REEDY CREEK IMPROVEMENT DISTRICT (FLORIDA) (Located in Orange and Osceola Counties)

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1 NEW ISSUE BOOK ENTRY ONLY RATINGS: Moody s: Aa3 Fitch: AA- S&P: A+ See RATINGS herein In the opinion of Greenberg Traurig, P.A., Bond Counsel, assuming continuing compliance with certain tax covenants, under existing statutes, regulations, rulings and judicial decisions, interest on the Series 2013 Bonds 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 certain corporations. However, see TAX EXEMPTION for a description of the federal alternative minimum tax imposed on corporations and certain other federal tax consequences of ownership of the Series 2013 Bonds. Bond Counsel is further of the opinion that the Series 2013 Bonds and the interest thereon are not subject to taxation under the laws of the State of Florida, except as to estate taxes imposed by Chapter 220, Florida Statutes, as amended, on interest, income or profits on debt obligations owned by corporations as defined therein. REEDY CREEK IMPROVEMENT DISTRICT (FLORIDA) (Located in Orange and Osceola Counties) $344,960,000 AD VALOREM TAX BONDS, SERIES 2013A $40,950,000 AD VALOREM TAX REFUNDING BONDS, SERIES 2013B Dated: Date of Delivery Due: June 1, as shown on inside cover The Reedy Creek Improvement District (the District ) Ad Valorem Tax Bonds, Series 2013A (the Series 2013A Bonds ) and its Ad Valorem Tax Refunding Bonds, Series 2013B (the Series 2013B Bonds, which together with the Series 2013A Bonds, the Series 2013 Bonds ) will be issued as fully registered bonds and will be initially issued to and registered in the name of Cede & Co., as nominee for The Depository Trust Company New York, New York ( DTC ), which will act as securities depository for the Series 2013 Bonds. The Series 2013 Bonds will be available to purchasers in denominations of $5,000 or any integral multiple thereof under the book-entry only system maintained by DTC through brokers and dealers who are, or act through, DTC Participants. Purchasers will not receive physical delivery of the Series 2013 Bonds. For so long as any purchaser is the beneficial owner of a Series 2013 Bond, they must maintain an account with a broker or dealer who is, or acts through, a DTC Participant in order to receive payment of principal of and interest on such Series 2013 Bond. For so long as the book-entry only system is in effect, any reference to a Bondholder or Bondholders shall be deemed to be Cede & Co. and not the beneficial owners of the Series 2013 Bonds. See Book-Entry Only System under THE SERIES 2013 BONDS herein. Interest on the Series 2013 Bonds is payable on each June 1 and December 1, commencing December 1, 2013 by U.S. Bank National Association, Orlando, Florida, as Paying Agent and Bond Registrar for the Series 2013 Bonds. The Series 2013A Bonds are being issued by the District (i) to finance the costs to design, construct, equip and improve roadways and parking facilities within and outside the District, (ii) to pay interest on a portion of the Series 2013A Bonds in fiscal years 2014 and 2015 and (iii) to pay the costs of issuance of the Series 2013A Bonds. The Series 2013B Bonds are being issued by the District (i) to advance refund the Reedy Creek Improvement District Ad Valorem Tax Bonds, Series 2004A (the Series 2004A Bonds ) and the Reedy Creek Improvement District Ad Valorem Tax Bonds, Series 2004B (the Series 2004B Bonds and collectively with the Series 2004A Bonds, the Series 2004 Bonds ) maturing on and after June 1, 2015 and (ii) to pay the costs of issuance of the Series 2013B Bonds. The Series 2013 Bonds and interest thereon are payable from and secured equally and ratably with other Outstanding Bonds under the Bond Resolutions (as such terms are defined herein), by an irrevocable prior lien on and a pledge of the first proceeds collected by the District from ad valorem taxes levied at a rate not exceeding 30 mills on the dollar per annum on the assessed value of all taxable property in the District, the major portion of which property is wholly-owned by affiliates of The Walt Disney Company. The Series 2013 Bonds are subject to optional and mandatory redemption prior to maturity as described in this Official Statement. MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES PRICES OR YIELDS AND INITIAL CUSIP NUMBERS ON INSIDE COVER This cover page contains certain information for quick reference only. It is not, and is not intended to be, a summary of the bond issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. The Series 2013 Bonds are offered for delivery when, as and if issued and received by the Underwriters, subject to the approval of legality by Greenberg Traurig P.A., Miami, Florida, Bond Counsel. Certain legal matters will be passed upon by Lee G. Schmudde, Esq., Orlando, Florida, as Special Counsel to the District and by Bryant Miller Olive P.A., Orlando, Florida, as Disclosure Counsel for the District. Certain legal matters will be passed on for the Underwriters by their counsel, Marchena and Graham, P.A., Orlando, Florida. Dunlap & Associates. Inc., Winter Park, Florida, is acting as financial advisor to the District. The Series 2013 Bonds are expected to be available for delivery through the offices of DTC in New York, New York on or about September 5, Raymond James J.P. Morgan BofA Merrill Lynch Loop Capital Markets Morgan Stanley Dated: August 15, 2013.

2 MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, PRICES OR YIELDS AND INITIAL CUSIP NUMBERS Ad Valorem Tax Bonds Series 2013A $220,740,000 Serial Bonds Maturity (June 1) Principal Amount Interest Rate Price or Yield Initial CUSIP Number* Maturity (June 1) Principal Amount Interest Rate Price or Yield Initial CUSIP Number* 2020 $11,255, % 2.660% NM $16,595, % 4.470% NV ,820, % 3.020% NN ,495, % 4.540% NW ,410, % 3.330% NP ,925, % 4.540% PD ,030, % 3.540% NQ ,325, % 4.630% NX ,685, % 3.760% NR ,290, % 4.710% NY ,365, % 3.970% NS ,100, % 4.760% NZ ,165, % 4.160% NT ,200, % 4.760% PE ,920, % 4.160% PC ,360, % 4.810% PA ,800, % 4.340% NU2 $124,220, % Term Bonds due June 1, 2038 Yield 5.000% Initial CUSIP Number* PB2 Ad Valorem Tax Refunding Bonds Series 2013B $40,950,000 Serial Bonds Maturity (June 1) Principal Amount Interest Rate Price or Yield Initial CUSIP Number* Maturity (June 1) Principal Amount Interest Rate Price or Yield Initial CUSIP Number* 2014 $ 570, % 0.180% PF $4,055, % 2.660% PM ,435, % 0.610% PG ,755, % 3.020% PN ,535, % 1.050% PH ,465, % 3.020% PS ,645, % 1.460% PJ ,415, % 3.330% PP ,755, % 1.840% PK ,590, % 3.540% PQ ,905, % 2.220% PL ,825, % 3.760% PR7 The District is not responsible for the use of the CUSIP numbers referenced in this Official Statement nor is any representation made by the District as to their correctness; such CUSIP numbers being included in this Official Statement solely for the convenience of the readers of this Official Statement.

3 REEDY CREEK IMPROVEMENT DISTRICT (FLORIDA) (Located in Orange and Osceola Counties) 1900 Hotel Plaza Boulevard Lake Buena Vista, Florida BOARD OF SUPERVISORS Donald R. Greer, President Laurence C. Hames, Vice President Wayne Schoolfield, Treasurer Elizabeth A. Duda Thomas Moses DISTRICT ADMINISTRATOR William L. Warren DEPUTY DISTRICT ADMINISTRATOR/COMPTROLLER Ann G. Blakeslee INDEPENDENT AUDITORS Ernst & Young, LLP Orlando, Florida BOND COUNSEL Greenberg Traurig, P.A. Miami, Florida FINANCIAL ADVISOR Dunlap & Associates, Inc. Winter Park, Florida DISCLOSURE COUNSEL Bryant Miller Olive P.A. Orlando, Florida

4 No dealer, broker, salesman or other person has been authorized by the Reedy Creek Improvement District (the District ) or by 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 as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any offer, solicitation or sale of the Series 2013 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. Certain information contained in this Official Statement (which includes the Appendices) has been obtained by the District from DTC (all as hereinafter defined) and other sources believed to be reliable. No representation is made by the District, however, as to the accuracy or completeness of such information, and nothing contained in this Official Statement is, or shall be relied upon as, a promise or representation as to such information by the District. This Official Statement is submitted in connection with the sale of the Series 2013 Bonds and may not be reproduced or used, in whole or in part, for any other purposes. The information herein is subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the information or in the affairs of the District since the date hereof. THE UNDERWRITERS HAVE PROVIDED THE FOLLOWING SENTENCE FOR INCLUSION IN THIS OFFERING STATEMENT: THE UNDERWRITERS HAVE REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN ACCORDANCE WITH, AND AS PART OF, THEIR RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND CIRCUMSTANCES OF THIS TRANSACTION, BUT THE UNDERWRITERS DO NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. IN CONNECTION WITH THE OFFERING OF THE SERIES 2013 BONDS, THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SERIES 2013 BONDS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITERS MAY OFFER AND SELL THE SERIES 2013 BONDS TO CERTAIN DEALERS AND CERTAIN DEALER BANKS AND BANKS ACTING AS AGENTS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE COVER HEREOF. UPON ISSUANCE THE SERIES 2013 BONDS WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR WILL THE INDENTURE BE QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE SERIES 2013 BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF THE SECURITIES LAWS OF THE STATES, IF ANY, IN WHICH THE SERIES 2013 BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN CERTAIN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION iii

5 THEREOF. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. THIS OFFICIAL STATEMENT SHALL NOT CONSTITUTE A CONTRACT BETWEEN THE UNDERWRITERS OR THE DISTRICT AND ANY ONE OR MORE OF THE OWNERS OF THE SERIES 2013 BONDS. THIS OFFICIAL STATEMENT IS BEING PROVIDED TO PROSPECTIVE PURCHASERS EITHER IN BOUND PRINTED FORM ("ORIGINAL BOUND FORMAT") OR IN ELECTRONIC FORMAT ON THE WEBSITE THIS OFFICIAL STATEMENT MAY BE RELIED UPON ONLY IF IT IS IN ITS ORIGINAL BOUND FORMAT OR IF IT IS PRINTED IN FULL DIRECTLY FROM SUCH WEBSITE. iv

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7 TABLE OF CONTENTS Page INTRODUCTORY STATEMENT... 1 PURPOSE OF THE SERIES 2013 BONDS... 2 DESCRIPTION OF THE PROJECT... 2 PLAN OF REFUNDING... 4 ESTIMATED SOURCES AND USES OF FUNDS... 5 DESCRIPTION OF THE SERIES 2013 BONDS... 5 General Description... 5 Book-Entry Only System... 5 Optional Redemption... 8 Mandatory Redemption... 9 Notice of Redemption... 9 Non-Presentment of Series 2013 Bonds SECURITY FOR THE SERIES 2013 BONDS Pledge of Ad Valorem Taxes Sinking Fund Disposition of Ad Valorem Taxes Flow of Funds Covenant by the State of Florida to District Investment of Funds Additional Obligations Additional Bonds THE REEDY CREEK IMPROVEMENT DISTRICT Description; Location Government Administration Powers Comprehensive Plan Future Financing Plans of the District Description of Major Business in the District Taxation PENSION PLANS AND OTHER POST EMPLOYMENT BENEFITS Pension Plans Other Post Employment Benefit Plans OUTSTANDING BONDS SECURED BY AD VALOREM TAXES AGGREGATE AD VALOREM DEBT SERVICE SCHEDULE LITIGATION vi

8 TAX EXEMPTION General Original Issue Discount and Premium RECENT IRS TECHNICAL ADVICE MEMORANDUM RELATED TO VILLAGE CENTER DEVELOPMENT DISTRICT FINANCIAL STATEMENTS FINANCIAL ADVISOR UNDERWRITING RATINGS APPROVAL OF LEGAL PROCEEDINGS CONTINUING DISCLOSURE VERIFICATION OF MATHEMATICAL COMPUTATIONS LEGALITY FOR INVESTMENT IN FLORIDA DISCLOSURE REQUIRED BY FLORIDA BLUE SKY LAWS CERTIFICATION CONCERNING OFFICIAL STATEMENT MISCELLANEOUS Appendix A Appendix B Appendix C Appendix D Audited Financial Statements of Reedy Creek Improvement District for the Fiscal Year Ended September 30, 2012 Bond Resolutions Resolution 245, Resolution 313, Resolution 546 and Resolution 551 Forms of Bond Counsel Opinions Form of Disclosure Dissemination Agent Agreement vii

9 OFFICIAL STATEMENT Relating to REEDY CREEK IMPROVEMENT DISTRICT (FLORIDA) (Located in Orange and Osceola Counties) $344,960,000 Ad Valorem Tax Bonds, Series 2013A $40,950,000 Ad Valorem Tax Refunding Bonds, Series 2013B INTRODUCTORY STATEMENT The purpose of this Official Statement, including the cover page, inside cover page, and the Appendices hereto, is to set forth certain information relating to the Reedy Creek Improvement District (the District ) and its Ad Valorem Tax Bonds, Series 2013A (the Series 2013A Bonds ) and its Ad Valorem Tax Refunding Bonds, Series 2013B (the Series 2013B Bonds, and collectively with the Series 2013A Bond, the Series 2013 Bonds ). The Series 2013 Bonds are being issued pursuant to the Constitution and laws of the State of Florida, particularly Chapter , Laws of Florida, Special Acts of 1967, effective May 12, 1967, Chapter 132, Florida Statutes and other applicable provisions of law (collectively, the Act ). See THE REEDY CREEK IMPROVEMENT DISTRICT Powers herein. On February 27, 2013, the Board of Supervisors of the District adopted Resolution No. 546, as amended, (the 2013B Resolution ) providing for the issuance of the Series 2013B Bonds in a principal amount not to exceed $115,000,000 to advance refund the District s Ad Valorem Tax Bonds, Series 2004A (the "Series 2004A Bonds") and the Reedy Creek Improvement District Ad Valorem Bonds, Series 2004B (the "Series 2004B Bonds" and collectively with the Series 2004A Bonds, the "Series 2004 Bonds"). The Board of Supervisors of the District adopted a resolution on April 4, 1972, providing for the issuance of its $20,000,000 Ad Valorem Tax Bonds dated June 1, 1972 (the 1972 Resolution ). On November 15, 1991, the District adopted Resolution No. 245 amending, supplementing, and restating the 1972 Resolution (the 1991 Resolution ) and authorizing the issuance of its Ad Valorem Tax Bonds, including its Ad Valorem Tax Bonds, Series 1991A, which Bonds are no longer outstanding. On April 21, 1995, the District adopted Resolution 313 (the 1995 Resolution ) providing for the issuance of its Ad Valorem Tax Bonds, Series 1995A and amending the 1991 Resolution. On November 19, 2003, the District adopted Resolution 441 providing for the issuance of the Series 2004 Bonds (the 2004 Resolution ) which Bonds are being refunded by the Series 2013B Bonds. On April 27, 2005, the District adopted Resolution No. 450 supplementing the 1991 Resolution and providing for the issuance of it s Ad Valorem Tax Bonds, Series 2005A and Series 2005B (the Series 2005 Bonds ). On September 22, 2010, the District adopted Resolution No. 516 supplementing the 1991 Resolution and providing for

10 the issuance of its Ad Valorem Tax Refunding Bonds, Series 2010 (the Series 2010 Bonds ). On January 26, 2011, the District adopted Resolution No. 519 supplementing the 1991 Resolution and providing for the issuance of its Ad Valorem Tax Refunding Bonds, Series On July 24, 2013, the District adopted Resolution No. 551 supplementing the 1991 Resolution and amending the 2013B Resolution and providing for the issuance of the 2013A Bonds (the Series 2013A Resolution ). The 1991 Resolution, as amended by the 1995 Resolution and supplemented by the 2013A Resolution and the 2013B Resolution are herein collectively referred to as the Bond Resolutions. The Series 2013 Bonds are to be issued on parity, and are to have an equal lien on the Ad Valorem Taxes collected by the District, with the Series 2004A Bonds that remain outstanding following delivery of the Series 2013B Bonds, the Series 2004B Bonds that remain outstanding following delivery of the Series 2013B Bonds, the Series 2005 Bonds, Series 2010 Bonds and the Series 2011 Bonds (collectively, the Outstanding Bonds ), and with any subsequent series of Additional Bonds issued as authorized under the Bond Resolutions, as supplemented. The Outstanding Bonds together with the Series 2013 Bonds being issued, and any subsequent series of Additional Bonds that may be issued and outstanding after the issuance of the Series 2013 Bonds, as authorized under the Bond Resolutions, are hereinafter collectively referred to as the Bonds. For a more complete description of the terms and conditions of the Series 2013 Bonds, reference is made to the Bond Resolutions, which are attached (without Exhibits) as Appendix B hereto. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Bond Resolutions. The description of the Series 2013 Bonds, the documents authorizing and securing the Series 2013 Bonds, and the information from financial reports contained herein do not purport to be comprehensive or definitive. All references herein to such documents and reports are qualified in their entirety by reference to such documents. Copies of such documents may be obtained from William L. Warren, District Administrator, 1900 Hotel Plaza Boulevard, Lake Buena Vista, Florida (telephone: ). PURPOSE OF THE SERIES 2013 BONDS The Series 2013A Bonds are being issued by the District (i) to finance the cost to design, construct, equip and improve roadways and parking facilities within and outside the District (ii) to pay interest on a portion of the Series 2013A Bonds in fiscal years 2014 and 2015 and (iii) to pay the costs of issuing the Series 2013A Bonds. The Series 2013B Bonds are being issued by the District (i) to advance refund the Series 2004 Bonds maturing on and after June 1, 2015 and (ii) to pay the costs of issuance of the Series 2013B Bonds. DESCRIPTION OF THE PROJECT The Series 2013A Bonds are being issued to provide financing for transportation improvements benefitting primarily the Buena Vista Drive corridor, including designing, constructing, equipping or improving certain roadways and parking facilities within or outside the District. 2

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12 PLAN OF REFUNDING A portion of the proceeds derived from the sale of the Series 2013B Bonds, together with other available funds, sufficient to pay, together with investment earnings, (i) the principal and interest on the Series 2004 Bonds maturing on and after June 1, 2015 (the Refunded 2004 Bonds ) as they become due and the redemption price of the Refunded 2004 Bonds on April 1, 2014, will be deposited into an escrow deposit trust fund for the Refunded 2004 Bonds (the "2004 Escrow Fund") established pursuant to the terms of an Escrow Deposit Agreement to be dated as of the date of delivery of the Series 2013B Bonds (the "Escrow Agreement") between the District and U.S. Bank National Association, as escrow agent (the "Escrow Agent"). The moneys deposited in the Escrow Fund established under the Escrow Agreement will be invested in direct obligations of the United States of America ("Government Obligations") not subject to redemption prior to their maturities, which are payable at such times and in such amounts so that such moneys, together with any moneys deposited in the Escrow Fund and left uninvested, will be available to pay, the principal and interest as they become due and the redemption price of the Refunded 2004 Bonds. The Refunded 2004 Bonds will be called for redemption on April 1, 2014, at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest to the redemption date. The refunding of the Refunded 2004 Bonds is being undertaken to effect an interest cost savings to the District. Concurrently with the deposit of the moneys with the Escrow Agent pursuant to the Escrow Agreement, Bond Counsel will render its opinion to the effect that, the Refunded 2004 Bonds are defeased and the obligations of the District with respect to the Refunded 2004 Bonds are completely discharged. Such opinion will be rendered in reliance upon the verification report of Causey Demgen & Moore, P.C., described herein under the heading "VERIFICATION OF MATHEMATICAL COMPUTATIONS". The maturing principal of and income from the Government Obligations and uninvested cash in the Escrow Fund are pledged solely to and will be available only to pay the Refunded 2004 Bonds. Amounts remaining in the Escrow Fund after redemption of the Refunded 2004 Bonds will be distributed to the District and made available for use for any lawful purpose of the District. [Remainder of page intentionally left blank.] 4

13 ESTIMATED SOURCES AND USES OF FUNDS Based upon current cost estimates, the District intends to apply the proceeds of the Series 2013 Bonds as follows: Series 2013A Series 2013B Total SOURCES: Principal Amount of Bonds $344,960, $40,950, $385,910, Net Original Issue Premium 15,104, ,314, ,419, Total Estimated Sources of Funds $360,064, $44,264, $404,329, USES: Deposit to Construction Fund (1) $358,095, $358,095, Deposit to Escrow Funds $44,035, ,035, Costs of Issuance (2) 1,969, , ,198, Total Estimated Uses of Funds $360,064, $44,264, $404,329, (1) Includes $10,000,000 of capitalized interest to pay a portion of the interest on the Series 2013A Bonds for fiscal years 2014 and (2) Includes Underwriters discount, legal fees and expenses, and other costs of issuance, and other fees and expenses associated with the issuance of the Series General Description DESCRIPTION OF THE SERIES 2013 BONDS The Series 2013 Bonds are being issued as a single fully-registered Bond for each maturity of each series, registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ). See Book-Entry Only System below. U.S. Bank National Association, Jacksonville, Florida, shall serve as Paying Agent and Bond Registrar for the Series 2013 Bonds. The Series 2013 Bonds will be dated as of their date of delivery, and will bear interest from their date of delivery at the rates and mature on the dates set forth on the inside cover page of this Official Statement. Interest on the Series 2013 Bonds is payable semiannually on each June 1 and December 1 of each year (the Interest Payment Dates ), commencing December 1, Principal of and interest on the Series 2013 Bonds is payable to the registered owner thereof, which initially will be a nominee of DTC. Book-Entry Only System DTC will act as securities depository for the Series 2013 Bonds. The Series 2013 Bonds will be issued as fully-registered bonds registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative 5

14 of DTC. One fully-registered bond certificate will be issued for each maturity of the Series 2013 Bonds. 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 (the "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 (the "Indirect Participants"). DTC has a Standard and 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 the Series 2013 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for such Series 2013 Bonds on DTC's records. The ownership interest of each actual purchaser of the Series 2013 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 Series 2013 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of the Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Series 2013 Bonds, except in the event that use of the book-entry system for the Series 2013 Bonds is discontinued. To facilitate subsequent transfers, all Series 2013 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 2013 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 6

15 Beneficial Owners of the Series 2013 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2013 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping an 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 made among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Series 2013 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2013 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the bond documents. For example, Beneficial Owners of Series 2013 Bonds may wish to ascertain that the nominee holding the Series 2013 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 shall be sent to DTC. If less than all of the Series 2013 Bonds are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such Bonds, as the case may be, to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2013 Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Series 2013 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Series 2013 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts, upon DTC's receipt of funds and corresponding detail information from the Issuer or the Agent on the 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 Agent or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer and/or the Paying Agent for the Series 2013 Bonds. 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 the Direct and Indirect Participants. 7

16 DTC may discontinue providing its services as securities depository with respect to the Series 2013 Bonds at any time by giving reasonable notice to the Issuer. Under such circumstances, in the event that a successor securities depository is not obtained, Series 2013 Bond certificates are required to be printed and delivered. The Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Series 2013 Bond certificates will be printed and delivered to DTC. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Issuer believes to be reliable, but takes no responsibility for the accuracy thereof. Optional Redemption Series 2013A Bonds Optional Redemption. The Series 2013A Bonds maturing on and after June 1, 2024 are subject to redemption by the District prior to maturity in whole or in part on any date on or after June 1, 2023, at a redemption price equal to 100% of the principal amount being redeemed (without premium) plus accrued interest to the date fixed for redemption. If less than all of the Series 2013A Bonds shall be called for redemption, the Series 2013A Bonds to be redeemed shall be selected, in multiples of $5,000, in such manner as the District in its discretion shall determine, and if less than all of a maturity shall be called for redemption, the Series 2013A Bonds to be redeemed shall be selected by lot within such maturity. Series 2013B Bonds Optional Redemption. The Series 2013B Bonds maturing on June 1, 2024 are subject to redemption by the District prior to maturity in whole or in part on any date on or after June 1, 2023, at a redemption price equal to 100% of the principal amount being redeemed (without premium) plus accrued interest to the date fixed for redemption. If less than all of the Series 2013B Bonds shall be called for redemption, the Series 2013B Bonds to be redeemed shall be selected, in multiples of $5,000, in such manner as the District in its discretion shall determine, and if less than all of a maturity shall be called for redemption, the Series 2013B Bonds to be redeemed shall be selected by lot within such maturity. Selection of Series 2013 Bonds to be Redeemed in Partial Redemptions. So long as the Series 2013 Bonds are registered in book-entry-only form and so long as DTC or a successor securities depositor is the sole registered owner of the respective Series of the Series 2013 Bonds, partial redemptions will be done in accordance with DTC procedures. 8

17 Mandatory Redemption The Series 2013A Bonds maturing on June 1, 2038 shall be subject to mandatory redemption prior to maturity, by lot, at a redemption price equal to the principal amount thereof plus interest accrued to the date of redemption, on June 1, 2034, and on each June 1 thereafter, from Amortization Installments deposited in the Sinking Fund, in the following principal amounts in the years specified: *Maturity Amortization Date Installments 2034 $22,480, ,605, ,785, ,025, * 27,325,000 Any Series 2013A Bond subject to mandatory prepayment as provided herein may be purchased by the District prior to the forty-fifth (45th) day preceding the respective redemption date at a price (including any brokerage and other charges) not exceeding the principal portion represented thereby, plus accrued interest to the date of purchase. At its option, to be exercised on or before the forty-fifth (45th) day next preceding any such applicable Redemption date, the District may receive a credit against its mandatory prepayment obligation for the applicable Series 2013A Bonds which prior to such date have been (i) purchased by the District and presented to the Registrar for cancellation or (ii) prepaid (otherwise than through the operation of the sinking fund) and canceled by the Registrar and not theretofore applied as a credit against any sinking fund prepayment obligation. Each Series 2013A Bond so purchased, delivered or previously prepaid and cancelled shall be credited by the Paying Agent at 100% of the principal portion represented thereby against the obligation of the District on such sinking fund redemption date. Any excess over such obligation shall be credited against applicable future sinking fund prepayment obligations, or deposits with respect thereto, in chronological order, and the principal portion represented by such Series 2013A Bonds to be prepaid by operation of the mandatory sinking fund shall be accordingly reduced. Notice of Redemption Notice of redemption of the Series 2013 Bonds (i) shall be published at least thirty (30) days prior to the redemption date in a financial journal published in the Borough of Manhattan, City and State of New York, and in a newspaper or newspapers of general circulation in the counties in which the District is located, (ii) shall be filed with the Paying Agent, and (iii) shall be mailed, postage prepaid, at least thirty (30) but not more than sixty (60) days prior to the date fixed for redemption, to all registered owners of the Series 2013 Bonds to be redeemed at their respective addresses as they appear on the registration books of the Registrar; provided such 9

18 notice of redemption is mailed to the registered owners thereof, such notice need not be published. With respect to the Series 2013A Bonds, each notice of redemption shall meet the requirements set forth in (i), (ii), (iii), (iv) and (v) below; provided, however, that the failure of such notice or payment to comply with the following terms shall not in any manner defeat the effectiveness of a redemption, if notice thereof is given as prescribed in the immediately preceding paragraph. (i) Each notice of redemption shall set forth the name and address of the Paying Agent, a contact person with the Paying Agent and his or her telephone number and the CUSIP numbers, if any, of the Series 2013 Bonds called for redemption, the date of publication of the notice, the redemption price, the date of the issue, the interest rate and the stated maturity date with respect to the Series 2013 Bonds to be redeemed; and with respect to owners of $1,000,000 or more in principal amount to be redeemed, such notice shall be sent by certified mail, return receipt requested. (ii) In addition to the foregoing, further notice of any redemption shall be given by the Registrar simultaneously with mailed notice to Holders, for any redemption other than by sinking fund installment, to the Municipal Securities Rulemaking Board. Such further notice shall contain the information required in subparagraph (i) above. Failure to give all or any portion of such further notice shall not in any manner defeat the effectiveness of a call for redemption. (iii) Each notice of redemption shall be published once in THE BOND BUYER, New York, New York, or, if THE BOND BUYER is no longer published in some other financial newspaper or journal which regularly carries notices of redemption of other obligations similar to the Series 2013A Bonds, such publication to be made at least thirty (30) days prior to the date fixed for redemption. (iv) Upon the payment of the redemption price of the Series 2013 Bonds being redeemed, each check or other transfer of funds issued for such purpose shall bear or be accompanied by an advice showing the CUSIP number identifying, by issue, the Series 2013 Bonds being redeemed with the proceeds of such check or other transfer. (v) A second notice of redemption shall be mailed in the manner provided above to any registered owner who has not tendered Series 2013 Bonds that have been called for redemption within sixty (60) days after the applicable redemption date. With respect to the Series 2013B Bonds, each notice of redemption shall contain the information required by the resolution authorizing the Series of Series 2013B Bonds, meet the requirements outlined above and shall also be provided to at least two nationally information services that disseminate notices of redemption of obligations such as the Series 2013B Bonds. 10

19 Non-Presentment of Series 2013 Bonds If any Series 2013 Bond is not presented for payment when its principal or redemption price becomes due in whole or in part, either at stated maturity or by redemption, or a check for interest is uncashed, and if sufficient moneys for the purpose of paying that principal, redemption price or interest are on deposit with the Registrar and available for such purpose, all liability of the District to that owner for that payment shall thereupon cease and be discharged completely, and it shall thereupon be the duty of the Registrar to hold those moneys in trust, without liability for interest thereon, for the exclusive benefit of that owner who shall thereafter be restricted exclusively to those moneys in trust, without liability for interest thereon, for the exclusive benefit of that owner who shall thereafter be restricted exclusively to those moneys for any claim of whatever nature on its part under the Bond Resolutions. Any moneys so held by the Registrar that remain unclaimed by the Holder of any Series 2013 Bond for a period of seven years after the due date of that payment shall be paid to the District, and thereafter the Holder of that Series 2013 Bond shall look only to the District for payment, and then only to the amounts so received by the District without any interest thereon, and the Registrar shall have no further responsibility with respect to those moneys. Pledge of Ad Valorem Taxes SECURITY FOR THE SERIES 2013 BONDS Payment of principal of and interest and premium, if any, on the Series 2013 Bonds is secured (equally and ratably with all other Bonds) by an irrevocable prior lien on the first proceeds collected by the District from Ad Valorem Taxes levied at a rate not exceeding 30 mills on the dollar per annum on the assessed value of all taxable property in the District. For the Fiscal Year ended September 30, 2012, the District levied Ad Valorem Taxes at the rate of mills, of which mills was for the payment of debt service on the Outstanding Bonds (other than the Series 2013 Bonds but including the Series 2004 Bonds, the Series 2005 Bonds, the Series 2010 Bonds and the Series 2011 Bonds) and mills was for the payment of the general operations of the District. For the Fiscal Year ending September 30, 2013, the District has set an Ad Valorem Tax rate of mills, of which mills was for the payment of debt service on Outstanding Bonds (other than the Series 2013 Bonds but including the Series 2004 Bonds, the Series 2005 Bonds, the Series 2010 Bonds and the Series 2011 Bonds) and mills was for the payment of the general operations of the District. The District covenants to levy each year such millage, not exceeding 30 mills on each dollar of assessed valuation of all taxable property within the District, as will produce a sum equal to the amounts required to be deposited in the Sinking Fund (hereafter described) in such Fiscal Year. If in any Fiscal Year the Ad Valorem Taxes actually collected shall be less than the amount required, then the amount of the deficit shall be added to the amount of Ad Valorem Taxes required to be levied in the next succeeding year or years; such tax, however, shall not exceed 30 mills in any Fiscal Year. See also the section herein entitled THE REEDY CREEK IMPROVEMENT DISTRICT Powers - Bond Guaranty Agreement for information concerning 11

20 the guaranty by the District, supported by its Ad Valorem Taxes, securing the Series 2004 Osceola Bonds. Sinking Fund The District shall maintain a Sinking Fund (the Sinking Fund ) for the payment of principal of and interest becoming due and payable on the Series 2013 Bonds and any other Outstanding Bonds during each Fiscal Year. Sinking Fund deposit requirements in a particular Fiscal Year shall be satisfied from the Ad Valorem Taxes collected in such Fiscal Year. See SECURITY FOR THE SERIES 2013 BONDS Disposition of Ad Valorem Taxes Flow of Funds. Disposition of Ad Valorem Taxes Flow of Funds The proceeds of the Ad Valorem Taxes, as soon as collected, shall be deposited in the Ad Valorem Taxes Fund (the Ad Valorem Taxes Fund ), which is a trust fund required to be kept separate from all the other funds of the District. Funds in the Ad Valorem Taxes Fund shall be disposed in accordance with the terms of the Bond Resolutions as follows: (1) There shall be deposited in the Sinking Fund a sum sufficient to pay the Bond Service Requirement for all outstanding Bonds during the current Fiscal Year and any deficiencies for prior Fiscal Years. Such annual payments shall be reduced by the amounts of money, if any, which are deposited into the Sinking Fund out of proceeds from the sale of a Series of Bonds to the extent such amounts are available to pay the Bond Service Requirement on such Series of Bonds. (2) Upon the issuance by the District of any Additional Bonds under the terms, limitations and conditions provided in the Bond Resolutions, the payments into the Sinking Fund shall be increased in such amounts as are necessary to make the payments set forth in paragraph (1) above for the principal of and interest on such Additional Bonds, on the same basis as provided with respect to the outstanding Bonds. (3) The District shall not be required to make any further payments into the Sinking Fund when the aggregate amount of money in the Sinking Fund is at least equal to the aggregate principal amount of Bonds then outstanding, plus the amount of interest then due or thereafter to become due on such Bonds then outstanding. (4) The balance of any moneys remaining in the Ad Valorem Taxes Fund after the above required current payments have been made in each Fiscal Year may be used for the purpose of redemption of the Bonds at the discretion of the District or for any other lawful purpose for which such moneys may be used by the District. 12

21 Excess proceeds of Ad Valorem Taxes in the Ad Valorem Taxes Fund are immediately transferred to the General Fund and are expended throughout the year to fund general operations of the District in accordance with the annual budget. The Ad Valorem Tax millage may be reduced to the extent the District receives revenues from operations or other sources. Such revenues will not be available to pay principal of and interest on the Series 2013 Bonds. Covenant by the State of Florida to District The State of Florida covenants in the Enabling Act to the holders of any bonds issued by the District that it will not limit or alter the rights of the District to own, acquire, construct, reconstruct, improve, maintain, operate or furnish the projects or to levy and collect the taxes, assessments, rentals, rates, fees, tolls, fares and other charges provided for in the Enabling Act [the Ad Valorem Taxes that are pledged to the payment of any bonds of the District,] and to fulfill the terms of any agreement made with the holders of any bonds of the District and that it will not in any way impair the rights or remedies of the holders, or modify in any way the exemption of the assets and properties of the District, its bonds and the interest thereon from taxation in Florida. Investment of Funds The Sinking Fund, the Ad Valorem Taxes Fund and any other special funds and accounts created by the Bond Resolutions (except for the Rebate Account as defined in the Bond Resolutions), are trust funds for the purposes provided in the Bond Resolutions. All such funds and accounts shall be continuously secured in the manner by which the deposit of public funds is authorized to be secured by the Laws of the State of Florida. Moneys on deposit in the Ad Valorem Taxes Fund and Sinking Fund may only be invested in investment obligations maturing no later than the date on which the moneys therein will be needed for the purposes of the Bond Resolutions. Any and all income received by the District from investment in the Ad Valorem Taxes Fund and the Sinking Fund shall be deposited into the Sinking Fund. Additional Obligations The District has covenanted not to issue any other obligations payable from the proceeds of the Ad Valorem Taxes pledged under the Bond Resolutions having priority to or being on parity with the lien of the Series 2013 Bonds and the Outstanding Bonds, except Additional Bonds as hereinafter described. Additional Bonds Additional Bonds may be issued by the District subject to the following terms and conditions: (1) There shall have been filed with the Board of Supervisors certificates of the tax assessors of Orange and Osceola Counties stating the total assessed value of taxable property within the District for the current calendar year, if then determined, or 13

22 otherwise for the calendar year immediately preceding the date of sale of the proposed Additional Bonds. (2) The Maximum Bond Service Requirement on the Bonds then Outstanding and Additional Bonds proposed to be issued shall not exceed 85% of the estimated annual collections from Ad Valorem Taxes calculated upon the basis of (a) the assessed value of the taxable property within the District for the current calendar year, if then determined, or otherwise for the calendar year immediately preceding the date of sale of such Additional Bonds, and (b) the maximum annual rate of millage for the levy of such Ad Valorem Taxes as authorized by law at the date of sale of such Additional Bonds. (3) If required by law, the Additional Bonds shall be approved at an election. (4) The principal amount of the proposed Additional Bonds together with all other Bonds then outstanding of the District shall not exceed in the aggregate 50% of the assessed value of the taxable property within the District as shown on the pertinent tax records at the time of the authorization of such Additional Bonds or such higher amount as allowed by the Act. At the time of issuance of the Series 2013 Bonds the District will deliver evidence of its satisfaction of the foregoing terms and conditions. In addition to the conditions for the issuance of Additional Bonds described in clause (1) through (4) above, under the terms of the Bond Guaranty Agreement, the District is prohibited from issuing Additional Bonds unless, upon issuance of said Additional Bonds, the aggregate principal amount of (i) Bonds then outstanding plus (ii) the Additional Bonds proposed to be issued, plus (iii) the Series 2004 Osceola Bonds then outstanding is not in excess of fifty percent (50%) of the assessed valuation of the taxable property within the District as shown on the pertinent tax records at the time of the authorization of such Additional Bonds. See THE REEDY CREEK IMPROVEMENT DISTRICT Powers - Bond Guaranty Agreement. [Remainder of page intentionally left blank] 14

23 Description; Location THE REEDY CREEK IMPROVEMENT DISTRICT The District is a public corporation of the State of Florida and is located in Orange and Osceola Counties in central Florida, about 15 miles southwest of the City of Orlando. The District currently encompasses approximately 25,000 acres or 40 square miles. Approximately 18,900 acres are located in Orange County and approximately 6,100 acres are located in Osceola County. The District is intersected diagonally (northeast to southwest) by U.S. Interstate Highway No. 4 and midway (east to west) by U.S. Route 192. The land in the District (exclusive of about 7,399 acres (30%) primarily owned by the District itself, 733 acres (3%) owned by the State of Florida and 375 acres owned by others) is primarily owned by wholly owned affiliates of The Walt Disney Company. The Walt Disney World Resort complex, which was first opened to the public on October 1, 1971, is located within the territorial boundaries of the District. See "THE REEDY CREEK IMPROVEMENT DISTRICT Description of Major Business in the District". Government The District is governed by a Board of Supervisors of five members. The Supervisors hold office for staggered terms of four years each. Elections of Supervisors are held every two years at the annual meeting of the landowners of the District, at which two or three Supervisors, as the case may be, are elected. The present members of the Board of Supervisors, their respective occupations and the respective dates on which their terms expire are as follows: Name Occupation Term Expires Donald R. Greer President Retired, Former Asset Manager of the Magnolia Service Corp. May 2017 Laurence C. Hames Vice President Wayne Schoolfield Treasurer Attorney, Laurence C. Hames, Esq. P.A. May 2015 Owner, Schoolfield Properties, Inc. May 2017 Elizabeth A. Duda Businesswoman; Civic Leader May 2017 Thomas Moses Retired, Reedy Creek Improvement District May 2015 The Enabling Act provides that at elections of Supervisors, each landowner is entitled to one vote for each acre of land (or major fraction thereof) owned by such landowner in the 15

24 District. The Board of Supervisors has the power to call special meetings of the landowners and is required to do so upon the request of owners of not less than 25% of the acreage in the District. Administration Under the direction of the Board of Supervisors, a District Administrator acts as the chief administrative officer of the District. William L. Warren, the current District Administrator, has served in this position since July Prior to joining the District, he was Vice President of Government Relations for the Walt Disney World Company and also led their media relations, internal communications and community relations teams. Formerly, Mr. Warren was a regional executive with Florida Power Corporation, and the founding editor and vice president of the Orlando Business Journal. Mr. Warren graduated from Virginia Commonwealth University with a degree in mass communications, and received his MBA from Stetson University. Ann G. Blakeslee is the Deputy District Administrator and has served in this position since She is responsible for certain of the day-to-day operations of the District and reports to Mr. Warren. Mrs. Blakeslee is also the Comptroller of the District, appointed by the Board of Supervisors. She is responsible for financial matters within the District and has served in such capacity for approximately seven years after serving as Assistant Comptroller for approximately eleven years. Mrs. Blakeslee graduated from Florida State University with a degree in accounting and is a Certified Public Accountant. Powers Pursuant to the Enabling Act, the District was given, among others, the following powers: (1) to acquire property, real, personal or mixed, within or without its territorial limits, to encumber any property acquired by the District, and to mortgage, hold, manage, control, convey, lease, sell, grant or otherwise dispose of the same; (2) to exercise the right and power of eminent domain within the limits of the District to condemn real property or mixed property which the Board of Supervisors deems necessary for the use of any of the projects of the District; the District may condemn property outside the limits of the District under specified conditions relating to the use of the property for drainage canals and other drainage purposes; the powers of condemnation shall be exercised in the same manner as is now provided by the general laws of the State of Florida; (3) to own, operate and maintain water and flood control facilities and to regulate the supply and level of water within the District; the District is declared eligible 16

25 to receive grants and assistance from the State of Florida available to flood control districts, water management districts and navigation districts or agencies; (4) to own, operate and maintain water and sewer systems; to regulate the use of sewers and the supply of water within the District; to prohibit or regulate the use of other sanitary structures and to prescribe methods of sewage treatment; (5) to own, operate and maintain a waste collection and disposal system and to sell or otherwise dispose of any effluent, residue or other byproducts of such system; (6) to own, operate and maintain electric power plants, transmission lines and related facilities, gas mains and facilities of any nature for the production or distribution of natural gas, and to purchase electric power, natural gas and other sources of power for distribution within the District; (7) to own, acquire, construct, operate, improve and maintain highways, streets, tollroads, alleys, sidewalks, promenades, boardwalks, bridges, tunnels, interchanges, causeways and public thoroughfares of all kinds and descriptions, and connections to and extensions of any and all existing public roads within the District; (8) to lease as lessor or lessee to or from any person, corporation, or body, public or private, any projects of the type that the District is authorized to undertake; (9) to own, operate and maintain canals, levees, plants, pumping systems and other works for drainage purposes and irrigation works; (10) to purchase electric power, natural gas and other sources of power for distribution within the District; and (11) to issue general obligation, revenue, assessment or other bonds to finance the acquisition, construction, extension or improvement of any projects. The District is authorized to exercise its powers and authorities within the confines of the City of Bay Lake, the City of Lake Buena Vista or any other municipality hereafter created lying wholly or partially within the District. In addition, the District has the power to conduct, maintain and operate its projects outside its geographical limits with the consent of the State of Florida or any municipality or political subdivision whose consent is required by law. Under the Enabling Act, District projects are exempt from county zoning, building, subdivision and construction regulation except as otherwise determined by the Board of Supervisors. The District may require all land, buildings, persons and corporations within the District to use the drainage, flood control, water and sewer and waste collection and disposal facilities of the District. No other such systems and facilities may be built without the consent of and approval of plans and specifications by the District. 17

26 Fees, Charges and Services. The District has the power, after notice and public hearing, to prescribe, fix, establish and collect rates, fees, rentals, tolls, fares or other charges for the facilities and services furnished by the District, to recover the cost of making connections to any District facility or system, and to provide for reasonable penalties for delinquent charges. Such rates, fees and charges shall be uniform for users of the same class, and may be based or computed on the amount of service furnished, the number of persons occupying the premises or any other factor affecting the use of the facilities furnished. The rates, fees and charges prescribed shall be such as will produce revenues, together with any other assessments, taxes, revenues or funds available or pledged for such purpose, at least sufficient to cover operation and maintenance expenses, operating reserves, debt service and reserves under resolutions authorizing the issuance of bonds. Ad Valorem Taxes, Maintenance Taxes and Utility Taxes. The Board of Supervisors has the power to levy and assess an ad valorem tax on all taxable real and tangible personal property in the District to pay the principal of and interest on any general obligation bonds of the District, to provide for sinking or other funds in connection therewith, and to defray the costs of any project or activity of the District authorized by law. Such taxes are to be in addition to any county or municipal ad valorem taxes. The total amount of such ad valorem taxes levied by the Board in any year shall not be in excess of 30 mills on the dollar per annum on the assessed value of all taxable property in the District. Such taxes shall be based on assessed valuation for county taxes as determined by Orange and Osceola Counties. However, in addition to the ad valorem tax of 30 mills on the dollar per annum, the Board may levy and assess a special ad valorem maintenance tax at a rate not exceeding 10 mills on the dollar per annum on the assessed value of all taxable property in the District for the purpose of defraying any of the costs and expenses of the District, including but not limited to maintenance, repair and operation of the District, costs incurred in connection with the financing of District projects, and the costs of administration. To date, maintenance charges have been fully satisfied out of user fees, regular ad valorem taxes and other revenues of the District and no special ad valorem tax has been assessed by the District. The District also has the power to impose, levy and collect on each and every purchase of electricity, metered or bottled gas, water service, telephone or telegraph service within the District, a utility tax not to exceed 10% of the payments received by the seller of such utility service, excluding the sale of natural gas to a public or private utility. No such tax has been imposed to date. Recent Bond Referendum. Pursuant to Resolution No 548 adopted by the District on April 24, 2013, the District ordered that a referendum be held on the question of the issuance of Ad Valorem Tax Bonds (1) in an aggregate principal amount not to exceed $360,000,000 to finance the costs of transportation improvements benefitting primarily the Buena Vista Drive corridor which include the design, construction, equipping and improvement of roadways and parking facilities (the Transportation Improvements ) and (2) in an aggregate principal amount not to exceed $5,000,000 to finance the costs of acquisition, design, construction, equipping and improving of certain administrative and/or operational facilities within the District. The bond referendum was held on June 4, 2013 and was passed by a majority of the qualified electors of the District (the 2013 Referendum ). The Series 2013A Bonds represent 18

27 substantially all of the Ad Valorem Tax Bonds to be issued to fund the Transportation Improvements. Ad Valorem Tax Bonds. The District has the power to issue ad valorem tax bonds so long as the aggregate principal amount of bonds outstanding at any one time is not in excess of 50% of the assessed valuation of the taxable property within the District as shown on the pertinent tax records at the time of the authorization of such bonds. The assessed valuation of property in the District as of October 1, 2012, as certified by the Property Appraisers of Orange and Osceola Counties, is $7,297,853,829. The aggregate principal amount of outstanding ad valorem tax debt of the District as of June 30, 2013 was $161,455,000 which was approximately 2.2% of such assessed valuation as of October 1, Upon issuance of the Series 2013 Bonds, the total principal amount of outstanding Bonds will be $505,030,000, which is approximately 6.9% of the assessed valuation as of October 1, Such bonds must be approved at an election in accordance with the applicable provisions of the Constitution of the State of Florida and Florida Statutes. The District may pledge its full faith and credit for the principal, interest and reserve charges on such ad valorem tax bonds. Bond Guaranty Agreement. In July of 1992, Osceola County issued $149,999,313 Osceola County, Florida Transportation Improvement Bonds (Osceola Parkway Project) (the Prior Osceola Bonds ) for the construction of the Osceola Parkway, a toll road that was constructed to improve the transportation systems in certain areas of Osceola County and the District. In connection with the issuance of the Prior Osceola Bonds, the District entered into a Bond Guaranty Agreement which required the District to make certain funds available for debt service on the Prior Osceola Bonds if operations of the toll road were insufficient to meet scheduled debt service. In January 2004, the Series 2004A Bonds were issued by the District to refinance, together with proceeds from the Osceola County Transportation Improvement Refunding Bonds (Osceola Parkway Project), Series 2004 (the Series 2004 Osceola Bonds ), the Prior Osceola Bonds. At the time of the refinancing of the Prior Osceola Bonds the District entered into a new Bond Guaranty Agreement dated as of December 1, The Bond Guaranty Agreement is a continuing guaranty of payment and not of collection. The obligations of the District under the Bond Guaranty Agreement are stated to be absolute and unconditional and to remain in full force and effect until the entire principal of and interest on the Series 2004 Osceola Bonds and any bonds issued to refinance such bonds are paid. The obligation of the District to make the payments required by the Bond Guaranty Agreement is junior and subordinate to the obligations of the District with respect to its Bonds, and any other obligations issued on parity therewith by the District as permitted by the Bond Guaranty Agreement, including, without limitation the Series 2013 Bonds. Pursuant to an Amended and Restated Osceola Parkway Development Agreement (the Parkway Agreement ) dated as of December 1, 2003 by and among Osceola County, the District and other landowners, Osceola County agreed to reimburse the District for amounts advanced under the Bond Guaranty Agreement. Osceola County has agreed to repay the debt service of the District s Series 2004A Bonds and any guaranty payments that are required along with accrued interest from excess toll revenues, if any, when they become available. The reimbursement payments will terminate on April 1, 2034 unless Osceola County decides to continue to collect tolls on the Osceola 19

