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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 02/05/2019 - FIRST READING OF ORDINANCE NO. 021, 2019, AUTHORIAgenda Item 24 Item # 24 Page 1 AGENDA ITEM SUMMARY February 5, 2019 City Council STAFF Blaine Dunn, Senior Treasury Analyst Travis Storin, Accounting Director John Duval, Legal SUBJECT First Reading of Ordinance No. 021, 2019, Authorizing the Leasing of Certain City Property and the Execution and Delivery by the City of a Site Lease, a Lease Agreement , and Other Documents and Matters in Connection with the Financing of Certain Projects for the City. EXECUTIVE SUMMARY The purpose of this item is to consider the Ordinance authorizing the financing, through Certificates of Participation (COPs), needed for both the I-25/Prospect Interchange and Police Training Facility Joint Venture. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. BACKGROUND / DISCUSSION Financing City staff is seeking $25.3 million in financing through Certificates of Participation (COPs) for a March 2019 closing. This financing will help support the construction of the I-25/Prospect interchange ($17.1 million) and the Police Training Facility Joint Venture ($8.2 million). The purchaser(s) of the COPs will be determined in early March when the COPs are marketed. The financing method for the projects is a lease-lease back transaction. The City plans to use the 215 N. Mason building and Civic Center Parking Garage as the leased property in the lease-lease back transaction. The total amount of collateral offered with these two buildings is $28.4 million. A copy of the Site Lease, Lease Agreement, Continuing Disclosure Certificate, Notice of Sale and Preliminary Official Statement are attached (Attachments 1-5). I-25/Prospect Interchange Council has previously adopted four resolutions regarding the interchange, Resolution 2018-004, Resolution 2018-005, Resolution 2018-024, and Resolution 2018-074. These resolutions did the following: • Resolution 2018-004: Approved Intergovernmental Agreement (IGA) with CDOT stating the City of Fort Collins’ intent to provide an additional $17.1 million in funding for the I-25/Prospect interchange improvements. This is an amendment to the existing IGA with CDOT that currently allocates the City’s fair share contribution of funds for the North I-25 improvements ($1.125 million per year for 2017 and 2018). Agenda Item 24 Item # 24 Page 2 • Resolution 2018-005: Approved Memorandum of Understanding (MOU) with the private property interests proximate to the interchange, stating their intent to repay the City of Fort Collins their share of the interchange improvements ($8.25 million). • Resolution 2018-024: Approved Binding Agreement pertaining to development of I-25/Prospect interchange improvements between the City and the private property owners proximate to the interchange. The Binding Agreement formalized the previous MOU approved in Resolution 2018-005. Under this Binding Agreement the property owners agreed to pay back the City a total of $8.25 million for their share of the interchange improvements. • Resolution 2018-074: Approved IGA with the Town of Timnath for financial participation in the I- 25/Prospect interchange improvements. This IGA is an agreement for the Town of Timnath to pay back the City of Fort Collins $2.5 million for their share of the interchange improvements. The interchange at Prospect Road and I-25 is aging infrastructure currently beyond its design lifespan and is failing in level of service (congestion) at peak periods of travel. Existing and planned development in the area are exacerbating congestion and safety issues. The interchange and Prospect Road are a critical gateway into central Fort Collins, as well as Timnath. City of Fort Collins staff worked closely with CDOT during preliminary design phases to ensure improvements to the interchange meet the City’s needs, design standards, and integrates with the City’s road network. City staff worked with CDOT Project Managers, Town of Timnath, and private property interests proximate to the interchange throughout the past year to develop a private-public funding partnership model to share costs related to the interchange improvements. City of Fort Collins will act as primary agent with CDOT on the funding agreement, with separate repay agreements to the City from Town of Timnath, and the private property interests. Police Training Facility Joint Venture In 2014, the City of Fort Collins and City of Loveland held a Joint Council session to discuss the possibility of a police training facility to be shared between the two agencies and as a regional resource for our neighbors. There were needs and benefits identified to provide a better facility for training of both agencies. Some of the benefits identified were: • Ensure a highly trained, efficient world class operation • Develop a center that allows for current and future growth • Ability to train together with multiple jurisdictions (many high-profile incidents are multi-jurisdictional) • Provide members of law enforcement, fire, government, and private entities a venue for training • Fulfill Colorado Peace Officer Standards and Training (POST) training requirements In 2017, Fort Collins and Loveland City Councils jointly approved for design work to begin on the facility. There were some assumptions made as part of the partnership: Facility is jointly owned and operated and costs are split 50/50, Loveland will take the lead on contracts with Fort Collins reimbursing the costs. The first IGA signed was for design; the second IGA will focus on construction, operation and maintenance. Operations agreements will be resolved before the construction bid process. Staff at the two Cities have been working with the design firm SHE to design a facility that meets the scope, budget, and building requirements for both organizations. Based on updated requirements from the Northern Colorado Regional Airport and surveys of the land, adjustments have been made to the design to stay within the project budget and the scoped needs of both agencies. The facility is set to include: • 50-yard, 21 lane indoor pistol range • 6,000 sq. ft. administration space, including - 2 classrooms and office space • Driving skid pad • 1.4-mile driving pursuit/speed track Agenda Item 24 Item # 24 Page 3 • Room to add on and grow in the future, including - Street grid and tactical village, 100-yard range, shoot house, EVOC maintenance facility and fuel station, AVT and off-road driving course. CITY FINANCIAL IMPACTS Financing - Ordinance No. 021, 2019 Depending on the outcome of the prior discussion item this evening regarding consideration of a waiver of the LEED Gold certification, the total amount to borrow will be affected. If the LEED Gold waiver is granted, the City will seek to borrow a total of $25.6 million, $25.3 million for the projects and $300k in closing costs, with the COPs. The average annual debt service is $1,756,000. If the LEED Gold waiver is not granted, the City will seek to borrow a total of $26.3 million, $26 million for the projects and $300k in closing costs, with the COPs. The average annual debt service is $1,804,000. The debt service for both projects was approved as part of the 2019/2020 budget. The average annual debt service in the purchased offers totaled $2,036,000. The COPs will have a 20-year term and fixed interest rate. The City will make semiannual payments starting in June 2019 with the last payment occurring in December 2038. I-25/Prospect Interchange Total cost for CDOT to improve the interchange is estimated at $31 million. This includes an additional $7 million (beyond CDOT’s basic interchange design standard) for urban design amenities required by the City of Fort Collins and to be paid by Fort Collins, Timnath and private property interests. CDOT will share in 50% of the base design portion, or $12 million. The remaining $19 million will be split across the City, property owners, and Timnath at 43.4%, 43.4%, and 13.2%, respectively. Timnath’s share is based on traffic studies with the City and property owners evenly splitting the remaining $16.5 million cost at $8.25 million each. The principal borrowed is the balance of the $19 million costs after accounting for right-of-way ($500k) contributions and Transportation Capital Expansion Fees ($1.4 million). The net amount is $17.1 million. The City will be responsible for debt service in full and then separately collect from Timnath and the property owners under the aforementioned repayment agreements. Police Training Facility Joint Venture The total cost of the facility will be $18.5 million. Both cities have agreed to split the constructions costs 50/50, making the City of Fort Collins’ portion of the project $9.25 million. In the 2017/18 budget, Council appropriated $1.08 million for this project from General Fund Reserves. With this previous appropriation the City is seeking $8.17 million in financing for the remainder of our share of the construction costs. BOARD / COMMISSION RECOMMENDATION At its October 15, 2018 meeting, the Council Finance Committee supported proceeding to Council with the First Reading of this Ordinance. ATTACHMENTS 1. Site Lease (PDF) 2. Lease Agreement (PDF) 3. Continuing Disclosure Certificate (PDF) 4. Notice of Sale (PDF) 5. Preliminary Official Statement (PDF) 6. PowerPoint Presentation (PDF) AFTER RECORDATION PLEASE RETURN TO: Butler Snow LLP 1801 California Street, Suite 5100 Denver, Colorado 80202 Attention: Sarah P. Tasker, Esq. SITE AND IMPROVEMENT LEASE DATED MARCH __, 2019 BETWEEN CITY OF FORT COLLINS, COLORADO, AS LESSOR AND U.S. BANK NATIONAL ASSOCIATION, SOLELY IN ITS CAPACITY AS TRUSTEE UNDER THE INDENTURE, AS LESSEE ATTACHMENT 1 1 This SITE AND IMPROVEMENT LEASE, dated March __, 2019 (this “Site Lease”), is by and between the City of Fort Collins, Colorado, a home rule city duly organized and validly existing under the Constitution and laws of the State of Colorado (the “City”), as lessor, and U.S. Bank National Association, Denver, Colorado, a national banking association duly organized and validly existing under the laws of the United States of America, solely in its capacity as trustee under the Indenture (the “Trustee”), as lessee. PREFACE Unless the context otherwise requires, capitalized terms used herein shall have the meanings ascribed to them herein and in the Lease Purchase Agreement, dated March __, 2019, between the Trustee, as lessor, and the City, as lessee (the “Lease”). RECITALS 1. The City has been duly organized and is validly existing as a home rule municipality and municipal corporation under the Constitution of the State of Colorado and the home rule charter of the City (the “Charter”). 2. The City is authorized by Article XX, Section 6 of the Colorado Constitution, its Charter and part 8 of article 15 of title 31, Colorado Revised Statutes (“C.R.S.”), to enter into rental or leasehold agreements in order to provide necessary land, buildings, equipment and other property for governmental or proprietary purposes. 3. The City Council of the City (the “City Council”) is authorized by Chapter 23, Article IV, Division 2 of the Fort Collins, Colorado, Municipal Code, to lease any and all interests in real property owned in the name of the City if the City Council first finds that the lease is in the best interest of the City. 4. The City Council has determined that it is in the best interests of the City and its inhabitants to finance a portion of the cost of (a) the improvements to the highway interchange at Interstate Highway I-25 and Prospect Road in the City, and (b) the construction of a joint police training facility with the City of Loveland, Colorado (jointly, the “Project”). 5. The City Council has determined that it is in the best interests of the City and its inhabitants to provide for the financing of the Project by entering into this Site Lease and the Lease. 6. The City owns, in fee title, the Site (as described in Exhibit A attached hereto) and the buildings and improvements located thereon, which presently serve as the Civic Center and the Civic Center Parking Garage (as more particularly described in Exhibit A attached hereto, the “Leased Property”). 7. To effectuate the Project, the Trustee will acquire a leasehold interest in the Leased Property by leasing the Leased Property from the City pursuant to this Site Lease and will lease the Leased Property back to the City pursuant to the Lease. 2 8. Contemporaneously with the execution and delivery of this Site Lease and the Lease, the Trustee will execute and deliver an Indenture of Trust (the “Indenture”) pursuant to which there will be executed and delivered certain certificates of participation (the “Certificates”) dated as of their date of delivery that shall evidence certain proportionate interests in the right to receive certain Revenues (as defined in the Lease). 9. The Certificates will be dated as of their date of delivery, will evidence proportionate interests in the right to receive certain Revenues (as defined in the Lease), will be payable solely from the sources therein provided, and shall not directly or indirectly obligate the City to make any payments beyond those appropriated for any fiscal year during which the Lease shall be in effect. 10. The net proceeds of the Certificates, together with other available money of the City, will be used to finance the Project and pay the costs of issuance of the Certificates. 11. The Trustee and the City intend that this Site Lease set forth their entire understanding and agreement regarding the terms and conditions upon which the Trustee is leasing the Leased Property from the City. 12. The City proposes to enter into this Site Lease with the Trustee as material consideration for the Trustee’s agreement to lease the Leased Property to the City pursuant to the Lease. The Trustee shall prepay in full its rental payments due under this Site Lease which rental payments shall be used by the City to effectuate the Project, all pursuant to this Site Lease, the Lease and the Indenture. NOW, THEREFORE, for and in consideration of the mutual promises and covenants herein contained, the parties hereto agree as follows: Section 1. Site Lease and Terms. The City hereby demises and leases to the Trustee and the Trustee hereby leases from the City, on the terms and conditions hereinafter set forth, the Leased Property, subject to Permitted Encumbrances as described in Exhibit B hereto. The term of this Site Lease shall commence on the date hereof and shall end on December 31, 2048 (the “Site Lease Termination Date”), unless such term is sooner terminated as hereinafter provided. If, prior to the Site Lease Termination Date, the Trustee has transferred and conveyed the Trustee’s leasehold interests in all of the Leased Property pursuant to Article 12 of the Lease as a result of the City’s payment of (a) the applicable Purchase Option Price thereunder; or (b) all Base Rentals and Additional Rentals, all as further provided in Section 12.2 of the Lease, then the term of this Site Lease shall end in connection with such transfer and conveyance. In the event that the Lease is terminated and this Site Lease remains in effect, and the Trustee exercises its remedies pursuant to this Site Lease and the Indenture, then the term of this Site Lease shall end when the outstanding remaining principal amount of the Certificates, plus accrued interest thereon, have been paid or provision has been made for such payment, provided that in the event that the payment of such Certificates has been made from a sale or assignment of the Trustee’s leasehold interest herein, then this Site Lease shall remain in effect in 3 accordance with the terms and provisions of any such sublease or assignment. Notwithstanding the foregoing or any provision to the contrary contained herein or in the Indenture, the term of any sublease of the Leased Property or any portion thereof, or any assignment of the Trustee’s interest in this Site Lease, pursuant to Section 5 hereof, the Lease and the Indenture, shall not extend beyond December 31, 2048. At the end of the term of this Site Lease, all right, title, and interest of the Trustee, or any sublessee or assignee, in and to the Leased Property, shall terminate. Upon such termination, the Trustee and any sublessee or assignee shall execute and deliver to the City any necessary documents releasing, assigning, transferring, and conveying the Trustee’s, sublessee’s or assignees’ respective interests in the Leased Property. Section 2. Rental. The Trustee has paid to the City and the City hereby acknowledges receipt from the Trustee as and for rental hereunder, paid in advance, the sum of $_________, as and for all rent due hereunder, and other good and valuable consideration, the receipt and the sufficiency of which are hereby acknowledged. The City hereby determines that such amount is reasonable consideration for the leasing of the Leased Property to the Trustee for the term of this Site Lease. Section 3. Purpose. The Trustee shall use the Leased Property solely for the purpose of leasing the Leased Property back to the City pursuant to the Lease and for such purposes as may be incidental thereto; provided, that upon the occurrence of an Event of Nonappropriation or an Event of Lease Default and the termination of the Lease, the City shall vacate the Leased Property, as provided in the Lease, and the Trustee may exercise the remedies provided in this Site Lease, the Lease and the Indenture. Section 4. Owner in Fee. The City represents that (a) it is the owner in fee of the Leased Property, subject only to Permitted Encumbrances as described in Exhibit B hereto, and (b) the Permitted Encumbrances do not and shall not interfere in any material way with the Leased Property. Section 5. Sales, Assignments and Subleases. Unless an Event of Nonappropriation or an Event of Lease Default shall have occurred and be continuing and except as may otherwise be provided in the Lease, the Trustee may not sell or assign its rights and interests under this Site Lease or sublet all or any portion of the Leased Property without the prior written consent of the City. Any such assignment without the City’s prior written consent shall be deemed null and void and of no effect. In the event that (a) the Lease is terminated for any reason and (b) this Site Lease is not terminated, the Trustee may sublease the Leased Property or any portion thereof, or sell or assign the Trustee’s leasehold interests in this Site Lease, pursuant to the terms of the Lease and the Indenture, and any purchasers from or sublessees or assignees of the Trustee may sell or assign its respective interests in the Leased Property, subject to the terms of this Site Lease, the Lease, and the Indenture. The City and the Trustee (or any purchasers from or assignees or sublessees of the Trustee) agree that, except as permitted by this Site Lease, the Lease, and the Indenture and except for Permitted Encumbrances (including purchase options under the Lease), neither the City, the Trustee, nor any purchasers from or sublessees or assignees of the Trustee will sell, 4 mortgage, or encumber the Leased Property or any portion thereof during the term of this Site Lease. The Trustee and any other person who has the right to use the Leased Property under this Site Lease, at its own expense, may install machinery, equipment, and other tangible property in or on any portion of the Leased Property. All such machinery, equipment, and other tangible property shall remain the sole property of the Trustee or such other person; provided, however, that title to any such machinery, equipment, and other tangible property shall become part of the Leased Property and be included under the terms of this Site Lease to the extent that (a) any such machinery, equipment, or other tangible property is permanently affixed to the Leased Property or (b) the removal of such machinery, equipment, or other tangible property would damage or impair the Leased Property. Section 6. Right of Entry. To the extent that the Lease is terminated and this Site Lease is still in effect, the City reserves the right for any of its duly authorized representatives to enter upon the Leased Property at any reasonable time to inspect the same or to make any repairs, improvements, or changes necessary for the preservation thereof. Section 7. Termination. The Trustee agrees, upon the termination of this Site Lease, to quit and surrender all of the Leased Property, and agrees that any permanent improvements and structures existing upon the Leased Property at the time of the termination of this Site Lease shall remain thereon. Section 8. Default. In the event the Trustee shall be in default in the performance of any obligation on its part to be performed under the terms of this Site Lease, which default continues for 30 days following notice and demand for correction thereof to the Trustee, the City may exercise any and all remedies granted by law, except that no merger of this Site Lease and of the Lease shall be deemed to occur as a result thereof and that so long as any Certificates are Outstanding and unpaid under the Indenture, the Base Rentals due under the Lease shall continue to be paid to the Trustee except as otherwise provided in the Lease. In addition, so long as any of the Certificates are Outstanding, this Site Lease shall not be terminated except as described in Section 1 hereof. Section 9. Quiet Enjoyment and Acknowledgment of Ownership. The Trustee at all times during the term of this Site Lease shall peaceably and quietly have, hold, and enjoy the Leased Property, subject to the provisions of this Site Lease, the Lease, and the Indenture. Section 10. Trustee’s Disclaimer. It is expressly understood and agreed that (a) this Site Lease is executed by U.S. Bank National Association solely in its capacity as Trustee under the Indenture, and (b) nothing herein shall be construed as creating any liability on U.S. Bank National Association other than in its capacity as Trustee under the Indenture. All financial obligations of the Trustee under this Site Lease, except those resulting from its willful misconduct or negligence, are limited to the Trust Estate. Section 11. Taxes; Maintenance; Insurance. During the Lease Term of the Lease and in accordance with the provisions of the Lease, including Sections 9.1 and 9.3 thereof, the City covenants and agrees to pay any and all taxes, assessments, or governmental charges due in 5 respect of the Leased Property and all maintenance costs and utility charges in connection with the Leased Property. In the event that (a) the Lease is terminated for any reason and (b) this Site Lease is not terminated, the Trustee, or any purchaser, sublessee, or assignee of the Leased Property (including the leasehold interests of the Trustee resulting from this Site Lease) shall pay or cause to be paid when due, all such taxes, assessments, or governmental charges and maintain the Leased Property in good condition and working order. Any such payments that are to be made by the Trustee shall be made solely from (a) the proceeds of such sale, subleasing, or assignment, (b) from the Trust Estate, or (c) from other moneys furnished to the Trustee under Section 8.02(m) of the Indenture, and in the absence of available moneys identified in the preceding clauses (a) through (c), the Trustee shall be under no obligation to pay or cause to be paid when due, all such taxes, assessments, or governmental charges and maintain the Leased Property in good condition and working order. The provisions of the Lease shall govern with respect to the maintenance of insurance hereunder during the Lease Term of the Lease. In the event that (a) the Lease is terminated for any reason and (b) this Site Lease is not terminated, the Trustee, or any sublessee, purchaser, or assignee of the Leased Property shall obtain and keep in force, (i) commercial general liability insurance against claims for personal injury, death, or damage to property of others occurring on or in the Leased Property in an amount not less than $990,000, and (ii) property insurance in an amount not less than the full replacement value of the improvements and structures constituting the Leased Property. Any such insurance that is to be obtained by the Trustee shall be paid for solely from (a) the proceeds of such subleasing, sale, or assignment, (b) from the Trust Estate, or (c) from other moneys furnished to the Trustee under Section 8.02(m) of the Indenture and in the absence of available moneys identified in the preceding clauses (a) through (c), the Trustee shall be under no obligation to obtain or keep in force such insurance coverages. All such insurance shall name the City as insured and the Trustee as an additional insured or loss payee. The City and the Trustee shall waive any rights of subrogation with respect to the Trustee, any sublessee, purchaser, or assignee, and the City, and their members, directors, officers, agents, and employees, while acting within the scope of their employment and each such insurance policy shall contain such a waiver of subrogation by the issuer of such policy. Section 12. Damage, Destruction or Condemnation. The provisions of the Lease shall govern with respect to any damage, destruction, or condemnation of the Leased Property during the Lease Term of the Lease. In the event that (a) the Lease is terminated for any reason and (b) this Site Lease is not terminated, and either (i) the Leased Property or any portion thereof is damaged or destroyed, in whole or in part, by fire or other casualty, or (ii) title to or use of the Leased Property or any part thereof shall be taken under the exercise of the power of eminent domain, the City, and the Trustee, or any sublessee, purchaser, or assignee of the Leased Property from the Trustee shall cause the Net Proceeds of any insurance claim or condemnation award to be applied in accordance with the provisions of Article 10 of the Lease. Section 13. Hazardous Substances. Except for customary materials necessary for operation, cleaning, and maintenance of the Leased Property, none of the City, the Trustee, or any sublessee, purchaser, or assignee of the Leased Property from the Trustee shall cause or permit any Hazardous Substance to be brought upon, generated at, stored, or kept or used in or about the Leased Property without prior written notice to the City and the Trustee and all Hazardous Substances, including customary materials necessary for construction, operation, 6 cleaning, and maintenance of the Leased Property, will be used, kept, and stored in a manner that complies with all laws regulating any such Hazardous Substance so brought upon or used or kept on or about the Leased Property, provided unless the Trustee has exercised its right to take possession of the Leased Property after the occurrence and continuance of an Event of Lease Default, the Trustee shall have no responsibility under this Section to monitor or investigate whether the Leased Property complies with environmental laws or is subject to any Hazardous Substance. If the presence of Hazardous Substance on the Leased Property caused or permitted by the City, the Trustee or any sublessee, purchaser or assignee of the Leased Property from the Trustee, as the case may be, results in contamination of the Leased Property, or if contamination of the Leased Property by Hazardous Substance otherwise occurs for which the City, the Trustee or any sublessee or assignee of the Leased Property, as the case may be, is legally liable for damage resulting therefrom, then the City, the Trustee, or any sublessee, purchaser or assignee of the Leased Property from the Trustee, as the case may be, shall reimburse the other party for its reasonable and necessary legal expenses to defend the parties hereto or assignees hereof that have not caused or permitted such contamination and are not so legally liable with respect to this Site Lease from claims for damages, penalties, fines, costs, liabilities or losses; provided that the cost of such defense, (a) in the case of the Trustee, shall be payable solely from the Trust Estate, or (b) in the case of the City, shall be payable only if the cost of such defense has been annually appropriated by the City. This duty to reimburse legal expenses is not an indemnification. It is expressly understood that none of the City, the Trustee, or any sublessee, purchaser, or assignee is indemnifying any other person with respect to this Site Lease. Without limiting the foregoing, if the presence of any Hazardous Substance on the Leased Property is caused or permitted by: (a) the Trustee after the Trustee has exercised its right to take possession of the Leased Property after the occurrence and continuance of an Event of Lease Default, or any sublessee, purchaser, or assignee of the Leased Property from the Trustee, as the case may be, results in any contamination of the Leased Property, the Trustee or any sublessee, purchaser, or assignee of the Leased Property from the Trustee, as the case may be, shall provide prior written notice to the City and the Trustee and promptly take all actions, solely at the expense of the Trust Estate as are necessary to effect remediation of the contamination in accordance with legal requirements; or (b) the City results in any contamination of the Leased Property, the City shall provide prior written notice to the Trustee and promptly take all actions, solely at the expense of the City, which expenses shall constitute Additional Rentals, as are necessary to effect remediation of the contamination in accordance with legal requirements. Section 14. Third Party Beneficiaries. It is expressly understood and agreed that the Owners of the outstanding Certificates are third party beneficiaries to this Site Lease and enforcement of the terms and conditions of this Site Lease, and all rights of action relating to such enforcement, shall be strictly reserved to the City, as Lessor, and the Trustee, as Lessee, and their respective successors and assigns, and to the Owners of the Certificates. Except as hereinafter provided, nothing contained in this Site Lease shall give or allow any such claim or right of action by any other or third person on this Site Lease. It is the express intention of the City and the Trustee that any person other than the City, the Trustee, or the Owners of the Certificates receiving services or benefits under this Site Lease shall be deemed to be an incidental beneficiary only. 7 Section 15. Amendments. This Site Lease may only be amended, changed, modified, or altered with the prior written consent of the City and the Trustee and in accordance with the provisions of the Indenture. Section 16. Partial Invalidity. If any one or more of the terms, provisions, covenants, or conditions of this Site Lease shall to any extent be declared invalid, unenforceable, void, or voidable for any reason whatsoever by a court of competent jurisdiction, the finding or order or decree of which becomes final, none of the remaining terms, provisions, covenants, and conditions of this Site Lease shall be affected thereby, and each provision of this Site Lease shall be valid and enforceable to the fullest extent permitted by law. Section 17. No Merger. The City and the Trustee intend that the legal doctrine of merger shall have no application to this Site Lease and that neither the execution and delivery of the Lease by the Trustee and the City nor the exercise of any remedies under this Site Lease or the Lease shall operate to terminate or extinguish this Site Lease or the Lease, except as specifically provided herein and therein. Section 18. Notices. All notices, statements, demands, consents, approvals, authorizations, offers, designations, requests, or other communications hereunder by either party to the other shall be in writing and shall be sufficiently given and served upon the other party if delivered personally or if mailed shall be made by United States registered mail, return receipt requested, postage prepaid, at the addresses indicated in the Lease, or to such other addresses as the respective parties may from time to time designate in writing, or in such other manner as authorized by the City or the Trustee, as the case may be. Section 19. Recitals. The Recitals set forth in this Site Lease are hereby incorporated by this reference and made a part of this Site Lease. Section 20. Section Headings. All section headings contained herein are for convenience of reference only and are not intended to define or limit the scope of any provision of this Site Lease. Section 21. Execution. This Site Lease may be executed in any number of counterparts, each of which shall be deemed to be an original but all together shall constitute but one and the same Site Lease. Section 22. Governing Law. This Site Lease shall be governed by and construed in accordance with the law of the State of Colorado without regard to choice of law analysis. Section 23. No Waiver of Governmental Immunity. Notwithstanding any other provisions of this Site Lease to the contrary, no term or condition of this Site Lease shall be construed or interpreted as a waiver, express or implied, of any of the immunities, rights, benefits, protections, limitations to liability or other provisions of the Colorado Governmental Immunity Act, Section 24-10-101, et. seq., C.R.S., as now or hereafter amended, or under any other law. Section 24. Annual Appropriation. Consistent with Article X, §20 of the Colorado Constitution, any financial obligation of the City under this Site Lease shall be from year to year 8 only, shall be subject to annual appropriation, shall extend only to monies currently appropriated, and shall not constitute a mandatory charge, requirement, debt, or liability beyond the current fiscal year. To the extent that any of the City's obligations under this Site Lease are deemed to constitute a multiple fiscal-year financial obligation, the City’s performance will be conditioned upon annual appropriation by the City Council, in its sole discretion. Section 25. Electronic Transactions. The parties hereto agree that the transactions described herein may be conducted and related documents may be stored by electronic means. Copies, telecopies, facsimiles, electronic files, and other reproductions of original executed documents shall be deemed to be authentic and valid counterparts of such original documents for all purposes, including the filing of any claim, action, or suit in the appropriate court of law. [The remainder of this page intentionally left blank.] 9 IN WITNESS WHEREOF, the City and the Trustee have caused this Site Lease to be executed by their respective officers thereunto duly authorized, all as of the day and year first above written. CITY OF FORT COLLINS, COLORADO, as Lessor U.S. BANK NATIONAL ASSOCIATION, solely in its capacity as Trustee under the Indenture, as Lessee By: By: Mayor Authorized Officer [SEAL] ATTEST: ____________________________________ City Clerk 10 STATE OF COLORADO ) ) CITY OF FORT COLLINS ) ss. ) COUNTY OF LARIMER ) The foregoing instrument was acknowledged before me this ___ day of March, 2019, by Wade Troxell, as Mayor of the City of Fort Collins, Colorado. WITNESS my hand and official seal. (SEAL) ____________________________________ Notary Public My commission expires: STATE OF COLORADO ) ) CITY OF FORT COLLINS ) ss. ) COUNTY OF LARIMER ) The foregoing instrument was acknowledged before me this ___ day of March, 2019, by Delynn Coldiron, as City Clerk of the City of Fort Collins, Colorado. WITNESS my hand and official seal. (SEAL) ____________________________________ Notary Public My commission expires: 11 STATE OF COLORADO ) ) ss. CITY AND COUNTY OF DENVER ) The foregoing instrument was acknowledged before me this _____ day of March, 2019, by Jennifer Petruno, as Assistant Vice President of U.S. Bank National Association, as Trustee. WITNESS my hand and official seal. (SEAL) ____________________________________ Notary Public My commission expires: A-1 EXHIBIT A DESCRIPTION OF THE LEASED PROPERTY: The Leased Property consists of the Site and the buildings and improvements located thereon as set forth below, as amended from time to time. Site. The Site consists of Parcels I and II: PARCEL I: (CIVIC CENTER) LOTS 1 AND 2, CIVIC CENTER OFFICE BUILDING, BEING A REPLAT OF LOTS 1 THROUGH 21, BLOCK 32, TOGETHER WITH THE NORTH 50.0 FEET OF VACATED LAPORTE AVENUE PARCEL II (CIVIC CENTER PARKING GARAGE) TRACT A AND TRACT B, OF A FINAL PLAT OF A REPLAT OF LOTS 24-39, BLOCK 21, OF THE TOWN MAP OF THE TOWN OF FORT COLLINS, CITY OF FORT COLLINS, LARIMER COUNTY COLORADO, EXCEPT THAT PORTION PLATTED AS CIVIC CENTER VILLAGE CONDOMINIUMS, RECORDED JANUARY 30, 2008 AT RECEPTION NO. 20080006230. Description of buildings and improvements located on Site: The Civic Center Office building is a 71,515 square foot office building located on Parcel I. The Civic Center Parking Garage is a 305,572 square foot parking garage located on Parcel II. Approximately 15,629 net square feet of retail space in the parking garage, which fronts North Mason Street, is not included within Parcel II. The parking garage contains 905 parking spaces. B-1 EXHIBIT B PERMITTED ENCUMBRANCES “Permitted Encumbrances” means, as of any particular time: (a) liens for taxes and assessments not then delinquent, or liens which may remain unpaid pending contest pursuant to the provisions of the Lease; (b) this Site Lease, the Lease, the Indenture and any related fixture filing and any liens arising or granted pursuant to the Lease or the Indenture; (c) utility, access and other easements and rights of way, licenses, permits, party wall and other agreements, restrictions, and exceptions which the City Representative certifies will not materially interfere with or materially impair the Leased Property or the use thereof, including rights or privileges in the nature of easements, licenses, permits, and agreements as provided in the Lease; (d) any sublease of the Leased Property that is permitted pursuant to the terms and provisions of Section 13.2 of the Lease; and (e) the easements, covenants, restrictions, liens, and encumbrances to which title to the Leased Property was subject when leased to the Trustee pursuant to this Site Lease, as shown below, and which the City Representative has certified do not and will not interfere in any material way with the intended use of the Leased Property. The easements, covenants, restrictions, liens, and encumbrances to which title to the Leased Property was subject when leased to the Trustee pursuant to this Site Lease, and which the City Representative has certified do not and will not interfere in any material way with the intended use of the Leased Property, are as follows: (Include Encumbrances from Title Insurance Policy) AFTER RECORDATION PLEASE RETURN TO: Butler Snow LLP 1801 California Street, Suite 5100 Denver, Colorado 80202 Attention: Sarah P. Tasker, Esq. LEASE PURCHASE AGREEMENT DATED MARCH __, 2019 BETWEEN U.S. BANK NATIONAL ASSOCIATION, SOLELY IN ITS CAPACITY AS TRUSTEE UNDER THE INDENTURE IDENTIFIED HEREIN, AS LESSOR AND CITY OF FORT COLLINS, COLORADO, AS LESSEE ATTACHMENT 2 i This Table of Contents is not a part of this Lease and is only for convenience of reference. TABLE OF CONTENTS ARTICLE 1 DEFINITIONS ........................................................................................................... 3 Section 1.1 Certain Funds and Accounts. .............................................................................. 3 Section 1.2 Definitions........................................................................................................... 3 ARTICLE 2 REPRESENTATIONS AND COVENANTS ............................................................ 8 Section 2.1 Representations and Covenants of the City. ....................................................... 8 Section 2.2 Representations and Covenants of the Trustee. ................................................ 10 Section 2.3 Nature of Lease. ................................................................................................ 10 Section 2.4 City Acknowledgment of Certain Matters. ....................................................... 11 Section 2.5 Relationship of City and Trustee. ..................................................................... 11 ARTICLE 3 LEASE OF THE LEASED PROPERTY................................................................. 11 ARTICLE 4 LEASE TERM ......................................................................................................... 11 Section 4.1 Duration of Lease Term. ................................................................................... 11 Section 4.2 Termination of Lease Term. ............................................................................. 12 ARTICLE 5 ENJOYMENT OF THE LEASED PROPERTY ..................................................... 14 Section 5.1 Trustee’s Covenant of Quiet Enjoyment........................................................... 14 Section 5.2 City’s Need for the Leased Property; Determinations as to Fair Value and Fair Purchase Price. .................................................................................................. 14 ARTICLE 6 PAYMENTS BY THE CITY .................................................................................. 15 Section 6.1 Payments to Constitute Currently Budgeted Expenditures of the City............. 15 Section 6.2 Base Rentals, Purchase Option Price and Additional Rentals. ......................... 15 Section 6.3 Manner of Payment. .......................................................................................... 16 Section 6.4 Nonappropriation. ............................................................................................. 17 Section 6.5 Holdover Tenant. .............................................................................................. 18 Section 6.6 Prohibition of Adverse Budget or Appropriation Modifications. ..................... 18 ARTICLE 7 SITE LEASE; TITLE INSURANCE ....................................................................... 19 Section 7.1 Site Lease. ......................................................................................................... 19 Section 7.2 Title Insurance. ................................................................................................. 19 ARTICLE 8 TITLE TO LEASED PROPERTY; LIMITATIONS ON ENCUMBRANCES ...... 19 Section 8.1 Title to the Leased Property .............................................................................. 19 Section 8.2 No Encumbrance, Mortgage or Pledge of the Leased Property........................ 19 ii ARTICLE 9 MAINTENANCE; TAXES; INSURANCE AND OTHER CHARGES ................. 20 Section 9.1 Maintenance of the Leased Property by the City. ............................................. 20 Section 9.2 Modification of the Leased Property; Installation of Furnishings and Machinery of the City. ........................................................................................................ 20 Section 9.3 Taxes, Other Governmental Charges and Utility Charges................................ 21 Section 9.4 Provisions Regarding Casualty, Public Liability and Property Damage Insurance ........................................................................................................... 21 Section 9.5 ........................................................................................................................ Advances. ........................................................................................................................... 22 Section 9.6 Granting of Easements. ..................................................................................... 22 ARTICLE 10 DAMAGE, DESTRUCTION AND CONDEMNATION; USE OF NET PROCEEDS ...................................................................................................................... 23 Section 10.1 Damage, Destruction and Condemnation. ........................................................ 23 Section 10.2 Obligation to Repair and Replace the Leased Property. ................................... 23 Section 10.3 Insufficiency of Net Proceeds. .......................................................................... 24 Section 10.4 Cooperation of the Trustee................................................................................ 25 ARTICLE 11 DISCLAIMER OF WARRANTIES; OTHER COVENANTS ............................. 25 Section 11.1 Disclaimer of Warranties. ................................................................................. 25 Section 11.2 Further Assurances and Corrective Instruments. .............................................. 26 Section 11.3 Compliance with Requirements. ....................................................................... 26 Section 11.4 Substitution of Leased Property. ....................................................................... 26 Section 11.5 Tax Covenants. ................................................................................................. 27 Section 11.6 Undertaking to Provide Ongoing Disclosure. ................................................... 27 Section 11.7 Covenant to Reimburse Legal Expenses. .......................................................... 27 Section 11.8 Access to the Leased Property; Rights to Inspect Books. ................................. 28 ARTICLE 12 PURCHASE OPTION ........................................................................................... 28 Section 12.1 Purchase Option. ............................................................................................... 28 Section 12.2 Conditions for Purchase Option. ....................................................................... 28 Section 12.3 Manner of Conveyance. .................................................................................... 29 Section 12.4 Release of Portions of the Leased Property ...................................................... 29 ARTICLE 13 ASSIGNMENT AND SUBLEASING .................................................................. 30 Section 13.1 Assignment by the Trustee; Replacement of the Trustee. ................................ 30 Section 13.2 Assignment and Subleasing by the City. .......................................................... 30 ARTICLE 14 EVENTS OF LEASE DEFAULT AND REMEDIES ........................................... 31 Section 14.1 Events of Lease Default Defined. ..................................................................... 31 Section 14.2 Remedies on Default. ........................................................................................ 32 Section 14.3 Limitations on Remedies. ................................................................................. 33 iii Section 14.4 No Remedy Exclusive....................................................................................... 33 Section 14.5 Waivers. ............................................................................................................ 33 Section 14.6 Agreement to Pay Attorneys’ Fees and Expenses. ........................................... 33 Section 14.7 Waiver of Appraisement, Valuation, Stay, Extension and Redemption Laws. 33 ARTICLE 15 MISCELLANEOUS .............................................................................................. 34 Section 15.1 Sovereign Powers of City. ................................................................................ 34 Section 15.2 Notices. ............................................................................................................. 34 Section 15.3 Third Party Beneficiaries. ................................................................................. 34 Section 15.4 Binding Effect. .................................................................................................. 35 Section 15.5 Amendments. .................................................................................................... 35 Section 15.6 Amounts Remaining in Funds. ......................................................................... 35 Section 15.7 Triple Net Lease. ............................................................................................... 35 Section 15.8 Computation of Time. ....................................................................................... 35 Section 15.9 Payments Due on Holidays. .............................................................................. 35 Section 15.10 Severability. ...................................................................................................... 35 Section 15.11 Execution in Counterparts................................................................................. 36 Section 15.12 Applicable Law. ................................................................................................ 36 Section 15.13 The Trustee Is Independent of the City............................................................. 36 Section 15.14 Governmental Immunity. .................................................................................. 36 Section 15.15 Recitals. ............................................................................................................. 36 Section 15.16 Captions. ........................................................................................................... 36 Section 15.17 Trustee’s Disclaimer. ........................................................................................ 36 Section 15.18 Electronic Transactions. .................................................................................... 36 EXHIBIT A: DESCRIPTION OF LEASED PROPERTY ....................................................... A-1 EXHIBIT B: PERMITTED ENCUMBRANCES .....................................................................B-1 EXHIBIT C: BASE RENTALS SCHEDULE ..........................................................................C-1 EXHIBIT D: FORM OF NOTICE OF LEASE RENEWAL ................................................... D-1 EXHIBIT E: AMORTIZATION AND RELEASE SCHEDULE……………………………E-1 1 This LEASE PURCHASE AGREEMENT, dated March __, 2019 (this “Lease”), is by and between U.S. Bank National Association, Denver, Colorado, a national banking association duly organized and validly existing under the laws of the United States of America, solely in its capacity as trustee under the Indenture (the “Trustee”), as lessor, and the City of Fort Collins, Colorado, a home rule city duly organized and validly existing under the Constitution and laws of the State of Colorado (the “City”), as lessee. PREFACE All capitalized terms used herein will have the meanings ascribed to them in Article 1 of this Lease. RECITALS 1. The City has been duly organized and is validly existing as a home rule municipality and municipal corporation under the Constitution of the State of Colorado and the home rule charter of the City (the “Charter”). 2. The City is authorized by Article XX, Section 6 of the Colorado Constitution, its Charter and part 8 of article 15 of title 31, Colorado Revised Statutes (“C.R.S.”), to enter into rental or leasehold agreements in order to provide necessary land, buildings, equipment, and other property for governmental or proprietary purposes. 3. The City Council of the City (the “City Council”) is authorized by Chapter 23, Article IV, Division 2 of the Fort Collins, Colorado, Municipal Code, to lease any and all interests in real property owned in the name of the City if the City Council first finds that the lease is in the best interest of the City. 4. The City Council has determined that it is in the best interests of the City and its inhabitants to finance a portion of the cost of (a) the improvements to the highway interchange at Interstate Highway I-25 and Prospect Road in the City, and (b) the construction of a joint police training facility with the City of Loveland, Colorado (jointly, the “Project”). 5. The City Council has determined that it is in the best interests of the City and its inhabitants to provide for the financing of the Project by entering into a Site and Improvement Lease with the Trustee, acting solely in its capacity of trustee (the “Site Lease”) and this Lease. 6. The City owns, in fee title, the Site (as hereinafter defined) and the buildings and improvements located thereon, which presently serve as the Civic Center and the Civic Center Parking Garage (as more particularly described in Exhibit A attached hereto, the “Leased Property”). 7. Contemporaneously with the execution and delivery of the Site Lease and this Lease, the Trustee will execute and deliver an Indenture of Trust (the “Indenture”) pursuant to which there will be executed and delivered certain certificates of participation (the “Certificates”) dated as of their date of delivery that shall evidence certain proportionate interests in the right to receive certain Revenues. 2 8. The Certificates will be dated as of their date of delivery, will evidence proportionate interests in the right to receive certain Revenues (as defined in this Lease), will be payable solely from the sources herein provided, and shall not directly or indirectly obligate the City to make any payments beyond those appropriated for any fiscal year during which the Lease shall be in effect. 9. The net proceeds of the Certificates, together with other available money of the City, will be used to finance the Project. 10. The payment by the City of Base Rentals and Additional Rentals hereunder in any future Fiscal Year is subject to specific Appropriations and the renewal by the City Council of this Lease for such future Fiscal Year. The Base Rentals and Additional Rentals payable by the City under this Lease shall constitute current expenditures of the City. 11. Neither this Lease nor the payment by the City of Base Rentals or Additional Rentals hereunder shall be deemed or construed as creating an indebtedness of the City within the meaning of any provision of the Colorado Constitution, the Charter, or the laws of the State of Colorado concerning or limiting the creation of indebtedness by the City, and shall not constitute a multiple fiscal year direct or indirect debt or other financial obligation of the City within the meaning of Article X, Section 20(4) of the Colorado Constitution or a mandatory charge or requirement against the City in any ensuing Fiscal Year beyond the then current Fiscal Year. The obligation of the City to pay Base Rentals and Additional Rentals hereunder shall be from year to year only, shall constitute currently budgeted expenditures of the City, shall not constitute a mandatory charge or requirement in any ensuing budget year, nor a mandatory payment obligation of the City in any ensuing Fiscal Year beyond any Fiscal Year during which this Lease shall be in effect. In the event that this Lease is not renewed, the sole security available to the Trustee, as lessor hereunder, shall be the Leased Property. 12. The Trustee is executing this Lease solely in its capacity as trustee under the Indenture, and subject to the terms, conditions and protections provided for herein. 