notice of bond sale $7,505,000 general obligation … · 2012. 2. 1. · notice of bond sale...

NOTICE OF BOND SALE $7,505,000∗

GENERAL OBLIGATION REFUNDING BONDS SERIES 2012

OF THE CITY OF MERRIAM, KANSAS

(GENERAL OBLIGATION BONDS PAYABLE FROM UNLIMITED AD VALOREM TAXES)

Bids. Bids will be received by the Finance Director of the City of Merriam, Kansas (the “City”), on behalf of the Governing Body at the address set forth herein, or, in the case of electronic proposals, via PARITY® (“PARITY”), in the manner described in this Notice of Bond Sale (“Notice”), until 11:00 a.m., Central Time, on

MONDAY, FEBRUARY 13, 2012

for the purchase of $7,505,000* principal amount of General Obligation Refunding Bonds, Series 2012 (the “Bonds”), of the City. All bids will be publicly available to the public at that time and place and will be acted upon by the Governing Body at its meeting to be held at 7:00 p.m. on the date of sale. No oral or auction bids will be considered.

Bond Details. The Bonds will consist of fully registered bonds in the denomination of $5,000 or any integral multiple thereof. The Bonds will be dated March 1, 2012 (the “Dated Date”), and will become due October 1 in the years as follows:

Year Principal Amount*

2013 $ 410,000 2014 1,045,000 2015 795,000 2016 815,000 2017 845,000 2018 875,000 2019 490,000 2020 515,000 2021 540,000 2022 570,000 2023 605,000

The Bonds will bear interest from the Dated Date at rates to be determined when the

Bonds are sold as provided herein, which interest will be payable semiannually on April 1 and October 1 in each year, beginning on October 1, 2012 (the “Interest Payment Dates”).

Principal Amounts Subject to Change. The City reserves the right to increase or decrease the total principal amount of the issue and the principal amount of any maturity and ∗Subject to change.

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adjust any bid premium in order to properly size the Bond issue and to obtain debt service savings in each maturity at a level acceptable to the City. The successful bidder may not withdraw its bid or change the interest rates bid as a result of any changes made to the principal amount of the Bonds or premium as described, and, if requested by the City or the City’s Financial Advisor, shall provide the City or the City’s Financial Advisor, within 20 minutes of such request, with the initial offering prices of the Bonds to the public. If there is an adjustment in the final aggregate principal amount of the Bonds or premium, the revised schedule of principal payment or premium as described above, the City’s Financial Advisor will notify the successful bidder by means of telephone, facsimile transmission or electronic mail. The net production as a percentage of the par amount of the Bonds generated from the bid of the successful bidder will not be decreased as a result of any change in the principal amount of Bonds or the premium.

Place of Payment and Bond Registration. The Bonds will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), to which payment of principal of and interest on the Bonds will be made. Individual purchases of Bonds will be made in book-entry form only. Purchasers of Bonds will not receive certificates representing their interest in Bonds purchased. The principal of and interest on the Bonds will be payable in lawful money of the United States of America by check or draft of the Treasurer of the state of Kansas, Topeka, Kansas (the “Paying Agent” and “Bond Registrar”). The principal of each Bond will be payable at maturity upon presentation and surrender at the principal office of the Paying Agent. The interest payable on the Bonds on any interest payment date shall be paid by the Paying Agent to the owner of each Bond at the owner’s address as it appears on the registration books of the Bond Registrar as of the fifteenth day (whether or not a business day) of the calendar month next preceding each interest payment date (the “Record Date”) or at such other address provided in writing by the owner to the Bond Registrar (a) by check or draft mailed by the Paying Agent to the address of such registered owner shown on the registration books, or (b) in the case of an interest payment to any registered owner that is a securities depository, by electronic transfer to such registered owner upon written notice given to the Paying Agent by such registered owner, not less than 15 days prior to the Record Date for such interest payment, containing the electronic transfer instructions, including the bank (which shall be in the continental United States), address, ABA routing number and account number to which such registered owner wishes to have such wire directed. The Bonds will be registered pursuant to a plan of registration approved by the City and the Attorney General of the state of Kansas.

The City will pay for the fees of the Bond Registrar for registration and transfer of the Bonds and will also pay for preparation of a reasonable supply of registered bond blanks. Any additional costs or fees that might be incurred in the secondary market, other than fees of the Bond Registrar, will be the responsibility of the owners.

As long as the Bonds remain in book-entry form only, the provisions relating to registration, transfer and exchange stated above will be governed by the procedures of DTC or its successor with respect to its book-entry only system.

Optional Redemption. At the option of the City, the Bonds maturing October 1, 2018, and thereafter, may be called for redemption and payment prior to maturity on October 1, 2017,

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or thereafter at any time, in whole or in part (selection of Bonds to be designated by the City in such equitable manner as it may determine), at the redemption price of 100% (expressed as a percentage of the principal amount), plus accrued interest to the date of redemption.

Mandatory Redemption. A bidder may elect to have all or a portion of the Bonds scheduled to mature in consecutive years issued as term bonds (the “Term Bonds”) scheduled to mature in the latest of those consecutive years and subject to mandatory redemption requirements consistent with the schedule of serial maturities set forth herein, subject to the following conditions: (a) not less than all Bonds of the same serial maturity shall be converted to Term Bonds with mandatory redemption requirements, (b) callable and noncallable serial maturities of the Bonds may not be combined in the same Term Bond maturity, and (c) a bidder must make the Term Bond election by completing the applicable portions of the Official Bid Form or providing appropriate indications of Term Bonds on Parity.

Whenever the City is to select Bonds for the purpose of redemption, it will, in the case of Bonds in denominations greater than $5,000, if less than all of the Bonds then outstanding are to be called for redemption, treat each $5,000 of face value of each such fully registered Bond as though it were a separate Bond in the denomination of $5,000.

Unless waived by any owner of the Bonds to be redeemed, if the City elects to call any Bonds for redemption and payment prior to maturity, the City shall instruct the Bond Registrar to give written notice of its intention to call and pay such Bonds on a specified date, the same being described by maturity, such notice to be mailed by United States first-class mail addressed to the owners of the Bonds, each of the notices to be mailed not less than 30 days prior to the date fixed for redemption. The City shall also give such additional notice as may be required by Kansas law or regulation of the Securities and Exchange Commission in effect as of the date of such notice. If any Bond be called for redemption and payment as described above, all interest on such Bond shall cease from and after the date for which such call is made, provided funds are available for its payment at the price specified.

As long as the book-entry only system remains in effect for the Bonds, the Paying Agent will provide the notices described above to DTC or its successor. It is expected that DTC will, in turn, notify its Participants (as defined in the Preliminary Official Statement) and that the Participants will notify the Beneficial Owners (as defined in the Preliminary Official Statement) of the Bonds. Please refer to the Preliminary Official Statement for a more detailed description of the book-entry only system.

Authority, Purpose and Security. The Bonds are being issued pursuant to K.S.A. 10-427 et seq., as amended, for the purpose of refunding a portion of the City’s outstanding General Obligation Bonds, Series 2004, General Obligation Bonds, Series 2005 and General Obligation Bonds, Series 2008. The Bonds shall be general obligations of the City payable as to both principal and interest from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the City. The full faith, credit and resources of the City are irrevocably pledged for the prompt payment of the principal and interest on the Bonds as the same become due.

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Conditions of Bids. Proposals will be received on the Bonds bearing such rate or rates of interest as may be specified by the bidders, subject to the following conditions: The same rate shall apply to all Bonds of the same maturity year. Each interest rate specified shall be a multiple of 1/8 or 1/20 of 1% and may not exceed a rate equal to the daily yield for the 10-year Treasury Bonds published by The Bond Buyer, in New York, New York, on the Monday next preceding the day on which the Bonds are sold, plus 6%. No bid will be considered for a price of less than 100% of the par value of the Bonds and accrued interest to the date of delivery. The difference between the highest rate specified and the lowest rate specified cannot exceed 2%. No supplemental interest payments will be considered. Each bid must specify the total interest cost to the City during the term of the Bonds on the basis of such bid and the TIC (as defined herein) on the basis of such bid, all certified by the bidder to be correct. The City will be entitled to rely on the certificate of correctness of the bidder.

Good Faith Deposit. Check or Surety Bond by 11:00 a.m. on Sale Date. Unless a wire transfer of funds is

provided as described in the next paragraph, each bid shall be accompanied by a cashier’s or certified check drawn on a bank located in the United States of America or a financial surety bond (the “Surety Bond”) in the amount of 2% of the principal amount of the Bonds (i.e., $150,100) payable to the order of the City of Merriam, Kansas, to secure the City from any loss resulting from the failure of the bidder to comply with the terms of its bid. If a check is used, it must be received by the Finance Director at the address shown below prior to the sale time. If a Surety Bond is used, it must be from an insurance company licensed to issue such a bond in the state of Kansas, and such bond must be submitted to the Finance Director before the bid opening or accompany the bid. The Surety Bond should identify each bidder whose good faith deposit is guaranteed by the Surety Bond. If the Bonds are awarded to a bidder using a Surety Bond then such successful bidder will be required to submit its good faith deposit to the City by wire transfer of such amount as instructed by the City or delivered in the form of a cashier’s check, in either case, not later than 2:00 p.m. on the business day following the sale. If the good faith deposit is not received by that time, the Surety Bond will be drawn on by the City to satisfy the good faith deposit requirement. Good faith checks submitted by unsuccessful bidders will be returned.

Wire Transfers Received by 1:00 p.m. on Sale Date. In lieu of submitting a check or Surety Bond with a bid prior to the sale, a bidder may elect to submit the good faith deposit in the amount previously specified after the sale time by wire transfer of same-day funds by checking the appropriate box on the bid form or notifying the Finance Director at [email protected] prior to the sale time of its intent to submit the good faith deposit by wire transfer if such bidder is notified by the City following the sale that the bidder has submitted the apparent best bid for the Bonds. The City agrees to use its best efforts to notify the bidder of the apparent best bid for the Bonds by no later than 11:15 a.m., Central Time, on the date of the sale by telephoning the representative of the bidder at the telephone number indicated on the bid form for such bidder and to provide such bidder with wire instructions at that time. The wire transfer of the good faith amount by such bidder must be received by the City by no later than 1:00 p.m., Central Time, on the date of the sale. The wire transfer identification information is to include the following identification to be completed by such bidder:

Ref: City of Merriam, Kansas Good Faith Deposit, Series 2012 Bonds

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Contemporaneously with such wire transfer, the bidder shall send an e-mail to Cindy Ehart (913-322-5504) [email protected] including the following information: (i) indication that a wire transfer has been made; (ii) the amount of the wire transfer; (iii) the wire transfer federal reference number and (iv) the name of the sending bank. The City assumes no liability for incorrect or incomplete information provided from a sending or receiving bank regarding a wire transfer. The apparent best bidder is advised to follow up with the City and sending bank on the status of the wire.

Disposition of Good Faith Deposit. If a bid is accepted the good faith deposit will be held by the City until the bidder has complied with all of the terms and conditions of this Notice at which time the good faith deposit will be returned to the successful bidder or deducted from the purchase price at the option of the City. If a bid is accepted but the City fails to deliver the Bonds to the bidder in accordance with the terms and conditions of this Notice the good faith deposit will be returned to such bidder. If a bid is accepted but the bidder defaults in the performance of any of the terms and conditions of this Notice, the good faith deposit will be retained by the City. No interest will be paid upon the successful bidder’s good faith deposit.

Basis of Award. The award of the Bonds will be made on the basis of the lowest true interest cost (“TIC”) to the City, which will be determined as follows: the TIC is the discount rate (expressed as a per annum percentage rate) which, when used in computing the present value of all payments of principal and interest to be paid on the Bonds, from the payment date to the Dated Date, produces an amount equal to the par amount of the Bonds, plus the premium, if any. Present value will be computed on the basis of semiannual compounding and a 360-day year of twelve 30-day months. If there is any discrepancy between the TIC specified and the interest rates and premium specified, the specified interest rates and premium shall govern, and the TIC specified in the bid shall be adjusted accordingly. If two or more proper bids providing for identical amounts for the lowest TIC are received, the City will determine which bid, if any, will be accepted, and its determination will be final. The City reserves the right to reject any and/or all bids and to waive any irregularities in a submitted bid. Any bid for the Bonds received after 11:00 a.m., Central Time on the date of sale will not be considered.

Bid Forms. Except for bids submitted through PARITY, all bids must be made on forms which may be procured from the City’s Finance Director or the Financial Advisor. No additions or alterations in such forms shall be made, and any erasures may cause rejection of any bid.

Submission of Bids. Bids must be received by 11:00 a.m., Central Time on February 13, 2012, and must be submitted in one of the following manners:

(a) Sealed Bids. Bids may be submitted in a sealed envelope marked “Proposal for the Bonds” to the Finance Director at the address provided at the end of this Notice.

(b) Telefacsimile Bids. Bids may be submitted via facsimile to 913/322-5505, Attn: Finance Director. The City accepts no responsibility for inaccurate bids submitted by facsimile transmission or for the inability to access the facsimile number before the indicated sale time. Facsimile facilities are limited and bidders using them should plan to allow time to compensate. The deadline for facsimile bids is based on

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the time the transmission is printed through the facsimile facilities as opposed to the time the transmission is sent by the bidder. Bidders are advised to allow time for the transmission to be received.

(c) Electronic Bids. Electronic bids may be submitted to PARITY. For purposes of the electronic bidding process, the time as maintained by PARITY shall constitute the official time with respect to all bids submitted to PARITY. Each bidder shall be solely responsible for making necessary arrangements to access PARITY for purposes of submitting its electronic bid in a timely manner and in compliance with the requirements of this Notice. Neither the City, its agents nor PARITY shall have any duty or obligation to undertake registration to bid for any prospective bidder or to provide or ensure electronic access to any qualified prospective bidder, and neither the City, its agents nor PARITY shall be responsible for a bidder’s failure to register to bid or for any failure in the proper operation of, or have any liability for any delays or interruptions of or any damages caused by PARITY’s service. The City is using the services of PARITY solely as a communication mechanism to conduct the electronic bidding for the Bonds, and PARITY is not an agent of the City.

To the extent any instructions or directions set forth in PARITY conflict with this Notice, the terms of this Notice shall control. For further information about PARITY, including any fee charged, potential bidders may contact PARITY at 212/849-5021.

The City assumes no liability for the inability of any bidder to submit a bid in the manner described in this Notice prior to the time of sale specified above. All bidders are advised that each bid shall be deemed to constitute a nonrescindable offer for a contract between the bidder and the City to purchase the Bonds regardless of the manner by which the bid is submitted.

CUSIP Numbers. It is anticipated that CUSIP identification numbers will be printed on or assigned to the Bonds, but neither the failure to print such number on or assign such number to any Bond nor any error with respect will constitute cause for failure or refusal by the purchaser to accept delivery of and pay for the Bonds in accordance with the terms of the purchase contract. All expenses in relation to the assignment and printing of CUSIP numbers on the Bonds will be paid by the City.

Delivery and Payment. The City will pay for preparation of the Bonds and will deliver the same, executed and registered, without cost to the successful bidder on or about March 1, 2012, through the facilities of DTC, New York, New York. Delivery elsewhere will be made at the expense of the successful bidder. The successful bidder will be furnished with a certified transcript of the proceedings evidencing the authorization and issuance of the Bonds and the usual closing documents, including a certificate that there is no litigation pending or threatened at the time of delivery of the Bonds affecting their validity and a certificate regarding the completeness and accuracy of the Official Statement. Payment for the Bonds must be made in federal reserve funds, immediately subject to use by the City.

Certification as to Offering Prices. The successful bidder for the Bonds will be required to complete, execute and deliver to the City, prior to the delivery of the Bonds, a certificate regarding the “issue price” of such Bonds (as defined in Section 148 of the Internal

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Revenue Code of 1986, as amended (the “Code”). The certificate shall state that, as of February 13, 2012 (the Sale Date), the bidder reasonably expected to offer all of the Bonds to the general public (excluding bond houses, brokers, or similar persons acting in the capacity of underwriters or wholesalers) in a bona fide public offering at the prices set forth in such certificate (excluding accrued interest and expressed as dollar prices) and that all of the Bonds have actually been offered to the general public at such prices. Such certificate, however, may indicate that the successful bidder will not reoffer such Bonds for sale. The form of such certificate may be obtained from Bond Counsel prior to the sale date.

Official Statement. The City has prepared a preliminary official statement dated February 2, 2012 (the “Preliminary Official Statement”), “deemed final” by the City except for the omission of certain information as provided in Securities and Exchange Commission Rule 15c2-12, copies of which may be obtained from the Finance Director or from the Financial Advisor. Upon the sale of the Bonds, the City will adopt the final official statement and will furnish the successful bidder, within seven business days of the award of the bid, with a reasonable number of copies of the final official statement without additional cost upon request. Additional copies may be ordered by the successful bidder at its expense.

Legal Opinion. The Bonds will be sold subject to the approving legal opinion of KUTAK ROCK LLP, Kansas City, Missouri, Bond Counsel, which opinion will be furnished and paid for by the City and delivered to the successful bidder when the Bonds are delivered. The opinion will also include the opinion of Bond Counsel relating to the exclusion of the interest on the Bonds from gross income for federal income tax purposes and from computation of Kansas adjusted gross income. Reference is made to the Preliminary Official Statement for further discussion of federal and Kansas income tax matters relating to the interest on the Bonds.

Bank Qualified. The Bonds will be designated as “qualified tax-exempt obligations” within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended.

Additional Information. Additional information regarding the Bonds may be obtained from the Finance Director or from the City’s Financial Advisor, Piper Jaffray & Co., 11150 Overbrook Road, Suite 310, Leawood, Kansas 66211, Attention: Greg Vahrenberg (913/345-3374) e-mail: [email protected] or from Kutak Rock LLP, Bond Counsel, 1010 Grand Boulevard, Suite 500, Kansas City, Missouri 64106-2220 (816/960-0090), Attention: Dorothea Riley.

DATED February 2, 2012.

CITY OF MERRIAM, KANSAS

By /s/ Cindy Ehart Finance Director Merriam City Hall 9000 W. 62nd Terrace Merriam, Kansas 66202-2815 (913/322-5500)

OFFICIAL BID FORM PROPOSAL FOR THE PURCHASE OF GENERAL OBLIGATION REFUNDING BONDS OF

THE CITY OF MERRIAM, KANSAS To: Cindy Ehart City’s ID# 48-6077097 Fax No. 913/322-5505 February 13, 2012

Finance Director Phone No. 913/322-5500

For $7,505,000∗ principal amount of General Obligation Refunding Bonds, Series 2012, of the City of Merriam, Kansas, to be dated March 1, 2012, as described in your Notice of Bond Sale dated February 2, 2012 (the “Notice”), the Bonds to bear interest as follows:

Maturity October 1

Principal Amount*

Interest Rate

Maturity October 1

Principal Amount*

Interest Rate

2013 $ 410,000 ________% 2019 490,000 ________% 2014 1,045,000 ________% 2020 515,000 ________% 2015 795,000 ________% 2021 540,000 ________% 2016 815,000 ________% 2022 570,000 ________% 2017 845,000 ________% 2023 605,000 ________% 2018 875,000 ________%

the undersigned will pay the par value of the Bonds plus accrued interest to the date of delivery, plus a total premium, in the amount set forth below:

Total interest cost to maturity at the rates specified $ Premium (if any) $ Net interest cost $ True interest cost %

□ [check here if electing to wire the good faith deposit] if notified that we have submitted the apparent best bid, we agree to wire transfer the good faith deposit amount referenced above in same-day funds to be received by the City by 1:00 p.m. Central Time, on February 13, 2012.

Term Bond Option. The Bidder elects to have the principal amount of Bonds maturing in the years shown below issued as Term Bond(s) subject to mandatory redemption requirements in the amounts and at the times shown above. To bid more than 3 term bonds include additional information on a separate sheet.

Years included in term bond: First Term Bond to , inclusive Second Term Bond to , inclusive Third Term Bond to , inclusive

This proposal is subject to all terms and conditions contained in the Notice, and if the undersigned is the successful bidder, the undersigned will comply with all of the provisions contained in the Notice. Unless agreeing to wire transfer the good faith deposit as checked in the box shown above, a cashier’s or certified check in the amount of $150,100 payable to the order of City of Merriam, Kansas, or a Surety Bond that complies with the provisions of the Notice accompanies this proposal as an evidence of good faith. This proposal is subject to all terms and conditions contained in the Notice, and if the undersigned is the successful bidder, the undersigned will comply with all of the provisions contained in the Notice. The acceptance of this proposal by the City shall constitute a contract between the City and the successful bidder for purposes of complying with Rule 15c2-12 of the Securities and Exchange Commission.

Submitted by: [LIST ACCOUNT MEMBERS ON REVERSE OR ON SEPARATE SHEET] By Telephone No. ( ) E-mail)

ACCEPTANCE

Pursuant to action taken by the Governing Body of the City of Merriam, Kansas, the above proposal is accepted February 13, 2012.

Attest:

Mayor City Clerk NOTE: No additions or alterations in the above proposal form shall be made, and any erasures may cause rejection of any bid. Bids may be filed with the Finance Director, or may be submitted electronically through PARITY® electric bid system prior to 11:00 a.m. Central Time, February 13, 2012. Any bid received after such time will not be considered.

∗Subject to change.

PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY 2, 2012 BANK QUALIFIED RATING: Moody’s: “____” BOOK-ENTRY ONLY In the opinion of Kutak Rock LLP, Kansas City, Missouri, Bond Counsel, under existing laws, regulations, rulings and juridical discussions and assuming the accuracy of certain representations and continuing compliance with certain covenants, interest on the Bonds is excludable from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. Under existing law, the interest on the Bonds may be excluded from computation of Kansas adjusted gross income. The Bonds have been designated as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). See "LEGAL MATTERS" herein.

$7,505,000* CITY OF MERRIAM, KANSAS


Dated: March 1, 2012 Due: As shown on the inside cover page hereof The Series 2012 General Obligation Refunding Bonds (the "Series 2012 Bonds" or the "Bonds") when issued, will be registered in the name of Cede & Co., as registered owner for The Depository Trust Company, New York, New York ("DTC"). DTC will act as securities depository for the Bonds. Purchases of Bonds will be made in book-entry form only and purchasers will not receive certificates representing their interest in the Bonds purchased. As long as Cede & Co. is the registered owner of the Bonds, as nominee of DTC, references herein to Bond owners or registered owners shall mean Cede & Co., and shall not mean the Beneficial Owners (herein defined) of the Bonds. See "BOOK-ENTRY ONLY SYSTEM" herein. The Bonds will be issued by the City of Merriam, Kansas (the "City" or the "Issuer"), as fully registered bonds without coupons in the denomination of $5,000 or any integral multiple thereof. Principal will be payable annually on October 1, on the dates set forth on the inside cover page hereof, and semiannual interest will be payable on April 1 and October 1, beginning on October 1, 2012. Principal will be payable upon presentation and surrender of the Bonds by the registered owners thereof at the office of the Treasurer of the State of Kansas, Topeka, Kansas, as bond registrar and paying agent (the "Paying Agent" and "Bond Registrar").

The Bonds maturing on October 1, 2018 and thereafter will be subject to redemption prior to maturity, at the option of the Issuer, on October 1, 2017 and any date thereafter as described herein. (See "THE BONDS-Redemption Provisions" herein).

The Bonds and the interest thereon will constitute general obligations of the Issuer payable as to both principal and interest from ad valorem taxes which may be levied without limitation as to rate or amount upon all taxable tangible property, real and personal, within the territorial limits of the Issuer. The Bonds are offered when, as and if issued by the Issuer, subject to the approval of legality by Kutak Rock LLP, Kansas City, Missouri, Bond Counsel. It is expected that the Bonds will be available for delivery through the facilities of The Depository Trust Company, New York, New York on or about March 1, 2012.

The date of this Official Statement is February ___, 2012

*Preliminary, subject to change.

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BIDS WILL BE RECEIVED ON MONDAY, FEBRUARY 13, 2012 AT 11:00 A.M., CENTRAL TIME, AT THE CITY OF MERRIAM, KANSAS

6200 EBY STREET, MERRIAM, KANSAS 66202-2815

$7,505,000*

CITY OF MERRIAM, KANSAS GENERAL OBLIGATION REFUNDING BONDS

SERIES 2012

SERIAL BONDS

Dated: March 1, 2012 Due: October 1, as shown below

Maturity

Principal Amount

Interest Rate

Yield

CUSIP

2013 $410,000 590111 KA7 2014 1,045,000 590111 KB5 2015 795,000 590111 KC3 2016 815,000 590111 KD1 2017 845,000 590111 KE9 2018 875,000 590111 KF6 2019 490,000 590111 KG4 2020 515,000 590111 KH2 2021 540,000 590111 KJ8 2022 570,000 590111 KK5 2023 605,000 590111 KL3

(Plus Accrued Interest, if any)

THE BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES OR "BLUE SKY" LAWS. THE BONDS ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE BONDS HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE.



City Hall 6200 Eby Street

Merriam, Kansas 66202-2815 Phone No. (913) 322-5500

Fax No. (913) 322-5505

GOVERNING BODY Ken Sissom, Mayor

Pam Bertoncin, Councilmember John Canterbury, Councilmember John Crabtree, Councilmember

Al Frisby, Councilmember Christine Evans Hands, Councilmember

Nancy Hupp, Councilmember Chad Rowe, Councilmember

Gayle Stephens, Councilmember

CITY ADMINISTRATOR

Phillip Lammers

CITY CLERK

FINANCE DIRECTOR

Juli Pinnick Cindy Ehart

CITY ATTORNEY Michelle Daise

BOND COUNSEL

Kutak Rock LLP Kansas City, Missouri

FINANCIAL ADVISOR

Piper Jaffray & Co. Leawood, Kansas

No dealer, broker, salesman or other person has been authorized by the Issuer, Financial Advisor or the Underwriter to give any information or to make any representations with respect to the Bonds other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been furnished by the Issuer and other sources which are believed to be reliable, but such information is not guaranteed as to accuracy or completeness, and is not to be construed as a representation, by the Financial Advisor or Underwriter. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Issuer since the date hereof. TABLE OF CONTENTS Page INTRODUCTION...............................................................................................................................................................................1 THE BONDS.......................................................................................................................................................................................1 BOOK-ENTRY ONLY SYSTEM..................................................................................................................................................... 3 THE REFUNDING PLAN .................................................................................................................................................................5 SOURCES AND USES OF FUNDS..................................................................................................................................................5 RISK FACTORS AND INVESTMENT CONSIDERATIONS........................................................................................................6 ABSENCE OF LITIGATION ............................................................................................................................................................7 LEGAL MATTERS ............................................................................................................................................................................7 UNDERTAKING TO PROVIDE ONGOING MARKET DISCLOSURE ......................................................................................8 RATING ..............................................................................................................................................................................................8 FINANCIAL ADVISOR ...................................................................................................................................................................8 UNDERWRITING..............................................................................................................................................................................9 AUTHORIZATION OF OFFICIAL STATEMENT .......................................................................................................................10 Appendix A: Information Concerning the Issuer .......................................................................................................................... A-1 Appendix B: Financial Statements and Report of Independent Certified Public Accountants ................................................... B-1 Appendix C: Form of Continuing Disclosure Letter of Instructions .............................................................................................C-1

OFFICIAL STATEMENT

$7,505,000* CITY OF MERRIAM, KANSAS


INTRODUCTION General Matters The purpose of this Official Statement is to furnish information relating to the City of Merriam, Kansas (the "Issuer" or the "City"), and the General Obligation Refunding Bonds, Series 2012, of the Issuer, dated March 1, 2012, to be issued in the principal amount of $7,505,000* (the "Bonds" or the "Series 2012 Bonds" ). The Appendices to this Official Statement are integral parts of this document and should be read in their entirety. The presentation of information herein, including tables of receipts from various taxes, is intended to show recent historic information, and is not intended to indicate future or continuing trends in the financial position or other affairs of the Issuer. No representation is made that past experience, as might be shown by such financial or other information, will necessarily continue or be repeated in the future. Continuing Disclosure The Securities and Exchange Commission (the "SEC") has promulgated amendments to Rule 15c2-12 (the "Rule"), requiring continuous secondary market disclosure. Subject to the requirements of the Rule, the Issuer has covenanted to provide continuous secondary market disclosure. The Issuer is not currently in default of any prior obligation to provide continuing disclosure. (See "UNDERTAKING TO PROVIDE ONGOING MARKET DISCLOSURE" and “APPENDIX C: FORM OF CONTINUING DISCLOSURE LETTER OF INSTRUCTIONS" herein.) Additional Information Additional information regarding the Issuer or the Bonds may be obtained from Cindy Ehart, Finance Director, at City Hall, 6200 Eby Street, Merriam, Kansas 66202-2815, (913) 322-5500, or the Financial Advisor, Piper Jaffray & Co., 11150 Overbrook, Suite 310, Leawood, Kansas 66211 (913) 345-3300. Book-Entry Only System The Bonds are available in book-entry form only. See "BOOK-ENTRY ONLY SYSTEM" herein. As long as Cede & Co., is the registered owner of the Bonds as nominee of DTC, New York, New York, references in the following sections entitled "THE BONDS" to the holders or owners of Bonds shall mean Cede & Co., and not the beneficial owners of the Bonds. THE BONDS Authority for the Bonds The Bonds are being issued pursuant to and in full compliance with the Constitution and statutes of the State of Kansas (the "State"), including K.S.A. 10-427 et. seq., as amended, and an ordinance and a resolution adopted by the governing body of the Issuer on February 13, 2012 (the "Bond Resolution"). *Preliminary, subject to change.

