OFFICIAL STATEMENT $3,470,000 CITY OF SANDUSKY, OHIO GENERAL

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OFFICIAL STATEMENT $3,470,000 CITY OF SANDUSKY, OHIO GENERAL Powered By Docstoc
					NEW ISSUE                                                                                                                              Ratings: Moody’s: A2
                                                                                                                                       See Rating

In the opinion of Squire, Sanders & Dempsey L.L.P., Bond Counsel, under existing law (i) assuming compliance with certain covenants and the accuracy of
certain representations, interest on the Bonds is excluded 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, and the Bonds are “qualified tax-exempt obligations” as defined in Section
265(b)(3) of the Internal Revenue Code of 1986, as amended, and (ii) that interest, and any profit made on the sale, exchange or other disposition, of the
Bonds, are exempt from the Ohio personal income tax, the Ohio commercial activities tax, the net income base of the Ohio corporate franchise tax, and
municipal and school district income taxes in Ohio. Interest on the Bonds may be subject to certain federal taxes imposed only on certain corporations,
including the corporate alternative minimum tax on a portion of that interest. (For a more complete discussion of tax aspects, see Tax Matters.)


                                             OFFICIAL STATEMENT
                                                    $3,470,000
                                            CITY OF SANDUSKY, OHIO
                                        GENERAL OBLIGATION (Limited Tax)
                                VARIOUS PURPOSE IMPROVEMENT BONDS, SERIES 2005

Dated: Date of Issuance (expected to be September 29, 2005)

The Bonds. The Bonds are general obligations of the City, issued to finance the purposes described under Authorization and Purpose. Principal and interest,
and any premium, unless paid from other sources, are to be paid from the proceeds of the City’s levy of ad valorem property taxes, which taxes are within the
ten-mill limitation imposed by Ohio law.

Book-Entry Only. The Bonds will be initially issued only as fully registered bonds, one for each maturity, under a book entry system, registered initially in
the name of The Depository Trust Company or its nominee (DTC). There will be no distribution of Bonds to the ultimate purchasers. The Bonds in
certificated form as such will not be transferable or exchangeable, except for transfer to another nominee of DTC or as otherwise described in this Official
Statement.

Payment. Principal and interest will be payable to the registered owner (DTC), principal upon presentation and surrender at the principal corporate trust office
of U.S. Bank National Association (the Bond Registrar), and interest transmitted by the Bond Registrar on each interest payment date (June 1 and December 1
of each year, commencing June 1, 2006) to the registered owner (DTC) as of the 15th day of the calendar month preceding that interest payment date.

                                                          PRINCIPAL MATURITY SCHEDULE
                                                                 ON DECEMBER 1

                                    Interest                                                                        Interest
         Year        Amount          Rate             Price                        Year            Amount            Rate              Price

         2006        $165,000             %               %                        2019            $ 85,000                 %                  %
         2007         185,000                                                      2020              90,000
         2008         195,000                                                      2021              95,000
         2009         200,000                                                      2022             105,000
         2010         215,000                                                      2023             110,000
         2011         180,000                                                      2024             115,000
         2012         180,000                                                      2025             120,000
         2013         190,000                                                      2026             110,000
         2014         195,000                                                      2027             115,000
         2015         205,000                                                      2028             120,000
         2016          75,000                                                      2029             125,000
         2017          80,000                                                      2030             135,000
         2018          80,000

Prior Redemption. The Bonds maturing on or after December 1, 2014 are subject to optional prior redemption by the City prior to maturity, beginning
December 1, 2013. Term Bonds may be created subject to mandatory prior redemption if so requested by the successful bidder, as described in this Official
Statement.


      The Bonds are offered subject to the opinion on certain legal matters relating to their issuance by Squire, Sanders & Dempsey L.L.P., Bond
Counsel. The Bonds are expected to be available for delivery through DTC on September 29, 2005.

            This Official Statement has been prepared by the City in connection with its original offering for sale of the Bonds. This cover page includes
certain information for quick reference only. It is not a summary of the Bond issue. Investors should read the entire Official Statement to obtain information as
a basis for making informed investment judgments. The date of this Official Statement is September 6, 2005, and the information speaks only as of that date.

           The Bonds are offered for sale pursuant to the Official Notice of Sale (Exhibit B) until 11:00 a.m., Ohio time, on Thursday, September 15, 2005.
This Official Statement is “deemed final” by the City as of its date for purposes of, and except for certain omissions as permitted by, SEC Rule 15c2-12(b)(1).
The City has made a continuing disclosure agreement with respect to the Bonds for purposes of SEC Rule 15c2-12 as described under Continuing Disclosure
Agreement.
                         REGARDING THIS OFFICIAL STATEMENT

            This Official Statement does not constitute an offering of any security other than the
original offering of the Bonds identified on the cover. No person, other than the Finance Director of
the City, has been authorized by the City to give any information or to make any representation
other than as contained in this Official Statement. Any other information or representation should
not be relied upon as having been given or authorized by the City. This Official Statement does not
constitute an offer to sell or the solicitation of an offer to buy, and there shall not be any sale of the
Bonds by any person, in any jurisdiction in which it is unlawful to make that offer, solicitation or
sale.

             The information and expressions of opinion in this Official Statement are subject to
change without notice. Neither the delivery of this Official Statement nor any sale made under it
shall, under any circumstances, give rise to any implication that there has been no change in the
affairs of the City since its date.

           Upon issuance, the Bonds will not be registered by the City under the Securities Act of
1933, as amended, or any state securities law, and will not be listed on any stock or other securities
exchange. Neither the Securities and Exchange Commission nor any other federal, state or other
governmental entity or agency will have at the request of the City passed upon the accuracy or
adequacy of this Official Statement or approved the Bonds for sale.




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                                                         TABLE OF CONTENTS

Cover Page.......................................................................................................................................       1
Regarding this Official Statement ..................................................................................................                    2
Table of Contents ............................................................................................................................          3
Introductory Statement....................................................................................................................              5
The Bonds -- Authorization and Purpose.......................................................................................                           5
Summary of Certain Terms of the Bonds ......................................................................................                            6
      General ..................................................................................................................................        6
      Book Entry Method ..............................................................................................................                  6
             Revision of Book Entry System; Replacement Bonds...............................................                                            8
      Prior Redemption..................................................................................................................                9
             Mandatory Redemption ...............................................................................................                       9
             Optional Redemption ...................................................................................................                    9
             Selection of Bonds and Book Entry Interests to be Redeemed..................................                                               9
             Notice of Call for Redemption; Effect ........................................................................                            10
Security and Sources of Payment ...................................................................................................                    10
      Refunding..............................................................................................................................          11
The City ...........................................................................................................................................   11
      General Introduction.............................................................................................................                11
      City Government ..................................................................................................................               13
      Employees.............................................................................................................................           14
      City Facilities ........................................................................................................................         14
      Economic and Demographic Information ...........................................................................                                 14
             Population.....................................................................................................................           14
             Recreational, Industrial, Commercial and Residential Activity.................................                                            15
             Employment .................................................................................................................              17
             Income ..........................................................................................................................         17
             Housing and Building Permits.....................................................................................                         18
             Utilities; Public Safety and Services ...........................................................................                         18
Financial Matters .............................................................................................................................        18
      Introduction...........................................................................................................................          18
      Budgeting, Tax Levy and Appropriations Procedures........................................................                                        19
      Financial Reports and Audits ...............................................................................................                     19
Ad Valorem Property Taxes ...........................................................................................................                  20
      Assessed Valuation...............................................................................................................                20
      Overlapping Governmental Entities ....................................................................................                           22
      Tax Rates...............................................................................................................................         22
             Tax Table A: Overlapping Tax Rates ........................................................................                               22
             Tax Table B: City Tax Rates ......................................................................................                        23
      Collections.............................................................................................................................         23
      Delinquencies........................................................................................................................            24
Other Major General Fund Revenue Sources ................................................................................                              25
      Municipal Income Tax .........................................................................................................                   25
      Admission Tax......................................................................................................................              25
      Hotel/Motel Tax....................................................................................................................              26
      Local Government Assistance Funds ..................................................................................                             26
City Debt and Other Long Term Obligations ................................................................................                             27
      Security for General Obligation Debt..................................................................................                           27
      Bonds and BANs ..................................................................................................................                27
      Statutory Direct Debt Limitations........................................................................................                        28
      Indirect Debt and Unvoted Property Tax Limitations ........................................................                                      29
      Debt Outstanding ..................................................................................................................              30
      Bond Anticipation Notes ......................................................................................................                   30

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       Bond Retirement Fund .........................................................................................................                   31
       Sewer Fund ...........................................................................................................................           31
       Water Fund............................................................................................................................           32
       Sewer and Water Rates.........................................................................................................                   32
       Future Financings .................................................................................................................              33
       Long Term Financial Obligations Other than Bonds and Notes ........................................                                              33
       Pension Obligations..............................................................................................................                33
       Insurance Coverages.............................................................................................................                 34
Litigation..........................................................................................................................................    34
Legal Opinion ..................................................................................................................................        34
Tax Matters......................................................................................................................................       35
       Original Issue Discount/Original Issue Premium................................................................                                   36
Eligibility for Investment and as Public Moneys Security............................................................                                    37
Transcript and Closing Documents ................................................................................................                       37
Continuing Disclosure Agreement .................................................................................................                       37
Rating...............................................................................................................................................   39
Financial Advisor ............................................................................................................................          40
Bond Registrar.................................................................................................................................         40
Concluding Statement .....................................................................................................................              40

Debt Tables
                    A:        Principal Amounts of Outstanding General Obligation Debt;
                              Leeway for Additional Debt within Direct Debt Limitations ................... DT-1
                    B:        Various City and Overlapping GO Debt Allocations................................ DT-2
                    C:        Projected Debt Service Requirements on City
                              GO Debt....................................................................................................... DT-3
                    D:        Outstanding GO Bond Anticipation Notes ................................................ DT-4


Appendix A-- Comparative Cash Basis Summary (Unaudited) of General Fund Receipts and
             Expenditures for Fiscal Years 2000 through 2004, and Budgeted Fiscal Year 2005

Appendix B-- All Funds Summaries for Fiscal Years 2003 and 2004 (Cash Basis – Unaudited)

Appendix C-- Basic Financial Statements Under GASB Statement No. 34 (Audited) from the
              City’s Comprehensive Annual Financial Report for Fiscal Year 2003

Exhibit A—Proposed Text of Legal Opinion

Exhibit B— Official Notice of Sale
Attachment I - Official Bid Form




                                                                            -4-
                                INTRODUCTORY STATEMENT

             This Official Statement has been prepared by the City of Sandusky (the City), Ohio, in
connection with its original issuance and sale of the Bonds identified on the cover page (the Bonds).
Certain information concerning the authorization, purpose, terms, and sources of payment and
security is provided in this Official Statement.
             All financial and other information in this Official Statement has been provided by the
City from its records, except for information expressly attributed to other sources. The presentation
of information, including tables of receipts from taxes and other sources, is intended to show recent
historical information, and is not intended to indicate future or continuing trends in the financial
position or other affairs of the City. No representation is made that past experience, as is shown by
that financial and other information, will necessarily continue or be repeated in the future.
             This Official Statement should be considered in its entirety and no one subject
considered less important than another by reason of location in the text. Reference should be made
to laws, reports or documents referred to for more complete information regarding their contents.
             References to provisions of Ohio law or of the Ohio Constitution or the City Charter (the
Charter), are references to those current provisions. Those provisions may be amended, repealed or
supplemented.
             As used in this Official Statement “debt service” means principal of and interest on the
obligations referred to, “County” means Erie County, and “State” or “Ohio” means the State of
Ohio. “Fiscal Year” means the 12-month period ending December 31, and reference to a particular
Fiscal Year (such as “Fiscal Year 2004”) means the Fiscal Year ending on December 31 in that
year.