28 Parkway. In Fiscal Year ended September 30, 2012, the District received from Osceola County $1,301,308 as reimbursement of prior payments under the Bond Guaranty Agreement. The District has not made a payment to Osceola County since entering the new Bond Guaranty Agreement in Under the terms of the Bond Guaranty Agreement, the District is prohibited from issuing Additional Bonds unless, upon issuance of such Additional Bonds, the aggregate principal amount of (i) all Bonds then Outstanding (which would include the Series 2013 Bonds), plus (ii) the Additional Bonds then proposed to be issued, plus (iii) the Series 2004 Osceola Bonds then Outstanding is not in excess of fifty percent (50%) of the assessed valuation of the taxable property within the District as shown on the pertinent tax records at the time of the authorization of such Additional Bonds. The District s Outstanding Bonds are currently outstanding as of the date of this Official Statement in the aggregate principal amount of $161,455,000 which is approximately 2.2% of the assessed valuation as of October 1, Upon issuance of the Series 2013 Bonds, the total principal amount of outstanding Bonds and the Series 2004 Osceola Bonds will be $505,030,000, which is approximately 6.9% of the assessed valuation as of October 1, See THE REEDY CREEK IMPROVEMENT DISTRICT Taxation. Other Borrowings Including Revenue Bonds; Authorization. The District has the power to issue revenue bonds from time to time without limitation as to amount. Such revenue bonds may be secured by or payable from the gross or net pledge of the revenues to be derived from any project or combination of projects, from the rates, fees, tolls, fares or other charges to be collected from the users of any project or projects, from any revenue-producing undertaking or activity of the District, or from any other source or pledged security. The Board of Supervisors may combine projects for revenue bonds financing and pledge to the payment of revenue bonds two or more sources of revenue. The District has the power to issue, without limitation as to amount, bonds payable from the proceeds of any utility service tax levied by the District. The District may provide for the construction or reconstruction of assessable improvements and for the levying of special assessments upon benefitted property for the payment thereof and the Board of Supervisors may issue assessment bonds payable out of such assessments when collected. Although all special assessments may be collected by the respective tax collectors of Orange and Osceola Counties or such other officer or agent as the District may designate, the District historically has elected to collect such special assessments itself. The District has the power to issue bond anticipation notes to borrow money for the purposes for which bonds have been authorized. Such bond anticipation notes are payable from the proceeds of the bonds when issued or may be retired from current revenues, taxes or assessments, but in such event, a like amount of the bonds authorized shall not be issued. The District may also obtain loans for current expenses or other costs, for a term not exceeding two 20

29 years, which may be repayable from such revenues, taxes or other funds as the Board of Supervisors may determine. Comprehensive Plan In accordance with Florida s Comprehensive Planning Act of 1985, the District is required to prepare a comprehensive plan for submittal to the Florida Department of Economic Opportunity. This plan provides for land uses within the District and establishes the basis for land development regulations to guide future development. The objective of the act is to require local government to ensure required infrastructure for new development is put in place as development occurs, and to ensure environmental impacts are addressed. The plan includes a detailed 5-year capital requirement plan and identifies funding sources for these requirements, and is currently being updated through 2017, as required by law. Future Financing Plans of the District Revenue Bonds. On July 10, 2013, the District issued $54,915,000 of its Utilities Revenue Refunding Bonds, Series to refund its outstanding Utilities Revenue Bonds, Series and Utilities Revenue Bonds, Series The District may consider issuance of additional Utility Revenue Bonds to refund the Series Utilities Revenue Bonds. The Series Bonds maturing on or after October 1, 2015 are subject to redemption in whole or in part on the first day of any calendar month on or after October 1, The outstanding principal balance on Series Bonds is $142,985,000. Ad Valorem Tax Bonds. In the future, the District may issue additional series of Ad Valorem Tax Bonds to complete the Transportation Improvements authorized by the 2013 Referendum and not otherwise financed with proceeds of the Series 2013A Bonds and to fund certain District operational and/or administrative facilities authorized by the 2013 Referendum. Refunding Opportunities. From time to time the District reviews its debt portfolio to determine if opportunities exist to refund outstanding bonds to realize debt service savings. Description of Major Business in the District Approximately 66% of the land in the District is owned by affiliates of The Walt Disney Company. Their combined properties, excluding properties leased to others by such affiliates, account for approximately 89% of the assessed valuations in the District, based upon the assessed valuation of taxable property within the District as of January 1, Walt Disney World Resort Complex. The Walt Disney World Resort is located within the District, and includes theme parks (the Magic Kingdom, Epcot, Disney s Hollywood Studios and Disney s Animal Kingdom); hotels; vacation club properties; a retail, dining and entertainment complex; a sports complex; conference centers; campgrounds; golf courses; water parks; and other recreational facilities designed to attract visitors for an extended stay. 21

30 Magic Kingdom. The Magic Kingdom, which opened in 1971, consists of six themed lands: Adventureland, Fantasyland, Frontierland, Liberty Square, Main Street USA and Tomorrowland. Each land provides a unique guest experience featuring themed rides and attractions, live Disney character interaction, restaurants, refreshment areas and merchandise shops. Additionally, there are daily parades and a nighttime fireworks extravaganza, Wishes. Fantasyland is undergoing an expansion that will nearly double its size and add new attractions and other guest offerings (see New and Future Projects at the Walt Disney World Resort Complex.) Epcot. Epcot, which opened in 1982, consists of two major themed areas: Future World and World Showcase. Future World dramatizes certain historical developments and addresses the challenges facing the world today through pavilions devoted to showcasing science and technology improvements, communication, energy, transportation, use of imagination, nature and food production, the ocean environment and space. World Showcase presents a community of nations focusing on the culture, traditions and accomplishments of people around the world. Countries represented with pavilions include Canada, China, France, Germany, Italy, Japan, Mexico, Morocco, Norway, the United Kingdom and the United States. Both areas feature themed rides and attractions, restaurants and merchandise shops. Epcot also features Illuminations: Reflections of Earth, a nighttime entertainment spectacular. Disney s Hollywood Studios. Disney s Hollywood Studios, which opened in 1989, consists of four themed areas: Animation Courtyard, Backlot, Hollywood Boulevard and Sunset Boulevard. The four areas provide behind-the-scenes glimpses of Hollywood-style action through various shows and attractions. The park also offers themed food service and merchandise facilities and features Fantasmic!, a nighttime entertainment spectacular. Disney's Animal Kingdom Theme Park. Disney s Animal Kingdom, which opened in 1998, consists of a 145-foot Tree of Life centerpiece surrounded by six themed areas: Africa, Asia, Camp Minnie-Mickey, Dinoland U.S.A., Discovery Island and Rafiki s Planet Watch. Each themed area contains adventure attractions, entertainment shows, restaurants and merchandise shops. The park features more than 300 species of mammals, birds, reptiles and amphibians and 3,000 varieties of trees and plants. In September 2011, the Company announced an agreement with James Cameron s Lightstorm Entertainment and Fox Filmed Entertainment for the exclusive global theme park rights to create themed lands based on the AVATAR franchise with the first land planned for Disney s Animal Kingdom (see New and Future Projects at the Walt Disney World Resort Complex.) Resort Hotels. Affiliates of The Walt Disney Company, own and operate resort hotels at the Walt Disney World Resort having a present capacity of approximately 24,000 rooms, as well as 1,200 campsites and cabins at the Fort Wilderness Resort and Campground. Two additional resort hotels the Walt Disney World Swan and Walt Disney World Dolphin with a combined capacity of approximately 2,300 rooms are located in the Epcot Resort area, and are being operated under lease arrangements similar to the hotels along Hotel Plaza Boulevard in Lake Buena Vista. In addition, Shades of Green, a 600-room resort, operated by the U.S. Government, is located near the Magic Kingdom. Many of the hotels contain substantial 22

31 convention and meeting space. Other recreational amenities and activities available at the Walt Disney World Resort include four championship golf courses, miniature golf courses, fullservice spas, tennis, sailing, water skiing, swimming, horseback riding and a number of other noncompetitive sports and leisure time activities. The resort also includes two water parks: Blizzard Beach and Typhoon Lagoon. Disney's Vacation Club Disney's Vacation Club is an innovative vacation ownership program. Disney Vacation Development, Inc. ("DVD"), an affiliate of The Walt Disney Company, has developed vacation villas at Disney s Old Key West Resort, Disney s BoardWalk, the Villas at Disney s Wilderness Lodge, Disney s Animal Kingdom Villas, Bay Lake Tower at Disney s Contemporary Resort, Disney's Beach Club Villas and Disney's Saratoga Springs Resort & Spa. ESPN Wide World of Sports Complex. This Sports Complex, consisting of athletic facilities for 32 sports and related site development opened in the spring of The sports complex is host to numerous sporting events, tournaments, special celebrity events and fantasy camps. This facility contains the following: a 9,500-seat baseball stadium that serves as the spring training facility for the Atlanta Braves; a multi-level field house including six basketball courts, 5,000 seats, locker rooms, weight rooms and classrooms; a twelve-court tennis center complex with a 2,000 seat center court; and athletic fields including four softball fields, two Little League fields, four baseball fields, five multi-use fields, four volleyball courts and an Olympic track. The goal of the sports complex is to provide the premier sports facilities in the world for amateur athletes and athletic competitions. The Amateur Athletic Union ("AAU"), the largest nonprofit volunteer sports organization and multi-sport sanctioning body in the country, relocated its headquarters to the District and conducts more than 30 events each year at the sports complex. Lake Buena Vista Hotel Plaza. Seven hotels located along Hotel Plaza Boulevard in Lake Buena Vista lease property from affiliates of The Walt Disney Company. These hotels have a present capacity of approximately 3,700 guest rooms as well as substantial meeting space and other facilities which afford them the ability to accommodate large functions and conventionoriented clientele as well as swimming pools, tennis courts and health clubs. Downtown Disney Area. The Walt Disney World Resort also hosts a 120-acre retail, dining and entertainment complex known as Downtown Disney. Downtown Disney is home to Cirque du Soleil, DisneyQuest, the House of Blues and the 51,000 square-foot World of Disney retail store featuring Disney-branded merchandise. 23

32 New and Future Projects at the Walt Disney World Resort Complex The newest additions at the Walt Disney World Resort are: In the Magic Kingdom Park, the Fantasyland expansion project began in 2010 and is being completed in phases, which are estimated to be finished by The expansion includes nearly doubling the size of Fantasyland. New additions to the Fantasyland Railroad Station opened in spring The Fantasyland Forest opened in fall 2012, and includes such attractions as the Enchanted Tales with Belle guests explore Maurice s Cottage, spend some face time with Madame Wardrobe and Lumiere, and engage in a storytelling activity with Belle; Under the Sea Journey of the Little Mermaid guests climb into clamshell vehicles and glide through scenes and songs taken straight from one of Disney s most beloved classic animated feature files; and Ariel s Grotto where guests can take photos and receive autographs from Ariel; as well as Gaston s Tavern and Be Our Guest restaurants. At the resorts, Bay Lake Tower at Disney's Contemporary Resort a Disney Vacation Club Resort with 295 units opened in August The Treehouse Villas at Disney s Saratoga Springs Resort and Spa stand-alone structures elevated 10 feet off the ground on pedestals and beams opened in June The Art of Animation Resort, a new 2,400 room value resort that celebrates some of Disney s most popular animated stories, opened in phases during Future additions at the Walt Disney World Resort Complex include: Fantasyland expansion project will also include Princess Fairytale Hall (taking the place of Snow White s Scary Adventures) a Disney Princess meet-and-greet location scheduled to open in 2013, and the Seven Dwarfs Mine Train a rollicking musical ride into the mine "where a million diamonds shine" scheduled to open in At the resorts, Disney s Vacation Club will be opening new villas at the Grand Floridian Resort, which will include an Alice in Wonderland themed water play area. The villas are scheduled to open in late Construction is also underway on a Four Seasons Hotel on property, scheduled to open in The resort will feature 434 rooms, a conference center, several dining outlets, a Tom Fazio-designed golf course, a full-service luxurious spa and fitness centre as well as various pools. Downtown Disney Area. The Downtown Disney area will undergo a multi-year transformation into Disney Springs, a unique destination that will treat guests to a vibrant place where they can relax, shop, dine and be entertained in an imaginative setting amid beautiful open-air promenades, meandering springs and waterfront charm. Disney Springs will feature an eclectic and contemporary mix from Disney and other noteworthy brands. From boutique shops to unique flagship anchor stores, guests will be able to explore a variety of shopping, dining and entertainment experiences. Drawing inspiration from Florida s waterfront towns and natural beauty, Disney Springs will include four outdoor neighborhoods interconnected by a flowing spring and lakefront. In addition to a new gateway with a signature water tower and grand entry, the destination will feature: 24

33 The Town Center, which offers a sophisticated mix of shopping and dining along with a promenade where guests can relax, refresh and reconnect. A colorful and thriving commercial district called The Landing with inspired dining and beautiful waterfront views. The family-friendly Marketplace that will continue to delight guests of all ages by combining new experiences, such as an over-the-water pedestrian causeway, along with classic Disney favorites, including an expanded World of Disney store. A West Side that provides an exuberant atmosphere with lively entertainment, along with a series of new elevated spaces that provide both shade and an overlook to the activity below. Construction is scheduled to begin in the spring with new areas opening in phases, and Disney Springs is expected to be complete in Harvest Power In December 2011, the District entered into a lease agreement with Harvest Power Orlando, LLC to provide District-owned land to Harvest Power for the construction and operation of an anaerobic digestion facility, which will convert organic waste into electrical energy and fertilizer. The term of the lease is for 20 years. In addition to the lease, the District entered into the following project agreements with Harvest Power: The "Waste Supply Agreement" describes the process, quality and amounts of organic waste to be provided to Harvest Power, operational requirements related to the facility, and fees to be paid to Harvest Power to accept and process the District s organic waste. The "Power Purchase Agreement" describes the sale of electrical energy to the District and the fees to be paid to Harvest Power to purchase the energy. The "Effluent Pre-Treatment Agreement" describes the quality and delivery of liquid effluent produced from the digestion facility to the District for treatment at the District s waste water treatment plant, and the compensation to be paid to the District by Harvest Power. The facility is expected to be fully operational in October, Facilities Serving Walt Disney World Resort Complex. The District owns the electric, water, gas, hot water and chilled water utilities which provide utility services to the District. Affiliates of The Walt Disney Company provide transportation systems throughout The Walt Disney World Resort Complex, including a monorail system, surface transportation, and water transportation. 25

34 Certain Information on The Walt Disney Company and Affiliates. The common stock of The Walt Disney Company is listed for trading on the New York Stock Exchange. The Walt Disney Company is subject to the information requirements of the Securities Exchange Act of 1934 and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC") which may be inspected and copied at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C Please contact the SEC at (800) SEC-0330 for information on the operation of the Public Reference Room. Information set forth in the most recent Forms 8-K, lo-k and 10-Q filed by The Walt Disney Company with the SEC is available at the locations referred to above and online at and Reference should be made to the foregoing for information on The Walt Disney Company and its affiliates. Taxation Ad Valorem Taxes The Board of Supervisors of the District has the power, under the Enabling Act, to levy and assess an ad valorem tax on all taxable real and tangible personal property in the District, to provide for sinking or other funds in connection therewith, and to defray the cost of District projects and activities. Such taxes are in addition to any county or municipal ad valorem taxes. See "THE REEDY CREEK IMPROVEMENT DISTRICT - Powers - Ad Valorem Taxes, Maintenance Taxes and Utility Taxes." The Board of Supervisors of the District sets the millage rate to be applied against taxable property in the District. The bills are mailed to property owners on or about November 1 each year. The taxpayer is entitled to a 4% discount if taxes are paid in November; a 3% discount if paid in December; a 2% discount if paid in January next following; and a 1% discount if paid in February. Taxes may also be paid in installments over a four-month period ending in the March next following the November levy; in such cases the taxpayer is not allowed a discount. Taxes unpaid as of April 1 become delinquent and are subject to penalty, interest and the issuance of a tax deed and foreclosure in accordance with laws of the State of Florida. Delinquent District taxes, tax sales certificates, and penalties and costs relating thereto constitute a lien in favor of the District of equal dignity with the liens of state and county taxes. Millage Rollback Legislation. In June 2007, the State of Florida Legislature passed House Bill1B which limits county, city and special district property taxes in fiscal year and will limit growth in these taxes in the future years to the growth in Florida's economy. These limits pertain only to the levy of the operating portion of the District's ad valorem tax millage. In January 2008, the State of Florida passed Amendment 1 to the Constitution which pertains primarily to exemptions on the assessed values of residential real estate and contains certain exemptions for tangible personal property. Due to the fact that the District's tax roll consists primarily of commercial real estate, there have been no material effects from this legislation on the District's property assessments. 26

35 Constitutional Amendments Related to Ad Valorem Exemptions. On January 29, 2008, in a special election held in conjunction with Florida's presidential primary, the requisite number of voters approved amendments to the Florida Constitution exempting certain portions of a property's assessed value from taxation and limiting increases in the assessed value of nonhomestead property to 10% per year, subject to certain adjustments. The cap on increases would be in effect for a 10-year period, subject to extension by an affirmative vote of electors. These amendments were effective for the 2008 tax year (fiscal year for local governments). Basis of Valuation Ad Valorem Taxes of the District are based on the assessed valuation for county taxes of tangible real and tangible personal property in the District. Property is valued for tax purposes as of January 1 of each year. Valuation is based on the fair market value of the property, taking into account actual use (agriculture, commercial, etc.) and applicable zoning and other use restrictions. Certain property, including property owned by the District itself, homesteads and other types of property are by law exempt from Ad Valorem Taxes. Property owners are notified of increases in valuation on or before each July 1, and may take an appeal to the County Value Adjustment Board which meets the following September. Assessments are subject to review and adjustment by the County Value Adjustment Board, and by the Department of Revenue of the State of Florida. The table on next page sets forth total taxable assessed property for the District as well as millage rates and total tax levies for the District for the Fiscal Years ended September 30, 2002 through 2012 (for information concerning total Ad Valorem Taxes collected, see TAXATION-- Collection of District Taxes ): [Remainder of page intentionally left blank.] 27

36 Fiscal Year Ended September 30, Assessed Value of Property Within District ($ in thousands) Taxable Assessed Property for Fiscal Year Ended September 30, 2012 Debt Service Millage Rates (mills) General Operating Millage Rates (mills) Tax Bill (2) Amount ($ in thousands) Percentage of Tax Roll The Walt Disney Company Affiliates Other % % (1) Percent Collected % ,694, , ,632, , ,826, , ,068, , ,577, , ,103, , ,486, , ,197, , ,948, , ,101, , ,297, , Source: District Tax Records (1) The majority of taxpayers in this category are lessees of property owned by companies that are affiliates of the Walt Disney Company. (2) Tax bills were mailed to property owners on or about November 1, Payments were due by March 31, See THE REEDY CREEK IMPROVEMENT DISTRICT Taxation Ad Valorem Taxes. Assessed Valuations; Description of Properties Taxable property within the District in Orange County consists of substantially all of the developed property within the District. For Fiscal Year 2012 and 2013, total assessed valuation of taxable property within the District in Orange County is $6,590,211,711 and $6,760,806,943, respectively. Taxable property within the District in Osceola County consists principally of land set aside for conservation areas, water storage areas and agricultural uses. For Fiscal Year 2012 and 2013, total assessed valuation of taxable property within the District in Osceola County is $511,057,304 and $537,046,886, respectively. The table on the next page identifies the major taxpayers of the District and indicates their type of business and assessed valuation for the Fiscal Years indicated (for information concerning the gross ad valorem tax revenues generated from the major taxpayers of the District, see TAXATION--Collection of District Taxes ). Approximately 66% of the land in the District is owned by affiliates of The Walt Disney Company. Their combined properties, excluding properties leased to others by such affiliates, account for approximately 89% of the 28

37 assessed valuations in the District, based upon the assessed valuation of taxable property within the District as of January 1, Assessed Valuation of Major Taxpayers Total Gross Assessed Valuation (1) For Fiscal Year Ended September 30 ($ in thousands) Taxpayer Walt Disney Company affiliates Unaudited Type of Business (2) Theme park/ Resort $6,536,726 $6,388,862 $6,205,432 $6,375,464 $6,518,857 Dolphin Lodging 255, , , , ,077 Palace Resort & Spa Lodging 120, ,717 92,802 81,392 76,838 Swan Lodging 113, ,525 89,272 89,297 91,347 Hilton Lodging 105,475 95,142 84,173 87,989 76,343 Wyndham Lodging 41,158 34,682 30,511 28,941 29,311 Smart City Telecommunications Utility 34,574 34,404 22,612 18,237 21,223 Century Golf Partners ,914 Doubletree Lodging 20,243 18,559 16,930 16,798 16,654 AMC Theatres Entertainment 21,014 20,658 16,500 16,359 17,611 Royal Plaza Lodging 26,162 21,753 16,474 15,201 13,529 Best Western Lodging 20,301 18,340 14,200 12,708 13,147 IBM Leasing 19,058 15,862 12,706 18,258 30,364 Holiday Inn Lodging 11,228 10,422 12,231 12,313 13,512 Landry s Restaurants, Inc Dining 8,634 15,929 21,171 19,802 14,554 Progress Energy Florida, Inc Utility 8,612 6,948 8,773 9,432 8,094 Planet Hollywood Dining 10,576 10,476 10,289 9,977 9,742 House of Blues Entertainment 13,323 10,205 9,688 9,316 9,021 Others Various 120,957 54,058 89,891 84, ,715 TOTAL $7,486,965 $7,197,469 $6,948,865 $7,101,269 $7,297,853 Source: District Tax Records (1) As of January 1 of the previous year. (2) Tax bills were mailed to property owners on or about November 1, Payments were due by March 31, See THE REEDY CREEK IMPROVEMENT DISTRICT Taxation Ad Valorem Taxes. 29

38 Direct and Overlapping Taxes The following table identifies governmental units authorized to levy ad valorem taxes on taxable real and tangible personal property in the District, and the millage levied for Fiscal Year ended September 30, Governmental Unit Millage Total Millage Reedy Creek Improvement District: General Operating Debt Service Total Millage City of Bay Lake (l) City of Lake Buena Vista (l) Orange County: Commission School South Florida Water Management District Library Total Millage Osceola County: Commission South Florida Water Management District School Library Total Millage Source: District Tax Records (1) The City of Bay Lake and the City of Lake Buena Vista are located in Orange County. [Remainder of page intentionally left blank] 30

39 Collection of District Taxes The Assessed Valuations within the District are certified to the District by the Property Appraisers of Orange and Osceola Counties. The District levies its Ad Valorem Taxes based on these Values. The District then collects its taxes in like manner as prescribed by law for the collection of county taxes. The following table sets forth total District Ad Valorem Taxes collected for the Fiscal Years ended September 30, 2003 through 2013 (for information concerning the total taxable assessed property within the District, see TAXATION - Basis of Valuation ): COLLECTION OF DISTRICT TAXES Fiscal Year Collections as a Adjustments (1) Total Net Tax Collections (2) Ended Total Tax Levy Percent of Total Tax and Discounts Collections as a Percent of September 30, ($ in thousands) Levy (%) ($ in thousands) ($ in thousands) Net Tax Levy (%) , ,259 30, , ,249 54, , ,456 57, , ,592 62, , ,779 63, , ,687 65, , ,960 71, , ,324 71, , ,012 72, , ,475 77, , ,363 77, Source: District Tax Records (1) Adjustments resulting from changes made in assessed value by the Orange and Osceola County Tax Assessors after taxes were levied. (2) Net Tax Collections includes reductions for adjustments described in note (1) above and discounts for early payment. [Remainder of page intentionally left blank] 31

40 The following table sets forth the gross ad valorem tax revenues generated from each of the major taxpayers of the District (for information concerning the assessed valuation for each of the major taxpayers of the District, see TAXATION Assessed Valuation Description of Properties): Gross Ad Valorem Tax Revenues by Major Taxpayer Unaudited Major Taxpayer (1) (2) 2013 Walt Disney Company affiliates $64,620,112 $66,078,083 $67,706,847 $72,737,666 $72,237,409 Dolphin 2,526,083 2,326,352 2,129,917 2,230,043 2,294,679 Palace Resort & Spa 1,187,836 1,165,798 1,012, , ,463 Swan 1,119,437 1,070, ,034 1,018,788 1,012,249 Hilton 1,042, , ,402 1,003, ,983 Wyndham 406, , , , ,805 Smart City Telecommunications 341, , , , ,173 Century Golf Partners ,994 Doubletree 200, , , , ,544 AMC Theatres 207, , , , ,153 Royal Plaza 258, , , , ,916 Best Western 200, , , , ,685 IBM 188, , , , ,475 Holiday Inn 110, , , , ,734 Landry s Restaurant, Inc 85, , , , ,277 Progress Energy Florida, Inc 85,132 71,864 95, ,606 89,696 Planet Hollywood 104, , , , ,957 House of Blues 131, , , ,287 99,962 Others 1,195, , , ,030 1,182,542 TOTAL $74,013,887 $74,441,265 $75,818,344 $81,018,379 $80,869,696 Source: District Comptroller s Office (1) These taxpayers, other than Walt Disney Company affiliates, pay Ad Valorem Taxes as lessees of property owned by affiliates of the Walt Disney Company. In the event these lessees fail to pay such Ad Valorem Taxes under their leases, the owners of the property would still be required under law to make such payment. (2) Tax bills were mailed to property owners on or about November 1, Payments were due by March 31, See THE REEDY CREEK IMPROVEMENT DISTRICT Taxation Ad Valorem Taxes. [Remainder of page intentionally left blank] 32

41 The District has prepared an unaudited summary of historical Statement of Revenues, Expenditures and Changes in Fund Balance of its General and Debt Service Funds. Summary Statements of Revenues, Expenditures and Changes in the Fund Balance of the General and Debt Service Funds For the Fiscal Year Ended September 30, Audited Unaudited Budget 2013 REVENUES: Ad Valorem Taxes net (1) $71,054,117 $71,117,082 $72,806,513 $77,538,181 $77,395,469 Intergovernmental 851,220 2,459,408 2,674,229 2,119,843 1,819,119 Building Permits and Fees 827,449 1,360,697 1,942,261 1,964,516 1,250,000 Drainage Fees 163, , , ,588 - Interest from investments 808, , , , ,000 Post Office 178, , , ,109 - Emergency Service Fees 181, , , ,559 - Other 304, , , , ,000 Total Revenues $74,370,067 $76,025,171 $78,609,282 $83,228,631 $81,064,588 EXPENDITURES: Administrative $3,647,323 $3,494,384 $3,037,230 $3,385,463 $4,321,418 Personnel Services 499, , , , ,903 Information Services 1,448,000 1,649,689 1,674,241 1,611,609 2,011,716 Post Office 381, , , ,052 0 Support Services 1,822,477 1,873,144 2,252,673 2,324,906 3,312,704 Building and Safety 2,185,322 2,321,437 2,455,998 2,446,805 2,987,109 Emergency Services 22,880,680 24,108,592 24,958,252 24,017,610 27,269,121 Water Control and Roadway Maintenance 9,188,419 8,154,824 8,389,394 12,910,386 12,223,980 Planning and Engineering 1,490,834 1,571,244 1,616,347 1,724,661 2,236,953 Groves 13,405 15,568 13,838 10,501 16,000 Capital Outlay 1,181, ,172 3,162,288 1,690,257 1,804,125 Debt Service 27,279,365 27,044,571 18,711,488 26,475,215 26,461,314 Total Expenditures $72,018,605 $71,646,929 $67,109,764 $77,711,829 $83,446,343 Excess (deficiency) of Revenues 2,351,462 4,378,242 11,499,518 5,516,802 (2,381,755) Over (under) Expenditures Other Financing Sources (Uses): Bond Proceeds - 12,150,000 47,715, Payments to Escrow Agents - (14,772,917) (53,714,220) - - Lease Proceeds - - 2,367, Operating Transfers out (3,404,962) (2,726,333) (2,872,028) (2,936,074) (3,787,398) Total Other Financing Sources (Uses) (3,404,962) (5,349,250) (6,503,608) (2,936,074) (3,787,398) Excess (Deficiency) of Revenues and Other Financing Sources Over (under) Expenditures and Other Financing Uses (1,053,500) (971,008) 4,995,910 2,580,728 (6,169,153) Fund Balance, Beginning of Year 20,526,225 19,472,725 18,501,717 23,497,627 26,078,355 Fund Balance, End of Year (2)(3) $19,472,725 $18,501,717 $23,497,627 $26,078,355 $19,909,202 Source: District Comptroller s Office (1) Net of prepayment discounts and other deductions. See Taxation Ad Valorem Taxes. (2) It is the goal of the District to maintain an ending fund balance to provide adequate funds to operate the following year until taxes are collected. If in one year a major project or some large capital purchases are postponed, a deficiency in the next year s operations in planned to reduce the fund balance to the desired level. (3) Consists of the General Fund and Debt Service Funds. Certain amounts are reserved for specific purposes such as capital projects and debt service. Refer to the annual Financial Report for details. 33

42 Pension Plans PENSION PLANS AND OTHER POST EMPLOYMENT BENEFITS With a few exceptions, all full-time and part-time employees working for the District in regularly established positions are members of the Florida Retirement System (the "FRS"), a multiple-employer cost-sharing public retirement system administered by the state of Florida. The FRS offers members both a defined benefit plan ("Pension Plan") and/or a defined contribution plan ("Investment Plan") to provide retirement, disability, and death benefits for active members, retirees, surviving beneficiaries, and Deferred Retirement Option Program ("DROP") participants. DROP is a program that provides for payment of retirement benefits for FRS members for a maximum of five years. Under this program, an employee may retire and have his benefits accumulate in the FRS Trust Fund, earning interest, while continuing to work for a system employer. When the DROP period ends, employment terminates, the employee receives payment of the accumulated DROP benefits, and monthly Pension Plan and/or Investment Plan retirement benefits begin. Benefits are established by Chapter 121, Florida Statutes, and Chapter 22B, Florida Administrative Code. Benefits are computed on the basis of age, average final compensation, and service credit. For FRS Pension Plan members hired prior to July 1, 2011, benefits vest either at age 62 with 6 years of credited service, or at 30 years of service regardless of age except for Special risk class employees such as sworn law enforcement officers, firefighters and correctional officers who retire at or after age 55 with 6 years of credited service, or with 25 years of service regardless of age. Such members are entitled to an annual retirement benefit payable monthly for life equal to a percentage of their average final compensation for each year of credited service. Average final compensation is the average of the employee's five highest fiscal years of salary earned during credited service. Vested employees with less than 30 years of service may retire before age 62 and receive reduced retirement benefits. The State Legislature passed Senate Bill 2100 ("FRS Legislation") during its 2011 session. The FRS Legislation made certain changes that are applicable only to members enrolling in FRS after July 1, 2011, including: (1) changing the Pension Plan vesting requirement from six years to eight years; (2) changing the average final compensation calculation from the average of the five highest fiscal years of salary to the eight highest fiscal years of salary; and (3) changing the normal retirement date to age 65 with eight years of service or 33 years of service regardless of age except for special risk class which is age 60 with eight years of special risk class service, or 30 years of special risk class service regardless of age, or age 57 with 30 years of combined special risk class service and military service. At the present time, it is uncertain how the FRS Legislation may impact the District's finances. 34

43 The FRS Legislation also made significant changes with respect to employee contributions and employer contributions, among other items. Effective July 1, 2011, the FRS Legislation requires all members to contribute 3% of their gross compensation toward their retirement. In addition, the FRS Legislation reduced the required employer contribution rates for each membership class and subclass of the FRS. Additionally, the FRS Legislation eliminated the cost of living adjustment for all FRS employees for service earned on or after July 1, 2011, although the FRS Legislation does provide for reinstatement of the adjustment in 2016 under certain conditions. The DROP was maintained but the interest accrual rate is reduced from 6.5% to 1.3%. In June 2011, the Florida Education Association, a teachers union, filed a class action lawsuit challenging the constitutionality of the FRS Legislation as it applies to existing employees. On March 6, 2012, the Circuit Court issued its ruling in favor of the plaintiffs holding that the required 3% contribution and elimination of the cost-of-living adjustment for employees who were FRS members prior to July 1, 2011 unlawfully impaired State employee contracts, constituted a taking of private property without full compensation and violated the public employees right to collective bargaining. The Circuit Court ordered the State to reimburse, with interest, the funds deducted or withheld from the compensation or cost-ofliving adjustments from such employees. The State appealed the Circuit Court's ruling to the First District Court of Appeals, which automatically stayed the effectiveness of the Circuit Court ruling. The First District Court of Appeals certified the case to the Florida Supreme Court as a matter of great public importance. On March 28, 2012, the Florida Supreme Court accepted jurisdiction in the case and oral arguments were held on September 7, On January 7, 2013 the Florida Supreme Court agreed with the State of Florida and upheld as constitutional the challenged provision of the FRS Legislation, thus reversing the Circuit Court s ruling. For the District's Fiscal Year ended September 30, 2012, the District s employees contributed approximately $608,000. The state of Florida issues a publicly available financial report that includes financial statements, required supplementary information for the FRS and other information including historical data regarding funding progress and actuarial values and liabilities. The most recent available report for the plan year ended June 30, 2012 may be obtained by writing the Florida Division of Retirement, P.O. Box 9000, Tallahassee, Florida or by accessing their Internet site at publications/system_information/annual_reports. The FRS Annual Report July 1, 2011 June 30, 2012 available as mentioned in the preceding paragraph, stated that the FRS pension plan was 86.9% funded at July 1, 2012, as the actuarial value of assets was $128 billion compared to the actuarial accrued liability of $147 billion. Per the July 1, 2012 actuarial valuation of the FRS, the entry age normal actuarial cost method was used. The actuarial assumptions included (a) a 7.75% investment rate of return and (b) projected salary increases of 5.85% per year. Both of these items included an inflation 35

44 component of 3.00%. The assumptions did not include postemployment benefit increases. The actuarial value of assets was determined using techniques that spread the effects of short-term volatility over a five-year smoothing period. The District has no responsibility to the FRS other than to make the periodic payments required by the Florida Statutes. Governmental employers are required to make contributions to the FRS based on actuarially determined statewide contribution rates. The FRS establishes contribution rates annually. The contribution rates by job class for the District's Fiscal Year ending September 30, 2012 were as follows for both the Pension Plan and the Investment Plan: regular 5.18%; special risk (e.g. law enforcement personnel) 14.9%; special risk administrative support 5.91%; senior management 6.3%; DROP participants 5.44%. During the fiscal year ended September 30, 2012, the District contributed to the plan an amount equal to 10.18% of total covered payroll. The District contributions to the FRS for the fiscal years ended September 30, 2010 through 2012 were $3,453,974, $3,376,966, and $2,236,110, respectively, which were equal to the required actuarially determined contributions for each fiscal year. See also Note 9 in the Notes to the Financial Statements of the District as of and for the Fiscal Year ended September 30, 2012 attached hereto as Exhibit B. Other Post Employment Benefit Plans General. In accordance with GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pension, the District expenses the cost of post-employment benefits over the active service lives of its employees rather than using a "pay-as-you-go" basis. Expensing the cost of a future benefit over the active work-lives of employees is a fiscally sound approach because employees actually earn the future benefits over their working careers. OPEB Plan Description. The District provides health-related benefits to retirees and certain former employees. The District is required by Florida law to allow retirees and certain former employees to buy healthcare coverage at the same group insurance rates that current employees are charged. Although retirees pay for healthcare at group rates they are receiving a valuable benefit because they can buy insurance at costs that are lower than the costs associated with the experience rating for their age bracket. The availability of this lower cost health insurance represents an "implicit subsidy" for retirees. This Other Post Employment Benefit (OPEB) plan is a single-employer plan and does not issue a stand-alone financial report. The plan's financial activity is included in the financial activity of the District. Annual OPEB Cost and Net OPEB Obligation. The actuary's estimate of the District's accrued OPEB liability, also known as the actuarial liability, which approximates the present value of all future expected postemployment and medical premiums, associated administrative costs and stipend payments (which are attributable to the past service of active and retired employees) was $54.3 million at September 30, 2012 as valued on October 1, The District's annual OPEB cost is the District's OPEB expenses on an accrual basis. The annual OPEB cost is calculated based on the annual required contribution (ARC), an amount actuarially determined 36

45 in accordance with GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost (current and future benefits earned) each year and to amortize any unfunded actuarial liabilities over a period of time not to exceed thirty years. Unfunded 3% Annual required Contribution (ARC) $4,986,936 Interest on net OPEB Obligation 388,629 Adjustment to Annual Required Contribution 641,669 Annual OPEB Cost 4,733,896 Projected Pay-as-you-go Expense 1,012,373 Net OPEB Obligation Beginning of Year 12,954,308 Prefunding - Net OPEB Obligation Projected End of Year 16,675,831 The District's estimated annual OPEB cost and ARC for fiscal year 2012 were approximately $4.7 and $5.0 million, respectively. The net OPEB obligation is the net amount for which the District would be obligated and is equivalent to the cumulative sum of the annual OPEB cost less estimated retiree claims, stipends and contributions to the plan paid by the District. The District's net OPEB obligation at September 30, 2012 was approximately $16.7 million. Fiscal Year Annual OPEB Costs % Costs Contributed Net OPEB Obligation 2008 $2,526,331 15% $2,153, ,136,160 14% 5,707, ,136,562 15% 9,226, ,438,894 16% 12,954, ,733,896 21% 16,675,831 Funding Policy, Status and Progress. The District has not currently funded any portion of the net OPEB obligation, however during fiscal years 2010 and 2011 the Board of Supervisors designated $1,000,000 each year for the future funding of the liability, and an additional $2,000,000 in Fiscal Year 2012 and $2,000,000 in Fiscal Year The District intends to eventually create an OPEB trust and contribute such amounts to the trust which will be dedicated to paying its net OPEB obligation. The Actuarial Accrued Liability (AAL) and the Unfunded Actuarial Accrued Liability (UAAL) as of October 1, 2011 was $54,318,654. Actuarial Methods and Assumptions. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. 37

46 The projected unit credit method was used in the September 30, 2012 actuarial valuation. Actuarial assumptions included a 30 year (closed) amortization period, a 3% investment rate of return, a Amortization Factor and an annual healthcare cost trend rate of 10% initially, reduced by 1% decrements to an ultimate rate of 5% by fiscal year The District's unfunded actuarial accrued liability is being amortized as a level dollar amount. See also Note 10 in the Notes to the Financial Statements of the District as of and for the Fiscal Year ending September 30, 2012, and the Required Supplementary Information which follows such Notes, attached hereto as Exhibit B. OUTSTANDING BONDS SECURED BY AD VALOREM TAXES The following table provides the principal amounts of the District s Outstanding Bonds secured by Ad Valorem Taxes as of September 30, 2012: Series of Bonds Principal Amount Outstanding Series 2004A $ 39,110,000 (1) Series 2004B 6,495,000 (1) Series 2005A 18,925,000 (1) Series 2005B 52,650,000 Series ,410,000 Series ,865,000 Total $161,455,000 (1) Does not reflect the issuance of the Series 2013 Bonds and the advance refunding of the Refunded 2004 Bonds. See THE REEDY CREEK IMPROVEMENT DISTRICT - Powers - Bond Guaranty Agreement herein for a discussion of the District s obligation to pay debt service on Osceola County s Transportation Improvement Refunding Bonds (Osceola Parkway Project), Series 2004 in the event of a shortfall of toll revenues. [Remainder of page intentionally left blank] 38

47 AGGREGATE AD VALOREM DEBT SERVICE SCHEDULE The following table sets forth the debt service for the Outstanding Bonds issued by the District and payable from Ad Valorem Taxes: AGGREGATE AD VALOREM DEBT SERVICE SCHEDULE Fiscal Year Ended Existing Series 2013A Series 2013B Total September 30 Debt Service (1) Principal Interest (1) Total Principal Interest Total Debt Service 2014 $ 23,474,126 $ 7,382,927 $ 7,382,927 $ 570,000 $ 1,209,118 $ 1,779,118 $ 32,636, ,090,162 12,935,540 12,935,540 3,435,000 1,627,850 5,062,850 38,088, ,085,528 17,435,540 17,435,540 3,535,000 1,524,800 5,059,800 42,580, ,381,108 17,435,540 17,435,540 3,645,000 1,418,750 5,063,750 42,880, ,374,558 17,435,540 17,435,540 3,755,000 1,309,400 5,064,400 42,874, ,895,038 17,435,540 17,435,540 3,905,000 1,159,200 5,064,200 37,394, ,938,150 $ 11,255,000 17,435,540 28,690,540 4,055,000 1,003,000 5,058,000 36,686, ,918,150 11,820,000 16,872,790 28,692,790 4,220, ,800 5,060,800 36,671, ,914,150 12,410,000 16,281,790 28,691,790 4,415, ,350 5,062,350 36,668, ,915,150 13,030,000 15,661,290 28,691,290 4,590, ,750 5,060,750 36,667, ,910,650 13,685,000 15,009,790 28,694,790 4,825, ,250 5,066,250 36,671, ,365,650 14,365,000 14,325,540 28,690,540 37,056, ,085,000 13,607,290 28,692,290 28,692, ,800,000 12,890,525 28,690,525 28,690, ,595,000 12,100,525 28,695,525 28,695, ,420,000 11,270,775 28,690,775 28,690, ,325,000 10,367,438 28,692,438 28,692, ,290,000 9,405,375 28,695,375 28,695, ,300,000 8,392,650 28,692,650 28,692, ,360,000 7,332,400 28,692,400 28,692, ,480,000 6,211,000 28,691,000 28,691, ,605,000 5,087,000 28,692,000 28,692, ,785,000 3,906,750 28,691,750 28,691, ,025,000 2,667,500 28,692,500 28,692, ,325,000 1,366,250 28,691,250 28,691,250 Totals (2) $142,262,418 $344,960,000 $290,252,844 $635,212,844 $40,950,000 $11,452,268 $52,402,268 $829,877,530 (1) Net of capitalized interest. (2) Totals may not foot due to rounding. LITIGATION As of the date of this Official Statement, there is no pending litigation restraining or enjoining the issuance or delivery of the Series 2013 Bonds or the proceedings and authority 39

48 under which they are to be issued, or which would adversely affect the District s ability to pay principal of and interest on the Series 2013 Bonds. Neither the creation, organization or existence of the District, nor the title of the present members of the Board of Supervisors of the District or other officers of the District to their respective offices is being contested. General TAX EXEMPTION The Internal Revenue Code of 1986, as amended (the "Code"), includes requirements which the District must continue to meet subsequent to the issuance of the Series 2013 Bonds in order that interest on the Series 2013 Bonds not be included in gross income for federal income tax purposes. The District's failure to meet these requirements may cause interest on the Series 2013 Bonds to be included in gross income for federal income tax purposes retroactive to their date of issuance. The District has covenanted in the Indenture to take the actions required by the Code in order to maintain the exclusion from gross income for federal income tax purposes of interest on the Series 2013 Bonds. In the opinion of Greenberg Traurig, P.A., Bond Counsel, assuming continuing compliance by the District with the tax covenants referred to above, under existing statutes, regulations, rulings and judicial decisions, interest on the Series 2013 Bonds 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, interest on the Series 2013 Bonds is taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax imposed on certain corporations. Bond Counsel is further of the opinion that the Series 2013 Bonds and the interest thereon are exempt from taxation under the laws of the State of Florida, except as to estate taxes and taxes imposed by Chapter 220, Florida Statutes, on interest, income or profits on debt obligations owned by corporations as defined therein. Except as described above, Bond Counsel will express no opinion regarding the federal income tax consequences resulting from the ownership of, receipt or accrual of interest on, or disposition of the Series 2013 Bonds. Prospective purchasers of Series 2013 Bonds should be aware that the ownership of Series 2013 Bonds may result in other collateral federal tax consequences, including (1) the denial of a deduction for interest on indebtedness incurred or continued to purchase or carry Series 2013 Bonds or, in the case of a financial institution, that portion of the owner's interest expense allocable to interest on a Series 2013 Bonds, (2) the reduction of the loss reserve deduction for property and casualty insurance companies by 15% of certain items, including interest on the Series 2013 Bonds, (3) the inclusion of interest on Series 2013 Bonds in the earnings of certain foreign corporations doing business in the United States for purposes of a branch profits tax, (4) the inclusion of interest on Series 2013 Bonds in the passive income subject to federal income taxation of certain Subchapter S corporations with Subchapter C earnings and profits at the close of the taxable year, and (5) the inclusion in gross 40

49 income of interest on the Series 2013 Bonds by recipients of certain Social Security and Railroad Retirement benefits. Original Issue Discount and Premium Under the Code, the difference between the principal amount of the Series 2013A Bonds maturing on June 1, 2026 bearing an interest rate of 4.10%, June 1, 2029 bearing an interest rate of 4.50% and June 1, 2032 bearing an interest rate of 4.75% (collectively, the "Discount Bonds") and the initial offering price thereof to the public, excluding bond houses and brokers, at which price a substantial amount of Discount Bonds of the same maturity was sold constitutes original issue discount. Original issue discount represents interest which is not includable in federal gross income. A portion of such interest that accrues to the owner of Discount Bonds in each year, as described below, is, however, included in the calculation for purposes of determining a corporate taxpayer's alternative minimum tax and may result in some of the collateral federal income tax consequences described above in the year of accrual. Consequently, owners of Discount Bonds should be aware that the accrual of original issue discount in each year may result in an alternative minimum tax liability or other collateral federal income tax consequences although the owner may not have received cash in such year. Original issue discount on Discount Bonds will accrue actuarially over the terms of such Bonds at a constant interest rate. A purchaser who acquires a Discount Bond at an issue price equal to the initial offering price thereof as set forth on the inside cover page of this Official Statement will be treated as receiving an amount of interest excludable from gross income for federal income tax purposes equal to the original issue discount accruing during the period such purchaser holds such Discount Bond, and will increase its adjusted basis in such Discount Bond by the amount of such accruing discount for purposes of determining taxable gain or loss on the sale or other disposition of such Discount Bond. The federal income tax consequences of the purchase, ownership and redemption, sale or other disposition of Discount Bonds which are not purchased in the initial offering at the initial offering price may be determined according to rules which differ from those described above. Owners of Discount Bonds should consult their own tax advisors with respect to the precise determination for federal income tax purposes of interest accrued upon sale, redemption or other disposition of Discount Bonds and with respect to the state and local tax consequences of owning and disposing of Discount Bonds. Under the Code, the difference between the principal amount of the Series 2013A Bonds maturing on June 1, 2020 through and including 2033 and all of the Series 2013B Bonds (collectively, the "Premium Bonds"), and the cost basis of such a Premium Bond to a bondholder (other than a bondholder who holds such a Premium Bond as inventory, stock in trade or for sale to customers in the ordinary course of business) is "bond premium." Bond premium is amortized over the term of such a Premium Bond for federal income tax purposes in the case of Premium Bonds which are not subject to optional redemption and over the period to the call date that minimizes the yield to the purchaser in the case of Premium Bonds which are subject to optional redemption. A Premium Bondholder is required to decrease his basis in such a Premium Bond by the amount of amortizable bond premium attributable to each taxable year he holds the Premium Bond. The amount of the amortizable bond premium attributable to a 41

