OFFICIAL STATEMENT. $45,695,000 ERIE CITY WATER AUTHORITY (Erie County, Pennsylvania) WATER REVENUE BONDS, SERIES OF 2016

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1 OFFICIAL STATEMENT NEW ISSUE BOOK-ENTRY ONLY CUSIP PREFIX: Dated: Date of Delivery Due: December 1, see Maturity Schedule, inside front cover $45,695,000 ERIE CITY WATER AUTHORITY (Erie County, Pennsylvania) WATER REVENUE BONDS, SERIES OF 2016 UNDERLYING RATING: Moody s Investors Service Underlying: A2 INSURED BONDS RATING: Standard & Poor s AA (stable outlook) (AGM Insured) In the opinion of Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, interest on the Bonds is excluded from gross income for federal income tax purposes. Bond Counsel is also of the opinion that interest on the Bonds is not a specific item of tax preference under 57 of the Internal Revenue Code of 1986, as amended (the Code ) for purposes of Federal individual or corporate alternative minimum taxes. The Bonds and interest income therefrom, are free from taxation for purposes of personal income, corporate net income and personal property taxes within the Commonwealth of Pennsylvania. For further information concerning tax matters relating to the Bonds, see TAX MATTERS herein. Interest Payable: June 1 and December 1 First Interest Payment Date: June 1, 2016 The Erie City Water Authority, (Erie County, Pennsylvania) Water Revenue Bonds, Series of 2016 in the principal amount of $45,695,000 (the 2016 Bonds or the Bonds ) are being issued by the Authority under the Indenture. The Bonds will be issued as fully registered bonds and will be registered in the name of Cede & Co., a nominee of The Depository Trust Company ( DTC ), New York, New York upon delivery. Individual purchases of the Bonds will be made in book-entry form only, and individual purchasers ( Beneficial Owners ) of the Bonds will not receive physical delivery of bond certificates. Payments of principal of, redemption premium, if any, and interest on the Bonds will be paid by the Trustee to DTC or its nominee. While DTC or its nominee is the registered owner of the Bonds, disbursement of such payments to DTC is the responsibility of the Trustee, disbursement of such payments to DTC Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants or indirect Participants, as more fully described herein. DTC will act as securities depository of the Bonds, and purchases of beneficial ownership interests in the Bonds will be made in book-entry form only, in denominations of $5,000 or integral multiples thereof. Interest on the Bonds is payable initially on June 1, 2016 and semiannually thereafter on June 1 and December 1 of each year until the principal sum thereof is paid. Principal, interest on and premium, if any, on the Bonds will be paid by the Trustee. So long as Cede & Co. is the registered owner, the Trustee will pay principal of, and interest on the Bonds to DTC, which will remit such principal and interest to its Participants (as defined herein), which will in turn remit such principal and interest to the Beneficial Owners of the Bonds, as more fully described herein. See The Bonds Book-Entry Only System. The Bonds are being issued for the purpose of (i) the advance refinancing of certain of the Authority s Water Revenue Bonds, Series of 2008; (ii) funding a portion of interest payments of certain of the Authority s Water Revenue Bonds, Series of 2012; (iii) repayment of the Authority s Water Revenue Note, Series of 2015, which is held by PNC Bank, National Association; and (iv) funding the costs of issuing the Bonds. The Bonds are equally and ratably secured with the Authority s Series 2001A, Series 2001B, Series 2004, Series 2006 Fixed Rate Bonds, Series 2008 Bonds, Series 2009 Bonds, Series 2011 Bonds, Series 2011A Bonds, Series 2012 Bonds, Series 2014 Bonds, Series 2015 Bonds and Series 2015 Note, together with any other Indebtedness, as defined herein, which may be issued in the future. The Bonds are limited obligations of the Authority and are payable solely from user charges, rates, revenues, rentals, fees, special assessments and receipts of the Water System which have been pledged for such purpose. The Bonds are subject to redemption prior to maturity as more fully set forth herein. The scheduled payment of principal of and interest on the Bonds maturing on December 1, 2037 and on December 1, 2039 (the Insured Bonds ) when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Bonds by Assured Guaranty Municipal Corp. 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 MAKING OF AN INFORMED INVESTMENT DECISION. ALL BONDS ISSUED UNDER THE INDENTURE, INCLUDING THE BONDS ARE REVENUE DEBT FOR WHICH THE REVENUES FROM THE WATER SYSTEM ARE PLEDGED. NEITHER THE CREDIT NOR THE TAXING POWER OF THE CITY OF ERIE, THE COUNTY OF ERIE, THE COMMONWEALTH OF PENNSYLVANIA, OR ANY AGENCY OR POLITICAL SUBDIVISION THEREOF IS PLEDGED TO PAY THE PRINCIPAL OF AND INTEREST ON THE BONDS. THE AUTHORITY HAS NO TAXING POWER. The Bonds are offered by the Underwriter, subject to approval of validity by Knox, McLaughlin, Gornall & Sennett, P.C., Erie, Pennsylvania, Bond Counsel. Certain legal matters will be passed on for the Authority by the Authority Solicitor, Knox, McLaughlin, Gornall & Sennett, P.C., Erie, Pennsylvania. Certain legal matters will be passed on by the Law Offices of Wayne D. Gerhold, Pittsburgh, Pennsylvania as Disclosure Counsel. It is expected that the Bonds in definitive form will be available for delivery in New York, New York on or about March 3, Dated: January 27, 2016

2 $45,695,000 Erie City Water Authority (Erie County, Pennsylvania) Water Revenue Bonds, Series 2016 MATURITY SCHEDULE Approximate Maturity Date Principal Coupon Yield Price (1) Proceeds CUSIP (2) December 1, 2017 $90, % 0.920% % $93, MK7 December 1, 2019 (3) 180, , ML5 December 1, 2021 (3) 195, , MM3 December 1, , , MN1 December 1, , , MP6 December 1, , , MQ4 December 1, , , MR2 December 1, , , MS0 December 1, 2031 (3) 660, , MT8 December 1, 2037 (3)(4) 5,200, ,070, MU5 December 1, 2039 (3)(4) 7,825, ,651, MV3 December 1, 2043 (3) 30,995, (5) 35,216, MW1 $45,695,000 $49,716, (1) Based on expected delivery date of March 3, 2016, unless otherwise noted. (2) CUSIP is a registered trademark of the American Bankers Association. Copyright American Bankers Association. All rights reserved. CUSIP data herein is provided by CUSIP Global Services, managed by Standard & Poor s Financial Services LLC on behalf of the American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for CUSIP Global Services. CUSIP numbers are provided for convenience of reference only. The CUSIP number for a specific maturity is subject to change after the issuance of the Bonds. Neither the Authority nor the Underwriter takes responsibility for the accuracy of the CUSIP numbers. (3) Term Bond (4) Insured Bond (5) Based on first optional redemption date of December 1, 2026.

