OFFICIAL NOTICE OF SALE CITY OF GAINESVILLE, GEORGIA $90,980,000* WATER AND SEWERAGE REFUNDING REVENUE BONDS, SERIES 2014

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1 OFFICIAL NOTICE OF SALE CITY OF GAINESVILLE, GEORGIA $90,980,000* WATER AND SEWERAGE REFUNDING REVENUE BONDS, SERIES 2014 Bids for the purchase of the above bonds (the Series 2014 Bonds ) will be received by the City of Gainesville, Georgia (the City ) until 10:00 a.m., Eastern Time, on Tuesday, December 16, THE BONDS BOND DETAILS: The Series 2014 Bonds will be issued in book-entry only form registered in the name of Cede & Co., the nominee of The Depository Trust Company, New York, New York ( DTC ), in the denomination of $5,000 or any integral multiple thereof. The Bank of New York Mellon Trust Company, N.A., Atlanta, Georgia will serve as registrar and paying agent for the Series 2014 Bonds. The Series 2014 Bonds will be dated as of the date of issuance and delivery, which is expected to be December 23, RATINGS: The Series 2014 Bonds have been rated Aa2 by Moody s and AA- by Standard & Poor s. INTEREST PAYMENTS: Interest on the Series 2014 Bonds will be payable on May 15, 2015 and semi-annually thereafter on November 15 and May 15 in each year until maturity. MATURITY SCHEDULE: The principal of the Series 2014 Bonds shall be payable annually on each November 15 beginning in 2015 through 2028, inclusive. OPTIONAL REDEMPTION: The Series 2014 Bonds maturing on or after November 15, 2025 are subject to redemption, in whole or in part at any time, on or after November 15, 2024 at par plus accrued interest to the redemption date. PURPOSE: The proceeds derived from the sale of the Series 2014 Bonds will be used by the City for the purpose of (a) prepaying loans from the Georgia Environmental Finance Authority and the State Revolving Fund (the GEFA/SRF Loans ), (b) refunding a portion of the City s Water and Sewerage Refunding Revenue Bonds, Series 2005 (the Series 2005 Bonds ) maturing in the years 2016 and thereafter (the Refunded Bonds ) and (c) paying the costs of issuing the Series 2014 Bonds. The Series 2005 Bonds that remain outstanding after the refunding and the City s Water and Sewerage Refunding Revenue Bonds, Series 2006 (the Series 2006 Bonds ) are referred to herein as the Prior Bonds. SECURITY: The Series 2014 Bonds are special limited obligations of the City secured by and payable solely from a first lien on and pledge of the revenues derived by the City from the ownership and operation of the System remaining after the payment of expenses of operating, maintaining and repairing the System (the Net Revenues ). The Series 2014 Bonds do not constitute a charge, lien or encumbrance, legal or equitable, on any other property of the City. Upon the refunding of the Refunded Bonds with the proceeds of the Series 2014 Bonds, the Series 2005 Bonds will be outstanding in the aggregate principal amount of $24,095,000 and the Series 2006 Bonds will be outstanding in the aggregate principal amount of $32,225,000 (the Outstanding Prior Bonds ). The Series 2014 Bonds and the Outstanding Prior Bonds will be secured on parity as to lien on the Net Revenues of the System. On December 16, 2014, the City will take competitive bids to issue bonds (the Series 2015 Bonds ) to finance the forward refunding of the remaining Series 2005 Bonds maturing on and after November 15, If the City determines to proceed with the forward refunding, the Series 2015 Bonds will be in the estimated amount of $18,000,000*, issued on or prior to November 15, 2015, and upon their issuance will * Preliminary, subject to change.

2 City of Gainesville, Georgia Water and Sewerage Refunding Revenue Bonds Official Notice of Sale Series 2014 Page 2 be secured on a parity as to lien on the Net Revenues of the System with the Series 2014 Bonds and the then outstanding Prior Bonds (which will consist, as of November 15, 2015, of the Series 2006 Bonds). The Outstanding Prior Bonds are secured by a debt service reserve fund. The Series 2014 Bonds will not be secured by a debt service reserve fund. AUTHORIZATION: The Series 2014 Bonds will be issued pursuant to and in accordance with the constitution and laws of the State of Georgia and the resolution adopted by the City of November 18, The Series 2014 Bonds were validated by judgment of the Superior Court of Hall County, Georgia on December 9, BID REQUIREMENTS & BASIS OF AWARD BID SUBMISSION: Electronic bids must be submitted via PARITY in accordance with its rules of participation and the provisions of this notice of sale, which shall control in the case of any conflicting provisions. The City shall not be responsible for any failure, misdirection, delay or error in the transmission of any bid. GOOD FAITH DEPOSIT: No good faith deposit is required. INTEREST RATES: Bidders must specify the fixed rates of interest the Series 2014 Bonds of each maturity shall bear to maturity. The stated interest rates for each maturity must not exceed five percent (5.00%) per annum. For Series 2014 Bonds maturing after November 15, 2024, no interest rate shall be lower than the interest rate in the prior year. PURCHASE PRICE: Any aggregate bid price of less than 99% of the aggregate principal amount of the Series 2014 Bonds will be rejected. SPECIAL TERM BONDS OPTION: Bidders for the Series 2014 Bonds have the option of specifying that the principal amount of the Series 2014 Bonds in any two or more consecutive years set forth in the maturity schedule may, in lieu of maturing in each of such years, be considered to comprise one maturity of a term certificate scheduled to mature in the latest of such years and be subject to mandatory redemption by lot at par in each of the years and in the principal amounts set forth in the maturity schedule (subject to adjustment as provided in the paragraph below). BASIS OF AWARD: The Series 2014 Bonds will be awarded to the responsible bidder whose bid results in the lowest TRUE INTEREST COST ( TIC ) to the City. The TIC will be the nominal interest rate which, when compounded semiannually and used to discount all debt service payments on the Series 2014 Bonds (computed at the interest rates specified in the bid and on the basis of a 360-day year comprised of twelve 30-day months) to the expected issuance date of the Series 2014 Bonds, results in an amount equal to the price bid for such Series 2014 Bonds. If two or more bids provide for the same lowest TIC, the City shall determine which bid shall be accepted, and such determination shall be final and conclusive. The City reserves the right to reject any and all bids and to waive informalities in any or all bids. The Series 2014 Bonds will be formally awarded or all bids will be rejected by designated authorized officials of the City at a meeting to occur the evening of Tuesday, December 16, ADJUSTMENT OF MATURITY SCHEDULE: If, after receipt and consideration of the bids, the City determines in its sole discretion that adjustments to the foregoing maturity schedule or any part thereof are necessary, the City reserves the right to either increase or decrease the par amount of the Series 2014