                     THE BONDS -- AUTHORIZATION AND PURPOSE

             The Bonds are to be issued pursuant to Chapter 133 of the Revised Code, the Charter of
the City, an ordinance passed by the City Commission and a certificate of award provided for by
that ordinance (collectively, the Authorizing Legislation).
             The Bonds are being issued for the purpose of: improving the municipal wastewater
system by acquiring real estate and interests therein for the expansion of the wastewater treatment
facilities, by acquiring a combination sewer cleaner, cab and chassis, by separating combined
sewers into separate sanitary sewers and storm sewers, together with all other improvements
incidental or related thereto, in order to reduce infiltration and inflow to the municipal wastewater
system, and by constructing, reconstructing and rehabilitating local sewer collection systems, all
together with the necessary appurtenances thereto (the Wastewater System Purpose); improving the
municipal water system by renovating, rehabilitating and otherwise improving the Big Island Water
Works Building (the Water System Purpose); acquiring two triple combination fire pumper trucks
and appurtenant equipment for the Fire Department (the Fire Department Purpose); eliminating
grade crossings by constructing the US 6/State Route 101 Grade Separation Project (the Grade
Separation Purpose); improving the Shelby Street Boat Launch Ramp Facility by dredging in order
to improve access thereto and the utilization thereof, and otherwise improving the same, all together
with the necessary appurtenances thereto (the Boat Launch Purpose); and paying the property
owners’ portion, in anticipation of the collection of special assessments heretofore levied, of the cost
of the City’s 2003 Program of constructing, re-laying and repairing certain sidewalks and
constructing certain curbs and gutters and approaches (the Sidewalk Assessment Purpose).
             The principal amount of the Bonds is allocated as follows: $1,815,000 to the
Wastewater System Purpose; $175,000 to the Water System Purpose; $910,000 to the Fire
Department Purpose; $200,000 to the Grade Separation Purpose; $185,000 to the Boat Launch
Purpose; and $185,000 to the Sidewalk Assessment Purpose. The proceeds of the Bonds will be

                                                 -5-
used to retire, together with other available funds of the City, at their maturity on October 26, 2005,
the $3,710,000 portion of the City’s $9,325,000 Various Purpose Improvement Note, Series 2004-1,
dated October 26, 2004, which portion was issued for the Wastewater System Purpose, the Water
System Purpose, the Fire Department Purpose, the City Building Purpose, the Grade Separation
Purpose, the Boat Launch Purpose, and the Sidewalk Assessment Purpose (the $3,710,000 portion
of such Note so being retired is collectively referred to herein as the Outstanding Notes).
            Any accrued interest or premium received by the City from the sale of the Bonds will be
deposited in the Bond Retirement Fund, moneys in which are used to pay debt service on City debt
obligations.

                     SUMMARY OF CERTAIN TERMS OF THE BONDS
General
             The Bonds will be dated, will mature in the amounts and on the dates, will bear
interest (computed on the basis of a 360-day year and twelve 30-day months) at the rates and
payable on the dates, and will be payable at the place and in the manner, described on the cover
page. The Bond Registrar will keep all books and records necessary for registration, exchange and
transfer of the Bonds.
             Discussion of the Bonds being issued under the book entry method is provided below.
Details regarding the procedures for and manner of payment, issuance, exchange and transfer of the
Bonds if ever issued in certificated form as provided in the Bond proceedings are also stated below.

Book Entry Method
            The Depository Trust Company, New York, New York (DTC), will act as securities
depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the
name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully-registered Bond certificate will be issued for each
maturity of the Bonds, and will be deposited with and retained in the custody of DTC or its
agent.
            For ease of reference in this and other discussions, reference to “DTC” includes when
applicable any successor securities depository and the nominee of the depository.
            For all purposes under the Bond proceedings (except the Continuing Disclosure
Agreement under which others as well as DTC may be considered an owner or holder of the Bonds,
see Continuing Disclosure Agreement), DTC will be and will be considered by the City and the
Bond Registrar to be the owner or holder of the Bonds.
            Owners of book entry interests in the Bonds (book entry interest owners) will not
receive or have the right to receive physical delivery of Bonds, and, except to the extent they may
have rights as beneficial owners or holders under the Continuing Disclosure Agreement, will not be
or be considered by the City and the Bond Registrar to be, and will not have any rights as, owners or
holders of Bonds under the Bond proceedings.
            DTC, the world’s largest securities depository, is a limited-purpose trust company
organized under the New York Banking Law, a “banking organization” within the meaning of
the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation”
within the meaning of the New York Uniform Commercial Code, and a “clearing agency”
registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934.
DTC holds and provides asset servicing for over 2 million issues of U.S. and non-U.S. equity
issues, corporate and municipal debt issues, and money market instruments from over 85
countries that DTC's participants (Direct Participants) deposit with DTC. DTC also facilitates
the post-trade settlement among Direct Participants of sales and other securities transactions in
deposited securities, through electronic computerized book-entry transfers and pledges between

                                                 -6-
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, in turn, is
owned by a number of Direct Participants of DTC and Members of the National Securities
Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing
Corporation, (NSCC, FICC and EMCC, also subsidiaries of DTCC), as well as by the New York
Stock Exchange, Inc., the American Stock Exchange, LLC, and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S.
and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations
that clear through or maintain a custodial relationship with a Direct Participant, either directly or
indirectly (Indirect Participants). DTC has Standard & Poor's highest rating: AAA. The DTC
rules applicable to its Participants are on file with the Securities and Exchange Commission.
More information about DTC can be found at www.dtcc.com.
            Purchases of Bonds under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest
of each actual purchaser of each Bond (Beneficial Owner) is in turn to be recorded on the Direct
and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from
DTC of their purchase. Beneficial Owners are, however, expected to receive written
confirmations providing details of the transaction, as well as periodic statements of their
holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into
the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries
made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership interests in the
Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
            To facilitate subsequent transfers, all Bonds deposited by Direct Participants with
DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name
as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC
and their registration in the name of Cede & Co. or such other DTC nominee do not effect any
change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the
Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such
Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect
Participants will remain responsible for keeping account of their holdings on behalf of their
customers.
            Conveyance of notices and other communications by DTC to Direct Participants, by
Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may
wish to take certain steps to augment the transmission to them of notices of significant events
with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to
the Bonds. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee
holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial
Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to
the registrar and request that copies of the notices be provided directly to them.
            Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue
are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each
Direct Participant in such issue to be redeemed.
            Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with
respect to Bonds unless authorized by a Direct Participant in accordance with DTC's procedures.
Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after
the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those


                                                -7-
Direct Participants to whose accounts the Bonds are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
             Redemption proceeds, distributions and dividend payments on the Bonds will be
made to Cede & Co., or such other nominee as may be requested by an authorized representative
of DTC. DTC’s practice is to credit Direct Participants’ accounts, upon DTC's receipt of funds
and corresponding detail information from the City or the Bond Registrar, on payable date in
accordance with their respective holdings shown on DTC's records. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form or registered in “street
name”, and will be the responsibility of such Participant and not of DTC (nor its nominee), the
Bond Registrar, or the City, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of redemption proceeds, distributions and dividends to Cede
& Co. (or such other nominee as may be requested by an authorized representative of DTC) is
the responsibility of the City or the Bond Registrar, disbursement of such payments to Direct
Participants will be the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners will be the responsibility of Direct and Indirect Participants.
             DTC may discontinue providing its services as depository with respect to the
Securities at any time by giving reasonable notice to City or the Bond Registrar. Under such
circumstances, in the event that a successor depository is not obtained, Bond certificates are
required to be printed and delivered.
             The City may decide to discontinue use of the system of book-entry-only transfers
through DTC (or a successor securities depository). In that event, Bond certificates will be
printed and delivered to DTC. See Revision of Book Entry System; Replacement Bonds.
             The information above in this section concerning DTC and DTC’s book entry system
has been obtained from sources that the City believes to be reliable, but the City takes no
responsibility for its accuracy.
             Direct Participants and Indirect Participants may impose service charges on book
entry interest owners in certain cases. Purchasers of book entry interests should discuss that
possibility with their brokers.
                The City and the Bond Registrar:
                Have no role in the purchases, transfers or sales of book entry interests. The
                rights of book entry interest owners to transfer or pledge their interests, and the
                manner of transferring or pledging those interests, may be subject to applicable
                state law. Book entry interest owners may want to discuss with their legal
                advisers the manner of transferring or pledging their book entry interests.
                Have no responsibility or liability for any aspects of the records or notices relating
                to, or payments made on account of, book entry interest ownership, or for
                maintaining, supervising or reviewing any records relating to that ownership.
                Cannot and do not give any assurances that DTC, Direct Participants, Indirect
                Participants or others will distribute to the book entry interest owners payments of
                debt charges on the Bonds made to DTC as the registered owner, or any
                redemption or other notices, or that they will do so on a timely basis, or that DTC
                will serve and act in a manner described in this Official Statement.