3 ERIE CITY WATER AUTHORITY (Erie County, Pennsylvania) AUTHORITY BOARD MEMBERS Members Office John J. McCormick, Jr... Chairman Shantel D. Hilliard... Vice Chairman Richard S. Wasielewski... Secretary Bryan D. Fife, Esq... Assistant Secretary Thomas M. Kennedy... Treasurer Ann M. DiMarco... Member Dr. Richard Dreyfus... Member Paul D. Gambill... Member Robert B. MacIsaac... Member CHIEF EXECUTIVE OFFICER Paul D. Vojtek BOND COUNSEL AND AUTHORITY SOLICITOR Knox, McLaughlin, Gornall & Sennett, P.C. Erie, Pennsylvania DISCLOSURE COUNSEL Law Offices of Wayne D. Gerhold Pittsburgh, Pennsylvania TRUSTEE The Bank of New York Mellon Trust Company, N.A. Pittsburgh, Pennsylvania UNDERWRITER PNC Capital Markets LLC Pittsburgh, Pennsylvania

4 This Official Statement does not constitute an offering of any securities other than the Bonds specifically offered hereby. No dealer, broker, salesman or other person has been authorized by the Authority or the Underwriters to give any information or to make any representations, other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon or be deemed to have been authorized by any of the foregoing named parties. Certain information contained herein has been obtained from the Authority, Assured Guaranty Municipal Corp. ( AGM ), and other sources that are believed to be reliable, but it is not guaranteed as to accuracy or completeness, and it is not to be construed to be the representation of the Underwriters. Neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the parties referred to above since the date hereof. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy and there shall be no sales of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. In connection with this offering, the Underwriters may over-allot or effect transactions which stabilize or maintain the market price of the Bonds offered hereby at a level above that which might otherwise prevail in the open market, and such stabilizing, if commenced, may be discontinued at any time. The Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon an exemption contained therein, and have not been registered or qualified under the securities laws of any state. AGM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading Bond Insurance and Appendix E Specimen Municipal Bond Insurance Policy.

5 TABLE OF CONTENTS PAGE INTRODUCTION... 1 THE AUTHORITY... 1 SOURCES AND USES OF FUNDS... 2 THE BONDS... 2 Payment of Principal and Interest... 2 Transfer, Exchange and Registration of the Bonds... 3 Optional Redemption... 3 Mandatory Redemption... 3 Notice of Redemption... 4 BOOK-ENTRY ONLY SYSTEM... 4 Discontinuation of Book-Entry Only System... 6 SECURITY AND SOURCE OF PAYMENT... 6 Pledged Revenues... 6 Debt Service Reserve Fund... 6 Rate Covenant... 6 Historical Debt Service Coverage... 7 Additional Bonds... 7 DEBT SERVICE FUND... 8 BOND INSURANCE... 8 CERTAIN BONDHOLDERS RISKS AND CONSIDERATIONS CERTAIN LEGAL MATTERS LITIGATION TAX MATTERS State Tax Matters Federal Tax Matters CONTINUING DISCLOSURE RATINGS UNDERWRITING CERTAIN RELATIONSHIPS AND SERIES 2015 NOTE FINANCIAL STATEMENTS MISCELLANEOUS APPENDIX A - Definitions of Certain Terms and Summaries of Certain Provisions of the Indenture APPENDIX B - The Erie City Water Authority APPENDIX C - Erie City Water Authority Summary of Financial Statements APPENDIX D - Proposed Opinion of Bond Counsel APPENDIX E - Specimen Municipal Bond Insurance Policy

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7 $45,695,000 Erie City Water Authority (Erie County, Pennsylvania) Water Revenue Bonds, Series of 2016 INTRODUCTION This Official Statement is being furnished to provide information with respect to the issuance of the Authority s $45,695,000 Water Revenue Bonds, Series of 2016 (the 2016 Bonds or the Bonds ) The Bonds are being issued for the purpose of (i) advance refunding certain of the Authority s Water Revenue Bonds, Series of 2008; (ii) funding a portion of interest payments of certain of the Authority s Water Revenue Bonds, Series of 2012; (iii) repayment of the Authority s Water Revenue Note, Series of 2015, which is held by PNC Bank, National Association and (iv) funding the costs of issuing the Bonds. The 2016 Bonds are being issued pursuant to the Eighteenth Supplemental Trust Indenture, dated as of March 3, 2016, with respect to the 2016 Bonds amending and supplementing a Trust Indenture, dated as of December 1, 1991, as amended and supplemented by a First Supplemental Trust Indenture, dated as of September 15, 1992, a Second Supplemental Trust Indenture, dated as of November 17, 1992, a Third Supplemental Trust Indenture, dated as of July 15, 1994, a Fourth Supplemental Trust Indenture, dated as of December 1, 1995, a Fifth Supplemental Trust Indenture, dated as of July 1, 1998, a Sixth Supplemental Trust Indenture, dated as of December 1, 2001, a Seventh Supplemental Trust Indenture, dated as of December 1, 2004, an Eighth Supplemental Trust Indenture, dated as of August 1, 2005, a Ninth Supplemental Trust Indenture, dated as of September 1, 2006, a Tenth Supplemental Trust Indenture dated July 22, 2008, an Eleventh Supplemental Trust Indenture, dated as of August 3, 2009, a Twelfth Supplemental Trust Indenture dated as of April 12, 2011, a Thirteenth Supplemental Trust Indenture, dated as of November 15, 2011, a Fourteenth Supplemental Trust Indenture, dated as of December 27, 2012, a Fifteenth, Supplemental Trust Indenture, dated as of November 6, 2014, a Sixteenth Supplemental Trust Indenture dated as of March 25, 2015, and a Seventeenth Supplemental Trust Indenture dated as of November 12, 2015 (collectively referred to as the Indenture ) between the Authority and The Bank of New York Mellon Trust Company, N.A. (as successor to J.P. Morgan Trust Company, National Association, successor to Chase Manhattan Trust Company, successor to PNC Bank National Association), as trustee (the Trustee ). Pursuant to the Indenture, all bonds issued thereunder are equally and ratably secured by the pledges and covenants contained therein. Pursuant to an Agreement of Lease dated April 1, 1991, as amended, and extended (the Lease ), between the Authority and the City of Erie (the City ), the City, as owner of its water supply and distribution system (the Water System ) leased the Water System to the Authority for operation and use by the Authority. See THE LEASE AGREEMENT in Appendix B for a summary of certain provisions of the Lease. The scheduled payment of the principal of and interest on the Bonds maturing on December 1, 2037 and December 1, 2039 (the Insured Bonds ) when due will be guaranteed under a municipal bond insurance policy to be issued by Assured Guaranty Municipal Corp. ( AGM ) simultaneously with the delivery of the Insured Bonds. See BOND INSURANCE. Neither the delivery of this Official Statement nor any sale made hereunder implies that there has been no change with respect to the Authority at any time subsequent to the date hereof. This Official Statement contains a summary of the terms of the Bonds. Definitions of certain capitalized terms used in this section and elsewhere in this Official Statement are contained in APPENDIX A Definitions of Certain Terms and Summaries of Certain Provisions of the Indenture. THE AUTHORITY The Authority is a body corporate and politic existing under the laws of the Commonwealth of Pennsylvania pursuant to the Pennsylvania Municipality Authorities Act, being the Act of the Commonwealth of Pennsylvania approved June 18, 2001, Act (53 Pa. Cons. Stat. Ch. 56, 5601 et seq.), as amended (the Act ). The Authority is duly organized, existing in good standing under the laws of the Commonwealth of Pennsylvania. The Authority s statutory life has been extended periodically during the Authority s existence and has been extended until December 31, The Bonds are authorized and issued by the Authority by a Resolution dated January 21, 2016 (the Resolution ), pursuant to the provisions of the Constitution and statutes of the Commonwealth of Pennsylvania, particularly the Act. Appendix B contains certain information relating to the Authority, including information regarding the Water System. 1