50 taxable year is determined on an actuarial basis at a constant interest rate on the basis of a constant yield compounded actuarially. The amortizable bond premium attributable to a taxable year is not deductible for federal income tax purposes. Premium Bondholders should consult their own tax advisors with respect to the precise determination for federal income tax purposes of the treatment of bond premium upon sale, redemption or other disposition of such Premium Bonds and with respect to the state and local consequences of owning and disposing of such Premium Bonds. Potential Legislation and Recent Developments. From time to time, there are legislative proposals suggested, debated, introduced or pending in Congress that, if enacted into law, could alter or amend one or more of the federal tax matters described above including, without limitation, the excludability from gross income of interest on the Series 2013 Bonds, adversely affect the market price or marketability of the Series 2013 Bonds, or otherwise prevent the holders from realizing the full current benefit of the status of the interest thereon. It cannot be predicted whether or in what form any such proposal may be enacted, or whether, if enacted, any such proposal would apply to the Series 2013 Bonds. If enacted into law, such legislative proposals could affect the market price or marketability of the Series 2013 Bonds. Prospective purchasers of the Series 2013 Bonds should consult their tax advisors as to the impact of any proposed or pending legislation. On May 30, 2013, the Internal Revenue Service (the "IRS") delivered to Village Center Community Development District, a Florida special district established under Chapter 190, F.S. ("Village Center CDD") a private ruling, called a technical advice memorandum (the "Villages TAM") in connection with the examination of bonds issued by the Village Center CDD. See "RECENT IRS TECHNICAL ADVICE MEMORANDUM RELATED TO VILLAGE CENTER COMMUNITY DEVELOPMENT DISTRICT" below for a discussion of the Villages TAM and potential risks to Bondholders related to the Villages TAM. Information Reporting and Backup Withholding. Interest paid on tax-exempt bonds such as the Series 2013 Bonds is subject to information reporting to the Internal Revenue Service in a manner similar to interest paid on taxable obligations. This reporting requirement does not affect the excludability of interest on the Series 2013 Bonds from gross income for federal income tax purposes. However, in conjunction with that information reporting requirement, the Code subjects certain non-corporate owners of Bonds, under certain circumstances, to backup withholding at the rates set forth in the Code, with respect to payments on the Series 2013 Bonds and proceeds from the sale of any of the Series 2013 Bonds. Any amount so withheld would be refunded or allowed as a credit against the federal income tax of such owner of Bonds. This withholding generally applies if the owner of Bonds (i) fails to furnish the payor such owner s social security number or other taxpayer identification number ( TIN ), (ii) furnished the payor an incorrect TIN, (iii) fails to properly report interest, dividends, or other reportable payments as defined in the Code, or (iv) under certain circumstances, fails to provide the payor or such owner s securities broker with a certified statement, signed under penalty of perjury, that the TIN provided is correct and that such owner is not subject to backup withholding. Prospective purchasers of the Series 2013 Bonds may also wish to consult with 42

51 their tax advisors with respect to the need to furnish certain taxpayer information in order to avoid backup withholding. RECENT IRS TECHNICAL ADVICE MEMORANDUM RELATED TO VILLAGE CENTER DEVELOPMENT DISTRICT On May 30, 2013, the Internal Revenue Service (the "IRS") delivered to Village Center Community Development District, a Florida special district established under Chapter 190, F.S. ("Village Center CDD") a private ruling, called a technical advice memorandum (the "Villages TAM"), in connection with the examination by the IRS of bonds issued by the Village Center CDD. The Villages TAM concluded that, despite having certain eminent domain powers, the Village Center CDD is not a political subdivision permitted to issue tax-exempt bonds based on a number of facts including that its governing board is elected by a small group of landowners, and that it "was organized and operated to perpetuate private control and avoid indefinitely responsibility to a public electorate, either directly or through another elected state or local governmental body." The Villages TAM, as a private, non-precedential, ruling, binds only the IRS and the Village Center CDD, and only in connection with the Village Center CDD bonds under examination and addressed in the Villages TAM. Moreover, the cited legal basis for the Villages TAM is extremely limited, and, therefore, the value of the Villages TAM as guidance is also limited. Nonetheless, the breadth and force of the language used in the Villages TAM may reflect the disfavor of the IRS toward governmental entities with governing boards elected by landowners, and this position may lead the enforcement branch of the IRS to select bonds of other issuers with landowner-controlled boards for examination. Like the board of the Village Center CDD, the Board of Supervisors of the District is elected by the landowners in the District. The Enabling Act by which the District is governed delegates to the District traditional sovereign powers including, but not limited to, eminent domain, ad valorem taxation and regulatory authority over zoning and building codes. On the basis of the Enabling Act Bond Counsel has concluded that under current law the District is a political subdivision for purposes of Section 103 of the Code, notwithstanding that its Board of Supervisors is elected by landowners. Bond Counsel intends to deliver its approving opinions in the forms attached hereto as "APPENDIX C" without modification as a result of release of the Villages TAM. See "TAX EXEMPTION" and "APPENDIX C - Forms of Bond Counsel Opinions". The IRS routinely examines bond issues of state and local governments. The IRS opened a routine examination of the District s Utilities Revenue Bonds, Series Bonds in 2011 and closed the examination in 2012 without a change to the tax-exempt status of such Series Bonds. In this audit, the IRS did not explicitly raise issues related to the District s status as a political subdivision. The release of the Villages TAM may cause an increased risk of examination of the Series 2013 Bonds. Owners of the Series 2013 Bonds are advised that, if the IRS does audit the Series 2013 Bonds, under its current procedures, at least during the early 43

52 stages of an audit, the IRS will treat the District as the taxpayer, and the owners of the Series 2013 Bonds may have limited rights to participate in such procedure. The Indenture does not provide for any adjustment to the interest rates borne by the Series 2013 Bonds in the event of a change in the tax-exempt status of the Series 2013 Bonds. The commencement of an audit or an adverse determination by the IRS with respect to the tax-exempt status of interest on the Series 2013 Bonds would adversely impact both liquidity and pricing of the Series 2013 Bonds in the secondary market. FINANCIAL STATEMENTS The financial statements of the District as of and for the year ended September 30, 2012, included in this Official Statement, have been audited by Ernst & Young LLP, independent certified public accountants, as stated in their report appearing herein as "APPENDIX A." Ernst & Young LLP, the District s independent auditor, has not been engaged to perform and has not performed, since the date of its report included in "APPENDIX A", any procedures on the financial statements addressed in that report. Ernst & Young LLP also has not performed any procedures relating to this Official Statement. FINANCIAL ADVISOR Dunlap & Associates Inc., Winter Park, Florida, is serving as financial advisor to the District. The financial advisor has assisted in the preparation of the Official Statement, and in other matters relating to the planning, structuring and issuance of the Series 2013 Bonds, and has provided additional advice. Dunlap & Associates, Inc. is a financial advisory and consulting organization and is not engaged in the business of underwriting, marketing or trading of municipal securities or any other negotiable instruments. UNDERWRITING The Underwriters listed on the cover page have agreed, subject to certain conditions, to purchase the Series 2013 Bonds from the District at an aggregate purchase price equal to $402,954, (par of $385,910,000, plus net original issue premium of $18,419, and less underwriters discount of $1,375,166.20). The Series 2013 Bonds may be offered and sold to certain dealers (including underwriters and other dealers depositing such Series 2013 Bonds into investment trusts) at prices lower than or yields greater than the public offering prices and yields set forth on the front cover of this Official Statement, and such public offering prices and yields may be changed, from time to time, by the Underwriters. J.P. Morgan Securities LLC ("JPMS"), one of the Underwriters of the Series 2013 Bonds, has entered into negotiated dealer agreements (each, a "Dealer Agreement") with each of UBS Financial Services Inc. ( UBSFS ) and Charles Schwab & Co., Inc. ("CS&Co.") for the retail distribution of certain securities offerings, including the Series 2013 Bonds, at the original issue prices. Pursuant to each Dealer Agreement, each of UBSFS and CS&Co. will purchase the Series 44

53 2013 Bonds from JPMS at the original issue price less a negotiated portion of the selling concession applicable to any of the Series 2013 Bonds that such firm sells. Morgan Stanley, parent company of Morgan Stanley & Co. LLC., an underwriter of the Bonds, has entered into a retail distribution arrangement with Morgan Stanley Smith Barney LLC. As part of the distribution arrangement, Morgan Stanley & Co. LLC may distribute municipal securities to retail investors through the financial advisor network of Morgan Stanley Smith Barney LLC. As part of this arrangement, Morgan Stanley & Co. LLC may compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the Bonds. The Underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage services. Certain of the Underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for the issuer, for which they received or will receive customary fees and expenses. In the ordinary course of their various business activities, the Underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities, which may include credit default swaps) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of the issuer. The Underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments. RATINGS Moody s Investors Service ( Moody s ), Standard & Poor s Ratings Services, a division of The McGraw-Hill Companies, Inc. ( S&P ) and Fitch Ratings ( Fitch ) have assigned their municipal bond ratings of Aa3, A+, and AA- respectively, to the Series 2013 Bonds. Certain information and materials not included in this Official Statement were furnished to the rating agencies. Generally, rating agencies base their ratings on the information and materials so furnished and on investigations, studies and assumptions by the rating agencies. Such credit ratings reflect only the views of such rating agencies, and an explanation of the respective significance of such credit ratings may be obtained from the rating agencies. There is no assurance that such credit ratings will continue for any given period of time or that they will not be revised or withdrawn entirely by any of such rating agencies, if in their respective judgments 45

54 circumstances so warrant. A revision or withdrawal of any such credit rating may have an adverse effect on the market price of the Series 2004 Bonds. APPROVAL OF LEGAL PROCEEDINGS Certain legal matters incident to the validity of the Series 2013 Bonds and the issuance thereof by the District are subject to the approval of Greenberg Traurig, P.A., Miami, Florida, Bond Counsel, whose approving opinions (in the forms attached hereto as APPENDIX C ) will be delivered on the date of issuance of the Series 2013 Bonds. Certain legal matters will be passed on for the District by Lee G. Schmudde, Special Counsel for the District, Bryant Miller Olive P.A., Disclosure Counsel to the District and for the Underwriters by their Counsel, Marchena and Graham, P.A., Orlando, Florida. CONTINUING DISCLOSURE The District has covenanted for the benefit of the Series 2013 Bondholders to provide certain financial information and operating data relating to the District and the Series 2013 Bonds in each year (the "Annual Report"), and to provide notices of the occurrence of certain enumerated material events. Such covenant shall only apply so long as the Series 2013 Bonds remain Outstanding under the Indenture. The covenant shall also cease upon the termination of the continuing disclosure requirements of SEC Rule 15c2-12(b)(5) (the "Rule") by legislative, judicial or administrative actions. The Annual Report and the notices of material events will be filed by the District with the Municipal Securities Rulemaking Board (the MSRB ) via its Electronic Municipal Market Access System commonly referred to as EMMA. The specific nature of the information to be contained in the Annual Report and the material events for which notice will be provided are described in "APPENDIX D - Form of Disclosure Dissemination Agent Agreement," which shall be executed by the District at the time of issuance the Series 2013 Bonds. The District has retained the services of Digital Assurance Certification, L.L.C. ("DAC") as it exclusive Disclosure Dissemination Agent to provide information notices to the MSRB. These covenants have been made in order to assist the Underwriters in complying with the Rule. With respect to the Series 2013 Bonds, no party other than the District is obligated to provide, nor is expected to provide, any continuing disclosure information with respect to the aforementioned Rule. The District has not previously failed to provide continuing disclosure pursuant to the Rule. However, in connection with the issuance of each of its prior Utilities Revenue Bonds and its Ad Valorem Tax Bonds, the District entered into separate agreements to provide continuing disclosure under the Rule, as in effect at the time of such issues. With respect to such undertakings, the District covenanted to provide certain annual financial and operational information related to the System within 180 days of the end of each fiscal year (September 30). The District also employed DAC as its exclusive Disclosure Dissemination Agent with respect to such undertakings. In reliance on advice provided to the District by DAC, the District 46

55 applied a 360 day year consisting of 12, 30 day months convention to the annual filing requirement rather than a strict 180 days from the end of its fiscal year convention and believed it had until March 31 of each year to file its annual reports. As a result of such interpretation, in all but one year (2011) since 2007 the District has filed its annual continuing disclosure reports for its prior issues four to five days after the expiration of the 180 day period, which it does not deem material. The District also agreed in the undertakings to provide updated comparative rate information as part of its annual report. Such information is included in the annual report of the consulting engineers, which is required to be filed with the information repositories within 60 days of its completion. While the District filed each of such reports within the applicable time period, such reports have been filed up to 50 days past the due date for filing the updated comparative rate information in the District's annual report. In addition, in 2009 the District failed to file timely notice of upgrades of the District s Bonds by Fitch Ratings. The District and DAC have implemented revised procedures to ensure that future annual reports will be filed no later than the March 31st following the end of the District s fiscal year and, so long as such prior undertakings are in effect, include updated comparative rate information in such annual reports. VERIFICATION OF MATHEMATICAL COMPUTATIONS Causey Demgen & Moore, P.C., a firm of independent public accountants, will deliver to the District its report indicating that it has examined, in accordance with standards established by the American Institute of Certified Public Accountants, certain information and assertions provided by the District and its representatives. Included in the scope of its examination will be a verification of the accuracy of the mathematical computations of the adequacy of the cash to be held in the Escrow Fund to pay, when due, the maturing principal of, interest on and redemption price requirements of the Series 2004 Bonds and the Series 2005 Bonds. LEGALITY FOR INVESTMENT IN FLORIDA The Enabling Act provides that the Series 2013 Bonds are legal investments for savings banks, banks, trust companies, insurance companies, executors, administrators, trustees, guardians, and other fiduciaries, and for any board, body, agency, instrumentality, county, municipality or other political subdivision of the State of Florida, and constitute securities which may be deposited by banks or trust companies as security for deposits of state, county, municipal or other public funds, or by insurance companies as required or voluntary statutory deposits. DISCLOSURE REQUIRED BY FLORIDA BLUE SKY LAWS Section , Florida Statutes, and the regulations promulgated thereunder (the Disclosure Act ) requires that the District make a full and fair disclosure of any bonds or other debt obligations that it has issued or guaranteed and that are or have been in default as to principal or interest at any time after December 31, The District is not and has not since December 31, 1975 been in default as to principal and interest on its bonds or other debt obligations. 47

56 CERTIFICATION CONCERNING OFFICIAL STATEMENT Concurrently with the delivery of the Series 2013 Bonds, the President or the Vice President of the Board of Supervisors of the District will furnish his certificate to the effect that, to the best of his knowledge, the Official Statement (other than information contained therein concerning DTC and its Book-entry only system) did not, as of its date and does not as of the date of delivery of the Series 2013 Bonds, contain any untrue statement of a material fact or omit to state a material fact which is necessary in order to make the statements contained herein, in the light of the circumstances in which they are made, not misleading. References to Documents MISCELLANEOUS References in this Official Statement to and excerpts and summaries from legislation, reports, contracts, the Bond Resolutions, the opinions of Bond Counsel to the District and other documents do not purport to be complete statements of the contents of such documents, and reference is made to such documents for full and complete statements of the provisions thereof. Copies of the Enabling Act, the Bond Resolutions, and the opinions of Bond Counsel to the District are available upon request to the District. Opinions Any statement in this Official Statement, including the appendices attached hereto, involving matters of opinion or estimates, whether or not expressly so stated, are intended as such and not as a representation of fact. The execution and delivery of this Official Statement have been duly authorized by the Board of Supervisors of the Reedy Creek Improvement District. REEDY CREEK IMPROVEMENT DISTRICT By: /s/ Donald R. Greer President, Board of Supervisors 48

57 APPENDIX A AUDITED FINANCIAL STATEMENTS OF REEDY CREEK IMPROVEMENT DISTRICT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012

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59 REEDY CREEK IMPROVEMENT DISTRICT Lake Buena Vista, Florida ANNUAL FINANCIAL REPORT AND COMPLIANCE REPORTS Year Ended September 30, 2012

60 REEDY CREEK IMPROVEMENT DISTRICT (LOCATED IN ORANGE AND OSECOLA COUNTIES) 1900 HOTEL PLAZA BOULEVARD LAKE BUENA VISTA, FLORIDA BOARD OF SUPERVISORS DONALD R. GREER, PRESIDENT LAURENCE C. HAMES, VICE PRESIDENT WAYNE SCHOOLFIELD, TREASURER ELIZABETH A. DUDA THOMAS M. MOSES DISTRICT ADMINISTRATOR WILLIAM L. WARREN DEPUTY DISTRICT ADMINISTRATOR/COMPTROLLER ANN G. BLAKESLEE INDEPENDENT AUDITORS Ernst & Young LLP Orlando, Florida

61 REEDY CREEK IMPROVEMENT DISTRICT FINANCIAL STATEMENTS Year Ended September 30, 2012 TABLE OF CONTENTS Page REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS... 1 MANAGEMENT S DISCUSSION AND ANALYSIS... 3 BASIC FINANCIAL STATEMENTS: Government-wide Financial Statements: Statement of Net Position Statement of Activities Fund Financial Statements: Balance Sheet Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual General Fund Statement of Net Position Utility Fund Statement of Revenues, Expenses, and Changes in Net Assets Utility Fund Statement of Cash Flows Utility Fund Notes to Financial Statements REQUIRED SUPPLEMENTARY INFORMATION Condition Rating of the District s Infrastructure and Comparison of Needed-to-Actual Maintenance Preservation Other Post Employment Benefits Schedule of Funding Progress COMPLIANCE REPORTS Report of Independent Certified Public Accountants on Compliance and on Internal Control over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Report of Independent Certified Public Accountants on Bond Covenants Management Letter... 55

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63 Ernst & Young LLP Suite North Orange Avenue Orlando, FL Tel: Fax: Report of Independent Certified Public Accountants Board of Supervisors Reedy Creek Improvement District Lake Buena Vista, Florida We have audited the accompanying financial statements of the governmental activities, the business-type activities, and each major fund of Reedy Creek Improvement District (the District) as of and for the year ended September 30, 2012, which collectively comprise the District s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the District s management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the District s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, and each major fund of the District as of September 30, 2012, and the respective changes in financial position and, where applicable, cash flows thereof and budgetary comparison for the general fund for the year then ended in conformity with US generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued our report dated January 17, 2013 on our consideration of the District s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. 1 A member firm of Ernst & Young Global Limited

64 Accounting principles generally accepted in the United States require that management s discussion and analysis, and Other Post Employment Benefits Schedule of Funding Progress, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. January 17, A member firm of Ernst & Young Global Limited

65 REEDY CREEK IMPROVEMENT DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS As management of the Reedy Creek Improvement District (the District ), we offer readers of the District s financial statements this narrative overview and analysis of the financial activities of the District for the fiscal year ended September 30, We encourage readers to consider the information presented here in conjunction with the District s financial statements, which follow this section. Financial Highlights The assets of the District exceeded liabilities at the close of the most recent fiscal year by $155,243,901 (net position). The District s total net position increased during the year by $33,239,289. The District s total noncurrent liabilities decreased by $10,124,972 during the year. As of September 30, 2012, the District s governmental funds reported combined ending fund balances of $39,692,689, an increase of $417,738 in comparison with the prior year. Approximately 29% of this total amount is available for spending at the government s discretion (unassigned fund balance). At September 30, 2012, unassigned fund balance for the general fund was $11,536,794, or 21% of total general fund expenditures, including transfers. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the District s basic financial statements. The District s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. Government-wide Financial Statements. The government-wide financial statements are designed to provide readers with a broad overview of the District s finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the District s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the District is improving or deteriorating. The statement of activities presents information showing how the government s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., arbitrage rebate owed but not due until a future year and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the District that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the District include general government, public safety, physical environment and transportation. The business-type activities of the District include water, wastewater, reuse, gas, solid waste, chilled water, hot water and electric utility operations. The government-wide financial statements can be found on pages of this report. 3

66 REEDY CREEK IMPROVEMENT DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS - CONTINUED Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the District can be divided into two categories: governmental and proprietary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The District maintains three individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, debt service fund and the capital projects fund, all of which are considered to be major funds. The District adopts an annual legally appropriated budget for its general fund and debt service fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with this budget. The governmental fund financial statements can be found on pages of this report. Proprietary funds. The District maintains one proprietary fund, the Utility Enterprise Fund. Enterprise funds are used to report the same functions presented as business-type activities in the governmentwide financial statements. The District uses its enterprise fund to account for its eight utility operations. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements can be found on pages of this report. Notes to the Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages of this report. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government s financial position. In the case of the District, assets exceeded liabilities by $155,243,901 at September 30,

67 REEDY CREEK IMPROVEMENT DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS - CONTINUED Current and noncurrent assets $ 43,852,351 $ 44,246,882 $ 150,851,861 $ 123,996,760 $ 194,704,212 $ 168,243,642 Capital assets 263,424, ,791, ,388, ,310, ,812, ,101,912 Total assets 307,276, ,038, ,240, ,307, ,517, ,345,554 Deferred outflow s of resources - - 8,150,804 13,605,715 8,150,804 13,605,715 Total deferred outflow s of resources - - 8,150,804 13,605,715 8,150,804 13,605,715 Current liabilities * 25,566,859 25,098,383 66,007,704 72,222,821 91,574,563 97,321,204 Noncurrent liabilities 186,159, ,157, ,689, ,468, ,849, ,625,453 Total liabilities 211,726, ,255, ,697, ,691, ,423, ,946,657 Net position: Net investment in capital assets 203,694, ,788,233 11,493,649 (607,477) 215,188, ,180,756 Restricted 6,833,130 7,405,732 4,316,971 4,126,206 11,150,101 11,531,938 Unrestricted (114,977,509) (125,411,097) 43,882,932 40,703,015 (71,094,577) (84,708,082) Total net position $ 95,550,349 $ 77,782,868 $ 59,693,552 $ 44,221,744 $ 155,243,901 $ 122,004,612 * includes current liabilities payable from restricted assets District's Net Position Governmental activities Business-type activities The District s net position includes: 1) invested in capital assets (e.g., land, land improvements, buildings, machinery and equipment), less any related debt used to acquire those assets that is still outstanding. The District uses these capital assets to provide infrastructure and services to businesses operating within the District; consequently, these assets are not available for future spending. Although the District s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities; 2) assets restricted for non-operating uses such as capital and debt service, and 3) unrestricted assets. The net investment in capital assets continues to increase as the related debt is paid. Governmental activities reflect negative unrestricted net position balances due to the financing, with long-term bonds of the District, of certain roadways that were subsequently donated to the State of Florida and long-term bonds issued in order to contribute to Osceola County s refinancing of their Transportation Improvement Bonds (Osceola Parkway). The roadways are not assets of the District, however the remaining debt associated with the roadways is a liability of the District amounting to approximately $109 million. All of the bonds are Ad Valorem Tax bonds, secured by an irrevocable lien on the ad valorem taxes collected by the District. As of September 30, 2011, business-type activities reflected a negative amount for net investment in capital assets. This was due to the accumulated depreciation expense, which is netted against capital assets, exceeding the payments of principal on the bonds. Although the depreciable lives of the assets are matched up with the duration of the bonds, during the early years the primary portion of the debt service was interest expense, thus resulting in the debt carried on the books exceeding the depreciated value of the capital assets. As the principal portion of the debt service continues to increase, this negative balance has decreased and is now positive at September 30, Total 5

68 REEDY CREEK IMPROVEMENT DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS - CONTINUED District's Change in Net Position Governmental Business-type activities activities Total Revenues: Program revenues: Charges for services $ 3,190,949 $ 2,684,325 $ 192,726,305 $ 193,300,274 $ 195,917,254 $ 195,984,599 Intergovernmental 2,119,843 2,674, ,119,843 2,674,229 Capital contributions 1,810,588 1,436,852 36, ,889 1,846,989 1,560,741 General revenues: Ad Valorem taxes-net 77,538,181 72,806, ,538,181 72,806,513 Interest income 209, ,733 32, , , ,974 Gain on sale of capital assets 15, ,293 - Total revenues 84,884,713 80,026, ,794, ,594, ,679, ,621,056 Expenses: General Government 7,986,263 7,371, ,986,263 7,371,215 Public Safety 33,172,762 34,231, ,172,762 34,231,169 Physical Environment 4,443,541 3,334, ,443,541 3,334,847 Transportation 10,680,768 7,149, ,680,768 7,149,346 Utility operations ,640, ,075, ,640, ,075,703 Interest on long-term debt 7,897,824 7,980,332 13,618,735 14,736,241 21,516,559 22,716,573 Total expenses 64,181,158 60,066, ,259, ,811, ,440, ,878,853 Increases in net position before transfers 20,703,555 19,959,743 12,535,734 6,782,460 33,239,289 26,742,203 Transfers (2,936,074) (2,872,028) 2,936,074 2,872, Change in net position 17,767,481 17,087,715 15,471,808 9,654,488 33,239,289 26,742,203 Net position - beginning 77,782,868 60,695,153 44,221,744 34,567, ,004,612 95,262,409 Net position - ending $ 95,550,349 $ 77,782,868 $ 59,693,552 $ 44,221,744 $ 155,243,901 $ 122,004,612 Governmental activities. Capital contributions increased due to a developer contribution toward the Flamingo Crossings infrastructure. Ad valorem tax increased due to an increased levy and increased assessed values. Interest on long-term debt decreased due to refinancing initiatives in fiscal years 2011 and Expenses and Program Revenues Governmental Activities 35,000 30,000 25,000 expenses program revenues $ in Thousands 20,000 15,000 10,000 5,000 0 General Government Public Safety Physical Environment Transportation Debt Service 6

69 REEDY CREEK IMPROVEMENT DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS - CONTINUED Total Revenue by Source Governmental Activities 0.2% 3.8% 2.5% 2.1% Charges for services Intergovernmental Capital contributions Ad Valorem taxes-net Interest income 91.4% Business-type activities. Utility operating costs decreased due primarily to decreased purchased power and fuel costs. Expenses and Program Revenues Business-type Activities expenses $ in Thousands 200, , , , , , , , , , ,000 program revenues 7

70 REEDY CREEK IMPROVEMENT DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS - CONTINUED Revenue by Source Business-type Activities Charges for services Capital contributions Interest income 99.9% Gain on sale of capital assets Financial Analysis of the Government s Funds As noted earlier, the District uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. Governmental funds. The focus of the District s governmental funds is to provide information on near term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the District s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. As of September 30, 2012, the District s governmental funds reported combined fund balances of $39,692,689. Approximately 29% of this total amount constitutes unassigned fund balance which is available for spending at the government s discretion. The remainder of fund balance is nonspendable, restricted or assigned. Restricted amounts are not available for general spending as those amounts have been reserved to pay for capital projects out of drainage impact fees or bond proceeds. Assigned amounts have been designated to cover the projected excess of expenditures over revenues in the fiscal year 2013 budget. The general fund is the chief operating fund of the District. At September 30, 2012, unassigned fund balance of the general fund was $11,536,794, while total fund balance reached $24,918,374. As a measure of the general fund s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 21% of the total general fund expenditures (including transfers), while total fund balance represents 45% of that same amount. During fiscal year 2012, the fund balance of the District s general fund increased by $2,211,534. This increase resulted from an increase in ad valorem tax revenues. The debt service fund has a total fund balance of $1,159,981, an increase of $369,194 from the prior year. 8

71 REEDY CREEK IMPROVEMENT DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS - CONTINUED Proprietary fund. The District s proprietary fund provides the same type of information found in the government-wide financial statements, but in more detail. At September 30, 2012 the unrestricted net position of the Utility Fund amounted to $43,882,932, an increase of $3,179,917 from prior year. The restricted net position amounted to $4,316,971. General Fund Budgetary Highlights There were no amendments to the budget or transfers between activity budgets in Capital Asset and Debt Administration Capital Assets. The District s investment in capital assets for its governmental and business type activities as of September 30, 2012 amounted to $515,812,872 (net of accumulated depreciation). This investment in capital assets includes land, buildings and utility systems, improvements, machinery and equipment, roads, highways, drainage systems and bridges. Additional information on the District s capital assets can be found in Note 4 of the financial statements. District's Capital Assets (net of depreciation) Governmental Business-type activities activities Total Land $ 2,762,209 $ 2,762,209 $ 6,907,829 $ 6,907,829 $ 9,670,038 $ 9,670,038 Buildings and system 12,993,759 13,713,782 28,996,028 27,485,545 41,989,787 41,199,327 Improvements other than buildings ,797,419 81,170,435 77,797,419 81,170,435 Machinery and equipment 6,768,460 7,054, ,565, ,236, ,333, ,291,741 Infrastructure 240,507, ,572, ,507, ,572,707 Construction in progress 392,311 3,687,762 9,121,571 6,509,902 9,513,882 10,197,664 Total $ 263,424,555 $ 260,791,435 $ 252,388,317 $ 259,310,477 $ 515,812,872 $ 520,101,912 Long-term debt. At September 30, 2012, the District had total long-term bonded debt outstanding of $492,725,737. Of this amount, $182,656,011 comprised debt backed by the full faith and credit of the District and $310,069,726 is secured by the revenues generated by the District s Utilities. During the year, the District s total long-term debt decreased by $11,169,226 (2%). The District has received ratings of A from Standard and Poor s, AA- from Fitch and Aa3 from Moody s for the Ad Valorem Tax general obligation bonds and ratings of A- from Standard and Poor s, A from Fitch and A1 from Moody s for the Utility Revenue bonds. Additional information on the District s long-term debt can be found in Note 7 of the financial statements. 9

72 REEDY CREEK IMPROVEMENT DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS - CONTINUED District's Outstanding Long-term Debt General Obligation and Revenue Bonds Governmental activities Business-type activities General obligation bonds $ 182,656,011 $ 200,231,576 $ - $ - $ 182,656,011 $ 200,231,576 Revenue bonds ,069, ,663, ,069, ,663,387 Total $ 182,656,011 $ 200,231,576 $ 310,069,726 $ 303,663,387 $ 492,725,737 $ 503,894,963 Total Infrastructure Assets. As demonstrated in the Required Supplementary Information on pages of this report, there have been no significant changes in the assessed condition of the bridges, roads and water control structures that use the modified approach for infrastructure reporting. There is an ongoing program to repair the remaining water control structures considered in good condition. The current conditions of the remaining assets are within the established levels maintained by the District. Economic Factors and Next Year s Budgets and Rates The unemployment rate of the Central Florida area is currently averaging 8.1%. This is consistent with the state s average unemployment rate of 8.1% and is greater than the national average rate of 7.7%. Fiscal year 2012 assessed values increased 2.2%. Inflationary trends in the region compare to national indices. Requests for Information This financial report is designed to provide a general overview of the District s finances for all those with an interest in the District s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Reedy Creek Improvement District, Comptroller, 1900 Hotel Plaza Blvd., P.O. Box 10,170, Lake Buena Vista, Florida

73 REEDY CREEK IMPROVEMENT DISTRICT STATEMENT OF NET POSITION September 30, 2012 Governmental Activities Business-type Activities Total ASSETS Cash and cash equivalents $ 9,866,325 $ 14,577,709 $ 24,444,034 Cash and cash equivalents - restricted 5,642,065 52,822,028 58,464,093 Investments 15,153,534 48,206 15,201,740 Investments - restricted 9,302,769 53,343,828 62,646,597 Accounts receivable 201,040 18,839,131 19,040,171 Internal balances 72,995 (72,995) - Inventories - 8,454,726 8,454,726 Prepaids 1,828,820 1,419,992 3,248,812 Deposits 30,000-30,000 Other assets 1,754,803 1,419,236 3,174,039 Capital assets not being depreciated 243,662,336 16,029, ,691,736 Capital assets, net of accumulated depreciation 19,762, ,358, ,121,136 Total Assets 307,276, ,240, ,517,084 DEFERRED OUTFLOWS OF RESOURCES Accumulated decrease in fair value of derivative instruments - 8,150,804 8,150,804 Total Deferred Outflows of Resources - 8,150,804 8,150,804 LIABILITIES Accounts payable and accrued liabilities 2,129,787 20,291,521 22,421,308 Accounts payable from restricted assets 209, , ,970 Deferred fuel - 4,891,552 4,891,552 Derivative fuel instruments - 8,150,804 8,150,804 Due to other governments 1,000-1,000 Compensated absences 1,149,820-1,149,820 Self insurance liability 651, ,057 Capital leases 863, ,697 Bonds payable 18,020,000 24,380,000 42,400,000 Accrued interest payable 2,541,989 7,653,366 10,195,355 Noncurrent liabilities: Compensated absences 1,060,081-1,060,081 Self insurance liability 2,497,122-2,497,122 Capital leases 1,290,653-1,290,653 Net OPEB obligation 16,675,831-16,675,831 Bonds payable 164,636, ,689, ,325,737 Total Liabilities 211,726, ,697, ,423,987 NET POSITION Net investment in capital assets 203,694,728 11,493, ,188,377 Restricted 6,833,130 4,316,971 11,150,101 Unrestricted (deficit) (114,977,509) 43,882,932 (71,094,577) Total Net Position $ 95,550,349 $ 59,693,552 $ 155,243,901 The accompanying notes are an integral part of these financial statements. 11

74 REEDY CREEK IMPROVEMENT DISTRICT STATEMENT OF ACTIVITIES For the Year Ended September 30, 2012 Business-type Activities Total Utility Total Governmental Activities Expenses: Labor $ 64,660,022 $ 30,938,570 $ 33,721,452 Operating expenses 132,665, ,961,269 19,704,429 Depreciation 25,272,394 22,414,941 2,857,453 Nonoperating expenses 325, ,716 - Interest on debt 21,516,559 13,618,735 7,897,824 Total expenses 244,440, ,259,231 64,181,158 Program revenues: Charges for services 195,917, ,726,305 3,190,949 Intergovernmental 2,119,843-2,119,843 Capital contributions 1,846,989 36,401 1,810,588 Total program revenues 199,884, ,762,706 7,121,380 Net program expense (revenue) 44,556,303 (12,503,475) 57,059,778 General revenues: Ad valorem taxes 77,538,181-77,538,181 Interest income 242,118 32, ,859 Gain on sale of capital assets 15,293-15,293 Transfers in (out) - 2,936,074 (2,936,074) Total general revenues and transfers 77,795,592 2,968,333 74,827,259 Change in net position 33,239,289 15,471,808 17,767,481 Total net position - beginning 122,004,612 44,221,744 77,782,868 Total net position - ending $ 155,243,901 $ 59,693,552 $ 95,550,349 The accompanying notes are an integral part of these financial statements.

75 Governmental Activities General Government Public Safety Physical Environment Transportation Debt Service $ 3,802,576 $ 28,469,390 $ 1,173,048 $ 276,438 $ - 3,561,789 2,597,794 3,233,278 10,311, ,898 2,105,578 37,215 92, ,897,824 7,986,263 33,172,762 4,443,541 10,680,768 7,897, ,874 2,192, ,301, , ,588 1,600,000-2,300,182 2,192, ,588 1,600, ,535 $ 5,686,081 $ 30,980,687 $ 4,232,953 $ 9,080,768 $ 7,079,289 The accompanying notes are an integral part of these financial statements. 12

76 REEDY CREEK IMPROVEMENT DISTRICT BALANCE SHEET - GOVERNMENTAL FUNDS September 30, 2012 General Debt Service Capital Projects Total Governmental Funds ASSETS Cash and cash equivalents $ 9,866,325 $ 415,884 $ 5,226,181 $ 15,508,390 Investments 1,867,674 90,604 1,040,621 2,998,899 Investments - restricted 13,285, ,516 7,527,028 21,457,404 Accounts receivable 192,050 8, ,040 Due from other funds 72, ,995 Prepaids 1,828, ,828,820 Deposits ,000 30,000 Total assets $ 27,113,724 $ 1,159,994 $ 13,823,830 $ 42,097,548 LIABILITIES AND FUND BALANCES Accounts payable and accrued liabilities $ 2,194,350 $ 13 $ 209,496 $ 2,403,859 Due to other governments 1, ,000 Total liabilities 2,195, ,496 2,404,859 Fund balances: Nonspendable: Prepaids 1,828, ,828,820 Restricted: Capital projects 5,673,149-13,614,334 19,287,483 Debt service - 1,159,981-1,159,981 Assigned: 2013 budget shortfall 5,879, ,879,611 Unassigned 11,536, ,536,794 Total fund balances 24,918,374 1,159,981 13,614,334 39,692,689 Total liabilities and fund balances $ 27,113,724 $ 1,159,994 $ 13,823,830 Amounts reported for governmental activities in the statement of net position are different because: Bond issuance costs are not financial resources and, therefore, are not reported in the funds. 1,754,803 Accrued interest payable on bonds not currently due is not reported in the funds. (2,541,989) Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 263,424,555 Some liabilities, including bonds payable and other liabilities are not due and payable in the current period and therefore are not reported in the funds. (206,779,709) Net position of governmental activities $ 95,550,349 The accompanying notes are an integral part of these financial statements. 13

77 REEDY CREEK IMPROVEMENT DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the Year Ended September 30, 2012 General Debt Service Capital Projects Total Governmental Funds REVENUES Ad valorem taxes $ 52,492,409 $ 25,045,772 $ - $ 77,538,181 Intergovernmental 1,301, ,535-2,119,843 Emergency services 227, ,559 Building permits and fees 1,964, ,964,516 Drainage fees 210, ,588 Interest income 86,840 35,982 87, ,859 Post office 105, ,109 Other 940,013-1,600,000 2,540,013 Total revenues 57,328,342 25,900,289 1,687,037 84,915,668 EXPENDITURES Current: General government 6,937, ,937,869 Public safety 27,776, ,776,685 Physical environment 4,274, ,274,719 Transportation 10,557, ,557,084 Capital outlay 1,690,257-3,850,027 5,540,284 Debt service: Principal 829,330 17,275,000-18,104,330 Interest and other charges 114,790 8,256,095-8,370,885 Total expenditures 52,180,734 25,531,095 3,850,027 81,561,856 Excess (deficiency) of revenues over (under) expenditures 5,147, ,194 (2,162,990) 3,353,812 OTHER FINANCING SOURCES (USES) Transfers (out) (2,936,074) - - (2,936,074) Total other financing uses (2,936,074) - - (2,936,074) Net changes in fund balances 2,211, ,194 (2,162,990) 417,738 Fund Balances, beginning of year 22,706, ,787 15,777,324 39,274,951 Fund Balances, end of year $ 24,918,374 $ 1,159,981 $ 13,614,334 $ 39,692,689 Amounts reported for governmental activities in the statement of activities are different because: Net changes in fund balances $ 417,738 Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. 2,682,831 The net effect of various miscellaneous transactions involving capital assets resulted in a decrease in net assets. (49,711) Governmental funds report the payment of bond principal and interest when the current financial resources are available and payments are due and they report the payment of issuance costs, premiums, discounts, and similar items when debt is first issued. However, on the statement of activities interest is accrued and bond related costs are deferred and amortized. 18,577,391 Increases in other liabilities reported as expenses in the statement of activities not requiring the use of current financial resources in governmental funds. (3,860,768) Change in net assets of governmental activities $ 17,767,481 The accompanying notes are an integral part of these financial statements. 14

78 REEDY CREEK IMPROVEMENT DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND For the Year Ended September 30, 2012 Budgeted Amounts Original Final Actual Variance with Final Budget REVENUES Ad valorem taxes $ 51,891,213 $ 51,891,213 $ 52,492,409 $ 601,196 Intergovernmental revenue 1,250,000 1,250,000 1,301,308 51,308 Emergency services , ,559 Building permits and fees 1,000,000 1,000,000 1,964, ,516 Drainage fees , ,588 Interest income 250, ,000 86,840 (163,160) Post office 178, , ,109 (72,891) Other 250, , , ,013 Total Revenues 54,819,213 54,819,213 57,328,342 2,509,129 EXPENDITURES GENERAL GOVERNMENT Administrative: Labor 1,340,189 1,202,622 1,205,680 (3,058) Operating 2,248,068 2,322,068 2,179, ,285 Capital outlay 2,400 5,400 7,415 (2,015) 3,590,657 3,530,090 3,392, ,212 Personnel services: Labor 356, , ,688 (18,966) Operating 201, , ,676 (128,030) Capital outlay - 3,600 1,534 2, , , ,898 (144,930) Information services: Labor 1,053,462 1,062, , ,414 Operating 931, , , ,610 Capital outlay 133, , ,813 32,557 2,118,150 2,127,003 1,718, ,581 Support services: Labor 581, , ,865 55,048 Operating 409, , , ,664 Capital outlay 16,603 16,603 14,818 1,785 1,007,733 1,028, , ,497 Post office: Labor 341, , ,946 30,782 Operating 117, , ,106 15,294 Capital outlay 3,501 3,501 3, , , ,493 46,136 TOTAL GENERAL GOVERNMENT 7,737,137 7,706,386 7,071, ,496 PUBLIC SAFETY Building and safety: Labor 2,512,636 2,521,333 2,316, ,172 Operating 146, , ,644 15,504 Capital outlay 397, , , ,557 3,056,284 3,064,981 2,655, ,233 The accompanying notes are an integral part of these financial statements. 15

79 REEDY CREEK IMPROVEMENT DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND For the Year Ended September 30, 2012 Budgeted Amounts Original Final Actual Variance with Final Budget Emergency services: Labor 24,851,746 24,861,106 22,639,858 2,221,248 Operating 1,620,672 1,632,672 1,377, ,920 Capital outlay 1,079,811 1,047, , ,373 27,552,229 27,541,589 24,908,048 2,633,541 Support services: Labor 259, , ,628 17,519 Operating 1,073,493 1,065,993 1,070,642 (4,649) Capital outlay 81, ,000 99,813 1,187 1,413,640 1,426,140 1,412,083 14,057 TOTAL PUBLIC SAFETY 32,022,153 32,032,710 28,975,879 3,056,831 PHYSICAL ENVIRONMENT Water control: Operating 2,514,000 2,534,400 2,353, ,098 Capital outlay 210, , ,698 (79,598) 2,724,000 2,749,500 2,648, ,500 Groves: Operating 16,000 16,000 10,501 5,499 16,000 16,000 10,501 5,499 Planning and engineering: Labor 1,216,760 1,226,120 1,041, ,679 Operating 910, , , ,681 Capital outlay 63,800 65,800 62,344 3,456 2,191,402 2,160,821 1,787, ,816 Support services: Operating 208, , ,255 22, , , ,255 22,436 TOTAL PHYSICAL ENVIRONMENT 5,140,093 5,135,012 4,631, ,251 TRANSPORTATION Roadway maintenance: Labor 262, , ,516 24,557 Operating 11,166,277 11,175,718 10,311, ,150 TOTAL TRANSPORTATION 11,428,394 11,445,791 10,557, ,707 DEBT SERVICE Lease payments 829, , ,330 - Interest and other charges 114, , ,790 (1) TOTAL DEBT SERVICE 944, , ,120 (1) Total expenditures 57,271,896 57,264,018 52,180,734 5,083,284 Excess (Deficiency) of Revenues Over (Under) Expenditures (2,452,683) (2,444,805) 5,147,608 7,592,413 The accompanying notes are an integral part of these financial statements. 16

80 REEDY CREEK IMPROVEMENT DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND For the Year Ended September 30, 2012 Budgeted Amounts Original Final Actual Variance with Final Budget OTHER FINANCING SOURCES & USES Transfers out (3,404,198) (3,412,076) (2,936,074) 476,002 Total other financing uses (3,404,198) (3,412,076) (2,936,074) 476,002 Excess (Deficiency) of Revenues Over (Under) Expenditures and Other Financing Uses $ (5,856,881) $ (5,856,881) 2,211,534 $ 8,068,415 Fund Balance, beginning of year 22,706,840 Fund Balance, end of year $ 24,918,374 The accompanying notes are an integral part of these financial statements. 17

81 REEDY CREEK IMPROVEMENT DISTRICT STATEMENT OF NET POSITION - UTILITY FUND September 30, 2012 ASSETS Current assets: Cash and cash equivalents $ 14,577,709 Accounts receivable 18,839,131 Inventories 8,454,726 Prepaids 1,419,992 Restricted Assets: Cash and cash equivalents 52,822,028 Investments 11,400,981 Total current assets 107,514,567 Noncurrent assets: Investments 48,206 Restricted investments 41,942,847 Capital assets: Land 6,907,829 Buildings 67,406,021 Improvements other than buildings 195,944,983 Machinery and equipment 377,041,178 Less accumulated depreciation (404,033,265) Construction in progress 9,121,571 Total capital assets 252,388,317 Other assets 1,419,236 Total noncurrent assets 295,798,606 Total Assets 403,313,173 DEFERRED OUTFLOWS OF RESOURCES Accumulated decrease in the fair value of derivative instruments 8,150,804 LIABILITIES Current liabilities: Accounts payable and accrued liabilities 20,291,521 Deferred fuel 4,891,552 Derivative fuel instruments 8,150,804 Due to other funds 72,995 Total current liabilities 33,406,872 Current liabilities payable from restricted assets: Bonds payable 24,380,000 Accrued interest payable 7,653,366 Contracts and retainage payable 640,461 Total current liabilities payable from restricted assets 32,673,827 Long-term liabilities: Bonds payable 285,689,726 Total Liabilities 351,770,425 NET POSITION Net investment in capital assets 11,493,649 Restricted for renewal and replacement 3,816,971 Restricted for emergency repairs 500,000 Unrestricted 43,882,932 Total Net Position $ 59,693,552 The accompanying notes are an integral part of these financial statements. 18

82 REEDY CREEK IMPROVEMENT DISTRICT STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION UTILITY FUND For the Year Ended September 30, 2012 OPERATING REVENUES Utility sales $ 192,726,305 Total operating revenues 192,726,305 OPERATING EXPENSES Purchased power and fuel 92,278,902 Labor support 30,938,570 Operating costs 10,036,065 Taxes 3,342,436 Repairs and maintenance 6,227,050 Insurance 1,076,816 Depreciation 22,414,941 Total operating expenses 166,314,780 Operating income 26,411,525 NONOPERATING REVENUES (EXPENSES) Interest and investment income 32,259 Interest expense (13,618,735) Amortization of bond issue costs (382,091) Gain on abandonment of plant assets 56,375 Total nonoperating expenses (13,912,192) Income before contributions and transfers 12,499,333 Capital contributions 36,401 Transfers in 2,936,074 Increase in net position 15,471,808 Total net position - beginning 44,221,744 Total net position - ending $ 59,693,552 The accompanying notes are an integral part of these financial statements. 19

83 REEDY CREEK IMPROVEMENT DISTRICT STATEMENT OF CASH FLOWS UTILITY FUND For the Year Ended September 30, 2012 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers $ 190,752,454 Payments to suppliers (116,165,358) Payments for labor contract and management service agreement (28,469,463) Payments to employees (2,385,862) Net cash provided by operating activities 43,731,771 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Operating transfers in 2,936,074 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from bonds 30,000,000 Payment of bond issue costs (82,974) Purchases of capital assets (14,174,512) Proceeds from sale of capital assets 124,470 Principal paid on bonds (23,195,000) Interest paid on bonds (15,191,322) Capital contributions 36,401 Net cash used by capital and related financing activities (22,482,937) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments (42,879,467) Proceeds from sales and maturities of investments 27,361,539 Investment income 55,645 Net cash used in investing activities (15,462,283) Net increase in cash and cash equivalents 8,722,625 Balances - beginning of the year 58,677,112 Balances - end of the year $ 67,399,737 Unrestricted $ 14,577,709 Restricted 52,822,028 $ 67,399,737 Reconciliation of operating income to net cash provided by operating activities Operating income $ 26,411,525 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation expense 22,414,941 Change in assets and liabilities: Accounts receivable (1,973,851) Inventories (484,215) Prepaid items (73,498) Other assets - Accounts payable and accrued liabilities (224,401) Due to other funds (282,333) Due to other governments (91,012) Deferred revenue (1,965,385) Net cash provided by operating activities $ 43,731,771 The accompanying notes are an integral part of these financial statements. 20

84 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS Year Ended September 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity Reedy Creek Improvement District (the "District") is a public corporation of the State of Florida created on May 12, 1967 by a special act of the legislature. The District includes approximately 25,000 acres of land in Orange and Osceola Counties. Walt Disney World Co. or other wholly owned subsidiaries of the Walt Disney Company own substantially all the land within the District. As outlined in Chapter of the Laws of Florida, the District was organized to provide for the reclamation, drainage, and irrigation of land, to establish water, flood, and erosion control, to provide water and sewer systems and waste collection and disposal facilities, to provide for mosquito and other pest controls, to provide for public utilities, to create and maintain conservation areas, to provide streets, roads, bridges and street lighting facilities, and to adopt zoning and building codes and regulations. The governing body of the District is a five-member Board of Supervisors elected to office for four-year terms by landowners of the District. The accompanying financial statements present the financial position and changes in financial position of the applicable fund types governed by the Board of Supervisors of the District in accordance with accounting principles generally accepted in the United States of America. Determination of the financial reporting entity of the District is founded upon the objective of accountability. Therefore, the financial statements include only the District (the primary government). There are no legally separate component units for which operational or financial responsibility rest with officials of the District or for which the nature and significance of their relationship to the District are such that exclusion would cause the financial statements to be misleading or incomplete. B. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all nonfiduciary activities of the primary government. As required by generally accepted governmental accounting principles, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses, of a given function or segment, are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and the proprietary, or enterprise fund. All governmental funds and the enterprise fund are considered to be major funds and are reported as separate columns in the fund financial statements. 21