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Security for the Bonds The Bonds and the interest thereon will constitute general obligations of the Issuer payable as to both principal and interest from ad valorem taxes which may be levied without limitation as to rate or amount upon all taxable tangible property, real and personal, within the territorial limits of the Issuer. Description of the Bonds The Bonds shall consist of fully registered bonds in the denomination of $5,000 or any integral multiple thereof. The Bonds shall be dated March 1, 2012 (the "Dated Date"). Interest on the Bonds will be payable on April 1 and October 1, in each year beginning October 1, 2012 (each an "Interest Payment Date"). The principal of the Bonds shall become due in the amounts as set forth on the inside cover page of this Official Statement on the Stated Maturities, and subject to redemption and payment prior to their Stated Maturities. The Bonds shall bear interest (computed on the basis of twelve 30-day months) from the later of the Dated Date or the most recent Interest Payment Date to which interest has been paid. Designation of Paying Agent and Bond Registrar The Treasurer of the State of Kansas, Topeka, Kansas (the "Bond Registrar" and "Paying Agent") has been designated by the Issuer as paying agent for the payment of principal of and interest on the Bonds and bond registrar with respect to the registration, transfer and exchange of Bonds. Method and Place of Payment of the Bonds The principal of, or redemption price, and interest on the Bonds shall be payable in any coin or currency which, on the respective dates of payment thereof, is legal tender for the payment of public and private debts. The principal or redemption price of each Bond shall be paid at maturity to the person in whose name such Bond is registered on the Bond Register at the maturity thereof, upon presentation and surrender of such Bond at the principal office of the Paying Agent. The interest payable on each Bond on any Interest Payment Date shall be paid to the Owner of such Bond as shown on the Bond Register at the close of business on the fifteenth day (whether or not a business day) of the calendar month next preceding each interest payment date (the "Record Date") for such interest (a) by check or draft mailed by the Paying Agent to the address of such Owner shown on the Bond Register or at such other address as is furnished to the Paying Agent in writing by such Owner, or (b) in the case only of an interest payment to an Owner that is a securities depository, by wire transfer to such Owner upon written notice given to the Bond Registrar by such Owner, not less than 15 days prior to the record date for such interest, containing the electronic transfer instructions, as provided in the Bond Resolution. Registration, Transfer and Exchange of Bonds As long as any of the Bonds remain Outstanding, each Bond when issued shall be registered in the name of the Owner thereof on the Bond Register. Bonds may be transferred and exchanged only on the Bond Register as hereinafter provided. Upon surrender of any Bond at the principal office of the Bond Registrar, the Bond Registrar shall transfer or exchange such Bond for a new Bond or Bonds in any authorized denomination of the same stated maturity and in the same aggregate principal amount as the Bond that was presented for transfer or exchange. Bonds presented for transfer or exchange shall be accompanied by a written instrument or instruments of transfer or authorization for exchange, in a form and with guarantee of signature satisfactory to the Bond Registrar, duly executed by the Owner thereof or by the Owner's duly authorized agent. In all cases in which the privilege of transferring or exchanging Bonds is exercised, the Bond Registrar shall authenticate and deliver Bonds in accordance with the provisions of the Bond Resolution. The Issuer shall pay the fees and expenses of the Bond Registrar for the registration, transfer and exchange of Bonds. Any additional costs or fees that might be incurred in the secondary market, other than fees of the Bond Registrar, are the responsibility of the Owners of the Bonds. In the event any Owner fails to provide a correct taxpayer identification number to the Paying Agent, the Paying Agent may make a charge against such Owner sufficient to pay any governmental charge required to be paid as a result of such failure. The Issuer and the Bond Registrar shall not be required to register the transfer or exchange of any Bond that has been called for redemption after notice of such redemption has been mailed by the Paying Agent and during the period of 15 days next preceding the date of mailing of such notice of redemption.

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Mutilated, Lost, Stolen or Destroyed Bonds If any Bond is lost, destroyed, mutilated or wrongfully taken, the Issuer will execute and the Registrar will authenticate a new Bond of the same date, maturity, denomination and interest rate, subject to the provisions of the Bond Resolution authorizing the issuance of the Bonds. In connection with the replacement of Bonds, the Issuer and the Registrar may require satisfactory indemnification and may charge the owner of such Bonds reasonable fees and expenses for the replacement of such Bonds. Redemption Provisions Optional Redemption. At the option of the Issuer, Bonds or portions thereof maturing in the years 2018 and thereafter may be called for redemption and payment prior to their Stated Maturity on October 1, 2017, and thereafter as a whole or in part (selection of maturities and the amount of Bonds of each maturity to be redeemed to be determined by the Issuer in such manner as it may determine) at any time, at the Redemption Price of 100% (expressed as a percentage of the principal amount), plus accrued interest thereon to the redemption date.

Notice of Redemption of Bonds. At the direction of the City, written notice of the call for any redemption identifying the Bonds or portions thereof to be redeemed shall be given by the Paying Agent, in the name of the City, by mailing a copy of the redemption notice by first class mail not less than 30 days prior to the date fixed for redemption to the registered owner of each Bond to be redeemed at the registered owners address shown on the registration books maintained by the Bond Registrar hereinafter described, and to the Treasurer of the State of Kansas; provided, however, that failure to give such notice by mailing as aforesaid, or any defect therein, shall not affect the validity of any proceedings for the redemption of the Bonds. Any notice of redemption shall state the date of redemption, the place or places at which such Bonds shall be presented for payment, the maturity dates and numbers and CUSIP numbers of the Bonds or portions of Bonds to be redeemed (and in the case of the redemption of a portion of any Bond, the principal amount thereof being redeemed), the redemption price, whether the redemption is conditioned on the occurrence of certain events and shall state that interest on the Bonds described in such notice will cease to accrue from and after the redemption date.

So long as DTC is effecting book-entry transfers of the Bonds, the Paying Agent shall provide the notices specified above to

DTC. It is expected that DTC will, in turn, notify the DTC Participants and that the DTC Participants, in turn, will notify or cause to be notified the Beneficial Owners. Any failure on the part of DTC or a DTC Participant, or failure on the part of a nominee of a Beneficial Owner of a Bond (having been mailed notice from the Paying Agent, a DTC Participant or otherwise) to notify the Beneficial Owner of the Bond so affected, shall not affect the validity of the redemption of such Bond.

Effect of Call for Redemption. On or prior to the date fixed for any redemption, funds or government securities maturing on or before the date fixed for redemption shall be deposited by the City with the Paying Agent or deposited in escrow as provided in the Bond Resolution in amounts sufficient to provide for payment of the Bonds called for redemption, the accrued interest thereon to the redemption date and the redemption premium, if any. Upon the deposit of such funds or government securities, and notice of such redemption having been given, the Bonds or portions of the principal amount of Bonds called for redemption shall cease to bear interest on the specified redemption date.

BOOK-ENTRY ONLY SYSTEM 1. The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered bond certificate will be issued for each scheduled maturity of the Bonds, and will be deposited with DTC. 2. DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct

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Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of “AA+.” The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. 3. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. 4. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. 6. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Issuer or Paying Agent, on the payment date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC nor its nominee, the Paying Agent, or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 9. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Issuer or Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained,

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Bond certificates are required to be printed and delivered. 10. The Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC. 11. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that Issuer believes to be reliable, but the Issuer takes no responsibility for the accuracy thereof.

THE REFUNDING PLAN

Proceeds of the Bonds will also be applied to refund the following general obligation bonds of the Issuer (collectively the

“Refunded Bonds”): General Obligation Bonds, Series 2004, dated December 1, 2004

Maturity Amount

Maturity Date

Interest Rate

Redemption Date

Redemption Price

$320,000 10/1/2013 3.400% October 1, 2012 100% 960,000 10/1/2014 3.500% October 1, 2012 100%

General Obligation Bonds, Series 2005, dated November 15, 2005

Maturity Amount

Maturity Date

Interest Rate

Redemption Date

Redemption Price

$345,000 12/1/2015 3.600% October 1, 2013 100% 375,000 12/1/2016 3.650% October 1, 2013 100% 405,000 12/1/2017 3700% October 1, 2013 100% 435,000 12/1/2018 3.750% October 1, 2013 100% 470,000 12/1/2019 3.800% October 1, 2013 100% 505,000 12/1/2020 3.850% October 1, 2013 100% 540,000 12/1/2021 3.850% October 1, 2013 100% 580,000 12/1/2022 3.900% October 1, 2013 100% 625,000 12/1/2023 3.950% October 1, 2013 100%

General Obligation Bonds, Series 2008, dated September 15, 2008

Maturity Amount

Maturity Date

Interest Rate

Redemption Date

Redemption Price

$370,000 10/1/2015 3.400% October 1, 2013 100% 380,000 10/1/2016 3.550% October 1, 2013 100% 395,000 10/1/2017 3.650% October 1, 2013 100% 410,000 10/1/2018 3.750% October 1, 2013 100%

An Escrow Fund will be established for the Refunded Bonds pursuant to the terms of the Escrow Trust Agreement dated as of

March 1, 2012 by and between the Issuer and Security Bank of Kansas City, Kansas City, Kansas (the “Escrow Agent”). Proceeds of the Bonds will be deposited in the Escrow Fund and used to acquire direct, non-callable obligations of the United States of America (the “Escrowed Securities”). The Escrowed Securities, in addition to any cash deposited in the Escrow Fund, will be used to pay the principal of and interest on the Refunded Bonds to and including their Redemption Date.

The accuracy of the mathematical computations of: (a) the adequacy of cash and certain Escrowed Securities to be held by

the Escrow Agent pursuant to the Escrow Agreement, together with the interest to be earned thereon, to pay the principal of, premium if any, and interest due and to become due on the Refunded Bonds to and including the applicable Refunded Bonds Redemption Date, and (b) certain yield calculations relating to the Bonds and the Escrowed Securities made in accordance with Code § 148, will be verified by Robert Thomas CPA, LLC, Certified Public Accountant, Shawnee Mission, Kansas. Such verification of the accuracy of such mathematical computations will be based upon information supplied by the Underwriter and on interpretations of the Code provided by Bond Counsel.

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SOURCES AND USES OF FUNDS

The following table itemizes the sources and uses of funds available for refunding the Refunded Bonds, including the proceeds from the sale of the Bonds:

Sources of Funds: Principal Amount of the Bonds $7,505,000.00* Total = Uses of Funds:

Deposit to Escrow Fund Costs of Issuance

Total = RISK FACTORS AND INVESTMENT CONSIDERATIONS A PROSPECTIVE PURCHASER OF THE BONDS DESCRIBED HEREIN SHOULD BE AWARE THAT THERE ARE CERTAIN RISKS ASSOCIATED WITH THE BONDS WHICH MUST BE RECOGNIZED. THE FOLLOWING STATEMENTS REGARDING CERTAIN RISKS ASSOCIATED WITH THE OFFERING SHOULD NOT BE CONSIDERED AS A COMPLETE DESCRIPTION OF ALL RISKS TO BE CONSIDERED IN THE DECISION TO PURCHASE THE BONDS. PROSPECTIVE PURCHASERS OF THE BONDS SHOULD ANALYZE CAREFULLY THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT AND ADDITIONAL INFORMATION IN THE FORM OF THE COMPLETE DOCUMENTS SUMMARIZED HEREIN, COPIES OF WHICH ARE AVAILABLE AND MAY BE OBTAINED FROM THE ISSUER OR FINANCIAL ADVISOR. Taxation of Interest on the Bonds An opinion of Bond Counsel will be obtained to the effect that interest earned on the Bonds is excludable from gross income for federal income tax purposes under current provisions of the Code, and applicable rulings and regulations under the Code; however, an application for a ruling has not been made and an opinion of counsel is not binding upon the Internal Revenue Service. There can be no assurance that the present provisions of the Code, or the rules and regulations thereunder, will not be adversely amended or modified, thereby rendering the interest earned on the Bonds includable in gross income for federal income tax purposes. The Issuer has covenanted in the Bond Resolution and in other documents and certificates to be delivered in connection with the issuance of the Bonds to comply with the provisions of the Code, including those which require the Issuer to take or omit to take certain actions after the issuance of the Bonds. Because the existence and continuation of the excludability of the interest on the Bonds depends upon events occurring after the date of issuance of the Bonds, the opinion of Bond Counsel described under "LEGAL MATTERS" assumes the compliance by the Issuer with the provisions of the Code described above and the regulations relating thereto. No opinion is expressed by Bond Counsel with respect to the excludability of the interest on the Bonds in the event of noncompliance with such provisions. The failure of the Issuer to comply with the provisions described above may cause the interest on the Bonds to become includable in gross income as of the date of issuance. Market for the Bonds Secondary Market. There is no assurance that a secondary market will develop for the purchase and sale of the Bonds. The absence of continuing disclosure of financial or other information pertaining to the Issuer may impair the development of a secondary market for the Bonds and could impair the ability of an Owner to sell the Bonds in the secondary market. Prices of Bonds traded in the secondary market, though, are subject to adjustment upward and downward in response to changes in the credit markets. From time to


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time it may be necessary to suspend indefinitely secondary market trading in the Bonds as a result of financial condition or market position of broker-dealers, prevailing market conditions, lack of adequate current financial information about the Issuer, or a material adverse change in the financial condition of the Issuer, whether or not the Bonds are in default as to principal and interest payments, and other factors which may give rise to uncertainty concerning prudent secondary market practices. Legal Matters Various state and federal laws, regulations and constitutional provisions apply to the obligations created by the Bonds. There is no assurance that there will not be any change in, interpretation of, or addition to such applicable laws, provisions and regulations which would have a material effect, either directly or indirectly, on the Issuer or the taxing authority of the Issuer. Limitations on Remedies Available to Owners of Bonds The enforceability of the rights and remedies of the Owners of Bonds, and the obligations incurred by the Issuer in issuing the Bonds, are subject to the federal Bankruptcy Code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual equity principles which may limit the specific enforcement under state law of certain remedies; the exercise by the United States of America of the powers delegated to it by the United States Constitution; and the reasonable and necessary exercise, in certain unusual situations, of the police power inherent in the State of Kansas and its governmental subdivisions in the interest of serving a legitimate and significant public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or state government, if initiated, could subject the Owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy and otherwise, and consequently may involve risks of delay, limitation or modification of their rights. Suitability of Investment The tax exempt feature of the Bonds is more valuable to high tax bracket investors than to investors who are in low tax brackets, and so the value of the interest compensation to any particular investor will vary with individual tax rates. Each prospective investor should carefully examine this Official Statement, including the Appendices hereto, and its own financial condition to make a judgment as to its ability to bear the economic risk of such an investment, and whether or not the Bonds are an appropriate investment.

ABSENCE OF LITIGATION

There is no controversy, suit or other proceeding of any kind pending or threatened wherein or whereby any question is raised or may be raised, questioning, disputing or affecting in any way the legal organization of the Issuer or its boundaries, or the right or title of any of its officers to their respective offices, or the legality of any official act or the constitutionality or validity of the indebtedness represented by the Bonds or the validity of said Bonds, or any of the proceedings had in relation to the authorization, issuance or sale thereof, or the levy and collection of a tax to pay the principal and interest thereof. LEGAL MATTERS Approval of Bonds. All matters incident to the authorization and issuance of the Bonds are subject to the approval of Kutak Rock LLP, Kansas City, Missouri, Bond Counsel. The factual and financial information appearing herein has been supplied or reviewed by certain officials of the Issuer and its certified public accountants, as referred to herein. Bond Counsel has participated in the preparation of the Official Statement but expresses no opinion as to the accuracy or sufficiency thereof, except for the matters appearing in the sections of this Official Statement captioned "THE BONDS", "LEGAL MATTERS", "APPENDIX C – FORM OF CONTINUING DISCLOSURE LETTER OF INSTRUCTIONS" .

Federal Tax Exemption - In General. In the opinion of Kutak Rock LLP, Bond Counsel, under existing laws, regulations, rulings and judicial decisions, interest on the Bonds is excluded from gross income for federal income tax purposes. Bond Counsel is further of the opinion that interest on the Bonds is not a specific preference item for purposes of the federal alternative minimum tax. The opinion described in the preceding sentence assumes compliance by the Issuer with covenants designed to satisfy the requirements of the Code that must be met subsequent to the issuance of the Bonds. Failure to comply with such requirements could cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The Issuer has covenanted to comply with such requirements. Bond Counsel has expressed no opinion regarding other federal tax consequences arising with respect to the Bonds. Bond Counsel is further of the opinion that the interest on the Bonds is exempt from State of Kansas income taxation.

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Notwithstanding Bond Counsel’s opinion that interest on the Bonds is not a specific preference item for purposes of the

federal alternative minimum tax, such interest will be included in adjusted current earnings of certain corporations, and such corporations are required to include in the calculation of alternative minimum taxable income 75% of the excess of such corporation’s adjusted current earnings over its alternative minimum taxable income (determined without regard to such adjustment and prior to reduction for certain net operating losses).

The accrual or receipt of interest on the Bonds may otherwise affect the federal income tax liability of the owners of the

Bonds. The extent of these other tax consequences will depend upon such owner’s particular tax status and other items of income or deduction. Bond Counsel has expressed no opinion regarding any such consequences. Purchasers of the Bonds, particularly purchasers that are corporations (including S corporations and foreign corporations operating branches in the United States), property or casualty insurance companies, banks, thrifts or other financial institutions, certain recipients of social security or railroad retirement benefits, taxpayers otherwise entitled to claim the earned income credit, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, should consult their tax advisors as to the tax consequences of purchasing or owning the Bonds.

Bank Qualified. The Issuer has represented that it does not reasonably anticipate issuing greater than $10,000,000 of tax-

exempt obligations in calendar year 2012 (excluding certain private activity and refunding bonds) and that it has designated the Bonds as “qualified tax-exempt obligations” within the meaning of Section 265(b)(3) of the Code. Accordingly, Bond Counsel is of the opinion that in the case of certain banks, thrift institutions or other financial institutions owning the Bonds, a deduction is allowed for 80% of that portion of such institutions’ interest expense allocable to interest on the Bonds. Bond Counsel has expressed no opinion with respect to any deduction for federal tax law purposes of interest on indebtedness incurred or continued by a holder of the Bonds or a related person to purchase or carry the Bonds.

Changes in Federal and State Tax Law. From time to time, there are legislative proposals in the Congress and in the states

that, if enacted, could alter or amend the federal and state tax matters referred to above or adversely affect the market value of the Bonds. An example is the American Jobs Act of 2011 (S. 1549), proposed by the President and introduced in the Senate on September 13, 2011. If enacted as introduced, a provision of S. 1549 would limit the amount of exclusions (including tax-exempt interest) and deductions available to certain high income taxpayers for taxable years after 2012, and as a result could affect the market price or marketability of the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted it would apply to Bonds issued prior to enactment. In addition, regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value of the Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Bonds or the market value thereof would be impacted thereby. Purchasers of the Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory initiatives or litigation. The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and delivery of the Bonds and Bond Counsel has expressed no opinion as of any date subsequent thereto or with respect to any pending legislation, regulatory initiatives or litigation.

Backup Withholding. As a result of the enactment of the Tax Increase Prevention and Reconciliation Act of 2005, interest on tax-exempt obligations such as the Bonds is subject to information reporting in a manner similar to interest paid on taxable obligations. Backup withholding may be imposed on payments made after March 31, 2007 to any bondholder who fails to provide certain required information including an accurate taxpayer identification number to any person required to collect such information pursuant to Section 6049 of the Code. The new reporting requirement does not in and of itself affect or alter the excludability of interest on the Bonds from gross income for federal income tax purposes or any other federal tax consequence of purchasing, holding or selling tax-exempt obligations.

UNDERTAKING TO PROVIDE ONGOING MARKET DISCLOSURE The Issuer has entered into an undertaking (the "Undertaking") for the benefit of the ultimate beneficial holders of the Bonds to send certain financial information and operating data to certain information repositories annually (the "Annual Report") and to provide notice to the Municipal Securities Rulemaking Board of certain events, pursuant to the requirements of Section (b)(5)(i) of Securities and Exchange Commission Rule 15c2-12 (17 C.F.R. Part 240, Section 240.15c2-12) (the "Rule"). The specific nature of the information to be contained in the Annual Report or the notices of material events is in APPENDIX C - FORM OF CONTINUING DISCLOSURE LETTER OF INSTRUCTIONS.

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A failure by the Issuer to comply with the Undertaking will not constitute an Event of Default under the Bond Resolution (although holders of the Bonds, as applicable, will have any available remedy at law or in equity). Nevertheless, such a failure must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds and their market price. To the best of its knowledge, the Issuer has not failed to comply with any prior undertaking.

RATING

Moody's Investors Service has assigned an independent rating of "____" to the Bonds. Any further explanation of the significance of such rating may be obtained only from the rating agency. The rating does not constitute a recommendation by the rating agency to buy, sell or hold any Bonds, including the Bonds. There is no assurance that any rating when assigned to the Bonds will continue for any period of time or that it will not be revised or withdrawn. A revision or withdrawal of the rating when assigned to the Bonds may have an adverse affect on the market price of the Bonds.

FINANCIAL ADVISOR

Piper Jaffray & Co., Leawood, Kansas, has acted as Financial Advisor to the Issuer in connection with the sale of the Bonds. The Financial Advisor is a “municipal advisor” as defined in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Financial Advisor has assisted the Issuer in the preparation of this Official Statement and in other matters relating to the issuance of the Bonds. The Financial Advisor will not be a manager or a member of any underwriting group submitting a proposal for the purchase of the Bonds. The fees of the Financial Advisor are contingent upon the issuance of the Bonds.

UNDERWRITING The Bonds have been sold by the Issuer to __________________________, __________ (the "Bond Underwriter") at the purchase price of _____% of the principal amount of the Bonds plus accrued interest. The Bond Underwriter has agreed, subject to certain conditions, to purchase the Bonds. The Bonds will be offered to the public initially at the prices determined to produce the yields set forth on the inside cover page of this Official Statement. The Bond Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing the Bonds into investment trusts) at prices other than the price stated on the inside cover page hereof and may change the initial offering price from time to time subsequent to the date hereof. In connection with the offering, the Bond Underwriter may overallot or effect transactions which stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time.

AUTHORIZATION OF OFFICIAL STATEMENT

The preparation of this Official Statement and its distribution has been authorized by the governing body of the Issuer as of the date on the cover page hereof. CITY OF MERRIAM, KANSAS By: ________________________________________ Mayor

(THIS PAGE LEFT BLANK INTENTIONALLY)

APPENDIX A INFORMATION CONCERNING THE ISSUER

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APPENDIX A INFORMATION CONCERNING THE ISSUER Size and Location The City, with a population of 11,003 covers 4 1/2 square miles. It is located in northeast Johnson County, Kansas, approximately eight miles from downtown Kansas City, Missouri, which, along with four other Kansas counties and six Missouri counties, comprise the metropolitan Kansas City region with a population of over 1.5 million. The City is a prime middle class community with a sound business basis in the center of the metropolitan region. The median age of residents in the City was 40.9 as of the 2010 Census. Government and Organization of the City The City of Merriam was incorporated as a third class city on October 23, 1950, and was made a second class city on January 18, 1957. The City operates under a non-partisan Mayor/Council form of government with the addition of a City Administrator. The Mayor is elected on an at-large basis and serves a four-year term. The eight Councilmembers are elected by ward (two representing each of four wards) and serve four year terms of office. An election for Councilmembers is held every odd-numbered year with one representative from each of the four wards being chosen each election. The City Administrator is appointed by the Mayor and City Council as the chief administrative officer of the City and is charged with the efficient and effective administration of the City. Pension System All full time employees of the City with one or more years of service, with the exception of the sworn members of the Police Department and Fire Department, belong to the Kansas Public Employee Retirement Systems (KPERS). The exceptions mentioned above belong to the Kansas Police and Fire Retirement (KP&F - which is a division of KPERS). KPERS and KP&F are funded by both the employer and the employee. The funding is based on a percentage of the biweekly compensation of the employee, and for 2012 is as follows:

KPERS KP&F Employee 4.00% 7.00% Employer 8.34% 16.54%

There are approximately 250,000 members of KPERS and KP&F, representing over 1,000 Kansas state and local public agencies. Members’ employers include the state, all counties, unified school districts, community junior colleges, area vocational technical schools, various cities and other public agencies. The KPERS and KP&F systems provide a retirement program for public employees, life insurance coverage, long-term disability, service connected death and disability and funeral benefits to members and their beneficiaries. A nine-member Board of Trustees administers the system. The Governor appoints four members, two are appointed by legislative leaders, two are elected by Retirement System members, and one is the elected State Treasurer. All serve four-year terms. The Board appoints an executive secretary to serve as the managing officer of the system, and the Board retains a qualified actuary to serve as its technical advisor and to provide an annual valuation of the liabilities and reserves of the system. Risk Management The City is exposed to various risks of loss related to torts, loss and damage to property, errors and omissions and injuries to employees. The City currently purchases commercial insurance coverage for these risks. Settled claims have not exceeded the commercial insurance coverage in any of the past three years. The City obtains employee health insurance through United Health Care and dental insurance through Met Life.

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The City obtains worker’s compensation coverage through its membership in the Kansas Eastern Region Insurance Trust

(KERIT), whose members consist of local cities and counties. KERIT is a risk-sharing pool organized under the insurance laws of the State of Kansas, which self-insures worker’s compensation and other related expenses up to certain limits and reinsures additional excess amounts up to certain limits. The City pays annual premiums to the Trust based upon historical experience and legal requirements mandated by the State of Kansas. The trust agreement allows for member assessments in the event claims and expenses exceed the Trust’s self-insured retention limit. The City does not anticipate any additional assessments in excess of premiums paid as a result of their participation in this trust. Educational Facilities The City is included in the Shawnee Mission Unified School District No. 512, which is divided into five attendance areas. Residents of Merriam are in the North or Northwest attendance district. Enrollment in the District is approximately 27,770. There are five high schools, five middle schools, two specialized schools, and thirty-four elementary schools in the District. The District's reputation is among the top in the United States, with several of its schools having been named "Blue Ribbon Schools of Excellence" by the United States Department of Education. Shawnee Mission students have also consistently scored in the top twenty percent in the nation on standardized tests. The Johnson County Community College (JCCC) is also located near the center of Johnson County. With an enrollment of over 34,000, JCCC is the largest of the nineteen community colleges in Kansas, and is a member of the League for Innovation in Community Colleges. The University of Kansas Edwards Campus, with an enrollment of 2,100, is located within Johnson County. It offers a variety of undergraduate and master's degree programs. The main campus of the University of Kansas is located in Lawrence, just 35 miles from the City and is one of the country's major state universities. The University of Kansas College of Health Sciences and Hospital is located in Kansas City, Kansas, approximately ten miles from the City. The Johnson County extension of the University of Saint Mary College has approximately 350 students enrolled. Transportation and Communication Facilities Airports: The City is located in close proximity to four area airports. Kansas City International (“K.C.I.”) Airport is located approximately twenty miles north of the City and is accessible by I-35 and I-435. Kansas City Municipal Airport is located ten miles northeast of the City and caters to flight training schools, charter flights, light aircraft, and small jet traffic. Johnson County Executive Airport (J.C.E.A.) is located ten miles south of the City limits and is the second busiest airport in Kansas. J.C.E.A. operates with an F.A.A. owned and operated tower and has 230 based aircraft and 218 leased hangars. Johnson County New Century Air Center, a 900 acre aviation center, is located seventeen miles southwest of the City. Railway: Burlington-Northern Santa Fe Railroad parallels Interstate Highway 35 bisecting the City and running from the south to the north border of the City. Interstates: I-35, which crosses the City limits, connects with I-29, which runs to K.C.I. and on north through Omaha, Nebraska. I-35 runs on north through Des Moines, Iowa. I-35 runs south toward Wichita and Dallas. I-35 also connects with I-635 leading to K.C.I., and I-435 circles the Kansas City Metropolitan Area. I-70 runs east to St. Louis and west to Denver. Highways: Highway K-12 runs west from Topeka into Merriam, becoming Merriam Drive, and connects with Shawnee Mission Parkway, which runs through the heart of the City to the Plaza and Swope Park in Kansas City, Missouri. I-35 South connects with Highway 69 running south to Joplin, Missouri. Public Transit: Johnson County Transit operates eleven routes between Johnson County and downtown or midtown Kansas City, Missouri, two routes between Johnson County and downtown Kansas City, Kansas, five routes inside Johnson County. These routes pass through the City on Antioch Road, Shawnee Mission Parkway, Johnson Drive, and I-35. The Kansas City Area Transportation Authority provides a Metro Bus System for the Missouri side of the Kansas City metropolitan area. The Johnson County Special Transportation Service provides a demand response lift van service for senior citizens and handicapped residents of Johnson County.

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Media: The Kansas City Star is the major metropolitan daily newspaper The Kansas City Metropolitan area is served by all five major television networks, one independent station, and a public television station. There are 45 radio stations, both AM and FM. The City is also served by Time Warner Cable. Medical and Health Facilities The Shawnee Mission Medical Center, located in the City, is a 504-bed not-for-profit full-service hospital with all ancillary and outpatient departments and a 24-hour emergency service. The Center provides an Alcoholism Recovery Unit, a Mental Health Unit, and an Infancy Development Center. Its Life Dynamics Building offers many health and wellness classes and programs.