3 City of Gainesville, Georgia Water and Sewerage Refunding Revenue Bonds Official Notice of Sale Series 2014 Page 3 Bonds (all calculations to be rounded to the nearest $5,000), provided that any such decrease or increase shall not exceed 15% of the initial par amount of the Series 2014 Bonds. Such adjustments, if any, will be made and the successful bidder will be notified within 24 hours of the award of the Series 2014 Bonds. In the event of any adjustment of the maturity schedule for the Series 2014 Bonds, no rebidding or recalculation of the bids submitted will be required or permitted. The total purchase price of the Series 2014 Bonds will be increased or decreased in the direct proportion that the adjustment bears to the aggregate principal amount of the Series 2014 Bonds adjusted as specified herein, and the Series 2014 Bonds of each maturity, as adjusted, will bear interest at the same rate and must have the same reoffering yield as is specified in the bid of successful bidder. CUSIP NUMBERS AND DTC ELIGIBLITY: It is the responsibility of the successful bidder to apply for CUSIP numbers for the Series 2014 Bonds and to apply for DTC eligibility for the Series 2014 Bonds. The CUSIPs assigned must be provided to the City upon receipt. Payment for the Series 2014 Bonds shall be made delivery versus payment in immediately available funds on the date of issuance. INFORMATION FROM PURCHASER: The successful bidder for the Series 2014 Bonds shall provide, immediately upon award of the Series 2014 Bonds, the expected reoffering price to the public of each maturity of the Series 2014 Bonds. At or before delivery of the Series 2014 Bonds, the purchaser of the Series 2014 Bonds shall provide a certificate to the City in a form acceptable to Bond Counsel stating the information necessary to enable the City to determine the issue price of the Series 2014 Bonds as defined in Section 1273 or 1274 of the Code, including the price (and yield to maturity or call, as applicable) at which the Series 2014 Bonds will be reoffered to the public, and such other reasonable and customary information as may be requested by Bond Counsel. RIGHT TO REJECT BIDS AND WAIVE IRREGULARITIES: The City reserves the right to reject any and all bids and, to the extent permitted by law, to waive any irregularity or informality in any bid. OTHER INFORMATION OFFICIAL STATEMENT: The preliminary official statement, dated December 9, 2014, has been deemed final by the City for purposes of Rule 15c2-12 of the Securities and Exchange Commission (the Rule ), but is subject to revision, amendment and completion in a final Official Statement as provided in the Rule. Within seven (7) business days of the bid opening date, the City will deliver to the successful bidder a final Official Statement in sufficient quantity to comply with the Rule. CONTINUING DISCLOSURE: The City has covenanted in the Bond Resolution and a Continuing Disclosure Certificate (the Disclosure Certificate ) for the benefit of the beneficial owners of the Series 2014 Bonds to provide certain financial information and operating data relating to the System (the Annual Report ) by not later than the first day of the 7 th calendar month after the end of each fiscal year of the City, commencing with fiscal year 2014, and to provide notices of the occurrence of certain enumerated events. The Annual Report will be filed by the City with the Municipal Securities Rulemaking Board (the MSRB ) in an electronic format as prescribed by the MSRB (which, as of the date hereof, is the Electronic Municipal Market Access ( EMMA ) system of the MSRB). The notices of certain events will be filed by the City with the MSRB in an electronic format as prescribed by the MSRB (which, as of the date hereof, is EMMA). See Appendix D to the preliminary official statement for a form of the Continuing Disclosure Certificate for the specific nature of the information to be contained in the Annual Report or the notices of certain events. These covenants have been made in order to assist the original purchaser of the Series 2014 Bonds in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the Rule ). See CONTINUING DISCLOSURE in the preliminary official statement.

4 City of Gainesville, Georgia Water and Sewerage Refunding Revenue Bonds Official Notice of Sale Series 2014 Page 4 LEGAL OPINION AND CLOSING DOCUMENTS: Upon delivery of the Series 2014 Bonds, the City will furnish a certified copy of the transcript of the record of the validation proceedings, a rule 15c2-12 certificate of the City, a continuing disclosure certificate of the City, a receipt for the bond proceeds, an execution, signature and no-litigation certificate, a non-arbitrage certificate with respect to the Series 2014 Bonds, and the approving opinion of Murray Barnes Finister LLP, Atlanta, Georgia, as Bond Counsel and Disclosure Counsel to the City, all without cost to the purchaser. The approving opinion will provide, among other things, that, in the opinion of Bond Counsel, under existing law, (a) interest on the Series 2014 Bonds is excluded from gross income for federal income tax purposes, (b) interest on the Series 2014 Bonds is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; provided, however, such interest is included in adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations (as defined for federal income tax purposes), and (c) interest on the Series 2014 Bonds is exempt from present State of Georgia income taxation, subject to the exemptions, conditions, and limitations described in the preliminary official statement. RIGHT TO MODIFY, CHANGE OR CANCEL: The City reserves the right to modify this Official Notice of Sale or to change or cancel the date and time for the receipt of bids in its sole discretion, for any reason and at any time prior to the receipt of bids. Any such modifications change or cancelation will be provided to PARITY for communication to potential bidders. ADDITIONAL INFORMATION: The preliminary official statement and this notice of sale are available electronically at Questions regarding the sale of the Series 2014 Bonds should be directed to the City s Financial Advisor, Dianne McNabb, Public Financial Management, Inc., mcnabbd@pfm.com, (404) Date: December 9, 2014.