8 SOURCES AND USES OF FUNDS The following table sets forth the expected sources and uses of funds for the plan of financing with respect to the issuance of the Bonds. Amounts in this table have been rounded to the nearest whole dollar. Sources of Funds: Bonds Par Amount of Bonds... $45,695, Original Issue Premium / (Discount)... 4,021, Total Sources... $49,716, Uses of Funds Refunding Requirements... $49,268, Issuance expenses (1) , Total Uses... $49,716, (1) Issuance expenses includes underwriting discount, legal fees, printing costs, Trustee fees, disclosure dissemination agent fees, municipal bond insurance premium and miscellaneous. THE BONDS The Bonds are being issued, as fully registered Bonds, without coupons, in denominations of $5,000 principal amount or any integral multiple thereof. Principal and interest are payable as set forth below. Payment of Principal and Interest The Bonds will bear interest payable on June 1 and December 1 (each an Interest Payment Date ) of each year, commencing June 1, 2016, until the principal sum thereof is paid. Each of the Bonds shall be dated as of the date of their authentication and shall bear interest (computed on the basis of a 360 day year comprised of twelve months of 30 days) from the Interest Payment Date next preceding the date of authentication of such Bonds, unless: (a) such Bond is authenticated as of an Interest Payment Date, in which event such Bond shall bear interest from said Interest Payment Date; or (b) such Bond is authenticated prior to June 1, 2016, in which event such Current Interest Bond shall bear interest from the Date of Delivery; or (c) such Bond is authenticated after a Record Date (hereinafter defined) and before the next succeeding Interest Payment Date, in which event such Current Interest Bond shall bear interest from the next succeeding Interest Payment Date; or (d) as shown by the records of the Trustee, interest on such Bond shall be in default, in which event such Current Interest Bond shall bear interest from the date on which interest was last paid on such Current Interest Bond. Principal of the Bonds will be paid to the registered owners thereof or assigns, when due, upon surrender of the Bonds at the designated corporate trust office of the Trustee. Interest on each Bond is payable by check drawn on behalf of the Trustee, which shall be mailed to the registered owner whose name and address shall appear, at the close of business on the fifteenth (15th) day of the month, (whether or not a business day) next preceding each Interest Payment Date (the Record Date ), on the registration books maintained by the Trustee, irrespective of any transfer or exchange of the Bond subsequent to such Record Date and prior to such Interest Payment Date, unless the Authority shall be in default in payment of interest due on such interest payment date. In the case of an interest payment to any registered owner of $500,000 or more in aggregate principal amount of the Bonds as of the close of business of the Trustee on the Record Date for a particular Interest Payment Date, such payment may be made by wire transfer to any designated account in a member bank of the Federal Reserve System as of the close of business on such Interest Payment Date upon written request from such registered owner, which written request is received by the Trustee not less than five days prior to such Record Date. In the event of any such default, such defaulted interest shall be payable to the person in whose name the Bond is registered at the close of business on a special record date for the payment of such defaulted interest established by notice mailed by the Trustee to the registered owners of Bonds not less than ten (10) days preceding such special record date. Such notice shall be mailed to the persons in whose names the Bond are registered at the close of business on the fifth (5th) day preceding the date of mailing. If the date for the payment of the principal of or interest on any Bonds shall be a Saturday, Sunday, legal holiday or on a day on which banking institutions in the Commonwealth of Pennsylvania (the Commonwealth ) are required or authorized by law or executive order to close, then the date for payment of such principal or interest shall be the next succeeding day which is not a Saturday, Sunday, legal holiday or a day on which such banking institutions are required or authorized to close, and payment on such date shall have the same force and effect as if made on the nominal date established for such payment. 2

9 Transfer, Exchange and Registration of the Bonds The Bonds may be exchanged for a like aggregate amount of Bonds of other authorized denominations of the same series, maturity and interest rate. Bonds are transferable or exchangeable by the registered owners thereof upon surrender of Bonds to the Trustee, at its designated corporate trust office, accompanied by a written instrument or instruments in form, with instructions, and with guaranty of signature satisfactory to the Trustee, duly executed by the registered owner of such Bond or his attorney-in-fact or legal representative. The Trustee shall enter any transfer of ownership of Bonds in the registration books and shall authenticate and deliver at the earliest practicable time in the name of the transferee or transferees a new fully registered Bond or Bonds of authorized denominations of the same series, maturity and interest rate for the aggregate principal amount which the registered owner is entitled to receive. The Authority and the Trustee may deem and treat the registered owner of any Bond as the absolute owner thereof (whether or not a Bond shall be overdue) for the purpose of receiving payment of or on account of principal and interest and for all other purposes, and the Authority and the Trustee shall not be affected by any notice to the contrary. The Authority and the Trustee shall not be required: (a) to issue or transfer or exchange any Bond during a period beginning at the close of business on the Record Date next preceding any Interest Payment date and ending at the close of business on the Interest Payment Date; or (b) to issue or transfer or exchange any Bond then considered for redemption during the period beginning at the close of business on the fifteenth (15th) day next preceding any date of selection of such Bonds to be redeemed and ending at the close of business on the day on which the notice of redemption is mailed; or (c) to transfer or exchange any portion of any Bond selected for redemption until after the redemption date. Optional Redemption The Bonds are subject to redemption prior to maturity at a redemption price of 100% of the principal amount thereof, at the option of the Authority, in whole or in part, in such order of maturities selected by the Authority, on December 1, 2026 or on any date thereafter, upon payment of the principal amount to be redeemed, together with accrued interest thereon to the redemption date. In the event that less than all Bonds of any particular maturity are to be redeemed, the applicable Bonds to be redeemed shall be drawn by lot by the Trustee. Mandatory Redemption The Bonds maturing on December 1, 2019, December 1, 2021, December 1, 2031, December 1, 2037, December 1, 2039 and on December 1, 2043 are subject to mandatory redemption by the Authority in part, by lot, at a redemption price of 100% of the principal amount thereof plus accrued interest to the date fixed for redemption, on December 1 in the years and in amounts set forth below: The Bonds Stated The Bonds Stated to Mature on December 1, 2019 to Mature on December 1, 2021 Year Principal Amount Year Principal Amount 2018 $90, $95, ,000 (1) ,000 (1) (1) At maturity. (1) At maturity. The Bonds Stated The Bonds Stated to Mature on December 1, 2031 to Mature on December 1, 2037 Year Principal Amount Year Principal Amount 2027 $125, $145, , , , , , , ,000 (1) , ,425,000 (1) 3