Additionally, Trinity Lutheran Manor, a 120-bed nursing home facility, is located in the City.

Public Utilities Electrical power is supplied under franchise by Kansas City Power and Light Company of Kansas City, Missouri. Local gas service is provided by Kansas Gas Service Company. Local phone service is provided by Southwestern Bell Telephone Company. Water District No. 1, a quasi-municipal corporation, provides water to the City. Sewer service is supplied by the Johnson County Unified Wastewater District, a separate governmental agency organized and governed by the County's Board of County Commissioners. Recreational and Cultural The Greater Kansas City Metropolitan Area, of which the City is a part, abounds with cultural and recreational amenities that include the Kauffman Center for the Performing Arts, National World War I Museum, Kansas City Museum, Nelson-Atkins Museum of Art, Harry S. Truman Library and Museum, the Kansas City Symphony, the Starlight Theater, the Missouri Repertory Theater, the Lyric Opera, and Kansas City Zoo. Oceans of Fun and Worlds of Fun are theme parks geared to family entertainment. Kansas City is the home of the Kansas City Chiefs, an NFL football team, the Kansas City Royals, a Major League Baseball team, Sporting KC, a Major League Soccer team, and a minor league baseball team, the Kansas City T-Bones. The Kansas Speedway hosts NASCAR Sprint Cup and other races. The City has ten municipal parks. Vavra Park is 4.37 acres and includes an Olympic size swimming pool and aquatic center, exercise trail, pavilion, picnic tables, and playground equipment. The Esther Brown Memorial Park is 3.68 acres, has tennis courts, basketball courts, picnic tables, and playground equipment. Campbell Park is located at 61st & Turkey Creek and has picnic tables and playground equipment. The Streamway Park offers a paved 2.5-mile nature trail running north along Turkey Creek from 75th Street to Johnson Drive. Chatlain Park is 5.25 acres and is equipped with pavilion, picnic tables and playground equipment. Quail Creek Park is 5.25 acres and includes playground equipment, an exercise trail, and a bird-watching area. Roger Werner Park includes 2.1 acres along Turkey Creek and is connected by a pedestrian bridge to the Merriam Marketplace pavilion. Dedicated in September 2006, Merriam Historic Plaza serves as a gateway to the City and home of the Merriam Visitors Bureau. The park features a paved walking path lined with interpretive signs tracing the history of the City, an original sculpture by artist Kwan Wu, fountains, a rain garden and native Kansas plantings. Waterfall Park contains 15 acres and includes a walking path for visitors to enjoy. Also located within the City is the 44-acre Antioch Park, which is maintained by the Johnson County Parks and Recreation District. Antioch Park provides picnic shelters, tennis and basketball courts, and two small fishing lakes. Shawnee Mission Park, located seven miles west of the City, is a 1,250-acre park with a 150-acre lake for boating and fishing. It also features an outdoor Theater in the Park.

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ECONOMIC INFORMATION Retail and Office

The City is a commercial center in Johnson County featuring many commercial and retail businesses including K-Mart, a chain discount store; and Home Depot, a large retail home improvement and construction supply center. Downtown Merriam features small art shops, a garden center, a feed store, a motorcycle dealership, auto parts stores, and other miscellaneous shops.

The Merriam Town Center includes more than 60 acres of land, containing approximately 500,000 square feet of store floor area. Merriam Town Center contains a grocery store, home improvement store, a pet supply store, three restaurants, a theater, and several other retail stores and employs approximately 1,000 people. Tax Increment Financing (TIF) was approved by the City as the method of financing for the Merriam Town Center. Tenants of the Merriam Town Center include:

Home Depot Hen House PetsMart Office Max Party City Quizno’s Subs GNC Mattress Firm Chili’s Great Clips Cinemark Theater Marshall’s Old Navy Famous Footwear Good Feet Store Cute Nails China Garden Buffet Dick’s Sporting Goods Bob Evans Restaurant Verizon Wireless Fast Frame

Several large automobile dealerships are located in the City, including Superior Chevrolet/Toyota, Aristocrat Motors, Baron

BMW/Volkswagon, Carmax and Shawnee Mission Hyundai. The five hotels located in the City are Drury Inn, Comfort Inn, Homestead Village, Quality Inn and Hampton Inn.

Many offices are located in the City such as doctors' offices associated with the Shawnee Mission Medical Center, corporate headquarters, and smaller offices. Merriam is also home to the Seaboard Allied Milling Corporation, one of the largest producers and sellers of agriculture products in the world. Financial and Banking Institutions

Residents of the City have easy access to the financial and banking institutions located in the greater metropolitan area. Four banks are located in the City. US Bank, which has a branch located at Antioch and Shawnee Mission Parkway, has assets in excess of $321 billion and is the fifth largest financial services holding company in the United States. UMB Bank operates a full service branch inside of Hen House at Merriam Town Center. UMB was founded in 1913 and has over $12.4 billion in assets. Brotherhood Bank operates a full service branch at Johnson Drive and Slater. Brotherhood Bank was founded in 1924 and has $506 million in assets. The Morrill & Janes Bank has $600 million in assets and serves clients through its main office in Merriam. Value of Construction

The following table sets forth the value of construction in the City:

Commercial Residential Construction Construction Number Number

Year of Units Value ($’s) of Units Value ($’s) 2002 1 $8,300,000 4 $475,000 2003 6 4,324,168 9 775,000 2004 2 1,735,000 5 828,400 2005 5 15,284,365 7 957,000 2006 6 8,880,987 5 1,207,970 2007 4 11,478,003 0 0 2008 8 17,627,005 0 0 2009 2 67,500 0 0 2010 0 0 1 248,550 2011 5 43,109,064 4 685,000

Source: City Community Development Department

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Personal Income The Johnson County per capita personal income and State of Kansas per capita personal income are listed for the years indicated in the following table:

Year

Johnson County Per Capita

Personal Income

State of Kansas Per Capita

Personal Income 2000 $44,170 $27,694 2001 43,726 28,714 2002 43,652 28,850 2003 43,912 29,438 2004 46,244 30,995 2005 48,153 32,709 2006 50,781 34,799 2007 54,160 37,775 2008 56,042 40,022 2009 53,353 39,173

Source: Kansas Statistical Abstract Employment

There are an estimated 13,500 jobs available in the City. Total employment for Johnson County is estimated at 279,000. The average unemployment rate to date for 2011 in Johnson County was 6.0%. The labor force has a strong work-ethic orientation, and the Kansas Constitution contains a "right-to-work" provision.

A partial list of the more than 600 businesses and employers located in Merriam include the following:

Employer Type of Business

Aristocrat Motors Automobile Dealer Baron BMW Automobile Dealer McCray Lumber Builders’ Supplies Carmax Automobile Dealer Cinemark Theater Movie Theater Creative Printing Printing Hen House Grocery Store GE Capital Services Administrative Center

Home Depot Home Improvement Retail Store Industrial Bearing (IBT) Industrial Equipment

Johnson County Library Public Library K-Mart Discount Department Store US Bank Bank J. A. Peterson Co. Developer Peterson Machine Tool Machine Tool Seaboard Allied Milling Agri-Business Shawnee Mission Hyundai Automobile Dealer Shawnee Mission Medical Center Hospital Shawnee Mission School District Education Shawnee Steel & Welding Steel Fabrication Superior Chevrolet/Toyota Automobile Dealer

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Major Employers

The major employers located in the City are set forth below:

Employer

Type of Business

Number of Employees

Shawnee Mission Medical Center Hospital 2,700 GE Consumer Finance Credit Services 530 First Student School Bus Service 330 Superior Chevrolet/Toyota Automobile Dealer 281 Seaboard Allied Milling Agri-business & Transportation 190 Shawnee Mission School District Education 181 Carmax Automobile Dealer 162 Home Depot Home Improvement Store 143 Aristocrat Motors Automobile Dealer 140 Industrial Bearing (IBT) Industrial Equipment 135

Labor Force and Employment The following table sets forth labor force and employment figures for Johnson County and the State of Kansas:

JOHNSON COUNTY

Year Total

Labor Force

Employed

Unemployed Unemployed

Rate 2001 265,844 255,679 10,165 3.8% 2002 270,008 257,006 13,002 4.8% 2003 279,108 264,675 14,433 5.2% 2004 285,609 271,230 14,379 5.0% 2005 291,011 277,554 13,457 4.6% 2006 292,778 280,831 11,947 4.1% 2007 297,132 285,601 11,531 3.9% 2008 299,344 285,781 13,563 4.5% 2009 297,731 277,703 20,028 6.7% 2010 295,026 275,853 19,173 6.5%

STATE OF KANSAS

Year

Total Labor Force

Employed

Unemployed

Unemployed Rate

2001 1,408,110 1,347,718 60,392 4.3% 2002 1,404,064 1,350,946 53,118 5.1% 2003 1,414,438 1,364,791 49,647 5.6% 2004 1,432,762 1,379,970 52,792 5.5% 2005 1,445,067 1,391,376 53,691 5.1% 2006 1,467,181 1,407,076 60,105 4.3% 2007 1,478,315 1,418,665 59,650 4.1% 2008 1,421,797 1,421,111 67,313 4.4% 2009 1,808,427 1,401,611 106,816 6.6% 2010 1,502,324 1,396,560 105,764 6.6%

Source: Kansas Statistical Abstract Tax Increment Financing Districts

The City has established two Tax Increment Financing (TIF) districts. One district includes the Merriam Town Center, as mentioned above. Merriam Town Center was completed in 1999. Retail sales from the Center generate over $1 million in additional City sales tax annually.

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The second TIF District is the I-35 Redevelopment District. This district encompasses significant underdeveloped area along both sides of I-35. This redevelopment district was formerly known as the Enterprise Zone Redevelopment District. TIF projects completed in this district include two hotels, a restaurant, and expansions of two existing automobile dealerships. In September 2004, the City entered into a TIF Development Agreement with Merriam Pointe, LLC to redevelop a 34 acre site formerly used for light industry. Merriam Pointe, LLC recently transferred their rights and obligations to Merriam Investors, LLC. The City entered into an amended and restated redevelopment agreement with Merriam Investors, LLC and Hendrick Automotive Group on March 28, 2011. The new developers will construct a 62,000 square foot auto dealership where an existing Merriam business is expected to relocate by December 31, 2012 according to the terms of the revised agreement.

Another development planned for the I-35 Redevelopment District is Merriam Village. In March 2005, the City entered into a TIF Development Agreement with DDR Merriam Village, LLC to redevelop approximately 35 acres of property adjacent to Merriam Town Center on the southeast corner of Johnson Drive and I-35. The project expects construction of 300,000 square feet of retail space plus condominium and senior housing. A portion of the retail component has been completed, but no permanent tenants have been announced. The timing of future construction is not known.

Comprehensive Plan

The Merriam Planning Commission has adopted a Comprehensive Plan that contains detailed guidelines for future development and redevelopment throughout the City. The Planning Commission reviews and updates the plan annually with the strategy of selecting a high priority portion of the City each year for review. A new Comprehensive Plan was adopted in January, 2001.

The Comprehensive Plan is designed to assist public decision-makers in the areas of land use control, policy formulation, and

capital improvement programming. The plan is a general guide and is supplemented and implemented by other policy documents and ordinances including the Zoning Ordinance, Subdivision Regulations, Flood Hazard Ordinance, Stormwater Management Ordinance, Building Codes and Capital Improvements Program. The Comprehensive Plan addresses eight major topics. These are: (1) goals and objectives, (2) background and relationships, (3) physiography, (4) socio-economic studies, (5) land use, (6) major thoroughfare plan, (7) community facilities and public utilities plan and (8) implementation. FINANCIAL INFORMATION OF THE ISSUER Accounting, Budgeting and Auditing Procedures The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All Governmental Funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of these funds present increases (i.e., revenues and other financing sources) and decreased (i.e., expenditures and other financing uses) in net current assets. The City has implemented a new financial reporting model, as required by the provisions of GASB Statement No. 34 as of 2003. As a result, the City has established a uniform system of accounting maintained in accordance with the laws of the State of Kansas and generally accepted accounting principles. The Governmental Accounting Standards Board (GASB) issued Statement No. 34, Basic Financial Statements–and Management’s Discussion and Analysis–for State and Local Governments in June 1999 (the "GASB Statement No. 34"), which established new requirements for the annual financial reports of state and local governments. Among the major changes embodied in Statement 34, governments will now be required to a) report on the overall state of the government’s financial health, not just its overall "funds" in a newly required Management’s Discussion and Analysis (MD&A), b) provide the most complete information available about the cost of delivering services to their citizens in the annual report which will now also include financial statements prepared using full accrual accounting for all of the government’s activities, c) include information about the government’s public infrastructure assets – such as bridges, roads and storm sewers, and d) prepare an introductory narrative section analyzing the government’s financial performance. The new GASB standard took effect for larger governments ($100 million plus in revenues) beginning with fiscal years ending after June 15, 2002. Medium-sized governments (between $10 and $100 million in revenue) will apply the Statement beginning with fiscal years ending after June 15, 2003 and smaller governments (under $10 million in revenue) beginning with fiscal years ending after June 15, 2004.

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An annual budget of estimated receipts and disbursements for the coming calendar year is required by statute to be prepared for all funds (unless specifically exempted). The budget is prepared utilizing the modified accrual basis which is further modified by the encumbrance method of accounting. For example, commitments such as purchase orders and contracts, in addition to disbursements and accounts payable, are recorded as expenditures. The budget lists estimated receipts by funds and sources and estimated disbursements by funds and purposes. The proposed budget is presented to the governing body of the City prior to August 1, with a public hearing required to be held prior to August 15, with the final budget to be adopted prior to August 25 of each year. Budgets may be amended upon action of the governing body after notice and public hearing, provided that no additional tax revenues may be raised after the original budget is adopted. Kansas law prohibits governmental units from creating indebtedness unless there are funds on hand in the proper accounts and unencumbered by previous action with which to pay such indebtedness. An exception to this cash-basis operation is made where provision has been made for payment of obligations by bonds or other specific debt obligations authorized by law. The financial records of the City are audited annually by a firm of independent certified public accountants in accordance with generally accepted auditing standards. The annual audit was performed by Cudney, Ecord, McEnroe & Mullane, L.L.C., Certified Public Accountants, Kansas City, Missouri. Copies of the audit reports for the past five (5) years are on file in the City Clerk's office and are available for review. The audit for the Fiscal Year ended December 31, 2010 is attached hereto as Appendix B. The City received the Distinguished Budget Presentation Award for the twenty-first consecutive year from the Government Finance Officers Association (GFOA). In addition, the City has received the GFOA Certificate of Achievement for Excellence in Financial Reporting Award for the last eighteen consecutive years. The financial information contained in the Appendices to this Official Statement are an integral part of this document and are intended to be read in conjunction herewith. Sources of Revenue The City finances its general operations through the local property tax levy, various other taxes, a variety of license and permit fees, and other miscellaneous sources as indicated below for the 2010 Fiscal Year (General Fund only):

Source Percent Property Tax 28% Sales Tax 49% Franchise Taxes 11% License and Permits 3% Fines, Forfeitures and Penalties 8% Intergovernmental <1% Other 1%

Property Valuation The determination of assessed valuation and the collection of property taxes for all political subdivisions in the state of Kansas is the responsibility of the various counties under the direction of state statutes. The County Appraiser's office determines the assessed valuation that is to be used as a basis for the mill levy on property located in the City. All property in the state of Kansas has been reevaluated as a result of a bill passed by the 1985 session of the Kansas Legislature requiring county appraisers to reassess property for tax purposes, with an effective date of January 1, 1989. In conjunction with the November 1986 general election, Kansas voters approved a proposition to modify the state constitution with respect to classification of property for ad valorem taxation. For taxable years 1989 through 1992, real and personal property was divided into classes and assessed at different percentages of fair market value. Land devoted to agricultural use was valued on the basis of its agricultural income or productivity and assessed at 30% of the value so obtained; commercial and industrial machinery and equipment was assessed at 20% of its fair market value; residential property and vacant lots were assessed at 12% of fair market value; and all other property was assessed at 30% of fair market value. Farm machinery and equipment, merchants' and manufacturers' inventories, and livestock were exempt from property taxation.

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In conjunction with the November, 1992 general election, Kansas voters approved a proposition to further modify the state constitution with respect to classification of property for ad valorem taxation. The modified classification provisions shall be effective for assessment and taxation of property on and after January 1, 1993 and each year thereafter. Property is divided into two classes, real property and personal property. Real property is divided into seven subclasses; there are six subclasses of personal property. The real property (Class 1) subclasses are: (i) real property used for residential purposes including multi-family mobile or manufactured homes and the real property on which such homes are located, assessed at 11.5%, (ii) agricultural land, valued on the basis of agricultural income or productivity, assessed at 30%, (iii) vacant lots, assessed at 12%, (iv) real property, owned and operated by a not-for-profit organization not subject to federal income taxation, pursuant to Section 501 of the Internal Revenue Code, assessed at 12%, (v) public utility real property, except railroad real property, assessed at the average rate that all other commercial and industrial property is assessed, assessed at 33%, (vi) real property used for commercial and industrial purposes and buildings and other improvements located on land devoted to agricultural use, assessed at 25%, and (vii) all other urban and real property not otherwise specifically classified, assessed at 30%. Tangible personal property (Class 2) subclasses are: (i) mobile homes used for residential purposes, assessed at 11.5%, (ii) mineral leasehold interests, except oil leasehold interests, the average daily production from which is 5 barrels or less, and natural gas leasehold interests, the average daily production from which is 100 mcf or less, which shall be assessed at 25%, assessed at 30%, (iii) public utility tangible personal property, including inventories thereof, except railroad personal property, including inventories thereof, which shall be assessed at the average rate all other commercial and industrial property is assessed, assessed at 33%, (iv) all categories of motor vehicles not defined and specifically valued and taxed pursuant to law enacted prior to January 1, 1985, assessed at 20%* (but see "Property Tax Levies and Collections below), (v) commercial and industrial machinery and equipment which if its economic life is 7 years or more, shall be valued at its retail cost, when new, less seven-year straight-line depreciation, or which, if its economic life is less than 7 years, shall be valued at its retail cost when new, less straight-line depreciation over its economic life, except that, the value so obtained for such property, notwithstanding its economic life and as long as such property is being used, shall not be less than 20% of the retail cost when new of such property, assessed at 25%, and (vi) all other tangible personal property not otherwise specifically classified, assessed at 30%. All property used exclusively for state, county, municipal, literary, educational, scientific, religious, benevolent and charitable purposes, farm machinery and equipment, merchants' and manufacturers' inventories, other than public utility inventories included in subclass (3) of class 2, livestock, and all household goods and personal effects not used for the production of income, shall be exempted from property taxation. Machinery and Equipment Tax Exemption

The 2006 Kansas Legislature exempted from all property or ad valorem property taxes levied under the laws of the State all

commercial, industrial, telecommunications and railroad machinery and equipment acquired by qualified purchase or lease after June 30, 2006 or transported into the State after June 30, 2006 for the purpose of expanding an existing business or creation of a new business. Assessed Valuation The following table shows the assessed valuation of the taxable tangible property within the City for the years set forth below:

State Real Personal Assessed Motor

Year Property Property Utility Vehicle Total 2000 $118,080,341 $15,948,719 $3,223,344 $15,033,456 $152,285,860 2001 124,850,661 16,044,221 3,531,059 13,964,552 158,390,493 2002 126,741,779 14,804,514 3,414,507 14,622,179 159,582,979 2003 133,811,048 13,092,465 3,469,381 14,543,850 164,916,744 2004 139,119,131 11,158,513 3,659,520 14,634,323 168,571,487 2005 144,466,828 11,611,330 3,807,284 14,370,747 174,256,189 2006 160,976,368 11,501,177 3,835,761 14,345,042 190,658,348 2007 151,632,913 10,145,687 3,962,287 14,242,858 179,983,745 2008 154,443,902 7,400,355 3,950,513 14,391,878 180,186,648 2009 150,765,175 6,161,303 3,910,033 14,277,629 175,114,140 2010 141,190,553 5,123,564 4,090,951 13,780,199 164,185,267 2011 138,046,432 4,577,169 3,605,514 13,417,878 159,646,693

Source: County Clerk

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Property Tax Levies and Collections

Year

Taxes Levied

Current Tax Collections

Percent of

Current Taxes Collected

Delinquent

Tax Collections

Total Tax Collections (Current & Delinquent)

Ratio of Total Tax

Collections to Total Tax Levy

2001 $2,398,486 $2,323,221 96.86% $9,562 $2,332,783 97.26% 2002 2,540,741 2,472,229 97.30% 19,072 2,491,301 98.05% 2003 2,685,544 2,603,296 96.94% 26,122 2,629,418 97.91% 2004 2,899,944 2,833,984 97.73% 19,286 2,853,270 98.39% 2005 2,967,139 2,887,999 97.33% 9,213 2,897,212 97.64% 2006 3,076,356 2,974,459 96.69% 30,987 3,005,446 97.70% 2007 3,734,492 3,256,645 87.20% 38,050 3,294,695 88.22% 2008 3,511,387 3,408,974 87.08% 19,151 3,428,125 97.63% 2009 4,536,145 4,378,952 96.53% 6,510 4,385,462 96.68% 2010 4,399,200 4,256,814 96.76% - 4,256,814 96.76%

Source: Johnson County Treasurer's Office Tax Collections Tax statements are mailed November 1 each year and may be paid in full or one-half on or before December 20 with the remaining one-half due on or before May 10 of the following year. Taxes that are unpaid on the due dates are considered delinquent and accrue interest at the rate of 12% per annum until paid or until the property is sold for taxes. Real estate bearing unpaid taxes is advertised for sale on or before August 1 of each year and is sold by the County for taxes and all legal charges on the first Tuesday in September. Properties that are sold and not redeemed within two years after the tax sale are subject to foreclosure sale, except homestead properties which are subject to foreclosure sale after three years. Personal taxes are due and may be paid in the same manner as real estate taxes, with the same interest applying to delinquencies. If personal taxes are not paid when due, and after written notice, warrants are issued and placed in the hands of the Sheriff for collection. If not paid on or before October 1, legal judgment is entered and the delinquent tax becomes a lien on the property. Unless renewed, a non-enforced lien expires five years after it is entered. Motor vehicle taxes are collected periodically throughout the year concurrently with the renewal of motor vehicle tags based upon the value of such vehicles. Such tax receipts are distributed to all taxing subdivisions, including the State of Kansas, in proportion to the number of mills levied within each taxpayer's tax levy unit. Tax Rates The City previously was required to levy taxes in accordance with the requirements of its adopted budget and within the restrictions of a state aggregate tax lid, which tax lid was repealed on July 1, 1999. The funds of the City that were previously restricted by the tax lid included the general fund, capital improvement funds and special improvement funds. Levies not previously affected by the tax lid include debt service payments on bonds, notes and no fund warrants; payments made to a public building commission; expenses related to tort claim liability, employer contributions for employee retirement, health care and benefit programs, expenses incurred for rebates to owners of property in connection with neighborhood revitalization programs and for expenses incurred by cities in administering juvenile delinquency and crime programs. Property tax levies are based on the adopted budget of the City and the assessed valuations provided by the county appraiser. Special Assessments and Collections In the past the City has pursued a policy of utilizing special benefit districts to assign the cost of certain internal improvement projects to the property which was directly benefited from the construction thereof. Kansas statutes allow for the creation of special benefit districts to pay for the cost of a variety of improvements including street construction, storm water drains, sanitary sewer system improvements, street lighting, water system improvements, recreational facilities, flood control projects, bridges and parking facilities. The City has typically utilized special benefit districts to pay for the costs associated with constructing streets, sidewalks, water lines, sewers, curbs, gutters and lighting in new residential developments within the City.

A-11

The creation of special benefit districts, the determination of property benefited and the method of allocating the cost of the improvements is at the discretion of the City. Property owners have the ability to suggest improvement to be made through a petition process and to comment on the final amount of their assessment. The City may or may not be included as part of the special benefit district. All property owners have the option to pay their portion of the improvement cost with a one time payment during an assessment prepayment period or pay in annual installments with interest over a certain number of years. Upon completion of the special benefit district improvement projects and a prepayment period, the City issues general obligation bonds to provide for permanent project financing. The payment of the principal of and interest on such bonds is paid from the special assessments levied annually on the benefited property owners. Special assessments are paid at the same time and in the same manner as ad valorem property taxes. If at any time the special assessments received from the property owners are insufficient to provide for the payment of the principal of and interest on the bonds, the City is obligated to provide for the balance of such payments through its ability to levy unlimited ad valorem property taxes. Property Tax Levy The following table shows the City's mill levies by fund (per $1000 of assessed valuation) for each of the years indicated:

Year

Basic Rate

Debt Service

Total Direct

2000/01 10.564 6.911 17.475 2001/02 10.957 6.635 17.592 2002/03 11.914 6.612 18.526 2003/04 17.174 2.111 19.285 2004/05 17.161 2.114 19.275 2005/06 17.131 2.110 19.241 2006/07 18.836 2.345 21.181 2007/08 18.840 2.346 21.186 2008/09 24.999 2.361 27.360 2009/10 24.991 2.361 27.352 2010/11 25.102 2.372 27.474 2011/12 25.045 2.367 27.412

Aggregate Tax Levies The aggregate tax levies (per $1000 assessed valuation) of the City and overlapping jurisdictions for the years included are set forth in the following table:

Year

City

County

School District

Junior College

State

Merriam Drainage

Total Levy

2001/02 17.592 24.867 38.699 7.743 1.500 2.886 93.287 2002/03 18.526 20.771 42.238 9.428 1.500 3.176 95.639 2003/04 19.285 21.700 37.774 9.432 1.500 3.612 93.303 2004/05 19.275 21.364 42.655 9.348 1.500 3.749 97.891 2005/06 19.241 23.163 49.748 8.960 1.500 3.798 106.410 2006/07 21.181 23.199 51.980 8.872 1.500 4.050 110.782 2007/08 21.186 23.242 52.008 8.749 1.500 3.934 110.619 2007/08 21.186 23.242 52.008 8.749 1.500 3.934 110.619 2008/09 27.360 23.165 52.094 8.768 1.500 2.488 115.375 2009/10 27.352 23.213 55.318 8.784 1.500 2.615 118.782 2010/11 27.474 23.256 57.192 8.799 1.500 2.849 121.070

Source: County Clerk

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Major Taxpayers The following table sets forth the largest taxpayers in the City in the year 2011:

Firm

Assessed Valuation

Merriam Town Center $8,798,004 Shawnee Mission Medical Center 5,264,644 Shawnee Mission Investors, LLC 3,611,250 T.E.N. Investments, Inc. 3,271,136 Hendrick Automotive Group 2,620,651 Cole CM Merriam KS, LLC 2,612,498 General Electric Capital 2,245,501 Baron Development Company LLC 2,193,393 JMZ Associates, L.P. 1,914,500 TKGSM-KS, L.L.C. 1,767,501

DEBT STRUCTURE OF THE ISSUER

General Obligation Bonds The following table shows the general obligation bonded indebtedness of the City as of the date of this issue:

Series

Purpose

Dated

Final Maturity

Original Amount

Amount Outstanding

2004(1) Street Improvements 12/1/04 10/1/12 $3,000,000 $310,000 2005(1) Street/Storm Drainage Improvements 11/15/05 10/1/14 5,900,000 945,000 2008(1) Redeem Temp Notes 9/15/08 10/1/14 3,500,000 1,025,000 2009 Refund General Obligation Bonds 9/1/09 10/1/12 2,980,000 980,000 2010 Refund General Obligation Bonds 7/1/10 10/1/13 3,585,000 2,765,000 2012(2) Refund General Obligation Bonds 3/1/12 10/1/23 7,505,000 7,505,000 TOTAL = $13,530,000 (1) Excludes the Bonds to be refunded with the proceeds of the Bonds. (2) This Issue. Subject to Change. History of Indebtedness The following table sets forth the general obligation debt information pertaining to the Issuer as of the end of the years set forth below:

Year

Total General Obligation Debt,

Net of Debt Service Monies Available

General Obligation Debt As % of Actual Value

Debt Per Capita

2001 $10,678,022 1.27% $970 2002 12,888,199 1.51% 1,177 2003 16,153,607 1.83% 1,490 2004 21,262,573 2.34% 1,962 2005 25,717,233 2.72% 2,383 2006 24,957,709 2.45% 2,318 2007 23,037,302 2.33% 2,138 2008 20,933,078 2.11% 1,940 2009 18,313,354 1.91% 1,693 2010 15,782,082 1.73% 1,434

The City has never in its history defaulted on the payment of any of its debt obligations.