Revision of Book Entry System; Replacement Bonds
            The Bond proceedings provide for issuance of fully registered Bonds (Replacement
Bonds) directly to owners of Bonds other than DTC only in the event that DTC (or a successor
securities depository) determines not to continue to act as securities depository for the Bonds.


                                                -8-
Upon occurrence of this event, the City may in its discretion attempt to have established a
securities depository book entry relationship with another securities depository. If the District
does not do so, or is unable to do so, and after the Bond Registrar has made provision for
notification of the owners of book entry interests in the Bonds by appropriate notice to DTC, the
District and the Bond Registrar will authenticate and deliver Replacement Bonds of any one
maturity, in authorized denominations, to or at the direction of any persons requesting such
issuance (and, if the event is not the result of City action or inaction, at the expense – including
printing costs – of those requesting).
            Debt charges on Replacement Bonds will be payable when due without deduction for
the services of the Bond Registrar as paying agent. Principal of Replacement Bonds will be
payable when due to the registered owner upon presentation and surrender at the principal
corporate trust office of the Bond Registrar. Interest on Replacement Bonds will be payable on
the interest payment date by the Bond Registrar by transmittal to the registered owner of record
on the Bond Register as of the 15th day of the month preceding the interest payment date.
            Replacement Bonds will be exchangeable for Replacement Bonds of authorized
denominations, and transferable, at the office of the Bond Registrar without charge (except taxes
or governmental fees).

Prior Redemption
          The Bonds are subject to optional redemption, and, if requested by the successful bidder,
mandatory redemption, as follows.
                                      Mandatory Redemption
            Any bidder may, at its option, specify that particular maturities of the Bonds for
which the same rate of interest is specified in its bid shall be issued as term bonds subject to
mandatory sinking fund redemption by the City in consecutive years immediately preceding the
maturity thereof (a “Term Bond”). In the event that the successful bidder specifies that any
maturity of the Bonds shall be issued as a Term Bond, that Term Bond shall be subject to
mandatory sinking fund redemption on December 1, in each applicable year, in the principal
amount for such year as set forth on the cover, at a redemption price equal to the principal
amount to be redeemed, plus interest accrued thereon to the redemption date, without premium.
See the Official Notice of Sale attached hereto as Exhibit B for more information. Term Bonds
redeemed by other than mandatory redemption, or purchased for cancellation, may be credited
against the applicable mandatory redemption requirement for the Term Bonds of the corresponding
maturity.
                                      Optional Redemption

            The Bonds maturing on or after December 1, 2014 are also subject to prior redemption
on or after December 1, 2013, by and at the sole option of the City, either in whole or in part (as
selected by the City) on any date and in integral multiples of $5,000, at par plus accrued interest to
the redemption date.

                  Selection of Bonds and Book Entry Interests to be Redeemed

             If fewer than all outstanding Bonds are called for redemption at one time, the Bonds to
be called will be called as selected by, and selected in a manner as determined by, the City.
             If less than all of an outstanding Bond of one maturity under a book entry system is to be
called for redemption (in the amount of $5,000 or any integral multiple), the Bond Registrar will
give notice of redemption only to DTC as registered owner. The selection of the book entry
interests in that Bond to be redeemed is discussed below under Notice of Call for Redemption;
Effect.


                                                 -9-
            If bond certificates are issued to the ultimate owners, and if fewer than all of the Bonds
of a single maturity are to be redeemed, the selection of Bonds (or portions of Bonds in amounts of
$5,000 or any integral multiples) to be redeemed will be made by lot in a manner determined by the
Bond Registrar.
            In the case of a partial redemption by lot when Bonds of denominations greater than
$5,000 are then outstanding, each $5,000 unit of principal will be treated as if it were a separate
Bond of the denomination of $5,000.

                              Notice of Call for Redemption; Effect

             The Bond Registrar is to cause notice of the call for redemption, identifying the Bonds
or portions of Bonds to be redeemed, to be sent by first class mail, at least 30 days prior to the
redemption date, to the registered owner (initially, DTC) of each Bond to be redeemed at the
address then shown on the Register on the 15th day preceding that mailing. Any defect in the notice
or any failure to receive notice by mailing will not affect the validity of any proceedings for the
redemption of any Bonds.
             On the date designated for redemption, Bonds or portions of Bonds called for
redemption shall become due and payable. If the Bond Registrar then holds sufficient moneys for
payment of debt service and any applicable premium payable on that redemption date, interest on
each Bond (or portion of a Bond) so called for redemption will cease to accrue on that date.
             So long as all Bonds are held under a book entry system by a securities depository (such
as DTC), call notice is sent by the Bond Registrar only to the depository or its nominee. Selection
of book entry interests in the Bonds called, and giving notice of the call to the owners of those
interests called, is the sole responsibility of the depository and of its participants and Indirect
Participants. Any failure of the depository to advise any participant, or of any participant or any
Indirect Participant to notify the book entry interest owners, of any such notice and in its content or
effect will not affect the validity of any proceedings for the redemption of any Bonds or portions of
Bonds. See Book Entry Method.


                          SECURITY AND SOURCES OF PAYMENT

             The Bonds will be unvoted general obligation debt of the City payable from the sources
described, subject to bankruptcy laws and other laws affecting creditors’ rights and to the exercise
of judicial discretion. The basic security for payment of the Bonds is the requirement of the levy by
the City of ad valorem property taxes within the ten-mill limitation imposed by Ohio law. Under
State law, the levy for debt service on unvoted general obligations of the City is to be placed before
and in preference to all other levies and for the full amount of that debt service. See the further
discussions under Ad Valorem Property Taxes and City Debt and Other Long Term
Obligations.

            Ohio law requires the City to levy and collect that property tax to pay debt service on the
Bonds as it becomes due, unless and to the extent that debt service is paid from other sources.
            The Authorizing Legislation provides further security by making a pledge of the full
faith and credit of the City for the payment of debt service on the Bonds as it becomes due.
Included in that pledge are all funds of the City, except those specifically limited to another use or
prohibited from that use by the Ohio Constitution, or Ohio or federal law, or revenue bond trust
agreements. Those exceptions include highway use receipts (limited by the Constitution to highway
related purposes), tax levies voted for specific purposes, and special assessments pledged to
particular bonds or notes, and certain utility revenues. A similar pledge is made in each ordinance
authorizing voted or unvoted general obligation debt.


                                                - 10 -
            The City expects that the debt service on the Bonds will be paid from proceeds of its
municipal income tax deposited into the City’s General Bond and Note Retirement Account (see
Municipal Income Tax), special assessments to be collected for the Sidewalk Assessment Purpose,
water and sewer system net revenues with respect to the Wastewater System Purpose and the Water
System Purpose, and other sources.
            In addition to the right of individual bondholders to sue upon their particular Bonds,
Ohio law authorizes the holders of not less than 10% in principal amount of the outstanding Bonds
to bring mandamus or other actions to enforce all contractual or other rights of the bondholders,
including the right to require the City to levy, collect and apply the voted property taxes to pay debt
service, and in the case of any default in payment of debt charges to bring action to require the City
to account as if it were the trustee of an express trust for the holders or to enjoin any acts that may
be unlawful or in violation of bondholder rights.

Refunding
            State law authorizes the refunding and advance refunding of the Bonds. If the City
places in escrow money, or direct obligations of or guaranteed as to payment by the United States,
or both, sufficient with investment income therefrom for the payment of debt service and any
redemption premium on the Bonds, those Bonds will no longer be considered to be outstanding and
will not be considered in determining any direct or indirect limitation on City indebtedness, and the
levy of taxes to pay debt service on them will not be required. For this purpose direct obligations of
or guaranteed by the United States include rights to receive payments or portions of payments of the
principal of or investment income on such obligations, and also includes other obligations fully
secured as to payment by those obligations and investment income on those obligations of the
United States.


                                               THE CITY

General Introduction

           The City is located in (and is the County seat of) Erie County on Sandusky Bay, Lake
Erie, approximately 63 miles west of the City of Cleveland and 55 miles east of the City of Toledo.
It was founded in 1818 and became a city in 1914.

            The City’s 2000 population of 27,844 placed it as the largest municipality in the County.

            The City’s land area is 9.1 square miles. Land use represented by assessed valuation of
taxable real property (excluding public utility) is as follows:
                                                                        % of Assessed
                                                                          Valuation
            Residential                                                     68.87%
            Commercial/Industrial                                           31.09
            Governmental (including parks) and Other Tax Exempt                 (a)
            Agricultural                                                      0.04
          (a) Exempt from property taxation.
          Source: County Auditor.

           The City is served by diversified transportation facilities, including five State and U.S.
highways and Interstate Highways and is located near the Ohio Turnpike (I-80). It is served by
CSX and Norfolk Southern Railroad for freight service and Amtrak for daily passenger service.
Passenger air service is provided at Griffing-Sandusky Airport located in the City. Cleveland
Hopkins International Airport and Toledo Express Airport are each within a one hour drive of the
City. Lake freighters load or unload coal, salt and other products from shipping docks in the City.

                                                 - 11 -
           Sandusky Transit System (STS) public transportation has been serving the Sandusky
and Erie County community since 1992. STS is largely supported through U.S. and State grants.
In 2004, STS provided over 83,000 rides, 54 percent being work related and another 28 percent
for medical reasons. STS is demand-responsive with a curb-to-curb assistance policy.

            The City is provided with banking and financial services by The Citizens Banking
Company, which has its principal office in the City, and by other commercial banks and savings and
loan associations, operating numerous offices in the City with principal offices elsewhere.

             Two daily newspapers serve the City. The City is within the broadcast area of television
stations in the Cleveland and Toledo areas and numerous AM and FM radio stations. Multi-channel
cable TV service, including educational, governmental and public access channels, is provided by
Erie County Cablevision.

           Within commuting distance are several public and private two-year and four-year
colleges and universities, including Firelands College, University of Toledo, Bowling Green State
University and Lorain County Community College. Public education for grades K through 12 are
provided by the Sandusky City School District (the School District) whose boundaries are
coterminous with those of the City.

            The Firelands Regional Medical Center is located in the City. This organization is
the result of the recent merging of Firelands and Providence Hospitals. The Firelands Regional
Center Main Campus contains 294 beds, and provides the majority of its medical services. The
former Providence Hospital location is called the Firelands Regional Center South Campus. It
contains an 84-bed skilled care and rehabilitation unit, along with the family practice and
outpatient physical therapy units.

