifen, Imhoff Inc. 1125 17th Street, Suite 1600 Denver, Colorado 80202 Telephone: (303) 296 -2300 RISK FACTORS Investment in the 1998 Certificates involves certain risks. Each prospective investor in the 1998 Certificates is encouraged to read this Official Statement in its entirety and to give particular attention to the factors described below which could affect the payment of rentals under the Lease and could affect the market price of the 1998 Certificates to an extent that cannot be determined at this time. The factors set forth below are not intended to provide an exhaustive list of the risks associated with the purchase of the 1998 Certificates. Nonappropriation Prospective purchasers of the 1998 Certificates should look to the ability of the Town to pay Base Rentals pursuant to the Lease; such Base Rentals will provide funds for payment of principal and interest on the 1998 Certificates. The Town is not obligated to pay Base Rentals or Additional Rentals under the Lease unless funds are budgeted and appropriated for such rentals by the Town each year. '.If, prior to December 31 of each year, the Town does not specifically budget and appropriate amounts sufficient to pay all Base Rentals for the next Fiscal Year, and to pay such Additional Rentals as are estimated to become due for the ensuing Fiscal Year, an "Event of Nonappropriation occurs. If an Event of Nonappropriation occurs, the Town will not be obligated to make payment of the Base Rentals or Additional Rentals which accrue after the last day of the Original or Renewal Term during which such Event of Nonappropriation occurs. Various political, legal and economic factors could lead to the nonappropriation of sufficient funds to make the required payments under the Lease, and prospective investors should carefully consider any factors which may influence the budgetary process. There is no assurance that the Town Council will appropriate sufficient funds to renew the Lease each year and the Town R has no obligation to do so.- In addition, the ability of the Town to maintain adequate revenues for its operations and obligations in general (including obligations associated with the. Lease) is dependent upon several factors outside the Town's control, such as the economy and sales and use tax . collections. See "CONSTITUTIONAL LIMITATIONS," "SECURITY FOR 'THE CERTIFICATES," and "TOWN FINANCIAL OPERATIONS." Sources of Base Rental and Additional Rental Payments The obligation of the Town to pay Base Rentals and Additional Rentals is limited to those Town funds that are specifically budgeted and appropriated annually by the Town Council for such purpose: The Lease directs the Town Finance Director (or any other'officer at any time charged with the responsibility of formulating budget proposals) to include, in the annual, budget proposals submitted to the Town Council, items for all payments required under the Lease for the ensuing Fiscal Year, until such time (if any) as the Town Council determines to terminate the Lease. The Lease provides that it is the intention of the Town Council that any decision to terminate the Lease is to be made solely by the Town Council and not by any other official of the Town. See "APPENDIX B - THE LEASE." The Town intends to budget, appropriate and pay the Base Rentals from sales and use tax revenues transferred from its General Fund to its Debt Service Fund. See "TOWN FINANCIAL OPERATIONS." The majority of the moneys deposited into the General Fund are sales and use tax revenues. See "TOWN FINANCIAL OPERATIONS - Sources of General Fund Revenue." Although the State's constitution and statutes limit the amount of property taxes the Town can levy and also limit the amount of sales and use tax revenues which can be retained and spent by the Town, the Town's voters approved a removal of these limitations in 1997 election. - See "CONSTITUTIONAL LIMITATIONS." Effect of a Termination of the Lease Term In the event of termination of the Town's obligations under the Lease upon the occurrence of an Event of Nonappropriation or an Event of Default,, the Town is required to vacate the Project and the Site (leaving the Equipment) (a) in the case of an Event of Nonappropriation,' by December 31 of the Fiscal Year during which an Event of Nonappropriation occurs, and (b) in the case of an Event of Default, within IS days after notice from the Trustee. The Trustee may proceed to foreclose through the courts on the Project, and exercise all the rights and remedies of a secured party under the Colorado Uniform Commercial Code with respect to the Equipment, and may: (i) lease the Project and sublease the Site to the highest responsible bidder, or sell the Project and assign its interest in the Ground Lease; (ii) recover from the Town Base Rentals and Additional Rentals allocable to any period in which the Town continues to occupy the Project; and/or (iii) take whatever action at law or in equity appears necessary or desirable to enforce its right in and to the Project. A potential purchaser of the Certificates should not assume that it will be possible to repossess and liquidate or otherwise dispose of the Equipment and to sublease the Site and the Project, or any portion thereof, or to sell an assignment of the Trustee's interest in the Ground Lease after a termination of the Lease Term for an amount equal to the aggregate principal amount of the Certificates then outstanding plus accrued interest thereon. This may be due to the inability to 7 recover certain of the costs incurred in connection with the issuance of the Certificates or the acquisition of .the Leased -Property. See "THE PROJECT" and "THE 1998 CERTIFICATES- - Sources and Uses of Funds." Also, because of the location, design and contemplated use of certain of the Project, it may not be easily converted to alternate uses, and present or future .zoning requirements or other land use regulations may also restrict use of the Project. See "THE PROJECT - Zoning Information." According to the Town, however, public works facilities are in demand by various political subdivisions in the Vail Valley due to a current lack of such facilities. IF THE 1998 CERTIFICATES ARE REDEEMED SUBSEQUENT TO A TERMINATION OF THE LEASE TERM FOR AN AMOUNT LESS THAN THE AGGREGATE PRINCIPAL AMOUNT THEREOF AND ACCRUED INTEREST THEREON, SUCH PARTIAL PAYMENT WILL BE DEEMED TO CONSTITUTE A REDEMPTION IN FULL OF THE 1998 CERTIFICATES .PURSUANT TO THE INDENTURE; AND UPON SUCH A PARTIAL PAYMENT, NO OWNER OF ANY CERTIFICATE WILL HAVE ANY FURTHER CLAIMS FOR PAYMENT UPON THE AUTHORITY, THE TRUSTEE OR THE TOWN. Condemnation Risk In a recent Colorado district court action, the City of Sheridan, Colorado ( "Sheridan") exercised its eminent domain powers to condemn its central administration building (which had been leased by Sheridan under an annually terminable lease purchase agreement). Prior to initiation of the condemnation action, Sheridan had renegotiated its lease payments to accommodate its deteriorating financial condition caused by the loss of a business which generated a large percentage of its sale tax revenues (and a large percentage of its general fund budget). By condemnation, Sheridan sought to acquire the administration building at a fraction of the remaining lease payments which would be paid to owners of certificates of participation in Sheridan's lease. Sheridan's condemnation suit was successful; however, Sheridan was unable to pay the court- determined amount representing the value of the property and recently vacated the building in favor of the Trustee. The Town believes its lease of the Project is different from the Sheridan situation in several ways. The Sheridan administration building is of limited value to anyone other than Sheridan, which required a place of operation in order to carry on its basic civic functions. The Town believes that the Project could be converted to use by other parties in the event it is no longer used by the Town. The Project therefore has greater potential value to a variety of purchasers if the Town chooses to terminate the Lease (including, but not limited to, the Districts, which have the right to lease the Project if the Town terminates the Lease). Also, the Town's tax base is not dependent on a single business to the same extent as was Sheridan's (see "TOWN FINANCIAL OPERATIONS - Sales Tax Information" for information on the two most significant sales and use tax payers in the Town); thus it is less likely than Sheridan to face the circumstances leading to Sheridan's termination of its lease. Finally, the land being leased to Sheridan was deed - restricted to being used for governmental purposes while there is no similar restriction on the use of the Project if the Town terminates the Lease. In addition, the effectiveness of Sheridan's condemnation strategy depended upon the assumption that the administration building had declined in value, and therefore its condemnation value may be less than the balance owing under its lease. Although the Project has 8 not been appraised, the Town does not expect its value to decline during the term of the 1998 Certificates. Enforceability of Remedies; Liquidation Delays Under the Lease, the Trustee has the right to take possession of and dispose of the Project and the Site upon a Event of Nonappropriation or an Event of Default. However, the enforceability of the Lease is subject to applicable bankruptcy laws, equitable principles affecting the enforcement of creditors' rights generally and liens securing such rights, and the police powers of the Town. Because of the use of the Project and the Site by the Town for the public welfare and the inherent police power of the Town, a court in any action brought to enforce the remedy of the Trustee to take possession of the Project and the Site may delay repossession for an indefinite period, even though the Town may be in default under the Lease. Because of the nature of the Project and its importance to the welfare and safety of the Town, the right of the Trustee to obtain possession of the Project and to enforce the remedies available under the Lease would probably be delayed until appropriate alternative space is obtained by the Town. As long as the Trustee is unable to take possession of the Project or any other projects which may subsequently be approved in connection with the issuance of Additional Certificates (collectively, the "Project "), it will be unable to sell or re -lease the Project and the Site as permitted under the Lease or ' to redeem or pay the 1998 Certificates except from funds otherwise available to the Trustee under the Indenture, including the Reserve Fund. See "SECURITY FOR THE CERTIFICATES." Effect of Termination on Exemption from Taxation and on Exemption from Registration Special Counsel has specifically disclaimed any . opinion as to the effect that termination of the Lease may have upon the treatment for federal or State income tax purposes of amounts received by a Participant. There is no assurance that any amounts representing interest received by the Participants after termination of the Lease as a consequence of a Event of Nonappropriation or Event of Default will be excluded from gross income under federal or state laws. In view of past private letter rulings by the United States Department of Treasury, Participants shouldmot assume that payments allocable to interest received from the 1998 Certificates would be excluded from gross income for federal or State income tax purposes. Special Counsel also has disclaimed any opinion as to the transferability of the 1998 Certificates under the federal securities laws after a termination of the Lease, and, upon such termination, there is no assurance -that Participants would be able to transfer their interests without compliance with federal securities laws. Casualty Risk If all, substantially all or any portion of the Project is damaged or destroyed by any casualty, there is no assurance that casualty insurance proceeds and other available monies of the Town will be sufficient either to repair or replace the damaged or destroyed property or to pay the 1998 Certificates, if the 1998 Certificates are called for mandatory redemption as a result of such casualty. Although the Town believes its casualty insurance coverages are adequate, there is no assurance that such damage or destruction would not have a material adverse effect on the ability of the Town to operate the Project. Delays in the receipt of casualty insurance proceeds pertaining to the Project or delays in the repair, restoration or replacement of property damaged or destroyed could 9 have an adverse effect upon the ability of the Town to operate the Project or upon its ability to make timely payment of debt service on, the 1998 Certificates. No Secondary Market There presently is a limited market for the 1998 Certificates, and there can be no assurance or guaranty that a secondary market for the 1998 Certificates will be maintained or that sufficient information will be, publicly available to permit the maintenance of such a market. Accordingly, each purchaser should expect to bear the risk of the investment represented by the 1997 1998,Certificates to maturity. THE. CERTIFICATES General The .1998 Certificates are issuable as fully registered certificates and initially will be registered in the name of "Cede & Co.," as nominee for DTC, the securities depository for the 1998 Certificates. Purchases by beneficial owners of the 1998 Certificates are to be made in book -entry only form. Payments to beneficial owners are to be made as described in " --Book -Entry Only Form" and Appendix C. The 1998 Certificates are dated July 1, 1998, and bear interest from such date to maturity payable semiannually on June 1 and December 1 of each year, commencing December 1, 1998. The 1998 Certificates mature on the dates, and in the amounts and bear interest at the rates set forth on the cover page of this Official Statement. See "INTRODUCTION- -The 1998 Certificates; Prior Redemption." Sources and Uses of Funds* The following are the estimated sources and uses of funds relating to the 1998 Certificates, exclusive of accrued interest. Accrued interest on the 1998 Certificates from July 1, 1998, will be deposited into the Certificate Fund for the payment of interest on the 1998 Certificates. *Subject to change 10 Amount SOURCES Proceeds from the 1998 Certificates ............ $7.000.000.00 TOTAL .................... ........... $7,000,000.00 USES. Construction Fund Deposit ................... $ Original Issue Discount ...................... Reserve Fund Deposit ....................... Issuance expenses (including underwriter's discount,' and insurance premium) ........... TOTAL .. ............................... $7,000,000.00 'See "UNDERWRITING." Source: The Underwriter The proceeds of the 1998 Certificates deposited into the Construction Fund will be used by the Town to finance the cost of constructing the Project, including Equipment. The Project will be located on the Site, which consists of approximately 4.2 acres of land presently owned by the Town. Currently, temporary modular public works facilities occupy this property. The Town began preliminary architectural design of the Project in December 1997, and groundbreaking is expected to occur in mid -July 1998. The Town anticipates that the Project will be completed in August 1999. The Town estimates that the total Project cost will, be approximately $7,000,000. ' See "THE PROJECT." Payment Provisions The principal of and premium, if any, on the 1998 Certificates is payable to the registered owner thereof as shown on the registration records of the Authority kept by the Trustee, upon presentation and surrender thereof at the principal office of the Trustee (currently located in Denver, Colorado). Payment of interest on any 1998 Certificate will be made to the registered owner thereof by check mailed by the Trustee, on each interest payment date (or, if such interest payment date is not a Business Day, on the next succeeding Business Day), to the registered owner thereof at the address of such registered owner shown on the registration records of the Authority- kept by the Trustee at the close of business on the Regular Record Date for such interest payment date; but any such interest not so timely paid shall cease to be payable to the registered owner thereof at the close of business on the Regular Record Date and shall be payable to the registered owner thereof at the close of business on a Special Record Date for the payment of any such defaulted interest. Such Special Record Date will be fixed by the Trustee whenever moneys become available for payment of the defaulted interest, and notice of the Special Record Date will be given to the registered owners of the 1998 Certificates not less than ten days prior thereto by first -class mail to each such registered owner as shown on the registration records, stating the date of the Special Record Date and the date fixed for the payment of such defaulted interest. The Trustee may make payments of interest on any 1998 Certificate by such alternative means as may be mutually agreed 11 to between the registered owner of such 1998 Certificate and the Trustee. All such payments shall be made in lawful money of the United States of America without deduction for the services of the Trustee. Each Certificate is payable solely from Revenues (defined herein) as, when, and if the same are received by the Trustee, which Revenues are specifically pledged to such purposes in the manner and to the extent provided in the Indenture. The issuance of the 1998 Certificates does not directly or contingently obligate the Town to make any payments beyond those appropriated for the Town's then current Fiscal Year. Redemption Provisions Redemption of the 1998 Certificates. Pursuant to the provisions of the Indenture, the 1998 Certificates are subject to redemption as follows: (a) Optional Redemption - Payment of Purchase Option Price with Non - Borrowed Funds. The 1998 Certificates shall be called for redemption on any interest payment date in the event of, and to the extent that moneys are actually received by the Trustee from the exercise by the Town of its option to purchase the Project as provided in the Lease, upon payment of the then applicable Purchase Option Price; provided, however, that the following paragraph, and not this paragraph, shall apply in the event that the Purchase Option Price is paid from moneys borrowed by the Town or the Districts or.derived from any installment purchase or lease purchase financing by the Town or the Districts, In the event the 1998 Certificates are redeemed pursuant to this paragraph, the 1998 Certificates shall be redeemed, in whole but not in part, at a redemption price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date. (b) Optional Redemption - Payment of Purchase Option Price with Borrowed Funds. In the event that the Purchase Option Price is paid from moneys borrowed by the Town or the Districts or derived from any installment purchase or lease purchase financing by the Town or the Districts, the 1998 Certificates _maturing on or before January 1, shall not be callable for redemption prior to maturity and the 1998 Certificates maturing on and after January 1, shall be callable for redemption prior to maturity, at the option of the Town, in whole or in part, from such maturities selected by the Town and by lot within any maturity, on January 1; and on anydate thereafter, at the redemption prices (expressed as percentages of principal amount) set forth in the table below, plus accrued interest to the redemption date: Redemption Dates Redemplion Prices 12 (c) Mandatory Sinking Fund Redemption. The Certificates maturing on January 1, 20_ and January 1, 20_ are subject to mandatory sinking fund redemption at a price equal to the principal amount thereof plus- accrued interest to the redemption date. The Certificates of a maturity subject to mandatory sinking fund redemption shall be selected. by lot in such manner as the Trustee shall determine. The following principal amounts of the Certificates maturing January 1, -, shall be subject to mandatory sinking fund redemption (after credit as provided below) on January 1 of the following years: o_ .. • The following principal amounts of the Certificates maturing January 1, , shall be subject to mandatory sinking fund redemption (after credit as provided below) on January 1 of the following years: Year Principal Amount On or before the thirtieth day prior to each such sinking fund payment date, the Trustee will call the Certificates indicated above (or any Certificate or.Certificates issued to replace such Certificates ) for redemption from the sinking fund on the next January� 1, and give notice of such call without other instruction or notice from the Town or the Authority. The amount of each sinking fund installment may be reduced by the principal amount of any Certificates of the maturity which is subject to sinking fund redemption on such date and which prior to such date have been redeemed (otherwise than through the operation of the sinking fund) or otherwise canceled and not theretofore applied as a credit against a sinking fund installment. Such reductions, if any, shall be applied in such year or years as may be determined by the Town. The amount of any 1998 Certificates redeemed prior. to maturity at the option of the Town otherwise than pursuant to the mandatory sinking fund redemption provisions above will be credited against such mandatory sinking fund obligations. (d) Extraordinary Redemption. The 1998 Certificates shall be called for redemption in the event and only to the extent that Extraordinary Revenues-are deposited into the Extraordinary Redemption Fund, other than as described above in (a), (b) or (c) or below in (e). In the event that the 1998 Certificates are redeemed pursuant to this paragraph, the 1998 Certificates shall be redeemed in whole, or in part in inverse order of maturity and by lot within any maturity, 13 at a redemption price of. 100% of the principal amount thereof plus accrued interest to the redemption date, on the first Business Day for which notice of redemption may be given. When 1998 Certificates are to be redeemed in part, the schedule of Base Rentals set forth in Exhibit B to the Lease shall be recalculated by the Trustee. (e) Termination Event Redemption. The Certificates are callable for redemption upon the occurrence of a Termination Event. If the Certificates are to be redeemed subsequent to a Termination Event as described in the preceding sentence, the Participants shall have no right to payment from the Town, the Authority or the Trustee in redemption of their Certificates or otherwise, except as expressly set forth in this Section; provided that nothing in this Section 4.02 shall affect the obligations of the Certificate Insurer to make payments as required under the 1998 Policy. "Termination Event" is defined in the Lease as (i) an Event of Nonappropriation, (ii) an Event of Default under the Lease followed by a determination by the Trustee to terminate the Lease, or (iii) an exercise by the Town of its right to terminate the Lease upon the occurrence of specified events as provided in the Lease. See "APPENDIX B - THE LEASE." Upon the occurrence of a Termination Event, the Certificates shall be payable from such moneys as may be obtained by the Trustee through the exercise of its rights under this Indenture. Upon the occurrence of a Termination Event, the Trustee shall commence proceedings for subleasing the Site and leasing the Project, or the sale of the Project and the assignment of the Trustee's leasehold interest in the Site as provided in the Indenture, and shall call the Certificates for redemption from and only to the extent of the Net Proceeds of such subleasing of the Site and leasing, sale or assignment of the Project and all other moneys, if any, then on hand and being held by the Trustee for the Participants at 100% of the principal amount thereof plus accrued interest to the redemption date (provided, however, that moneys in the Construction Fund and the Reserve Fund may be used by the Trustee to repair or modify the Project and to pay certain costs and expenses incurred by the Trustee, to the extent provided in the Lease and this Indenture). In the event that such Net Proceeds of subleasing of the Site and leasing, sale or assignment of the Project and other moneys shall be insufficient to redeem the Certificates at 100% of the principal amount thereof plus accrued interest to the redemption date, then such Net Proceeds of such subleasing of the Site and leasing, sale or assignment of the Project,and other moneys shall be allocated proportionately among the Certificates, according to the principal amount thereof Outstanding. In the event that suchNet Proceeds of such subleasing of the Site and leasing, sale or assignment of the Project and other moneys are in excess of the amount required to redeem the Certificates then Outstanding at 100% of the principal amount thereof plus accrued interest to the redemption date, after the Certificates have been redeemed, such excess moneys shall be paid to the Town. Prior to any distribution of the Net Proceeds of such subleasing of the Site and'leasing, sale or assignment of the Project in redemption of the Certificates pursuant to these provisions, the Trustee shall be entitled to payment of its customary fees for all- services rendered in connection with such subleasing of the Site and leasing, sale or assignment of the Project, as well as reimbursement for all costs and, expenses incurred thereby, from proceeds of such subleasing, leasing, sale or assignment. If the Certificates are to be redeemed subsequent to a Termination Event from the Net Proceeds of such subleasing of the Site and leasing, sale or assignment of the Project'for an amount less than 100% of the principal amount thereof plus accrued interest to the redemption date, no Participant shall have any further claim for payment against the Town, the Authority or the Trustee. 14 Nothing in the Indenture shall prevent the Trustee from applying any moneys available therefor to partial payments in redemption of Certificates, ratably according to the amounts ' principal and interest Outstanding, on more than one date, if the Trustee shall deem such application of moneys to be in the best interests of the Participants. , Whenever the principal of and interest on all Certificates has been paid, and all expenses and charges of the Trustee have been paid, any balance remaining in any fund or account created under the Indenture shall be paid to the Town as an overpayment of Base Rentals. Notice of Redemption. Notice of the call for any redemption, identifying the Certificates or portions thereof to be redeemed and specifying the terms of such redemption shall be given by the Trustee, upon being satisfactorily indemnified as to expenses, by mailing a copy of the redemption notice by first class mail at least 30 days and not more than 60 days prior to the date fixed for redemption to the registered owner of each Certificate to be redeemed at the address shown on the registration records; provided, however, that failure to give such notice by mailing, or any defect therein, shall not affect the validity of any proceedings for the redemption of Certificates as to which no such failure has occurred. Notwithstanding the provisions of the preceding paragraph, any notice of rederription may contain a statement that the redemption is conditioned upon the receipt by the Trustee of funds on or before the date fixed for redemption sufficient to pay the redemption price of the Certificates so called for redemption, and that if such funds are not available, such redemption shall be canceled by written notice to the owners of the Certificates called for redemption in the same manner as the original redemption notice was mailed. Additional Certificates So long as the Lease Term remains in effect and no Event of Nonappropriation or Event of Default has occurred, one or more issues of Additional Certificates may be issued upon the terms and conditions as provided in the Indenture without the .consent of or notice .to the Participants: Additional Certificates may be'issued to provide funds to pay any one or more of the following: (i) the costs of completing the construction, acquisition and equipping of the Project, including the acquisition of the related Equipment; (ii) the costs of making at any time or from time to time such additions, modifications and improvements for or to the Project as the Town'may deem necessary or desirable; (iii) the costs of issuance and sale of the Additional Certificates, any deposit ,to the Reserve Fund or to a separate reserve fund created solely for the Additional Certificates or'any portion thereof, and capitalized interest for such period, and other costs reasonablely related to the financing, as shall be agreed upon by the Town and the Trustee;'and (iv) the costs of refunding all or any portion of the 1998 Certificates and any Additional Certificates then Outstanding. Additional Certificates may be issued for the purpose specified in clause (iv) above without the consent of or notice to the Participants or the Certificate Insurer, if the refunding results in debt service savings. The prior approval of Certificate Insurer, but not of the Participants shall be required for the issuance of Additional Certificates for the other purposes specified above. Additional Certificates may be issued only. upon the satisfaction of the conditions set forth in the Indenture. Each of the Additional Certificates issued pursuant to the Indenture will 15 evidence an assignment of a proportionate interest in rights to receive Revenues under the Lease, as amended, proportionately and ratably secured with the 1998 Certificates originally issued and all other issues of Additional Certificates, if any, issued pursuant to the Indenture, without preference, priority or distinction of any 1998 Certificates or Additional Certificates over any other. Book -Entry Only Form The 1998 Certificates will be available only in book -entry form in the principal amount of $5,000 or any integral multiples thereof. DTC will act as the initial securities depository for the 1998 Certificates. The ownership of one fully registered Certificate for each maturity as set forth on the cover page of this Off_ icial Statement, each in the aggregate principal amount of such maturity, will be registered in the name of Cede & Co., as nominee for DTC. See "Appendix C -- Book -Entry Only System." SO LONG AS CEDE & CO., AS NOMINEE OF DTC, IS THE REGISTERED OWNER OF THE CERTIFICATES, REFERENCES IN THIS OFFICIAL STATEMENT TO THE REGISTERED OWNERS OF THE CERTIFICATES WILL MEAN CEDE & CO. AND WILL NOT MEAN THE BENEFICIAL OWNERS. SECURITY FOR THE CERTIFICATES General Each Certificate evidences the assignment of a proportionate interest in rights,to receive certain payments pursuant to the Lease. The Authority has assigned its right to receive payments pursuant to the Lease (other than its rights to payments or reimbursements of certain fees and expenses) to the Trustee under the Indenture, and the Trustee has agreed to hold such moneys in trust for the benefit of the Participants. As more fully described under the caption "RISK FACTORS," the Lease is subject to termination on an annual basis at the option of the Town. The Lease Tenn and the schedule of payments of Base Rentals are designed to produce moneys sufficient to pay the Certificates and interest thereon when due (if the Town elects not to terminate the Lease prior to the end of the Lease Term). , The Lease provides that it is the intention of the Town that the decision to terminate the Lease is to be made "solely by the Town Council. None of the Lease, the Certificates or the interest thereon constitutes a general obligation or other indebtedness of the Town within the meaning of any constitutional or statutory debt limitation: None of the Lease, the Indenture or the Certificates have directly or indirectly obligated the Town to make any payments beyond those appropriated for the then current Fiscal Year. Base R_ entals and Additional Rentals may be paid from "any lawfully available Town monies appropriated for that purpose. See "TOWN FINANCIAL OPERATIONS." In the event of termination of the Town's obligations. under the Lease upon the occurrence of an Event of Nonappropriation or an Event of Default, the Town is required to vacate the Project and the Site (leaving the Equipment) (a) in the case of an Event of Nonappropriation, by December 31 of the Fiscal Year during which an Event of Nonappropriation occurs, and (b) in the case of an Event of Default, within 15 days after notice from the Trustee. The Trustee may proceed 16 to foreclose through the courts on the Project, and exercise all the rights and remedies of a secured party under the Colorado Uniform Commercial Code with respect to the Equipment, and may: (i) lease the Project and sublease the Site to the highest responsible bidder, or sell the Project and assign its interest in the Ground Lease; (ii) recover from the Town Base Rentals and Additional Rentals allocable to any period in which the Town continues to occupy'tfie Project; and/or (iii) take whatever action at law or in equity appears necessary or desirable to enforce its right in and to the Project; Pursuant to the Indenture, the Authority has -also granted to the-Trustee an assignment of the Authority's interest in the Ground Lease and a mortgage and a security interest in the Site and the Equipment. The Reserve Fund The Reserve Fund established by the Indenture is required to be funded in the amount of the Reserve Fund Requirement, which is an amount equal to the least of (i) maximum annual debt service with respect to -the Certificates Outstanding; (ii) 125% of average annual debt service on all Certificates Outstanding, or'(iii) 10% of the aggregate principal amount of the 1998 Certificates and of any Additional Certificates hereafter issued upon original issuance thereof (but not taking into account any series of Certificates which has been paid in full or provision for which payment in full has been made pursuant to the Indenture). See "APPENDIX B - DEFINITIONS." 'Amounts in the Reserve Fund are to be used to pay principal of and interest on the 1998 Certificates; at the option of the Trustee, subsequent to a Termination Event, to the payment of costs necessary to preserve the Project; in the event that the Certificates are to be redeemed subsequent to a Termination Event, proportionately to the redemption of the Certificates then Outstanding; in the event that the Town exercises its option to purchase the Project, to the Town; or at the option of the Town, in reduction of the final payment of Base Rentals. - Upon the satisfaction of certain conditions set forth in the Lease and the Indenture, the Town may deposit an unconditional and irrevocable surety bond or other insurance policy (a "Qualified Surety Bond ") in .the Reserve Fund in lieu of or in- partial substitution for moneys on deposit therein. See "APPENDIX B - THE INDENTURE - The Reserve Fund." Upon issuance of the 1998 Certificates, the Reserve Fund Requirement will be $ , all of which is expected to be funded with proceeds of 'the 1998 Certificates.' 'See "THE 1998 CERTIFICATES -- Sources and Uses of Funds." Insurance on the 1998 Certificates The Town has applied for insurance for the 1998 Certificates. Accordingly, the definitions herein of the "Policy" and the "Certificate Insurer" are subject to change, and the terms of the Policy and the rights of the Certificate Insurer are subject to modification. 'Final information regarding the Policy and the Certificate Insurer will be provided in the final Official Statement. 17 THE PROJECT General Description The facility financed with 1998 Certificate proceeds will be a public works vehicle maintenance and repair facility (the "Project "). Currently, the Town leases a public works administration building located on the Swift Gulch area (as defined below) pursuant to a lease purchase agreement dated September 25, 1995. See "TOWN DEBT STRUCTURE - Contracts and Leases. ", The Town plans to purchase this building in July 1998 and will continue to use it as the administration building for the public works department and other Town departments. This building is located adjacent to the Project, but is not located on the Site and is not a part of the Project. In addition to this leased building, the Town currently leases other real estate for equipment storage and maintenance purposes. The 1998 lease obligation for this space is estimated to be over $234,000, which has been increasing at an annual rate of over 5% per year. No comparable space is available in or near the Town; accordingly, it has become essential for the Town to construct the Project so that the Town will not be required to rely upon private leased space for its public works requirements. The Town expects that the current expenditure for leased space will be used to partially pay the annual obligation of the Certificates. - The Project is a vehicle maintenance building consisting of 19,500 square feet on the first floor and 4,750 square feet on the mezzanine area. The Project primarily consists of a vehicle repair bay area, in addition to a small lobby area, two offices, and a lunchroom. The repair bay area of the building will contain vehicle lifts, a large fabrication�bay with a bridge crane, a flat large repair bay, two small repair bays, an implement repair bay, a wash bay with lift, and a lube /compressor room. The repair bays will also- contain a tire repair area and tire storage mezzanine, metal, shop, parts storeroom with mezzanine, battery room, manuals library, a rebuild room, an electronics shop, and lockers and showers. The property upon which the Project will be located (the "Site ") consists of a single parcel of real property of 4.198 acres in the Swift Gulch Addition,( "Swift Gulch ") to the Town. The entire Swift Gulch area consists of approximately 25 acres, including the Site. The Site is located near Interstate Highway 70 near the principal entrance to the Town, and is currently owned by the Town. Pursuant -to the Lease and the Ground Lease, the Town will lease the Site to the Authority, and the Authority will sublease the Site to the Town. Both parcels of the Swift Gulch area will be used for public works and transportation purposes by the Town. Design and Construction The Town began architectural planning of the Project in December 1997, and ground breaking is expected to occur in mid -July 1998. The Town anticipates that the Project will be completed in August 1999. The development of the entire Swift Gulch area has a total construction budget of approximately $9,700,000, of which approximately $7,000,000 is allocable to the Site and the Project. Development of the portion of Swift Gulch which does not include the Site and the Project 18 will be financed primarily with existing Town hinds. See "THE CERTIFICATES - Sources and Uses of Funds." Zoning Information . The Site is zoned pursuant to the Swift Gulch Planned Unit Development (the "Swift Gulch PUD "). The Swift Gulch PUD was originally established by the Town in 1994; and allows the following uses: offices, mechanical shops and storage, outdoor storage yards for uses associated with municipal services, water, transit and fire. Maximum building height is 48 feet. On April 14; 1998, following public hearings before the Town's Planning and'Zoning Commission and before the Town Council, the Town Council adopted an ordinance amending the Swift Gulch PUD to specifically allow the construction of the Project on the Site. The Town does not anticipate requesting any further zoning changes to the Site. 19 BASE RENTALS SCHEDULE The following table sets forth the Base Rentals principal component and the Base Rentals interest component for the 1998 Certificates and the estimated total Base Rentals for the 1998 Certificates. Schedule of Base Rentals Base Rentals Base Rentals Fiscal Principal Interest Total Base Year (1) Component (2) Component - Rentals - (1) This schedule sets forth the annualized principal components of Base Rentals for each period indicated. The Lease provides for semiannual payments of Base Rentals commencing November 15, 1998. Base Rentals are payable fifteen days in advance of the payment dates on the 1998 Certificates, which are set forth on the cover page of this Official Statement. (2) The principal amounts shown assume that no optional redemptions of the 1998 Certificates are made prior to maturity, but that mandatory sinking fund redemptions are made as scheduled. See "THE CERTIFICATES — Redemption Provisions." Source: The Underwriter. 20 THE AUTHORITY General The Authority was incorporated in 1998 as a Colorado nonprofit corporation, with the purpose of facilitating Town financings, including lease - purchase financings. Specifically, the Authority was treated to acquim real estate, property and improvements and lease them to the Town, to borrow money, to execute and deliver bonds, notes or debentures to' evidence such indebtedness, for the purpose of acquiring such real and personal property, constructing or installing such improvements and for such other purposes as may be necessary to accomplish the objectives of the Authority. Board of Directors The Authority has a three- member board of directors. The persons currently on the board of directors of the Authority, their principal occupations and the length of service of each are as follows: Name Prim= Occupation Scott Wright Town Finance Director Terry Halverson Bank President Wayne Thayer Corporate Banker The directors of the Authority have no private or proprietary interest in the Authority. The Board of Directors serve without compensation (except reimbursement of expenses), and no part of the Authority's net earnings, income or assets, inure to the benefit of any private entity or person. The Authority's Limited Liability The Authority has entered into the Lease and Ground Lease with the Town solely to facilitate the financing of the Projects. The Authority assigns, pursuant to the Indenture, its rights and interests under the Lease (except certain rights to payment or reimbursement of certain fees and expenses) and Ground Lease to the Trustee for the benefit of the Participants. Since the Authority is not financially liable for, and will not make, any Lease payments (including Base Rentals or Additional Rentals), the Participants will have no right to look to the Authority, or its assets, for any payment,of the Certificates, the interest thereon or for any other payments. In addition, the Authority has no responsibility for or control over the expenditures of the proceeds of the Certificates. The Authority's obligations with respect to the Certificates and the Projects are strictly limited to those provided for in the Lease, the Ground Lease and the Indenture: Furthermore, neither the Lease, the Ground Lease nor the Indenture creates any pecuniary liability on the part of directors or officers of the Authority. 