5 This Preliminary Official Statement and the information contained herein are subject to change, completion or amendment without notice. The Series 2014 Bonds may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of the Series 2014 Bonds in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. PRELIMINARY OFFICIAL STATEMENT DATED DECEMBER 9, 2014 NEW ISSUE - BOOK ENTRY ONLY RATINGS: Moody s: Aa2 S&P: AA- (See MISCELLANEOUS Ratings herein) In the opinion of Bond Counsel, subject to the limitations and conditions described herein, (a) interest on the Series 2014 Bonds (including any original issue discount properly allocable to an owner thereof) is excludable from gross income for federal income tax purposes, and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, such interest is taken into account in determining adjusted current earnings for the purpose of computing the federal alternative minimum tax imposed on certain corporations and (b) interest on the Series 2014 Bonds is exempt from present State of Georgia income taxation. See LEGAL MATTERS Tax Exemption. $90,980,000 * CITY OF GAINESVILLE, GEORGIA Water and Sewerage Refunding Revenue Bonds, Series 2014 Dated: Date of Issuance Due: November 15, as shown on the inside front cover The City of Gainesville, Georgia (the City ) is issuing its Water and Sewerage Refunding Revenue Bonds, Series 2014 (the Series 2014 Bonds ) in fully registered form and in denominations of $5,000, or any integral multiple thereof, for the purpose of (a) refunding a portion of the City s Water and Sewerage Refunding Revenue Bonds, Series 2005, (b) prepaying loans from the Georgia Environmental Finance Authority and the State Revolving Fund and (c) paying the costs of issuing the Series 2014 Bonds. See APPLICATION OF FUNDS. The Series 2014 Bonds are special limited obligations of the City secured by and payable solely from a first lien on and pledge of the Net Revenues (defined herein) of the City s water and sewerage system and will be issued on a parity as to lien on Net Revenues with the City s Water and Sewerage Refunding Revenue Bonds, Series 2005 remaining outstanding after the issuance of the Series 2014 Bonds and the City s outstanding Water and Sewerage Refunding Revenue Bonds, Series The Series 2014 Bonds do not constitute a charge, lien or encumbrance, legal or equitable, on any other property of the City. See SECURITY FOR AND SOURCES OF PAYMENT OF THE SERIES 2014 BONDS. Interest on the Series 2014 Bonds is payable semiannually on May 15 and November 15 of each year (each such date, an Interest Payment Date ), commencing May 15, 2015 by The Bank of New York Mellon Trust Company, N.A., Atlanta, Georgia, as Paying Agent, to the owners thereof as shown on the registration books maintained by The Bank of New York Mellon Trust Company, N.A., Atlanta, Georgia, as Bond Registrar. The Series 2014 Bonds bear interest from the Interest Payment Date next preceding their date of authentication, except as provided herein. See THE SERIES 2014 BONDS Description. The Series 2014 Bonds will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ). DTC will act as securities depository for the Series 2014 Bonds. Purchases will be made only in book-entry form through the Participants (as herein defined) in DTC, and no physical delivery of the Series 2014 Bonds will be made to Beneficial Owners (as herein defined). Payment of principal of and interest on the Series 2014 Bonds will be made to Beneficial Owners by DTC through its Participants. As long as Cede & Co. is the registered owner of the Series 2014 Bonds, as nominee of DTC, references herein to the holders of the Series 2014 Bonds or registered owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners of the Series 2014 Bonds. See THE SERIES 2014 BONDS Book-Entry System of Registration. The Series 2014 Bonds are subject to redemption prior to maturity, as more fully described herein. See THE SERIES 2014 BONDS Redemption. THE SERIES 2014 BONDS DO NOT CONSTITUTE A GENERAL OBLIGATION, OR A PLEDGE OF THE FAITH AND CREDIT OR TAXING POWER OF THE CITY. NEITHER THE STATE OF GEORGIA NOR ANY POLITICAL SUBDIVISION OR MUNICIPAL CORPORATION THEREOF, INCLUDING THE CITY, IS OBLIGATED TO LEVY ANY TAX FOR THE PAYMENT OF THE SERIES 2014 BONDS. THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. The Series 2014 Bonds are offered when, as and if issued, subject to prior sale, to withdrawal or modification of the offer without notice, and subject to approval of legality by Murray Barnes Finister LLP, Bond Counsel and Disclosure Counsel to the City. Certain legal matters will be passed upon for the City by its counsel, James E. Palmour III, Gainesville, Georgia, The Series 2014 Bonds are expected to be delivered through DTC in New York, New York, on or about December, The City will receive sealed bids on December 16, 2014 at 10:00 A.M., Eastern Time, as set forth in the Official Notice of Sale. Dated: * Preliminary, subject to change.

6 MATURITIES, AMOUNTS, INTEREST RATES, YIELDS AND CUSIP NUMBERS Series 2014 Bonds Maturity Principal Interest (November 15) * Amount * Rate Yield CUSIP (1) 2015 $6,170, ,045, ,230, ,385, ,590, ,945, ,000, ,855, ,115, ,210, ,060, ,465, ,055, ,855,000 * (1) Preliminary, subject to change. CUSIP data presented herein has been provided by Standard & Poor s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. Copyright American Bankers Association.

7 City Manager s Office Room 303, City Administration Bldg. 300 Henry Ward Way Gainesville, Georgia MAYOR AND CITY COUNCIL C. Danny Dunagan, Jr., Mayor Sam Couvillon Robert L. Hamrick Myrtle W. Figueras George Wangemann Ruth H. Bruner CITY MANAGER Kip Padgett CHIEF FINANCIAL OFFICER Melody N. Marlowe DIRECTOR OF UTILITIES Kelly Randall CITY CLERK Denise O. Jordan CITY ATTORNEY James E. Palmour III Gainesville, Georgia CITY S BOND COUNSEL AND DISCLOSURE COUNSEL Murray Barnes Finister LLP Atlanta, Georgia FINANCIAL ADVISOR TO THE CITY Public Financial Management Atlanta, Georgia CERTIFIED PUBLIC ACCOUNTANT Rushton & Company, LLC Gainesville, Georgia

8 No dealer, broker, salesman or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement and the Appendices hereto and, if given or made, such other information or representations must not be relied upon as having been authorized by the City. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2014 Bonds by any person, in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. Except where otherwise indicated, the information set forth herein has been provided by the City. The information set forth herein has been obtained by the City from sources that are believed to be reliable. The information and expression of opinions herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances create an implication that there has been no change in the affairs of the City since the date hereof. Any statements in this Official Statement involving estimates, assumptions and matters of opinion, whether or not so expressly stated, are intended as such and are not representations of fact. No registration statement relating to the Series 2014 Bonds has been filed with the Securities and Exchange Commission or any state securities agency. The Series 2014 Bonds have not been approved or disapproved by the Securities and Exchange Commission or any state securities agency, nor has the Securities and Exchange Commission or any state securities agency passed upon the accuracy or adequacy of this Official Statement. Any representation to the contrary is a criminal offense. The order and placement of information in this Official Statement, including the appendices, are not an indication of relevance, materiality, or relative importance, and this Official Statement, including the appendices, must be read in its entirety. The captions and headings in this Official Statement are for convenience only and in no way define, limit, or describe the scope or intent, or affect the meaning or construction, of any provision or section in this Official Statement. THIS OFFICIAL STATEMENT IS BEING PROVIDED TO PROSPECTIVE PURCHASERS IN ELECTRONIC FORMAT ON THE FOLLOWING WEBSITE: THIS OFFICIAL STATEMENT MAY BE RELIED UPON ONLY IF IT IS PRINTED IN ITS ENTIRETY DIRECTLY FROM SUCH WEBSITE. This Official Statement has been deemed final for purposes of Securities Exchange Act of 1934 Rule 15c2-12, except for Permitted Omissions described in paragraph (b)(1) of Rule 15c2-12.