85 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within sixty days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are generally not measurable and available until the District receives cash. The District reports the following major governmental funds: The general fund is the District s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The debt service fund accounts for the resources accumulated and payments made for principal and interest on long-term general obligation debt of governmental funds. The capital projects fund accounts for the financial resources to be used for the acquisition or construction of major general government capital projects. The District reports the following major proprietary fund: The utility fund accounts for the activities of the District s electric generation and distribution system, wastewater collection and treatment system, water supply and distribution system, natural gas distribution system, solid waste collection and disposal system, reuse water system, chilled water system and hot water system. 22

86 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation Continued As a general rule the effect of interfund activity has been eliminated from the governmentwide financial statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the government s water and sewer function and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating contributions, and 3) capital contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. The principal operating revenues of the District enterprise fund are charges to customers for sales and services. The District also recognizes as operating revenue connection fees which are to recover the expense of connecting new customers to the system. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the government s policy to use restricted resources first, then unrestricted resources as they are needed. D. Property Taxes Property taxes are billed and collected within the same fiscal period, and are reflected on the modified accrual basis. Ad Valorem taxes on property values have a lien and assessment date of January 1, with millage established during the preceding September. The fiscal year for which taxes are levied begins October 1. Taxes, which are billed in November, carry a maximum discount available through November 30, and become delinquent April 1. State Statutes permit the District to levy property taxes at a rate up to 30 mills. The millage rates assessed by the District for the fiscal year ended September 30, 2012 were for General Operating and for Debt Service. E. Cash, Cash Equivalents and Investments Cash balances from the majority of funds are pooled for investment purposes. Earnings from such investments are allocated to the respective funds based on applicable balances maintained in the pool by each fund. Holdings in the pool, for purposes of these statements, are allocated to the participating funds based on their equity. Cash and cash equivalents consist of demand accounts (interest and non-interest bearing), money market funds and investments with a maturity of three months or less when purchased. Cash and cash equivalents are carried at cost, which approximates fair value. 23

87 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued E. Cash, Cash Equivalents and Investments Continued Investments are stated at fair value based upon quoted market prices or matrix pricing for certain fixed income securities. F. Inventories Enterprise Fund inventories consist of materials, supplies and fuel. Materials and supplies inventories are valued at the lower of cost or market using the first-in first-out method (FIFO) and fuel oil inventories are accounted for at the lower of cost or market using the moving average cost method. G. Restricted Assets Certain assets in the Debt Service Fund, Capital Projects Fund and Enterprise Fund are restricted as to use by specific provisions of bond resolutions. These assets are classified as restricted assets on the statement of net position. H. Capital Assets Infrastructure improvements such as roads, bridges, canals, curbs, gutters, sidewalks, drainage systems and lighting systems, are recorded as capital expenditures in the various governmental funds at the time of purchase. These assets are presented as capital assets in the government-wide statement of net assets for governmental activities. Infrastructure assets are not depreciated and are accounted for using the modified approach, as further explained in the Required Supplementary Information. Condition assessments are periodically performed and preservation and maintenance costs are reflected as expenses in the government-wide statement of activities under transportation expenses. Land, buildings, plants, machinery and equipment are carried on the statement of net assets for governmental activities and business-type activities at cost, except for contributed assets, which are recorded at estimated fair value at the date of contribution. The District s capitalization threshold is $1,000. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets as follows: Buildings and land improvements Improvements, including utility distribution and collection systems Machinery and equipment years years 3-30 years Repairs and maintenance are expensed when incurred. Additions, major renewals and replacements, which increase the useful lives of the assets, are capitalized. Net interest costs incurred during the construction or installation of property, plant and equipment are capitalized. 24

88 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued I. Unamortized Bond Discount and Issuance Costs Bond discount and issuance costs are amortized over the life of the bonds using the effective interest method. Bond discounts are presented as a reduction of the face amount of the bonds payable and issuance costs are presented as other assets. J. Deferred Amount on Refunding For current refundings and advance refundings resulting in defeasance of debt, the difference between the reacquisition price and the net carrying amount of the old debt is deferred and amortized using the effective interest method over the remaining life of the old debt or the life of the new debt, whichever is shorter. The deferred amount is offset against the new liability. K. Compensated Absences In the Government wide financial statements, compensated absences are recorded as a liability when the benefits are earned. The current portion is the amount accrued during the year that would normally be liquidated with available, expendable resources in the next fiscal year and is reported in accounts payable. In the fund statements, expenditures are recognized when payments are due to the employee. L. Fund Balances In the Governmental Fund financial statements, fund balances are classified as follows: Nonspendable The portion of fund balance that includes amounts that cannot be spent because they are either not in a spendable form or legally or contractually required to be maintained intact. Restricted Amounts that can only be used for specific purposes due to constraints that have been placed on them by external parties, constitutional provisions or enabling legislation. Committed Amounts that are constrained for specific purposes that are internally imposed through formal action of the Board of Supervisors and does not lapse at year end. Assigned Amounts constrained by the Board of Supervisors to be used for a specific purpose. Unassigned All amounts not included in other spendable classifications. The District spends restricted amounts first when both restricted and unrestricted fund balance is available unless legally prohibited from doing so. When expenditures are incurred for payment from the unrestricted fund balances, assigned is used first, followed by unassigned fund balance. The District does not have a formal minimum fund balance policy. 25

89 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued M. Budgets and Budgetary Accounting The following procedures are used to establish the budgetary data reflected in the financial statements: (1) The District Administrator submits to the Board of Supervisors a proposed operating budget for the fiscal year commencing on October 1. (2) Public hearings are conducted to obtain taxpayer comments. (3) Prior to October 1, the budget is legally enacted through passage of an ordinance. (4) Budgets are legally adopted for the General Fund, Debt Service Fund and the Enterprise Fund. (5) Budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP). (6) The District's charter does not require formal authorization for actual expenditures to exceed budgeted expenditures; however, the Board of Supervisors monitors the budget periodically during the year. The budgetary control is legally maintained at the fund level. (7) All appropriations and encumbrances, except those specifically approved by the Board of Supervisors, lapse at the close of the fiscal year to the extent not expended. N. Forward Contracts The District enters into forward contracts as part of its normal purchases of power and fuel and accounts for such contracts as settled, as a component of the cost of its operations. O. Derivative Instruments Fuel related derivative transactions are executed in accordance with the District s established Energy Risk Management Policy ( Policy ) which is controlling the level of price risk exposure involved in the normal course of the District s natural gas purchasing activities. The Policy establishes the Energy Risk Management Oversight Committee which enters into financial hedging agreements and contracts with third parties pursuant to enabling agreements approved by the Board of Supervisors. The Policy establishes the organizational structure of the committee and various volume and pricing limits. The fair value of these derivative fuel instruments is included in the Statement of Net Position with the accumulated changes in fair value reported as deferred outflows or deferred inflows of resources as they have been determined to qualify for hedge accounting under GASB Statement No. 53. Related gains and/or losses are deferred and recognized in the specific period in which the derivative is settled and included as a part of fuel costs. P. New Accounting Pronouncements Effective October 1, 2011, the District adopted GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements (GASB No. 62), GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position (GASB No. 63), and GASB Statement No. 66, Technical Corrections 2012 an amendment of GASB Statements No. 10 and No. 62 (GASB No. 66). GASB No. 62 is intended to improve financial reporting by contributing to the GASB s efforts to codify all sources of generally accepted accounting principles for state and local governments so that they derive from a single source. 26

90 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued P. New Accounting Pronouncements Continued GASB No. 63 is intended to improve financial reporting by standardizing the presentation of deferred outflows of resources and deferred inflows of resources and their effects on a government s net position. It alleviates uncertainty about reporting those financial statement elements by providing guidance where none previously existed. GASB No. 66 resolves conflicting guidance resulting from the issuance of two pronouncements; Statements No. 54 and No. 62. The implementation of these new standards does not materially affect the District s financial reporting. Q. Rates and Regulations The District follows the accounting practices set forth in GASB No. 62, paragraphs , Regulated Operations. This standard allows utilities to capitalize or defer certain costs or revenues based on management s ongoing assessment that it is probable these items will be recovered through the rate-making process. Regulatory liabilities consist of deferred fuel. If the District no longer applied GASB No. 62 due to competition, regulatory changes, or other reasons, the District would make certain adjustments that would include the write-off of all or a portion of its regulatory assets and liabilities, the evaluation of utility plant, contracts and commitments, and the recognition, if necessary, of any losses to reflect market condition. Management believes that the District currently meets the criteria for continued application of GASB No. 62, but will continue to evaluate significant changes in the regulatory and competitive environment to assess the ability to continue to apply GASB No. 62. R. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and differences could be material. 2. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. Explanation of certain differences between the balance sheet governmental funds and the government-wide statement of net position The governmental fund balance sheet includes a reconciliation between fund balance total governmental funds and net position governmental activities as reported in the government-wide statement of net position. Further details of certain elements of that reconciliation are as follows: 27

91 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS Continued A. Explanation of certain differences between the balance sheet governmental funds and the government-wide statement of net position Continued 1. Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. This amount represents the total capital assets of governmental activities of $294,396,416 net of accumulated depreciation of $30,971,861, or $263,424, Some liabilities, including bonds payable and other long-term liabilities, are not due and payable in the current period and therefore are not reported in the funds. The details of this difference are as follows: Compensated absences payable $ 2,145,338 Self insurance liability 3,148,179 Capital leases 2,154,350 Net OPEB obligation 16,675,831 Bonds payable 182,656,011 Net adjustment to reduce total fund balances - total governmental funds to arrive at net position of governmental activities $ 206,779,709 B. Explanation of certain differences between the statement of revenues, expenditures and changes in fund balances governmental funds and the government-wide statement of net activities The statement of revenues, expenditures and changes in fund balances governmental funds includes a reconciliation of the net changes in fund balances total governmental funds and change in net position of governmental activities as reported in the governmentwide statement of activities. Further details of certain elements of that reconciliation are as follows: 1. Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. The amount by which capital outlays exceeded depreciation in the current period is as follows: Capital outlay expenditures: General fund General government $ 134,021 Public safety 1,199,194 Physical environment 357,042 Capital projects 3,850,027 Depreciation expense (2,857,453) Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net position of governmental activities $ 2,682,831 28

92 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS Continued B. Explanation of certain differences between the statement of revenues, expenditures and changes in fund balances governmental funds and the government-wide statement of net activities Continued 2. Governmental funds report the payment of the bond and capital lease principal and interest when the current financial resources are available and payments are due, and they report the payment of issuance costs, premiums, discounts, and similar items when debt is first issued. However, on the statement of activities interest is accrued and bond related costs are deferred and amortized. The details of the difference are as follows: Net changes of deferred loss, bond costs, discount, and premium $ 103,587 Principal payments on bonds outstanding 18,104,330 Accrued interest payable 369,474 Net adjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net position of governmental activities $ 18,577, Increases in other liabilities reported as expenses in the statement of activities not requiring the use of current financial resources in governmental funds. The details of the difference are as follows: Compensated absences $ (49,440) Workers compensation (89,805) Net OPEB obligation (3,721,523) Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net position of governmental activities $ (3,860,768) 3. DEPOSITS AND INVESTMENTS The District is authorized to invest in securities as described in its investment policy and in its bond resolutions. As of September 30, 2012, the District held the following deposits and investments as categorized below: Investment Maturities (in years) Fair Value Less than More than 10 Demand and certificate of deposits $ 389,845 $ 286,025 $ 103,820 $ - $ - US Treasury Securities 55,421,842 14,399,880 40,550, ,946 US Government Agency Securities 22,059,600-22,059, Florida Prime, Money Market Fund 1,274,458 1,274, SBA Fund B 263, ,076 Money market mutual funds 81,347,643 81,347, Totals $ 160,756,464 $ 97,308,006 $ 62,713,436 $ - $ 735,022 29

93 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, DEPOSITS AND INVESTMENTS Continued Interest Rate Risk - As a means of limiting its exposure to fair value losses arising from rising interest rates, the District s investment policy for operating funds is structured to provide sufficient liquidity to pay obligations as they come due and (1) limits investments to not more than 7 year maturities; (2) requires that the portfolio have no more than 15% in securities maturing in or having an average life of more than 5 years; (3) requires that the portfolio have no more than 40% in securities maturing in or having an average life of more than 3 years; and (4) requires that no more than 25% of the investment portfolio shall be of a non-liquid nature. Bond proceeds and reserve funds are managed in accordance with bond covenants and funding needs which could result in maturities longer than seven years. Credit Risk - The District s investment policy limits credit risk by restricting authorized investments to the following: direct obligations of, or obligations guaranteed by, the U.S. Government; bonds and notes issued by various federal agencies; state and local government securities; Canadian public obligations; public improvement bonds; public utility obligations; public housing obligations; State Board of Education obligations; international development banks; certain government security money market mutual funds; repurchase agreements and reverse repurchase agreements. Securities that derive their value from underlying securities ( derivatives ) are specifically prohibited except when separately approved by the District s Board of Supervisors. In November 2007, the State Board of Administration s Florida Local Government Investment Pool (SBA) which was normally classified as a cash and cash equivalent, experienced liquidity difficulties with certain of its investments that were either in default, having payment extensions or experiencing significant credit risk. At that time the SBA restructured its investments into two separate funds; Fund A consisted of all money market appropriate assets and Fund B consisted of the riskier investments where availability to the funds would be limited. Initially $2.1 million of the Districts funds at the SBA were transferred to Fund B. Fund A is currently referred to as Florida Prime and is considered a 2a-7 like pool where the actual pooled share price approximates fair value. To date $1.84 million has been transferred back to the District s Florida Prime accounts from Fund B. The estimated fair market value of Fund B at year end of the remaining $0.28 million was $0.26 million. The $0.02 million unrealized loss has been recognized by the District in investment earnings. All of the District s investments held in the portfolio are currently rated in the highest credit category by two rating services, except for Fund B which is not rated by any nationally recognized rating agency. Custodial Credit Risk - All demand deposits are entirely insured by federal depository insurance or by the multiple financial institution collateral pool pursuant to the Public Depository Security Act of the State of Florida. The District s investment policy requires that all investments be held by a third party custodian and held in the District s name. As of September 30, 2012, all of the District s investments are held in a bank s trust department in the District s name. Concentration of Credit Risk At September 30, 2012, there was one issuer with which the District held investments exceeding 5% of the total investment portfolio which was the Federal National Mortgage Association (FNMA) (10%). 30

94 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, DEPOSITS AND INVESTMENTS Continued Statement of Net Position Classifications - In addition to demand accounts, the District classifies repurchase agreements, Florida Prime, money market mutual funds and investments with maturities of three months or less from the date of purchase as cash and cash equivalents on the statement of net position. As of September 30, 2012 the following is a summary of these amounts reflected on the statement of net position: Unrestricted Restricted Totals Statement of Net Position Classifications: Cash and cash equivalents $ 24,444,034 $ 58,464,093 $ 82,908,127 Investments 15,201,740 62,646,597 77,848, CAPITAL ASSETS $ 39,645,774 $ 121,110,690 $ 160,756,464 Capital asset activity for the year ended September 30, 2012 was as follows: Beginning Balance October 1, Increases Decreases Governmental Activities: Capital assets, not being depreciated: Land $ 2,762,209 $ - - Ending Balance September 30, 2012 $ $ 2,762,209 Construction in progress 3,687,762 3,850,027 (7,145,478) 392,311 Infrastructure 233,572,707 6,935, ,507,816 Total capital assets, not being depreciated 240,022,678 10,785,136 (7,145,478) 243,662,336 Capital assets, being depreciated Buildings 22,492, ,492,460 Machinery and equipment 26,851,017 1,976,588 (585,985) 28,241,620 Total capital assets, being depreciated 49,343,477 1,976,588 (585,985) 50,734,080 Less accumulated depreciation for: Buildings 8,778, ,023-9,498,701 Machinery and equipment 19,796,042 2,137,430 (460,312) 21,473,160 Total accumulated depreciation 28,574,720 2,857,453 (460,312) 30,971,861 Total capital assets, being depreciated, net 20,768,757 (880,865) (125,673) 19,762,219 Governmental activities capital assets, net $ 260,791,435 $ 9,904,271 $ (7,271,151) $ 263,424,555 Business-type Activities: Capital assets, not being depreciated: Land $ 6,907,829 $ - $ - $ 6,907,829 Construction in progress 6,509,902 13,047,239 (10,435,570) 9,121,571 Total capital assets, not being depreciated 13,417,731 13,047,239 (10,435,570) 16,029,400 Capital assets, being depreciated Buildings 63,904,471 3,501,550-67,406,021 Improvements other than buildings 193,175,398 2,769, ,944,983 Machinery and equipment 371,783,786 6,678,072 (1,420,680) 377,041,178 Total capital assets, being depreciated 628,863,655 12,949,207 (1,420,680) 640,392,182 Less accumulated depreciation for: Buildings 36,418,926 1,991,067-38,409,993 Improvements other than buildings 112,004,963 6,142, ,147,564 Machinery and equipment 234,547,020 14,281,273 (1,352,585) 247,475,708 Total accumulated depreciation 382,970,909 22,414,941 (1,352,585) 404,033,265 Total capital assets, being depreciated, net 245,892,746 (9,465,734) (68,095) 236,358,917 Business-type activities capital assets, net $ 259,310,477 $ 3,581,505 $ (10,503,665) $ 252,388,317 31

95 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, CAPITAL ASSETS Continued During the year, the Enterprise Fund incurred interest costs totaling $13,618,735. Interest incurred during the construction period relating to the construction of property, plant and equipment, net of interest earned on the investment of funds borrowed for construction, totaling $994,687 was capitalized during the year. 5. LEASE OF ASSETS Capital leases Governmental activities During fiscal year 2008, the District entered into leasing agreements for 911 emergency communications equipment and data storage equipment. During fiscal year 2011, the district entered into additional leasing agreements for 911 emergency communications equipment and computer equipment. The terms of these leases are such that the District capitalized them under the provisions of GASB No. 62. This year, $1,867,022 and $102,774 were included in depreciation expense for 911 equipment and computer equipment, respectively. The following is a schedule of future minimum lease payments of $2,081,729 for 911 equipment and $72,623 for computer equipment assets capitalized under lease agreements, and the present value of these minimum lease payments as of September 30, 2012: Fiscal Year Ending September 30 Total 911 Equipment Computer Equipment 2013 $ 944,120 $ 870,515 $ 73, , , , , , , , ,965 - Total Minimum Lease Payments Less Amount Representing Interest Payments 2,347,980 2,274,375 73, , , $ 2,154,352 $ 2,081,729 $ 72, INTERFUND RECEIVABLE AND PAYABLE BALANCES AND TRANSFERS Interfund receivable and payable balances as of September 30, 2012 are as follows: Interfund Interfund Receivables Payables (Due from) (Due to) General $ 72,995 $ - Utility Fund - 72,995 $ 72,995 $ 72,995 Interfund transfers consisted of a transfer to the Utility Fund from the General Fund to subsidize the operations of the Environmental Lab. The transfers were as follows: Interfund Interfund Transfers In Transfers Out General $ - $ 2,936,074 Enterprise 2,936,074 - $ 2,936,074 $ 2,936,074 32

96 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, LONG TERM DEBT A. Changes in long-term liabilities Long-term liability activity for the year ended September 30, 2012, was as follows: Beginning Balance October 1, 2011 Additions Reductions Ending Balance September 30, 2012 Due Within One Year Governmental activities: General Obligation Bonds: 2004A Ad Valorem $ 44,410,000 - $ (2,605,000) $ 41,805,000 $ 2,695, B Ad Valorem 7,410,000 - (450,000) 6,960, , A Ad Valorem 18,925, ,925, B Ad Valorem Refunding 66,140,000 - (6,580,000) 59,560,000 6,910, A Ad Valorem Refunding 12,150,000 - (2,350,000) 9,800,000 2,390, A Ad Valorem Refunding 47,715,000 - (5,290,000) 42,425,000 5,560,000 Deferred amounts: Discount/Premium 6,153,048 - (895,299) 5,257,749 - Loss on refunding (2,671,472) - 594,734 (2,076,738) - Total long-term bonds payable 200,231,576 - (17,575,565) 182,656,011 18,020,000 Compensated absences 2,178,377 $ 31,524-2,209,901 1,149,820 Capital leases 2,983,680 - (829,330) 2,154, ,697 Self insurance liability 3,058,374 89,805-3,148, ,057 Net OPEB obligation 12,954,308 3,721,523-16,675,831 - Long-term liabilities $ 221,406,315 $ 3,842,852 $ (18,404,895) $ 206,844,272 $ 20,684,574 Business-type activities: Revenue Bonds: Utility $ 42,040,000 - $ (3,170,000) $ 38,870,000 $ 3,315, Utility Refunding 172,965,000 - (14,605,000) 158,360,000 15,375, Utility 26,930, ,930, Utility Refunding 57,485,000 - (5,420,000) 52,065,000 5,690, Utility Refunding 1,200, ,200, Utility - $ 30,000,000-30,000,000 Deferred amounts: Discount/Premium 15,348,366 - (2,651,451) 12,696,915 Loss on refunding (12,304,979) - 2,252,790 (10,052,189) Total long-term bonds payable 303,663,387 30,000,000 (23,593,661) 310,069,726 24,380,000 Long-term liabilities $ 303,663,387 $ 30,000,000 $ (23,593,661) $ 310,069,726 $ 24,380,000 33

97 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, LONG TERM DEBT Continued A. Changes in long-term liabilities Continued General Obligation Bonds Payable 2004A Ad Valorem Tax Bonds In January 2004, the District issued $63,520,000 Ad Valorem Tax Bonds at interest rates of 2.0% to 5.0%, priced to yield 1.1% to 4.57%. The proceeds were used to refund, together with proceeds from the Osceola County Transportation Improvement Refunding Bonds Series 2004 issued by Osceola County, the Osceola County Transportation Improvement Bonds Series B Ad Valorem Tax Bonds In January 2004, the District issued $10,230,000 Ad Valorem Tax Bonds at interest rates of 2.0% to 4.5%, priced to yield 1.4% to 3.68%. The proceeds were used to finance certain road improvement projects within and outside of the District. 2005A Ad Valorem Tax Bonds In June 2005, the District issued $18,925,000 Ad Valorem Tax Bonds at interest rates of 4.25% to 5.0%, priced to yield 4.14% to 4.3%. The proceeds were used to finance road improvements and the construction of two fire stations. 2005B Ad Valorem Tax Refunding Bonds In June 2005, the District issued $90,310,000 Ad Valorem Tax Refunding Bonds at interest rates of 3.25% to 5.0%, priced to yield 2.97% to 4.04%. The proceeds were used for the advance refunding of a portion of the 1995C and 1998A Ad Valorem Tax Bonds. 2010A Ad Valorem Tax Refunding Bonds In September 2010, the District issued $12,150,000 Ad Valorem Tax Refunding Bonds at an interest rate of 1.58%. The proceeds were used for the advance refunding of the 1998B Ad Valorem Tax Bonds. 2011A Ad Valorem Tax Refunding Bonds In April 2011, the District issued $47,715,000 Ad Valorem Refunding Bonds at an interest rate of 2.75%. The proceeds were used for the advance refunding of the 2001A Ad Valorem Tax Bonds. The major provisions of the District s Ad Valorem Tax Bond Resolutions authorizing its debt are as follows: (1) The Ad Valorem tax bond issues and related interest are collateralized by an irrevocable lien on the proceeds from Ad Valorem taxes levied by the District. (2) Additional bonds may be issued by the District provided (a) the maximum bond debt service requirement of the proposed and then outstanding bonds does not exceed 85% of the maximum annual collection from Ad Valorem Taxes calculated for the current year and (b) the principal amount of all bonds proposed and then outstanding not exceed 50% of the assessed value of the taxable property within the District. 34

98 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, LONG - TERM DEBT Continued A. Changes in long-term liabilities Continued Revenue Bonds Payable Utilities Revenue Bonds In July 2003, the District issued $69,605,000 Utilities Revenue bonds at interest rates of 1.4% to 6%, priced to yield.92% to 4.03%. The proceeds will be used to finance the construction and acquisition of improvements to the utility systems. A portion of these bonds was advance refunded by the Utilities Revenue Refunding Bonds Utilities Revenue Refunding Bonds In January 2004, the District issued $200,720,000 Utilities Revenue Refunding Bonds at interest rates of 5.0% to 5.25%, priced to yield 1.45% to 4.15%. The proceeds were used for the advance refunding of the Utilities Revenue Bonds that were outstanding after October 1, Utilities Revenue Bonds In June 2005, the District issued $26,930,000 Utilities Revenue Bonds at a 5% interest rate, priced to yield 4.17% to 4.33%. The proceeds will be used to finance the construction and acquisition of improvements to the utility systems Utilities Revenue Refunding Bonds In June 2005, the District issued $73,045,000 Utilities Revenue Refunding Bonds at interest rates of 3.5% to 5.25%, priced to yield 3.1% to 4.33%. The proceeds were used for the partial advance refunding of the , , and Utilities Revenue Bonds Utilities Revenue Refunding Bonds In August 2011, the District issued $1,200,000 Utilities Revenue Refunding Bonds at an interest rate of 2.93%. The proceeds were used for the advance refunding of the Utilities Revenue Bonds outstanding after October 1, Utilities Revenue Bonds In December 2011, the District issued $30,000,000 Utilities Revenue Bonds at an interest rate of 3.49%. The proceeds are being used to pay for construction and acquisition of improvements to the utility systems. The major provisions of the Utility Fund s trust indentures securing its debt are as follows: (1) The debt obligation and related interest are collateralized by a pledge of the net revenues of the combined utility systems. (2) The District will establish rates that will provide sufficient net revenues (revenues less operating expenses (excluding depreciation and lease payments to WDWC)), to pay 110% of the annual debt service requirements due each year. Revenues are defined to mean all rates, fees, charges or other income (including certain investment earnings, impact fees and special assessments) generated by the Enterprise Fund. (3) The District will pay all current operating expenses. 35

99 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, LONG - TERM DEBT Continued A. Changes in long-term liabilities Continued (4) The District will deposit into the Sinking Fund on a monthly basis an amount equal to one-sixth of the next semi-annual interest payment and one-twelfth of the next annual principal payment. (5) The District will maintain a renewal and replacement fund equal to 5% of the gross revenues (less expenses for purchased power and fuel) received in the prior year. Such amount may be and was reduced to 4% by certification from the District s consulting engineer. (6) The District will maintain on deposit in the emergency repair fund at least $500,000. (7) The debt service reserve requirements are being provided by Debt Service Reserve accounts with the bond trustee. (8) Additional bonds may be issued if the net revenues (revenues of the system less operating expenses (excluding depreciation and lease payments to WDWC)) for twelve consecutive prior months are at least equal to 125% of the maximum annual debt service of the proposed and then outstanding bonds. B. Annual Debt Service Requirements The annual requirements to amortize the principal balance and interest of all bonds outstanding are as follows: General Obligation Bonds Year Ended September 30, Principal Interest 2013 $ 18,020,000 $ 7,495, ,680,000 6,855, ,355,000 6,186, ,080,000 5,454, ,155,000 4,677, ,365,000 11,920, ,820,000 2,270,360 Total 179,475,000 $ 44,860,735 Current portion (18,020,000) Deferred amounts: Discount/Premium 5,257,749 Loss on refunding (2,076,738) Long-term bonds payable $ 164,636,011 36

100 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, LONG - TERM DEBT Continued B. Annual Debt Service Requirements Continued Revenue Bonds Year Ended September 30, Principal Interest 2013 $ 24,380,000 $ 14,677, ,855,000 13,377, ,190,000 12,026, ,370,000 10,611, ,850,000 9,102, ,655,000 22,774, ,125,000 4,524,115 Total 307,425,000 $ 87,095,261 Current portion (24,380,000) Deferred amounts: Discount/Premium 12,696,915 Loss on refunding (10,052,189) Long-term bonds payable $ 285,689,726 C. Refunded Debt The balances outstanding of the refunded debt at September 30, 2012 are as follows: Date Outstanding as of Issue Refunded September 30, Utility Revenue Bonds June 6, 2005 $ 7,855, TRANSACTIONS WITH PRINCIPAL LANDOWNERS During fiscal 2012, Walt Disney World Co. and other wholly owned subsidiaries of The Walt Disney Company provided certain services to the District as follows: Governmental Funds (1) Financial and other administrative services amounted to $752,324. (2) The operation and maintenance of various District water control facilities amounted to $510,892. (3) The maintenance of certain right of ways and District property within the District amounted to $73,119. At September 30, 2012, accounts payable of the General Fund included $101,822 to Walt Disney World Co. and other wholly owned subsidiaries of the Walt Disney Company. 37

101 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, TRANSACTIONS WITH PRINCIPAL LANDOWNERS Continued Enterprise Fund (1) Financial and other administrative services amounted to $176,057. (2) The management and construction of various capital improvements amounted to $114,142. (3) The operation and maintenance of the utility systems for which the District has a labor agreement. The District incurred $28,462,204 of labor support fees under this agreement. At September 30, 2012 the Enterprise Fund had accounts receivable of $13,142,006 and accounts payable of $7,340,765 with Walt Disney World Co. and other wholly owned subsidiaries of The Walt Disney Company. The District provides utility services to Walt Disney World Co. and other associated companies within its service area. Revenues from services provided to these companies were 83% of total utility revenues for the year ended September 30, RETIREMENT SYSTEM Plan description - All full-time employees of the District participate in the Florida Retirement System (FRS), administered by the State of Florida (State). Employees elect participation in either the defined benefit plan ( Pension Plan ), a multiple-employer cost-sharing defined benefit retirement plan, or the defined contribution plan ( Investment Plan ) under the FRS. The FRS provides retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members and beneficiaries. Benefits are established by Chapter 121, Florida Statutes. Amendments to the law can be made only by an act of the Florida Legislature. The State of Florida issues a publicly available report that includes financial statements and required supplementary information for FRS. That report may be obtained by writing to State of Florida Division of Retirement, Department of Management Services, Tallahassee, Florida, Pension plan members are eligible for retirement as follows: Regular Senior Management Special Risk 38 Special Risk Administrative Support Enrolled prior to July 1, 2011 Vested 6 years 6 years 6 years 6 years Normal retirement age Retirement benefit earlier of 30 years of credited service or attainment of age % of average final compensation for each year of credited service earlier of 30 years of credited service or attainment of age 62 2% of average final compensation for each year of credited service earlier of 25 years of credited service or attainment of age 55 3% of average final compensation for each year of credited service earlier of 25 years of credited service or attainment of age % of average final compensation for each year of credited service Enrolled on or after July 1, 2011 Vested 8 years 8 years 8 years 8 years Normal retirement age earlier of 33 years of credited service or attainment of age 65 earlier of 33 years of credited service or attainment of age 65 earlier of 30 years of credited service or attainment of age 60 earlier of 30 years of credited service or attainment of age 60 Retirement benefit 1.6% of average final compensation for each year of credited service Class 2% of average final compensation for each year of credited service 3% of average final compensation for each year of credited service 1.6% of average final compensation for each year of credited service

102 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, RETIREMENT SYSTEM Continued Early retirement may be taken anytime; however, there is a five percent benefit reduction for each year prior to normal retirement age. Members are also eligible for in-line-of-duty or regular disability benefits if permanently disabled and unable to work. Pension Plan Members eligible for retirement are given the option to enter the DROP (Deferred Retirement Option Program), which effectively allows them to work for a FRS employer for up to 60 months beyond their eligible retirement date and receive, at termination, a lump sum payment of their benefits accumulated over that time period. Benefits are computed on the basis of age, average final compensation and service credit. Investment plan members are vested after one year of credited service. These participants receive a contribution for self-direction in an investment product with a third party administrator selected by the State. Funding Policy - The FRS has numerous classes of membership (of which District employees qualify in five classes) with descriptions and employer contribution rates in effect at September 30, 2012 as follows: Regular Class - Members not qualifying for other classes (5.18% rate). Special Risk Class - Members employed as law enforcement officers, firefighters, correctional officers or community-based correctional probation officers, and paramedics and EMTs who meet the criteria set to qualify for this class (14.9% rate). Special Risk Administrative Support Class Special risk employees who are transferred or reassigned to a non-special risk position (5.91%). Senior Management Service Class - Qualifying member of senior management (6.3% rate). Deferred Retirement Option Program (DROP) Participating members of the program, not to exceed 60 months (5.44% rate). The contribution requirements of the District are established and may be amended by FRS. Effective July 1, 2011 Florida Legislature required employees contribute 3% of their annual earnings on a pretax basis, with remaining contributions being the obligation of the District. The District contributed 10.18% of covered payroll during the year. The District s contributions to FRS for the years ended September 30, 2010, 2011 and 2012, respectively, were $3,453,974, $3,376,966 and $2,236,110. Employee contributions to FRS for the 3 months ended September 30, 2011 and for the year ended September 30, 2012, respectively, were $146,132 and $607,586. Contributions made and accrued were equal to the required contributions for each year. 39

103 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, OTHER POSTEMPLOYMENT BENEFITS (OPEB) Plan description - The District provides postemployment healthcare benefits. State Statute requires the District to continue offering healthcare coverage to retirees at the District s cost; however the District has elected by policy, which can be changed, to provide this coverage at no cost to retirees that have met certain requirements during employment with the District. To qualify for this benefit non-union employees must have 20 years of service with the District and be age 62 to obtain paid coverage for themselves and their eligible dependent, and union employees must have 20 years of service with the District and be age 55 to obtain paid coverage for themselves. Annual OPEB cost and net OPEB obligation - The actuary s estimate of the District's accrued OPEB liability, also known as the actuarial accrued liability, which approximates the present value of all future expected postemployment medical premiums, associated administrative costs and stipend payments (which are attributable to the past service of active and retired employees) was $54.3 million at September 30, 2012 as valued on October 1, The District s annual OPEB cost is the District s OPEB expenses on an accrual basis. The annual OPEB cost is calculated based on the annual required contribution (ARC), an amount actuarially determined in accordance with GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost (current and future benefits earned) each year and to amortize any unfunded actuarial liabilities over a period of time not to exceed thirty years. Annual required Contribution (ARC) Interest on net OPEB Obligation Adjustment to Annual Required Contribution Annual OPEB Cost Projected Pay-as-you-go Expense Net OPEB Obligation - Beginning of Year Prefunding Net OPEB Obligation - Projected End of Year Unfunded 3% $ 4,986, , ,669 4,733,896 1,012,373 12,954,308-16,675,831 The District's estimated annual OPEB cost and ARC for fiscal year 2012 were approximately $4.7 and $5.0 million, respectively. The net OPEB obligation is the net amount for which the District would be obligated and is equivalent to the cumulative sum of the annual OPEB cost less estimated retiree claims, stipends and contributions to the plan paid by the District. The District s net OPEB obligation at September 30, 2012 was approximately $16.7 million. Fiscal Year Annual OPEB Costs % Costs Contributed Net OPEB Obligation 2008 $ 2,526,331 15% $ 2,153, ,136,160 14% 5,707, ,136,562 15% 9,226, ,438,894 16% 12,954, ,733,896 21% 16,675,831 40

104 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, OTHER POSTEMPLOYMENT BENEFITS (OPEB) Continued Funding policy, status and progress The District has not currently funded any portion of the net OPEB obligation, however during fiscal years 2010 and 2011 the Board of Supervisors designated $1,000,000 each year for the future funding of the liability, and an additional $2,000,000 in fiscal year The Actuarial Accrued Liability (AAL) and the Unfunded Actuarial Accrued Liability (UAAL) as of October 1, 2011 was $54,318,654. Actuarial Methods and Assumptions - Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the longterm perspective of the calculations. Actuarial evaluations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. Examples include assumptions about future employment, mortality and healthcare cost trends. Actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. The projected unit credit method was used in the September 30, 2012 actuarial valuation. Actuarial assumptions included a 30 year (closed) amortization period, a 3% investment rate of return, a Amortization Factor and an annual healthcare cost trend rate of 10% initially, reduced by 1% decrements to an ultimate rate of 5% by fiscal year The District s unfunded actuarial accrued liability is being amortized as a level dollar amount. Survivor Income Plan - The District also has a Survivor Income Plan for retirees that have met certain requirements during employment with the District. This benefit provides an equivalent of two times the participant s final annual base salary at retirement to their designated beneficiary upon their death. To qualify for this benefit they must have reached the position of manager, director or administrator and be age 62 with 10 years (7 years for directors and administrators) of service or 25 years of service with no age requirement. The District has purchased certain life insurance policies that can, but are not required to be used to fund these obligations. The District currently has three retirees that meet these eligibility requirements. Benefit payments of $220,241 have been required to date. 11. RISK MANAGEMENT The District is exposed to various risks of loss related to theft of, damage to and destruction of assets, torts, injuries to employees and natural disasters for which the District is self-insured and carries excess commercial insurance. The District provides coverage for up to a maximum of $1,000,000 for each worker s compensation claim, $1,000,000 for each general liability claim and $100,000 for each property damage claim. The District purchases commercial insurance for claims in excess of coverage provided. There have been no claim settlements in excess of insurance coverage during the three fiscal years ended September 30, 2010, 2011 and

105 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, RISK MANAGEMENT Continued Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported. The self-insurance liability of $3,148,179 at September 30, 2012 is reported in accordance with the requirements of GASB Statement No. 10 based on an actuarial review of claims pending and past experience. Increases in the claims liability have occurred due to the District increasing the maximum coverage in recent years. Changes in the claims liability amount during fiscal years 2011 and 2012 are as follows: Year ended September Self insurance liability beginning balance $ 3,058,374 $ 2,953,516 Claims and changes in estimates 734, ,074 Claims payments (644,272) (458,216) Self insurance liability ending balance $ 3,148,179 $ 3,058, DERIVATIVE FUEL INSTRUMENTS The District entered into derivative fuel instruments cash flow hedges (commodity swaps, caps and collars) in order to financially hedge the cost of natural gas. The District s fuel-related derivative transactions are recorded at fair value in accordance with GASB Statement No. 53 on the Statement of Net Position as either an asset or liability depending on their fair value, and the related unrealized gains and/or losses for effective hedges are deferred and reported as either deferred inflows or outflows of resources. Realized gains and losses on these transactions are recognized as fuel expense in the specific period in which the instrument is settled. During the year a total of $13,878,363 in settlement losses were recognized in fuel expense. The following is a summary of the derivative fuel instruments of the Utility Fund as of September 30, 2012 which have been deemed effective and are recorded as deferred outflows. Fair Value at September 30, Change in Classification 2011 fair value 2012 Notional Maturity Deferred outflows $ 13,605,715 $ (5,454,911) $ 8,150,804 12,445,196 MMBTUs FY Credit Risk The District s counterparties must have a minimum credit rating of BBB- issued by Standard and Poor s or Fitch s rating service or Baa3 issued by Moody s Investor Services. Basis Risk - All of the District s transactions are based on the same reference rates, thus there is no basis risk. Termination Risk The District s Energy Risk Management Oversight Committee oversees the derivative instrument activity and of the counterparties who are required to maintain a minimum credit rating and present collateral at certain levels which mitigates the chance of a termination event. To date, no termination events have occurred. 42

106 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, NET POSITION AND FUND BALANCE REPORTING In the Statement of Net Position for Governmental activities reflects a negative unrestricted net position of $114,977,509 due to the financing, with long-term bonds of the District, of certain roadways that were subsequently donated to the State of Florida; and long-term bonds that were issued in order to contribute to Osceola County s refinancing of their Transportation Improvement Bonds (Osceola Parkway). The roadways are not assets of the District, however the remaining debt, amounting to $109,311,850 at September 30, 2012, associated with the roadways is a liability of the District. All of the bonds are Ad Valorem Tax bonds secured by an irrevocable lien on the ad valorem taxes collected by the District. Governmental Fund Balances In the Balance Sheet Governmental Funds, the District has classified fund balances into nonspendable, restricted, assigned and unassigned amounts. Restricted amounts represent the following: General Fund - Funds set aside for capital projects by contracts with developers of property, outside of the District, for ongoing maintenance of the District s drainage system. Capital Projects Fund Bond funds to be spent on road system and building improvements subject to specific provisions in bond resolutions. Debt Service Fund - Assets required for servicing of general obligation bond indebtedness under the District's trust indenture. Assigned amounts in the General Fund represent that portion of fund balance designated by the Board of Supervisors to cover the projected excess of expenditures over revenues in the District s fiscal year 2013 budget. Note 1(M) discusses the District s budget approval process. 14. COMMITMENTS AND CONTINGENCIES Purchased Power and Gas The District has entered into several Purchase Power Agreements (PPA) with public and private entities throughout Florida for the purchase and sale of power at wholesale rates, and associated transmission service. Some of these PPAs require the District to pay reservation charges for capacity. The District's minimum commitment for fiscal year 2012 reservation charges under these agreements is approximately $30,500,000. There are no requirements for the District to sell wholesale power or reserve capacity for wholesale sales. Initial terms of the agreements expire in fiscal years 2013 through 2016, with various provisions for renewal or cancellation by both parties. On October 27, 2010, the District entered into a PPA with Florida Power Corporation (FPC) for the period of January 1, 2011 through December 31, On October 27, 2010, the District entered into a PPA with MM Tomoka Farms Energy LLC for the period of January 1, 2011 through December 31, On December 14, 2010, the District entered into a Service Agreement for Network Integration Transmission Service with FPC for the period January 1, 2011 through December 31, On January 25, 2012, the District entered into two separate PPAs with Florida Power Corporation (FPC) for the period January 1, 2013 through December 31,

107 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, COMMITMENTS AND CONTINGENCIES Continued Similarly, the District is obligated to purchase minimum pipeline capacity to transport natural gas under two agreements with Florida Gas Transmission Company. Minimum payments for natural gas under these agreements will total approximately $3,400,000 for fiscal year The terms of the agreements expire in the years 2015 and The District has entered into forward contracts for specified periods of time to purchase natural gas at either specified prices in the future or prices that fluctuate within ceiling and floor amounts. The District enters into these contracts to help plan its natural gas costs for the year and to protect itself against an increase in the market price of the commodity. It is possible that the market price before or at the specified time to purchase natural gas may be lower or higher than the price at which the District is committed to buy. This would reduce or increase the value of the contracts. The District would have options with respect to holding the forward contracts. The District is also exposed to the failure of the counterparty to fulfill the contracts. The terms of the contracts included provisions for recovering the cost in excess of the guaranteed price from the counterparty should the District have to procure natural gas on the open market. Concurrency Management Agreement On December 7, 1995, pursuant to a Concurrency Management Agreement dated February 28, 1994, between the District and Osceola County, the District issued the 1995C Ad Valorem Tax Bonds, in order to fund certain road improvements and interchanges in the vicinity of U.S. Route 192, World Drive and Interstate 4. Osceola County agreed to participate in such financing by reimbursing the District for a portion of the debt service on the Bonds. However, such payments by Osceola County are not pledged to collateralize the District s Ad Valorem Tax Bonds. The District expects to receive from Osceola County approximately $20,800,000 in total to be paid in various annual installments over the term of the 1995C bonds. The maximum annual payments are calculated based on growth in certain areas of the County affected by the improvements and are subject to annual appropriation by the County. The District records the annual payments as Intergovernmental Revenue when received from the County. Osceola County paid to the District $818,535 during the year. Osceola Parkway Agreement In July of 1992, Osceola County issued $149,999,313 Osceola County, Florida Transportation Improvement Bonds ( the Prior Osceola Bonds ) for the construction of the Osceola Parkway, a toll road constructed to improve the transportation systems in certain areas of Osceola County and the District. In connection with the issuance of the bonds, the District entered into a Bond Guarantee Agreement which required the District to make certain funds available for debt service on the bonds if operations of the toll road were insufficient to meet scheduled debt service. Amounts paid were to be reimbursed to the District by Osceola County. This obligation was junior and subordinate to all outstanding Ad Valorem Tax Bonds of the District. In 2003 the District wrote off $23,368,613 in amounts previously advanced and recorded as receivables from Osceola County under the Bond Guarantee Agreement in connection with its entrance into the transactions described below. 44

108 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, COMMITMENTS AND CONTINGENCIES Continued In January 2004, the District entered into an Amended and Restated Bond Guarantee Agreement in connection with the issuance of the Series 2004A Ad Valorem Tax Bonds in the amount of $63,520,000. These bonds were issued to refinance, together with proceeds from $110,935,000 Osceola County Transportation Improvement Refunding Bonds, the Prior Osceola Bonds. The District s obligation to make payments required by the Amended and Restated Bond Guarantee Agreement is subordinate to all outstanding Ad Valorem Tax Bonds of the District. Osceola County has agreed to repay the debt service of the District s 2004A Ad Valorem Tax Bonds and any guarantee payments that are required along with accrued interest from excess toll revenues, if any, when they become available. These payments will terminate upon the earlier of repayment in full or April 1, The District received $1,301,308 from Osceola County during the year. STOPR Agreements In 2007, the District entered into agreements with the City of St. Cloud, the Tohopekaliga Water Authority (TWA), Orange County, Polk County and South Florida Water Management District to provide for mitigation of certain wetlands within and outside the District. The agreements, as amended, provide that in order to jointly fund these projects the parties will make payments totaling $6,908,791. The District s portion of these payments was $3,972,969. The final payment was made in December In September 2007, the District entered into an agreement with the City of St. Cloud, TWA, Orange County and Polk County to jointly perform permit compliance monitoring activities as required by the Water Use Permits issued by the South Florida Water Management District. That agreement, as amended, requires the District to contribute 18.2% of the total costs until June 30, As of September 30, 2012, the District has paid $462,860 for these efforts. In November 2010, the District entered into an agreement with the City of St. Cloud, TWA, Orange County and Polk County to jointly participate in the Central Florida Coordination Area rulemaking, monitoring and modeling to work with South Florida Water Management District in identifying the availability of groundwater and other water resources to accommodate future growth in the Central Florida area. That agreement, as amended, requires the District to contribute up to $282,433 for this effort. As of September 30, 2012, the District has paid $132,313. In August 2011, the District entered into an agreement with the Water Cooperative of Central Florida (which currently consists of the City of St. Cloud, TWA, Orange County and Polk County) to participate in the preliminary design and permitting of the Cypress Lake Wellfield alternative water supply project. That agreement, as amended, requires the District to contribute $459,062 for this work. As of September 30, 2012, the District has paid $221,

109 REEDY CREEK IMPROVEMENT DISTRICT NOTES TO FINANCIAL STATEMENTS - CONTINUED Year Ended September 30, COMMITMENTS AND CONTINGENCIES Continued Harvest Power Agreements In December 2011, the District entered into a lease agreement with Harvest Power Orlando, LLC to provide District-owned land to Harvest Power for the construction and operation of an anaerobic digestion facility, which will convert organic waste into electrical energy and fertilizer. The term of the lease is for 20 years. In addition to the lease, the District entered into the following project agreements with Harvest Power: The Waste Supply Agreement describes the process, quality and amounts of organic waste to be provided to Harvest Power, operational requirements related to the facility, and fees to be paid to Harvest Power to accept and process the District s organic waste. The Power Purchase Agreement describes the sale of electrical energy to the District and the fees to be paid to Harvest Power to purchase the energy. The Effluent Pre-Treatment Agreement describes the quality and delivery of liquid effluent produced from the digestion facility to the District for treatment at the District s waste water treatment plant, and the compensation to be paid to the District by Harvest Power. The facility is not expected to be fully operational until October, Litigation and Other Claims Various suits and claims arising in the ordinary course of operations are pending against the District. Management believes that the ultimate disposition of such matters will not materially affect the financial position of the District or the results of its operations. 46