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Debt Service Requirements The following debt service schedule shows the annual principal and interest requirements for all outstanding general obligation indebtedness of the Issuer, including the Bonds: Debt Service Schedule

Outstanding Bonds Series 2012 Bonds Year Total Debt Service Principal Interest Total 2012 $3,094,146.25 -0- 2013 2,638,447.50 $410,000 2014 697,987.50 1,045,000 2015 795,000 2016 815,000 2017 845,000 2018 875,000 2019 490,000 2020 515,000 2021 540,000 2022 570,000 2023 605,000

TOTAL = Lease Obligations The City has entered into various operating leases for office equipment. There are no capital leases outstanding at the time of this issue. Overlapping Indebtedness The following table sets forth the overlapping indebtedness and the percent attributable (on the basis of assessed valuation) to the City as of December 31, 2011:

Taxing

Jurisdiction

Debt

Outstanding

Percent Applicable to Issuer

Amount Applicable to Issuer

Shawnee Mission Unified School District No. 512 $222,340,000 4.98% $11,072,532 Johnson County 240,750,000 1.92% 4,622,400 Johnson County Park and Recreation 3,625,000 1.92% 69,600 Total = $15,764,532

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A-14

Debt Ratios Assessed Valuation ..................................................................................................................................$159,646,693 Estimated Actual Valuation(1) ...................................................................................................................$922,813,254 Outstanding General Obligation Bonds(2) ...................................................................................................$13,530,000 Overlapping Indebtedness...........................................................................................................................$15,764,532 Direct and Overlapping Indebtedness(2) ......................................................................................................$29,294,532 Direct Debt per Capita ....................................................................................................................................$1,229.66 Direct and Overlapping Debt per Capita ........................................................................................................$2,662.41 Direct Debt as a percentage of Assessed Valuation..............................................................................................8.47% Direct Debt as a percentage of Estimated Actual Valuation .................................................................................1.47% Direct & Overlapping Debt as a percentage of Assessed Valuation ...................................................................18.34% Direct & Overlapping Debt as a percentage of Estimated Actual Valuation ........................................................3.17%

(1) The Estimated Actual Valuation has been estimated based upon an average assessment ratio of 17.3%. (2) Includes the Bonds. Excludes the Refunded Bonds to be refunded with proceeds of the Bonds.

(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)

APPENDIX B

FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010

MERRIAM K A N S A S

City of

COMPREHENSIVE ANNUAL FINANCIAL REPORTFor the year ended December 31, 2010

9000 W. 62nd Terrace Merriam, Kansas 66202-2815 913.322.5500

COMPREHENSIVE ANNUAL FINANCIAL REPORT

For the Year ended December 31, 2010

MERRIAM, KANSAS

Prepared by:

Cynthia Ehart Finance Director

Trish Wertz Accountant


COMPREHENSIVE ANNUAL FINANCIAL REPORT

For The Year Ended December 31, 2010

TABLE OF CONTENTS

Page

INTRODUCTORY SECTION Transmittal Letter...................................................................................................... 1 City Organizational Chart ......................................................................................... 4 Principal Officials ...................................................................................................... 5 Certificate of Achievement for Excellence in Financial Reporting............................ 6 FINANCIAL SECTION Report of Independent Auditors ............................................................................... 7 Management’s Discussion and Analysis.................................................................. 9 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets........................................................................................... 17 Statement of Activities .............................................................................................. 18 Fund Financial Statements: Balance Sheet – Governmental Funds .................................................................... 19 Reconciliation of the Balance Sheet to the Statement of Net Assets – Governmental Funds ........................................................................................... 22 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds ........................................................................... 23 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities ........................................................................................... 25 Notes to the Basic Financial Statements......................................................................... 26 Required Supplementary Information: Schedule of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual – General Fund ...................................................................... 46 Schedule of Funding Progress – Other Postemployment Benefits.......................... 47 Notes to Required Supplementary Information ........................................................ 48 Combining and Individual Fund Statements and Schedules: Non-major Governmental Funds: Fund Descriptions...... .............................................................................................. 51 Combining Balance Sheet ....................................................................................... 52 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ................................................................................................. 54 Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual: Special Highway Fund.......................................................................................... 56 Special Alcohol Fund ........................................................................................... 57 Special Parks and Recreation Fund..................................................................... 58 Transient Guest Tax Fund.................................................................................... 59

Page

Equipment Reserve Fund..................................................................................... 60 Risk Management Reserve Fund......................................................................... 61 General Obligation Debt Service Fund: Fund Description ...................................................................................................... 62 Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual ...... ........................................................................................... 63 General Fund: Fund Description .......... ........................................................................................... 65 Schedule of Expenditures – Budget and Actual – General Fund............................. 66 STATISTICAL SECTION Statistical Section – Overview of Contents............................................................... 69 Net Assets by Component – Last Seven Fiscal Years ........................................... 70 Changes in Net Assets – Last Seven Fiscal Years.................................................. 71 Fund Balances of Governmental Funds – Last Ten Fiscal Years............................ 72 Changes in Fund Balances, Governmental Funds – Last Ten Fiscal Years ........... 73 Tax by Revenue Source, Governmental Funds – Last Ten Fiscal Years .............. 74 Total City Taxable Sales by Category – Last Ten Fiscal Years............................... 75 Sales Tax Rates – Last Ten Fiscal Years ................................................................ 76 Assessed Value and Estimated Actual Value of Taxable Property – Last Ten Fiscal Years............................................................................................ 77 Property Tax Rates – Direct and Overlapping Governments – Last Ten Fiscal Years............................................................................................ 78 Principal Property Taxpayers – Current Year and Nine Years Ago......................... 79 Property Tax Levies and Collections – Last Ten Fiscal Years................................. 80 Ratios of Outstanding Debt by Type – Last Ten Fiscal Years ................................. 81 Ratios of General Bonded Debt Outstanding – Last Ten Fiscal Years.................... 82 Direct and Overlapping Governmental Activities Debt ............................................. 83 Legal Debt Margin Information – Last Ten Fiscal Years.......................................... 84 Pledged Revenue Coverage – Last Ten Fiscal Years ............................................. 85 Demographic and Economic Statistics – Last Ten Fiscal Years.............................. 86 Principal Employers – Current Year and Nine Years Ago ....................................... 87 Full-Time Equivalent City Government Employees by Function – Last Ten Fiscal Years............................................................................................. 88 Operating Indicators by Function – Last Ten Fiscal Years ...................................... 89 Capital Asset Statistics by Function – Last Ten Fiscal Years .................................. 90

CITY OF MERRIAM 9000 W. 62nd Terrace � Merriam, Kansas 66202-2815 Phone: 913-322-5500 � Fax: 913-322-5505 www.merriam.org � [email protected]

CITY OF MERRIAM June 15, 2011 To The Honorable Mayor, City Council, and Citizens of the City of Merriam: The Finance Department is pleased to submit the Comprehensive Annual Financial Report (CAFR) of the City of Merriam, Kansas for the fiscal year ended December 31, 2010. This report is submitted to you in compliance with the provisions of Kansas statutes which require an annual audit. Responsibility to report financial data that is complete and accurate rests with the management of the City. It is our belief that the information reported in this document fairly presents the financial position of the City in all material aspects on a Government-wide and a Fund basis. To enhance the reader’s understanding of these financial statements, note disclosures have been included as an integral part of this document. Management of the City is responsible for establishing and maintaining internal controls designed to ensure that the assets of the City are protected from loss, theft or misuse and to ensure that adequate accounting data is compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles (GAAP) in the United States of America. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived and (2) the valuation of costs and benefits requires estimates and judgments by management. The independent auditing firm of Cudney, Ecord, McEnroe & Mullane, LLC has audited the City of Merriam’s financial statements. The goal of the independent audit was to provide reasonable assurance that the City’s financial statements for the fiscal year ended December 31, 2010, are free of material misstatements. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the Government-wide and Fund Financial Statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The City management’s narrative on the financial activities of the City for the fiscal year is in the Management’s Discussion and Analysis (MD&A), immediately following the Independent Auditor’s Report. This letter of transmittal is written to complement the MD&A and the financial statements, and should be read from that perspective and in conjunction with all other sections of the CAFR. Profile of the City General Information: The City of Merriam is located in northeast Johnson County, approximately eight miles from downtown Kansas City, Missouri, and is part of the metropolitan Kansas City area. The City of Merriam is built at the former location of Merriam Park, a major amusement park in the late 1800’s that stood at the site of what is now Shawnee Mission Parkway and Interstate-35. The area was originally settled after the Civil War and now encompasses 4.5 square miles and has a population of 11,003. Merriam was incorporated as a third class city on October 23, 1950 and became a second-class city on January 18, 1957. The City operates under a non-partisan Mayor/Council form of government with the addition of a City Administrator. More information about elections and appointments may be found in Note 1 of the Notes to the Basic Financial Statements. The City of Merriam provides its citizens with a wide variety of services, including: police and fire protection, cultural and recreational activities, construction and maintenance of the City’s facilities, parks, street network

and drainage systems, snow removal, building and residential code enforcement, city planning and zoning, and court services. Component Units: In evaluating the City as a reporting entity, management has considered all potential component units. Such component units would include organizations for which the primary government is financially accountable, and other organizations whose relationships with the primary government are such that the City's financial statements would be misleading or incomplete if excluded. The definition of the reporting entity is based primarily on financial accountability as distinct from strictly legal relationships. Based on the evaluation criteria, there are no organizations related to the City that should be accounted for in the financial statements. Budgetary Control: In addition to accounting and internal controls, the City maintains budgetary controls. The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the governing body. Kansas statutes require that an annual operating budget be legally adopted for the General Fund, Special Revenue Funds (unless specifically exempted by statute), and the General Obligation Bond Debt Service Fund. The City also maintains an encumbrance accounting system as one technique of accomplishing budgetary control. See Note 1, Budgetary Basis Accounting and Information, in the Notes to the Basic Financial Statements for additional information. Factors Affecting Financial Condition Local economy: Merriam’s location along the highly visible Interstate-35 corridor in Kansas City contributes to strong sales per square mile. Merriam businesses have averaged $507 million in annual sales over the last five years. This translates into approximately $113 million in sales per square mile and is due to the presence of several large auto dealerships in the City, as well as the success of the Merriam Town Center retail area. However, effects of the recent recession linger for the City. Sales taxes declined an additional 2% in 2010 following a 10% decline in 2009. Sales tax trends for early 2011 show some improvement over the prior year. Net assessed property valuations have declined over 7% since 2008 and preliminary valuations for 2011 indicate additional, though smaller declines, for 2011. Total employment in Merriam is estimated at 13,500 jobs. The county unemployment rate for 2010 is 6.5%, with an average of approximately 4.6% over the last 10 years. Two of the County's major employers are located in the City: Shawnee Mission Medical Center and GE Capital Credit. Private redevelopment of Shawnee Mission Medical Center continues and will include the addition of the Women’s Care Facility. Opportunities for future redevelopment exist within the City. Public infrastructure improvements have been completed for two projects adjacent to I-35, Merriam Pointe and Merriam Village. Additionally, the City has provided incentives to developers for private construction. Although the projects have encountered numerous obstacles including a soft market for retail development, there has been recent activity. Plans for construction of a nationally known fast-food restaurant and a convenience store have been submitted for Merriam Village. A new auto dealership facility will be constructed at Merriam Pointe in 2012, per the terms of the amended redevelopment agreement. Two new residential developments have been long-planned although construction has been slow to commence: the 45-unit Pointe at Prairie Haven townhomes and the 41-unit Timber Ridge single family homes development. The timing of construction for the Pointe at Prairie Haven townhomes is unknown, though a developer has submitted an application to the Kansas Housing Resources Corporation for Housing Tax Credits to finance the construction of an age-restricted housing development. Construction of model homes for the Timber Ridge development is anticipated in late 2011. Long-term financial planning: The City of Merriam prepares five-year financial projections of its capital improvement program (CIP). The CIP includes stormwater drainage improvements for Shawnee Creek, Meyer Creek, and South Quaker Creek, plus upgrades to residential streets. The 2011-2016 plan includes projects totaling an estimated $40 million — a significant amount for a city of Merriam’s size. The City Council receives staff and citizen input on the prioritization of capital improvement needs which is used to set priorities in preparing the CIP.

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The CIP is funded by sales tax transfers from the General Fund in accordance with Council policy, a dedicated city sales tax of ¼ cent, available tax increment, and supplemental grants from federal, state and county sources. The current CIP plan calls for only one debt issue of $1.5 million, because most projects will be completed on a “pay-as-you-go” basis. Reserves and Contingencies: The City maintains a Reserve and Fund Balance Policy that requires General Fund reserves to equal or exceed the greater of 15% of budgeted revenues or 2 months of budgeted operating expenditures. As of December 31, 2010, General Fund reserves exceed requirements with 40.1% of budgeted revenues. The policy also requires that the Risk Management reserves equal or exceed 7.5% of General Fund budgeted revenues. Risk Management reserves ended the year at just 6.8% of budgeted revenues. City Council acknowledged a conflict with their policy in the preparation of the 2011 budget, with Risk Management reserves projected to equal 6.6% of budgeted revenues for 2011. Relevant financial policies: There were no significant effects in the current year from the application of relevant financial policies. Awards and Acknowledgments The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Merriam for its comprehensive annual financial report for the fiscal year ended December 31, 2009. This was the seventeenth consecutive year that the government has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The City is also the recipient of the GFOA’s Distinguished Budget Presentation Award for its annual budget for the fiscal year beginning January 1, 2011. In order to receive this award, a governmental unit must publish a budget document that meets program criteria as a policy document, as a financial plan, as an operations guide, and as a communication device. The Distinguished Budget Award is valid for a period of one year only. We believe that our current budget continues to conform to program requirements and we are submitting it to the GFOA to determine its eligibility for another award. We offer special thanks to all City staff who contributed to preparing this report on a timely basis, particularly Trish Wertz, Accountant, and Christy Playter, Communications Coordinator. We wish to acknowledge the support given by the Mayor and City Council for their interest in maintaining the highest standard of financial reporting. They have given particular emphasis to the planning and operations of the financial function of the City, resulting in a very responsible and progressive financial operation. _______________________ __________________________ Cynthia Ehart Phil Lammers Finance Director City Administrator

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June 2011

City Organizational Chart

Citizens of Merriam

Mayor Ken Sissom

City Council Chad Rowe

John Canterbury John Crabtree

Al Frisby Christine Evans Hands

Nancy Hupp Gayle Stephens Pam Bertoncin

Legal Michelle Daise, City Attorney

City Prosecutor Elizabeth Boldt

Municipal Judge John Harvell

City Treasurer Cynthia Ehart

Boards & Commissions Planning Commission Parks & Recreation

Advisory Board Board of Zoning Appeals

Board of Structure Appeals Visitors Commission

Administration Phil Lammers,

City Administrator

Public Works Randall Carroll,

Director

Finance Cynthia Ehart,

Director

City Clerk Juliana Pinnick,

City Clerk

Parks & Recreation Susan Hayden,

Director

Fire Bob Pape, Fire Chief

Police William Lietzke,

Police Chief

Community Development Bryan Dyer,

Director

City Engineer Hye Jin Lee

4

PRINCIPAL OFFICIALS

MAYOR AND CITY COUNCIL

LENGTH OF SERVICE

TERM EXPIRES

POSITION

Ken Sissom John Canterbury Chad Rowe Al Frisby John Crabtree Nancy Hupp Christine Evans Hands Pam Bertoncin Gayle Stephens

2 Years <1 Year 6 Years <1Year 6 Years 8 Years 6 Years 4 Years 10 Years

2013 2015 2013 2015 2013 2015 2013 2015 2013

Mayor Ward 1 Ward 1 Ward 2 Ward 2 Ward 3 Ward 3 Ward 4 Ward 4

APPOINTED OFFICIALS

POSITION

LENGTH OF SERVICE TO

CITY

GOVERNMENT

SERVICE Phil Lammers Bob Pape William Lietzke Randy Carroll Susan Hayden Michelle Daise Juli Pinnick Cynthia Ehart Bryan Dyer Hye Jin Lee

City Administrator Fire Chief Police Chief Public Works Director Parks & Recreation Director City Attorney City Clerk Finance Director / City Treasurer Community Development Director City Engineer

3 34 31 29 21 11 7 7 3 2

31 34 31 29 25 14 13 7 11 10

Mission Statement: Our primary values, as a city, are to achieve results and reach our goals exceeding the minimum and leaving things better than we found them. We strive to be the best and to serve the public fairly, honestly, and openly by working together with our citizens. We work to provide local government of unquestioned integrity with a conservative tone in our fiscal planning while providing first class service and facilities.

5

6

Certificate of Achievement for Excellence

in Financial Reporting

Presented to

City of Merriam Kansas

For its Comprehensive Annual

Financial Report

for the Fiscal Year Ended

December 31,2009

A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers

Association of the United States and Canada to government units and public employee retirement

systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in governmeut accounting

and financial reporting.

Executive Director

Certificate of Achievement for Excellence

in Financial Reporting

Presented to

City of Merriam Kansas

For its Comprehensive Annual

Financial Report

for the Fiscal Year Ended

December 31,2009

A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers

Association of the United States and Canada to government units and public employee retirement

systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in governmeut accounting

and financial reporting.

Executive Director

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CUDNEY, ECORD, McENROE & MULLANE L.L.c. CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITOR'S REPORT

The Honorable Mayor and Members of the City Council

City of Merriam, Kansas

We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Merriam, Kansas (the City), as of and for the year ended December 31,2010, which collectively comprise the City's basic financial statements as listed in the accompanying table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express opinions on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 opinions.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Merriam, Kansas as of December 31,2010, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Management's Discussion and Analysis and the required supplementary information as listed in the table of contents are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

1310 CARONDELET DRIVE, SUlTE 333, KANSAS CITY, MiSSOURI 64114, 816/942-3133

CUDNEY, ECORD, McENROE & MULLANE L.L.c. CERTIFIED PUBLIC ACCOUNTANTS

INDEPENDENT AUDITOR'S REPORT

The Honorable Mayor and Members of the City Council


We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Merriam, Kansas (the City), as of and for the year ended December 31,2010, which collectively comprise the City's basic financial statements as listed in the accompanying table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express opinions on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 opinions.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Merriam, Kansas as of December 31,2010, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Management's Discussion and Analysis and the required supplementary information as listed in the table of contents are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

1310 CARONDELET DRIVE, SUlTE 333, KANSAS CITY, MiSSOURI 64114, 816/942-3133

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Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, the combining and individual fund financial statements and schedules, and the statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements and schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them.

June 3, 2011

MANAGEMENT’S DISCUSSION AND ANALYSIS

This section of the City of Merriam’s (the City) financial statements provides a narrative overview and analysis of the City’s financial activities for the fiscal year ended December 31, 2010. This discussion follows guidelines prescribed by the Governmental Accounting Standards Board (GASB) Statement 34, which enhances comparability between governments. The information presented here should be read in conjunction with the accompanying basic financial statements and the notes to those basic financial statements. FINANCIAL HIGHLIGHTS • The assets of the City exceeded its liabilities at the close of the most recent fiscal year by

$76,653,587 (net assets). • The City’s total net assets increased during this fiscal year by $3,573,091 due to the completion

of four street and bridge projects combined with repayment of general obligation debt associated with capital assets. In addition, the unrestricted net assets component increased due to the net reduction of non-capital related TIF liabilities.

• At the close of 2010, the City’s governmental funds reported combined ending fund balances of

$15,516,123, an increase of $786,836 over the prior year. This was primarily due to a less aggressive construction schedule for the I-35 Redevelopment District.

• At the close of 2010, unreserved fund balance for the General Fund was $4,965,949, or 48.4% of

total General Fund operating expenditures. • The City’s total general obligation debt decreased by $2,545,000 (13.9%) during 2010 due to

repayment of outstanding debt. During the year, the City issued $3,585,000 in general obligation bonds to refund an outstanding issue.

OVERVIEW OF THE FINANCIAL STATEMENTS Management’s Discussion and Analysis is intended to serve as an introduction to the City’s basic financial statements, which include three components: 1) Government-wide financial statements, 2) Fund financial statements and 3) Notes to the basic financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. These statements use the accrual basis of accounting, which means that the current year’s revenues and expenses are recorded as they are earned or incurred, regardless of when cash is received or paid. The Statement of Net Assets presents information on all of the City’s assets and liabilities, with the difference between the two reported as net assets. These statements include infrastructure assets as well as all known liabilities, including long-term debt. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The Statement of Activities provides information detailing how the City’s net assets changed during 2010.

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Fund Financial Statements A fund is a fiscal entity with a set of self-balancing accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City uses fund accounting to demonstrate compliance with legal requirements, such as state statutes or bond covenants. There are three types of funds: governmental, proprietary, and fiduciary. All of the City’s funds are classified as governmental funds. Fund accounting focuses on 1) cash flow and how financial assets can readily be converted to available resources, and 2) the balances left at the end of the fiscal year for future spending. The focus is on the budgetary, short-term financial picture of the reported operations rather than on the longer term economic picture of the City as a whole. Governmental funds are reported using the modified accrual basis of accounting, which measures cash and other financial assets that can readily be converted to cash. Under this basis of accounting, revenues are recognized when they become measurable and available, and expenditures are generally recognized when the related fund liability is incurred. Such information may be useful in determining what financial resources are available in the near future to finance the City’s programs. Therefore, both the government-wide and fund financial statements present different useful aspects of the City’s financial picture. They are designed to be compared and interpreted together. The reconciliations at the end of the fund financial statements detail the relationship and differences between the two types of financial statements. Notes to the Basic Financial Statements The notes to the basic financial statements are an integral part of the basic financial statements. They provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. Other Supplementary Information Required budgetary data related to the General Fund, combining statements for non-major governmental funds and fund budgetary schedules are presented immediately following the notes to the basic financial statements. GOVERNMENT-WIDE FINANCIAL ANALYSIS

2010 2009Current and other assets 25,793,941$ 26,678,596$ Capital assets 91,094,238 91,083,215 Total assets 116,888,179 117,761,811

Long-term liabilities 32,866,465 36,061,031 Other liabilities 7,368,127 8,620,284 Total liabilities 40,234,592 44,681,315

Net assets:Invested in capital assets, net of related debt 78,094,202 75,940,313 Restricted 5,331,592 4,471,514 Unrestricted (6,772,207) (7,331,331) Total net assets 76,653,587$ 73,080,496$

Condensed Statement of Net Assets

GovernmentalActivities

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Analysis of Net Assets As previously mentioned, net assets may serve as a useful indicator of a government’s financial position. The City’s assets exceeded liabilities by $76,653,587 at the close of 2010. The largest portion of the City’s net assets reflects its investment of $78,094,202 in capital assets (e.g. land, buildings, equipment and infrastructure) less any related outstanding debt used to acquire those assets. These assets are used on an ongoing basis to provide services to citizens, and are thus not available for future spending. The City’s investment in its capital assets is reported net of related debt; however, the resources needed to repay this debt must come from other sources. The capital assets themselves cannot be liquidated to satisfy these liabilities. An additional $5,331,592 of the City’s net assets represents resources that are subject to external restrictions on how they may be used. Assets restricted for capital projects include sales tax revenues and funds collected in the City’s I-35 Redevelopment District restricted by statute for capital improvements. The portion of the City’s net assets classified as unrestricted is ($6,772,207). Were it not for $16,348,657 in tax increment financing bonds and other contractual obligations, unrestricted net assets would be $9,576,450. These bonds and contractual obligations are considered fully paid on their maturity date, regardless of the amount of principal or interest that may be outstanding, in the event that property tax increment revenues are insufficient to fully retire the debt. However, they do not correspond to any City-owned capital asset.

2010 2009Revenues:Program revenues: Charges for services 1,701,187$ 1,437,443$ Operating grants and contributions 355,361 313,871 Capital grants and contributions 2,103,160 249,749 General revenues: Property taxes 7,173,989 7,339,108 Sales taxes 7,246,064 7,387,073 Other taxes 733,491 770,388 Franchise taxes 1,325,346 1,136,796 Miscellaneous 378,696 475,508 Total revenues 21,017,294 19,109,936

Expenses: General government 2,118,597 2,065,512 Law enforcement 3,252,442 3,107,819 Fire prevention and control 2,065,774 1,934,384 Public works 1,907,778 1,933,778 Capital improvement program 3,710,509 3,272,407 Community development 1,945,042 3,763,792 Health and welfare 23,827 27,746 Culture and recreation 1,428,918 1,402,631 Interest on long-term debt 991,316 1,228,714 Total expenses 17,444,203 18,736,783 Increase in net assets 3,573,091 373,153 Net assets - beginning of year 73,080,496 72,707,343 Net assets - end of year 76,653,587$ 73,080,496$


Condensed Statement of Changes in Net Assets

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Analysis of Changes in Net Assets The City’s net assets increased during the fiscal year by a total of $3,573,091 including these changes: • Investment in capital assets increased by $2,153,889 due to the repayment of general obligation

debt associated with capital assets. • Net assets restricted for capital projects increased by $970,150 primarily due to a less aggressive

construction schedule for the I-35 Redevelopment District. • Unrestricted net assets increased by $559,124 due to the net reduction of non-capital related TIF

liabilities.

$0$500

$1,000$1,500$2,000$2,500$3,000$3,500$4,000

General Government

Law Enforcement Fire Prevention and Control

Public Works Capital Improvement

Program

Community Development

Culture and Recreation

Interest on Long-Term Debt

Expenses and Program RevenuesIn thousands ($,000's)

Program revenuesExpenses

Property tax34%

Sales tax34%

Other taxes3%

Franchise taxes6%

Miscellaneous2%

Charges for services

8%

Operating and capital grants

12%

Revenues by Source

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The charts on the previous page illustrate Merriam’s governmental expenses and program revenues by function, and revenues by source. The Capital Improvement Program represents the largest portion of 2010 expenses, followed by Law Enforcement. Operating grants and contributions for 2010 were largely due to federal and county revenues and cost sharing contributions received for street and bridge projects. Community development expenses for 2010 included the addition of $1,108,386 for non-capital related TIF expenses for redevelopment projects while such amounts totaled $2,903,133 for 2009. Other revenues and expense functions fall within anticipated ranges. For governmental activities overall, sales taxes are the largest source of revenue (34.5%) followed closely by property taxes (34.1%). ANALYSIS OF THE FUND FINANCIAL STATEMENTS The City uses fund accounting to ensure and demonstrate compliance with finance related legal requirements. Types of governmental funds reported by the City include the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Projects Funds. At the end of 2010, the City’s governmental funds reported combined ending fund balances of $15,516,123. Unreserved fund balance is $14,688,554 (95% of total), of which $4,465,185 has been designated for subsequent year’s expenditures, $7,267,772 has been designated for capital improvement projects, with the remainder available to be spent at the City’s discretion. Fund balances of $827,569 have been previously committed and are therefore not available for spending. The General Fund is the primary operating fund for the City. At the end of 2010, the total fund balance of the General Fund was $4,977,647. Almost the entire amount is unreserved, with $3,536,349 designated for subsequent year’s expenditures, and $1,429,600 available to be spent at the City’s discretion. The fund balance for the City’s General Fund increased by $63,553 during the fiscal year. A larger than expected beginning fund balance was offset by the increased cost of personal services. The Capital Improvement Fund had a decrease in fund balance of $93,727 due to a high level of construction activity offset by a reduction in transfers out necessary to fund debt service obligations. The fund balance for the I-35 Redevelopment District Fund increased by $675,610 due to limited construction of projects within the district. Construction projects were postponed to provide for debt service payments in the event that special assessment payments due from a bankrupt developer were not received by the City. No payments are delinquent at this time. Other Governmental Funds increased by $148,144 of which $84,555 was attributable to the Equipment Reserve Fund. The fund anticipates 2011 major equipment purchases, including a fire department pumper truck. GENERAL FUND BUDGETARY HIGHLIGHTS The City’s budget was not amended during 2010; therefore, the original budget and the final budget are the same. Variances between the final budget and actual amounts are not expected to impact either liquidity or future services. The City budgets for reserves and contingency, but does not expect to expend more than a small amount of these funds. This creates a large positive budget variance each year. Personal services also show a positive variance due to budgeting for a full staff but actually having vacancies in some positions during the year. The budget for personal services includes various estimates for benefit rates including medical insurance and workers compensation, which vary from actual rates.

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CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The City’s investment in capital assets, net of accumulated depreciation, was $91,094,238 as of December 31, 2010. These capital assets include land, buildings, improvements, equipment, drainage improvements, streets, bridges, streetlights, and traffic signals.

2010 2009

Land 12,603,732$ 12,603,732$ Artwork 24,000 24,000 Construction in progress 212,975 1,928,328 Buildings 9,171,088 9,522,411 Improvements other than buildings 2,559,772 2,700,696 Equipment 2,529,432 2,439,162 Infrastructure 63,993,239 61,864,886 Total 91,094,238$ 91,083,215$


Capital Assets(net of depreciation)

Infrastructure additions for 2010 include the completion of Residential Street Group II, Residential Street Group III South, 47th Street and Drainage project, and rehabilitation of the Shawnee Mission Parkway Bridge at Mastin Street. Three street overlay projects were also constructed using Federal Economic Stimulus funds (American Recovery and Reinvestment Act or ARRA). Equipment additions included replacement of radios for police, fire and public works departments. Additional information about the City’s capital assets may be found in Note 2 to the basic financial statements. Long-Term Debt At December 31, 2010 the City had total long-term bonds outstanding of $23,218,972. This amount included $15,830,000 of general obligation bonds backed by the full faith and credit of the City. The general obligation bonds include a 2010 refunding issue for $3,585,000 on Series 2003 general obligation bonds. The refunding issue matched the maturity schedule for the original bonds, but will reduce interest expense due to lower interest rates. The City has an additional $7,388,972 in outstanding special obligation tax increment revenue bonds. These bonds are repaid solely with property tax increment generated in the project area and do not constitute a general obligation of the City. The City also has tax increment contractual liabilities outstanding of $8,959,685. The City’s total long-term bonds payable decreased by $3,845,000 during the fiscal year due to principal reductions on outstanding bond issues. Moody’s Investor Services rated the City’s most recent bond issue Aa2 and affirmed this rating for all existing debt. Kansas statutes limit the amount of general obligation debt a governmental entity to 30% of its total assessed valuation. The current debt limitation for the City is $49,255,580. Additional information on the City’s long-term debt can be found in Note 4 of the basic financial statements.