9 TABLE OF CONTENTS INTRODUCTION... 1 General... 1 The City... 1 Purpose of the Series 2014 Bonds... 1 Security and Sources of Payment... 1 Amendment of Bond Resolution... 2 Description of the Series 2014 Bonds... 2 Tax Exemption... 3 Professionals Involved in the Offering... 3 Bond Registrar, Paying Agent, Escrow Agent, Custodian, and Depository... 4 Legal Authority... 4 Offering and Delivery of the Series 2014 Bonds... 4 Continuing Disclosure... 4 Other Information... 5 THE SERIES 2014 BONDS... 5 Description... 5 Registration Provisions; Transfer and Exchange... 6 Book-Entry System of Registration... 6 Redemption... 8 Redemption Notice... 9 Legal Authority... 9 Investments... 9 SECURITY FOR AND SOURCES OF PAYMENT OF THE SERIES 2014 BONDS General Flow of Funds Additional Bonds No Debt Service Reserve Account Rate Covenant Enforceability of Remedies APPLICATION OF FUNDS Estimated Sources and Uses of Funds * Refunding Verification Debt Service Schedule THE CITY General City Government Employees, Employee Benefits and Pension Plan Insurance Coverage and Governmental Immunity Demographic Information Economic Information Media Commercial Services Healthcare Recreation Arts and Cultural Activities Utilities and Municipal Services Higher Education Transportation i

10 THE SYSTEM Introduction System Management Water System Sewer System The System s Service Area Georgia Service Delivery Strategy Act Awards/Recognition Water and Sewer Customers Rates, Fees and Charges Comparison of Water and Sewer Rates Rate Setting Process Billing and Collection Governmental Approvals and Environmental Regulation Employees, Employee Relations and Labor Organizations SYSTEM FINANCIAL INFORMATION Accounting System and Policies Five-Year Operating History Unaudited Interim Operating History Management s Discussion and Analysis Historical Debt Service Coverage Historical Net Position Data Future Debt; No Default Capital Improvements Program Operating Budget LEGAL MATTERS Litigation Tax Exemption Validation and Approving Opinions MISCELLANEOUS Ratings Sale at Competitive Bidding Financial Advisor Independent Professionals Verification of Mathematical Computations Additional Information AUTHORIZATION OF OFFICIAL STATEMENT APPENDIX A Audited Financial Statements of the City of Gainesville, Georgia for the fiscal year ended June 30, 2014 (1) APPENDIX B Form of Bond Counsel Opinion APPENDIX C Summary of Certain Provisions of the Bond Resolution APPENDIX D Form of Continuing Disclosure Certificate (1) The Series 2014 Bonds are secured solely by the Net Revenues of the System and not by any other sources, including the General Fund or any other moneys of the City. The audited financial statements of the City are included only because the financial statements for the System s operations are not prepared separately. ii

11 $90,980,000 * CITY OF GAINESVILLE, GEORGIA Water and Sewerage Refunding Revenue Bonds, Series 2014 INTRODUCTION General This Official Statement sets forth certain information concerning the City of Gainesville, Georgia (the City ) and its water and sewerage system (the System ) in connection with the issuance of $90,980,000 * in aggregate principal amount of City of Gainesville, Georgia Water and Sewerage Refunding Revenue Bonds, Series 2014 (the Series 2014 Bonds ). Capitalized terms used but not defined herein shall have the meanings assigned to them in APPENDIX C. This Introduction is not a summary of this Official Statement and is intended only for quick reference. It is only a brief description of and guide to, and is qualified in its entirety by reference to, more complete and detailed information contained in the entire Official Statement, including the cover page and the Appendices, and the documents summarized or described herein. Investors should fully review the entire Official Statement. The offering of the Series 2014 Bonds to potential investors is made only by means of the entire Official Statement, including the Appendices hereto. No person is authorized to detach this Introduction from the Official Statement or otherwise to use it without the entire Official Statement. The City The City is a duly created and validly existing municipal corporation of the State of Georgia, and is authorized to own and operate the System. The City is located in the northeastern portion of the State of Georgia approximately 52 miles northeast of the City of Atlanta. The City had an estimated population of 35,533 in For more complete information, see THE CITY. Purpose of the Series 2014 Bonds The proceeds derived from the sale of the Series 2014 Bonds will be used by the City for the purpose of (a) prepaying loans from the Georgia Environmental Finance Authority and the State Revolving Fund (the GEFA/SRF Loans ), (b) refunding a portion of the City s Water and Sewerage Refunding Revenue Bonds, Series 2005 (the Series 2005 Bonds ) maturing in the years 2016 and thereafter (the Refunded Bonds ) and (c) paying the costs of issuing the Series 2014 Bonds. The Series 2005 Bonds and the City s Water and Sewerage Refunding Revenue Bonds, Series 2006 (the Series 2006 Bonds ) are referred to herein as the Prior Bonds. See APPLICATION OF FUNDS. Security and Sources of Payment The Series 2014 Bonds are special limited obligations of the City secured by and payable solely from a first lien on and pledge of the revenues derived by the City from the ownership and operation of the System remaining after the payment of expenses of operating, maintaining and repairing the System (as more specifically defined in APPENDIX C, the Net Revenues ). The Series 2014 Bonds do not constitute a charge, lien or encumbrance, legal or equitable, on any other property of the City. Upon the refunding of the Refunded Bonds with the proceeds of the Series 2014 Bonds, the Series 2005 Bonds will be outstanding in the aggregate principal amount of $24,095,000 and the Series 2006 Bonds will be outstanding in the aggregate principal amount of $32,225,000 (the Outstanding Prior Bonds ). The Series 2014 Bonds and the Outstanding Prior Bonds will be secured on parity as to lien on the Net Revenues of the System. On December 16, 2014, the City will take competitive bids to issue bonds (the Series * Throughout this Preliminary Official Statement, an asterisk indicates that the information is preliminary and subject to change.