110 REEDY CREEK IMPROVEMENT DISTRICT REQUIRED SUPPLEMENTARY INFORMATION (RSI) SCHEDULES SUPPORTING MODIFIED APPROACH FOR DISTRICT INFRASTRUCTURE CAPITAL ASSETS Year Ended September 30, 2012 % of Roadways Roads (Note 2. A.): Excellent 92% 93% 96% 99% 98% Acceptable 8% 7% 4% 1% 2% Poor 0% 0% 0% 0% 0% Bridges by Category Bridges (Note 2. B.): Excellent Good Poor Structures by Priority 2008 Water Control Structures (Note 2. C.) Structures requiring Priority 1 repairs 3 Structures requiring Priority 2 repairs - Structures requiring Priority 3 repairs 547 Water Control Structures (Note 2. C.) Structures by Category Excellent Good Poor Maintenance and Preservation Costs - Budget and Actual Budgeted Costs: Roads $ 2,972,000 $ 4,435,500 $ 1,550,000 $ 2,569,804 $ 4,179,834 $ 2,192,405 Bridges 1,034, ,000 55, , , ,220 Water Control Structures 2,850,000 2,139,000 1,935,000 2,403,100 2,967,100 2,153,100 Actual Costs: Roads n/a $ 4,173,108 $ 1,088,718 $ 920,767 $ 2,710,368 $ 1,787,605 Bridges n/a 62,881 43, ,784 68,610 - Water Control Structures n/a 1,877, , , , ,189 47

111 REEDY CREEK IMPROVEMENT DISTRICT REQUIRED SUPPLEMENTARY INFORMATION (RSI) SCHEDULES SUPPORTING MODIFIED APPROACH FOR DISTRICT INFRASTRUCTURE CAPITAL ASSETS 1. Election to use Modified Approach Year Ended September 30, 2012 The District has elected to use the Modified Approach as defined by GASB Statement No. 34 for infrastructure reporting for its roads, bridges and water control structures. The infrastructure capital assets are managed using an asset management system with (1) an up-to-date inventory; (2) annual or bi-annual (depending on the asset) condition assessment that is summarized using a numerical measurement scale; and (3) estimate annual amount to maintain and preserve the asset at the established condition assessment level. 2. Basis for Condition Assessments and Targeted Condition Level A. Roads The District performs a bi-annual physical condition assessment of the streets/roadways within its jurisdiction. Roads and/or streets which are most commonly asphaltic pavement were defined as public right-of-way used primarily for vehicular transportation. The physical condition assessment was performed using the Pavement Surface Evaluation and Rating (PASER) method, developed at the University of Wisconsin - Madison. All roads were visually inspected and given a numerical rating of 1 to 10, varying from poor to excellent condition. The ratings were based on visual observation of the roads surface condition: defects or deformation, cracking (transverse, reflective, longitudinal and alligator), and patching/pot hole frequency. A numerical rating of 7 through 10 corresponded to an assessment of Excellent and requires no or only routine maintenance. A numerical rating of 5 or 6 corresponded to an assessment of Acceptable and requires crack sealing, minor patching or preservative treatments. A rating of 1 through 4 would require structural improvement or reconstruction and received an assessment of Poor. The District attempts to preserve all roadways at an assessment condition of Excellent. The minimum acceptable level is a condition assessment of Acceptable. Infrequently, a roadway may fall into the Poor category, due to unexpected and/or severe stresses, i.e. overloading due to construction traffic, base deterioration due to a saturated condition, etc. In this circumstance the required repairs are accelerated so as to restore the roadway to a minimum acceptable level. Streets and roads are constantly deteriorating due to environmental causes (weathering and aging) and structural causes (repeated traffic loading). The rate at which pavement deteriorates depends on the original construction quality, environmental conditions, drainage, traffic loading and interim maintenance procedures. The Reedy Creek Improvement District bases all pavement design on existing traffic counts, proposed traffic generation due to planned development and known loading factors. We continually maintain the pavement by way of crack sealing, patching and applying preservative treatments as well as structural overlay work when warranted. This substantially extends the useful life of asphaltic pavement. As a result of our previous year s annual assessment of the pavement in the District s roadway system, as well as our desire to extend the pavement life and to improve the comfort and ride-ability of the system, we planned for the refurbishment/overlay of 13.7 lane miles of roadway and the total replacement of structural course for 19.6 lane miles of roadway during fiscal year The cost of this major rehabilitation was estimated and budgeted at $4,235,500, and this work was completed prior to the end of fiscal year 2012 at a cost of $4,102,535. Based on the work completed, at the conclusion of fiscal year 2012, 92% of the District roadways remain within the Excellent ranking and 8% are within the Acceptable ranking. No District roadways are ranked as Poor. 48

112 REEDY CREEK IMPROVEMENT DISTRICT REQUIRED SUPPLEMENTARY INFORMATION (RSI) SCHEDULES SUPPORTING MODIFIED APPROACH FOR DISTRICT INFRASTRUCTURE CAPITAL ASSETS - CONTINUED Year Ended September 30, Basis for Condition Assessments and Targeted Condition Level Continued A. Roads - Continued In addition to this major asphalt refurbishment, the District continued with routine maintenance and repairs throughout its system. These routine expenditures for fiscal year 2012 encompassed routine repair of asphalt, shoulder protection, as well as repair and replacement of guardrail and totaled $70,573. B. Bridges There are currently 43 bridges within the District and all are inspected bi-annually by a Florida licensed Structural Engineer. Using the Florida Department of Transportation (FDOT) reporting system, the bridge deck, super-structure, substructure, and channel configuration are rated Excellent, Good or Poor. The age of the bridges within the District span 40 years with the first bridges constructed in 1971, a majority of the bridges built during the 1990 s and an additional seven bridges constructed within the last ten years. Preservation and maintenance of the bridges is an on-going activity and because of this work, all bridges are in either Excellent or Good condition. Within recent years it has become apparent that the high volume of bus traffic along the District roadways was causing excess deterioration of the armor joints within the bridge decks. Although this deterioration was not critical and yielded no safety issues, a test program was implemented to find a better alternative for protecting these bridge joints. After testing various products, it was decided that the replacement of these armor joints by a new expansion joint system would greatly reduce maintenance efforts, decrease maintenance costs and extend the useful life of the bridge joints. Subsequently, in 2008 the District ceased repairing armor joints, choosing instead to remove armor joints as they experienced initial signs of failure and replace them with an alternative expansion media. Based on the results of bi-annual inspections, no expansion joint replacements were needed in fiscal year In fiscal year 2012, major bridge repairs were initiated and consisted of encapsulating the concrete piles on bridges and This encapsulation protects the piling from further deterioration due to the high levels of acidity in the water and is accomplished by installing epoxy filled jackets around the piles. These repairs were performed during fiscal year 2012 at a cost of $59,037. Erosion around bridge embankments continues to be an on-going maintenance issue and this issue as well as minor guardrail replacements were addressed during 2012 in the course of routine maintenance activities. Maintenance expenditures for fiscal year 2012 totaled $3,844. C. Water Control Structures The Master Drainage System within the District is comprised of 66 river miles of canals and waterway. It incorporates 22 major water control structures comprised of Amil Gates, sharp crested weirs, and one set of 48 diameter culverts. Amil Gates are constant level water control structures. These gates provide a consistent water level within the waterways or canals, and open due to increasing water pressure during a storm event, thereby allowing flood waters to pass downstream and exit the District. Weirs maintain water levels at a set elevation; as the flood waters rise due to a storm event, they spill over the weirs and pass downstream. The two 48 culverts act as an overflow or pass through, allowing flood waters to pass to an adjacent wetland on the eastern perimeter of the District. Many of these structures were constructed during the late 1960 s making the structures 35 to 40 years old. The structures are all in working order and generally in good condition. 49

113 REEDY CREEK IMPROVEMENT DISTRICT REQUIRED SUPPLEMENTARY INFORMATION (RSI) SCHEDULES SUPPORTING MODIFIED APPROACH FOR DISTRICT INFRASTRUCTURE CAPITAL ASSETS - CONTINUED Year Ended September 30, Basis for Condition Assessments and Targeted Condition Level Continued C. Water Control Structures Continued It is important to note the District reported 24 water control structures in previous years. Although there are 24 structures lying within the Drainage System, two of these structures are owned and maintained by a private entity. These two structures were eliminated from the assessment table in fiscal year 2011, thereby resulting in 22 reported structures. The major water control structures are inspected annually and a condition assessment report is generated. This Annual Water Control Structure (WCS) Report lists all items inspected both above ground and below the water surface. Using this information, the structure condition is assigned, the required repairs are prioritized and the repair work is scheduled. Required repairs are listed as Priority 1, 2 or 3. Priority 1 signifies a major rehabilitative repair. Priority 1 repairs are items that if not repaired, may degrade the integrity of the structural element or reduce the operational capacity of the structure. Historically, we have found Priority 1 repairs often occur in underwater conditions and have evolved over long periods of time. This type of repair may require extensive construction work and as such, cannot always be done immediately, but must be scheduled & budgeted in a future year. Priority 2 repairs are those that can be addressed as routine monthly maintenance. Priority 3 identifies items not in current need of repair but signify a condition, though noteworthy, that is expected to remain stable for a number of years. As such, the recommendation is that Priority 3 items need not be separately scheduled for repair, but addressed when the structure undergoes Priority 1 or Priority 2 repairs. Prior to fiscal year 2009, the Condition of Infrastructure Assets table included in this report categorized the structures by the number of repairs within each priority category. In an effort to make this table more readable and informative, the report format was changed in Structures are now classified by their overall condition and are listed as Good, Fair or Poor condition. During fiscal year 2012 one Priority 1 repair was completed. This repair involved the replacement of both gate leaves for Structure S-40 as well as pressure injection and crack sealing of the wing wall and structure apron. Pile jackets were installed and to accomplish the complete refurbishment of the energy dissipaters, all structural support members were either replaced or sanded, weld repaired and coated. These major rehabilitative costs for the S-40 water control structure totaled $1,175,471. Routine maintenance on levees, canals and structures totaled $414,691. Also during fiscal year 2012, construction of safety enhancements to all of the Amil gate structures was performed. These enhancements included construction of handrails on the upstream walls of these structures, walkways were constructed to provide access to the center pier of the structures with dual Amil gates, and ladders were constructed to safely access the lower portions of these structures. These enhancements were constructed at a cost of $286,

114 REEDY CREEK IMPROVEMENT DISTRICT REQUIRED SUPPLEMENTARY INFORMATION (RSI) OTHER POST EMPLOYMENT BENEFITS SCHEDULE OF FUNDING PROGRESS Year Ended September 30, 2012 Actuarial Valuation Date Actuarial Accrued Liability (AAL) Actuarial Value of Assets Unfunded AAL (UAAL) Percentage Funded Annual Covered Payroll UAAL as Percentage of Payroll 10/1/2007 $ 24,115,157 $ - $ 24,115, % $ 19,562, % 10/1/ ,172,825-43,172, % 20,651, % 10/1/ ,613,950-44,613, % 21,374, % 10/1/ ,746,556-49,746, % 21,588, % 10/1/ ,318,654-54,318, % 21,960, % The District implemented GASB Statement No. 45 Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions during the fiscal year, hence only five years of data is available. 51

115 Ernst & Young LLP Suite North Orange Avenue Orlando, FL Tel: Fax: Report of Independent Certified Public Accountants on internal control over financial reporting and on compliance and other matters based on an audit of the financial statements performed in accordance with Government Auditing Standards Mr. Bill Warren, District Administrator, and The Board of Supervisors Reedy Creek Improvement District Lake Buena Vista, Florida We have audited the financial statements of the governmental activities, the business-type activities, and each major fund of Reedy Creek Improvement District (the District) as of and for the year ended September 30, 2012, which collectively comprise the District s basic financial statements and have issued our report thereon dated January 17, We conducted our audit in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal control over financial reporting Management of the District is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered the District s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the District s internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. 52 A member firm of Ernst & Young Global Limited

116 Compliance and other matters As part of obtaining reasonable assurance about whether the District s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of management and the Board of Supervisors, and others within the entity and is not intended to be and should not be used by anyone other than these specified parties. January 17, A member firm of Ernst & Young Global Limited

117 Ernst & Young LLP Suite North Orange Avenue Orlando, FL Tel: Fax: Report of Independent Certified Public Accountants on Compliance Board of Supervisors Reedy Creek Improvement District Lake Buena Vista, Florida We have audited, in accordance with auditing standards generally accepted in the United States, the basic financial statements of Reedy Creek Improvement District (the District) as of and for the year ended September 30, 2012, and have issued our report thereon dated January 17, In connection with our audit, nothing came to our attention that caused us to believe that the District failed to comply with terms, covenants, provisions, or conditions of Sections , and of the Trust Indenture dated November 1, 1987, as amended and supplemented, with Sun Bank d.b.a. SunTrust, National Association (the Trustee), who assigned their rights and duties to US Bank, insofar as they relate to accounting matters. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. This report is intended solely for the information and use of the Board of Supervisors, management of the District, and the Trustee and is not intended to be and should not be used by anyone other than these specified parties. January 17, A member firm of Ernst & Young Global Limited

118 Ernst & Young LLP Suite North Orange Avenue Orlando, FL Tel: Fax: Bill Warren, District Administrator, and The Honorable Board of Supervisors Reedy Creek Improvement District Lake Buena Vista, Florida In planning and performing our audit of the financial statements of Reedy Creek Improvement District (the District) as of and for the year ended September 30, 2012 in accordance with auditing standards generally accepted in the United States, we considered its internal control over financial reporting (internal control) as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District s internal control. Accordingly, we do not express an opinion on the effectiveness of the District s internal control. We conducted our audit in accordance with United States generally accepted auditing standards, and Government Auditing Standards issued by the Comptroller General of the United States. We have issued our Report of Independent Certified Public Accountants on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance With Government Auditing Standards. Disclosures in that report, which is dated January 17, 2013, should be considered in conjunction with this management letter. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control that we consider to be material weaknesses, as defined above. Additionally, our audit was conducted in accordance with provisions of Chapter , Rules of the Auditor General, which govern the conduct of local governmental entity audits performed in the State of Florida. The letter includes the following information, which is not included in the aforementioned auditor s report. 55 A member firm of Ernst & Young Global Limited

119 Section (1)(i)1., The Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report. There were no recommendations in the preceding annual financial report. Section (1)(i)2., Rules of the Auditor General, requires our audit to include a review of the provisions of Section , Florida Statutes, regarding the investment of public funds. In connection with our audit, nothing came to our attention that would cause us to believe that the District was not in compliance with Section , Florida Statutes. Section (1)(i)3., Rules of the Auditor General, require that we address in the management letter any recommendations to improve financial management. In connection with our audit, we did not have any such recommendations. Section (1)(i)4., Rules of the Auditor General, require that we address violations of provisions of contracts, fraud, illegal acts, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but more than inconsequential. In connection with our audit, we were not made aware of such matters. Section (1)(i)5., Rules of the Auditor General, provides that the auditor may, based on professional judgment, report the following matters that have an inconsequential effect on financial statements, considering both quantitative and qualitative factors: (1) violations of provisions of contracts or grant agreements, fraud, illegal acts, or abuse, and (2) deficiencies in internal control that are not significant deficiencies. In connection with our audit, we did not report such findings. Section (1)(i)6., Rules of the Auditor General, requires that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in the management letter, unless disclosed in the notes to the financial statements. This information is disclosed in the notes to the financial statements. Section (1)(i)7.a., Rules of the Auditor General, requires a statement be included as to whether or not the local government entity has met one or more of the conditions described in Section (1), Florida Statutes, and identification of specific condition(s) met. In connection with our audit, nothing came to our attention that would cause us to believe that the District met any of the conditions described in Section (1), Florida Statutes. Section (1)(i)7.b, Rules of the Auditor General, requires that we determined whether the annual financial report for the District for the fiscal year ended September 30, 2012, filed with the Florida Department of Financial Services pursuant to Section (1)(a), Florida Statutes, is in agreement with the annual financial audit report for the fiscal year ended September 30, In connection with our audit, we were not made aware of any material differences between the annual financial report and the audited financial statements. 56 A member firm of Ernst & Young Global Limited

120 Pursuant to Sections (1)(i)7.c. and (7), Rules of the Auditor General, we applied financial condition assessment procedures. It is management s responsibility to monitor the entity s financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same. This communication is intended solely for the information and use of the Board of Supervisors, management, and the State of Florida Office of the Auditor General and is not intended to be and should not be used by anyone other than these specified parties. We would be pleased to discuss the above matters or to respond to any questions, at your convenience. January 17, A member firm of Ernst & Young Global Limited

121 APPENDIX B BOND RESOLUTIONS RESOLUTION 245 RESOLUTION 313 RESOLUTION 546 RESOLUTION 551

122 [THIS PAGE INTENTIONALLY LEFT BLANK]

123 " REEDY CREEK IMPROVEMENT DISTRICT AD VALOREM TAX BONDS AMENDED AND RESTATED BOND RESOLUTION REEDY CR~EK ~MPROVEMENT DISTRICT AD VALOREM TAX BONDS AMENDED AND RESTATED BOND ~ESOLUTION Table of'contents (This table of contents is not part of the Bond Resolution and is only for convenience of reference,. j.'. SECTION PAGE 1 Authority for this Resolution..2 2 Definitions.. '....2 Adopted on November 15, 199' ' Findings..8 Authorization of Construct~on and Acquisition of Series 1972 Projects. "._.. ",.8.! B-1 " Resolution to Constitute contr,act. Authorization of Series 1972 Bonds Description of Series 1972 Bonds Details of Bonds.,..... '..9.9 ~, 'Reserved Execution of Bonds and Coupons '.. 13 Negotiability and Registration Bonds Mutilated, Destroyed, Stolen or Lost 15 12A Provisions for,redemption B 12C Notice of Redemption Effect of Redemption " Form of Series 1972 Bond and Coupons 17 ' 14 Pledge of Ad Valorem Taxes Covenants of the District Application of Bond proceeds. Defeasance

124 .~.., 18 Authorization of Use of.derivative Products ,.2:6L:. ~} ~.'. r.. 1.' i':,,'.' \., 29 Holders not Affected by use of Bond Proceeds 29 Modification or Amendment....'.. 30 Events of Default; Remedies....'..' Contraction of District Boundaries 35 severability of Invalid Provisions 36 sale of Bonds Validation Authorized.. _ Repealing Clause.. '... No Third Part;,y Bene~iciaries Controlling Law; Members o.f Governing Body' of District not Liable Effective Date., RESOLUTION NO. 245 A RESOLUTION OF THE REEDY CREEK IMPROVEMENT DISTRICT SUPPLEMENTING, AMENDING AND RESTATING A RESOLUTION ADOPTED BY THE DISTRICT ON APRIL 4, 1972 PERTAINING TO THE ISSUANCE BY THE DISTRICT OF ITS AD VALpREM TAX BONDS TO PAY THE COSTS OF VARIOUS PUBLIC PURPOSES IN THE DISTRICT; flroviding FOR THB RIGHTS. OF THE HOLDERS OF SUCH AD VALOREM TAX. BONDS; MAKING CERTAIN OTHER COVENANTS AND AGREEMENTS IN CONNECTION THEREWITH; AND P~OVIDING'.ArJ EFFECTIVE Dl\TE. WHEREAS, pursuant to a Re.solution (the "1972 Resolution") adopted by th~ Board of supervisors (th'e "Board") of the Reedy Creek Improvement Dis1;rict (the "District") on April. 4, 1972, the District authorized the issuance of its,ad Valorem Tax Bonds in the aggregate principal amount of $20 i ooo'~ 600 (the "Series 1972 Bonds") a,nd authorized the issuance of additional parity 'bonds under the'1972.resolution, such bonds to be secured by a lien on cert,ain, Ad Valorem T~xes (as defined, herein).,collected by the DistrIct on a parity with the lien of the Series 1972,Bonds; and ' B-2 t;,', WHEREAS, the District has issued its Ad Va'lorem 'Tax Bonds, series 1987A, its Ad Valorem Tax Bonds,,Series,:i98'9A and its Ad Valorem Tax Bonds, Series 1989B as 'additional parity bonds,unger the 1972 Resolution; and WHERE~S, section 18 of the 1972 Resolution provides that certain amendments may be made to' the 1972 Resolution upon receipt of,the consent of the holders of two.-thirds of all Bonds outstanding under the 1972 Resolution; and : :,. WHEREAS, pursuant- to District established a Account") into Which the aggregate, $1,657,096 in connection Series 1972 Bonds and all add issued pursuant to the Resolution, the (the "Reserve ited, in the with.the issuance of the rity bonds heretofore and applied by the Board; of this resolund the moneys rdance \'lith a and, WHEREAS, the District desires to amend and restc;te the 1972 Resolution to read i!1 its ent~rety as irov1ded herein, effective upon receipt of the consent of he Holders of two-thirds, and as to certain provisions as ii 1

125 trerein provided, one hundred percent (100%) outstanding under the 1972 Resolution; of the Bonds 'Fund creat;ed by this resolution and rank equally in all.' J:;BGpects w~th the Bonds initially issued hereunder. NOW THEREFORE, BElT RESOLVED BY THE BOARD OF SUPERVISORS OF THE REEDY CREEK IMPROVEMENT DISTRICT:,~;:, IIAmortization Installment" means the funds to be deposited in the, Sinking Fund,in a given B,ond Year fox the payment at matur1ty or redempt10n of a port10n of Term Bonds "d'f' 'a designed Series, as established by resolutiorn of the "(f;i~,trict at or before the delivery of that Series of Term 'sonds# B-3 SECTION 1. AUTHORITY FOR THIS RESOLUTION. This resolution is adopted pursuant to Chapter , Laws of Florida, special Acts of ~. c.! SECT:J,:ON 2. DEFINITIONS. The following terms used herein shall have the meanings set forth below, unless the context otherwise expressly requires:'.'~;: :.... "Accreted Value'" 'means ( as o'f any date of computation with respect to any Capital AppreCiation Bond, an amount equal to the principal amount of such Capital Appreciation. Bond (the principal amount 'at "' its initial offer;i.ng),.plus the interest. accreted on such capital Appreciation Bond from the date of delivery to the original purchasers thereof to the valuatio.n Date next pl:'eceding the 'date o.n computation or the da.te of compu:t.ation if a Valuation Date, such interest. to accrete at a rate not.'exceeding the maximum rate penni tted by law, compounded periodically, plus, if such date of computation shall not be a Va.luation Date., a portion of the difference between the Accreted ValUe as of the immediatel,y, preceding Valuation Date (or the date' of original issuance if the date of computation is prior to 'the first valuation Date succeeding the date of original issuance) and the Acc:t;.eted Value as of the immediately succeeding Valuation Pate, calculated based on the assumption that Accreted Value acc::rues during any period in equal daily amounts on the bqsis of a year of twel~~ 30-day months.. "Ad Valorem T?Xes" means the proceeds collected by the District pursuant to Section 24 of tj:le Act from Ad Valorem Taxes 'levied at a rate not exceeding thirty (30) mills on the dollar per ann~m on the assessed value of all taxable prope~ty in the District. "Ad Valorem Taxes' Fund" me~ns the fund by that name created pursuant to Section 15A hereof. "Additional Bonds"'" means additional Bonds issued in compliance with the terms', conditions and limitations c~ntained in Section 15E hereof which.sha;tl. have an equal llen on the tax proceeds deposited in the Ad Valorem Taxes (,, (.. ' "Board" means the Board of supervisors of the,~istrict. ':), "Bonds'" means the Ad Valorem Tax Bonds herein,ctuthorized,'to be issued" together with any Additional Bonds W.ereafter issued under the tenus, conditioifs and limitations Clt'0nt,ained herein'., ' :' "Bon Counsel" means nationally recognized counsel et'l<perienced in matters relating to the validity of, and the,tax,',e'xemptionof interest on, obligations of states and tiheir'political subdi visi'ons., '!~~... ' r '''Bond Obligation" means;, as of the date computation, the sum,of: (i) the principal, amount of Current Interest Bonds' then outstanding 'and (ii) Accreted Value on all capital' Appreciation Bonds 'O,uts't<fnding of all the then.' IIBond Service Requirement't means for a given 'Bond '{ear,the remainder I after subtracting, any accrued and capitalized interest,for that Bond Year which has been deposited into th~ Sinking Fund from the sum of: (1) The amount required to pay the interest coming due on Bonds during that 'Bond Year, including the accreted interest component of the Accreted Value of Capital' Appreciation Bonds Gaming due during that Bond Year, (2) The amount required to pay the principal of Serial Bonds and the principal of Term Bonds coming due during tha,t Bond year including the principal component of the Accreted Value,of Capital Appreciation Bonds maturing in that Bond Year tha.t are not included in the Amortization Installments 'for such Te~m Bonds, and (3) The Amortization Installment for all Series of Term Bonds for that Bond Year. The interest rate for variable Rate Bonds for the 'Bond Year in which such calculation is made, or for the fallowing Bond Year, as the case may be, shall be assumed to 2 3

126 B-4 " '- be one hundred ten percent (110%) of the greater of (i) the average daily interest rate on such Variable Rate Bonds during,t;he>twelve months ending with the month preceding the date,'o'f,. Gfllculation, or such shorter period th<;lt such Variable Rate Bonds shall have been outstanding, or (ii) the rate of xnterest on such Variable Rate Bonds on the date of calcul?lti~l1'.. For purposes of determining the Haximutn Bond Service Rl"!quirement6r the Bond service Requirement for the issuance of Additional Bonds pursuant to section 15E of this resolution, the interest' rate on Variable, Rate Bonds outstanding on the date of calculation shall be calculated as provided above I and the interest rate on Variable' Rate Bonds proposed to be issued shall be d~emed to be the higher of (a) the initial interest rate on such Variable Rate Bonds on the date of issuance thereof I or (b) if Variable Rate Bonds are outstanding hereunder, the rate calculated pursu!ant,to" the immediately preceding sentence for such variable Rate Bonds. If, Bonds are,subj edt, to purchase' by the District, at,the option of' the Holder and a liquidity facility,,is available.,with re;:;pect thereto at the time such determination is made to provide for the purchase of such Bonds, the,' "put" date or dates w~th respect to such Bonds shall be ignored and the stated maturity dates thereof shall be used for, :purposes of 'this calculation..., "Bond 'lea'r" means the annual period beginning on the first day Of' June of each year and ending on the l~st day of May of the following year, except that the first Bond. Year with respect to any series o~ Bonds shall begin on the date of issuance of such Series of Bonds and,end on the last day of the'succeeding'may; provided that when such term is used to' describe the period during which deposits ',are to be made to amortize the principal and inter~st,on the Bonds maturing or becoming subject to redemption, the principal and interest,maturing or becom~ng subject to redemption on the first day Of the month immediately succeeding 'any Bond Year shall bede,eroed. to matur~ or become subject to redemption on the last day of the preceding Bond, Year. II Business. Day" means any day other tha:n a Saturday, Sunday, legal holiday or other day on which banking institutions in the city or cities in which t'he Paying Agent has its principal corporate trust office' are authorized by law to be closed for business or on which the New York stock exchange is closed..,"capital Appreciation Bonds" means those Bonds lssued hereunder,as to which interest is compounded per~odically,on "each of the applicable periodic dates deslgnated for compounding and payable in an anount equal to the. then current Accreted Va1~e only at the maturity, ear~ler redemption or othet payment date thereof, all as so ~eslgnated by the supplemental resolution authorizing the lssuance of such Bonds. 4 "closing Date" means, with respect to any Series of Bonds, the date on which such Series of Bonds are issued and delivered. "Code" means the Internal Revenue Code of 1986, as am~nded, and f if applicable I the Inte:rnal Rev,enue Code of 1954, as amended, or any correspondl.ng provl.sion of any future laws of the United States of America relating to federal income taxation, and except as otherwise provided herein or required by the context hereof, including inter-' oretations thereof contained or set forth in the a~plica~le regulations of the Department of the Treasury (including applicable final regulations and temporary regulations), the applicable rulings of the Internal Revenue Service (inoluding published revenue. rulings and private letter rulings) and applicable court decisions. IIConstruction Fund" means the Ad Valorem Taxes Construction Fund created pursuant to Section 16C hereof. "Current Interest. Bonds" means those Bonds issued,hereunder, the interest on which shall be payable on a periodic basis, as provided in the supplemental resolution authorizing the issuance of such Bonds.. District. \I District" means the Reedy Creek Improvement "Fiscal Year" means the period commencing on October 1 of each year and ending on the succeeding September 30 or such other consecutive 12-monthperiod as may be hereafter designated as the fiscal year of the District.. "Government Obligations" means direct noncallable obligations of the United states of America, obligations the payment when due of principal of and interest on which is unconditionally guaranteed by the united states of America and stripped interest obligations on bonds, notes, debentures and similar obligations issued by the Resolution ~unding torporation. "Holder of Bonds" or "Bondholders" or any similar term means any person who shall be the bearer or owner of any Outstan.din.g bearer Bond and Bonds registered to bearer, or the reg1stered owner of any outstandipg registered Bond or Bonds which shall at the time be registered other than to bearer. II Investment ObI igations" means any investments in 1t/h1ch the District is permitted to invest its funds under Section 68 of the Act, as amended or supplemented, or any other applicable provisions of law. 5

127 B-5 "t1aturity Amount" means the amount payable at maturity of a Capital Appreciation Bond consisting of the original principal amount thereof or discounted principal value (original offering price) and interest or prins;ipal accreted thereon to the maturity date thereof, as determined by reference to the accreted value tables contained or referred to in such Bond. "Maximum Bond Service Requirement" means, as of any particular date of calculation, the largest Bond Service Requirement for any remaining Bond 'lear, except that with respect to any Bonds for which Amortization Installments have been established, the amount of principal coming due on the final maturity date with respect to such Bonds shall be reduced by the aggregate principal amount or Accreted Value, as the case may be, of such Bonds that are to be redeemed or paid from Amortization Installments to.be made in prior Bond Years. For purposes of this resolution, that MaximUm Bond service R"equirementshall be calculated at least annually as of the first day of each Bond 'lear and as of the date of. issuance of any Series of Bond~ hereunder. "outstanding". meims all Bonds authenticated and delivered u nder this resolution, except: (a) all Bonds theretofore cancelled or required to be cancelled hereunder or under any supplemental resolution authorizing.a Series of Bonds; (b) Bonds for the payment, redemption or purchase of which moneys and/or Government Obligations, the principal of and interest on which, when due, will provide sufficient moneys to fully pay such Bonds in accordance herewith 6r with the supplemental resolution pursuant to vlhich such Bonds were is~ued, shall have been or shall concurrently be deposited with the Paying Agent; and (c) Bonds in SUbstitution for which other Bonds have been authentiqated and delivered pursuant to this resolution or any supplemental resolution. In determining whether the Holders of a r~quisite aggregate amount, of Bond Obligation outstanding have concurred in any request, demand, authorization, direction, notice, consent or waiver, Bonds which are held on behalf of the District shall be disregarded for the purpose of any such determination. "Paying Agent" me~ns the applicable person or entity (including the District) authorized by the District to pay the principal of, premium, if any I a'nd interest on Bonds on behalf of the District pursuant to the supplemental resolution adopted in connection with the issuance of any series of Bonds. "Rebate Amountll shall have the meaning ascribed to that term in section 15F of this resolution. "Rebate Fund" means the Rebate Fund established pursuant to section 15F of this resolution. "Registrar ll means, with respect to any Series of Bonds, the person o~ entity (including the District) designated as the reglstrar by the Board pursuant to a supplemental resolution adopted in connection with the issuance of such series of Bonds. "Serial Bonds" means all Bonds of a Series other than Term Bonds. "series" means the Bonds and any portion of the Bonds of an issue authenticated and. delivered in a single transaction, payable from an identical source of revenue and identified pursuant to the supplemental resolution authoriz~ ing such Bonds as a separate Series of Bonds, regardless of variations in maturity, intqrest rate, Amortization Installments or other provision, and any Bonos thereafter authenticated and delivered in lieu of' or in substitution of a Series of Bonds issued pursuant to this resolution. "Series 1972 Bonds" means the District's outstand Valorem Tax Bonds dated June 1, 1972 authorized ing Ad hereby. "Sinking Fund" means the Ad Valorem Taxes Sinking Fund created pursuant to section 15B hereof. "Taxable Bonds ll means Bonds the interest on \vhich is not intended at the time of the issuance thereof to be excluded from the gross income of the Holders thereof for federal income tax purposes. "Term Bonds" means Bonds of a Series for which Amortization Installmen.ts are established, and such other Bon~s of a Series so designated by supplemental resolution of the District adopted on or before the d~~e of delivery of SUch Bonds. "Valuation Date" means, with respect to any Capital Appreciation Bond, if applicable, the date or dates set. forth in the supplemental resolution authorizing the issuance of such Capital Appreciation Bonds. variablo, "Variable Rate auction reset, Bonds" means adjustable, Bonds issued tv i th a convertible or other 6-7

128 B-6, tf. ~: &. ~: f ~:. t f: ~. t.,. t: similar rate whic~ is not fixed in percentage at the date of issue for the entlre term thereof. Words importing singular number shall include the lural number in each case and vice versa, and words lmporting persons shall include firms and corporations. SECTION 3. FINDINGS. determined and declared that: It is hereby found, A. It is necessary, desirable, and in the best interest of the District that the.series 1972 Bonds in an amount not exceeding $20,000,000 be issued to finance the cost of various public purposes to be located Hithin the District and described ~s follow: (1) $10,500,000 to provide,for the refunding of $7 000,000 outstanding Drainage Revenue Bonds, series A Anticipation Notes of the District issued to finance the cost of the construction and acquisition of certain drainage, reclamation and water control improvements pursuant to the Special Report and Water Control for Reedy Creek' Improvement District of Gee and Jenson, Consulting Engineers, Inc., dated April 1968, presently on file with the Board (hereinafter called "project I"). (2) $9,500,000 to finance the cost of the construction and acquisition of a sanitary sewer system pursuant to a. design an.d J;eport of James H. Hontgomery, Consulting Engineers, Inc., dated December 16, 1966, and solid waste disposal facilities pursuant to a design and report of James M. Montgomery, Consulting Engineers, Inc.,' dated July 16, 1970, all presently on file with the Board (hereinafter c;::alled "Project II").. approved April 3, and Laws B. The issuance of the Series 1972 Bonds was' by a majority of votes cast in a bond election held 1972, in the manner required by the Constftution of Florida. C. Such Series 1972 Bonds together \.fith all other outstanding ad valorem tax bonds of the District, if any, do not exceed fifty per centum (50%) of the assessed value of the taxable property within the District. SECTION 4. AUTHORIZATION OF CONSTRUCTION AND &CQUISITION OF SERIES 1972 PROJECTS. There is hereby authorized the construction and acquisition of Proj ects I and II (hereinafter referred to as the "1972 Proj ects") p';lrsuant to. the reports and designs referred to Insubsectlon JA(l) and (2) hereof presently on file with the Board, as the same may be amended and supplemented, and subject to SUch modifications thereof and variations theret'l."om which from t'ime to time may be determined by the Bail rd to be 8 ecessary for or in the best interest of the District. The ~ost of such 1972 Projects, in addition to the items set forth in the reports or in the plans and specifications, may include, but need not be limited to, the items contained in the definition of the term "cost" as provided in subsection 3(5) of the Act. SECTION 5. RESOLUTION TO CONSTITUTE CONTRACT. In consideration of the acceptance of the Bonds authorized to be issued hereunder by the Holders thereof from time to time, this resolution shall be deemed \to be and shall constitute a contract between the District and such Holders. The covenants and agreements herein set forth to be performed by the District shall be for the equal benefit, protection and security of the legal Holders of any and all of such Bonds and the coupons attached thereto, if any, all of which shall be of equal rank and without preference, priority or distinction of any of the Bonds or coupons, if any, over any other thereof, except as expressly provided therein and herein. SECTION 6. AUTHORIZATION OF SERIES 1972 BONDS. subject and pursuant to the provisions of this resolution, obligations of the District to be known as "Ad Valorem Tax Bonds," herein defined in the "Series 1972 Bonds,". are hereby authorized to be issued in the aggrega.te principal amount of not exceeding Twenty Million Dollars ($20,000,000.00). SECTION 7. DESCRIPTION OF SERIES 1972 BONDS. The Series 1972 Bonds shall bedatect June 1~ 1972, shall be in the denomination 0[$5,000 each, shall be numbered from one upward in order of maturity; shall bear interest at such rate or rates, not exceeding the legal rate, to be determined upon the sale thereof, such interest to be payable semi-annually, June 1 and December 1 of each year, and shall mature in 'numerical order on June 1 in the years.and amounts as follows: 9...

129 B-7 \. ~'. f 1 r, YEA.B AMOUNT YEAR AMOUNT 1974 $270, $ 650, , , , , , , , , , , , ,000 :) , , , ,035, , ,100, , ,165, , ,235, , ,310, , ,390, ,000 SECTION 8. DETAILS OF BONDS. The Series 1972 Bonds. shall be issued in coupon form~ shall be payable with respect to both principal and interest at a bank or banks to be subsequently determined by the District prior to the delivery of the Series 1972 Bonds; at least one of such. banks shall be the main office of a bank located in the Borough of Manhattan, City and state of New York; shall be payable in lawful money of the Unit.ed States of America; and shall bear interest from their date, payable in accordance with and upon sifrrender of the appurtenant interest coupons as they severally mature. Except as otherwise provided in a subsequent resolution adopted with respect to a series of Bonds, the following provisions shall apply to the Bonds: The Bonds shall be numbered consecutively from 1 upward preceded by the letter UR" prefixed to the number. The principal of and ~edemption premium, if any, on th~. Bonds shall be payable. upon presentation and ~urrender at the principal office (or principal corporate trust office, if applicable) of the Registrar. Interest on current Interest Bonds sha1l be paid by check or draft drawn upon the Registrar and mailed to the registered owners of such Bonds at the addresses as they appear on the registration books maintained by the Registrar at the close of busi~ess on the 15th day (whether or not a business day) of the month next p:r:-eceding the interest payment date (the "Record Date lt ), irrespective of any transfer.or exchange of such Bonds subsequent to such Record Date and prior to such interest pay~ent date, unless the District shall be in default in payment of interest due on such interest payment date. In the event of any such default, such defaulted interest shall be payable to the persons in Hhose names such Bonds are registered at the Close of business on a special record date for the payment of such defaulted interest as established by notice deposited in the U.S. mails, postage prepaid, by the 10 District to the registered owners of such Bonds not less than fifteen (15) days ~receding such specia~ record date. such notice shall ~e malled to the persons In. whose names uch Bonds are reg1stered at the close of bus1ness on the ~ifth day (whether or not a Business Day) preceding the date f mailing. Payment of interest on Current Interest Bonds ~ay at the option of any Holder of Current Interest Bonds in ~n aggregate principal amount of at least $1,000,000, be transmi tted by wire transfer to such Holder to the bank account number on file with the Paying Agent as of the Record Date. Principal and any interest on capital Anoreciation Bonds shall be payable at maturity or earlier ;~demption thereof upon present;:1tion and surrender of such Bonds at the office of the Registrar by check or draft unless otherwise provided by subsequent ordinance or resolutions. If any date for payment of the principal of, premium, if any, or interest on any Bond is not a Business Oay, then the. date for such payment shall be the next succeeding BUS1ness Day and payment on such date shall have the same force and effect as if made on the nominal date of payment. If any Bond is not presented for payment when its principal or redemption price becomes due in whole or in part, either at stated maturity or by redemption, or a check for inter~st is uncashed,. and if sufficient mone~s for the purpose of paying that principal, redemption price or interest are on deposit with the Registrar and available for such purpose, all liability of the District to that Holder for that payment shall thereupon cease and be discharged completely, and it shall thereupon be the duty of the Registrar to hold those moneys in trust, without liability. for interest thereon, for the exclusive benefit of that Bondholder who shall thereafter be restricted exclusively to those moneys for any claim of whatever nature on its part under the Bond Resolution and the Indenture.. Any moneys so held by the Registrar. that remain unclaimed by the Holder of any Bond for a period of seven years after the due date of that payment shall be paid to the District, and thereafter the Holder of that Bdnd shall look only to the District for payment, and then only to the amounts so received by the District without any interest thereon, an~ the Registrar shall have no further responsibility with respect to those moneys. The Bonds authorized hereunder may be issued in one or more series that may be delivered from time to time. The.District shall by suppleme~t~l resolution authorize such Se:1e: and shall specify the following: the authorized P~lnclpal amount of such Series; the projects to be financed \.11. th the proceeds thereof; the date and terns of maturity 11

130 B-8 o~ maturities of the Bonds of such Series, or the pa~uent of the Bonds on the demand of the holder, unless otherwise expressly provided by subsequent resolution; the interest rate or rates of th~ Bonds of such Series, which may include variable, dual ~djustable, convertible or other rates, original issue discounts, compound interest, capital Ar)preciation Bonds and zero interest rate bonds, provided that the average net interest dost rate on each such Series shall never exceed for such series the maximum inter~st rate permitted by law in effect at the time such Series are issued, and provided further that in the event original issue discount, zero interest rate, capital Appreciation Bonds or similar Bonds are issued, only the or1ginal principal amount of such Bonds shall be deemed issued on the date of issuance for the purposes o the maximum amount of Bonds authorized hereunder or under a supplemental resolution; the denominations, numbering, lettering and series designation of such Series of Bonds, provided that the Bonds shall be in the denominations of $5,000 or any integral my.ltlple thereof, or.in. the case.of capital Appreciation Bonds, $5,000 amount due.at m.aturi ty I or: any integral roul tiple thereof, or any other denomination designated by subsequentresdlution; the Paying Agent and place or places of payment of such- Bonds; the redemption prices for such series of Bonds and ~ny terms qf redemption or any formula for accretion upon redemption not incon'sistent with the provisions of tnis resolution which. may il"'\clude mandatory redem,ption,at the election of,the holder or :t:"egistered owner thereof; "t:he amount and date of each Amortization Installment, if any t for such. Series of Bonds and any other terms 0,1: provisions applicable to the Series of. Borids, not inconsistent with the provisions of this resolution or the Act. SECTION 9. RESERVED. SECTION 10. EXECUTION OF BONDS AND COUPONS. Except as otherwise provided in a subsequent resolutipn adopted by the District with respect to a Series of Bonds, the Bonds shall be executed in the npme of the Distric.t by the manual or facsimile signature or the President of the Board and countersigned and. attested by the manual or facsimil e signature of the Secretary' to' tl1e Board, ard its corporate seal or a facsimile thereof shall be. affixed thereto or reproduced thereon. The facslmile signatures of the Presid~nt or the Secretary may be imprinted or reproduced on the Bonds, p~o*ided that at least one signature required to be placed thereon, including that of the authentication agent, shall be manually SUbscribed. In case any officer whose signatur~ shall appear on uny Bonds Shall cease to be such officer before the delivery of such Bonds, such signature shall n~vertheless be valid and SUfficient for all purposes the same as if he had remained in office until such delivery. Any Bonds may be signed and 12 led on behalf of the District by such person who at the se~ual time of the execution of such Bonds shall hold the a~oper office in the District although at the date of such ~onds such person may not have been such officer. The coupons attached to any coupon Bonds issued hereunder shall be authenticated with the facsimile signatures of any present or future President and Secretary of said Board, and the validation certificate, if any, on the Bonds shall be executed with the facsimile signature of the president. The District may adopt and use for such purposes the facsimile ~ignatures of any persons who shall have been such President and secretary at any time on or after the date of particular Series of Bonds notwithstanding that they may have ceased to be such officers at the time such Series of Bonds shall be actually delivered. with respect to any Series of Bonds issued.hereunder, pending the preparation of definitive Bonds, the District may execute and deliver temporary Bonds. Temporary Bonds shall be issuable as registered Bonds without coupons, of any authorized denomination, and substantially in the form of the definitive Bonds but with such omissions, insertions, and variations as may b.e appropriate for temporary Bonds, all as may be determined by the District. Temporary Bonds may contain such reference to any provisions of this resolution as may be appropriate. Every temporary Bond shall be executed and authenticated upon the same conditions and in. substantially the same manner, and with like effect, as the definitive Bonds. As. promptly as. practicable the District shall execute and shall furnish definitive Bonds and thereul;)on temporary Bonds may be surrendered in exchange for definitive Bonds without charge at the principal office of the Registrar, and the Registrar shall authenticate and deliver in exchange for such temporary Bonds a like aggregate principal amount of. definitive Bonds of authorized denominations. until so exchanged, the temporary Bonds shall be entitled to the same benefits under this resolution as definitive Bonds. SECTION 11. NEGOTIABILITY AND. REGISTRATION. The Bonds of each s~ries issued her~under shall be, and shall ~ave all of the qualities and incidents of, negotiable lnstruments under the law merchant and the Laws of the State of Florida, and each successive holder, in. accepting any of such Bonds o,r the coupons appertaining thereto, if any, shall be co.nclusively deemed to have agreed that such Bonds shall be and have all of the qualities and incidents. of negotiable instruments under the law merchant and the Laws of the State of Florida., The District shall caus.e books for the registrat}.o~ of the Bonds to be kept by the Registrar. At the optlon of the Holder, any coupon Bond may be registered as 13

131 ',": B-9 - rincipal alone on such books upon presentation thereof,to ~he Registrar, who shall make notation of such registrat~ n thereon. Any coupon Bond maybe registered as to both t~~ncipal and intet;est upon presentation thereof to the ~ g istrar, accompan1.ed by all unmatured coupons and all e tured coupons, if any, not theretofore paid or provided ~~r, and the Registrar shall make notation?f ~uc~ registration thereon and detach therefrom and retal.n 1.n 1ts custody all such coupons. Any Bond registered,as to principal alone or as to both principal and interest may thereafter be transferred only upon a!1 assignment duly executed by the registered owner or his 'attorney or legal representative in such form as sha~l be satisfactory to the Registrar, such transfer to be made on such books and endorsed on the Bond by the Registrar. Unless such Bond shall be registered as to both principal and interest, such transfer may be to bearer and thereby transferability by delivery shall be restored, subject, however, t~ successive registrations and transfers as before. The principal of any Bond registered as to principal alone, unless registered to bearer, and the principal of any Bond registered as to both principal and interest shall be payable only to or upon the order of the registered owner or his legal representative, but the coupons appertaining to any coupon Bond registered as to p r i n,c i pal a 1 one s hall r ern a in' pay a b 1 e to bearer notwithstanding such registration. Any series 1972 Bond registered as to both principal and interest may be reconverted into a coupon Bond uponpresent'ation thereof to the Registrar, "together with an instrument requesting such reconversion duly executed by the registered owner or his attorney or,legal representative and in such form as shall be satisfactory to the Registrar. Upon any such presentation, the Registrar shall reattach to such series 1972 Bond the coup6n~ representing the interest to become due thereafter on the Series 1972 Bond to the date of maturity and interest then 'dueancl unpaid, if any I and shall make notation thereon whether the Series 1972 Bond is registered as to principal alone or is payable to bearer. The District shall pay a~l costs of the first conversion 6r exchange of the Series 1972 Bonds fromcqupon form to fully registered and vide versa, buta'll costs of such subsequent conversions or exchanges shall be paid by the Bondholders requesting the same. Exc~pt as otherwise provided in a subsequent resolution adopted by the Board with respect to any Series of Bonds, the registration of any Bond may be transferred upon the registration books upon delivery thereof to the ~tincipal office of the Registrar accompanied by a written lnstrument or instruments of transfer in form and with guaranty of signature satisfactory to the Registrar, duly executed by the Bondholder or his attorney-in-fact or legal representative, containing Vlritten instructions as to the 14 " f' - f, tails of the transfer of such Bond, along with the social ~:curity number or federal employer identification number of such transferee. In all ca~es of at~ranlsf~r o~ a Bond, the R gistrar shall at the earl~est prac 1ca t1me 1n accordance ~th the terms hereof enter the transfer of ownership in the Wlgistration books and shall deliver in the name of the new ~;ansferee or transferees a new fully registered Bond or Bonds of the same series and maturity and of authorized denomination or denominations, for the same aggregate rincipal amount and payable from the same source of funds. ~he District and the Re.gistrar may charge the Bondholder for the registration of every transfer or exchange of a Bond an amount sufficient to reimburse them for any tax, fee or any other governmental charge required (other than by the District) to be paid with respect to the registration of such transfer, and may require that such amounts be paid before any such new Bond shall be delivered. Except as otherwise provided by a subsequent resolution adopted by the Board prior to the issuance of a series of Bonds, neither the District nor the Registrar shall be required to register the transfer of any Bond during the period between the fifteenth (15th) day of the month preceding an interest payment date and such interest pay'ment date on the Bonds or, in the case of any proposed redemption of Bonds, after SUCh Bonds or any portion thereof have been selected for redemption. The District and the Registrar may deem and treat the registered owner of any Bond as the absolute ~wner of such Bond for the purpose of payment of the principal thereof and the interest and premiums, if any, thereon. Bonds maybe exchanged at the office of the Registrar for a like aggregate princip'al amount of Bonds, or other authorized denominations of the same series and maturity. Notwithstanding the' foregoing, with respect to any. Series of Bonds, the District may provide for such alternative system of registration and terms for the Bonds, includi1,1g, but h9t limited to, a book-entry system of registratlon, as such system of registration is provided for by a subsequent resolution of the Board adopted with respect to such Series of Bonds. If the District adopts a 'system for the issuance of uncertificated registered public obligations, it may permit thereunder the conversion, at the option,of a Holder of any Bond then outstanding, of a c~rtificated 'registered public obligation to an uncertiflcated registered public obligation, and the reconversion of th0 same. SECTION 12. BONDS MUTILATED. DESTROYED. STOLEN OR LOST. In case any Bond shall become mutilated, or be d~stroyc;d, stolen or lost, the District may in its discretlon, issue and deliver a new Bond, with all unmatured 15