21 THE TOWN Overview The Town is located within Eagle County (the "County ") which encompasses approximately 1,686 square miles and spans from the summit of Vail Pass to Glenwood-Canyon. Approximately 80 percent of the County's total land area is publicly owned, controlled primarily by the U.S. Forest Service and the U.S. Bureau of Land Management. Cooperative agreements with the United States Forest Service have enabled the development and expansion of Vail, Arrowhead and Beaver Creek ski resorts, which are located within the County. The Town is located within eight miles of the Vail Ski Area and is directly adjacent to the Beaver Creek resort. The focus of the economy within and surrounding the Town is the recreation and tourism industry. See "ECONOMIC AND DEMOGRAPHIC INFORMATION." The Town encompasses approximately five square miles and has an estimated population of 2,706. Transportation to the Town is provided primarily by Interstate 70. Air service is provided at the Eagle County Airport, 24 miles west of the Town. The Town provides a free bus system with the Town and to Beaver Creek Resort. See "Services Available to Town Residents" below. Town Powers Pursuant to the Charter, and except as limited by the State Constitution, the Town has the power of self - government and home rule, as well as all municipal powers established by the constitution and laws of the State of Colorado. Among those powers, rights and liabilities specifically, but not exclusively, enumerated in the Charter are the following: perpetual succession; to own, possess, and hold real and personal property; to succeed to all rights and liabilities, to acquire all benefits, and to assume payment of all bonds, obligations, and indebtedness of the Town; to sue and defend, plead and be impleaded in all courts and places and in all matters and proceedings; to purchase, receive, hold and enjoy, or sell and dispose of real and personal property; and to have and use a common seal. Governing Body The Town operates under a council- manager form of government whereby all powers and authority of the Town are vested in an elected Town Council. The Town Council consists of seven members, one of whom serves as mayor and one of whom serves as mayor pro-tem. All Town Council members are elected at large for staggered four -year terms at general municipal elections. General municipal elections are conducted on the first Tuesday after the first Monday in November of even numbered years. Any vacancies which occur are filled by the remaining council I members who choose by majority vote a duly qualified person to fill such vacancy, until a successor can be elected at the next general municipal election. At the first Town Council meeting following each genial Town election, the Town Council elects one of its members to serve as Mayor and one to serve as mayor pro -tem. The Mayor is the executive head of the Town and presiding officer of the Town Council. The Mayor has no power to vote except in cases of tie vote of the members of the Town Council present and voting. The mayor pro-tem is elected by the Town Council from the Town Council membership to serve in the event of absence or,disability of the Mayor: The Town Council meets on the second and fourth Tuesdays of the month. Special meetings are held at the written request of the Mayor or any four council members. As compensation for their services, the,council members currently receive salaries of $200 per month and the Mayor receives $500 per month. The members of the Town Council, their principal occupations, length of service on the Town Council, and terms of office are set forth in the following chart. Enactment of Ordinances . All official action of the Town Council must be done through the passage of ordinances, resolutions or motions: All legislative enactments must be in the. form of ordinances; all other actions may be -in the form of resolutions or motions. Except as otherwise provided by State law and the Charter-, the adoption, amendment, or repeal of ordinances requires the affirmative vote of not less than a majority of the Town Council members. Generally, no ordinance may be enacted until it has been introduced and approved on first reading and published and finally approved on second reading. The effective date of all ordinances is seven days. after public notice following final passage. An exception to the above is made for any ordinance which declares therein that it is an emergency. ordinance immediately necessary for the preservation of the public peace, health, or safety. Such an ordinance may be enacted at the meeting at which it is introduced by unanimous minus one vote of Town .Council members present and without publication or second reading,on passage. The emergency, ordinance, takes effect,eight days after passage and is required to be published for informational purposes after final passage. The Charter reserves the right of the Town's electors to propose ordinances to the Town Council by means of an initiatory petition procedure .and to subject certain ordinances to reconsideration by the Town Council or a referendum vote through the submission of a petition. Administration and. Management The council- manager form of government vests responsibility for Town operations in the Town Manager and Town staff. The Town Manager is appointed by the Town Council and 23 Term Principal Name Position ' es- Occupation Jack Fawcett Mayor 11/98 Publisher Judy Yoder Mayor Pro -Tern 11/98 Business Manager Jim Benson Councilmember 11 /00 Business Owner Richard Carnes Councilmember 11/98 Business Owner Albert J. Reynolds, Jr. Councilmember 11 /00 General Contractor Albert J. Reynolds, Sr. Councilmember 11/98 Retired Bob McIlveen Councilmember 11 /00 Manager -Vail Associates Enactment of Ordinances . All official action of the Town Council must be done through the passage of ordinances, resolutions or motions: All legislative enactments must be in the. form of ordinances; all other actions may be -in the form of resolutions or motions. Except as otherwise provided by State law and the Charter-, the adoption, amendment, or repeal of ordinances requires the affirmative vote of not less than a majority of the Town Council members. Generally, no ordinance may be enacted until it has been introduced and approved on first reading and published and finally approved on second reading. The effective date of all ordinances is seven days. after public notice following final passage. An exception to the above is made for any ordinance which declares therein that it is an emergency. ordinance immediately necessary for the preservation of the public peace, health, or safety. Such an ordinance may be enacted at the meeting at which it is introduced by unanimous minus one vote of Town .Council members present and without publication or second reading,on passage. The emergency, ordinance, takes effect,eight days after passage and is required to be published for informational purposes after final passage. The Charter reserves the right of the Town's electors to propose ordinances to the Town Council by means of an initiatory petition procedure .and to subject certain ordinances to reconsideration by the Town Council or a referendum vote through the submission of a petition. Administration and. Management The council- manager form of government vests responsibility for Town operations in the Town Manager and Town staff. The Town Manager is appointed by the Town Council and 23 serves for an indefinite term at the pleasure of the Town Council. During his tenure in office, the Town Manager must reside within the Town's boundaries. The staff functions through the Town's various departments which are under the direction of the Town Manager. The background and experience of the Town Manager, Assistant Town Manager, and the Finance Director, the officials most directly involved with the issuance of the 1998 Certificates, are set forth below. Town Manager - Mr. Bill Efting has served as the Town Manager since January 6, 1997. Prior to -his employment with the Town, Mr. Efting had fifteen years of experience in municipal government. Mr. Efting has a Bachelor of Science degree and a Masters degree from the University of South Dakota. Assistant Town Manager - Mr. Larry Brooks was appointed Assistant Town Manager on March 31, 1997. Prior to his appointment, Mr. Brooks served as the Town's Director of Municipal Services, a position he continues to hold: Mr. Brooks also served as the Acting Town Manager, from June 26, 1996 to January 5, 1997. Prior to his employment with the Town, Mr. Brooks had fourteen years of experience with other Colorado municipal governments. Mr. Brooks has a Bachelor of Science degree and a Masters degree from Colorado State University and spent two years as a teacher early in his career. Finance Director - Mr. Scott Wright was hired as the,Town's Finance Director on May 1, 1996. Prior to joining the Town, Mr. Wright was the Chief Financial Officer for the City of Northglenn, Colorado, and the Chief Accountant for the Irving Independent School District in Irving, Texas. Mr. Wright also has been employed as a Certified Public'Accountant performing audits of local governments in Texas and Colorado. Mr. Wright has seventeen years of experience in local government finance and is a Certified Government Finance Officer. Mr. Wright has a Bachelor of Arts degree in Accounting from the University of Northern Iowa. Staff - The Town currently employs 106 full -time regular employees and approximately 146 full -time equivalent part-s-time, temporary and seasonal employees. The Town does not recognize any union as the representative of the employees for collective bargaining purposes. The Town Charter requires the Town to create a personnel merit system to hear and determine appeals by any aggrieved employee who has been subject to disciplinary action. In the opinion of the Town Manager, employee relations-are good. Benefits - The Town offers its full -time employees a comprehensive health, dental, and vision insurance plan, a long -term disability.plan, term life insurance, an employee assistance program; a cafeteria 125 plan, and a wellness program. In addition, beginning in 1997, the Town began offering its part-time and seasonal employees a group health insurance plan. Full -Time Employee Retirement Plan - Full -time employees participate in one of three mandatory (police, fire, or general employee) defined contribution pension plans. Norwest Investment Management and Trust administers the plans and serves as the Town's trustee. Each of the plans are self-directed with a number of different investment options. 24 In a defined contribution plan, each plan participant maintains "a separate account consisting of employee and Town contributions, and investment earnings credited to the account. Benefits depend solely upon the accumulation of moneys within each participant's account. Under the terms of the plans, all participants must contribute 11 % of compensation which is then matched by the Town. Participants begin partial vesting after two years of service and are fully vested after seven years. Forfeitures are used toward payment of administration fees of the plans. The Town has no liability for benefits under the plans beyond the Town's matching payments. The Town's total contributions for all full -time plans for 1996 and 1997 were $296,230 and $363,966, respectively. PTS Retirement Plan ­In 1997, the Town established a PTS Retirement Plan (the "PTS Plan") for its part-time, temporary and seasonal employees. A PTS Retirement Plan is a Social Security replacement retirement plan established under Section 457 of the Internal Revenue Code. The PTS Plan allows participants to defer federal and state income taxes on savings until retirement. The PTS Plan requires a mandatory contribution of 7.5% of an employee's salary per plan year, of which 3.75% is an employee contribution, and 3.75% is a matching Town contribution. Upon separation from service, participants may withdraw the account balance in a lump -sum payment, roll the account balance over into another Section 457 plan, or continue to allow the account balance to be invested tax -free. Taxes are paid when funds are withdrawn from the plan. The Town's total PTS Plan contribution for 1997 was $12,861. Section 457 Deferred Compensation Plan - Effective January 1, 1998, the Town's previously inactive deferred compensation plan was reopened to contributions. The deferred compensation plan allows employees to participate in a voluntary, payroll- deducted supplementary retirement program. Under the plan, the maximum amount of deferred compensation may not exceed the lesser of $7,500 or 25% of the participant's normal compensation. Legal Matters Affecting the Town Litigation, - The Town Attorney states that, as of the date hereof, there is no pending action, suit, proceeding or investigation at law or in equity before or by any court, public board or body to which the Town is a party, nor, to the best of his knowledge and information, is there any action threatened against or materially affecting the Town, wherein an unfavorable decision, finding or ruling would materially adversely affect the transactions contemplated by the Bond Ordinance or which would affect the imposition or collection of Town revenues. The Town is, however, subject to certain pending and threatened litigation regarding various other matters arising in the ordinary course of the Town's business. To the best knowledge of the Town Attorney, none of these claims, if resolved against the Town, would result in a material adverse effect upon the Town's financial condition or its ability to perform its obligations to the owners of the Certificates. Sovereign Immunity - The Colorado Governmental Immunity Act, Title" 24, Article 10, Part 1, Colorado Revised Statutes, (the "Immunity Act "), provides that, with certain specified exceptions, sovereign immunity acts as a bar to any action against a public entity, such as the Town, for injuries which lie in tort or could lie in tort. 25 The Immunity Act provides that sovereign immunity is waived by a public entity for injuries occurring as a result of certain specified actions or conditions, including: the operation of a non - emergency motor vehicle, owned or leased by the public entity; a dangerous condition of any public buildings; the operation of any public water, gas, sanitation, electrical, power or swimming facility; and a dangerous condition of a public highway, road or street as provided in the Immunity Act. In such instances, the public entity may be liable for injuries arising from an act or omission of the public entity, or an act or omission of its public employees, which are not willful andwanton, and which occur during the performance of their duties and within the scope of their employment. The maximum amounts that may be recovered under the Immunity Act, whether from one or more public entities and public employees, are as follows: (a) for any injury to one person in any single occurrence, the sum of $150,000; (b) for an injury to two or. more persons in any single occurrence, the sum of $600,000, except in such instance, no person may recover in excess of $150,000. The Town may, by resolution, increase any maximum amount that may be recovered from the Town for the type of injury described in the resolution. However, the Town may not be held liable either directly or by indemnification for punitive or exemplary damages. The .Town may be subject to civil liability and may not be able to claim sovereign immunity for actions founded upon various federal laws. Examples of such civil liability include suits filed pursuant to 42 U.S.C. § 1983 alleging the deprivation of federal constitutional or statutory rights of an individual. In addition, the Town may be enjoined from engaging in anti- competitive practices- which violate the antitrust laws. However, the Immunity Act provides that it applies -to any action brought against a public entity or a public employee in any State court having jurisdiction over any claim brought pursuant to any federal law, if such action lies in tort or could lie in tort. Town Insurance Coverage The Town is a member of the Colorado Intergovernmental Risk Sharing Agency ( "CIRSA "), which is considered to be a joint venture. The Town does not exercise oversight responsibility nor does it exercise significant influence over CIRSA's operations. CIRSA is an organization created by intergovernmental agreement to provide property, general and automobile liability and public officials coverage to its members. Coverage is provided through CIRSA self funding and various excess insurance contracts which limit maximum losses and mi mi ze exposure on large risks. CIRSA does not have a legal obligation to pay losses or loss adjustment expenses in excess of its annual established loss fund and amounts recoverable under excess specific aggregate insurance contracts. Losses and loss adjustment expenses incurred in excess of loss funds and amounts recoverable from excess insurance are direct liabilities of the participating members. CIRSA has indicated that the amount in excess of annual loss funds will be billed to members in proportion to their contributions in the year such excess occurs. The Town has not been informed of any excess losses which may have been incurred by the pool. The Town's contribution to CIRSA was $130,980 in 1996 and $180,582 in 1997. The Town continues to carry commercial insurance coverage for other risks of loss including workers compensation, contingent business, boiler, machinery and employee health and accident insurance. In the opinion of the Town Manager, such insurance is sufficient. Intergovernmental Agreements Fire Services. The Town provides fire protection services to Arrowhead Metropolitan District, Beaver Creek Metropolitan District, Berry Creek . Metropolitan District, Edwards Metropolitan District, Eagle -Vail Metropolitan District, Belly Ache Ridge Metropolitan District, Squaw Creek Metropolitan District, Cordillera Metropolitan District, Smith Creek Metropolitan District, and Pilgrim Downs Subdivision (the "Participants ") pursuant to an agreement. Under the terms of the agreement, the- Town is reimbursed by the Participants for their share of the Fire Department's actual operating costs and an agreed upon administrative fee. Transportation Services. In 1991, the Town entered into a joint agreement with Eagle County, the Town of Vail, and Beaver Creek Resort Company. - This agreement was a consolidated effort by the four entities to subsidize the cost of providing regional bus service between Leadville, Vail, Avon/Beaver Creek, and Edwards. The Town also entered into an agreement with Beaver Creek Resort Company to provide additional bus service from the skier parking lots on Highway 6 to the base of the Beaver Creek ski area. In January 1996, the Eagle County Regional Transit Authority ( "ECRTA ") was created and funded through a % cent Eagle County sales tax in order to provide permanent funding for the regional routes previously operated through the joint agreement. The Town was then retained by ECRTA to continue to operate the system in essentially the same manner as prior to the creation of ECRTA. Recreation Authority. The Town also is a participant in the Eagle County Recreation Authority (the "Authority "). The Authority was formed pursuant to an intergovernmental agreement in 1991 by the Town, the Town of Vail, Eagle County, Arrowhead Metropolitan District, Beaver Creek Metropolitan District, Berry Creek Metropolitan District and Eagle -Vail Metropolitan District in order to acquire open space and develop regional recreational facilities -with the County. The Town has a 6% participation in the Authority. Each participant in the Authority appoints one voting member to the Authority's Board of Directors. The Authority assesses each participant based upon its participation percentage for operation, maintenance and capital costs based .upon an annual budget. Excess contributions are rebated at year end, while deficiencies are assessed based upon participation percentage. To date, the Authority has purchased a parcel of land from the Town of Vail for approximately $2.5 million and has entered into an installment loan agreement with Vail for 40% of the purchase price. Annual debt service on the loan agreement is approximately $90,000. The Town contributed $15,056 to the Authority in 1996 and $15,056 in 1997. Avon Metropolitan District. Pursuant to -an agreement for assumption of water services effective January 1, 1996, between the Town and Avon Metropolitan District (the "Metro District "), the Town assumed responsibility for the provision of water supply services (including the administrative and other services currently provided by the Town) and setting of rates and charges. The Metro District also conveyed title to all water supply and•distribution facilities, equipment and water rights. The Town assumed the Metro District's obligation pursuant to service contracts with the Upper Eagle Regional Water Authority whereby the Town and other participating entities have 27 given a general obligation pledge to the Authority's service contract obligations. The Town also assumed the Metro District's cost recovery agreement with a private entity. Pursuant to resolutions adopted by.both the Metro District and the Town in early 1998, an Agreement for Dissolution of the Metro District .was executed, and the District was dissolved on May 31, 1998. According to the dissolution agreement, the Metro District assigns to the Town all of the Metro District's current contractual obligations related to the provision of water and fire protection services, and maintenance of the facilities. Pursuant to Colorado law, the Metro District continue in existence as a political subdivision of Colorado for the sole purpose of levying ad valorem property taxes to pay debt service on existing Metro District obligations. The Town Council will be appointed as the Metro District's board of directors and will set annual Metro District mill levies as necessary to pay in full the Metro District's existing obligations. Services Available to Town Residents The Town provides various services to its residents. Included among these are police and fire protection, highways and streets, parks and recreation, planning and zoning, and general administrative services. The following additional services and facilities also are available to Town residents: Transportation System - The Town is served primarily by Interstate Highway 70, which is one of the primary highways providing access from the east and west coasts of the United States. Commercial airlines serve the Eagle County airport-located approximately 30 miles west of Avon on U.S. Highway 6. The Town manages, operates and maintains - three separate transit systems: Eagle County Regional, Beaver Creek ski area parking lots, and the Town of Avon. These systems comprise a total of 47 transit vehicles carrying 1.5 millionpassengers annually. In addition to its public transit functions, the Town operates a year -round charter bus service within the Vail Valley. See "Intergovernmental Agreements - Transportation Services," above. Recreational Activities - The Town is eight miles west of the Vail ski and summer resort area. It is immediately adjacent to the Beaver Creek Resort, a destination, year -round resort being developed by-Beaver Creek Associates, Inc., a subsidiary of Vail Associates, Inc. Within eight miles of the Town are the 18 -hole championship Eagle -Vail golf course, Vail golf course; Singletree golf course, Beaver Creek golf course and the Country Club of. the Rockies Golf Course. at Arrowhead Other recreational activities available within the general area and in the National Forest surrounding the Town include tennis, fishing, hiking, hunting; and camping. Nottingham Park serves as the Town park, and contains comprehensive recreational activities and systems including outdoor tennis facilities, sailing on the existing sixteen acre man -made Nottingham Lake, a soccer field, volleyball courts, basketball courts, a baseball diamond, and -bicycle and cross country paths, and a recently constructed sand beach. The Town's recently completed Recreation Center offers an aquatics center, weight room, aerobics facilities and day care facilities to Town residents. 28 Utility Systems - The Town transferred most of its water operations to the Upper Eagle Regional Water Authority (the "Authority"). effective January 1, 1997. Prior to the transfer, revenues from water operations included the sales of water and collection of tap fees. Expenses included the cost of purchasing treated water, and all related personnel, equipment, supplies and other related costs required to operate and maintain the water system. Since the transfer of operations, the Authority now collects and retains all revenues from water sales and pays for all costs required to operate and maintain the water system. Water related functions retained by the Town include limited administrative functions, maintenance of Nottingham Lake and related ditches, and administration "of water rights. The Town continues to charge tap fees and to assess a water service fee surcharge which is collected by the Authority and then forwarded to the Town. These revenues are used to cover expenses related to the limited remaining water related functions retained by the Town. Electrical utility facilities for heat and power are provided by Holy Cross Rural Electrical Association. Natural gas facilities for heat are provided to certain areas within the Town by Public Service Company of Colorado. Solid and liquid waste removal services are provided by two private companies and the Upper Eagle Valley Consolidated Sanitation District, respectively. Telephone and cable television service is provided by U.S. West Communications, Inc. and TCI Cablevision respectively. Medical Services - Comprehensive medical,. surgical and emergency services are available both within the Town and throughout the Vail Valley. The Vail Valley Medical Center, located in the Town of Vail approximately 8 miles east of the Town, is a full- service community hospital. Clinics located within or near the Town include the Colorado Mountain Medical'Center, Beaver Creek Medical Center, and Colorado West Mental Health Center. Education - Public education in the ,Town is provided by Eagle County School District RE -50J. The school district includes parts of Garfield County and Routt County, as well as all of Eagle County. I.. Capital Improvement Plan . The Town has adopted a Comprehensive Plan as a policy document used to guide land-use decisions. Included in this plan are goals and policies grouped into nine categories: land use; community and economic development; housing; . community facilities and services; transportation, parking and circulation; environment; parks, recreation and open space; community image and design; and communication. During the past several years, the Town has completed several major capital improvement projects, including: the separated railroad crossing on Avon Road in 1992; a 40,000 square foot recreation center in 1995; and the completion of roundabout traffic intersections on Avon Road in 1997. Capital improvement expenditures for 1997 totaled $5,362,825. The Town's major capital improvement project in 1997 was the construction of roundabouts and other traffic 29 improvements along Avon Road. The cost of these improvements was approximately $4.7 million, a large portion of which was financed with proceeds of the Town's General Obligation Bonds, Series 1997, in the amount of $3,500,000 and Supplemental "B" Interest Registered Coupons, in the amount of $140,000. The Town funds the majority of its non -major capital improvement projects with annual real estate transfer tax proceeds, which totaled $1,543,707 in 1997. The Town budgets annually for capital improvements. The Town's major capital improvements planned for 1998 (in addition to the Project) include a new municipal' building entrance, a new pump house and, picnic shelter, a small park, paving and road improvements, and landscaping along Avon Road. The 1998 budget for capital improvements totals $1,801,883. The Town currently projects capital expenditures of approximately $1.6 million in the years 1999 through 2002. Such expenditures are expected to be paid from available revenues of the Town. TOWN DEBT STRUCTURE General Obligation Debt Debt Authorization - Indebtedness and other obligations of the Town may be incurred as provided in the Town Charter and Article X, Section 20 of the Colorado Constitution (the "Amendment "). See "CONSTITUTIONAL LIMITATION." The Town Council has the power to contract indebtedness on behalf of the Town for any municipal purpose and may issue the following securities to evidence such indebtedness: (a) short-term notes; (b) general obligation bonds; (c) revenue bonds; (d) special or local improvement bonds; and (e) any other legally recognized form of security (including capital lease obligations). The Amendment requires the Town to hold an election prior to the issuance of most securities, with the exception of short-term notes and annually appropriated lien obligations. In addition, the Town may not issue any bonds or other evidence of indebtedness payable in whole or in part from the proceeds of general property taxes and/or sales taxes and/or municipal taxes, or to which the full faith and credit of the Town is pledged except by ordinance adopted and approved by two- thirds vote of the entire Town Council. Limitation on Indebtedness - Pursuant to the Charter, the total outstanding indebtedness of the Town may not exceed 25% of the assessed valuation of taxable property within the T own as determined by the county assessor for the last preceding assessment or the sum of $15,000;000; whichever amount is greater. The Charter 'specifically excludes from the limitation any indebtedness for the acquisition or extension of a water -works system, municipal storm, sewer or sanitary sewer systems; short-term notes; special or local, improvement securities; securities payable from the revenues of an income - producing system, utility, project, or any other capital improvement; or from Town sales or use taxes; and long -term contracts other than real property acquisitions, rentals or leaseholds. The Town has a total of $8,055,000 in general obligation debt applicable to the Town's debt limitation. 30 The Town's legal debt limit is calculated as follows: Legal Debt Limit 1997 Assessed Valuation .................................. Debt limit -- greater of 25% of assessed valuation or $15,000,000 ........................................ Total amount of general obligation debt outstanding applicable tolimit ............... ............................... Net Debt Limit Available ................................. $95,534,550 23,883,638 $.055.000 $15.828.638 To date, the Town has made timely payment of all principal and interest due on its outstanding general obligation bonded indebtedness. Town Debt Ratios ' The following table sets forth estimated ratios of direct debt of the, Town to assessed valuation, statutory actual value, and population within the Town: Selected Debt Ratios of the Town as of December 31. 1997 Town Population (1) 2,706 Direct Town Debt (2) $8,196,815 Overlapping Debt (3) $13.453.772 Total Direct and Overlapping Debt $21,919,185 Per Capita Direct Debt $3,029.13 Per Capita Direct Debt Plus Overlapping Debt $8,000.96 1997 Assessed Valuation for the Town $95,534,550 Direct Debt to Assessed Valuation 8.58x/, Direct Debt Plus Overlapping Debt to Assessed Valuation 22.66% 1997 Estimated Statutory Actual Value for the Town (4) $558,243,781 Direct Debt to Estimated Statutory Actual Value 1.47% Direct Debt leis Overlapping Debt to Estimated Statutory Actual Value 3.88% (1) As estimated by the To (2) Includes the accreted value of "B" interest registered coupons. (3) Figure is estimated based upon information supplied by other taxing authorities. See "— Estimated Overlapping General Obligation Debt" above and the footnote regarding what types of General Obligation Overlapping Debt are included in this figure. (4) Statutory Actual Value is determined by a statutory formula under which assessed valuation is calculated as 9.74% statutory actual value of residential property and 29% of statutory actual value of all other classes of property. See " —Ad Valorem Property Taxes" above. Sources: Eagle, Garfield and Routt Counties Assessors' Offices; the Town; and information obtained from individual overlapping taxing entities. 31 Estimated Overlapping General Obligation Debt In addition to the general obligation indebtedness of the Town, other taxing entities are authorized to incur general obligation debt within boundaries which overlap or partially overlap the boundaries of the Town. The following table sets forth the estimated overlapping general obligation debt chargeable to property owners within the Town as of the date of this Official Statement. Estimated Overlapping General Obligation Debt Entity( I ) Eagle County Eagle County School District Re-50J (4) Upper Eagle Valley Sanitation District (5) Eagle County Health Service District Upper Eagle Regional Water Authority (6) Eagle Valley Library District Avon Metropolitan District (7) Eagle -Vail Metropolitan District Eagle River Water and Sanitation District (8) TOTAL: Estimated Outstanding General Obligation Debt hareeable to the Tom Percent(3) Outstanding 1997 Assessed General Obligation Valuation(2) Debt $1;280,148,66 $ 4,865,000 1,196,260,280 49,035,000 67,515,300 775,000 1,080,847,800 150,000 448,696,110 7,895,000 743,738,640 5,265,000 92,920,730 4,250,000 48,063,260 5,760,000 994,355,810 17,688,000 Estimated Outstanding General Obligation Debt hareeable to the Tom Percent(3) Amount 7.46% $ 362,929 7.99 3,917,897 14.12 109,430 8.84 13,260 21.29 1,680,846 12.85 676;553 100.00 4,250,000 12.90 743,640 9.61 1.699.817 $13,453.772 (1) The following entities also overlap the District but have no general obligation debt outstanding: Colorado Mountain College, Colorado River Water Conservation District, and Upper Eagle Valley Consolidated Sanitation District. (2) The 1997 assessed valuation figures were certified by the respective county assessors for collection of ad valorem property taxes in 1998. (3) The percentage of each entity's outstanding debt chargeable to the District is calculated by comparing the assessed valuation of the portion overlapping the District to the total assessed valuation of the overlapping entity. To the extent the District's assessed valuation changes disproportionately with the assessed valuation of overlapping entities, the percentage of debt for which property owners within the District . are responsible will also change. (4) Eagle County School District Re-50J expects to seek voter authorization for additional general obligation indebtedness at the November 1998 election. (5) Upper Eagle valley Consolidated Sanitation District ( "UEVCSD') issued bonds in 1987 on behalf of Upper Eagle Valley Sanitation District ( "UEVSD ") to refund bonds of UEVSD. Such bonds are not a debt of UEVCSD. UEVCSD consists of the UEVSD and Vail Valley Sanitation District and performs all of their service and administrative functions. UEVSD and Vail Valley Sanitation District exist only to the extent that they levy for debt service. UEVCSD can only issue new debt with an election. (6) Upper Eagle Regional Water Authority is comprised of the following six entities: Arrowhead Metropolitan District, the Town of Avon (as successor to Avon Metropolitan District), Beaver Creek Metropolitan District, Berry Creek Metropolitan District, Eagle -Vaij Metropolitan District and Edwards Metropolitan District The water authori3O outstanding debt is paid for entirely by service fees; however, in the event service fees are insufficient to meet such debt obligation, each of the six entities comprising the water authority have made a general obligation pledge to meet a portion of the debt obligation. (7) Effective January 1, 1996, water services formerly provided by Avon Metropolitan District were assumed by the Town. Avon Metropolitan District now exists only to pay its existing debt (8) Effective July 1, 1996 Upper Eagle Valley Consolidated Sanitation District ("UEVCSD °)arid Vail Valley Consolidated Sanitation District ("VVCSD ") merged to become Eagle River Water and Sanitation District ( "ERWSD "). UEVCSD and VVCSD continue to assess a debt service mill levy and property owners within the boundaries of UEVCSD and VVCSD remain obligated for such mill levy. Sources: Eagle, Garfield and Routt Counties Assessors' Offices; and information obtained from individual taxing entities. Contracts and Leases The Town Council has the authority to enter into installment or lease option contracts for the purchase of land, buildings, equipment and other property for governmental or proprietary purposes. The term of any such contract may not extend over a period greater than the estimated 32 useful life of the property or equipment. The Town Council may provide for the payment of such obligations by the imposition of a tax levy imposed on property within the Town, by rates, tolls or service charges imposed for the use of such property, or by any other available municipal revenues. The obligation created under such leases or contracts does not constitute an indebtedness of the Town. In January 1998, the Town entered into a master lease agreement with Norwest-Bank for the purchase of various items of equipment in the amount of $961,300. The term of the lease is seven years with an annual interest rate of 5.28% and annual principal payments of $49,807. The Town also has prior lease obligations for various vehicles and equipment outstanding, which totaled $575,583 as of December 31, 1997. During 1995, the Town also entered into a ten -year Maintenance Facility Lease Purchase Agreement dated as of September 25, 1995 with LaSalle National Bank, Chicago, Illinois, for the construction and acquisition of a public works maintenance facility. The $500,000 principal amount of the Lease is payable over 10 years in quarterly installments (commencing December 25, 1995) of $16,851 (principal and interest at the rates of 6.18 %' per annum). - As. part of the development of the Project and the Swift Gulch area, the Town plans to pay the purchase option price . of this lease in' July 1998 and purchase the building, which will' then be used as an administration building for the public works department and other Town departments. This building will be located adjacent to the Project, but is not located on the Site. See "THE PROJECT." Revenue Obligations The Town Council has the power to issue revenue bonds for any public purpose payable from the revenues derived from the operation of facilities to be acquired', constructed, or improved with the proceeds of the bonds, or payable inwhole or part from available proceeds of Town sales taxes. As of December 31, 1997, the Town had $5,010,000 in outstanding sales tax revenue bonds. Special Assessments The'Town issued special assessment refunding bonds in 1991 to refinance special assessment bonds issued in 1990 for the purpose of extending natural gas and-cable facilities to the Wildridge Subdivision. The special assessment bonds were outstanding in the principal amount of $430,000 as of December 31, 1997. Short -Term Borrowing and Other Obligations The Town may borrow funds which must mature before the close of the fiscal year 'in which the money is borrowed, in anticipation of the correction of taxes or other revenues. No short-term borrowing has been requested or authorized in the last five years.` The Town also records a long -term liability for compensated absences. This amount was $230,111 as of December 31, 1997 (latest audited figure available.) 33 TOWN FINANCIAL OPERATIONS Town's Budget and Appropriation Process The Town's fiscal year begins on January 1 and ends December 31. Pursuant to the Charter, prior to the start of each fiscal year the Town Manager presents a recommended budget and long -range capital program to the Town Council. The budget provides a complete financial plan of all municipal, funds and activities for the coming fiscal year and contains the proposed financial policies for the Town for the next fiscal year, including an explanation of any major changes in policy, expenditures and revenues from the prior year, a description of all expenditures and ivenues, and a summary of the Town's debt position and estimated surpluses or deficits in the various funds. A public hearing on the proposed budget and.capital program is held following the publication of a notice indicating that copies of the proposals are on file for public inspection. The budget, is adopted by the Town Council, either with or without amendment,, by resolution. The Charter provides that the budget must be adopted on or before the last day established by law for certification of the next year's tax .levy to the County. If the Town Council fails to do so, the amounts appropriated for the current fiscal year are deemed adopted for the following fiscal year on a monthly basis until a budget is adopted. The adoption constitutes an appropriation of the amounts specified therein and a levy of the property tax contained therein. Supplemental appropriations may be made during the fiscal year upon the certification by the Town Manager that revenues in excess of those estimated in the budget are available. As a part of its annual budget process, the Town Council amends its current -year budget to realize changes in revenues and expenditures. The Town Council amended its 1997 budget in November, 1997 for that purpose. The Town Council may, by emergency"ordinance; make appropriations to meet public emergencies affecting life, health, property, or the public peace. The Town Council may authorize the issuance of emergency notes which may be renewed from time to time and must be paid no later than the last day of the fiscal year following that in which the emergency appropriation was made. The adopted budget must provide for a levy- on real and personal property which will result in the collection of revenues in the amount necessary to be raised from ad valorem property taxes for municipal purposes. Following adoption of the budget, the Town Council certifies to the county assessor the amount to be levied on taxable property within the Town for collection by the county treasurer. General Fund Budget Summary The Town has budgeted $8,879,003 for total revenues in its General Fund in 1998, and has budgeted $8,958,690 in total expenditures from its General Fund in 1998. The Town's largest appropriation from its General Fund for 1998 ($2,634,029) is for public works and utilities. See %- Sources of General Fund Revenues." 34 1 Sources of General Fund Revenues Sales Tax - The Sales Tax constitutes the primary 'source of General Fund revenues. In 1996 and 1997, respectively, such revenues accounted for_ $3,858,577 and $4,165,005 (approximately 32.4% and 33.8 %, respectively, of General Fund revenues). In 1997, approximately 45% of the Town's General Fund tax revenues were attributable to sales taxes paid by two companies. In 1998, the Town has budgeted to receive $4,540,000 (approximately 5 1. 1 % of General Fund revenues) from Sales Tax revenues. The Town presently anticipates that most of the Base Rentals will be financed by transferring Sales Tax revenues, from the General Fund to the Debt Service Fund; however, neither, Sales Tax revenues nor any other funds or revenues of the Town are pledged to the payment of Base Rentals. Detailed information regarding the Sales'Tax is presented in "Sales Tax Information," below. Ad Valorem Property Taxes - Another source of General Fund revenue is the ad valorem property tax levied pursuant to State law against all taxable property within the Town. Ad valorem property tax revenues accounted for $747,898 and $896,851 (approximately 6.3% of total General Fund revenues in 1996, and 7.3% in 1997) in 1996 and 1997, respectively. See "Ad Valorem Property Tax Data" below for a discussion of collection of the Town's ad valorem property taxes. In 1998, the Town has budgeted to receive $1,072,555 (approximately 12.1 % of General Fund revenues) from property tax revenues. See "Ad Valorem Property Tax Information," below. Other - The Town also receives General Fund revenues from .several additional sources including the accommodations tax, franchise fees, real estate transfer taxes, licenses and permits, fines and forfeits, charges for services, and interest income. Several intergovernmental revenue sources ,are also included in the General Fund; among these are highway users' taxes, specific ownership taxes, motor vehicle registration fees, cigarette taxes and road and bridge revenues. Intergovernmental revenue sources accounted for 11.5% and 12.8% of General Fund revenues in 1996 and 1997. Charges for services accounted for 35.9% and 32.2% of General Fund revenues in 1996 and 1997. Financial Statements The Town Charter requires that an independent audit be made of all Town accounts at least annually, and more frequently if deemed necessary by the Town Council. The "Colorado Local Government Audit Law" requires that an annual audit be made of the Town's financial affairs at the end of the fiscal year. The audited financial statements must be filed with the Town Council by June 30th of each year and with the State auditor 30 days thereafter. Failure to comply.with this requirement to file an audit report may result in the withholding of the Town's property tax revenues by the county treasurer pending compliance. Attached to this Official Statement as Appendix A are the Town's audited financial statements as of and for the year ended December 31, 1997, including the report rendered thereon by Van Schooneveld and Co., Inc., Certified Public Accountants, Greenwood Village, Colorado. Such financial statements represent the most current audited financial information available for the Town. See "INDEPENDENT AUDITORS." 