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2010 2009

General obligation bonds 15,830,000$ 18,375,000$ Tax increment revenue bonds 2,275,450 3,575,450 Subordinate special obligation tax increment revenue bonds 5,113,522 5,113,522 Total 23,218,972$ 27,063,972$


Outstanding BondsGeneral Obligation and Revenue Bonds

Economic Factors The City experienced an additional 2.99% reduction in net assessed property valuations and a 2% reduction in sales tax collections during 2010. Preliminary property valuations for 2011 indicate additional declines may occur. Sales tax collections for early 2011 show improvement over the prior year and with the highest sales tax pull factor in Kansas, Merriam continues to serve a customer base of over 3 times its population. Although the market for new retail development is currently soft, the City offers significant area along Interstate-35 with potential for future development. The City has completed improvements to public infrastructure to facilitate such development and is working with developers in the following redevelopment projects in the Interstate-35 corridor: • Merriam Pointe: In September 2004 the City entered into a redevelopment agreement with

Merriam Pointe, LLC to redevelop a 35-acre parcel at the southwest corner of 67th Street and I-35 from a light industrial use to a 275,000 square foot retail center. The City has provided $6.5 million in general obligation bond proceeds and $2 million in other resources to assist with public infrastructure improvements and eligible redevelopment costs. Additionally the City has committed to provide future TIF increments from property taxes. Merriam Pointe, LLC recently transferred their rights and obligations to Merriam Investors, LLC. The City entered into an amended and restated redevelopment agreement with Merriam Investors, LLC and Hendrick Automotive Group on March 28, 2011. The new developers will construct a 62,000 square foot auto dealership where an existing Merriam business is expected to relocate by December 31, 2012 according to the terms of the revised agreement.

• Merriam Village: The City executed a redevelopment agreement in March 2005 with DDR

Merriam Village, LLC to redevelop 34 acres at the southeast corner of Johnson Drive and I-35. This redevelopment plans to convert outdated residential uses to 300,000 square feet of retail space as well as condominiums and affordable senior housing. This project is adjacent to the established Merriam Town Center shopping area on the northeast corner of Johnson Drive and I-35. The new project will be a complementary expansion of the existing retail area into a regional shopping attraction. The City has committed $5.9 million in general obligation bonds for public infrastructure improvements and $2.05 million in other resources to assist with eligible redevelopment costs. Additionally the City has committed to provide future TIF increments from property taxes. No anchor tenants have been announced for the development, but the City is reviewing plans for the construction of a nationally known fast-food restaurant and convenience store on parcels in the development.

REQUESTS FOR INFORMATION This financial report is designed to provide an overview of the City’s finances for all interested parties. Questions concerning any of the information provided in the report or requests for additional information should be directed to the Finance Director, City of Merriam, 9000 W. 62nd Terrace, Merriam, KS 66202.

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BASIC

FINANCIAL STATEMENTS

See accompanying notes to the basic financial statements.


AssetsDeposits and investments 13,697,124$ Receivables - (net of allowance for uncollectibles): Property taxes 6,327,577 Sales and other taxes 1,528,846 Intergovernmental 382,180 Special assessments - current 320,000 Interest and other 88,115 Restricted investments 762,922 Special assessments - noncurrent 2,580,000 Bond issuance costs, net 107,177 Capital assets: Land and other capital assets, non-depreciable 12,840,707 Other capital assets, net of depreciation 78,253,531

Total assets 116,888,179

LiabilitiesAccounts and retainage payable 796,207 Accrued payroll and related liabilities 105,277 Unearned revenue 6,343,645 Accrued interest payable 122,998 Long-term liabilities: Due within one year 4,652,407 Due in more than one year 28,214,058

Total liabilities 40,234,592

Net AssetsInvested in capital assets, net of related debt 78,094,202 Restricted for: Capital projects 4,629,979 Debt service 701,613 Unrestricted (6,772,207)

Total net assets 76,653,587$

City of Merriam, KansasStatement of Net Assets

December 31, 2010

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Net (Expense) Operating Capital Revenue and

Charges for Grants and Grants and ChangesFunctions/Programs Expenses Services Contributions Contributions in Net AssetsGovernmental Activities: General government 2,118,597$ 185,749$ 6,580$ 23,576$ (1,902,692)$ Law enforcement 3,252,442 1,075,580 33,385 56,775 (2,086,702) Fire prevention and control 2,065,774 692 - 19,365 (2,045,717) Public works 1,907,778 - 296,924 - (1,610,854) Capital improvement program 3,710,509 - - 2,003,444 (1,707,065) Community development 1,945,042 170,830 - - (1,774,212) Health and welfare 23,827 - - - (23,827) Culture and recreation 1,428,918 268,336 18,472 - (1,142,110) Interest on long-term debt 991,316 - - - (991,316) Total primary government 17,444,203$ 1,701,187$ 355,361$ 2,103,160$ (13,284,495)

General revenues: Taxes: Property taxes, levied for general purposes 3,541,841 Property taxes, levied for debt service 3,632,148 Sales taxes 7,246,064 Transient guest taxes 287,678 Franchise taxes 1,325,346 Tax increment financing replacement taxes 445,813 Intergovernmental not restricted to a specific program 18,472 Unrestricted investment earnings 248,880 Miscellaneous 111,344 Total general revenue 16,857,586 Change in net assets 3,573,091 Net assets-beginning of year 73,080,496 Net assets-end of year 76,653,587$

Program Revenues

City of Merriam, KansasStatement of Activities

For the Year Ended December 31, 2010

18

See the accompanying notes to the basic financial statements.

I-35Capital Redevelopment

General Improvements District

Deposits and investments 4,138,410$ 4,202,656$ 2,861,365$ Receivables (net of allowance for uncollectibles)

Property tax 3,111,876 - - Sales and other taxes 1,241,877 182,719 - Intergovernmental - 305,803 - Interest and miscellaneous 18,248 17,403 6,627 Special assessments - - -

Due from other funds 55,800 19,200 - Restricted investments - - -

Total assets 8,566,211$ 4,727,781$ 2,867,992$

Liabilities:Accounts and retainage payable 355,343$ 215,531$ 112,470$ Accrued payroll 105,277 - - Deferred revenue 3,127,944 - - Due to other funds - - -

Total liabilities 3,588,564 215,531 112,470

Fund balances:Reserved for encumbrances 11,698 - - Reserved for debt service - - - Unreserved:

Designated for subsequent year's expenditures - General fund 3,536,349 - - Non-major special revenue funds - - - Designated for capital improvements - 4,512,250 2,755,522 Undesignated 1,429,600 - - Undesignated reported in non-major funds: Special revenue funds - - -

Total fund balances 4,977,647 4,512,250 2,755,522

Total liabilities and fund balances 8,566,211$ 4,727,781$ 2,867,992$

Assets:

City of Merriam, KansasBalance Sheet

Governmental FundsDecember 31, 2010

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See the accompanying notes to the basic financial statements.

Tax TaxGeneral Increment Increment Other Total

Obligation Revenue Contractual Governmental GovernmentalBonds Bonds Liability Funds Funds

47,918$ -$ 75,600$ 2,371,175$ 13,697,124$

294,728 1,321,189 1,599,784 - 6,327,577 - - - 104,250 1,528,846 - - - 76,377 382,180 - - 13,409 6,916 62,603

2,900,000 - - - 2,900,000 - - - - 75,000 - 762,922 - - 762,922

3,242,646$ 2,084,111$ 1,688,793$ 2,558,718$ 25,736,252$

-$ -$ 88,709$ 24,154$ 796,207$ - - - - 105,277

3,194,728 1,321,189 1,599,784 - 9,243,645 - - - 75,000 75,000

3,194,728 1,321,189 1,688,493 99,154 10,220,129

- - - 4,731 16,429 47,918 762,922 300 - 811,140

- - - - 3,536,349 - - - 928,836 928,836 - - - - 7,267,772 - - - - 1,429,600

- - - 1,525,997 1,525,997

47,918 762,922 300 2,459,564 15,516,123

3,242,646$ 2,084,111$ 1,688,793$ 2,558,718$ 25,736,252$

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2121


Amounts reported for governmental activities in the Statement of Net Assets aredifferent because:

Ending fund balances - total governmental funds 15,516,123$

Governmental funds report capital outlays as expenditures. However, in the Statement of Net Assets the cost of those assets is capitalized and shown at cost, net of accumulated depreciation. This is the amount of net capital assets reported in the Statement of Net Assets 91,094,238

Long-term assets are not available to pay for current period expenditures and are therefore deferred in the fund statements 2,925,512

Long-term liabilities are not due and payable in the current period and, accordingly, are not reported as liabilities within the fund financial statements. Interest on long-term debt is not accrued in governmental funds, but rather is recognized as an expenditure when due. Discounts, premiums, deferred amounts on refunding and bond issuance costs are reported in the governmental fund financial statements when the debt was issued, whereas these amounts are deferred and amortized over the life of the debt in the government-wide financial statements. Balances as of December 31, 2010 are:

Bond issuance costs, net 107,177 Accrued interest payable (122,998) Long-term liabilities (32,866,465)

Total net assets of governmental activities 76,653,587$

City of Merriam, KansasReconciliation of the Balance Sheet to the Statement of Net Assets

Governmental FundsDecember 31, 2010

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I-35Capital Redevelopment

General Improvements DistrictRevenues:

Ad valorem taxes 3,541,841$ -$ -$ Tax increment financing replacement taxes - - - Special assessments - - - Sales tax 6,169,046 1,077,018 - Transient guest tax - - - Intergovernmental 34,159 678,867 - Licenses, permits and fees 356,579 - - Franchise taxes 1,325,346 - - Charges for services 251,306 - - Fines, forfeitures and penalties 1,049,970 - - Use of money and property 22,679 65,715 27,861 Miscellaneous 102,427 412 -

Total revenues 12,853,353 1,822,012 27,861

Expenditures:Current:

General government 1,899,942 - - Law enforcement 3,032,005 - - Fire prevention and control 1,973,464 - - Public works 1,730,056 - - Capital improvement program - 189,541 - Community development 645,274 - - Health and welfare 23,827 - - Culture and recreation 946,644 - -

Capital outlay - 2,466,986 16,448 Debt service:

Principal retirements - - - Interest, fiscal charges and issue costs - 105,688 -

Total expenditures 10,251,212 2,762,215 16,448 Excess (deficiency) of revenues

over (under) expenditures 2,602,141 (940,203) 11,413

Other financing sources (uses):Proceeds from sale of capital assets - - - Issuance of refunding bonds - 3,585,000 - Premium on refunding bonds - 97,846 - Redemption of refunded bonds - (3,570,000) - Transfers in 90,000 2,959,099 1,476,708 Transfers out (2,628,588) (2,225,469) (812,511)

Total other financing sources (uses) (2,538,588) 846,476 664,197

63,553 (93,727) 675,610

Fund balances, beginning of year 4,914,094 4,605,977 2,079,912

Fund balances, end of year 4,977,647$ 4,512,250$ 2,755,522$

Net change in fund balances

City of Merriam, KansasStatement of Revenues, Expenditures and Changes in Fund Balances

Governmental FundsFor the Year Ended December 31, 2010

23


Tax TaxGeneral Increment Increment Other Total

Obligation Revenue Contractual Governmental GovernmentalBonds Bonds Liability Funds Funds

337,162$ 1,490,211$ 1,804,775$ -$ 7,173,989$ - 190,593 255,220 - 445,813

563,414 - - - 563,414 - - - - 7,246,064 - - - 287,678 287,678 - - - 380,034 1,093,060 - - - - 356,579 - - - - 1,325,346 - - - 22,663 273,969 - - - 20,669 1,070,639

5,411 17 - 17,011 138,694 - - - 2,410 105,249

905,987 1,680,821 2,059,995 730,465 20,080,494

- - 17,456 341,877 2,259,275 - - - 71,948 3,103,953 - - - - 1,973,464 - - - 280,399 2,010,455 - - - - 189,541 - - - 111,338 756,612 - - - - 23,827 - - - 200,966 1,147,610 - - - - 2,483,434

2,560,000 1,300,000 584,638 - 4,444,638

585,184 182,931 172,099 - 1,045,902 3,145,184 1,482,931 774,193 1,006,528 19,438,711

(2,239,197) 197,890 1,285,802 (276,063) 641,783

- - - 32,207 32,207 - - - - 3,585,000 - - - - 97,846 - - - (3,570,000)

2,225,469 - - 450,000 7,201,276 - (190,593) (1,286,115) (58,000) (7,201,276)

2,225,469 (190,593) (1,286,115) 424,207 145,053

(13,728) 7,297 (313) 148,144 786,836

61,646 755,625 613 2,311,420 14,729,287

47,918$ 762,922$ 300$ 2,459,564$ 15,516,123$

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See accompaning notes to the basic financial statements.

Amounts reported for governmental activities in the Statement of Activities aredifferent because:

Net changes in fund balances - total governmental funds 786,836$

Governmental funds report capital outlays as expenditures in the year acquired. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital additions exceeded depreciation in the current period. Capital additions 2,823,455 Depreciation expense (4,170,253)

Contributions of capital assets are reported as capital contributions in the Statement of Activities 1,383,933

Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. Disposition of assets (26,112) Change in deferred revenue and interest on special assessments (453,228)

The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the of long-term debt consumes the current financial resources of governmental funds. Neither transaction has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts and similar items when debt is first issued, whereas these amounts are deferred and amortized in the Statement of Activities. These amounts are the effect of these differences in the treatment of long-term debt and related items. Proceeds from the issuance of debt (3,682,846) Principal payments 8,014,638 Accrued interest expense 9,830 Bond premium amortization 37,363 Deferred amount on refunding amortization (7,928) Bond issuance costs, net 15,321

Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. TIF contractual liability (1,108,386) Change in compensated absences (46,274) Other post employment benefits (3,258)

Total changes in net assets of governmental activities 3,573,091$

City of Merriam, KansasReconciliation of the Statement of Revenues, Expenditures,

and Changes in Fund Balances of

For the Year Ended December 31, 2010Governmental Funds to the Statement of Activities

25

NOTES TO THE

BASIC

FINANCIAL STATEMENTS

City of Merriam, Kansas Notes to the Basic Financial Statements

December 31, 2010

Note 1: Summary of Significant Accounting Policies

The City of Merriam, Kansas (the City), was incorporated as a third class city on October 23, 1950 and was made a second class city on January 18, 1957. The City, with a population of 11,003, is located in northeast Johnson County and covers 4.5 square miles. The City operates under a non-partisan Mayor-Council form of government with the addition of a City Administrator. The Mayor is elected on an at-large basis and serves a four year term. The eight Council Members are elected by ward (two represent each of four wards) and serve four year terms of office. The City Administrator is appointed by the Mayor and City Council as the chief administrative officer of the City and is charged with the efficient and effective administration of the City. The City provides a host of services including general government, law enforcement, fire prevention and control, public works, community development, health and welfare, and cultural and recreation. The accounting and reporting policies of the City of Merriam, Kansas conform to accounting principles generally accepted in the United States of America. The more significant accounting and reporting policies and practices employed by the City are as follows:

A. Reporting Entity Generally accepted accounting principles require that the basic financial statements present the City (the primary government) and its component units. Component units are required to be included in the City’s reporting entity because of the significance of their operational or financial relationships with the City. Based on the evaluation criteria, there are no component units related to the City which should be accounted for in the basic financial statements. B. Basis of Presentation The City’s basic financial statements include both government-wide (reporting the City as a whole) and fund financial statements (reporting the City’s major funds).

Government-wide Financial Statements

The Statement of Net Assets and the Statement of Activities display information about the City as a whole. Governmental activities are generally financed through taxes, intergovernmental revenues, and other non-exchange transactions. Eliminations of interfund charges and balances have been made in these statements to minimize the double-counting of internal activities. The Statement of Activities presents a comparison between direct expenses and program revenues for each program of the governmental activities. Direct expenses are specifically associated with a service, program or department and are therefore clearly identifiable to a particular function. Program revenues include charges paid by the recipients of the goods or services offered by the programs and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues. The comparison of program revenues and expenses identifies the extent to which each program is self-financing or draws from the general revenues of the City. The City’s net assets are reported in three parts—invested in capital assets, net of related debt; restricted net assets; and unrestricted net assets. The City first utilizes restricted resources to finance qualifying activities. At December 31, 2010, net assets invested in capital assets, net of related debt, excludes $23,777 of unspent debt proceeds.

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The government-wide focus is more on the sustainability of the City as an entity and the change in the City’s net assets resulting from the current year’s activities.

Fund Financial Statements

Fund financial statements report detailed information about the City. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. Non-major funds are aggregated and presented in a single column. The major governmental funds of the City are described below:

General Fund

is the main operating fund of the City which accounts for all financial transactions not accounted for in other funds. The general operating expenditures, fixed charges and capital improvement costs that are not paid through other funds are financed through revenues received by the General Fund.

Capital Improvement Fund

is used to account for all monies derived from 50% of the City 1% sales tax, 100% of special sales taxes, grants and contributions of outside agencies used to finance infrastructure improvements in the City.

I-35 Redevelopment District

is used to account for all monies derived from property tax incremental financing (TIF) revenue received from properties located in a redevelopment district.

General Obligation Bonds Fund

is used to account for resources to be used for the payment of principal, interest and related costs of the general obligation bonds and certain other long-term obligations of the City.

Tax Increment Revenue Bonds Fund

is used to account for revenues received from the property tax increment of a tax increment financing (TIF) project to be used for the payment of principal, interest and related costs of the revenue bonds that financed improvements within the district.

Tax Increment Contractual Liability Fund

is used to account for revenues received from the property tax increments of tax increment financing (TIF) projects to be used for the payment of contractual obligations to certain entities that have made improvements within the district.

C. Measurement Focus and Basis of Accounting

Government-wide Financial Statements

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Non-exchange transactions, in which the City gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, grants, sales tax, and donations are recognized in the fiscal year in which all eligibility requirements have been satisfied. This approach differs from the manner in which governmental fund financial statements are prepared. Therefore, the governmental fund financial statements include a reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for governmental funds.

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Governmental Fund Financial Statements

All governmental funds are accounted for using the modified accrual basis of accounting and the current financial resources measurement focus. Under this basis, revenues are recognized in the accounting period in which they become measurable and available. Expenditures are recognized in the accounting period in which the fund liability is incurred, if measurable.

Revenue Recognition

In applying the susceptible to accrual concept under the modified accrual basis, certain revenue sources are deemed both measurable and available (collectible within the current year or within two months of year-end and available to pay obligations of the current period). This includes investment earnings and state-levied locally shared taxes (including motor fuel taxes). Reimbursements due for federally funded projects are accrued as revenue at the time the expenditures are made, or when received in advance, deferred until expenditures are made. Property taxes and special assessments, though measurable, are not available soon enough in the subsequent year to finance current period obligations. Therefore, property taxes and special assessments receivable are recorded and deferred until they become available. Other revenues, including licenses and permits, certain charges for services, and miscellaneous revenues, are recorded as revenue when received in cash because they are generally not measurable until actually received.

Expenditure Recognition

The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Most expenditures are measurable and are recorded when the related fund liability is incurred. However, principal and interest on long-term debt, which have not matured are recognized when due. Allocations of cost, such as depreciation and amortization, are not recognized in the governmental funds.

Budgetary Basis Accounting and Information

Kansas statutes require that an annual operating budget be legally adopted for the General Fund, Special Revenue Funds (unless specially exempted by statute), and the General Obligation Debt Service Fund. An annual operating budget is not required for the Special Law Enforcement special revenue fund under the statutory exemption. The statutes provide for the following sequence and timetable in the adoption of the legal annual operating budget:

(1) Preparation of the budget for the succeeding calendar year on or before August 1st

.

(2) Publication in local newspaper of the proposed budget and notice of public hearing on the budget on or before August 5th

.

(3) Public hearing on or before August 15th

, but at least ten days after publication of notice of hearing.

(4) Adoption of the final budget on or before August 25th

.

The statutes allow for the governing body to increase the originally adopted budget for previously unbudgeted increases in revenue other than ad valorem property taxes. To do this, a notice of public hearing to amend the budget must be published in the local newspaper. At least ten days

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after publication the hearing may be held and the governing body may amend the budget at any time. There were no budget amendments in 2010. The statutes establish the overall budget level of control at the fund level by prohibiting expenditures in excess of the total amount of the adopted budget of expenditures of individual funds. City Council approval is required for overexpenditures or transfers of personal services line items. The City Administrator is authorized to approve overexpenditures or transfers of budgeted appropriations of all other individual departmental line items. Also, management may not amend a fund’s budgeted expenditures without Council approval. Spending in funds that are not subject to the legal annual operating budget requirement are controlled by federal regulations, other statutes, or by the use of internal spending limits established by the City. All legal annual operating budgets are prepared using the modified accrual basis of accounting, modified further by the encumbrance method of accounting. Expenditures include disbursements, accounts payable, and encumbrances. Encumbrances are commitments by the City for future payments such as purchase orders or contracts. Property Taxes Receivable

In accordance with governing state statutes, property taxes levied during the current year are revenue sources to be used to finance the budget of the ensuing year. Taxes are assessed on a calendar year basis and are levied and become a lien on the property on November 1 of each year. The County Treasurer is the tax collection agent for all taxing entities within the County. Property owners have the option of paying one-half or the full amount of the taxes levied on or before December 20 during the year levied with the balance to be paid on or before May 10 of the ensuing year. State statutes prohibit the County Treasurer from distributing taxes collected in the year levied prior to January 1 of the ensuing year. Consequently, for revenue recognition purposes, the taxes levied during the current year are not due and receivable until the ensuing year. At December 31, such taxes are recorded as taxes receivable with a corresponding amount recorded as deferred revenues on the balance sheets of the appropriate funds. It is not practical to apportion delinquent taxes held by the County Treasurer as of December 31, 2010. Estimated delinquencies are insignificant and have not been recorded.

Deposits and Investments

The disclosures that follow have been prepared in accordance with the provisions of GASB Statement No. 40, Deposit and Investment Risk Disclosures. This statement establishes disclosure requirements for investment and deposit risks related to credit risk, concentrations of credit risk, interest rate risk, and foreign currency risk.

The City pools temporarily idle cash from all funds for investments purposes. Each fund’s portion of the pool is shown on the Statement of Net Assets as deposits and investments. Deposits during the year included cash in interest bearing and demand bank accounts. Interest is allocated to each fund based on the respective invested balance.

As permitted by GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, the City reflects investments with a maturity of one year or longer at the time of purchase at fair value and those maturing in less than one year at the time of purchase at amortized cost, which approximates fair value. Investments carried at amortized cost consist of $1,169,545 of United States Treasury Bills.

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December 31, 2010

A summary of the carrying values of deposits, investments and petty cash at December 31, 2010 is as follows:

Total deposits 6,719,303$ Total investments 7,734,366 Petty cash 6,377

Total 14,460,046$

Investments include $762,922 of money market funds held by the trustee which are restricted for debt service on the tax increment revenue bonds.

Investment Policies

The City’s investment policies follow state statutes which limit the types of investments it may utilize. Allowable investments generally include United States Treasury bills or notes with maturities not exceeding two years, repurchase agreements and the Kansas State Municipal Investment Pool. In addition, bond proceeds and capital project and equipment reserve funds may be invested in United States government agency securities, money market mutual funds that invest in United States government or agency securities and certain Kansas municipal obligations.

The carrying amount, maturity segment and ratings for the City’s investments at December 31, 2010 are as follows:

Investment MaturityUnder One to

Investment Fair Value one year five years RatingU.S. Treasury Bills 1,169,545$ 1,169,545$ -$ AAAFederal Home Loan Bank 3,682,503 2,666,899 1,015,604 AAAFederal Home Loan Mortgage Corporation 722,822 - 722,822 AAAFederal National Mortgage Association 1,396,574 1,396,574 - AAAFederated U.S. Treasury Money Market Fund 762,922 762,922 - AAAm

7,734,366$ 5,995,940$ 1,738,426$

Credit Risk

The statutory limitations on the allowable investments under the City’s policy inherently reduce its credit risk. Credit risk is the risk that the issuer or other counterparty to an investment will be unable to fulfill its obligations to the holder of the investment. This risk can be measured by the assignment of a rating by a nationally recognized statistical rating organization. The ratings shown above are by Standard & Poor’s as of year end for each investment.

Custodial Credit Risk

The custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, the City will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. For deposits, the City follows state statutes which require pledged collateral with a fair value equal to 100% of the funds on deposit, less insured amounts, and that the collateral be held in safekeeping in the City’s name at other than the depository financial institution. To comply with the statutes, the City requires the issuance of joint custody receipts as evidence of the pledged collateral. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the City will not be able to recover the value of its investment or collateral securities that are in the

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possession of an outside party. The City’s investment policy requires that securities be held by the City’s agent. At December 31, 2010, the City’s deposits were covered by Federal depository insurance or were fully collateralized by securities held by the City’s agent in the City’s name.

At December 31, 2010, the U.S. Treasury Bills and U.S. Government agency securities were held by the City’s financial institution in the City’s name.

Interest Rate Risk

As a means of managing its exposure to fair value losses arising from increasing interest rates, the City’s investment policy follows state statutes which generally limit investment maturities to two years. To minimize the risk of loss, the City matches investments to anticipated cash flows and diversifies the investment types to the extent practicable. The City has elected to use the segmented time distribution method of disclosure for its interest rate risk.

Concentration of Credit Risk

The City’s investment policies limit the amounts that can be invested in certain investment types and include having no more than 25% invested in Kansas municipal securities and 50% in certificates of deposit. Investments that represent more than 5% of the City’s investments consist of the Federal Home Loan Bank, Federal Home Loan Mortgage Corporation, and the Federal National Mortgage Association U.S. Government agency securities.

Capital Assets

Capital assets, which include property, equipment, and infrastructure assets (i.e. roads, street lights, storm sewers, etc.), are reported in the applicable governmental activities column in the government-wide financial statements. In the governmental fund statements, capital assets are charged to expenditures as purchased. Capital assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated assets are recorded at estimated fair value as of the date of the donation.

Capital assets are defined by the City as assets with an initial individual cost of $5,000 or more ($100,000 for streets and bridges, $25,000 for sidewalks, parking lots, jogging trails, and drainage structures) and a useful life greater than one year. Additions or improvements and other capital outlays that significantly extend the useful life of an asset, or that significantly increase the capacity of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Assets, which have been acquired with funds received through federal grants, must be used in accordance with the terms of the grant. Depreciation on exhaustible assets is recorded as an allocated expense in the Statement of Activities with accumulated depreciation reflected in the Statement of Net Assets and is provided on the straight-line basis over the following estimated useful lives:

Buildings 40 years Improvements other than buildings 5-20 years Equipment 3-20 years Infrastructure 20-50 years Fully depreciated capital assets are included in the capital asset accounts until their disposal.

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Compensated Absences

The City’s policies allow up to 240 hours of vacation leave to be carried over into the next year for full-time employees and 336 hours for firefighters. This carryforward is payable upon separation from service. The liability of $383,055 for vacation leave at December 31, 2010 is reported in the government-wide financial statements, but not in the governmental fund financial statements as it is not estimated to be payable from expendable available resources. Sick leave is earned at the rate of one day per month for full-time employees and one-half shift day per month for firefighters, with a maximum accumulation of 520 hours for full-time employees and 720 hours for fire department shift personnel. Upon separation from service due to retirement, employees are compensated for 30% of the accumulated balance. The liability of $189,735 for sick leave at December 31, 2010 is reported in the government-wide financial statements, but not in the governmental fund financial statements as it is not estimated to be payable from expendable available resources.

Reserves and Designations of Fund Balances

Reserves are reported in the various funds in the fund financial statements to indicate that a portion of the fund balance is restricted by law or contract for a specific purpose. The amount of unreserved fund balance designated for subsequent year’s expenditures represents the amount of fund balance available for appropriation that has been designated for the adopted 2011 budget.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates.