132 B-10 pons attached with respect to coupon Bonds, of like tenor cou the Bond and attached coupons, if any, so mutilated, as troyed, stolen or lost, in exchange and substitution for de~h mutilated Bond, upon surrender and cancellation of such sutilated Bond and attached coupons, if any, or in lieu of mud substitution for the Bond and attached coupons, if any, ~n stroyed, stolen or lost, and upori the Holder furnishing t~e District proof of his ownership thereof and satisfactory indemnity and complying with such other reasonable regulations and conditions as the. Di~trict m~y prescribe and paying such expenses' as the Dl.strl.ct may l.ncur. All Bonds and coupons so surrendered shall be cancelled by the Registrar. If any such Bond or coupon, if any, shall have matured or be about to mature, instead of issui~g a substitute Bond or 'coupon, if any, the District may pay the same upon being indemnified as aforesaid, and if such Bond or doupon, if ~ny, be lost, stolen or destroyed, without surrender thereof. Any such duplicate Bonds and coupons, if any, issued pursuant to this section shall constitute original, additional '. contractual obligations on the part of the District whether or not the lost, stolen nr destroyed BOnds or coupons, if any, beat any time found by anyone, and such duplicate Bonds and coupons, if any., shall be entitled to equal and proportionate benefits and rights as to lien 'on and source and security for payment from :t:unds, as hereinafter pledged, and to the same extent as all other Bonds and coupons, if any, issued hereunder. SECTION. 12A. PROVISIONS FOR REDEMPTION. The Bonds of any particular series may' be redeemed prior to their stated dates.of maturityt either in whole or in part, at such time or times and upon. such terins as shall be determined by subsequent resolution of the Board adopted prior to the issuance of such series of Bonds. SECTION 12B. NOTICE OF REDEMPTION. Except, as otherwise provided in a subsequent resolution adopted by th'e Board with respect to any Series of Bonds, notice of redemption of the Bonds (i) shall be published at least ~hirty (30) days prior to the redemption date in a finangial Journal published in the Borough of Hanhattan, city and State of Ne\! York, and in a newspaper or newspapers. of general circulation in the counties in which the District is l~<?~ted, (ii). shall be filed with the paying Agent, and (111) shall be mailed by certified mail, postage prepaid, at least 30 but not more than GO days prior to the date fixed for redemption to all registered owners of Bonds to be red~emed at their respective addresses as they appear on the reg1strution books hereinbefore provided for. If all of the Bon~s to be redeemed are registered.other than Bonds reg1stered to bearer, and notice of redemption is mailed to 16 the r.egistered owners t,hereof as hereinabove provided, such notice need not be publlshed. Failure to give such notice by mailing to any B ndholder, or any defect therein, shall not affect the lidity of the proceedings for the redemption of any Bond v~ portion thereof with respect to which no such failure or ~efect has occurred. All such. Bonds called for redemption and for which funds are duly provided will cease to bear interest on such redemption date. SECTION 12C. EFFECT OF REDEMPTION. Notice having been given in the manner and under the conditions herein: above provided or as proyided in any resolution adopted by the Board with respect to a Series of Bonds, the Series of Bonds or portions of Series of Bonds so called for redemption shall, on the redemption date designated in such notice, become and be due and payable at the redemption price provided for redemption of such Series of Bonds or portions of series of Bonds on such date. On the date so designated for redemption, notice having been published and/or mailed as required herein or in any resolution adopted with respect to a Series of Bonds and moneys for payment of the redemption price being held in separate accounts for the registered owners o f the Bonds or portions thereof to be rede~med,.a1l as proviaed in this resolution or in any resolution adopted with respect to a Se:r;ies of Bonds, interest on the Series of. Bonds or portions of Seri,es of Bon.ds so called for redemption. shall cease to accrue, such Series of Bonds and portions of Series of Bonds shall cease to be.entitled to. any lien, benefit or sec;urity under this resolution, and the holders or registered owners of such series of Bonds or portions of Series of Bonds shall have no right in respect thereof except to receive payment of the redemption price thereof and to receive replacement Bonds for any unredeemed portions of the Bonds. SECTION 13. FORM OF SERIES 1972 BOND AND COUPONS,. The Series 1972 Bonds, 'the interest coupons to be attached thereto, and the certificate of validation shall be in ~ubsta'ntially the follovling form' with such omissions, lnsertions and variations as may be necessary or desirable and authorized or permitted by this resolution or in any subsequent resolution adopted prior to the issuance thereof; 17

133 B-11 R- - UNITED STATES OF AMERICA STATE OF FLORIDA COUNTIES OF ORANGE AND OSCEOLA REEDY CREEK IMPROVEMENT DISTRICT AD VALOREH TAX BONDS $5,000 KNOH ALL MEN BY THESE PRESENTS that Reedy Creek Improvement District, Orange and Osceola Counties, Florida (hereinafter called "District"), for value received, hereby promises to pay to the bearer, or if this Bond be registered, to the reg istered holder as herein prov ide?, on the first day of December, 19, from the spec1al funds hereinafter mentioned, the principal sum of FIVE THOUSAND DOLLARS with interest th~reon at the rata of per centum ( %) per annum, payable semi-annually on the first day ofjuneand the first day of December in each year upon the presentat.ion and surrender of the annexed coupons as they severally, fall due.. Both principal of and interest on this Bond are payable 1n lawful money of the United States of America at or, at the option of the holder, at This Bond is one of an authorized issu~ of Bonds in the aggregate principal amount' of $20,000,000 of like date, tenor and effect, except as to number, interest,rate and date of maturity, issued to finance the cost of various public purposes within the District consisting of $10,500,000 to provide for the refunding' of certain outstanding Drainage Revenue Bonds, Series A Anticipation Notes of the District issued to finance the cost of the construction and acquisition of certain drainage, reclamation and water control improvements, and to finance the cost of construction and acquisition of additional drainage, reclamation and water control improvement.~, and $9,500,OO~ to finance the cost of the construction and acquisition of a sanitary sewer system and solid waste disj?osql facilities, under the authority of and in full compliance with the Constitution and Statute~ of the State of Florida, including particularly '~hapter , Laws of Florida, Special Acts of 1967, as amended, and other applicable provisions of law, and a resolution duly adopted by the Board of Supervisors of the Di!:itrict, (hereinafter called "Board") on the 24th day of February, 1972, as supplemented, (hereinafter collectively called "Resolution"), and is subject to all the terms and Conditions of such Resolution. ' I (provisions for redemption prior to maturity to be. ted in accordance with resolution to be subsequently lnser adopted by the Board.) Notice of such redemption shall be given in the manner required by the Resolution. The Resolution provides that the Bonds, together. th interest thereon, are payable from and secured by a Wl ior lien on and a pledge of the first proceeds collected b r the District from Ad Valorem Taxes levied at a rate not e~ceeding thirty (30) mills on the dollar 'per... annun: on. the assessed value of all taxable property 1.n <-he D1.strJ.. ct. Such Ad Valorem Taxes shall be collected at the same time and in the same manner as other Ad Valorem Taxe.s of the District are assessed, levied and collected. It. is hereby certified and recited that all acts, c~nditions and things required to happen to exist and to be performed,. precedent to and in the issuance of this Bond, have happened, exist, and have been performed in due time, form and manner as required by the Constitution and Laws of the state of Florida, applicable thereto; that the issue of Bonds of which this Bond is a part has been approved at an election held in accordance with the Constitution and Laws of Florida on the. 3rd day of April, 1972; and that the total indebtedness of the District, inc~uding the issue of Bonds of which this Bond is one, does not exceed any constitutional or sta~utory limitation. This Bond, and the couponsapp~rtaining thereto, are and have all the qualities and incidents of a negoti.able instrument under the law merchant and the Laws of the state of Florida. This Bond may be registered as to principal alone. or as to principal and interest in accordance with the provisions endorsed hereon. IN WITNESS WHEREOF, Reedy Creek Improvement District, Orange and Osceola counties, Florida, has issued this Bond and has caused the same to be signed by the manual Or facsimile signature of the President of the Board of Supervisors and the corporate seal of said District or a f~csimile thereof to be affixed, impressed, imprinted, l~thographed or reproduced hereon and attested and counterslgned by the manual or facsimile signature of the Secretary Ot the Board, and has caused the interest coupons hereto attached to be executed with the facsimile signatures of SUch President and Secretary all as of the 1st day of June,

134 (SEAL) ATTESTED AND COUNTERSIGNED: REEDY CREEK IMPROVEMENT DISTRICT BY=- ~ -= ~ ~ ~ President, Board of Supervisors VALIDATION CERTIFICATE This Bond is one of a Series of Bonds which were lidated and confirmed by judgment of the Circuit Court for ~:ceola county, Florida, rendered on the day of, President, Board of supervisors B-12 Secretary, Board of supervisors No. FORM OF COUPON $_----- On the 1st day of,19,reedy.creek Improvement District, orange-a-n-d-::---::o-s-c-e-o-=l:-'a- counties, Florida, will pay to the bearer at or, at the option of the holder, at the amount shown hereon in lawful money of the united states of America, upon presentation and surrender of this coupon, being six months' interest then due on its Ad Valorem Tax Bond, dated June 1, 1972, No. (SEAL) ATTESTED AND COUNTERSIGNED: Secretary, aoard of supervisors REEDY CREEK I~PROVEMENT DISTRICT BY=- ~~~~~~~~~ ~_ President, Board of supervisors (To be inserted on coupons maturing after callable date) IIUnless the Bond to which this coupon is attached shall have been previously duly called for prior redemption and payment thereof duly pr~)vided for. II 20. PROVISIONS FOR REGISTRATION This Bond may be registered as to principal alone on books of the District kept by the Secretary under the within mentioned Resolution, as Registrar, or such other Registrar as may hereafter be appointed, upon presentation hereof to the Registrar who shall make notation of such registration in the registration blank below, and this Bond may thereafter be transferred only upon an assignment duly executed by the registered owner or his attorney or legal representative in such form as shall be satisfactory to the Registrar, such transfer to be made on such books and endorsed hereon by the Registrar. unless this Bond be registered as to both principal and interest, such transfer may be to bearer and thereby transferability by delivery shall be restored, but this BODd shall again be subject to successive registrations and transfers as berore. The principal of thij3 Bond, if registered, uniess registered, to bearer, shall be payable only to or upon the order of the registered owner or his legal representative. Notwithstanding the registration of this Bond as to principal alohe, the coupons shall remain payable to bearer and s~all continue to be transferable by delivery. This Bond may be registered as to both principal and interest upon presentation hereof to the Registrar who shall detach and retain in his custody all unmatured coupons and all matured coupons,. if any, not theretofore paid or provided for, and shall make notation of $uch registration as to both principal and interest in the registration blank below.! and this Bond may thereafter be transferred only upon an assignment duly executed by the registered owner or his attorney or legal representative in such form as shall be satisfactory to the Registrar I such transfer to be made on such books and endorsed hereon by the ~egistrar; after such registration both the principal of and lnterest on this Bond shall be payable only to or upon the or~er of the 'registered owner or his legal representative. Th~s,Bond I if converted into a Bond registered as to both pr lnclpal and interest t may be reconverted into a coupon ~ond up,on presentation hereof to the Registrar t accompanied y an lnstrument duly executed by the registered owner or hls attorney or legal representative in such form as shall ~~ sati~factory to the Registrar; upon any such reconversion e Reglstrar shall reattach hereto the coupons repr.esenting 21

135 B-13 interest to become due thereafter on this Bond to the th~e of maturity and the interest, if any, not theretofore da'd and shall make notation in the registration blank below p~lther this bond is registered as to principal alone or is w e able to bearer. The Dis!trict shall, bear the cost of the ~~~5t conversion or exchange of this Bond from coupon form t 1 fully registered and vice versa, but the cost of all ~b5equent conversions or exchanges of this Bond from fully 5 gistered into coupon form or vice versa shall be paid by re the holder requestlng. sue h converslon. or exc h ange. DATE OF REGISTRATION IN WHOSE NAME REGISTERED MANNER OF REGISTRATION (End of Bond Form) SIGNATURE OF REGISTRAR The form of any Series of Additional Bonds shall be as provided in a subsequent resolution adopted by the Board with respect to such Series of Bonds. SECTION 14. PLEDGE OF AD VALOREM TAXES. The payment of the principal of and interest on the Bonds (including the Accreted Value of. capital Appreciation Bonds) shall be secured forthwith equally and ratably by an irrevocable prior lien on the first proceeds collected by the District from Ad Valorem Taxes levied at a rate not exceeding thirty (30) mills on the dollar per annum on the assessed value of all taxable property in the District. The District does hereby irrevocably pledge such funds to the' payment of the principal of and interest on the Bonds and for any and all other required payments 'with respect to the Bonds. The District will diligently enforce its right to receive the Ad Valorem Taxes to the extent lawful, will not take any action that will impair or adversely affect its rights to levy,. collect and receive the Ad Valorem Taxes as / herein provided, or impair or adversely affect in any manner the pledge of the Ad Valorem Taxes made herein, in each case~ that would impair the rights of the Bondholders to receive payment for the Bonds. The' District shall be unconditionaliy and irrevocably obligated, so long as any of the. Bonds are outstanding and unpaid, to take all lawful a<?tlo~ necessary or required to continue to entitle the Distrlct tv receive the Ad Valorem Taxes in at least the amounts r:equired by this resolution for payr.;ent of the Bonds. 22 SECTION 15. COVENANTS OF THE DISTRICT. With sect to each Series of Bonds issued hereunder I for as ren~ as any of the principal of and interest on any of the B~ndS of such Series shall be Outstanding and unpaid or ntil there shall have been set apart in the Sinking Fund, ~ereinafter established, a sum sufficient to pay when due the entire Bond Obligation with respect to such Series emaining unpaid, the District covenants with the Holders ~f any and all Bonds of such Series as follows: A. AD VALOREM TAXES FUND. All of the proceeds of 'the Ad Valorem Taxes collected by the District, shall be deposited into a fund to be known as the "Ad Valorem Taxes Fund," which fund is hereby crea~ed and established. Such Ad Valorem Taxes Fund shall const1tute a trust fund for the purposes herein provided, a,nd shall be kept separate and distinct from all other funds of the District and used only for the purposes and in the manner herein provided. The proceeds of all Ad Valorem Taxes shall be applied only for the purposes provided in this resolution, and shall be assessed, 'levied and collected in the same manner and at the same time as other Ad Valorem Taxes of the District are assessed, levied and collected. Such annual Ad Valorem Taxes levied in the amount of not exceeding thirty (30) mills in each ye,ar shall be subject to the following provisions: (1) In each Fiscal Year, the District shall be required to levy such millage', not exceeding thirty (30) mills, as will produce a sum at least sufficient to pay the amounts required to be deposit~d by this resolution into the sinking Fund in such Fiscal Year. (2) In the event that in any Fisca1 Year the aggregate amount of such Ad Valorem Taxes actually collected and deposited in the Ad Valorem Taxes Fund shall be less than the amounts required to be deposited into the Sinking Fund in such Fiscal Year, then the amount of' such deficit shall be added to the amount of Ad Valorem Taxes required to be levied pursuant to the preceding paragraph in the next succeeding Fiscal Year, or such additional Fiscal Years if n7cessary, not exceeding, in the' aggregate, thirty (30) mills, however, in any Fiscal Year. B. DISPOSITION OF FUNDS. All funds on deposit in the Ad Valorem Taxes Fund shall be disposed of annually in the following manner and in the following order of priority: t (l) From the moneys in the Ad Valorem Taxes Fund, f. t~e Distr lct shall t as soon as such moneys nre available, ~i fitst deposit into a separate fund designated as the "Ad ~ V<llot'Gffi Tax Bonds Sinking Fund" (herein called "Sinking r t 23!<-

136 '."".. '" '. ~.. """ B-14 d") hereby created and established, such sums as will be ~~~ficient to pay th~ Bond Service Requirement for all outstanding Bonds durlng the current Fiscal Year, and any d f' ciencies for prior Fiscal Years. Such annual payments ~a~l be reduced by t~e ~mounts of money if any, which are ~ osited into the S~nklng Fund out of proceeds from the s:le of a series of Bonds to the extent such amounts are available to pay the Bond Service Requirement on such Series of Bonds. (2) Upon the issuance by the ~istrict of any Ad~Htional Bond,s under th~ terms/ limitation,s and cond~ti{:ms rovided in thls resolutlon, the payments lnto the Slnklng ~und shall be increased in such amounts as are necessary to make the payments required above for the principal of and interest on such Additional Bonds, on the same basis as hereinabove provided with respect to the Outstanding Bonds. (3) The District sq.all not be required to make any further payments into the sink~ng Fund When the aggregate amount of money in the Sinking Fund is at le~st equal to the aggregate principal amount of Bonds then outstandirg, plus the ampunt of interest then due or thereafter to become due on such Bonds then outstanding. (4) The balance of any moneys remaining in the Ad Valorem Taxes Fuhd after the above required current payments have he en made in each Fiscal Year may be Used for the purpose of redemption of. the Bonds at the discretion of the District or for any other lawful purpose for which such moneys may be used by the District. The S inking Fund, the Ad Valorem Taxes Fund and any other special funds herein established and created shall constitute trust funds for the purposes provided herein for such funds, All such funds shall be continuously secured in the manner by which the deposit of public funds are authorized to be secured by the laws of the State of Florida. Moneys on deposit in the Ad Valorem Ta.xes Fund and Sinking Fund may be invested and reinvested only in Investment Obligations maturing not later than the date on Wh~ch the moneys therein wj,ll be nee.ded for the purposes of t~ls,resolution. Any and e'lll income rece~ved by the Dlstrlct from investments in the Ad Valorem Taxes Fund and the Sinking Fund shall be deposited into the Sinking Fund. C. RESERVED. D. ISSUANCE OF OTHER.,OBLIGATIONS. The District will, ~ot issue.any other obligations, except under the conditions and in, the manner hereinbelow provided, payable from the proceeds of the Ad Valore~ Taxes ple9ged hereunder, n<?t" VOluntarily crente or cause to be created any debt, l1en, pledge~ assignment, encumbrance or other charge 24. priority to or being on a parity with the lien of the hav~ngand the interest thereon, upon the proceeds of such Ad Bon S m TaXes. Any other obligations issued by the District,:,al~~~ition to the Bond herein authorized payable from the ln eds of the Ad Valorem Taxes pledged hereunder shall pro~:in an express statement that such obligations are ~on'or and subordinate in all respects to the Bonds herein ~~~~orizedt as to lien on and source and security for payment from such Ad. Valorem Taxes. E. ADDITIONAL BONDS. issued by the District upon conditions: Additional Bonds may be the following terms and~ (I) There shall have been filed with the Board a certificate of the tax assessors of Orange and Osceola counties setting forth the total amount of the assessed value of the taxable prop<?rty within the District for the current calendar year, if then determined,' or otherwise for the calendar year immediately proceeding the date of sale'of the proposed Additional.Bond$. (2) The Maximum Sand. Service Requirement on (i) a 11 Bonds issued hereunder and then Outstand ing, and (i i) the Additional Bonds then prop6sed to be issued, shall not exceed eighty-five percent (85%) of the estimated annual collections from Ad :Valorem Taxes ~alculated upon the basis of (a) the ass!3ssed value of the taxable property within the District for the current calendar year, if then determined, or otherwise for the calendar yea,r immediately preceding the date of sale of such Additional Bonds, ahd (b) the ~aximum annual rate of millage for the levy of such Ad Valorem Taxes as authorized by law at ~he date of sale of such Additional Bonds. (3) I f required. by law I such Additional Bonds shall be approved at an election. (4) The principa~ amount of proposed Additional Bonds together wi~hal1 other Bonds then outstanding will not exceed in the aggregate fifty percent (50%) of the assessed value of the taxable property within the District as Shown on the pertinent tax records at the time of the authorization of such Additional Bonds or such higher amount as allowed by the Act. F. COMPLIANCE WITH TAX REQUIREMENTS; REBATE FUND. The District hereby covenants and agrees, for the benefit of the Holders from time to time of each Series of Bond~ that are not Taxable Bonds, to comply with the requirements applicable to it contained in the Internal Reven~e Code of 1954, as amended, if applicable, and ~~ntained in section 103 and Part IV of Subchapter B of apter 1 of the Internal Revenue Code of 1986, as amended, 25

137 B-15 extent necessary to preserve.the exclusion of to the on such Series of Bonds from gross income for interest,, 1 income tax purposes. Spec~f~cally, without ~ederdaing to limit in any way the generality of the lnten 1.'ng the District covenants and agrees: forego, (1) with respect to each Series of Bonds other than Taxable Bonds and other than the Series 1972 Bonds, to pay to the United States of America from the funds and sources of revenues pledged to the payment of such Series of Bonds, and from any other legally available funds, at the times required pursuant to Section 148(f) of the code, the excess of the amount: earn,ed on <;11 nonpurpose investments (as def~ned 1n Sectl0n 148(f) (6) of the Code) over the amount which would have been earned if such non-purpose investments were invested at a rate equal to the yield on such series of Bonds, plus any income. attributable to such excess or any penalty paid in lieu of payment of such amount (the "Rebate Amountlt); (2) with respect to. each Series of Bonds other than Taxable Bonds and other than the Series 1972 Bonds, to maintain and retain all records,perta~ning to and to be respohsible for making or causing to be made all determinations. and calculations of the Rebate Amount. and required payments of the Rebate Amount as shall be necessary to comply with the Code; (3) with respect to each Series of Bonds other than Taxable Bonds, to refrain from using proceeds from any Series of Bonds in a manner that would cause such Series of Bonds or any of the Bonds or portions thereof I to be classified as private activity bonds under section 141(a) of the Code; and (4) with respect to each Series of Bonds,other than Taxable Bonds, to refrain from taking any action that would cause any Series of Bonds or any portion thereof to become arbitrage bonds under Section l03(b) and section 148 of the Code... lations of the Rebate Amount for each S~ries of Bonds eal eu than the series 1972 Bonds and Taxable Bonds in the oth er r and at the times required in a subsequent resolution m~nn~ed by the Board with respect to such Series of Bonds. a op eeial fund designated as the "Rebate Fund" is hereby ~r::ted and established. Upon the issuance of each Series of Additional. Bond~, except Taxable Bon?s and except as th r wise prov~ded 1n a subsequent resolutlon adopted by the oe B rd with respect to. suc hs' h.. er~es of Bonds, t e Dlstrlct ~:ll create a separate account within the Rebate Fund. The ~istrict shall deposit into the account in the Rebate Fund created with ~espe~t to a ~eri~s of Bonds, from an~ legally available funas ox: the D1.strl.ct, an amount equal to the Rebate Amount with respect to such Series of Bonds. The District shall use such moneys deposited in the Rebate Fund only for the payment of the Rebate Amount to the united states as required by Section 15F above in the manner and at the times required by a subsequent resolution adopted by the Board with respect to.such Series of Bonds. If any amount shall remain in any rebate account in the Rebate Fund after payment in full of the Series of Bonds for which such aecount was established, and after payment in.full of the Rebate Amount with respect to such series of Bonds to the Un~ted states in accordance with the terms hereof, such amounts shall be available to the District for ariy lawful purp6se. Each rebate account in the Rebate Fund shall be held separate and apart from all other funds and accounts of the District, shall be impressed with a lien in favor of the Holders of the series of Bonds for which such account was established, only after all obiigations of the District with respect to payment of the Rebate Amounts with respect to such Series of Bonds have been fully satisfied and the moneys therein shall be available for use only as herein provided. Notwithstanding any other provision of this r~solution, the obligation to pay over the Rebate Amount wlth respect to a Series of Bonds to the Unibed states and to comply... lith all other requirements of. this Section 15F sha~l survive the defeasance or payment in full of any SeLles of Bonds. The, District understands that the foregoing covenants impose continuing obligations on the District to comply with the requirements of Section 103 and Part IV of SUbc~apter B o~ Chapter 1 of the Code so long as such requlrements are applicable.., The District c'ovenants and agrees that it shall nulntal~ and retain all records pertaining to and shall be responslble for making or having made all determinations and SECTION 16. APPLICATION OF BOND PROCEEDS. All ~oneys received from the sale of the Series 1972 Bonds shall be applied by the District as follows: A. All interest accrued or to accrue on the Se~ies 1972 Bonds through December 1, 1972 shall be deposited in the Sinking Fund

138 B-16 B. A special trust fund is hereby created, tablished and designated as the "Ad Valorelll Tax Bonds ~s nstruction Fund". There is also created and established.0 the Construction Fund two separate accounts representing ~~ch of the two proj ects described in Section. 3~ of this esolution. The balance of the moneys remaining after raking all the deposits and payments provided for in rn aragraphs A and B above with respect to the Series 1972 ~onds shall be deposited in the Construction Fund to the credit of the special account representing the project for which the moneys so deposited are applicable. upon the issuance of any Series of Additional Bonds, there ~hall be est?blished a separate ac~ount within the constructlon Fund, WhICh separate construction accounts may be held by the District or by a trustee with respect to any series of the, Bonds as provided in a subsequent resolution adopted by the Board prior to the issuance of such series. Each separate account shall be held only for the benefit and security of the Holders of the Series of Bonds with,respect to which such account was created. The proceeds of any Series of Additional Bonds shall be applied by the District in the manner provided in a subsequent resolution adopted by the Board with respect to the issuance Q.f such Series bf Bonds. The construction Fund and the accquntsthere;in created with respect :uo the" Series '1972 Bonds pursuant to this resolution const'i tute trust funds for the purposes provided herein, and there 'is hereby 'created a lien upon moneys deposited therein' until so applied in favor of the Holders of the Series' 1972 Bonds. The accounts created in the construction 'Fund with respect to the 1972 Bonds shall be kept separate and apart from all other funds and accounts of t~e District, and the moheysnn deposit therein shall be withdrawn, used and applied by: the District solely to the payment of the cost of the 1972 Projects '(including, but not limited to, future expansions and improvements) and purposes incidental theretb, as hereinabove described and set forth (including each 1972 Project's' 'pro rata share of the costs ~nd expenses incurred in connection with the preparation, 1ssuance and sale of 'the Series Bonds). If for 'any reason the proceeds of the Series 1972 Bonds or any part thereof on' deposit in any of the special accounts in the Construction. Fund created with respect to the 1972 Bonds are not necessary for or are not applied to the payment of 7uch costs, then the unapplied proceeds shall be deposited 1n the Sinking Fund. Any funds on deposit Construction Fund which are' not expenditure, as hereinabove may Obligations maturing at suc~ time 28 in any account in the immediately necessary fol;" be invested in Investment or'times as the Board may appropriate to meet the requirements of the particular dee~unt in the Construction Fund. All income derived ~~~refrom sha.ll be retained in the appropriate account in the construct~on Fund. SECTION 17. DEFEASANCE. If, at any time after the date of issuance of any Series of Bonds I (a) all Bonds ecuredhereby or any Series or maturity of Bonds within a ~eries shall have become due and payable in accordance with their terms or otherwise as provided in thjs resolution, or shall have been duly called for redemption, or, with respect to Bonds other than Variable Rate Bonds, the District gives the Paying Agents irrevocable instructions directing the payment of the principal of, premium, if any, and interest on such Bonds at maturity or at any earlier redemption date scheduled by the District, or any combination thereof, (b) the whole amount of the principal, premium, if any, and the interest so due and payable upon all of such Bonds or any series or maturity of Bonds within a Series then outstanding, at maturity or upon redemption, shall be paid, or, with respect to Bonds othe~ than Variable Rate Bonds, sufficient moneys shall be held by a Paying Agent or other authorized depositary acting as an escrow agent in irrevocable.trust for the benefit of the Holders of such Bonds (whether.or not in any accounts createct hereby) which, when invested in Government Obligations maturing not later than the maturity or redemption dates of such principal, premium, ifanyl and interest will, together with the income realized on such investments, be sufficient to pay all such principal, premium, if any,and intere!3t on such Bohds at. the maturity thereof or the date upon which such Bonds are to be called for redemption prior to maturity, and (c) provisions satisf~ctory to the Registrar and Paying Agent shall also be made for paying all fees, charges and expenses of the Registrar and Paying Agent payable hereunder by the District, then and in that case the right, title and interest of the Holders of such Bonds hereunder and the pledge of and lien on the Ad Valorem Taxes, and all other pledges and liens creat.ed hereby or pursuant hereto, with respect to such Holders shall thereupon cease, determine and become void, and if such conditions have been satisfied with respect to all Bonds issued hereunder and then Outstanding, all balances remaining in any other funds or accounts created by this resolution other than moneys held for redemption or payment of Bonds and to pay all other sums payable by the District hereunder shall be distributed to the D~strict for any lawful purpose; otherwis~ this resolutlon shall be, continue and remain in full force and effect. Expect as otherwise provided in a subsequent ~esolution adopted by the Board, Variable Rate Bonds issued ereunder may not be defeased. SECTION 18. AUTHORIZATION OF USE OF DERIVATIVE!:BODUCTS. Nothing in this resolution shall be construed as 29

139 ':4 B-17 h'biting the District from negotiating and entering into pro ~ments relating to any derivative product in connection a1~~ the issuance of any Series of Bonds hereunder, ~~cluding, but not limited to, interest rate swaps and interest rate caps. SECTION 19. HOLDERS NOT AFFECTED BY' USE OF BOND PROCEEDS. The Holders of the Bonds issued hereunder shall h ve no- responsibility for-, the use of the proceeds of said B~nds and the use of such Bond proceeds by the District shall'in no way af~ect the rights,of such Bondh~lders. The District shall be ~rrevocably obl~gated to cont~nue to' levy and collect the Ad Valorem Taxes as provided herein and to pay the principal of and the interest on the Bonds notwithstanding any failure of the District to use and apply such Bond proceeds in the manner provided herein. SECTION 20. MODIFICATION OR AMENDMENT. No material modification or amendment' of this resolution or of any resolution amendatory hereof or supplemental hereto may be made without the consent in writing af the Holders of at least a majority in principal amount of the Bond Obligation then outstanding; provided, however, that no modification or amendment shall permit a change in, the maturity of such Bonds or a reduction in the rate o~ interest thereon or in the amount of the principal obligation thereof or affecting the promise of the District to pay the principal of and interest on the Bonds as the same.shall become due from the procee~s o.f the Ad Valorem Taxes or reduce the percentage of the Holders of the Bond Obligation required to consent to any material modification.or amendment hereof without the consent of the Holder or Holders of all such Bond obliga.tion. SECTION 21.. EVENTS OF DEFAULTi REMEDIES. Each of the' following events is hereby declared an "event of default,"that is to say if: A. EVENTS OF DEFAULT., (a) payment of principal of or redemption price of any Bond shall not be made when the same shall become due and pay-able, 'either at maturity or on required payment dates by proceedings for redemption or otherwise; or. (b) payment of any installment of interest on any Bond or the unsatisfied balance of any Amortization Installment therefor shall not be made \-Jhen the same shall become due and payable; or (c) the District shall fo~ a~y reason be rend~red incapable of fulfilling its obligations hereunder to the extent that the payment of or 30 security for the Bonds or any of them ' wou,ld, be materially adversely affected, and such cond1t10ns shall continue. unremedied for a period of thirty (J 0) days ~ fter the Distr,ic,t becomes aware or receives notlce of such condltlons; or (d) an order or decree shall be entered, with the consent or acquiescence of the District, appointing a receiver or receivers of the District, or its assets, the Ad Valorem Taxes, or any part thereof, or the filing of a, petition by the nistrict for relief under federal bankruptcy laws ;~ any other similar law or statute of the United states of America or the state of Florida, which shall not be dismissed, vacated or discharged within thirty (30) days after the filing thereof; or (e) any proceedings shall be instituted, with the consent or acquiescence of the District, for, the purpose of effecting a composition betwb.en the District and its,creditors or for the purpose of adjusting the claims of such creditors, pursuant to any federal or state' statutes now or hereafter enacted, if the claims of such creditors are under any circumstances payable from the Ad Valorem Taxes; or ' (f) the entry of a final judgment or judgments for the payment of money' against the District which subj ects any of the funds pledged hereunder to a lien f,or the payment thereof in contravention of the provisions of this resolution for which there does not exist adequate insurance, reserves or appropriate bonds for the \ timely payment thereat:, and an such judgment shall not be discharged within ninety (90) days from the entry thereof or an apveal shall not be taken therefrom or from the,order, decree or process upon which or pursuant to which such judgment shall have been granted or entered, in such manner as to stay.th~ execution of or levy under such judgment, order, decree or process or the' enforcement thereof; or (g) the District shall default in the due and punctual, performance of any of the covenants, conditions, agreements and provisions contained in t~e B~nds or in this resolution on the part of the Dlst~lctto be perfofmed, other than those mentloned in clauses (a)' and (b) above, and such default shall continue for thirty (30) consecutive days after \'/ritten notice specifying such default and requiring the same to be remedied shall have 31

140 B-18 been given to the District by the Holders of not less than ten percent (10%) of the Bond Obligation. Notwi thstanding the foregoing, with respe.ct to the ts described in clause (g), the District shall not be even d in default hereunder if such default can be cured d~~~~ n a reasonable period of time and if the District in w d 1 faith institutes approp'riate curative action and di~igently pursues such' action until the default has been corrected. B. REMEDIES. Upon the happening and continuance of any event of default specified in Paragraph 21A a~o~e, any Holder of Bonds, or ~f. any cou~ons appe~talnlng thereto issued under the provls10ns of thls resolutlon, may by suit' action, mandamus or other proceedings in any court of colup~tent jurisdiction protect and en~orce. any ~nd. all rights under the laws of the state of Florlda, lncludlng the Act or granted and contain.ect in this resolution, and may enf~rce and compel the performance of all duties required by this resolution or by any applicable statutes to be performed by the' District.. or by any officer thereof, including, but not limited to, the levying and collecting of the Ad Valorem Taxes in the manner provided in this resolution. The Holders of not less than twenty-five percent (25%) of the Bond Obligation outstanding may appoint any state bank, national. bank, trustcoinpany or national banking association. qualified to transact business in. Florida to serve as trustee for the benefit of the Holders of all Bonds then outstanding (the "Default Trustee"), C.EFFECT OF DISCONTINUING PROCEEDINGS. In case any proceeding taken by the Default. Trustee or any Bon<;lholder on account,. of any default shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Default Trustee or such Bondholder, then and in every such 6ase the District, the Default Trustee and Bondholders shall fe restored to their former positions and rights hereunder, respectively, and all rights, remedies and powers of the Default Trustee shall continue as though no such proceeding had be~n taken. D. DIRECTIONS TO DEFAULT TRUSTEE AS TO REMEDIAL PROC~EDrNGS. Anything in. this resolution to. the contrary not~lthstanding, the Holders of a majority of the Bond?bl1.gation?-c ting jointly, shall have the right, by an lnstrum~nt or concurrent instruments in writing executed and dellvered to the Default Trustee, to direct the method ~nd place cf conducting all remedialprobeedings to be taken dy th; DefaUlt Trustee hereunder,. provided that such It'ectlon shall not be otherwise than in accordance with law ~t'the provisions of this resolution, and that the Default d :Uste~ shall have the right to decline to follow any such b~t'ec~lon Which in the opinion of the Default Trustee would dl't'un)~stly ection. prejudicial to Bondholders not parties to such i E. RESTRICTIONS ON ACTIONS BY INDIVIDUAL BOND- No Bondholder shall have any right to institute ~~~D~~~tl action or proceeding in equity or at law for the ution of any trust hereunder or for any other remedy exe~under unless such Bondholder previously shall have given her the Default Trustee ~ritten notice of the event of ~ofault on account of which such suit, action or proceeding,e to be taken, arid unless the Holders of not less than ~~enty-five percent (25%) of the Bond Obligation shall have ~ade written request of the ~efault Tru~tee after the right to exercise such powers or r~ght of act~onf as the case may be shall have accrued, and shall have afforded the Default Tr~stee a reasonable opportunity either to proceed to exercise the powers hereinabove granted or to institute such action, suit or proceeding in its or their name, and unless I also, there shall have been offered to the Default Trustee reasonable security and indemnity against the costs, expenses and liabilities to be incurred therein or thereby, including the reasonable fees of its attorneys (including fees on appeal), and the Default Trustee shall have refused or neglect~d to comply with 5uchrequest within a reasonable timei and such notification, request and offer of indemnity are hereby declared in every such case, at the option of the Default Trustee, to be conditions precedent to the execution of the powers and trusts of this resolution or for any other remedy hereunder. It is understood and intended that no one or more Holders of the Bonds hereby secured shall have any right in any manner whatever by his or their action. to affect, disturb or prejudice the. security of this resolution, or to enforce any right hereunder, except in the manner herein provided, and that all proceedings at law or in equity shall be instituted, had and maintained in the manner herein provided and for the benefit of all Bondholders, and that any individual rights of action or any other right given to one or more of such Holders by law are restricted by this resolution to the rights and remedie~ herein provided.,nothing contained herein, however, shall affect or impair the right of any Bondholder, individually, t~ enforce the payment of th-e principal of and interest on his B<;>nd or Bonds at and after the maturity thereof, at the tl~e, place, from the source -and in the manner provided in th~s resolution. t. F., PRO RATA APPLICATION OF FUNDS. Anything in t~ls resolutlon to the contrary notwithstanding, if at any l~e ~he Ad Valorem TaXes shall not be SUfficient to pay the ~~lnclpal of or the interest on the Bonds, as the case may t I as the same become due and payable, such funds, ogether with any funds then available or thereafter beeo.. m~ng available for such purpose,. whether through the ~~~rel~e of the remedies p~ovided for in this resolution or erwlse, shall be applied as follows: 32 33

141 B-19 \ (a) Unless the principal of all the Bonds h 11 have become due and payable, all such funds Sh:ll be applied (1) first, to the payment of all ~ stallments of interest on Bonds other than ~~pital Apprec~ation Bonds ~hen due, in the order f the maturity of the lnstallments of such ~nterest together with accrued and unpaid interest o ln the Bonds other than Capital. Appreciation Bonds, theretofore called for redemptl.on, to the persons entitled thereto; then, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the, same date then to the payment thereof, ratably, acco~ding to the amounts due thereon without any discrimination or preference, and (2) then, to the payment of all unpaid principal, or with respect to Capital Appreciation Bonds, the unpaid Maturity Amount or redemption price of any Bonds which shall have become due, whether at maturity or by call for redemption, in the order of their due dates I and, if the amount available shall not be sufficient to pay in full all the Bonds due on any date, then to the payment thereof ratably according to the amounts due thereon, or with respect to capital Appreciation Bonds the unpaid,aturity Amount due on such date Y'ithout discrimination or preference.. (b) If the principal (or with respect to Capital Appreciation Bonds, the Maturity Amount) of all the Bonds shall have become duejand payable, all such funds shall be applied to the payment of the principal and interest (or with respect to capital Appreciation Bonds,' the Maturity Amount)then due and unpaid upon the Bonds, without preference or priority of principal over interest or of interest over principal, or of' any installment of interest over any other installment,of interest, or of any Bond over any other Bond" ratably, accordin~ to the amounts due, respectively, for principal and interest (or with respect to capital Appreciation Bonds, the M~turity Amount), to the persons entitled thereto wlthout any discrimination or preference except as ~o any difference in the respective rates,of lnterest'specified in the Bonds. " '~henever funds are to be applied pursuant to the provls~ons of this Section, such funds shall be applied at ~~Ch t~mes, ~md from time to time, as the District, in its Ie dlscretlon shall determine, having due regard ;to the ~~~un~ of such funds available for appli6ation and the a~ ~tlho~d o~ additional funds becoming available for such in P t catlon 1n the future; the setting aside of such funds, appl,rust, for the proper purpose, shall constitute proper lea tlon of such funds. Whenever such discretion in 34 I applying such funds shall be exercised, the date (which h 11 be an interest payment date unless another date.more 5 ~table shall be fixed) upon which such application is to SUl made shall be fixed by the District and upon such date ~eterest on the amounts of principal to be paid on such date l~all cease to accrue. Such notice as shall be deemed to be S propriate of the fixing of any such date shall be given. ~p payment to the Holder of any Bond shall be required o less such Bond shall be presented to the Registrar for ~~propriate endorsement or for cancellation if fully paid. G. SUBROGA~ION. Notwithstanding anything in this resolution to the contrary, if the principal, interest and redemption premium, if any, with respect to any Series of Bonds are paid by a bond insurer with respect to such Series of Bonds, the pledge of the amounts on deposit from time to time in the funds and acco~nts created hereby and all covenants t agreements and other Obligations of' the District to the Bondholder.s of such Series of Bonds shall continue to exist and the Bond Insurer, to the extent of any payment by such entity with, respect to such Series of Bonds shall be subrogated to the rights of such Bondholders. SECTION 22. CONTRbCTION OF DISTRICT BOUNDARIES. A. Pursuant to Chapter , Laws of Florida, Special Acts of 1967, the District has the power to contract-' the territorial' limits of the District to exclude any. land within the District by following certain procedures set forth therein... By acceptance of any Bond issued hereunder, the Holder of such Bond acknowledges and agrees that (i) in addition to the rights provided under paragraph B below and subject to th~ provisions of paragraph C below, the District may contract and exclude from its boundaries an area of taxable property within the District, the assessed valuation of Which, at the time of such exclusion, together with all other taxable property theretofore excluded from the District's boundaries (based upon its assessed valuation at the time of exclusion) after the date of adoption of this resolution, does not e*oeed 10% of the total assessed value o~ all taxable property located within the District at the tlme of the current exclusion, and (ii) after such contraction and exclusion, suqh land will not be subject to Ad Valorem Taxes thereafter imposed by th.e District... B. Notwithstanding the preceding paragraph, and 'sub) ect to the conditions set forth in this paragraph and paragr:aph C below, the District may contract and exclude from lts boundaries any area of taxable property f without regard to the assessed value thereof; if the District provides at. the time of such 'exclusion an amount of funds equc: 1 to the percentage of the principal amount of the Bond Obl1gation Outstanding hereunder. that the assessed value of ~uc~ taxable property, at the time of such exclusion, bears t~ th~ to~al assessed value of all taxable property within Q e, D~st~ict at the time of such exclusion, such amount to e provlded at the time of such contraction of the 35

142 B-20 't's boundaries (the "contraction Amount"), which D~strlCtion Amount, together with all interest earnings contra c shall be held in escrow by the District or an thereon~gent appointed by the District, for the benefit of escro~olders of all Bonds outstanding hereunder. The t~et ict shall apply the contraction Amount, to the payment Dl.S ~e Bonds on a pro rata basis on each interest payment of t following the contraction. Prior to any contraction dar:uant to this paragraph B, the District shall obtain an pu inion of Bond Counsel to the effect that the use of the ~Pntraction Amount to pay debt service on the Bonds pursuant t o the terms of the escrow establ ished pursuant to this ~ragraph will. not adversely affect the exclusion of interest on any of the Bonds from gross income for federal income tax purposes. C. In no event shall the District contract or exclude any taxable property pursua~t to this section 22 unless the District certifies in writing.at the time of such contraction or exclusio:q that, after such contraction or exclusion, (i) the Maxi.mum Bond service Requirement on all Bonds outstanding hereunder' does not exceed eighty-five (85%) of the estimated annual collections from Ad Valorem Taxes calculated on the basis of (a) the assessed value of the taxable property within the District for the current calendar year, if determined, or otherwise for the calendar year immediately preceding the date,of such contraction and (b) the maximum anntj,al.rate of millage, for the levy of such Ad Valorem Taxes as. authorized by, law at the date of such contraction and (ii) the principal amount of all Bonds then Outstanding will not exceed in the aggregate fifty percent (50%),Of the assessed value of the taxable property \within the District at the t;me of the Qontraction or such high,er amount as allowed by the Act. ' D. The District agrees to noti fy Moody I s Investors Services, Inc. and Standard & Poor I s Corporation of the occurrence o:r any contraction or exclusion pursuant to this Section. ' SECTION 23. SEVERABILITY OF INVALID PROVISIONS.!f ~ny one or more of the covenants, agreements or prov1slons herein contained shall be held contrary to any express provisions of law or contrary to the policy of express law, though not expressly prohibited, or against I?ubli<;= policy'" or shall for any reason whatsoever be held ~nvalld, then stich covenants, agreements or provisions shall e n.ul.l and void and shall be deemed separable from the remainlng covenants, agreements, 'or provisions and shall in ~o way affect the validity of any of the other provisions ereof or of the Bonds or coupons issued hereunder., SECTION 24. SALE OF BONDS. The Bonds shall be LSSU~d and sold in such manner and at such price or prices consistent with the Act, all at one time or in instailments from time to time, as shall be hereafter determined by the Board. SECTION 25. VALIDATION AUTHORIZED. The attorney the District is authorized and directed to prepare and ~?~ proceedings to validate the Series 1972 Bonds in the m~n~er provided by law. SECTION 26. REPEALING CLAUSE. All resolutions or -rts thereof of the Board in conflict with the provisions h:rein pontained are, to' the extent of such conflict, hereby superceded and repealed. SECTION 27. NO THIRD PARTY BENEFICIARIES. Except as herein otherwise expressly provided, nothing in this resolution expressed or implied is intended or shall be construed to confer upon any. person, firm or corporation other than the parti~s hereto and the owners and Holders of the Bonds issued under and s.ecured by this resolution, any right, remedy or claim, legal or equitable, under or by reason of this resolution or any provision hereof, this resolution and. all its provisions being intended to be and being for the sole and exclusive l:?enefi:t of the parties hereto and the owners and Holders from time to time of the Bonds issued hereunder. SECTION 28. CONTROLLING LAW; MEMBERS OF GOVERNING BODY OF DISTRICT NOT" LIABLE. All covenants I stipulations I obligations and" agreements of tl1edistrict contained' in this resolution shall be deemed to be covenants I stipulations, obligations and agreements of the District to the full extent authorized by the Act and provided by the Consti tution and laws of the St.ate of Florida. No covenant, stipulation, obligation.or agreement contained herein sha1.l be deemed to be a covenant, stipulation, obligation or agreement of any present or. future member, agent or employee of or to the Board in his individual capacity, and neither the members of the Board nor any official executing the Bonds shall be liable personally on the Bonds or this resolution or shall be subject to any personal liability or accol}ntability by reason of the issuance or the execution by the District or such members thereof. SECTION 29. EFFECTIVE DATE. This resolution shall take effect upon receipt of the consent to the amendments made herein by the Holders of two-thirds of the Bond, ~bligation outstanding; provided, however, that the irovlslons of section 22 hereof and the amendment to section 8 of the )972 Resolution as provided in Section 20 hereof shall only" become effective upon receipt of the consent of 36 37