             Public recreation programs are provided by the City in conjunction with the School
District. These recreational programs combine arts and crafts, sports camps and skill development
activities. The City operates numerous parks and playgrounds totalling over 233 acres. The
facilities include playgrounds, tennis courts, basketball courts, baseball diamonds, soccer fields,
picnic areas and a downtown gazebo. The City also owns and operates the Mills Creek Golf
Course. The City is also home to a merry-go-round museum.

             The City is located on the shores of Sandusky Bay and Lake Erie so that many of its
commercial and recreational activities are associated with its waterfront location including ferry
lines that provide service to certain Lake Erie islands and to Canada. Cedar Point Amusement Park
(Cedar Point), one of the premier amusement parks in the United States, is located on 364 acres on a
peninsula within the City limits and includes over 67 rides and attractions, along with hotels, a
marina and a campground. For further discussion of Cedar Point and other related matters, see
Recreational, Industrial, Commercial and Residential Activity.

           The construction of several indoor waterpark resorts over the last several years has
made the area a year round tourist destination. In 2001, the Great Bear Lodge completed the
construction of a 271-room hotel near the City with a 22,000 square foot indoor water
amusement park. Last year, Cedar Point completed construction of Castaway Bay, a 35,000
square foot indoor, year-round water-park at the entrance to Cedar Point Causeway in the City.
The Kalahari Resort and Convention Center, located near the City, opened earlier this year and
includes an 80,000 square foot indoor water-park.

            A public library, performing arts theatre and several museums are available in the City,
and other cultural activities are available in Cleveland and Toledo, which are each within a one hour
drive of the City.

                                               - 12 -
City Government
             The City operates under and is governed by its Charter, which was first adopted by the
voters in 1914 and which has been and may be amended by the voters from time to time. The City
is also subject to some general laws applicable to all cities. Under the Ohio Constitution, the City
may exercise all powers of local self-government, and police powers to the extent not in conflict
with applicable general laws. The Charter provides for a Commission-Manager form of
government.
             Legislative authority is vested in a seven-member City Commission, all of whom are
elected at-large for four-year staggered terms. The Charter establishes “term limits” for members of
the City Commission by providing that no person can seek election to, or be appointed to, the City
Commission if such election or appointment would result in that person serving on the City
Commission more than eight years of the twelve year period ending the end of the term to which
that person is seeking election or to which that person would be appointed.
             The City Commission fixes compensation of City officials and employees, and enacts
ordinances and resolutions relating to the City services, tax levies, appropriating and borrowing
money, licensing and regulating businesses and trades, and other municipal purposes. The presiding
officer is the President, who is elected by the City Commission for a two-year term. The President
of the City Commission serves as the Ex-Officio Mayor. The Charter establishes certain
administrative departments; the City Commission may establish divisions of those departments and
additional departments.
             The City’s chief administrative officer is the City Manager, who is appointed by the City
Commission. The City Commission also appoints the Clerk of the City Commission, the Law
Director and the Finance Director as well as members to a number of boards and commissions.
Those appointed officials may be removed by a vote of four out of the seven members of the City
Commission. The City Manager appoints the directors of the remaining City departments.
             All elected officials serve part-time; all of the appointed officials listed below serve full-
time. The current elected officials, and some of the major appointed officials, are:


                                                       ELECTED
                                                          Years in                    Vocation in
                                        Name               Office                     Private Life
   Members of
   City Commission:          Suanne N. Brown(a)                     8      Retired Elementary School Teacher
                             Dannie K. Edmon(b)                     2      Community Outreach Coordinator
                             Brett L. Fuqua Sr.(b)                  2      Employee of Ford Motor Company
                             Dan J. Kaman(b)                        2      Employee of Sandusky International
                             Michael J. Kresser*(a)                16(c)   Retired
                             Leroy E. Sizemore(a)                  12(d)   Retired Plant Superintendent
                             David L. Waddington(b)                 2      Employee of School District

   * President of City Commission/Ex-Officio Mayor.
   (a) Present term expires December 31, 2005.
   (b) Present term expires December 31, 2007.
   (c) Mr. Kresser served as a City Commission member from 1986 until 1994 and has again served since 1998.
   (d) Mr. Sizemore served as a City Commission member from 1988 until 1996 and has again served since 2002.




                                                        - 13 -
                                             APPOINTED
                                                               Years in             Years Service
             Position                        Name              Position             with the City

   Finance Director                Edward A. Widman               17                     17
   Law Director                    Donald C. Icsman                7                     20
   City Manager                    Michael J. Will                 1                      3
   Clerk of City Commission        B. Joyce Brown                 11                     21

Employees
           The City has 277 full-time and 54 part-time employees. The number of full-time
employees has decreased by 19 since June 1, 2001. A state-wide public employee collective
bargaining law applies generally to public employee relations and collective bargaining.
           Full-time employees are represented by the following bargaining units:
               Bargaining Unit                  Agreement Duration         Number of Employees

   American Federation of State, County           December 31, 2006                    112
    and Municipal Employees, Local No.
    1519

   The Fraternal Order of Police, Lodge No.       December 31, 2006                     50
    17

   The International Association of Fire          December 31, 2006                     51
    Fighters, Local No. 327

The remaining full-time City employees have not elected to join a bargaining unit.

            The City Commission by ordinance establishes salaries, wages and other economic
benefits for City employees, the terms of which generally are the products of negotiations with
representatives of the employees or bargaining unit. Increases in economic benefits have been
provided on an annual basis. In the City’s judgment, its employee relations have been and are good.

City Facilities
            The City operates facilities for governmental, recreational, utility and other purposes and
owns land, buildings, furniture, equipment, fixtures and other improvements for those purposes.
See Notes 10, 11 and 20 to the City’s Basic Financial Statements attached hereto as Appendix C for
further information as to the value thereof and the insurance coverages thereon.

Economic and Demographic Information
                                             Population
           Census population since 1960 has been:
                        Year                      City                    County
                        1960                     31,989                    68,000
                        1970                     32,674                    75,909
                        1980                     31,360                    79,655
                        1990                     29,764                    76,779
                        2000                     27,844                    79,551



                                                - 14 -
                Recreational, Industrial, Commercial and Residential Activity

            The City has a unique position as a tourist center due to the City’s location on
Sandusky Bay with over 22 miles of shoreline within the City limits and the location of Cedar
Point within the City. Several years ago, the City enhanced its shoreline by entering into a
development agreement with a private developer in order to implement improvements to the
City’s Battery Park Marina and adjacent park. These improvements included not only the
marina and park but also a restaurant and a breakwall. Battery Park is now a successful
commercial operation which has further enhanced the use of the City’s waterfront. Further
improvements to the City’s waterfront include Shoreline Park which consists of shore protection,
bridges, sidewalks, parking, a gazebo, playground equipment, landscaping and lighting as well as
the 1.7 mile Bay-Front Corridor, a linear park linking major attractions located on the City’s
central waterfront with a continuous walkway. In 1998, the City received a very generous
donation (over $1 million) from a long-time Sandusky benefactor to develop a plaza at the foot
of Columbus Avenue as part of the Bay-Front Corridor development; that project was completed
in 2000. All of these waterfront improvements are part of the Port Development Plan adopted by
the City Commission in 1991 and updated in 1996.

           Besides Battery Park Marina, there are other marinas which have developed since
1990, including a $5 million, 700 slip marina created from idle industrial space and a 210 slip
marina complex completed by a local legal firm which also erected a waterfront office center on
that site. The Lyman Harbor Marina project rehabilitated an abandoned industrial site into a
transient marina and entertainment complex and received a tax abatement for its $2.94 million
project. There are over 8,000 slips available in the Sandusky Bay area.

            Implementation of the Sandusky Bay Pathway Master Plan, with pathways along the
lakefront, began in 2004 with Phase 1 and Phase 2 scheduled for construction this year. The
pathway provides a route that offers a means of exercise, relaxation, and access to public parks
and facilities and a scenic view of Sandusky Bay.

            The City is served by a number of boat lines which transport passengers and
automobiles to certain islands in Lake Erie as well as offering day long cruises to those islands
for tourists. The City is also served by a Canadian ferry boat line that provides ferry service to
Canada. The City is a port of entry to Canada.

            Cedar Point, a 364-acre amusement and theme park, is located on a peninsula
extending into Lake Erie from the City. Developed as a resort area in 1870, Cedar Point is open
daily from early May to early October, attracting in excess of 3 million visitors each season to its
numerous rides and attractions. Cedar Point also includes a recreational vehicle area, marina,
restaurants, one of which is open year-round, and hotels with a combined capacity of almost
1,100 beds, which are open during Cedar Point’s season. A water park attraction with a separate
entrance is included in the park as well as “Challenge Park”, with miniature golf, bungee
jumping and grand prix racing. Cedar Point employs 3,700 seasonal employees, primarily
college students, and approximately 400 year-round employees.

             Significant annual capital expenditures on new attractions are made at Cedar Point.
These expenditures have aggregated over $85 million during the last few years. Cedar Point
opened “Breakers Express” hotel in 2001. In 2003, Cedar Point opened another new roller
coaster, its 16th; called the “Top Thrill Dragster” which is touted by Cedar Point as the tallest and
fastest in the world. In 2004, Cedar Point completed its first year-round attraction – Castaway
Bay Indoor Water Park Resort. The admission tax and the hotel/motel tax generated from Cedar
Point provide a significant amount of revenue for the City’s General Fund; see Admission Tax
and Hotel/Motel Tax.


                                               - 15 -
           The Streetscape Project in the City’s Central Business District has been completed.
In 2002, the Main Streets Program received a Downtown Revitalization grant for over $400,000
to renovate buildings. The City has used the grant to complete code and façade improvements to
twelve properties in the targeted area. In 2003, a Community Reinvestment Area was
established to offset costs to property owners of improving downtown buildings.

           Recent projects in the City’s Downtown District have included renovations to the
Sandusky State Theatre and the expansion and renovation of the Sandusky Library. Several
businesses have also undergone renovations including the Sherwin Williams building with
$300,000 of improvements. Other projects include the Lake View building with eleven units and
office space, the Hubbard building with nine units and retail space, and Reiger Lofts which is
planned to have forty-one apartment lofts, retail space and a restaurant when it is completed.