13. The Trustee and the City intend that this Lease set forth their entire understanding and agreement regarding the terms and conditions upon which the City is leasing the Leased Property from the Trustee. NOW, THEREFORE, for and in consideration of the mutual promises and covenants herein contained, the Trustee and the City agree as follows: 3 ARTICLE 1 DEFINITIONS Section 1.1 Certain Funds and Accounts. All references herein to any funds and accounts shall mean the funds and accounts so designated which are established under the Indenture. Section 1.2 Definitions. All capitalized terms used herein and not otherwise defined shall have the meanings given to them in the Indenture, unless the context otherwise requires. Capitalized terms used herein shall have the following meanings under this Lease: “Additional Certificates” means Additional Certificates which may be executed and delivered pursuant to the Indenture. “Additional Rentals” means the payment or cost of all: (a) (i) reasonable expenses and fees of the Trustee related to the performance or discharge of its responsibilities under the provisions of the Lease, the Site Lease, or the Indenture, including the reasonable fees and expenses of any person or firm employed by the City to make rebate calculations under the provisions of Section 3.05 of the Indenture and the expenses of the Trustee in respect of any policy of insurance or surety bond obtained in respect of the Certificates executed and delivered with respect to the Lease, (ii) the cost of insurance premiums and insurance deductible amounts under any insurance policy reasonably deemed necessary by the Trustee to protect the Trustee from any liability under the Lease, and approved by the City Representative, which approval shall not be unreasonably withheld, (iii) reasonable legal fees and expenses incurred by the Trustee to defend the Trust Estate or the Trustee from and against any legal claims, and (iv) reasonable expenses and fees of the Trustee incurred at the request of the City Representative; (b) taxes, assessments, insurance premiums, utility charges, maintenance, upkeep, repair, and replacement with respect to the Leased Property or as otherwise required under the Lease; (c) rebate payments as provided in the Lease; and (d) all other charges and costs (together with all interest and penalties that may accrue thereon in the event that the City shall fail to pay the same, as specifically set forth in the Lease) which the City agrees to assume or pay as Additional Rentals under the Lease. Additional Rentals shall not include Base Rentals. “Appropriation” means the action of the City Council in annually making moneys available for all payments due under this Lease through the process of appropriation by ordinance under the Charter, including the payment of Base Rentals and Additional Rentals. 4 “Approval of Special Counsel” means an opinion of Special Counsel to the effect that the matter proposed will not adversely affect the excludability from gross income for federal income tax purposes of the Interest Portion of the Base Rentals paid by the City under this Lease and attributable to the Certificates. “Base Rentals” means the rental payments payable by the City during the Lease Term, which constitute payments payable by the City for and in consideration of the right to possess and use the Leased Property as set forth in Exhibit C (Base Rentals Schedule) hereto. Base Rentals does not include Additional Rentals. “Base Rentals Payment Dates” means the Base Rentals Payment Dates set forth in Exhibit C (Base Rentals Schedule) hereto. “Business Day” means any day, other than a Saturday, Sunday, or legal holiday or a day (a) on which banks located in Denver, Colorado are required or authorized by law or executive order to close or (b) on which the Federal Reserve System is closed. “Certificates” means the “Certificates of Participation, Series 2019, Evidencing Proportionate Interests in the Base Rentals and other Revenues under an Annually Renewable Lease Purchase Agreement, dated March __, 2019, between U.S. Bank National Association, as Trustee, as lessor, and the City of Fort Collins, Colorado, as lessee” dated as of their date of delivery, executed and delivered pursuant to the Indenture. “Charter” means the home rule charter of the City, and any amendments or supplements thereto. “City” means the City of Fort Collins, Colorado. “City Council” means the City Council of the City or any successor to its functions. “City Manager” means the City Manager of the City or the City Manager’s successor in functions, if any. “City Representative” means the Mayor, the City Manager or the Financial Officer or such other person at the time designated to act on behalf of the City for the purpose of performing any act under this Lease, the Site Lease, or the Indenture by a written certificate furnished to the Trustee containing the specimen signature of such person or persons and signed on behalf of the City by the Mayor. “Continuing Disclosure Certificate” means the certificate executed by the City of even date herewith which constitutes an undertaking pursuant to Rule 15c2-12 promulgated by the Securities and Exchange Commission. “Costs of Execution and Delivery” means all items of expense directly or indirectly payable by the Trustee related to the authorization, execution, and delivery of the Site Lease and this Lease and related to the authorization, sale, execution, and delivery of the Certificates, as further defined in the Indenture. 5 “Counsel” means an attorney at law or law firm (who may be counsel for the Trustee) who is satisfactory to the City. “C.R.S.” means Colorado Revised Statutes. “Event(s) of Lease Default” means any event as defined in Section 14.1 of this Lease. “Event of Nonappropriation” means the termination and non-renewal of this Lease by the City, determined by the City Council’s failure, for any reason, to appropriate by the last day of each Fiscal Year (a) sufficient amounts to be used to pay Base Rentals due in the next Fiscal Year and (b) sufficient amounts to pay such Additional Rentals as are estimated to become due in the next Fiscal Year, as provided in Section 6.4 of this Lease. An Event of Nonappropriation may also occur under certain circumstances described in Section 10.3(c) of this Lease. The term also means a notice under this Lease of the City’s intention to not renew and therefore terminate this Lease or an event described in this Lease relating to the exercise by the City of its right to not appropriate amounts due as Additional Rentals in excess of the amounts for which an Appropriation has been previously effected. “Financial Officer” means the Financial Officer of the City or his or her successor in functions, if any. “Fiscal Year” means the City’s fiscal year, which begins on January 1 of each calendar year and ends on December 31 of the same calendar year, or any other twelve-month period which the City or other appropriate authority hereafter may establish as the City’s fiscal year. “Force Majeure” means, without limitation, the following: acts of God; strikes, lockouts or other industrial disturbances; acts of public enemies; orders or restraints of any kind of the government of the United States of America, the State of Colorado or any of their departments, agencies or officials or any civil or military authority; insurrection; riots; landslides; earthquakes; fires; storms; droughts; floods; explosions; breakage or accidents to machinery, transmission pipes, or canals; or any other cause or event not within the control of the City in its capacity as lessee hereunder or the Trustee. “Hazardous Substance” means and includes: (a) the terms “hazardous substance,” “release” and “removal” which, as used herein, shall have the same meaning and definition as set forth in paragraphs (14), (22) and (23), respectively, of Title 42 U.S.C. §9601 and in Colorado law, provided, however, that the term “hazardous substance” as used herein shall also include “hazardous waste” as defined in paragraph (5) of 42 U.S.C. §6903 and “petroleum” as defined in paragraph (8) of 42 U.S.C. §6991; (b) the term “superfund” as used herein means the Comprehensive Environmental Response, Compensation and Liability Act, as amended, being Title 42 U.S.C. §9601 et seq., as amended, and any similar State of Colorado statute or local ordinance applicable to the Leased Property, including, without limitation, Colorado rules and regulations promulgated, administered, and enforced by any governmental agency or authority pursuant thereto; and (c) the term “underground storage tank” as used herein shall have the same meaning and definition as set forth in paragraph (1) of 42 U.S.C. §6991. 6 “Indenture” means the Indenture of Trust, dated March __, 2019, entered into by the Trustee, as the same may be amended or supplemented. “Initial Term” means the period which commences on the date of delivery of this Lease and terminates on December 31, 2018. “Interest Portion” means the portion of each Base Rentals payment that represents the payment of interest set forth in Exhibit C (Base Rentals Schedule) hereto. “Lease” means this Lease Purchase Agreement, dated March __, 2019, between the Trustee, as lessor, and the City, as lessee, as the same may hereafter be amended. “Lease Remedy” or “Lease Remedies” means any or all remedial steps provided in this Lease whenever an Event of Lease Default or an Event of Nonappropriation has happened and is continuing, which may be exercised by the Trustee as provided in this Lease and in the Indenture. “Lease Term” means the Initial Term and any Renewal Terms as to which the City may exercise its option to renew this Lease by effecting an Appropriation of funds for the payment of Base Rentals and Additional Rentals hereunder, as provided in and subject to the provisions of this Lease. “Lease Term” refers to the time during which the City is the lessee of the Leased Property under this Lease. “Leased Property” means the Site and the premises, buildings, and improvements situated thereon, including all fixtures attached thereto, as more particularly described in Exhibit A to this Lease, together with any and all additions and modifications thereto and replacements thereof, and any New Facility. “Mayor” means the Mayor of the City, or his or her successor in duties. “Net Proceeds” means the proceeds of any performance or payment bond, or proceeds of insurance, including self-insurance, required by this Lease or proceeds from any condemnation award, or any proceeds derived from the exercise of any Lease Remedy or otherwise following termination of this Lease by reason of an Event of Nonappropriation or an Event of Lease Default, allocable to the Leased Property, less (a) all related expenses (including, without limitation, attorney’s fees and costs) incurred in the collection of such proceeds or award; and (b) all other related fees, expenses and payments due to the City and the Trustee. “New Facility” means any real property, buildings, or equipment leased by the City to the Trustee pursuant to a future amendment to the Site Lease and leased back by the City from the Trustee pursuant to a future amendment to this Lease in connection with the execution and delivery of Additional Certificates. “Owners” means the registered owners of any Certificates. “Permitted Encumbrances” with respect to the Leased Property, means, as of any particular time: (a) liens for taxes and assessments not then delinquent, or liens which may remain unpaid pending contest pursuant to the provisions of this Lease; (b) the Site Lease, this 7 Lease, the Indenture, and any related fixture filing and any liens arising or granted pursuant to the Lease or the Indenture; (c) utility, access, and other easements and rights of way, licenses, permits, party wall and other agreements, restrictions, and exceptions which the City Representative certifies will not materially interfere with or materially impair the Leased Property or the use thereof, including rights or privileges in the nature of easements, licenses, permits, and agreements as provided in the Lease; (d) any sublease of the Leased Property that is permitted pursuant to the terms and provisions of Section 13.2 hereof; and (e) the easements, covenants, restrictions, liens, and encumbrances to which title to the Leased Property was subject when leased to the Trustee pursuant to the Site Lease, as shown on Exhibit B hereto, and which the City Representative has certified do not and will not interfere in any material way with the intended use of the Leased Property. “Prepayment” means any amount paid by the City pursuant to the provisions of this Lease as a prepayment of the Base Rentals due hereunder. “Project” means, collectively, that portion of the costs of (a) the improvements to the highway interchange at Interstate Highway I-25 and Prospect Road in the City, and (b) the construction of a joint police training facility with the City of Loveland, Colorado, that is being financed with the net proceeds of the Certificates. “Principal Portion” means the portion of each Base Rentals payment that represents the payment of principal set forth in Exhibit C (Base Rentals Schedule) hereto. “Purchase Option Price” means the amount payable on any date, at the option of the City, to prepay Base Rentals, terminate the Lease Term, and purchase the Trustee’s leasehold interest in the Leased Property, as provided herein. “Renewal Term” means any portion of the Lease Term commencing after the Initial Term on January 1 of any calendar year and terminating on or before December 31 of such calendar year as provided in Article 4 of this Lease. “Revenues” means (a) all amounts payable by or on behalf of the City or with respect to the Leased Property pursuant to this Lease including, but not limited to, all Base Rentals, Prepayments, the Purchase Option Price, and Net Proceeds, but not including Additional Rentals; (b) any portion of the proceeds of the Certificates deposited into the Base Rentals Fund created under the Indenture; (c) any moneys which may be derived from any insurance in respect of the Certificates; and (d) any moneys and securities, including investment income, held by the Trustee in the Funds and Accounts established under the Indenture (except for moneys and securities held in the Rebate Fund or any defeasance escrow account). “Site” means, collectively, the real property, with all its appurtenances, owned by the City and leased by the City to the Trustee under the Site Lease and subleased by the Trustee to the City under this Lease, the legal description of which is set forth in Exhibit A to this Lease, or an amendment or supplement thereto. “Site Lease” means the Site and Improvement Lease, dated March __, 2019, between the City, as lessor, and the Trustee, as lessee, as the same may hereafter be amended. 8 “Special Counsel” means any counsel experienced in matters of municipal law and listed in the list of municipal bond attorneys, as published semiannually by The Bond Buyer, or any successor publication. So long as the Lease Term is in effect, the City shall have the right to select Special Counsel. “Tax Certificate” means the Tax Compliance and No-Arbitrage Certificate entered into by the City with respect to this Lease and the Certificates. “Tax Code” means the Internal Revenue Code of 1986, as amended, and all regulations and rulings promulgated thereunder “Trustee” means U.S. Bank National Association, acting in the capacity of trustee pursuant to the Indenture, and any successor thereto appointed under the Indenture. ARTICLE 2 REPRESENTATIONS AND COVENANTS Section 2.1 Representations and Covenants of the City. The City represents and covenants to the Trustee, to the extent allowed by law and subject to renewal of this Lease and Appropriation as set forth in Article 6 hereof, as follows: (a) The City is a home rule municipal corporation duly organized and existing within the State under the Constitution and laws of the State and its Charter. The City is authorized to enter into this Lease and the Site Lease and to carry out its obligations under this Lease and the Site Lease. The City Council has duly authorized and approved the execution and delivery of this Lease, the Site Lease, and all other documents related to the execution and delivery of this Lease and the Site Lease. (b) The City owns the Leased Property and the Trustee has a leasehold interest in the Leased Property pursuant to the Site Lease. (c) The leasing of the Leased Property by the City to the Trustee pursuant to the Site Lease, and the financing of the Project by the City and the Trustee under the terms and conditions provided for in this Lease, are necessary, convenient, and in furtherance of and is in the best interests of the citizens of the City and serve a valid public purpose. The City will apply the net proceeds of the Certificates, together with other available money of the City, to finance the Project and to pay the Costs of Execution and Delivery. (d) Neither the execution and delivery of this Lease and the Site Lease, nor the fulfillment of or compliance with the terms and conditions of this Lease and the Site Lease, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a breach of the terms, conditions, or provisions of any restriction or any agreement or instrument to which the City is now a party or by which the City or its property is bound, or violates any statute, regulation, rule, order of any court having jurisdiction, judgment, or administrative order applicable to the City, or constitutes a default under any of the foregoing, or results in the creation or imposition of 9 any lien or encumbrance whatsoever upon any of the property or assets of the City, except for Permitted Encumbrances. (e) The City agrees that, except for non-renewal and non-appropriation as set forth in Article 6 hereof, if the City fails to perform any act which the City is required to perform under this Lease, the Trustee may, but shall not be obligated to, perform or cause to be performed such act, and any reasonable expense incurred by the Trustee in connection therewith shall be an obligation owing by the City (from moneys for which an Appropriation has been effected) to the Trustee shall be a part of Additional Rentals, and the Trustee shall be subrogated to all of the rights of the party receiving such payment. (f) There is no litigation or proceeding pending against the City affecting the right of the City to execute this Lease or the Site Lease or the ability of the City to make the payments required hereunder or to otherwise comply with the obligations contained herein, or which, if adversely determined, would, in the aggregate or in any case, materially adversely affect the property, assets, financial condition, or business of the City or materially impair the right or ability of the City to carry on its operations substantially as now conducted or anticipated to be conducted in the future. (g) Except for customary materials necessary for construction, operation, cleaning, and maintenance of the Leased Property, the City shall not cause or permit any Hazardous Substance to be brought upon, generated at, stored, or kept or used in or about the Leased Property without prior written notice to the Trustee and all Hazardous Substances, including, customary materials necessary for construction, operation, cleaning, and maintenance of the Leased Property, will be used, kept, and stored in a manner that complies with all laws regulating any such Hazardous Substance so brought upon or used or kept in or about the Leased Property. If the presence of any Hazardous Substance on the Leased Property caused or permitted by the City results in contamination of the Leased Property, or if contamination of the Leased Property by any Hazardous Substance otherwise occurs for which the City is legally liable for damage resulting therefrom, then the City shall include as an Additional Rental any amount necessary to reimburse the Trustee for legal expenses incurred to defend (to the extent that an Appropriation for the necessary moneys has been effected by the City Council) the Trustee from claims for damages, penalties, fines, costs, liabilities, or losses. The reimbursement of the Trustee’s legal expenses is not an indemnification. It is expressly understood that the City is not indemnifying the Trustee and expenses of such defense shall constitute Additional Rentals. Without limiting the foregoing, if the presence of any Hazardous Substance on the Leased Property caused or permitted by the City results in any contamination of the Leased Property, the City shall provide prior written notice to the Trustee and promptly take all actions at its sole expense (which expenses shall constitute Additional Rentals) as are necessary to effect remediation of the contamination in accordance with legal requirements. (h) The City covenants and agrees to comply with any applicable covenants and requirements of the City set forth in the Tax Certificate. 10 Section 2.2 Representations and Covenants of the Trustee. The Trustee represents and covenants as follows: (a) So long as no Event of Indenture Default has occurred and is then continuing or existing, except as specifically provided in the Site Lease or the Lease or as necessary to transfer the Trust Estate to a successor Trustee, the Trustee shall not pledge or assign the Trustee’s right, title, and interest in and to (i) this Lease or the Site Lease, (ii) the Base Rentals, other Revenues and collateral, security interests, and attendant rights and obligations which may be derived under this Lease or the Site Lease, and/or (iii) the Leased Property and any reversion therein or any of its or the Trustee’s other rights under this Lease or the Site Lease or assign, pledge, mortgage, encumber, or grant a security interest in its or the Trustee’s right, title and interest in, to, and under this Lease or the Site Lease or the Leased Property except for Permitted Encumbrances. (b) Neither the execution and delivery of this Lease, the Site Lease or the Indenture by the Trustee, nor the fulfillment of or compliance with the terms and conditions thereof and hereof, nor the consummation of the transactions contemplated thereby or hereby conflicts with or results in a breach of the terms, conditions, and provisions of any restriction or any agreement or instrument to which the Trustee is now a party or by which the Trustee is bound, or constitutes a default under any of the foregoing. (c) To the Trustee’s knowledge, there is no litigation or proceeding pending against the Trustee affecting the right of the Trustee to execute the Lease, the Site Lease, or the Indenture, and perform its obligations thereunder or hereunder, except such litigation or proceeding as has been disclosed in writing to the City on or prior to the date the Indenture is executed and delivered. Section 2.3 Nature of Lease. The City and the Trustee acknowledge and agree that the Base Rentals and Additional Rentals hereunder shall constitute currently budgeted and appropriated expenditures of the City and may be paid from any legally available funds. The City’s obligations under this Lease shall be subject to the City’s annual right to terminate this Lease (as further provided herein), and shall not constitute a mandatory charge or requirement in any ensuing Fiscal Year beyond the then current Fiscal Year. No provision of this Lease shall be construed or interpreted as creating a general obligation, multiple fiscal year financial obligation, or other indebtedness of the City within the meaning of any constitutional, home rule charter, or statutory debt limitation. No provision of this Lease shall be construed or interpreted as creating an unlawful delegation of governmental powers nor as a donation by or a lending of the credit of the City within the meaning of Article XI, Sections 1 or 2 of the Colorado Constitution. Neither this Lease nor the execution and delivery of the Certificates shall directly or indirectly obligate the City to make any payments beyond those duly budgeted and appropriated for the City’s then current Fiscal Year. The City shall be under no obligation whatsoever to exercise its option to purchase the Trustee’s interest in the Leased Property. No provision of this Lease shall be construed to pledge or to create a lien on any class or source of City moneys, nor shall any provision of this Lease restrict the future issuance of any City bonds or obligations payable from any class or source of City moneys (provided, however, certain restrictions in the Indenture shall apply to the issuance of Additional Certificates). In the event that this Lease is not renewed by 11 the City, the sole security available to the Trustee, as lessor hereunder, shall be the Leased Property, and other monies available to the Trustee under the Site Lease and the Indenture. Section 2.4 City Acknowledgment of Certain Matters. The City acknowledges the Indenture and the execution and delivery by the Trustee of the Certificates pursuant to the Indenture. The City also acknowledges the Trustee’s authority to act on behalf of the Owners of the Certificates with respect to all rights, title, and interests of the Trustee in, to, and under this Lease, the Site Lease, and the Leased Property. Section 2.5 Relationship of City and Trustee. The relationship of the City and the Trustee under this Lease is, and shall at all times remain, solely that of lessee and lessor; and the City neither undertakes nor assumes any responsibility or duty to the Trustee or to any third party with respect to the Trustee’s obligations relating to the Leased Property; and the Trustee does not undertake or assume any responsibility or duty to the City or to any third party with respect to the City’s obligations relating to the Leased Property. Notwithstanding any other provisions of this Lease: (a) the City and the Trustee are not, and do not intend to be construed to be, partners, joint ventures, members, alter egos, managers, controlling persons, or other business associates or participants of any kind of either of the other, and the City and the Trustee do not intend to ever assume such status; and (b) the City and the Trustee shall not be deemed responsible for, or a participant in, any acts, omissions, or decisions of either of the other. ARTICLE 3 LEASE OF THE LEASED PROPERTY The Trustee demises and leases the Leased Property to the City and the City leases the Leased Property from the Trustee, in accordance with the provisions of this Lease, subject only to Permitted Encumbrances, to have and to hold for the Lease Term. The City and the Trustee acknowledge that the City owns the Leased Property and the City has leased the Leased Property to the Trustee pursuant to the Site Lease; and the City and the Trustee intend that there be no merger of the City’s interests as sublessee under this Lease and the City’s ownership interest in the Leased Property so as to cause the cancellation of the Site Lease or this Lease, or an impairment of the leasehold and subleasehold interest intended to be created by the Site Lease and this Lease. ARTICLE 4 LEASE TERM Section 4.1 Duration of Lease Term. The Lease Term shall commence as of the date hereof. The Initial Term shall terminate on December 31, 2019. This Lease may be renewed, solely at the option of the City, for nineteen (19) Renewal Terms, with the Lease Term terminating no later than December 31, 2038 except that the Renewal Term beginning on January 1, 2038 shall terminate upon the City’s ,payment of the final Base Rental payment as set forth in Exhibit C.. The City hereby finds that the maximum Lease Term hereunder does not exceed the weighted average useful life of the Leased Property. The City further determines and 12 declares that the period during which the City has an option to purchase the Trustee’s leasehold interest in the Leased Property (i.e. the entire maximum Lease Term) does not exceed the useful life of the Leased Property. The City Manager or other officer of the City at any time charged with the responsibility of formulating budget proposals for the City is hereby directed to include in the annual budget proposals submitted to the City Council, in any year in which this Lease shall be in effect, items for all payments required for the ensuing Renewal Term under this Lease until such time, if any, as the City may determine to not renew and terminate this Lease. Notwithstanding this directive regarding the formulation of budget proposals, it is the intention of the City that any decision to effect an Appropriation for the Base Rentals and Additional Rentals shall be made solely by the City Council and not by any other official of the City, as further provided in the following paragraph. During the Lease Term, the City shall in any event, whether or not the Lease is to be renewed, furnish the Trustee with copies of its annual budget promptly after the budget is adopted. Not later than December 15 of the then current Initial Term or any Renewal Term the City Representative shall give written notice (in substantially the form set forth in Exhibit D attached hereto) to the Trustee that either: (a) the City has effected or intends to effect on a timely basis an Appropriation for the ensuing Fiscal Year which includes (1) sufficient amounts authorized and directed to be used to pay all of the Base Rentals and (2) sufficient amounts to pay such Additional Rentals as are estimated to become due, all as further provided in Sections 6.2, 6.3, and 6.4 of this Lease, whereupon, this Lease shall be renewed for the ensuing Fiscal Year; or (b) the City has determined, for any reason, not to renew this Lease for the ensuing Fiscal Year. Subject to the provisions of Section 6.4(a) hereof, the failure to give such notice shall not constitute an Event of Lease Default, nor prevent the City from electing not to renew this Lease, nor result in any liability on the part of the City. The City’s option to renew or not to renew this Lease shall be conclusively determined by whether or not the applicable Appropriation has been made on or before December 31 of each Fiscal Year, all as further provided in Article 6 of this Lease. The terms and conditions hereof during any Renewal Term shall be the same as the terms and conditions hereof during the Initial Term, except that the Purchase Option Price and the Base Rentals shall be as provided in Article 12 and Exhibit C (Base Rentals Schedule) hereof. Section 4.2 Termination of Lease Term. The Lease Term shall terminate upon the earliest of any of the following events: (a) the expiration of the Initial Term or any Renewal Term during which there occurs an Event of Nonappropriation pursuant to Section 4.1 and Article 6 of this Lease 13 (provided that the Lease Term will not be deemed to have been terminated if the Event of Nonappropriation is cured as provided in Section 6.4 hereof); (b) the occurrence of an Event of Nonappropriation under this Lease (provided that the Lease Term will not be deemed to have been terminated if the Event of Nonappropriation is cured as provided in Section 6.4 hereof); (c) the conveyance of the Trustee’s leasehold interest in the Leased Property under this Lease to the City upon payment of the Purchase Option Price or all Base Rentals and Additional Rentals, for which an Appropriation has been effected by the City Council for such purpose, as provided in Section 12.2(a) or (b) of this Lease; or (d) an uncured Event of Lease Default and termination of this Lease under Article 14 of this Lease by the Trustee. Except for an event described in subparagraph (c) above, upon termination of this Lease, the City agrees to peacefully deliver possession of the Leased Property to the Trustee. Termination of the Lease Term shall terminate all unaccrued obligations of the City under this Lease, and shall terminate the City’s rights of possession under this Lease (except to the extent of the holdover provisions of Sections 6.5 and 14.2(c)(i) hereof, and except for any conveyance pursuant to Article 12 of this Lease). All obligations of the City accrued prior to such termination shall be continuing until the Trustee gives written notice to the City that such accrued obligations have been satisfied. Upon termination of the Lease Term, any moneys received by the Trustee in excess of the amounts necessary to terminate and discharge the Indenture shall be paid to the City. The City shall not have the right to terminate this Lease due to a default by the Trustee under this Lease. 14 ARTICLE 5 ENJOYMENT OF THE LEASED PROPERTY Section 5.1 Trustee’s Covenant of Quiet Enjoyment. The Trustee hereby covenants that the City shall, during the Lease Term, peaceably and quietly have, hold, and enjoy the Leased Property without suit, trouble, or hindrance from the Trustee, except as expressly required or permitted by this Lease. The Trustee shall not interfere with the quiet use and enjoyment of the Leased Property by the City during the Lease Term so long as no Event of Lease Default shall have occurred. The Trustee shall, at the request of the City and at the cost of the City, join and cooperate fully in any legal action in which the City asserts against third parties its right to such possession and enjoyment, or which involves the imposition of any taxes or other governmental charges on or in connection with the Leased Property. In addition, the City may at its own expense join in any legal action affecting its possession and enjoyment of the Leased Property and shall be joined in any action affecting its liabilities hereunder. The provisions of this Article 5 shall be subject to the Trustee’s right to inspect the Leased Property and the City’s books and records with respect thereto as provided in Section 11.8 hereof. Section 5.2 City’s Need for the Leased Property; Determinations as to Fair Value and Fair Purchase Price. The City has determined and hereby determines that it has a current need for the Leased Property. It is the present intention and expectation of the City that this Lease will be renewed annually until the Trustee’s interests in the Site Lease are released and unencumbered title to the Leased Property is acquired by the City pursuant to this Lease; but this declaration shall not be construed as contractually obligating or otherwise binding the City. The City has determined and hereby determines that the Base Rentals under this Lease during the Lease Term for the Leased Property represent the fair value of the use of the Leased Property and that the Purchase Option Price for the Leased Property will represent the fair purchase price of the Trustee’s leasehold interest in the Leased Property at the time of the exercise of the option. The City has determined and hereby determines that the Base Rentals do not exceed a reasonable amount so as to place the City under an economic compulsion to renew this Lease or to exercise its option to purchase the Trustee’s leasehold interest in the Leased Property hereunder. In making such determinations, the City has given consideration to the estimated current value of the Leased Property, the uses and purposes for which the Leased Property will be employed by the City, the benefit to the citizens and inhabitants of the City by reason of the use and occupancy of the Leased Property pursuant to the terms and provisions of this Lease, the City’s option to purchase the Trustee’s leasehold interest in the Leased Property and the expected eventual vesting of unencumbered title to the Leased Property in the City. The City hereby determines and declares that the period during which the City has an option to purchase the Trustee’s leasehold interest in the Leased Property (i.e., the entire maximum Lease Term for the Leased Property) does not exceed the weighted average useful life of the Leased Property. 15 ARTICLE 6 PAYMENTS BY THE CITY Section 6.1 Payments to Constitute Currently Budgeted Expenditures of the City. The City and the Trustee acknowledge and agree that the Base Rentals, Additional Rentals, and any other obligations hereunder shall constitute currently budgeted expenditures of the City, if an Appropriation has been effected for such purpose. The City’s obligations to pay Base Rentals, Additional Rentals, and any other obligations under this Lease shall be from year to year only (as further provided in Article 4 and Sections 6.2 and 6.4 hereof), shall extend only to moneys for which an Appropriation has been effected by the City Council, and shall not constitute a mandatory charge, requirement, or liability in any ensuing Fiscal Year beyond the then current Fiscal Year. No provision of this Lease shall be construed or interpreted as a delegation of governmental powers or as creating a multiple fiscal year direct or indirect debt or other financial obligation whatsoever of the City or a general obligation or other indebtedness of the City within the meaning of any constitutional, home rule charter provision, or statutory debt limitation, including without limitation Article X, Section 20 of the Colorado Constitution. No provision of this Lease shall be construed or interpreted as a donation by or a lending of the credit of the City within the meaning of Sections 1 or 2 of Article XI of the Constitution of the State. This Lease shall not directly or indirectly obligate the City to make any payments beyond those for which an Appropriation has been effected by the City Council for the City’s then current Fiscal Year. The City shall be under no obligation whatsoever to exercise its option to purchase the Trustee’s leasehold interest in the Leased Property. No provision of this Lease shall be construed to pledge or to create a lien on any class or source of City moneys, nor shall any provision of this Lease restrict the future issuance of any City bonds or obligations payable from any class or source of City moneys (provided, however, that certain restrictions in the Indenture shall apply to the issuance of Additional Certificates). Section 6.2 Base Rentals, Purchase Option Price and Additional Rentals. (a) The City shall pay Base Rentals for which an Appropriation has been effected by the City Council, directly to the Trustee during the Initial Term and any Renewal Term, on the Base Rentals Payment Dates and in the “Total Base Rentals” amounts set forth in Exhibit C (Base Rentals Schedule) attached hereto and made a part hereof. For federal and State income tax purposes, a portion of each payment of Base Rentals for the Certificates is designated and will be paid as interest, and Exhibit C (Base Rentals Schedule) hereto sets forth the Interest Portion of each payment of Base Rentals for the Certificates. The City shall receive credit against its obligation to pay Base Rentals to the extent moneys are held by the Trustee on deposit in the Base Rentals Fund created under the Indenture and are available to pay Base Rentals. The City acknowledges that upon receipt by the Trustee of each payment of Base Rentals, the Trustee, pursuant to the terms of the Indenture, is to deposit the amount of such Base Rentals in the Base Rentals Fund. The Base Rentals set forth in Exhibit C shall be recalculated in the event of the issuance of Additional Certificates as provided in the Indenture and shall also be recalculated in the event of a partial redemption of the Certificates. 16 (b) The City may, on any date, pay the then applicable Purchase Option Price for the purpose of terminating this Lease and the Site Lease in whole and purchasing the Trustee’s leasehold interest in the Leased Property as further provided in Article 12 of this Lease. Subject to the Approval of Special Counsel, the City may also, at any time during the Lease Term, (1) prepay any portion of the Base Rentals due under this Lease and (2) in connection with such prepayment, recalculate the Base Rentals set forth in Exhibit C (Base Rentals Schedule). Any such revised Exhibit C (Base Rentals Schedule) shall be prepared by the City Representative and delivered to the Trustee. The City shall give the Trustee notice of its intention to exercise either of such options not less than forty-five (45) days in advance of the date of exercise and shall deposit with the Trustee by not later than the date of exercise an amount equal to the Purchase Option Price due on the date of exercise or the applicable amount of Base Rentals to be prepaid. If the City shall have given notice to the Trustee of its intention to prepay Base Rentals but shall not have deposited the amounts with the Trustee on the date specified in such notice, the City shall continue to pay Base Rentals which have been specifically appropriated by the City Council for such purpose as if no such notice had been given. The Trustee may waive the right to receive forty-five (45) days advance notice and may agree to a shorter notice period in the sole determination of the Trustee. (c) All Additional Rentals shall be paid by the City on a timely basis directly to the person or entity to which such Additional Rentals are owed. Additional Rentals shall include, without limitation, the reasonable fees and expenses of the Trustee, reasonable expenses of the Trustee in connection with the Leased Property, and for the cost of taxes, insurance premiums, utility charges, maintenance, and repair costs, and all other expenses expressly required to be paid hereunder, including any Rebate Fund payments required pursuant to this Lease and the Indenture. All of the payments required by this paragraph are subject to Appropriation; provided, however, a failure by the City Council to budget and appropriate moneys for any of the payments required by this paragraph shall constitute an Event of Nonappropriation. If the City’s estimates of Additional Rentals for any Fiscal Year are not itemized in the budget required to be furnished to the Trustee under Section 4.1 of this Lease, the City shall furnish an itemization of such estimated Additional Rentals to the Trustee on or before the 15th day preceding such Fiscal Year. Section 6.3 Manner of Payment. The Base Rentals, for which an Appropriation has been effected by the City Council, and, if paid, the Purchase Option Price, shall be paid or prepaid by the City to the Trustee at its designated corporate trust office by wire transfer of federal funds, certified funds, or other method of payment acceptable to the Trustee in lawful money of the United States of America. The obligation of the City to pay the Base Rentals and Additional Rentals as required under this Article 6 and other sections hereof in any Fiscal Year for which an Appropriation has been effected by the City Council for the payment thereof shall be absolute and unconditional and payment of the Base Rentals and Additional Rentals in such Fiscal Years shall not be abated through accident or unforeseen circumstances, or any default by the Trustee under this Lease, or under any other agreement between the City and the Trustee, or for any other reason including without limitation, any acts or circumstances that may constitute failure of consideration, destruction of or damage to the Leased Property, commercial frustration of purpose, or failure of 17 the Trustee, to perform and observe any agreement, whether expressed or implied, or any duty, liability, or obligation arising out of or connected with this Lease, it being the intention of the parties that the payments required by this Lease will be paid in full when due without any delay or diminution whatsoever, subject only to the annually renewable nature of the City’s obligation hereunder as set forth in Section 6.1 hereof, and further subject to the City’s rights under Section 9.3 hereof. Notwithstanding any dispute between the City and the Trustee, the City shall, during the Lease Term, make all payments of Base Rentals and Additional Rentals in such Fiscal Years and shall not withhold any Base Rentals or Additional Rentals, for which an Appropriation has been effected by the City Council, pending final resolution of such dispute (except to the extent permitted by Sections 8.2 and 9.3 hereof with respect to certain Additional Rentals), nor shall the City assert any right of set-off or counterclaim against its obligation to make such payments required hereunder. No action or inaction on the part of the Trustee shall affect the City’s obligation to pay all Base Rentals and Additional Rentals, for which a specific Appropriation has been effected by the City Council for such purpose, in such Fiscal Years subject to this Article (except to the extent provided by Sections 8.2 and 9.3 hereof with respect to certain Additional Rentals). Section 6.4 Nonappropriation. In the event that the City gives notice that it intends to not renew this Lease as provided by Section 4.1 hereof or the City Council shall not effect an Appropriation, on or before December 31 of each Fiscal Year, of moneys to pay all Base Rentals and reasonably estimated Additional Rentals coming due for the next ensuing Renewal Term as provided in Section 4.1 hereof and this Article, or in the event that the City is proceeding under the provisions of Section 10.3(c) hereof (when applicable), an Event of Nonappropriation shall be deemed to have occurred; subject, however, to each of the following provisions: (a) In the event the Trustee does not receive the written notice provided for by Section 4.1 hereof or evidence that an Appropriation has been effected by the City Council on or before December 31 of a Fiscal Year, then the Trustee shall declare an Event of Nonappropriation on the first Business Day of the February following such Fiscal Year or such declaration shall be made on any earlier date on which the Trustee receives official, specific written notice from the City that this Lease will not be renewed; provided that the Trustee’s failure to declare an Event of Nonappropriation on such date shall not be construed as a waiver of the Event of Nonappropriation or the consequences of an Event of Nonappropriation under this Lease. In order to declare an Event of Nonappropriation, the Trustee shall send written notice thereof to the City. (b) The Trustee shall waive any Event of Nonappropriation which is cured by the City, within 30 days of the receipt by the City of notice from the Trustee as provided in (a) above, by a duly effected Appropriation to pay all Base Rentals and sufficient amounts to pay reasonably estimated Additional Rentals coming due for such Renewal Term. (c) Pursuant to the terms of the Indenture, the Trustee may waive any Event of Nonappropriation which is cured by the City within a reasonable time with the procedure described in (b) above. 18 In the event that during the Initial Term or any Renewal Term, any Additional Rentals shall become due which were not included in a duly effected Appropriation and moneys are not specifically budgeted and appropriated or otherwise made available to pay such Additional Rentals within 60 days subsequent to the date upon which such Additional Rentals are due, an Event of Nonappropriation shall be deemed to have occurred, upon notice by the Trustee to the City to such effect (subject to waiver by the Trustee as hereinbefore provided). If an Event of Nonappropriation occurs, the City shall not be obligated to make payment of the Base Rentals or Additional Rentals or any other payments provided for herein which accrue after the last day of the Initial Term or any Renewal Term during which such Event of Nonappropriation occurs; provided, however, that, subject to the limitations of Sections 6.1 and 14.3 hereof, the City shall continue to be liable for Base Rentals and Additional Rentals allocable to any period during which the City shall continue to occupy, use, or retain possession of the Leased Property. Subject to Section 6.5 hereof, the City shall in all events vacate or surrender possession of the Leased Property by March 1 of the Renewal Term in respect of which an Event of Nonappropriation has occurred. After March 1 of the Renewal Term in respect of which an Event of Nonappropriation has occurred, the Trustee may proceed to exercise all or any Lease Remedies. The City acknowledges that, upon the occurrence of an Event of Nonappropriation (a) the Trustee shall be entitled to all moneys then being held in all funds created under the Indenture (except the Rebate Fund and any defeasance escrow accounts) to be used as described therein and (b) all property, funds, and rights then held or acquired by the Trustee upon the termination of this Lease by reason of an Event of Nonappropriation are to be held by the Trustee in accordance with the terms of the Indenture. Section 6.5 Holdover Tenant. If the City fails to vacate the Leased Property after termination of this Lease, whether as a result of the occurrence of an Event of Nonappropriation or an Event of Lease Default as provided in Section 14.2(a) hereof, with the written permission of the Trustee it will be deemed to be a holdover tenant on a month-to-month basis, and will be bound by all of the other terms, covenants and agreements of this Lease. Any holding over by the City without the written permission of the Trustee shall be at sufferance. The amount of rent to be paid monthly during any period when the City is deemed to be a holdover tenant will be equal to (a) one-sixth of the Interest Portion of the Base Rentals coming due on the next succeeding Base Rentals Payment Date plus one-twelfth of the Principal Portion of the Base Rentals coming due on the next succeeding Base Rentals Payment Date on which a Principal Portion of the Base Rentals would have been payable with appropriate adjustments to ensure the full payment of such amounts on the due dates thereof in the event termination occurs during a Renewal Term plus (b) Additional Rentals as the same shall become due. Section 6.6 Prohibition of Adverse Budget or Appropriation Modifications. To the extent permitted by law, the City shall not, during any Fiscal Year of the Lease Term, make any budgetary transfers or other modifications to its then existing budget and appropriation measures relating to the Leased Property or this Lease which would adversely 19 affect the City’s ability to meet its obligation to pay Base Rentals and duly budgeted and appropriated Additional Rentals hereunder. ARTICLE 7 SITE LEASE; TITLE INSURANCE Section 7.1 Site Lease. At the time of the execution and delivery of this Lease, the City shall have leased to the Trustee, and the Trustee shall have leased from the City, the Leased Property pursuant to the Site Lease. As further provided in Section 8.1 hereof, a leasehold interest in the Leased Property shall be held by the Trustee, subject to this Lease. Section 7.2 Title Insurance. The Trustee shall be provided with a Leasehold Owner’s title insurance policy insuring the Trustee’s leasehold estate under the Site Lease, subject only to Permitted Encumbrances, with such policy to be in an amount not less than the original aggregate principal amount of the Certificates or such lesser amount as shall be the maximum insurable value of the Leased Property. Such policy, or a binding commitment therefor, shall be provided to the Trustee concurrently with the issuance of each series of Certificates. ARTICLE 8 TITLE TO LEASED PROPERTY; LIMITATIONS ON ENCUMBRANCES Section 8.1 Title to the Leased Property At all times during the Lease Term, title to the Leased Property shall remain in the City, subject to the Site Lease, this Lease, the Indenture, and any other Permitted Encumbrances. Except for personal property purchased by the City at its own expense pursuant to Section 9.2 of this Lease, a leasehold estate in the Leased Property and any and all additions and modifications thereto and replacements thereof shall be held in the name of the Trustee until the Trustee has exercised Lease Remedies or until the Trustee’s leasehold interest in the Leased Property is conveyed to the City as provided in Article 12 of this Lease, or until termination of the Site Lease, notwithstanding (a) the occurrence of an Event of Nonappropriation; (b) the occurrence of one or more Events of Lease Default; (c) the occurrence of any event of damage, destruction, condemnation, or construction, manufacturing, or design defect or title defect, as provided in Article 10 of this Lease; or (d) the violation by the Trustee of any provision of the Site Lease or this Lease. The Trustee shall not, in any way, be construed as the owner of the Leased Property. Section 8.2 No Encumbrance, Mortgage or Pledge of the Leased Property. Except as may be permitted by this Lease, the City shall not permit any mechanic’s or other lien to be established or remain against the Leased Property; provided that, if the City shall first notify the Trustee of the intention of the City to do so, the City may in good faith contest any mechanic’s or other lien filed or established against the Leased Property, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom unless the Trustee shall notify the City that, in the opinion of Counsel, by nonpayment of any such items the Trustee’s leasehold interest in the Leased Property will be materially endangered, or the Leased Property or any part thereof will be subject to loss or forfeiture, in which event the City shall promptly pay and cause to be satisfied and 20 discharged all such unpaid items (provided, however, that such payment shall not constitute a waiver of the right to continue to contest such items). The Trustee will cooperate in any such contest. Except as may be permitted by this Lease, the City shall not directly or indirectly create, incur, assume, or suffer to exist any mortgage, pledge, lien, charge, encumbrance, or claim on or with respect to the Leased Property, except Permitted Encumbrances. The City shall promptly, at its expense, take such action as may be necessary to duly discharge any such mortgage, pledge, lien, charge, encumbrance, or claim not excepted above. ARTICLE 9 MAINTENANCE; TAXES; INSURANCE AND OTHER CHARGES Section 9.1 Maintenance of the Leased Property by the City. Subject to its right to not appropriate and as otherwise provided in Section 10.3 hereof, the City agrees that at all times during the Lease Term, the City will maintain, preserve, and keep the Leased Property or cause the Leased Property to be maintained, preserved, and kept, in good repair, working order, and condition, and from time to time make or cause to be made all necessary and proper repairs, including replacements, if necessary. The Trustee shall have no responsibility in any of these matters or for the making of any additions, modifications, or replacements to the Leased Property. Section 9.2 Modification of the Leased Property; Installation of Furnishings and Machinery of the City. The City shall have the privilege of making additions, modifications, and improvements to the Leased Property, at its own cost and expense, as appropriate and any such additions, modifications, and improvements to the Leased Property shall be the property of the City, subject to the Site Lease, this Lease, and the Indenture and shall be included under the terms of the Site Lease, this Lease, and the Indenture; provided, however, that such additions, modifications, and improvements shall not in any way damage the Leased Property or cause the Leased Property to be used for purposes other than lawful governmental functions of the City (except to the extent of subleasing permitted under Section 13.2 hereof) or cause the City to violate its tax covenant in Section 11.5 hereof; and provided that the Leased Property, as improved or altered, upon completion of such additions, modifications, and improvements, shall be of a value not less than the value of the Leased Property immediately prior to such making of additions, modifications, and improvements. The City may also, from time to time in its sole discretion and at its own expense, install machinery, equipment, and other tangible property in or on the Leased Property. All such machinery, equipment, and other tangible property shall remain the sole property of the City in which the Trustee shall have no interests; provided, however, that title to any such machinery, equipment, and other tangible property shall become part of the Leased Property and be included under the terms of this Lease to the extent that (a) any such machinery, equipment, or other tangible property is permanently affixed to the Leased Property or (b) the removal of such machinery, equipment, or other tangible property would damage or impair the Leased Property. The City shall have the right to make substitutions to the Leased Property upon compliance with the provisions set forth in Section 11.4 hereof. 