35 The Town received the Certificate of Achievement for Excellence in Financial Reporting awarded by the Government Finance Officers Association ( "GFOA ") for each of the years 1991 through 1996. Such certificate is the highest form of recognition in the area of government finance reporting and is awarded to governmental entities whose comprehensive annual financial reports are judged to conform substantially to program standards. The Town has submitted its 1997 comprehensive annual financial report for award consideration. History of General Fund Revenues and Expenditures Set forth hereafter is a -five -year comparative statement of revenues and expenditures of the Town's General Fund, including the beginning and ending fund balances for each year. This information should be read together with the financial -statements and accompanying notes of the Town included as Appendix A hereto. M Five -Year History of General Fund Revenues Expenditures and Changes in Fund Balance - GAAP Basis - Years Ended December 31 Revenues: 1993 1994 1995 1996 1997 Taxes $3,797,351 $4,152,535 $4,531,251 $5,205,580 $5,605,552 Intergovernmental (1) 3,217,477 3,593,662 3,847,265 1,364,229 1,572,414 Licenses and permits 117,904 206,043 205,057 277,132 296,166 Charges for services (1) 483,917 552,785 912,669 4,438,087 3,964,656 Fines and forfeits 29,372 47,256 37,698 50,424 45,538 Miscellaneous Revenues 31,010 32,650 68,529 300,685 499,458 Interest Income 70.716 150.611 287.699 247,248 3.22.266 Total Revenues 67.747.747 8,735,542 9,890,168 11.883.385 06 OS Expenditures: General government 1,292,110 1,442,741 1,395,613 1,179,939 1,392,244 Community development (2) - - - 391,454 433,381 Public works (3), (4) 806,947 787,887 866,896 4,640,072 1,655,115 Public safety 1,390,116 1,457,633 1,648,989 2,198,046. 2,206,089 Parks and Recreation (3) 561,296 639,280 783,743 2,050,642 -- Recreation and Culture (3) - - - - 1,601,614 Transportation Services (4) 2,471,347 2,581,394 2,954,623 - 3,325,255 Recreation Center Activities (5) 0 9,153 258,829 - -- Capital Projects (6) 326.546 828.506 665.157 Total expenditures 6,848,362 7.746.594 8,573,850 10.460.153 10.613.698 Excess of revenues over expenditures 899.385 89 8.948 1,316,318 1,423,232 1,692,352 Other financing sources (uses]: Proceeds from capital lease 132,271 550,367 - - Sale of fixed assets - - - 21,081 21,960 Operating transfers (out) (752,538)- (468,208) (670,475) (519.000) (541:5781 Total other financing sources (uses) (620.267) (82,159) (670.475) (497.919)' 19.61 Excess of revenues and other sources over (under) expenditures and other uses 279,118 1,071,107 645,843 925,313 1,172,734 Fund balance - January 1 1,066,342 1.724.670(7) 2.795.777 443. 1.620 4.366.933 Fund balance - December 31 SIJA5,40 $2.795.777 $3.441.620 $4.366.933 $5 539.667 (1) Amounts for 1996 and 1997 are not directly comparable to prior years because in 1996 the Town reclassified certain intergovernmental revenues as charges for service. (2) Community development expenditures were included in general government expenditures in 1993, 1994, and 1995. (3) In 1996, parks expenditures were included in parks and recreation expenditures. In 1997, parka expenditures were included in public works res expenditures, and recreation expenditu were accounted for in a new category called recreation and culture. (4) In 1996, transportation expenditures were�included in public works expenditures. In 1993 -95 and 1997, transportation expenditures were accounted for in a separate category of expenditures. (5) Expenditures associated with constriction of the Town's recreation center. (6) The increase in "Capital Projects" in 1994 and 1995 is due to expenditures associated with the Town's recreation center (7) The Town's ftmd balances in 1994 have been restated to reflect the adoption of Governmental Accounting Standards Board Statement No. 22 ( "GASB 22 "). Asa result of GASB 22, a retroactive adjustment of $379,210 was made to the December 31, 1993 fiord balance. Source: Town Comprehensive Annual Financial Reports, 1993 -1997. On Comparison of Budget Information Set forth below is a comparison (budgetary basis) of the Town's General Fund 1996 audited results, the Town's 1997 Amended General Fund Budget as compared to actual results, and the Town's 1998 General Fund Budget. Budget Summary and Comparison Town's General Fund Budgets for 1997 and 1998 Actual 1996 and 1997 Results Other Uses Contingency 1996 50,000 1997 - - - 31,558 Actual 1997 Actual 1998 REVENUES Results Bud 1) Results Budgrc Taxes $5,205,580 $5,569,764 $5,605,552 $5,917,555 Licenses & Permits 277,132 236,250 296,166 229,250 Intergovernmental Revenues 1,364,229 1,545,937 1,572,414 510,548 Charges for Services 4,438,087 4,199,933 3,964,656 - .1,265,000 Fines & Forfeits 50,424 52,700 45,538 51,700 Investment Earnings 247,248 270,000 322,266 250,000 Miscellaneous ...: 300.685 219.776 499,458 - 105,154 Total Operating Revenues 1 1.883.385 12.094.360 12,366,050 8.419.203 Other Sources Sale of Fixed Assets 21,081 - 21,960 30,000 Capital Lease Proceeds - 21.960 -- 429,800 TOTAL REVENUES $11 904 4 $12.116.320 $21.960 $8.879.003 EXPENDITURES General Government $1,179,939 1,438,035 1,392,244 1,552,118 Community Development 391,454 451,602 .433,381 497,522 Public Safety (2) 2,198,046 2,301,151 2,206,089 1,084,091 Public Works (3) 1,753,771 1,818,373 1,655,11.5 2,634,029 Transportation (4) 3,408,694 3,459,377 3,325;255 - Parks & Recreation (3) 1,528,249 1,666,994 -- - Recreation and culture (3) - - _ 2 1_ x_41.614 l�,l97 Total Operating Expenditures - 10.460.15 13 14 3,52$ 7,603,957 Other Uses Contingency - 50,000 -- 50,000 Transfers Out to Mall Maintenance - - - 31,558 Transfers Out to Fire Operations - - - 267,598 Transfers Out to Debt Service 519,000 541,578 541,578 537,432 Transfers Out to Transit Enterprise - - - 257,295 Transfers Out to IS Internal Service 210,850 TOTAL EXPENDITURES $9.962.234 $11.727.110 $11.155.276 $8.958690 NET SOURCE (USE) OF FUNDS SA-232 Ml I $ $.L1Z2 7 $Q-681) (1) As amended. (2) In 1996 and 1997, the public safety category included fire department expenditures. In 1998, fire department operations are budgeted in a separate special revenue fund and are not shown in this table. (3) In 1996, both park and recreation expenditures were accounted for in the parks and recreation category. In 1997 and 1998, park expenditures are accounted for in the public works category, and recreation expenditures are accounted for in a new category called'recreation and culture. (4) In 1996 and 1997,1transpoitation expenditures were included in the general fund. In 1998, transportation operations are budgeted in a separate enterprise fund not shown in this table. Source: Town of Avon; 1998 budget and 1996 and 1997 audited financial statements. 38 Sales Tax Information Authority for Imposition of Sales Taxes - The Town's sales tax (the "Sales Tax "), which has been in effect since 1982, is imposed pursuant to the Charter and is collected in accordance with Chapter 308 of the Avon Municipal Code (the "Code "). The Sales Tax imposed by the Town is currently 4 %. The Town does not impose a use tax. State statutes limit the total sales or use taxes imposed by the State, any county, and any city or town in any locality in the State to 7 %, except that this limitation does not preclude a county sales or use tax at a rate not to exceed 1 %; however, this limitation does not apply to home rule towns such as the Town. With the State's 3% sales and use tax, Eagle County's 1.5% sales tax, and the Town's 4% Sales Tax, the total sales tax rate currently in effect within the Town is 8.5 %. Description of the Sales Tax - The Town regards the sale and rental of tangible personal property and the sale of all meals as a taxable privilege and imposes a charge, through the imposition of its Sales Tax, for the exercise of that privilege. Generally, "tangible personal property" under the Code means corporeal personal property, except for newspapers. Items which are exempt from the Sales Tax include motor vehicles registered outside of the Town; sales of tangible personal property where the sales are to parties who are residents of, or doing business in, Colorado but outside of the Town, and the property purchased is to be delivered to the purchaser outside of the Town; fuel for internal combustion engines; medical supplies and prosthetic devices; goods manufactured in the Town and sold to common carriers operating in interstate commerce; cable television services; construction and building materials; and certain commercial packaging materials. Exempt taxpayers include federal, state and local governments and religious and charitable institutions. Manner of Collection of Sales Tax - The collection of the Town's Sales Tax is administered by the Finance Director. Consequently, while persons in business within the Town's boundaries must remit the State and Eagle County sales taxes to the State, the Town's Sales Tax is remitted directly to the Town. Any person defined as 'a "retailer" in the Code must obtain a Town license. The Town's Finance Director estimates that there are approximately 474 licensed retailers currently operating within the Town. Generally, retailers are required to file Sales Tax-returns on or before the twentieth day of each month for the sale activities of the preceding month, and must be accompanied by an amount equal to the Sales Tax required to be'collected by that retailer. The Town enforces the collection of its Sales Tax as specified in the Code. The Code contains provisions for the assessment of penalties and interest when any person fails, neglects or refuses to properly collect and/or pay the Sales Tax due because of fraud, negligence, or disregard for the reporting requirements of the Code. In the case of a deficiency due to negligence, the vendor must pay 10% of the amount of such deficiency as a penalty. In addition; interest is due -on the amount of such. deficiency at the rate of interest of one and one -half percent per month. If the deficiency is a result of fraud with the intent to evade the tax, the vendor is obligated to pay a penalty of 50% of the amount of the deficiency plus interest at the rate of one and one -half percent per month. The administration of the Sales Tax collection process and enforcement of the Code is the duty of the Finance Director. 39 Town Remedies for Delinquent Taxes - Failure to pay the Sales Tax and any interest or penalties thereon, when due, results in a written notice of final determination, assessment and demand for payment. This assessment of the deficiency amount is due and payable 15 days after notice of its determination is given. The Sales Tax is a first and prior lien upon the goods and business fixtures owned or used by 'any retailer, except the stock of goods held for sale in the ordinary course of business, until the Sales Tax is paid in full. . History of Sales Tax Collections - Set forth in the following chart is a history of collections of the Town's Sales Tax since 1992. •_► •_ - - Lt= Source: The Town Finance Director's Summary of Material Trends in Sales Tax Collections - The following comments regarding.trends in the Town's Sales Tax collections have been provided by the Town Finance Director. In the last five years, total Sales Taxes have increased_ 67.3 %, from $2,496,146 in 1992 to $4,175,713 in 1997. The increases are due to continued development within the Town. In 1997, Sales Tax collections increased 8.1% over collections for 1996. The Town's 1998 budget anticipates Sales Tax collections of $4,540,000, an increase of 8.0% over 1997. Principal Sales Tax Generators - Two businesses in. the Town (a dry goods retailer and a grocery store) have paid a significant portion of the Town's total Sales Tax revenues over the past five years. Other Town Sales Tax generators accounted for a significantly lower amount of collections on an individual basis than the two principal generators. In the past several years, however, there_ has also been a significant increase in the diversification of the Town's Sales Tax base and a decrease in the Town's reliance on the few largest merchants. In 19932 Sales Tax revenues from the top two merchants totaled 55.6% of total Sales Tax Revenues. In 1997, only 45.7% of such revenues were generated by the top two merchants. The percentage of total Sales Tax revenues generated by the top ten merchants has also decreased, from 73.9% in 1993 to 61.3% in 1997. In 1997, three new large grocery stores opened in the Vail Valley, outside of the Town. Even with this increased competition for Sales Tax revenues, the Town experienced an 8.1 % growth an its Sales Tax revenues. 40 Sales Tax e Collection Percent Increase 1992 $2,496,146 n/a 1993 2,831,846 13.45% 1994 3,172;041 12.01 1995 3,447,559 8.69 1996 3,862,803 12.04 1997 4,175,713 8.10 Source: The Town Finance Director's Summary of Material Trends in Sales Tax Collections - The following comments regarding.trends in the Town's Sales Tax collections have been provided by the Town Finance Director. In the last five years, total Sales Taxes have increased_ 67.3 %, from $2,496,146 in 1992 to $4,175,713 in 1997. The increases are due to continued development within the Town. In 1997, Sales Tax collections increased 8.1% over collections for 1996. The Town's 1998 budget anticipates Sales Tax collections of $4,540,000, an increase of 8.0% over 1997. Principal Sales Tax Generators - Two businesses in. the Town (a dry goods retailer and a grocery store) have paid a significant portion of the Town's total Sales Tax revenues over the past five years. Other Town Sales Tax generators accounted for a significantly lower amount of collections on an individual basis than the two principal generators. In the past several years, however, there_ has also been a significant increase in the diversification of the Town's Sales Tax base and a decrease in the Town's reliance on the few largest merchants. In 19932 Sales Tax revenues from the top two merchants totaled 55.6% of total Sales Tax Revenues. In 1997, only 45.7% of such revenues were generated by the top two merchants. The percentage of total Sales Tax revenues generated by the top ten merchants has also decreased, from 73.9% in 1993 to 61.3% in 1997. In 1997, three new large grocery stores opened in the Vail Valley, outside of the Town. Even with this increased competition for Sales Tax revenues, the Town experienced an 8.1 % growth an its Sales Tax revenues. 40 Selected Ad Valorem Property Tax Information The following table sets forth the historical assessed valuation of property in the Town. History of Assessed Valuation and Mill Levies for the Town Levy Collection Assessed Percent Mill Year Year Valuation Increase " 1993 1994 $38,208,880 — 25.573 1994 1995 46,757,650 22.370/a 23.551 1995 1996 65,703,510 40.52(1) 20.324 1996 1997 67,896,320 3.34 22.785 1997 1998 95,534,550 40.71(2) 19.568 (1) The County Assessor's office reports that the large increase in the assessed valuation for the 1995 levy year was primarily attributable to a change in the base year level of valuation from 1992 to 1994, a time period during which property values increased in the Town. (2) The County Assessor's office reports that the large increase in the assessed valuation for the 1997 levy year was primarily attributable to a change in the base year level of valuation from 1994 to 1996, a time period during which property values increased in the Town. Sources: State of Colorado, Department of Local Affairs, Division of Property Taxation, State of Colorado Annual Reports (1993 -96); and the Eagle County Assessor's Office. 41 The following table sets forth_ a history of the Town's ad valorem property tax collections for the indicated time period. Mmal (1) The Eagle County Treasurees,collection fee has not been deducted from these amounts. (2) Tax collections may include interest and penalties resulting in collection of amounts greater than 100 percent. (3) According to the County Treasurers Office, in tax year 1990 the County Assessor re- classified timeshare units from residential to commercial property; such change resulted in an increase in the assessment ratio from 15% to 29% of statutory "actual" value. Due to property owner protests, the County Assessor was mandated by court order to return the timeshare units back to a residential status. As a result, property owners who had not paid their 1990 taxes.due in 1991, chose to pay such taxes late, resulting in a large amount of delinquent tax collections in 1993. (4) Tax collections are for January 1 through_ May 31, 1998. Taxes are due January 1 in the year of collection; however they may be paid in two installments, without interest penalty, if payments are made by February 28 and June 15 in the collection year. The property owner may elect to make only one payment if it is made by April 30. Sources: State of Colorado, Department of Local Affairs, Division of Property Taxation, State of Colorado Annual Reports (1992 - 1996); and the Eagle County Assessor's and Treasurer's Offices. The following table represents the ten largest property taxpayers within the Town. A determination of the largest taxpayers can be made only by manually reviewing individual tax records. Therefore, it is possible that owners of several small parcels may have an aggregate assessed value in excess of those set forth in the following table. Furthermore, the taxpayers shown in the table may own additional parcels within the Town not included herein. No independent investigation has been made of the following taxpayer listing, and consequently there can be no representation as to the financial conditions of the taxpayers listed below or that such taxpayers will continue to maintain their status as major taxpayers, based on the assessed valuation of their property, in the Town. 11 Y) Current Total Tax Current Taxes as a Delinquent Collections as Levy Collection Taxes Tax Percent of Tax Total Tax a Percent of Taxes ] r Year Levied Collection 1)(2) Taxes Levied (1)(2) Collection5(1)(2) Collections(I)(2) Levied(1)(2) 1992 1993 $972,332 $954,023 98.1% $93,067 $1,047,090 107.7 0/o(3) 1993 1994 977,116 973,653 99.6 19,080 992,733 102.0 1994 1995 1,101,189 1,091,926 99.2 399 1,092,325 99.2 1995 1996 1,335,358 1,326,161 99.3 657 1,326,818 99.4 1996 1997 1,547,018 1,548,673 100.1 3,340 1,552,013 100.3 1997 1998 1,869,420 1,475,033 (4) 78.9(4) 5,124 1,480,157 (4) 79.2(4) (1) The Eagle County Treasurees,collection fee has not been deducted from these amounts. (2) Tax collections may include interest and penalties resulting in collection of amounts greater than 100 percent. (3) According to the County Treasurers Office, in tax year 1990 the County Assessor re- classified timeshare units from residential to commercial property; such change resulted in an increase in the assessment ratio from 15% to 29% of statutory "actual" value. Due to property owner protests, the County Assessor was mandated by court order to return the timeshare units back to a residential status. As a result, property owners who had not paid their 1990 taxes.due in 1991, chose to pay such taxes late, resulting in a large amount of delinquent tax collections in 1993. (4) Tax collections are for January 1 through_ May 31, 1998. Taxes are due January 1 in the year of collection; however they may be paid in two installments, without interest penalty, if payments are made by February 28 and June 15 in the collection year. The property owner may elect to make only one payment if it is made by April 30. Sources: State of Colorado, Department of Local Affairs, Division of Property Taxation, State of Colorado Annual Reports (1992 - 1996); and the Eagle County Assessor's and Treasurer's Offices. The following table represents the ten largest property taxpayers within the Town. A determination of the largest taxpayers can be made only by manually reviewing individual tax records. Therefore, it is possible that owners of several small parcels may have an aggregate assessed value in excess of those set forth in the following table. Furthermore, the taxpayers shown in the table may own additional parcels within the Town not included herein. No independent investigation has been made of the following taxpayer listing, and consequently there can be no representation as to the financial conditions of the taxpayers listed below or that such taxpayers will continue to maintain their status as major taxpayers, based on the assessed valuation of their property, in the Town. 11 Y) Ten Largest Taxpayers Within the Town (1) Based on a 1997 certified assessed valuation of $95,534,550. Source:, The Town (from information obtained from the Eagle County Assessor's Office). The following table sets forth the current assessed valuation of specific classes of property within the Town. As shown in the following table, commercial property accounts for the largest percentage of the Town's assessed valuation, and therefore, owners of commercial property are anticipated to pay the largest percentage of ad valorem property taxes levied by the Town. Estimated Assessed Valuation of Classes of Property in the Town(1) 1997 Percent of Assessed Town's Total Assessed Town's Assessed Name Tyne of Business Valuation Valuation(] l -Avon Partners Il, LLC Property Management $ 3,045,190 3.19% Mountain Star, LLC Real Estate Developer 2,294,840 2.40 Chapel Square LLC Property Management 2,160,020 2.26 Avon Wynfield Inn, LTD Hotel 2,054,810 2.15 Riverview Park Associates, Inc. Property Management 1,725,370 1.81 Vail Building Arts Associates LTD Property Management 1,703,380 1.78 Avon Commercial Center LTD Property Management 1,634,230 1.71 Tanavon Corporation Property Management 1,605,720 1.68 Dillon Real Estate Co., Inc. Property Management 1,269,050 1.33 Vail -Avon Commercial Properties, LLC Property Management 1.081.120 1.13 $18.576.730 19.4 %o (1) Based on a 1997 certified assessed valuation of $95,534,550. Source:, The Town (from information obtained from the Eagle County Assessor's Office). The following table sets forth the current assessed valuation of specific classes of property within the Town. As shown in the following table, commercial property accounts for the largest percentage of the Town's assessed valuation, and therefore, owners of commercial property are anticipated to pay the largest percentage of ad valorem property taxes levied by the Town. Estimated Assessed Valuation of Classes of Property in the Town(1) (1) Due to adjustments and abatements-made to the County Assessor's compilation of the above information subsequent to certification, the assessed valuation shown above may differ from the assessed valuation shown elsewhere in this Official Statement. Source: Eagle County Assessor's Office. 43 Percent of Assessed Town's Total Prope a Class Valuation Assessed Valuation Commercial $35,935,110 37.62% Residential 33,566,840 35.' 14 Vacant Land 24,360,000 25:0 State Assessed 1,653.250 1.73 (Public Utilities) TOTAL: $25.515.200 100.00% (1) Due to adjustments and abatements-made to the County Assessor's compilation of the above information subsequent to certification, the assessed valuation shown above may differ from the assessed valuation shown elsewhere in this Official Statement. Source: Eagle County Assessor's Office. 43 CONSTITUTIONAL LIMITATIONS At the general election on November 3, 1992, the voters of Colorado approved the Amendment. In general the Amendment was effective December 31, 1992, and limits the ability of the State and local governments to increase revenues and impose taxes. The Amendment appears to apply to the State and all local governments, including home rule municipalities such as the Town. (collectively, the "districts "). Enterprises, defined as government -owned businesses, authorized to issue revenue bonds and receiving under 10% of annual revenue in grants from all state and local governments combined, are excluded from the provisions of the Amendment. The provisions of the Amendment are unclear and will probably require judicial interpretation. However, as-described below, the impact of the Amendment on the payment of the 1998 Certificates is reasonably clear. The Amendment limits percentage increases in government spending and property tax revenues. The Amendment requires that district property tax revenues yield no more than the prior year's revenues adjusted for inflation, voter approved changes and local growth. As defined in the Amendment, "inflation" means the percentage change in the United States Bureau of Labor Statistics Consumer Price Index for Denver - Boulder, all items, all urban consumers, or its successor index. For a non - school district, "local growth" means the net percentage change in actual value of all real property in a district from construction of taxable real property improvements, minus destruction of similar improvements, and additions to, minus deletions from taxable real property. Changes in the value of personal property are not taken into account in determining local growth. Pursuant to the Amendment, local government spending is- limited by the same formula and State spending is limited by inflation plus the percentage change in State population in the prior calendar year. The bases for future spending and revenue limits are 1992 fiscal year spending and 1991 property taxes collected in 1992. Future spending and property tax revenue limits are determined based upon the prior year's limits. Revenues collected in excess of permitted spending must be rebated unless the district's voters approve an increase in spending. Among other provisions, the Amendment requires districts to establish emergency reserve funds. The reserve fund must consist of at least 1 % of fiscal year spending in 1993, 2% in 1994, and 3% in each year thereafter. The Amendment allows districts to impose emergency taxes (other than property taxes) if certain conditions are met. Districts are not allowed to use emergency reserves or taxes to compensate for economic conditions, revenue shortfalls, or district salary or benefit increases. According to the Town, it has budgeted emergency reserves as required by the .Amendment. Beginning November 4, 1992, the Amendment requires voter approval prior to imposing new taxes, increasing a tax rate, increasing a mill levy above that for the prior year, increasing a valuation of assessment ratio for a property class, extending an expiring tax, or implementing a tax policy change directly causing a net tax revenue gain to any district. Except for voter approved obligations, bond refinancings at lower interest rates or adding employees to existing pension plans, the Amendment specifically prohibits the creation of multiple -fiscal year debt or financial obligations without present cash reserves held for all future payments. The Amendment provides that to the extent that annual Town revenue is less than annual payments on general 44 obligation bonds, pensions, and final court judgements, the voter approvals discussed above and the Amendment's spending limits are suspended to provide for the deficiency. The Amendment also prohibits new or increased real property transfer tax rates, new State real property taxes and local district income taxes. The Amendment allows districts to enact exemptions and credits to reduce or end business personal property taxes; provided, however, the district's spending is reduced by the amount saved by such action. With the exception of K -12 public education and federal programs, the Amendment also allows local districts (subject to certain notice and phase -out requirements) to reduce or end subsidies to any program delegated for administration by the general assembly; provided, however, the district's spending is reduced by the amount saved by such action. Except for refinancing at lower interest rates or adding employees to existing pension plans, the Amendment specifically prohibits the creation of multiple -fiscal year direct or indirect debt or other financial obligations without voter approval or without present cash reserves held for all future payments. The Colorado Court of Appeals has held that a year -to -year lease is not a -multiple -fiscal year direct or indirect debt or other financial obligation. No appeal of that ruling has been taken to the Colorado Supreme Court. There is no assurance that the Colorado Supreme Court would affirm the position of the Colorado Court of Appeals if called upon to consider the matter. In the opinion of Special Counsel, the Series 1998 Certificates may be issued without a .vote by the electors based upon the fact that the Series 1998 Certificates are not a multiple -fiscal year direct or indirect debt or other financial obligation. The Town will be required to apply the general spending and revenue limits imposed by the Amendment. These limits could impact the Town's ability to spend other Town moneys received in excess of the spending formula in the Amendment on capital projects and operation and maintenance. Under the Amendment, all Town spending and revenues have one combined limit other than debt service on bonds; different functions and accounts are not independently reviewed. At the November 8, 1994 election, the Town voters authorized the Town Council to take action on all spending and revenue raising measures limited by the Amendment (except sales or use tax or property tax rate increases) and also authorized the Town to keep and spend all revenues collected by the Town through 1998 regardless of the limitations contained in the Amendment. Further; the election question approved by the voters provided that the Town's 1998 fiscal year spending and property tax revenues would be utilized as the base upon which the subsequent year's spending and revenue would be calculated pursuant to the Amendment. At the November 4, 1997 election, the Town voters authorized the Town, without increasing any taxes, to collect, retain and spend excess revenues received in 1998 and each year thereafter. No representation can be made as to the overall impact of the Amendment on the Town's operations. 45 ECONOMIC AND DEMOGRAPHIC INFORMATION . This portion of the Official Statement contains general information concerning the economic and demographic conditions in and surrounding .the -Town. - It is .provided so that prospective investors will be aware of factors which may affect future development and growth of the Town. The information presented was obtained from the sources indicated, and neither the Town nor the Underwriter.guarantees or makes any -representation as to the accuracy or completeness of the data presented. - General The Town's location at the base of the Beaver Creek ski resort, and near the Vail ski resort, has resultedin significant development within the-Town and surrounding areas in the past decade. See "Construction in the Town," below. As shown in "Population," below, the population of the Town increased 332.8% from 1980 to 1996, from 640 residents to 2,706 residents. The Town serves as the corporate headquarters for Vail Resorts, Inc., which is the largest employer in Eagle County. In 1997, Vail Resorts, Inc. acquired, the Breckenridge and Keystone ski resorts in neighboring Summit County, becoming one of the largest ski companies in the world. See "Recreation and Tourism," below. Population and Age Distribution Population. The following table sets forth a history of the population of the Town, the County, and the State. Between 1980 and 1990, the Town's population increased 180.9 %, the County's population increased 64.6 %; and the State's population increased 14.0 %. These figures represent the permanent resident populations for these entities. Total population figures increase significantly during the winter season and moderate population increases also occur during the summer season. M (1) Avon was not incorporated until 1978. (2) Figures for 1997 will not be available until July 1998. Sources: Figures for 1950 through 1990 were obtained from the United States Department of Commerce, Bureau of the Census, Census of- Population and Housing; figures for 1991 -96 are estimates provided by the Colorado Department of Local Affairs, Division of Local Government, and are subject to periodic revision. Age Distribution. The following table sets forth a comparative age distribution profile for the County, the State and the United States as of December 31, 1996. Age Distribution Percent of Population United Age Town of Percent Eagle ..Percent _.. 26.1% Percent Year Avon(]),, Increase County Increase State Increase 1950 n/a - -- 4,488 --- 1,325,089 --- 1960 n/a - -- 4,677 :4.2% 1,753,947 32.4% 1970 n/a --- 7,498 60.3 2,209,596 26.0 1980 640 --- 13,320 77.6 2,889,735 30.8 1990 1,798 180.9% 21,928 64.6 3,294,394 14.0 1991 1,857 3.3 23,060 5.2 3,369,199 2.3 1992 2,232 20.2 24,169 4.8 3,464,116 2.8 1993 2,366 6.0 25,629 6.0 3,567,727 3.0 1994 2,434 2.9 27,331 6.6 3,662,684 2.7 1995 2;490 2.3 28,687 5.0 3,747,560 2.3 . 1996(2) 2,706 8.7 30,140 5.1 3,822,676 2.0 (1) Avon was not incorporated until 1978. (2) Figures for 1997 will not be available until July 1998. Sources: Figures for 1950 through 1990 were obtained from the United States Department of Commerce, Bureau of the Census, Census of- Population and Housing; figures for 1991 -96 are estimates provided by the Colorado Department of Local Affairs, Division of Local Government, and are subject to periodic revision. Age Distribution. The following table sets forth a comparative age distribution profile for the County, the State and the United States as of December 31, 1996. Age Distribution Percent of Population United Age County mate . States 0 -17 26.1% 26.5% 26.0% 18 -24 8.7 8.5 9.1 25 -34 24.2 16.3 15.2 35-49 30.1 26.0 23.3 50 and Older 10.9 22.7 26.4 Source: Sales & Marketing Mana eat ment, "Survey of Buying Power," 1997 edition. 47 Income The following table sets forth annual per capita personal income levels for the County, the State and the United States. Per capita personal income levels in the County consistently have exceeded levels in the State and the United States during the period shown. Source: United States Department of Commerce, Regional Economic Information System, Bureau of Economic Analysis. The following two tables reflect the Median Household Effective Buying Income ("EBI "), and also the percentage of households by EBI groups as reported in Sales & Marketing Managetent, "Survey of Buying Power." EBI is a classification developed by Sales & Marketing Management. In 1996, Sales & Marketing Mana eg_ment changed the definition of EBI to include "money income" rather than "personal income," which definition was used in all years prior to the 1995 "Survey of Buying Power." Because of this change, the 1995 EBI cannot be directly compared to the EBI for prior years. For 1994 and prior years, EBI has been defined as "personal income" (which includes wages and salaries, other labor income; proprietor's income, rental income, dividends, personal interest income and transfer payments) less personal fax and nontax payments. Deductions are made for federal, state and local taxes, nontax payments , such as fines and penalties, and personal contributions for social insurance. The resulting figure is known as "disposable personal income." For 1995 and subsequent years, EBI has been defined as "money income" (which includes wages and salaries, net farm and nonfarm self - employment income, interest, dividends; net rental and royalty income, Social Security and railroad retirement income, other retirement and disability income, public assistance income, unemployment compensation, Veteran Administration payments, alimony and child support, military family allotments, net winnings from gambling, and other periodic income) less personal tax and nontax payments. Deductions are made for personal federal, state and local income taxes, personal contributions to social insurance (Social Security and 48 United Year County 5= States 1991 $22,673 $19,738 $19,201 1992 25,001 20,601 20,146 1993 26,257 21,991 21,223 1994 27,391 22,665 22,044 1995 28,574 23,958 23,196 1996 30,398 25,740 24,436 Source: United States Department of Commerce, Regional Economic Information System, Bureau of Economic Analysis. The following two tables reflect the Median Household Effective Buying Income ("EBI "), and also the percentage of households by EBI groups as reported in Sales & Marketing Managetent, "Survey of Buying Power." EBI is a classification developed by Sales & Marketing Management. In 1996, Sales & Marketing Mana eg_ment changed the definition of EBI to include "money income" rather than "personal income," which definition was used in all years prior to the 1995 "Survey of Buying Power." Because of this change, the 1995 EBI cannot be directly compared to the EBI for prior years. For 1994 and prior years, EBI has been defined as "personal income" (which includes wages and salaries, other labor income; proprietor's income, rental income, dividends, personal interest income and transfer payments) less personal fax and nontax payments. Deductions are made for federal, state and local taxes, nontax payments , such as fines and penalties, and personal contributions for social insurance. The resulting figure is known as "disposable personal income." For 1995 and subsequent years, EBI has been defined as "money income" (which includes wages and salaries, net farm and nonfarm self - employment income, interest, dividends; net rental and royalty income, Social Security and railroad retirement income, other retirement and disability income, public assistance income, unemployment compensation, Veteran Administration payments, alimony and child support, military family allotments, net winnings from gambling, and other periodic income) less personal tax and nontax payments. Deductions are made for personal federal, state and local income taxes, personal contributions to social insurance (Social Security and 48 federal retirement payroll deductions), and taxes on owner- occupied nonbusiness real estate. The resulting figure is known as "disposable" or "after -tax" income. Median Household Effective Baing Income United e�(1) County State States 1992 $41,750 $32,758 $33,178 1993 44,146 34,797 35,056 1994 46,604 36,770 37,070 1995(2) 45,365 31,797 .2,238 1996(2) 47,503 32,947 33,482 (1) The Median Household EBI figures have been based on the 1990 United States Census Data. _ (2) In the 1996 edition of Sales & Marketing Management "Survey of Buying Power" the definition of EBI was changed (as described in the above paragraph). As a result, the 1995 EBI figures cannot be compared to those for prior years. Source: Sales & Marketing Management, "Survey of Buying Power," 1993 -97. Set forth in the following table is the percent of households by EBI groups for the County, the State and the United States for 1996. Employment The following table presents information on employment within the County, the State and the United States, for the time period indicated. M Percent of Households by Effective Buying Income Groups - 1996 Effective Buying Percent of Hou_ seholds Income Group COMM State United States Under $20,000 12.9% 28.5% 29.0% $20,000 - 34,999 19.5 24.6 23.2 $35,000 - 49,999 21.0 18.7 18.3 $50,000 and over 46.6 28.2 29.5 Source: Sales & Marketing Mana eg mmL "Survey of Buying Power," 1997 edition. Employment The following table presents information on employment within the County, the State and the United States, for the time period indicated. M (1) Due to the seasonal nature of much- of the employment in Eagle County, the monthly estimates are not necessarily representative of the overall employment in the County. (2) Effective January 1994, the Bureau of Labor Statistics changed the Current Population Survey, commonly known as the household survey, in order to provide more credible and consistent measurements of labor force activity. - Labor force statistics for all periods prior to that date cannot be amended to reflect this change. Therefore, no direct comparison should be made between labor force statistics prior to January 1994 and after January 1994. (3) Figures for the County and the State are not seasonally adjusted. Source: State of Colorado, Division of Employment and Training, Labor Market Information, Colorado Labor Force view. The following table sets forth the number of individuals employed within selected Eagle County industries which are covered by unemployment insurance. In 1996, the largest employment sector in Eagle County was services, followed, in order, by retail trade, construction and government. For the twelve -month period ended December 31, 1996, total, average employment in 50 Labor Force and Percent UnemRloyed(1) Eagle QounV Colorado United States Labor Total Percent Labor Total Percent Percent Y Ya Force Emnloved Unem l�oyed Force m o e Unemployed Unemployed 1993 14,653 13,885 5.2% 1,900,187 1,800,035 5.3% 6.8% 1994(2) 16,316 159723 3.6 2,001,491 1,917,043 4.2 6.1 1995(2) 17,452 16,884 3.3 2,087,518 2,000,022 4.2 5.6 1996(2) 18,012 .17,456 3.1 2,098,971 2,020,284 4.2 5.4 1997(2) 18,890 18,370 2.8 2,158,169 2,087,760 3.3 4.9 Month of Januarv(2)(3) 1997 20,241 19,789 2.2% 2,095,934 2,008,550 4.2% 5.4% 1998 22,109 21,656 2.0 2,180,049 2,108,384 3.3 4.7 (1) Due to the seasonal nature of much- of the employment in Eagle County, the monthly estimates are not necessarily representative of the overall employment in the County. (2) Effective January 1994, the Bureau of Labor Statistics changed the Current Population Survey, commonly known as the household survey, in order to provide more credible and consistent measurements of labor force activity. - Labor force statistics for all periods prior to that date cannot be amended to reflect this change. Therefore, no direct comparison should be made between labor force statistics prior to January 1994 and after January 1994. (3) Figures for the County and the State are not seasonally adjusted. Source: State of Colorado, Division of Employment and Training, Labor Market Information, Colorado Labor Force view. The following table sets forth the number of individuals employed within selected Eagle County industries which are covered by unemployment insurance. In 1996, the largest employment sector in Eagle County was services, followed, in order, by retail trade, construction and government. For the twelve -month period ended December 31, 1996, total, average employment in 50 Eagle County increased by approximately 7.3 percent as compared to the same twelve -month period ending December 31, 1995, while total average wages increased by approximately 5.5 percent. Average Number of Emjlovees Within Selected Industries - Eagle County (1) Due to confidentiality, data was not released. (2) Figures are through the third quarter of 1997. Source: State of Colorado, Division of Employment and Training, Colorado Employment and Wages Collected Unerh 1p�yment Insurance. '51 1992 1M -1244 IM 1996 JM(2) Agriculture, Forestry and Fisheries ..... 124 144 170 243 309 422 Mining(1) ......................... n/a(1) 15 20 38 n/a(1) 3 Construction ..... ..:................ 1,688 1,996 2,696 2,905 3,281 3,752 Manufacturing ..................... 352 389 463 454 457 420 Transportation, Communication and Public Utilities .................... 472 488 605 654 694 839 Wholesale Trade .................... 153 188 214 251 273. 279 Retail Trade ....................... 