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Note 2: Capital Assets

A summary of changes in capital assets for the year follows:

Beginning EndingBalances Increases Decreases Balances

Governmental activities:Capital assets not being depreciated:

Land 12,603,732$ -$ -$ 12,603,732$ Artwork 24,000 - - 24,000

Construction in progress 1,928,328 3,703,523 5,418,876 212,975 Total capital assets not being depreciated 14,556,060 3,703,523 5,418,876 12,840,707

Capital assets being depreciated:Buildings 12,989,976 - - 12,989,976 Improvements other than buildings 4,350,250 70,440 5,755 4,414,935 Equipment 5,195,683 497,570 63,486 5,629,767 Infrastructure 100,183,274 5,354,731 812,219 104,725,786

Total capital assets being depreciated 122,719,183 5,922,741 881,460 127,760,464 Less accumulated depreciation for:

Buildings 3,467,565 351,323 - 3,818,888 Improvements other than buildings 1,649,554 211,364 5,755 1,855,163 Equipment 2,756,521 381,188 37,374 3,100,335 Infrastructure 38,318,388 3,226,378 812,219 40,732,547 Total accumulated depreciation 46,192,028 4,170,253$ 855,348$ 49,506,933

Total capital assets being depreciated, net 76,527,155 78,253,531 Governmental activity capital assets, net 91,083,215$ 91,094,238$

Depreciation expense was charged to functions/programs of the primary government as follows:

General government 138,208$ Law enforcement 186,299 Fire prevention and control 91,951 Public works 151,079 Capital improvement program 3,226,378 Community development 75,235 Culture and recreation 301,103 Total depreciation expense 4,170,253$

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December 31, 2010

Note 3: Special Assessments

As required by state statutes, projects financed in part by special assessments are financed through general obligation bonds of the City and are retired from the Debt Service Fund. Further, state statutes require levying additional general ad valorem property taxes in the Debt Service Fund to finance delinquent special assessments. The City’s special assessment taxes are levied over the ten year term of the bonds and the annual installments are due and payable with annual ad valorem property taxes. Liens may be foreclosed against the property benefited by the special assessments when delinquent assessments are two years in arrears. At December 31, 2010, the special assessment taxes levied are a lien on the property and are recorded as special assessments receivable in the Debt Service Fund with a corresponding amount recorded as deferred revenue in the fund financial statements. Special assessments receivable at December 31, 2010 are as follows:

Current 320,000$ Noncurrent 2,580,000

Total 2,900,000$

Note 4: Long-term Debt

The following is a summary of changes in long-term debt for the year ended December 31, 2010:

Balance Balance Amounts DueJanuary 1, December 31, Within

2010 Increases Decreases 2010 One YearGeneral obligation bonds

to be paid with:Tax levies 15,165,000$ 3,585,000$ 5,820,000$ 12,930,000$ 2,370,000$ Special assessments 3,210,000 - 310,000 2,900,000 320,000

Unamortized premium 70,645 97,846 37,363 131,128 - Deferred amount on refunding (13,446) (19,756) (7,928) (25,274) - Tax increment revenue bond 3,575,450 - 1,300,000 2,275,450 1,300,000 Subordinate special obligation

tax increment revenue bond 5,113,522 - - 5,113,522 - Tax increment contractual

liabilities 8,407,438 1,136,885 584,638 8,959,685 245,407 Claims and judgements 5,000 15,026 15,026 5,000 5,000 Compensated absences* 526,516 394,669 348,395 572,790 412,000 Net OPEB obligation 906 3,258 - 4,164 -

Total governmentalactivity debt 36,061,031$ 5,212,928$ 8,407,494$ 32,866,465$ 4,652,407$

* Compensated absences typically have been liquidated in the General Fund

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The general obligation bonds to be paid with tax levies were issued to construct or acquire capital assets.

General obligation bonds outstanding at December 31, 2010 are as follows:

Outstanding

Date Interest Original Maturity December 31,Issued Rates Amount Date 2010

Internal improvements: Series 2004 12/01/04 2.95-3.5% 3,000,000$ 10/01/14 1,890,000$ Series 2005 11/15/05 3.55-5.0% 5,900,000 10/01/23 5,475,000 Series 2008 09/15/08 3.25-3.75% 3,500,000 10/01/18 2,900,000 Series 2009 09/01/09 2.00-3.00% 2,980,000 10/01/12 1,980,000 Series 2010 07/01/10 2.00% 3,585,000 10/01/13 3,585,000

18,965,000$ 15,830,000$

The annual debt service requirements to amortize the general obligation bonds outstanding as of December 31, 2010 are as follows:

Year Principal Interest Principal Interest Principal Interest2011 2,370,000$ 389,945$ 320,000$ 102,050$ 2,690,000$ 491,995$ 2012 2,470,000 334,870 330,000 90,850 2,800,000 425,720 2013 2,530,000 272,295 340,000 79,300 2,870,000 351,595 2014 1,280,000 207,765 355,000 67,400 1,635,000 275,165 2015 345,000 162,805 370,000 55,862 715,000 218,667

2016 - 2020 2,190,000 601,735 1,185,000 88,450 3,375,000 690,185 2021 - 2023 1,745,000 140,093 - - 1,745,000 140,093

Total 12,930,000$ 2,109,508$ 2,900,000$ 483,912$ 15,830,000$ 2,593,420$

Governmental Special Assessments Total

On September 15, 2008, the City issued $3,500,000 General Obligation Bonds, Series 2008 to retire temporary notes issued to finance the cost of improvements in the West Frontage Road Benefit District, which is located in the I-35 Redevelopment District. The notes were issued as part of a redevelopment agreement dated September 15, 2004. In connection with this agreement, the benefit district was established to levy special assessments in order to provide for the repayment of the notes. These bonds are to be retired from the special assessments levied on the property that benefited from the improvements. As provided for by state statute, if the assessments are not sufficient due to delinquencies, the deficiency is payable from ad valorem property taxes. On July 1, 2010, the City issued $3,585,000 in General Obligation Refunding Bonds, Series 2010 with an average interest rate of 2.00% to currently refund the $3,570,000 of outstanding Series 2003 bonds with an average interest rate of 3.35%. Net proceeds of $3,570,000, including the issuance premium and after the payment of issuance costs, were used to call and redeem the Series 2003 bonds on October 1, 2010.

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The refunding resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $19,756. This difference, reported in the accompanying financial statements as a deduction from bonds payable, is being amortized through the year 2013. The City completed the refunding to reduce its total debt service payments over the next three years by $150,302 and to obtain an economic gain (difference between the present values of the old and new debt service payments) of $147,018.

Tax Increment Revenue Bonds

On March 27, 1995 the City established a redevelopment district for the purpose of financing redevelopment projects in blighted areas within the City. Kansas statutes provide for the establishment of these districts to encourage and promote development in blighted areas and enterprise zones and limit the use of the bond proceeds to finance the costs that the City would be eligible to incur, primarily land acquisition and infrastructure improvements.

On February 26, 1996 the City entered into an agreement with Developers Diversified Realty Corporation (the Developer) for the redevelopment of certain property into a commercial and retail shopping center. On April 1, 1996, the City issued $9,675,450 in Tax Increment Revenue Bonds Series 1996 (the Bonds) in connection with the establishment of the redevelopment district. The Developer purchased the Bonds. The Bonds are special obligations of the City and are payable solely from the real property tax increment received by the City from properties located in the redevelopment district. Real property tax increment received by the City is required to be deposited in a Bond Fund maintained by United Missouri Bank, N.A. (the original trustee). Principal and interest payments on the Bonds are due on February 1 and August 1 of each year, until maturity. If the Bonds have not been paid and redeemed in full prior to February 1, 2016, the final maturity date, then the Bonds will be deemed to be paid in full upon payment to the registered owners by the original trustee of the amount then on deposit in the Bond Fund. (Through December 2001 the annual property tax increment received by the City had only been sufficient to pay a portion of the interest on the Bonds.) In accordance with the Trust Indenture Agreement, interest accrued and unpaid on the semi-annual payment dates is added to the principal amount of the Bonds. On December 14, 2001 the Bonds were restructured and reissued pursuant to a supplemental trust indenture agreement between the City and J. P. Morgan Trust Company, National Association (the successor Trustee). Prior to the restructuring and reissuance the amount outstanding on the Bonds was $14,788,972, which included the original principal amount of $9,675,450 plus accrued and unpaid interest of $5,113,522, which had been compounded as principal. The City has restructured certain provisions of the Bonds by lowering the interest rate from 10.35% to 6.9%, eliminating the compounding of the accrued and unpaid interest on the Bonds as principal and reducing the principal amount of the Bonds to the original principal amount of $9,675,450. The restructured Bonds mature February 1, 2016, with principal payments to be applied from the excess tax increment, which is any amount available after payment of interest on the Bonds on the principal payment date. Since the principal and interest amounts are based on future tax collections, it is not practical to present the debt service requirements to maturity for this issue. The compounded interest has been restructured and reissued as a separate bond designated as the Subordinate Special Obligation Tax Increment Revenue Bond, Series 1996 A (the Subordinate Bond). The Subordinate Bond matures February 1, 2016 and is a non-interest bearing obligation payable solely from excess tax increment finance revenues as defined in the supplemental indenture; and following payment in full of the Bonds. The Bonds and Subordinate Bond do not constitute a general obligation of the City and are excluded from its statutory debt limitation. The City’s only obligation is to remit the property tax increment received each year over the twenty-year term of the Bonds to the successor Trustee.

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The bonds are deemed fully paid on their maturity date, regardless of the amount of principal or interest that may be outstanding in the event the property tax increment revenues are not sufficient to fully retire the debt. For 2010, principal and interest paid and incremental tax revenues were $1,482,931 and $1,490,211, respectively.

Tax Increment Contractual Obligations

On August 22, 1994 the City established the I-35 Redevelopment District (the District) pursuant to Kansas Statute Annotated 12-1771. Real property taxes produced from that portion of the current assessed valuation of real property within the District in excess of the base year assessed valuation (the tax increment) are reported as ad valorem taxes in the Tax Increment Contractual Liability Debt Service Fund. These ad valorem taxes can be used to pay for the redevelopment project costs, including the payment of principal and interest on any special obligation bonds or full faith and credit tax increment bonds. In prior years, the City entered into contractual agreements with four private entities to reimburse them for certain eligible land and land improvement costs, plus interest, fixed at the prime rate at the time the agreement was executed. The agreements limit the total reimbursement to $3,384,279, plus interest, at fixed rates from 6.00% to 8.25%. The reimbursements are made solely from the property tax increment derived from each property over the seventeen to twenty year terms of the agreements. In accordance with these agreements, interest accrued and unpaid when due is added to the principal amount of the contractual obligation. For the year ended December 31, 2010, $28,499 of unpaid interest has been added to the principal amount on these obligations. If the increments are not sufficient to fully reimburse the costs and interest, the City will have no further obligation to the entities. Eligible costs as allowed by state statute were previously certified to the City under the terms of a development agreement in the District which was entered into on March 28, 2005. The City is to reimburse these eligible costs from the project’s future tax increments over the remaining fifteen-year term of the agreement, and the resulting contractual liability for these reimbursable costs has been reflected in the government-wide financial statements. This obligation does not bear interest and is payable solely from the future increments generated over the remaining term of the agreement. The portion of the tax increments during 2010 used to reimburse these private entities is recorded as principal and interest expenditures in the Tax Increment Contractual Liability Fund. Any ad valorem tax increment collected in excess of the amount required to service the debt under the contractual agreements is transferred to the I-35 Redevelopment District Capital Project Fund and is designated for other improvements within the District. Excess collections of $1,286,115 were transferred to the I-35 Redevelopment District Capital Project Fund during the year ended December 31, 2010.

In connection with another redevelopment agreement in the District dated September 15, 2004, the City has agreed to reimburse up to $6,750,000 of eligible costs over the remaining thirteen-year term of the agreement. The original developer recently transferred their rights and obligations to new developers and the City entered into an amended and restated redevelopment agreement with the new developers on March 28, 2011. Key provisions of the original agreement remain in place although a revised development timeline allows the City the right to terminate the agreement unless specific development occurs by December 31, 2012, with additional development to occur by September 15, 2018. The City may also terminate the agreement if the developers’ ad valorem or special assessment taxes become delinquent. Eligible costs, including amounts recognized in 2010 as certified by the developer, are reflected as a contractual liability at December 31, 2010. This obligation does not bear interest and is payable solely from the future increments generated over the remaining term of the agreement.

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Conduit Debt

The City has issued various industrial revenue bonds to provide capital financing to private entities, which are not component units of the City. The City has no obligation for this debt which is collateralized by the respective facilities and payable solely from rentals generated by the underlying lease-purchase agreements. Accordingly, the bonds are not reported as liabilities in the accompanying basic financial statements. As of December 31, 2010, there was one series of industrial revenue bonds outstanding, with an aggregate principal amount payable of $6,170,000.

Legal Debt Margin

The City is subject to state statutes, which limit the amount of bonded debt (exclusive of revenue bonds, bonds issued for storm drainage and sanitary sewer improvements, and refunding bonds) that the City may issue to 30% of assessed valuation. Currently the City has a debt limit of $49,255,580, leaving a debt margin of $38,990,580.

Note 5: Pension Plans

Defined Benefit Plans

Plan Description

– The City participates in the Kansas Public Employees Retirement System (KPERS) and the Kansas Police and Firemen’s Retirement System (KP&F). Both are part of a cost-sharing multiple-employer defined benefit pension plan as provided by K.S.A. 74-4901, et seq. KPERS and KP&F provide retirement benefits, life insurance, disability income benefits, and death benefits. Kansas law establishes and amends benefit provisions. KPERS and KP&F issue a single available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to KPERS (611 S. Kansas Avenue, Suite 100; Topeka, KS 66603-3803) or by calling 1-888-275-5737.

Funding Policy

– K.S.A. 74-4919 establishes the KPERS member-employee contribution rate at 4% of covered salary. K.S.A. 74-4975 establishes the KP&F member-employee contribution rate at 7% of covered salary. The employer collects and remits member-employee contributions according to the provision of section 414(h) of the Internal Revenue Code. State law provides that the employer contribution rates be determined annually based on the results of an annual actuarial valuation. KPERS and KP&F are funded on an actuarial reserve basis. State law sets a limitation on annual increases in the employer contribution rates. The KPERS employer rate established by statute for calendar year 2010 is 7.14%. The City’s employer contributions to KPERS for the years ended December 31, 2010, 2009, and 2008 were $169,285, $134,860, and $117,332, respectively, equal to the statutory required contributions for each year. The KP&F uniform participating employer rate established for fiscal year 2010 is 12.86%. Employers participating in KP&F also make contributions to amortize the liability for past service costs, if any, which is determined separately for each participating employer. The City’s contributions to KP&F for the years ended December 31, 2010, 2009, and 2008 were $410,985, $419,650, and $403,566, respectively, equal to the statutory required contributions for each year.

Defined Contribution Plan

In 1998, the City established a defined contribution plan for those full-time employees eligible for the KPERS program. The plan is administered by the ICMA Retirement Corporation, and any changes to the plan’s provisions or the contribution requirements are determined by the governing body of the City. The contribution percentages are determined annually and for 2010 were 0% to 3% for employees, with a City matching range of .21% to 5.72%. In 2010, covered payroll was

38


December 31, 2010

$2,320,083. The contributions by the City and employees for 2010 were $115,315 and $60,502, respectively.

Note 6: Other Postemployment Benefits

Plan Description

– The City sponsors a single-employer, defined benefit healthcare plan that provides healthcare benefits to retirees and their dependents to age 65, including medical and dental coverage. Retiree health coverage is provided for under Kansas Statute 12-5040. Retirees who retire with at least 10 years of cumulative service with the City and commence retirement or disability benefits under the Kansas Public Employee Retirement System (KPERS) are eligible for benefits. There is no stand alone financial report for the plan.

The City requires retirees to pay the same premiums charged to active participants. The rates being paid by retirees for benefits are typically lower than those for individual health insurance policies. The difference between these amounts is the implicit rate subsidy, which is considered other postemployment benefits (OPEB) under Governmental Accounting Standards Board Statement No. 45 (GASB Statement 45). Retirees and spouses have the same benefits as active employees. Coverage terminates either when the retiree or spouse becomes covered under another employer health plan, or when they reach age 65.

Funding Policy

– GASB Statement 45 does not require funding of the OPEB liability, and the City has chosen not to fund it. City policy dictates the payment of retiree claims as they become due.

Annual OPEB Cost and Net OPEB Obligation

– The City’s annual OPEB cost is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize the unfunded actuarial liability over a period not to exceed thirty years. The following table shows the components of the City’s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City’s net OPEB obligation:

39


December 31, 2010

Normal cost 2,453$ Amortization of unfunded actuarial accrued liability 6,955Interest cost 159

Annual required contribution (ARC) 9,567

Interest on net OPEB obligation 59 Adjustment to annual required contribution (77)

Annual OPEB cost 9,549

Contributions made:Claims and fees paid on behalf of retirees 29,066Retiree contributions (22,775)

Net employer contributions 6,291

Change in net OPEB obligation 3,258

Net OPEB obligation, December 31, 2009 906

Net OPEB obligation, December 31, 2010 4,164$

The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation are as follows:

Fiscal Year Ended

Annual OPEB Cost

Annual OPEB Cost

ContributedNet OPEB Obligation

12/31/2008 9,882$ 94.7% 530$ 12/31/2009 9,728 96.1% 906 12/31/2010 9,549 65.8% 4,164

Funded Status and Funding Progress

– As of January 1, 2008, the most recent actuarial valuation date, the plan was not funded. The actuarial accrued liability for benefits was $76,943, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $76,943. The covered payroll (annual payroll of active employees covered by the plan) was $6,171,000, and the ratio of the UAAL to the covered payroll was 1.25%.

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents trend

40


December 31, 2010

information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions

– Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

In the January 1, 2008, actuarial valuation, the projected unit credit method was used. The actuarial assumptions included a 6.45% investment rate of return (net of administrative expenses), which is a blended rate of the expected long-term investment returns on plan assets and on the employer’s own investments calculated based on the funded level of the plan at the valuation date, an annual healthcare cost trend of 8% initially, reduced by decrements to an ultimate rate of 5% after six years. The actuarial value of assets was determined using techniques that spread the effects of short-term volatility in the market value of investments over a five-year period. The UAAL is being amortized as a level percentage of projected payroll on a closed basis over a period of 20 years. The remaining amortization period at December 31, 2010 was 18 years.

Note 7: Interfund Balances and Transfers

The interfund balances between the General Fund, Capital Improvements Fund, and Transient Guest Tax Fund are due to the nature and timing of governmental receipts and will be repaid from subsequent years’ resources.

Interfund transfers for the year ended December 31, 2010 are as follows:

Capital General Equipment

Transfers General Improvements I-35 Obligation Reservefrom Fund Fund District Bond Fund Fund Total

General Fund -$ 2,178,588$ -$ -$ 450,000$ 2,628,588$

Capital Improvements Fund - - - 2,225,469 - 2,225,469

I-35 District 90,000 722,511 - - - 812,511

Tax Increment Revenue Bond Fund - - 190,593 - - 190,593

Tax Incremental Contractual Liability Fund - - 1,286,115 - - 1,286,115

Transient Guest Tax Fund - 58,000 - - - 58,000

Total 90,000$ 2,959,099$ 1,476,708$ 2,225,469$ 450,000$ 7,201,276$

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December 31, 2010

Transfers are used to (1) move revenues from the fund that a statute or the budget requires to collect them to the fund that a statute or the budget requires to expend them, (2) move receipts restricted to debt service from the funds collecting the receipts to the debt service fund as debt service payments become due, and (3) use unrestricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. Any transfers within the governmental funds have been eliminated in the government-wide Statement of Activities.

Note 8: Commitments and Contingencies

Litigation

Various legal actions and claims against the City are currently pending. The ultimate liability that might result form their resolution is not presently determinable; however, in the opinion of management and counsel, the probability of material aggregate liabilities resulting from these claims is remote.

Commitments

Capital projects often extend over several years. The City has made normal commitments for future expenditures related to capital project programs. Project authorizations and expenditures since the inception of each project are as follows:

ObligationsProject Category Authorization Since Inception

Drainage Projects 168,454$ 124,057$

Note 9: Risk Management

The City is exposed to various risks of loss related to torts, loss and damage to property, errors and omissions and injuries to employees. The City currently purchases commercial insurance coverage for these risks. Settled claims have not exceeded the commercial insurance coverage in any of the past three years. The City’s current coverages include a $1,000 deductible for both automobile and employee benefits liability, a $5,000 deductible for large vehicles, public officials’ and law enforcement liability, and a $15,000 deductible for employment practices liability. Based on outstanding claims at December 31, 2010, a $5,000 deductible liability has been recorded in the financial statements. The City reports its risk management activities in the General Fund with the deductible claim liability reported as long-term debt, as it is not expected to be liquidated with expendable available financial resources. The changes in the claims liability are as follows:

2010

2009

Beginning liability $ 5,000 $ 5,000 Claims and changes in estimates 15,026 3,230 Payments (15,026) (3,230) Ending liability $ 5,000 $ 5,000

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December 31, 2010

The City obtains workers’ compensation insurance through its membership in the Kansas Eastern Region Insurance Trust (KERIT), whose members consist of local cities and counties. KERIT is a risk-sharing pool organized under the insurance laws of the State of Kansas, which self-insures workers’ compensation and other related expenses up to certain limits and reinsures additional excess amounts up to certain limits. The City pays annual premiums to the Trust based upon historical experience and legal requirements mandated by the State of Kansas. The trust agreement allows for member assessments in the event claims and expenses exceed the Trust’s self-insured retention limit. The City does not anticipate any additional assessments in excess of premiums paid as a result of their participation in the Trust.

43


4444

REQUIRED SUPPLEMENTARY

INFORMATION


45

VarianceOriginal Final PositiveBudget Budget Actual (Negative)

Revenues:Ad valorem taxes 3,613,180$ 3,613,180$ 3,541,841$ (71,339)$ Sales tax 6,006,587 6,006,587 6,169,046 162,459 Intergovernmental 15,000 15,000 34,159 19,159 Licenses, permits and fees 280,200 280,200 356,579 76,379 Franchise taxes 1,170,100 1,170,100 1,325,346 155,246 Charges for services 242,553 242,553 251,306 8,753 Fines, forfeitures and penalties 1,001,500 1,001,500 1,049,970 48,470 Use of money and property 25,000 25,000 22,679 (2,321) Miscellaneous 67,436 67,436 102,427 34,991

Total revenues 12,421,556 12,421,556 12,853,353 431,797

Expenditures:Current:

General government 4,059,028 4,059,028 1,907,151 2,151,877 Law enforcement 3,318,223 3,318,223 3,032,005 286,218 Fire prevention and control 2,112,345 2,112,345 1,976,722 135,623 Public works 1,950,094 1,950,094 1,730,056 220,038 Community development 701,912 701,912 644,565 57,347 Health and welfare 31,100 31,100 23,827 7,273 Culture and recreation 1,055,176 1,055,176 946,644 108,532

Total expenditures 13,227,878 13,227,878 10,260,970 2,966,908

Excess (deficiency) of revenues over (under) expenditures (806,322) (806,322) 2,592,383 3,398,705

Other financing sources (uses):Transfers in 90,000 90,000 90,000 - Transfers out (2,502,541) (2,502,541) (2,628,588) (126,047)

Total other financing uses (2,412,541) (2,412,541) (2,538,588) (126,047)

(3,218,863) (3,218,863) 53,795 3,272,658$

Fund balance, beginning of year 3,218,863 3,218,863 4,914,094

Fund balance, end of year, budget basis -$ -$ 4,967,889

Encumbrances at beginning of year (1,940) Encumbrances at end of year 11,698

Fund balance, end of year 4,977,647$

For the year ended December 31, 2010

Net change in fund balance

City of Merriam, KansasSchedule of Revenues, Expenditures and Changes in Fund Balance -

Budget and Actual - General Fund(Non-GAAP Basis)

46

City of Merriam, Kansas Schedule of Funding Progress

Other Postemployment Benefits For the year ended December 31, 2010

(b) (b) - (a) / ( c )(a) Actuarial (b) - (a) ( c ) UAL As A

Actuarial Accrued Unfunded (a) / (b) Annual PercentageActuarial Value of Liability AAL Funded Covered Of Covered Valuation Assets (AAL) (UAAL) Ratio Payroll Payroll

January 1, 2008 -$ 76,943$ 76,943$ - % 6,171,000$ 1.25%

47

City of Merriam, Kansas Notes to Required Supplementary Information

December 31, 2010

Required supplementary information includes financial information and disclosures that are required by GASB but are not considered a part of the basic financial statements. For the City, this information includes:

• Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – General Fund

• Schedule of Funding Progress – Other Postemployment Benefits

Budgetary Data The City utilizes encumbrances for budgetary reporting purposes. Encumbrances relating to certain contractual agreements, supplies and equipment that have been ordered but not received are reported in the year the commitment arises for budgetary reporting purposes. However, for financial reporting purposes, the goods or services are reported when they are received.

48


49

COMBINING AND

INDIVIDUAL FUND

STATEMENTS AND

SCHEDULES


50

City of Merriam, Kansas Non-major Governmental Funds

December 31, 2010

Fund Descriptions Budgeted Funds Special Highway To account for monies levied by the State of Kansas (Motor Fuel Tax) producing revenues to be used to defray in whole or in part the cost of constructing, altering, reconstructing, maintaining and repairing streets and highways pursuant to K.S.A. 79-3425C. Special Alcohol To account for monies provided by a state liquor taxation on private clubs, and expended for the purchase, establishment, maintenance or expan sion of service s or p rograms for al coholism prevention and education. Special Parks and Recreation To account for monies provided by a state liquor taxation on private clubs, and expended for the purchase, establishment, maintenance or expansion of park an d recreational services, programs and facilities. Transient Guest Tax To account for monies derived from transient guest tax levied upon the gross rental receipts paid by guests for lodging to be used for promotion of tourism, conventions and economic development. Equipment Reserve To account for monies reserved pursuant to K. S.A. 12-1,117 for the p urpose of finan cing the acquisition of equipment. Risk Management Reserve To account for monies reserved pursuant to K.S.A. 12-2615 for the purpose of having reserves on hand to transfer to the General Fund for paying claims and related costs arising from legal action and settlement not covered by commercial insurance.

Non-budgeted Fund Special Law Enforcement Fund This fund derives monies from property seizures related to drug arrests and prosecution.

51

SpecialSpecial Special Parks and

Highway Alcohol Recreation

Deposits and investments 236,498$ 8,147$ 17,769$ Receivables, net

Sales and other taxes - - - Intergovernmental 76,377 - - Interest and miscellaneous - - -

Total assets 312,875$ 8,147$ 17,769$

Liabilities:Accounts and retainage payable 11,356$ -$ 1,151$ Due to other funds - - -

Total liabilities 11,356 - 1,151

Fund balances:Reserved for encumbrances - - 4,731 Unreserved:

Designated for subsequent year's expenditures 173,118 4,675 4,654 Undesignated 128,401 3,472 7,233

Total fund balances 301,519 8,147 16,618

Total liabilities and fund balances 312,875$ 8,147$ 17,769$

Assets:

City of Merriam, KansasCombining Balance Sheet

Non-major Government FundsDecember 31, 2010

52

Transient Risk SpecialGuest Equipment Management LawTax Reserve Reserve Enforcement Totals

3,788$ 1,216,889$ 849,388$ 38,696$ 2,371,175$

104,250 - - - 104,250 - - - - 76,377 - 6,916 - - 6,916

108,038$ 1,223,805$ 849,388$ 38,696$ 2,558,718$

5,675$ 2,463$ -$ 3,509$ 24,154$ 75,000 - - - 75,000 80,675 2,463 - 3,509 99,154

- - - - 4,731

12,431 718,958 15,000 - 928,836 14,932 502,384 834,388 35,187 1,525,997

27,363 1,221,342 849,388 35,187 2,459,564

108,038$ 1,223,805$ 849,388$ 38,696$ 2,558,718$

53

Special ParksSpecial Special and

Highway Alcohol RecreationRevenues:

Transient guest tax -$ -$ -$ Intergovernmental 296,924 18,472 18,472 Charges for services - - - Fines, forfeitures and penalties - - - Use of money and property - - - Miscellaneous - - -

Total revenues 296,924 18,472 18,472

Expenditures:General government - - - Law enforcement - 17,165 - Public works 216,424 - - Community development - - - Culture and recreation - - 8,732

Total expenditures 216,424 17,165 8,732

Excess (deficiency) of revenues over (under) expenditures 80,500 1,307 9,740

Other financing sources (uses):Proceeds from sale of capital assets - - - Transfers in - - - Transfers out - - -

Total other financing sources (uses) - - -

80,500 1,307 9,740

Fund balance, beginning of year 221,019 6,840 6,878

Fund balance, end of year 301,519$ 8,147$ 16,618$



City of Merriam, KansasCombining Statement of Revenues, Expenditures

and Changes in Fund Balances - Non-major Governmental Funds

54

Transient Risk SpecialGuest Equipment Management LawTax Reserve Reserve Enforcement Totals

287,678$ -$ -$ -$ 287,678$ - 44,860 - 1,306 380,034

22,663 - - - 22,663 - - - 20,669 20,669 - 13,486 3,353 172 17,011

1,290 858 - 262 2,410 311,631 59,204 3,353 22,409 730,465

- 328,381 13,496 - 341,877 - 46,720 - 8,063 71,948 - 63,975 - - 280,399

111,338 - - - 111,338 174,454 17,780 - - 200,966 285,792 456,856 13,496 8,063 1,006,528

25,839 (397,652) (10,143) 14,346 (276,063)

- 32,207 - - 32,207 - 450,000 - - 450,000

(58,000) - - - (58,000) (58,000) 482,207 - - 424,207

(32,161) 84,555 (10,143) 14,346 148,144

59,524 1,136,787 859,531 20,841 2,311,420

27,363$ 1,221,342$ 849,388$ 35,187$ 2,459,564$

55


Revenues:Intergovernmental 275,000$ 275,000$ 296,924$ 21,924$

Expenditures:Public works:

Contractual services 257,901 257,901 190,466 67,435 Commodities 40,000 40,000 25,958 14,042 Contingency 25,000 25,000 - 25,000

Total expenditures 322,901 322,901 216,424 106,477

(47,901)$ (47,901)$ 80,500 128,401$

Fund balance, beginning of year 221,019

Fund balance, end of year 301,519$


Special Highway Fund

Schedule of Revenues and Expendituresand Changes in Fund Balance

Budget and Actual


(Non-GAAP Basis)


56



Expenditures:Law enforcement:

Contractual services 17,165 17,165 17,165 -

(2,165)$ (2,165)$ 1,307 3,472$




and Changes in Fund BalanceSchedule of Revenues and Expenditures

Special Alcohol Fund



Budget and Actual(Non-GAAP Basis)

57



Expenditures:Culture and recreation:

Capital outlay 17,224 17,224 13,463 3,761


(2,224)$ (2,224)$ 5,009 7,233$


Fund balance, end of year, budget basis 11,887

Encumbrances at end of year 4,731


Schedule of Revenues and Expenditures


Budget and Actual


(Non-GAAP Basis)

Special Parks and Recreation Fund


and Changes in Fund Balance

58


Revenues:Transient guest tax 315,000$ 315,000$ 287,678$ (27,322)$ Charges for services 21,500 21,500 22,663 1,163 Miscellaneous - - 1,290 1,290

Total revenues 336,500 336,500 311,631 (24,869)

Expenditures:General government 11,967 11,967 - 11,967 Community development 123,978 123,978 111,309 12,669 Culture and recreation 186,615 186,615 174,454 12,161


Excess of revenues over expenditures 13,940 13,940 25,868 11,928

Other financing uses:Transfers out (58,000) (58,000) (58,000) -

(44,060)$ (44,060)$ (32,132) 11,928$


Fund balance, end of year, budget basis 27,392

Encumbrances at beginning of year (29)




Transient Guest Tax Fund


(Non-GAAP Basis)Budget and Actual



59


Revenues:Use of money and property 5,000$ 5,000$ 13,486$ 8,486$ Intergovernmental - - 44,860 44,860 Miscellaneous - - 858 858

Total revenues 5,000 5,000 59,204 54,204

Expenditures:General government 951,940 951,940 328,381 623,559 Fire prevention 35,000 35,000 - 35,000 Law enforcement 84,000 84,000 46,720 37,280 Public works 64,000 64,000 63,975 25 Culture and recreation 17,500 17,500 17,780 (280)

Total expenditures 1,152,440 1,152,440 456,856 695,584

Excess of revenues over (under) expenditures (1,147,440) (1,147,440) (397,652) 749,788

Other financing sources:Proceeds from sale of capital assets 5,000 5,000 32,207 27,207 Transfers in 450,000 450,000 450,000 -

Total other financing sources 455,000 455,000 482,207 27,207

(692,440)$ (692,440)$ 84,555 776,995$

Fund balance, beginning of year 1,136,787

Fund balance, end of year 1,221,342$





Equipment Reserve Fund

(Non-GAAP Basis)Budget and Actual


60


Revenues:Use of money and property 25,000$ 25,000$ 3,353$ (21,647)$

Expenditures:General government:

Contractual services 15,000 15,000 12,000 3,000 Contingencies and reserves 796,644 796,644 1,496 795,148


(786,644)$ (786,644)$ (10,143) 776,501$




(Non-GAAP Basis)



Budget and Actualand Changes in Fund Balance


Risk Management Reserve Fund

61

Debt Service Fund

Fund Description Budgeted Funds General Obligation Bonds To account for resources to be used for the payment of principal, interest and related costs of the general obligation bonds and certain other long-term obligations of the City.