143 B-21 H lders of one hundred percent (100%) of the Bond ~g~iga~ion outstanding ATTEST: PASSED AND ADOPTED this 15th day of November, 2i;ln,~1A:!lt~:!-/ secretary to Board of supervisors (SEAL) IMPROVEMENT DISTRICT I certify this to be a true and exact copy of Resolution No. 245 as adopted by the Reedy Creek Improvement District Board of Supervisors on November 15, R loarbr:46 Donna L Palmer, Clerk 38 RESOLUTION NO A RESOLUTION OF THE REEDY CREEK IMPROVEMENT.:OISTRICT DISTRICT SUPl?LEMENTING SUPPLEMENTING AND AMENDING RESOLUTION NO. 245 ADOPTED ON NOVEMBER 15, 1991; AUTHORIZING (\UTHORIZING THE 'lssuance T~sUANCE OF REEDY. CREEK IMPROVEMENT DISTRICT AD VALOREM TI~LOREM. TAX BONDS, SERIES 1995A SA IN. AN AGGREGATE BR"INCI.PAL RRplCIPAL AMOUNT NOT EXCEEDING EXCEEDI.NG$60, $60,000, ,000 FOR THE f;viu'-ose. ~JRPOSE OF FINANCING A ~ PORTION OF THE COST OF AN.t\DMI:N,l;STRATION J~MJ~NISTRATION BUILDING FOR.. THE DISTRICT AND "..certaj:n CERTAIN SPORTS AND.RECREATION FACILITIES; <DELEGATING TO THE PRESIDENT OF %'HE 'l'he BOARD BOAAD OF S:UPERVISORS SUPERVISORS AND THE SECRETARY OR THE DISTRICT DIRECTOR OF FINANCE. AND PLANNING THE AUTHORIZATION.'1'0. TO AWARD ~WARD :THE SALE OF SUCH BONDS ON A A. NEGOTIATED * -; BASIS.'1'0 TO MERRILL LYNCH & CO., BEAR, STEARNS & CO... ~,~INC C., ~, MORGAN STANLEY., STANLEY, & CO, CO. INC.,, PAINEWEBBER PAIN~BBER '. INCORPORJ\.TED, INcORP.ORATED, WARD BRADFORD & CO, CO. AND FIRST EQUITY CORPORATION COREORATION OF FLORIDA; APPROVING THE FORM AND. QON~ENT NTENT OF AND RATIFYING.THE DISTRIBUTION, USE,.',EXECUTION ECUTION AND DELIVERY OF A FINAL OFFICIAL OFFICI~. STATEMENT WITH WI.TH RESPECT TO SUCH BONDS; APPROVING THE,FORM OF AND AUTHORIZING THE EXECUTION OF A A. CONTRACT ". :.,QF OF. PURCHASE WITH WI~H RESPECT TO SUCH BONDS; BONDS.; AUTHORIZING ING SUN BANK, NATIONAL ASSOCIATION AS.SOCIATION TO ACT AS REGISTRAR, PAYING AGENT AND AUTHENTICATING AGENT WITH.RESPECT TO SUCH BONDS; APPROVING THE FORM OF AND AUTHORIZ- AUTHORIZ ING THE EXECUTION OF THE TH~ REGISTRAR AND PAYING AGENT AGREEMENT; APPROVING THE FORM OF AND AUTHORIZING ING THE EXECUTION OF A LETTER OF REPRESENTATIONS WITH. THE DEPOSITORY TRUST COMPANY; MAKING CERTAIN. FINDINGS,. 'REPRESENTATIONS AND COVENANTS WITH > RESPECT THERETO; PROVIDING PROVIOING AN EFFECTIVE DATE FOR THIS TH~SRESOLUTION; AND PROVIDING CERTAIN OTHER DETAILS WITH RESPECT THERETO. WHEREAS, the Board of Supervisors (the "Board") of the dy Creek Improvement District D.istrict {the. (the. "District") ttdistrict") previously previol1$.ly tadl:ldt:ed. Pted a Resolution on April 4, 1972 (the '"1972 '''1972Resolu~iontt) Resolution") :~u1t:hc'rl.zing uthorizing.-the the issuance of certain ad valorem tax bonds and dditional bonds thereunder on a parity therewith; and WHEREAS, WHEREA~,. on November 15, '1991,. the District adopted lution No. '245 24S (the "Bond Resolution") providing for the ~Etncb.nent endmt?nt and restatement of the 1972 Resolution as provided ~ne~rel.n; and WHEREAS, the Board now desires to issue bonds pursuant to he Bond ~ond Resolution and this Resolution, payable on a parity with he bonds 'incipal i outstanding under the Bond Resolution,. in an aggregate he nc pal amount not exceeding $60,000,000 to finance a portion of cost of the acquisition and construction of an administration l';" ""\J.~nl(] uilding for the District (the "Building") It'Building") and certain sports and

144 B-22 ion facilities more particularly described on Exhibit "A" (the "Series A Facilities"), with a portion of the cost of other sports and recreation facilities to be paid for h the issuance by the District of its Ad Valorem Tax Bonds, 1995Bi and WHEREAS, pursuant to Resolution No. 304 adopted by the ct. on September '21, 1994, the' District authorized the holding referendum related to the issuance of not to exceed o 000 ad va~orem Lorem tax bonds, notes or other obligations to. ~he costs of the Series A Facilities and certain other facilities and not to exceed $5,000,000 ad valorem tax notes or other obligations to finance the cost of the and, WHEREAS, the issucince issuance of not to exceed $125,000,000 pal -.amount of ad valorem tax bonds, notes or other tions to finance the Series A,Facilities Pacilities and certain other facilities and not to exceed $5,000,000 ad.valorem tax notes or other obligations to finance the cost of the ng was approved at an election of the qualified voters of the ct held on October 25, 1994; and ca1...i.vi<,-.. WHEREAS,,Merrill Lynch,& Co.,, Bear, Stearns,& Co. Inc., Stanley 'Co. 6 Inc., PaineWebber Incorporated, Ward Bradford and First Equity Corporation of Florida (collectively, the nal Purchaser"), intend to submit an offer to purchase the ct's Ad Valorem Tax Bonds, Series 1995A, 199SA, in an aggregate pal amount not exceeding $60,000,000 (the "1995A Bonds") to e the cost of the Building and of the Series A Facilities, 'IlY-.. l1... nt to a Contract of Purchase in substantially the form ed hereto as Exhibit "B" (the "Purchase Contract"); and an6 WHERE.AS, WHEREAS,. the Board desires to approve the form and ntent of and ratify the distribution of the Preliminary Official ~ ~tjeme~nt bent relating to the 1995A 199SA Bonds attached hereto as bit "c" "C" and to authorize the execution and delivery of the A Final Official St'atement Statement with such changes from the." Official Statement as shall be approved by the P, re ident of or Or Secretary to the Board (the "1995A Final Official 'Statement" )'i' 'and au. WHEREAS, the Board' wishes to approve the form of and WHEREAS, the Board wishes to approve the form of and authorize in the th~. exe,cution execution of a Registrar and Paying Agent Agreement, in.p 8ubstantl.ally the form attached hereto as Exhibit "0" "D" (the As "Paying,Agent Agreement") II) and to' appoint Sun Bank, National ;a880c~htl.o~ to ~ct act as the registrar and paying agent thereunder and au entlcatlng ag~nt agent for the 1995A Bonds; and Re WHEro:AS, WHEREAS, the Board wishes to approve the form of a Letter Of Representations presentatl.ons between the District and The Depository Trust 2 ubstantially in the form attached hereto as Exhibit "E" er r of Representations"); and WHEREAS, because of the current conditions existing in for securities similar sim.j.lar to the 1995A Bonds, the Board appropriate priate to delegate to the President of the Board and to the Board or Director of Finance and Planning of ict, the authority to accept the offer of the Original to'purchase the 1995A Bonds pursuant to the terms of the Contract contract if certain conditions set forth in this are met; meti and WHEREAS, the Board desires to amend Section lsf 1SF of the elution in order to make modifications thereto to conform ent requirements o'f of the Internal Revenue Code of 1986, which modifications shall be immaterial to the Holders, ds (as those terms are used in the Bond Resolution) ng'under, the Bond Resolut~oni Resolution; and WHEREAS, the Board desires to take certain other actions ect to, and to make other authorizations related to, the, of the 1995A 199% Bonds; Bo'nds; NOW THEREFORE, BE IT RESOLVED BY THE BOARD OF SUPERVISORS EDY CREEK IMPROVEMENT DISTRICT, that: SECTION 1. Authority. Authoritv. This Resolution is adopted,to Chapter , Laws of Florida, Special Acts of 1967, r applicable provisions of law (collectively, the tlact") "Act") ond Resolution. ",0,,"''''-'' Resolution. SECTION 2. Definitions. All terms us'ed used herein in zed form, unless otherwise defined herein, shall have the nhgs as ascribed to such terms in the Bond Resolution. S defined in the preamble hereto shall have the meanings therein. As, us,ed used herein, the following terms shall have ngs rigs set forth below:.qii.iil~s.<':: ~:i' "1991A Bonds" means the Reedy Creek Improvement District,,~~'Orem Tax Bonds, Series 1991A. ' :-:- :.> r "1992 Bonds" means, collectively, the Reedy Creek mprovement provernent District Ad Valor~m Valorem Tax Bonds, Series 1992A and Ad alorem Tax Refu~ding Refunding Bonds" Bonds, Series 1992B ' "Closing Date" means th~ the date of issuance of the 1995A 199SA II "Code" means the Internal Revenue Code of 1986, as S or Or any corresponding provision of any future laws of the ited States of ~erica America relating to federal income taxation, and as otherw~se Otherwise provided herein or required by the context 3

145 ' I fees I B-23 i'npll~uclllillg ing interpretations thereof contained or set forth in regulations of the Department of the' Treasury ilii~l!g"~a};,plicable icable final regulations and temporary.regulatians),,regulations), :'ai*,~~~~~~~e 'rulings of the Internal Revenue'Service (including L.1,S~!Il1:;IIa",n.(,;:r-evenue nue rulings and private letter,.rulings) and li.iw~ r,.&jdrt, ',tibdrt decisions, decisions. ~S\l~;'l';~;:.- '''Costs"" means the cost of acquisition, construction or ~nd all:,other er. items of cost incident to" the acquisition, cind::equipping, and the financing the Building and the including, without limitation, the following: ~-"'~ii,," 'f il'dj..lit.ies, -~ c r~':'; j... ~:~.~. ',l1l.c~'-:(1j)'obl:i;gations ions incurred' for labor and materials ' a«d(;~::'c()ii'tractors, builders and ' materialmen in d"i~6tii,i:onwith such construction, for. for' machinery and ecftf!~die!,ntt,and for the restoration or relocation of p'1o~e-'f-f... Y:' dama~ed aged or. or, 'destroyed in connection with such e~l'islttwg,tion ;-, (.i'~): th'e,cost of acquiring by purchase, if' such ptjt-ch~.s!e shall be deemed expedient, and the amount of any :~~ 'award or,' final judgl1\ent in 'or or,.any settlement or :~~ comprqms'e,of any:proceeding t'o, to. acquire by condemnation, :ltl,~~~t1""p'\:6per:ty, lands, rights, rights'of way, franchises; J.;t~ "el~'ls'emeht,s and other interests in land constituting a part ',;,(:{.. of, "or as may be e deemed necessary or,convenient for the,~;~:f(' acculisi~j:on, or construction of, the' Building and the ~ti;,: '.set:ies; "A :F'ac~lities, options and partial payments t~. 2thereori;,t'he cost of filling, draining or iil\proving improving any, lands so acquired, and the amount of any damages incident to or 'consequent %onsequent upon the acquisition or construction of :"''4 ''>ff, r l,-the - Building and the Series A Facilities; (iii) the fees liod and expenses of the Paying Agent under 'w the Paying Age'lit Agent Agreement,, including legal expenses and ;'I fees (including appellate fees), fees and e'xpenses expenses of' '- consultants 'and,financial advisors, legal and accounting fees'and expenses,financing:charges, charges, costs of Of preparing and, 'issuing the 1995A Bonds nqt not previously paid or reimbursed to the District, including but not limited to, consultant fees 'and expenses, costs of printing the 1995A Final Off~cial, Official Statement and the 1995A Bonds and any?ther other costs incurred by the District with respect to the lssuance issuance bf of the 1995A 1995~ Bonds, costs of bond insurance, if any, taxes or other municipal or governmental charges law~ully lawfully levied or assessed "upon 'upon the Building and the Ser1.7 Series acquired s A Facilities, during construction, or any property acqul.red therefor, and premiums of insurance (if any) in con~ectionwith connection the Building and the Series A Facilities durl.ng during const'ruction; construction;. ~- : 4 _..(iw) fees and expenses of engineers for making xes,,surveys and estimates of costs and of revenues 'for for'preparing plans and supervising construction, as 1 as for the performance of all other duties of ineers set forth herein in relation to the construc- construcof the Building and the Series' A Facilities or the uance of the 1995A Bonds therefor;,~:.,: :,(:9',) v),expenses of admin'istration administration properly chargeable,ttie."'projects, and, all other items of expense not " ere in thisse:ction Section specified, incident,to the ddljll;-".1;:.l.oin ition or construction and equipping of the Building..';iI""t-n,p-' e..series,series A Facilities and the placing,of the same "::operation, including, to the extent authqrized authorized by icable law, certain operating expenses, and to the sition of real' 1 estate, franchises and rights of way me:~&or, including abstracts of title and title ;ns:uran.ce; and (vi) any amounts heretofore or hereafter advancedby District for any of the foregoing purposes. ~Eiection Resolution" m~ans, means, collectively Resolution No. by the Board on September 21, 1994 and Resolution No. No, pted by the Board on October 31, 1994" ' ' "Paying Agent" means Sun Bank, National Association ed hereunder to serve as Paying Agent and Registrar.under ing Agent Agreement, its successors or assigns. "President" means the President or Vice President of the "Rebate Year" means, with respect to the Series 1995A 199SA Bo~d:s':,issued hereunder I the twelve-month period commencing on the of the Closing'Date in,each year and ending on the day, to the anniversary ry of such Closing Date in the following,,'. except that the first Rebate Year with respect to the Series 99SA:Bonds shall commence on the Closing Date and the final Rebate shall end on the date of final maturity of such Series 1995A BOI'lds rids; Or or such other period as regulations promulgated by the States Department of Treasury may prescribe. "Secretary" means m~ans the Secretary to the Board. SECTION 3. Findings Findinas and Awards. A. The District is authorized by the Act to own, Owire,, construct, equip, operate and maintain~thletic athletic fields,, recreational centers and recreational facilities and arr rejects C s' of all types and descriptions and facilities for the arrying y in 9 out Out of the functions of the District and to issue general. "r"'o""j"~e"w(t'si 5

146 i B-24 tion:bonds to pay all or part of the cost of the acquisition,,.. maintenance and operation of any project authorized., ',:Act ~; 8. The primary livelihood of the residents and eo6,-of the District is is tourism and the provision provj.sj.on of and: ion entertainment and the construction and operation of stadium, arena, tennis facilities, gymnasiums, track and 9: aoi~it-es, i1ities, athletic fields and other sports facilities and ~,ffice, administrative Unistrative and parking facilities and roads,!tntl8.n,ce the District and. benefit the residents and taxpayers ; :b,y providing employment - opportunities, promoting o~~en t and d having a positive impact on the general economy of strict. ~;: I_~.- It -is necessary, desirable, and in the best interest advantageous to, the District that 1995A Bonds be issued in egate principal amount not exceeding $60,000,000 to finance on of the cost of the Building and the Series A Facilities. D. The Distr ict District shal.l shall not use. more than the. net ds,from ;from $5,000,000 in principal amount of the.1995a Bonds to : portion of the cost Cost of the Building.. ~ E. The issuance of the 1995A Bonds to finance the cost Building and the Series A Facilities was approved by a y vote of the qualified electors of the DH;trict District at an n duly called pursuant to Resolution No. 304 adopted on i:e.t;lliel1l\ber er 21, 1994, and held for that purpose on October 25, 1994, results of which were certified to the Board by the inspectors clerk of the election designated pursuant to Resolution NO. No. 04. F. The 1995A Bonds will not be issued until all relating to the issuance of Additional Bonds under the Resolution have been met, and when issued, the 1995A Bonds be payable on a parity with the District'-s District's Outstanding 1991A and 1992 Bonds and with any other additional parity bonds after issued underthe terms the-terms of the Bond Resolution.. ~v~,u.tions ~Ollds G._ The District will issue the 1995A Bonds with the ntent that the interest thereon will be excluded from the gross ncome of the. Holders thereof for federal income tax purposes... h H. 3- It: is hereby ascertained, determined. and declared. at, be?a~se of the characteristics of the 1995A Bonds, prevailing nd ltntl.cl.pated market conditions.and additional savings to be st ~ed from an expeditious sale of the 1995A Bonds, it is in the est r hl.nterest interest of the District to accept the offer 0. af the Original urchaser i~c ~ser to Purchase purchase the 1995A Bonds in an aggregate original rincipal le l.pal amount not exceeding $60,000,000, 000,000 at a private negotiated 'le', upon Won the terms and conditions set forth herein and in the :...;..., ase Contract or as determined' by the President, and the p~r "ljasie to the Board or Director of Finance and. Planning of the ',in accordance with the terms hereof. h~reof.,..1. I. The Original original Purchaser will' provide to the District to;: 'tlie he execution of the Purchase p~rchase. Contract 'a a disclosure '--':~eqardinq regarding the 1995A Bonds containing the information by Section (6), Florida ~lor~da Statutes. 'The Original ;'will submit prior.to the date of issuance iss.uance of' the 1995A n affidavits on public entity crimes as required by a1.t33(3) (a), Florida Statutes, Statutes',. No further disclosure is ~y the Board. *,.. J. The A, Bonds shall only be issued at a rate of.i.{l;~j;~~tpot t pot exceeding' the. max;lmum maximum. interest int,!!rest rate to the terms of Section , Florida Statutes ptihtiant."t-o the terms of Section , Florida Statutes. _. '.:.,.i<~ Notice of a publiq hea~ing to be held befor.e the Notice of a public hearing to be held before the i~ji3,; on,:.';:the date hereof, inviting invlt,ing' comments comment~ and a~~ discussion disc,:,ssi~n, ~9~05f.I;lin.$ thel~s~a~ce,.of e issuance 1995A.Bo,nds Bonds.. by ~y the DJ.strJ.ct District to finance ~J.nance tfi~l:fl,~rie1s A Facilities F(3.cJ.IJ.tJ.e.s. was published publj.shed in J.n, the. Orlando Sentinel, Sent~nel, a ~ ~ap~l?el\.. p,f. general ~eneralcl.rculat:ion circulation.:in; in.the th~. District, t?j.strj.ct ~. at. least 14 1~ days da s ~~~P.i~'~o.:~~e :date hereof, which constitutes constj.tutes reasonable reas~nable notice not~ce of S!:lS~~~Jlear~~g,...,.... LIlC ':.:"" ~~~:_ '. t-~ 'Fol~owing 'SUCh notice, a, public hea~irig,was held j)y Following such notice, a public hearing was held by Jrc - 5. ~~~ the -"ffqcird #bard dn' on,the.the date hereof, during which" comments and discussions qp8~~n~ng cq@l;j$rning the issuance.of the.l995a 199SA Bonds BO~ds to finance the Series A. F~91.11.t'J.e$ Fqc ilitias were requested and heard.. :"'. '..~, SECTION 4. Resolution R to Constitute R a contract.. In consideration of the acceptance of the 1995A 199SA Bonds authorized to be issued hereunder by those who shall ~hall hold the sam~ same from 'time the to tim~1 time, th~s this Resolution,.together with the Bond Resolution, shall be deemed to be and shall cons.ti constitute tute a contract b~tween between the District and.the (Bondholders {Bondholders o.f of the 1995A Bonds.,The covenants and agreements.,herein set forth to be performed by, the District' shall be f,or' for the equal benefit, protection. and security of the Bondholders, and all 1995A'Bonds shall be of eq~al equal rank and without preference, Preference,. priority of.or distinction over any other thereof, except as expressly prov.ided provided heredn. herein. SECTION 5." Authorization, of Building Buildina and Series A Ficilities, Facilities. There is hereby authorized t~e the acquisition, construct tion and equipping of the' Building and the Series A Facilities pursuant Pursuant to the reports, I plans, specifications and designs on' file, ordto Or be on file, with ~he the Board, as the s~e same m~y may be.s3lpplemented Rupplemented and,amended, and subject subject to suchmodif~catl.ons modifications thereof and ~~rl.ations therefrom which, from time' to time, may be determined by the,e Board to be necessary or to be construc- D in the best interests of the District. l.strict. 7 I 1! j I i I

147 B-25 :SECTION 6. authorization Authorization of 1995A SA Bonds.' Subject and the provisions of this Resolution and' any subsequent :adopted.by the Board in connection with the 1995A Bonds 'the issuance thereof,' the 1995A ~99 5A Bonds of the District as "Reedy II Creek Improvement District, District, Ad Valorem Tax 1gg5A" 1995A" are hereby authorized to. be issued is sued in an il1cipal ncipal amount not exceeding $60,000,000 $60,000,'000 to finance the tb.e Building and the Series A Facilities, with the exact. Giiriount 'unt to be determined in accordance with the (terms,terms 'i'fi'is, Kis. authorization shall constitute approval 'of the the A Bonds for purposes of Section section 147(f) of the The President of the Board and the Secretary to to the Director of Finance Finande apd a~~ Planning' of the District are. '4"Ih'... rized ' zed ahd and directed to award the sale of the 1995A Bonds l(j!:!r.1;g:l.n.al 9yihal Purchaser' and to approve the terms thereof, thereoj:, ~1~!~~t~~th6ut without limitation, the principal princ:ipal amount thereof,' the th~.:':j tes thereof, the interest rate or rates. rates- with respect bhe purchase price thereof and the redemption terms terms with lafi!t:::;e:he~re~t.:o, hereto, provided, however, h~wever, that in no event even.t shall (i) the.~w~.~t~ ;,"amount d\amount of the 1995A Bonds exceed $60,000,000, (ii) (ii.) the p\ll~cf,l~se:price be less than 99% of the original principal amount of 1~:95A Bonds (excluding ( excluding oriqinal original issue discount) (the "Minhum "Minimwn purch8.s~price'''), Purchds&Price"), (iii) the true interest cost rate (the "TIC") for the 19 9' 5A E995A Bonds exceed 6.5% 5 % (the 1\ "Maximum Maximum. TIC") 1\ ) or (iv) V) the intere s~ interest rates exceed the maximum rates permitted' by applicable law. ".....'. * B. The ;l995a' J995A Bonds shall bear interest.from their date, payab~e payable semiannually on the first day of June an~ and the first day of December Decembkr of each year, commencing on the date provided in the Purchase Contract and approved by the President of the Board and the Secretary to the Board or the Director of Finance and Planning of the District, at the rates, and shall mature in accordance with the schedules, schedules, set forth or incorporated by reference in the Purchase Contract and the 1995A Final Official Statement and approved WProved by -the President of the Board and' the Secretary to the Board or the Director o.f of 'Finance and Planning of the District, the approval of Of the President of the. Board and the Secretary to the Board or 01: the Dire~tor Director of Finance and Planning of the District to be ~~nclusively evidenced by their execution of the Purchase Contract. The e principal Principal of the 1995A Bonds shall be payable either in annual. ~r Or semiannual semhmual installments, as shall be set.forth in the Purchase 'Ontract ontract and approved by the president President of the Board and the ~~cre~ary.to the Board or the Director of Finance and Planning of the ehd~str~ct, the execution thereof to be conclusive evidence of such approval. approval,. 8 I 'I I~ I 1995ABonds s shall be issued as fully registered bonds. 'ation of $5,00 0 $5,000 ($5,000 value at maturity with. 'coupon or capital Capital Appreciation Bonds) each or any ~;P'f'l~ e thereof and may be'issued as current interest pon bonds or capital appreciation bonds. In all on the 1995A Bonds,shall be computed on the basis ~~E!'alr 1: 'consisting of twelve (12) thirty PO) (30) day months. "'SE i7:ic)n- 8. Redemption Provisions. The. 1995A Bonds Bon~s shall ~~~udh optional a1 ~nd and mandatory redemption provisions, if in the Purchase Contract and approved by the Board and the Secretary to the Board or the ~~~nan.ce and Planning of the District, the execution ~onclusive ponclusive evidence of such approval....~~tion"9.. Notice of RedemDtion. Redemption. In ~n addition t:o to the teil~s:!t\'q~.f 'Section 12B of the Bond Resolution, Resolut~on, each notice not~ce of iol1~v"",j..i.,'.ariy, with respect ect to the 1995A Bonds shall meet the \<set, forth in (i), (ii), (iii), (iv), and (v) below; aij~p~,e~~r that, notwithstanding any other provision of this of the Bond Resolution to the contrary, failure of :tiicfe1~-elt'i lpayment to comply with the terms of 'this Section '99 in any manner defeat the effectiveness of a redemption if t-h~~r"'of is given as otherwise prescribed in Section 12B. 128 of JI>!';,,,,,~,,,,,...,Ql~tion... '( i r ' Each notice of redemption shall set forth the and address of the e Paying Agent, a cont'act contact person h.the ;thepaying Agent and his or her. telephone number and CUSIP numbers, if any, of the 1995A Bonds called for ~edelnp1:ic)n, emption, the date of publication of the notice, the emption price, the date of the issue, the interest and the stated maturity date with respect to the Bonds to be e redeemed; and with respect to owners of,000,000 or more in principal amount to be redeemed, notice.shall 1 be sent by certified mail, return.;:.;freceipt requested. i\~$,~<'r.-iili!l995a ',Yr:!~;~uch ~- (ii) Each notice of redemption shall be sent at 'least thirty-five (35.> (35) days before the redemption date,and.and to the extent possible, at least two (2) days prior to t~e the general publication publication date by certified mail, return,rec71.pt 'requested.requested or overnight delivery service to all regl.ste~ed registered ~ecurities securities depositories then theri in the business of ho~d~ng holding substantial amounts of obligations of types compr~s~n? the 1995A Bonds (such depositories now being ;he The DePository D~p~s~tory Trust Company, New York, New York, Midwest Securities ecur~tl.es. Trust Company, Chicago, Illinois, and :hiladelph7a Depository Trust Company, Philadelphia, ennsylvanl.a) and to two or more national information ~~~ice~ that disseminate notices of redemption or Obligations l.gatl.ons such as the 1995A Bonds. 9

148 ~ ~.- B-26 (iii) Each notice of redemption shall be published e in THE BOND BUYER, New York, New York or, if THE. D BUYER is no longer published in. some other financial spaper.. or journal which regularly carries notices of emption of other obligations similar to the 1995A ds, such publication to be made at least thirty (30) ~ d s prior to the date fixed flxed for ror reaemptlon. redemption. p: (iv) 6 upon Upon the payment of the redemption price of khe 1995A Bonds being redeemed, each check or other ;rsransfer of funds issued for such purpose shall bear or,accompanied. by an advice showing the CUSIP number gntifying, by issue, the 19.9SA 1995A Bonds being redeemed lith the proceeds of such check or other transfer... b~.; (v) A second notice of redemption shall be mailed :the manner provided above to any registered owner who not tendered 1995A SA Bonds that have been called for edemlc ltion demption within sixty (60)' days after the applicable bdemption n. date. I7 SECTION 10. Funds and Accounts, Accounts. A. Establishment of and Pavments from the Building. There ar.e are hereby established and created two accounts - the Construction Fund created pursuant to the Bond ition to be designated-, designated; respectively, the "Reedy District Ad Valorem Tax Bonds, Series 1995A Builc Building iing :uction Account" (hereinafter referred to as the "Building rl1<~" uction Account") and the "Reedy Creek Improvement District Ad [~~~l~~!m &$@ern Tax Bonds, series Series 1995A Facilities Construction Account" (hbkinafter referred to as the "Series A Facilities Construction AC1eo\lnt"), Iratzpunt"), into which shall be deposited,the the amounts provided in $tion 11 below from which Costs of the Building and Costs of the ise:t'ie!s ;erfes A Facilities, respectively, and capitalized interest may be.?aid as set forth herein. herein. Costs of issuance of the 1995A Bonds,u... ~~~' be paid from t~e Building Construction Account and from the ; ::;e!rl;es A Facilities Construction Account on a pro rata basis, such?ro ration to be based upon the amount, of net proceeds to,be r..cleiposited ieposited in-each such account. The amounts in the Building "COnStruction Account and the Series A Facilities COnStruction Construction Account h (collectively, the "Construction ACCOUntS" Accounts" ),, Until until applied 1995 hereinafter provided, p:z::ovided, shall be held fort he the security Of of all the 1995A A Bonds outstanding. In addition to payment of Costs, funds may be disbursed disbur~ed from the Construction Accounts to PaY pay any any Rebate nlts due ~n accordance wi th the Bond Resolution and this ution.. ' Lii*fi) that tl1at the work to which the payment relates has b.:accomplished :'i.'~lcc:oltlplished in a manner satisfactory satisfa'ctory to the &kt,. and that the t'he amount to be paid does not exceed bbe&g'ation ~bj~~gation on account of which the payment is made Gt~trict'sdeterminations t's may be based -~ upon &f&wtes ~.t'es satisfactory to it ',provided by a consulting h m.': or engineers or construction manager or $pa=) )r: &\ '-.:A 1&4j++jA.)~ l~~< that the obligation obliqation was properly incurred and ;;~~o~.e charge against the appropriate Construction bn;t:.'and that the amount requisitioned is due and &IS),that with respect to'such items, there are no.lorsf liens, mechanics' liens, or other liens, dment llne~ht leases or conditional sale contracts which,must. #$ii$iqfied 'or discharged; before" the payments as ikitioned i;tioned therein are made,. or which will not be fcilllar':qed harged by such sueh payment; i and ',i ailg,r., :~ 'r..t.~~ (iv)). in the case ease of a a. transf.er of funds in i? the. ~'t.1lo~~s'.trruc:tl<onaecounts uction Accounts to pay any Rebate Amount or in l.n the' '.c~ie of a transfer of funds in the Construction.Accounts,:tQ:;:: pay y any capitalized capitali.zed interest, that such transfer is,. ;;:10. ~essa:r saw and in accordance accordanc:e with the provisions and.r\.!~.~ ftttj4u~rements :S of the Resolution. FS. :..':::.:/ :,....:. Any balance remaining. in the respective Construction' Accou'n~s' Accounits~ after the respective. completion' dates of the Building 4 and the Series SeL-ies A Facilities, and after the District has set aside : thedseries: shall t and amounts. th'e 'Series for payment seqreqated A Facilities of items but included not then in' due the and Cost payable, of the' Building ~hall be. set aside and segregated' from all other moneys of the District and 'applled'at applied at the discretion dxscketion of the District as follows: ",:. 'J~":'~' ;'4" '~'. * (i) (1) to redeem or purchase 1995A 3995A Bonds or a portion thereof, in the case of redemption, at the earliest redemption date permitted on which a premium or penalty for redemption is not required; or. - (ii) for any other legal purpos'e purpose for which such f~nds funds may be used by' the District,' provided that the' Dl.strict District obtains an opinion of Bond Counsel to the effect that such use is authorized under the Act, the Election Resolutions, the Bond Resolution and this R~solution Resolution and such use will not adversely affect the exclusion from federal income tax of interest on the 1995A 199SA Bonds. The District shall make payments from the Construction f to pa Costs of the Building and the Series A Facilities a ter mak~ng the following determinations: suuntil used as' provided in subsections (i) or (ii) above, Re such eh se?regated segregated amount may be invested as permitted by the Bond Resolution solutl.on but may not be invested (without an opinion of Bond 10 11

149 B-27 ;;the effect.that such' investment will not adversely w.r:-,cexclusion from gross income for federal income tax interest on any of the 1995A BOnds) to produce a yield greater than the yield on the 1995A Bonds, all in. with Section 148 of the.code. Any investment earnings in' the Construction Account from which derived ::ib,s provided _herein; provided, however, that the ;to the ex tent that it determines that adequate. funds ii.mit3clslt. in, the' applicable Construction Account to pay the hdtn~""'lding or. the Series A Facilities~ as the' case may it receives an opinion of' Bond Counsel that such will not adverselyaffec't the exclusion from gross ;federal income tax purposes of i,nterest on the 1995A. such earnings,,to pay operating costs of the Building ~ffacilities, as. the case may, be.. p.,,.'establishme nt of and Payments' from the,series 1995A ~~~~ There is hereby, established and created,a trust a the R~bate Fund created pursuant :to_ the Bond to be designated "Reedy Creek Improvement District Ad. Tax,' Bonds, Series' 1995A Rebate Account" (hereinafter ~o... as the "Series 1995A Reb~te Account") into which ~~ ~(;stlall be' :deposi ted as set forth,below. ~',:,.:.. ' t,:nji't'dt(t«!li,~i.!the_ District covenants' and agrees that it shall maintain.b~t;l~ja;jm 'a'il:'.erecords \&l:-xecoirds pertaining. to,and shall be responsible for ila'ttl1gjltgi: 'r -having made' all determinations and calculations of the Rbbak.OStAmaunt Ralt)at;ijS)Jnount,~for :for the 1995A Bonds. for each -Rebate Year within twenty~.fi twenty-five '((25) days after the end of such Rebate Year and within twenty:"'five twenty-five..(25) ) days after the final matqrity maturity of such 1995A Bonds. On orrbe'fore orrbefore the expiration of each such period, the District shall deposit into the Series 1995A Rebate- Account from any legally available funds of the District, an amount equal to the Rebate Amount 'with respect to the 19'95A 1995A Bonds for such Rebate Year. The District shall use such moneys deposited in the Series 1995A Rebate Account only for the payment of the Rebate Amo.unt Amount with respect to the 1995A Bonds to the United States as required by the Bond Resolution, which payments shall be made in installments, commencing not more than thirty (30) day after the end of the fifth Rebate Year and with subsequent payments to b~madenot be later than five (5)' years after the preceding payment was 'due, due; except that the final payment Payment shall be made within sixty (60) days after the final maturity of t.he the last obligation of the 1995A Bonds. In complying Witih. with the foregoing, the District may rely upon any instructions or op Opinions n10ns from f rorn Bohd Counsel. Counsel,. If any amount shall remain in the Series 1995A Rebate ACcount after payment in full of all 1995A Bonds issued hereunder ~~~ after payment in full of the Rebate Amount with respect to the h SA Bonds to the United States in accordance with. the terms lerefof, such amounts shall be available to the District for any aw ul purpose. L r.~~~m :TION 11. Application Amdication of Proceeds of 1995A 1995~ Bonds. The m the sale of the 1995A Bonds shall.be applied by the follows: f OllOWS : i).there shall first be paid into the Sinking Fund, 1).There shall first be paid into the Sinking Fund, and administered by the District pursuant to 'the Bond,an.,.amount equal to the accrued interest on. the 1995A.& by the District as part 6f of the proceeds o'f of,the s'ale sale &@SA 5'A' Bonds, which amount shall' be used on the first ent date for the ~ayment payment of interest due on the 1995A ( 2)". There shall next be paid into t~e the Building l1c:~:~:n. n Account Ac"Count an amqunt amount set forth' in a certifl.cate certificate of the the Board to~e.used be to pay Costs of the Building, a~ an l1)9lfql~th : rth in 'a a certificate of the President of the Board to ~~'~.y hqpay costs of issuance.of the 1995A Bonds and an amount f.*.l-*-j. ~.U!Q n;a certificate of the,president of the Board to be used &%tajazed :"ll!~l;;.cl""j,.zed interest on the 199.5A 1995A Bonds; and '''... (:.... ' I,de f *.&HE rij13). 3;). There' shall next be paid into the Series A Construction Account an amount set forth in a,1e :le~~:,of'. the. the-president,of the Board to be used to pay Costs b'j!e~seir'1,es Ir'ies A A.Facilities, an amount set froth in a certificate of *vw$dsnt of. the Board to be used to pay costs pf of issuance of ~~S~~~E~Qnlds 35ArBonds. and an amount set forth in a certificate of the,-,jntf*;of 1jd,:$n1tt..iof the Board to be used to pay capitalized interest in'terest on ~18951EL 9SA.:Bonds Bonds... '1",i~.i~ '.':~ '" ~ ::..:X.:, 'SECTl;QN KTION '12. :antia Form of 1995A Bonds. The 1995A Bonds shall 'dn-,substantially 1lY the form provided in Exhibit. "F" hereto, 4hh3e.ct.,".,. ~e,at. - to: such changes, t omissions and insertions and such filling &&.blanks.. and the officers ofh.cers executing the same shall approve, such ~~~ution 'Blte'cution to be conclusive evidence of such apprqval. approval. C' V Y ;'t ;. 'fb. SECTION 13. Approval ADD of Purchase Contract. The form of --- the Purchase Contract presented by the Original Purchaser is hereby a.pproved, approved, subject to such changes, insertions and omissions and spch sj1ch filling ffllincr of blanks therein as may be approved and made in such Purchase PWchase Contract Cokract by the President of the-board and the Secretary tq to' the Board BoaJ:d or the Director of Finance and Planning of the District, in a manner consistent with the provi$ions provisions of this Resolution, bwlution, such execution to be conclusive evidence of such a.l>proval. approval. Upon receipt r.eceipt of a disclosure statement from the Original Purchaser, the President of the Board and the Secretary to the Board or the Director of Financ~-and Finance-and Planning of the District are hereby authorized to accept the offer of the Original Purchaser to purcha~e Purchase the 1995A Bonds in an aggregate principal amount not :~ceedl.ng $60,000,000, at a TIC not to exceed the Maximum TIC, and at a Purchase purchase price of not less than the Minimum Purchase Price, rplus accrued interest thereon to the date of delivery, upon the terms and conditions set forth in, the Purchase Contract. The 12 13

150 ., 2.., B-28..'. ;'sjt(l~n t t '0 of the Board and the Secretary to the Board or the E"'r~'t ('.af Finance and Planning of the District are hereby O::,Wzed to ex:ectite execute the Purchase Contract for and on behalf of :be4),~'s~trict. pursuant to the terms hereof and of the Purchase conts",t.. '. ' '~e ril$t~;:-5 ~':......,,::,(.i!'.r :~'l.~\-:.s E0TION k2~-,-.~~son Pavinu paying Agent«Auent. Registrar Reuistrar and Authe~tic:ating Authenticatin W.,babesrBoard tddjie:; rboard hereby appoints Sun B'ank, Bank, National Assocloatloon Association a: as tlte~ptail.,; n.aying f&:.eaying Agent, and Registrar' in connection with the 1995A Bon&+u~der ondilitii)der' the terms of the Paying Agent Agreement, and Sun Bank, National :atio~al ASSbciation, A$S~ciation,.as as Registrar, Reqist:ar, is hereby appointed to act as au,.hebbieatihg Autheiti(:atitlg'agent agent.in,lon connection loon with the 1995A Bonds. i,section 15.. Pavinu paying Agent Aaen t Agre.ement. Aur eement. The Board hereby &pp,,,p&e, apro~es!-!;the.,~ - form' and content of the Payine;r Paying Agent Agreement atta@ed atta~lle.d. hereto h~reto as Exhibit: "D.". The President of and Secretary to the ijbar&are Bbar4:.. are her.eby hereby authorlozedto authorized to execute on behalf of the Board, the i~n9;.: -ncj:-- Agent Agreement substantially sub5tantially in 'the. form. f om attached h&et;r, hereto. with w.ith such changes, omissions and insertions as they, in their. their; sole.:discretion, may approve, such execution to be conclusive evideflce. evidence, of such approval. a&*: adv!." L.;.:.: ''',.f~("l:~~,section ~LGL: , Official Offi.cial Statements. Staten\ents. The Board hereby approves, approye:s:~the form and content of the Preliminary Official Statement attached 'hereto as Exhibit.. "C" c.. and ratifies the use and distribu-. tionof of a P]l:elimj;nary Pz;elirninary Official Statement by the Original Purchaser in cotin'ec tion'with cotimotion the marketing of the 1995A Bonds. The President of the Board or' the Secretary is hereby authorized to make any findings. with regard to the Preliminary Official Statement required undwsecurities underrsecurities and Exchange Conunission Commission Rule 15c ~2-12 and is hereby authorized to execute, on behalf of the Board, the 1995A Final Official' Statement relating' to the. Series 1995A Bonds with such changes, omissions and insertions from the Preliminary preliminary Official Statement as the officer or offic~rs officers executing the same may, in his or their sole' discretion, approve, such execution to be conclusive evidence of such approval. -.. SECTION 17., Letters of Representations. Remesentations. The Board here- hereby by approves the form and content of the Letter of Representations Pertaining pertaining to the' 1995A 199SA Bonds between the District and The Depository -Trust Company ("DTC") attached hereto as Exhibit "E" (the "Letter of Representations"), Representations"). The President of and the Secretary to the Board are hereby authorized to execute, on.behalf Of ~f the District,. the Letter of Representations Represeatations substantially in the form attached hefeto, hereto, with such changes, omissions and insertions as the officer executing the same. saa~ '"may, in his or her sole discretion, approve, such execution to be conclusive evidence of such discre- approval... o SECTION 18. Continuing C! Disclosure.. (A) So SO long as.any any of Of the 1995A Bonds remain Outstanding,. the District Dis.tri~t wwill provide-to One ne 01 or nore more nationally recognized municipal securities information ormatlon 1 within 180 days of the end of each,fiscal.fiscal Year, a cqp,ofthe District's audited general purpose'financial,,,~or such h Fiscal Year. "Uk So long as any of 1995A 95A :Bonds remain Outstanding,,will also in good faith endeavor t9 to provide one or ',1y recognized municipal ipal ~,ecurities securities information,u(;;n;;,.l,l;;;e of the occu):'rence occurrence o,f of'any of the. following Ire~~~~~ upon n the District having, havsng. ac~ual actual knowledge thereof: 1.-;" "... 1-' 3.. ' '~ii4.) 1.:: ~1::,V.;::.:.. ',, -'(~l' delinquencies delinquenbies. in the payment of principal 'or ~'I"'I;~gt r,e,at,.on the 1995A Bonds;', " : <, "(ii')' material non-payment de,f~ults de.f aults hereunder herer'lnder or ""'" ' ' " der :,:t;he, Bond Resolution;,,U!l~cheduled heduled draw';' draws on any credit, credit. enhancement ':tt.a.~(~f;,~nng any 1995A Bonds~' Bonds; - " OdetY,tih,.1' ::"". limd,',~sdiv) receip1:, ipt of o'f any adverse opinion of Bond Counsel f"llg.~ating to,, or the occurren~e occurrence of'any event known to,'j;' ::'~q,ve~sely affect, the exclusl.on exclusion fro,m from gross ;,ncome income for,.~igeral income.tax purposes of.interest on the 1995A, ,;~l:inds.,' I!'<!!'''- t, HC';" ; "... '(r'!.~k;~ (v) material texial ' amendments'. 'hereto hereto'. or,to.to the Bond ~$solution; ii: '.... ;.:',,;(vi) the redemption of any 1995A Bonds other than p~rsuant toa mandatory sinking fund. redemption; ',', (v.ii:) the e defeasance of any 1995A i995a Bonds;,(viii), material matters,adversely 'adversely affecting the ad valorem taxes of the District; (ix,) ( ix)the 'the pledging of any supplemental. supplemental,. revenues hereunder or.under the Bond Resolution; and (x) any changes in the credit ratings assigned to' the 1995A Bonds. (C). The District shall shall also' provide such information to the tihe Registrar, Registrar. The Registrar is hereby authorized to provide such nformation to any requestiqg requesting Bondholder or potential Bondholder, Provided provided that the Registrar shall be entitled to charge such requesting ~eque~ting Bondho.lder Bondholder or potential Bondholder an amount sufficient to 0hi reimburse the Registrar for costs incurred for copying and s pping such infomation. information. \.\, ', v,(0) (D) By endeavoring to provide information pursuant to this Section, the District intends only to in good faith attempt to

151 B-29 ~"",...",... ble e information that might not otherwise be easily $0.interested parties. The dissemination of certain on., or..notices pursuant pur$uant to this Section shall not n0.t be as a'representation a.,representation by the District that other matters be material to an investment decision in the 1995A Bonds transpired; and-failure to provide information or. notice. :r.e'ferred :referred to in this Section Sectidn shall not.be construed as a a&o~ tij.on: on behalf of. the District that matters that may be to~alt investment to: an:.investment decision with respect. to the 1995A Bonds transp.ired. tr,ansp.ired. Nothing in this Section is. intended to to. impose o.i:strict,. ict,. and this Section shall not be constx'ued construed as upon.the District, any disclosure obligations beyond those pplicable law. 1laI~!!r~p br applicable law..... ; i>~~;..sect,ion. SElCT.ION. 19. Amendment ent Of of Bond Resolution..., In order to. "'ke.r' :;;tain, tain,ynendments ~~endments to Section 15F 1SF in or~e~. order.to comply. with the ~c\ir"requirements.requirements of the Code, wh~chamendments which the Board l\ereby hereby ffnd$:)~#ill:"~be Zllzhe immaterial to. the I HO.lders Holders of.any BOn?S Bonds Outstanding urider':the Bond Resolution, the provisions of Sectl.on Section. 1SF 15F of the the Bond.Resolt:l'tion are hereby amended' amended in their entirety to read as \ follo~f\){" '... \... :(';t,hi;' :~:;' eh,;-, 83.!~....':F::.. E-...COMPLIANCE WITa WITH TAX REQUIREMENTSi REQUIREMENTS; REBATE FUND.. The ~tr.icthereby w,trict covenants and agrees, for the Qenefit benefit 'of the 'Holders.Holders from time to time the of 'each Series of Bonds that are, not 'T:axableBonds, Taxable to comply with the requirements.applicable to ilr::con.tained ie:contained in the Internal Revenu~' Revenue Code of 1954, as amended,.i1fhapplicable, Qf,j,applicable, and contained in Section 103 and Pat:t Part.. IV of Subchapter Subahapter B. B of Chapter I 1 of the.. Internal Revenue Code of 1:;,9,:.8' , "as.; amended., amended, to the.extent necessary to preserve the exclusion of interest on such Series, of Bonds from gross income for federal income tax purposes. Specifically, without ihtending i-htending to limit in any way the generality. of the foregoing, the District. covenants and agrees; agrees:.. (1) with respect' respect to. each Series of. Bonds other than Taxable Bonds a'nd and other than the Series 1972 Bonds, to pay to the United States of America from the funds and sources of revenues pledged to.the payment of' such Series of. Bonds, I and from any other leg,ally legally available funds, fundsc at the times required pursuant to Section 148(f) of the Code, the amount, if any, required by Section 148(f) of the. Code the exclusion fro~ from gross income. for federal. income tax purposes of interest on such Series of Bonds (the... Rebate IIRebate Amount ); It') ; (2) with respect to each S~ries Series of Bonds other than Taxable Bonds and other than the Series 1972 Bonds, to maintain and retain all records pertaining to and to be r~~ponsible responsible 'for making or causing to be made all determinations and 16 ~:.:.f j',....: :wlculations :oalculations of the Rebate Amount and required,;c.:.g,:".:.,(',!.payments,payments of the Rebate Amount as shall be necessary, :<, to comply with the Code;.' '. (.3)' (3)'. with respect to each Series, of Bonds,', ';-" dther other than Taxable Bonds,' ' to. to, refrain from' 'using ';; :', procee'ds proceeds 'from any Series of Bonds in a manner,that '; VI -would cause causa.such Series series of Bonds or any of the,;'t-,"."bonds;'of..bontls('of' such Series. or' portions thereof, to bear b~ar!'.'ip,';,tnterest.-$hteeest. that is not excludable from gross income " :, for federal income tax purposes pursuant to Section,'..:!:-,'t, 103(a)..of the Code; and... '". (4)'. with respect to.each Series of Bonds ;,'.;'}~ --other &t%er'than Taxable Bonds, to refrain' ' from taking Sc.:acy Se,' any action-.that a(:tion, that would cause any Series of Bonds or i. (thai the:; any:port.idn any; portion theteof thereof to, become arbitrage bonds. boiids under unde'r.:.~..ia',~~ectkorl..l03(b),,;~,fec~ectioiil03(b) and SeatioII Section. 148 of the Code. The Diktrict Di:strict 'understands, that. that, the foregoing covenants lants :fmpo%e., :impose,continuing obligations 'on 'the District to comply with i*.r r the th~ r;tequkements requirements of Section Sectio~ 103 and.part,part IV of Subchapter B B' Of o,f G chapter. Chapter,.1:' '1," of the Code so long as. as, such requirements' are,applicable applicable.,.i. ~.' :'.,1, l-.l 1 % I The District covenants and agrees that it shall maintain and re'tain retain all records,pertaining to and shall be responsible for making or having made all determinations and calculations of the Reba'te Rebate Amount for each Series of Bonds other than 'the Series 1972 Bonds and Taxable Bonds in the manner and,at the times required 'in a subsequent resolution adopted by the Board with respect to such Series of, Bonds. A special fund designated' as the "Rebate 'Fund" is hereby created and established. Upon the issuan e issuanqe of each Series of Additional Bonds, except Taxable Bonds and except as otherwise provided in a subsequent resolution adopted by the Board with respect to such Series of Bonds, the District shall create a separate account within the Rebate Fund. The District shall deposit into the account in-the Rebate Furid Fund created with resp'ect respect to a Series of Bonds, from any leqa;lly legally available funds of. the, District, an amount equal to the Rebate Amount with respect to such Series of Bonds. The District sqa11 shall use such moneys deposited in the Rebate Fund only for the payment of the Rebate Amount to the United States as required by Section 15F above in the manner and at ~he the times required by a subsequent resolution adopted by the Board with respect to such Series of Bonds. If any amount shall remain in any rebate account in the Re~ate Rebate Fund after payment in full of the Series of Bonds for wh~ch which such account was established, and after payment in full of the Rebate Amount with respect to such Series of Bonds to 17