4,375 4,673 5,179 5,456 5,668 6,063 Finance, Insurance and Real Estate ..... 1,295 1,453 1,545 1,669 1,833- 1,928 Services ........................... 5,963 6,479 7,068 7,466 8,012 8;561 Non - Classifiable .................... n/a(l) 11 5 5 n/a(1) n/a(1) Government ....................... 1.614 1.684 1.219 1.936 2.060 2.170 Total ............................. 16.036 17.520 19,184' 21077 22.612 24.447 (1) Due to confidentiality, data was not released. (2) Figures are through the third quarter of 1997. Source: State of Colorado, Division of Employment and Training, Colorado Employment and Wages Collected Unerh 1p�yment Insurance. '51 A selection of some of the largest employers in the County as of February 1998 is set forth below. No independent investigation..of the stability or-financial condition-of the employers listed hereafter has been conducted; therefore, no representation can be made that.these employers will continue to maintain'their status as major employers in the Coun t y_. Product `Estimated Employer : or Service Number of Em llgyees(1) Off Ski— ', , Season Season Summer Vail Associates, Inc. Ski resorts 1,200 6,300. 1,600(2) Eagle County School Authority Re 50J(3) Education 600 -600 95(4) Vail Cascade Hotel & Club Hotel 375 500 500 Hyatt Beaver Creek Resort Hotel 300 450 350 Eagle County ' Government 350 350 350 Marriott Vail Mountain Resort Hotel 275 325 275 Town of Vail Government 235 293 235 Town of Avon Government 225 282 225 The Lodge at Vail Hotel 70 230 175 Holiday.Inn/Chateau Vail Hotel 52 79 52 (1) Due to the seasonal nature of the majority of the businesses in the County, these employers have provided estimated employee figures based on the 1996 -97 ski season, which ran from approximately mid - November 1996 through mid -April 1997, the off - season which generally ran from mid -April 1996, through early June 1996 and the summer season which began in early June 1996. (2) The anticipated opening of approximately five new restaurants in Beaver Creek and Vail during 1998 should increase, the number of summer employees. An exact estimate of the number of employees that will be hired to fulfill staffing requirements at the new restaurants is not available. (3) Figures reflect the number of full -time and part-time certified and classified employees as estimated for the 1997 -98 school year. (4) The decline in employees reflects the fact- dud school is not in session in the summer. The figure does not include teachers, bus drivers or food service workers. Source: - Individual employers. 52 Set "forth in, the following table is a list of the major employers in the Town. No independent investigation of the stability or financial condition of the employers listed hereafter has been conducted;, therefore, no. representation can be made that these employers will continue to maintain their status as major employers in the Town.- . Selected Major Eml2lovers in Town of Avon Colorado Mountain Express- - Town of Avon City Market Wal -Mart Comfort Inn - Vail/ Beaver Creek Transportation Government Grocery Store General Merchandise Discount Store Hotel Estimated Number of Employees(1) . - , 400 (2) 225 (3) 120 _ 115 40 (1) As of April 1998. _ _ - (2) The figure shown is for peak season. The Company estimates that it will employ, approximately 230, people during the 1998 summer season. (3) The Town employs approximately 282 employees during the ski season. Source: Individual employers. Retail Sales Annual retail sales figures for the Town, the County and the State are set forth below. Retail sales figures have continuously increased during the time period shown. Retail Sales (in thousands) Percent Eagle Percent Percent YM Avon Increase COMM (1) Increase Colorado Increase 1993 $101,468 _ $776,110 — $59,042,680 _ — 1994 119,065 17.3% 887,656 14.4% 65,650,512 11.2% 1995 144,526 21.4 953,638 7.4 - 69,360,654 5.7 1996 175,202 21.2 1,081,801 13.4 74,895,340 8.0 - 1997 207,028 18.2 1,250,240 15.6 79,312,815 5.9 (1) Revised data for 1993 -95. Source: State of Colorado, Department of Revenue, Sales Tax Statistics, 1993 -97. 53 Recreation and Tourism Year -round tourism and skiing - related businesses account for a significant portion of the employment and earned income of area residents. The Ski Industrv-in the State. Information in this section has been obtained from a report on the Colorado ski industry entitled The 1993 -94 Profile of Colorado Skiing. March 1995 (the "Ski Report") which'was prepared by Colorado Ski County U.S.A. in conjunction with RRC Associates and BBC Research and Consulting. The Ski Report is the most current publication available from Colorado Ski Country, U.S.A. Revised data will not be available until July 1998. The Ski Report found that Colorado's 25 ski areas support approximately 10,500 full - time- equivalent jobs, while the broader ski industry is estimated to support nearly 38,000 direct jobs in lodging, retailing and related visitor services. Indirect employment, which includes jobs in local service industries, such as resident - oriented retail and government, has also grown in proportion to the expansion of the local economy. In total, the Colorado ski industry has grown, as of the date of the Ski Report, to support approximately 86,000 full- time - equivalent jobs, primarily on the Western Slope, but also in the Denver metropolitan area and elsewhere around the State. The industry's geographic reach also has expanded as workers commute increasing distances to take advantage' of industry employment opportunities and to find suitable housing. An examination of monthly sales activity by county and by retail category indicates that winter guest retail sales exceeded $1.4 billion during the 1993 -94 ski season (exclusive of airfares) according to the Ski Report. Summer sales attributable to guest spending in the resorts grew to approximately $305 million. Direct expenditures by visiting skiers and summer tourists support a variety of businesses and service operations in Colorado's resort communities. These businesses and their employees in turn purchase additional goods and services, which results in a secondary level of business activity. This secondary spending amounts to some $1.47 billion in retail activity. In total, the 1993 -94 ski season and related summer activity supported in excess of $3.2 billion in Colorado retail sales. The increase in skier visits since the 1990 -91 ski season is presumably benefiting many Colorado resort communities which are largely .dependent upon retail sales taxes for maintenance of public services; retail sales for Eagle County have increased annually since 1988. Colorado's resort towns have benefited from a number of recent market trends in the ski industry, including a larger number of non -skier visitors and greater interest in off - mountain activities such as shopping and non - skiing recreation. During the 1995 -96 ski season, Colorado's 25 ski areas logged approximately 11.4 million skier visits. Skier visits include all lift tickets sold, season pass use and complimentary tickets. Based on survey data provided by area operators, an estimated 66 percent of skier visits were purchased by destination skiers (persons spending the night away from home in association with a day of skiing). The remaining skiers are day skiers (i.e., local and surrounding area residents). 54 The Ski Industry in the Vail Valley. Skier visits at the two largest ski areas-in the vicinity, Beaver Creek and Vail Mountain, accounted for 19.7% (combined) of the total skier visits for the State for the 1996 -97 ski season. In addition to the ski resorts in Eagle County, another major tourist area in the State is Summit County, which hosts three major ski resorts that have accounted for an average of approximately 30 % of total skier visits in Colorado during the last five seasons. Such ski areas also are accessed via Interstate 70 and are located east of the Town. Set forth in the following table are the skier visits for the Arrowhead Mountain, Beaver Creek and Vail Mountain ski areas from the 1992 -93 ski season through the 1996 -97 ski season, as well as skier visit data for the State. Skier data for the 1997 -98 ski season will not be available until July 1998. Ski Area 1992 -93 1993 -94 1994-95 1995 -96 1996 -97 Arrowhead 31,480 23,721 28,641 21,729 n/a(2) Beaver Creek 488,603 504,516 583,897 554;520 644,451 Vail 1.570.350 1.527,698 1,568,360 1,652,170 681. 6.790 Total 2,090,433 2,055;935, 2,135,898 2,228,419 2,331,241 Percent Increase (Decrease) - -- (1.65)% 3.89% 4.50% 4.61% Colorado Total 11,111,290 11;164,232 11,105,106 11,394,090 11,845,052 Percent Increase (Decrease) --- 0.48% (0.53)% 2.60% 4.02% (1) Skier visits include all lift tickets issued by the ski area for discount, fully paid or complimentary lift tickets on a daily basis for each ski season. (2) For 1996 -97, Arrowhead is included in Beaver Creek. Source: Colorado Ski Country, USA. Ski Resort Development. Vail Mountain, Beaver Creek Resort and Arrowhead ski areas are all owned and operated by Vail Associates, Inc. (the "Company "). - For the. 1997 -98 ski season, daily peak lift ticket rates for Beaver Creek Resort and Vail Mountain ski areas were $56. The resorts posted approximately 2.33 million skier visits during the 1996 -97 ski season, an increase of 4.61 percent from the; 1995-96, season. The Company opened Bachelor Gulch Village, a new .development discussed below, for the 1996 -97 season. According to Company financial information published in the Denver Post,, revenue per skier visit for the Company was $68.89 for the nine months ended April 30,,1998, compared with $56.39 for the same nine months a year earlier, an increase of 22.2 %. According to the same source, however, the total number of skier visits during the 1997 -98 season decreased 3.5 %from the 1996 -97 season. Vail Mountain lies within the %ite-River National Forest and operates under permits from the U.S. Forest Service. The ski area is directly adjacent to the Town of Vail; and rises approximately 3,330 vertical feet above the town. For the 1997 -98 ski season, Vail Mountain had a total of 30 lifts, including one 12- passenger gondola and ten high -speed detachable quad lifts, ;&I servicing approximately 4,644 acres of skiable terrain, making Vail the largest single ski area in North America. There has been significant expansion on Vail Mountain during the last decade. Since 1985, over $76 million has been spent on improvements on Vail Mountain, including construction of nine new high -speed quad lifts, expanded snowmaking and skiable terrain (China Bowl was completed in 1988), construction of a children's ski school center at Golden Peak, expansion of Vail Mountain restaurant capacity and the purchase of additional grooming equipment. The opening of China Bowl more than doubled the previously existing 1,880 acres of skiable terrain. In addition, the completion of the Westin (Cascade Village) lift in 1988 has provided an additional base access point. Capital improvements for the 1995 -1996 season included a bar -code lift ticket scanning system and completion of the Game Creek Club, a rustic chalet accessible only by skis or snowcat from the top of the gondola. During the 1996 -97 season, Vail opened the Adventure Ridge at Eagle's Nest, a lighted mountaintop activity center with tubing, snowboard half- pipes, snowmobile rides, terrain parks, and ice skating. For the 1996 -97 season, capital improvements included the installation of a new gondola in Lionshead. The new high - speed, 12 passenger gondola more than doubled the current gondola's uphill capacity and transports skiers from the base of Lionshead to Eagle's Nest in approximately seven minutes, less than half the time previously required. During the 1997 -98 season, Vail opened a new 83,000 square foot base lodge at Golden Peak, and replaced the Golden Peak Lift with Vail Mountain's tenth high -speed quad lift. Vail is also pursuing the Category III expansion on the slope facing the back bowls. The expansion would create 885 acres of intermediate -level skiing serviced by four chairlifts. The U.S. Forest Service and Eagle County have approved the expansion, but concerns about the environmental impact of additional development within and surrounding the resort, in addition to other concerns, have delayed finalization of the project. During the 1996 -97 ski season, Vail Associates completed the first step in introducing a European style village -to- village ski experience on Beaver Creek Mountain by connecting, through ski lifts and trails, three distinct areas - Beaver Creek Resort, Bachelor Gulch Village and Arrowhead. The interconnection of these three areas increased the contiguous ski terrain to approximately 1,530 acres, a 30% increase. Beaver Creek Resort includes not only a ski area, but also an 18 -hole championship golf course, a commercial center, and residential areas. The ski area rises approximately 4,040 vertical feet; there are approximately 1,625 acres, of skiable terrain. The ski area operates under permits from the United States Forest Service. During the past five years, capital improvements to Beaver Creek Mountain . have -included: the renovation and expansion of the Spruce Saddle Restaurant located at mid- mountain, completion of the Strawberry Park Express lift and the Elkhorn lift; completion of Stickline Park snowboarding area; expanded snowmaking capabilities; and hiking trail improvements. The One Beaver Creek condominium and retail project, the Market Square condominium and retail project, the Beaver Creek Center for the Arts and an outdoor skating rink were recently contructed in the heart of Beaver Creek Village. The 1999 World Alpine Ski Championships will be co- hosted by Beaver Creek Resort and Vail. The snowmaking system covers an estimated 547 acres. Beaver Creek has 14 lifts, including 5 express quad chairlifts. 56 The Bachelor Gulch Village development, the newest village on Beaver Creek Mountain, is comprised of 1,410 acres of Company -owned land located in a valley between Arrowhead and Beaver Creek Resort. Bachelor Gulch Village combines a skiing gateway to Beaver Creek Mountain, an intimate mountain village and private upscale real estate enclaves with ski -in, ski -out access. During the 1996 -97 ski season; Bachelor Gulch Village opened a high -speed quad lift and approximately 150 acres of mostly intermediate ski terrain. Arrowhead is comprised of over 1,500 acres and is recognized for its country club approach to residential and resort amenities. Arrowhead contains the westernmost access point to Beaver Creek Mountain. The Arrowhead ski area opened in December 1988 with one high -speed quad lift with a capacity of 2,400 skiers per hour. The ski area rises approximately -1,700 vertical feet and contains approximately 150 acres of primarily beginner /intermediate ski terrain. Summer Activities. At the present time, there are two _public, 18 -hole championship golf courses in Eagle County, located at Eagle -Vail and at Vail, as well as eight private courses, including Arrowhead, Beaver Creek, Eagle Springs, Sonnenalp (formerly Singletree), three courses at Cordillera, and Cotton Ranch. Year -round visitors are attracted to the Upper Eagle Valley area to take advantage of these and other recreational facilities and amenities. Horseback riding, bicycling, tennis, swimming, and other recreational sports also draw guests to the area during the summer. The Town sponsors the State's largest 4th of July fireworks display and a free concert each summer. The following table sets forth 18 -hole equivalent rounds played for the time period indicated. Arrowhead, Cordillera, Cotton Ranch and Eagle Springs are private golf courses which have varying policies regarding tee times, green fees, etc., and such courses may have restrictions on golf rounds played; as a result, the private golf courses may have a lower number of rounds played as compared to Sonnenalp, Beaver Creek, Eagle -Vail and Vail, which are open for public play. Vail Associates, Inc. recently announced plans to construct an additional 18 -hold golf course approximately 10 miles west of the* Town; however, these plans are subject to approval by, the County, and such approval may or may not be received. 57 (1) Formerly Singletree golf coum (2) In 1993, Eagle -Vail added a new nine -hole par three course named Willow Creek. This addition accounted for approximately 13,000 nine -hole equivalent rounds which are not included in the table. (3) Cordillera did not open until the 1994 season. (4) Cotton Ranch did not open until June 1 997. Officials anticipate that the number of rounds played will increase when the course opens for its fast full season in March 1998. (5) Eagle Springs did not open until the summer of 1995. The first full season of operation was in 1996. (6) According to Sonmenalp officials, the decline in the number of golf rounds played in 1994 was primarily due to the golf course implementing a membership program. As a result, Sonnenalp reduced the total number of golf games to allow the membership more access.. (7) The summer 1995 golf season in the Avon/Vail area was reduced by unusually late spring snow and rain. Sources: Vail Recreation Departinent;'Eagle-Vail Golf Course; Beaver Creek Golf Course; Sonnenalp Golf Club; Country Club of the Rockies at Arrowhead; Eagle Springs Golf Club; Cordillera Golf Course; and Cotton Ranch Golf Course. Elimination of Fundingfor Colorado Tourism Board. At the November 1993 general election, state voters rejected the continuance of the State's 0.2% tourism sales tax. Funds generated by the tax, approximately $11,000,000 annually, were expended in the promotion of Colorado tourism (including skiing), through the activities of the Colorado Tourism Board. It is not expected that the State will supplement the Colorado Tourism Board's work from any other source of State funds. Development in Eagle County Before'1963, Eagle County's economy was based primarily on agriculture, forestry, and mining. The County's development pattern changed significantly after 1962 with the establishment of the skiing and tourism industry at Vail Mountain. Partly in response to the growth in tourism, commercial and residential construction, particularly of second homes, increased between 1970 and 1980. The rapid growth accompanying the ski resort development at Beaver Creek and Vail Mountain has prompted County officials to develop a master plan for development. The plan may be updated at least every three years if necessary. The focus of the current plan is to develop a strong economy based primarily on the services industry, along with providing opportunities for economic diversification. During the 1960's and 1970's real estate development in the County was concentrated in the Vail area with some residential development also occurring in the Eagle -Vail subdivision which is located approximately five miles west of Vail. By 1980, as the Vail area approached full buildout, real estate development intensified at the new Beaver Creek Resort, the Town of Eagle and the Eagle -Vail, Singletree, Arrowhead and Edwards subdivisions. 58 Estimated Golf Rounds Plate Percent Beaver Cotton Eagle Increase lr Arrowhead nnenal 1) Creek Eagle- Vai1(2)i Cordillera(3) Ranch(4) Sorin 5) Total (Decrease) 1991 12,500 21,400 20,000 27,000 25,500 n/a n/a n/a 106,400 - 1992 11,800 23,400 20,000 27,000 27,970 n/a n/a n/a 110,170 3.5% 1993 13,828 22,000 19,163 24,434 28,981 n/a n/a n/a 108,406 (1.6) 1994 11,500 16,500(6) 19,123 25,535 32,504 6,500 n/a n/a 111,662 3.0 1995(7) 9,633 16,000 16,334 23,251 27,105 8,500 n/a 1,000 101,823 (8.8) 1996 10,000 16,500 n/a 26,000 30,200 9,500 n/a 7,000 99,200 (2.6) 1997 10,000 18,000 n/a 25,000 28,000 11,000 9,000 7,000 108,000 8.9 (1) Formerly Singletree golf coum (2) In 1993, Eagle -Vail added a new nine -hole par three course named Willow Creek. This addition accounted for approximately 13,000 nine -hole equivalent rounds which are not included in the table. (3) Cordillera did not open until the 1994 season. (4) Cotton Ranch did not open until June 1 997. Officials anticipate that the number of rounds played will increase when the course opens for its fast full season in March 1998. (5) Eagle Springs did not open until the summer of 1995. The first full season of operation was in 1996. (6) According to Sonmenalp officials, the decline in the number of golf rounds played in 1994 was primarily due to the golf course implementing a membership program. As a result, Sonnenalp reduced the total number of golf games to allow the membership more access.. (7) The summer 1995 golf season in the Avon/Vail area was reduced by unusually late spring snow and rain. Sources: Vail Recreation Departinent;'Eagle-Vail Golf Course; Beaver Creek Golf Course; Sonnenalp Golf Club; Country Club of the Rockies at Arrowhead; Eagle Springs Golf Club; Cordillera Golf Course; and Cotton Ranch Golf Course. Elimination of Fundingfor Colorado Tourism Board. At the November 1993 general election, state voters rejected the continuance of the State's 0.2% tourism sales tax. Funds generated by the tax, approximately $11,000,000 annually, were expended in the promotion of Colorado tourism (including skiing), through the activities of the Colorado Tourism Board. It is not expected that the State will supplement the Colorado Tourism Board's work from any other source of State funds. Development in Eagle County Before'1963, Eagle County's economy was based primarily on agriculture, forestry, and mining. The County's development pattern changed significantly after 1962 with the establishment of the skiing and tourism industry at Vail Mountain. Partly in response to the growth in tourism, commercial and residential construction, particularly of second homes, increased between 1970 and 1980. The rapid growth accompanying the ski resort development at Beaver Creek and Vail Mountain has prompted County officials to develop a master plan for development. The plan may be updated at least every three years if necessary. The focus of the current plan is to develop a strong economy based primarily on the services industry, along with providing opportunities for economic diversification. During the 1960's and 1970's real estate development in the County was concentrated in the Vail area with some residential development also occurring in the Eagle -Vail subdivision which is located approximately five miles west of Vail. By 1980, as the Vail area approached full buildout, real estate development intensified at the new Beaver Creek Resort, the Town of Eagle and the Eagle -Vail, Singletree, Arrowhead and Edwards subdivisions. 58 Over the past several years, a substantial amount of new real estate development has occurred at the Beaver Creek Resort. This development activity has been causing new development to occur in the Town of Eagle, and in the Eagle -Vail, Singletree, Arrowhead, and Edwards communities. Future new real estate development in the Town of Vail is limited because of the lack of available land, but residential development will continue, as will commercial renewal projects. Building Permits As evidenced by the following table, construction activity in unincorporated Eagle County has fluctuated. in response to nationwide economic conditions, reflecting the area's . dependence on the tourism and skiing industries. Development within unincorporated Eagle County primarily is residential.- No further history or breakdown of building permits is available. (1) (2) History of Building Permits Issued in Unincorporated Eagle County Year Dwelling Units 1993 752 1994 628 1995 598 1996 554 1997(1) 969 1998(2) 264 Total Number Total of Permits Issued Valuation 624 $93,495,356 604 163,696,195 567 131,479,898 660 216,474,554 808 251,771,815 248 100,890,982 The Division of Planning attributes the magnitude of the increase in 1997 to the construction of employee housing by Vail Associates. Through April 30, 1998. Source: Eagle County Department of Community Development, Division of Planning. Construction in the Town During the past five years, since 1993, the Town has seen the construction of approximately 714,747 square feet of commercial space and the addition of about 346 residential units. The total value of building construction since 1993 has been approximately $146.0 million. During 1997, the Town realized approximately $34.0 million in building activity, including the construction of 160,150 square feet of commercial property and the addition of 89 residential units. In addition to traditional residential property, residential time -share units are available in the Town. Some of the time -share properties include The Seasons in Avon, Falcon Point, and the Chambertin, Wildflower and Seibert Duplexes. Mountain Star, a recent residential subdivision,_ has also been constructed in the Town. Mobile home spaces are also available in the Town. Some of the commercial development .which has occurred in the Town includes the relocation of the headquarters of Vail Associates, Inc. to the 60,000 square foot Seasons at Avon 59 building, located in the Town; the expansion of City Market by 15,000 square feet for a total of 58,000 square feet; and, the construction of a 70,000 square foot WaWart Center. of Buildine P-dwrits Issued in the-Town o Commercial Total Valuation of Year Residential Units SQuare Feet Building Permits 47 (54.4)0/o 1993 50 79,045 $ 8,' 880,100 1994(1) 91 188,818 41,685,093 1995. 49 34,094- . 35,157,196 1996(2) 67 252,640 26,264,719 1997(2) 89 160,150 33,985,426 (1) Building Department officials indicate that the increase in total building permit valuation was primarily due to the construction of two large commercial structures in 1994. (2) Officials at the - Community Development Department attributed the increases in 1996 and 1997 to a county- wide surge in development. Source: Town of Avon, Community Development Department. Foreclosure Activity in Eagle County As set forth in the following table, the number of foreclosures filed in Eagle County decreased in 1993 and 1994 and increased again in 1995 and 1996. Such figures represent the total number of foreclosures filed' and do not take into account foreclosures which were filed and subsequently withdrawn or redeemed. (1) History of Foreclosures - Eagle County Number of Percent Increase Year Foreclosures Filed D c e 1993 103 - -- 1994 47 (54.4)0/o 1995 62 31.9 1996 76 22.6 1997 78 2.6 1998(1) 37 - -- Through May 29, 1998. Source: Eagle County Public Trustee's Office. .o LEGAL MATTERS Sherman & Howard, L.L.C.'s opinion, as Special Counsel, addresses only those matters set forth therein; issuance of the 1998 Certificates is subject to the delivery of the approving opinion of bond counsel. Sherman & Howard L.L.C., also has acted as special counsel for the Town in connection with the preparation of this Official Statement. TAX MATTERS In the opinion -of, Sherman & Howard L.L.C.,, Special Counsel, assuming continuous compliance with certain covenants described below, the portion of the Base Rentals which is designated in the Lease and paid by the Town as interest on the 1998 Certificates is not included in gross income under federal income tax laws pursuant to Section 103 of the Tax Code, interest on the 1998 Certificates to the extent paid by the Town under.the Lease is not included in alternative minimum taxable income as defined in Section 55(b)(2) of the Code except that such interest is required to be included In calculating the "adjusted current earnings" adjustment applicable to corporations for purposes of computing the alternative minimum taxable income of corporations as described below, and the portion of the Base Rentals which is designated in the Lease and paid by the Town as interest on the 1998 Certificates is not included in State taxable income or State alternative minimum taxable income under State income -tax laws in effect on the date of delivery of the 1998 Certificates. Special Counsel's opinion also is rendered in reliance upon certifications of the Town 'and other certifications furnished to Special Counsel. Special Counsel has not undertaken to verify such certifications by independent investigation. The opinion of Special Counsel does not cover the treatment for federal or State income tax purposes of any moneys received in payment of or in respect to the 1998 Certificates subsequent to the occurrence of an Event of Default or an Event of Nonappropriation. The Code and State law impose several requirements which must be met with respect to the 1998 Certificates in order for the interest thereon to be excluded from gross income, alternative minimum taxable income (except to the extent of the aforementioned adjustment applicable to-corporations), State taxable income and State alternative minimum taxable income. Certain of these requirements must be met on a continuous basis throughout the term of the 1998 Certificates. These requirements include: (a) limitations as to the use -of proceeds of the 1998 Certificates; (b) limitations on the'extent to which proceeds of the 1998 Certificates may -be invested in higher yielding investments; and (c) a provision, subject to certain limited exceptions, that requires all investment earnings on the proceeds of the 1998 Certificates above the yield on the 1998 Certificates to be paid to the United States Treasury. The Town will covenant and represent in the Lease that it will, during the Lease Term, take all steps to comply with the requirements of the Code and State law (as in effect at the time of the issuance of the 1998 Certificates) to the extent necessary to maintain the exclusion of interest on the 1998 Certificates from gross income and alternative minimum taxable income (except to the extent of the aforementioned adjustment applicable to corporations) under present federal income tax laws and State taxable income and State alternative minimum taxable income under present State income tax laws. Special Counsel's opinion as to the exclusion of interest on the 1998 Certificates from gross income and alternative minimum taxable income (to the extent described above), State taxable income and State alternative minimum taxable income is rendered in reliance on these covenants and assumes continuous compliance therewith. 61 The foregoing covenant does not, however, preclude the Town from exercising its right to terminate the Lease at the times and in the manner previously described in this Official Statement. The failure or inability of the Town to comply with these requirements could cause the interest on the 1998 Certificates to be included in gross income, alternative minimum taxable income, State taxable income or State alternative minimum taxable income, or a combination thereof, from'the date of issuance. Section 55 of the Code contains a 20 percent alternative minimum tax on the alternative minimum taxable income of corporations. Under the Tax Code, 75 percent of the excess of a corporation's "adjusted current earnings" over the corporation's alternative minimum-taxable income (determined without regard to this adjustment and the alternative minimum tax net operating loss deduction) is included in the corporation's alternative minimum taxable income for purposes of the alternative minimum tax applicable to the corporation. "Adjusted current earnings" includes interest on the 1998 Certificates. The Tax Code contains numerous provisions which may affect an investor's decision to purchase the 1998 Certificates. Owners of the 1998 Certificates should be aware that the ownership of tax- exempt obligations by particular: persons and entities, including, without limitation, financial institutions, insurance companies, recipients of Social Security or Railroad Retirement benefits, taxpayers who may be deemed to have incurred or continued indebtedness to. purchase or carry tax- exempt obligations, foreign corporations doing business in the United States and. certain "subchapter S" corporations may result in adverse federal and State tax consequences. Special Counsel's opinion relates, only to the exclusion of interest on the 1998 Certificates from gross income,.altemative minimum taxable income, State taxable income and State alternative minimum taxable income as described above and will state that no opinion is expressed regarding other federal or State tax consequences arising from the receipt or accrual of interest on or ownership of the 1998 Certificates. Owners of the 1998 Certificates should consult their own tax advisors as to the applicability of these consequences. The opinions expressed by Special Counsel are based upon existing law as,of the delivery date of the 1998 Certificates. No opinion is expressed as of any subsequent, date nor is any opinion expressed with respect to any pending or proposed legislation. Amendments to federal and State tax laws may be pending now or -could be proposed in the future which, if enacted into law, could adversely affect the value of the 1998 Certificates, the .exclusion of interest on the 1998 Certificates from gross income, alternative minimum taxable income, State taxable income, State alternative minimum taxable income or any combination thereof from the date of issuance of the 1998 Certificates or any other date, or which could result in other adverse federal or State tax consequences. Owners of the 1998 Certificates are advised to consult with their own tax advisors with respect to such matters. M INDEPENDENT AUDITORS The financial statements of the Town as of December 31, 1997 and for the year then ended included herein as Appendix A, have been audited by Van Schooneveld and Co., Inc., Greenwood Village, Colorado, independent certified public accountants, as stated in their report appearing herein. RATINGS The Town has applied for ratings for the 1998 Certificates, and such ratings will be described in the final Official Statement. UNDERWRITING Hanifen, Imhoff Inc. has agreed to purchase the 1998 Certificates from the Town under a Certificate Purchase Agreement at a purchase price equal to $ (which is equal to the par amount of the 1998 Certificates, less Underwriter's discount of $ plus accrued interest on the date of delivery of and payment for the 1998 Certificates. The Underwriter is committed to take and pay for all of the 1998 Certificates if any are taken. OFFICIAL STATEMENT CERTIFICATION As of the date hereof, to the best of my knowledge, this Official Statement is true, complete and correct in all material respects, and does not include any untrue statement of material fact or omit to state a material fact necessary in order to make the statements made herein, in light of the circumstances under which they are made, not misleading. The preparation of this Official Statement and its distribution have been authorized by the Town. This Official Statement is hereby duly approved by the Town as of the date on the cover page hereof. TOWN OF AVON, COLORADO By /s/ Jack Fawcett Mayor 63 ( This Page Intentionally Left Blank ) F4vj, 2-310 0) KW41 AUDITED GENERAL PURPOSE FINANCIAL STATEMENTS OF THE TOWN FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 ( This Page Intentionally Left Blank) TOWN OF AVON, COLORADO COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 1997 Prepared by . Department of Finance Scott C. Wright, CPA, CGFO, Director, TOWN OF AVON, COLORADO Jack Fawcett, Mayor. . Judy Yoder, Mayor Pro -Tem Jim Benson Richard Carnes Bob McIlveen Buz Reynolds., Jr. Buz Reynolds, Sr. Bill Efting, Town Manager Larry Brooks, Assistant Town Manager/Director of Public Works Meryl Jacobs, Director of Recreation Mike Matzko, Director of Community Development Charles Moore, Fire Chief Kris Nash, Town Clerk Gary Thomas, Police Chief Norm Wood, Town Engineer Scott Wright, Finance Director Van Schooneveld and Co., Inc. Certified Public Accountants an chooneveld and Co., Inc. Certified Public Accountants MEPENDENT AUDITOR'S REPORT Town Council Town of Avon, Colorado Principals Jack C. Schroeder Larry R. Beardsley Richard M. Carlson :Nark D. Elmshauser Kevin F. Collins We have audited the accompanying general purpose financial statements of the Town of Avon, Colorado as of and for the year ended December 31, 1997, as listed in the foregoing Table of Contents. These financial statements are the responsibility of the Town's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the Town of Avon, Colorado at December 31, 1997 and the results of its operations and the cash flows of its proprietary fund type for the year then ended, in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the general purpose financial statements taken as a whole. The combining, individual fund and individual account group financial statements and schedules and other schedules, as listed in the Table of Contents, are presented for purposes of legal compliance and additional analysis and are not a required part of the general purpose financial statements of the Town of Avon, Colorado. Such information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly stated in all material respects in relation to the general purpose financial statements taken as a whole. The statistical section, as listed in the Table of Contents, has not been audited by us and, accordingly, we do not express an opinion thereon. r � J April 28, 1998 6000 Greenwood Plaza Blvd.. #110 - Greenwood Village, CO 80111 -4817 303 - 779 -4000 - FAX 303 - 770 -9276 @E-mail: vscocpas @vscocpa.com Members: American Institute of Certified Public Accountants - S.E.C. and Private Practice Sections - Colorado Society of Certified Public Accountants THIS PAGE INTENTIONALLY LEFT BLANK GENERAL PURPOSE . .FINANCIAL STATEMENTS 3 TOWN OF AVON, COLORADO COMBINED BALANCE SHEET ALL FUND TYPES AND ACCOUNT GROUPS DECEMBER 31,1997 Assets: - Cash and Cash Equivalents Investments Receivables: Interest Taxes Accounts Special Assessments Intergovernmental Notes Inventory Fixed Assets, Net of Accumulated Depreciation Other Debits: Amount Available in Debt Service Funds Amount to be Provided for Retirement of General Long -term Debt Total Assets Liabilities: Accounts Payable Accrued Liabilities Retainages Payable Deposits Deferred Taxes Deferred Revenues Compensated Absences Payable General Obligation Bonds Payable Special Assessment Debt With Government Commitment Revenue Bonds Payable Capitalized Lease Obligations Payable Deferred Compensation Benefits Payable Total Liabilities Equity and Other Credits: Investment in General Fixed Assets Contributed Capital Retained Eartsings (Accumulated Deficit) Fund Balances: Reserved: Inventory Debt Service Unreserved: Designated for Subsequent Year's Expenditures Unreserved, Undesignated Total Equity and Other Credits Total Liabilities, Equity and Other Credits Governmental Fund Types Debt Capital General Service Projects S 4,889,592 S 364,586 S 2.308.757 250,000 - - 9,740 - - 1,703,742 759,500 22,138 349,717 - 5,025 - 295,469 - 51.217 - 73,131 253,653 - - 20.215 - - S. .7,527.876 S 1,419.555 S 2,409,051 S 403,166 S 545 S 225,732 206,508 - - - _ 167,936 52,327 - 1,072,555 759,470 - 253,653 295,469 - 1.988,209 1.055.484 393.668 20,215 - 364,071 79,687 - 290,878 5,439,765 - 1.724,505 5.539,667 364,071 2.015,383 S 7,527.876 S 1.419555 S 2.409.051 The accompanying notes are an integral part of the financial statements. 4 .:IRII Propietary Account Groups Totals Fund Type General General (Memorandum Only) Water Fixed Long -term Enterprise Assets Debt 1997 1996 S 1,854,776 S - S - S 9.417,7I1 S 6,703,163 - - - 250,000 631,957 - - - 9,740 6,031 - - - 2.485,380 2,116,803 81087 - - 362,829 443.002 - - - 295,469 '362,626 - - - 124,348 48,253 - - - 253,653 535,809 - - - 20.215 23.486 7.444,346 20,557,953 - 28.002.299 27,642.891 - - 364,071 364,071 339,285 - - 14.078.438 14.078,438 11331,991 S_ 9,307.209 S 20.557.953 S 14.442.509 S 55.664,153 S 50,185.297 S 30 S - S - S 629,473 S 650.301 712 - - 207,220 233,998 - - - 167,936 11,528 - - - 52.327 136.954 • - - 1,832.025 1,506,646 - - - 549,122 897.411 - - 230,111 230.111 229,300 - - 8,196,815 8.196.815 4,922.784 - - 430.000 430,000 510.000 - 5,010,000 51010,000 5,195,000 - - 575,583 575.583 814.192 - - - - 431.957 742 - 14,442.509 17.880,612 15.540,071 - 20,557,953 - 20,557,953 20,178,166 9450,290 - - 9450,290 9,077,830 (243,823) - - (243,823) (162160) - - - 20,215 23,486 - - - 364,071 339,285 370,565 139,471 7,164,270 5.049 .248 9306,467 20.557,953 - 37.783.541 34.645.226 S_ 9307.209 5 20557.953 S 14,442.509 S 55.664.153 S 50,185.297 5 THIS PAGE INTENTIONALLY LEFT BLANK TOWN OF AVON, COLORADO COMBINED STATEMENT OF REVENUES, EXPENDITURES AND EXHIBIT 2 CHANGES IN FUND BALANCES - ALL GOVERNMENTAL FUND TYPES FOR THE YEAR ENDED DECEMBER 31,1997 Governmental Fund Types Totals (Memorandum Only) Debt Capital Revenues General Service �- Projects 1997 1996 �_ Taxes Licenses and Permits S 5.605,552 S 770,001 S 1,543,707 S 7,919,260 S 6.747,636 Intergovernmental 296.166 - - - 296,166 277.132 Charges for Services 3,964,656 - 1,221.305 2,793,719 1,400,828 Fines and Forfeitures 45,538 - - - 3,964,656 4,279,505 Special Assessments - 105486 45,538 50,424 Investment Earnings 322,266 4,540 - 162,915 105,586 489,721 96,780 300.518 Miscellaneous 499,458 3__439 502.897 391,948_ Total Revenues 12,306,050 880,127 2,931,366 16,117,543 13,744,771 Expenditures - Current: General Government 1,392.244 Community Development 433,381 - - 1,392,244 1,179,939 Public Safety 2,206,089 - 433,381 391,454 Public Works 1.655,115 - - 2.206,089 2,198,046 Transportation 3,325,255 - - 1,655,115 1,753,771 Recreation and Culture 1,601,614 - - 3,325255 3,408,694 Capital Improvements - - 1.601.614 1_,528,249 Debt Service - - 5.192,614 5.192,614 906,928 Principal Interest - 630,000 50,000 680,000 730,000 Bond Issuance Costs - 765,196 3,750 768,946 537,972 Fiscal Charges _ 116,461 116,461 178,385 19.874 - 19,874 16,581 Total Expenditures 10,613.698 1,415,070 5,362,825 17,391,593 12.830,619 Excess (Deficiency) of Revenues Over(Under)Expenditures 1,692.352 (534.943) (2,431,459) (1,274,050) 914.752 Other Financing Sources (Uses) Operating Tra::.;c:s In: General Fund Capital Projects Fund - 541.578 - 541,578 519,000 Operating Transfers Out: - 18,151 - 18,151 19.131 Debt Service Fund Wildridge Special Assessment Fund (541,578) - - (541,578) (519,000) Proceeds of General Obligation Bonds - - (18.151) (18.151) (19,131) Proceeds of Refunding Bonds - 3.619,721 3.619,721 Payment to Refunded Bond Escrow Agent - - 5.346,869 Disposal of Fixed Assets 21,960 - - (5,163,919 ) 21,960 21.081 Total Other Financing Sources (Uses) (519,618) _ 559,729 1601.570 3,641,681 204,031* Excess of Revenues and Other Sources Over Expenditures and Other Uses 1,172.734 24,786 1.170,111 2,367,631 .1 118.783 Fund Balances, Beginning of Year 4,366,933 339.285 845,272 5.551.490 4,432.707 Fund Balances. End of year S 5,539.667 S 364,071 S 2,015.383 S 7,919,121 S 5551,490 The accompanying notes are an integral part of the financial statements. 7 TOWN OF AVON, COLORADO, COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL ALL GOVERNMENTAL FUND TYPES FOR THE YEAR ENDED DECEMBER 31,1997 Revenues Taxes Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Special Assessments Investment Earnings Miscellaneous Total Revenues Expenditures Cumnt: General Government Community Development Public Safety Public Works Ttatipsortation Recreation and Culture Capital Improvements Debt Service: Bond issuance Cost Fiscal Charges Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses) Operating Transfers In: General Fund Capital Project Fund Operating Transfers Out: Debt Service Fund Wildridge Special Assessment Fund Procxds of General Obligation Bonds Disposal of Fixed Asset Total Other Financing Sources (Uses) Excess (Deficiency) of Revenues and Other Sources Over (Under) Expenditures and Other Uses Fund Balances, Beginning of Year Fund Balances, End of year Geaerai Fund Debt Service Funds Variance - variance = Amended Favorabie Amended Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable) S 5.569.764 S 5,605.552 S '35,788 S 753,813 S 770,001 S 16.188 236,250 296,166 59.916 - - - 1.545,937 1,572,414 26,477 - - 4,199,933 3,964.656 (235.277) - - - 52,700 45,538 (7,162) - - _ 87,000 105.586 18,586 270.000 322,266 52,266 3,000 4,540 1,540 219,776 499,458 279.682 - - - 12.094.360 12.306.050 211,690 843,813 880,127 36,314 1.488.035 1,392.244 95.791 - - - 451,602 433381 18.221 - - - 2.301,151 2,206,089 95,062 - - - 1,818.373 1.655,115 163,258 - - - 3,459377 3325,255 134,122 - - - 1.666.994 1.601.614 65.390 _ - 630.000 630,000 - _ - 771,978 765.196 6.782 . - 28,176 191874 9.302 11.185.532 10.613.698 571.834 1,430.154 1.415.070 15.084 908,828 1.692352 783,524 (586.341) (534,943) 51398 _ - 541.578 541,578 - _ - 18,151 18.151 (541,578) (541,578) - - - 21.960 21.960 - - - (519.618) (519,618) - 559.729 559,729 - 389,210 1,172.734 783,524 (26,612) 24,786 51.399 4366.933. 