12 2015 Bonds ) to finance the forward refunding of the remaining Series 2005 Bonds maturing on and after November 15, If the City determines to proceed with the forward refunding, the Series 2015 Bonds will be in the estimated amount of $18,000,000 *, issued on or prior to November 15, 2015, and upon their issuance will be secured on a parity as to lien on the Net Revenues of the System with the Series 2014 Bonds and the then outstanding Prior Bonds (which will consist, as of November 15, 2015, of the Series 2006 Bonds). The Series 2014 Bonds, the Outstanding Prior Bonds and any additional bonds issued under the Bond Resolution and secured on a parity with the Series 2014 Bonds and the Outstanding Prior Bonds ( Additional Bonds ) are referred to herein as the Bonds. THE SERIES 2014 BONDS DO NOT CONSTITUTE A GENERAL OBLIGATION, OR A PLEDGE OF THE FAITH AND CREDIT OR TAXING POWER OF THE CITY. NEITHER THE STATE OF GEORGIA NOR ANY POLITICAL SUBDIVISION OR MUNICIPAL CORPORATION THEREOF, INCLUDING THE CITY, IS OBLIGATED TO LEVY ANY TAX FOR THE PAYMENT OF THE SERIES 2014 BONDS. For more complete information see SECURITY FOR AND SOURCES OF PAYMENT OF THE SERIES 2014 BONDS and APPENDIX C. Amendment of Bond Resolution In connection with the issuance of the Prior Bonds, a debt service reserve for the Prior Bonds was funded with Debt Service Reserve Surety Bonds (the Existing Reserve ) in accordance with the requirements of the Original Resolution (hereafter defined) pursuant to which the Prior Bonds were issued. Pursuant to the resolution of the City Council adopted on November 18, 2014 (the 2014 Resolution ), the Original Resolution was amended to provide that (a) the Existing Reserve be segregated in a separate reserve subaccount for the benefit only of such owners of the Prior Bonds, (b) whether a debt service reserve is funded with respect to any future series of Bonds will be made on an issue by issue basis with a debt service reserve requirement to be determined at the time of the issuance of such Bonds, (c) if a debt service reserve for a series of Bonds is funded in the future, a separate reserve subaccount will be established for that bond issue which secures only that bond issue, and (d) that no debt service reserve will be funded for the Series 2014 Bonds. See SECURITY FOR AND SOURCES OF PAYMENT OF THE SERIES 2014 BONDS Flow of Funds and No Debt Service Reserve Account herein. Bond Counsel will deliver an opinion that such amendment is permitted under the terms of the Original Resolution. Purchasers of the Series 2014 Bonds are subject to these provisions. The 2014 Resolution also reduced the rating requirement for Debt Service Reserve Surety Bonds deposited to a reserve subaccount to provide that once the Prior Bonds are no longer outstanding, the obligation to fund a reserve subaccount may be fulfilled by depositing a Debt Service Reserve Surety Bond if it is rated from a provider that has a rating at the time of issuance of such Debt Service Reserve Surety Bond equal to or higher than the rating on the Bonds secured thereby. Prior to such amendment, the Debt Service Reserve Surety Bond was required to be rated in the highest rating category by Moody s Investors Service, Inc., Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. and A.M. Best & Co. No other requirements relating to the provision of a Debt Service Reserve Surety Bond for deposit to a reserve subaccount were amended. See Appendix C SUMMARY OF CERTAIN PROVISIONS OF THE BOND RESOLUTION Revenue Fund, Sinking Fund and Renewal and Replacement Fund Sinking Fund hereto. Purchasers of the Series 2014 Bonds are subject to these provisions. Description of the Series 2014 Bonds Redemption *. The Series 2014 Bonds are subject to optional and mandatory redemption prior to maturity, as more fully described herein. See THE SERIES 2014 BONDS Redemption. Denominations. The Series 2014 Bonds are issuable in denominations of $5,000 or any integral multiple thereof. 2

13 Book-Entry Bonds. The Series 2014 Bonds will be issued in the denomination of one bond per aggregate principal amount of the stated maturity thereof, and, when issued, will be registered in the name of Cede & Co., as nominee for The Depository Trust Company ( DTC ), New York, New York, an automated depository for securities and clearing house for securities transactions, which will act as securities depository for the Series 2014 Bonds. Actual purchasers ( Beneficial Owners ) will not receive certificates representing their ownership interest in the Series 2014 Bonds purchased. Purchases of beneficial interests in the Series 2014 Bonds will be made in bookentry only form (without certificates). See THE SERIES 2014 BONDS Book-Entry System of Registration. Registration, Transfers and Exchanges. The Series 2014 Bonds will be issued in fully registered form. When in book-entry form, ownership of Series 2014 Bonds held by DTC or its nominee, Cede & Co., on behalf of the Beneficial Owners, may be transferred or exchanged in accordance with the rules and procedures of DTC. When not in book-entry form and subject to the conditions hereinafter described, ownership of any Series 2014 Bond may be registered as transferred upon surrender of such Series 2014 Bond to The Bank of New York Mellon Trust Company, N.A., as Bond Registrar (the Bond Registrar ), together with an assignment duly executed by the registered owner or his attorney. When not in book-entry form and subject to the conditions hereinafter described, the Series 2014 Bonds are exchangeable for a like aggregate principal amount of Series 2014 Bonds of authorized denominations and of the same maturity and series. See THE SERIES 2014 BONDS Registration Provisions; Transfer and Exchange. Payments. Interest on the Series 2014 Bonds will be payable on May 15 and November 15 of each year, commencing May 15, 2015, until maturity (each an Interest Payment Date ). Principal of the Series 2014 Bonds will be payable at the times and in the amounts shown on the inside front cover of this Official Statement. When in book-entry form, payment of the principal of and interest on the Series 2014 Bonds will be made by The Bank of New York Mellon Trust Company, N.A., as Paying Agent (the Paying Agent ) directly to Cede & Co., as nominee of DTC, and will subsequently be disbursed to Participants and thereafter to Beneficial Owners of the Series 2014 Bonds. See THE SERIES 2014 BONDS Book-Entry System of Registration. When not in book-entry form, interest on the Series 2014 Bonds is payable by check or draft mailed to the registered owners thereof at the addresses which appear on the bond registration books of the Bond Registrar as of the close of business on the 15th calendar day preceding each Interest Payment Date (the Record Date ). When not in book-entry form, the principal of and premium, if any, on the Series 2014 Bonds are payable at the corporate trust office of the Paying Agent. See THE SERIES 2014 BONDS Description. For a more complete description of the Series 2014 Bonds, see THE SERIES 2014 BONDS and APPENDIX C. Tax Exemption In the opinion of Bond Counsel, subject to the limitations and conditions described herein, (a) interest on the Series 2014 Bonds is exempt from present State of Georgia income taxation and (b) interest on the Series 2014 Bonds (including any original issue discount properly allocable to a holder thereof) is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, such interest is taken into account in determining adjusted current earnings for the purpose of computing the federal alternative minimum tax imposed on certain corporations. See APPENDIX B for the form of opinion Bond Counsel proposes to deliver in connection with the issuance of the Series 2014 Bonds. For a more complete discussion of such opinion and certain tax consequences incident to the ownership of the Series 2014 Bonds, see LEGAL MATTERS Tax Exemption. Professionals Involved in the Offering Certain legal matters pertaining to the City and its authorization and issuance of the Series 2014 Bonds are subject to the approving opinion of Murray Barnes Finister LLP, Bond Counsel and Disclosure Counsel to the City. Copies of the opinion of Bond Counsel will be available at the time of delivery of the Series 2014 Bonds, and a copy of the proposed form of such opinion is attached hereto as APPENDIX B. Certain legal matters will be passed on for the City by its counsel James E. Palmour III, Gainesville, Georgia. The basic financial statements of the City as of June 30, 2014 and for the fiscal year then ended (which includes the financial statements of the System), attached 3