152 B-30..united ~u.nited States in accordance with the terms hereof, such nts shall be available to the th: District for any lawful.eachrebate account accoun.t in the Rebate Fund shall' be. held rate te'and apart from all other.funds and accounts of the t:he 1B1:,r:J;~;::'e:, riqk, shall be impressed with a lien. in favor' of the ~""""..,.' rs of the Series of Bonds for which such account was -~" " "hed~ $&shed, only after all obligations of the District with ~EI~~. et k~ to.payment of the Rebate,Amounts with respect to such of. Bonds have, been fully satisfied and the moneys nej;;~+..'l n.. shall be available for use orily only as herein provided. ~. ~'\: ~ t... :. "ll1:q,\:withstandinq twithstanding any other prov,ision provision of this resolution., resolution, ~M.~.~ation igation to pay over the.rebate 'Rebate Amount with -respect to ~.iis~.ri1.-esof, sics.of: Bonds to the United States. states and to. comply with all.-,.,requirements," of this Section ' 15F shall.survive the e8;ance e;(!.~ance or payment in full of any'series of Bonds. ;; ':'SEC'l'ION CTION 20, Bond.Insurance. The President 'of '0: the Board. Secretary etary to the Board Bo~rdor.or the Director Oirector of Finance and of<:the District are hereby authorized authc;>rized to'negotiate.with a 'l.n''''''''''t'' '~r:for :.for rnunicpal municpal bond insurance insuranc.e with respect' to the 1995A.,... to o execute a commitment and any. other documentation in. connection therewith. PUb~~.,(:,:,. ", SECTION A AuthoriZations. V'3s.d 'm:~d.~r'.' YIS.. i,:;:(e6pi<:.' ',.2t+eeets.' A. The Presidemt President of the Board and the,secretary to the,2o.~m1 Bo,&&sr qr.the,. Director of Finance and Planning of the Distl;ict District are hereby authorized and directed to sign the Purchase Contract at the. places provided. therein and to approve such changes, I in accordance with, wibh ~hetermsof the this Resolution, to. the Purchase Contract as they may: <ieem deem advisable,. The signature of the President and the Secr~taryor Secretary Director of Finance on the Purchase Contract shall be concl.ljsive Conchsive,evidence of the acceptance and the terms tenns thereof. The president President of the Board and the Secretary to the Board or the Director.Director of' Finance and Planning of the District are hereby authorized and directed to deliver the, Purchase Contract immediately following the ex~cution execution thereof pursuant to the terms hereof to the representa~ive representative of the Original Purchaser.. B B..... The President of and the ~ecretary qecretary to the Board or OX the~r. their duly authorized' alternative officers are hereby' authorized a~d and d~rected directed on behalf of the District to execute the 1995A Bonds (~ncludinq (including any' temporary bond or" or-bonds) as provided in the Bond Re~Ol?tion Resolution and herein and any of such officers is hereby authorized :~ and d~rected directed upon the execution of the 1995A Bonds in substantially t e form'and manner set forth herein, to deliver the 1995A 2995A Bonds in the h~hamo~nts mxmts authorized to be issued hereunder to the Registrar for :~ authentication ent~cation and delivery to or upon the order of the Original pursuant to the Purchase Contract upon payment of the rchaser pursuant to the purchase Contract upon payment of the L 18 I, d.1 ~ i I i " urchase pfice price and upon Compliance compliance by the Original Origi~al Purchaser with,',~he terms terns of the t,he Purchase Contract, Contract. C., The President, Vice President or Treasurer of and Secretary secretary and ',Assistant Secretary secretary to the Board and the Director of Finance and Planning of :the District, Distr.i,ct, and ~nd such s~ch other o,t~er officers of,the Board legally lega~ly authorized authorlozed to take action acti6n,lon in their t~elor.absence, and,~such other,of~locers, officers, employees e~ployees or agents o.f of the District D~strloct as may be, 'designated by the President, PreSlodent, are each deslognated designated as agents of the ':~Board and the: District in connection with the issuance and delivery ': af of the 1995ABonds and are authorized a~thorized and empowered, collectively,:':or individually, to take all, action and steps and to execute all ';,>instruments, 'documents and contracts on behalf of the Board and the "i';'oistrict istrict that are necessary or desirable in connection with the ';\1:xecution and de,livery delivery of the 1995A 199SA 'Bonds, and which are ar,e specifi specifi- '~l;cally ally authurized authorized or pr are not inconsistent with the terms and,!-nd ::~rovision~'_ ovisions of ~f. this Resolution or the Bond Resolution Res,olution or any action loon,':;~j$elating eo to the, 1995A Bonds heretofore her~tofore taken by the Board. such Such '~ll:officers ficers,and those SO so designated are hereby charged with the '~:~}responsibility for the,issuance of.the.t~e' 1995A Sonds Bonds... >:~t;~', SECTION 22. Severability. 'If anyone or more of the SECTION 22. Severability. If any one or more of the ");~ovenants, agreements or provisions of' this Resolution shall be,, : f.~~held Id contrary to any express provisions 6 df law or contrary to the ';~I"~~liCY licy of express law, I.though not expressly prohibited, or against }J;,~,ublic policy, or shall for. any reason whatsoever' be held invalid, "~{i;',hen such covenants, agreements agreement's or 'provisions shall be null and ;void '/i:void ands.hall shall be deemed- separate from the remaining covenants, ':;'~9reements *agreements or provisions of this' Resolution or of the 1995A Bonds ' fssued issued hereunder. SECTION 23. No Third Partv Party Beneficiaries. Except Ex.cept as "herein otherwise expressly- provided, nothing in this Resolution expressed or implied is intended or shall be construed to confer dpon upon any person, firm or corporation other than the parties hereto ; a.nd and the owners and holders of the 1995A Bonds issued under and 'secured by this Resolution, any right, remedy or claim, legal or equitable, under or by reason of this Resolution or any provision hereof, this Resolution and all its provisions being intended to be and being for the sole and exclusive benefit of the parties hereto and ahnd the Holders from time to time of the 1995A Bonds issued hereunder. SECTION 24, 24. Controllinq Controlling Law; w: Members ers of Governing Body 9f 2 Issuer Not Liable. ~ All l covenants, l stipulations, obligations and agreements of the District contained in this Resolution shall be deemed ~heme~ to,be covenants, stipulations, obligations and agreements -of 'of the b e District Dlostr~ct to the full extent authorized by the'act and provided by sri the Constitution C~nstitution and laws of the State of Florida. No covenant, de stipulation, pulatloon, obligation or agreement contained cont~ined herein shall be deemed an emed to be a covenant,' stipulation, stipulation" obligation or agreement of Y Present present or future member, agent or employee of the Board or the 19

153 B-31 District in his individual capacity, and neither the members of the Board nor any official executing the 1995A Bonds shall be liable ersonally on the 1995A Bonds or this Resolution or shall be ;ubject to any personal liability or accountability. by reason of the issuance o~ the execution by the Board or such members thereof. SECTION 25. Repeal of Inconsistent Resolutions. All resolutions 'or portions thereof previously adopted by the Board, other than the. Bond Resolution, which. are incons~stemt with the provisions of.this resolution are hereby repealed to the extent of such inconsistency! SECTlON 26. Effective Date. This Resolution shall effective immediately upon its adoption.. This.Resolut~on approved. and adopted by the Board.of supervisors of the Reedy Creek Improvement District, this 21st day of April, -1"995.,. (SEAL) RESOLUTION NO. 546 A RESOLUTION OF THE REEDY CREEK IMPROVEMENT DISTRICT SUPPLEMENTING RESOLUTION NO. 245 ADOPTED ON NOVEMBER 15, 1991, AS AMENDED; AUTHORIZING THE ISSUANCE OF REEDY CREEK IMPROVEMENT DISTRICT AD VALOREM TAX REFUNDING BONDS, SERIES [TO BE DESIGNATED] IN ONE OR MORE SERIES AND AT ONE OR MORE TIMES IN AN AGGREGATE PRINCIPAL AMOUNT NOT EXCEEDING $115,000,000 (COLU:CTlVEL Y, THE "REFUNDING BONDS") TO PROVIDE FOR THE ADVANCE REFUNDING OF ALL OR A PORTION 01<' THE DISTRICT'S AD VALOREM TAX BONDS, SERIES 2004A, AD VALOREM TAX BONDS, SERIES 2004B, AD VALOREM TAX BONDS, SERIES 2005A, AND AD VALOREM TAX REFUNDING BONDS, SEIUES 2005B; DELEGATING TO THE PRESIDENT, THE SECRETARY, THE DISTRICT ADMINISTRATOR, THE DEPUTY DISTRICT ADMINISTRATOR AND DISTRICT COMPTROLLER THE AUTHORIZATION TO AWARD THE SALE OF EACH SERIES OF THE BONDS ON A NEGOTIATED BASIS; APPROVING THE FORM AND CONTENT OF AND AUTHORIZING THE DISTRIBUTION OF A PRELIMINARY OFFICIAL STATEMENT AND THE EXECUTION AND DELIVERY OF A FINAL OFFICIAL STATEMENT WITH RESPECT TO EACH SERIES OF REFUNDING BONDS; APPROVING THE FORM OF AND AUTHORIZING THE EXECUTION AND DELIVERY OF A CONTRACT OF PURCHASE WITH RESPECT TO EACH SERIES OF REFUNDING BONDS; APPROVING THE FORM OF AND AUTHORIZING THE EXECUTION AND DELIVERY OF ONE OR MORE ESCROW DEPOSIT AGREEMENTS WITH RESPECT TO THE REFUNDED 2004A BONDS, REFUNDED 2004B BONDS, REFUNDED 2005A BONDS, AND REFUNDED 2005B BONDS; AUTHORIZING U.S. BANK NATIONAL ASSOCIATION TO ACT AS REGISTRAR, PAYING AGENT AND AUTHENTICATING AGENT WITH RESPECT TO SUCH REFUNDING BONDS AND AS ESCROW AGENT WITH RESPECT TO THE REFUNDED BONDS; APPROVING THE FORM OF AND AUTHORIZING THE EXECUTION AND DELIVERY OF ONE OR MORE REGISTRAR AND PAYING AGENT AGREEMENTS AND ONE OR MORE DISCLOSURE DISSEMINATION AGENT AGREEMENTS RELATING TO THE REFUNDING BONDS; MAKING CERTAIN FINDINGS, REPRESENTATIONS AND COVENANTS WITH RESPECT THERETO; PROVIDING CERTAIN OTHER DETAILS WITH RESPECT THERETO; AND PROVIDING AN EI<'FECTIVE DATE. 20 WHEREAS, the Board of Supervisors (the "Board") of the Reedy Creek Improvement District (the "District") previously adopted a Resolution on April 4, 1972 (the "1972 Resolution") authorizing the issuance of certain ad valorem tax bonds and additional bonds thereunder on a parity therewith; and

154 B-32 WHEREAS, on November 15,1991, the District adopted Resolution No. 245 (the "1991 Resolution") providing for the amendment and restatement of the 1972 Resolution as provided therein; and WHEREAS, on April 21,1995, the District adopted Resolution No. 313 (the "1995A Resolution") supplementing and amending the 1991 Resolution (the 1991 Resolution as amendcd by the 1995A Resolution is hereinaftcr referred to as the "Bond Resolution") to authorize the issuance of the District's Ad Valorem Tax Bonds, Series 1995A and to amend Section 15F of the 1991 Resolution regarding compliance with tax requirements; and WHEREAS, on November 19,2003, the District adopted Resolution No. 441 (the "2004 Resolution") supplementing the 1991 Resolution (the 1991 Resolution as amended by the 2004 Resolution is hereinafter referred to as the "2004 Bond Resolution") to authorize the issuance of the District's Ad Valorem Tax Bonds, Series 2004A (the "Series 2004A Bonds") and Ad Valorem WHEREAS, on November 15, 1991, the District adopted Resolution No. 245 (the "1991 Tax Bonds, Series 2004B (the "Series 2004B Bonds"); and WHEREAS, on April 21, 2005, the District adopted Resolution No. 450 (the "2005 Resolution") supplementing the 1991 Resolution (the 1991 Resolution as amended by the 2005 Resolution is hereinafter referred to as the "2005 Bond Resolution") to authorize the issuance of the District's Ad Valorem Tax Bonds, Series 2005A (the "Series 2005A Bonds") and Ad Valorem Tax Refunding Bonds, Series (the "Series 2005B Bonds"); and WHEREAS, as a result of a decline in interest rates the District now desires to issue Reedy Creek Improvement District Ad Valorem Tax Refunding Bonds, Series [to be designated] (the "Refunding Bonds") in one or more series and at one or more times in an aggregate principal amount not exceeding $115,000,000, pursuant to the 2004 Bond Resolution and 2005 Bond Resolution, as applicable) and this Resolution, payable on a parity with the bonds outstanding under the Bond Resolution to provide for the advance refunding of all or a portion of the District's Series 2004A Bonds (the "Refunded 2004A Bonds"), all or a portion of the District's Series 2004B Bonds (the "Refunded 2004B Bonds"), all or a portion of the Series 2005A Bonds (the "Refunded 2005A Bonds") and all or a portion of the District's Series 2005B Bonds (the "Refunded Bonds" and, together with the Refunded 2004A Bonds, the Refunded 2004B Bonds, and the Refunded 2005A Bonds, the "Refunded Bonds"), as more particularly described in Exhibit A attached hereto; and WHEREAS, the Board wishes to approve the form and content of and authorize the execution and delivery of one or more Escrow Deposit Agreements relating to the Refunded Bonds (the "Escrow Deposit Agreements"), the proposed form of which is attached hereto as Exhibit G, to provide for the payment of the Refunded Bonds, and to appoint U.S. Bank National Association to act as escrow agent thereunder with respect to the Refunded Bonds; and WHEREAS, thc Board wishes to approve the form of and authorize the execution, subject to the conditions hereinafter set forth, of one or more Contracts of Purchase substantially in the form of Exhibit C attached hereto (the "Purchase Contracts"), with the underwriters named therein (the "Underwriters"), with respect to the Refunding Bonds; and WHEREAS, the Board desires to approve the form and content of one or more Preliminary Official Statements relating to the Refunding Bonds substantially in the form of Exhibit E attached hereto with such changes as are appropriate to reflect thc terms of the related series of Refunding Bonds, to deem each "final" for purposes of Rule l5c2-12 of the Securities and Exchange Commission (the "Rule") and to authorize the execution and delivery of a Final Official Statement relating to the related series of Refunding Bonds (each a "Final Official Statement") with such changes from the Preliminary Ofticial Statcmcnt as shall be approved by the President, the Secretary, the District Administrator, the Deputy District Administrator or the District Comptroller (the "Official Statement"); and WHEREAS, the Board wishes to approve the form of and authorize the execution of one or more Registrar and Paying Agent Agreements, in substantially the form of Exhibit D attached hereto (the "Paying Agent Agreement") and to appoint U.S. Bank National Association to act as the registrar and paying agent thereunder and as authenticating agent for the related series of Refunding Bonds; and WHEREAS, the Board wishes to approve the form and content of and authorize the execution and delivery by the District of onc or more Disclosure Dissemination Agent Agreements in connection with the Refunding Bonds, the proposed form of which is attached hereto as Exhibit H, and WHEREAS, because of the current conditions existing in the market for securities similar to the Refunding Bonds, the Board finds it appropriate to delegate to the President, the Secretary, the District Administrator, the Deputy District Administrator or the District Comptroller, the authority to accept an offer from the Underwriters to purchase a series of Refunding Bonds pursuant to the terms of the related Purchase Contract, if certain conditions set forth in this Resolution are met; and WHEREAS, the Board desires to take certain other actions with respect to, and to make other authorizations related to, the issuance of the Refunding Bonds; NOW THEREFORE, BE IT RESOLVED BY THE BOARD OF SUPERVISORS OF THE REEDY CREEK IMPROVEMENT DISTRICT THAT: SECTION 1. Authority. This Resolution is adopted pursuant to Chapter , Laws of Florida, Special Acts of 1967, Chapter 132, Florida Statutes, and other applicable provisions of law (collectively, the "Act") and the 2004 Bond Resolution or 2005 Bond Resolution, as applicable. SECTION 2. Definitions. All terms used herein in capitalized form, unless otherwise defined herein, shall havc the same meanings as are ascribed to such tcrms in the 2004 Bond Resolution or 2005 Bond Resolution, as applicable. All terms defined in the preamble hcreto shall have the meanings ascribed therein. As used herein, the following terms shall have the meanings set forth below: "2004A Bonds" means the $63,520,000 aggregate principal amount Reedy Creek Improvement District Ad Valorem Tax Bonds, Series 2004A. 2 3

155 "2004B Bonds" means the $10,230,000 aggregate principal amount Reedy Creek Improvement District Ad Valorem Tax Bonds, Series 2004B. "200SA Bonds" means the $18,92S,000 aggregate principal amount Reedy Creek Improvement District Ad Valorem Tax Bonds, Series 200SA. "200SB Bonds" means the $90,310,000 aggregate principal amount Reedy Creek Improvement District Ad Valorem Tax Refunding Bonds, Series 200SB. "2010 Bonds" means the $12,IS0,000 aggregate principal amount Reedy Creek Improvement District Ad Valorem Tax Refunding Bonds, Series hereunder. hereunder. hereunder. hereunder. "Refunded 2004A Bonds" means the 2004A Bonds which are to be refunded "Refunded 2004B Bonds" means the 2004B Bonds which are to be refunded "Refunded 2005A Bonds" means the 2005A Bonds which are to be refunded "Refunded 2005B Bonds" means the 2005B Bonds which are to be refunded B-33 "2011 Bonds" means the $47,71S,000 aggregate principal amount Reedy Creek Improvement District Ad Valorem Tax Refunding Bonds, Series "Closing Date" means the date of issuance of the Refunding Bonds. "Code" means the Internal Revenue Code of 1986, as amended, or any corresponding provision of any future laws of the United States of America relating to federal income taxation, and except as otherwise provided herein or required by the context hereof, including interpretations thereof contained or set forth in the applicable regulations of the Department of the Treasury (including applicable final regulations and temporary regulations), the applicable rulings of the Internal Revenue Service (including published revenue rulings and private letter rulings) and applicable court decisions. "Escrow Agent" means U.S. Bank National Association, appointed hereunder to serve as escrow agent under the Escrow Deposit Agreements, its successors or assigns. "Escrow Deposit Agreements" means the Escrow Deposit Agreements with respect to the Refunded Bonds, the proposed form of which are attached to this Resolution as Exhibit G, each between the District and the Escrow Agent, pursuant to which a portion of the proceeds of the Bonds, together with investment earnings thereon and certain other funds and investments will be held in irrevocable escrow for the payment of the principal of and interest on the related series of Refunded Bonds. "Paying Agent" means U.S. Bank National Association, appointed hereunder to serve as Paying Agent and Registrar under the Paying Agent Agreement, its successors or assigns. "President" means the President or Vice President of the Board. "Rebate Year" means, with respect to the Refunding Bonds issued hereunder, the twelve-month period commencing on the anniversary of the applicable Closing Date in each year and ending on the day prior to the anniversary of such Closing Date in the following year, except that the first Rebate Year with respect to each series of Refunding Bonds shall commence on the applicable Closing Date and the final Rebate Year shall end on the date of final maturity of such Refunding Bonds; or such other period as regulations promulgated by the United States Department of Treasury may prescribe. SECTION 3. "Secretary" means the Secretary to the Board. Findings and Awards. A. The District is authorized by the Act to own, acquire, construct, equip, operate, improve and maintain roads located within or outside of the District and projects of all types and descriptions and facilities for the carrying out of the functions of the District and to issue ad valorem tax bonds to pay all or part of the cost of the acquisition, construction, maintenance and operation of any project authorized by the Act. B. The primary livelihood of the residents and taxpayers of the District is tourism and the provision of improvements to the roads and other public ways of the District will enhance the District and benefit the residents and taxpayers thereof by promoting development and having a positive impact on the general economy ofthe District. C. It is necessary, desirable and in the best interest of the District that the Refunding Bonds be issued to advance refund the Refunded Bonds. D. The Refunding Bonds will not be issued until all conditions relating to the issuance of Additional Bonds under the Bond Resolution have been met, including, but not limited to, (i) the Maximum Bond Service Requirement on all Bonds issued under the Bond Resolution and then Outstanding and the Refunding Bonds to be issued hereunder shall not exceed eight-five percent (85%) of the estimated annual collections from Ad Valorem Taxes calculated as provided in the 2004 Bond Resolution and the 2005 Bond Resolution, as applicable, and (ii) the principal amount of the proposed issuance of Refunding Bonds together with all other Bonds then outstanding will not exceed in the aggregate fifty percent (50%) of the assessed value of the taxable property within the District, and when issued, the Refunding Bonds will be payable on a parity with the District's Outstanding unre±unded 2004A Bonds, unrefundcd 2004B Bonds, unrefunded 2005A Bonds, unrefunded 2005B Bonds, 2010 Bonds and 2011 Bonds and with any other additional parity bonds hereafter issued under the terms of the Bond Resolution. E. The District will issue the Refunding Bonds (other than the Bonds issued to refund the Refunded 2005B Bonds) with the intent that the interest thereon will be excludable from the gross income of the Holders thereof for federal income tax purposes. Refunding Bonds 4 5

156 B-34 issued to refund the Refunded 2005B Bonds are expected to be includable in the gross income of the Holders thereof for federal income tax purposes. f. It is hereby found, determined and declared that a negotiated sale of the Refunding Bonds is in the best interest of the District and is found to be necessary on the basis of the following reasons, as to which specific findings arc hereby made: (i) Due to the volatility of the municipal market, including the market for tax exempt securities such as the Refunding Bonds (or taxable securities with respect to the Refunding Bonds refunding the 2005B Bonds), the District must be able to enter the market at the most advantageous time, rather than at a specific advertised date, thereby permitting the District to obtain the best possible price and interest rate with respect to the Refunding Bonds. (ii) The Underwriters have participated in structuring the issuance of the Refunding Bonds and can assist the District in attempting to obtain the most attractive financing for the District. (iii) The nature of the Refunding Project is a complex transaction which requires the assistance of an underwriter in dealing with prospective investors. G. It is hereby ascertained, determined and declared that it is in the best interest of the District to authorize each of the President, the Secretary, the District Administrator, the Deputy District Administrator and the District Comptroller to accept an offer of the Underwriters to purchase each series of the Refunding Bonds at a private negotiated sale upon the terms and conditions set forth herein and in the related Purchase Contract or as determined by the President, the Secretary, the District Administrator, Deputy District Administrator or District Comptroller in accordance with the terms hereof. H. The Underwriters will provide to the District prior to the execution of each Purchase Contract a disclosure statement regarding the related series of Refunding Bonds, containing the information required by Section (6), Florida Statutes. 1. The District is authorized under the Act and Chapter 132, Florida Statutes, to issue refunding bonds and to deposit the proceeds thereof in escrow to provide for the payment when due of the principal of, interest on and redemption premiums, if any, in connection with the Refunded Bonds. J. The Refunding Bonds to retlll1d the Refunded Bonds shall only be issued at a lower average net interest cost rate than the average net interest cost rate of the related series of Refunded Bonds and the rate of interest borne by the Refunding Bonds shall not exceed the maximum interest rate established pursuant to the terms of Section , Florida Statutes. It is estimated that the present value of the total debt service savings anticipated to accrue to the District from the issuance of Refunding Bonds, calculated in accordance with Section (2), Florida Statutes, shall be at least 5.00% of the aggregate principal amount of the Refunded Bonds to be refunded. K. The principal amount of each series of Refunding Bonds to be used to refund the Refunded Bonds shall not exceed an amount sufficient to pay the sum of the principal amount of the related Refunded Bonds that are outstanding on the date of issuance of such series of Refunding Bonds, the aggregate amount of unmatured interest payable on such Refunded Bonds to and including the date that they are called for redemption, the applicable redemption premiums, if any, related to such Refunded Bonds that are called for redemption, and the costs of issuance of the related series of Refunding Bonds, all in accordance with Section , Florida Statutes. 1. The sum of the present value of the total payments of both principal and interest to become due on the portion of the Refunding Bonds (excluding all such principal and interest payments as will be made with moneys held by the Escrow Agent under the Escrow Deposit Agreements) allocated to the refunding of the related Refunded Bonds and the present value of costs of issuance of such portion of the Refunding Bonds, if any, not paid with proceeds ofthe Refunding Bonds, will be less than the present value of the principal and interest payments to become due at their stated maturities, or earlier mandatory redemption dates, on the related Refunded Bonds. M. The Refunding Bonds shall in no event mature later than the maturity date ofthe related Refunded Bonds. N. The first installment of principal of each series of Refunding Bonds shall mature, or be subject to mandatory redemption, not later than the date of the first stated maturity or mandatory redemption of the related Refunded Bonds occurring after the issuance of such series of Refunding Bonds. O. Each series of Refunding Bonds shall not be issued until such time as the District Comptroller shall have filed a certificate with the Board setting forth the present value of the total debt service savings which will result from the issuance of such series of Refunding Bonds to refund a portion of fhe Refunded Bonds, computed in accordance with the terms of Section , Florida Statutes, and demonstrating mathematically that the series of Refunding Bonds are issued at a lower net average interest cost rate than the related Refunded Bonds. P. Each series of Refunding Bonds shall only be issued at a ratc of interest not exceeding the maximum interest rate established Pursuant to the tenns of section , Florida Statutes. SECTION 4. Resolution to Constitute a Contract. In consideration of the acceptance of the Refunding Bonds authorized to be issued hereunder by those who shall hold the same from time to time, this Resolution, together with the Bond Resolution, shall be deemed to be and shall constitute a contract between the District and the Bondholders of the Refunding Bonds. The covenants and agreements herein set forth to be performed by the District shall be for the equal benefit, protection and security of the Bondholders, and the Refunding Bonds shall be of equal rank and without preference, priority of or distinction over any other thereof, except as expressly provided herein. 6 7

157 B-35 SECTION 5. Authorization of Refunding. The District hereby authorizes the advance rcfunding of the Refunded 2004A Bonds, Refunded 2004B Bonds, Refunded 200SA Bonds and Refunded 200SB Bonds. The District hereby authorizes (i) the deposit and pledge of a sufficient portion of the proceeds of the Refunding Bonds, together with interest earnings thereon, and certain other funds of the District, if necessary, to pay the principal of, interest on and redemption premiums, if any, with respect to the Refunded 2004A Bonds, Refunded 2004B Bonds, Refunded 200SA Bonds and Refunded 200SB Bonds, (ii) the investment and reinvestment of a portion of the proceeds from the sale of Refunding Bonds in Government Obligations for the purpose of effecting the defeasance of the Refunded 2004A Bonds, Refunded 2004B Bonds, Refunded 200SA Bonds and Refunded 200SB Bonds, (iii) the calling of thc Refunded 2004A Bonds, Refunded 2004B Bonds, Refunded 200SA Bonds and Refunded 200SB Bonds prior to their dates of maturity as set forth in the related Escrow Deposit Agreement, (iv) the disbursement of unneeded principal and income, if any, from the funds and accounts created and established pursuant to each Escrow Deposit Agreement to the District in accordance with the terms of such Escrow Deposit Agreement. the District hereby elects to call and redeem the Refunded 2004A Bonds, Refunded 2004B Bonds, Refunded 200SA Bonds and Refunded 200SB Bonds in accordance with the terms of the related Escrow Deposit Agreement as approved by the Secretary, District Administrator, Deputy District Administrator and the District Comptroller. The Escrow Agent is hereby directed in the name of the District, to cause notice of such call to be given as required by law and by the terms of the Refunded 2004A Bonds, Refunded 2004B Bonds, Refunded 200SA Bonds and Refunded 200SB Bonds, as the case may be, and the related Escrow Deposit Agreement. SECTION 6. Authorization of Refunding Bonds. Subject and pursuant to the provisions of this Resolution and any subsequent resolutions adopted by the Board in connection with the Refunding Bonds and prior to the issuance thereof, the Refunding Bonds of the District to be known as "Reedy Creek Improvement District Ad Valorem Tax Refunding Bonds, Series [To be Designated] [(Taxable)]" are hereby authorized to be issued in an aggregate principal amount not exceeding $11S,000,000 to finance the Refunding Project and the payment of a portion of the costs of issuance of the Refunding Bonds, with the exact principal amount to be determined in accordance with the terms hereof. SECTION 7. Delegation to President and Secretary, District Administrator, Deputy District Administrator or District Comptroller: Terms and Form of Refunding Bonds. A. The President, the Secretary, the District Administrator, the Deputy District Administrator or the District Comptroller are hereby authorized and directed to award the sale of each series of the Refunding Bonds to the Underwriters and to approve the terms thereof, including, without limitation, the principal amounts thereof, the series designations thereof, the date thereot~ the interest rates with respect thereto, the purchase price thereof and the redemption terms with respect thereto, provided, however, that in no event shall (i) the principal amount of the Refunding Bonds exceed $IIS,OOO,OOO, (ii) the purchase price of Refunding Bonds be less than 98% of the face amount thereof exclusive of original issue discount (the "Minimum Purchase Price"), (iii) the present value of the total savings anticipated to accrue to the District upon refunding the Refunded Bonds be less than S.OO% of the aggregate principal amount of the principal amount of the amount of Refunded Bonds to be refunded, or (iv) the interest rates exceed the maximum rates permitted by applicable law. B. Each series of the Refunding Bonds shall bear interest from their date, payable semiannually on the first day of June and the first day of December of each year, at the rate, and shall mature in accordance with the schedules, set forth or incorporated by reference in the related Purchase Contract and Final Official Statement and approved by the President, the Secretary, the District Administrator, Deputy District Administrator or the District Comptroller, such approval to be conclusively evidenced by their execution of the related Purchase Contract. The principal of the Refunding Bonds shall be payable either in annual or semiannual installments, as shall be set forth in the related Purchase Contract and approved by the President, the Secretary, the District Administrator, the Deputy District Administrator or the District Comptroller, the execution thereof to be conclusive evidence of such approval. The Refunding Bonds shall be issued as fully registered bonds in the denomination of $5,000 each or any integral multiple thereof. Interest on the Refunding Bonds shall be computed on the basis ofa 360-day year consisting of twelve (12) thirty (30) day months. So long as there shall be maintained a book-entry-only system with respect to a series of Refunding Bonds, the following provisions shall apply: Such Refunding Bonds shall initially be issued in the name of Cede & Co. as nominee for The Depository Trust Company ("DTC"), which will act initially as securities depository for the Refunding Bonds and so long as the Refunding Bonds are held in book-entry-only form, Cede & Co. shall be considered the registered owner for all purposes hereof. On original issue, the Refunding Bonds shall be deposited with DTC, which shall be responsible for maintaining a book-entry-only system for recording the ownership interest of its participants ("DTC Participants") and other institutions that clear through or maintain a custodial relationship with DTC Participants, either directly or indirectly ("Indirect Participants"). The DTC Participants and Indirect Participants will be responsible for maintaining records with respect to the beneficial ownership interests of individual purchasers of the Refunding Bonds ("Beneficial Owners"). The principal of and interest on the Refunding Bonds at maturity shall be payable directly to Cede & Co. in care of DTC. Disbursal of such amounts to DTC Participants shall be the responsibility of DTC. Payments by DIC Participants to Indirect Participants, and by DTC Participants and Indirect Participants to Beneficial Owners shall be the responsibility of DTC Participants and Indirect Participants and not of DTC, the Paying Agent, or the Issuer. The Refunding Bonds shall initially be issued in the form of one fully registered Proposed Bond for each maturity and shall be held in such form until maturity. Individuals may purchase beneficial interests in denominations of $5,000 or integral multiples thereof, in bookentry-only form, without certificated Refunding Bonds, through DTC Participants and Indirect Participants. DURING THE PERIOD FOR WHICH CEDE & CO. IS REGISTERED OWNER OF THE REFUNDING BONDS, ANY NOTICE TO BE PROVIDED TO ANY REGISTERED 8 9

158 B-36 OWNER WILL BE PROVIDED TO CEDE & CO. DTC SHALL BE RESPONSIBLE FOR NOTICE TO DTC PARTICIPANTS AND DTC PARTICIPANTS SHALL BE RESPONSIBLE FOR NOTICE TO INDIRECT PARTICIPANTS, AND DTC PARTICIPANTS AND INDIRECT PARTICIPANTS SHALL BE RESPONSIBLE FOR NOTICE TO INDIVIDUAL PURCHASERS OF BENEFICIAL INTERESTS. The District has entered into a blanket letter of representations with DTC providing for such book-entry-only system. Such agreement may be terminated at any time by either DTC or the District. In the event of such termination, the District shall select another securities depository. If the District does not replace DTC, the Registrar will register and deliver to the Beneficial Owners replacement Refunding Bonds in the form of fully registered Refunding Bonds of the same series and maturity, in denominations of $5,000 or integral multiples thereof, in accordance with instructions from Cede & Co. SECTION 8. Redemption Provisions. the Refunding Bonds shall be subject to such optional and mandatory redemption provisions, if any, as are provided in the Purchase Contract for the related series of Refunding Bonds, and approved by the President, the Secretary, the District Administrator, the Deputy District Administrator or the District Comptroller, the execution thereof to be conclusive evidence of such approval. In the case of an optional redemption of the Refunding Bonds, in no event shall the redemption price for the Refunding Bonds exceed one hundred one percent (101%) of the principal amount or accreted value of the Refunding Bonds to be redeemed nor shall the first optional redemption date of the Refunding Bonds be latcr than June 1,201_1. SECTION 9. Notice of Redemption. In lieu of the requirements of Section 12B of the Bond Resolution, each notice of redemption, if any, with respect to the Refunding Bonds shall meet the requirements set forth below. Notice of any redemption of Refunding Bonds hereunder shall be mailed, by first class mail, or such other manner as maybe customary for the industry, to the registered owner of each Refunding Bond to be redeemed at such Holder's registered address as it appears in the bond register or at such other address as is furnished in writing by such Holder to the Registrar; provided, however, that failure to give any such notice to any Holder, or any defect therein, shall not affect the validity of the redemption proceedings for any Refunding Bond with respect to which no such failure or defcct has occurred. (i) Each notice of redemption shall set forth (A) the name and address of the Paying Agent, a contact person with the Paying Agent and his or her telephone number, (B) the complete official name of the Refunding Bonds, to be redeemed, (C) the CUSIP numbers, if any, of the Refunding Bonds being redeemed, provided that any such notice shall state that no representation is made as to the correctness of CUSIP numbers either as printed on such Refunding Bonds or as contained in the notice of redemption and that reliance may be placed only on the identification numbers contained in the notice or printed on such Refunding Bonds, (D) any other descriptive information needed to identify accurately the Refunding Bonds being redeemed, including, but not limited to, the original issuance date and maturity date of, and interest rate on, such Bonds, (E) in the case of partial redemption of any Refunding Bonds, the respective principal amounts thereof to be redeemed; (F) the date of mailing of redemption notices, (G) the redemption date; (H) the redemption price; (I) that on the redemption date the redemption price will become due and payable upon each such Proposed Bond or portion thereof called for redemption, and that interest thereon shall cease to accrue from and after said date. (ii) Each notice of redemption shall be sent at least thirty (30) days and not more than sixty (60) days before the redemption date. (iii) In addition to the foregoing, further notice of any redemption of Refunding Bonds hereunder shall be given by the Registrar simultaneously with mailed notice to Holders, by registered or certified mail or overnight delivery service to at least two national information services that disseminate notices of redemption of obligations such as the Refunding Bonds and, for any redemption other than by sinking fund installment, to the Municipal Securities Rulemaking Board. Such further notice shall contain the information required in 9(i). Failure to give all or any portion of such further notice shall not in any manner defeat the effectiveness of a call for redemption. (iv) Upon the payment of the redemption price of the Refunding Bonds being redeemed, each check or other transfer of funds issued for such purpose shall bear or be accompanied by an advice showing the CUSIP number identifying, by issue, the Refunding Bonds being redeemed with the proceeds of such check or other transfer. (v) A second notice of redemption shall bc mailed in the manner provided above to any registered owner who has not tendered Refunding Bonds that have been called for redemption within sixty (60) days after the applicable redemption date. SECTION 10. Funds and Accounts. Establishment of and Payments from the Rebate Account. There is hereby established and created a trust account for each series of Refunding Bonds within the Rebate Fund pursuant to the Bond Resolution to be designated the "Reedy Creek Improvement District Ad Valorem Tax Refunding Bonds, Series 2013[SERIES TO BE DESIGNATED] Rebate Account" (hereinafter referred to as the "Series 2013[SERIES TO BE DESIGNATED] Rebate Account"), as the case may be, into which amounts shall be deposited as set forth below. The District covenants and agrees that it shall maintain and retain all records pertaining to and shall be responsible for making or having made all determinations and calculations of the 10 11

159 B-37 Rebate Amount for the related series of Refunding Bonds for each Rebate Year within twenty-five (25) days aftcr the end of such Rebate Year and within twenty-fivc (25) days after the final maturity of the related series of Refunding Bonds. On or before the expiration of each such period, the District shall deposit into the Rebate Account for each series of Refunding Bonds from any legally available funds of the District, an amount equal to the Rebate Amount with respect to such series of Refunding Bonds for such Rebate Year. The District shall use such moneys deposited in each Rebate Account only for the payment of the Rebate Amount with respect to such related series of Refunding Bonds to the United States as required by the Bond Resolution, which payments shall be made in installments, commencing not more than thirty (30) days after the end of the fifth Rebate Year for such related series of Refunding Bonds and with subsequent payments to be made not later than five (5) years after the preceding payment was due, except that the final payment shall be made within sixty (60) days after the final maturity of the last obligation of such related series of Refunding Bonds. In complying with the foregoing, the District may rely upon any instructions or opinions from Bond Counsel. If any amount shall remain in the respective Rebate Account after payment in full of all such related series of Refunding Bonds issued hereunder and after payment in full of the Rebate Amount with respect to such related series of Refunding Bonds to the United States in accordance with the terms hereof, such amounts shall be available to the District for any lawful purpose. SECTION 11. Application of Proceeds of Refunding Bonds. The proceeds from the sale of the Refunding Bonds shall be applied by the District as follows: (i) Upon issuance of the Refunding Bonds there shall be paid to the Escrow Agent an amount to be provided in the Series 2004A Escrow Deposit Agreement for the defeasance of the Refunded 2004A Bonds, an amount to be provided in the Series 2004B Escrow Deposit Agreement for the defeasance of the Refunded 2004 B Bonds, an amount to be provided in the Series 2005A Escrow Deposit Agreement for the defeasance of the Refunded 2005A Bonds and an amount to be provided in the Series 2005B Escrow Deposit Agreement for the defeasance of the Refunded 2005B Bonds; and (ii) The balance of the proceeds from the sale of the Refunding Bonds shall be paid to the District and used to pay the costs of issuing the Refunding Bonds. SECTION 12. Form of Refunding Bonds. The Refunding Bonds shall be in substantially the form provided in Exhibit B hereto, subject to such changes, omissions and insertions and such filling of blanks as the officers executing the same shall approve, such execution to be conclusive evidence of such approval. SECTION 13. Approval of a Purchase Contract for each Series of Refunding Bonds. The fonn of a Purchase Contract for each series of Refunding Bonds, substantially in the form presented hereto as Exhibit C, by the Underwriters is hereby approved, subject to such changes, insertions and omissions and such filling of blanks therein as may be approved and made in such related Purchase Contract by the President, the Secretary, the District Administrator, the Deputy District Administrator or the District Comptroller, in a manner consistent with the provisions of Sections 7 and 8 of this Resolution, such execution to be conclusive evidence of such approval. Upon receipt of a disclosure statement from the Underwriters, the President, the Secretary, the District Administrator, the Deputy District Administrator or the District Comptroller are hereby authorized to accept an offer of the Underwriters to purchase the Refunding Bonds in an aggregate principal amount not exceeding $115,000,000, at a TIC not to exceed the Maximum TIC, and at a purchase price of not less than the Minimum Purchase Price, plus accrued interest thereon to the date of delivery, upon the terms and conditions set forth in the related Purchase Contract, and, so long as the present value of the total savings to accrue to the District upon refunding the Refunded 2004A Bonds shall be not less than _% of the aggregate principal amount of the Refunded 2004A Bonds, upon refunding the Refunded 2004B Bonds shall be not less than _% of the aggregate principal amount of the Refunded 2004B Bonds, upon refunding the Refunded 2005A Bonds shall be not less than % of the aggregate principal amount of the Refunded 2005A Bonds and upon refunding the Refunded 2005B Bonds shall be not less than _% of the aggregate principal amount of the Refunded 2005B Bonds. The President, the Secretary, the District Administrator, the Deputy District Administrator or the District Comptroller are hereby authorized to execute and deliver the related Purchase Contract for and on behalf of the District pursuant to the terms hereof and of the related Purchase Contract. SECTION 14. Registrar and Pavine: Agent. The Board hereby appoints U.S. Bank National Association as the initial Paying Agent, Registrar and Authenticating Agent in connection with the Refunding Bonds under the terms of the Registrar and Paying Agent Agreement. SECTION 15. Registrar and Paying Agent Agreement. The Board hereby approves the form and content of the Registrar and Paying Agent Agreement attached hereto as Exhibit D. The President and Secretary are hereby authorized to execute on behalf of the Board, the Registrar and Paying Agent Agreement substantially in the form attached hereto with such changes, omissions and insertions as they, in their sole discretion, may approve, such execution to be conclusive evidence of such approval. SECTION 16. Official Statement. The Board hereby approves the form and content of the Preliminary Official Statement attached hereto as Exhibit E, and approves the use and distribution of a Preliminary Official Statement substantially in the form of Exhibit E by the Underwriters in connection with the marketing of the Refunding Bonds. The President is hereby authorized to execute, on behalf of the Board, a Final Official Statement relating to the Refunding Bonds with such changes, omissions and insertions from the form of Preliminary Official Statement as the officer or officers executing the same may, in his or their sole discretion, approve, such execution to be conclusive evidence of such approval. the use and distribution of the final Official Statement in connection with the offering and sale of the Refunding Bonds by the Underwriters is hereby authorized. The District Comptroller is authorized to deem the Preliminary Official Statement other than Permitted Omissions "final" within the meaning of Rule 15c2-12 under the Securities Exchange Act of 1934, in the form as 12 13

160 B-38 mailed, and in furtherance thereof to execute a certificate evidencing same substantially in the form attached hereto as Exhibit F. SECTION 17. Escrow Deposit Agreements. The Board hereby approves the forms and content of the Escrow Deposit Agreement attached hereto as Exhibit G. The President and Secretary to the Board are hereby authorized to execute on behalf of the Board, the Escrow Deposit Agreements, substantially in the forms attached hereto with such changes, omissions and insertions, including, without limitation, the filling of blanks therein and attachment of schedules thereto, as they, in their sole discretion, may approve, such execution to be conclusive evidence of such approval. SECTION 18. Escrow Agent. The Board hereby appoints U.S. Bank National Association as the initial Escrow Agent in connection with the Refunded Bonds under the terms of the respective Escrow Deposit Agreement. SECTION 19. Continuing Disclosure Compliance. Thc District hereby approves the form and contcnt of an agreement between the District and Digital Assmance Certification, L.L.C. ("DAC") for continuing secondary market disclosme in connection with the Refunding Bonds (the "Disclosme Disscmination Agent Agreement"), in the form attached hereto as Exhibit H. The President, jointly with the Secretary, District Administrator, Deputy District Administrator or District Comptroller of the District, are authorized and directed to execute and deliver the Disclosme Dissemination Agent Agreement substantially in the form of Exhibit H with such changes, insertions or deletions as the officer executing the same, in his or her sole discretion, may approve, such execution to constitutc conclusive evidence of such approval. SECTION 20. Authorizations. A. The President, the Secretary, the District Administrator, the Deputy District Administrator or the District Comptroller are hereby authorized and directed to sign the Purchase Contract with respect to each series of Refunding Bonds at the place provided therein and to approve such changes, in accordance with the terms of this Resolution, to each related Pmchase Contract as they may deem advisable. The signature of the President, the Secretary, the District Administrator, the Deputy District Administrator or the District Comptroller on the related Purchase Contract shall be conclusive evidence of the acceptance of the terms thereof. The President, the Secretary, the District Administrator, Deputy District Administrator or the District Comptroller are hereby authorized and directed to deliver the Pmchase Contract with respect to each series of Refunding Bonds immediately followings the execution thereof pmsuant to the terms hereofto the Underwriters. B. The President and the Secretary or their duly authorized alternative officers are hereby authorized and directed on behalf of the District to execute the Refunding Bonds (including any temporary bond or bonds) as provided in the Bond Resolution and herein and any of such officers is hereby authorized and directed upon the execution of the Refunding Bonds in substantially the form and manner set forth herein, to deliver the Refunding Bonds in the amounts authorized to be issued hereunder to the Registrar for authentication and delivery to or upon the order of the Underwriters pmsuant to the Purchase Contract upon payment of the purchase price and upon compliance by such Underwriters with the terms of such Purchase Contract. C. The President or Treasurer of and Secretary and Assistant Secretary to the Board and the District Administrator, the Deputy District Administrator, the District Comptroller, and such other officers of the Board legally authorized to take action in their absencc, and such other officers, employees or agents of the District as may be designated by the President, are each designated as agents of the Board and the District in connection with the issuance and delivery of the Refunding Bonds and are authorized and empowered, collectively or individually, to take all action and steps and to execute all instruments, documents and contracts on behalf of the Board and the District that are necessary or desirable in connection with the execution and delivery of the Refunding Bonds, and which are specifically authorized or are not inconsistent with the tenns and provisions of this Resolution or the Bond Resolution or any action relating to the Refunding Bonds heretofore taken by the Board. Such officers and those so designated are hereby charged with the responsibility for the issuance of thc Refunding Bonds. SECTION 21. Severability. If anyone or more of the covenants, agreements or provisions of this Resolution shall be held contrary to any express provisions of law or contrary to the policy of express law, though not expressly prohibited, or against public policy, or shall for any reason whatsoever be held invalid, then such covenants, agreements or provisions shall be null and void and shall be deemed separate from the remaining covcnants, agreements or provisions of this Resolution or of the Refunding Bonds issued hereunder. SECTION 22. No Third Party Beneficiaries. Except as herein otherwise expressly provided, nothing in this Resolution expressed or implied is intended or shall be construed to confcr upon any person, firm or corporation other than the parties hereto, the Bond Insurer, if any, for all or any portions of the Refunding Bonds, and the owners and holders of the Refunding Bonds issued under and secured by this Resolution, any right, remedy or claim, legal or equitable, under or by reason of this Resolution or any provision hereof, this Resolution and all its provisions being intended to be and being for the sole and exclusive benefit of the parties hereto, the Bond Insurer, if any, for the Refunding Bonds, and the Holders from time to time of the Refunding Bonds issued hereunder. SECTION 23. Controlling Law: Members of Governing Body of Issuer Not Liable. All covenants, stipulations, obligations and agreements of the District contained in this Resolution shall be deemed to be covenants, stipulations, obligations and agreements of the District to the full extent authorized by the Act and provided by the constitution and laws of the State of Florida. No covenant, stipulation, obligation or agreement contained herein shall be deemed to be a covenant, stipulation, obligation or agreement of any present or future member, agent or employee of the Board or the District in his or her individual capacity, and, to the extent permitted by law, neither the members of the Board nor any official executing the Refunding Bonds shall be liable personally on the Refunding Bonds or this Resolution or shall be subject to any personal liability or accountability by reason ofthe issuance or the execution by the Board or such members thereof. SECTION 24. Open Meetings. It is hereby found and determined that all formal actions of the Board concerning and relating to the adoption of this Resolution and the 14 15