4366.933 - 339.285 339285 - 3 4.756.143 S _ 5,539.667 S.. 783.524 _ S ._-- 312.673 S 364.071 S S1,398 The accompanying notes are an integral part of the financial statements. 8 2.654.426 Capital Projects Fund 276.940 Totals (Memorandum Only) 16,117,543 524.944 Variance - -_ Variance - Amended 1,488.035 Favorable Amended • Favorable Budget Actual _ (Unfavorable) Budget —Actual - (Unfavorable) (Unfavorable) S 1,300.000 S 1,543.707 S 243,707 S 7,623,577 S 7,919,260 S 295,683 - - - 236,250 296.166 59,916 1,207,671 1,221.305 13,634 2,753,608 2,793,719 40.111 - - - 4,199.933 3,964,656 (235,277) 5,192,614 • - 52.700 45,538 (7,162) _ 50,000 • - 87,000 105,586 18.586 126,222 162.915 36.693 399,222 489,721 90.499 20.533 3,439 (17,094) 240,309 502.897 262,588 2.654.426 2.931.366 276.940 15.592,599 16,117,543 524.944 -_ - - 1,488.035 1,392;244 95,791 • - - 451,602 433,381 18,221 - - - 2.301,151 2,206,089 95.062 - - 1.818,373 1.655.I15 163,258 • - - 3,459,377 3,325,255 134,122 • - 1,666,994 1,601,614 65,380 5,712,615 5,192,614 520,001 5,712,615 5,192,614 520,001 50,000 50,000 - 680,000 680.000 - 3,750 3.750 - 775,728 768,946 6.782 116,462 116.461 1 116,462 116,461 1 - - 28.176 �19.874 5,882,827 5.362.325 520.002 18.498.513 17.391,593 1,106.920 (3.228.401) (2,431.459) 796.942 (2.905.914) (1.274.050) 1.631.864 - - - 541.578 541J78 - • - 18,151 18,151 _ - (541,578) (541,578) (18,151) (18.151) - (18,151) (18,151) 3,619,721 3,619,721 - 3,619,721 3,619,721 • - 21,960 21.960 3.601,570 3,601,570 3,641,691 3.641.691 _ 373,169 1,170,111 796,942 735,767 2,367,631 1,631.864 845.272 845.272 - 5.551.490 5.551.490 , S 1.218.441 S 2,015383 S 796,942 S 6187.257 S 7,919.121 S 1,631.864 9 TOWN OF AVON, COLORADO STATEMENT OF REVENUES, EXPENSES AND EX=IT 4 CHANGES IN RETAINED EARNINGS PROPRIETARY FUND TYPE FOR THE YEAR ENDED DECEMBER 31,1997 Operating Revenues Charges for Services Other Operating Revenues Total Operating Revenues Operating Expenses: Cost of Water Raw Water Storage Operations and Maintenance General and Administrative Depreciation Total Operating Expenses Operating Loss Nonoperating Revenues Investment Earnings Net Loss Accumulated Deficit, Beginning of Year Accumulated Deficit, End of Year Proprietary Fund Type, Water Enterprise Fund $ 96,740 6,497 103,237 13,548 12,244 25,727 216,819 268,338 (165,101) 83,538 (81,563) (162,260) $ (243,823) The accompanying notes are an integral part of the financial statements. 10 TOWN OF AVON, COLORADO STATEMENT OF CASH FLOWS - PROPRIETARY FUND TYPE x:111: FOR THE YEAR ENDED DECEMBER 31,1997 Proprietary Fund Type Water Enterprise Cash Flows From Operating Activities Fund Cash Received From Customers S 158,642 Cash Payments to Suppliers for Goods and Services Cash Payments to Employees for Services (70,906) 497 , (1 Other Operating Revenues 6 6.497 Net Cash Provided by Operating Activities 764872 Cash Flows From Capital Financing Activities Tap Fees Received 315,906 Acquisition and Construction of Capital Assets (14,736) Cost Recovery Payments to Developers (166,924) Net Cash Provided by Capital Financing Activities 134,246 Cash Flows From Investing Activities Earnings on Investrnents 83,538 Net Cash Provided by Investing Activities 83,538 Net Increase in Cash and Cash Equivalents 294,656 Cash and Cash Equivalents, Beginning of Year 1,560,120 Cash and Cash Equivalents, End of Year S 1,854,776 RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED BY OPERATING ACTIVTTIF,S Operating Loss S (165,101) Adjustments to Reconcile Operating Loss to Net Cash Provided by Operating Activities Deprcasation 216,819 Change in Assets and Liabilities: Decrease in Water Charges Receivable 48,165 Decrease in Other Receivables 20,141 Decrease in Accounts Payable (37.460) Increase in Accrued Liabilities . 712 Decrease in Customer Deposits (6,404) Total Adjustments 241,973 Net Cash Provided by Operating Activities S 76,872 NONCASH IIWESTING, CAPITAL AND FINANCING ACTIVITIES Noncash Transactions Affecting Financial Position Contributions of Capital Assets from Developers S 181,-704 The accompanying notes are an integral part of the financial statements. 11 THIS PAGE INTENTIONALLY LEFT BLAND 12 TOWN OF AVON, COLORADO NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31,1997 The financial statements of the Town of Avon have bee^ prepared in conformity with generally accepted accounting principles ( "GAAP'l as applied to governmental entities. The Governmental Accounting Standards Board ( "GASB') is the accepted standard- setting board for establishing governmental accounting and financial reporting principles. The following notes are an integral part of the Town's Comprehensive Annual Financial Report. Note 1. Summary of Significant Accounting Policies A. Financial Reporting Entity The Town of Avon, Colorado, was incorporated as a Town on April 24, 1978. On June 13, 1978, the citizenry voted to become a Home Rule City, as authorized by Article 20 of the Colorado State Constitution. The Town operates under a Council- Manager form of government and provides the following services as authorized, by its charter., public safety, highways and streets,' culture- recreation, public improveents, PI 'n"n ng and zoning, transportation, water utility services. and general administrative services. The Town follows the Governmental Accounting Standards Board (GASB) accounting pronouncements which provide guidance for determining which governmental activities, organizations and functions should be included within the financial reporting entity. GASB pronouncements set forth the financial accountability of a governmental organization's elected governing body as the basic criterion for including a possible component governmental organization in a primary government's legal entity. Financial accounta-Mlity includes, but is not limited to, appointment of a voting majority of the organization's governing body, ability to impose its will on the organization, a potential for the organization to provide specific financial benefits or burdens and fiscal dependency. The Town is not financially accountable for any other organization, nor is the Town a component unit of any other- governmental entity. B. Fund Accounting The Town uses funds and account groups to report its results of operations and its financial posi-: ,)n. Through the use of fund accounting, the Town demonstrates compliance with Iegal, contractual' and regulatory requirements, segregates transactions by government function or activity, and assists financial management in coordinating and evaluating the_ use and control of the Town's assets and operations. A fund is a separate accounting entity with a self - balancing set of accounts. In contrast, an account group is a financial reporting devise designed to provide accountability for certain assets and liabilities which do not require or use available financial resources. Funds are classified into three categories: governmental, proprietary, and fiduciary. Each category, in turn, is divided into three separate "fund types ". Governmental funds are used to account for all of the Town's general activities, including the collection and disbursement of earmarked monies (special revenue funds), and the servicing of general long term debt (debt service funds). The General Fund is used to 13 TOWN OF AVON, COLORADO NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER.31,1997 account for all activities of the Town not accounted for in some other fund, including, activities related to the collection of proceeds from the seizure.of contraband; if any. Proprietary funds are used to account for activities which are similar to those found in the private sector, where the determination of net income is necessary or useful to sound financial administration. Goods or services from such activities can be provided either to outside parties (enterprise funds), or to other departments or agencies primarily within the government (internal service funds). An enterprise fund is used by the Town to account for water services provided to its residents. The General Fixed Assets Account Group is not a fund but rather an account group that is used to account for general fixed assets acquired for general purposes and excludes fixed assets relating to proprietary funds. The General Long -term Debt Account Group is an account group that is used to account for the outstanding principal balance of general obligation bonds and other long -term obligations of the Town. C. Basis of Accounting The modified accrual basis of accounting is followed in the governmental fund types: The measurement, focus of the governmental fund types using current financial resources is described as follows: Revenue is recorded when susceptible to accrual, i.e., both measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The major sources of revenue which are susceptible to accrual are property, use, accommodations and sales taxes. Expenditures, other than interest on long -term obligations are recorded when the liability is incurred or the Iong -term obligation paid. The accrual basis of accounting is utilized in the proprietary fund type. Revenue is recognized when earned and expenses are recognized when the liability is incurred: Depreciation is computed and recorded as an operating expense. Expenditures for property, plant and equipment are shown as increase in assets and redemption of bonds and notes are recorded as a reduction in liabilities. Tap fees ' recorded as contributed capital when received. The Town has elected to follow Governmental Accounting Standards Board Pronouncements. Therefore statements issued by the Financial Accounting Standards Board after November 30, 1989, are not applied. D. Budgets Budgets are adopted on a basis consistent with generally accepted accounting principles for all funds, with the exception of the enterprise fund which are budgeted on the modified 14 accrual basis of accounting. All appropriations except for capital projects or special revenue Rinds lapse at fiscal year -end. Encumbrance accounting (open purchase orders, contracts in . process and other commitments for the expenditures of funds in future periods) is not used by the Town for budget. or financial reporting purposes. E. Cash and Investments The Town concentrates the cash resources of its various funds in order to facilitate the management of cash. The'balance in this concentrati on account is available to meet the Town's current operating requirements. Cash resources in excess ,of current requirements is invested in various interest - bearing securities and disclosed as part of the Town's investments. Town Charter and Colorado State statutes authorize the Town'to invest its excess funds in: direct U.S. Government securities, agencies, bonds and other obligations of states and political subdivisions, corporate bonds, money market mutual funds, and local government investment pools. Investments are stated at fair value on the balance sheet except for money - market investments that have a remaining maturity at time of purchase of one year or less. Investment income is recognized when earned. F. Inventories Inventories are valued at cost using the fast- in/first -out (FIFO) method. The costs of. governmental- fund -type expenditures are recorded as expenditures when purchased ratherl than when consumed. G. Fixed Assets General fixed assets are not capitalized in the funds used to acquire or construct them. Instead, capital acquisition and construction for general governme atal operations are recorded as expenditures in the fund making the expenditure and tae related assets are reported in the'General Fixed Assets Account Group. All purchased at cost or estimated historical cost if actual historical records are no t available e Donated fixed assets are recorded at their estimated fair market value at the date, of contribution. No depreciation is provided on general fixed assets. Depreciation of property, plant and equipment *in the proprietary fund.is'computed using the straight -line method over the estimated economic useful life of the asset. Public domain or infrastructure fixed assets such as roads, bridges, curbs and gutters, streets and sidewalks, drainage systems; lighting systems, other land improvements, and similar assets that are immovable and of value only to the Town are not reflected in the General Fixed Assets Account Group. 15 TOWN OF AVON, COLORADO NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31,1997 It is the Town's policy to capitalize expenditures with a cost greater than $1,000 and an estimated useful life of more than one year. The costs of normal main_ tenance and, repair are charged to operations as incurred. H. Long -term Obligations Long -term debt is recognized as a liability of a governmental fund when due. For other long -term obligations, only that portion expected to be financed from expendable available financial resources is reported as a fund liability of a governmental fund. The remaining portion of such obligations is reported in the General Long -term Debt Account Group. Long -term liabilities expected to be financed from proprietary funnd operations are accounted for in those funds. I. Property Taxes Property taxes are levied by the Town Council. The levy is based on the assessed valuation of property located within the Town as determined by the County Assessor generally as of . January 1 of each year. The levy is normally set by December 15 by certification.to the County Commissioners. The County Treasurer collects the property taxes during the ensuing calendar year and remits the taxes collected to the Town on a monthly basis. Property taxes are payable in full by April 30, or if in two equal installments, by February 28 and June 15. Delinquent taxpayers are notified in August and generally sales of the tax liens on delinquent properties are held in November or December. Property taxes, net of estimated uncollectible taxes, are recorded as receivable in the year levied and offset to deferred revenue since they typically do not meet the availability criterion. J. Special Assessments Special assessments are recorded as revenue in the year that the assessments become available. Typically this results in recognizing revenues as the assessments are collected. The remaining assessed but uncollected installments are recorded as deferred revenue. K. Compensated Absences Compensated absences are recognized as General Fund expenditures when they are expected to be liquidated with expendable available financial resources. A long -term liability has been recorded in the General Long -term Debt Account Group representing the Town's commitment to fund the amounts not expected to be liquidated with expendable available financial resources from future operations (see Note 6). 'No liability is reported for unpaid accumulated sick leave. 16 L. Interest Accretion — Supplemental "B" Interest Registered Certificates Two Supplemental `B" Interest Registered Certificates (see Note 6) have been issued by the Town at a total net present value of $911,590 and will accrete to' a maturity value of $960,000. The accretion is being recognized over the term of the Certificates using-the interest method. The net present value of the Certificates is reflected in the General Long- term Debt Account Group in order to reflect the liability for such Certificates. The accretion does not effect the Town's governmental fund operations because it does not involve the use of cash or working capital. The measurement focus is based upon recognition of debt service expenditures when the Certificates are due. M. Fund Equity Reserves are used to segregate portions of fund balance or retained earnings that are legally restricted for specific future uses. Designated fund balances represent tentative plans for future use of financial resources. Contributed capital is recorded in proprietary funds for capital grants or contributions from developers, customers, other funds and other entities.' The Town considers all unreserved fund balances to be "reserves" for future operations or capital replacement as defined within Article X, Section 20 of the Constitution of the State of Colorado (see Note 10). N. Memorandum Only —Total Columns Total columns on the general purpose financial statements are captioned "Memorandum Only" because they do not represent consolidated financial information and are presented only to facilitate financial analysis. Data in these columns do not present financial position or results of operations, in conformity with generally accepted accounting principles. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. O. Comparative Data Comparative total data for the prior year have been presented in the accompanying financial statements in order to provide an understanding of changes in the Town's financial position and operations. However, comparative data have not been presented in all statements because their inclusion would make certain statements unduly complex and difficult to understand. P. Reclassifications For comparability, 1996 comparative data has been reclassified where appropriate to conform with the 1997 financial statement presentation. 17 TOWN OF AVON, COLORADO NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEM13ER.31,1997 Q. Statements of Cash Flows For purposes of the statement of cash flows, the Town considers all highly liquid investments with a maturity when purchased of three months or less and all local government investment pools to be cash equivalents. Note 2. Legal Compliance — Budgets No later than October 15'', the Town Manager submits to the Mayor and Town Council, a proposed budget for the calendar year commencing the following January I". The budget is prepared by fund, department, program and project and includes information,on the prior year, current estimates and requested appropriations and estimated revenues for the upcoming year. The Town Council holds public hearings and may change appropriations except for expenditures required by law for debt service or for estimated cash deficits., No change to the budget may increase the authorized expenditures to any amount greater than the total amount of funds available. The Town Council must adopt the budget by resolution prior to December 15`h. Once adopted, the Town Council may at any time, by resolution, amend the budget. In addition, the Town Manager may transfer part or all of any unencumbered appropriation balance among programs within a department. A department is defined by the Town as a distinct, principal or specialized division (i.e. the fire department; the department of public works). Expenditures may not legally exceed budgeted appropriations at the fund level. Budgetary comparisons in the accompanying combined financial statements and in the individual fund statements are presented at a lower - than- required level of control to facilitate detailed financial analysis. During the year ended December 31, 1997, supplemental appropriations were approved by the Town as follows: General Fund S 11,271,022 S 11,727,110 Debt Service Fund 1,372,264 1,295,391 Wildridge Special Assessment Fund 101,687 134,763 Capital Projects Fund 4,502,568 5,900,978 Water Enterprise Fund 948,580 298,093 18 Note 3. Deposits and Investments Deposits. At year -end the carrying amount of the Town's deposits was $1,314,340 and the bank balance was $1,798,657. Of the bank balance, $380,915 was covered by federal depository insurance. The remaining balance was collateralized under the Colorado Public Deposit Protection Act ( "PDPA'). PDPA requires that cash be deposited in eligible public depositories and that deposits in excess of federal insurance levels must be collateralized. The eligible collateral is determined by the PDPA. PDPA allows the institution to create a single collateral pool for all public funds. The pool for all the uninsured public deposits as a group is to be maintained by another institution or held in trust. The market value of :he collateral must be at least equal to 102% of the aggregate uninsured deposits. The Town is a named participant in the single institution collateral pool. Pursuant to the implementation Guide to GASB Statement No. 3, deposits collateralized under PDPA have been classified as credit risk Category 2 - collateralized with securities held by the pledging financial .institution's trust department or agent in the Town's name - because the collateral pool is considered to meet the "held in the name of the government" criterion. Investments. Investments made by the Town are categorized to give an indication of the level of credit risk assumed by the Town in its investment program., Investments represented by specific identi fiable securities are classified by the following risk categories: Category 1 Insured or registered securities or for which the securities are held by the Town or its agent in the Town's name. Category 2 Uninsured and unregistered securities. With the securities held by the counter - party's trust department or agent in the Town's name. Category 3 Uninsured and unregistered securities. With the securities held by the counter -party, or by its trust department or agent, but not in the Town's name. Investments in local government investment pools or in money market mutual funds are not categorized because they are not evidenced by specific, identifiable securities that exist in physical or book entry form. The Town has elected the early implementation of GASR Statement No. 31 Accounting and Financial Reporting for Certain Investments and for External Investment Pools.' This statement essentially requires investments to be recorded at fair value. The implementation of GASB Statement No. 31 does not affect the comparability of prior period amounts, since the change to fair value at December 31, 1996, was not material. 19 TOWN OF AVON, COLORADO NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31,1997 Investments held by the Town at December 31, 1997, are summarized below: Categorized Investments None Not Subject to Categorization Local Government Investment Pools $6,823,646 Money Market Mutual Funds. 1.523.175 $8.346:821 A reconciliation of deposits and investments to the financial statements by caption is as follows: Cash and Cash Equivalents $9,417,711 Investments 250.000 Total 59.667.711 Deposits $1,314,340 Cash on Hand 6$50 Local Government Investment ,Pools 6;823,646 Money Market Mutual Funds, 1.523.175 Total $9.667.711 Note 4. Notes Receivable Beaver Creek Metropolitan District. At December 31, 1996, the Town's note receivable balance from Beaver Creek Metropolitan District was $213,960. The note is due in equal annual installments of principal and accrued interest at 8.426 %, with a final maturity in November, 2010.. In September, -1997, the Town received $228,984 as payoff of the note plus accrued interest. Beaver Creek Resort Company. The Town has a note receivable from Beaver Creek Resort Company with imputed interest at 12.227% per annum. The note is accounted for in the General Fund and is due in equal monthly installments of principal and - interest, with final maturity in November 2000. As of December 31, 1997, the note receivable balance was - $253,653. Note receivable principal installments will be recognized as revenue.when principal payments are received.- Notes receivable principal and interest maturities are as follows: 20 Year Ended uecemoer � t rnn_roai Interes 1998 $ 77,018 S 26,785 $ 103,803 1999 86,980 16,823 103,803 2000 89.655 5.597 95-257 Total $ 253.653 9.205 08 8 8 Note 5. Fixed Assets The following is a summary of the changes in the general f xed assets account group for the year ended December 31, 1997: The following is a summary of proprietary fund -type assets at December 31, 1997: Balance Balance 'January 1, Water Systems December 31, By Classification im Additions Deletions IQQ7 ' Land $ 4,375,983 $ - $ - S 4,375,983 Buildings and Improvements 8,905,709 - - 8,905,709 Machinery and Equipment 6.896.474 379.787 - - 7.276.261 Total General Fixed Assets $20.178.166 S 379.787 S - S20.557.953 Balance Balance January 1, December 31, By Source Im Additions Deletions 1222 General Revenue S 7,660,923 S 379,787 S - S 8,040,710 General Obligation and Revenue Bonds 8,814,494 - - 8,814,494 Capital Lease Obligations 2,562,401 - - 2,562,401 Contributions 1.140348 - - 1.140348 Total General Fixed Assets $20.178.166 S 379.787 $ - $20.557.953 The following is a summary of proprietary fund -type assets at December 31, 1997: Net Property and Equipment - . Li-4m.346 21 Water Enterprise Fluid Water Systems S 7,048,664 Raw Water Facilities and Storage 447,340 Water Wells 51,355 Water Rights 1,434,574 Machinery and Equipment 176.243 9,158,176 Less: Accumulated Depreciation !1.713.830) Net Property and Equipment - . Li-4m.346 21 TOWN OF AVON, COLORADO NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1997 In proprietary funds, the following estimated useful live are used to compute depreciation: Water Systems 40 years Raw Water Facilities and Storage 40 years Water Wells 20 years Machinery and-Equipment 7 -10 years Note 6. Long -term Debt General Obligation Bonds. The Town has issued general obligation bonds and supplemental `B" interest registered coupons in order to provide funds for the acquisition and construction of major capital facilities and to refund outstanding general obligation bonds. These bonds and supplemental interest coupons are direct obligations, and pledge the full faith and credit of the Town_ and are ultimately secured by the Town's general ad valorem tax collections. General obligation bonds and supplemental `B" interest registered certificates currently outstanding at December 31, 1997, areas follows: Dose General Government — Roundabouts and Street Improvements General Government - Refunding 4.00%- 5.45% S3,605,235 3.65%- 5.30% 4.591.580 Annual debt service requirements to maturity for general obligation bonds and supplemental "B" interest registered certificates outstanding at December 31; -1997, are as follows: Year Ending 1998 S 759,470 1999 757,580 2000 758,305 2001 763,043 2002 761,360 Thereafter 8.873.000 12,672,758 Less: Interest to Maturity ( 4,452,758) Less: Original Issue Discount Total General Obligation Bonds and Supplemental "B" Interest Registered Certificates I-8.126.815 22 Revenue Bonds. The Town has issued bonds whereby the bonds are payable solely from and secured by an irrevocable first lien on the Town's sales tax revenues. These revenue bond_ s have been issued for construction of a recreation center and for acquisition of land and construction of a temporary public works and transportation facility. Revenue bonds outstanding at December 31, 1997, are as follows: PUMOS General Government — Recreation Center General Government — Public Works Interest Rates AmotiIIt 3.75% - 7.00% 53,465,000 4.25%- 6.75% 1.545.000 Annual debt service requirements to maturity for revenue bonds outstanding at December 31, 1997, are as follows. Year Ending 1998 5 512,243 1999 512,363 2000 506,563 2001 505,113 2002 507,708 Thereafter 5.908.949 8,452,939 Less: Interest to Maturity (3.442.939) Total Revenue Bonds S 5.010.000 Special Assessment Debt. In 1990, the Town formed the Wildridge Local Improvement District in order to issue $1,085,000 in special assessment bonds to be used to finance :he cost of natural gas and cable television utility lines to certain areas within the district. '.n 1991 the bonds were refunded with similar bonds carrying a Iower interest rate. The * )nds are payable sol Tow ely from monies collected by the To from special assessments levie against the assessable land in the District. The Eagle'County Treasurer collects asses. -rents from those land owners who elect to -pay in installments., The assessments constitute a perpetual lien in the amounts assessed against the real, property described in the assessment ordinance. 23 TOWN OF AVON, COLORADO NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31,1997 Below is the annual estimated Bond redemption schedule based upon the Underwriter's estimate of assessment receipts and moneys to be paid annually by the Town.' Year Ending 1998 $ 113,713 1999 111,713 2000 99,213 2001 92,038 2002 84,863 Thereafter 82.688 General Obligation Bonds Payable 584,228 Less: Interest to Maturity (154128) Total Special Assessment Bonds S 430.000 Capital Lease Obligations. The following leases are renewable on an annual basis, at the option of the Town, for consecutive one year periods. Upon final payment; title to the leased assets will pass to the Town l • Lease obligation for loader, snowplow, bus and people mover due in monthly installments of $10,588 through April 1, 1999. Amortization is based on interest of 5.5 %. • Lease obligation for maintenance facility due in monthly installments of $16,851 through September 25, 2005. Amortization is based on interest of 6.18 %. The Town may terminate the lease by paying the applicable purchase option price on any scheduled payment. Changes in Long -term Liabilities., During the year ended December 31, 1997, the following changes occurred in liabilities reported in the General Long -term Debt Account Group. Capitalized Lease Obligations Payable Total General Long -term Debt $11.671.276 3 3.620.531 $ 849.298 S 14.442.509 24 Balance Balance January 1, Decembei 31, 1342 Additions Deletions .. _ 1222 Compensated Absences Payable $ 229,300 $ 811 $ - $ .230,111 General Obligation Bonds Payable 4,922,784 3,619,720 345,689 8,196,815 Special Assessment Debt 510,000 - 80,000 430,000 Revenue Bonds Payable 5,195,000 - 185,000 59010,000 Capitalized Lease Obligations Payable Total General Long -term Debt $11.671.276 3 3.620.531 $ 849.298 S 14.442.509 24 Note 7. Transfers Operating Transfers In/Out to Other Funds consists of the following: Ewd Transfers In Transfers Ott General Fund s - S 541,578 Debt Service Fund 541,578 - Wildridge Special Assessment Fund 18,151 _ Capital Projects Fund - 18.151 Total, 3 559.729 S 559 72Q Note 8. Employee Retirement Plans Full -time Employees. The Town maintains three single- employer, defined contribution pension plans for full -time employees: (1) the Town of Avon Police Officers Money Purchase Pension Plan, (2) the Town of Avon Firefighter Money Purchase Pension Plan, and (3) the Town of Avon General Employee Money Purchase Pension Plan. A defined contribution pension plan has terms that specify how contributions to an individual's account are to be determined rather than the amount of pension benefits the individual is to receive. In a defined contribution plan, the pension benefits a participant will receive depend only on the amount contributed to the participant's account, earnings on investments of those contributions, and forfeitures of other participant's benefits that may be allocated to the participant's account. All full-time employees are required to participate in one of the above retirement plans upon employment with the Town. The type of plan that an employee participates in is dependent on the type of employee (police officer, fire fighter, or general government employee). Town ordinance provides that both the employee and the Town will contribute an amount equal to 11 % of the employee's base salary each month., Employees hired prior to September 30, 1990, become vested in accordance with a vesting schedule which is dependent on the type of employee and hire date. All employees hired after September 30, 1990 start partial vesting after two years of service and are fully vested after seven years of service. In addition, if an employee reaches normal retirement age, dies; or becomes totally and permanently disabled his account becomes fully- vested regardless of length of service. Forfeitures by employees who leave employment before being fully vested are applied, first, to offset administrative expenses of the plans, and second, to reduce matching employer contributions. 25 TOWN OF AVON, COLORADO NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31,1,997 Contributions actually made by plan members and the Town for the years ended December 31, 1997 and 1996, are as follows: Employees' IM Im •.. •. Town MUM 122L= Both the Town and the covered employees each made the required 11% contributions to the plans. There are no liabilities for benefits beyond the Town's matching payments. No changes in the various plan's provisions occurred in 1997. Part -time, Temporary and Seasonal Employees. On October 14, 1997, the Town adopted a PTS Retirement Plan established under Section 457 of the Internal Revenue Code that pertains to deferred compensation plans. The PTS plan is designed specifically for employees who are part-time, temporary, or seasonal, and is defined as a Social Security replacement retirement plan. The PTS plan allows participants to defer federal and state income taxes on savings until retirement. The PTS plan requires a minimum contribution of 7.5% of an employee's salary per plan year. This 7.5% may be the employee's contribution, the employer's contribution or a combination of both. The Town elected to have 3.75% contributed by the employee and 3.75% matched by the Town. Upon separation of service, participants may withdraw the account balance in a lump -sum payment, roll the account balance over into another 457 plan, or continue to allow the account balance earn interest tax free. Taxes are paid when funds are withdrawn from the- plan. Contributions actually made by plan members and the Town for the year ended December 31, 1997, is as follows: .. Employees $12.861 Town $12.861 Both the Town and the covered employees each made the required 3.75% contributions to the plan. There are no liabilities for benefits beyond the Town's matching payments. Note 9. Deferred Compensation Plan The Town offers employees a deferred compensation plan created in accordance with Internal Revenue Section 457. Participation in the plan is optional for all employees. The 26 plan allows the employees to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death or unforeseen emergencies. On December 10, 1996, the Town amended the Section 457 deferred compensation F .n to require all amounts deferred to be held in trust for the exclusive benefit of participatiu:; employees and not be accessible by the Town or its creditors. Such amendment is effective on January 1, 1997. Therefore, the assets of the plan are no longer reflected in an Ag,. icy Fund. Note 10. Commitments and Contingencies Litigation. The Town is a defendant in various lawsuits., Although the outcome of these, lawsuits is not presently determinable, in the opinion of Town management and its legal counsel the resolution of these matter will not have a material adverse effect on the financial condition of the Town. Leases. The Town had no material operating lease commitments at December 31, 1997. Fire Protection Services. The Town provides fire protection services to Arrowhead Metropolitan District, Beaver Berry Creek Metropolitan District, Edwards Metropolitan District, Eagle -Vail etropolitan District,,Belly Ache Ridge Metropolitan District, Squaw Creek Metropolitan District, Cordillera Metropolitan District, Travis Creek Subdivision, Bear Gulch Subdivision, Delia Subdivision and Pilgrim Dow--.s . Subdivision (participants). Under the terms of the agreement, the Town is reimbursed b•- the participants for their share of the Fire Department's actual operating cost and an agr -d upon administrative fee. Conduit Debt Obligations. The Town has issued Revenue Bonds in prior years to prov, financial assistance to private- sector entities for the acquisition and construction of ind, -ial, and commercial facilities deemed to be in the public interest. Neither the Town, the St. )f Colorado, nor any political subdivision thereof is obligated in any manner for repaymer f the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying general purpose financial statements. As of December 31, 1997, there was $21,260,000 outstanding in Series 1997A Eaglebend Affordable Housing Corporation Revenue Refunding Bonds, and $1,600,000 outstanding in Series 1997 B &C Subordinate Eaglebend Affordable Housing Corporation Revenue Refunding Bonds. Tax, Spending and Debt Limitations. Article X, Section 20 of the Colorado Constitution, commonly known as the Taxpayer's Bill of Rights (TABOR) contains tax, spending, revenue and debt limitations which apply to the State of Colorado and all local governments. 27 TOWN OF AVON, COLORADO NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31,1997 Spending and revenue limits are determined based on the prior year's Fiscal Year Spending adjusted for allowable increases based upon inflation and local growth. Fiscal Year Spending is generally defined as expenditures plus reserve increases with certain exceptions. Revenue in excess of the Fiscal Year Spending limit must be refunded unless the voters approve retention of such revenue. Enterprises, defined as government -owned business authorized to issue revenue bonds and receiving less than 10 percent of annual revenue in grants from all state and local governments combined, are excluded from the provisions of TABOR TABOR also requires local governments to establish Emergency Reserves. These reserves must be at least 3% of Fiscal Year Spending (excluding bonded debt service). Local governments are not allowed to use the emergency reserves to compensate for economic conditions, revenue shortfalls, or salary or benefit increases. These emergency reserve provisions are not considered applicable to the Town as the voters within the Town - essentially removed any limitations contained in TABOR until 1999 as described in the following paragraph. In November 1994, voters within the Town passed a ballot issue which authorized the Town to take action on all spending and revenue raising measures which are limited by TABOR without an election until November 10, 1998. In addition, voters authorized the Town to keep and spend all revenue collected by the Town through 1998 regardless of any limitation contained in TABOR. The only exceptions are proposed sales or use tax rate increases and property tax rate increases which must be submitted to the voters, unless otherwise allowed by law. In November, 1997, voters passed a similar ballot issue that permanently extends the provisions discussed above. The Town's management believes it is in compliance with the provisions of TABOR However, TABOR is complex and subject to interpretation. Many of the provisions, including the interpretation of how to calculate Fiscal Year Spending limits will require judicial interpretation. Note 11. Joint Venture The Town is a participant in the Eagle County Recreation Authority. The Authority was formed pursuant to an Intergovernmental Agreement on October 15, 1991 by the following governmental entities located in Eagle County, Colorado: 28 Participating Participant Pert --- end Town of Vail Town of Avon Eagle County Arrowhead Metropolitan District Beaver Creek Metropolitan District Berry Creek Metropolitan District Eagle -Vail Metropolitan District 60.0% 6.0% 11.0% 5.0% 5.0% 6.5% 6.5% Total 100.00% The Authority was formed to acquire open space and develop regional recreational facilities within Eagle County, Colorado. Each participant of the Authority has appointed, one voting member to the Authority's Board of Directors. All actions of the Board of Directors require majority approval by the Board of Directors representing two- thirds (2/3) of the interest in the Authority. The Authority assesses each participant based upon its percentage -for maintenance, operations and capital costs based upon the Authority's annual budget. At the end of each fiscal year, any excess of contributions over expenditures will be rebated to the participants based upon their respective participation percentage. Any deficiency will be assessed to the participants based upon their respective participation.percentage. The Authority's primary transaction to date was to purchase, a parcel of land from the Town of Vail for 52,555,000 and enter into an- installment Ioan agreement with the Town of Vail for 40% of the purchase price. The loan is payable in semiannual installments with interest of 4.5% to 6.1%. Annual debt service requirements of the Authority approximate $90,000. If a participant withdraws from the Authority, the member shall lose all rights, title and interes. in the Authority. All contributions made to the Authority shall remain with the Authority and will not be refunded to the withdrawing participant. Any withdrawing participants' participation percentage not acquired by an other participant will be acquired by the Town of Vail. Upon the sale of the above mentioned parcel of land and any other property of the Authority, the net proceeds will be distributed to the participants based upon their respective. - participation percentage. The Town of Avon made a contribution to the Authority in the amount of $15,561 during 1997 and has estimated its 1998 contribution to be approximately $15,400. Financial statements for the Authority may be obtained from the Colorado State Auditor's Office. A summary of audited financial information of the Authority for the year ended December 31, 1997; the most recent available financial information, is as follows: 29 TOWN OF AVON, COLORADO NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31,1997 Assets $ 3.574.071 Liabilities $ 841,889 Investment in General Fixed Assets 2,608,873 Fund Balance 123.309 Total Liabilities and Fund Equity $ 3.574.071 Revenues: Member Assessments $ 123,440 Interest income and Other 12.634 136,074 Expenditures 140.438 Deficit of Revenues Over Expenditures $ (4.364) Note 12. Risk Management The Town is exposed to various risks of loss related to torts; thefts of, damage to, and, destruction of assets; errors or omissions; injuries to employees; and natural disasters. The Town is a member of the Colorado Intergovernmental Risk Sharing Agency (CIRSA). CIRSA is a joint self insurance pool created by intergovernmental agreement of 158 municipalities to provide property, general and automobile liability and public officials coverage to its members. CIRSA is governed by a seven member Board elected by and from its members. Coverage is provided through pooling of self- insured. losses and the purchase of excess insurance coverage. CIRSA has a legal obligation for claims against'its members to the extent that funds are available in its annually established loss fund and that amounts are available from insurance providers under excess specific and aggregate insurance contracts. Losses incurred in excess of loss funds and amounts recoverable from excess insurance are direct liabilities of the participating members. CIRSA has indicated that the amount of.any excess losses would be billed to members in proportion to their contributions in the year such excess occurs, although it is not legally required to do so. The Town's annual contribution to CIRSA amounted to $180,582 for 1997. Thelown has not been informed of any excess losses that may have been incurred by the pool. The Town continues to carry commercial insurance coverage for other risks of loss including workers compensation and employee group health and life insurance. Settled claims have not exceeded this commercial coverage in any of the past three fiscal years. 