14 hereto as part of APPENDIX A, have been audited by Rushton & Company, LLC, Gainesville Georgia, independent certified public accountants, to the extent and for the period indicated in their report thereon which appears in APPENDIX A hereto. See MISCELLANEOUS Independent Professionals herein. Bond Registrar, Paying Agent, Escrow Agent, Custodian, and Depository The Bank of New York Mellon Trust Company, N.A. will act as Bond Registrar and as Paying Agent for the Series 2014 Bonds. The address of the principal corporate trust office of the Bond Registrar and Paying Agent in Georgia is 200 Ashwood Center North, Suite 550, Atlanta, Georgia 30338, Attention: Public Finance-Corporate Trust. The Bank of New York Mellon Trust Company, N.A., Atlanta, Georgia also has been designated as Escrow Agent under the Escrow Deposit Agreement between the City and the Escrow Agent with respect to the Refunded Bonds. SunTrust Bank, Gainesville, Georgia, will continue to act as Revenue Fund Depository and Renewal and Extension Fund Depository. Regions Bank, Gainesville, Georgia, will continue to act as Sinking Fund Custodian. Legal Authority The Series 2014 Bonds are to be issued pursuant to the Constitution of the State of Georgia and the laws of the State of Georgia, including particularly the Revenue Bond Law of the State of Georgia (O.C.G.A. Section et seq., as amended (the Revenue Bond Law ). The Series 2014 Bonds will be issued under and secured pursuant to the terms and conditions of a bond resolution adopted by the City Council on October 25, 2001, as supplemented on October 4, 2005, a resolution adopted October 20, 2005, and a resolution adopted November 16, 2006 (collectively, the Original Resolution ), and a parity bond resolution adopted November 18, 2014, as supplemented on December, 2014 (collectively, the Series 2014 Resolution and together with the Original Resolution, the Bond Resolution ). Offering and Delivery of the Series 2014 Bonds The Series 2014 Bonds are offered when, as and if issued, subject to prior sale and subject to withdrawal or modification of the offer without notice. The Series 2014 Bonds in definitive form are expected to be delivered through DTC in New York, New York, on or about December, Continuing Disclosure The City has covenanted for the benefit of the owners of the Series 2014 Bonds in a Continuing Disclosure Certificate (the Disclosure Certificate ) to provide (a) certain financial information and operating data relating to the City (the Operating and Financial Data ) annually to the Municipal Securities Rulemaking Board s Electronic Municipal Market Access System ( EMMA ) and (b) notices of the occurrence of certain events within 10 business days of their occurrence (the Events Notices ), to EMMA. The form of the Disclosure Certificate containing the City s undertaking to provide Operating and Financial Data and Events Notices is set forth in APPENDIX D hereto. The covenants have been made in order to comply with Securities and Exchange Commission Rule 15c2-12 (the Rule ). The City has entered into prior undertakings with respect to the Rule. For fiscal years 2009 through 2013, the City was required to provide continuing disclosure with respect to the (i) City of Gainesville Water and Sewerage Refunding Revenue Bonds, Series 2001, (ii) City of Gainesville Water and Sewerage Refunding Revenue Bonds, Series 2005, (iii) City of Gainesville Water and Sewerage Refunding Revenue Bonds, Series 2006, (iv) the Gainesville Redevelopment Authority Revenue Bonds (Frances Meadows Community Center Project), Series 2007 (the Frances Meadows Bonds ) and (v) the Gainesville Redevelopment Authority Revenue Bonds (Downtown Parking Garage Project), Series 2009A and the Gainesville Redevelopment Authority Revenue Bonds (Public Safety Facilities Project), Series 2009B. For fiscal years 2012 and 2013, the City was required to provide continuing disclosure with respect to the Gainesville Redevelopment Authority Revenue Refunding Bonds (City of Gainesville, Georgia Projects), Series 2012A and Gainesville Redevelopment Authority Revenue Refunding and Improvement Bonds (City of Gainesville, Georgia), Series 2012B (Taxable). Each of the undertakings requires that continuing disclosure be filed by December 27 of each year. The City timely complied with its undertakings for fiscal years 4

15 2011 through For fiscal years 2009 and 2010, the City filed its continuing disclosure after December 27 but no later than December 31, as follows: Fiscal Year Due Date Date Filed June 30, /27/ /31/2009 June 30, /27/ /28/2010 The City failed to timely file Event Notices that were required to be filed with respect to changes in the underlying and insured credit ratings of certain of the City s bonds. The notices of rating changes were posted to EMMA on November 26, The City is currently in material compliance with all of its continuing disclosure undertakings. Other Information The information contained in this Official Statement does not purport to be comprehensive or definitive. All references herein to, or summaries of, the Bond Resolution, the Series 2014 Bonds or any other document are qualified in their entirety by reference to the definitive forms thereof and the provisions with respect thereto included in the Bond Resolution, the Series 2014 Bonds or such other document. Copies of the Bond Resolution and Disclosure Certificate and other documents and information are available, upon request and upon payment to the City of a charge for copying, mailing and handling, from Melody Marlowe, Chief Financial Officer, City of Gainesville, P.O. Box 2496, Gainesville, Georgia, 30503; telephone (770) During the period of the offering of the Series 2014 Bonds copies of such documents are available upon request and upon payment of a charge for copying, mailing, and handling from Public Financial Management, 600 Peachtree Street, Suite 3770, Atlanta, Georgia, ; telephone: (404) Description THE SERIES 2014 BONDS The Series 2014 Bonds will be dated as of their date of issuance and will bear interest at the rates specified on the inside front cover page of this Official Statement (computed on the basis of a 360-day year of twelve 30-day months) from the Interest Payment Date next preceding their date of authentication to which interest has been paid (unless their date of authentication is an Interest Payment Date, in which case from such Interest Payment Date, unless their date of authentication is after a Record Date but before an Interest Payment Date, in which case from the next Interest Payment Date, or unless their date of authentication is before the first Interest Payment Date, in which case from their date of issuance). Interest will be payable semiannually on each Interest Payment Date, commencing May 15, The principal amount of the Series 2014 Bonds is payable at the times and in the amounts set forth on the inside cover page of this Official Statement. Both the principal of and interest on the Series 2014 Bonds shall be payable in lawful money of the United States of America. When in book-entry form, payment of the principal of and interest on the Series 2014 Bonds will be made by the Paying Agent directly to Cede & Co., as nominee of DTC, and will subsequently be disbursed to Participants and thereafter to Beneficial Owners of the Series 2014 Bonds. See THE SERIES 2014 BONDS Book-Entry System of Registration. When not in book-entry form, the principal amount of the Series 2014 Bonds shall be payable at maturity upon presentation and surrender thereof at the principal corporate trust office of the Paying Agent. Payments of interest on the Series 2014 Bonds shall be made by check or draft payable to the registered owner as shown on the bond registration book kept by the Bond Registrar at the close of business on each Record Date, and such payments of interest shall be mailed by first class mail to the registered owner at the address shown on the bond registration book. If the registered owner of Series 2014 Bonds in the aggregate principal amount of at least $1,000,000 shall supply wire instructions to the Paying Agent on or prior to the Record Date, then interest due on the Interest Payment Date succeeding the Record Date shall be payable by wire transfer in accordance with such instructions. 5