62


Revenues:Ad valorem taxes 341,300$ 341,300$ 337,162$ (4,138)$

Special assessments 422,900 422,900 563,414 140,514 Use of money and property 10,000 10,000 5,411 (4,589)

Total revenues 774,200 774,200 905,987 131,787

Expenditures:Debt service 3,298,884 3,298,884 3,145,184 153,700

Deficiency of revenues under expenditures (2,524,684) (2,524,684) (2,239,197) 285,487

Other financing sources:Transfers in 2,509,693 2,509,693 2,225,469 (284,224)

(14,991)$ (14,991)$ (13,728) 1,263$





General Obligation Debt Service Fund

Schedule of Revenues, Expenditures andChanges in Fund Balance

Budget and Actual(Non-GAAP Basis)


63


64

General Fund Fund Description To account for resources traditionally associated with governments which are not required to be accounted for in another fund. The General Fund functions are reported in five categories as follows: General government - City Council, Administration, Municipal Court, Information Services and General Overhead Law enforcement - Police Fire prevention and Control - Fire Public works - Public Works Community development - Community Development Health and welfare - Direct grants to outside agencies Culture and recreation – Aquatic Center and Community Center

65


General Government

City CouncilPersonal services 58,079$ 58,079$ 56,825$ 1,254$ Contractual services 10,105 10,105 4,236 5,869 Commodities 2,025 2,025 1,252 773

Total 70,209 70,209 62,313 7,896

AdministrationPersonal services 655,194 655,194 604,243 50,951 Contractual services 44,205 44,205 31,327 12,878 Commodities 2,000 2,000 1,320 680

Total 701,399 701,399 636,890 64,509

Municipal CourtPersonal services 192,509 192,509 151,562 40,947 Contractual services 142,525 142,525 124,778 17,747 Commodities 4,350 4,350 3,593 757

Total 339,384 339,384 279,933 59,451

Information ServicesPersonal services 66,208 66,208 64,652 1,556 Contractual services 87,116 87,116 73,710 13,406 Commodities 38,900 38,900 37,580 1,320

Total 192,224 192,224 175,942 16,282

General OverheadPersonal services 9,500 9,500 5,780 3,720 Contractual services 812,862 812,862 689,111 123,751 Commodities 23,450 23,450 17,453 5,997 Reserves and contingency 1,910,000 1,910,000 39,729 1,870,271

Total 2,755,812 2,755,812 752,073 2,003,739

Total General Government 4,059,028$ 4,059,028$ 1,907,151$ 2,151,877$

Law Enforcement

Law EnforcementPersonal services 2,973,803$ 2,973,803$ 2,727,786$ 246,017$ Contractual services 186,920 186,920 171,244 15,676 Commodities 151,300 151,300 126,775 24,525 Capital outlay 6,200 6,200 6,200 -

Total Law Enforcement 3,318,223$ 3,318,223$ 3,032,005$ 286,218$

Fire Prevention and Control

Fire Prevention and ControlPersonal services 1,982,705$ 1,982,705$ 1,871,337$ 111,368$ Contractual services 60,600 60,600 51,065 9,535 Commodities 69,040 69,040 54,320 14,720

Total Fire Prevention and Control 2,112,345$ 2,112,345$ 1,976,722$ 135,623$

City of Merriam, KansasSchedule of Expenditures - Budget and Actual - General Fund

(Non-GAAP Basis)For the year ended December 31, 2010

66


Public Works

Public WorksPersonal services 1,362,527$ 1,362,527$ 1,213,100$ 149,427$ Contractual services 247,908 247,908 217,671 30,237 Commodities 339,659 339,659 299,285 40,374

Total Public Works 1,950,094$ 1,950,094$ 1,730,056$ 220,038$

Community Development

Community DevelopmentPersonal services 648,392$ 648,392$ 618,388$ 30,004$ Contractual services 48,395 48,395 21,645 26,750 Commodities 5,125 5,125 4,532 593

Total Community Development 701,912$ 701,912$ 644,565$ 57,347$

Health and Welfare

Community ServicesContractual services 31,100$ 31,100$ 23,827$ 7,273$

Total Health and Welfare 31,100$ 31,100$ 23,827$ 7,273$

Culture and recreation

Aquatic CenterPersonal services 218,634$ 218,634$ 171,797$ 46,837$ Contractual services 65,990 65,990 62,379 3,611 Commodities 43,675 43,675 31,230 12,445

Total 328,299 328,299 265,406 62,893

Community CenterPersonal services 508,889 508,889 482,999 25,890 Contractual services 188,113 188,113 170,994 17,119 Commodities 29,875 29,875 27,245 2,630

Total 726,877 726,877 681,238 45,639

Total Culture and Recreation 1,055,176$ 1,055,176$ 946,644$ 108,532$

Total expenditures 13,227,878$ 13,227,878$ 10,260,970$ 2,966,908$


City of Merriam, KansasSchedule of Expenditures - Budget and Actual - General Fund

(Non-GAAP Basis)

67


68

STATISTICAL SECTION This part of the City of Merriam’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health. Contents Tables Financial Trends These tables contain trend information to help the reader understand how 1 - 5 the City’s financial performance and well-being have changed over time. Revenue Capacity These tables contain information to help the reader assess the City’s two 6 - 11 most significant local revenue sources: sales tax and property tax. Debt Capacity These tables present information to help the reader assess the affordability 12 - 16 of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future. Demographic and Economic Information These tables offer demographic and economic indicators to help the reader 17 - 18 understand the environment within which the City’s financial activities take place. Operating Information These tables contain service and infrastructure data to help the reader 19 - 21 understand how the information in the City’s financial report relates to the services the City provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2003; schedules presenting government-wide information include information beginning in that year.

69

City of Merriam, Kansas Table 1Net Assets by Component

Last Eight Fiscal Years(accrual basis of accounting)

2003 2004 2005 2006 2007 2008 (a) 2009 2010Governmental activities Invested in capital assets, 61,741,717$ 63,684,387$ 63,944,547$ 69,073,366$ 70,780,458$ 76,334,025$ 75,940,313$ 78,094,202$ net of related debt

Restricted 4,898,861 8,054,119 3,855,008 2,309,606 3,224,248 3,144,552 4,471,514 5,331,592

Unrestricted (5,494,085) (9,357,622) (8,547,109) (8,069,993) (6,255,938) (6,771,234) (7,331,331) (6,772,207)

Total Governmental activities net assets 61,146,493$ 62,380,884$ 59,252,446$ 63,312,979$ 67,748,768$ 72,707,343$ 73,080,496$ 76,653,587$

Note: GASB 34 was implemented in FY 2003, so only eight fiscal years are shown.

Note: The City had no business-type activities for years 2003 through 2010.

(a) During 2008, the City determined that $3.87 million of construction in progress capitalized in 2005 did not qualify as public infrastructure.

Fiscal Year

70

City of Merriam, Kansas Table 2Changes in Net AssetsLast Eight Fiscal Years

(accrual basis of accounting)

2003 2004 2005 2006 2007 2008 2009 2010

ExpensesGeneral Government 1,872,409$ 2,070,372$ 1,993,649$ 2,037,324$ 2,245,240$ 2,097,021$ 2,065,512$ 2,118,597$

Law enforcement 2,326,745 2,570,839 2,944,730 2,851,255 3,077,774 3,255,207 3,107,819 3,252,442 Fire prevention and control 1,658,481 1,777,561 1,873,660 1,873,247 1,933,116 1,836,880 1,934,384 2,065,774 Public works 1,681,830 1,451,927 1,600,768 1,674,918 1,823,196 1,863,887 1,933,778 1,907,778 Capital improvement program 3,052,852 3,703,037 2,661,360 2,831,548 2,962,448 3,291,462 3,272,407 3,710,509 Community development 463,695 2,567,420 8,465,709 1,379,909 595,872 3,766,110 3,763,792 1,945,042 Health and welfare 17,758 23,992 47,510 49,389 31,586 19,885 27,746 23,827 Culture and recreation 1,041,167 1,223,648 1,292,932 1,351,841 1,333,353 1,512,621 1,402,631 1,428,918 Interest on long-term debt 1,448,448 1,462,107 1,562,269 1,673,577 1,527,469 1,423,509 1,228,714 991,316

Total expenses 13,563,385$ 16,850,903$ 22,442,587$ 15,723,008$ 15,530,054$ 19,066,582$ 18,736,783$ 17,444,203$

Program RevenuesCharges for services: General government 157,026$ 147,439$ 167,619$ 136,878$ 158,213$ 195,743$ 182,052$ 185,749$ Law enforcement 607,031 693,690 766,380 782,567 866,708 972,469 896,337 1,075,580 Fire prevention and control 1,618 1,748 1,018 920 1,068 509 920 692 Community development 91,173 181,657 169,213 217,511 286,050 215,664 104,502 170,830 Culture and recreation 260,387 246,192 247,355 251,123 240,606 255,748 253,632 268,336 Operating grants and contributions 10,024 - 142,087 440,723 319,538 331,335 313,871 355,361 Capital grants and contributions 849,148 1,562,483 1,893,996 1,087,348 850,375 5,045,656 249,749 2,103,160

Total program revenues 1,976,407$ 2,833,209$ 3,387,668$ 2,917,070$ 2,722,558$ 7,017,124$ 2,001,063$ 4,159,708$

Total Net Expense (11,586,978)$ (14,017,694)$ (19,054,919)$ (12,805,938)$ (12,807,496)$ (12,049,458)$ (16,735,720)$ (13,284,495)$

General Revenues and Other Changes in Net Assets

Taxes 14,569,222$ 14,936,174$ 15,355,692$ 15,595,272$ 15,970,932$ 16,300,105$ 16,633,365$ 16,478,890$ Unrestricted investment earnings 340,069 286,973 506,358 818,906 875,861 492,230 277,877 248,880 Miscellaneous (80,233) 28,938 64,431 437,262 382,718 200,533 180,090 111,344 Legal settlement 1,050,000 - - - - - - - Intergovernmental not restricted - - - 15,031 13,774 15,165 17,541 18,472 to a specific program

Total general revenues 15,879,058$ 15,252,085$ 15,926,481$ 16,866,471$ 17,243,285$ 17,008,033$ 17,108,873$ 16,857,586$

Change in Net Assets, as restated (a) 4,292,080$ 1,234,391$ (3,128,438)$ 4,060,533$ 4,435,789$ 4,958,575$ 373,153$ 3,573,091$

Note: GASB 34 was implemented in FY 2003, so only eight fiscal years are shown.

(a) The City determined that $3.87 million of construction in progress capitalized in 2005 did not qualify as public infrastructure.Community development expenses for 2005 have been increased accordingly.

Fiscal Year

71

City of Merriam, Kansas Table 3Fund Balances of Governmental Funds

Last Ten Fiscal Years(modified accrual basis of accounting)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010General Fund

Reserved 11,632$ 36,381$ 37,481$ 15,950$ 5,016$ 27,389$ 39,332$ 19,583$ 1,940$ 11,698$ Unreserved 4,788,362 4,267,687 3,708,681 4,002,960 4,026,794 4,077,660 4,100,651 4,500,168 4,912,154 4,965,949

Total general fund 4,799,994$ 4,304,068$ 3,746,162$ 4,018,910$ 4,031,810$ 4,105,049$ 4,139,983$ 4,519,751$ 4,914,094$ 4,977,647$

All Other Governmental FundsReserved 737,378$ 1,159,936$ 611,122$ 681,123$ 786,761$ 736,620$ 793,635$ 728,180$ 817,913$ 815,871$ Unreserved, reported in : Capital projects funds 6,282,393 11,847,736 14,746,682 16,686,658 10,105,901 8,101,019 7,107,537 6,224,893 6,685,889 7,267,772 Special revenue funds 1,875,281 1,783,497 1,838,753 1,351,337 1,589,236 1,883,550 1,982,326 2,117,071 2,311,391 2,454,833

Total all other governmental funds 8,895,052$ 14,791,169$ 17,196,557$ 18,719,118$ 12,481,898$ 10,721,189$ 9,883,498$ 9,070,144$ 9,815,193$ 10,538,476$

72

City of Merriam, Kansas Table 4Changes in Fund Balances, Governmental Funds

Last Ten Fiscal Years(modified accrual basis of accounting)

2001 2002 2003 2004 2005 2006 2007 2008 (d) 2009 2010Revenues

Taxes (see Table 5) 13,580,017$ 13,501,727$ 14,234,030$ 14,622,632$ 15,039,502$ 15,647,617$ 16,025,394$ 16,351,480$ 16,911,369$ 17,042,304$ Intergovernmental 745,913 1,273,408 445,178 1,384,985 2,407,251 1,543,102 1,183,687 716,806 566,161 1,093,060 Licenses, permits and fees 250,752 267,010 247,824 329,096 336,832 354,389 444,263 411,406 286,554 356,579 Charges for services 275,840 272,387 273,537 254,835 253,148 257,739 246,332 259,252 259,163 273,969 Fines, forfeitures and penalties 480,917 533,251 595,844 686,795 761,605 776,871 862,050 969,475 891,727 1,070,639 Uses of money and property 675,480 501,878 340,069 286,973 506,358 818,906 875,861 458,733 154,630 138,694 Miscellaneous 195,791 64,024 19,964 28,938 64,431 437,262 119,885 177,388 168,996 105,249

Total revenues 16,204,710 16,413,685 16,156,446 17,594,254 19,369,127 19,835,886 19,757,472 19,344,540 19,238,600 20,080,494

ExpendituresCurrent: General government 1,739,533$ 2,054,812$ 1,645,702$ 1,861,465$ 1,810,614$ 1,897,151$ 2,090,447$ 1,888,964$ 1,923,990$ 2,259,275$ Law enforcement 2,399,784 2,257,529 2,340,427 2,505,606 2,940,455 2,776,197 3,023,002 3,118,002 3,032,358 3,103,953 Fire prevention and control 1,411,552 1,532,712 1,606,647 2,387,182 1,784,602 1,813,836 1,892,137 1,778,730 1,849,585 1,973,464

Public works 1,570,884 1,677,919 1,865,370 1,811,413 1,816,485 1,711,502 1,900,830 2,189,116 1,992,175 2,010,455 Capital improvement program (a) - - 284,211 270,348 357,993 307,482 298,207 88,509 28,558 189,541 Community development (b) 329,028 385,870 457,125 2,559,426 8,395,226 520,253 561,539 726,701 679,521 756,612 Health and welfare 47,247 40,792 17,758 23,992 47,510 49,389 31,586 19,885 27,746 23,827 Culture and recreation 1,176,072 1,056,000 924,722 1,049,526 1,076,234 1,118,463 1,137,703 1,104,239 1,150,102 1,147,610 Capital outlay 4,906,152 2,847,180 6,843,437 7,044,872 9,740,366 7,959,274 5,157,492 4,048,384 1,962,804 2,483,434 Bad debt 667,094 - - - - - - - - - Debt service: Principal 1,396,317 2,608,739 2,817,375 1,957,990 2,117,735 2,506,276 3,258,409 3,489,801 4,249,149 4,444,638 Interest 2,717,836 1,301,941 1,609,017 1,416,592 1,498,333 1,604,999 1,504,402 1,405,243 1,261,781 1,045,902

Total expenditures, as restated (c) 18,361,499 15,763,494 20,411,791 22,888,412 31,585,553 22,264,822 20,855,754 19,857,574 18,157,769 19,438,711

Excess of revenues over (under) expenditures (2,156,789) 650,191 (4,255,345) (5,294,158) (12,216,426) (2,428,936) (1,098,282) (513,034) 1,080,831 641,783

Other financing sources (uses)Proceeds from sale of capital assets - - 67,827 589,467 91,662 266,466 295,525 63,742 14,615 32,207 Issuance of general obligation bonds - 4,750,000 4,985,000 3,000,000 5,900,444 475,000 - - - - Issuance of general obligation notes - - - 3,500,000 - - - - - - Unpaid matured interest added to principal 1,144,960 - - - - - - - - - Premium on general obligation bonds - - - - - - - - - - Issuance of refunding bonds - - - - - - - 3,500,000 2,980,000 3,585,000 Premium on refunding bonds - - - - - - - 15,706 63,946 97,846 Redemption of refunded bonds - - - - - - - (3,500,000) (3,000,000) (3,570,000) Transfers in 5,249,530 6,793,602 5,760,560 5,953,566 5,925,029 6,816,820 7,382,087 7,476,079 8,102,479 7,201,276 Transfers out (5,249,530) (6,793,602) (5,760,560) (5,953,566) (5,925,029) (6,816,820) (7,382,087) (7,476,079) (8,102,479) (7,201,276)

Total other financing sources (uses) 1,144,960 4,750,000 5,052,827 7,089,467 5,992,106 741,466 295,525 79,448 58,561 145,053

Other changes in fund balanceLegal settlement - - 1,050,000 - - - - - - -

Total other changes in fund balance - - 1,050,000 - - - - - - -

Net change in fund balances, as restated (c) (1,011,829)$ 5,400,191$ 1,847,482$ 1,795,309$ (6,224,320)$ (1,687,470)$ (802,757)$ (433,586)$ 1,139,392$ 786,836$

Debt service as a percentage of noncapital expenditures 33.1% 31.0% 33.5% 21.9% 16.8% 29.2% 31.4% 31.5% 34.6% 33.0%

(a) Prior to 2003 and after 2007, Capital improvement program expenditures were included primarily in the general government expenditures.(b) In 2004 and 2005, Community development expenditures included non-recurring payments for project costs related to the Merriam Pointe and Merriam Village developments.(c) In 2008, the City restated of $3.87 million of construction in progress capitalized in 2005 and reclassified the same amount from capital outlay to community development expenditures.(d) In 2008, $3.5 million of bonds were issued to finance maturing temporary notes and were previously presented as issuance of general obligation bonds and debt service expenditures.

The reporting of these transactions have been revised and are now reflected as an issuance of refunding bonds and a redemption of refunded bonds.

73

City of Merriam, Kansas Table 5Tax by Revenue Source,Governmental Funds

Last Ten Fiscal Years(Modified Accrual Basis of Accounting)

Property TIF Property City Sales County Sales Transient TIF Replace- Special FranchiseFiscal Year Tax Taxes Tax Tax Guest Tax ment Taxes Assessments Fees Total

2001 2,314,792$ 1,718,900$ 6,511,712$ 1,083,829$ 325,653$ 297,482$ 53,536$ 1,274,113$ 13,580,017$

2002 2,511,884 1,864,074 6,149,580 1,046,826 400,566 333,870 51,734 1,143,193 13,501,727

2003 2,517,294 2,173,363 6,423,777 1,275,896 357,528 333,625 54,560 1,097,987 14,234,030

2004 2,730,585 2,071,549 6,575,355 1,439,407 333,124 344,253 52,390 1,075,969 14,622,632

2005 2,764,039 2,522,742 6,377,908 1,449,336 348,014 396,625 54,978 1,125,860 15,039,502

2006 2,806,413 2,855,175 6,623,315 1,454,689 362,605 427,628 52,345 1,065,447 15,647,617

2007 3,055,871 2,947,029 6,550,788 1,473,119 379,558 412,696 54,462 1,151,871 16,025,394

2008 3,151,493 3,098,333 6,694,377 1,357,193 393,902 440,540 51,375 1,164,267 16,351,480

2009 3,952,594 3,386,514 6,040,858 1,346,215 306,165 464,223 278,004 1,136,796 16,911,369

2010 3,879,003 3,294,986 5,952,837 1,293,227 287,678 445,813 563,414 1,325,346 17,042,304

Tax Revenues

74

City of Merriam, Kansas Table 6Total City Taxable Sales by Category

Last Ten Fiscal Years

Sales by Retail Category 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Restaurants/Entertainment 20,850,889$ 22,407,784$ 18,814,848$ 21,192,720$ 23,237,520$ 19,255,040$ 18,290,240$ 19,310,880$ 20,111,440$ 21,893,680$

Auto dealerships 157,278,703 156,381,052 200,877,453 204,015,840 194,993,280 208,754,480 216,574,960 228,372,320 204,567,600 207,159,440

Auto rental, leasing, repairs 20,399,303 24,324,024 30,569,326 26,246,160 30,450,672 32,306,240 28,049,120 26,291,120 26,118,400 25,510,080 gasoline

Construction, home repairs 95,041,899 91,577,510 61,839,257 60,813,120 54,373,538 54,522,800 55,799,680 51,604,800 49,816,240 44,964,080 and maintenance

Grocery and drug stores 23,369,718 22,733,530 20,778,049 19,695,760 18,703,680 19,289,760 19,807,840 21,153,200 20,497,440 19,074,160

Clothing, department and 41,112,772 36,203,246 34,824,193 32,684,000 31,840,080 29,505,840 26,962,400 24,762,400 25,347,680 25,040,240 shoe stores

Utilites and communications 56,535,783 28,455,640 27,596,390 25,665,200 27,169,440 27,074,560 29,507,040 37,167,840 30,971,920 37,145,920

Hotels 6,206,406 7,516,158 6,563,867 5,877,680 5,860,080 7,475,600 5,411,680 6,050,320 4,965,840 5,275,760

Medical 1,778,354 3,293,179 2,912,690 2,644,640 6,291,440 6,385,600 1,868,720 3,163,200 6,442,960 5,265,600

Specialty shops 25,693,225 18,776,110 19,933,535 22,156,720 21,108,160 28,460,400 25,229,520 24,647,520 18,966,080 19,297,680

All other outlets 72,671,883 80,300,269 89,194,516 105,038,538 96,206,777 96,836,938 96,563,857 93,008,086 75,441,440 65,600,320

Total 520,938,935$ 491,968,502$ 513,904,124$ 526,030,378$ 510,234,667$ 529,867,258$ 524,065,057$ 535,531,686$ 483,247,040$ 476,226,960$

Source: Determined from information provided by the Kansas Department of Revenue.

Note: Kansas statutes prohibit cities from disclosing sales tax remitters and the respective amounts of sales tax revenue remitted.

Fiscal Year

75

City of Merriam, Kansas Table 7Sales Tax Rates

Direct and Overlapping GovernmentsLast Ten Fiscal Years

Fiscal YearDirect Sales Tax Rate of Merriam 2001 2002 (a) 2003 2004 2005 2006 2007 2008 2009 (b) 2010 (c)

General 1.000% 1.000% 1.000% 1.000% 1.000% 1.000% 1.000% 1.000% 1.000% 1.000%Street Improvement 0.250% 0.250% 0.250% 0.250% 0.250% 0.250% 0.250% 0.250% 0.250% 0.250%

Total Direct Sales Tax 1.250% 1.250% 1.250% 1.250% 1.250% 1.250% 1.250% 1.250% 1.250% 1.250%

Total Sales Tax Rate

State of Kansas 4.900% 5.300% 5.300% 5.300% 5.300% 5.300% 5.300% 5.300% 5.300% 6.300%Johnson County 0.975% 0.850% 1.100% 1.100% 1.100% 1.100% 1.100% 1.100% 1.225% 1.225%City of Merriam 1.250% 1.250% 1.250% 1.250% 1.250% 1.250% 1.250% 1.250% 1.250% 1.250%

Total Direct and Overlapping Rate 7.125% 7.400% 7.650% 7.650% 7.650% 7.650% 7.650% 7.650% 7.775% 8.775%

Source: Kansas Department of Revenue

(a) Rates effective as of 12/31/2002. The State of Kansas rate increase to 5.300% was effective 7/1/2002. The Johnson County rate decrease to .850% was effective 4/1/2002.

(b) Rates effective as of 12/31/2009. The Johnson County rate increase to 1.225% was effective 4/1/2009.

(c) Rates effective as of 12/31/2010. The State of Kansas rate increase to 6.300% was effective 7/1/2010.