10 (1) At maturity. The Bonds Stated The Bonds Stated to Mature on December 1, 2039 to Mature on December 1, 2043 Year Principal Amount Year Principal Amount 2038 $700, $7,375, ,125,000 (1) ,745, ,330, ,545,000 (1) Notice of Redemption Any redemption of Bonds shall be upon notice effected by depositing a copy of the redemption notice in first class mail, addressed to the registered owners of Bonds to be redeemed, not less than thirty (30) days and not more than sixty (60) days prior to the date fixed for redemption, at the addresses shown on the registration books kept by the Trustee as of the day such Bonds are selected for redemption; provided, however, that failure to give such notice by mailing, or any defect therein or in the mailing thereof, shall not affect the validity of any proceeding for redemption of other Bonds called for redemption as to which proper notice has been given. If at the time of mailing of any notice of optional redemption the Authority shall not have deposited with the Trustee monies sufficient to redeem all the Bonds called for redemption, such notice shall state that it is subject to the deposit of the redemption monies with the Trustee not later than the opening of business on the redemption date and shall be of no effect unless such monies are so deposited. On the date designated for redemption, notice having been provided as aforesaid and money for payment of the principal and accrued interest being held by the Trustee, interest on the Bonds and portions thereof so called for redemption shall cease to accrue and such Bonds or portions thereof shall cease to be entitled to any benefit or security under the Ordinance, and registered owners thereof shall have no rights with respect thereto, except to receive payment of the principal to be redeemed and accrued interest thereon to the date fixed for redemption. If the redemption date for any Bonds shall be a Saturday, Sunday, legal holiday or a day on which banking institutions in the Commonwealth are required or authorized by law or executive order to close, then the date for payment of the principal, premium, if any, and interest upon such redemption shall be the next succeeding day which is not a Saturday, Sunday, legal holiday or a day on which such banking institutions are required or authorized to close, and payment on such date shall have the same force and effect as if made on the nominal date of redemption. BOOK-ENTRY-ONLY SYSTEM The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond will be issued for each maturity of the Bonds, each in the aggregate principal amount of such issue, and will be deposited with DTC. DTC, the world s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.6 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 posttrade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry only 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 4

11 Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of a Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry only system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds. DTC s records reflect only the identity of the Direct Participants to whose accounts the 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 the Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices will be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to 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 Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payment of principal and interest on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the Authority or the Paying Agent, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, the Paying Agent, or the Authority, 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 Authority 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. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Authority or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, bond certificates are required to be printed and delivered. The Authority may decide to discontinue use of the system of bookentry only transfers through DTC (or a successor securities depository). In that event, bond certificates will be printed and delivered to DTC. So long as Cede & Co., or any successor thereto, is the registered owner of the Bonds, as DTC s partnership nominee, references herein to the Bondholders or Owners or registered owners of the Bonds will mean DTC and will not mean the Beneficial Owners of the Bonds. During such period, the Paying Agent and the Authority will recognize DTC or its partnership nominee as the owner of all of the Bonds for all purposes, including the payment of the principal of, premium, if any, and interest on the Bonds, as well as the giving of notices and voting. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Issuer believes to be reliable, but the Issuer takes no responsibility for the accuracy thereof. 5

12 THE AUTHORITY AND THE TRUSTEE WILL HAVE NO RESPONSIBILITY OR OBLIGATION TO THE DIRECT PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE ACCURACY OF THE RECORDS OF DTC, ITS NOMINEE OR ANY DIRECT PARTICIPANT PERTAINING TO OWNERSHIP IN THE BONDS OR THE PAYMENTS TO, OR THE PROVIDING OF NOTICE FOR, TO THE DIRECT PARTICIPANTS, OR THE INDIRECT PARTICIPANTS OR THE BENEFICIAL OWNERS. SO LONG AS CEDE & CO., AS NOMINEE OF DTC, IS THE REGISTERED OWNER OF THE BONDS, REFERENCES HEREIN TO THE HOLDERS OF THE BONDS, OR OWNERS OF THE BONDS, SHALL MEAN CEDE & CO., AND SHALL NOT MEAN THE BENEFICIAL OWNERS. Discontinuation of Book-Entry Only System DTC may determine to discontinue providing its service with respect to the Bonds at any time by giving notice to the Authority and the Trustee and discharging its responsibilities with respect thereto under applicable law. Upon the giving of such notice, the book-entry only system for the Bonds will be discontinued unless a successor securities depository is appointed by the Authority. If the Authority and the Trustee concur that it would be in the best interests of the Holders of the Bonds for the bookentry only system to be discontinued (in whole or in part), such book-entry only system shall be discontinued (in whole or in part) in accordance with the provisions of the applicable procedures of DTC. SECURITY AND SOURCE OF PAYMENT Pledged Revenues Under the Indenture, the Authority, subject to the prior claim thereon for the Authority s Operating Expenses and amounts payable annually to the City under the Lease, has pledged and assigned to the Trustee as security for the Bonds all Revenues and Receipts and all other moneys pledged under the Indenture, including revenues which consist primarily of user or service charges payable to the Authority for the use of the Water System facilities serving the City and designated areas outside the City. Revenues and Receipts are described in the Indenture as the entire gross revenues of the Authority derived from the Water System. Until Revenues and Receipts are paid over to the Trustee as required by the Indenture, the Authority shall hold them subject to the pledge under the Indenture. Debt Service Reserve Fund The Indenture requires that the Debt Service Reserve Fund shall include a Debt Service Reserve Sub-Fund which shall be held by Trustee and shall initially consist of a sum equal to the lesser of ten percent (10%) of the proceeds of the Bonds or the maximum annual Debt Service Requirements of all outstanding Authority bonds. The Debt Service Reserve Fund Requirement is an amount equal to the maximum annual debt service requirements of all Authority bonds. Currently, the Debt Service Reserve Fund for the Authority s outstanding Bonds is fully funded as required under the Indenture. Rate Covenant Under the rate covenant in the Lease and described in the Indenture (the Rate Covenant ), the Authority covenants that it will, so long as any Bonds are outstanding under the Indenture and consistent with the provisions of the Lease, fix, alter, charge and collect reasonable and uniform rates and other charges, as determined by it, with respect to all customers and users in the area served by the Water System sufficient in each year ending December 31 st (the Fiscal Year ), to provide Revenues and Receipts (and in the Lease defined as Operating Revenues ) in an amount not less than the sum of: a) an amount not less than the budgeted Operating Expenses of the Authority for such Fiscal Year, plus b) to the extent not funded with proceeds of the Bonds, including any additional Bonds to be issued under the Indenture, the annual rental due to the City during such Fiscal Year pursuant to the Lease, plus c) amounts due and payable during the Fiscal Year as principal of, or interest on or necessary for coverage required for, Undischarged Existing City Debt including, with regard to the Undischarged Existing City Debt owing to Pennsylvania Infrastructure Investment Authority ( Pennvest ) as may be required in accordance with loan agreements pertaining thereto, plus d) an amount not less than 120% of the Debt Service Requirements for all Bonds outstanding under the Indenture during such Fiscal Year, plus 6