21 Section 9.3 Taxes, Other Governmental Charges and Utility Charges. In the event that the Leased Property shall, for any reason, be deemed subject to taxation, assessments, or charges lawfully made by any governmental body, the City shall pay the amount of all such taxes, assessments, and governmental charges then due, as Additional Rentals. With respect to special assessments or other governmental charges which may be lawfully paid in installments over a period of years, the City shall be obligated to provide for Additional Rentals only for such installments as are required to be paid during the upcoming Fiscal Year. Except for Permitted Encumbrances, the City shall not allow any liens for taxes, assessments, or governmental charges to exist with respect to the Leased Property (including, without limitation, any taxes levied upon the Leased Property which, if not paid, will become a charge on the rentals and receipts from the Leased Property, or any interest therein, including the leasehold interests of the Trustee), or the rentals and revenues derived therefrom or hereunder. The City shall also pay as Additional Rentals, as the same respectively become due, all utility and other charges and fees and other expenses incurred in the operation, maintenance, and upkeep of the Leased Property. The City may, at its expense, in good faith contest any such taxes, assessments, utility, and other charges and, in the event of any such contest, may permit the taxes, assessments, utility, or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Trustee shall notify the City that, in the opinion of Counsel, by nonpayment of any such items the value of the Leased Property will be materially endangered or the Leased Property will be subject to loss or forfeiture, or the Trustee will be subject to liability, in which event such taxes, assessments, utility, or other charges shall be paid forthwith (provided, however, that such payment shall not constitute a waiver of the right to continue to contest such taxes, assessments, utility, or other charges). Section 9.4 Provisions Regarding Casualty, Public Liability and Property Damage Insurance. Upon the execution and delivery of this Lease, the City shall, at its own expense, cause casualty and property insurance to be carried and maintained with respect to the Leased Property in an amount equal to the estimated replacement cost of the Leased Property. Such insurance policy or policies may have a deductible clause in an amount deemed reasonable by the City Council. The City may, in its discretion, insure the Leased Property under blanket insurance policies which insure not only the Leased Property, but other buildings as well, as long as such blanket insurance policies comply with the requirements hereof. If the City shall insure against similar risks by self-insurance, the City may, at its election provide for casualty and property damage insurance with respect to the Leased Property, partially or wholly by means of a self-insurance fund. If the City shall elect to self-insure, the City Representative shall annually furnish to the Trustee a certification of the adequacy of the City’s reserves. The Trustee shall be named as an additional insured and loss payee on any casualty and property insurance. Upon the execution and delivery of this Lease, the City shall, at its own expense, cause public liability insurance to be carried and maintained with respect to the activities to be undertaken by and on behalf of the City in connection with the use of the Leased Property, in an amount not less than the limitations provided in the Colorado Governmental Immunity Act (Article 10, Title 24, Colorado Revised Statutes, as heretofore or hereafter amended). Such insurance may contain deductibles and exclusions deemed reasonable by the City Council. The public liability insurance required by this Section may be by blanket insurance policy or policies. 22 If the City shall insure against similar risks by self-insurance, the City, at its election may provide for public liability insurance with respect to the Leased Property, partially or wholly by means of a self-insurance fund. If the City shall elect to self-insure, the City Representative shall annually furnish to the Trustee a certification of the adequacy of the City’s reserves. The Trustee shall be named as additional insured and loss payee on any public liability insurance. Any casualty and property damage insurance policy required by this Section shall be so written or endorsed as to make payments under such insurance policy payable to the City and the Trustee. Each insurance policy provided for in this Section shall contain a provision to the effect that the insurance company shall not cancel the policy without first giving written notice thereof to the City at least 30 days in advance of such cancellation. Upon the initial execution and delivery of this Lease, the City shall provide the Trustee with evidence that the insurance required pursuant to this Section 9.4 is in effect. On or about October 1 in each year the City shall provide the Trustee with evidence that the insurance required pursuant to this Section 9.4 is in effect. A certification by the City or the City’s insurance agent that such insurance is in effect shall be sufficient evidence of insurance. Section 9.5 Advances. If the City fails to pay any Additional Rentals during the Lease Term as such Additional Rentals become due, the Trustee may (but shall not be obligated to) pay such Additional Rentals and the City agrees to reimburse the Trustee to the extent permitted by law and subject to Appropriation as provided under Article 6 hereof. Section 9.6 Granting of Easements. As long as no Event of Nonappropriation or Event of Lease Default shall have happened and be continuing, the Trustee shall upon the request of the City, (a) grant or enter into easements, permits, licenses, party wall and other agreements, rights-of-way (including the dedication of public roads), and other rights or privileges in the nature of easements, permits, licenses, party wall and other agreements, and rights of way with respect to any property or rights included in this Lease (whether such rights are in the nature of surface rights, sub-surface rights, or air space rights), free from this Lease and any security interest or other encumbrance created hereunder or thereunder; (b) release existing easements, permits, licenses, party wall and other agreements, rights-of-way, and other rights and privileges with respect to such property or rights, with or without consideration; and (c) execute and deliver any instrument necessary or appropriate to grant, enter into or release any such easement, permit, license, party wall or other agreement, right-of-way, or other grant or privilege upon receipt of: (i) a copy of the instrument of grant, agreement, or release and (ii) a written application signed by the City Representative requesting such grant, agreement, or release and stating that such grant, agreement, or release will not materially impair the effective use or materially interfere with the operation of the Leased Property. 23 ARTICLE 10 DAMAGE, DESTRUCTION AND CONDEMNATION; USE OF NET PROCEEDS Section 10.1 Damage, Destruction and Condemnation. If, during the Lease Term, (a) the Leased Property shall be destroyed (in whole or in part), or damaged by fire or other casualty; or (b) title to, or the temporary or permanent use of, the Leased Property or any portion thereof or the estate or any interest of the City or the Trustee in the Leased Property is taken under the exercise of the power of eminent domain by any governmental body or by any person, firm, or entity acting under governmental authority; or (c) a breach of warranty or a material defect in the construction, manufacture, or design of the Leased Property becomes apparent; or (d) title to or the use of all or a portion of the Leased Property is lost by reason of a defect in title thereto; then the City shall be obligated to continue to pay Base Rentals and Additional Rentals (subject to Article 6 hereof). Section 10.2 Obligation to Repair and Replace the Leased Property. The City and the Trustee, to the extent Net Proceeds are within their respective control, shall cause such Net Proceeds of any insurance policies, performance bonds, or condemnation awards to be deposited in a separate trust fund held by the Trustee. All Net Proceeds so deposited shall be applied to the prompt repair, restoration, modification, improvement, or replacement of the Leased Property by the City, upon receipt by the Trustee of requisitions signed by the City Representative stating with respect to each payment to be made: (a) the requisition number; (b) the name and address of the person, firm, or entity to whom payment is due; (c) the amount to be paid; and (d) that each obligation mentioned therein has been properly incurred, is a proper charge against the separate trust fund and has not been the basis of any previous withdrawal and specifying in reasonable detail the nature of the obligation, accompanied by a bill or a statement of account for such obligation. The Trustee shall have no duty to review or examine the accompanying bill, invoice or statement of account, but may conclusively rely on the properly executed disbursement request. The City and the Trustee shall agree to cooperate and use their best reasonable efforts subject to the terms of the Indenture to enforce claims which may arise in connection with material defects 24 in the construction, manufacture, or design of the Leased Property or otherwise. If there is a balance of any Net Proceeds allocable to the Leased Property remaining after such repair, restoration, modification, improvement, or replacement has been completed, this balance shall be used by the City, to: (a) add to, modify, or alter the Leased Property or add new components thereto, or (b) prepay the Base Rentals with a corresponding adjustment in the amount of Base Rentals payable under Exhibit C (Base Rentals Schedule) to this Lease, or (c) accomplish a combination of (a) and (b). Any repair, restoration, modification, improvement, or replacement of the Leased Property paid for in whole or in part out of Net Proceeds allocable to the Leased Property shall be the property of the City, subject to the Site Lease, this Lease, and the Indenture and shall be included as part of the Leased Property under this Lease. Section 10.3 Insufficiency of Net Proceeds. If the Net Proceeds are insufficient to pay in full the cost of any repair, restoration, modification, improvement, or replacement of the Leased Property required under Section 10.2 of this Lease, the City may elect to: (a) complete the work or replace such Leased Property (or portion thereof) with similar property of a value equal to or in excess of such portion of the Leased Property and pay as Additional Rentals, to the extent amounts for Additional Rentals which have been specifically appropriated by the City are available for payment of such cost, any cost in excess of the amount of the Net Proceeds allocable to the Leased Property, and the City agrees that, if by reason of any such insufficiency of the Net Proceeds allocable to the Leased Property, the City shall make any payments pursuant to the provisions of this paragraph, the City shall not be entitled to any reimbursement therefor from the Trustee, nor shall the City be entitled to any diminution of the Base Rentals and Additional Rentals, for which a specific Appropriation has been effected by the City Council for such purpose, payable under Article 6 of this Lease; or (b) apply the Net Proceeds allocable to the Leased Property to the payment of the Purchase Option Price in accordance with Article 12 of this Lease, or an appropriate portion thereof. In the event of an insufficiency of the Net Proceeds for such purpose, the City shall, subject to the limitations of Section 6.1 hereof, pay such amounts as may be necessary to equal that portion of the Purchase Option Price which is attributable to the Leased Property for which Net Proceeds have been received (as certified to the Trustee by the City); and in the event the Net Proceeds shall exceed such portion of the Purchase Option Price, such excess shall be used as directed by the City in the same manner as set forth in Section 10.2 hereof; or (c) if the City does not timely budget and appropriate sufficient funds to proceed under either (a) or (b) above, an Event of Nonappropriation will be deemed to 25 have occurred and, subject to the City’s right to cure, the Trustee may pursue remedies available to it following an Event of Nonappropriation. The above referenced election shall be made by the City within 90 days of the occurrence of an event specified in Section 10.1 of this Lease. It is hereby declared to be the City’s present intention that, if an event described in Section 10.1 hereof should occur and if the Net Proceeds shall be insufficient to pay in full the cost of repair, restoration, modification, improvement or replacement of the Leased Property, the City would use its best efforts to proceed under either paragraph (a) or paragraph (b) above; but it is also acknowledged that the City must operate within budgetary and other economic constraints applicable to it at the time, which cannot be predicted with certainty; and accordingly the foregoing declaration shall not be construed to contractually obligate or otherwise bind the City. Section 10.4 Cooperation of the Trustee. The Trustee shall cooperate fully with the City, at the expense of the City, in filing any proof of loss with respect to any insurance policy or performance bond covering the events described in Section 10.1 of this Lease and in the prosecution or defense of any prospective or pending condemnation proceeding with respect to the Leased Property and the enforcement of all warranties relating to the Leased Property. So long as no Event of Lease Default or Event of Nonappropriation has occurred and is then existing, the Trustee shall not voluntarily settle, or consent to the settlement of, any proceeding arising out of any insurance claim, performance or payment bond claim, or prospective or pending condemnation proceeding with respect to the Leased Property without the prior written consent of the City. ARTICLE 11 DISCLAIMER OF WARRANTIES; OTHER COVENANTS Section 11.1 Disclaimer of Warranties. THE TRUSTEE HAS NOT MADE AND WILL NOT MAKE ANY WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OR FITNESS FOR USE OF THE LEASED PROPERTY OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE LEASED PROPERTY. THE CITY HEREBY ACKNOWLEDGES AND DECLARES THAT THE CITY IS SOLELY RESPONSIBLE FOR THE MAINTENANCE AND OPERATION OF THE LEASED PROPERTY, AND THAT THE TRUSTEE HAS NO RESPONSIBILITY THEREFOR. For the purpose of enabling the City to discharge such responsibility, the Trustee constitutes and appoints the City as its attorney in fact for the purpose of asserting and enforcing, at the sole cost and expense of the City, all contractor’s and manufacturer’s warranties and guaranties, express or implied, with respect to the Leased Property, as well as any claims or rights the Trustee may have in respect of the Leased Property against any manufacturer, supplier, contractor, or other person. Except as otherwise provided in this Lease, the Trustee shall not be liable for any direct or indirect, incidental, special, punitive, or consequential damage in connection with or arising out of this Lease or the existence, furnishing, functioning, or use by the City of any item, product, or service provided for herein except that nothing shall relieve the Trustee’s liability for any claims, damages, liability, or court awards, including costs, expenses, and attorney fees, relating to or arising from the Trustee’s 26 actions or omissions that result from the negligence, bad faith, or intentional misconduct of the Trustee or its employees. Section 11.2 Further Assurances and Corrective Instruments. The Trustee and the City agree that they will, from time to time, execute, acknowledge, and deliver, or cause to be executed, acknowledged, and delivered, such amendments hereof or supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Leased Property. Section 11.3 Compliance with Requirements. During the Lease Term, the City and the Trustee shall observe and comply promptly to the extent possible with all current and future orders of all courts having jurisdiction over the Leased Property, provided that the City and the Trustee may contest or appeal such orders so long as they are in compliance with such orders during the contest or appeal period, and all current and future requirements of all insurance companies writing policies covering the Leased Property. Section 11.4 Substitution of Leased Property. So long as no Event of Default or Event of Nonappropriation shall have occurred and be continuing, the City shall be entitled to substitute any improved or unimproved real estate (collectively, the “Replacement Property”), for any Leased Property then subject to the Site Lease, this Lease, and the Indenture, upon receipt by the Trustee of a written request of the City Representative requesting such release and substitution, provided that: (a) such Replacement Property shall have an equal or greater value and utility (but not necessarily the same function) to the City as the Leased Property proposed to be released, as determined by a certificate from the City to that effect; (b) the fair market value of Replacement Property shall be not less than the fair market value of the Leased Property proposed to be released from this Lease and the Indenture, or, in the alternative, the fair market value of the Leased Property remaining after the proposed release shall be at least equal to the aggregate principal amount of the Outstanding Certificates. The fair market value of any improved or unimproved real property shall be determined by an M.A.I. appraisal report prepared by an independent real estate appraiser and submitted by the City to the Trustee; and (c) the execution and delivery of such supplements and amendments to the Site Lease, as applicable, this Lease, and the Indenture and any other documents necessary to subject any Replacement Property to be substituted for the portion of the Leased Property to be released to the lien of the Indenture. The Trustee shall cooperate with the City in implementing the City’s rights to release and substitute property pursuant to this Section 11.4 and shall execute any and all conveyances, releases, or other documents necessary or appropriate in connection therewith. The City agrees that any cash paid to the Trustee pursuant to the provisions of this Section 11.4 shall be used to redeem or defease Outstanding Certificates. 27 Section 11.5 Tax Covenants. The City acknowledges that the moneys in all funds and accounts expected to be created under the Indenture are to be invested or deposited by the Trustee, at the written direction of the City. The City covenants for the benefit of the Owners of the Certificates that it will not take any action or omit to take any action with respect to the Certificates, the proceeds thereof, any other funds of the City, or any facilities financed with the proceeds of the Certificates (except for the possible exercise of the City’s right to terminate this Lease as provided herein) if such action or omission (i) would cause the interest on the Certificates to lose its exclusion from gross income for federal income tax purposes under Section 103 of the Tax Code, or (ii) would cause interest on the Certificates to lose its exclusion from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code, or (iii) would cause interest on the Certificates to lose its exclusion from Colorado taxable income or to lose its exclusion from Colorado alternative minimum taxable income under present Colorado law. Subject to the City’s right to terminate this Lease as provided herein, the foregoing covenant shall remain in full force and effect, notwithstanding the payment in full or defeasance of the Certificates, until the date on which all obligations of the City in fulfilling the above covenant under the Tax Code and Colorado law have been met. In addition, the City covenants that its direction of investments pursuant to Article 5 of the Indenture shall be in compliance with the procedures established by the Tax Certificate to the extent required to comply with its covenants contained in the foregoing provisions of this Section. The City hereby agrees that, to the extent necessary, it will, during the Lease Term, pay to the Trustee such sums as are required for the Trustee to pay the amounts due and owing to the United States Treasury as rebate payments. Any such payment shall be accompanied by directions to the Trustee to pay such amounts to the United States Treasury. Any payment of City moneys pursuant to the foregoing sentence shall be Additional Rentals for all purposes of this Lease. The City is to execute the Tax Certificate in connection with the execution and delivery of this Lease, which Tax Certificate shall provide further details in respect of the City’s tax covenants herein. Section 11.6 Undertaking to Provide Ongoing Disclosure. The City covenants for the benefit of the Owners of the Certificates to comply with the terms of the Continuing Disclosure Certificate, provided that a failure of the City to do so shall not constitute an Event of Lease Default. The Trustee shall have no power or duty to enforce this Section. Unless otherwise required by law, no Certificate Owner shall be entitled to damages for the City’s non- compliance with its obligations under this Section. Section 11.7 Covenant to Reimburse Legal Expenses. To the extent permitted by law and subject to Appropriation by the City Council, the City shall defend and hold harmless the Trustee against claims arising from the alleged negligent acts or omissions of the City’s public employees, which occurred or are alleged to have occurred during the performance of their duties and within the scope of their employment, unless such acts or omissions are, or are alleged to be, willful and wanton. Such claims shall be subject to the limitations of the Colorado Governmental Immunity Act, C.R.S. 24-10-101 to 24-10-120. The City shall include as 28 Additional Rentals, the reimbursement of reasonable and necessary expenses incurred by the Trustee to defend the Trustee from and against all claims, by or on behalf of any person, firm, corporation, or other legal entity arising from the conduct or management of the Leased Property or from any work or thing done on the Leased Property during the Lease Term requested by the City, or from any condition of the Leased Property caused by the City. This duty to reimburse the Trustee’s legal expenses is not an indemnification and it is expressly understood that the City is not indemnifying the Trustee and, as previously stated, is limited to Net Proceeds and moneys, if any, in excess of such Net Proceeds, for which an Appropriation has been effected. Section 11.8 Access to the Leased Property; Rights to Inspect Books. The City agrees that the Trustee shall have the right at all reasonable times to examine and inspect the Leased Property (subject to such regulations as may be imposed by the City for security purposes) and all of the City’s books and records with respect thereto, but the Trustee has no duty to inspect the Leased Property books or records. The City further agrees that the Trustee shall have such rights of access to the Leased Property as may be reasonably necessary to cause the proper maintenance of the Leased Property in the event of failure by the City to perform its obligations under this Lease. The Indenture allows the City to have the right at all reasonable times to examine and inspect all of the Trustee’s books and records with respect to the Leased Property and all funds and accounts held under the Indenture. The City and its representatives shall have the right to examine and inspect the books and records of the Trustee relating to the Leased Property at all reasonable times from the date of this Lease and until three years after the termination date of this Lease. ARTICLE 12 PURCHASE OPTION Section 12.1 Purchase Option. The City shall have the option to purchase the Trustee’s leasehold interest in the Leased Property at any time while this Lease is in effect. The City may exercise its option on any date by complying with one of the conditions set forth in Section 12.2. The City shall give the Trustee notice of its intention to exercise its option not less than forty-five (45) days in advance of the date of exercise and shall deposit the required moneys with the Trustee on or before the date selected to pay the Purchase Option Price. The Trustee may waive such notice or may agree to a shorter notice period in the sole determination of the Trustee. If the City shall have given notice to the Trustee of its intention to purchase the Trustee’s leasehold interest in the Leased Property or prepay Base Rentals, but shall not have deposited the amounts with the Trustee on the date specified in such notice, the City shall continue to pay Base Rentals, which have been specifically appropriated by the City for such purpose, as if no such notice had been given. Section 12.2 Conditions for Purchase Option. The Trustee shall transfer and release the Trustee’s leasehold interests in the Leased Property to the City in the manner provided for in Section 12.3 of this Lease; provided, however, that prior to such transfer and release, either: 29 (a) the City shall have paid the then applicable Purchase Option Price which shall equal the sum of the amount necessary to defease and discharge the Indenture as provided therein (i.e., provision for payment of all principal and interest portions of any and all Certificates which may have been executed and delivered pursuant to the Indenture shall have been made in accordance with the terms of the Indenture) plus any fees and expenses then owing to the Trustee; or (b) the City shall have paid all Base Rentals set forth in Exhibit C (Base Rentals Schedule) hereto, for the entire maximum Lease Term, and all then current Additional Rentals required to be paid hereunder. At the City’s option, amounts then on deposit in any fund held under the Indenture (except the Rebate Fund and excluding any defeasance escrow funds) may be credited toward the Purchase Option Price. Section 12.3 Manner of Conveyance. At the closing of the purchase or other conveyance of all of the Trustee’s leasehold interest in the Leased Property pursuant to Section 12.2 of this Lease, the Trustee shall release and terminate the Site Lease, this Lease, and the Indenture and execute and deliver to the City any necessary documents releasing, assigning, transferring, and conveying the Trustee’s leasehold interest in the Leased Property, as they then exist, subject only to the following: (a) Permitted Encumbrances, other than the Site Lease, this Lease, and the Indenture; (b) all liens, encumbrances, and restrictions created or suffered to exist by the Trustee as required or permitted by the Site Lease, this Lease, or the Indenture or arising as a result of any action taken or omitted to be taken by the Trustee as required or permitted by the Site Lease, this Lease, or the Indenture; (c) any lien or encumbrance created or suffered to exist by action of the City; and (d) those liens and encumbrances (if any) to which title to the Leased Property was subject when leased to the Trustee. Section 12.4 Release of Portions of the Leased Property. When the principal component of Base Rentals paid by the City, plus the principal amount of any Certificates redeemed through optional redemption, or the total principal amount of Certificates paid or deemed to be paid pursuant to Article VI of the Indenture, equals the amount set forth in Exhibit E hereto, the cost of the corresponding portion of the Leased Property set forth in Exhibit E (or of any property substituted for such portion of the Leased Property pursuant to any provision of this Lease) shall be deemed to have been fully amortized and the Trustee shall execute and deliver to the City all documents necessary to release such portion of the Leased Property from the provisions of the Site Lease and this Lease (or any property substituted for such portion of the Leased Property pursuant to any provision of this Lease) and the lien thereon granted to the Trustee pursuant to the Indenture; provided, however, that the fair value of the 30 remaining Leased Property shall be at least equal to 100% of the aggregate principal amount of the Certificates Outstanding at the time of such release, as certified in writing by the City Representative. Upon such release of a portion of the Leased Property, the Trustee shall execute and deliver to the City all documents necessary or appropriate to convey the Trustee’s leasehold interest in such portion of the Leased Property to the City, free of all restrictions and encumbrances imposed or created by this Lease, the Site Lease or the Indenture, in substantially the manner provided in Section 12.3 hereof. After such release and conveyance, the property so released and conveyed shall no longer be a part of the Leased Property for any purpose of this Lease, the Site Lease or the Indenture. The Trustee shall fully cooperate with the City in executing, delivering and recording, at the City’s expense, such documents as may be necessary to effectuate the provisions of this Section. ARTICLE 13 ASSIGNMENT AND SUBLEASING Section 13.1 Assignment by the Trustee; Replacement of the Trustee. Except as otherwise provided in this Lease and the Indenture, this Lease may not be assigned by the Trustee for any reason other than to a successor by operation of law or to a successor trustee under the Indenture or with the prior written consent of the City which consent shall not be unreasonably withheld. Any assignment made by the Trustee without the City’s required prior written consent shall be considered null and void and of no effect. The Trustee will notify the City of any assignment to a successor by operation of law. If an Event of Lease Default or Event of Nonappropriation has occurred and is continuing, the Trustee may act as herein provided, including exercising the remedies set forth in Section 14.2, without the prior written consent of the City. Section 13.2 Assignment and Subleasing by the City. This Lease may not be assigned by the City for any reason other than to a successor by operation of law. However, the Leased Property may be subleased, as a whole or in part, by the City, without the necessity of obtaining the consent of the Trustee or any owner of the Certificates subject to each of the following conditions: (a) The Leased Property may be subleased, in whole or in part, only to an agency or department of, or a political subdivision of, the State, or to another entity or entities with Approval of Special Counsel; (b) This Lease, and the obligations of the City hereunder, shall, at all times during the Lease Term remain obligations of the City, and the City shall maintain its direct relationships with the Trustee, notwithstanding any sublease; (c) The City shall furnish or cause to be furnished to the Trustee a copy of any sublease agreement; (d) Any sublease of the Leased Property shall provide that it is subject to the terms and conditions of this Lease and that, except as hereinafter provided, it shall automatically terminate upon a termination of this Lease; provided, however, that upon a 31 termination of this Lease due to an Event of Default or an Event of Nonappropriation, the Trustee may, upon notification to the sublessee, keep any such sublease in full force and effect as a direct lease by the Trustee to the sublessee; and (e) No sublease by the City shall cause the Leased Property to be used for any purpose which would cause the City to violate its tax covenant in Section 11.5 hereof. ARTICLE 14 EVENTS OF LEASE DEFAULT AND REMEDIES Section 14.1 Events of Lease Default Defined. Any one of the following shall be Events of Lease Default under this Lease: (a) failure by the City to pay any Base Rentals or Additional Rentals, which have been specifically appropriated by the City for such purpose, during the Initial Term or any Renewal Term, within five (5) Business Days of the date on which they are due; or (b) subject to the provisions of Section 6.5 hereof, failure by the City to vacate or surrender possession of the Leased Property by March 1 of any Renewal Term in respect of which an Event of Nonappropriation has occurred; or (c) failure by the City to observe and perform any covenant, condition, or agreement on its part to be observed or performed hereunder, other than as referred to in (a) or (b), (and other than a failure to comply with Section 11.6 hereof) for a period of 30 days after written notice, specifying such failure and requesting that it be remedied shall be received by the City from the Trustee, unless the Trustee shall agree in writing to an extension of such time prior to its expiration; provided that if the failure stated in the notice cannot be corrected within the applicable period, the Trustee shall not withhold its consent to an extension of such time if, in the Trustee’s reasonable judgment, corrective action can be instituted by the City within the applicable period and diligently pursued until the default is corrected; or (d) failure by the City to comply with the terms of the Site Lease. The foregoing provisions of this Section 14.1 are subject to the following limitations: (i) the City shall be obligated to pay the Base Rentals and Additional Rentals, which have been specifically appropriated by the City Council for such purpose, only during the then current Lease Term, except as otherwise expressly provided in this Lease; and (ii) if, by reason of Force Majeure, the City or the Trustee shall be unable in whole or in part to carry out any agreement on their respective parts herein contained other than the City’s agreement to pay the Base Rentals and Additional Rentals due hereunder, the City or the Trustee shall not be deemed in default during the continuance of such inability. The City and the Trustee each agree, however, to remedy, as promptly as legally and reasonably possible, the cause or causes preventing the City or the Trustee from carrying out their 32 respective agreements; provided that the settlement of strikes, lockouts, and other industrial disturbances shall be entirely within the discretion of the City. Section 14.2 Remedies on Default. Whenever any Event of Lease Default shall have happened and be continuing beyond any applicable cure period, the Trustee may, or shall at the request of the owners of a majority in aggregate principal amount of the Certificates then Outstanding and upon indemnification as to costs and expenses as provided in the Indenture, without any further demand or notice, take one or any combination of the following remedial steps: (a) terminate the Lease Term and give notice to the City to vacate and surrender possession of the Leased Property, which vacation and surrender the City agrees to complete within sixty (60) days from the date of such notice; provided, in the event the City does not vacate and surrender possession on the termination date, the provisions of Section 6.5 hereof shall apply; (b) lease or sublease the Leased Property or sell or assign any interest the Trustee has in the Leased Property, including the Trustee’s leasehold interest in the Leased Property; (c) recover from the City: (i) the portion of Base Rentals and Additional Rentals, for which a specific Appropriation has been effected by the City Council for such purpose, which would otherwise have been payable hereunder, during any period in which the City continues to occupy, use, or possess the Leased Property; and (ii) Base Rentals and Additional Rentals, for which a specific Appropriation has been effected by the City Council for such purpose, which would otherwise have been payable by the City hereunder during the remainder, after the City vacates and surrenders possession of the Leased Property, of the Fiscal Year in which such Event of Lease Default occurs. (d) take whatever action at law or in equity may appear necessary or desirable to enforce its rights in and to the Leased Property under the Site Lease, this Lease and the Indenture. Upon the occurrence of an Event of Nonappropriation, the Trustee shall be entitled to recover from the City the amounts set forth in Section 14.2(c)(i) hereof if the City continues to occupy the Leased Property after December 31 of the Fiscal Year in which such Event of Nonappropriation occurs. The Trustee shall also be entitled, upon any Event of Lease Default, to any moneys in any funds or accounts created under the Indenture (except the Rebate Fund or any defeasance escrow accounts). 33 Section 14.3 Limitations on Remedies. The remedies in connection with an Event of Lease Default shall be limited as set forth in this Section. A judgment requiring a payment of money may be entered against the City by reason of an Event of Lease Default only as to the City’s liabilities described in paragraph (c) of Section 14.2 hereof. A judgment requiring a payment of money may be entered against the City by reason of an Event of Nonappropriation only to the extent that the City fails to vacate and surrender possession of the Leased Property as required by Section 6.4 of this Lease, and only as to the liabilities described in paragraph (c)(i) of Section 14.2 hereof. The remedy described in paragraph (c)(ii) of Section 14.2 of this Lease is not available for an Event of Lease Default consisting of failure by the City to vacate and surrender possession of the Leased Property by March 1 following an Event of Nonappropriation. Section 14.4 No Remedy Exclusive. Subject to Section 14.3 hereof, no remedy herein conferred upon or reserved to the Trustee, is intended to be exclusive, and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Trustee to exercise any remedy reserved in this Article 14, it shall not be necessary to give any notice, other than such notice as may be required in this Article 14. Section 14.5 Waivers. The Trustee may waive any Event of Lease Default under this Lease and its consequences. In the event that any agreement contained herein should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. Payment of Base Rentals or Additional Rentals by the City shall not constitute a waiver of any breach or default by the Trustee hereunder. Section 14.6 Agreement to Pay Attorneys’ Fees and Expenses. In the event that either party hereto shall default under any of the provisions hereof and the non-defaulting party shall employ attorneys or incur other expenses for the collection of Base Rentals or Additional Rentals, or the enforcement of performance or observance of any obligation or agreement on the part of the defaulting party herein contained, the defaulting party agrees that it shall on demand therefor pay to the non-defaulting party, to the extent permitted by law, the reasonable fees of such attorneys and such other reasonable expenses so incurred by the non-defaulting party. Notwithstanding the foregoing, any such fees and expenses owed by the City hereunder shall constitute Additional Rentals for all purposes of this Lease and shall be subject to Appropriation. Section 14.7 Waiver of Appraisement, Valuation, Stay, Extension and Redemption Laws. To the extent permitted by law, in the case of an Event of Nonappropriation or an Event of Lease Default neither the Trustee nor the City nor any one claiming through or under either of them shall or will set up, claim or seek to take advantage of any appraisement, valuation, stay, extension, or redemption laws now or hereafter in force in order to prevent or hinder the enforcement of the Indenture; and the Trustee and the City, for themselves and all who may at any time claim through or under either of them, each hereby waives, to the full extent that it may lawfully do so, the benefit of all such laws. 34 Notwithstanding the foregoing, it is expressly understood that the City cannot and does not hereby waive its right to set up, claim or seek to take advantage of its police powers or its Colorado constitutional or statutory right of eminent domain. ARTICLE 15 MISCELLANEOUS Section 15.1 Sovereign Powers of City. Nothing in this Lease shall be construed as diminishing, delegating, or otherwise restricting any of the sovereign powers or immunities of the City. Nothing in this Lease shall be construed to require the City to occupy and operate the Leased Property other than as lessee, or to require the City to exercise its right to purchase the Leased Property as provided in Article 12 hereof. Section 15.2 Notices. All notices, certificates, or other communications to be given hereunder shall be sufficiently given and shall be deemed given when delivered or mailed by certified or registered mail, postage prepaid, addressed as follows: if to the City, City of Fort Collins, Colorado 300 LaPorte Avenue Fort Collins, Colorado 80521 Attention: City Manager if to the Trustee, U.S. Bank National Association 950 17 th Street, Suite 1200 Denver, CO 80202 Attention: Global Corporate Trust Services The City and the Trustee may, by written notice, designate any further or different means of communication or addresses to which subsequent notices, certificates or other communications shall be sent. Section 15.3 Third Party Beneficiaries. It is expressly understood and agreed that the Owners of the outstanding Certificates are third party beneficiaries to this Lease and enforcement of the terms and conditions of this Lease, and all rights of action relating to such enforcement, shall be strictly reserved to the City, as lessee and the Trustee, as lessor, and their respective successors and assigns, and to the Owners of the Certificates. Except as hereinafter provided, nothing contained in this Lease shall give or allow any such claim or right of action by any other or third person on this Lease. It is the express intention of the City and the Trustee that any person other than the Town, the Trustee or the Owners of the Certificates receiving services or benefits under this Lease shall be deemed to be an incidental beneficiary only. 35 Section 15.4 Binding Effect. This Lease shall inure to the benefit of and shall be binding upon the Trustee and the City and their respective successors and assigns, subject, however, to the limitations contained in Article 13 of this Lease. Section 15.5 Amendments. This Lease may only be amended, changed, modified, or altered as provided in the Indenture. Section 15.6 Amounts Remaining in Funds. It is agreed by the parties hereto that any amounts remaining in the Base Rentals Fund, the Costs of Execution and Delivery Fund, or any other fund or account created under the Indenture (except the Rebate Fund and any defeasance escrow account), upon termination of the Lease Term, and after payment in full of the Certificates (or provision for payment thereof having been made in accordance with the provisions of this Lease and the Indenture) and fees and expenses of the Trustee in accordance with this Lease and the Indenture, shall belong to and be paid to the City by the Trustee, as an overpayment of Base Rentals. Section 15.7 Triple Net Lease. This Lease shall be deemed and construed to be a “triple net lease” and, subject to the prior Appropriation requirements hereof, the City shall pay absolutely net during the Lease Term, the Base Rentals, the Additional Rentals and all expenses of, or other payments in respect of, the Leased Property as required to be paid by the City under this Lease, for which a specific Appropriation has been effected by the City Council for such purpose, free of any deductions, and without abatement, deduction, or setoff (other than credits against Base Rentals expressly provided for in this Lease). Section 15.8 Computation of Time. In computing a period of days, the first day is excluded and the last day is included. If the last day of any period is not a Business Day, the period is extended to include the next day which is a Business Day. If a number of months is to be computed by counting the months from a particular day, the period ends on the same numerical day in the concluding month as the day of the month from which the computation is begun, unless there are not that many days in the concluding month, in which case the period ends on the last day of that month. Notwithstanding the foregoing, Base Rentals shall be recalculated in the event of any prepayment of Base Rentals as provided in Section 6.2(b) hereof. Section 15.9 Payments Due on Holidays. If the date for making any payment or the last day for performance of any act or the exercising of any right, as provided in this Lease, shall be a day other than a Business Day, such payment may be made or act performed or right exercised on the next succeeding Business Day, with the same force and effect as if done on the nominal date provided in this Lease. Section 15.10 Severability. Except for the requirement of the City to pay Base Rentals for which a specific Appropriation has been effected by the City Council for such purpose and the requirement of the Trustee to provide quiet enjoyment of the Leased Property and to convey the Trustee’s leasehold interest in the Leased Property to the City under the conditions set forth in Article 12 of this Lease (which, if held invalid or unenforceable by any court of competent jurisdiction, may have the effect of invalidating or rendering unenforceable the other provisions of this Lease), in the event that any other provision of this Lease shall be held invalid or 36 unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. Section 15.11 Execution in Counterparts. This Lease may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 15.12 Applicable Law. This Lease shall be governed by and construed in accordance with the laws of the State of Colorado without regard to choice of law analysis. Section 15.13 The Trustee Is Independent of the City. Neither the Trustee nor any agent or employee of the Trustee shall be or shall be deemed to be an agent or employee of the City. The Trustee acknowledges that the Trustee and its employees are not entitled to unemployment insurance benefits of the City unless the Trustee or a third party otherwise provides such coverage and that the City does not pay for or otherwise provide such coverage. The Trustee shall have no authorization, express or implied, to bind the City to any agreements, liability or understanding except as expressly set forth herein. Section 15.14 Governmental Immunity. Notwithstanding any other provisions of this Lease to the contrary, no term or condition of this Lease shall be construed or interpreted as a waiver, express or implied, of any of the immunities, rights, benefits, protections, or other provisions of the Colorado Governmental Immunity Act, Section 24-10-101, et. seq., C.R.S., as now or hereafter amended, or under any other law. Section 15.15 Recitals. The Recitals set forth in this Lease are hereby incorporated by this reference and made a part of this Lease. Section 15.16 Captions. The captions or headings herein are for convenience only and in no way define, limit, or describe the scope or intent of any provisions or sections of this Lease. Section 15.17 Trustee’s Disclaimer. It is expressly understood and agreed that (a) the Lease is executed by U.S. Bank National Association solely in its capacity as Trustee under the Indenture, and (b) nothing herein shall be construed as creating any liability on U.S. Bank National Association other than in its capacity as Trustee under the Indenture. All financial obligations of the Trustee under this Lease, except those resulting from its willful misconduct or negligence, are limited to the Trust Estate. Section 15.18 Electronic Transactions. The parties hereto agree that the transactions described herein may be conducted and related documents may be stored by electronic means. Copies, telecopies, facsimiles, electronic files, and other reproductions of original executed documents shall be deemed to be authentic and valid counterparts of such original documents for all purposes, including the filing of any claim, action, or suit in the appropriate court of law. 37 IN WITNESS WHEREOF, the parties have executed this Lease Purchase Agreement as of the day and year first above written. CITY OF FORT COLLINS, COLORADO, as Lessee U.S. BANK NATIONAL ASSOCIATION, solely in its capacity of Trustee under the Indenture, as Lessor By: ________________________________ By: ________________________________ Mayor Authorized Officer [SEAL] ATTEST: ____________________________________ City Clerk 38 STATE OF COLORADO ) ) CITY OF FORT COLLINS ) ss. ) COUNTY OF LARIMER ) The foregoing instrument was acknowledged before me this ___ day of March, 2019, by Wade Toxell, as Mayor of the City of Fort Collins, Colorado. WITNESS my hand and official seal. (SEAL) ____________________________________ Notary Public My commission expires: STATE OF COLORADO ) ) CITY OF FORT COLLINS ) ss. ) COUNTY OF LARIMER ) The foregoing instrument was acknowledged before me this ___ day of March, 2019, by Delynn Coldiron, as City Clerk of the City of Fort Collins, Colorado. WITNESS my hand and official seal. (SEAL) ____________________________________ Notary Public My commission expires: 39 STATE OF COLORADO ) ) ss. CITY AND COUNTY OF DENVER ) The foregoing instrument was acknowledged before me this _____ day of March, 2019, by Jennifer Petruno, as an Authorized Officer of U.S. Bank National Association, as Trustee. WITNESS my hand and official seal. (SEAL) ____________________________________ Notary Public My commission expires: A-1 EXHIBIT A DESCRIPTION OF LEASED PROPERTY The Leased Property consists of the Site and the buildings and improvements located thereon as set forth below, as amended from time to time. Site. The Site consists of Parcels I and II: PARCEL I: (CIVIC CENTER) LOTS 1 AND 2, CIVIC CENTER OFFICE BUILDING, BEING A REPLAT OF LOTS 1 THROUGH 21, BLOCK 32, TOGETHER WITH THE NORTH 50.0 FEET OF VACATED LAPORTE AVENUE PARCEL II (CIVIC CENTER PARKING GARAGE) TRACT A AND TRACT B, OF A FINAL PLAT OF A REPLAT OF LOTS 24-39, BLOCK 21, OF THE TOWN MAP OF THE TOWN OF FORT COLLINS, CITY OF FORT COLLINS, LARIMER COUNTY COLORADO, EXCEPT THAT PORTION PLATTED AS CIVIC CENTER VILLAGE CONDOMINIUMS, RECORDED JANUARY 30, 2008 AT RECEPTION NO. 20080006230. Description of buildings and improvements located on Site: The Civic Center Office building is a 71,515 square foot office building located on Parcel I. The Civic Center Parking Garage is a 305,572 square foot parking garage located on Parcel II. Approximately 15,629 net square feet of retail space in the parking garage, which fronts North Mason Street, is not included within Parcel II. The parking garage contains 905 parking spaces. B-1 EXHIBIT B PERMITTED ENCUMBRANCES “Permitted Encumbrances” as defined in Section 1.2 of this Lease and the following: (Include Encumbrances from Title Insurance Policy) C-1 EXHIBIT C BASE RENTALS SCHEDULE Date Base Rentals Principal Component Base Rentals Interest Component Total Base Rentals Annual Base Rentals 5/15/2019 11/15/2019 5/15/2020 11/15/2020 5/15/2021 11/15/2021 5/15/2022 11/15/2022 5/15/2023 11/15/2023 5/15/2024 11/15/2024 5/15/2025 11/15/2025 5/15/2026 11/15/2026 5/15/2027 11/15/2027 5/15/2028 11/15/2028 5/15/2029 11/15/2029 5/15/2030 11/15/2030 5/15/2031 11/15/2031 5/15/2032 11/15/2032 5/15/2033 11/15/2033 5/15/2034 11/15/2034 5/15/2035 11/15/2035 5/15/2036 11/15/2036 5/15/2037 11/15/2037 5/15/2038 11/15/2038 ________________ Base Rental payments are due on May 15 and November 15 of each year during the Lease Term. The Base Rentals have been calculated on the basis of a 360-day year of twelve 30- day months and any recalculation of Base Rentals under Section 6.2(a) hereof shall be done on C-2 the same basis. If Base Rentals are stated to be due on any date that is not a Business Day, such Base Rentals shall be due on the next day that is a Business Day without the accrual of interest on Base Rentals between such dates. Statement Regarding the Leased Property The duration of the Lease, throughout the maximum Lease Term, does not exceed the weighted average useful life of the Leased Property. D-1 EXHIBIT D FORM OF NOTICE OF LEASE RENEWAL To: U.S. Bank National Association, as Trustee Attention: Global Corporate Trust Services The undersigned is the City Representative of the City of Fort Collins, Colorado (the “City”). The City is the lessee under that certain Lease Purchase Agreement, dated March __, 2019 (the “Lease”), between the City and U.S. Bank National Association, solely in its capacity of Trustee under the Indenture, as the lessor thereunder. I am familiar with the facts herein certified and am authorized and qualified to certify the same. The undersigned hereby states and certifies: (a) the City has effected or intends to effect on a timely basis an Appropriation for the ensuing Fiscal Year which includes (1) sufficient amounts authorized and directed to be used to pay all the Base Rentals and (2) sufficient amounts to pay such Additional Rentals as are estimated to become due, all as further provided in Sections 6.2, 6.3 and 6.4 of the Lease, whereupon, the Lease shall be renewed for the ensuing Fiscal Year; _______________ Initial or (b) the City has determined not to renew the Lease for the ensuing Fiscal Year. _______________ Initial CITY OF FORT COLLINS, COLORADO By: City Representative E-1 EXHIBIT E RELEASE AND AMORTIZATION SCHEDULE TOTAL AMOUNTS OF BASE RENTALS PRINCIPAL PAYMENTS AND OPTIONAL PRIOR REDEMPTIONS WHICH MUST BE MADE OR OF CERTIFICATES WHICH MUST BE PAID OR DEFEASED, TO RELEASE (1) PORTION OF THE LEASED PROPERTY TO BE RELEASED $________________ Parcel II – Civic Center Parking Garage $________________ Parcel I – Civic Center ________________ (1) Pursuant to Section 12.4 of this Lease, when the principal component of Base Rentals paid by the City, plus the principal amount of Certificates redeemed through optional redemption, or the total principal amount of Certificates paid or deemed to be paid, totals the amount set forth in this column, the corresponding portion of the Leased Property will be deemed amortized and shall be released from the lien of the Site Lease, this Lease and the Indenture, provided, however, that the fair value of the remaining Leased Property shall be at least equal to 100% of the aggregate principal amount of the Certificates Outstanding at the time of such release, as certified in writing by the City Representative. CITY OF FORT COLLINS, COLORADO CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the City of Fort Collins, Colorado (the “Issuer”) in connection with the authorization, execution, and delivery of a Lease Purchase Agreement, dated as of March __, 2019, between U.S. Bank National Association, solely in its capacity as trustee under the Indenture described hereing (the “Trustee”), as lessor, and the Issuer, as lessee, and the execution and delivery of the Certificates of Participation, Series 2019, in the aggregate principal amount of $____________(the “Certificates”). The Certificates are being issued pursuant to an Indenture of Trust, dated as of March __, 2019, (the “Indenture”) executed by the Trustee. The Issuer covenants and agrees as follows: SECTION 1. Purpose of this Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Issuer for the benefit of the holders and beneficial owners of the Certificates and in order to assist the Participating Underwriter in complying with Rule 15c2-12(b)(5) of the Securities and Exchange Commission (the “SEC”). SECTION 2. Definitions. In addition to the definitions set forth in the Indenture or parenthetically defined herein, which apply to any capitalized terms used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: “Annual Report” shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Dissemination Agent” shall mean any Dissemination Agent designated in writing by the Issuer and which has filed with the Issuer a written acceptance of such designation. “Fiscal Year” shall mean the period beginning on January 1 and ending on December 31, or such other 12-month period as may be adopted by the Issuer in accordance with law. “Listed Events” shall mean any of the events listed in Section 5 of this Disclosure Certificate. “MSRB” shall mean the Municipal Securities Rulemaking Board. As of the date hereof, the MSRB’s required method of filing is electronically via its Electronic Municipal Market Access (EMMA) system, which is currently available at http://emma.msrb.org. “Official Statement” means the final Official Statement prepared in connection with the Certificates. “Participating Underwriter” shall mean the original underwriter of the Certificates required to comply with the Rule in connection with an offering of the Certificates. “Rule” shall mean Rule 15c2-12(b)(5) adopted by the SEC under the Securities Exchange Act of 1934, as in effect on the date of this Disclosure Certificate. ATTACHMENT 3 2 SECTION 3. Provision of Annual Reports. (a) The Issuer shall, or shall cause the Dissemination Agent to, not later than nine (9) months following the end of the Issuer’s fiscal year of each year, commencing nine (9) months following the end of the Issuer’s fiscal year ending December 31, 2019, provide to the MSRB (in an electronic format as prescribed by the MSRB), an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than five (5) business days prior to said date, the Issuer shall provide the Annual Report to the Dissemination Agent, if any. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the Issuer may be submitted separately from the balance of the Annual Report. (b) If the Issuer is unable to provide to the MSRB an Annual Report by the date required in subsection (a), the Issuer shall file or cause to be filed with the MSRB a notice in substantially the form attached to this Disclosure Certificate as Exhibit “A.” SECTION 4. Content of Annual Reports. The Issuer’s Annual Report shall contain or incorporate by reference the following: (a) A copy of its annual financial statements, if any, prepared in accordance with generally accepted accounting principles audited by a firm of certified public accountants. If audited annual financial statements are not available by the time specified in Section 3(a) above, audited financial statements will be provided when and if available. (b) An update of the type of information identified in Exhibit “B” hereto, which is contained in the tables in the Official Statement with respect to the Certificates. Any or all of the items listed above may be incorporated by reference from other documents (including official statements), which are available to the public on the MSRB’s Internet Web Site or filed with the SEC. The Issuer shall clearly identify each such document incorporated by reference. SECTION 5. Reporting of Listed Events. The Issuer shall file or cause to be filed with the MSRB, in a timely manner not in excess of ten (10) business days after the occurrence of the event, notice of any of the events listed below with respect to the Certificates. All of the events currently mandated by the Rule are listed below; however, some may not apply to the Certificates. (1) Principal and interest payment delinquencies; (2) Non-payment related defaults, if material; (3) Unscheduled draws on debt service reserves reflecting financial difficulties; (4) Unscheduled draws on credit enhancements reflecting financial difficulties; (5) Substitution of credit or liquidity providers or their failure to perform; 3 (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Certificates, or other material events affecting the tax status of the Certificates; (7) Modifications to rights of bondholders, if material; (8) Bond calls, if material, and tender offers; (9) Defeasances; (10) Release, substitution or sale of property securing repayment of the Certificates, if material; (11) Rating changes; (12) Bankruptcy, insolvency, receivership or similar event of the obligated person; 1 (13) 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 than pursuant to its terms, if material; (14) Appointment of a successor or additional trustee or the change of name of a trustee, if material; (15) Incurrence of a financial obligation 2 of the obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the Issuer, any of which affect security holders, if material; and 1 For the purposes of the event identified in subparagraph (b)(5)(i)(C)(12) of the Rule, the 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 a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governing body and official 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. 2 For purposes of the events identified in subparagraphs (b)(5)(i)(C)(15) and (16) of the Rule, the term “financial obligation” is defined to mean a (A) debt obligation; (B) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (C) a guarantee of (A) or (B). The term “financial obligation” does not include municipal securities as to which a final official statement has been otherwise provided to the MSRB consistent with the Rule. Numerous other terms contained in these subsections and/or in the definition of “financial obligation” are not defined in the Rule; SEC Release No. 34-83885 contains a discussion of the current SEC interpretation of those terms. For example, in the Release, the SEC provides guidance that the term “debt obligation” generally should be considered to include only lease arrangements that operate as vehicles to borrow money. 4 (16) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation 2 of the obligated person, any of which reflect financial difficulties. SECTION 6. Format; Identifying Information. All documents provided to the MSRB pursuant to this Disclosure Certificate shall be in the format prescribed by the MSRB and accompanied by identifying information as prescribed by the MSRB. As of the date of this Disclosure Certificate, all documents submitted to the MSRB must be in portable document format (PDF) files configured to permit documents to be saved, viewed, printed and retransmitted by electronic means. In addition, such PDF files must be word-searchable, provided that diagrams, images and other non-textual elements are not required to be word-searchable. SECTION 7. Termination of Reporting Obligation. The Issuer’s obligations under this Disclosure Certificate shall terminate upon the earliest of: (i) the date of legal defeasance, prior redemption or payment in full of all of the Certificates; (ii) the date that the Issuer shall no longer constitute an “obligated person” within the meaning of the Rule; or (iii) the date on which those portions of the Rule which require this written undertaking are held to be invalid by a court of competent jurisdiction in a non-appealable action, have been repealed retroactively or otherwise do not apply to the Certificates. SECTION 8. Dissemination Agent. (a) The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist the Issuer in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. If the Issuer elects not to appoint a successor Dissemination Agent, it shall perform the duties thereof under this Disclosure Certificate. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate and any other agreement between the Issuer and the Dissemination Agent. (b) In addition to the filing duties on behalf of the Issuer described in this Disclosure Certificate, the Dissemination Agent shall: (1) each year, prior to the date for providing the Annual Report, determine the appropriate electronic format prescribed by the MSRB; (2) send written notice to the Issuer at least 45 days prior to the date the Annual Report is due stating that the Annual Report is due as provided in Section 3(a) hereof; and (3) certify in writing to the Issuer that the Annual Report has been provided pursuant to this Disclosure Certificate and the date it was provided. (4) If the Annual Report (or any portion thereof) is not provided to the MSRB by the date required in Section (3)(a), the Dissemination Agent shall file with the MSRB a notice in substantially the form attached to this Disclosure Certificate as Exhibit A. 5 SECTION 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Issuer may amend this Disclosure Certificate and may waive any provision of this Disclosure Certificate, without the consent of the holders and beneficial owners of the Certificates, if such amendment or waiver does not, in and of itself, cause the undertakings herein (or action of any Participating Underwriter in reliance on the undertakings herein) to violate the Rule, but taking into account any subsequent change in or official interpretation of the Rule. The Issuer will provide notice of such amendment or waiver to the MSRB. SECTION 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Issuer shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 11. Default. In the event of a failure of the Issuer to comply with any provision of this Disclosure Certificate, any holder or beneficial owner of the Certificates may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Issuer to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an event of default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the Issuer to comply with this Disclosure Certificate shall be an action to compel performance. SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Issuer, the Dissemination Agent, the Participating Underwriter and the holders and beneficial owners from time to time of the Certificates, and shall create no rights in any other person or entity. DATE: March __, 2019. CITY OF FORT COLLINS, COLORADO By: Mayor A-1 EXHIBIT “A” NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: City of Fort Collins, Colorado Name of Bond Issue: Certificates of Participation, Series 2019 Date of Issuance: March __, 2019 CUSIP Number: ___________________________ NOTICE IS HEREBY GIVEN that the Issuer has not provided an Annual Report with respect to the above-named Certificates as required by the Continuing Disclosure Certificate dated March __, 2019. The Issuer anticipates that the Annual Report will be filed by ______________________. Dated: ______________, _____ CITY OF FORT COLLINS, COLORADO B-1 EXHIBIT “B” OFFICIAL STATEMENT TABLES TO BE UPDATED History of City Sales and Use Tax Collections Ten Largest Sales and Use Tax Generators - 2017 Budget to Actual Comparison - City General Fund General Fund-Statement of Revenues, Expenditures and Changes in Fund Balances Notice of Sale - Page 1 NOTICE OF PUBLIC SALE DATED FEBRUARY __, 2019 CITY OF FORT COLLINS, COLORADO CERTIFICATES OF PARTICIPATION SERIES 2019 - $24,255,000* PUBLIC NOTICE IS HEREBY GIVEN that the City Council (the “Council”) of the City of Fort Collins, Colorado (the “City”) will receive electronic bids for the purchase of the Certificates described below on: March 5, 2019 at the hour of 9:30, Mountain Time. Bids must be submitted electronically via the BIDCOMP/PARITY BIDDING SYSTEM (“BIDCOMP/PARITY”) as described in “BIDCOMP/PARITY” and “BID PROPOSAL REQUIREMENTS” below. ISSUE DETAILS: The Certificates of Participation to be sold are the “City of Fort Collins, Colorado, Certificates of Participation, Series 2019” (the “Certificates”) in the aggregate principal amount of $24,255,000.* The Certificates evidence proportionate interests in the base rentals and other revenues under an annually renewable Lease Purchase Agreement (the “Lease”) between U.S. Bank National Association, solely in its capacity as Trustee under the Indenture, as lessor, and the City, as lessee. The Certificates will be executed and delivered as fully registered certificates and are initially to be registered in the name of “Cede & Co.” as nominee of The Depository Trust Company (“DTC”), which is acting as the securities depository for the Certificates. Purchases are to be made in book-entry form in denominations of $5,000 or any integral multiple thereof. Purchasers will not receive certificates evidencing their interest in the Certificates. MATURITIES: Except as otherwise provided below in “ADJUSTMENT OF MATURITIES AFTER DETERMINATION OF BEST BID” and “MANDATORY SINKING FUND REDEMPTION” below, the Certificates will mature on December 1 in the years and designated amounts designated below: Maturity Date (December 1) Principal Amount* 2019 $910,000 2020 800,000 2021 820,000 2022 855,000 *Subject to change. ATTACHMENT 4 Notice of Sale - Page 2 2023 900,000 2024 945,000 2025 990,000 2026 1,040,000 2027 1,090,000 2028 1,145,000 2029 1,205,000 2030 1,265,000 2031 1,325,000 2032 1,395,000 2033 1,450,000 2034 1,505,000 2035 1,565,000 2036 1,625,000 2037 1,685,000 2038 1,740,000 ADJUSTMENT OF MATURITIES AFTER DETERMINATION OF BEST BID: The aggregate principal amount and the principal amount of each serial maturity of the Certificates set forth in the maturity schedule above (the “Maturity Schedule”) are subject to adjustment by the City, after the determination of the best bid. Changes to be made will be communicated to the winning bidder at the time of award of the Certificates to the winning bidder; changes will not reduce or increase the aggregate principal amount of the Certificates of any maturity by more than ten percent (10%) from the amount shown in the Maturity Schedule and will not increase the total aggregate principal amount of Certificates to an amount in excess of $26,680,500. The price bid (i.e., par less any discount bid or plus any premium bid) by a winning bidder may be changed as described below, but the interest rates specified by the winning bidder for all maturities will not change. A winning bidder may not withdraw its bid as a result of any changes made within these limits. The price bid will be changed so that the percentage net compensation to the winning bidder (i.e., the percentage resulting from dividing (i) the aggregate difference between the offering price of the Certificates to the public and the price to be paid to the City by (ii) the principal amount of the Certificates) does not increase or decrease from what it would have been if no adjustment was made to the principal amounts shown in the Maturity Schedule. OPTIONAL PRIOR REDEMPTION: The Certificates maturing on or prior to December 1, 20__ are not subject to redemption prior to their respective maturity dates. The Certificates maturing on and after December 1, 20__ shall be subject to redemption prior to their respective maturity dates at the option of the City, in whole or in part, in integral multiples of $5,000, and if in part in such order of maturities as are selected by the City and by lot within a maturity (giving proportionate weight to Certificates in denominations larger than $5,000), on December 1, 20__, and on any date thereafter, at a redemption price equal to the principal amount of the Certificates so redeemed plus accrued interest to the redemption date without a premium. Redemption will be made in the manner and upon the conditions described in the Final Official Statement (as described below). Notice of Sale - Page 3 MANDATORY SINKING FUND REDEMPTION: Any bidder may, at its option, specify that one or more consecutive maturities of the Certificates will consist of term Certificates (the “Term Certificates”) which are subject to mandatory sinking fund redemption in consecutive years immediately preceding the maturity thereof, as designated in the bid of such bidder. Amounts included as a Term Certificate must consist of consecutive maturities, must bear the same rate of interest and must include the entire principal amount for any maturity included in the Term Certificate (i.e., the principal amount maturing in any year may not be divided between a serial maturity and a mandatory sinking fund redemption). Any such Term Certificate will be subject to mandatory sinking fund redemption in installments in the same amounts and on the same dates as the Certificates would have matured if they were not included in a Term Certificate or Term Certificates. Certificates redeemed pursuant to the mandatory sinking fund redemption provisions will be redeemed at a redemption price equal to the principal amount of the Certificates to be redeemed plus accrued interest to the redemption date in the manner provided in the Indenture, including any sale certificate executed by the City Manager or the Financial Officer of the City (the “Financial Officer”) in accordance with the ordinance authorizing the execution and delivery of the Lease (the “Ordinance”). Any election to designate the Certificates as being included in a Term Certificate must be made in the official bid forms. INTEREST RATES AND LIMITATIONS: Interest shall be payable on June 1, and December 1 of each year, commencing June 1, 2019, and will be computed on the basis of a 360-day year of twelve 30-day months. 1. There is no limit on the number of rates specified. 2. The interest rate for the Certificates must be stated in a multiple of 1/8th or 1/20th of 1% per annum. A zero rate of interest may not be named for the Certificates. 3. For Certificates maturing after December 1, 20__, the maximum differential between the lowest and the highest interest rates stated in the bid for the Certificates may not exceed ___ basis points (e.g., if the lowest rate is ___% the highest rate may not exceed ____%). PURCHASE PRICE: The purchase price bid for the Certificates shall not be less than ____% nor more than _____% of the par amount of the Certificates. SEE “WINNING BIDDER’S REOFFERING YIELDS AND ESTABLISHING THE ISSUE PRICE”. INFORMATION AVAILABLE FROM PRELIMINARY OFFICIAL STATEMENT: Reference is made to the Preliminary Official Statement dated February __, 2019 (the “Preliminary Official Statement”) for information as to the authorization and purpose of the Certificates; security for the Certificates; the Leased Property; the book-entry system, transfer, exchange and place of payment of the Certificates; the exclusion of the interest on the Certificates from federal and State of Colorado income taxation; and other information relating to the Certificates, the Site Lease, the Lease, the Indenture, the Leased Property and the City. Notice of Sale - Page 4 BIDCOMP/PARITY: Bids must be submitted electronically using BIDCOMP/PARITY no later than the time designated herein for the receipt of bids. During the electronic bidding, no bidder will see any other bidder’s bid nor the status of their bid relative to other bids (i.e., whether their bid is a leading bid). Bidders may change or withdraw their bids at any time up to the time designated herein. Electronic bids may only be submitted through BIDCOMP/PARITY. If any provisions in this Notice of Public Sale should conflict with information or terms provided or required by BIDCOMP/PARITY, this Notice of Public Sale (and any amendments hereto) shall control. BID PROPOSAL REQUIREMENTS: A prospective bidder must register electronically to bid for the Certificates via BIDCOMP/PARITY no later than 9:00 a.m., (Mountain Time), on March 5, 2019. A prospective bidder must register electronically to bid for the Certificates by completing the information required by BIDCOMP/PARITY. By registering to bid for the Certificates, a prospective electronic bidder represents and warrants to the City that such bidder’s bid for the purchase of the Certificates (if a bid is submitted in connection with the sale) is submitted for and on behalf of such prospective bidder by an officer or agent who is duly authorized to bind the prospective bidder to a legal, valid and enforceable contract for the purchase of the Certificates. By registering via BIDCOMP/PARITY to bid for the Certificates, a prospective bidder is not obligated to submit a bid in connection with the sale. Bids must be submitted electronically for the purchase of the Certificates by means of BIDCOMP/PARITY by 9:30 a.m., (Mountain Time), on March 5, 2019. Prior to that time, an eligible prospective bidder may (1) input the proposed terms of its bid on BIDCOMP/PARITY, (2) modify the proposed terms of its bid, in which event the proposed terms as last modified will (unless the bid is withdrawn as described herein) constitute its bid for the Certificates, (3) send its proposed bid, or (4) withdraw its proposed bid. Once the bids are communicated electronically via BIDCOMP/PARITY, each bid will constitute an irrevocable offer to purchase the Certificates on the terms therein provided. Each prospective bidder shall be solely responsible to register to bid via BIDCOMP/PARITY as described above. Each qualified prospective bidder shall be solely responsible to make necessary arrangements to access BIDCOMP/PARITY for purposes of submitting its bid in a timely manner and in compliance with the requirements of this Notice of Public Sale. Neither the City nor the City’s municipal advisor Hilltop Securities, Inc. (the “Municipal Advisor”) shall have any duty or be obligated to undertake such registration to bid for any prospective bidder or to provide or assure such access to any qualified prospective bidder, and neither the City nor the Municipal Advisor shall be responsible for a bidder’s failure to register to bid or for proper operation of, or have any liability for any delays or interruptions of, or any damages caused by, BIDCOMP/PARITY. The City is using BIDCOMP/PARITY as communication mechanisms, and not as the City’s agents, to conduct the electronic bidding for the Certificates. Each bidder is required to transmit electronically via BIDCOMP/PARITY an unconditional bid specifying the lowest rate or rates of interest and the premium, or discount, as applicable, at which the bidder will purchase the Certificates. Each bid must be for all the Certificates herein offered for sale. Notice of Sale - Page 5 For informational purposes only, the electronic bid will show the effective interest rate for the Certificates represented on a TIC basis, as described under “BASIS OF AWARD” below, represented by the rate or rates of interest and the bid price specified in the bid. No bid will be received after the time for receiving such bids specified above. Further information about BIDCOMP/PARITY, including any fees charged, may be obtained from such respective entity as follows: Bidcomp/Parity, 1359 Broadway, 2nd Floor, New York, New York 10018; telephone (212) 404-8153; fax (212) 849-5021. WINNING BIDDER’S REOFFERING YIELDS AND ESTABLISHING THE ISSUE PRICE: At or before 10:30 a.m. Mountain Time on March 5, 2019, the winning bidder (or manager of the purchasing account) for the Certificates must provide to the Financial Officer and the Municipal Advisor the initial offering price and yield to the public. The winning bidder shall assist the City in establishing the issue price of the Certificates for federal income tax purposes and shall execute and deliver to the City at Closing an “issue price” or similar certificate setting forth the reasonably expected initial offering price to the public or the sales price or prices of the Certificates, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit A, in a form acceptable to the City and Butler Snow LLP (“Bond Counsel”). All actions to be taken by the City under this Notice of Public Sale to establish the issue price of the Certificates may be taken on behalf of the City by the Municipal Advisor and any notice or report to be provided to the City may be provided to the Municipal Advisor. The City intends that the provisions of Treasury Regulation Section 1.148-1(f)(3)(i) (defining “competitive sale” for purposes of establishing the issue price of the Certificates) will apply to the initial sale of the Certificates (the “competitive sale requirements”) because: (i) the City will disseminate this Notice of Public Sale to potential underwriters in a manner that is reasonably designed to reach potential underwriters; (ii) all bidders will have an equal opportunity to bid; (iii) the City may receive bids from at least three underwriters of municipal Certificates who have established industry reputations for underwriting new issuances of municipal Certificates; and (iv) the City anticipates awarding the sale of the Certificates to the bidder who submits a firm offer to purchase the Certificates at the highest price (or lowest interest cost), as set forth in this Notice of Public Sale. Any bid submitted pursuant to this Notice of Public Sale shall be considered a firm offer for the purchase of the Certificates, as specified in the bid. Notice of Sale - Page 6 In the event that the competitive sale requirements are not satisfied, the City shall so advise the winning bidder. The City may determine to treat (i) the first price at which 10% of a maturity of the Certificates (the “10% test”) is sold to the public as the issue price of that maturity and/or (ii) the initial offering price to the public as of the sale date of any maturity of the Certificates as the issue price of that maturity (the “hold-the-offering-price rule”), in each case applied on a maturity-by-maturity basis (and if different interest rates apply within a maturity, to each separate CUSIP number within that maturity). The winning bidder shall advise the City if any maturity of the Certificates satisfies the 10% test as of the date and time of the award of the Certificates. The City shall promptly advise the winning bidder, at or before the time of award of the Certificates, which maturities (and if different interest rates apply within a maturity, which separate CUSIP number within that maturity) of the Certificates shall be subject to the 10% test or shall be subject to the hold-the-offering-price rule. Bids will not be subject to cancellation in the event that the City determines to apply the hold-the-offering-price rule to any maturity of the Certificates. Bidders should prepare their bids on the assumption that some or all of the maturities of the Certificates will be subject to the hold-the-offering-price rule in order to establish the issue price of the Certificates. By submitting a bid, the winning bidder shall (i) confirm that the underwriters have offered or will offer the Certificates to the public on or before the date of award at the offering price or prices (the “initial offering price”), or at the corresponding yield or yields, set forth in the bid submitted by the winning bidder and (ii) agree, on behalf of the underwriters participating in the purchase of the Certificates, that the underwriters will neither offer nor sell unsold Certificates of any maturity to which the hold-the-offering-price rule shall apply to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following: (A) the close of the fifth (5 th ) business day after the sale date; or (B) the date on which the underwriters have sold at least 10% of that maturity of the Certificates to the public at a price that is no higher than the initial offering price to the public. The winning bidder shall promptly advise the City when the underwriters have sold 10% of that maturity of the Certificates to the public at a price that is no higher than the initial offering price to the public, if that occurs prior to the close of the fifth (5th) business day after the sale date. If the competitive sale requirements are not satisfied, then until the 10% test has been satisfied as to each maturity of the Certificates, the winning bidder agrees to promptly report to the City the prices at which the unsold Certificates of that maturity have been sold to the public. That reporting obligation shall continue, whether or not the Closing Date, as set forth in the Official Statement, has occurred, until the 10% test has been satisfied as to the Certificates of that maturity or until all Certificates of that maturity have been sold. The City acknowledges that, in making the representation set forth above, the winning bidder will rely on (i) the agreement of each underwriter to comply with the hold-the- offering-price rule, as set forth in an agreement among underwriters and the related pricing Notice of Sale - Page 7 wires, (ii) in the event a selling group has been created in connection with the initial sale of the Certificates to the public, the agreement of each dealer who is a member of the selling group to comply with the hold-the-offering-price rule, as set forth in a selling group agreement and the related pricing wires, and (iii) in the event that an underwriter is a party to a retail distribution agreement that was employed in connection with the initial sale of the Certificates to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the hold- the-offering-price rule, as set forth in the retail distribution agreement and the related pricing wires. The City further acknowledges that each underwriter shall be solely liable for its failure to comply with its agreement regarding the hold-the-offering-price rule and that no underwriter shall be liable for the failure of any other underwriter, or of any dealer who is a member of a selling group, or of any broker-dealer that is a party to a retail distribution agreement to comply with its corresponding agreement regarding the hold-the-offering-price rule as applicable to the Certificates. By submitting a bid, each bidder confirms that: (i) any agreement among underwriters, any selling group agreement and each retail distribution agreement (to which the bidder is a party) relating to the initial sale of the Certificates to the public, together with the related pricing wires, contains or will contain language obligating each underwriter, each dealer who is a member of the selling group, and each broker-dealer that is a party to such retail distribution agreement, as applicable, to (A) report the prices at which it sells to the public the unsold Certificates of each maturity allotted to it until it is notified by the winning bidder that either the 10% test has been satisfied as to the Certificates of that maturity or all Certificates of that maturity have been sold to the public and (B) comply with the hold-the-offering-price rule, if applicable, in each case if and for so long as directed by the winning bidder and as set forth in the related pricing wires, and (ii) any agreement among underwriters relating to the initial sale of the Certificates to the public, together with the related pricing wires, contains or will contain language obligating each underwriter that is a party to a retail distribution agreement to be employed in connection with the initial sale of the Certificates to the public to require each broker-dealer that is a party to such retail distribution agreement to (A) report the prices at which it sells to the public the unsold Certificates of each maturity allotted to it until it is notified by the winning bidder or such underwriter that either the 10% test has been satisfied as to the Certificates of that maturity or all Certificates of that maturity have been sold to the public and (B) comply with the hold-the-offering-price rule, if applicable, in each case if and for so long as directed by the winning bidder or such underwriter and as set forth in the related pricing wires. Sales of any Certificates to any person that is a related party to an underwriter shall not constitute sales to the public for purposes of this Notice of Public Sale. Further, for purposes of this Notice of Public Sale: (i) “public” means any person other than an underwriter or a related party, (ii) “underwriter” means (A) any person that agrees pursuant to a written contract with the City (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Certificates to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in Notice of Sale - Page 8 the initial sale of the Certificates to the public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Certificates to the public), (iii) a purchaser of any of the Certificates is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (A) at least 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (B) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (C) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other), and (iv) “sale date” means the date that the Certificates are awarded by the City to the winning bidder. GOOD FAITH DEPOSIT: A good faith deposit in the amount of ________ Dollars ($_________) will be required to be made by the apparent winning bidder after the bids have been received. The apparent winning bidder will be required to wire the good faith deposit to the City no later than 1:00 p.m. Mountain Time on March 5, 2019. The Municipal Advisor will contact the apparent winning bidder and request the apparent winning bidder to wire such good faith deposit and the apparent winning bidder shall provide the federal wire reference number of such good faith deposit to the Municipal Advisor by 1:00 p.m. Mountain Time on March 5, 2019. Wire information shall be provided by the City upon award. The Certificates will not be officially awarded to a bidder until such time as the bidder has provided a federal wire reference number for the good faith deposit to the Municipal Advisor. No interest on the good faith deposit will accrue to any bidder. The good faith deposit of the winning bidder for the Certificates will be applied to the purchase price of the Certificates. In the event the winning bidder for the Certificates fails to honor its accepted bid, the good faith deposit plus any interest accrued on the good faith deposit will be retained by the City. Any investment income earned on the good faith deposit will not be credited to the successful bidder on the purchase price of the Certificates. SALE RESERVATIONS: The City reserves the right (1) to reject any and all bids for the Certificates, (2) to reoffer the Certificates for sale as provided by law, and (3) to waive any irregularity or informality in any bid. In addition, the City reserves the privilege of changing the date and/or time of sale of the Certificates. If the City changes the date and/or time of the sale of the Certificates, this Notice of Public Sale shall remain effective, except as amended by communication or other amendment communicated to potential bidders. Notice of Sale - Page 9 If bids are not taken on March 5, 2019, or if all bids are rejected on March 5, 2019, the City may reoffer the Certificates for sale at any time thereafter. BASIS OF AWARD: Subject to the sale reservations and limitations set forth herein, the Certificates will be sold to the responsible bidder making the best bid therefor. The best bid(s) will be determined by computing the actuarial yield on the Certificates (i.e., using an actuarial or true interest cost method) for each bid received. “True interest cost” on the Certificates as used herein means that yield which if used to compute the present worth as of the estimated delivery date of the Certificates of all payments of principal and interest to be made on such series of the Certificates from the estimated delivery date to their respective maturity dates (or mandatory sinking fund redemption dates), using the interest rates specified in the bid and the principal amounts specified in the Maturity Schedule, produces an amount equal to the principal amount of the Certificates, less any discount or plus any premium bid. All interest calculations and the calculation of the best bid shall be based on a 360-day year and a semiannual compounding interval. If an award is made, it will be made to the bidder whose bid results in the lowest true interest cost, i.e., to the bidder making the bid resulting in the lowest true interest cost on the Certificates. If two or more equal bids for the Certificates are received and such equal bids are the best bids received, the City will determine which bid will be accepted. TIME OF AWARD: The Council has authorized certain designated officers, on behalf of the City, to accept the best responsible bid for the purchase of the Certificates, and to accept such bid, for and in the name of the City, by notice to the winning bidder. The City will award the Certificates or reject all bids not later than twenty-four (24) hours after the expiration of the time herein specified for the receipt of bids unless such time of award is waived by the winning bidder. MANNER AND TIME OF DELIVERY: The good faith deposit of the winning bidder will be credited to the purchaser at the time of delivery of the Certificates (without accruing interest). If the winning bidder for the Certificates fails or neglects to complete the purchase of the Certificates when the Certificates are made ready and are tendered for delivery, the amount of this good faith deposit will be forfeited (as liquidated damages for noncompliance with the bid) to the City, except as hereinafter provided. In that event, the Council may reoffer the Certificates for sale as provided by law. The purchaser will not be required to accept delivery of any of the Certificates if they are not tendered for delivery within sixty (60) days from the date herein stated for opening bids. If the Certificates are not so tendered within said period of time, the good faith deposit, if any, will be returned to the purchaser upon its request (without accruing interest). The City contemplates, however, effecting delivery of the Certificates to the purchaser through DTC on or about March __, 2019. PAYMENT: The winning bidder or bidders will be required to make payment of the balance due for the Certificates at a bank or trust company designated by the Financial Officer. Payment of the balance of the purchase price due at delivery must be made in Federal Reserve Funds or other funds acceptable to the City for immediate and unconditional credit to the City. The Certificates will be delivered at the office of The Depository Trust Company in Notice of Sale - Page 10 New York, New York, on confirmation by the City of receipt of the balance of the purchase price. CUSIP NUMBERS: CUSIP numbers will be ordered by the Municipal Advisor and will be paid for by the City as a cost of issuance. CUSIP numbers will be printed on the Certificates. If a wrong number is imprinted on any Certificate or if a number is not printed thereon, any such error or omission will not constitute cause for the winning bidder to refuse delivery of any Certificate. OFFICIAL STATEMENT: The City has prepared the Preliminary Official Statement, which is deemed by the City to be final as of its date for purposes of allowing bidders to comply with Rule 15c2-12(b)(1) of the Securities and Exchange Commission (the “Rule”), except for the omission of certain information as permitted by the Rule. The Preliminary Official Statement is subject to revision, amendment and completion in a Final Official Statement, as defined below. Copies of the Preliminary Official Statement and other information concerning the City and the Certificates may be obtained prior to the sale from the sources listed under “INFORMATION” below. The City will, as soon as practicable after the award of the Certificates to the winning bidder, update the information contained in the Preliminary Official Statement to the date of the award, and such updated Preliminary Official Statement will constitute the “Final Official Statement” relating to the Certificates. The City authorizes the winning bidder to distribute the Final Official Statement in connection with the offering of the Certificates. The City will provide to the winning bidder an amount not to exceed ___ copies of the Final Official Statement on or before the seventh business day following the date of the award of the Certificates to the winning bidder. The winning bidder may obtain additional copies of the Final Official Statement at its expense. The Final Official Statements will be delivered to the winning bidder at the offices of the Municipal Advisor at the address listed below (see “INFORMATION” herein). If the winning bidder fails to pick up the Final Official Statements at the offices of the Municipal Advisor, the Final Official Statements will be forwarded to the winning bidder by mail or another delivery service mutually agreed to between the winning bidder and the Municipal Advisor. For a period beginning on the date of the Final Official Statement and ending twenty-five (25) days following the date, the winning bidder shall no longer hold for sale any of the Certificates, if any event concerning the affairs, properties or financial condition of the City shall occur as a result of which it is necessary to supplement the Final Official Statement in order to make the statements therein, in light of the circumstances existing at such time, not misleading, the City shall, at the request of the winning bidder, notify the winning bidder of any such event of which the Financial Officer has actual knowledge and shall cooperate fully in preparation and furnishing of any supplement to the Final Official Statement necessary, in the reasonable opinion of the City and the winning bidder, so that the statements therein as so supplemented will not be misleading in the light of the circumstances existing at such time. Notice of Sale - Page 11 SECONDARY MARKET DISCLOSURE UNDERTAKING: Pursuant to Securities and Exchange Commission Rule 15c2-12, the City will undertake to provide notice of the occurrence of certain material events. A form of the undertaking is set forth as an appendix to the Preliminary Official Statement. TRANSCRIPT AND LEGAL OPINION: The validity and enforceability of the Certificates will be approved by Butler Snow LLP, Denver, Colorado, as Special Counsel. The purchaser will receive a transcript of legal proceedings, which will include, among other documents:  A certificate executed by officials of the City stating that there is no litigation pending affecting the validity of the Certificates as of the date of their delivery;  A certificate executed by the Financial Officer or other authorized official of the City stating that, to the best of his knowledge, the Final Official Statement as of its date did not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements made in the Final Official Statement, in the light of the circumstances under which they were made, not misleading, and that, to the best of his knowledge, since the date of the Final Official Statement no event has occurred which would cause the Final Official Statement as of the date of the delivery of the Certificates to contain any untrue statement of a material fact or to omit to state any material fact necessary to make the statements made in the Final Official Statement, in the light of the circumstances under which they were made, not misleading (provided that, if between the date of the public sale of the Certificates and the date of delivery of the Certificates, any event should occur or be discovered which would cause the Final Official Statement to contain an untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the City shall notify the purchaser thereof, and if in the opinion of the City or the purchaser such event requires the preparation and publication of a supplement or amendment to the Final Official Statement, the City, at its sole expense, will supplement or amend the Final Official Statement in a form and in a manner approved by the purchaser and by Butler Snow LLP, Denver, Colorado, as Special Counsel to the City);  The opinion of Butler Snow LLP as to the validity, enforceability and tax- exempt status of interest on the Certificates, a form of which is set forth as Appendix D to the Preliminary Official Statement. GOVERNING LAW AND VENUE: This Notice of Public Sale and the contract formed when the City accepts the winning bid is governed by the laws of the State of Colorado. By submitting a bid, each bidder consents to the exclusive jurisdiction of any court of the State Notice of Sale - Page 12 of Colorado located in Larimer County or the United States District Court for the State of Colorado for the purpose of any suit, action or other proceeding arising under this Notice of Public Sale, and each bidder hereby irrevocably agrees that all claims in respect of any such suit, action or proceeding may be heard and determined by such court. Each bidder further agrees that service of process in any such action commenced in such state or Federal court shall be effective on such bidder by deposit of the same as registered mail addressed to the bidder at the address set forth in the bid submitted by the bidder. INFORMATION: This Notice of Public Sale, the Preliminary Official Statement, the official bid form and other information concerning the City and the Certificates may be obtained from the Financial Officer, City of Fort Collins, 215 N. Mason Street, 2nd Floor, Fort Collins, Colorado 80522 (telephone (970) 221-6795) or from the City’s Municipal Advisor, Hilltop Securities, Inc., 8055 E. Tufts Avenue, Suite 500, Denver, Colorado, 80237, phone (303) 771-1678. Dated __________, 2019. /s/ Mike Beckstead Financial Officer Notice of Sale - Page 13 EXHIBIT A CITY OF FORT COLLINS, COLORADO CERTIFICATES OF PARTICIPATION SERIES 2019 - $24,255,000* (FOR USE WHEN COMPETITIVE SALE REQUIREMENTS ARE SATISFIED) ISSUE PRICE CERTIFICATE The undersigned, on behalf of [NAME OF UNDERWRITER] (“[SHORT NAME OF UNDERWRITER]”), hereby certifies as set forth below with respect to the sale of the above- captioned obligations (the “Certificates”). 1. Reasonably Expected Initial Offering Price. (a) As of the Sale Date, the reasonably expected initial offering prices of the Certificates to the Public by [SHORT NAME OF UNDERWRITER] are the prices listed in Schedule A (the “Expected Offering Prices”). The Expected Offering Prices are the prices for the Maturities of the Certificates used by [SHORT NAME OF UNDERWRITER] in formulating its bid to purchase the Certificates. Attached as Schedule B is a true and correct copy of the bid provided by [SHORT NAME OF UNDERWRITER] to purchase the Certificates. (b) [SHORT NAME OF UNDERWRITER] was not given the opportunity to review other bids prior to submitting its bid.** (c) The bid submitted by [SHORT NAME OF UNDERWRITER] constituted a firm offer to purchase the Certificates. 2. Defined Terms. (a) Issuer means the City of Fort Collins, Colorado. (b) Maturity means Certificates with the same credit and payment terms. Certificates with different maturity dates, or Certificates with the same maturity date but different stated interest rates, are treated as separate Maturities. (c) Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter. The term “related party” for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly. *Subject to change. ** Treas. Reg. §1.148-1(f)(3)(i)(B) requires that all bidders have an equal opportunity to bid to purchase Certificates. If the bidding process affords an equal opportunity for bidders to review other bids prior to submitting their bids, then this representation should be modified to describe the bidding process. Notice of Sale - Page 14 (d) Sale Date means the first day on which there is a binding contract in writing for the sale of a Maturity of the Certificates. The Sale Date of the Certificates is March 5, 2019. (e) Underwriter means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Certificates to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Certificates to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Certificates to the Public). 3. Yield. The yield on the Certificates has been calculated to be not less than ___%. The ___ maturities were treated as having been redeemed on the optional redemption date that produces the lowest yield on such maturities. 4. Weighted Average Maturity. The weighted average maturity of the Certificates has been calculated to be ____ years. The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents [SHORT NAME OF UNDERWRITER]’s interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Tax Certificate and with respect to compliance with the federal income tax rules affecting the Certificates, and by Butler Snow LLP in connection with rendering its opinion that the interest on the Certificates is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Certificates. [UNDERWRITER] By: ______________________________________ Name: ____________________________________ Dated: [ISSUE DATE] Notice of Sale - Page 15 CITY OF FORT COLLINS, COLORADO CERTIFICATES OF PARTICIPATION SERIES 2019 - $24,255,000* (FOR USE WHEN COMPETITIVE SALE REQUIREMENTS ARE NOT SATISFIED TO BE ADJUSTED BY BOND COUNSEL AS APPLICABLE) ISSUE PRICE CERTIFICATE The undersigned, on behalf of [NAME OF UNDERWRITER/REPRESENTATIVE] [“[SHORT NAME OF UNDERWRITER]”)][the “Representative”)][, on behalf of itself and [NAMES OF OTHER UNDERWRITERS] (together, the “Underwriting Group”),] hereby certifies as set forth below with respect to the sale and issuance of the above-captioned obligations (the “Certificates”). (1) [If all maturities satisfy the 10% test on the sale date:] Sale of the General Rule Maturities. As of the date of this certificate, for each Maturity of the Certificates, the first price at which at least 10% of such Maturity of the Certificates was sold to the Public is the respective price listed in Schedule A. [If only some of the maturities satisfy the 10% test on the sale date:] As of the date of this certificate, for each Maturity of the General Rule Maturities, the first price at which at least 10% of such Maturity was sold to the Public is the respective price listed in Schedule A. (2) Initial Offering Price of the [Certificates][Hold-the-Offering-Price Maturities]. (a) [If all maturities use hold-the-offering-price rule:][SHORT NAME OF UNDERWRITER][The Underwriting Group] offered the Certificates to the Public for purchase at the respective initial offering prices listed in Schedule A (the “Initial Offering Prices”) on or before the Sale Date. A copy of the pricing wire or equivalent communication for the Certificates is attached to this certificate as Schedule B. [If selected maturities use hold-the- offering-price rule:][SHORT NAME OF UNDERWRITER][The Underwriting Group] offered the Hold-the-Offering-Price Maturities to the Public for purchase at the respective initial offering prices listed in Schedule A (the “Initial Offering Prices”) on or before the Sale Date. A copy of the pricing wire or equivalent communication for the Certificates is attached to this certificate as Schedule B. (b) [If all maturities use hold-the-offering-price rule:]As set forth in the Notice of Sale and bid award, [SHORT NAME OF UNDERWRITER][the members of the Underwriting Group] [has][have] agreed in writing that, (i) for each Maturity of the Certificates, [it][they] would neither offer nor sell any of the Certificates of such Maturity to any person at a price that is higher than the Initial Offering Price for such Maturity during the Holding Period for such Maturity (the “hold-the-offering-price rule”), and (ii) any selling group agreement shall contain the agreement of each dealer who is a member of the selling group, and any retail *Subject to change. Notice of Sale - Page 16 distribution agreement shall contain the agreement of each broker-dealer who is a party to the retail distribution agreement, to comply with the hold-the-offering-price rule. Pursuant to such agreement, no Underwriter (as defined below) has offered or sold any Maturity of the Certificates at a price that is higher than the respective Initial Offering Price for that Maturity of the Certificates during the Holding Period. [If selected maturities use hold-the-offering-price rule:][s set forth in the Notice of Sale and bid award, [SHORT NAME OF UNDERWRITER][the members of the Underwriting Group] [has][have] agreed in writing that, (i) for each Maturity of the Hold-the-Offering-Price Maturities, [it][they] would neither offer nor sell any of the Certificates of such Maturity to any person at a price that is higher than the Initial Offering Price for such Maturity during the Holding Period for such Maturity (the “hold-the- offering-price rule”), and (ii) any selling group agreement shall contain the agreement of each dealer who is a member of the selling group, and any retail distribution agreement shall contain the agreement of each broker-dealer who is a party to the retail distribution agreement, to comply with the hold-the-offering-price rule. Pursuant to such agreement, no Underwriter (as defined below) has offered or sold any Maturity of the Hold-the-Offering-Price Maturities at a price that is higher than the respective Initial Offering Price for that Maturity of the Certificates during the Holding Period. (3) Defined Terms. (a) General Rule Maturities means those Maturities of the Certificates listed in Schedule A hereto as the “General Rule Maturities.” (b) Hold-the-Offering-Price Maturities means those Maturities of the Certificates listed in Schedule A hereto as the “Hold-the-Offering-Price Maturities.” (c) Holding Period means, with respect to a Hold-the-Offering-Price Maturity, the period starting on the Sale Date and ending on the earlier of (i) the close of the fifth business day after the Sale Date ([DATE]), or (ii) the date on which [SHORT NAME OF UNDERWRITER][the Underwriters] [has][have] sold at least 10% of such Hold-the-Offering- Price Maturity to the Public at prices that are no higher than the Initial Offering Price for such Hold-the-Offering-Price Maturity. (d) Issuer means the City of Fort Collins, Colorado. (e) Maturity means Certificates with the same credit and payment terms. Certificates with different maturity dates, or Certificates with the same maturity date but different stated interest rates, are treated as separate maturities. (f) Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter. The term “related party” for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly. (g) Sale Date means the first day on which there is a binding contract in writing for the sale of a Maturity of the Certificates. The Sale Date of the Certificates is March 5, 2019. Notice of Sale - Page 17 (h) Underwriter means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Certificates to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Certificates to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Certificates to the Public). (4) Yield. The yield on the Certificates has been calculated to be not less than ___%. The ___ maturities were treated as having been redeemed on the optional redemption date that produces the lowest yield on such maturities. (5) Weighted Average Maturity. The weighted average maturity of the Certificates has been calculated to be ____ years. The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents [NAME OF UNDERWRITING FIRM][the Representative’s] interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Tax Certificate and with respect to compliance with the federal income tax rules affecting the Certificates, and by Butler Snow LLP in connection with rendering its opinion that the interest on the Certificates is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Certificates. [Signature Page Follows] Notice of Sale - Page 18 [UNDERWRITER][REPRESENTATIVE] By: Name: Dated: __________ __, 2019 Exhibit A - Notice of Sale SCHEDULE A SALE PRICES OF THE GENERAL RULE MATURITIES AND INITIAL OFFERING PRICES OF THE HOLD-THE-OFFERING-PRICE MATURITIES (Attached) Exhibit B - Notice of Sale SCHEDULE B PRICING WIRE OR EQUIVALENT COMMUNICATION (Attached) Draft - 1/29/19-for filing PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY __, 2019 NEW ISSUE RATING: Moody’s: [TO COME] BOOK-ENTRY ONLY See “RATING” In the opinion of Butler Snow LLP, Special Counsel, assuming continuous compliance with certain covenants described herein, the portion of the Base Rentals which is designated in the Lease as interest and paid as interest on the Certificates is excludable from gross income under federal income tax laws pursuant to Section 103 of the Internal Revenue Code of 1986, as amended to the date of delivery of the Certificates (the “Tax Code”), is excludable from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code, and is excludable from Colorado taxable income and Colorado alternative minimum taxable income under Colorado income tax laws in effect on the date of delivery of the Certificates. See “TAX MATTERS.” $24,255,000* CERTIFICATES OF PARTICIPATION, SERIES 2019 Evidencing Proportionate Interests in the Base Rentals and other Revenues under an Annually Renewable Lease Purchase Agreement, dated March __, 2019, between U.S. BANK NATIONAL ASSOCIATION, as Trustee, as lessor, and the CITY OF FORT COLLINS, COLORADO, as lessee Dated: Date of Delivery Due: December 1, as shown herein The Certificates of Participation, Series 2019 (the “Certificates”) evidence a proportionate interest in the base rentals and certain other revenues under an annually renewable Lease Purchase Agreement dated as of March __, 2019 (the “Lease”), entered into between U.S. Bank National Association, solely in its capacity as trustee under the Indenture (the “Trustee”), as lessor, and the City of Fort Collins, Colorado, as lessee (the “City”). The Certificates are being executed and delivered pursuant to an Indenture of Trust dated as of March __, 2019 (the “Indenture”), executed and delivered by the Trustee. The Certificates are issued as fully registered certificates in denominations of $5,000 or any integral multiple thereof and initially will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), which is acting as the securities depository for the Certificates. Purchases of the Certificates are to be made in book-entry form only. Purchasers will not receive certificates representing their beneficial ownership interest in the Certificates. See “THE CERTIFICATES--Book-Entry Only System.” The Certificates bear interest at the rates set forth herein, payable on June 1 and December 1 of each year, commencing on [June 1], 2019, to and including the maturity dates shown herein (unless the Certificates are redeemed earlier), payable to the registered owner of the Certificates, initially Cede & Co. The principal of the Certificates will be payable upon presentation and surrender at the Trustee. See “THE CERTIFICATES.” The maturity schedule for the Certificates appears on the inside cover page of this Official Statement. *Subject to change. ATTACHMENT 5 The Certificates are subject to redemption prior to maturity at the option of the City as described in “THE CERTIFICATES--Redemption Provisions.” At the option of the winning bidder, certain of the Certificates may also be subject to mandatory sinking fund redemption. The Certificates are also subject to extraordinary mandatory redemption upon the occurrence of an Event of Nonappropriation or an Event of Lease Default as described in “THE CERTIFICATES--Redemption Provisions - Extraordinary Mandatory Redemption.” The proceeds from the execution and delivery of the Certificates will be used to: (i) finance a portion of the cost improvements to the highway interchange at Interstate Highway I-25 and Prospect Road in the City, and the construction of a joint police training facility with the City of Loveland, Colorado, each as described herein; and (ii) pay the costs of issuing the Certificates. See “SOURCES AND USES OF FUNDS.” Neither the Lease nor the Certificates constitute a general obligation, a multiple fiscal year direct or indirect debt or other financial obligation or indebtedness of the City within the meaning of any constitutional, statutory or charter debt limitation. None of the Lease, the Indenture or the Certificates directly or indirectly obligates the City to make any payments beyond those appropriated for any fiscal year in which the Lease may be in effect. Except to the extent payable from the proceeds of the Certificates and income from the investment thereof, from the Net Proceeds (as defined herein), or from other amounts made available under the Indenture, the Certificates are payable during the lease term solely from Base Rentals payable to the Trustee under the Lease and the income from certain investments under the Indenture. All payment obligations of the City under the Lease are from year to year only. The Lease is subject to annual renewal by the City. Upon termination of the Lease, the Certificates will be payable solely from moneys, if any, held by the Trustee under the Indenture and any amounts resulting from the exercise of various remedies by the Trustee under the Site Lease, the Lease and the Indenture, all as more fully described herein. This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement to obtain information essential to making an informed investment decision and should give particular attention to the section entitled “RISK FACTORS.” The Certificates are offered when, as, and if executed and delivered and subject to the approval of legality of the Certificates by Butler Snow LLP, Denver, Colorado, Special Counsel, and the satisfaction of certain other conditions. Butler Snow LLP also has acted as special counsel to the City in connection with the Official Statement. The City Attorney will pass upon certain legal matters for the City. Hilltop Securities, Inc., Denver, Colorado, is acting as Municipal Advisor to the City. It is expected that the Certificates will be available for delivery through the facilities of DTC, on or about March __, 2019.