16 Registration Provisions; Transfer and Exchange The Series 2014 Bonds will be issued only as fully registered bonds in denominations of $5,000 and integral multiples thereof (an Authorized Denomination ). The City, the Bond Registrar and the Paying Agent may deem and treat the registered owner as shown on the registration books maintained by the Bond Registrar as the absolute owner of such Series 2014 Bond for all purposes, including receiving payment of or on account of principal and interest payable thereon, and for all notices, and the City, the Bond Registrar and the Paying Agent will not be affected by any actual or constructive notice to the contrary. When in book-entry form, Series 2014 Bonds will be registered to DTC or Cede & Co., as its nominee, on behalf of the Beneficial Owners thereof. When in book-entry form, ownership of the Series 2014 Bonds held by DTC or Cede & Co., as its nominee, on behalf of the Beneficial Owners thereof, may be transferred or exchanged in accordance with the rules of DTC. See THE SERIES 2014 BONDS Book-Entry System of Registration. When not in book-entry form, the transfer of any Series 2014 Bond shall be registered upon the registration book upon the surrender and presentation of the Series 2014 Bond to the Bond Registrar duly endorsed for transfer or accompanied by an assignment duly executed by the registered owner or attorney duly authorized in writing in such form as shall be satisfactory to the Bond Registrar. Upon any such registration of transfer, the Bond Registrar shall authenticate and deliver in exchange for such Series 2014 Bond or Series 2014 Bonds so surrendered, a new Series 2014 Bond or Series 2014 Bonds registered in the name of the transferee, of any Authorized Denomination, and in an aggregate principal amount or maturity amount equal to the aggregate principal amount or maturity amounts of the Series 2014 Bonds so surrendered and of the same maturity and series. When not in book-entry form, any Series 2014 Bond, upon presentation and surrender thereof to the Bond Registrar, together with an assignment duly executed by the registered owner or duly authorized attorney, in such form as may be satisfactory to the Bond Registrar, may be exchanged, at the option of the registered owner, for an aggregate principal amount of Series 2014 Bonds of the same series, type and maturity equal to the principal amount of the Series 2014 Bond so surrendered and of any Authorized Denomination. The Bond Registrar may make a charge for every exchange or registration of transfer of the Series 2014 Bonds sufficient to reimburse it for any tax or other governmental charge required to be paid with respect to such exchange or registration of transfer, but no other charge shall be made to the owner for the privilege of exchanging or registering the transfer of Series 2014 Bonds under the Bond Resolution. Book-Entry System of Registration DTC will act as securities depository for the Series 2014 Bonds. The Series 2014 Bonds will be issued as fully-registered Series 2014 Bonds 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 Series 2014 Bond certificate will be issued for each 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 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 6

17 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 Purchases of Series 2014 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2014 Bonds on DTC s records. The ownership interest of each actual purchaser of Series 2014 Bonds ( 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 Series 2014 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series 2014 Bonds, except in the event that use of the book-entry system for the Series 2014 Bonds is discontinued. To facilitate subsequent transfers, all the Series 2014 Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2014 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of Series 2014 Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Series 2014 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 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 Series 2014 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2014 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Series 2014 Bond documents. For example, Beneficial Owners of Series 2014 Bonds may wish to ascertain that the nominee holding the Series 2014 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Bond Registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Series 2014 Bonds within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Series 2014 Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the 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 Series 2014 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds and principal and interest payments on Series 2014 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts, upon DTC s receipt of funds and corresponding detail information from the City or the Paying Agent, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, the City or the Paying Agent, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 7

18 DTC may discontinue providing its services as depository with respect to Series 2014 Bonds at any time by giving reasonable notice to the City or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, certificates for the Series 2014 Bonds 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 for the Series 2014 Bonds 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. NEITHER THE CITY NOR THE PAYING AGENT WILL HAVE ANY OBLIGATION TO THE DIRECT PARTICIPANTS OR THE INDIRECT PARTICIPANTS OR THE BENEFICIAL OWNERS WITH RESPECT TO DTC S PROCEDURES OR ANY PROCEDURES OR ARRANGEMENTS BETWEEN DIRECT PARTICIPANTS, INDIRECT PARTICIPANTS AND BENEFICIAL OWNERS. NEITHER THE CITY NOR THE PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO PARTICIPANTS, BENEFICIAL OWNERS OR OTHER NOMINEES OF SUCH BENEFICIAL OWNERS FOR (1) SENDING TRANSACTION STATEMENTS; (2) MAINTAINING, SUPERVISING OR REVIEWING, THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY PARTICIPANT OR OTHER NOMINEES OF SUCH BENEFICIAL OWNERS; (3) PAYMENT OR THE TIMELINESS OF PAYMENT BY DTC TO ANY PARTICIPANT, OR BY ANY PARTICIPANT OR OTHER NOMINEES OF BENEFICIAL OWNERS TO ANY BENEFICIAL OWNER, OF ANY AMOUNT DUE IN RESPECT OF THE PRINCIPAL OF OR REDEMPTION PREMIUM, IF ANY, OR INTEREST ON SERIES 2014 BONDS; (4) DELIVERY OR TIMELY DELIVERY BY DTC TO ANY PARTICIPANT, OR BY ANY PARTICIPANT OR OTHER NOMINEES OF BENEFICIAL OWNERS TO ANY BENEFICIAL OWNERS, OF ANY NOTICE (INCLUDING NOTICE OF REDEMPTION) OR OTHER COMMUNICATION WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE BOND RESOLUTION TO BE GIVEN TO HOLDERS OR OWNERS OF SERIES 2014 BONDS; (5) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF SERIES 2014 BONDS; OR (6) ANY ACTION TAKEN BY DTC OR ITS NOMINEE AS THE REGISTERED OWNER OF SERIES 2014 BONDS. Redemption Optional Redemption *. The Series 2014 Bonds maturing on and after November 15, 2025 may be redeemed, at the option of the City, in whole or in part at any time on or after November 15, 2024 at a redemption price of 100% of par, plus accrued interest. Mandatory Redemption *. The Series 2014 Bonds maturing on November 15, are subject to scheduled mandatory sinking fund redemption prior to maturity in part on November 15, through November 15, (the last maturity to be paid rather than redeemed), the actual bonds to be redeemed to be selected by lot in such manner as may be designated by the Bond Registrar, at a redemption price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date, in the following principal amounts and on the dates set forth below: November 15 of the Year Principal Amount (Leaving $ to mature November 15, ) 8