13 e) amounts not less than the Debt Service Requirements of and coverage required for any Additional Bonds, including the Series of 2016 Bonds issued under the Indenture, plus f) amounts, if any, required to be deposited into the Debt Service Reserve Fund for the Bonds to replenish the same as required by the Indenture, plus g) amounts required to be deposited into the Authority Capital Improvement Fund as required by the Indenture. Historic Debt Service Coverage As calculated per the Indenture, the Authority s historic debt service coverage is summarized below: Operating Revenue 23,734,220 25,941,120 27,854,415 29,741,431 29,957,032 31,584,531 Non Operating Revenue 2,883,474 4,047,146 2,075,557 1,452,237 1,386, ,644 Total Revenues and Receipts 26,617,694 29,988,266 29,929,972 31,193,668 31,343,249 32,560,175 Operating Expenses 13,358,165 13,187,089 13,685,059 13,301,519 14,365,232 14,968,506 City Lease 2,760,599 2,884,825 3,014,642 3,150,302 3,292,066 3,440,208 Pennvest Debt Service 787, , , , , , % Debt Service 8,832,000 10,379,079 6,767,972 a 13,045,748 12,693,862 12,874,294 Total Coverage Requirement 25,738,299 27,266,648 24,143,828 30,016,442 30,874,893 32,182,032 Revenues in Excess of Coverage Requirement 879,395 2,721,618 5,786,144 1,177, , ,143 a Partial debt restructuring applied to pension funding Additional Bonds Provided the Authority is not in default in regard to any covenant or other obligation in the Indenture, the Authority may issue additional series of bonds ( Additional Bonds ) under the Indenture from time to time provided the Authority shall have received the Certificate of a Consulting Engineer engaged by it or of an Independent Public Accountant engaged by it (the Certificate ) to the effect that: (a) during each of the two Fiscal Years of its operations of the Water System immediately preceding the issuance and sale of the Additional Bonds, the Revenues and Receipts derived by the Authority from the Water System and as could have been derived from the Water System had the Authority s rates and charges fixed and to be collected as of the date of such Certificate been in effect during each of such two Fiscal Years, were or would have been sufficient, in each such Fiscal Year, to pay the Authority s Operating Expenses, the annual Lease Payment, required principal of and interest on Undischarged Existing City Debt, any payments required to the Authority Capital Improvement Fund, and to provide the Authority with additional moneys equal to not less than 120% of the maximum annual Debt Service Requirements of all Outstanding Bonds plus the maximum annual Debt Service Requirement of the Additional Bonds to be issued under the Indenture; (b) during the Fiscal Year in which the Certificate is made and during each of the next succeeding four Fiscal Years, the Revenues and Receipts derived by the Authority from the Water System, after making due and reasonable allowances for contingencies and a margin of error in necessary calculations, will be sufficient in each Fiscal Year to pay the Authority s Operating Expenses, annual Lease Payments, required principal of and interest on Undischarged Existing City Debt, any payments required to the Authority Capital Improvement Fund, and to provide the Authority with additional moneys equal to not less than 120% of the maximum annual Debt Service Requirements on all Outstanding Bonds, including the Additional Bonds issued in reliance on said certificate; and (c) the Authority is otherwise in compliance with the Rate Covenant. 7

14 DEBT SERVICE FUND Pursuant to the Indenture a Debt Service Fund will be established for the Bonds. Moneys in the Debt Service Fund will be expended by the Trustee in payment when due of the Debt Service Requirements of the Bonds, including the Bonds. The Authority on each February 15, May 15, August 15 and November 15 until final payment of the principal of and the interest on the Bonds has been made or provided for, pay to the Trustee, from the Authority Revenue Fund, moneys for payment of the Debt Service Requirements of the Bonds which will on each such payment date be equal to one-quarter (1/4) of the principal amount of the Bonds stated to mature or to be mandatory redeemed on the December 1 next following such date. The Authority will pay to the Trustee, from the Authority Revenue Fund, on a monthly basis prior to each Interest Payment Date moneys in an amount sufficient to pay interest due on the Bonds on the next following Interest Payment Date. To the degree that there is a shortfall of funds deposited, the Authority will promptly transfer funds to the Debt Service Funds from the Revenue Fund or other accounts as needed upon notification by the Trustee to provide sufficient funds for debt service. All moneys received by Trustee from the Authority on account of the Debt Service Requirements of the Bonds will be deposited into the Debt Service Fund. The Trustee will pay to Registered Holders of outstanding Bonds from the Debt Service Fund an amount which will be equal to the principal annually due to be paid on the Bonds. Bond Insurance Policy BOND INSURANCE Concurrently with the issuance of the Bonds maturing on December 1, 2037 and December 1, 2039 (the Insured Bonds ), Assured Guaranty Municipal Corp. ("AGM") will issue its Municipal Bond Insurance Policy for the Insured Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Insured Bonds when due as set forth in the form of the Policy included as an appendix to this Official Statement. The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. Assured Guaranty Municipal Corp. AGM is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. ( AGL ), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol AGO. AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of its shareholders or affiliates, other than AGM, is obligated to pay any debts of AGM or any claims under any insurance policy issued by AGM. AGM s financial strength is rated AA (stable outlook) by Standard and Poor s Ratings Services, a Standard & Poor s Financial Services LLC business ( S&P ), AA+ (stable outlook) by Kroll Bond Rating Agency, Inc. ( KBRA ) and A2 (stable outlook) by Moody s Investors Service, Inc. ( Moody s ). Each rating of AGM should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of AGM in its sole discretion. In addition, the rating agencies may at any time change AGM s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by AGM. AGM only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by AGM on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn. Current Financial Strength Ratings On June 29, 2015, S&P issued a credit rating report in which it affirmed AGM s financial strength rating of AA (stable outlook). AGM can give no assurance as to any further ratings action that S&P may take. On November 13, 2014, KBRA assigned an insurance financial strength rating of AA+ (stable outlook) to AGM. AGM can give no assurance as to any further ratings action that KBRA may take. 8