* * Subject to change. MATURITY SCHEDULE* (CUSIP 6-digit issuer number: ______) $24,255,000* CERTIFICATES OF PARTICIPATION, SERIES 2019 Maturing (December 1) Principal Amount Interest Rate Price or Yield CUSIP© Issue Number Maturing (December 1) Principal Amount Interest Rate Price or Yield CUSIP© Issue Number 2019 $ 910,000 2029 $ 1,205,000 2020 800,000 2030 1,265,000 2021 820,000 2031 1,325,000 2022 855,000 2032 1,395,000 2023 900,000 2033 1,450,000 2024 945,000 2034 1,505,000 2025 990,000 2035 1,565,000 2026 1,040,000 2036 1,625,000 2027 1,090,000 2037 1,685,000 2028 1,145,000 2038 1,740,000 * Subject to change.  Copyright 2019, CUSIP Global Services. CUSIP is a registered trademark of the American Bankers Association. CUSIP Global Services is managed on behalf of the American Bankers Association by S&P Global Market Intelligence. The CUSIP numbers are provided for convenience only. The City takes no responsibility for the accuracy of the CUSIP numbers. USE OF INFORMATION IN THIS OFFICIAL STATEMENT This Official Statement, which includes the cover page, the inside cover page and the appendices, does not constitute an offer to sell or the solicitation of an offer to buy any of the Certificates in any jurisdiction in which it is unlawful to make such offer, solicitation, or sale. No dealer, salesperson, or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement in connection with the offering of the Certificates, and if given or made, such information or representations must not be relied upon as having been authorized by the City. The City maintains an internet website; however, the information presented there is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Certificates. The information set forth in this Official Statement has been obtained from the City and from the sources referenced throughout this Official Statement, which the City believes to be reliable. No representation is made by the City, however, as to the accuracy or completeness of information provided from sources other than the City. This Official Statement contains, in part, estimates and matters of opinion which are not intended as statements of fact, and no representation or warranty is made as to the correctness of such estimates and opinions, or that they will be realized. The information, estimates, and expressions of opinion contained in this Official Statement are subject to change without notice, and neither the delivery of this Official Statement nor any sale of the Certificates shall, under any circumstances, create any implication that there has been no change in the affairs of the City, or in the information, estimates, or opinions set forth herein, since the date of this Official Statement. This Official Statement has been prepared only in connection with the original offering of the Certificates and may not be reproduced or used in whole or in part for any other purpose. The Certificates have not been registered with the Securities and Exchange Commission due to certain exemptions contained in the Securities Act of 1933, as amended. The Certificates have not been recommended by any federal or state securities commission or regulatory authority, and the foregoing authorities have neither reviewed nor confirmed the accuracy of this document. THE PRICES AT WHICH THE CERTIFICATES ARE OFFERED TO THE PUBLIC BY THE INITIAL PURCHASER (AND THE YIELDS RESULTING THEREFROM) MAY VARY FROM THE INITIAL PUBLIC OFFERING PRICES OR YIELDS APPEARING ON THE INSIDE COVER PAGE HEREOF. IN ADDITION, THE INITIAL PURCHASER MAY ALLOW CONCESSIONS OR DISCOUNTS FROM SUCH INITIAL PUBLIC OFFERING PRICES TO DEALERS AND OTHERS. IN ORDER TO FACILITATE DISTRIBUTION OF THE CERTIFICATES, THE INITIAL PURCHASER MAY ENGAGE IN TRANSACTIONS INTENDED TO STABILIZE THE PRICE OF THE CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. CITY OF FORT COLLINS, COLORADO City Council Wade Troxell, Mayor Gerry Horak, Mayor Pro Tem Susan Gutowsky, Council Member Ray Martinez, Council Member Ken Summers, Council Member Kristin Stephens, Council Member Ross Cunniff, Council Member City Staff Darin A. Atteberry, City Manager Jeff Mihelich, Deputy City Manager Mike Beckstead, City Financial Officer Carrie Daggett, City Attorney MUNICIPAL ADVISOR TO THE CITY Hilltop Securities Inc. Denver, Colorado TRUSTEE, REGISTRAR AND PAYING AGENT U.S. Bank, National Association Denver, Colorado SPECIAL COUNSEL Butler Snow LLP Denver, Colorado -i- TABLE OF CONTENTS Page INTRODUCTION .......................................................................................................................... 1 General ........................................................................................................................................ 1 The City ...................................................................................................................................... 1 Purpose ........................................................................................................................................ 2 The Certificates; Prior Redemption ............................................................................................ 2 The Leased Property ................................................................................................................... 2 Security for the Certificates; Termination of Lease .................................................................... 3 Tax Status.................................................................................................................................... 6 Professionals ............................................................................................................................... 6 Continuing Disclosure Undertaking ........................................................................................... 6 Additional Information ............................................................................................................... 7 CERTAIN RISK FACTORS .......................................................................................................... 8 Nonappropriation ........................................................................................................................ 8 Effect of a Termination of the Lease Term ................................................................................. 8 Factors that Could Impact Value of Property if Lease is Terminated ...................................... 11 Limited Duration of Site Lease ................................................................................................. 13 Enforceability of Remedies; Liquidation Delays ...................................................................... 13 Effect of Termination on Exemption from Taxation and on Exemption from Registration .... 13 Condemnation Risk ................................................................................................................... 14 Casualty Risk ............................................................................................................................ 14 Insurance Risk ........................................................................................................................... 14 Future Changes in Laws............................................................................................................ 15 Forward-Looking Statements.................................................................................................... 15 Secondary Market ..................................................................................................................... 15 SOURCES AND USES OF FUNDS ............................................................................................ 16 Sources and Uses of Proceeds................................................................................................... 16 The Project ................................................................................................................................ 16 THE CERTIFICATES .................................................................................................................. 18 General ...................................................................................................................................... 18 Payment Provisions ................................................................................................................... 18 Redemption Provisions ............................................................................................................. 18 Tax Covenants .......................................................................................................................... 21 Defeasance and Discharge ........................................................................................................ 21 Book-Entry Only System .......................................................................................................... 22 BASE RENTALS SCHEDULE ................................................................................................... 23 SECURITY FOR THE CERTIFICATES ..................................................................................... 24 General ...................................................................................................................................... 24 Additional Certificates .............................................................................................................. 25 CURRENT SOURCES OF AVAILABLE REVENUE ............................................................... 26 General ...................................................................................................................................... 26 Page -ii- Sources of General Fund Revenues .......................................................................................... 26 Collection and Enforcement of the City Sales and Use Tax ..................................................... 26 City General Fund Budget Summary and Comparison ............................................................ 35 History of City General Fund Revenues, Expenditures and Changes in Fund Balances ......... 35 THE CITY .................................................................................................................................... 39 General ...................................................................................................................................... 39 Principal Officials ..................................................................................................................... 39 Employees; Labor Relations ..................................................................................................... 40 Pension Plans ............................................................................................................................ 40 Services Provided by Other Entities ......................................................................................... 41 City Insurance Coverage ........................................................................................................... 41 CITY FINANCIAL OPERATIONS ............................................................................................. 42 Budget Process .......................................................................................................................... 42 Financial Statements ................................................................................................................. 42 Capital Improvement Program .................................................................................................. 42 CITY DEBT STRUCTURE ......................................................................................................... 44 Authority to Incur Debt ............................................................................................................. 44 Debt Structure of the City ......................................................................................................... 44 Other Obligations ...................................................................................................................... 45 ECONOMIC AND DEMOGRAPHIC INFORMATION ............................................................ 47 Population ................................................................................................................................. 47 Income....................................................................................................................................... 47 Employment .............................................................................................................................. 48 Major Employers ...................................................................................................................... 49 Building Permits ....................................................................................................................... 50 Foreclosure Activity.................................................................................................................. 50 Education .................................................................................................................................. 51 TAX MATTERS ........................................................................................................................... 52 LEGAL MATTERS ...................................................................................................................... 54 Litigation ................................................................................................................................... 54 Sovereign Immunity.................................................................................................................. 54 Approval of Certain Legal Proceedings .................................................................................... 55 Certain Constitutional Limitations ............................................................................................ 55 Police Power ............................................................................................................................. 56 MUNICIPAL ADVISOR.............................................................................................................. 56 INDEPENDENT AUDITORS...................................................................................................... 56 RATING ....................................................................................................................................... 57 PUBLIC SALE ............................................................................................................................. 57 OFFICIAL STATEMENT CERTIFICATION............................................................................. 57 Page -iii- APPENDIX A - Audited Basic Financial Statements of the City for the Fiscal Year Ended December 31, 2017......................................................... A-1 APPENDIX B - Certain Definitions and Document Summaries .............................................B-1 APPENDIX C - Book-Entry Only System ...............................................................................C-1 APPENDIX D - Form of Continuing Disclosure Certificate ................................................... D-1 APPENDIX E - Form of Opinion of Special Counsel ............................................................. E-1 -iv- INDEX OF TABLES NOTE: Tables marked with an (*) indicate Annual Financial Information to be updated pursuant to SEC Rule 15c2 12, as amended. See Appendix D - Form of Continuing Disclosure Certificate. The information to be updated may be reported in any format chosen by the City; it is not required that the format reflected in this Official Statement be used in future years. Further, the budget to actual comparison referenced below is to be satisfied with current year budget information found in the City’s audited financial statements only; no budget documents are required to be filed. Page Sources and Uses of Proceeds....................................................................................................... 16 Schedule of Base Rentals .............................................................................................................. 23 *History of City Sales and Use Tax Collections .......................................................................... 33 Comparison of Monthly Sales Tax Collections ............................................................................ 34 Comparison of Monthly Use Tax Collections .............................................................................. 34 *Ten Largest Sales and Use Tax Generators - 2017 ..................................................................... 35 *Budget to Actual Comparison - City General Fund.................................................................... 35 *General Fund-Statement of Revenues, Expenditures and Changes in Fund Balances ............... 37 2018-2022 Capital Improvements................................................................................................. 43 Combined Statement of Debt as of September 30, 2018 .............................................................. 45 Base Rentals Payable Pursuant to Other City Lease-Purchase Agreements................................. 46 Population ..................................................................................................................................... 47 Annual Per Capita Personal Income ............................................................................................. 48 Labor Force and Percent Unemployed ......................................................................................... 48 Average Number of Employees within Selected Industries – Larimer County............................ 49 Major Employers in the City of Fort Collins and Surrounding Area ........................................... 50 History of Building Permits Issued in the City of Fort Collins .................................................... 50 History of Foreclosures – Larimer County ................................................................................... 51 OFFICIAL STATEMENT $24,255,000* CERTIFICATES OF PARTICIPATION, SERIES 2019 Evidencing Proportionate Interests in the Base Rentals and other Revenues under an Annually Renewable Lease Purchase Agreement, dated March __, 2019, between U.S. BANK NATIONAL ASSOCIATION, as Trustee, as lessor, and the CITY OF FORT COLLINS, COLORADO, as lessee INTRODUCTION General This Official Statement, including the cover page and appendices, is furnished in connection with the execution, delivery and sale of $24,255,000* aggregate principal amount of Certificates of Participation, Series 2019 (the “Certificates”). The Certificates evidence proportionate interests in the Base Rentals and other Revenues under an annually renewable Lease Purchase Agreement dated as of March __, 2019 (the “Lease”), between U.S. Bank National Association, Denver, Colorado, solely in its capacity as trustee (the “Trustee”) under the Indenture (defined below), as lessor, and the City of Fort Collins, Colorado, as lessee (the “City”). The Certificates will be executed and delivered pursuant to the terms of an Indenture of Trust executed by the Trustee dated as of March __, 2019 (the “Indenture”). Certain of the capitalized terms used herein and not otherwise defined are defined in Appendix B to this Official Statement. The offering of the Certificates is made only by way of this Official Statement, which supersedes any other information or materials used in connection with the offer or sale of the Certificates. The following introductory material is only a brief description of and is qualified by the more complete information contained throughout this Official Statement. A full review should be made of the entire Official Statement and the documents summarized or described herein, particularly the section entitled “CERTAIN RISK FACTORS.” Detachment or other use of this “INTRODUCTION” without the entire Official Statement, including the cover page and appendices, is unauthorized. The City The City is a political subdivision of the State of Colorado (the “State”) founded in 1864 and incorporated as a statutory town on February 3, 1873. The City became a city of the second class on February 2, 1883, and existed in this form until September 16, 1913, when the City Charter (the “City Charter”) was adopted by a majority of the electors of the City acting under the provisions of Article XX of the Constitution of the State. On October 5, 1954, the present City Charter was adopted authorizing a council-manager form of government. The City had an estimated population of 170,100 as of March 2018 and is located approximately 65 miles north of Denver in north central Colorado just west of Interstate 25, the principal route between Denver, Colorado, and Cheyenne, Wyoming. The City is the county seat of Larimer County (the “County”). Colorado State University (the “University”) is located in the * Subject to change. 2 City, and students and staff at the University are a significant factor in the City’s economy. See “THE CITY.” Purpose The proceeds from the execution and delivery of the Certificates will be used to: (i) finance a portion of the cost improvements to the highway interchange at Interstate Highway I-25 and Prospect Road in the City, and the construction of a joint police training facility with the City of Loveland, Colorado (together, the “Project”); and (ii) pay the costs of issuing the Certificates. See “SOURCES AND USES OF FUNDS--The Project.” The Certificates; Prior Redemption The Certificates are issued solely as fully registered certificates in denominations of $5,000, or any integral multiple thereof. The Certificates are dated as of their date of delivery and will mature and bear interest (calculated based on a 360-day year consisting of twelve 30- day months) as set forth on the inside cover page of this Official Statement. The payment of principal and interest on the Certificates is described in “THE CERTIFICATES--Payment Provisions.” The Certificates initially will be registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York (“DTC”), which is acting as the securities depository for the Certificates. Purchases of the Certificates are to be made in book- entry form only. Purchasers will not receive certificates representing their beneficial ownership interest in the Certificates. See “THE CERTIFICATES--Book-Entry Only System.” The Certificates are subject to redemption prior to maturity at the option of the City as described in “THE CERTIFICATES--Redemption Provisions.” At the option of the winning bidder, certain of the Certificates may also be subject to mandatory sinking fund redemption. See the Notice of Public Sale dated February 22, 2019. The Certificates are subject to extraordinary mandatory redemption upon the occurrence of an Event of Nonappropriation or an Event of Lease Default as described in “THE CERTIFICATES--Redemption Provisions - Extraordinary Mandatory Redemption.” The Leased Property Pursuant to the Site Lease, the City will lease the Leased Property to the Trustee. Pursuant to the Lease, the City will lease the Leased Property back from the Trustee as further described herein. The Leased Property consists of two City-owned buildings and the sites on which they are located. Each of the buildings and sites is discussed below. Civic Center Office Building Property. The Civic Center Office Building (“Civic Center”) is a 71,515-square foot office building located in downtown Fort Collins. The Civic Center serves as the municipal administration building for the City and includes municipal court and administrative uses. The Civic Center was constructed in 2001 and significantly remodeled in 2010. The Civic Center site consists of 95,793 square feet (2.199 acres) with 45 paved parking spots and bicycle parking. The site is fully landscaped. The City has obtained an appraisal of the Civic Center. As of December 28, 2017, the market value of the Civic Center, including the site, was $16,500,000. 3 Civic Center Parking Garage. The Civic Center Parking Garage (the “Garage”) is a 305,572-square foot parking garage building built in 1999, including 15,629 net square feet of retail space fronting on North Mason Street. The Garage is a five-level reinforced concrete structure containing 905 parking spaces. The Garage Site consists of 75,446 square feet, 18,426 of which consist of leased land improved with the retail spaces. The retail spaces and the leased land improved with the retail space (referred to herein as the “Garage Retail”) do not constitute Leased Property. The City has obtained an appraisal of the Garage. As of November 28, 2017, the total market value of the Garage, including the site, was $15,850,000. [NOTE: allocation method to be discussed with the City. I took the total square feet of the leased land divided by the total land square feet - 24.4%.] The City has allocated approximately 24.4% of the total value of the Garage and its site to the Garage Retail, resulting in a value of $11,982,600 for the portion of the Garage and its site that constitutes the Leased Property. Security for the Certificates; Termination of Lease General. The Certificates and the interest thereon are payable solely from certain revenues (the “Revenues”) received under the Lease, which include: (a) all amounts payable by or on behalf of the City or with respect to the Leased Property pursuant to the Lease including, but not limited to, all Base Rentals, Prepayments, the Purchase Option Price and Net Proceeds (all as defined in Appendix B), but not including Additional Rentals; (b) any portion of the proceeds of the Certificates deposited into the Base Rentals Fund created under the Indenture; (c) any moneys which may be derived from any insurance in respect of the Certificates; and (d) any moneys and securities, including investment income, held by the Trustee in the Funds and Accounts established under the Indenture (except for moneys and securities held in the Rebate Fund or any defeasance escrow account). Under the Indenture, the Trustee, for the benefit of the Owners of the Certificates, is to receive Base Rentals payable by the City under the Lease. The amount and timing of the Base Rentals are designed to provide sufficient money to the Trustee to pay the principal of and interest on the Certificates when due. The Trustee is to deposit to the Base Rentals Fund created under the Indenture all amounts payable by or on behalf of the City or with respect to the Leased Property pursuant to the Lease, including all Base Rentals, Prepayments, the Purchase Option Price and Net Proceeds. Neither the Lease nor the Certificates constitute a general obligation or other indebtedness or multiple fiscal year financial obligation of the City within the meaning of any constitutional, statutory, or Charter debt limitation. Neither the Certificates nor the Lease will directly or indirectly obligate the City to make any payments other than those which may be appropriated by the City for each fiscal year. The Trustee does not have any obligation to and will not make any payments on the Certificates pursuant to the Lease or otherwise. Sources of Payment of Base Rentals. Amounts due under the Lease are payable from all general revenues of the City and no particular revenues of the City are pledged to the payment of Base Rentals. The City currently intends to budget, appropriate and pay the Base Rentals (and Additional Rentals, if any) allocable to the Certificates from legally available funds in its General Fund. Notwithstanding the foregoing, Base Rentals and Additional Rentals may be budgeted, appropriated and paid from any of the City’s available funds in the future. 4 The major source of the moneys deposited into the City’s General Fund is the City’s base sales and use tax (the “Base Sales and Use Tax”), which is currently imposed at a rate of 2.25%. The City’s overall sales and use tax rate is 3.85%; however, portions of the total Sales and Use Tax are restricted to specific uses and are not deposited into the General Fund. As a result, the major source of legally available revenue is expected to be the Base Sales and Use Tax. See “CURRENT SOURCES OF AVAILABLE REVENUES” for a description of the City’s Sales Tax. Certain statutory and constitutional limitations limit the amount of Sales and Use Tax the City can collect. See “LEGAL MATTERS--Certain Constitutional Limitations” for a discussion of those limitations. Termination of Lease; Annual Appropriation. The Lease constitutes a one-year lease of the Leased Property which is annually renewable for additional one-year terms as described in the Lease. The City must take action annually in order to renew the Lease term for another year. If the City fails to take such action, the Lease automatically will be terminated. The City’s decision to terminate its obligations under the Lease will be determined by the failure of the City Council of the City (the “City Council”) to specifically budget and appropriate moneys to pay all Base Rentals and reasonably estimated Additional Rentals for the ensuing Fiscal Year. The City Manager or other officer of the City at any time charged with the responsibility of formulating budget proposals is directed under the Lease to include in the annual budget proposal submitted to the City Council, in any year in which the Lease is in effect, items for all payments required under the Lease for the ensuing Renewal Term until such time, if any, as the City may determine to not renew and terminate the Lease. Notwithstanding this directive regarding the formulation of budget proposals, it is the intention of the City that any decision to effect an appropriation for the Base Rentals and Additional Rentals shall be made solely by the City Council and not by any other official of the City, as further provided in the Lease. If on or before the December 31 prior to the beginning of any Fiscal Year of the City, the City fails to budget and appropriate sufficient funds to pay all Base Rentals and all reasonably estimated Additional Rentals, the City will be considered to have terminated the Lease (subject to certain waiver and cure provisions). Upon termination of the City’s obligations under the Lease, the Trustee may proceed to exercise certain remedies under the Lease and the Indenture, including the lease or sublease of the Leased Property, the sale or assignment of any interest the Trustee has in the Leased Property, including the Trustee’s leasehold interest in the Leased Property, or one or any combination of the steps described in the Lease. See “CERTAIN RISK FACTORS--Nonappropriation” and “CERTAIN RISK FACTORS--Effect of a Termination of the Lease Term.” See also Appendix B - Certain Definitions and Document Summaries--The Lease - Nonappropriation. The net proceeds of any such disposition are required to be applied by the Trustee toward the payment of the Certificates. See “THE CERTIFICATES--Redemption Provisions - Mandatory Redemption Upon the Occurrence of Certain Events.” The Site Lease; Termination of the Site Lease. The City and the Trustee will enter into a Site and Improvement Lease dated March __, 2019 (the “Site Lease”), pursuant to which the City will lease to the Trustee the Site and the premises, buildings and improvements thereon (the “Leased Property,” as more particularly described below). 5 The Leased Property will be leased by the City to the Trustee pursuant to the Site Lease. At the end of the term of the Site Lease, all right, title and interest of the Trustee, or any sublessee or assignee in and to the Leased Property will vest in the City. The Site Lease will terminate on the earliest to occur of the following: (a) the termination of the Lease Term as provided in the Lease due to the payment of the Purchase Option Price by the City, or upon payment by the City of all Base Rentals and Additional Rentals for the entire Lease Term; or (b) discharge of the Indenture as a result of the fact that all Certificates have been paid or have been deemed to have been paid as provided in the Indenture; or (c) December 31, 2048. The Leased Property will no longer be subject to the provisions of the Site Lease, the Lease or the Indenture upon the termination of the Site Lease. See “CERTAIN RISK FACTORS--Limited Duration of Site Lease” and Appendix B - Certain Definitions and Document Summaries--The Site Lease - Site Lease and Term. Release of Portion of Leased Property; Substitution of Leased Property. Pursuant to the Lease, the City may release the individual properties comprising the Leased Property in the order shown in the following table when the principal component of Base Rentals paid by the City, plus the principal amount of any Certificates redeemed through optional redemption, or the total principal amount of Certificates paid or deemed to be paid pursuant to the Indenture equals the amounts shown in the release schedule shown below. Leased Property to be Released: Total Certificate Principal Paid* Garage Civic Center When each component of the Leased Property is deemed to have been fully amortized, the Trustee will execute and deliver to the City all documents necessary to convey and transfer the applicable portion of the Leased Property (or any property substituted for that portion of the Leased Property pursuant to the Lease) to the City. Notwithstanding the foregoing, the fair value of the remaining Leased Property must be at least equal to 100% of the aggregate principal amount of the Certificates then Outstanding, as certified to the Trustee by the City. After such release and conveyance, the applicable portion of the Leased Property will no longer be a part of the Leased Property for any purpose of the Lease or the Indenture. See Appendix B - Certain Definitions and Document Summaries - Release of Portions of the Leased Property. In addition, so long as no Event of Default or Event of Nonappropriation has occurred and is continuing, the City shall be entitled to substitute any improved or unimproved real estate in place of the Leased Property after satisfying the conditions set forth in the Lease. See Appendix B - Certain Definitions and Document Summaries--The Lease - Substitution of Leased Property. Purchase Option Price. The City will have the option to purchase the Trustee’s leasehold interest in the Leased Property pursuant to the Lease and terminate the Site Lease and the Lease by paying the Purchase Option Price, which is equal to the amount necessary to pay all principal and interest due on all outstanding Certificates and any other amounts necessary to defease and discharge the Indenture, as provided in the Lease. See Appendix B - Certain Definitions and Document Summaries--The Lease - Purchase Option and Conditions for Purchase Option. The Trustee is required to use the Purchase Option Price to pay the principal, * Subject to change. 6 interest, and any premium on the Certificates. See “THE CERTIFICATES--Redemption Provisions.” Additional Certificates. The Indenture permits the issuance of Additional Certificates without notice to or approval of the owners of the outstanding Certificates under the circumstances described in “SECURITY FOR THE CERTIFICATES--Additional Certificates.” The Certificates and any Additional Certificates are referred to herein as the “Certificates.” Tax Status In the opinion of Butler Snow LLP, Special Counsel, assuming continuous compliance with certain covenants described herein, the portion of the Base Rentals which is designated in the Lease as interest and paid as interest on the Certificates is excludable from gross income under federal income tax laws pursuant to Section 103 of the Internal Revenue Code of 1986, as amended to the date of delivery of the Certificates (the “Tax Code”), is excludable from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code, and is excludable from Colorado taxable income and Colorado alternative minimum taxable income under Colorado income tax laws in effect on the date of delivery of the Certificates. See “TAX MATTERS.” Notwithstanding the foregoing, Special Counsel has disclaimed any opinion regarding the tax status of the Certificates upon any termination of the Lease. See “CERTAIN RISK FACTORS--Effect of Termination on Exemption from Taxation and on Exemption from Registration” and “TAX MATTERS.” Professionals Butler Snow LLP, Denver, Colorado, has acted as Special Counsel to the City in connection with issuance of the Certificates and in connection with the preparation of this Official Statement. The fees of Butler Snow LLP will be paid only from Certificate proceeds at closing. Certain legal matters pertaining to the City will be passed upon by the City Attorney. Hilltop Securities, Inc., Denver, Colorado, is acting as the municipal advisor to the City (the “Municipal Advisor”) in connection with execution and delivery of the Certificates. See “MUNICIPAL ADVISOR.” The City has appointed U.S. Bank National Association, Denver, Colorado, to serve as Trustee. The fees of the Municipal Advisor are expected to be paid from 2018 Bond proceeds at closing. The City’s audited basic financial statements, attached as Appendix A to this Official Statement, have been audited by RSM US LLP, certified public accountants, Denver, Colorado, to the extent and for the period indicated in their report thereon. See “INDPENDENT AUDITORS.” Continuing Disclosure Undertaking The City will execute a continuing disclosure certificate (the “Disclosure Certificate”) at the time of the closing for the Certificates. The Disclosure Certificate will be executed for the benefit of the beneficial owners of the Certificates and the City will covenant in the Lease to comply with its terms. The Disclosure Certificate will provide that so long as the Certificates remain outstanding, the City will provide the following information to the Municipal Securities Rulemaking Board, through the Electronic Municipal Market Access system (“EMMA”): (i) annually, its audited financial statements; (ii) annually, certain financial information and operating data; and (iii) notice of the occurrence of certain listed events; all as 7 specified in the Disclosure Certificate. The form of the Disclosure Certificate is attached hereto as Appendix D. In the last five years, the City’s electric utility enterprise failed to file its annual financial information for 2013 and did not file associated notices of the filing failures. In 2015 and 2018, the electric utility enterprise made remedial filings associated with those failures. Additional Information This introduction is only a brief summary of the provisions of the Certificates, the Indenture, the Lease, the Site Lease and other documents described herein; a full review of the entire Official Statement should be made by potential investors. Brief descriptions of the Project, the Leased Property, the City, the Certificates, the Indenture, the Lease and the Site Lease are included in this Official Statement. All references herein to the Certificates, the Lease, the Site Lease, the Indenture and other documents are qualified in their entirety by reference to such documents. This Official Statement speaks only as of its date and the information contained herein is subject to change without notice. Additional information and copies of the documents referred to herein are available from the City or the Municipal Advisor as follows: City of Fort Collins, Colorado Attention: Chief Financial Officer 215 North Mason, 2 nd Floor Fort Collins, Colorado 80522 Telephone: (970) 221-6795 Hilltop Securities, Inc. 8055 East Tufts Avenue, Suite 500 Denver, Colorado 80237 Telephone: (303) 771-1678. 8 CERTAIN RISK FACTORS Investment in the Certificates involves certain risks. Each prospective investor in the Certificates is encouraged to read this Official Statement in its entirety and to give particular attention to the factors described below which could affect the payment of rentals under the Lease and could affect the market price of the Certificates to an extent that cannot be determined at this time. The factors set forth below are not intended to provide an exhaustive list of the risks associated with the purchase of the Certificates. Nonappropriation Prospective purchasers of the Certificates must look to the ability of the City to pay Base Rentals pursuant to the Lease; such Base Rentals will provide funds for payment of principal and interest on the Certificates. The City is not obligated to pay Base Rentals or Additional Rentals under the Lease unless funds are budgeted and appropriated for such rentals by the City each year. If, prior to December 31 of each year, the City Council does not specifically budget and appropriate amounts sufficient to pay all Base Rentals for the next Fiscal Year, and to pay such Additional Rentals as are estimated to become due for the ensuing Fiscal Year, an “Event of Nonappropriation” occurs. If an Event of Nonappropriation occurs, the City will not be obligated to make payment of the Base Rentals or Additional Rentals which accrue after the last day of the Original or Renewal Term during which such Event of Nonappropriation occurs. Various political, legal and economic factors could lead to the nonappropriation of sufficient funds to make the payments under the Lease, and prospective investors should carefully consider any factors which may influence the budgetary process. There is no assurance that the City Council will appropriate sufficient funds to renew the Lease each year and the City has no obligation to do so. In addition, the ability of the City to maintain adequate revenues for its operations and obligations in general (including obligations associated with the Lease) is dependent upon several factors outside the City’s control, such as the economy, collections of Sales Tax and changes in law. See “LEGAL MATTERS--Certain Constitutional Limitations,” “SECURITY FOR THE CERTIFICATES,” and “CITY FINANCIAL OPERATIONS.” The obligation of the City to pay Base Rentals and Additional Rentals is limited to those City funds that are specifically budgeted and appropriated annually by the City Council for such purpose. The Lease directs the City Manager (or any other officer at any time charged with the responsibility of formulating budget proposals) to include, in the annual budget proposals submitted to the City Council, items for all payments required under the Lease for the ensuing Fiscal Year, until such time (if any) as the City Council determines that it will not renew the Lease. The Lease provides that it is the intention of the City Council that any decision to renew the Lease is to be made solely by the City Council and not by any other official of the City. See Appendix B - Certain Definitions and Document Summaries--The Lease - Nonappropriation by the City. Effect of a Termination of the Lease Term In the event of termination of the City’s obligations under the Lease upon the occurrence of an Event of Nonappropriation or an Event of Lease Default, the City is required to vacate and surrender the Leased Property by March 1 of any Renewal Term in respect of which an Event of Nonappropriation or an Event of Lease Default has occurred. If an Event of Lease 9 Default shall have occurred and remain uncured, the Trustee may take any of the following actions: (i) terminate the Lease Term and give notice to the City to vacate and surrender possession of the Leased Property which vacation and surrender the City agrees under the Lease to complete within sixty (60) days from the date of such notice (in the event the City does not vacate and surrender possession on the termination date, the “holdover tenant” provisions of the Lease shall apply); (ii) lease or sublease the Leased Property or sell or assign any interest the Trustee has in the Leased Property, including the Trustee’s leasehold interest in the Leased Property pursuant to the Site Lease; (iii) recover from the City (a) the portion of Base Rentals and Additional Rentals, for which a specific Appropriation has been effected by the City for such purpose, which would otherwise have been payable under the Lease, during any period in which the City continues to occupy, use or possess the Leased Property; and (b) Base Rentals and Additional Rentals, for which a specific Appropriation has been effected by the City for such purpose, which would otherwise have been payable by the City under the Lease during the remainder, after the City vacates and surrenders possession of the Leased Property, of the Fiscal Year in which such Event of Lease Default occurs; or (iv) take whatever action at law or in equity may appear necessary or desirable to enforce its rights in and to the Leased Property under the Site Lease, the Lease and the Indenture. A potential purchaser of the Certificates should not assume that the amount of money received by the Trustee upon the exercise of its rights under the Site Lease, the Lease and the Indenture after a termination of the Lease Term will be sufficient to pay the aggregate principal amount of the Certificates then outstanding plus accrued interest thereon. This may be due to the inability to recover certain of the costs incurred in connection with the issuance of the Certificates. IF THE CERTIFICATES ARE REDEEMED SUBSEQUENT TO A TERMINATION OF THE LEASE TERM FOR AN AMOUNT LESS THAN THE AGGREGATE PRINCIPAL AMOUNT THEREOF AND ACCRUED INTEREST THEREON, SUCH PARTIAL PAYMENT WILL BE DEEMED TO CONSTITUTE A REDEMPTION IN FULL OF THE CERTIFICATES PURSUANT TO THE INDENTURE; AND UPON SUCH A PARTIAL PAYMENT, NO OWNER OF ANY CERTIFICATE WILL HAVE ANY FURTHER CLAIMS FOR PAYMENT UPON THE TRUSTEE OR THE CITY. No Reserve Fund The Certificates are not secured by a reserve fund. Factors that May Cause Insufficiency of Expected Revenues Economic and Other Factors Beyond the Control of the City. Although the City is not obligated to pay Base Rentals and Additional Rentals from any particular revenue source, it is the current expectation of the City Council that Base Rentals and Additional Rentals will be paid (to the extent funds are appropriated therefor each year) from revenues in the City’s General Fund. See “CURRENT SOURCES OF AVAILABLE REVENUES.” The primary sources of revenue in the General Fund are derived from the City’s Base Sales and Use Tax. Sales and Use Tax revenues are subject to fluctuation, and may be impacted by adverse changes in national and local economic and financial conditions generally, reductions in the rates of employment and economic growth in the City, the County, the State 10 and the region, a decrease in rates of population growth and rates of residential and commercial development in the City, the County, the State and the region and various other factors. Collections of Sales and Use Tax revenues are also subject to fluctuations in consumer spending. Such fluctuations cause Sales and Use Tax revenues to increase along with the increasing prices brought about by inflation, but also cause collections to be vulnerable to adverse economic conditions and reduced spending. Consequently, the rate of Sales Tax collections can be expected to correspond generally to economic cycles. The City has no control over general economic cycles and is unable to predict what general economic factors or cycles will occur while the Certificates remain outstanding. Existing Use of Property Tax Revenues. Ad valorem property tax revenues are another source of General Fund revenues. However, the majority of property tax revenues (68%) in the General Fund are required to be remitted to the Poudre Fire Authority (“PFA”) pursuant to an agreement between the City and the PFA for firefighting services. The portion of the property tax revenue required to be remitted to the PFA are not legally available to pay Base Rentals under the Lease. Tax Increment Areas. The City has formed an Urban Renewal Authority (the “URA”) which has established several redevelopment areas within the City and has also formed a Downtown Development Authority (the “DDA”). Two of the URA plan areas receive only property tax increment as does the DDA. The third redevelopment area, the Foothills redevelopment area, receives both property tax and sales tax increment for a 25-year period (through 2038). The Foothills plan area was formed in 2013 as part of the redevelopment of the Foothills Mall. The sales tax increment, derived from the Base Sales Tax imposed at a rate of 2.25%, attributable to the Foothills redevelopment area is not available to the City. The City is considering the creation of a new URA plan area within the City. Although the City Council has taken action to begin the creation process, no determination has yet been made as to whether sales tax increment will be available to the new area (if it is formed). It is possible that the new area will receive both property tax and sales tax increment. Further, the City may create additional plan areas in the future in accordance with the dictates of State law. If additional plan areas are created and sales tax increment financing is authorized for use within such areas, increases in the amount