            The City purchased the Chesapeake Building in 1999 and also adopted an urban
renewal plan to revitalize about forty acres of the waterfront, including the Chesapeake property,
and that area is now referred to as the “Paper District”. In 2002, the Bay-Front Corridor
Committee was established to act as an advisory committee on the selection of a developer.
They received proposals from six developers and selected Mid-States Development Corporation
(Mid-States) to develop the properties. The City has entered into a development agreement with
Mid-States for that purpose. The City received a State grant to pay for acquisition,
environmental cleanup, and demolition of part of the project site and also issued its urban
revitalization notes for that purpose. Mid-States plans to invest over $130 million to revitalize
the Paper District including the Chesapeake Building which the City has conveyed to it and in
which over 190 condominium units have been reserved by prospective buyers.

           The City has established a number of programs to encourage economic development,
including the Sandusky Enterprise Zone Program and the Sandusky Revolving Loan Program.
The City has maintained its Labor Surplus Area Designation and its Impacted City Certification
by the State Department of Development. These designations help the City provide additional
economic development tools for use with manufacturing and commercial development projects.
The City has negotiated with new and existing businesses to help them locate or expand within
the City, using these and other City and State development tools and incentives. In the past
several years, the City has provided support to local businesses by selling over twenty acres of
business park land to local companies. A number of businesses were able to expand because of
tax abatements that the City and the School District provided and the availability of City
revolving loan funds to support the purchase of new equipment.

            The City strives to improve existing housing by obtaining housing improvement
grants. The City received a Community Housing Improvement Program (CHIP) grant in 2004
for $550,000 for Owner Occupied Rehabilitation and has applied for a CHIP 2005 grant. In
addition, the City received a $300,000 Distress Grant for infrastructure improvements targeted to
the City’s south side neighborhood. In 2004, the Cold Creek Subdivision broke ground on the
City’s west end which will contain ninety-five single-family homes and one hundred two
condominiums when completed; the City’s cost of public infrastructure improvements in this
area are to be paid from the levy and collection of special assessments. This new neighborhood
includes over eight acres of woods, a common area, and natural creek and park.

           Sandusky has been successful in raising funds through various grant opportunities. In
the last year alone, the City was able to receive over $2 million in grant and revolving loan
funds. These funds help programs that fund fair housing, economic development, public transit,
and downtown revitalization efforts. The City has also been designated as an Entitlement
Community, which allows the City to access $967,000 in federal funds directly from the
Department of Housing and Urban Development.


                                              - 16 -
                                                     Employment
             The following table shows comparative average employment and unemployment
statistics for the last five years.
                                       Employed in                     Unemployment Rate
              Year(a)                    County                    County     State                  U.S.
              2000                       40,600                     4.4%       4.4%                  4.0%
              2001                       41,300                     4.7        4.3                   4.8
              2002                       40,900                     5.4        5.7                   5.8
              2003                       41,500                     6.0        6.1                   6.0
              2004                       43,300                     6.0        6.1                   5.5
(a) Not seasonally adjusted.
Source: Ohio Bureau of Job and Family Services.

          The following are the private and public employers that have work forces of 250 or more
employees within the City (those marked with an asterisk (*) are located in the immediate vicinity
of the City):

             Employer                               Nature of Activity or Business                    Employees(a)
Firelands Regional Medical Center                   Health care                                         1,600
Visteon Automotive Systems Co.                      Automotive parts                                    1,400*
Delphi Automotive Systems                           Automotive parts                                    1,400*
Erie County                                         Government                                            715
Ohio Veterans Home                                  Skilled nursing home                                  600*
Cedar Fair Limited Partnership(b)                   Amusement park                                        600(b)
School District                                     Education                                             595
Sandusky Athol International                        Vinyl products                                        350
J.H. Routh Packing Co.                              Meat processor                                        300
City                                                Government                                              277
FMC Foodtech, Inc.                                  Food processing equipment                               250
(a) Includes approximate number of full-time employees only.
(b) Operator of Cedar Point. In addition, Cedar Fair hires approximately 3,700 seasonal employees.
Sources: 2005 Harris Ohio Industrial and Service Directories for manufacturing employers.


                                                        Income

          Census reports show the 1999 median household income in the City was $31,133,
compared to County, State and national medians of $42,746, $40,956 and $41,994.

            According to the Ohio Department of Taxation, the average federal adjusted gross
income for residents of the School District (which overlaps the City) filing Ohio personal income
tax returns for calendar year 2003 was $33,224, compared to the averages of $50,263 for all Ohio
school districts and $42,183 for all districts in the County.




                                                          - 17 -
                                   Housing and Building Permits
             The following is Census information concerning housing in the City, with comparative
County and State statistics.
               2000 Median               %
                  Value of          Constructed             Number of
             Owner-Occupied            Prior to           Housing Units                  %
                   Homes                1940           1990           2000            Change
    City         $ 75,400               37.6%          13,416         13,330            -0.6%
    County        109,800               25.4           32,827         35,909            +9.4
    State         103,700               22.5        4,371,945      4,783,051            +9.4
             The number and value of all building permits (including commercial, industrial,
residential and public, and both remodeling and new construction) issued by the City in recent years
were:
                             Year             Number             Value
                             2000               708           $24,522,602
                             2001             1,269            36,391,190
                             2002               574            30,934,832
                             2003               417            21,475,218
                             2004               492            39,758,872

                               Utilities; Public Safety and Services
            Water service within the City is provided by the City water system. Sewage collection,
treatment and disposal service is provided by the City sewerage system. Electricity is delivered by
the Ohio Edison Company, and natural gas is delivered by Columbia Gas of Ohio. Fire protection
is provided by the City. Trash collection is provided by numerous private companies which
contract directly with consumers.

                                    FINANCIAL MATTERS
Introduction
          The City’s Fiscal Year corresponds with the calendar year.
          The main sources of City revenue have been and are property, admission, hotel/motel,
and income taxes, and State distributions, as described below.
            The responsibilities for the major financial functions of the City are divided among the
City Manager, the Finance Director and the City Commission.
            Other important financial functions include general financial recommendations and
planning by the City Manager; budget preparation by the City Manager with the assistance of the
Finance Director; and express approval of appropriations by the City Commission.
            The Finance Director is the City’s fiscal and chief accounting officer. Among that
officer’s duties are to keep the books and accurate statements of all moneys received and expended
and of all taxes and assessments; at the end of each Fiscal Year, or more often if requested by the
City Commission, to examine all accounts of City officers and departments; and not to allow the
amount set aside for any appropriation to be overdrawn, or the amount appropriated for any one
item of expense to be drawn upon for any other purpose, or a voucher to be paid unless sufficient
funds are in the City treasury to the credit of the fund on which the voucher is drawn. The Finance
Director is responsible for receiving, maintaining custody of and disbursing all City funds.
            The Finance Director has charge of the financial affairs of the City, including the
keeping and supervision of all City accounts and the custody and disbursements of all City funds
and moneys. The Finance Director is appointed by the City Commission.


                                               - 18 -
            Investments and deposits of City funds are governed by the Uniform Depository Law
(Chapter 135 of the Revised Code) applicable to all subdivisions, and by the City Charter and
ordinances. The Finance Director is responsible for those investments and deposits. Under recent
and current practices, and the City’s adopted investment policy, in addition to deposits evidenced by
interest bearing certificates of deposit, investments are made in the State Treasurer’s subdivision
investment pool (STAR Ohio), repurchase agreements (with the underlying securities held on the
City’s behalf by the depository institution), certain of the City’s own bonds and notes, bankers’
acceptances, commercial paper, United States Treasury obligations, and obligations of various
federal agencies and instrumentalities, including Federal National Mortgage Association Notes and
Debentures, Federal Home Loan Mortgage Corporation Notes and Federal Home Loan Bank Notes
and Bonds.
            For property taxation purposes, assessment of real property is by the County Auditor
subject to supervision by the State Tax Commissioner, and assessment of public utility and tangible
personal property is by the State Tax Commissioner. Property taxes and assessments are billed and
collected by County officials.
Budgeting, Tax Levy and Appropriations Procedures
            Detailed provisions for budgeting, tax levies and appropriations are made in the Revised
Code, including a requirement that the City levy a property tax in a sufficient amount, with any
other moneys available for the purpose, to pay the debt service on securities payable from property
taxes.
            The law generally requires that a subdivision prepare, and then adopt after a public
hearing, a tax budget approximately six months before the start of the next fiscal year. The tax
budget then is presented for review by the county budget commission, comprised of the county
auditor, treasurer and prosecuting attorney. However, a county budget commission may either
waive the requirement for tax budget or permit an alternative form of tax budget with more limited
information. The County Budget Commission has waived the requirement of a tax budget from the
City.
           The County Budget Commission then determines and approves levies for debt service
outside and inside the ten-mill limitation. The Revised Code provides that “if any debt charge is
omitted from the budget, the commission shall include it therein.”
            The County Budget Commission then certifies to each subdivision its action together
with the estimate by the County Auditor of the tax rates outside and inside the ten-mill limitation.
Thereafter, and before the end of the then Fiscal Year, the Board of County Commissioners
approves the tax levies and certifies them to the proper City officials. The approved and certified
tax rates are then reflected in the tax bills sent to property owners. Real property taxes are payable
in two equal installments, the first usually in February and the second in July.
            The City Commission adopts by April 1, a permanent appropriation measure for that
Fiscal Year. Although called “permanent”, the annual appropriation measure may be, and often is,
amended during the Fiscal Year. Annual appropriations may not exceed the County Budget
Commission’s official estimates of resources, and the County Auditor must certify that the City’s
appropriation measures do not appropriate moneys in excess of the amounts set forth in those
estimates.
Financial Reports and Audits
           The City maintains its accounts, appropriations and other fiscal records in accordance
with the procedures established and prescribed by the Ohio Auditor of State (the State Auditor.)
The State Auditor is charged by law with the responsibility of inspecting and supervising the
accounts and records of each taxing subdivision and most public agencies and institutions.