15 On July 2, 2014, Moody s issued a rating action report stating that it had affirmed AGM s insurance financial strength rating of A2 (stable outlook). On February 18, 2015, Moody s published a credit opinion under its new financial guarantor ratings methodology maintaining its existing rating and outlook on AGM. AGM can give no assurance as to any further ratings action that Moody s may take. For more information regarding AGM s financial strength ratings and the risks relating thereto, see AGL s Annual Report on Form 10-K for the fiscal year ended December 31, Capitalization of AGM At September 30, 2015, AGM s policyholders surplus and contingency reserve were approximately $3,769 million and its net unearned premium reserve was approximately $1,603 million. Such amounts represent the combined surplus, contingency reserve and net unearned premium reserve of AGM, AGM s wholly owned subsidiary Assured Guaranty (Europe) Ltd. and 60.7% of AGM s indirect subsidiary Municipal Assurance Corp.; each amount of surplus, contingency reserve and net unearned premium reserve for each company was determined in accordance with statutory accounting principles. Incorporation of Certain Documents by Reference Portions of the following documents filed by AGL with the Securities and Exchange Commission (the SEC ) that relate to AGM are incorporated by reference into this Official Statement and shall be deemed to be a part hereof: (i) the Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (filed by AGL with the SEC on February 26, 2015); (ii) the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015 (filed by AGL with the SEC on May 8, 2015); (iii) the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015 (filed by AGL with the SEC on August 6, 2015); and (iv) the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015 (filed by AGL with the SEC on November 6, 2015). All consolidated financial statements of AGM and all other information relating to AGM included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof furnished under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to above and before the termination of the offering of the Insured Bonds shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC s website at at AGL s website at or will be provided upon request to Assured Guaranty Municipal Corp.: 31 West 52 nd Street, New York, New York 10019, Attention: Communications Department (telephone (212) ). Except for the information referred to above, no information available on or through AGL s website shall be deemed to be part of or incorporated in this Official Statement. Any information regarding AGM included herein under the caption BOND INSURANCE Assured Guaranty Municipal Corp. or included in a document incorporated by reference herein (collectively, the AGM Information ) shall be modified or superseded to the extent that any subsequently included AGM Information (either directly or through incorporation by reference) modifies or supersedes such previously included AGM Information. Any AGM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded. Miscellaneous Matters AGM makes no representation regarding the Insured Bonds or the advisability of investing in the Insured Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading BOND INSURANCE and in Appendix E Specimen Municipal Bond Insurance Policy. 9

16 CERTAIN BONDHOLDERS RISKS AND CONSIDERATIONS Investment in the Bonds may involve certain risks and each investor should carefully consider the risks involved to determine whether to purchase any of the Bonds. Prospective investors should carefully examine this Official Statement and their individual financial condition (including the diversification of investment portfolio) in order to make a judgment as to whether the Bonds are an appropriate investment. The Authority has identified and summarized below certain bondholders risks that could adversely affect the finances of the Authority, the operation of the Water System and/or the funds available for payment of the Bonds, which should be considered by prospective investors. The following discussion is not intended to be exhaustive, but includes certain major factors, which should be considered along with other factors set forth elsewhere in this Official Statement, including the Appendices hereto. Water Supply Although the quantity and quality of water available from the Authority s sole source of water, Lake Erie, is believed to be adequate, it is possible that circumstances could change this condition. Geographic Concentration The number of customers using the Water System may be adversely affected by regional and local economic conditions, competitive conditions, changes in population and general market conditions. There can be no assurance that the Water System will be able to maintain the current number of existing users, if there are changes in the resident and/or commercial population of the service area. Governmental Regulation The federal and local government significantly regulates providers of water and sewer systems. Future regulations and conditions affecting the acquisition, development ownership and operation of the Water System could increase the operating expenses of the Water System or could otherwise have a material adverse effect on the financial condition of the Authority. Bond Insurance Ratings Risk Rating agencies review the credit quality of municipal bond insurers on a periodic basis and have downgraded the credit ratings of various monoline bond insurance companies in the past. Based upon these prior rating actions, other downgrades may occur in the future and there is no assurance that insured bond ratings of the Insured Bonds will not be downgraded in the future. See BOND INSURANCE. CERTAIN LEGAL MATTERS The legality and validity of the Bonds as issued will be approved by Knox McLaughlin Gornall & Sennett, P.C., Erie Pennsylvania, Bond Counsel. The proposed form of the approving opinion of Bond Counsel is included herein as APPENDIX D. Certain legal matters will be passed upon by the Law Offices of Wayne D. Gerhold, Pittsburgh, Pennsylvania which has been retained by the Authority, and acts as Disclosure Counsel. Certain legal matters will be passed upon for the Authority by Knox, McLaughlin, Gornall & Sennett, P.C., Erie, Pennsylvania. The various legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. 10