of Sales Tax revenue available to the City will be limited in the future. Existing Obligations Payable from Legally Available Revenues; Future Bonds and Other Obligations. The City has numerous other obligations outstanding that are serviced from the General Fund. Although Sales and Use Tax revenues are not specifically pledged to these obligations, those revenues comprise the vast majority of revenues in the General Fund and are used to pay debt service on various obligations. See “CITY DEBT STRUCTURE” for a description of the obligations payable from legally available revenues in the General Fund. In addition, in connection with the URA’s 2013 issuance of tax increment bonds (the “TIF Bonds”) regarding one of the redevelopment areas described above (the North College Avenue Project), the City has adopted a resolution (the “Moral Obligation Resolution”) in which it declares its present intent to consider the appropriation of funds to replenish the reserve fund for the TIF Bonds to the applicable reserve fund requirement, if necessary. While the City Council has agreed in the City’s Moral Obligation Resolution to consider appropriating money to replenish deficiencies in the reserve fund for the TIF Bonds, the City Council may in its sole 11 discretion determine whether to make such an appropriation, and it is never required to do so. Should the City choose to honor the covenant made in the Moral Obligation Resolution, it is likely that available General Fund revenues (likely Sales Tax revenues) will be used to satisfy the City’s obligation. The TIF Bonds are currently outstanding through December 1, 2029, in the aggregate principal amount of $8,265,000; and the applicable reserve fund requirement is currently $948,962.50. The City is a party to two agreements pursuant to which it has agreed to rebate Use Tax, along with other development fees, to private parties. These include (i) a 2011 agreement to rebate, over a 10-year period, a maximum of $1,725,000 in use taxes and a maximum of $817,000 in personal property tax revenues associated with the redevelopment of a specified building; and (ii) a 2013 business assistance agreement to rebate 80% of use taxes collected with respect to the retention and expansion of a specified business in the City, up to a maximum of $1,212,000 for use taxes on equipment. There is no maximum reimbursement limit on construction material use tax. See Note II(C) in the audited financial statements attached hereto as Appendix A. These agreements are subject to annual appropriation by the City and do not have a pledge on any existing City revenues. The City may enter into additional incentive or business assistance agreements in the future. The City may enter into additional capital leases in the future; if it does so, the base rentals due under those leases will also be payable from legally available revenues. The City is currently considering entering into a lease in the amount of approximately $10 million in the next several years. Further, the City is authorized to issue bonds secured in whole or in part by its Base Sales and Use Tax after satisfying all legal conditions. Should the City issue bonds secured by the Base Sales and Use Tax, debt service on those bonds will be paid prior to any Base Sales and Use Tax revenues being available to pay Base Rentals or Additional Rentals. The City currently has no plans to issue any bond secured by its Sales and Use Tax. Factors that Could Impact Value of Property if Lease is Terminated General. The City will retain fee simple title to the Leased Property and the Trustee will have a leasehold interest in the Leased Property pursuant to the Site Lease. Upon the termination of the Lease, the Trustee will have the right to use and possession of the Leased Property. However, a potential purchaser of the Certificates should not assume that it will be possible for the Trustee to sublease the Leased Property or otherwise sell or dispose of its leasehold interest in the Leased Property, or any portion thereof, for an amount equal to the aggregate principal amount of the Certificates then outstanding plus accrued interest thereon or that such subleasing or disposal can be accomplished in time to pay any installment of principal or interest on the Certificates when due. Valuation of Property. The market valuation of each component of the Leased Property is discussed in “INTRODUCTION--The Leased Property.” The market valuations are based upon appraisals obtained in late 2017 and early 2018. The market valuations contained in the appraisals are based upon numerous factors that impact value, including regional and City data, neighborhood data and zoning considerations. The market value of the Leased Property may have fluctuated since the appraisals were obtained. In any event, the market value of the property is an imperfect indicator of the value of the Leased Property to third parties if an Event of Lease Default or an Event of Nonappropriation occurs. The Trustee is not able to sell the 12 Leased Property upon the occurrence of an Event of Lease Default or an Event of Nonappropriation and the insured value of the facilities may not be indicative of amounts the Trustee may receive in exercising its remedies under the Lease. There is no assurance that the current level of value of the Leased Property will continue in the future and there is no guarantee that the Trustee will be able to sublease or otherwise sell or dispose of its leasehold interest in the Leased Property under the Site Lease in an amount equal to the amount of the outstanding Certificates. Current Uses; Restrictions and Encumbrances. The Leased Property is subject to various encumbrances, all of which are Permitted Encumbrances for purposes of the Site Lease and the Lease. The ability of third parties to exercise their rights under the Permitted Encumbrances may make the Leased Property less attractive to third parties in the event the Trustee must exercise its remedies under the Lease. There is no guarantee that the Trustee will be able to liquidate its interest in the Leased Property in an amount equal to the amount of the outstanding Certificates. The general Permitted Encumbrances are described below. Both the Civic Center and the Garage are subject to various utility easements. In addition, the Garage parcel is subject access easements and easements for operating and maintaining pipes, vents, conduits, wires, trash facilities, doors and windows, signage and utilities for operation of the Garage Retail and maintenance of exterior walls. The Garage parcel is also subject to a party wall agreement with the management of the Garage Retail. Under the management agreement, the City and the Garage Retail management are each responsible for certain maintenance activities and landscaping. Should the Trustee exercise its remedies under the Lease, the Trustee and any third party that assumes the Trustee’s interest in the Lease will be required to comply with the terms and responsibilities under the party wall agreement. Compliance with these requirements may make the Garage parcel less appealing to third parties should the Trustee exercise its remedies under the Lease. The Garage is also subject to a Parking Structure License Agreement dated as of August 1, 1998, between the City and the County (the “License Agreement”). The License Agreement is also a Permitted Encumbrance. The County contributed approximately $4.3 million to the original construction of the Garage. In return, the County was granted a license to purchase up to 240 permits annually at rates established by the City; each permit entitles the holder to parking in the Garage in an undesignated space, subject to availability. The City is also required to provide 60 parking spaces for hourly public parking in the Garage. The City is required to provide operation and maintenance of the Garage with the costs being shared equally between the City and the County. The License Agreement expires on July 1, 2040. Should the Trustee exercise its remedies under the Lease, the Trustee and any third party that assumes the Trustee’s interest in the Lease will be required to comply with the City’s responsibilities under the License Agreement. Compliance with these requirements may make the Garage parcel less appealing to third parties should the Trustee exercise its remedies under the Lease. Current Zoning of Property. The Leased Property is also subject present and future zoning requirements or other land use regulations imposed by the City. The Civic Center and the Garage are zoned D (Downtown District) and the Civic Center Subdistrict. Certain uses are permitted by right in this Subdistrict, but office use is permitted only after administrative review; other commercial uses are permitted after administrative review or Planning and Zoning Board review. 13 It is possible that current zoning or future zoning changes could limit the alternate uses of the Leased Property absent a zoning change. That requirement could make the Leased Property less attractive to potential users if the Trustee must sublease or otherwise sell or dispose of its leasehold interest in the Leased Property. Zoning and land use regulations in effect in the future may restrict the future uses of the Property. Should that occur, the Leased Property may have less value to third parties than the insured value would indicate. Limited Duration of Site Lease The term of the Site Lease is ten years longer than the term of the Certificates. Upon termination of the Lease for any reason (including the occurrence of an Event of Nonappropriation), the Trustee may assign its interest in the Site Lease and may foreclose through the courts on or sell, lease, sublease or otherwise liquidate or dispose of its interest in the Leased Property. The net proceeds received from those activities are to be applied to pay the Certificates. However, due to the limited term of the Site Lease, the Trustee may find it difficult or impossible to locate third parties that are interested in accepting an assignment of the Trustee’s rights in the Leased Property. Further, the limited term of the Site Lease may make it difficult or impossible for the Trustee to collect revenues over the remaining term of the Site Lease that are sufficient to pay the Certificates. Enforceability of Remedies; Liquidation Delays Under the Lease and the Site Lease, the Trustee has the right to take possession of and dispose of the Trustee’s leasehold interest in the Leased Property upon an Event of Nonappropriation or an Event of Lease Default and a termination of the Lease. However, the enforceability of the Lease is subject to applicable bankruptcy laws, equitable principles affecting the enforcement of creditors’ rights generally and liens securing such rights, and the police powers of the City. Because of the use of the Leased Property by the City for the public welfare, a court in any action brought to enforce the remedy of the Trustee to take possession of the Leased Property may delay repossession for an indefinite period, even though the City may have terminated the Lease or be in default thereunder. As long as the Trustee is unable to take possession of the Leased Property or any other projects or property which may subsequently be approved in connection with the issuance of Additional Certificates, it will be unable to sublease or otherwise dispose of its leasehold interests in the Leased Property as permitted under the Site Lease and the Indenture or to redeem or pay the Certificates except from funds otherwise available to the Trustee under the Indenture. See “SECURITY FOR THE CERTIFICATES.” Effect of Termination on Exemption from Taxation and on Exemption from Registration Special Counsel has specifically disclaimed any opinion as to the effect that termination of the Lease may have upon the treatment for federal or State income tax purposes of amounts received by the registered owners of the Certificates. There is no assurance that any amounts representing interest received by the registered owners of the Certificates after termination of the Lease as a consequence of an Event of Nonappropriation or an Event of Default will be excludable from gross income under federal or State laws. In view of past private letter rulings by the United States Department of Treasury, registered owners of the Certificates should not assume that payments allocable to interest received from the Certificates would be excludable from gross income for federal or State income tax purposes. 14 In the event of a termination of the City’s obligations under the Lease, there is no assurance that Owners of Certificates would be able to transfer their interests without compliance with federal securities laws. Condemnation Risk In the mid-1990’s, the City of Sheridan, Colorado (“Sheridan”) exercised its eminent domain powers to acquire an administration building it previously had leased under an annually terminable lease purchase agreement. Sheridan sought to use its condemnation power to acquire the property at a fraction of the remaining lease payments (which would be paid to owners of certificates of participation in Sheridan’s lease). Sheridan’s condemnation suit was successful; however, Sheridan was unable to pay the court-determined amount representing the value of the property and eventually vacated the building in favor of the trustee. Sheridan eventually reached a settlement with the trustee and reacquired possession of the building from the trustee. Pursuant to this settlement, certificate holders reportedly received less than half of the amounts due them under the certificates. The City considers the occurrence of a situation such as the one described above to be unlikely; however, there is no assurance that the Leased Property (or portions thereof) would not be condemned in the future. Casualty Risk If all, substantially all, or any portion of the Leased Property is damaged or destroyed by any casualty, there is no assurance that casualty insurance proceeds and other available monies of the City will be sufficient either to repair or replace the damaged or destroyed property or to pay all the outstanding Certificates, if the Certificates are called for mandatory redemption as a result of such casualty. See “THE CERTIFICATES--Redemption Provisions.” Although the City believes its casualty insurance coverages are adequate, there is no assurance that such damage or destruction would not have a material adverse effect on the ability of the City to make use of the Leased Property. Delays in the receipt of casualty insurance proceeds pertaining to the Leased Property or delays in the repair, restoration or replacement of property damaged or destroyed also could have an adverse effect upon the ability of the City to make use of the Leased Property or upon its ability to make timely payment of rental payments under the Lease. Insurance Risk The Lease requires that until termination of the Lease Term, the City must provide casualty and property damage insurance for the Leased Property in an amount equal to the estimated replacement cost of the Leased Property. The insurance policy or policies may have a deductible clause in an amount deemed reasonable by the City. Pursuant to the Lease, if the City insures against similar risks by self-insurance, the City may, at its election, provide for public liability insurance in connection with the Project partially or wholly by means of an adequate self-insurance fund. Such a self-insurance fund (if established) would likely be funded annually by appropriation, and there is no assurance that such fund will at any time be adequately funded. The City currently self-insures for property and casualty coverage, including the Leased Property. There is no guarantee that the City will be able to maintain sufficient self- insurance reserves or, in the alternative, be able to acquire sufficient commercial casualty insurance at reasonable prices in the future. See “THE CITY--City Insurance Coverage.” 15 There is also no assurance that, in the event the Lease is terminated as a result of damage to or destruction or condemnation of the Leased Property, moneys made available from the City’s insurance by reason of any such occurrence will be sufficient to redeem the Certificates at a price equal to the principal amount thereof outstanding plus accrued interest to the redemption date. See “THE CERTIFICATES--Redemption Provisions.” Future Changes in Laws Various State laws and constitutional provisions apply to the imposition, collection, and expenditure of sales taxes and other revenues, and the operation of the City. There is no assurance that there will not be any change in, interpretation of, or addition to the applicable laws, provisions, and regulations which would have a material effect, directly or indirectly, on the affairs of the City and the imposition, collection, and expenditure of its revenues. Such changes could include, but are not limited to, future restrictions on real estate development and growth in the City and State law changes in the items subject to sales taxes or exemptions therefrom. Forward-Looking Statements This Official Statement contains statements relating to future results that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. When used in this Official Statement, the words “estimate,” “forecast,” “intend,” “expect” and similar expressions identify forward-looking statements. Any forward-looking statement is subject to uncertainty. Accordingly, such statements are subject to risks that could cause actual results to differ, possibly materially, from those contemplated in such forward-looking statements. Inevitably, some assumptions used to develop forward-looking statements will not be realized or unanticipated events and circumstances may occur. Therefore, investors should be aware that there are likely to be differences between forward looking statements and actual results. Those differences could be material and could impact the availability of Revenues available to pay Base Rentals and Additional Rentals under the Lease. Secondary Market No assurance can be given concerning the future existence of a secondary market for the Certificates or its maintenance by the Initial Purchaser or others, and prospective purchasers of the Certificates should therefore be prepared to hold their Certificates to maturity. 16 SOURCES AND USES OF FUNDS Sources and Uses of Proceeds The City expects to apply the proceeds of the Certificates as shown below: Sources and Uses of Proceeds Amount Sources of Funds Par amount of the Certificates ....................................... Plus/(less): original issue premium/(discount) ............. Total: ....................................................................... Uses of Proceeds The Project ..................................................................... Costs of issuance (including underwriting discount ) .... Total: ....................................................................... __________________ Source: The Municipal Advisor. The Project General. The net proceeds of the Certificates are expected to be used to: (i) finance a portion of the cost improvements to the highway interchange at Interstate Highway I- 25 and Prospect Road in the City; and (ii) construct a joint police training facility with the City of Loveland, Colorado. Each portion of the expected Project is discussed in more detail below. In its discretion, the City may determine to use net proceeds to fund any eligible capital cost in addition to, or in lieu of, the Project described below. I-25 and Prospect Interchange. The I-25 and Prospect Interchange (the “Interchange”) project will replace the current two-lane interchange with a new 4-lane interchange that also includes urban design features. The construction will be in conjunction with the Colorado Department of Transportation (“CDOT”) I-25 corridor project which is adding a third lane on I-25 through an area that includes the Interchange. The Interchange is planned as a new bridge approximately 140 feet wide and 2,700 feet long. The rock outcroppings that will make up the urban design are planned to span approximately 640 feet in the gore area of the interchange on both the east and west sides. The Interchange project will be constructed in the CDOT right-of-way. CDOT has entered into a guaranteed maximum price construction contract for its entire I-25 corridor project, including the Interchange. The estimated cost of the Interchange Project is approximately $31 million, including the urban design features. CDOT is expected to fund $12 million of the total cost; the City expects to fund its portion of the Interchange project using a portion of the Certificate proceeds, $1.4 million in available transportation capital expansion fees and $500,000 in right-of-way donation. Police Training Facility. The City will use a portion of the COP proceeds to finance its 50% share of a joint police training facility which is planned to include an indoor range, classrooms and administrative space as well as a 1.5 mile driving track all to be used for training police personnel. The facility, as planned, will have the capacity to train all City police officers as well as the City of Loveland police personnel. Additionally, the facility will support training needs for multiple northern Colorado law enforcement agencies. The location of the 17 facility is directly west of the Northern Colorado Regional Airport along the eastern side of Boyd Lake Road in Loveland. [The property on which the facility will be located is a lease exchange with the jointly owned airport.] The property has been allocated, however a lease agreement has yet to be signed. Both cities are in the process of completing an intergovernmental agreement with a usage agreement and moving towards completing a lease agreement. Design of the project has begun but no construction contract has yet been entered into. The total estimated cost of the Police Training Facility is approximately $____ million. 18 THE CERTIFICATES General The Certificates are issuable as fully registered certificates and initially will be registered in the name of “Cede & Co.,” as nominee for DTC, the securities depository for the Certificates. Purchases by Beneficial Owners of the Certificates are to be made in book-entry only form. Payments to Beneficial Owners are to be made as described in “Book-Entry Only System” below. The Certificates are dated the date of their execution and delivery, and will mature on the dates and in the amounts and bear interest at the rates set forth on the inside cover page of this Official Statement. Payment Provisions Except for any Certificates for which DTC is acting as Depository or for an Owner of $1,000,000 or more in aggregate principal amount of Certificates, the principal of, premium, if any, and interest on all Certificates shall be payable to the Owner thereof at its address last appearing on the registration books maintained by the Trustee. In the case of any Certificates for which DTC is acting as Depository, the principal of, premium, if any, and interest on such Certificates shall be payable as directed in writing by the Depository. In the case of an Owner of $1,000,000 or more in aggregate principal amount of Certificates, the principal of, premium, if any, and interest on such Certificates shall be payable by wire transfer of funds to a bank account designated by the Certificate Owner in written instructions to the Trustee. Interest (based on a 360-day year consisting of twelve 30-day months) shall be paid to the Owner of each Certificate, as shown on the registration books kept by the Trustee, as of the close of business on the 15th day of the calendar month immediately preceding the Interest Payment Date, or the Business Day immediately preceding such 15 th day, if such 15 th day is not a Business Day (the “Regular Record Date”), irrespective of any transfer of ownership of Certificates subsequent to the Regular Record Date and prior to such Interest Payment Date, or on a special record date, which shall be fixed by the Trustee for such purpose, irrespective of any transfer of ownership of Certificates subsequent to such special record date and prior to the date fixed by the Trustee for the payment of such interest. Notice of the special record date and of the date fixed for the payment of such interest shall be given by providing a copy thereof by first class mail postage prepaid at least ten (10) days prior to the special record date, to the Owner of each Certificate upon which interest will be paid, determined as of the close of business on the day preceding the giving of such notice. Redemption Provisions* Optional Redemption.* The Certificates maturing on or prior to December 1, ____, shall not be subject to optional redemption prior to their respective maturity dates. The Certificates maturing on and after December 1, ____, shall be subject to redemption prior to their respective maturity dates at the option of the City, in whole or in part, in integral multiples of $5,000, and if in part in such order of maturities as the City shall determine and by lot within a maturity, on December 1, ____, and on any date thereafter, at a redemption price equal to the principal amount of the Certificates so redeemed plus accrued interest to the redemption date, without a premium. . * Subject to change. 19 Extraordinary Mandatory Redemption. The Certificates are required to be called for redemption upon the occurrence of the events described in the following paragraph, except as specifically described below. If called for redemption as described above, the Certificates are to be redeemed in whole on such date or dates as the Trustee may determine, for a redemption price equal to the principal amount thereof, plus accrued interest to the redemption date (subject to the availability of funds as described below). The occurrence of the following events could cause the Lease to be terminated: (a) an Event of Nonappropriation, (b) an Event of Lease Default, or (c) in the event that (1) the Leased Property is damaged or destroyed in whole or in part by fire or other casualty, or (2) title to, or the temporary or permanent use of, the Leased Property has been taken by eminent domain by any governmental body, or (3) breach of warranty or any material defect with respect to the Leased Property becomes apparent, or (4) title to or the use of all or any part of the Leased Property is lost by reason of a defect in title thereto, and the Net Proceeds of any insurance, performance bond or condemnation award, or Net Proceeds received as a consequence of defaults under contracts relating to the Leased Property, made available by reason of such occurrences, shall be insufficient to pay in full the cost of repairing or replacing the Leased Property, and the City does not appropriate sufficient funds for such purpose or cause the Lease to be amended in order that Additional Certificates may be executed and delivered pursuant to the Indenture for such purpose. If the Net Proceeds, including the Net Proceeds from the exercise of any Lease Remedy under the Lease, otherwise received and other moneys then available under the Indenture are insufficient to pay in full the principal of and accrued interest on all Outstanding Certificates, the Trustee may, or at the request of the Owners of a majority in aggregate principal amount of the Certificates Outstanding, and upon indemnification as to fees, costs and expenses as provided in the Indenture, without any further demand or notice, shall exercise all or any combination of Lease Remedies as provided in the Lease and the Certificates shall be redeemed by the Trustee from the Net Proceeds resulting from the exercise of such Lease Remedies and all other moneys, if any, then on hand and being held by the Trustee for the Owners of the Certificates. If the Net Proceeds resulting from the exercise of such Lease Remedies and other moneys are insufficient to redeem the Certificates at 100% of the principal amount thereof plus interest accrued to the redemption date, then such Net Proceeds resulting from the exercise of such Lease Remedies and other moneys shall be allocated proportionately among the Certificates, according to the principal amount thereof Outstanding. In the event that such Net Proceeds resulting from the exercise of such Lease Remedies and other moneys are in excess of the amount required to redeem the Certificates at 100% of the principal amount thereof plus interest accrued to the redemption date, then such excess moneys shall be paid to the City as an overpayment of the Purchase Option Price. Prior to any distribution of the Net Proceeds resulting from the exercise of any of such remedies, the Trustee shall be entitled to payment of its reasonable and customary fees for all services rendered in connection with such disposition, as well as reimbursement for all reasonable costs and expenses, including attorneys’ fees, incurred thereby, from proceeds resulting from the exercise of such Lease Remedies and other moneys. 20 IF THE CERTIFICATES (INCLUDING ANY ADDITIONAL CERTIFICATES) ARE REDEEMED FOR AN AMOUNT LESS THAN THE AGGREGATE PRINCIPAL AMOUNT THEREOF PLUS INTEREST ACCRUED TO THE REDEMPTION DATE, SUCH PARTIAL PAYMENT WILL BE DEEMED TO CONSTITUTE A REDEMPTION IN FULL OF THE CERTIFICATES, AND UPON SUCH A PARTIAL PAYMENT NO OWNER OF SUCH CERTIFICATES SHALL HAVE ANY FURTHER CLAIM FOR PAYMENT AGAINST THE TRUSTEE OR THE CITY. Notwithstanding the provisions described above or any other provisions to the contrary in the Lease or the Indenture, if the Net Proceeds resulting from the exercise of such Lease Remedies are insufficient to redeem the Certificates at 100% of the principal amount thereof plus interest accrued to the redemption date, the Trustee may, or at the request of the Owners of a majority in aggregate principal amount of the Certificates Outstanding, and upon indemnification as to fees, costs and expenses as provided in the Indenture, shall, determine that the Certificates shall not be subject to extraordinary mandatory redemption as described above, in which event the Trustee will not apply any Net Proceeds or other available moneys to the redemption of any Certificates prior to their respective maturity dates. In such event, the Trustee shall (a) allocate such Net Proceeds (together with any other available moneys held under this Indenture), proportionately among all Outstanding Certificates, and (b) apply such allocation of Net Proceeds to the payment of the principal of and interest on the Certificates on the regularly scheduled maturity and Interest Payment Dates of the Certificates. Notice of Redemption. Whenever Certificates are to be redeemed, the Trustee is required to, not less than thirty (30) and not more than sixty (60) days prior to the redemption date (except for notice of an Extraordinary Mandatory Redemption, which is required to be immediate), mail notice of redemption to all Owners of all Certificates to be redeemed at their registered addresses, by first class mail, postage prepaid, or in the event that the Certificates to be redeemed are registered in the name of the Depository, such notice may, in the alternative, be given by electronic means in accordance with the requirements of the Depository. Any notice of redemption is to (1) identify the Certificates to be redeemed, (2) specify the redemption date and the redemption price, (3) in the event of optional redemption, state that the City has given notice of its intent to exercise its option to purchase or prepay Base Rentals under the Lease, (4) state that such redemption is subject to the deposit of the funds related to such option by the City on or before the stated redemption date and (5) state that on the redemption date the Certificates called for redemption will be payable at the corporate trust office of the Trustee and that from that date interest will cease to accrue. The Trustee may use “CUSIP” numbers in notices of redemption as a convenience to Certificates Owners, provided that any such notice is required to state that no representation is made as to the correctness of such numbers either as printed on the Certificates or as contained in any notice of redemption and that reliance may be placed only on the identification numbers containing the prefix established under the Indenture. Any notice of redemption may contain a statement that the redemption is conditioned upon the receipt by the Trustee of funds on or before the date fixed for redemption sufficient to pay the redemption price of the Certificates so called for redemption, and that if such funds are not available, such redemption shall be canceled by written notice to the owners of the Certificates called for redemption in the same manner as the original redemption notice was given. 21 Tax Covenants In the Lease, the City covenants for the benefit of the Owners of the Certificates that it will not take any action or omit to take any action with respect to the Certificates, the proceeds thereof, any other funds of the City or any facilities financed or refinanced with the proceeds of the Certificates (except for the possible exercise of the City’s right to terminate the Lease as provided therein) if such action or omission (i) would cause the interest on the Certificates to lose its exclusion from gross income for federal income tax purposes under Section 103 of the Tax Code, or (ii) would cause interest on the Certificates to lose its exclusion from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code, or (iii) would cause interest on the Certificates to lose its exclusion from Colorado taxable income or to lose its exclusion from Colorado alternative minimum taxable income under present Colorado law. Subject to the City’s right to terminate this Lease as provided herein, the foregoing covenant shall remain in full force and effect, notwithstanding the payment in full or defeasance of the Certificates, until the date on which all obligations of the City in fulfilling the above covenant under the Tax Code and Colorado law have been met. In addition, the City covenants that its direction of investments pursuant to the Indenture shall be in compliance with the procedures established by the Tax Compliance Certificate entered into by the City with respect to the Lease (the “Tax Certificate”) to the extent required to comply with its covenants described in the previous paragraph. The City further agrees in the Lease that, to the extent necessary, it will, during the Lease Term, pay to the Trustee such sums as are required for the Trustee to pay the amounts due and owing to the United States Treasury as rebate payments. Any payments pursuant to the foregoing sentence shall be Additional Rentals for all purposes of the Lease. Defeasance and Discharge When the principal or redemption price (as the case may be) of, and interest on, all the Certificates executed and delivered hereunder have been paid or provision has been made for payment of the same (or, in the case of redemption of the Certificates as described in “Redemption Provisions--Extraordinary Mandatory Redemption” above, if full or partial payment of the Certificates and interest thereon is made as described), and all other sums payable hereunder relating to the Certificates, then the right, title and interest of the Trustee in and to the Trust Estate and all covenants, agreements and other obligations of the Trustee to the Owners shall thereupon cease, terminate and become void and be discharged and satisfied. In such event, the Trustee shall (1) release the Site Lease and transfer and convey the Trustee’s leasehold interest in the Leased Property to the City as provided by the Lease, (2) release the Lease and the Indenture, (3) execute such documents to evidence such releases as may be reasonably required by the City, and (4) turn over to the City all balances then held by the Trustee in the Funds or Accounts hereunder except for amounts held in the Rebate Fund or any defeasance escrow accounts. If payment or provision therefor is made with respect to less than all of the Certificates, the particular Certificates (or portion thereof) for which provision for payment shall have been considered made shall be selected by the City. Provision for the payment of all or a portion of the Certificates shall be deemed to have been made when the Trustee holds in the Base Rentals Fund, or there is on deposit in a separate escrow account or trust account held by a trust bank or escrow agent, either moneys in an amount which shall be sufficient, and/or Federal Securities, the principal of and the interest on which when due, and without any reinvestment thereof, will provide moneys which, together 22 with the moneys, if any, concurrently deposited in trust, shall be sufficient to pay when due the principal of, premium, if any, and interest due and to become due on said Certificates on and prior to the redemption date or maturity date thereof, as the case may be. Prior to any discharge of the Indenture as described above or the defeasance of any Certificates pursuant to the provisions described above becoming effective, there shall have been delivered to the Trustee a report of an independent firm of nationally recognized certified public accountants verifying the sufficiency of the escrow established to pay the applicable Certificates in full on the maturity or redemption date thereof unless fully funded with cash. At such time as any Certificate shall be deemed paid as described above, such Certificate shall no longer be secured by or entitled to the benefits of the Indenture, the Lease or the Site Lease, except for the purpose of exchange and transfer and any payment from such cash or Federal Securities deposited with the Trustee. Book-Entry Only System The Certificates will be available only in book-entry form in the principal amount of $5,000 or any integral multiples thereof. DTC will act as the initial securities depository for the Certificates. The ownership of one fully registered Certificate for each maturity of each series as set forth on the inside cover page of this Official Statement, each in the aggregate principal amount of such maturity, will be registered in the name of Cede & Co., as nominee for DTC. See Appendix C--Book-Entry Only System. SO LONG AS CEDE & CO., AS NOMINEE OF DTC, IS THE REGISTERED OWNER OF THE CERTIFICATES, REFERENCES IN THIS OFFICIAL STATEMENT TO THE OWNERS OR REGISTERED OWNERS OF THE CERTIFICATES WILL MEAN CEDE & CO. AND WILL NOT MEAN THE BENEFICIAL OWNERS. Neither the City nor the Trustee will have any responsibility or obligation to DTC’s Participants or Indirect Participants, or the persons for whom they act as nominees, with respect to the payments to or the providing of notice for the DTC Participants, the Indirect Participants or the beneficial owners of the Certificates as further described in Appendix C to this Official Statement. 23 BASE RENTALS SCHEDULE The following table sets forth the schedule of Base Rentals due pursuant to the Lease in each year, including the Principal Component and the Interest Component. The City has other obligations (including lease-purchase agreements) which are also payable from legally available revenues. The base rentals owed under two prior lease- purchase agreements are set forth in “CITY DEBT STRUCTURE.” Schedule of Base Rentals(1)(2)* Calendar Year Principal Component Interest Component Total Base Rentals 2019 $ 910,000 $ 902,965 $ 1,812,965 2020 800,000 1,017,046 1,817,046 2021 820,000 993,046 1,813,046 2022 855,000 960,246 1,815,246 2023 900,000 917,496 1,817,496 2024 945,000 872,496 1,817,496 2025 990,000 825,246 1,815,246 2026 1,040,000 775,746 1,815,746 2027 1,090,000 723,746 1,813,746 2028 1,145,000 669,246 1,814,246 2029 1,205,000 611,996 1,816,996 2030 1,265,000 551,746 1,816,746 2031 1,325,000 488,496 1,813,496 2032 1,395,000 422,246 1,817,246 2033 1,450,000 366,446 1,816,446 2034 1,505,000 308,446 1,813,446 2035 1,565,000 248,246 1,813,246 2036 1,625,000 191,515 1,816,515 2037 1,685,000 130,578 1,815,578 2038 1,740,000 67,390 1,807,390 Total $24,255,000 $12,044,391 $36,299,391 (1) Totals may not add due to rounding. (2) The Base Rentals are due semi-annually on May 15 and November 15 of each year that the Lease remains in effect. The Trustee will use the Base Rentals to pay the principal and interest due on the Certificates on June 1 and December 1 of each year. Source: The Municipal Advisor. * Subject to change. 24 SECURITY FOR THE CERTIFICATES General Each Certificate evidences a proportionate interest in the right to receive certain designated Revenues, including Base Rentals, under and as defined in the Lease and the Indenture. Under the Site Lease, the Leased Property has been leased by the City to the Trustee, and under the Lease, the Leased Property has been leased by the Trustee back to the City and the City has agreed to pay directly to the Trustee, Base Rentals in consideration of the City’s right to possess and use the Leased Property. Certain Revenues, including Base Rentals, are required under the Indenture to be distributed by the Trustee for the payment of the Certificates and interest thereon. The Lease is subject to annual appropriation, non-renewal and, in turn, termination by the City. The execution and delivery of the Certificates does not directly or contingently obligate the City to make any payments beyond those appropriated for the City’s then current Fiscal Year. As more fully described under the caption “CERTAIN RISK FACTORS,” the Lease is subject to renewal on an annual basis at the option of the City. The Lease Term and the schedule of payments of Base Rentals are designed to produce moneys sufficient to pay the Certificates and interest thereon when due (if the City elects not to terminate the Lease prior to the end of the Lease Term). The Certificates shall not constitute a mandatory charge or requirement of the City in any ensuing Fiscal Year beyond the current Fiscal Year, and shall not constitute or give rise to a general obligation or other indebtedness of the City or a multiple fiscal year direct or indirect debt or other financial obligation whatsoever of the City, within the meaning of any constitutional, home rule charter or statutory debt provision or limitation. No provision of the Certificates shall be construed or interpreted as creating a delegation of governmental powers nor as a donation by or a lending of the credit of the City within the meaning of Sections 1 or 2 of Article XI of the Colorado Constitution. The execution and delivery of the Certificates shall not directly or indirectly obligate the City to renew the Lease from Fiscal Year to Fiscal Year or to make any payments beyond those appropriated for the City’s then current Fiscal Year. Base Rentals and Additional Rentals may be paid from any lawfully available City monies appropriated for that purpose. See “CITY FINANCIAL OPERATIONS.” In the event of termination of the City’s obligations under the Lease upon the occurrence of an Event of Nonappropriation or an Event of Lease Default, the City is required to vacate and surrender the Leased Property by March 1 of any Renewal Term in respect of which an Event of Nonappropriation or an Event of Lease Default has occurred. If an Event of Lease Default shall have occurred and remain uncured, the Trustee may take any of the following actions: (i) terminate the Lease Term and give notice to the City to vacate and surrender possession of the Leased Property which vacation and surrender the City agrees under the Lease to complete within sixty (60) days from the date of such notice; (ii) lease or sublease the Leased Property or sell or assign any interest the Trustee has in the Leased Property, including the Trustee’s leasehold interest in the Leased Property; (iii) recover from the City (a) the portion of Base Rentals and Additional Rentals, for which a specific Appropriation has been effected by the City for such purpose, which would otherwise have been payable under the Lease, during any period in which the City continues to occupy, use or possess the Leased Property; and (b) Base Rentals and Additional Rentals, for which a specific Appropriation has been effected by the City for such purpose, which would otherwise have been payable by the City under the Lease during 25 the remainder, after the City vacates and surrenders possession of the Leased Property, of the Fiscal Year in which such Event of Lease Default occurs; or (iv) take whatever action at law or in equity may appear necessary or desirable to enforce its rights in and to the Leased Property under the Site Lease, the Lease and the Indenture. In the event the City does not vacate and surrender possession on the termination date, the “holdover tenant” provisions of the Lease shall apply. Additional Certificates So long as no Event of Indenture Default, Event of Nonappropriation or Event of Lease Default has occurred and is continuing and the Lease Term is in effect, one or more series of Additional Certificates may be executed and delivered upon the terms and conditions set forth in the Indenture. The principal of any Additional Certificates shall mature on December 1 and the interest payment dates therefore shall be the same as the interest payment dates for the Certificates; otherwise the times and amounts of payment of Additional Certificates shall be as provided in the supplemental ordinance or indenture and amendment to the Lease entered into in connection therewith. Additional Certificates may be executed and delivered without the consent of or notice to the Owners of Outstanding Certificates, to provide moneys to pay any one or more of the following: (a) the costs of acquiring, constructing, improving, installing and equipping any New Facility, or of acquiring a Site for any New Facility (and costs reasonably related thereto); (b) the costs of making, at any time or from time to time, such substitutions, additions, modifications and improvements for or to the Leased Property as the City may deem necessary or desirable, and as in accordance with the provisions of the Lease; or (c) for the purpose of refunding or refinancing all or any portion of Outstanding Certificates. Each of the Additional Certificates issued pursuant to the Indenture will evidence a proportionate interest in the rights to receive Revenues under the Indenture and shall be ratably secured with all Outstanding Certificates and in respect of all Revenues, and shall be ranked pari passu with such Outstanding Certificates and with Additional Certificates that may be executed and delivered in the future, if any. For additional information on the issuance of Additional Certificates, see Appendix B - Certain Definitions and Document Summaries - Additional Certificates. 26 CURRENT SOURCES OF AVAILABLE REVENUE General Although no particular funds or sources of revenue are pledged to make payments under the Lease, the City currently intends to budget, appropriate and pay the Base Rentals (and Additional Rentals, if any) allocable to the Certificates from its General Fund. Notwithstanding the foregoing, such Base Rentals and Additional Rentals may be budgeted, appropriated and paid from any of the City’s available funds in the future. The City’s overall financial operations, budgeting process and information and historical General Fund financial statement comparisons are discussed in “CITY FINANCIAL OPERATIONS.” Sources of General Fund Revenues Sales and Use Tax revenues comprise the largest of the City’s General Fund revenues, accounting for approximately 50% of General Fund revenues in fiscal year 2017. The Sales Tax is described in more detail below. Other sources of revenue in the General Fund include: franchise taxes, sidewalk and special assessments; license and permit revenues; intergovernmental revenues; charges for services; fines and forfeits; investment income; contributions; and miscellaneous other income. Collection and Enforcement of the City Sales and Use Tax The following discussion includes information with respect to the imposition, collection and administration of the City’s Sales Tax. Licensing. A sales/use tax license is required in order to engage in the business of selling at retail tangible personal property and taxable services and to use, store, distribute or consume any tangible personal property or taxable services subject to the City Sales Tax Ordinance. As of August 31, 2018, 12,450 businesses remit Sales and Use Tax to the City. Authority for Imposition of Sales and Use Tax. The City’s Sales and Use Tax currently is imposed at a rate of 3.85%, except that the amount of Use Tax levied on manufacturing equipment is 3% of the purchase price. Any further increases are required to be approved by a majority of the registered electors of the City. See “LEGAL MATTERS--Certain Constitutional Limitations.” The ordinances enacting the Sales Tax have been codified as Section 25, Article III of the Fort Collins Revised Municipal Code (the “City Sales Tax Ordinance”). The imposition, collection and enforcement of the Sales and Use Tax is governed by the City Sales Tax Ordinance, which declares the sale or use of tangible personal property, or of certain services, to be a taxable privilege. Notwithstanding the foregoing, certain portions of the City Sales and Use Tax are restricted to specific uses. The revenues received from those restricted Sales and Use Taxes may not be available to pay Base Rentals under the Lease. The unrestricted portion of the City Sales and Use Tax is imposed at a rate of 2.25%. The remainder of the Sales and Use Tax is restricted as follows: streets improvements - 0.25% (sunsets in 2025); Community Capital Improvement Program (specified capital projects) - 0.25% (sunsets in 2025); open space - 0.25% (sunsets in 2030); and Keep Fort Collins Great - 0.85% (sunsets in 2020). 