30 Note 13. Subsequent Events Pursuant to resolutions adopted by both the Avon Metropolitan District and the Town of Avon, an Agreement for Dissolution of the Avon Metropolitan District has been executed and a petition filed by the District with the District Court of Eagle County. Subject to the review and approval of the District Court and approval of the proposed dissolution at an election, the planned effective time and date of the dissolution are 12:00 midnight, May 31, 1998. According to the Agreement, the District and the Town agree that the District assigns over to the Town all of the District's current contractual obligations related to the provision of water and fire protection services, and maintenance of the facilities.. The parties also agree that the District shall continue in existence as a political subdivision of the State for the sole purpose of securing payment in full of the principal and interest of existing indebtedness. The Town Council shall be appointed as the District Board of Directors and shall set mill levies as necessary in order to pay in full the costs of annual payments on the outstanding indebtedness. Note 14. Contributed Capital A summary of the components of contributed capital is provided below: Total Contributed Capital $ 9.077:830 $ 497.610 Cost Recovery Agreement — Mountain Star. Prior to 1996, the Avon Metropolitan District entered into an agreement with Mountain Star, LLC to refund the cost of lines contributed to the District in an amount not to exceed $450,000. The "cost recovery" amounts are generated from tap fees for taps made to the contributed lines. The cost recovery agreement provides for payment to Mountain Star of 50 percent of all tap fees received from any connection to the District's water system as a result of a building constructed on Mountain Star's property. If the District reduces the tap fee below current levels, the 50 percent shall be increased in the same proportion as the amount of the reduction in the tap fee. The District's obligation pursuant to the agreement is to continue until the earlier of December 31, 2003, or the date that the aggregate payments equal 31 Balance Balance January 1, December'31, Classification .1222 Additions Deletions im Water Lines S 2,510,608 S - S - S 2,510,608 Tap Fees 2,136,588 315,906 - 2,452,494 Cost Recovery 336,181 181,704 25,150 492,135 Intergovernmental 4.094.453 - 4.094.453 Total Contributed Capital $ 9.077:830 $ 497.610 Cost Recovery Agreement — Mountain Star. Prior to 1996, the Avon Metropolitan District entered into an agreement with Mountain Star, LLC to refund the cost of lines contributed to the District in an amount not to exceed $450,000. The "cost recovery" amounts are generated from tap fees for taps made to the contributed lines. The cost recovery agreement provides for payment to Mountain Star of 50 percent of all tap fees received from any connection to the District's water system as a result of a building constructed on Mountain Star's property. If the District reduces the tap fee below current levels, the 50 percent shall be increased in the same proportion as the amount of the reduction in the tap fee. The District's obligation pursuant to the agreement is to continue until the earlier of December 31, 2003, or the date that the aggregate payments equal 31 TOWN OF AVON, COLORADO NOTES TO THE COMBINED FINANCIAL STATEMENTS DECEMBER 31,1997 $450,000. The Contributed Capital — Cost Recovery account will be reduced as payments to Mountain Star are made. The Town of Avon assumed the District's obligation for the cost recovery agreement with Mountain Star effective January 1_, 1996. During 1997, the Town collected $9,100 of tap fees related to-the Mountain Star agreement, and reimbursed Mountain Star $4,550 (50 %). Cost Recovery Agreement — Riverview. On August 26, 1996, the Town entered into a cost recovery agreement with Riverview Park Associates, Inc., whereby the Town agreed- to pay, to Riverview fifty percent (50 %) of all tap fees received from any connection to the Town's water system due to development on Lot 1 & 2, Eaglewood Subdivision up to the certified construction cost amount of $181,704. The Contributed Capital — Cost kecovery 'account will be reduced as payments to Riverview are made. During 1997, the Town collected $ 41,200 of tap fees related to :the Riverview agreement, and reimbursed Riverview $20,600. Note 15. Water Enterprise Operations The Town transferred most of its water operations to. the Upper Eagle Regional Water Authority (the "Authority', effective January 1, 1997. Prior to the transfer, revenues from water operations included the sales of water, as well as tap fees collected. Expenses included the cost of purchasing treated water, and all related personnel, equipment, supplies and other related costs required to operate and =intain the water system: With the transfer of operations, the Authority now collects and retains all revenues from water sales and pays for all costs required :to operate and maintain the water system. Water related functions retained by the Town include limited administrative functions, maintenance of Nottingham Lake and related ditches and administration of water rights. The Town continues to charge tap fees and to assess a water service fee surcharge which is collected by the Authority and then forwarded to the Town. These revenues are used to cover-expenses related to the limited remaining water related functions retained by the Town. Note 16. Major Taxpayers For the year ended December 31, 1997, approximately 45% of the Town's sales tax re venues were received from two companies. Note 17. Deficit Retained Earnings At December 31, 1997, the Town's Water Enterprise Fund had an accumulated deficit of $243,823. 32 APPENDIX B ( This Page Intentionally Left Blank ) 11 1 APPENDIX B CERTAIN DEFINITIONS AND SUMMARIES OF CERTAIN PROVISIONS OF THE LEASE, THE INDENTURE AND THE GROUND LEASE Set forth below are the definitions of some of the terms used in this Official Statement, the Lease, the Ground Lease and the Indenture and summaries of certain provisions of the Lease, the Ground Lease and the Indenture. These summaries do not purport to be definitive summaries of all provisions of the Lease, the Ground Lease or the Indenture; reference must be made to those documents in order to obtain descriptions of all provisions. Copies of the Lease, the Ground Lease, and the Indenture may be obtained from the sources listed in "INTRODUCTION -- Additional Information." DEFINITIONS "Additional Rentals" means the cost of all taxes, insurance premiums, reasonable expenses and fees of the Trustee, utility charges, costs of maintenance, upkeep and repair, payments into the Reserve Fund, amounts required to be deposited in the Rebate Fund, and all charges or costs which the Town assumes or agrees to pay under the Lease with respect to the Project, other than Base Rentals (together with interest that may accrue thereon in the event that the Town shall fail to pay the same, as set forth herein), including but not limited to costs and expenses charged to or incurred by the Authority at the request of the Town and, in its capacity as lessor under the Lease. "Base Rentals" means the payments payable by the Town pursuant to the Lease, as it may be amended, which constitute the payments payable by the Town for and in consideration of the right to use the Project during such Original Term or Renewal Term. "Certificates of Participation" or "Certificates" means the 1998 Certificates and any Additional Certificates. "Completion Date "means the date of final acceptance of the Project by the Town, as evidenced by the certificate provided for in the Lease. "Construction Contract" means any contract entered into by the Town for the Project, including but not limited to any contract between the Town and any contractor, engineer, architect or Project Manager regarding the Project. "Cost of Construction" shall be deemed to include payment of or reimbursement for the following items: 1. obligations incurred or assumed for labor, materials and equipment in connection with the construction; acquisition and equipping of the Project; . ': 2. the cost of performance and payment bonds, and of insurance of all kinds (including, without limitation, title insurance and, if procured and maintained by the Town, builder's risk completed value insurance)- that may be necessary or appropriate during the course of the construction, acquisition and equipping of the Project; 3. the costs of engineering; architectural, hydrological, geological, aeronomical and other professional and technical services, including obligations incurred or assumed for preliminary design and development work, -test borings, surveys, estimates, plans and specifications; 4. the cost of the administration of construction of the Project incurred prior to the Completion Date, including supervision of construction as well' as the performance of all of the other duties required by' or 'consequent upon the construction, acquisition and equipping of the Project; including, without limitation, costs of preparing and securing all Project Documents, architectural fees, legal fees and expenses, independent inspection fees, engineering fees, auditing fees and advertising- expenses in connection with the Project; 5. costs incurred in connection with the issuance of the Certificates, including legal fees and expenses; financial advisory fees and expenses, costs incurred in obtaining ratings from rating agencies, if 'any, costs incurred in connection with obtaining municipal bond insurance or other credit enhancement, if any, costs of publication, printing' and engraving and recording and filing fees; 6. the compensation and expenses of any Project Manager, and all costs which shall be required to be paid under the terms of any Construction Contract; 7. payment of or reimbursement to the Town for thatportion of the Base Rentals due and payable through and including not later than the first anniversary of the Completion Date, which is designated and paid as interest; 8. all other costs which are considered to be a part of the costs of the- Project in accordance with generally accepted accounting principles and which will not adversely affect the exclusion' - from - federal' income taxation of the designated interest component of Base Rentals payable by the Town under the Lease and assigned pursuant to-the Indenture; and - 9. payments of Base Rentals or payments for redemption of the 1998 Certificates or any Additional Certificates, at the Town's option, from any moneys remaining in the Construction Fund subsequent to the Completion Date, as provided' in the Indenture. "Equipment" means the items of equipment, machinery and related property acquired and installed in the Project with proceeds from the sale of the 1998 Certificates or the proceeds from the sale of any Additional Certificates, and any items of equipment, machinery and related property acquired in replacement or substitution therefor pursuant the Lease, less any machinery, equipment and related property released from the Lease in accordance with its terms. "Event of Nonappropriation" means a nonrenewal of the Lease by the Town, determined by the failure of the Town Council, for any reason, to budget and appropriate specifically with respect to the Lease moneys sufficient to pay all Base Rentals and reasonably estimated 11N Additional Rentals, as provided in the Lease. An Event of Nonappropriation can also occur under circumstances of damage, destruction or condemnation of the Project as provided in the Lease. See "APPENDIX B - THE LEASE - Damage, Destruction or Condemnation." "Extraordinary Revenues" means (i) the Purchase Option Price; if paid; (ii) any amounts remaining in the Construction Fund subsequent to the Completion Date which the Town instructs to be deposited in the Extraordinary Redemption Fund pursuant to the Indenture; (iii) all Net Proceeds, if any, of casualty insurance, title insurance, performance bonds, condemnation awards and awards resulting from defaults under the Construction Contracts (as defined in the Lease) in connection with the Project, and not applied to the repair, restoration, modification, improvement or replacement of the Project, which are received pursuant to the provisions of the Lease; and (iv) all Net Proceeds, if any, derived from subleasing the Site or any portion thereof, and the leasing, sale or assignment of the Trustee's interest in the Project, pursuant to the Indenture. "Federal Securities" means direct obligations of, or obligations the timely payment of principal and interest of which are fully and unconditionally guaranteed by, the United States of America. "Federal Tax Exemption Certificate" means the certificate concerning compliance with the requirements of the Code in relation to the Town's covenants under the Lease, to be delivered by the Town at the time of delivery of the 1998 Certificates, and including any supplements or amendments thereto. "Fiscal Year" means the Town's fiscal year, which begins on January 1 and ends on December 31. "Force Majeure" means the following: acts of God; strikes, lockouts or other industrial disturbances; acts of public enemies; orders or restraints of any kind of the government of the United States of America or of the State or any of their departments, agencies or officials or any civil or military authority; insurrections; riots; landslides, earthquakes; fires; storms; droughts; floods;, explosions; breakage or accidents to machinery, transmission pipes or canals; or any other cause or event not within the control of the Authority or the Town. "Independent Counsel" means an attorney duly admitted to the practice of law before the highest court in the State and who is not an employee of the Authority, the Trustee or the Town. "Lease Term" means the Original Term and any Renewal Terms as to which the Town may exercise its option to renew the Lease. "Lease Term" refers to the time during which the Town is the lessee and sublessee under the Lease; provided, however, certain provisions of the Lease survive the termination of the Lease Term as further provided in the Lease. "Net Proceeds," when used with respect lo, any, performance or payment bond proceeds, or proceeds from policies of insurance required hereby, or proceeds from any condemnation award, or proceeds resulting from any default under a Construction Contract, or proceeds from any foreclosure and sale, leasing or assignment of the Trustee's interest in the Project and subleasing of the Site, means the amount remaining after deducting from the gross proceeds MN thereof all expenses (including, without limitation, attorneys' fees and costs) incurred in the collection of such proceeds or award. "1998 Certificates" means, for purposes of this Appendix, the 1998 Certificates, i.e., the certificates of participation to be issued pursuant to the Indenture evidencing assignment of proportional undivided interests in rights to receive Revenues. "Outstanding" or "Certificates Outstanding" means all Certificates which have been executed and delivered, except: 1. Certificates canceled or which shall have been surrendered to the Trustee for cancellation; 2. Certificates in lieu of which other Certificates have been authenticated under the Indenture; 3. Certificates which shall have been redeemed as provided in the Indenture (including Certificates redeemed on a partial payment as provided in the Indenture); and 4. Certificates paid or deemed to be paid in accordance with the Indenture. "Participant" or "owner" or "registered owner" of a Certificate means the registered owner of any Certificate as shown in the registration records of the Trustee. "Permitted Encumbrances" means, as of any particular time, (i) liens for taxes and assessments not then delinquent, or liens which may remain unpaid pursuant to the provisions of the Lease; (ii) the Lease, the Ground Lease and the Indenture; (iii) utility, access and other easements and rights, of way, - restrictions, and exceptions which do not, in the opinion of the Town Representative, interfere with or impair the Project; (iv) any Financing Statements filed to perfect security interests pursuant to the Lease, the Ground Lease or the Indenture; (v) such minor defects, irregularities, encumbrances and clouds on title as normally exist with respect to property of the general character of the Site or the Project and as do not, in the opinion of the Town Representative, materially impair the value of or title to the Site or the Project; (vi) any subleases entered into pursuant to the Lease; and (vii) those encumbrances and exceptions to title set forth in Exhibit 1) to the Lease. "Permitted Investments" means any of the investments or deposits which are legal investments or deposits for the Town under the then applicable laws of the State and which are listed in the Indenture. "Project" means the acquisition, construction and installation of the building A, with approximately 4,800 square feet of administration space; building B, with 2,700 square feet of heated storage and shop space and 3,000 square feet of unheated storage space; and building E with approximately 20,700 .square feet of vehicle maintenance space; and the Equipment, collectively, and includes all property permanently affixed to the Site. -* "Project Documents" means the following: (i) plans, drawings and specifications for the Project, when and as they are approved by the Town, including change orders, if any, as provided in the Lease; (ii) a survey of the Site, prepared by a registered land surveyor in accordance with standard requirements for land title surveys, showing the location of all improvements, easements, encroachments and other encumbrances on such real estate; (iii) any necessary permits for construction of the Project, including any building permits and certificates of occupancy; (iv) the Construction Contract; (v) policies of title, casualty, public liability and worker's compensation insurance, or certificates thereof, as required by the Lease with respect to the Project; (vi) performance and payment bonds with respect to the Project; (vii) the executed contracts with the architects, engineers, hydrologists, geologists or agronomists hired by the Town in connection with the preparation of plans, drawings and specifications for the Project; and (viii) any and all other documents executed by or furnished to the Town in connection with the construction, acquisition and equipping of the Project. "Purchase Option Price" means the amount payable, at the option of the Town, for the purpose of terminating the Lease and purchasing the Project, which amount shall be equal to such amount as shall be necessary to discharge the Indenture in the manner provided in Article VI of the Indenture. "Qualified Surety Bond" means any, unconditional and irrevocable surety bond or other insurance policy deposited in the Reserve Fund in lieu of or in partial substitution for inoneys or another Qualified Surety Bond on deposit therein, the provider of which is acceptable to the Certificate Insurer. "Reserve Fund Requirement" means the lesser of (i) maximum annual. debt service with respect to the Certificates Outstanding; (ii) 125% of average annual debt service on all Certificates Outstanding, or (iii) 10% of the aggregate principal amount of the 1998 Certificates and of any Additional Certificates hereafter issued upon original issuance thereof (but not taking into account any series of Certificates which has been paid in full or provision for which payment in full has been made pursuant to the Indenture); provided that the Reserve Fund Requirement shall not exceed the amount permitted to be capitalized from Certificate proceeds under then applicable provisions of federal tax law in order for interest on the Certificates to be excluded from gross income for federal income tax purposes. "Revenues" means (i) Extraordinary Revenues, if any; (ii) the Base Rentals; (iii) any portion of the proceeds of the Certificates deposited with or by the Trustee in the Certificate Fund to -pay accrued interest on the Certificates; (iv) any earnings on moneys on deposit in the Certificate Fund except to the extent such earnings are deposited in the Rebate Fund; (v) all other revenues derived from the Lease, excluding Additional Rentals and excluding payments constituting compensation to the Trustee for its services; and (vi) any other moneys to which the Trustee may be entitled for the benefit of the Participants. "Site" means the parcels of real estate, the legal description of which is set forth in Exhibit A to the Lease (subject to, the provisions of the Lease), owned by the Town and leased by the Town to the Authority under the Ground Lease, and subleased by the Authority to the Town_ under the Lease. IM THE LEASE The following is a summary of certain provisions of the Lease. Reference is hereby made to the actual Lease for a complete recital of its terms. See "INTRODUCTION -- Additional Information." The Lease Term The Lease Term commences as of July 1, 1998. The Lease Term will terminate upon the earliest of any of the following. events: (a) the expiration of the Original Term (which expires December 31, 1998) or any Renewal Term during which there occurs an Event of Nonappropriation (which is not thereafter waived) pursuant to the Lease; (a) the Town shall have purchased the Project as provided in the Lease and the Certificates shall have been paid or deemed paid pursuant to the Indenture; provided, however, that in the event of discharge of the Indenture pursuant to the provisions thereof, the Lease shall remain in effect solely for the purpose of conferring rights upon the Participants to payments of principal of, premium, if any, and interest on the Certificates solely from moneys or Federal Securities deposited in accordance with the Indenture; (c) an Event of Default and termination of the Lease Term by the Trustee under the Lease; (d) the election of the Town to terminate the Lease Term pursuant to the Lease; or (e) December 31, 2018, which date constitutes the last day of the final Renewal Term of the Lease, or such later date as all Base Rentals and Additional Rentals required under the Lease shall be paid, with the effect that the Certificates shall be paid or deemed paid pursuant to the Indenture. The Lease provides that it is the intention of the Town Council that the decision to renew or not to renew the Lease shall be made solely by the Town Council and not by any other Town officer, and the Finance Director of the Town (or any other officer at any time charged with the responsibility of formulating budget proposals) is directed in the Lease to include in the budget proposals submitted to the Town Council, in any year in which this Lease shall be in effect, items for all payments required for the ensuing Renewal Term under this Lease. The Town shall in any event, whether or not the Lease is to be renewed, furnish the Trustee, the Authority and the Certificate Insurer with copies of its annual budget promptly after the budget is adopted. Termination of the Lease Term will terminate all unaccrued obligations of the Town under the Lease and will terminate the Town's rights of possession under the Lease (except to the extent. of the holdover provisions of the Lease and except for any conveyance to the Town pursuant to the Lease); but all other provisions of the Lease, including all obligations of the Town accrued prior to the termination, and all other obligations of the Trustee with respect to the Participants and the receipt and disbursement of funds will be continuing until the Indenture is discharged, as provided in the Indenture. Base Rentals and Additional Rentals The Base Rentals and Additional Rentals constitute currently budgeted expenditures of the Town. The Town's obligations under the Lease are from year to year only and do not constitute a mandatory payment obligation of the Town in any fiscal year beyond a fiscal year during with the Lease is in effect. No provision of the Lease is to be construed or interpreted as creating :. a general obligation or other indebtedness of the Town within the meaning of any constitutional, statutory or charter debt limitation. Neither the Lease nor the issuance of the Certificates directly or indirectly obligates the Town to make any payments beyond those specifically appropriated by the Town for any fiscal year in which the Lease is in effect.. The Town is under no obligation to exercise its option to purchase the Project. Under the Lease, the Town is required to pay Base Rentals directly to the Trustee for distribution to the Participants in accordance with the Indenture during the Lease Term. There shall be credited against the amount of Base Rentals otherwise payable under the Lease all amounts at the time of deposit in the Certificate Fund, and available for such payments to Participants. Base Rentals are recalculated in the event of any partial redemption of Certificates prior to maturity or upon the issuance of Additional Certificates. The Lease also requires the Town to pay Additional Rentals during the Lease Term. The Additional Rentals during the Lease Term shall be in an amount sufficient to pay the reasonable fees and expenses of the Trustee, and for the cost of taxes (if any), insurance premiums, utility charges, maintenance and repair costs, and all other expenses expressly required to be paid under the Lease or the Indenture, including but not limited to costs and expenses charged to or incurred by the Authority at the request of the Town and in its capacity as Authority under the Lease, as well as for payments into the Reserve Fund or the Rebate Fund required by the Lease or the Indenture. - To the extent any moneys in the Reserve Fund shall ever be less than the Reserve Fund Requirement (other than as a result of an application of moneys therein pursuant to subsections (b), (c), (d) or (e) of Section 3.08 of the Indenture), the Town, agrees to cause to be deposited (i) as a payment of Additional Rentals, not later than December 31 of the year following such transfer, moneys into the Reserve Fund so that the amount therein shall equal the Reserve Fund Requirement for the Certificates then Outstanding or (ii) will cause to be deposited in , the Reserve Fund a Qualified Surety Bond in an amount which, together with any moneys then contained in the Reserve Fund, will be sufficient to restore the amount on deposit in the Reserve Fund to the Reserve Fund Requirement, on or before the first day of the fourth month of the Fiscal Year following such withdrawal of moneys from the Reserve Fund; and that failure to budget and appropriate moneys for such payment or purchase of a Qualified Surety Bond by the last day of the Fiscal Year in which such withdrawal occurs shall constitute an Event of Nonappropriation. The Additional Rentals will be paid by the Town on a timely basis directly to. the person or entity to which such Additional Rentals are owed, except that Reserve Fund and rebate payments will be made to the Trustee as provided in the Indenture. The Base Rentals and, if paid, the Purchase Option Price are payable by lawful money of the United States of America to the Trustee at its principal corporate trust office. During the Lease Term, the Town is not to withhold any Base Rentals or Additional Rentals (with certain exceptions as to Additional Rentals as provided in the Lease), pending final, resolution of any dispute, nor may it assert any right of set -off or counter -claim against its obligation to make such payments. IM Upon receipt-by the Trustee of each payment of Base Rentals, the Trustee will apply the amount of each Base Rental payment in the following manner and order: (a) the amount of such payment of Base Rentals designated and paid as interest, to the Interest Account of the Certificate Fund, and (b) the remaining .portion of such payment of Base Rentals will be deposited in the Principal Account of the Certificate Fund. Nonappropriation by the Town In the event that the Town Council shall not budget and appropriate, on or before December 31 of each Fiscal Year, moneys sufficient to pay all Base Rentals and the reasonably estimated Additional Rentals coming due for the next ensuing Renewal Term, an Event of Nonappropriation shall be deemed to have occurred as of such December 31; subject; however, to each of the following provisos: (a) The Trustee shall declare an Event of Non - appropriation on any earlier date on which the Trustee receives written notice from the Town that the Lease will not be renewed. (b) The Trustee may waive any Event of Non - appropriation which is cured by the Town within a reasonable time if in the Trustee's judgment such waiver is in the best interest of the Participants. In the event that during any Fiscal Year, any Additional Rentals shall become due which were not included in the Town's current budget, and if there are no moneys available to pay such Additional Rentals pursuant to the Indenture, then, in the event that moneys are not specifically budgeted and appropriated to pay such Additional Rentals within 90 days subsequent to the date upon which such Additional Rentals are due, an Event of Non - appropriation shall be deemed to have occurred, upon notice by -the Trustee to the Town to such effect (subject to waiver by the Trustee as provided in paragraph (b) above): If an Event of Non - appropriation occurs, the Town shall not be obligated to make payment of the Base Rentals or Additional Rentals or any other payments provided for herein which accrue -after the last day of the Original or Renewal Term during which such Event 'of Nonappropriation occurs; provided, however, that, subject to the limitations of the Lease, the Town shall continue to be liable for Base Rentals and Additional Rentals allocable to any period during which the Town shall continue to occupy or retain possession of the Project. The Town shall in all events vacate the Site and the Project (leaving the Equipment) by the expiration of the Original or Renewal Term during which an Event of Nonappropriation occurs. The Trustee, upon the occurrence of an Event of Nonappropriation, shall be entitled to all moneys then on hand and being held in all funds created under the Indenture, including the Construction Fund, but excluding the Rebate Fund, for the benefit of the Participants and the Certificate Insurer. After the expiration of the Original or Renewal Term during which an Event of Nonappropriation occurs,'and in the event that payments under the Policy shall be insufficient to pay the principal of and interest on the Certificates when due, or in the event that the Certificate Insurer shall so direct the Trustee, the Trustee may proceed to foreclose on and sell, lease or assign its interest in the Project or any portion thereof, sublease the Site and exercise the rights and remedies IM of a secured party under the Colorado Uniform Commercial Code with respect to the Equipment, as provided in the Indenture, or take one or any combination of steps described in the Lease: All property, funds and rights acquired by the Trustee by reason of an Event of Nonappropriation as provided in the Lease, less any moneys due and owing to the Trustee, shall be held by the Trustee for the benefit of the Participants and the Certificate Insurer as set forth in the Indenture. Construction, Other Acquisition and Installation of the Project The Town hereby agrees that in order to effectuate the purposes of this Lease it will make, execute, acknowledge and transmit any and all contracts, orders, receipts, writings and instructions with any other persons, firms or corporations and in general do all things which may be necessary or proper for the Project, on behalf of the Authority as owner of the Project. The Project shall be constructed in accordance with the Project Documents, subject to reasonable change orders or any other reasonable changes approved by the Town. So long as the Lease is in full force and effect and no Event of Nonappropriation or Event of Default shall have occurred, the Town shall have full power to cant' out the acts and agreements provided in this paragraph, and such power is granted and conferred under the Lease to the Town, and is accepted by the Town_ , and shall not be terminated or restricted by act of the Authority, the Trustee or the Town, except as provided in the Lease. The Town agrees to effect the Project on behalf of the Authority as owner of the Project, through the application of moneys to be disbursed from the Construction Fund pursuant to the Lease and the Indenture by the Trustee at the direction of the 'town. In the event that the Project shall not have been substantially completed by August 1, 2000, the Trustee shall, upon 30 days written notice to the Town, be authorized, but not required, to complete the Project, without any direction by the Town, from any moneys remaining in the Construction Fund. The Trustee shall also be authorized, but not required, to complete the Project without any direction by the Town, upon the occurrence of a Termination Event. Title to the Project At all times during the Lease Term, title to the Site shall remain in the Town, subject to the Ground Lease, the Lease, the Indenture and any other Permitted Encumbrances. Except personal property purchased by the Town or any of its sublessees at its own expense pursuant to the Lease and personal property purchased by the Town from amounts on deposit in the Special Construction Fund, title to the Project and any and all additions and modifications to or replacements of any portion of the Project. shall be held in the, name of the Authority, subject only to Permitted Encumbrances, until foreclosed on or conveyed as provided in the Indenture or the Lease; or until the termination of the Ground Lease, notwithstanding (i) the occurrence of an Event of Nonappropriation as provided in the Lease or one or more Events of Default as defined in the Lease; (ii) the occurrence of any event of damage; destruction, condemnation or construction defect or title defect, as provided in the Lease; (iii) termination of the right of the Town to direct the acquisition, construction and equipping of,the Project pursuant to the Lease; or (iv) the violation' by the Authority (or by the Trustee as assignee of the Authority pursuant to the Indenture) of any provision of the Lease. The Town shall have no right, title or interest in the Project or any additions and 10-Si modifications thereto or replacements any portion of the Project, except as expressly set forth in the Lease. The Town shall not permit any mechanic's or other lien to be perfected or remain against the Site or the Project; provided that; if the Town shall first notify the Trustee of the intention of the Town so to do, the Town may in good faith contest any mechanic's or other lien filed or perfected against the Site or the Project, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom if, during the prosecution of such contest and appeal and until final discharge of such mechanic's or other lien, the Town shall (i) provide a surety bond in the amount of such mechanic's or other lien in accordance with the laws ofthe State, or (ii) provide affirmative title insurance coverage over such mechanic's or other lien, or (iii) provide such other collateral or surety of payment as the Trustee may deem acceptable in the Trustee's sole discretion. The Authority and the Trustee will cooperate fully with the Town in any such contest, upon the request and at the expense of the Town. Neither the Authority nor, except as provided above, the Town, shall directly or indirectly create, incur, assume or suffer to exist any mortgage, pledge, lien, charge, encumbrance or claim on or with respect to the Site or the Project, except Permitted Encumbrances. The Town shall promptly, at its own expense, take such action as may be necessary to duly discharge 'any such mortgage, pledge, lien, charge, encumbrance or claim not excepted above which it shall have created, incurred or suffered to exist. The Authority shall promptly, at its own expense, take such action as may be necessary to duly discharge any such mortgage, pledge, lien, charge, encumbrance or claim not excepted above which it shall have created or incurred. Maintenance and Modification of the Project The Town agrees that at all times during the Lease Term, it will maintain, preserve and keep the Project or cause the Project to be maintained, preserved and kept, with the appurtenances and every part and parcel thereof, in good repair, working order and condition, and that the Town will from time to time make or cause to be made all necessary and proper repairs, except as otherwise provided in the Lease. None of the Authority, the Trustee, the Certificate Insurer or any of the Participants shall have any responsibility in any of these matters or for the making of any additions, modifications or replacements to the Project. The Town shall have the privilege of remodeling the Project or making substitutions, additions, modifications and improvements to the Project at its own cost and expense and title to the same shall beheld in the name of the Authority, subject to this Lease and the Indenture, and shall be included under the terms of the Lease and the Indenture; provided, however; � that such remodeling, substitutions, additions, modifications and improvements shall not in any way damage the Project or cause the Project to be used for purposes other than lawful governmental functions of the Town, or cause the Town to violate its covenants in the Lease; and provided further that the Project, as remodeled, improved or altered, upon completion of such remodeling, substitutions, additions, modifications and improvements, shall be of a value not less than the value of the Project immediately prior to such remodeling or such making of substitutions, additions, modifications and improvements, as reasonably determined by the Trustee. E The Town or its sublessees may also, from time to time in its sole discretion and at its own expense, install machinery; equipment and other tangible property in or on the Project.. All such machinery, equipment and other tangible property shall remain the sole property of the Town or its sublessees, as the case may be, in which none of the Authority, the Trustee, the Certificate Insurer or the Participants shall = have any interest; provided; however, that title to any such machinery, equipment and other tangible property which becomes permanently affixed to the Project shall be in the Authority, subject to this Lease and the Indenture, and shall be included under the terms of the Lease and the Indenture. Property shall be considered permanently affixed if the Trustee shall reasonably determine that the Project would be damaged, or impaired by the removal- of such machinery, equipment or other tangible property. Replacement and Substitution of Certain Equipment The Town shall not be under any obligation to renew, repair or replace any inadequate, obsolete, worn-out, unsuitable, undesirable or unnecessary Equipment. In any instance where the Town determines that any Equipment has become inadequate, obsolete,, worn-out, unsuitable, undesirable or unnecessary, the Town may remove such Equipment from the Project and (on behalf of the Authority) sell, trade -in, exchange or otherwise dispose of it (as a whole or in part) without any responsibility or accountability to the Authority or the Trustee therefor, provided that the Town shall either: (a) substitute (by direct payment of the costs thereof or by designating as Equipment other machinery, equipment or personal property; other, than property included as part of the Project pursuant to the Lease) and install anywhere in or on the Project, other equipment, machinery or related property having equal or greater value and utility (but not necessarily having the same function) in the operation of the Project; or (b) not make any such substitution and installation, provided (i) in the case of the sale of any such Equipment to anyone other than itself or in the case of the scrapping thereof, the Town shall pay to the Trustee for deposit into the Extraordinary Redemption Fund the net proceeds from such sale or the scrap value thereof, as the case may be, (ii) in the case of the trade -in of such Equipment for other machinery, equipment or related property not to be installed in or on the Project, the Town shall pay to the Trustee for deposit into the Extraordinary Redemption Fund the amount of the credit received by it in such trade -in and (iii) in the case of the sale of any such Equipment to the Town; or .in the case of any other disposition thereof, the Town shall pay to the Trustee for deposit into the Extraordinary Redemption Fund an amount equal to the original cost thereof less depreciation at rates calculated in accordance with generally accepted accounting principles. The removal from the Project of any portion of the Equipment pursuant to these provisions shall not entitle the Town to any postponement, abatement or diminution of the Base Rentals or other payments required to be made under the Lease. The Town will promptly report in writing to the Trustee each removal, substitution, sale or other disposition under subsections (a) and (b) above and will pay to the Trustee all amounts required by subsection (b) above to be paid into the Extraordinary Redemption Fund promptly after B -11 any subsequent sale, trade -in or other disposition requiring such payment. All substituted machinery, equipment or related property installed pursuant to these provisions shall be free of all liens and encumbrances (other than Permitted Encumbrances) and shall become a part of the Project. The Town shall furnish 'to the Trustee such Financing Statements and other documentation with respect to any equipment, machinery or related property substituted as Equipment as would have been required therefor if originally acquired from the Construction Fund as provided in the Lease. The Town will not remove, or permit the removal of, any of the Equipment from the Site except in accordance with this Section or in accordance with the Lease. The Authority and the Trustee will cooperate with the Town in implementing the rights of the Town to dispose of Equipment pursuant to these provisions and will execute any and all conveyances, releases or other documents necessary or appropriate in connection therewith Taxes, Other Governmental Charges and Utility Charges In the event that the'Project or any portion thereof shall, for any reason, be deemed subject to taxation, assessments or charges lawfully made by any governmental body, the Town shall, during the Lease Term, pay the amount of all such taxes, assessments and governmental charges then due as Additional Rentals. With respect to special assessments or other governmental charges which may be lawfully paid in installments over a period of years; the Town shall be obligated to provide for Additional Rentals only for such installments as are required to be paid during the Original or any Renewal Term. Except as provided in the immediately preceding sentence, the Town shall not allow any liens for taxes, assessments or governmental charges to exist with respect to the Project or any portion thereof (including, without limitation, any taxes levied upon the Site, the Project or any portion thereof which, if not paid;. will become a charge on the rentals and receipts from the Project or any portion thereof, or any interest therein, including the interest of the Authority, the Trustee, the Certificate Insurer, or the Participants), or the rentals and revenues derived therefrom or under the Lease. The Town shall also pay as Additional Rentals, as the same respectively become due, all gas, water, steam, electricity, heat, power, telephone, utility and other charges incurred in the maintenance and upkeep of the Project. The Town may, at the expense and in the name of the Town, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments, utility or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Trustee shall notify the Town that, in the opinion of Independent Counsel; by nonpayment of any such items the security afforded pursuant to the Indenture will be materially endangered or the Project or any portion thereof will be subject to loss or forfeiture, or the Authority or the Trustee will be subject to liability, in which event such taxes, assessments, utility or other charges shall be paid forthwith as Additional Rentals (provided, however, that such payment shall not constitute a waiver of the right to continue to contest such taxes, assessments, utility or other charges). Insurance to Be Maintained for the Project Upon the execution and delivery of the Lease, the Town shall cause casualty and property damage insurance to be carried and maintained with respect to the Project in an amount equal to the replacement cost of the Project. In the event that the Town shall so fail to insure the B -12 Project, the Trustee may, but shall,be under no obligation to, pay premiums for such casualty and property damage insurance. The7rustee shall comply with the reasonable direction of the Town as to the terms of such casualty and property damage insurance, consistent with the requirements of the Lease, and as to the selection of a,responsible insurer to provide ,such casualty and property damage insurance. The insurance policy may have a deductible clause 'in an amount not to exceed $150,000. The Project may be insured under a blanket insurance policy which insures other.buildings as well, as long as such blanket insurance- policy complies with the requirements of the Lease. If the Town shall insure against similar risks by self - insurance, the Town, at its election, with consent of the Certificate Insurer, may provide for property and casualty insurance with respect to the Project, partially or wholly by means of an adequate self - insurance fund. Upon the execution and delivery of the Lease, the Town 'shall, at its own expense or the, expense of any of the sublessees, cause public liability insurance to be carried and maintained with respect to the activities to be undertaken in connection with the use of the Project. Such public .liability insurance.in connection with the Project shall be in an amount not less than the amounts for which the Town may be held liable as provided in the Colorado Governmental Immunity Act, Article 10 of Title 24, Colorado Revised Statutes, as the same may be hereafter amended. The public liability, insurance required by the Lease maybe by blanket insurance policy or policies. If the Town shall insure against similar risks by self - insurance, the Town, at its election, with consent of the Certificate Insurer, may provide for public liability insurance in connection with the Project partially or wholly by means of an adequate self - insurance fund. Any casualty and property damage insurance policy required by the Lease shall be so written or endorsed, as to make payments under such insurance policy of $2,500 or less payable to the Town, and payments under such insurance policy over $2,500 payable to the Trustee, who, along with the Town and the Authority, shall be a co- insured. Each insurance policy provided for in the Lease shall contain a provision to the effect that the insurance company shall not cancel the policy or modify it materially and adversely to the interest of the Trustee or the Participants, without first giving written notice thereof to the. Town and the Trustee at least 30 days in advance of such cancellation or modification. All insurance policies issued pursuant to the Lease, or certificates with respect thereto, shall be deposited with the Trustee. No agent or employee of the Town shall have the power to adjust or settle any loss with respect to the Project, whether or not covered by insurance, without the prior written consent of the Trustee. The consent of the Authority shall not be required for-any such adjustment or settlement. Damage, Destruction or Condemnation If, during the Lease Term (i) the Project shall be destroyed (in whole or in part), or damaged by fire or other casualty; or (ii) title to, or the temporary or permanent use of, the Project or any portion thereof or the estate of the Town, the Authority or.the, Trustee in the Project or any portion thereof shall be taken under the exercise of the.