19 The Series 2014 Bonds maturing on November 15, are subject to scheduled mandatory sinking fund redemption prior to maturity in part on November 15, through November 15, (the last maturity to be paid rather than redeemed), the actual bonds to be redeemed to be selected by lot in such manner as may be designated by the Bond Registrar, at a redemption price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date, in the following principal amounts and on the dates set forth below: November 15 of the Year Principal Amount (Leaving $ to mature November 15, ) The City shall be entitled to receive a credit in respect of its mandatory sinking fund redemption obligation for Series 2014 Bonds delivered, purchased, or redeemed, as hereinafter described, if the City at its option purchases in the open market and delivers to the Paying Agent for cancellation Series 2014 Bonds or redeems Series 2014 Bonds (other than through mandatory sinking fund redemption) and such Series 2014 Bonds have not theretofore been applied as a credit against any mandatory redemption obligation. Each such Series 2014 Bond so purchased or redeemed shall be credited by the Paying Agent at 100% of the principal amount thereof on the obligation of the City on such mandatory redemption payment date, and any excess shall be credited on future mandatory sinking fund redemption obligations in chronological order, and the principal amount of such Series 2014 Bonds to be redeemed by operation of mandatory redemption shall be accordingly reduced. Redemption Notice Not more than 60 days and not less than 30 days before any date upon which any such redemption is to be made a notice of redemption describing the conditions of the redemption call (if any) and designating the Series 2014 Bonds to be redeemed shall be sent to DTC if the Series 2014 Bonds are held in book-entry form or mailed, postage prepaid, to all registered owners of the Series 2014 Bonds to be redeemed at addresses which appear upon the bond registration book as of the date of giving such notice. The failure to receive any such notice or any defect therein shall not affect the validity of the proceedings for such redemption or cause the interest to continue to accrue on the principal amount of the Series 2014 Bonds so designated for redemption. Legal Authority Paragraph I of Section VI of Article IX of the Constitution of the State of Georgia authorizes any political subdivision to issue revenue bonds as provided by general law and provides (1) that the obligation represented by revenue bonds shall be repayable only out of the revenue derived from the project and shall not be deemed to be a debt of the issuing political subdivision and (2) that no issuing political subdivision shall exercise the power of taxation for the purpose of paying any part of the principal or interest of any such revenue bonds. The Series 2014 Bonds are being issued and secured pursuant to the authority granted by the Constitution of the State of Georgia, the Revenue Bond Law and under the provisions of the Bond Resolution. Investments For a description of how the amounts held to pay debt service on the Series 2014 Bonds are invested, see SUMMARY OF CERTAIN PROVISIONS OF THE BOND RESOLUTION Investments in APPENDIX C hereto. 9

20 SECURITY FOR AND SOURCES OF PAYMENT OF THE SERIES 2014 BONDS General The Series 2014 Bonds are limited obligations of the City and are payable from and secured by a first lien on and pledge of the Net Revenues of the System on a parity with the Outstanding Prior Bonds. NEITHER THE GENERAL CREDIT NOR THE TAXING POWER OF THE STATE OF GEORGIA OR ANY POLITICAL SUBDIVISION OR MUNICIPAL CORPORATION THEREOF, INCLUDING THE CITY, IS PLEDGED FOR THE PAYMENT OF THE SERIES 2014 BONDS. THE SERIES 2014 BONDS SHALL NOT CONSTITUTE A DEBT OF THE STATE OF GEORGIA OR ANY POLITICAL SUBDIVISION OR MUNICIPAL CORPORATION THEREOF, INCLUDING THE CITY, WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION. Flow of Funds Funds and Accounts. The following funds and accounts have been established in the Bond Resolution and are currently being maintained: the Revenue Fund, the Sinking Fund and the Renewal and Extension Fund. The Sinking Fund consists of three accounts: the Debt Service Account, the Swap Payments Account and the Debt Service Reserve Account. Within the Debt Service Reserve Account, there is held the Prior Bonds Reserve Subaccount. Flow of Funds. All revenues arising from the ownership or operation of the System will be collected by the City or by its agents or employees and deposited promptly into the Revenue Fund. The City will pay from the Revenue Fund the reasonable and necessary costs of operating, maintaining and repairing the System, including salaries, wages, the payment of any contractual obligations incurred pertaining to the operation of the System, the cost of materials and supplies, rentals of leased property, real or personal, insurance premiums, audit fees, proper charges for materials and services provided by other departments of the City and such other charges as may properly be made for the purpose of operating, maintaining and repairing the System in accordance with sound business practice, but before making provision for depreciation, interest expense and amortization. The Net Revenues remaining in the Revenue Fund after the payment of such operating expenses have been pledged by the City first as security for any outstanding Bonds and to the provider of any Debt Service Surety Bond or Credit or Liquidity Facility. After there have been paid from the Revenue Fund the sums required or permitted to be paid pursuant to the provisions of the preceding paragraph, the City will pay from the Revenue Fund into the Debt Service Account of the Sinking Fund equal monthly deposits sufficient to pay debt service on any outstanding Bonds on the next Interest Payment Date. After there have been paid from the Revenue Fund the sums required or permitted to be paid pursuant to the preceding paragraphs, the City will pay from the Revenue Fund into the Prior Bonds Reserve Subaccount contained in the Debt Service Reserve Account of the Sinking Fund substantially equal monthly payments sufficient to maintain the Prior Bonds Reserve Subaccount in an amount equal to the Debt Service Reserve Requirement for the Outstanding Prior Bonds. The Prior Bonds Reserve Subaccount has been established and segregated for the benefit of the Outstanding Prior Bonds and only secures the Outstanding Prior Bonds. See APPENDIX C SUMMARY OF CERTAIN PROVISIONS OF THE BOND RESOLUTION Revenue Fund, Sinking Fund and Renewal and Extension Fund Sinking Fund. The Series 2014 Bonds will not be secured by the Debt Service Reserve Account. As to any issue of Additional Bonds for which the City has determined that it is necessary or desirable to establish a debt service reserve for such Additional Bonds, the Sinking Fund Custodian shall establish a separate special subaccount within the Debt Service Reserve Account, each of which shall be designated as the Series Reserve Subaccount. The Prior Bonds Reserve Subaccount and each subaccount created in connection with the issuance of Additional Bonds are hereinafter referred to as a Reserve Subaccount. Each Reserve Subaccount shall only secure the Bonds for which it was established. Each Reserve Subaccount shall be funded and replenished pro rata. 10