76

City of Merriam, Kansas Table 8Assessed Value and Estimated Actual Value of Taxable Property


Direct Tax Estimated Assessed Personal Railroads Total Rate Actual Value as a

Fiscal Year Residential Commercial Vacant/Other Property & Utilities Assessed (per $1,000) Valuation (a) % of Actual

2001 51,740,433$ 65,519,143$ 820,765$ 15,948,719$ 3,223,344$ 137,252,404$ 17.475 792,560,803$ 17.3%

2002 55,529,255 68,708,899 612,507 16,044,221 3,531,059 144,425,941 17.592 838,981,180 17.2%

2003 57,624,220 67,601,787 1,515,772 14,804,514 3,414,507 144,960,800 18.526 854,841,242 17.0%

2004 59,882,752 72,999,059 929,237 13,092,465 3,469,381 150,372,894 19.285 884,798,708 17.0%

2005 61,818,650 76,401,456 899,025 11,158,513 3,659,520 153,937,164 19.275 908,073,012 17.0%

2006 64,022,739 78,740,324 1,703,765 11,611,330 3,807,284 159,885,442 19.241 945,643,429 16.9%

2007 65,340,913 93,188,068 2,447,387 11,501,177 3,835,761 176,313,306 21.181 1,017,536,544 17.3%

2008 66,457,996 81,786,926 3,387,991 10,145,687 3,962,287 165,740,887 21.186 987,892,871 16.8%

2009 67,060,047 83,627,805 3,756,050 7,400,355 3,950,513 165,794,770 27.360 992,708,496 16.7%

2010 65,569,729 82,541,936 2,653,510 6,161,303 3,910,033 160,836,511 27.352 961,187,702 16.7%

Source: Johnson County Appraiser's Office and Johnson County Records & Tax Administration

(a) Estimated Actual Valuation is equal to appraised value. Residential real estate is assessed at 11.5% of appraised value; commercial real estate at 25%; all other property at rates between 12% to 33%

Real PropertyAssessed Valuation

77

City of Merriam, Kansas Table 9Property Tax Rates (Per $1,000 of Assessed Valuation)

Direct and Overlapping GovernmentsLast Ten Fiscal Years

TotalBasic Debt Total Junior Board of Merriam Total Direct and

Fiscal Year Rate Service Direct State County (b) College Education (c) Drainage Bd. Overlapping Overlapping

2001 10.564$ 6.911$ 17.475$ 1.500$ 24.626$ 7.646$ 40.327$ 2.743$ 76.842$ 94.317$

2002 10.957 6.635 17.592 1.500 24.867 7.743 38.699 2.886 75.695 93.287

2003 11.914 6.612 18.526 1.500 20.771 9.428 42.238 3.176 77.113 95.639

2004 17.174 2.111 19.285 1.500 21.700 9.432 37.774 3.612 74.018 93.303

2005 17.161 2.114 19.275 1.500 21.364 9.438 42.655 3.749 78.706 97.981

2006 17.131 2.110 19.241 1.500 23.163 8.960 49.748 3.798 87.169 106.410

2007 18.836 2.345 21.181 1.500 23.199 8.872 51.980 4.050 89.601 110.782

2008 18.840 2.346 21.186 1.500 23.242 8.749 52.008 3.934 89.433 110.619

2009 24.999 2.361 27.360 1.500 23.165 8.768 52.094 2.488 88.015 115.375

2010 24.991 2.361 27.352 1.500 23.213 8.784 55.318 2.615 91.430 118.782

Source: Johnson County Appraiser's Office

(a) Overlapping rates are those of local and county governments that apply to property owners within the City of Merriam.(b) County rate includes Johnson County, Parks and Recreation District, and Library(c) Shawnee Mission School District No. 512

City of Merriam Overlapping Rates (a)

78

City of Merriam, Kansas Table 10Principal Property Taxpayers

Current Year and Nine Years Ago

Percentage Percentage Taxable of Total Taxable of Total

Assessed City Taxable Assessed City TaxableTaxpayer Value Rank Assessed Value Value Rank Assessed Value

Merriam Town Center 7,062,501$ 1 4.26% 9,195,400$ 1 7.00%Aristocrat Motors 2,948,493 2 1.78% 1,625,000 9 1.24%Santa Fe Medical Building 2,650,000 3 1.60% - - Car Max 2,612,498 4 1.58% - - G.E. Capital 2,245,501 5 1.35% 2,525,575 2 1.92%Antioch Plaza Office 1,914,500 6 1.15% 2,037,300 5 1.55%Baron BMW 1,748,930 7 1.05% 1,910,040 6 1.45%Georgetown Apartments 1,616,555 8 0.98% 2,063,802 4 1.57%Georgetown Medical Building 1,442,500 9 0.87% 1,871,225 7 1.43%Superior Chevrolet 1,390,903 10 0.84% - - Lee Apparel Company - - 2,463,525 3 1.88%King's Cove Office Park - - 1,663,125 8 1.27%Georgetown Marketplace - - 1,604,575 10 1.22%

25,632,381$ 15.46% 26,959,567$ 20.53%

Source: Johnson County Appraiser's Office

2010 2001

79

City of Merriam, Kansas Table 11Property Tax Levies and Collections


Taxes Levied Collectionsfor the in Subsequent

Fiscal Year Fiscal Year Amount % of Levy Years Amount % of Levy

2001 2,398,486$ 2,323,221$ 96.86% 9,562$ 2,332,783$ 97.26%

2002 2,540,741 2,472,229 97.30% 19,072 2,491,301 98.05%

2003 2,685,544 2,603,296 96.94% 26,122 2,629,418 97.91%

2004 2,899,944 2,833,984 97.73% 19,286 2,853,270 98.39%

2005 2,967,139 2,887,999 97.33% 9,213 2,897,212 97.64%

2006 3,076,356 2,974,459 96.69% 30,987 3,005,446 97.70%

2007 * 3,734,492 3,256,645 87.20% 38,050 3,294,695 88.22%

2008 3,511,387 3,408,974 97.08% 19,151 3,428,125 97.63%

2009 4,536,145 4,378,952 96.53% 6,510 4,385,462 96.68%-

2010 4,399,200 4,256,814 96.76% - 4,256,814 96.76%

Note: Source Johnson County Treasurer's Office

* The assessed valuation for the 2007 budget included 3 parcels that were classified as tax-exempt prior to 2007. These parcels werebeing replatted at the time the county assessment was prepared, but regained their tax-exempt status after taxes were levied for 2007. Without the inclusion of these parcels, taxes levied would have been approximately $3,403,000, with collections totaling 95.69% in the fiscal year of levy, and 96.82% for total collections to date.

Collected within theFiscal Year of the Levy Total Collections to Date

80

City of Merriam, Kansas Table 12Ratios of Outstanding Debt by Type


General Special Subordinate Tax Increment PercentageFiscal Obligation Assessment Temporary TIF Revenue Special Obligation Contractual of Personal PerYear Bonds G.O. Bonds Notes Bond TIF Bond Liabilities Total Income Capita

2001 11,413,300$ -$ -$ 9,675,450$ 5,113,522$ 2,766,305$ 28,968,577$ 9.4% 2,632

2002 13,798,300 - - 9,475,450 5,113,522 2,746,254 31,133,526 9.9% 2,844

2003 16,430,000 - - 9,075,450 5,113,522 2,696,762 33,315,734 10.7% 3,072

2004 18,060,000 - 3,500,000 8,575,450 5,113,522 2,629,019 37,877,991 11.6% 3,496

2005 22,535,000 - 3,500,000 7,975,450 5,113,522 2,563,065 41,687,037 12.6% 3,863

2006 21,055,000 - 3,975,000 7,075,450 5,113,522 3,276,180 40,495,152 12.2% 3,760

2007 19,250,000 - 3,810,000 5,975,450 5,113,522 3,107,850 37,256,822 10.8% 3,458

2008 20,845,000 - 145,000 4,775,450 5,113,522 5,832,254 36,711,226 10.3% 3,402

2009 15,165,000 3,210,000 - 3,575,450 5,113,522 8,407,438 35,471,410 10.4% 3,280

2010 12,930,000 2,900,000 - 2,275,450 5,113,522 8,959,685 32,178,657 9.3% 2,925

Note: See Table 17 for personal income data.

Note: Details regarding the City's outstanding debt can be found in Note 4 to the financial statements.

Governmental Activities

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City of Merriam, Kansas Table 13Ratios of General Bonded Debt Outstanding


Less: Amounts Net Percentage ofGeneral Available in Bonded Estimated Actual

Fiscal Obligation Temporary Debt Service Debt Taxable Value of PerYear Bonds Notes Fund Outstanding Property Capita

2001 11,413,300$ -$ 735,278$ 10,678,022$ 1.27% 970$

2002 13,798,300 - 910,101 12,888,199 1.51% 1,177

2003 16,430,000 - 276,393 16,153,607 1.83% 1,490

2004 18,060,000 3,500,000 297,427 21,262,573 2.34% 1,962

2005 22,535,000 3,500,000 317,767 25,717,233 2.72% 2,383

2006 21,055,000 3,975,000 72,291 24,957,709 2.45% 2,318

2007 19,250,000 3,810,000 22,698 23,037,302 2.33% 2,138

2008 20,845,000 145,000 56,922 20,933,078 2.11% 1,940

2009 18,375,000 - 61,646 18,313,354 1.91% 1,693

2010 15,830,000 - 47,918 15,782,082 1.73% 1,434

Note: See Table 8 for property value data.

Note: See Table 17 for population data.

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City of Merriam, Kansas Table 14Direct and Overlapping Governmental Activities Debt

As of December 31, 2010

Estimated Estimated SharePercentage of Overlapping

Governmental Unit Debt Outstanding Applicable Debt

Debt repaid with property taxes:

Shawnee Mission U.S. District No. 512 222,340,000$ 5.12% 11,379,170$

Johnson County 19,909,385 2.00% 397,371

Subtotal, overlapping debt 11,776,540$

City direct debt 15,830,000

Total direct and overlapping debt 27,606,540$

Source: Johnson County Office of Financial Management

Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of Merriam. This process recognizes that, when considering the City's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government.

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City of Merriam, Kansas Table 15Legal Debt Margin Information


2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Debt Limit $47,517,148 $47,874,894 $49,475,023 $50,571,446 $52,276,857 $57,197,504 $53,995,124 $54,055,994 $52,534,242 $49,255,580

Total net debt applicable to limit 6,118,300 9,388,300 11,025,625 17,065,625 21,835,625 20,830,625 20,830,625 19,120,625 13,780,625 10,265,000

Legal debt margin $41,398,848 $38,486,594 $38,449,398 $33,505,821 $30,441,232 $36,366,879 $33,164,499 $34,935,369 $38,753,617 $38,990,580

Total net debt applicable to the limit as a percentage of debt limit 12.88% 19.61% 22.29% 33.75% 41.77% 36.42% 38.58% 35.37% 26.23% 20.84%

Legal Debt Margin Calculation for Fiscal Year 2010Assessed Value (a) $164,185,267Debt Limit (b) 49,255,580

Debt applicable to limit: General Obligation bonds and notes 15,830,000 Less: Drainage and refunding issue not subject to limit (c) (5,565,000) Total net debt applicable to limit 10,265,000

Legal debt margin $38,990,580

(a) Combination of Motor Vehicle values and Real Property Values(b) Debt limits for Kansas cities are established by state statutes. Based on the statutes, the debt limit for the City of Merriam is 30% of assessed value.(c) As provided by Kansas statute K.S.A. 10-309

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City of Merriam, Kansas Table 16Pledged Revenue Coverage


Special Property PropertyFiscal Assessment Tax TaxYear Collections Principal Interest Coverage Increment Principal Interest Coverage Increment Principal Interest Coverage

2001 53,571$ 35,000$ 788$ 1.50 895,530$ -$ -$ - 224,317$ 21,317.00$ 170,086.00$ 1.17

2002 51,568 - - - 1,039,510 200,000 633,148 1.25 256,280 43,739 182,400 1.13

2003 54,560 - - - 1,118,559 400,000 633,106 1.08 297,151 64,075 201,162 1.12

2004 52,390 - - - 1,126,361 500,000 600,331 1.02 312,203 87,990 193,515 1.11

2005 54,977 - - - 1,292,286 600,000 560,656 1.11 300,273 92,735 178,551 1.11

2006 52,345 - - - 1,592,966 900,000 503,731 1.13 361,910 126,275 179,296 1.18

2007 54,462 - - - 1,545,727 1,100,000 438,281 1.00 458,058 188,409 174,925 1.26

2008 51,375 - - - 1,506,552 1,200,000 353,706 0.97 493,686 219,801 236,233 1.08

2009 278,004 290,000 128,519 0.66 1,569,365 1,200,000 273,406 1.07 628,321 454,149 190,365 0.97

2010 563,414 310,000 112,900 1.33 1,490,211 1,300,000 182,931 1.00 905,413 584,638 172,099 1.20

Note: Details regarding the City's outstanding debt can be found in Note 4 to the financial statements.

(a) Special assessment bonds were refunded early in 2001 due to additional payments made in 1998. The related special assessment taxes were collected through 2008. In 2008, new general obligation bonds with special assessment backing were issued.(b) Tax increment revenue bonds and contractual liabilities are backed by the incremental real estate property tax revenue produced by the properties located in the redevelopment district.

Tax Increment Contractual Liabilities (b)

Debt ServiceDebt Service

Special Assessment Bonds (a) Tax Increment Revenue Bonds (b)

Debt Service

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City of Merriam, Kansas Table 17Demographic and Economic Statistics


Per CapitaPersonal Personal Median Unemployment

Year Population (a) Income Income (b) Age (b) Rate (c)

2001 11,008 308,279,040 28,005 35.5 3.70%

2002 10,947 313,609,656 28,648 36.2 3.90%

2003 10,844 310,658,912 28,648 36.2 4.50%

2004 10,835 327,000,300 30,180 36.2 4.30%

2005 10,791 331,272,909 30,699 36.8 4.50%

2006 10,769 331,308,285 30,765 36.5 4.00%

2007 10,777 344,993,324 32,012 36.5 3.90%

2008 10,790 354,861,520 32,888 37.0 4.40%

2009 10,814 342,457,752 31,668 37.3 6.30%

2010 11,003 344,199,477 31,282 40.4 6.50%

(a) Population data for 1999 and 2002 - 2008 was based upon State of Kansas estimates. The 2000 and 2001 data is based on the 2000 Federal Census. The 2010 data is based on the 2010 Federal Census.(b) County Economic Research Institute, Inc., Johnson County Zip Code Demographics.(c) Kansas Department of Labor provides demographics by county.

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City of Merriam, Kansas Table 18Principal Employers

Current Year and Nine Years Ago

Percentage Percentageof Total City of Total City

Employer Employees Rank Employment Employees Rank Employment

Shawnee Mission Medical Center 2,700 1 19.29% 2,500 1 17.86%GE Consumer Finance 530 2 3.79% - - First Student 330 3 2.36% - - Superior Chevrolet/Toyota 281 4 2.01% 265 5 2.04%Seaboard Allied Milling 190 5 1.36% 170 7 1.31%Shawnee Mission School District 181 6 1.29% - - Carmax 162 7 1.16% - - Home Depot 143 8 1.02% 150 8 1.15%Industrial Bearing (IBT) 142 9 1.01% 140 9 1.08%Aristocrat Motors 140 10 1.00% - - Montgomery Ward Credit Services - - 800 2 6.15%Lee Company - - 303 3 2.33%School Services Leasing - - 300 4 2.31%Lucent Technologies - - 200 6 1.54%Hen House - - 120 10 0.92%

4,799 34.28% 4,948 36.69%

Source: Employee totals provided by individual employers.

2010 2001

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City of Merriam, Kansas Table 19Full-Time Equivalent City Government Employees by Function


Function/Program 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

General governmentMayor/City Council 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 General Government 9.45 9.75 9.75 9.00 9.75 9.75 9.75 9.75 8.75 8.75 Information Services (a) - - - - - - - 0.50 0.50 0.50 Municipal Court 2.95 2.95 2.95 2.95 2.75 2.75 2.75 2.75 2.75 2.75

Law enforcementOfficers 26.00 26.00 26.00 26.00 28.00 28.00 29.00 28.00 28.00 28.00 Civilians 5.75 6.00 6.00 6.00 7.00 7.00 7.00 7.00 7.00 7.00

Fire prevention and controlFirefighters 21.64 22.00 22.00 22.00 22.00 22.00 22.00 21.00 24.00 23.00

Public works 18.00 19.00 19.00 19.00 20.46 20.46 20.46 20.76 20.96 20.96 Culture and recreation

Community Center 8.98 8.98 8.98 9.36 9.36 9.36 9.36 9.36 9.36 9.36 Aquatic Center 10.33 10.33 10.33 10.33 10.66 10.66 10.66 10.66 10.66 10.66 Merriam Marketplace 0.20 0.26 0.32 0.32 0.32 0.32 0.32 0.32 0.32 0.32

Community development 6.78 6.00 6.00 6.75 6.00 6.00 8.00 8.00 8.00 8.00 Capital improvement program (b) 4.00 4.00 3.00 3.00 3.00 3.00 3.00 - -

Total 123.08 124.27 123.33 123.71 128.30 128.30 131.30 127.10 129.30 128.30

Source: City of Merriam Human Resources records

(a) Previously included in General Government(b) Capital Improvements Program employees included in Community Development after 2008

Fiscal Year

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City of Merriam, Kansas Table 20Operating Indicators by Function



General governmentOccupational licenses issued 887 913 898 967 912 915 915 996 1,003 966 Vendor payments 4,512 4,667 4,168 4,384 4,475 4,225 3,632 3,552 3,327 3,184 Court filings processed 7,198 8,172 8,585 8,010 9,958 10,641 10,597 10,159 8,913 9,172

Law enforcementPhysical arrests 996 1,130 1,577 1,427 1,326 1,406 1,193 1,116 1,209 1,278 Accidents investigated 543 546 529 512 637 764 688 587 499 486 Traffic violations issued 7,504 8,016 8,006 8,233 9,958 10,641 10,867 10,159 8,913 9,202 Animal control service calls 1,361 1,352 1,375 1,293 1,310 733 1,620 1,872 288 1,020

Fire prevention and controlFire inspections performed 410 978 926 832 865 814 954 675 781 562 Alarm responses 1,585 1,538 1,478 1,614 1,647 1,624 1,740 1,761 1,554 1,542 Public education attendance 2,893 15,176 15,000 13,246 6,707 14,040 18,318 5,352 5,205 3,526

Public worksMiles of street repair/overlay 8.5 8.5 8.5 4.0 3.5 3.0 3.0 3.0 3.0 2.2 Acres mowed 40 40 60 60 60 60 60 66 60 66 Miles of curbing/sidewalk repaired 4.0 4.0 4.5 3.5 4.0 3.0 5.0 3.5 3.0 3.0

Culture and recreationCommunity Center attendance 63,325 70,511 68,399 56,805 49,993 50,090 43,586 45,434 46,543 44,946 Aquatic Center attendance 35,131 36,914 28,389 14,534 20,306 20,167 17,600 19,030 21,235 25,996 Farmers' Market ave. wkly. attend. 134 469 389 340 532 581 431 446 532 708

Community developmentConstruction permits issued 528 333 313 236 252 311 250 351 276 274 Value of new commercial const. 1,325,000$ 8,300,000$ 4,324,168$ 1,735,000$ 15,284,365$ 8,880,987$ 11,478,003$ 17,627,005$ 67,500$ -$ Value of new residential const. 90,000$ 475,000$ 935,000$ 828,400$ 957,000$ 1,207,970$ -$ -$ -$ 248,550$

Capital improvement programNumber of projects managed 15 7 6 32 29 23 19 21 19 19

Source: City of Merriam departmental records

Fiscal Year

89

City of Merriam, Kansas Table 21Capital Asset Statistics by Function



General governmentVisitors' Bureau/Historical Plaza (a) - - - - - 1 1 1 1 1

Law enforcementStations 1 1 1 1 1 1 1 1 1 1 Patrol units 12 12 15 14 15 15 15 15 18 19 Animal control units 1 1 1 1 1 1 1 1 1 1 Mobile command post 1 1 1 1 1 1 1 - - -

Fire control and preventionStations 1 1 1 1 1 1 1 1 1 1 Emergency vehicles 5 4 4 4 4 4 4 4 4 4 Non-emergency vehicles 3 3 3 3 2 2 2 2 1 1 Rescue boat 1 1 1 1 1 1 1 1 1 1 Civil defense sirens 4 4 4 4 4 4 4 4 4 4

Public worksStreets (miles) 112 112 112 112 112 112 112 113 113 113 Streetlights 953 953 988 1,117 1,302 1,481 1,493 1,571 1,601 1,615 Traffic signals 102 102 102 102 106 106 107 107 107 107 Maintenance vehicles 20 20 21 20 23 24 24 24 23 24

Culture and recreationAcreage of city parks 55.73 60.98 60.98 63.08 63.08 64.08 64.08 79.08 79.08 79.08 Parks 6 7 7 8 8 9 9 9 9 9 Tennis courts 1 1 1 1 1 1 1 1 1 1 Community centers 1 1 1 1 1 1 1 1 1 1 Aquatic centers 1 1 1 1 1 1 1 1 1 1 Farmers' Market 1 1 1 1 1 1 1 1 1 1

Source: Capital asset records maintained by the Merriam Finance Department

(a) Merriam Visitors' Bureau opened in 2006

Fiscal Year

90

APPENDIX C

FORM OF CONTINUING DISCLOSURE INSTRUCTIONS

FORM OF CONTINUING DISCLOSURE LETTER OF INSTRUCTIONS

[Closing Date]

Governing Body of the City of Merriam, Kansas

Re: Continuing Disclosure Letter of Instructions for $7,285,000* General Obligation Refunding Bonds, Series 2012, of the City of Merriam, Kansas, Dated March 1, 2012 (the “Obligations”)

The purpose of this letter is to assist the Underwriter (as defined below) in complying with the requirements of the SEC Rule (as defined below). It being the intention of the City that there be full and complete compliance with the SEC Rule and EMMA (as defined below), this letter shall be construed in accordance with the written interpretative guidance and no-action letters published from time to time by the Commission (as defined below) and its staff or the MSRB (as defined below) and its staff with respect to the SEC Rule or EMMA, as the case may be. The City represents that it will be the only Obligated Person (as defined below) with respect to the Obligations at the time the Obligations are delivered to the Underwriter and that no other person is expected to become so committed at any time after issuance of the Obligations.

Section 1. Definitions. Unless the context otherwise requires, the following capitalized terms have the following meanings:

“Annual Financial Information” means the financial information or operating data with respect to the City, provided at least annually, of the type included in the portions of the Final Official Statement set forth in Exhibit A to this Letter, and shall include, at a minimum, that financial information and operating data which is customarily prepared by the City and publicly available.

“Audited Financial Statements” means the City’s annual financial statements, prepared in accordance with GAAP for governmental units as prescribed by GASB, which financial statements shall have been audited by such auditor as shall be then required or permitted by the laws of the State.

“Bond Counsel” means the firm of Kutak Rock LLP, or any other attorney or firm of attorneys whose expertise in matters relating to the issuance of obligations by states and their political subdivisions is nationally recognized and acceptable to the City.

“City” means the City of Merriam, Kansas.

“Commission” means the Securities and Exchange Commission.

* Subject to change.

Governing Body of the City of Merriam, Kansas [Closing Date] Page 2

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“Continuing Disclosure Letter of Instructions” or “Letter” means this Continuing Disclosure Letter of Instructions the execution of which is authorized by the Obligation Resolution, as the same may be amended or supplemented in accordance with its terms.

“EMMA” means the Electronic Municipal Market Access facility for municipal securities disclosure of the MSRB, or any other market access method approved under the SEC Rule.

“Final Official Statement” means the Official Statement and Addendum prepared by the City or its representatives in connection with the sale of the Obligations and delivered to the Underwriter within seven business days after the sale of the Obligations in accordance with the SEC Rule. The Final Official Statement includes the information in the Official Statement as supplemented or amended.

“GAAP” means generally accepted accounting principles.

“GASB” means the Governmental Accounting Standards Board or its successors or assigns.

“MSRB” means the Municipal Securities Rulemaking Board and any successors or assigns, or any other entities or agencies approved under the SEC Rule.

“Obligation Resolution” means the resolution of the City prescribing the terms and details of the Obligations.

“Obligations” means the City's general obligation issue as described on the first page of this letter.

“Obligated Person” means an obligated person as defined in the SEC Rule.

“Official Statement” means the Official Statement which was prepared by the City and its advisors in connection with the sale of the Obligations and distributed to potential purchasers of the Obligations before the Final Official Statement, as described in the SEC Rule, was made available.

“Outstanding” means as of a particular date of determination, all Obligations authenticated and delivered under the provisions of the Obligation Resolution, except:

A. Obligations canceled by the Paying Agent or delivered to the Paying Agent for cancellation pursuant to the Obligation Resolution;


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B. Obligations for the payment or redemption of which moneys or investments have been deposited in accordance with the defeasance provisions of the Obligation Resolution; and

C. Obligations in exchange for or in lieu of which other Obligations have been authenticated and delivered pursuant to the Obligation Resolution.

“Prescribed Form” means such electronic format accompanied by such identifying information as shall have been prescribed by the MSRB and which shall be in effect on the date of filing of the applicable information.

“Reporting Event” means any of the following events with respect to the Obligations:

A. principal and interest payment delinquencies;

B. non-payment related defaults, if material;

C. unscheduled draws on debt service reserves reflecting financial difficulties;

D. unscheduled draws on credit enhancements reflecting financial difficulties;

E. substitution of credit or liquidity providers, or their failure to perform;

F. adverse tax opinions, the issuance by the Internal Revenue service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security;

G. modifications to rights of security holders, if material;

H. bond calls (other than mandatory sinking fund redemptions), if material, and tender offers;

I. defeasances;

J. release, substitution, or sale of property securing repayment of the securities, if material;

K. rating changes;

L. bankruptcy, insolvency, receivership or similar event of the obligated person (this event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in proceedings under the U.S. Bankruptcy


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

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

N. appointment of a successor or additional trustee or the change of name of a trustee, if material.

“Reporting Event Notice” means notice in Prescribed Form in accordance with EMMA of a Reporting Event.

“SEC Report Date” means within 180 days after the end of each fiscal year for the City (currently the fiscal year ends on December 31), beginning with the fiscal year 2012.

“SEC Rule” means the Securities and Exchange Commission Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, as amended (17 CFR part 240, § 240.15c2-12).

“State” means the state of Kansas.

“Underwriter” means each broker, dealer or municipal securities dealer acting as an underwriter in the primary offering of the Obligations.

Section 2. Undertaking.

A. This Letter constitutes the written undertaking for the benefit of the holders of the Obligations required by Section (b)(5)(i) of the SEC Rule.

B. The City, as an “obligated person” within the meaning of the SEC Rule, undertakes to provide the following information as provided in this Letter:

(1) Annual Financial Information;

(2) Audited Financial Statements, if any; and


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(3) Reporting Event Notices.

C. (1) The City shall while any Obligations are Outstanding provide the Annual Financial Information in Prescribed Form in accordance with EMMA to the MSRB, on or before the SEC Report Date. The City may adjust the SEC Report Date if the City changes its fiscal year by providing written notice of the change of fiscal year and the new SEC Report Date to the MSRB; provided that the new SEC Report Date shall be six months after the end of the new fiscal year and provided further that the period between the final SEC Report Date relating to the former fiscal year and the initial SEC Report Date relating to the new fiscal year shall not exceed one year in duration. It shall be sufficient if the City provides to the MSRB the Annual Financial Information by specific reference to documents available to the public on the MSRB’s Internet Web site, or filed with the Commission.

(2) If not provided as part of the Annual Financial Information, the City shall provide the Audited Financial Statements when and if available while any Obligations are Outstanding to the MSRB in Prescribed Form in accordance with EMMA.

(3) If a Reporting Event occurs while any Obligations are Outstanding, the City shall file a Reporting Event Notice in a timely manner not in excess of ten business days after the occurrence of such event in Prescribed Form in accordance with EMMA with the MSRB. Each Reporting Event Notice shall be so captioned and shall prominently state the date, title and CUSIP numbers of the Obligations.

(4) The City shall provide in Prescribed Form in accordance with EMMA in a timely manner not in excess of ten business days after the occurrence of such event to the MSRB notice of any failure by the City while any Obligations are Outstanding to provide to the MSRB Annual Financial Information on or before the SEC Report Date.

D. Any failure by the City to perform in accordance with this Letter shall not constitute an “event of default” under the Obligation Resolution, and the rights and remedies provided therein upon the occurrence of an event of default shall not apply to any such failure.

Section 3. Method of Transmitting Continuing Disclosure. The information listed in Section 2 shall be provided by the City to the MSRB, at www.emma.msrb.org, in the Prescribed Form or by such other method of transmitting information that is approved by the Commission.


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Section 4. Termination or Amendment of Obligation to Provide Continuing Disclosure. The continuing obligation hereunder of the City to provide Annual Financial Information, Audited Financial Statements, if any, and Reporting Event Notices shall terminate immediately once the Obligations no longer are Outstanding. This Letter, or any provision hereof, shall be null and void in the event that the City delivers to the MSRB an opinion of Bond Counsel to the effect that those portions of the SEC Rule which require this Letter, or any such provision, are invalid, have been repealed retroactively or otherwise do not apply to the Obligations. This Letter may be amended without the consent of the holders of the Obligations, but only upon the delivery by the City to the MSRB, of the proposed amendment and an opinion of Bond Counsel to the effect that such amendment, and giving effect thereto, will not adversely affect the compliance of this Letter by the City with the SEC Rule.

Section 5. Dissemination Agent. The City may, from time to time, appoint or engage an agent to assist it in carrying out its obligations under this Letter and may discharge any such agent with or without appointing a successor agent.

Section 6. Additional Information. Nothing in this Letter shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this subsection or any other means of communication, or including any other information in any Annual Financial Information or notice of occurrence of a Reporting Event in addition to that which is required by this Letter. If the City chooses to include any information from any document or notice of occurrence of a Reporting Event in addition to that which is specifically required by this Letter, the City shall not have any obligation under this Letter to update such information or include it in any future disclosure or notice of the occurrence of a Reporting Event.

Section 7. Beneficiaries. This Letter has been executed in order to assist the Underwriter in complying with the Rule; however, this Letter shall inure solely to the benefit of the holders of the Obligations as required by Section (b)(5)(i) of the SEC Rule, and shall create no rights in any other person or entity.

Section 8. Recordkeeping. The City shall maintain records of all disclosure made pursuant to this Letter, including the content of such disclosure, the names of the entities with whom such disclosure was filed and the date of filing such disclosure.

KUTAK ROCK LLP

THIS CONTINUING DISCLOSURE LETTER OF INSTRUCTIONS, received, acknowledged and agreed to as of [Closing Date].


By Ken Sissom, Mayor

EXHIBIT A

ANNUAL FINANCIAL INFORMATION

“Annual Financial Information” shall include the City’s audited financial statements and the following portions of the Final Official Statement:

APPENDIX A, INFORMATION CONCERNING THE ISSUER, FINANCIAL INFORMATION OF THE ISSUER

APPENDIX A, INFORMATION CONCERNING THE ISSUER, DEBT SERVICE

STRUCTURE OF THE ISSUER, General Obligation Bonds

notice of bond sale $7,505,000 general obligation … · 2012. 2. 1. · notice of bond sale...

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