27 Overlapping Sales Taxes. The total sales tax rate currently in effect within the City’s boundaries is 7.3%, comprised of the City Sales Tax of 3.85%, the State’s 2.9% sales tax, and the County’s 0.55% sales tax. Sales Tax - General. The City’s Sales Tax is levied on the full purchase price paid or charged for tangible personal property and taxable services sold or purchased at retail by every person exercising a taxable privilege in the City by the sale or purchase of such property and services. The Sales Tax is levied on all sales and purchases of tangible personal property or taxable services except those specifically exempted and is collected by the retailer and remitted to the City. Property and Services Subject to the Sales Tax. The Sales Tax applies, without limitation, as follows: (1) On the purchase price paid or charged for all sales and purchases of tangible personal property at retail, regardless of whether such property has been included in a previous taxable transaction; (2) On the total amount due under a lease or contract when the right to possession or use of tangible personal property is granted therein and such transfer of possession would be taxable under the City Sales Tax Ordinance if an outright sale were made; (3) In the case of retail sales involving the exchange of property, on the purchase price paid or charged, including the fair market value of the property exchanged at the time and place of the exchange, excluding, however, from the consideration or purchase price, the fair market value of the exchanged property, provided that such exchanged property is to be sold in the usual course of the vendor’s business; (4) Upon telecommunication services, including carrier access services, whether furnished by public or private corporations or enterprises, for all intrastate telecommunication services originating from or received on telecommunication equipment in the City if the charge for the service is billed to a person in the City or billed to an affiliate or division of such person in the City on behalf of a person in the City; (5) Upon carrier access services, whether furnished by public or private corporations or enterprises, for all interstate telecommunication services originating from or received on telecommunication equipment in the City if the charge for the service is billed to a person in the City or billed to an affiliate or division of such person in the City on behalf of a person in the City; (6) Upon gas and electric service, whether furnished by municipal, public or private corporations or enterprises, for gas and electricity furnished and sold for domestic and commercial consumption and not for resale and upon steam when consumed or used by the purchaser and not resold in original form, whether furnished or sold by public or private corporations or enterprises; (7) Upon the entire amount charged to any person or persons for lodging services; (8) Upon the amount paid for all prepared food or food for immediate consumption; (9) Upon the purchase price paid for any automotive vehicle, whether new or used, purchased inside or outside the City by a resident of the City or for a business located in the City for use or storage in the City. The tax shall be paid prior to or at the time the title and registration for the vehicle are issued by the County Clerk, whichever occurs first; (10) Upon television and entertainment services; (11) Upon all sales of preprinted newspaper supplements; and (12) Upon the purchase price paid for food, but only at the tax rate of two and twenty-five hundredths (2.25) percent of the purchase price. Remittance of Sales Tax. The Sales Tax is imposed upon the purchaser of the personal property or service; however, the duty to collect and remit the Sales Tax to the City is imposed upon the seller under penalties for failure to do so as prescribed in the City Sales Tax Ordinance. Every retailer shall file a tax return each month with the Financial Officer on or before the twentieth day of each month for the preceding month and simultaneously remit the tax 28 due to the Financial Officer. The burden of proving that any retailer is exempt from collecting or paying Sales Tax shall be on the retailer under such reasonable requirements of proof as the Financial Officer may prescribe. The Financial Officer may authorize a retailer to remit the sales tax on a basis other than an accrual basis pursuant to the written request of the retailer. If any amount of Sales Tax is not remitted on or before the date due, penalties and interest as set forth in the City Sales Tax Ordinance shall be paid by the retailer for the period from the date due to the date paid. Exemptions from Sales Tax. The following shall be exempt from the Sales Tax: (1) All sales of automotive vehicles properly titled and registered to an address outside the City; (2) All sales of tangible personal property if all of the following conditions exist: (a) The sales are to those who reside or do business outside the City; (b) The articles purchased are to be delivered to the purchaser outside the City by common carrier or by the conveyance of the retailer or by mail; and (c) The articles purchased and delivered are used outside the City; (3) All sales of gasoline or motor fuel which are taxed under the provisions of Title 39, Article 27, C.R.S.; (4) All sales of goods manufactured in the City and sold by the manufacturer thereof directly to the ultimate consumer when delivery of such goods is made by common, contract or commercial carrier or by conveyance of the vendor or the purchaser to a point outside the City for use outside the City; (5) All sales to the United States or the State, or departments, institutions or political subdivisions thereof, and all sales to the City and any department thereof, provided that such purchases are supported by official government purchase orders or charged to the governmental entity’s credit card account and are paid for by draft or warrant drawn on the governmental entity’s bank account or such purchases are made pursuant to a written agreement with the governmental entity in which the purchaser is to make such purchases on behalf of the governmental entity; (6) All sales to charitable organizations of tangible personal property or taxable services to be used in the conduct of the organization’s regular activities to foster its religious or other expressed charitable purpose, provided that the organization obtains from the City an exempt organization license pursuant to the City Sales Tax Ordinance and presents the license to the vendor at the time of the sale; (7) All sales which the City is prohibited from taxing under the Constitution or laws of the United States or the Colorado Constitution; (8) All sales and purchases of neat cattle, sheep, lambs, swine and goats; all sales and purchases of mares and stallions for breeding purposes; and all farm close-out sales; (9) All sales of drugs dispensed in accordance with a prescription, all sales of prescription drugs for animals (except prescription pet food), all sales of prosthetic devices and all sales of medical supplies; (10) All sales of cigarettes; (11) All charges for lodging services pursuant to a written lease for a period of thirty (30) consecutive days or more; (12) All sales of tangible personal property to a public utility doing business both within and without the City, for use in such business operations outside the City, even though delivery is made in the City; (13) All sales of tangible personal property through a coin-operated device; provided, however, that the owner of such device shall pay a tax in the amount stated in the City Sales Tax Ordinance on the value of the tangible personal property sold in excess of ten cents ($0.10) per item so vended in the coin-operated device unless the sale shall be otherwise exempt as provided in this Article; (14) All sales of farm machinery for use in farming operations and all sales of farm machinery parts for use in farming operations; provided, however, that this exemption for farm machinery parts shall not apply in the case of repairs performed or parts installed on farm machinery in the City. Trucks having a manufacturer’s rated capacity of one (1) ton or less shall not be considered farm machinery for the purposes of this Section. Nothing herein contained shall be construed to limit any other exemption contained in the City Sales Tax Ordinance; (15) All sales of feed and feed supplements and drugs for livestock or poultry and all sales and purchases of seeds, plants and fertilizers when such sales 29 are made for farm operations; (16) All sales of construction materials if such materials are picked up by the purchaser and if the purchaser of such materials presents to the vendor a building permit or other documentation acceptable to the City evidencing that a local sales or use tax has been paid or is required to be paid; (17) All sales of tangible personal property or taxable services which transaction was previously subjected to a sales or use tax lawfully imposed on the purchaser or user by another municipality in the State at a rate equal to or greater than the rate stated in the City Sales Tax Code and such tax was collected. If the rate of the sales tax paid to such municipality is less than the rate stated in the City Sales Tax Code, the difference between the tax due under the City Sales Tax Code and the tax paid previously shall be remitted to the Financial Officer; (18) All occasional sales (as defined in the City Sales Tax Code); (19) All sales of commercial packaging materials, and commercial shipping materials; (20) All sales of newsprint and printers’ ink used to print newspapers and all sales and purchases of newspapers; (21) All sales of tangible personal property purchased in order to be sold at retail in the City either in its original form or as an ingredient of a manufactured or compounded product, in the regular course of business; (22) All sales of tangible personal property to a person engaged in the business of manufacturing or compounding for sale, profit or use of any product, which tangible personal property becomes an ingredient or component part of the product which is manufactured or compounded; (23) All sales of fuel for use in a continuing activity of producing tangible personal property or taxable services, including, but not limited to, processing, manufacturing, mining, refining, irrigation, telecommunication services and street and railroad transportation services; and (24) All sales of automotive vehicles and parts and accessories therefor when used or engaged in interstate commerce. The sale of food is exempt from taxation under the City Sales Tax Ordinance as provided below: (1) No sales or use tax shall apply to the sale of food purchased with food stamps issued under the supplemental nutrition assistance program as defined in 7 U.S.C. § 2012(t), as amended; and (2) No sales or use tax shall apply to the sale of food purchased with funds provided by the special supplemental food program for women, infants and children under 42 U.S.C. § 1786, as amended. Use Tax - General. The City’s Use Tax is levied and required to be paid on the full purchase price paid for or acquisition costs of tangible personal property and taxable services brought into the City for the purpose of using, storing, distributing or consuming such property and services within the City. The use tax is levied upon the privilege of using, storing, distributing, or consuming in the City, personally or in connection with the operation of a business, tangible personal property or taxable services and is paid by either the retailer or the consumer. Remittance of Sales Tax. The Use Tax on construction materials and supplies and certain construction equipment is collected by the City at the time of application for a building permit. The Use Tax on automobiles purchased outside the City must be paid to the County Clerk at the time of licensing of the vehicle. Every person who operates or maintains a business in the City, and who purchases or leases tangible personal property for use, storage, distribution or consumption in the City in connection with the business and taxable hereunder, and who has not paid the sales tax to a retailer required or authorized to collect the same, shall make a return and pay the tax due to the Financial Officer, on or before the twentieth day of each calendar month following the month in which such purchase or lease was consummated or such later date as is approved by the Financial Officer. The burden of proving that any person is exempt from paying the use tax shall 30 be on such person under such reasonable requirements of proof as the Financial Officer may prescribe. Every resident of the City who purchases or leases tangible personal property for use, storage, distribution or consumption in the City and taxable hereunder, and who has not paid the sales tax imposed thereon to a retailer required or authorized to collect the same, shall make a return and pay the tax due to the Financial Officer within thirty (30) days from the purchase or lease of such tangible personal property unless a reporting period greater than thirty (30) days is approved by the Financial Officer. If any amount of use tax is not remitted on or before the date due, penalties and interest as set forth in the City Sales Tax Ordinance shall be paid by the taxpayer for the period from the date due to the date paid. Exemptions from Use Tax. The use, storage, distribution or consumption in the City of the following are hereby exempted from the use tax: (1) Tangible personal property, the sale or use of which was previously subjected to a sales or use tax lawfully imposed on the purchaser or consumer by another statutory or home rule municipality in the State at a rate equal to or greater than the rate stated in the City Sales Tax Ordinance and such tax was collected. If the rate of the sales or use tax paid to such municipality is less than the rate stated in City Sales Tax Ordinance, the difference between the tax due under this Article and the tax paid previously shall be remitted to the Financial Officer; (2) Tangible personal property purchased in order to be sold at retail in the City either in its original form or as an ingredient of a manufactured or compounded product, in the regular course of business; (3) Gasoline or motor fuel upon which has accrued or has been paid the tax prescribed by Title 39, Article 27, C.R.S.; (4) Tangible personal property brought into the City by a nonresident for that person’s own use, storage, distribution or consumption while temporarily in the City, and the tangible personal property of a resident if such property was purchased prior to becoming a resident of the City; (5) Tangible personal property used, stored, distributed or consumed by the United States or the State or departments, institutions or political subdivisions thereof and the City and any department thereof; (6) Tangible personal property purchased from a nonresident retailer by a resident common carrier, resident public utility or resident construction company which tangible personal property is stored in the City but not used or consumed in the City; (7) Tangible personal property of a person engaged in the business of manufacturing or compounding for sale, profit or use any product, which tangible personal property becomes an ingredient or component part of the product which is manufactured or compounded; (8) Fuel for use in a continuing activity of producing tangible personal property or taxable services, including, but not limited to, processing, manufacturing, mining, refining, irrigation, telecommunication services and street and railroad transportation services; (9) Tangible personal property used, stored, distributed or consumed by charitable organizations in the conduct of the organization’s regular activities to foster its religious or other express charitable purpose, provided that the organization obtains from the City an exempt organization license pursuant to City Sales Tax Ordinance and presents the license as required; (10) Neat cattle, sheep, lambs, swine and goats; and mares and stallions used for breeding purposes; (11) Automotive vehicles and parts and accessories therefor when used or engaged in interstate commerce; (12) Tangible personal property or services which the City is prohibited from taxing under the Constitution or laws of the United States or the Colorado Constitution; (13) Drugs dispensed in accordance with a prescription, prescription drugs for animals (excluding prescription pet food), prosthetic devices, and medical supplies; (14) The storage of construction materials and construction materials picked up by the purchaser if the purchaser of such materials presents to the vendor a building permit or other documentation 31 acceptable to the City evidencing that a local sales or use tax has been paid or is required to be paid; (15) Automotive vehicles properly titled and registered to an address outside the City; (16) Goods manufactured in the City and sold by the manufacturer thereof directly to the ultimate consumer when delivery of such goods is made by common, contract or commercial carrier or by conveyance of the vendor or the purchaser to a point outside the City for use outside the City; (17) Cigarettes; (18) Farm machinery and farm machinery parts for use in farming operations; provided, however, that this exemption for farm machinery parts shall not apply to parts installed on farm machinery in the City. Trucks having a manufacturer’s rated capacity of one (1) ton or less shall not be considered farm machinery for the purposes of this Section; (19) Feed and feed supplements and drugs for livestock or poultry and seeds, plants and fertilizers when used for farm operations; (20) Commercial packaging materials and commercial shipping materials; (21) Newsprint and printers’ ink used to print newspapers and newspapers; and (22) All other tangible personal property and taxable services that are exempt from the sales tax imposed pursuant to the City Sales Tax Ordinance. Sales Tax Rebate on Food. Pursuant to the City Sales Tax Ordinance, upon yearly application to the City Treasurer, a $63 Sales Tax rebate will be available to all members of the applicant’s household (up to 8 household members) who, prior to such application, has been a resident of the City or its growth management area during the year for which the rebate application is made and the household income meets certain low income limits specified in the City Sales Tax Ordinance. The rebate amounts are paid from the General Fund. Over the past three years, the largest amount of these rebates was approximately $174,000 in 2015. Use Tax Rebate for Manufacturing Equipment. The City Sales Tax Ordinance also establishes a manufacturing use tax rebate program for qualifying manufacturers as defined in the City Sales Tax Ordinance. Application for the rebate must be made by June 30 of the year following the year in which the use taxes were paid. The rebate amounts are paid from the General Fund. Over the past three years, the largest amount of these rebates was approximately $1.3 million in 2015. Penalties for Failure to Pay Sales Tax; Remedies. If any person fails, neglects or refuses to collect tax or to file a return and pay the tax as required by the City Sales Tax Ordinance, the Financial Officer shall make an estimate of the tax due based on available information and shall add thereto interest on such delinquent taxes at the rate of 1.5% per month from the date the return and tax was due. The Financial Officer shall serve upon the delinquent taxpayer written notice of such estimated taxes, penalty and interest. Such notice shall constitute a notice of determination, assessment and demand for payment and, which payment shall be due and payable within 21 days from the date the notice is mailed. The Financial Officer may, at any time within three years of the date a tax is due, serve upon any taxpayer a written notice of audit notifying the taxpayer that the Financial Officer will be conducting an audit of the taxpayer’s books and records to determine the exact amount of any tax, penalty, interest, collection costs and other charges due. Any tax deficiency must be paid within 21 days from the mailing of a notice of deficiency. Taxpayers may protest deficiency notices and request a hearing. If any taxpayer has failed, neglected or refused to pay the tax imposed by the City Sales Tax Ordinance within the time specified for payment, the Financial Officer may assess a $25 charge upon the issuance of each notice of determination, assessment and demand for 32 payment in addition to the taxes, penalties and interest provided for elsewhere in this Article. This charge is imposed to compensate the City for its administrative costs to issue the notice. In addition, the City may include in any assessment against the taxpayer the collection costs the City incurs in collecting the taxes, penalties, interest and other charges owed under this Article, including, without limitation, the City’s attorney fees. Tax constitutes lien. The Sales and Use Tax, together with all penalties, interest, collection costs and other charges pertaining thereto, is a first and prior lien upon the goods, stock-in-trade and business fixtures in which the retailer has an ownership interest except for goods that have been purchased in the ordinary course of business by retail purchasers and such lien takes priority over other liens or claims of whatsoever kind or nature on such property. The Sales and Use Tax imposed by the City Sales Tax Ordinance, together with all penalties, interest, charges and costs of collection pertaining thereto, is a first and prior lien on the real and personal property of the taxpayer other than the goods, stock-in-trade and business fixtures in which the taxpayer has an ownership interest, except as to preexisting liens or claims of a bona fide mortgagee, pledgee, judgment creditor or purchaser whose rights have attached prior to the filing of the notice of lien, on the property of the taxpayer. The Financial Officer may file a lien as provided in the City Sales Tax Ordinance which may be foreclosed and executed upon by the City in the district court of the county in which the encumbered property is located in the same manner as security agreements, mortgages and judgment liens are so foreclosed and executed upon under state law. The full amount of unpaid use taxes arising from and required to be reported pursuant to specified provisions of the City Sales Tax Ordinance, together with interest, penalties, collection costs and other charges as herein provided, are a first and prior lien on the property of the taxpayer and take priority over all other liens of whatsoever kind and nature, except for liens for general taxes created by state law and preexisting liens or claims of a bona fide mortgagee, pledgee, judgment creditor or purchaser whose rights have attached prior to the filing of the notice of lien provided for in the City Sales Tax Ordinance. This lien may be foreclosed and executed upon as described in the prior paragraph. The City’s Building Official shall not make a final inspection on or issue a certificate of occupancy for any construction project unless a person has paid or arranged with the Financial Officer to pay all taxes due under the City Sales Tax Ordinance on all fixtures, minerals and other construction materials and supplies or tangible personal property used in or connected with the construction, reconstruction, alteration, expansion, modification or improvement of any building, dwelling or other structure or improvement to real property in the City. The Financial Officer may issue a warrant directed to any employee, agent or representative of the City or any sheriff of any county of the State, commanding such person to distrain, seize and sell any personal property in which the taxpayer has an ownership interest, except such property as is exempt from the execution and sale by any statute of the State, for the payment of tax due together with interest, penalties, collection costs and other charges thereon in the following circumstances: Under certain conditions, the Financial Officer may apply to the Judge of the City’s Municipal Court for a warrant authorizing the Financial Officer to search for and seize property located within the City limits for the purpose of enforcing the collection of any tax deficiency owed under the City Sales Tax Ordinance. 33 In addition to other remedies provided in the City Sales Tax Ordinance, the Financial Officer may treat any such taxes, penalties, interest, collection costs and other charges due and unpaid under the City Sales Tax Ordinance as a debt due to the City from the taxpayer. If a taxpayer fails to pay the tax, or any portion thereof, or any penalty, interest, collection costs or other charges thereon, when due, the Financial Officer may recover at law the amount of such taxes, penalties, interest, collection costs and other charges in any court having jurisdiction. The Financial Officer may also send delinquent tax payers to a collections agency. The City has two staff members dedicated to Sales and Use Tax collections and three auditors. The two staff members focused on collections make every effort to make sure all taxpayers remit any sales and use taxes due to the City. The audit staff conducts between 20-30 audits per year to confirm compliance with the City Sales Tax Ordinance. History of Sales and Use Tax Collections. The following table sets forth a history of City Sales and Use Tax collections at a rate of 3.85%. Not all of the Sales and Use Tax revenues depicted in the table below are available to pay Base Rentals under the Lease. History of City Sales and Use Tax Collections Year Sales Tax Collections Percent Change Use Tax Collections Percent Change Total Collections Percent Change 2013 $ 92,134,251 -- $ 18,781,097 -- $ 110,915,348 -- 2014 99,847,163 8.37% 27,836,853 48.22% 127,684,016 15.12% 2015 104,713,889 4.87 29,161,032 4.76 133,874,927 4.85 2016 109,314,929 4.39 26,849,688 (7.93) 136,164,617 1.71 2017 112,113,302 2.56 23,645,444 (11.93) 135,758,746 (0.30) 2018(1) 77,186,023 -- 13,919,225 -- 91,105,248 -- (1) Represents collections for January through August 2018. As compared to the same eight-month period in 2017, theses figures represent an increase of approximately 4.5% in Sales Tax collections, a decline of approximately 17.2% in Use Tax collections and approximately a 0.5% increase in total collections. Source: The City. Sales and Use Tax Trends. The City Sales Tax continues to grow. In the last three years overall growth has begun to slow, but the year-over-year trend is still on a growth trajectory. The City expects this trend to continue in the years to come. Sales Tax will continue to increase, but at a more modest pace than seen in the past. Use tax receipts have historically been volatile and reflect the local community’s investment in new equipment and buildings. In 2015 use tax collections hit a historic high of $29.1 million and have been steadily declining as the City has not seen any recent major economic expansion of the industry sectors that drive use tax. Actual revenue has been higher than budgeted revenue in 4 of the last 5 years. In 2017 our actual sales tax came in below what was budgeted. Year-to-date actual revenue is currently higher than budgeted. In the last 5 years the City added Amazon as a sales tax remitter. The City lost Sports Authority and Toys R Us as sales tax remitters during the last 5 years. The City does not currently anticipate adding any new major sales tax remitters, or losing any of our top remitters. 34 Monthly Collection Comparisons. The following tables present a comparison of monthly Sales Tax and Use Tax collections (based on a rate of 3.85%) for the 12-month periods ended August 31, 2018 and 2017. As of August 31, 2018, 2017, the City had experienced a 4.4% increase in Sales Tax revenues and an 18.6% decline in Use Tax revenues as compared to the same 12-month period of the previous year. The figures in the following tables are presented on a cash basis (i.e., the figures are recorded in the month in which the revenue was received by the City, not the month in which the underlying sale was made). Comparison of Monthly Sales Tax Collections Twelve-Month Period Ending August 31, 2018 Twelve Month Period Ending August 31, 2017 Percent Change Month Current Month Cumulative Current Month Cumulative Current Month Cumulative September $ 9,930,395 $ 9,930,395 $ 9,634,263 $ 9,634,263 3.07% 3.07% October 9,954,353 19,884,748 9,291,093 18,925,356 7.14 5.07 November 9,169,082 29,053,830 8,841,023 27,766,379 3.71 4.64 December 9,216,826 38,270,656 9,035,338 36,801,717 2.01 3.99 January 12,052,066 50,322,722 11,467,687 48,269,404 5.10 4.25 February 8,650,719 58,973,441 8,146,364 56,415,768 6.19 4.53 March 8,102,652 67,076,093 7,878,451 64,294,219 2.85 4.33 April 9,731,632 76,807,725 9,203,175 73,497,394 5.74 4.50 May 9,003,489 85,811,214 8,794,816 82,292,210 2.37 4.28 June 9,610,964 95,422,178 9,235,551 91,527,761 4.06 4.25 July 10,379,725 105,801,903 9,916,992 101,444,753 4.67 4.30 August 9,654,776 115,456,679 9,199,610 110,644,363 4.95 4.35 Source: City Finance Department. Comparison of Monthly Use Tax Collections Twelve-Month Period Ending August 31, 2018 Twelve Month Period Ending August 31, 2017 Percent Change Month Current Month Cumulative Current Month Cumulative Current Month Cumulative September $ 1,645,763 $ 1,645,763 $ 2,447,705 $ 2,447,705 (32.76)% (32.76)% October 1,848,590 3,494,353 2,350,226 4,797,931 (21.34) (27.17) November 1,662,453 5,156,806 2,368,492 7,166,423 (29.81) (28.04) December 1,679,365 6,836,171 1,536,414 8,702,837 9.30 (21.45) January 1,955,504 8,791,675 2,751,836 11,454,673 (28.94) (23.25) February 1,688,330 10,480,005 2,120,492 13,575,165 (20.38) (22.80) March 1,874,037 12,354,042 1,674,364 15,249,529 11.93 (18.99) April 1,469,936 13,823,978 1,747,541 16,997,070 (15.89) (18.67) May 1,665,697 15,489,675 2,193,588 19,190,658 (24.07) (19.29) June 1,861,284 17,350,959 2,376,935 21,567,593 (21.69) (19.55) July 1,688,422 19,039,381 1,910,690 23,478,283 (11.63) (18.91) August 1,716,015 20,755,396 2,033,827 25,512,110 (15.63) (18.64) Source: City Finance Department. Principal Sales and Use Tax Generators. The following table sets forth the ten vendors that generated the largest amount of City Sales and Use Tax in 2017. Certain of the vendors listed below may represent more than one location of the business within the City. Because of the confidential nature of the gross sales of such entities, the vendors’ identities 35 cannot be divulged under penalty of law. The City expects that these large Sales and Use Tax generators will remain substantially the same for 2018. Ten Largest Sales and Use Tax Generators - 2017 Type of Business Type of Tax Sales and/or Use Tax Collected % of Total Collections(1) Grocery Sales Tax $6,262,626 4.61% General Merchandise Sales Tax 3,786,666 2.79 Home Improvement Sales Tax 3,546,124 2.61 Utility Sales Tax 3,273,995 2.41 General Merchandise Sales Tax 3,142,444 2.31 Technology Use Tax 2,734,518 2.01 Wholesale Trade Sales Tax 1,902,612 1.40 Tech Retailer Sales Tax 1,394,343 1.03 Warehouse Sales Tax 1,363,114 1.00 Utility Sales Tax 1,349,995 0.99 Total $28,756,437 21.18% (1) Based on total 2017 Sales and Use Tax collections of $135,758,746. Source: The City. In 2017, restaurants as a group accounted for approximately 15.4% of total City Sales and Use tax collections and grocery/convenience stores as a group accounted for approximately 13.5%. No other industry accounted for more than 10% of total City Sales and Use Tax collections in 2017. City General Fund Budget Summary and Comparison General. Set forth below is a comparison of the City’s Open Space Fund budgets for 2017 and 2018, compared to actual, unaudited interim results for the _____ months ended _______ __, 2017 and 2018. The table below is presented in budgetary format and is not intended to conform to generally accepted accounting principles. Minimum Fund Balance Policy. It is the City’s policy to maintain a 60-day liquidity goal minimum unassigned fund balance in the General Fund. The minimum unassigned fund balance should be at least 17% of the subsequent year’s originally adopted budgeted expenditures and transfers out, excluding expenditures and transfers out for large and unusual one-time items. This liquidity goal is in addition to the 3% emergency reserve requirement of Article X, Section 20 of the Colorado Constitution (“TABOR”), as described in “CERTAIN LEGAL MATTERS--Constitutional Limitations.” Budget to Actual Comparison - City General Fund [to come] History of City General Fund Revenues, Expenditures and Changes in Fund Balances The following table provides a comparative history of revenues, expenditures and changes in fund balance in the City’s General Fund for fiscal years 2013 through 2017. The 36 information in this table has been derived from the audited financial information presented in the City’s Comprehensive Annual Financial Report (“CAFR”) for those years. The information should be read together with the City’s fiscal year 2017 basic financial statements (and accompanying notes) appearing in Appendix A. Financial statements for preceding years may be obtained from the sources noted in “INTRODUCTION--Additional Information.” Prospective investors should be aware that the Certificates are payable solely from the Trust Estate. Inclusion of the following material is for informational purposes only and does not imply that the Certificates constitute a general obligation of the City or a lien on any City revenues. The General Fund is not pledged to pay debt service on the Certificates. The City has other obligations payable from legally available revenues. See “CITY DEBT STRUCTURE.” In addition, the City may use legally available revenues in the General Fund to appropriate funds for the payment of other City obligations as described in “CERTAIN RISK FACTORS-- Factors that May Cause Insufficiency of Expected Revenues - Existing Obligations Payable from Legally Available Revenues; Future Bonds and Other Obligations.” 37 General Fund-Statement of Revenues, Expenditures and Changes in Fund Balances Year Ended December 31, Revenues 2013 2014 2015 2016 2017 Taxes $89,625,619 $101,405,160 $106,377,268 $108,842,908 $109,330,572 Licenses and permits 2,776,268 4,366,908 3,635,061 3,740,888 3,809,880 Intergovernmental 10,903,908 11,684,816 12,604,604 12,575,111 14,052,239 Fees and charges for services 8,668,524 9,182,619 9,209,344 10,132,917 9,506,463 Fines and forfeitures 2,803,037 2,536,019 2,774,131 2,151,744 2,033,894 Earnings on investments 113,166 1,334,797 1,007,591 501,851 1,159,928 Miscellaneous 1,490,609 1,319,949 2,014,863 1,796,671 1,424,505 Total Revenues 116,381,131 131,830,268 137,622,862 139,742,090 141,317,481 Expenditures (1) Current Police services 31,009,177 31,588,192 32,706,835 34,735,721 36,927,099 Financial services 3,583,699 3,716,210 3,867,954 3,957,133 4,360,932 Community services 19,494,541 19,156,348 20,618,636 21,560,882 12,485,988 Planning, development & transportation 4,918,379 6,699,335 6,829,551 7,755,895 8,856,489 Executive, legal and judicial 5,287,972 5,838,697 6,841,668 6,934,808 6,815,336 Information and employee 2,708,537 2,812,320 3,541,153 4,651,522 17,298,851 Sustainability services 5,328,328 4,712,753 7,831,087 7,913,103 6,727,816 Other 1,649,314 1,198,085 2,205,191 1,249,843 1,695,009 Intergovernmental Fire protection 17,412,296 17,682,145 19,383,092 20,556,911 24,012,449 Capital outlay 830,728 3,370,494 1,860,349 1,174,048 4,022,277 Debt Service Principal 27,725 110,761 235,228 224,223 -- Interest and debt service costs 1,903 11,430 21,798 16,534 497 Total Expenditures 92,252,599 96,896,770 105,942,542 110,730,623 123,202,743 Excess of revenues over expenditures 24,128,532 34,933,498 31,680,320 29,011,467 18,114,738 Other Financing Sources (Uses) Transfers in 2,085,971 3,398,310 619,247 955,314 1,678,411 Transfers out (2) (21,506,120) (25,115,948) (34,192,559) (27,536,157) (25,967,493) Capital leases 158,771 1,321,925 43,800 -- -- Sale of capital assets -- 16,097 118,298 1,249 1,539,481 Total Other Financing Sources (Uses) (19,261,378) (20,379,616) (33,411,214) (26,579,594) (22,749,601) Net change in fund balances (deficit) 4,867,154 14,553,882 (1730,894) 2,431,873 (4,634,863) Fund balances-Beginning of year 55,252,765 60,119,919 74,673,801 72,942,907 75,374,780 Fund balances-End of Year $60,119,919 $74,673,801 $72,942,907 $75,374,780 $70,739,917 (1) The City reallocates its expenditures among categories from time to time. For example, in 2017, certain City services were reallocated between the “community services” category and the “information and employee” category. (2) The City transfers funds out to various funds each year as required by law, accounting principles, or in its discretion. The largest transfers are to the transit services and transportation funds, internal service funds (such as the self-insurance and data and communication funds), the capital leasing corporation fund (for the payment of amounts due under certain lease agreements) and the capital projects fund. Source: Derived from the City’s CAFRs for the years ended December 31, 2013 through 2017. Over the past 5 years the General Fund has remained healthy with fund balances ranging from $60.1 million to $75.4 million and a compound annual growth rate (CAGR) of 4.2% from 2013-2017. Revenue continues to grow at a steady pace. Actual revenue continues to 38 come in over budget for items within the General Fund. Sales tax makes up about 50% of revenue in the General Fund. Use tax accounts for about 8% of the General Fund revenue. In 2017, sales tax revenue was lower than budget, but other revenue sources were above budget to offset the shortfall. The City developed a contingency budget mid-year to ensure that it would be able to stay within the actual amounts collected on sales tax during the year, however, this contingency budget was ultimately unnecessary. Thus far, 2018 sales tax is 4.4% higher than 2017 through August 31. Sales tax is also 1.9% higher than budgeted for 2018 through August 31. The City has had no major swings in revenue or expenditures during the previous five years. Revenues continue to keep up with expenditures even with a slowing of growth in our sales tax. The City continues to pay down outstanding debt and in the past five years has held governmental debt service as a percentage of governmental expenditures between 1% and 2%. 39 THE CITY General The City was founded in 1864 and incorporated as a statutory town on February 3, 1873. The City became a city of the second class on February 2, 1883, and existed in this form until September 16, 1913, when the City Charter was adopted by a majority of the electors of the City acting under the provisions of Article XX of the Constitution of the State. Pursuant to such provisions, the City is considered to have plenary powers in matters of local concern and broad powers to legislate in areas of mixed statewide and local concern, except as limited by State law and the provisions of the City Charter. On October 5, 1954, the present Charter was adopted authorizing a council-manager form of government. The City had an estimated population of 170,100 as of March 2018 and is located approximately 65 miles north of Denver in north central Colorado just west of Interstate 25, the principal route between Denver, Colorado, and Cheyenne, Wyoming. The University is located in the City, and students and staff at the University are a significant factor in the City’s economy. The City is the county seat of Larimer County (the “County”). Historically, the City was a trading center for the surrounding agricultural area, but in recent years the City has attracted a significant number of light industry and high technology businesses. Basic municipal services provided by the City include parks, recreation, planning, police protection, public transportation (“TransFort”), water, wastewater, electricity, public works (including street maintenance), stormwater and municipal court. The City’s water, wastewater, stormwater and electric utilities are operated as separate enterprises of the City but are all administered as parts of the City’s Utility Services. Principal Officials City Council. Under the provisions of the City Charter, the City is governed by a six-member Council and a Mayor who is elected by the voters. Members of the City Council are elected from six districts within the City. The present Mayor and members of the City Council are as follows: Term Expires 4/2019 4/2019 4/2021 4/2019 4/2021 4/2019 Name and Position Wade Troxell, Mayor Gerry Horak, Mayor Pro Tem Susan Gutowsky, Council Member Ray Martinez, Council Member Ken Summers, Council Member Kristin Stephens, Council Member Ross Cunniff, Council Member Principal Occupation CSU Professor Member, Various Boards Retired Teacher Consultant Minister & Former State Legislator Graduate Coordinator Computer Engineer 4/2021 All legislative powers of the City are vested in the City Council except as otherwise provided in the City Charter. The affirmative vote of the majority of the City Council members present is required for the enactment of any regularly enacted ordinance. The City Charter provides for voter referenda and initiatives, pursuant to which voters may require the City Council to submit ordinances and City Charter amendments to the voters. Under these provisions of the City Charter, any registered elector may commence a referendum proceeding on the ordinance authorizing the execution and delivery of the 2018 Bonds at any time within ten days after final passage of the ordinance, by filing a notice of protest. 40 The City Council appoints all boards and commissions, unless otherwise required by law, and also appoints the City Manager, the City Attorney and the Municipal Court Judge. The City Manager is the chief executive of the City and is responsible for the enforcement of the City’s laws and ordinances. The City Manager also administers the operation of all the departments and divisions of the City, except that the City Attorney supervises the City’s legal staff and the Municipal Judge supervises the operation of the Municipal Court. Agencies or officials reporting directly to the City Council include the City Manager, the City Attorney, the Municipal Court Judge and a number of boards and commissions, including the Energy Board, the Water Board and the Planning and Zoning Board. The State Constitution reserves to the City certain powers, including the power to issue, refund, and liquidate all kinds of municipal obligations, the power to assess property in the City and the power to levy and collect property and sales and use taxes. However, such powers are subject to certain limitations as described in “LEGAL MATTERS--Certain Constitutional Limitations.” Administration. The City Manager, Darin A. Atteberry, has held the position since December 2004, having previously served as Assistant City Manager since 1996. Prior to that time, Mr. Atteberry served as a Senior City Planner for the City of Vancouver, Washington, for approximately five years. The City’s Deputy City Manager and Chief Operating Officer is Jeff Mihelich. Mr. Mihelich is responsible for day-to-day operations of the City’s municipal services. Mr. Mihelich holds a Master of Science degree in Urban and Regional Planning from Portland State University and has more than 25 years of experience in city and county governmental operations. The City Financial Officer, Mike Beckstead, has held that position since August 2011. Prior to that time, Mr. Beckstead served nearly 25 years working for Fortune 100 companies including Ford, Navistar, Honeywell and Exelon. Employees; Labor Relations The City administration manages 2,519 full-time, part-time, seasonal and contractual employees. The City recognizes a bargaining agent for only one group of employees, full-time sworn police officers of the City police department maintaining the rank of lieutenant and below and community service officers and dispatchers equivalent to the rank of lieutenant and below. Charter provisions and State legal decisions limit the matters to which the City and its police union can agree in a collective bargaining agreement. Labor relations between the City and its employees may be described as free of significant dispute. Pension Plans Except as explained below, the City’s permanent, classified non-uniformed employees hired prior to January 1, 1999, are eligible to be members of the General Employees’ Retirement Plan, a single employer defined benefit plan. The City’s current funding policy (which can be changed by the City Council in its discretion) is to contribute 10.5% of the compensation for active plan participants plus an annual supplemental contribution while the plan is underfunded, as defined in the policy. The City’s contribution for 2017 was 10.5% of covered payroll and a supplemental contribution of $1.12 million dollars. Based on the most recent actuarial report (March 2018), the total City contribution recognized for 2017 was 41 $1,652,786. As of December 31, 2017, the City’s Net Pension Liability (“NPL”) was $11.2 million and the Plan had a funded ratio of 81.31% of a Total Pension Liability of $60,025,297. See Note IV(B)(1) and the Required Supplementary Information Other Than MD&A for a history of funding levels and more information regarding the Plan, including significant assumptions, funding policies and information about the Pension Trust Fund. Employees hired after January 1, 1999, are only eligible to participate in a defined contribution money purchase pension plan created in accordance with Internal Revenue Code § 401(a). Contributions made by the City are not taxed until they are withdrawn. Employee contributions are made with pre-tax dollars, and the earnings on City and employee contributions are not taxed until withdrawn. City and employee contributions to the plan were $6,390,833 and $3,798,842, respectively, during 2017. Services Provided by Other Entities Certain basic municipal services are provided within the City by public entities other than the City. These include the County, the Health District of Northern Larimer County, East Larimer County Water District, Fort Collins-Loveland Water District, South Fort Collins Sanitation District, Boxelder Sanitation District, Poudre River Public Library District and Poudre Fire Authority. The County provides additional recreation, law enforcement and social services. Elementary schools, middle schools and high schools in the City are provided by both Poudre School District R-1 and Thompson School District No. R2-J, which are independent political subdivisions of the State, not under the control of the City. The City and the City of Loveland jointly own and operate the Northern Colorado Regional Airport. The City’s government-wide financial statements reflect 50% equity ownership interest in the airport. Certain other basic services are provided within the City by private entities. Natural gas service is provided by Xcel Energy. Trash collection is provided by private contractors. City Insurance Coverage The City maintains a comprehensive insurance program covering automobile liability, general liability, police liability, and public official liability exposures as well as damage or destruction of property. The City self-insures for a portion of the program and purchases liability insurance through a risk retention group. The City also maintains workers’ compensation insurance as required by law. See Note IV(A) in the audited financial statement attached hereto as Appendix A for a description of the City’s risk management program for 2017. 42 CITY FINANCIAL OPERATIONS Budget Process Pursuant to the City Charter and the Municipal Code, the City budget is submitted by the City Manager to the City Council biannually. The proposed budget is required to provide a complete financial plan of all City funds for the ensuing budget term. In addition, the City Manager annually submits a five-year long-range capital program for the City’s physical development. Two public hearings are conducted on the proposed budget. After the public hearing, the City Council may adopt the budget with or without amendment. In amending the budget it may add or increase programs or amounts and may delete or decrease any programs or amounts. The City Council must adopt a budget by ordinance on or before November 30 of the year preceding the budget term. The ordinance approving the budget or appropriating funds for the ensuing budget year includes the property tax levy to be certified to the County no later than December 15 of each year for collection as required by law. The City Charter provides that, upon recommendation by the City Manager, the City Council may make supplemental appropriations by ordinance at any time during the fiscal year, provided that the total amount of the supplemental appropriations, combined with previous appropriations for the same fiscal year, do not exceed the current estimate of actual and anticipated revenues to be received by the City during the fiscal year. Financial Statements Pursuant to Title 29, Article 1, Part 6, C.R.S., an annual audit is required to be made of the City’s financial statements at the end of the fiscal year. The audited financial statements must be filed with the City Council within six months after the end of the fiscal year and with the state auditor 30 days thereafter. Failure to file an audit report may result in the withholding of the City’s property tax revenues by the County treasurer pending compliance. The City’s audited basic financial statements, derived from the City’s 2017 CAFR, are attached to this Official Statement as Appendix A. Those financial statements are the most current audited financial information available for the City. Capital Improvement Program The information below was provided by the City’s Finance Department and reflects the potential spending on Capital Improvements by the City on various categories of Capital Improvements for the time periods shown below. 43 2018-2022 Capital Improvements(1)(2) 2018 2019 2020 2021 2022 TOTAL General Capital Projects(3) $3,197,000 $5,255,000 $5,360,000 $5,467,000 $5,576,000 $24,855,000 0.25% Community Capital Improvement Program 5,590,000 7,366,000 5,034,000 2,949,000 5,959,000 26,898,000 Neighborhood Parkland(3) 2,156,000 3,548,000 1,843,000 1,880,000 1,918,000 11,345,000 Conservation Trust(3) 1,300,000 1,568,000 1,243,000 1,267,000 1,293,000 6,671,000 Light & Power 9,871,000 9,735,000 9,223,000 16,558,000 25,875,000 71,262,000 Water 12,042,000 4,856,000 13,008,000 22,102,000 29,087,000 81,095,000 Wastewater 15,775,000 7,906,000 16,159,000 6,007,000 6,483,000 52,330,000 Storm Drainage 10,956,000 4,656,000 6,300,000 15,495,000 15,595,000 53,002,000 TOTAL $60,887,000 $44,890,000 $58,170,000 $71,725,000 $91,786,000 $327,458,000 (1) Projects of the Downtown Development Authority are not included in this table. (2) Actual results will vary from the amounts projected, and the variances may be material. (3) These categories have no adopted and dedicated budget for Capital Improvement. The amounts of spending shown for years 2020-2022 in the table above is an average of prior spending by the City on Capital Improvements within these categories. 44 CITY DEBT STRUCTURE The following is a general discussion of the City’s authority to incur general obligation indebtedness and other financial obligations and the amount of such obligations currently outstanding. Authority to Incur Debt General. The City Charter provides that the City is authorized to issue (a) short- term notes, (b) general obligation bonds (which, except for general obligation water bonds, must be approved at an election and are subject to a limitation of 10% of the most recent assessed valuation of taxable property in the City), (c) revenue securities, (d) special or local improvement district securities, (e) tax increment securities, and (f) any other securities not in contravention of the City Charter. Notwithstanding the foregoing, Article X, Section 20 of the State Constitution (“TABOR”) requires prior voter approval of any multiple-fiscal year direct or indirect debt or other financial obligation, subject to certain exceptions. For example, an “enterprise” as defined in TABOR is not subject to these voter approval requirements. See “LEGAL MATTERS-- Certain Constitutional Limitations.” Enterprises. On April 6, 1993, the registered electors of the City approved an amendment to the City Charter that permits the City Council by ordinance to create enterprises for the City’s water, wastewater, stormwater and electrical utilities and to authorize such enterprises to issue their own revenue bonds without voter approval. On November 7, 2017, the City’s registered electors approved another Charter amendment that permits the City Council by ordinance to authorize the Enterprise to issue revenue bonds without voter approval to fund the provision of telecommunication facilities and services. The City Council serves as the board for each enterprise. Revenue bonds issued by an enterprise are treated as having the same obligor as revenue bonds of the City payable from the same sources and are subject to contractual restrictions on revenue pledges contained in prior City ordinances. Debt Structure of the City The following table describes the long-term debt structure of the City as of September 30, 2018. 45 Combined Statement of Debt as of September 30, 2018 Amount Outstanding(1)(2) Light and Power Bond Debt Supported by Light and Power/Broadband Revenue $ 129,635,000 Water Revenue Bonds Debt Supported by Water Fund Revenue 3,574,049 Sewer Revenue Bonds Debt Supported by Sewer Fund Revenue 21,550,000 Storm Drainage Revenue Bonds Debt Supported by Storm Drainage Fund Revenue 9,110,000 Tax Increment Revenue Bonds Debt Supported by Downtown Development Authority Property Tax Increment Revenue 10,061,000 Debt Supported by Urban Renewal Authority Property Tax Increment Revenue 8,860,000 TOTAL $ 182,790,049 (1) Does not include accumulated leave payable and capital lease obligations that are reported by the City as long-term debt in its financial statements. (2) The City has defeased certain bonds by placing the proceeds of refunding bonds in irrevocable trusts to provide for all future debt service payments on the defeased bonds. The trust accounts’ assets and the liability for the defeased bonds are not included in the City’s financial statements. Other Obligations General. The City’s policy is to utilize short-term borrowing only for capital, as opposed to operating, purposes, and the City has used short-term borrowing sparingly. In the past the City’s short-term borrowing has been by means of notes or lines of credit. Lease-Purchase Agreements. On October 1, 2001, the City executed and delivered a Lease Agreement, the proceeds of which are to be used by the City to pay the costs of a golf clubhouse, improvements to two municipal golf courses and a police building. As of September 30, 2018, the present value of future lease payments under that Lease Agreement was $797,000. On July 27, 2004, the City executed and delivered $48,650,000 aggregate principal amount of Lease Certificates of Participation (Police Facility, Open Space and Transportation Facility projects), Series 2004, the proceeds of which were used by the City to pay the costs of a new police headquarters facility, the acquisition of open space acreage and the remodeling of a transportation materials warehouse. On October 18, 2012, this financing was refunded by the issuance of $34,395,000 aggregate principal amount of Certificates of Participation, Series 2012. As of September 30, 2018, the outstanding principal amount of the 2012 Certificates of Participation was $16,525,000. On August 9, 2017, there were executed and delivered $8,425,000 aggregate principal amount of Lease Certificates of Participation (Firehouse Alley Parking Structure), Series 2017, the proceeds of which were used by the City to purchase 216 parking spaces within a newly-constructed 323 space parking garage. As of September 30, 2018, the outstanding principal amount of the 2017 Certificates of Participation was $7,660,000. The following table sets forth the base rentals payable by the City under the 2012 Lease and the 2017 Lease. The base rentals payable under those leases are also payable from any legally available revenues of the City. 46 Base Rentals Payable Pursuant to Other City Lease-Purchase Agreements Year 2012 Base Rentals 2017 Base Rentals Total Base Rentals 2019 $ 3,446,863 $ 959,968 $ 4,406,831 2020 2,071,181 960,872 3,032,053 2021 2,072,283 961,280 3,033,563 2022 2,072,749 961,192 3,033,941 2023 2,072,577 960,608 3,033,185 2024 2,066,814 959,528 3,026,342 2025 1,926,734 957,952 2,884,686 2026 1,922,336 960,880 2,883,216 2027 -- 958,188 958,188 Total $17,651,535 $8,640,468 $26,292,005 Other Leases. The City has also entered into long-term leases for various property and equipment. Since the leases are arrangements that either transfer the ownership of the assets to the City or provide options to purchase the assets at the completion of the agreement, they are treated as capital leases as defined by Statement of Financial Accounting Standards Board Release No. 13, “Accounting for Leases,” as amended and interpreted. As of September 30, 2018, the present value of future minimum lease payments under the City’s outstanding long- term capital lease obligations totaled $9,138,951. This amount does not include the Lease Certificates of Participation or the Lease Agreement described in the preceding four paragraphs. Payments by the City under the leases of the facilities, property and equipment securing these obligations are subject to annual appropriation by the City Council. 47 ECONOMIC AND DEMOGRAPHIC INFORMATION This portion of the Official Statement contains general information concerning historic economic and demographic conditions in and surrounding the City. It is intended only to provide prospective investors with general information regarding the City’s community. The information was obtained from the sources indicated and is limited to the time periods indicated. The information is historic in nature; it is not possible to predict whether the trends shown will continue in the future. The City makes no representation as to the accuracy or completeness of data obtained from parties other than the City. Population The following table sets forth the respective populations of the City, Larimer County and the State for the time periods shown. Between 2000 and 2010, the City’s population increased 21.4% and Larimer County’s population increased 19.1%. The State’s population increased 16.9% during the same time period. Population Year City of Fort Collins Percent Change Larimer County Percent Change Colorado Percent Change 1970 43,337 -- 89,900 -- 2,207,259 -- 1980 65,092 50.2% 149,184 65.9% 2,889,735 30.9% 1990 87,758 34.8 186,136 24.8 3,294,394 14.0 2000 118,652 35.2 251,494 35.1 4,301,261 30.6 2010 143,986 21.4 299,630 19.1 5,029,196 16.9 2011 146,474 -- 305,135 -- 5,119,182 -- 2012 149,566 2.1% 310,636 1.8% 5,189,861 1.4% 2013 152,511 2.0 315,983 1.7 5,266,317 1.5 2014 156,644 2.7 323,792 2.5 5,345,680 1.5 2015 160,975 2.8 332,980 2.8 5,444,871 1.9 2016 163,253 1.4 338,704 1.7 5,534,240 1.6 2017 164,810 1.0 343,853 1.5 5,609,445 1.4 Sources: United States Department of Commerce, Bureau of the Census (1970 to 2010 figures) and Colorado State Demography Office (2011 to 2017 figures, which are subject to periodic revisions). Income The following table sets forth annual per capita personal income levels for Larimer County, the State and the nation. Per capita personal income levels in Larimer County have consistently been lower than personal income levels in the State and the nation during the period shown. 48 Annual Per Capita Personal Income Year(1) Larimer County Colorado United States 2013 $42,560 $47,308 $44,826 2014 45,189 50,746 47,025 2015 47,005 52,228 48,940 2016 48,289 52,372 49,831 2017 50,539 54,646 51,640 (1) Figures for Larimer County updated November 15, 2018. Figures for the State and the nation updated September 25, 2018. All figures are subject to periodic revisions. Source: United States Department of Commerce, Bureau of Economic Analysis. Employment The following table presents information on employment within Larimer County, the State and the nation for the period indicated. Labor Force and Percent Unemployed Larimer County(1) Colorado(1) United States Year Labor Force Percent Unemployed Labor Force Percent Unemployed Percent Unemployed 2013 174,165 5.8% 2,767,153 6.9% 7.4% 2014 176,951 4.3 2,799,491 5.0 6.2 2015 180,520 3.3 2,824,759 3.9 5.3 2016 187,311 2.8 2,893,268 3.3 4.9 2017 195,084 2.4 2,992,307 2.8 4.4 Month of November 2017 198,303 2.5% 3,032,759 2.9% 4.1% 2018 205,976 2.9 3,123,331 3.4 3.7 (1) Figures for Larimer County and the State are not seasonally adjusted. Sources: State of Colorado, Department of Labor and Employment, Labor Market Information, Labor Force Data and United States Department of Labor, Bureau of Labor Statistics. The following table sets forth the number of individuals employed within selected Larimer County industries which are covered by unemployment insurance. In 2017, the largest employment sector in Larimer County was health care and social assistance (comprising approximately 14.1% of the county’s work force), followed, in order, by retail trade, accommodation and food services, educational services, and manufacturing. For the twelve- month period ended December 31, 2017, total average employment in Larimer County increased 3.0% as compared to the same period ending December 31, 2016, and average weekly wages increased approximately 4.8% during the same period. 