                                                - 19 -
           City receipts and expenditures are compiled on a cash basis, pursuant to accounting
procedures prescribed by the State Auditor which are generally applicable to all Ohio political
subdivisions. The records of these cash receipts and expenditures are converted annually for
audit purposes to a modified accrual basis of accounting. These accounting procedures conform
to generally accepted accounting principles as recommended by the Governmental Accounting
Standards Board (GASB), including GASB Statement 34. Those recommendations, among other
things, provide for a modified accrual basis of accounting for the general fund, all special
revenue funds and the debt service (bond retirement) fund and for a full accrual basis of
accounting for all other funds, and for the preparation for each fund of balance sheets, statements
of revenues and expenditures, and statements showing changes in fund balances.
           The City has issued a Comprehensive Annual Financial Report (CAFR), including
General Purpose Financial Statements, for several years, and, beginning with Fiscal Year 2002,
including, as required by GASB Statement No. 34, Management’s Discussion and Analysis and
Basic Financial Statements. The CAFRs for 1991 through 2003 were awarded the Government
Finance Officers Association (GFOA) Certificate of Achievement for Excellence in Financial
Reporting, which is awarded to those governmental reporting agencies that comply with the
GFOA reporting standards. When available, the City plans to submit its CAFR for its most recent
Fiscal Year to GFOA for consideration.
           Audits are made by the State Auditor, or by CPAs at the direction of that officer,
pursuant to Ohio law, and examinations or audits are made under certain federal program
requirements. No other independent examination or audit of the City’s financial records is made.
The most recent audit (including compliance audit) of the City’s accounts by the State Auditor
was completed through Fiscal Year 2004. No material findings, citations or items for
adjustment, or material weaknesses in internal controls, were noted as part of the audit.
           See Appendix A for an unaudited comparative cash basis summary of General Fund
receipts and expenditures for the last five Fiscal Years and budgeted for the following Fiscal
Year. See Appendix B for an unaudited cash basis all funds summary for the last two Fiscal
Years. Those summaries have been prepared by the City in comparative form based on its
records. The Basic Financial Statements (audited) for Fiscal Year 2004 are set forth in
Appendix C. The audited financial statements are public records and no bring-down procedures
have been undertaken by the State Auditor since the date of its report with respect thereto.

                                            AD VALOREM PROPERTY TAXES
Assessed Valuation
               The following table shows the recent assessed valuations of property subject to ad
valorem taxes levied by the City.
      Tax                                                                            Total
   Collection                              Tangible             Public             Assessed
      Year               Real(a)           Personal            Utility(b)         Valuation
      2000           $318,326,290        $64,159,264         $22,875,100         $405,360,654
      2001             350,460,030(c)     65,521,406          23,655,510          439,636,946
      2002             357,159,460        76,042,536          17,532,410(d)       450,734,406
      2003             361,711,830        70,518,286          17,798,430          450,028,546
      2004             421,567,300(e)     64,275,034          17,514,670          503,357,004
      2005             424,339,140        68,206,114          16,654,580          509,199,834
(a)     Includes the real property of railroads. The real property of public utilities, other than railroads, is assessed by the County Auditor. Real
        property of railroads is assessed, together with tangible personal property of all public utilities, by the State Tax Commissioner.
(b)     Tangible personal property of all public utilities other than real property of railroads. See footnote (a).
(c)     Reflects sexennial reappraisal.
(d)     Decrease primarily due to effect of State legislation which, beginning with collection year 2002, reduced to 25% of true value the
        assessed valuation of electric utility production equipment from 100% and of natural gas property from 88%.
(e)     Reflects triennial adjustment.
Source: County Auditor.



                                                                      - 20 -
             Taxes collected on “Real” in one calendar year are levied in the preceding calendar year
on assessed values as of January 1 of that preceding year. Taxes collected on “Tangible Personal”
in one calendar year are levied in the same calendar year on assessed values during and at the close
of the most recent fiscal year of the taxpayer that ended on or before December 31 of the preceding
calendar year, and at the tax rates determined in the preceding year. “Public Utility” (real and
tangible personal) taxes collected in one calendar year are levied in the preceding calendar year on
assessed values determined as of December 31 of the second year preceding the tax collection year.
             Based on County Auditor records of assessed valuations for the 2004 tax collection year,
the largest City ad valorem property tax payers are:
      Name of Taxpayer                          Nature of Business             Assessed Valuation
      Cedar Fair                                Amusement park                        $57,847,970
      Ohio Edison Company                       Electric utility                       14,908,090
      Ameritech (Ohio Bell)                     Telephone utility                       7,303,860
      Sandusky International Inc.               Castings                                6,922,230
      Fort James Operating Co.                  Plastic injection                       6,141,466
      FMC Foodtech, Inc.                        Food processing equipment               5,401,560
      Sandusky Athol International              Vinyl products                          4,999,563
      Norfolk & Western Railroad                Railroad                                4,286,040
      S&S Realty, Inc.                          Real estate developer                   4,098,750
      Firelands Regional Medical Center         Health care                             4,066,550
             Pursuant to statutory requirements for sexennial reappraisals, in 2000 the County
Auditor adjusted the true value of taxable real property to reflect then current fair market values.
These adjustments were first reflected in the 2000 duplicate (collection year 2001) and in the ad
valorem taxes distributed to the City in 2001 and thereafter. The County Auditor is required to
adjust (but without individual appraisal of properties except in the sexennial reappraisal), and has
adjusted, taxable real property value triennially to reflect true values.
             The “assessed valuation” of real property is fixed at 35% of true value and is determined
pursuant to rules of the State Tax Commissioner. An exception is that real property devoted
exclusively to agricultural use is to be assessed at not more than 35% of its current agricultural use
value. Real property devoted exclusively to forestry or timber growing is taxed at 50% of the local
tax rate upon its assessed value.
             The recently enacted State biennial budget bill phases out the taxation of all tangible
personal property used in business (except for certain public utility tangible personal property)
over four years, from tax year 2006 through tax year 2009 (2006—18.75%; 2007—12.50%;
2008—6.25%; 2009—0%). Currently, machinery and equipment, and furniture and fixtures, are
generally taxed at 25% of true value, and inventory is taxed at 23%. Certain new tangible
personal property not previously used in business in Ohio is not subject to tangible personal
property taxation. To compensate for foregone revenue as the tangible personal property tax is
phased out, the State will make distributions to taxing subdivisions from revenue generated by its
newly enacted commercial activities tax. Generally, these distributions will fully compensate
taxing subdivisions for such tax revenue losses through 2010, with a phasing out of the
reimbursement amount from 2011 through 2017 (2018 for school districts).
             Public utility tangible personal property (with some exceptions) is currently assessed
(depending on the type of property) from 25% to 88% of true value. Effective for collection year
2002, the assessed valuation of electric utility production equipment was reduced from 100% and
natural gas utility property from 88% of true value, both to 25% of true value; makeup payments
in varying and declining amounts are to be made through 2016 to taxing subdivisions by the
State from State resources. The recently enacted State biennial budget bill includes a reduction
in the 88% assessment rate for electric utility transmission and distribution equipment to 85%,
and a reduction in the 25% assessment rate for all electric company taxable property to 24%,


                                                - 21 -
commencing in tax year 2006. That legislation also provides for a phasing-out of the taxation of
all personal property used by telephone companies, telegraph companies, or interchange
telecommunications companies by tax year 2011, with State reimbursement payments to be
made in declining amounts through 2018.
             The first $10,000 of taxable value of tangible personal property has been exempted
from taxation; reimbursement of resulting reduced local collections has been made from State
resources. The recently enacted State biennial budget bill provides that no such reimbursement
payments are to be made after fiscal year 2009. See Collections for information as to the
amount of this reimbursement.
             As described herein, the General Assembly has from time to time exercised its power
to revise the laws applicable to the determination of assessed valuation of taxable property and
the amount of receipts to be produced by ad valorem taxes levied on that property, and may
continue to make similar revisions.
             Ohio law grants tax credits to offset increases in taxes resulting from increases in the
true value of real property. Legislation classifies real property as between residential and
agricultural property and all other real property, and provides for tax reduction factors to be
separately computed for and applied to each class. These tax credits apply only to certain voted
levies on real property, and do not apply to unvoted levies, or to voted levies to pay debt service on
general obligation debt. None of the City’s tax levies are affected by these credits. These credits
are discussed further following Tax Table A.
Overlapping Governmental Entities
             The major political subdivisions or other governmental entities that overlap all or a
portion of the territory of the City are listed below. The “%” figure is that approximate percentage
of a recent tax valuation of the overlapping entity that is located within the City.
1.           The County. (26%)
2.           The School District which includes 100% of the territory within the City.
             (100%)
3.           Erie County Metropolitan Park District. (26%)
             Each of these entities operates independently, with its own separate budget, taxing
power and sources of revenue. Only the County and school district may, as may the City, levy ad
valorem property taxes within the ten-mill limitation (subject to available statutory allocation of the
10 mills) described under Indirect Debt and Unvoted Property Tax Limitations.
Tax Rates
             All references to tax rates under this caption are in terms of stated rates in mills per
$1.00 of assessed valuation. The following are the rates at which the City and overlapping taxing
subdivisions have in recent years levied ad valorem property taxes.
                                             TAX TABLE A
                                       Overlapping Tax Rates
    Collection                                                     Sandusky City
       Year                  City               County(a)         School District(b)       Total
       2000                  5.51                  8.30                 66.84              80.65
       2001                  5.51                  8.30                 66.00              79.81
       2002                  5.51                  8.30                 66.00              79.81
       2003                  5.51                  8.30                 66.00              79.81
       2004                  4.95                  8.80                 70.55              84.30
       2005                  4.95                  8.80                 71.35              85.10
(a)     Includes Erie County Metropolitan Parks.
(b)     Includes Sandusky Library.
Source: County Auditor.




                                                   - 22 -
             Statutory procedures limit, by the application of tax credits, the amount realized by each
taxing subdivision from real property taxation to the amount realized from those taxes in the
preceding year plus: (i) the proceeds of any new taxes (other than renewals) approved by the
electors, calculated to produce an amount equal to the amount that would have been realized if those
taxes had been levied in the preceding year, and (ii) amounts realized from new and existing taxes
on the assessed valuation of real property added to the tax duplicate since the preceding year.
             As noted above, all of the City’s property tax levies, as levies inside the ten-mill
limitation or for voted debt service, are exempt from those tax credit provisions. The tax credit
provisions do not apply to amounts realized from taxes levied at whatever rate required to produce a
specified amount or an amount to pay debt service, or from taxes levied inside the ten-mill
limitation or any applicable charter tax rate limitation. To calculate the limited amount to be
realized, a reduction factor is applied to the stated rates of the levies subject to these tax credits. A
resulting “effective tax rate” reflects the aggregate of those reductions, and is the rate based on
which real property taxes are in fact collected. As an example, the total overlapping tax rate for
tax collection year 2005 of 85.10 mills within the City is reduced by reduction factors, which
results in “effective tax rates” of 44.4095 mills for residential and agricultural property and
56.4294 mills for all other real property. See Tax Table A.
            Real property tax amounts are generally further reduced by an additional 10% (12.5%
in the case of owner-occupied residential property). The recently enacted State biennial budget
bill eliminates the 10% “rollback” for certain commercial and industrial real property (it remains
for all other real property), effective for the 2005 tax year and thereafter. See Collections for
information as to the amount of this reimbursement.
            The following are the rates at which the City levied property taxes for the general
categories of purposes for recent years, both outside (Debt Retirement) and inside (Operating and
Police and Fire Pension) the ten-mill limitation:

                                                          TAX TABLE B
                                                          City Tax Rates
      Collection                                            Police and                        Debt
        Year                     Operating                 Fire Pension                   Retirement(a)                      Total
        2000                       3.65                        0.60                           1.26                           5.51
        2001                       3.65                        0.60                           1.26                           5.51
        2002                       3.65                        0.60                           1.26                           5.51
        2003                       3.65                        0.60                           1.26                           5.51
        2004                       3.65                        0.60                           0.70                           4.95
        2005                       3.65                        0.60                           0.70                           4.95
(a)     Additional levy for bond issue approved by City electors in November, 1998, for expansion of the Sandusky Library; rates are reviewed
        for each collection year by County Budget Commission based on debt service due on that bond issue in that collection year, the City’s
        assessed valuation and any unused moneys carried over from that levy in prior years.