17 LITIGATION To the knowledge of the appropriate officials of the Authority, there is no action, proceeding, injury or investigation, at law or in equity, before or by any court, public body or tribunal of competent jurisdiction federal or commonwealth, pending or threatened against the Authority: (1) Affecting the existence of the Authority or the titles of its officers to their respective offices; or (2) Seeking to prohibit, restrain or enjoin the issuance, sale or delivery of the Bonds or the collection of the revenues of the Authority pledged to pay the Bonds; or (3) Contesting the power or ability of the Authority to issue, sell and deliver the Bonds, and adopt the Resolution and the Indenture or execute a purchase contract for the sale of the Bonds, or any official acts in connection herewith; or (4) Which, if decided adversely to the Authority, would materially adversely affect the Authority s financial condition or ability to pay debt service on the Bonds. At closing, the Authority will present the officers certificate, in form and content satisfactory to the Underwriter and Disclosure Counsel, to that effect. State Tax Matters TAX MATTERS In the opinion of Bond Counsel, the Bonds, and the interest income therefrom, are free from taxation for purposes of personal income, corporate net income and personal property taxes within the Commonwealth of Pennsylvania, but such exemption does not extend to gains made on the sale thereof or to gift, estate, succession or inheritance taxes or any other taxes not levied or assessed directly on the Bonds, the transfer thereof, or the income therefrom. Federal Tax Matters As of the date of closing, Bond Counsel will issue a legal opinion to the effect that under existing law, the interest on the Bonds (a) is excluded from gross income for federal income tax purposes and (b) is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal tax purposes of interest on obligations such as the Bonds. The Authority has covenanted to comply with certain requirements designed to assure that interest paid on the Bonds will not become includable in gross income. Failure to comply with those covenants may result in interest paid on the Bonds being included in gross income from the date of issue of the Bonds regardless of the date on which the event causing such taxability occurs. The opinion of the Bond Counsel assumes continuing compliance with those covenants. Post closing federal tax law compliance procedures will be provided to the Authority by Bond Counsel to assist in maintaining such continued compliance. Although interest on the Bonds is excluded from gross income for federal income tax purposes, the accrual or receipt of such interest may otherwise affect the federal income tax liability of the recipient. The extent of these other tax consequences will depend upon the recipient s particular tax status or other items of income or deductions. Purchasers of the Bonds, particularly purchasers that are corporations (including Subchapter S corporations and foreign corporations operating branches in the United States), property or casualty insurance companies, banks, thrift or other financial institutions, certain recipients of Social Security or Railroad Retirement benefits, taxpayers otherwise entitled to the earned income credit and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax-exempt obligations are advised to consult their tax advisors as to the tax consequences of purchasing or holding the Bonds. Bond Counsel expresses no opinion regarding such consequences. From time to time, there are legislative proposals in Congress that, if enacted, could alter or amend the federal tax matters referred to above or adversely affect the market value of the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted, it would apply to bonds issued prior to enactment. Each purchaser of the Bonds should consult his or her own tax advisor regarding any pending or proposed federal law legislation. Bond Counsel will not express any opinion regarding any pending or proposed federal tax legislation. 11

18 THE FOREGOING IS NOT INTENDED AS AN EXHAUSTIVE LIST OF THE PROVISIONS OF FEDERAL TAX LAW WHICH MAY HAVE AN EFFECT ON INDIVIDUALS AND CORPORATIONS HOLDING THE BONDS (OR BOOK ENTRY INTERESTS) OR RECEIVING INTEREST THEREON. PROSPECTIVE PURCHASERS SHOULD CONSULT WITH THEIR TAX ADVISORS REGARDING THE EFFECT HOLDING THE BONDS (OR BOOK ENTRY INTERESTS) OR RECEIVING INTEREST THEREON MAY HAVE ON THEIR AFFAIRS, INCLUDING, BUT NOT LIMITED TO, THE EFFECT OF STATE AND LOCAL TAX LAWS. CONTINUING DISCLOSURE In accordance with the requirements of Rule 15c2-12 (the "Rule"), promulgated under the Securities Exchange Act of 1934, as amended, by the Securities and Exchange Commission (the "Commission"), the Authority will, in a Disclosure Dissemination Agreement (as hereinafter defined) to be executed by the Authority on the date of settlement of the Bonds, agree to provide, or cause to be provided: (i) To the Municipal Securities Rulemaking Board s ( MSRB ) Electronic Municipal Market Access System ( EMMA ) in accordance with the Rule, the Authority s audited financial statements, prepared in accordance with generally accepted accounting principles ( annual financial information ); such information shall be provided on or before December 31 of each year after the end of each fiscal year ending on the previous December 31 thereafter, as long as the Bonds remain outstanding or are not defeased, (ii) The following events with respect to the Bonds shall constitute Reportable Events and shall be provided to the MSRB no later than ten (10) business days after the occurrence: 1. Principal and interest payment delinquencies 2. Non-payment related defaults, if material 3. Unscheduled draws on debt service reserves reflecting financial difficulties 4. Unscheduled draws on credit enhancements reflecting financial difficulties 5. Substitution of credit or liquidity providers, or their failure to perform 6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds or other material events affecting the tax-exempt status of the Bonds 7. Modifications to rights of holders of the Bonds, if material 8. Bond calls, if material, and tender offers 9. Defeasances 10. Release, substitution or sale of property securing repayment of the Bonds, if material 11. Rating changes 12. Bankruptcy, insolvency, receivership or similar event of the Authority (or any other entity that is an obligated person within the meaning of the Rule with respect to the Bonds) 13. The consummation of a merger, consolidation, or acquisition involving the Authority (or any other entity that is an obligated person within the meaning of the Rule with respect to the Bonds) or the sale of all or substantially all of the assets of the Authority or any such 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. The appointment of a successor or additional trustee or the change of name of a trustee, if material; and (iii) Notice of a failure to make an annual financial information filing with respect to itself on or before the date specified in the Disclosure Dissemination Agreement. Note that the Rule requires the listing of (1) through (15) above, although some of the events may not be applicable to the Bonds. The Disclosure Dissemination Agreement will provide bondholders or beneficial owners with certain enforcement rights in the event of a failure by the Authority to comply with the terms thereof; however, a default under the Disclosure Dissemination Agreement does not constitute a default under the Indenture. The Disclosure Dissemination Agreement may be revised from time to time as permitted or required by applicable law, without the consent of the Bondholders, and may be terminated upon the economic defeasance of all outstanding Bonds, or other arrangement, whereby the Authority is released from any further obligation with respect to the Bonds. Covenants in the Disclosure Dissemination Agreement may also be terminated, without the consent of the Bondholders, at such time as continuing disclosure is no longer required by applicable law. The Authority will promptly notify the MSRB via EMMA of any revision or termination of the disclosure covenants. The sole remedy for a breach by the Authority of its covenants to provide financial statements, tabular information and notices of material events is an action to compel performance of such covenants. Under no circumstances may monetary damage be 12