49 Average Number of Employees within Selected Industries – Larimer County Industry 2013 2014 2015 2016 2017 2018(2) Accommodation and Food Services 15,972 16,770 17,611 18,175 18,630 18,799 Administrative and Waste Services 9,031 8,484 8,559 8,518 8,579 8,364 Agriculture, Forestry, Fishing, Hunting 676 677 719 798 843 864 Arts, Entertainment and Recreation 2,497 2,636 2,808 3,006 3,071 3,097 Construction 8,328 9,222 9,594 10,426 10,753 10,972 Educational Services 16,235 16,701 16,956 17,295 17,644 18,296 Finance and Insurance 3,373 3,457 3,544 3,673 3,709 3,633 Government 7,380 7,499 7,607 7,926 8,036 7,969 Health Care and Social Assistance 18,360 18,983 19,795 21,111 22,181 23,301 Information 2,591 2,713 2,940 2,950 3,028 3,233 Management of Companies/Enterprises 757 786 833 860 865 873 Manufacturing 11,747 12,135 12,922 13,321 13,731 14,166 Mining 437 562 543 498 497 492 Non-classifiable 30 31 21 19 7 26 Other Services 3,832 3,926 4,076 4,314 4,584 4,657 Professional and Technical Services 9,475 9,929 10,272 10,662 10,877 10,644 Real Estate, Rental and Leasing 2,300 2,486 2,727 2,721 2,975 3,030 Retail Trade 17,177 17,389 18,035 18,582 19,067 19,047 Transportation and Warehousing 2,625 2,813 2,925 3,151 3,263 3,283 Utilities 700 713 726 737 761 777 Wholesale Trade 3,627 3,837 4,235 4,359 4,653 4,727 Total(1) 137,152 141,748 147,447 153,103 157,754 160,237 (1) Figures may not equal totals when added due to the rounding of averages or the inclusion in the total figure of employees that were not disclosed in individual classifications. (2) Figures are averaged through the second quarter of 2018. Source: State of Colorado, Department of Labor and Employment, Labor Market Information, Quarterly Census of Employment and Wages (QCEW). Major Employers The following table sets forth a brief description of selected major employers located in the City and surrounding area. No independent investigation of the stability or financial condition of the employers listed hereafter has been conducted; therefore, no representation can be made that these employers will continue to maintain their status as major employers in Larimer County. 50 Major Employers in the City of Fort Collins and Surrounding Area Name of Employer Product or Service Estimated Number of Employees UCHealth(1) Healthcare 7,963 Colorado State University Higher education 6,701 Poudre School District R-1 K-12 education 3,615 City of Fort Collins Government 2,400 Larimer County Government 1,639 Broadcom Ltd. Optoelectronic components/subsystems 1,500 Woodward Inc. Industrial engine components 1,475 Front Range Community College Higher education 939 Otter Products Electronic device protection 854 Advanced Energy Industries Inc. Power conversion solutions 500 (1) UCHealth includes Poudre Valley Hospital. Source: BizWest 2018 Book of Lists. Building Permits The following table sets forth the number of permits issued for construction in the City during the time period indicated. History of Building Permits Issued in the City of Fort Collins New Single Family(1) New Multi-Family New Commercial(2) Year Permits Valuation Units Valuation Permits Valuation 2013 630 $127,920,926 555 $58,992,399 10 $ 13,358,135 2014 743 164,923,337 349 42,531,913 25 134,036,045 2015 509 133,046,263 465 59,469,368 30 107,395,464 2016 522 142,232,626 968 117,394,354 24 70,873,280 2017 583 123,784,230 695 103,976,330 28 54,560,177 2018(3) 347 90,553,519 386 45,984,881 9 31,865,844 (1) Includes Single Family Detached and Single Family Attached dwellings. (2) Includes hotels/motels; office/bank/professional; mercantile/retail/services; recreation; garage/service station; grocery/convenience store; and industrial construction. (3) Through September 30, 2018. Source: City of Fort Collins Building Services Department. Foreclosure Activity The following table sets forth the number of foreclosures filed in Larimer County during the time period shown. Such information only represents the number of foreclosures filed and does not take into account foreclosures which were filed and subsequently redeemed or withdrawn. 51 History of Foreclosures – Larimer County Year Number of Foreclosures Percent Change 2014 399 -- 2015 294 (26.3)% 2016 260 (11.6) 2017 236 (9.2) 2018 190 (19.5) Sources: Colorado Division of Housing (2014 to 2017 figures) and Public Trustee’s Office of Larimer County (2018 figure). Education Poudre School District R-1, which includes substantially the entire City, presently has 28 elementary schools, eight middle schools, four senior high schools, two alternative high schools, five charter schools, and five option schools. Total enrollment was 29,190 students for the 2017-18 school year. The main campus of Colorado State University (the “University”) is located in the City. The University was established in 1870 as the “Colorado Agricultural College” on land owned by the United States Department of Agriculture, and, with the adoption of the State Constitution in 1876, became a State institution. The University has eight colleges: (1) Agricultural Sciences, (2) Business, (3) Walter Scott, Jr. College of Engineering, (4) Health and Human Sciences, (5) Liberal Arts, (6) Natural Sciences, (7) Veterinary Medicine and Biomedical Sciences, and (8) Warner College of Natural Resources. The University offers academic programs enabling students to obtain undergraduate, graduate and doctoral degrees. Enrollment in the fall of 2018 was approximately 28,691 resident instruction students, defined as those students who study on campus. 52 TAX MATTERS In the opinion of Special Counsel, assuming continuous compliance with certain covenants described below, the portion of the Base Rentals which is designated in the Lease and paid by the Trustee as interest on the Certificates, is excludable from gross income under federal income tax laws pursuant to Section 103 of the Tax Code, is excludable from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code, and is excludable from Colorado taxable income and Colorado alternative minimum taxable income under Colorado income tax laws in effect on the date of delivery of the Certificates. The opinion of Special Counsel does not cover the treatment for federal or Colorado income tax purposes of any monies received in payment of or in respect to the Certificates subsequent to the occurrence of an Indenture Event of Default, an Event of Lease Default or an Event of Nonappropriation. The Tax Code and Colorado law impose several requirements which must be met with respect to the Certificates in order for the interest thereon to be excludable from gross income, alternative minimum taxable income, Colorado taxable income and Colorado alternative minimum taxable income. Certain of these requirements must be met on a continuous basis throughout the term of the Certificates. These requirements include: (a) limitations as to the use of proceeds of the Certificates; (b) limitations on the extent to which proceeds of the Certificates may be invested in higher yielding investments; and (c) a provision, subject to certain limited exceptions, that requires all investment earnings on the proceeds of the Certificates above the yield on the Certificates to be paid to the United States Treasury. The City covenants and represent in the Lease that it will, during the Lease Term, take all steps to comply with the requirements of the Tax Code and Colorado law (in effect on the date of delivery of the Certificates) to the extent necessary to maintain the exclusion of interest on the Certificates from gross income and alternative minimum taxable income under such federal income tax laws and Colorado taxable income and Colorado alternative minimum taxable income under such Colorado income tax laws. Special Counsel’s opinion as to the exclusion of interest on the Certificates from gross income, alternative minimum taxable income (to the extent described above), Colorado taxable income and Colorado alternative minimum taxable income is rendered in reliance on these covenants and assumes continuous compliance therewith. (The foregoing covenant does not, however, preclude the City from exercising its right to terminate the Lease at the times and in the manner previously described in this Official Statement.) The failure or inability of the City to comply with these requirements could cause the interest on the Certificates to be included in gross income, alternative minimum taxable income, Colorado taxable income or Colorado alternative minimum taxable income, or a combination thereof, from the date of issuance. Special Counsel’s opinion also is rendered in reliance upon certifications of the City and other certifications furnished to Special Counsel. Special Counsel has not undertaken to verify such certifications by independent investigation. The Tax Code contains numerous provisions which may affect an investor’s decision to purchase the Certificates. Owners of the Certificates should be aware that the ownership of tax-exempt obligations by particular persons and entities, including, without limitation, financial institutions, insurance companies, recipients of Social Security or Railroad Retirement benefits, taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, foreign corporations doing business in the United States and certain “subchapter S” corporations may result in adverse federal and Colorado tax consequences. Under Section 3406 of the Tax Code, backup withholding may be imposed on 53 payments on the Certificates made to any owner who fails to provide certain required information, including an accurate taxpayer identification number, to certain persons required to collect such information pursuant to the Tax Code. Backup withholding may also be applied if the owner underreports “reportable payments” (including interest and dividends) as defined in Section 3406, or fails to provide a certificate that the owner is not subject to backup withholding in circumstances where such a certificate is required by the Tax Code. The Certificates were sold at a premium, representing a difference between the original offering price of those Certificates and the principal amount thereof payable at maturity. Under certain circumstances, an initial owner of such Certificates (if any) may realize a taxable gain upon their disposition, even though such Certificates are sold or redeemed for an amount equal to the owner’s acquisition cost. Special Counsel’s opinion relates only to the exclusion of interest on the Certificates from gross income, alternative minimum taxable income, Colorado taxable income and Colorado alternative minimum taxable income as described above and will state that no opinion is expressed regarding other federal or Colorado tax consequences arising from the receipt or accrual of interest on or ownership of the Certificates. Owners of the Certificates should consult their own tax advisors as to the applicability of these consequences. The opinions expressed by Special Counsel are based on existing law as of the delivery date of the Certificates. No opinion is expressed as of any subsequent date nor is any opinion expressed with respect to pending or proposed legislation. Amendments to the federal or State tax laws may be pending now or could be proposed in the future that, if enacted into law, could adversely affect the value of the Certificates, the exclusion of interest on the Certificates from gross income or alternative minimum taxable income or both from the date of issuance of the Certificates or any other date, or that could result in other adverse tax consequences. In addition, future court actions or regulatory decisions could affect the market value of the Certificates. Owners of the Certificates are advised to consult with their own tax advisors with respect to such matters. The Internal Revenue Service (the “Service”) has an ongoing program of auditing tax-exempt obligations to determine whether, in the view of the Service, interest on such tax- exempt obligations is includable in the gross income of the owners thereof for federal income tax purposes. No assurances can be given as to whether or not the Service will commence an audit of the Certificates. If an audit is commenced, the market value of the Certificates may be adversely affected. Under current audit procedures, the Service will treat the City as the taxpayer and the Owners may have no right to participate in such procedures. The City has covenanted in the Lease not to take any action that would cause the interest on the Certificates to lose its exclusion from gross income for federal income tax purposes or lose its exclusion from alternative minimum taxable income for the owners thereof for federal income tax purposes. None of the City, the Municipal Advisor or Special Counsel is responsible for paying or reimbursing any Registered Owner or Beneficial Owner for any audit or litigation costs relating to the Certificates. 54 LEGAL MATTERS Litigation The City Attorney states that there are no pending lawsuits or claims that have been filed against the City that will materially adversely affect the financial position of the City or its ability to enter into the Lease or to pay Base Rentals under the Lease as set forth therein. The City is, however, subject to certain pending and threatened litigation or administrative proceedings regarding various other matters arising in the ordinary course of the City’s business. It is the opinion of the City Attorney that the pending litigation is either adequately covered by insurance or, to the extent not insured, the final settlement thereof, individually or in the aggregate, is not expected to materially adversely affect the City’s financial position or its ability to perform its obligations under the Lease. Sovereign Immunity The Colorado Governmental Immunity Act, Title 24, Article 10, C.R.S. (the “Immunity Act”), provides that, with certain specified exceptions, sovereign immunity acts as a bar to any action against a public entity, such as the City, for injuries which lie in tort or could lie in tort. The Immunity Act provides that sovereign immunity is waived by a public entity for injuries occurring as a result of certain specified actions or conditions, including: the operation of a non-emergency motor vehicle owned or leased by the public entity; operation and maintenance of any public water, gas, sanitation, electrical, power or swimming facility; a dangerous condition of any public buildings; and a dangerous condition of a public highway, road or street as provided in the Immunity Act. In such instances, the public entity may be liable for injuries arising from an act or omission of the public entity, or an act or omission of its public employees, which are not willful and wanton, and which occur during the performance of their duties and within the scope of their employment. The City may not be held liable under the Immunity Act either directly or by indemnification for punitive or exemplary damages unless the City voluntarily pays such damages in accordance with State law. The maximum amounts that may be recovered under the Immunity Act for injuries occurring on or after January 1, 2018, whether from one or more public entities and public employees, are as follows: (a) for any injury to one person in any single occurrence, the sum of $387,000; and (b) for an injury to two or more persons in any single occurrence, the sum of $1,093,000; except in such instance, no person may recover in excess of $387,000. Those amounts will increase every four years pursuant to a formula based on the Denver-Boulder- Greeley Consumer Price Index. Lower amounts are recoverable for injuries accruing prior to January 1, 2018. The City may be subject to civil liability and damages including punitive or exemplary damages and it may not be able to claim sovereign immunity for actions founded upon various federal laws, or other actions filed in federal court. Examples of such civil liability include suits filed pursuant to 42 U.S.C. § 1983 alleging the deprivation of federal constitutional or statutory rights of an individual. In addition, the City may be enjoined from engaging in anti- competitive practices which violate the antitrust laws. 55 Approval of Certain Legal Proceedings The approving opinion of Butler Snow LLP, as Special Counsel, will be delivered with the Certificates. A form of the Special Counsel opinion is attached to this Official Statement as Appendix E. Butler Snow LLP, Denver, Colorado, has also acted as Special Counsel to the City in connection with this Official Statement. Certain matters will be passed upon for the City by the City Attorney. Certain Constitutional Limitations General. In 1992, Colorado voters approved a constitutional amendment which is codified as Article X, Section 20, of the Colorado Constitution (the Taxpayers Bill of Rights or “TABOR”). In general, TABOR restricts the ability of the State and local governments to increase revenues and spending, to impose taxes, and to issue debt and certain other types of obligations without voter approval. TABOR generally applies to the State and all local governments, including school districts (“local governments”), but does not apply to “enterprises,” defined as government-owned businesses authorized to issue revenue bonds and receiving under 10% of annual revenue in grants from all state and local governments combined. Because some provisions of TABOR are unclear, litigation seeking judicial interpretation of its provisions has been commenced on numerous occasions since its adoption. Additional litigation may be commenced in the future seeking further interpretation of TABOR. No representation can be made as to the overall impact of TABOR on the future activities of the City, including its ability to generate sufficient revenues for its general operations, to undertake additional programs or to engage in any subsequent financing activities. Voter Approval Requirements and Limitations on Taxes, Spending, Revenues, and Borrowing. TABOR requires voter approval in advance for: (a) any new tax, tax rate increase, mill levy above that for the prior year, valuation for assessment ratio increase, extension of an expiring tax, or a tax policy change causing a net tax revenue gain; (b) any increase in a local government’s spending from one year to the next in excess of the limitations described below; (c) any increase in the real property tax revenues of a local government from one year to the next in excess of the limitations described below; or (d) creation of any multiple- fiscal year direct or indirect debt or other financial obligation whatsoever, subject to certain exceptions such as the refinancing of obligations at a lower interest rate. In the opinion of Special Counsel, based upon decisions of the Colorado appellate courts, the Lease does not constitute a “multiple fiscal year obligation” which requires an election under the terms of TABOR. TABOR limits increases in government spending and property tax revenues to, generally, the rate of inflation and a local growth factor which is based upon, for school districts, the percentage change in enrollment from year to year, and for non-school districts, the actual value of new construction in the local government. Unless voter approval is received as described above, revenues collected in excess of these permitted spending limitations must be rebated. Debt service on bonds can be paid without regard to any spending limits, assuming revenues are available to do so. In 1997, the City received approval from its voters to collect and spend, for 1996 and each subsequent year, the full proceeds received pursuant to the City’s property taxes and all other funds and revenue sources that exceed the TABOR revenue and spending limitations, 56 provided such excess revenues are spent for one or more of the following purposes: public health and safety, including, but not limited to, environmental monitoring and mitigation; growth management; transportation services; and maintaining and repairing City facilities. Emergency Reserve Funds. TABOR also requires local governments to establish emergency reserve funds. The reserve fund must consist of at least 3% of fiscal year spending. TABOR allows local governments to impose emergency taxes (other than property taxes) if certain conditions are met. Local governments are not allowed to use emergency reserves or taxes to compensate for economic conditions, revenue shortfalls, or local government salary or benefit increases. The City has set aside emergency reserves as required by TABOR. Other Limitations. TABOR also prohibits new or increased real property transfer tax rates and local government income taxes. TABOR allows local governments to enact exemptions and credits to reduce or end business personal property taxes; provided, however, the local governments’ spending is reduced by the amount saved by such action. With the exception of K-12 public education and federal programs, TABOR also allows local governments (subject to certain notice and phase-out requirements) to reduce or end subsidies to any program delegated for administration by the General Assembly; provided, however, the local governments’ spending is reduced by the amount saved by such action. Police Power The obligations of the City are subject to the reasonable exercise in the future by the State and its governmental bodies of the police power inherent in the sovereignty of the State and to the exercise by the United States of America of the powers delegated to it by the federal constitution, including bankruptcy. MUNICIPAL ADVISOR Hilltop Securities, Inc., Denver, Colorado (the “Municipal Advisor”) has served as Municipal Advisor to the City with respect to the Certificates. As the City’s Municipal Advisor, the Municipal Advisor has assisted in the preparation of this Official Statement and in other matters relating to the planning, structuring, rating and issuance of the Certificates. In its role of Municipal Advisor to the City, the Municipal Advisor has not undertaken either to make an independent verification of or to assume responsibility for the accuracy or completeness of the information contained in the Official Statement and the appendices hereto. INDEPENDENT AUDITORS The basic financial statements of the City for the fiscal year ended December 31, 2017, included in this Official Statement as Appendix A, have been audited by RSM US LLP, certified public accountants, Denver, Colorado, to the extent and for the period indicated in their report thereon. The City will not obtain a consent letter from its auditor for the inclusion of the audit report in this Official Statement. RSM US LLP, the City’s independent auditor, has not been engaged to perform, and has not performed, since the date of the report included herein, any procedures on the financial statements addressed in that report. RSM US LLP also has not performed any procedures relating to this Official Statement. 57 RATING Moody’s Investors Service (“Moody’s”) has assigned the Certificates the rating shown on the cover page of this Official Statement. An explanation of the significance of any Moody’s rating may be obtained from Moody’s at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007. The rating reflect only the views of the rating agency, and there is no assurance that the rating will continue for any given period of time or that the rating will not be revised downward or withdrawn entirely by the rating agency if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price or liquidity of the Certificates. Except for its responsibilities under the Disclosure Certificate, the City has not undertaken any responsibility to bring to the attention of the owners of the Certificates any proposed change in or withdrawal of such ratings once received or to oppose any such proposed revision. PUBLIC SALE The City expects to offer the Certificates at public sale on Tuesday, March 5, 2019. See the Notice of Public Sale dated February 22, 2019. OFFICIAL STATEMENT CERTIFICATION The preparation of this Official Statement and its distribution has been authorized by the City. This Official Statement is hereby duly approved by the City as of the date on the cover page hereof. CITY OF FORT COLLINS, COLORADO By: Mayor A-1 APPENDIX A AUDITED BASIC FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017 NOTE: The audited basic financial statements of the City for the year ended December 31, 2017, have been excerpted from the City’s Comprehensive Annual Financial Report for that year. Combining and individual fund financial statements, the introductory section and statistical tables for the year ended December 31, 2017, were purposely excluded from this Appendix A. Such statements provide supporting details and are not necessary for a fair presentation of the general purpose financial statement of the City. B-1 APPENDIX B CERTAIN DEFINITIONS AND DOCUMENT SUMMARIES C-1 APPENDIX C BOOK-ENTRY ONLY SYSTEM DTC will act as securities depository for the Certificates. The Certificates 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 Certificate will be issued for each maturity of the Certificates, in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book- entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the Certificates on DTC’s records. The ownership interest of each actual purchaser of each Certificate (“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 Certificates are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Certificates representing their ownership interests in Certificates, except in the event that use of the book-entry system for the Certificates is discontinued. To facilitate subsequent transfers, all Certificates 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 Certificates with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Certificates; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Certificates 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. C-2 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 Certificates may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Certificates, such as redemptions, tenders, defaults, and proposed amendments to the Certificate documents. For example, Beneficial Owners of Certificates may wish to ascertain that the nominee holding the Certificates 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 Trustee and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Certificates 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. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Certificates unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, interest and redemption proceeds on the Certificates will be made to Cede& Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the City or the Trustee on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, interest or redemption proceeds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Certificates at any time by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Certificates will be printed and delivered to DTC. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. D-1 APPENDIX D FORM OF CONTINUING DISCLOSURE CERTIFICATE E-1 APPENDIX E FORM OF OPINION OF SPECIAL COUNSEL E-2 45770288.v1 02-05-2019 COPs Financing: I-25/Prospect Interchange & Police Training Facility Blaine Dunn, Sr. Treasury Analyst & Travis Storin, Accounting Director ATTACHMENT 6 Overview • Authorize the financing of: • I-25/Prospect Interchange • Police Training Facility Joint Venture • Financing done through Certificates of Participation (COPs) 2 Connection to Strategic Plan 3 Safe Community • 5.2 – Meet the expected level of core and specialized police services as the community grows Transportation • 6.4 – Support, enhance and accelerate I-25 improvements according to the multi-modal environmental impact statement I-25/Prospect Project Information 4 • Prospect/I-25 Interchange has failing level of service at peak travel times • Total Cost $31M ($24M + urban design) • CDOT cost $12M (half interchange cost) • City cost $19M • Estimated savings of $7M if constructed with I-25 expansion • Partnership with • City of Fort Collins • Town of Timnath • Interchange property owners Intersection Cost & Cost Share 5 Borrow $17.1M for Fort Collins/Timnath/Property Owner Share of Interchange • Total Cost $31M • Includes $7M for Urban Design • CDOT $12M - 50% of base design • City/Property Owners/Timnath $19M • FC = $8.25M • Property Owners = $8.25M • Timnath = $2.5M • Property Owners’ contribution is contingent on development Total FC Property Timnath Overpass Cost $ 19.00 $ 8.25 $ 8.25 $ 2.5 43% 43% 13% Less ROW Value 0.50 TCEF 0.70 0.70 Debt Obligation $ 17.1 $ 7.55 $ 7.05 $ 2.5 % Share 44% 41% 15% Borrow‐Principle $ 17,100,000 Term 20 Interest* 3.50% Payment Share* $1,184,350 $521,115 $ 485,583 $ 177,652 Partners Share Allocation ($ in millions) *Market rates as of 01/25/19; subject to change Police Training Facility Project Information • Total Cost $18.5M • $9.25M from City of Fort Collins • $1.08M Appropriated 2017 • $9.25M from City of Loveland • Estimated completion date of early 2021 and will include: • 50 yard, 21 lane indoor pistol range • 6,000 Sq. Ft. Admin Space including • 2 Classrooms • Office Space • Driving Skid Pad • 1.4 mile driving pursuit/speed track Borrow $8.2M for Fort Collins Share of Facility 6 Project Recap I-25/Prospect • IGA with CDOT • Partnership with Timnath and Interchange Property owners • $31M – Total Project Cost • $12M – CDOT Portion (half of interchange cost) • $19M – City Cost • $1.4M – TCEF money contributed • $500k – Right of Way value contributed $17.1M – Total Amount to Borrow 7 Police Training Facility • Partnership with Loveland • $18.5M – Agreed on total cost • Splitting cost 50/50 • $9.25M – City of Fort Collins Cost • $1.08M Appropriated in 2017 $8.2M – Total Amount to Borrow City is seeking to fund $25.3M Debt Structure • 20 Year Term • Fixed interest rate • Semiannual payments starting in June 2019 • Last payment December 2038 • Borrowing • Issue Costs* $ .3M • Project Amounts 25.3M • Total $ 25.6M 8 *estimate subject to change Debt Service** • 3.50% - Net Interest Cost • Debt Service • $1,752,000 • Purchased budget offer assumed $2,038,500 **Market rates as of 01/25/19; subject to change COP Collateral • 215 N Mason Building • Came off lease in June 2018 • Appraised value of $16.5M • Civic Center Parking Garage • Came off lease in June 2018 • Appraised value of $15.9M • Value of $11.9M after removing leased space on 1st floor • Received Aa1 rating from Moody’s on 1/30 9 Selection Criteria – Minimal Deed Restrictions and Criticality of Service Ordinance • Ordinance No. 021, 2019 – Authorizing the Financing for both projects • Parameters are included in Ordinance for Financing • Maximum annual payment not to exceed: $2,038,500 • Total repayment amount not to exceed: $40,770,000 10 Key Upcoming Dates • February 5 COP Ordinance first reading • February 19 COP Ordinance second reading • February 19 Appropriation and IGA first readings • February 22 Preliminary Official Statement posted to Internet • March 5 Appropriation second reading • March 6 Marketing and Pricing of COPs • March 19 Closing and delivery of proceeds • End of March First Payment to Loveland – subject to construction progress • April First of Three Payments to CDOT 11 COPs can not be sold until IGA with Loveland is finalized 12 Questions and Comments 13 Appendix Interchange Ownership & Development Plans 14 • NW Corner – 144.6 total acres, in PDP • 276 apartments • 27 single family homes • Additional single family homes and commercial development potential (Future) • NE Corner – 110 total acres, in ODP • Industrial/Employment • Commercial • Urban Estate • SE Corner – 17 acres, in ODP • Commercial • SW Corner – 96 acres, owned CSURF • No development plans in review Campus Capacity Segment Assumptions • Increased segment availability • 4 segments of 4 hours/day • 7 days/week • 48 weeks/year • 80% availability • Majority of excess capacity due to track and skid pad Total Segments 2021 2022 2023 2024 2025 Track 1,075 1,075 1,075 1,075 1,075 Skid Pad 1,075 1,075 1,075 1,075 1,075 Ranges (1) 1,075 1,075 1,075 1,075 1,075 Classroom (2) 2,150 2,150 2,150 2,150 2,150 Total Segments 5,376 5,376 5,376 5,376 5,376 Segments Consumed by FC/Loveland Track 89 92 94 97 99 Skid Pad 89 92 94 97 99 Ranges (1) 369 373 377 381 386 Classroom (2) 621 630 639 648 658 Total Segments 1,168 1,186 1,204 1,222 1,242 Percentage of Segments Used In‐house Track 8%9%9%9%9% Skid Pad 8% 9% 9% 9% 9% Ranges (1) 34% 35% 35% 35% 36% Classroom (2) 29% 29% 30% 30% 31% Total Segments 22% 22% 22% 23% 23% 15 Facility Revenue & Cost Facility Cost Assumptions • Rental Revenue based on avg. $325/segment • No FRCC Academy revenue • 2 Dedicated FTEs • Loveland provides administrative support • Capital Renewal for Future maintenance • Before savings, additional $200k of O&M per city Training Facility Operating Costs ($ 000's) 2020 2021 2022 2023 2024 Revenue Class Charge to Outside User $ ‐ $ 24 $ 49 $ 50 $ 52 Rental Revenue ‐ 54 111 114 118 Total Revenue $ ‐ $ 78 $ 160 $ 165 $ 170 Expenses Personnel 29 151 155 160 165 Admin/Classroom ‐ 35 36 37 38 Shooting Range ‐ 135 139 143 147 Driving Track/ Pad and Parking lot ‐ ‐ 50 50 50 Insurance /Admin Charge/WFO ‐ 97 116 120 123 Capital Renewal ‐ 61 63 65 66 Total Expense $ 29 $ 479 $ 560 $ 575 $ 591 Training Facility Income/(Loss) $ (29) $ (401) $ (400) $ (410) $ (421) 16 Construction & Operations IGA • IGA governs construction, facility operations and maintenance after completion • Loveland is lead on construction, contracting and project management • LEED certification & Zero Energy for class rooms and office space • Facility Management - Shared operational decision authority by both Chiefs • Chiefs develop annual Operational Plan & budget – feeds each City’s budget process • O&M cost net of rental revenue and prior year underspend shared 50/50 • Loveland provides Administrative Services support for a fee– finance, hr, facilities, legal, etc. • Capital Renewal of $60k per year included in budget – non-lapsing and builds over time • Grants will be pursued to enhance track and skid pad above base design 17 If COPs Approved by Council, IGA will be Considered at 2/19 Council Meeting Ground Lease IGA • Federal Aviation Administration released portion of Airport for use of joint training facility • Part of release required Fort Collins and Loveland to lease the property at fair market value • Fort Collins and Loveland entering into IGA for released property to be used as joint training facility • IGA establishes fair market value rental rate • Each city will contribute 50% of rental rate to the Airport 18 If COPs Approved by Council, IGA will be Considered at 2/19 Council Meeting Debt Structure – No LEED Waiver • 20 Year Term • Fixed interest rate • Semiannual payments starting in June 2019 • Last payment December 2038 • Borrowing • Issue Costs* $ .3M • Project Amounts 26.0M • Total $ 26.3M 19 *estimate subject to change Debt Service** • 3.50% - Net Interest Cost • Debt Service • $1,801,000 • Purchased budget offer assumed $2,038,500 **Market rates as of 01/25/19; subject to change Outstanding Debt 20 $64 $60 $55 $52 $48 $41 $37 $33 $29 $25 $29 $24 $45 $41 $98 $87 $106 $114 $104 $93 $82 $73 $63 $53 $42 $158 $152 $149 $10 $18 $0 $16 $13 $12 $28 $26 $24 $21 $19 $16 $14 $11 $0 $50 $100 $150 $200 $250 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Millions Outstanding Debt with 2019 COPs Governmental Proprietary Funds DDA/URA *Debt service excludes capitalized interest for Broadband 1.6% 1.9% 1.8% 1.5% 1.4% 1.2% 1.0% 1.0% 1.0% 0.9% 0.8% 1.1% 1.2% 0.9% 4.2% 4.5% 4.4% 3.2% 3.2% 3.1% 3.1% 2.8% 2.6% 2.4% 2.2% 2.3% 1.3% -1- ORDINANCE NO. 021, 2019 OF THE COUNCIL OF THE CITY OF FORT COLLINS AUTHORIZING THE LEASING OF CERTAIN CITY PROPERTY AND THE EXECUTION AND DELIVERY BY THE CITY OF A SITE LEASE, A LEASE AGREEMENT, AND OTHER DOCUMENTS AND MATTERS IN CONNECTION WITH THE FINANCING OF CERTAIN PROJECTS FOR THE CITY WHEREAS, the City of Fort Collins, Colorado (the “City”) is a duly organized and existing home rule municipality of the State of Colorado, created and operating pursuant to Article XX of the Constitution of the State of Colorado and the home rule charter of the City (the “Charter”); and WHEREAS, the City is authorized by Article XX, Section 6 of the Colorado Constitution, and part 8 of Article 15 of title 31, Colorado Revised Statutes (“C.R.S.”), to enter into rental or leasehold agreements in order to provide necessary land, buildings, equipment and other property for governmental or proprietary purposes; and WHEREAS, the City Council of the City (the “City Council”) is authorized by Chapter 23, Article IV, Division 2 of the Fort Collins Municipal Code, to lease any and all interests in real property owned in the name of the City if the City Council first finds that the lease is in the best interest of the City; and WHEREAS, the City Council has determined and hereby determines that it is in the best interests of the City and its inhabitants to finance a portion of the cost of (a) the improvements to the highway interchange at Interstate Highway I-25 and Prospect Road in the City, and (b) the construction of a joint police training facility with the City of Loveland, Colorado (jointly, the “Project”); and WHEREAS, the City Council has determined and hereby determines that it is in the best interest of the City to finance the acquisition, construction and installation of the Project by entering into a lease financing, as hereinafter provided; and WHEREAS, the proceeds of the lease financing, together with other available moneys of the City, will be used to finance the acquisition, construction and installation of the Project; and WHEREAS, the City Council has determined and hereby determines that the leased property under the Site Lease (hereinafter defined) and the Lease (hereinafter defined) will consist of certain parcels owned by the City (collectively the “Site”) and the buildings and improvements located thereon, which presently serve as the Civic Center and the Civic Center Parking Garage (as more particularly described in Exhibit A to the Site Lease and the Lease, the “Leased Property”); and WHEREAS, the City Council now hereby determines that in order to finance the acquisition, construction and installation of the Project, it is in the best interest of the City and its inhabitants that (a) the City enter into a Site and Improvement Lease (the “Site Lease”) with U.S. Bank National Association, as trustee (the “Trustee”) under the Indenture (hereinafter defined) -2- pursuant to which the City will lease the Leased Property to the Trustee, and that (b) the City enter into a Lease Purchase Agreement (the “Lease”) with the Trustee pursuant to which the Trustee will lease the Leased Property back to the City; and WHEREAS, pursuant to the Lease, and subject to the right of the City to terminate the Lease and other limitations as therein provided, the City will pay certain Base Rentals and Additional Rentals (as such terms are defined in the Lease) in consideration for the right of the City to use the Leased Property; and WHEREAS, the City’s obligation under the Lease to pay Base Rentals and Additional Rentals shall be from year to year only; shall constitute currently budgeted expenditures of the City; shall not constitute a mandatory charge or requirement in any ensuing budget year; shall not constitute a general obligation or other indebtedness or multiple fiscal year financial obligation of the City within the meaning of any constitutional, charter, statutory limitation or other requirement concerning the creation of indebtedness or multiple fiscal year financial obligation, nor a mandatory payment obligation of the City in any ensuing fiscal year beyond any fiscal year during which the Lease shall be in effect; and WHEREAS, the Trustee will enter into an Indenture of Trust (the “Indenture”) pursuant to which there will be executed and delivered certain certificates of participation (the “Certificates”) dated as of their date of delivery that shall evidence proportionate interests in the right to receive certain Revenues (as defined in the Lease), which Certificates shall be payable solely from the sources therein provided and shall not directly or indirectly obligate the City to make any payments beyond those appropriated for any fiscal year during which the Lease shall be in effect; and WHEREAS, at a public sale to be held in connection with the sale of the Certificates, the City anticipates receiving a proposal from a purchaser for the purchase of the Certificates; and WHEREAS, the City Council has determined and now hereby determines that the competitive sale of the Certificates is to the best advantage of the City; and WHEREAS, the net proceeds from the sale of the Certificates, together with other available moneys of the City, will finance the acquisition, construction and installation of the Project and pay the costs of issuance in connection therewith; and WHEREAS, Section 11-57-204 of the Supplemental Public Securities Act, constituting Title 11, Article 57, Part 2, C.R.S., as amended (the “Supplemental Act”), provides that a public entity, including the City, may elect in an act of issuance to apply all or any of the provisions of the Supplemental Act; and WHEREAS, there has been presented to the City Council and are on file at the City offices the following: (i) the proposed form of the Site Lease; (ii) the proposed form of the Lease; (iii) the proposed form of the Continuing Disclosure Certificate to be provided by the City in connection with the execution and delivery of the Certificates (the “Disclosure Certificate”); (iv) the proposed form of the Notice of Sale to be used in connection with the competitive sale of the Certificates (the “Notice of Sale”); and (v) the Preliminary Official Statement (the “Preliminary Official Statement”) relating to the Certificates; and -3- WHEREAS, capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Lease. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS, COLORADO as follows: Section 1. Recitals Incorporated. The foregoing recitals are incorporated herein by reference and adopted as findings and determinations of the City Council. Section 2. Ratification and Approval of Prior Actions. All action heretofore taken (not inconsistent with the provisions of this Ordinance) by the City Council or the officials, officers, agents or employees of the City relating to the execution and delivery of the Site Lease and the Lease, the acquisition, construction and installation of the Project, and the sale, execution and delivery of the Certificates is hereby ratified, approved and confirmed. Section 3. Finding of Best Interests. The City Council hereby finds and determines, pursuant to the Colorado Constitution, the laws of the State of Colorado and the Charter, that the acquisition, construction and installation of the Project, and the financing of the costs thereof, including the costs of issuance incurred in connection therewith, pursuant to the terms set forth in the Site Lease, the Lease, the Indenture and the Sale Certificate (hereinafter defined) are necessary, convenient, and in furtherance of the City’s public purposes and are in the best interests of the City and the City Council hereby authorizes and approves the same. Section 4. Supplemental Act; Parameters. The City Council hereby elects to apply all of the provisions of the Supplemental Act to the Site Lease and the Lease and in connection therewith delegates to each of the City Manager or the Financial Officer of the City (the “Financial Officer”) the independent authority to make any determination delegable pursuant to Section 11-57-205(1)(a-i) C.R.S., as amended, in relation to the Site Lease and the Lease, and to execute a sale certificate (the “Sale Certificate”) setting forth such determinations, including without limitation, the term of the Site Lease, the rental amount to be paid by the Trustee pursuant to the Site Lease, the term of the Lease, and the rental amount to be paid by the City pursuant to the Lease, subject to the following parameters and restrictions: a. the term of the Site Lease shall not extend beyond December 31, 2048; b. the consideration to be paid by the Trustee to the City pursuant to the Site Lease shall not be less than $25,000,000; c. the Lease Term shall not extend beyond December 31, 2038; d. the maximum annual repayment amount of the Base Rentals payable by the City under the Lease shall not exceed $2,038,500; e. the maximum total repayment amount of the Base Rentals payable by the City pursuant to the Lease shall not exceed $40,770,000; and f. the purchase price of the Certificates shall not be less than 98% of the principal amount of the Certificates. -4- Pursuant to Section 11-57-205 of the Supplemental Act, the City Council hereby delegates to each of the City Manager or the Financial Officer the independent authority to receive bids for the purchase of the Certificates and to determine the best bid therefor in accordance with the provisions of this Ordinance, and subject to the parameters set forth herein and the other terms and provisions set forth in this Ordinance and the Notice of Sale. Each of the City Manager and the Financial Officer are hereby independently authorized to accept a binding bid for the Certificates. The purchaser of the Certificates and the terms of the winning bid shall be set forth in the Sale Certificate. The delegation set forth in this Section 4 shall be effective for one year following the effective date of this Ordinance. The City Council hereby agrees and acknowledges that the net proceeds of the Certificates will be used, together with other available moneys of the City, to finance the costs of acquiring, constructing and installing the Project and to pay costs of issuance. Section 5. Approval of Documents. The Site Lease, the Lease and the Disclosure Certificate, in substantially the forms presented to the City Council and on file with the City, are in all respects approved, authorized and confirmed, and the Mayor of the City is hereby authorized and directed for and on behalf of the City to execute and deliver the Site Lease, the Lease and the Disclosure Certificate, in substantially the forms and with substantially the same contents as presented to the City Council, provided that such documents may be completed, corrected or revised as deemed necessary by the parties thereto in order to carry out the purposes of this Ordinance. The execution of the Site Lease, the Lease and the Disclosure Certificate by the Mayor shall be conclusive evidence of the approval by the City Council of such documents in accordance with the terms hereof and thereof. Section 6. Competitive Sale of Certificates; Notice of Sale. The Certificates shall be sold by competitive sale in accordance with the Notice of Sale. The City Council hereby approves the Notice of Sale in substantially the form presented to the City Council and on file with the City, provided that such Notice of Sale may be completed, corrected or revised as deemed necessary by the City Manager or the Financial Officer in order to carry out the purposes of this Ordinance. The Financial Officer is hereby authorized and directed to cause the Notice of Sale to be distributed to prospective bidders on the Certificates. Section 7. Official Statement. The designation of the Preliminary Official Statement by the Mayor or the City Manager as a “nearly final Official Statement” for purposes of Rule 15c2-12 of the Securities and Exchange Commission is hereby authorized and confirmed. A final Official Statement, in substantially the form of the Preliminary Official Statement presented to the City Council and on file with the City, is in all respects approved and authorized. The Mayor is hereby authorized and directed to execute and deliver the final Official Statement, for and on behalf of the City, in substantially the form and with substantially the same content as the Preliminary Official Statement presented to the City Council and on file with the City, provided that such document may be completed, corrected, or revised as deemed necessary by the City Manager or the Financial Officer. The distribution of the Notice of Sale, the Preliminary Official Statement and the final Official Statement to prospective purchasers of the Certificates is hereby ratified, approved, and authorized. -5- Section 8 Direction to Act. The City Clerk is hereby authorized and directed to attest all signatures and acts of any official of the City in connection with the matters authorized by this Ordinance and to place the seal of the City on any document authorized and approved by this Ordinance. The Mayor, the City Clerk, the City Manager, the Financial Officer, the City Attorney and other employees and officials of the City are hereby authorized and directed to execute and deliver for and on behalf of the City any and all additional certificates, documents and other papers, and to perform all other acts that they may deem necessary or appropriate in order to implement and carry out the transactions and other matters authorized by this Ordinance. The approval hereby given to the various documents referred to above includes an approval of such additional details therein as may be necessary and appropriate for their completion, deletions therefrom and additions thereto as may be approved by the City Manager or the Financial Officer prior to the execution of the documents. The execution of any instrument by the appropriate officers of the City herein authorized shall be conclusive evidence of the approval by the City of such instrument in accordance with the terms hereof. Section 9. No General Obligation Debt. No provision of this Ordinance, the Site Lease, the Lease, the Indenture, the Disclosure Certificate, the Notice of Sale, the Preliminary Official Statement, the final Official Statement or the Certificates shall be construed as creating or constituting a general obligation or other indebtedness or multiple fiscal year financial obligation of the City within the meaning of any constitutional, statutory or Charter provision, nor a mandatory charge or requirement against the City in any ensuing fiscal year beyond the then current fiscal year. The City shall have no obligation to make any payment with respect to the Certificates except in connection with the payment of the Base Rentals and certain other payments under the Lease, which payments may be terminated by the City in accordance with the provisions of the Lease. Neither the Lease nor the Certificates shall constitute a mandatory charge or requirement of the City in any ensuing fiscal year beyond the then current fiscal year or constitute or give rise to a general obligation or other indebtedness or multiple fiscal year financial obligation of the City within the meaning of any constitutional, statutory or Charter debt limitation and shall not constitute a multiple fiscal year direct or indirect debt or other financial obligation whatsoever. No provision of the Site Lease, the Lease or the Certificates shall be construed or interpreted as creating an unlawful delegation of governmental powers nor as a donation by or a lending of the credit of the City within the meaning of Sections 1 or 2 of Article XI of the Colorado Constitution. Neither the Lease nor the Certificates shall directly or indirectly obligate the City to make any payments beyond those budgeted and appropriated for the City’s then current fiscal year. Section 10. Reasonableness of Rentals; Fair Market Value. The City Council hereby determines and declares that the Base Rentals due under the Lease, in the maximum amounts authorized pursuant to Section 4 hereof, constitute the fair rental value of the Leased Property and do not exceed a reasonable amount so as to place the City under an economic compulsion to renew the Lease or to exercise its option to purchase the Trustee’s leasehold interest in the Leased Property pursuant to the Lease. The City Council hereby determines and declares that the period during which the City has an option to purchase the Trustee’s leasehold interest in the Leased Property (i.e., the entire maximum term of the Lease) does not exceed the useful life of the Leased Property. -6- The City Council hereby further determines that the amount of rental payments to be received by the City from the Trustee pursuant to the Site Lease, in accordance with the provisions set forth in Section 4 hereof, is fair market consideration for the leasing of the Leased Property to the Trustee for the term of the Site Lease as provided therein. Section 11. No Recourse against Officers and Agents. Pursuant to Section 11-57-209 of the Supplemental Act, if a member of the City Council, or any officer or agent of the City acts in good faith, no civil recourse shall be available against such member, officer, or agent for payment of the principal, interest or prior redemption premiums on the Certificates. Such recourse shall not be available either directly or indirectly through the City Council or the City, or otherwise, whether by virtue of any constitution, statute, rule of law, enforcement of penalty, or otherwise. By the acceptance of the Certificates and as a part of the consideration of their sale or purchase, any person purchasing or selling such Certificate specifically waives any such recourse. Section 12. Repealer. All ordinances, resolutions, bylaws, orders, and other instruments, or parts thereof, inconsistent herewith are hereby repealed to the extent only of such inconsistency. This repealer shall not be construed to revive any ordinance, resolution, bylaw, order, or other instrument, or part thereof, heretofore repealed. Section 13. Severability. If any section, subsection, paragraph, clause or other provision of this Ordinance for any reason is held to be invalid or unenforceable, the invalidity or unenforceability of such section, subsection, paragraph, clause or other provision shall not affect any of the remaining provisions of this Ordinance, the intent being that the same are severable. Section 14. Charter Controls. Pursuant to Article XX of the State Constitution and the Charter, all State statutes that might otherwise apply in connection with the provisions of this Ordinance are hereby superseded to the extent of any inconsistencies or conflicts between the provisions of this Ordinance and the Sale Certificate authorized hereby and such statutes. Any such inconsistency or conflict is intended by the City Council and shall be deemed made pursuant to the authority of Article XX of the State Constitution and the Charter. Introduced, considered favorably on first reading, and ordered published this 5th day of February, A.D. 2019, and to be presented for final passage on the 19th day of February, A.D. 2019. __________________________________ Mayor ATTEST: _______________________________ City Clerk -7- Passed and adopted on final reading on the 19th day of February, A.D. 2019. __________________________________ Mayor ATTEST: _______________________________ City Clerk 0.9% 0.7% 0.8% 1.8% 0.4% 1.2% 0.6% 0.7% 1.0% 0.9% 1.1% 1.7% 0.6% 0.6% 0.6% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Debt Service as Percent of Expenditures with 2019 COPs* Governmental Proprietary Funds DDA/URA