The voted levies for “Debt Retirement” continue for the life of the bonds authorized by the
electors, in annual amounts sufficient to pay debt service on those bonds as it becomes due.
            See the discussion of the ten-mill limitation, and the priority of claim on that millage for
debt service on unvoted general obligation debt, under Indirect Debt and Unvoted Property Tax
Limitations.




                                                                  - 23 -
Collections
            The following are the “Current” amounts billed and collected for City ad valorem
property taxes and special assessments for recent tax collection years.
  Collection                                                                 Delinquent
     Year           Billed         Collected        %Collected          Current     Accumulated
                                     Real and Public Utility
      2000            $1,878,167     $1,811,168            96.4%          $ 75,352          $152,603
      2001             2,055,937      1,970,562            95.8             85,375           161,411
      2002             2,065,656      1,977,807            95.7             87,849           222,421
      2003             2,090,696      2,003,508            95.8             87,188           248,326
      2004             2,153,296      2,041,010            94.8            112,286           274,960
                                     Tangible Personal Property
      2000                $364,993    $359,799             98.6%            $1,968           $36,076
      2001                 439,458     429,693             97.8              9,765            43,686
      2002                 435,614     428,276             98.3              7,338            52,908
      2003                 374,787     369,588             98.6              5,199            47,611
      2004                 341,521     335,817             98.3              5,704            43,073
                                         Special Assessments
      2000                $509,214    $429,463             84.3%         $162,976           $319,414
      2001                 522,518     430,500             82.4            92,078            394,571
      2002                 517,285     423,490             81.8            79,197            473,152
      2003                 477,462     387,696             81.2            89,766            525,522
      2004                 448,225     362,381             80.8            85,844            560,374
Source: County Auditor.

            Current and delinquent property taxes and special assessments are billed and collected
by County officials for all taxing subdivisions in the County. Cedar Fair Limited Partnership
(Cedar Fair), the operator of Cedar Point, accounts separately for 5% or more of the billed taxes
identified above for collection year 2005.
            Included in the “Billed” and “Collected” figures above are payments made from State
revenue sources under two statewide real property tax relief programs (which do not apply to
special assessments). Homestead exemptions are available for persons over 65 and the disabled.
Payments to taxing subdivisions have been made in amounts equal to approximately 10% (12.5%
with respect to owner-occupied residential property) of all ad valorem real property taxes levied,
thereby reducing the tax obligations of real property owners in any given year by the applicable
10% or 12.5%. This State assistance reflected in the City’s tax collections for tax collection year
2004 was $26,294 for the elderly/disabled homestead payment and $235,491 for the rollback
payment. Also included in tax collection year 2004 was $17,118 received from the State as a
reimbursement of reduced collections resulting from the partial exemption of tangible personal
property used in business.

Delinquencies
            The following is a general description of delinquency procedures under Ohio law, the
implementation of which may vary in practice among the counties. Real estate taxes and special
assessments not paid in the due year are to be certified by the county auditor’s office as delinquent.
A list of delinquent properties then is published. If the delinquent taxes and special assessments are
not paid within one year after certification, the properties are then to be certified as delinquent to the
county prosecuting attorney.



                                                  - 24 -
            The property owner may arrange a payment plan with the county treasurer providing for
payments over not to exceed five years. If payments are made when due under the plan, no further
interest will be assessed against delinquent balances covered by the plan; a default in any payment
under the plan or in the payment of current taxes will invalidate the taxpayer’s participation in the
plan. If a payment plan is not adhered to or if none is arranged, foreclosure proceedings may be
initiated by the county. Mass foreclosure proceedings and sales are permitted after three years’
delinquency. County officials employ a notification procedure and judicial proceedings to collect
delinquent tangible personal property taxes. Proceeds from delinquent property foreclosure sales
become part of and are distributed as current collections to the taxing subdivisions.
            Of the 12,267 nonexempt parcels in the City for tax collection year 2004, the number
of delinquent parcels was 1,307, against 11 of which foreclosure proceedings have been
commenced.


                OTHER MAJOR GENERAL FUND REVENUE SOURCES
           Major sources of revenue to the General Fund, in addition to ad valorem property
taxes, have included the City’s income tax, admission tax, hotel/motel tax and State local
government assistance distributions. The Appendices provide further information regarding
other revenue sources for the General Fund and other funds.

Municipal Income Tax
            Ohio law authorizes a municipal income tax on both corporate income and employee
wages and salaries at a rate of up to 1% without, and above that rate with, voter authorization. The
City, pursuant to City Commission action, currently levies the tax at the rate of 1.0%. This tax on
business income and individuals’ salaries and wages is collected and administered by the Regional
Income Tax Agency (RITA) on behalf of the City.
            The tax is in effect for a continuing period of time. It could be reduced or terminated by
action of the City Commission, or by vote of the electors initiated by petition of 10% of the number
of electors of the City who voted at the last preceding election for governor, following initiated
ordinance procedure, or 10% of the electors of the City who voted at the last preceding City general
election, following charter amendment procedures. Under current law, the City Commission could
unless restricted by a Charter provision reimpose a 1% tax without authorization by the electors.
            Income tax proceeds, after payment of collection expenses, were allocated by the City
Commission for Fiscal Year 2004 as follows: 1.00% to the Capital Improvement Fund, 92.75%
to the General Fund, and 6.25% to the General Bond and Note Retirement Fund.

           Annual income tax receipts (all at 1%) have been:
                          Year                          Amount
                          2000                         $7,650,048
                          2001                          7,494,818
                          2002                          7,399,956
                          2003                          7,357,030
                          2004                          7,178,288

Residents are currently permitted, as a credit against their City income tax liability, up to a
maximum of 50% of 1%, paid as municipal income tax on the same income in another municipal
corporation. Based on employer payments of corporate and withheld personal income taxes,
Cedar Fair contributed more than 5% of the City income taxes collected in Fiscal Year 2004.




                                                - 25 -
Admission Tax
            The City levies a tax of 3% on the amounts paid for admission to any place, with
certain limited exceptions, for which an admission charge is made. The tax is collected and
administered by the City and the proceeds thereof are deposited in the General Fund of the City.
The City’s admission tax is in effect for a continuing period of time unless preempted by the
State (the City knows of no plans for preemption). It could be reduced or terminated by action of
the City Commission, or by vote of the electors initiated by petition of 10% of the number of
electors of the City who voted for governor at the last preceding election for governor, following
initiated ordinance procedures. The City Commission could, unless restricted by a Charter
provision (no such Charter provision is currently in effect), reimpose the tax. Cedar Fair paid a
substantial portion of admission tax collections in Fiscal Year 2004. Annual admission tax
receipts (all at 3%) have been:
                                   Year                       Amount
                                   2000                      $2,488,309
                                   2001                        2,315,724
                                   2002                        2,384,262
                                   2003                        2,488,178
                                   2004                        2,440,013
Hotel/Motel Tax
            Under Ohio law, the City currently levies a tax of 3% on transactions by which
lodging by a hotel or motel is furnished to transient guests. The tax is collected and administered
by the City and the proceeds thereof are deposited in the General Fund of the City. The City’s
hotel/motel tax is in effect for a continuing period of time. It could be reduced or terminated by
action of the City Commission, or by vote of the electors initiated by petition of 10% of the
number of electors of the City who voted for governor at the last preceding election for governor,
following initiated ordinance procedures. The City Commission could, unless restricted by a
Charter provision (no such Charter provision is currently in effect), reimpose the tax. Cedar Fair
and the Radisson Harbour Inn paid a substantial portion of the hotel/motel tax collections in
Fiscal Year 2004. Annual hotel/motel tax receipts (all at 3%) have been:
                                   Year                       Amount
                                   2000                      $ 865,913
                                   2001                          913,060
                                   2002                        1,011,412
                                   2003                        1,021,399
                                   2004                        1,040,898
Local Government Assistance Funds
            Statutory state-level local government assistance funds are comprised of designated
State revenues which are distributed to each county and then allocated on a formula basis or, in
some cases, on an agreement basis, among the county and cities, villages and townships, and in
some cases park districts, in the county. City receipts from those funds in recent years were:
                                   Year                       Amount
                                   2000                       $980,313
                                   2001                         969,382
                                   2002                         942,266
                                   2003                         909,747
                                   2004                         890,698
            The amounts of and formula for distribution of these funds may be revised. The State
appropriations act for the period July 1, 2005 through June 30, 2007 caps those annual
distributions during that two-year period generally at the prior levels during the period July 1,
2003 through June 30, 2005.