19 assessed or recovered, nor will any such breach constitute a default under the Bonds or a failure to comply with any provision of the Bonds for purpose of the Act. On or prior to the issuance of the Bonds, the Authority has entered into a Disclosure Dissemination Agent Agreement ( Disclosure Dissemination Agreement ) with Digital Assurance Certification, L.L.C. ( DAC ) as its Disclosure Dissemination Agent for the purpose of assisting it with any required remedial filings and ensuring ongoing compliance with its continuing disclosure filing requirements. DAC provides its clients with automated filing of rating events, templates consolidating all outstanding filing requirements that accompany reminder notices of annual or interim mandatory filings, review of all template filings by professional accountants, as well as a time and date stamp record of each filing along with the unique ID from EMMA accompanying the copy of the actual document filed. DAC also offers its clients a series of training webinars each year qualified for NASBA certified CPE credits, as well as model secondary market compliance policies and procedures. The Disclosure Dissemination Agent has only the duties specifically set forth in the Disclosure Dissemination Agreement. The Disclosure Dissemination Agent s obligation to deliver the information at the times and with the contents described in the Disclosure Dissemination Agreement is limited to the extent the Authority has provided such information to the Disclosure Dissemination Agent as required by this Disclosure Dissemination Agreement. The Disclosure Dissemination Agent has no duty with respect to the content of any disclosures or notice made pursuant to the terms of the Disclosure Dissemination Agreement. The Disclosure Dissemination Agent has no duty or obligation to review or verify any information in the Annual Report, Audited Financial Statements, notice of Notice Event or Voluntary Report, or any other information, disclosures or notices provided to it by the Authority and shall not be deemed to be acting in any fiduciary capacity for the Issuer, the Holders of the Bonds or any other party. The Disclosure Dissemination Agent has no responsibility for the Authority s failure to report to the Disclosure Dissemination Agent a Notice Event or a duty to determine the materiality thereof. The Disclosure Dissemination Agent shall have no duty to determine or liability for failing to determine whether the Issuer has complied with the Disclosure Dissemination Agreement. The Disclosure Dissemination Agent may conclusively rely upon certifications of the Authority at all times. Bondholders are advised that the Disclosure Dissemination Agreement, copies of which are available at the office of the Authority, should be read in their entirety for more complete information regarding their contents. The Authority has entered into prior undertakings to provide information pursuant to continuing disclosure undertakings for several outstanding bond issues. The following table provides information regarding the undertaking, annual filing deadlines and history of filing. Bond Issues Subject to Disclosure Water Revenue Bonds, Series A of 2001 and Water Revenue Bonds, Series B of 2001 Annual Filing Deadline for the Previous Fiscal Year Ended December 31 Water Revenue Bonds, Series of 2006 December 31 Water Revenue Bonds, Series of 2008 December 31 Water Revenue Bonds, Series of 2009 December 31 Water Revenue Bonds, Series of 2011 December 31 Dates of Actual Filings Audited Financial Statements (Last 5 years) (1) December 31 (2) Fiscal Year 2010: August 22, 2011 Fiscal Year 2011: June 22, 2012 Fiscal Year 2012: May 17, 2013 Fiscal Year 2013: June 23, 2014 Fiscal Year 2014: July 30, 2015 Fiscal Year 2010: August 22, 2011 Fiscal Year 2011: June 22, 2012 Fiscal Year 2012: May 17, 2013 Fiscal Year 2013: June 23, 2014 Fiscal Year 2014: July 30, 2015 Fiscal Year 2010: August 22, 2011 Fiscal Year 2011: June 22, 2012 Fiscal Year 2012: May 17, 2013 Fiscal Year 2013: June 23, 2014 Fiscal Year 2014: July 30, 2015 Fiscal Year 2010: August 22, 2011 Fiscal Year 2011: June 22, 2012 Fiscal Year 2012: May 17, 2013 Fiscal Year 2013: June 23, 2014 Fiscal Year 2014: July 30, 2015 Fiscal Year 2011: June 22, 2012 Fiscal Year 2012: May 17, 2013 Fiscal Year 2013: June 23, 2014 Fiscal Year 2014: July 30,

20 Water Revenue Bonds, Series of 2011A December 31 Water Revenue Bonds, Series of 2012 December 31 Fiscal Year 2011: June 22, 2012 Fiscal Year 2012: May 17, 2013 Fiscal Year 2013: June 23, 2014 Fiscal Year 2014: July 30, 2015 Fiscal Year 2012: May 17, 2013 Fiscal Year 2013: June 23, 2014 Fiscal Year 2014: July 30, 2015 Water Revenue Bonds, Series of 2014 December 31 Fiscal Year 2014: July 30, 2015 Water Revenue Bonds, Series of 2015 December 31 Presently prior to initial filing deadline (1) Filings with EMMA began in July, (2) The continuing disclosure agreement for the Water Revenue Bonds, Series A of 2001 and Water Revenue Bonds, Series B of 2001 was amended on April 16, 2015 to change the original filing deadline December 31. The Authority failed to file certain notices of rating changes and late filings of annual financial information within the past five fiscal years. Filings of the relevant insured and recalibrated rating changes was completed and notice of failure to file material event notices with respect to insured and recalibrated rating changes and late filings were filed on EMMA. RATINGS It is a condition to closing that Standard & Poor s assign the rating of AA (stable outlook) to the Insured Bonds on the understanding that the a municipal bond insurance policy of AGM insuring the timely payment of the scheduled principal of and interest on the Bonds will be delivered as described herein. See BOND INSURANCE herein and APPENDIX E attached hereto. Additionally, Moody s Investors Service has assigned long-term debt ratings to the Bonds without consideration of municipal bond insurance of A2. All such ratings reflect only the views of Standard & Poor s and Moody s Investors Service at the time such rating was given, and neither the Authority nor the Underwriters makes any representations as to the appropriateness of such rating. Any explanation of the significance of such ratings may only be obtained from Standard & Poor s or Moody s Investors Service. There is no assurance that such ratings will remain for any given period of time or that they may not be lowered or withdrawn entirely if in the judgments of Standard & Poor s or Moody s Investors Service, circumstances so warrant. Any such downward change in or withdrawal of such ratings may have an adverse effect on the market price of the Bonds. UNDERWRITING The Bonds are being purchased from the Authority by PNC Capital Markets LLC as underwriter of the Bonds (the Underwriter ). The Underwriter has agreed to purchase the Bonds for an aggregate purchase price of $49,442, (which represents the par amount of the Bonds less underwriter s discount of $274, plus net original issue premium of $4,021,663.65). The Authority has agreed to indemnify the Underwriter against certain liabilities. The obligation of the Underwriter to accept delivery of the Bonds is subject to various conditions of the Bond Purchase Contract between the Authority and the Underwriter. CERTAIN RELATIONSHIPS AND SERIES 2015 NOTE The Authority issued its Water Revenue Note, Series of 2015 to provide funds with regard to the acquisition of the Millcreek Township Water Authority and recognition of certain accounts receivable. The Series 2015 Note was issued pursuant to the Seventeenth Supplemental Indenture dated November 12, The Series 2015 Note matures December 1, 2016 principal amount is $750,000 with a fixed rate of interest. PNC Bank, National Association. is the purchaser and current holder of the Series 2015 Note. PNC Capital Markets LLC is Underwriter of the Bonds and is a wholly owned subsidiary of The PNC Financial Services Group and affiliate of PNC Bank, National Association. A portion of the proceeds of the Bonds will be applied to the repayment of the Series 2015 Note. 14