-power of eminent domain by any governmental authority; or (iii) a material defect in construction of the Project_ shall become apparent; or,(iv) title.to or the use of all or any, portion of the. Project shall,be lost by reason of a defect in title; then the Town shall continue;to be obligated; subject to the provisions of the Lease, to continue to pay the amounts specified in the Lease regardless of whether the certificate provided for in the Lease shall have been delivered to the Trustee. B -13 . Subject to the provisions of the Lease, the Town and the Trustee shall cause the Net Proceeds of any insurance policies, performance bonds, condemnation awards or Net Proceeds received as a consequence of a default under a Construction Contract or made available by reason of any occurrence described in the Lease to be deposited in the Construction Fund, if received before the Completion Date, or, if received thereafter, to be deposited in a separate trust fund held by the Trustee. Except as set forth in the Lease, all Net Proceeds so deposited shall be applied to the prompt repair, restoration, modification, improvement or replacement of the Project upon receipt of requisitions acceptable to the Trustee signed by the Town Representative and; if drawn from the Construction Fund, the Project Manager, stating with respect to each payment to be made: (i) the requisition number, (ii) the name and address of the person, firm or corporation to whom payment is due; (iii) the amount to be paid; (iv) if requested by the Trustee, a statement that every general contractor has filed with the Town.'receipts or waivers of liens by subcontractors for all amounts theretofore certified for payment for work, materials and equipment fiunished by such subcontractor, and (v) that each obligation mentioned therein has been properly incurred, is a proper charge against the Construction Fund or the separate trust fund and has not been the basis -of any previous withdrawal and specifying in reasonable detail the nature of the obligation, accompanied by a bill or a statement of account for such obligation. Upon request of the Trustee, the Town .will furnish the receipts or waivers of liens specified in clause (iv) above. In carrying out any of the provisions of this Section, the Town shall have all power and authority granted under the Lease. The Trustee shall cooperate with the Town in the administration of such fund and shall not unreasonably withhold its approval of requisitions under this, Section. The balance of any such Net Proceeds remaining after such repair, restoration, modification, improvement or replacement has been completed shall, if received prior to the Completion Date, be deposited into the Construction Fund and, if received thereafter, shall be deposited into the Extraordinary Redemption Fund. Any repair, restoration, modification, improvement or replacement paid for in whole or in part out of such Net Proceeds shall be the property of the Authority, subject to this Lease and the Indenture, and shall be included as part of the Project under the Lease and the Indenture. If the Net Proceeds shall be insufficient to pay in full the cost of any repair, restoration, modification,- improvement or replacement of the Project as required under the Lease, the Town may elect to proceed under any of the following options: (a) The Town may complete the work and pay any cost in excess of the amount of the Net Proceeds, and the Town agrees that, if by reason of any such insufficiency of the Net Proceeds, the Town shall make any payments pursuant to the provisions of this subsection, the Town shall not be entitled to any reimbursement therefor from the Authority, the Trustee or -the Participants, nor shall the Town be entitled to any diminution of the Base Rentals and Additional Rentals payable under the Lease. (b) The obligation of the Town to repair or replace the Project under the Lease may, at the option of the Town, be discharged by depositing the Net Proceeds of insurance policies, performance bonds or condemnation awards, or Net Proceeds received - as a consequence of default under a Construction Contract made available by reason of such occurrence into the Extraordinary Redemption Fund to be used to redeem Certificates as provided in the - Indenture. Upon such deposit: (i) the Lease shall terminate and all obligations of the Town thereunder shall terminate (except the obligation to pay Base Rentals B -14 and Additional Rentals which would otherwise have been payable by the Town thereunder during the Original or Renewal Term in which such deposit of Net Proceeds occurs); and (ii) the Trustee shall notify the Town to vacate the Project (leaving the Equipment) within 30 days of such deposit; the Project shall thereafter be foreclosed on and subleased or -sold or assigned as provided in the -Indenture; and the Net Proceeds of such foreclosure and leasing and subleasing or sale and assignment, together with any moneys remaining in the Construction Fund, shall also be deposited into the Extraordinary Redemption Fund for the purpose of redeeming Certificates as provided in the Indenture. (c) ' The obligation of the Town to repair or replace the Project under the Lease may, at the option of the Town, be discharged by applying the Net Proceeds of such insurance policies, performance bonds or condemnation awards to the payment of the Purchase Option Price in, accordance with the Lease. In the event of an insufficiency of the Net Proceeds for such purpose, the Town shall pay such amounts as may be necessary to equal the Purchase Option Price and in the event the Net Proceeds shall exceed the Purchase Option Price, such excess shall be paid to or retained by the Town. Within 90 days of the occurrence of an event specified in the Lease, the Town shall commence the repair, restoration, modification, improvement or replacement of the Project, or shall elect, by written notice to the Trustee, to proceed under the provisions of subsection (b) or (c) of this Section. In the event that the Town shall, after commencing the repair, restoration, modification, improvement or replacement of the Project, determine that the Net Proceeds shall be insufficient for the accomplishment thereof, the Town may elect to proceed under the Lease. Conveyance of the Project The Authority shall transfer and convey to the Town the Project (or, in the case of subsection (c) below, any portion of the Project to which the Authority may then hold title), in the manner provided for in the Lease; provided, however, that prior to such transfer and conveyance: (a) The Town shall have paid the then applicable Purchase Option Price and the Indenture shall have been discharged as provided in the Indenture; or (b) The Town shall have paid all Base-Rentals set forth in Exhibit B to the Lease for the Original Term and all Renewal Terms, including the final Renewal Term, and all then current Additional Rentals required under the Lease; or (c) The Indenture shall have been discharged as provided in the Indenture. The Town is granted the option in the Lease to terminate the Lease Term and to purchase the Project upon payment by the Town of the then applicable Purchase Option Price and discharge of the Indenture as provided in the Indenture. In order to exercise this option, the Town shall give written notice to the Trustee of its intention to purchase the Project, specifying a closing date for such purchase which shall be no less than fifteen days after the giving of such written notice (provided, however, that no such notice shall be required for conveyance pursuant to (b) above). At the Town's option, amounts then on deposit in any fund (except the Rebate Fund' and defeasance B -15 escrows pursuant to the Indenture) held under the Indenture may be credited toward the Purchase Option Price. . - Assignment of the Lease and Subleasing of the Project The rights of the Authority under the Lease, including rights to receive and enforce payments thereunder (except certain ri ghts of the Authority set forth in the Lease), have been assigned to the Trustee pursuant to the Indenture. In the event -of any bankruptcy, insolvency, or other similar proceeding as to the Authority, or in any other event which in the judgment of the Trustee materially impairs the ability of the Authority to serve as-lessor under the Lease or as grantor under the Indenture, the Trustee may replace the Authority with such other entity as it deems appropriate. In any such event the Authority shall cooperate with the Trustee in conveying title to the Project and any and all other right, title and interest of Authority in, to and under the Lease, the Ground Lease, the Indenture, the Access Agreement, and any sublease to such successor entity as the Trustee may designate. Any costs or expenses incurred by or charged to the Authority at the request of the Trustee and in the course of cooperating with the Trustee pursuant to the provisions of the Lease shall be paid by the Town. The Lease may not be assigned by the Town for any reason. However, the Project may be subleased, as a whole or in part, by the Town without the necessity of obtaining the consent of.the Authority, the Trustee, the Certificate Insurer, or any Participants subject, however, to each of the following conditions: (a) The Project may be subleased, in whole or in part to another entity or entities if, in the opinion of nationally recognized bond counsel acceptable to the Trustee; such sublease will not cause the Town to violate its covenants in the Lease; (b) The Lease and the obligations of the Town thereunder shall at all times during the Original and any Renewal Terms remain obligations of the Town, and the Town shall maintain its direct relationships with the Authority and the Trustee,- notwithstanding any sublease; (c) The Town shall furnish or cause to be furnished to the Authority and the Trustee a copy of any sublease agreement; (d) No sublease by the Town shall cause the Project to be used for any purpose which would cause the Town to violate its covenants in the Lease or to violate the Constitution, statutes or laws of the State or the Charter; and (e) Any sublease shall provide: (i) the sublease is subordinate to the Lease, the Ground Lease and the Indenture; . (ii) if a Termination Event occurs, the sublessee shall pay to the Trustee all rents payable under the sublease and that the sublease is assigned to the Trustee; (iii) that so long as the sublessee is in compliance with the terms of the sublease, the Trustee shall not disturb the sublessee's use of the portion of the Project rented to the sublessee. Events of Default and Remedies Any one of the following shall be "Events of.Default" under the Lease: (a) Failure by the Town to pay any Base Rentals or Additional Rentals when due during the Lease Term; or (b) Failure by the Town to vacate the Project (leaving the Equipment) by the expiration of the Original or Renewed Term during which an Event of Nonappropriation occurs; or (c) Failure by the Town to observe ,and perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in (a) or (b), for a period of 30 days after written notice, specifying such failure and requesting that it be remedied shall be =given to the Town by the Trustee or the Certificate Insurer, unless the Trustee or the Certificate Insurer shall agree in writing to an extension of such time prior to its expiration; provided, however-, that if the failure stated in the notice cannot be corrected within the applicable period, the Trustee or the Certificate Insurer shall not withhold its consent to an extension of such time if corrective action shall be instituted by the Town within the applicable period and diligently pursued until the default is corrected; or (d) Failure by the Town to afford the Authority quiet use and enjoyment of the Site pursuant to the Ground Lease. The foregoing provisions are subject to the following limitations: (i) the Town shall be obligated to'pay the Base Rentals and Additional Rentals only during the Lease Term; except as otherwise expressly provided in the Lease; and (ii) if, by reason of Force Majeure, the Town shall be unable in whole or-in part to carry out any agreement on its part in the Lease, other than the obligations on the part of the Town contained in Article VI of the Lease, the Town shall not be deemed in default during the continuance of such inability. The Town agrees, however, to remedy, as promptly as legally and reasonably possible, the cause or causes preventing the Town from carrying out its agreement; provided that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of the Town. Whenever any Event of Default referred to in the Lease shall have happened and is continuing, the Trustee may, with the consent of the Certificate Insurer or, shall at.the direction of the Certificate Insurer, or, if the Certificate Insurer shall be in default in its payments under the Policy, shall at the request of the owners of a majority in aggregate principal, amount of the Certificates then Outstanding and upon indemnification as to costs and expenses as provided in the Indenture, terminate the Lease Term and may give notice to the Town to vacate the Project (leaving the Equipment) within 15 days from the date of such notice. After the occurrence of an Event of Default the Trustee may, without any further demand or notice, foreclose through the courts on the Project, and exercise all the rights and remedies of a secured party under the Colorado Uniform B -17 Commercial Code with respect to the Equipment, and take one or any combination of the following additional remedial steps: (a) The Trustee may lease the Project and sublease the Site or any portion thereof to the highest responsible bidder, for the benefit of the Participants, or sell the Project and assign its interest in the Ground Lease. Any such lease and sublease or sale and assignment shall be conditioned; however, on an agreement by, the lessee /sublessee or assignee to use the Site and the Project in a manner permitted under applicable zoning restrictions and compatible with, other uses in the area immediately surrounding the Site. (b) The Trustee may recover from the Town: (i) . the portion of Base Rentals and Additional Rentals which would otherwise have been payable under the Lease, allocable to any period in which the Town continues to occupy the Project; and (ii) - Base Rentals and duly budgeted and appropriated-Additional Rentals which would otherwise have been payable by the Town under the Lease during the remainder, after the Town vacates the Project, of the Original or Renewal Term in which such Event of Default occurs; provided, however, that if the Trustee does not proceed to foreclose and sell the Project and assign its interest in the Ground Lease reasonably promptly after such Event of Default, the Trustee shall be obligated to the Town to use its best efforts to lease and sublease the -Project and the Site for the remainder of such Original or Renewal Term, as provided in subsection (a) of this Section, and the Net Proceeds of such leasing and subleasing shall be offset against the amount recoverable from the Town under this paragraph. (c) The Trustee may take whatever action -at. law or in equity may appear necessary , or. desirable to enforce its right in and to the Project under the Lease, the Ground Lease and the Indenture, including without limitation, the right of the Certificate Insurer to direct, or consent to the exercise of, such remedies under certain circumstances. Notwithstanding any other provision hereof, before exercising any remedy provided in paragraph (a), above, the Trustee shall offer to lease the Project and sublease the Site to the Districts upon - substantially the same terms and conditions as set forth herein, including, but not limited to, the schedule of Base Rentals attached to the Lease as Exhibit B'. Upon the occurrence of an Event of Default, the Trustee shall give the Districts written notice thereof. If neither Beaver Creek Metropolitan 'District nor Smith Creek Metropolitan District, or their successors executes and delivers a lease purchase agreement in substantially the same form as the Lease acceptable to the Trustee within sixty days after occurrence of an Event of Default, the Trustee may then proceed to pursue any remedy in paragraphs (a), (b) or (c) above. B -18 Amendments, Changes and Modifications Except as otherwise provided in the Lease or the Indenture, subsequent to the issuance of the Certificates and prior to the discharge of the Indenture, the Lease may not be effectively amended, changed, modified or altered without the written consent of the Trustee and, in certain instances, the Certificate Insurer, as provided in the Indenture. Tag Covenants The Town covenants for the benefit of the Participants that it will not take any action or omit to take any action with respect to the 1998 Certificates, the proceeds thereof, any other funds of the Town or any facilities financed with the proceeds of the 1998 Certificates (except for the possible exercise of the Town's right to terminate this Lease as provided in Section 6.6 hereof) if such action or omission (i) would cause the interest on the 1998 Certificates to lose its exclusion from gross income for federal income tax purposes under Section 103 of the Code, or (ii) would cause interest on the 1998 Certificates to lose its exclusion from alternative minimum taxable income as defined in Section 55(b)(2) of the Code except to the extent such interest is required to be included in the adjusted current earnings adjustment applicable to corporations under Section 56 of the Code in calculating corporate alternative minimum taxable income,--or (iii) would cause interest on the 1998 Certificates to lose its exclusion from Colorado taxable income or Colorado alternative minimum taxable income under present Colorado law. Subject to the Town's right to terminate the Lease as provided in the Lease, the foregoing covenant shall remain in full force and effect, notwithstanding the payment in full or defeasance of the 1998 Certificates, until the date on which all obligations of the Town in fulfilling the above covenant under the Code and Colorado law have been met. The Town further covenants that its direction of investments pursuant to the Indenture shall be in compliance with the Federal Tax Exemption Certificate and that the procedures set forth in the Federal Tax Exemption Certificate implementing the above covenant shall be complied with; to the extent necessary to maintain the above - described exclusions and, to the extent required by the,, Federal Tax Exemption Certificate, the investment earnings on any moneys held by the Trustee under the Indenture (except defeasance escrows pursuant to the Indenture) shall be deposited from time to time in the Rebate Fund for timely payment of all amounts due and owing to the United States Treasury. The Town acknowledges and consents to the directions to, the Trustee regarding transfer of investment income in the Indenture. The Town agrees that, to the extent necessary, it will during the Lease Tenn pay to the Trustee, at the Trustee's request, such sums as are required for the Trustee to pay the amounts due and owing to the United States Treasury as rebate payments. Any payment of Town moneys pursuant to the foregoing sentence shall be Additional Rentals for all purposes of the Lease. THE INDENTURE The following is a summary of certain provisions of the Indenture. Reference is hereby made to the actual Indenture for a complete recital of its terms. See "INTRODUCTION- - Additional Information. r "' Payment of the 1998 Certificates - The principal amount of, premium, if any, and interest on the .1998 Certificates are payable solely from the Revenues as provided in the Lease and.the Indenture; and the. Revenues, when; as and if received by the Trustee, are to be held.in trust for the payment of the principal of, premium, if any, and interest on the 1998 Certificates. For a definition of "Revenues," see "DEFINITIONS." Funds and Accounts The Indenture provides for the creation and establishment of the various funds and accounts as described in the following paragraphs. Except as otherwise provided in the Lease and the Indenture, the Trustee will hold all funds and accounts in trust for the benefit of the Participants. The Certificate Fund - The Certificate Fund will consist of the Interest Account and the Principal Account. The Trustee is required to withdraw funds from the Certificate Fund to pay the principal of and interest on the 1998 Certificates as the same become due and payable. There shall be .deposited: into the Interest Account of the Certificate Fund (i) all accrued interest, if any, received at the time of the original issuance, sale and delivery of the 1998 Certificates; (ii) that portion of each payment of Base Rentals made by the Town which is designated and paid as interest under the Lease; (iii) any moneys transferred to the Interest Account of the Certificate Fund from the Reserve Fund or the Construction Fund pursuant to the Lease; and (iv) all other moneys received by the Trustee under the Indenture to be used for the purpose or paying interest on the Certificates. There shall be deposited into the Principal Account of the Certificate Fund (i) that portion of each payment of Base Rentals made by the Town which is designated and paid as principal under the Lease; (ii) any moneys transferred to the Principal Account of the Certificate Fund from the Reserve Fund or the Construction Fund pursuant to the Lease; and (iii) all other moneys received by the Trustee under the Indenture to be used for the purpose of paying the principal of the Certificates. The Construction Fund - There shall be deposited into the Construction Fund sale proceeds of the Certificates in the amount of $ , in addition to all amounts specified in a supplemental indenture entered into in connection with the issuance of a series of Additional Certificates to finance the Project. Any moneys held as part of the Construction Fund shall be invested and reinvested by the Trustee in accordance with the Indenture, -and the income therefrom shall be retained in the Construction Fund and used to pay Costs of Construction, except to the extent necessary to be deposited to the Rebate Fund. Moneys held in the Construction Fund shall be disbursed in accordance with the provisions of the Lease, which generally require the Town to submit a requisition to the Trustee prior to the disbursement of funds. The Trustee shall keep and maintain adequate records pertaining to the Construction Fund and all disbursements therefrom as reasonably directed by the Town. After the Project has been completed and the certificate completed and received as required by the Lease, and after any amounts in the Construction Fund are deposited UN to the Certificate Fund or Extraordinary Redemption Fund as provided in the Indenture, the Trustee shall file an accounting thereof with the Town. The Special Construction Fund - Upon direction of the Town, there shall be created and established with the Trustee the' Special Construction Fuiid1 pursuant to the Lease. Amounts deposited therein by the Town shall be expended solely for the purchase of moveable personal property for use in or on the Project or for the purpose of paying-any other expense related to the leasehold estate of the Town, which in the opinion of nationally recognized municipal bond counsel, shall not adversely affect the validity and enforceability of the Lease. The Reserve Fund - There shall be deposited into the Reserve Fund the amount of the initial Reserve Fund Requirement from the proceeds of the sale of the 1998 Certificates, and any other moneys paid by the Town pursuant to the Indenture. The income derived' from the investment of the Reserve Fund shall be deposited when received: (i) to the Reserve Fund until the amount on deposit equals the Reserve Fund Requirement and (ii) any remaining income derived from the investment of the Reserve Fund will be deposited in the Certificate Fund. Moneys held in the Reserve Fund, excluding income from the investment thereof applied pursuant to clause (ii) of the preceding paragraph, shall be applied to any of the following purposes: 1. To the payment of the principal amount of the Certificates and interest thereon, as the same shall become due, to the extent of any deficiency in either the Interest Account or the Principal Account of the Certificate.,. Fund for such purpose and to the payment of any Additional Rentals in the event the Town shall fail to make payment thereof; 2. At the option of the Trustee, subsequent to a Termination Event, to the payment of any cost or expense necessary to preserve or protect the Project or the interest of the Trustee or the Participants therein, or necessary to make any repairs or modifications to the Project in preparation for sale or sub - leasing thereof, as the Trustee may deem to be in the best interests of the Participants; 3. In the event that the Certificates are to be redeemed subsequent to a Termination Event, proportionately to the redemption of the Certificates then Outstanding and the payment of interest thereon; 4. In the event that the Town shall exercise its option to purchase the Project and terminate the Lease upon payment of the Purchase Option Price, to the Town, or, at the option of the Town, as a reduction of such Purchase Option Price; or 5. At the option of the Town, in reduction of the final payment of Base Rentals payable by the Town under the Lease and, to the extent of moneys in the Reserve Fund, the next preceding payment or payments of Base Rentals. B -21 .The Trustee shall notify the Town immediately upon the withdrawal of,amounts on deposit in the Reserve Fund, other than amounts representing investment earnings thereon and applied pursuant to clause (ii) of the paragraph above. Cash or Permitted Investments in the Reserve Fund shall be used for the purposes specified above before , any Qualified Surety Bond therein is so used. The Town may at any time substitute (i) cash or Permitted Investments for a Qualified Surety Bond, (ii) a Qualified Surety Bond for cash or Permitted Investments, or (iii) a Qualified Surety Bond for another Qualified Surety Bond so long as the amount on deposit in the Reserve Fund -after any such substitution is at least equal to the Reserve Fund Requirement. Notwithstanding the foregoing, no Qualified Surety Bond shall be accepted by the Trustee for substitution for cash or Permitted Investments unless the Trustee has received an opinion of nationally recognized municipal bond counsel acceptable to the Trustee to the effect that such substitution, and the intended use by the Town of the cash or Permitted Investments to be released from the Reserve Fund will not adversely affect the exclusion from gross income' for federal income tax purposes of interest on the Certificates: For the purposes of determining the amount on deposit in the Reserve Fund, a Qualified Surety Bond shall be valued at the amount available to be drawn thereunder. To the extent that Reserve Fund moneys are applied pursuant to paragraph (1) or (2) above, the Town has agreed to pay to the Trustee for deposit in the Reserve Fund as Additional Rentals such amounts as are required to restore the amount on deposit in the Reserve Fund to the Reserve Fund Requirement by the first day of the fourth month of the Fiscal Year following such withdrawal of moneys from the Reserve Fund. The Town has further agreed that,failure to budget and appropriate moneys for such payment by_ the last day of the Fiscal Year during which such withdrawal occurs shall constitute an Event of Nonappropriation. The Extraordinary Revenue Fund - The Indenture requires all Extraordinary Revenues to be deposited into the Extraordinary Revenue Fund and to be applied to the redemption of the 1998 Certificates as provided in the Indenture on the first Business day for which notice of redemption may be given. Any income from investment of moneys in the Extraordinary Redemption Fund is deposited into the Certificate Fund. The Rebate Fund - Notwithstanding anything in the Indenture to the contrary, there shall be deposited into the Rebate Fund investment. income, on moneys in any fund created thereunder (except defeasance escrows) to the extent necessary to comply with the provisions of the Federal Tax Exemption Certificate. In order to ensure that the moneys on deposit in the Rebate Fund will be sufficient to fulfill the Town's rebate obligation even if the Lease has been terminated, the Trustee agrees that immediately upon crediting any investment income to any fund created thereunder (except defeasance escrows), it shall request the Town to determine the difference, if any, between the yield on the investment and the yield on the Certificates (as determined pursuant to the Federal Tax Exemption Certificate) and the Trustee,, upon being informed of such difference, shall transfer such amount, if any, to the Rebate Fund. The transfer referred to in the foregoing sentence shall take place before any investment income is used for any other purpose under the Indenture or the Lease. In addition to the deposit of investment income as provided herein, there shall be deposited into the Rebate Fund moneys received from the Town as Additional Rentals for rebate payments pursuant to the Lease; moneys transferred to the Rebate Fund from any other fund created B -22 thereunder pursuant to the provisions of the Indenture; and all other moneys received by the Trustee when accompanied by directions not inconsistent with the Lease or the Indenture that such moneys are to be paid into the Rebate Fund. The Trustee shall cause amounts on deposit in the Rebate Fund to be forwarded to the United States Treasury at the address and times provided in the Federal Tax Exemption Certificate, and in the amounts calculated by the Trustee to ensure that the Town's rebate obligations are met. Amounts on deposit in the Rebate Fund shall not be subject to the lien of the Indenture to the extent that such amounts are required to be paid to the United States Treasury. If, at any time the .Trustee shall determine that the moneys on deposit in the Rebate Fund are insufficient for the purposes thereof, and if the Trustee does not receive Additional Rentals or cannot transfer investment income so as to make the amount on deposit in the Rebate Fund sufficient for its purpose, the Trustee may transfer moneys to the Rebate Fund from the following funds in the following order of priority. the Construction Fund, the Reserve Fund, the Issuance Expense Fund, the Principal Account of the Certificate Fund and the. Interest Account of the Certificate Fund., Any moneys so advanced shall be included in the Town's estimates of Additional Rentals for the ensuing Fiscal Year pursuant to the Lease and shall be repaid to the fund from which advanced upon payment to the Trustee of such Additional Rentals. Upon receipt by the Trustee of an opinion of nationally recognized bond counsel acceptable to the Trustee to the effect that the amount- in the Rebate Fund is in excess of the amount required to be therein pursuant to the provisions of the Federal Tax Exemption Certificate, such excess shall be transferred to the Interest Account of the Certificate Fund. Notwithstanding the foregoing, in the event that the Lease has been terminated or the Town has failed to comply with the Lease so as to make the amount on deposit in the Rebate Fund sufficient for its purpose, the Trustee shall make transfers of investment income or of moneys from the above - described funds in such combination as the Trustee shall determine to be in -the -best interests of the Certificate Owners. Nonpresentment of 1998 Certificates In the event any Certificate shall not be presented for payment when due, if funds sufficient to pay such Certificate shall have been made available to the Trustee for the benefit of the owner thereof, it shall be the duty of the Trustee to hold such funds without liability for interest thereon, for the benefit of the owner of such Certificate, who shall be restricted exclusively.to such funds for any claim of whatever nature on his part under the Lease or the Indenture or on or with respect to such Certificate. Amounts Remaining in the Funds After payment in full of the 1998 Certificates, any premium thereon, interest thereon, the fees, charges and expenses of the Trustee and the Authority and all other amounts required to be paid under the Lease or the Indenture, any amounts remaining in the Certificate Fund, the Construction Fund, the Reserve Fund, the Issuance Expense Fund; the Extraordinary Redemption Fund, or otherwise held by the Trustee pursuant to the Indenture (except the Rebate Fund), are to be paid to the Town as a return of an overpayment of Base Rentals. N&A] Investment of Moneys All moneys held as part of the Certificate Fund, the Construction Fund, the Issuance Expense Fund, the Reserve Fund, the Extraordinary Redemption Fund, the Rebate Fund or any other fund or account created under the Indenture or under the Lease shall be deposited or invested- and reinvested by the Trustee, at the written direction of the Town, in Permitted Investments; provided, however, that notwithstanding anything to the contrary contained in the Indenture (i) the Trustee shall make no deposits or investments of any fund or account created under the Indenture which shall interfere with or prevent withdrawals for payment of the Cost of Construction or for payment of the Certificates at or before maturity or interest thereon as required thereunder, and (ii) the Reserve Fund shall be invested solely in Federal Securities. The Trustee may make any and all such deposits or investments through its own investment department or the investment department of any bank or trust company under common control with the Trustee. The Trustee is specifically authorized to enter into agreements with itself or any other Person, which agreements guarantee the repurchase of specific Permitted Investments at specific prices and provided that such Permitted Investments are held by a third party during the term thereof. Income from deposits or investments of moneys in the Reserve Fund shall be deposited in the Certificate Fund under certain circumstances as provided in Section 3.08 of this Indenture; income from deposits or investments of moneys in the Extraordinary Redemption Fund shall be deposited into the Certificate Fund as provided in the Indenture;, otherwise, deposits or investments shall at all times be a part of the fund or account from which the moneys used to acquire such deposits or investments shall have come, and all income and ,profits on such deposits or investments shall be credited to, and losses thereon shall be charged against, such fund or account. Any interest or other gain from any fund created under the Indenture (except defeasance escrows pursuant to the Indenture). shall be deposited to the Rebate Fund to the extent required pursuant to the Indenture. In any computation of the amount in any fund or account held under the provisions of the Indenture, obligations purchased as a deposit or investment of moneys therein shall be valued at the cost or market price thereof, whichever is lower, exclusive of accrued interest. - The Trustee shall sell and reduce to cash a sufficient amount of such deposits or investments whenever the cash balance in any fund or account created under the Indenture is insufficient to satisfy the purposes of such fund or account, to the extent that such purposes require a current cash disbursement. In the Indenture, the Trustee agrees to secure and retain the documentation with respect to investments of moneys in the funds created under the Indenture as required by and as described in the Federal Tax Exemption Certificate. Discharge of the Indenture If, when the Certificates secured by the Indenture become due and payable in accordance with their terms or otherwise as in the Indenture, the whole amount of the principal of, premium, if any, and interest due and payable upon all of the Certificates shall -be paid (or, in the case of redemption of the Certificates pursuant to the Indenture, if full or partial payment of the Certificates and interest thereon is made as provided in the Indenture), or provision shall have been made for the payment of the same, together with all other sums payable thereunder, then the right, title and interest of the Trustee in and to the Trust Estate and all covenants, agreements and other obligations of the Authority and the Town to the Trustee and the Participants shall thereupon B -24 cease, terminate and become void and be discharged and satisfied. In such event, upon the request of the Town, the Trustee and the Authority shall transfer and convey to the Town all property assigned, pledged or mortgaged to the Trustee by the Authority then held by the Authority or by the Trustee pursuant to the Indenture, and the Authority and the Trustee shall execute such documents as may be reasonably required by the'Town and shall turn over to the Town any surplus in any fund created under this Indenture except the Rebate Fund. Any Outstanding Certificate shall, prior to the maturity or redemption date thereof, be deemed to have been paid within the meaning and with the effect expressed in this section if (i) in case said Certificate is to be redeemed on any date prior to its maturity, the Town shall have given to the Trustee irrevocable instructions, in form and substance satisfactory to the Trustee, to give, on a date in accordance with the provisions of the Indenture, notice of redemption of such Certificate on said redemption date, such notice to be given in accordance with the provisions of the Indenture, (ii) there shall have been deposited in trust either moneys in an amount-which shall be sufficient, or Federal Securities which shall not contain provisions permitting the redemption thereof at the option of the issuer, the principal of, and the interest on which when due, and without a reinvestment thereof, will provide moneys which, together with the moneys, if any, deposited with or held in trust at the same time, shall be sufficient to pay when due the principal of, premium, if any, and interest due and to become due on said Certificate on and prior to the redemption date or maturity date thereof, as the case may be, and (iii) in the event said Certificate is not by its terms subject,to redemption within the next 60 days; the Town shall have given the Trustee irrevocable instructions, in form and substance satisfactory to the Trustee, to give, as soon as practicable in the same manner as the notice of redemption is given pursuant to the Indenture, a notice to the registered owners of such Certificate that the deposit required by (ii) above has been,,made with the Trustee and that said Certificate is deemed to have been paid in accordance with this section and stating such maturity or redemption date upon which moneys are to be available for.the payment of the principal of, premium, if any, and interest on said Certificate. Neither the Federal Securities nor moneys deposited with the Trustee pursuant to this section or principal or, interest payments on any such Federal Securities shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of, premium, if any, and interest on said Certificate; provided any cash received from such principal or interest payments on such Federal Securities deposited in trust, if not then needed for such purpose, shall, to the extent practicable, be reinvested in Federal Securities of the type described in clause (ii) of the first sentence of this paragraph maturing at the times and in amounts sufficient to' pay when due the principal of, premium, if any, and interest to become due on said Certificate on or prior to such redemption date or maturity date thereof,.as the case may be. At such time as any Certificate shall be deemed paid as aforesaid, such Certificate shall no longer be secured by or entitled to the benefits of the Indenture, the Lease and the Ground Lease, except for the purpose of exchange and .transfer and any payment from such :moneys or Federal Securities deposited with the Trustee. The release of the obligations of the Authority under this section shall be without prejudice, to the rights of the Trustee to be paid reasonable compensation for all services rend_ ered by it thereunder and all -its reasonable expenses, charges and'other disbursements incurred with respect to the administration of the trust hereby created and the performance of its powers and duties thereunder. B -25 In the event that there is a defeasance of only part of the Certificates of any maturity, the ,Trustee shall, if requested by the Town, institute a system to preserve the identity of the individual Certificates or portions thereof so defeased, regardless of changes in Certificate numbers attributable to transfers and exchanges of Certificates; and the Trustee shall be entitled to reasonable compensation and reimbursement of expenses from the Town in connection with such system as Additional Rentals under the Lease. In the event that the principal and/or interest with respect to the Certificates is paid by the Certificate Insurer pursuant to the Policy, the assignment and pledge of the Trust Estate and all covenants, agreements and other obligations of the Town and the Trustee to the Certificate Owners shall continue to exist, such Certificates shall be deemed to be Outstanding and ' ,the Certificate Insurer shall be fully subrogated to the rights of such Certificate Owners. Events of Default and Remedies Under the Indenture If any of the following events occur it is hereby defined as and shall be deemed an "Event of Default" under the Indenture: (a) Default in the due and punctual payment of interest on any Certificate or in the due and punctual payment of the principal of or premium, if any, on any Certificate; whether at the stated maturity thereof, or upon proceedings for redemption thereof, or upon acceleration thereof or otherwise; . (b) The occurrence of a Termination Event; or (c) The occurrence of an Event of Default as provided in the Lease. Upon the occurrence of an Event of Default, the Trustee shall immediately give notice of such occurrence to the Certif cate Insurer. Upon the occurrence of an Event of Default, the Trustee. may, with the consent of the Certificate Insurer or, shall at the direction of the Certificate Insurer, or, if the Certificate Insurer shall-be in default in its payments under the Policy, shall at the request of the owners of a majority in aggregate principal amount of the Certificates then Outstanding terminate the Lease Term, shall become entitled to possession of the Project, and shall give notice to the Town to vacate the Project (leaving the Equipment) as provided in the Lease, and shall exercise the rights'and remedies of a secured party under the Colorado Uniform Commercial Code with respect to the Equipment; and the Trustee may, or as provided in the Indenture, shall, without any further demand or notice, take one or any combination of the following additional remedial steps: (a) The Trustee may lease the Project and sublease the Site or any portion thereof, to the highest responsible bidder, or sell the Project and assign its interest in the Ground Lease, all for the benefit of the Participants: Any such, lease and sublease or sale and assignment shall be conditioned, however, on an agreement 'by the lessee /sublessee or assignee to use the Site and the Project in a manner permitted by 10-M applicable zoning restrictions and compatible with other uses in the area immediately surrounding the Site. (b) The Trustee, on behalf of the Authority, may recover from the Town: (i) The portion of Base Rentals and Additional Rentals which would otherwise have been payable under the Lease allocable to any period in which the Town continues to occupy the Project; and (ii) Base Rentals and any duly budgeted . and appropriated Additional Rentals which would otherwise have been payable by the Town under the Lease during the remainder, after the Town vacates the Project, of the Original or Renewal Term in which such Event of Default .occurs; provided, however, that if the Trustee does not proceed to sell the Project and assign its interest in the Ground Lease reasonably promptly after such Event of Default, the Trustee shall be obligated to the Town to use its best efforts to lease and sublease the Project and the Site for the remainder of such Original or Renewal Term, as provided in paragraph (a) above, and the Net Proceeds of such leasing and subleasing shall be offset against the amount recoverable from the Town under this paragraph (ii). (c) The Trustee may take whatever action at law or inequity may appear necessary or desirable to enforce its rights in and to the Project under the Lease and the Indenture. Notwithstanding any other provision hereof, before exercising any remedy provided in paragraph (a), above, the Trustee shall offer to lease the Project and sublease the Site to the Districts upon substantially the same terms and conditions as set forth in the Lease, including, but not limited to, the schedule of Base Rentals attached thereto as Exhibit B. Upon the occurrence of an Event of Default, the-Trustee shall give the Districts written notice thereof. If neither Beaver Creek Metropolitan District nor Smith Creek Metropolitan District executes and delivers a lease purchase agreement in substantially the same form as the Lease acceptable to the Trustee within sixty days after occurrence of an Event of Default, the Trustee may then proceed to pursue any remedy in paragraphs (a), (b) or (c) above. Except as provided above, no right or remedy is intended to be exclusive of any other rights or remedies, but each and every such right or remedy shall be cumulative and in addition to any other remedy given under the Indenture or now or hereafter existing at law or in equity or by statute. However, notwithstanding any other provision of the Lease or this Indenture, any and all remedies against the Town under the Lease or the Indenture shall be limited as provided in the Lease. If any Event of Default shall have occurred and if requested by the Certificate Insurer or, if the Certificate Insurer shall be in default in its payments under the Policy, if requested by the registered owners of a majority in, aggregate principal amount of Certificates then Outstanding and indemnified as provided in the Indenture, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by this section as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Participants. Anything in the Indenture to the contrary notwithstanding, the Certificate Insurer or, if the Certificate Insurer shall be in default in its payments under the Policy, the registered owners of a majority in aggregate principal amount of the Certificates then Outstanding shall have the right at any time, to the extent permitted by law, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the time, method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of this Indenture, or for the appointment of a receiver, and any other proceedings thereunder; provided that such direction shall not be otherwise than in accordance with the Indenture. The Trustee shall not be required to act on any direction given to it until the indemnity described in the Indenture is furnished to it by such Participants. No Participant shall have any right to institute any suit, action or proceeding in equity or at law for the enforcement of the Indenture or for the execution of any trust under the Indenture or for the appointment of a receiver or any other remedy thereunder, unless (i) a default has occurred of which the Trustee has been notified as provided in the Indenture; (ii) such default shall have become an Event of Default as defined in the Indenture; (iii) the registered owners of not less than a majority in aggregate principal amount of Certificates then Outstanding shall have made written request to the Trustee and shall have offered reasonable opportunity either to proceed to exercise the powers hereinbefore granted or to, institute such action, suit or proceedings in its own name; (iv) such registered owners of the Certificates shall have offered to the Trustee indemnity as provided in the Indenture; and (v) the Trustee shall thereafter fail or refuse to exercise the powers hereinbefore granted, or to institute such action, suit or proceeding in its own name; and either the Certificate Insurer shall have consented thereto or the Certificate Insurer shall -be: in default in its payments under the Policy. The foregoing conditions are hereby declared in every case to be conditions precedent to the execution of the powers and trusts of the Indenture, and to any action or cause of action for the enforcement of the Indenture, or for the appointment of a receiver or for any other remedy thereunder, it being understood and-intended that no one or more Participants shall have any right in any manner whatsoever to affect, disturb or prejudice the lien of this Indenture_by any action or to enforce any right thereunder except in the manner herein provided and that all proceedings at law or in equity shall be instituted, had and maintained in the manner herein provided and for the equal benefit of the registered owners of all Certificates then Outstanding. Nothing contained in the Indenture shall, however, affect or impair the right of any Participant to enforce the payment of the principal of, premium, if any, and interest on any Certificate at and after the maturity thereof. Subject to the right of the Districts to lease the Project and sublease the Site as provided in the Indenture, upon the-occurrence of an Event of Default under the Indenture, the lien on the Project created and vested in the Trustee thereunder may be foreclosed either by sale at public auction or by proceedings in equity. Upon any such sale, any Participant or the Trustee may bid for and purchase the Project and, upon compliance with the terms of sale, may hold, retain and possess and dispose of such property in their, own absolute right without further accountability; and any purchaser at any such sale may, if permitted by law, after allowing for the proportion of the total purchase price required to be paid in cash for the costs and expenses of the sale, compensation and other charges, in paying purchase money, turn in all Certificates then Outstanding in lieu of cash, to B -28 the amount which shall, upon distribution of the Net Proceeds of such sale, be payable thereon. If the Trustee shall acquire title to the Project as a result of any such foreclosure sale, or any proceeding or transaction in lieu of foreclosure, the Trustee shall thereafter lease and sublease the Project and the Site, or sell the Project and an assignment of the Trustee's interest in the Site, as provided in of the Indenture and may take any fiirther lawful action with respect to the Project which it, being advised by counsel, shall deem to be in the best interest of the Participants, including but not limited to the enforcement of all rights and remedies set forth in the Lease and the Indenture and the taking of all other courses of action permitted therein. Certain Provisions'Relating to the'Trustee The Indenture contains provisions that set forth the express terms and conditions regarding the duties and liabilities of the Trustee. During the Lease Term, the Trustee is entitled to receive payment or reimbursement of its reasonable fees and expenses. The Indenture provides that the Trustee may resign and become discharged from its duties under the Indenture, by notice in writing given to the Town, the Certificate Insurer and the Authority not.less than 60 days before the resignation is to take effect. The resignation will take effect only upon the appointment of a successor qualified to act under the Indenture. The present or any future Trustee -may be removed at any time prior to the occurrence of a Termination Event by an instrument in writing executed by the Town, and after a Termination Event, by an instrument(s) in writing executed by the registered owners of a majority in aggregate principal amount of the Certificates then Outstanding and delivered to the Trustee. Every, successor shall always be a bank or trust company in good standing, duly authorized to exercise trust powers and subject to examination by federal or state authority, qualified to act under the Indenture, having a reported capital and surplus of not less than $25,000,000 and approved by the Certificate Insurer. Supplemental Indentures and Amendments of the Lease and the Ground Lease The Trustee and the Authority may, with the written consent of the Town, but without the consent of, or notice to, the Participants or the Certificate Insurer, enter into supplemental indentures or agreements for any one or more or all of the following purposes: (a) To add to the covenants and agreements of the Authority contained in the Indenture other covenants and agreements to be thereafter observed by the Authority; (b) To cure any ambiguity, or to cure, convect or supplement any defect or omission or inconsistent provision contained in the Indenture, including, but not limited to, the grant of any interest in the Site pursuant to the Lease, or to make any provisions with respect to matters arising under this Indenture or for any other purpose if such provisions are necessary or desirable and do not adversely affect the interests of the Participants; (c) To. subject to the Indenture additional revenues, properties or collateral; (d) , In connection with the issuance of Additional Certificates pursuant to the Indenture; or (e) In connection with the substitution of cash or Permitted Investments in the Reserve Fund with a Qualified Surety Bond or the substitution of a Qualified Surety Bond for another Qualified Surety Bond as provided in the Indenture. And further provided that such amendments or supplements to the Indenture shall require notice to and the consent of the Certificate Insurer. Exclusive of supplemental indentures described in the preceding paragraph, the Indenture requires that the written consent of the Town and the Certificate Insurer, or if the Certificate Insurer is in default under the Policy, the consent of the owners of not less than two- thirds in aggregate principal arnount_of the Certificates then Outstanding, or the owners of not less than two - thirds in aggregate principal amount of the Certificates of any series then Outstanding affected thereby, be obtained for any supplemental indenture; except that, without the consent of the owners of all of the Certificates at the time Outstanding, the following will not be permitted: (a) A change in the terms of redemption or maturity of the principal amount of or the interest on any Outstanding Certificate, or a reduction in the principal amount of or premium payable upon any redemption of any Outstanding Certificate or the rate of interest thereon, without the consent ,of the registered owner of such Certificate; (b) The deprivation of the registered owner of any Certificate then Outstanding of the lien created by the Indenture (other than as originally permitted hereby); (c) A privilege or priority of any Certificate or Certificates over any other Certificate or Certificates; or (d) A reduction in the aggregate principal amount of the Certificates required for consent to such supplemental indenture. The Authority and the Trustee may, with the written consent of the Town, but without the consent of or notice to the Participants, consent to any amendment, change or modification of the Lease as may be required (i) by the provisions of the Lease or the Indenture, (ii) for the purpose of,curing any ambiguity or formal defect or omission in the Lease,'(iii) in order to more precisely identify the Project or the Site or to add additional improvements or properties acquired in accordance with the Lease and the-Indenture (including the replacement, substitution or deletion of Equipment pursuant the Lease and the grant of any interest in the Site pursuant to the Lease); (iv) M in connection with the issuance of Additional Certificates, (v) to amend Section 11.8 of the Lease in accordance with its terms; or (vi) in connection with any other change therein which, in the judgment of the Trustee, is not-to the prejudice of the Participants. Miscellaneous Provision Regarding the Certificate Insurer . Any provisions of the Indenture expressly recognizing or granting rights in or to the Certificate Insurer may not be amended in any manner which affects the rights of the Certificate Insurer under the Indenture without the prior written consent of the Certificate Insurer. Absent a default by the Certificate Insurer under the 1998 Policy, the Certificate Insurer's consent shall be required in lieu of the consent of the Certificate Owners, when required, for the following purposes: (i) except as provided in the following sentence, execution and delivery of any supplemental indenture; (ii) removal of the Trustee and selection and appointment of any successor trustee, and (iii) initiation or approval of any action not described in (i) or (ii) above which otherwise requires the consent of the Certificate Owners. Notwithstanding the foregoing, the Certificate Insurer's consent shall be required in addition to, but not in lieu of, the consent of the Certificate Owners for the execution and delivery.of any supplemental indentures for which the consent of 100% of the Certificate Owners is required pursuant to the Indenture. Any reorganization or liquidation plan with respect to the Town must be acceptable to the Certificate Insurer. In the event of any reorganization or liquidation, the Certificate Insurer shall have the right to vote on behalf of all Certificate Owners absent a default by the Certificate Insurer under the 1998 Policy. Anything in, the Indenture to the contrary notwithstanding, absent a default by the Certificate Insurer under the 1998 Policy, upon the occurrence and continuance of an Event of Default under the Indenture, the Certificate Insurer shall be entitled to control and direct the enforcement of all rights and, remedies granted to the Certificate_ Owners or the Trustee for the benefit of the Certificate Owners under the Indenture. THE GROUND LEASE The following is a summary of certain provisions of the Ground Lease. Reference is hereby made to the actual Ground Lease for a -complete recital of its terms. See " INTRODUCTION -- Additional Information." Demise of the Site The Town has demised and leased the Site to the Authority in accordance with the terms and conditions of the Ground Lease and subject only to Permitted Encumbrances. The Town covenants in the Ground Lease to provide the Authority, during the term of the Ground Lease, with quiet use and enjoyment of the Site, except as expressly set forth in the Ground Lease or the Lease, and subject to the Town's rights to peaceful and quiet enjoyment of the Project under the terms of the Lease. Under the Indenture, the Ground Lease is assigned by the Authority to the Trustee for the benefit of the Participants. The Ground Lease Term L The term of the Ground Lease commences as of July 1, 1998, and terminates on the earliest of the following events: (a) a Termination Event as provided in Sections 4.2(b) or 4.2(e) of B -31 the Lease; (b) Discharge of the Indenture as a result of the fact that all Certificates have been paid or have been deemed to have been paid as provided in the Indenture; (c) December 31, 2028; (d) a Termination Event, except as provided in (a) above, and the Trustee's written election to terminate the Ground Lease; and (e) an event of default under the Ground Lease and the Town's election to terminate the Ground Lease. The rights- acquired by the Town upon termination of the Ground Lease pursuant to (b) above shall be subject to the rights of any subsequent sublessee of the Site or the Project or any portion thereof or any assignee of the Trustee's interest in the Ground Lease pursuant to the. Lease. Rent Payments The Authority has paid to the Town the sum of One Dollar ($1.00), which sum shall, together with the financing, acquisition, construction, equipping and leasing of the Project to be leased to the Town pursuant to the Lease, constitute (i) consideration for the leasehold interest in the Site conveyed to the Authority under the Ground Lease from the date hereof until the occurrence and continuance of a Termination Event under the Lease; and (ii) consideration for the execution and delivery of the Lease. Subsequent to the occurrence and during the continuance of a Termination Event under the Lease, if the Trustee subleases the Site and the Project, or any portion thereof, or sells an assignment of its interest in the Ground Lease and the Project, the Trustee, as assignee of the Ground Lease, shall pay additional rent to the Town, in an amount equal to 5% of the gross proceeds of such subleasing or assignment. Any rent payable to the Town shall be paid promptly upon receipt by the Trustee of such gross proceeds. Maintenance, Taxes, Other Charges, Insurance Prior to a Termination Event under the Lease, the payment of taxes and utility charges, the maintenance of the Site and the Project, and the insurance of the Site and the Project, shall be governed by Article IX of the Lease. After a Termination Event under the Lease and if the Ground Lease has not been terminated, the Trustee or its sublessee or assignee shall promptly pay or cause to be paid when due all taxes and assessments which may be imposed on the Site and the Project and all costs or charges for utility service supplied to the Site and the Project. After a Termination Event under the Lease and if the Ground Lease has not been, the Trustee or its sublessee or assignee shall maintain the Site and the Project in good condition and in good working order. After a Termination Event under the Lease and if the Ground Lease has not been terminated pursuant, the Trustee or its sublessee or assignee shall obtain and keep in force, at its own expense (i) comprehensive general public liability insurance against claims for personal injury- death or property damage occurring on the Site or the Project in an amount not less than $1,000,000, and (ii) fire and extended coverage insurance in an amount not less than the replacement cost of the Project (excluding foundations). All such insurance shall name the Authority, the Trustee, any sublessee or assignee and the Town as insureds. Proceeds of such fire and extended coverage insurance shall be payable to the Authority, the Trustee, any sublessee or assignee and the Town as their respective interests may appear. All such insurance policies shall provide that the insurance company shall not cancel such insurance without first giving at least 30 days' advance written notice B -32 to the Authority, the Trustee and the Town. Each insurance policy required by the Ground Lease shall contain a waiver of subrogation by the issuer of such policy with respect to the Authority, the Trustee, any sublessee or assignee, and the Town, and their officers, agents and employees, while acting within the scope of their empIoyment. Assignment, Conveyance The Town and the Authority agree that, pursuant to the Indenture, the rights of the Authority to receive certain payments and to enforce remedies pursuant to the Lease and the Ground Lease will be assigned to the Trustee. The Ground Lease may also be assigned by the Trustee pursuant to the Indenture. After a Termination Event under the Lease, and if the Ground lease has not been terminated, the Authority and the Trustee may also sublease and lease the Site and the Project, or any portion thereof, or sell an assignment of their interest in the Ground Lease pursuant to the Lease. The Town's Option to Purchase the Project At any time during the Lease Term, the Town's option to terminate the Ground Lease and purchase the Project are as provided in the Lease. At any time during the term of the Ground Lease but after termination of the Lease Term, the Town has the option to terminate the Ground Lease and to purchase the Project, upon payment by the Town to the Trustee of an amount sufficient to pay in full the Outstanding Certificates, redemption premium, if any, and accrued interest thereon to a payment date reasonably selected by the Trustee in accordance with the Indenture, plus all fees and expenses then owing to the Trustee; provided, however, that the Town's purchase option is subject to the rights of the Trustee and any sublessee or assignee pursuant- to the Lease. In order to exercise that option, the Town must give written notice to the Trustee and its sublessee or assignee of its intention to purchase such Buildings and must comply with the other applicable provisions of the Ground Lease (including payment by cash or certified funds). Events of Default and Remedies The following shall be "events of default" under the Ground Lease and the terms "events of default" and "default" shall mean, subsequent to a Termination Event under the Lease; failure by the Authority and the Trustee or any sublessee or assignee to pay any Rent or any premiums for the insurance required by the Ground Lease, at the time when such Rent or premiums shall be due and payable and the continuation of such failure for a period of 30 days after the Town has notified the Trustee of such failure. Whenever any event of default shall have happened and be continuing, the Town shall have the right, at its option without any further demand or notice, to take whatever action at law or in equity may appear necessary or desirable to enforce its rights as the owner of the Site, including the termination of the Authority's leasehold interest in the Site granted under the Ground Lease and the retaking of possession of the Site. B -33 ( This Page Intentionally Left Blank ) APPENDIX C ( This Page Intentionally Left Blank ) APPENDIX C BOOK -ENTRY ONLY SYSTEM DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Colorado Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC was created to hold securities of its participants (the "DTC Participants ") and to facilitate the clearance and settlement of securities transactions among DTC Participants in such securities through electronic book -entry changes in accounts of the DTC Participants, thereby eliminating the need for physical movement of security certificates. DTC Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations, some of whom (and/or their representatives) own DTC. Access to the DTC system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly (the "Indirect Participants "). Purchases of 1998 Certificates under the book -entry system may be made only through brokers and dealers who are, or act through, DTC Participants. Each DTC Participant will receive a credit balance in the records of DTC in the amount of such DTC Participant's ownership interest in the 1998 Certificates. The ownership interest of each actual purchaser of a 1998 Certificate (the "Beneficial Owner ") will be recorded through the records of the DTC Participant or the Indirect Participant. Beneficial Owners are to receive a written confirmation of their purchase providing certain details of the 1998 Certificates acquired. Transfers of ownership interests in the 1998 Certificates will be accomplished only by book entries made by DTC and, in turn, by DTC Participants or Indirect Participants who act on behalf of the Beneficial Owners. Beneficial Owners of the 1998 Certificates will not receive nor have the right to receive physical delivery of 1998 Certificates, and will not be or be considered to be registered owners under the Indenture, except as specifically provided in the Indenture in the event the book -entry system is discontinued. SO LONG AS CEDE & CO., AS NOMINEE OF DTC, IS THE REGISTERED OWNER OF THE 1998 CERTIFICATES, REFERENCES IN THIS OFFICIAL STATEMENT TO THE REGISTERED OWNERS -OF THE 1998 CERTIFICATES WILL-MEAN CEDE & CO. AND WILL NOT MEAN THE BENEFICIAL OWNERS. The Town and the Trustee, a paying agent and registrar, may treat DTC (or its nominee) as the sole and exclusive owner of the 1998 Certificates registered in its name for the purpose. of payment of the principal of or interest or premium, if any, on the 1998 Certificates, selecting 1998 Certificates and portions thereof to be redeemed, giving any notice permitted or required to be given to registered owners under the Indenture, including any notice of redemption, registering the transfer of 1998 Certificates, obtaining any consent or other action to be taken by registered owners and for all other purposes whatsoever, and will not be affected by any notice to the contrary. The Town and the Trustee will not have any responsibility or obligation to any DTC `Participant, any person claiming.a beneficial ownership interest in the 1998 Certificates under or through DTC or any DTC Participant, Indirect Participant or other person not shown on the records of the Registrar as being a registered owner with respect to: the accuracy of any records maintained C -1 by DTC, any DTC Participant or Indirect Participant regarding ownership interests in the 1998 Certificates; the payment by DTC, any DTC Participant or Indirect Participant of any amount in respect of the principal of or interest or premium, if any, on the 1998 Certificates; the delivery to any DTC Participant, Indirect Participant or any Beneficial Owner of any notice which is permitted or required to be given to registered owners under the Indenture, including any notice of redemption; the selection by DTC, any DTC Participant or any Indirect Participant of any person to receive payment in the event of a partial redemption of the 1998 Certificates; or any consent given or other action taken by DTC as a registered owner. Neither DTC nor its nominee, Cede & Co., provides consents with respect to any security. Under its usual procedures; DTC mails an omnibus proxy to the issuer of the securities for which it is acting as securities depository as soon as possible after the establishment of a "record date by the issuer for purposes 'of soliciting consents from the holders of such securities. - The omnibus proxy assigns Cede & Co.'s voting rights to those DTC Participants having such securities credited to their accounts on such record date. Principal or redemption price of, and interest on, the 1998 Certificates will be paid to DTC or its nominee, Cede & Co., as registered owner of the 1998 Certificates. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners of the -1998 Certificates is the responsibility of the DTC Participants or the Indirect Participants. Upon receipt of any such payments, DTC's current practice is to immediately credit the accounts of the DTC Participants in accordance with their respective holdings shown on the records of DTC. Payments by DTC Participants and Indirect Participants to Beneficial Owners of the 1998 Certificates will be governed by standing in and customary practices, as is now the case with municipal securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such DTC Participant or Indirect Participant and not of DTC, the Trustee or the Town, subject to any statutory and regulatory requirements then in effect. As long as the DTC book -entry system is used for the 1998 Certificates, the Trustee will give any notice of redemption or any other notices required to be given to registered owners of 1998 Certificates only to DTC or its nominee. Any failure of DTC to advise any DTC Participant, or any DTC, Participant to notify any Indirect -Participant, or any DTC Participant or Indirect Participant to notify any Beneficial Owner, of any such notice and its content or effect will not affect the validity of the redemption of the 1998 Certificates called for redemption or of any other action premised on such notice. Conveyance of notices and other communications by DTC to DTC Participants, by DTC Participants to Indirect Participants and by DTC Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory and regulatory requirements as may be in effect from time to time. Beneficial Owners may desire to make arrangements with a DTC Participant or Indirect Participant so that all notices of redemption or other communications to DTC which affect such Beneficial, Owners will be forwarded in writing by such DTC Participant or Indirect Participant. NEITHER THE TOWN NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO, SUCH DTC PARTICIPANTS, OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES, WITH RESPECT TO THE PAYMENTS TO OR THE C -2 11 APPENDIX D ( This Page Intentionally Left Blank ) PROVIDING OF NOTICE FOR THE DTC PARTICIPANTS, THE INDIRECT PARTICIPANTS OR THE BENEFICIAL OWNERS OF THE 1998 CERTIFICATES. For every transfer and exchange of a beneficial ownership interest in the 1998 Certificates, a Beneficial Owner may be charged a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto. DTC may determine to discontinue providing its service with respect to the 1998 Certificates at any time by giving reasonable notice to the Town or the Trustee at any time. In addition, if the Town determines that (i) DTC is unable to discharge its responsibilities with respect to the 1998 Certificates or (ii) continuation of the system of book -entry only transfers through DTC is not in the best interests of the Beneficial Owners of the 1998 Certificates or of the Town, the Town may thereupon terminate the services of DTC with respect to the 1998 Certificates. If for any such reason the system of book -entry transfers through DTC is discontinued, the Town may-within 90 days thereafter appoint a substitute securities depository which, in its opinion, is willing and able to undertake the functions of DTC upon reasonable and customary terms. If a successor is not approved, 1998 Certificate certificates will be delivered as described in the Indenture in fully registered form in denominations of $5,000 or any integral multiples thereof in the names of Beneficial Owners, Indirect Participants or DTC Participants. In the event the book -entry system is discontinued, the persons to whom 1998 Certificate certificates are registered will be treated as registered owners for all purposes of the Indenture, including the giving to the Town or the Trustee of any notice, consent, request or demand pursuant to the Indenture for any purpose whatsoever. In such event, the 1998 Certificates will be transferable to such registered owners, interest on the 1998 Certificates will be payable by check of the Trustee, mailed to such registered owners, and the principal and redemption price of all 1998 Certificates will be payable at the principal operations office of the Trustee. The foregoing material concerning DTC and DTC's book -entry system is based on information furnished by DTC. No representation is made by the Town as to the accuracy or completeness of such information. C -3 ( This Page Intentionally Left Blank) APPENDIX D FORM OF CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the "Disclosure Certificate ") is executed and delivered by the Town of Avon, Colorado (the "Town ") in connection with the issuance of $7,000,000* aggregate principal amount of Certificates of Participation (the "1998 Certificates ") which evidence assignments of proportionate interests in rights to receive certain payments under the Lease Purchase and Sublease Agreement dated as of July 1, 1998 (the "Lease ") between the Town and the Town of Avon Building Authority. The 1998 Certificates are being issued pursuant to a Mortgage and Indenture of Trust dated July 1, 1998 and a resolution (the "Resolution ") adopted by the Town Council on July 1998. 1he Town covenants and agrees as follows: SECTION 1. u=se of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Town for the benefit of the holders and beneficial owners of the 1998 Certificates and in order to assist the Participating Underwriter in complying with Rule 15c2- 12(b)(5), as amended, of the Securities and Exchange Commission. SECTION 2. Definitions. In addition to the definitions set forth in the Resolution or parenthetically defined herein, which apply to any capitalized terms used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided .by the Town pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. "Dissemination Agent" shall mean, initially, the Town, or any successor Dissemination Agent designated in writing by the Town and which has filed with the Town a written acceptance of such designation. "Listed Events" shall mean any of the events listed in Section 5 of this Disclosure Certificate. "National Repository" shall-mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. Currently, the following are National Repositories: *Subject to change. Bloomberg Municipal Repositories P. O. Box 840 Princeton, NJ 08542 -0840 Phone: (609) 279 -3200 Fax: (609) 279 -5962 E -mail: Muni@Bloomberg.com D -1 Thomson NRMSIR Attn: Municipal Disclosure 395 Hudson Street, 3d Floor New York, NY 10014 Phone: _ (212) 807 -5001 Fax: (212) 989 -2078 E -mail: Disclosure@Muller.com Kenny. Information Systems, Inc. 65 Broadway -16th Floor New York, NY 10006 Attn: Kenny Repository Service . Phone: (212) 770 -4595 Fax: (212) 797 -7994 DPC Data, Inc. One Executive Drive Fort Lee, NJ 07024 Phone: (201) 346 -0701 Fax: (201) 947 -0107 E -mail: nrmsir @dpcdata.com "Participating Underwriter" shall mean the original underwriter of- the 1998 Certificates required to - comply with the Rule in connection with an offering of the 1998 Certificates. "Repository" shall mean each National Repository and each State Repository. "Rule" shall mean Rule 15c2- 12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "State Repository" shall mean any public or private repository or entity designated by the State of Colorado as a state information depository for the purpose of the Rule. As of the date of this Disclosure Certificate, there is no State Repository. SECTION 3. Provision of Annual Reports. a. The Town shall, or shall cause the Dissemination Agent to, not later than nine (9) months following the end of the Town's fiscal year of each year, commencing nine (9) months following the end of the Town's fiscal year ending December 31, 1998, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than five (5) business days prior to said date, the Town shall provide the Annual Report to the Dissemination Agent (if other than the Town). The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross - reference other information as provided in Section 4 of this Disclosure Certificate; provided that the D -2 audited financial statements of the' Town may. be submitted separately, from the balance of the Annual Report. b. If the Town is unable to provide to the Repositories an Annual Report by the date required in subsection (a), the Town shall send a notice to the Municipal Securities Rulemaking Board ( "MSRB ") and to the State Repository, if any, in substantially the form attached as Exhibit "A ". C. The Dissemination Agent shall: (1) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and each State Repository, if any; and (2) if the Dissemination Agent is other than the Town, file a report with the Town certifying the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided and listing all the Repositories to which it was provided. SECTION 4. Content of Annual Reports. The Town's Annual Report shall contain or incorporate by reference the following: a. A copy of its annual financial statements prepared in accordance with generally accepted accounting principles audited by a firm of certified "public accountants. If audited annual financial statements are not available by the time specified in Section 3(a) above, unaudited financial statements will be provided as part of the Annual Report and audited financial statements will be provided when, and if, available. b. An update of the information of the type contained in the tables in the Official Statement, identified in Exhibit "B" hereto. - Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of the Town or related public entities, which have been submitted to each of the- Repositories or the Securities and Exchange Commission. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The Town'shall clearly identify each such document incorporated by reference. SECTION 5. $eporting.of Significant Events. The Town shall provide or cause to be provided, in a timely manner, to the MSRB and the State Repository, if any; notice of any of the following events with respect to the 1998 Certificates, if such event is material: a. Principal and interest payment delinquencies; b. Non - payment related defaults; c. Unscheduled draws on debt service reserves reflecting-financial difficulties; D -3 Certificates; d. Unscheduled draws on credit enhancements reflecting financial difficulties; e. Substitution of credit or liquidity providers, or their failure to perform; f. Adverse tax opinions or events affecting the tax- exempt status of the 1998 g. Modifications to rights of Certificate holders; h. Certificate calls; i. Defeasances; j. Release, substitution or sale of property security, repayment of the 1998 Certificates; or k. Rating changes. SECTION 6: Termination of Reporting Obligation. The Town's obligations under this Disclosure Certificate shall terminate upon the earliest of. (i) the date of legal defeasance, prior redemption or payment in-full of all of the 1998 Certificates; (ii) the date that the Town shall no longer constitute an "obligated person" within the meaning of the Rule; or (iii) the date on which those portions of the Rule which require this written undertaking are held to be invalid by a court of competent jurisdiction in a non - appealable action, have been repealed retroactively or otherwise do not apply to the 1998 Certificates. SECTION 1. Dissemination Agent. The Town may, from time to time, appoint or engage a Dissemination Agent to assist the Town in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. SECTION 8. Amendment. Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Town may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, without the consent of:the holders of the 1998 Certificates, if such amendment or waiver does not, in and of itself, cause the undertakings herein (or action of any Participating Underwriter in reliance on the undertakings herein) to violate the Rule, but taking into account any subsequent change in or official interpretation of the Rule: The Town will provide notice of such amendment or waiver to-the Repository. SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Town from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice, of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Town chooses to include any information in any Annual Report or notice of.occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Town shall have no obligation under this D -4 Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 10. Default. In the event of a failure of the Town to comply with any provision of this Disclosure Certificate, any holder or beneficial owner of the 1998 Certificates may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Town to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an event of default under the Resolution, and the sole remedy under this Disclosure Certificate in the event of any failure of the Town to comply with this Disclosure Certificate shall be an action to, compel performance. SECTION 11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Town, the - Dissemination Agent, the Participating Underwriter, the holders and beneficial owners from time to time of the 1998 Certificates, and shall create no rights in any other person or entity. DATE: 111998. TOWN OF AVON, COLORADO By: Mayor D -5 EXHIBIT "A" NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT Name of Town: Town of Avon, Colorado . Name of Issue: Certificates of Participation, Series 1998, in the .aggregate principal amount of $7,000,000., Date of Issuance: 1998. NOTICE IS HEREBY GIVEN that the Town has not provided an Annual Report with respect to the above -named 1998 Certificates as required by Section _ of the Indenture dated July 1, 1998, and the Continuing Disclosure Certificate executed, on 1998 by the Town. " The Town anticipates that the Annual Report will be filed by Dated: , TOWN OF AVON, COLORADO By: Its: M EXHIBIT "B" TABLES TO BE UPDATED See page v of this Official Statement D -7 ( This Page Intentionally Left Blank ) APPENDIX E ( This Page Intentionally Left Blank ) APPENDIX E SPECIMEN OF MUNICIPAL BOND INSURANCE POLICY [TO BE PROVIDED BY THE CERTIFICATE INSURER] E -1 ( This Page Intentionally Left Blank )