                                              - 26 -
                    CITY DEBT AND OTHER LONG TERM OBLIGATIONS
            The following describes the security for general obligation debt such as the Bonds, and
applicable debt and ad valorem property tax limitations, and outstanding and projected bond and
note indebtedness and certain other long term financial obligations of the City.
            As used in the discussions that follow, BANs refers to notes issued in anticipation of the
issuance of general obligation bonds.
            The Bonds are unvoted general obligations of the City, $1,295,000 of those Bonds are
subject to both of the direct debt limitations, and the Bonds are subject to the indirect debt and
related property tax limitation, all as described below. Certain overlapping subdivisions also may
issue voted and unvoted general obligation debt.
            The City is not, and to the knowledge of current City officials has not in at least the last
25 years been, in default in the payment of debt service on any of the bonds or notes on which the
City is obligor. However, the City makes no representation as to the existence of a condition of
default resulting from a default by any private entity under any financing documents relating to
industrial development or hospital revenue bonds of which the City was the issuer.
Security for General Obligation Debt
            The following describes the security for City general obligation debt, such as the
unvoted Bonds.
Bonds and BANs
            Unvoted Bonds. The basic security for unvoted City general obligation debt is the
City’s ability to levy, and its levy pursuant to constitutional and statutory requirements of, an ad
valorem tax on all real and tangible personal property subject to ad valorem taxation by the City,
within the ten-mill limitation described below. This tax must be in sufficient amount to pay (to the
extent not paid from other sources) as it comes due the debt service on unvoted City general
obligation bonds, both outstanding and in anticipation of which BANs are outstanding. The law
provides that the levy necessary for debt service has priority over any levy for other purposes within
that tax limitation; that priority may be subject to the provisions of bankruptcy laws and other laws
affecting creditors’ rights and to the exercise of judicial discretion. See the discussion below, under
Indirect Debt and Unvoted Property Tax Limitations, of the ten-mill limitation, and the priority
of claim on it for debt service on unvoted general obligation debt of the City and all overlapping
taxing subdivisions.
            Voted Bonds. The basic security for voted City general obligation debt is the
authorization by the electors for the City to levy to pay debt service on those bonds, without
limitation as to rate or amount, ad valorem taxes on all real and tangible personal property subject to
ad valorem taxation by the City. The tax is outside of the ten-mill limitation, and is to be in
sufficient amount to pay (to the extent not paid from other sources) as it comes due the debt service
on the voted bonds (subject to the provisions of bankruptcy laws and other laws affecting creditors’
rights and to the exercise of judicial discretion).
            BANs. While BANs are outstanding, Ohio law requires the levy of an ad valorem
property tax in an amount not less than what would have been levied if bonds had been issued
without the prior issuance of the BANs. That levy need not actually be collected if payment in fact
is to be provided from other sources, such as the proceeds of the bonds anticipated or of renewal
BANs. BANs, including renewal BANs, may be issued and outstanding from time to time up to a
maximum period of 240 months (20 years) from the date of issuance of the original notes (the
maximum maturity for special assessment BANs is five years). Any period in excess of five years
must be deducted from the permitted maximum maturity of the bonds anticipated, and portions of
the principal amount of BANs outstanding for more than five years must be retired in amounts at
least equal to, and payable not later than, those principal maturities that would have been required if
the bonds had been issued at the expiration of the initial five year period.

                                                 - 27 -
Statutory Direct Debt Limitations
          The Revised Code provides that:

               The net principal amount of both voted and unvoted debt of a city, excluding
               “exempt debt” (discussed below), may not exceed 10½% of the total tax valuation of
               all property in the city as listed and assessed for taxation.

               The net principal amount of the unvoted nonexempt debt of a city may not exceed
               5½% of that valuation, as discussed below.

These two limitations, which are referred to as the “direct debt limitations,” may be amended from
time to time by the General Assembly.

            A city’s ability to incur unvoted debt (whether or not exempt from the direct debt
limitations) also is restricted by the indirect debt limitation discussed below under Indirect Debt
and Unvoted Property Tax Limitations.

           Certain debt the City may issue is exempt from the direct debt limitations (“exempt
debt”). Exempt debt includes, among others:
           o       General obligation debt:
                   o        That is “self-supporting” (that is, nontax revenues from the facility or category of
                            facilities are sufficient to pay operating and maintenance expenses and related debt
                            service and other requirements) issued for city utility systems or facilities; airports or
                            landing fields; railroads and other mass transit systems; parking facilities; health care
                            facilities; solid waste facilities; urban development; recreation, sports, convention,
                            museum and other public attraction facilities; facilities for natural resource exploration,
                            development, recovery, use or sale; correctional and other related rehabilitation facilities.

                            o         For highway improvements if the municipality has covenanted to pay debt
                                      service and financing costs from distributions of motor vehicle license and fuel
                                      taxes.
                             o        Issued in anticipation of the levy or collection of special assessments.
                             o        To pay final judgments or court-approved settlements.
                             o        Voted for water or sanitary or storm water sewerage facilities to the extent that
                                      another subdivision has agreed to pay amounts equal to debt service to the city.
           o       Unvoted general obligation bonds to the extent that debt service will be met from lawfully
                   available municipal income taxes to be applied to that debt service pursuant to ordinance
                   covenants.
           o       Revenue debt and mortgage revenue bonds to finance municipal utilities.
           o       Notes anticipating the collection of current revenues or the proceeds of a specific tax levy.
           o       Notes issued for certain energy conservation improvements or certain emergency purposes.
           o       Debt issued in anticipation of the receipt of federal or State grants for permanent improvements,
                   or to evidence loans from the State capital improvements fund or State infrastructure bank.
           o       Voted debt for urban redevelopment purposes not in excess of 2% of the City’s assessed
                   valuation.
           o       Debt issued to make a single payment on certain accrued liability to the State’s Police and
                   Firemen’s Disability and Pension Fund.
           o       Debt issued for municipal educational and cultural facilities.
           o       Debt issued for the acquisition of property for public use in excess of that needed for a public
                   improvement.
           BANs issued in anticipation of exempt bonds also are exempt debt.



                                                     - 28 -
             The City may incur debt for operating purposes, such as current tax revenue anticipation
notes or tax anticipation notes, only under certain limited statutory authority.
             In the calculation of debt subject to the direct debt limitations, the amount in a city’s
bond retirement fund allocable to the principal amount of nonexempt debt is deducted from gross
nonexempt debt. Without consideration of amounts in the City’s Bond Retirement Fund, and based
on the issuance of the Bonds and the retirement of the Outstanding Notes and the assessed valuation
for tax collection year 2005, the City’s voted and unvoted nonexempt debt capacities are:
                                           Nonexempt Debt               Additional Debt Capacity
                 Limitation                  Outstanding                    Within Limitation
        10-1/2% = $ 53,465,982              $22,362,532                       $31,103,450
         5-1/2% = $ 28,005,990              $17,002,532                       $11,003,458
This is further detailed in Debt Table A.

Indirect Debt and Unvoted Property Tax Limitations
            Voted general obligation debt may be issued by the City if authorized by vote of the
electors. Ad valorem taxes, without limitation as to amount or rate, to pay debt service on voted
bonds are authorized by the electors at the same time they authorize the issuance of the bonds.
                General obligation debt such as the Bonds also may be issued by the City without a
vote of the electors. This unvoted debt may not be issued unless the ad valorem property tax for the
payment of debt charges on:

               Those bonds (or the bonds in anticipation of which BANs are issued), and

               All outstanding unvoted general obligation bonds (including bonds in anticipation of
               which BANs are issued) of the combination of overlapping taxing subdivisions
               including the City resulting in the highest tax required for such debt charges,

in any year is 10 mills or less per $1.00 of assessed valuation. This indirect debt limitation, the
product of what is commonly referred to as the “ten-mill limitation,” is imposed by a combination
of provisions of the Ohio Constitution and the Revised Code.

             The ten-mill limitation is the maximum aggregate millage for all purposes that may be
levied on any single piece of property by all overlapping taxing subdivisions without a vote of the
electors. This 10 mills is allocated pursuant to a statutory formula among certain overlapping taxing
subdivisions in the County, including the City. The entire 10 mills is currently being levied by the
combination of the City and taxing subdivisions overlapping the City. The current allocation of the
10 mills (sometimes referred to as the “inside millage”) is as follows: 4.25 City, 2.30 County, 3.45
School District; that allocation has remained constant for at least the last five years.
             Present Ohio law requires the inside millage allocated to a taxing subdivision to be used
first for the payment of debt service on its unvoted general obligation debt, unless provision has
been made for that payment from other sources, with the balance usable for other purposes. To the
extent this inside millage is required for debt service of a taxing subdivision (which may exceed the
formula allocation to that subdivision), the amount that would otherwise be available to that
subdivision for general fund purposes is reduced. Since the inside millage that may actually be
required to pay debt service on a subdivision’s unvoted general obligation debt may exceed the
formula allocation of that millage to the subdivision, the excess reduces the amount of inside
millage available to overlapping subdivisions. In the case of the City, however, a law applicable to
all Ohio cities and villages requires that any lawfully available receipts from a municipal income tax
or from voted property tax levies be allocated to pay debt service on City unvoted debt before the
formula allocations of the inside millage to overlapping subdivision can be invaded for that purpose.


                                                - 29 -
            In the case of BANs issued in anticipation of unvoted general obligation bonds, the
highest annual debt service estimated for the anticipated bonds is used to calculate the millage
required.
            Revenue bonds and notes and mortgage revenue bonds are not included in debt subject
to the indirect limitation since they are not general obligations of the City, and the full faith and
credit and property taxing power of the City is not pledged for their payment.
            The indirect limitation applies to all unvoted general obligation debt even if debt service
on some of it is expected to be paid in fact from special assessments, utility earnings or other
sources.
            If the City were to convert to the anticipated bonds its outstanding unvoted general
obligation BANs (not including the Outstanding Notes) at the interest rates assumed in the
ordinances authorizing those BANs (see Debt Table D) the highest debt service requirement in any
year for all City debt subject to the ten-mill limitation is estimated to be $2,382,385. That debt
includes unvoted general obligation bonds outstanding or bonds anticipated by BANs outstanding
(see Debt Table D). The payment of that annual debt service would require a levy of 4.68 mills
based on current assessed valuation. Of this maximum annual debt service requirement, at least
$1,033,835 is expected by the City to be paid from sources other than ad valorem taxes, such as
special assessments and utility revenues; see Debt Table C. If those other sources for any reason
are not available, the debt service could not be met from the amounts produced by the millage
currently levied for all purposes by the City within the ten-mill limitation, and therefore inside
millage allocated to the overlapping subdivisions might have to be preempted for that debt service.
(See the discussion of this preemption, and of limitations on it, above under this caption.)
            The total millage theoretically required by the City and by the County (the only
overlapping taxing subdivision which has issued unvoted debt) for their outstanding unvoted
general obligation debt is estimated to be 7.91 mills for the year of the highest potential debt service.
There thus remains 2.09 mills within the ten-mill limitation which has yet to be allocated to debt
service and which is available to the City and overlapping subdivisions in connection with the
issuance of additional unvoted general obligation debt.

Debt Outstanding
            The Debt Tables attached list the City’s outstanding debt represented by bonds and
notes, with respect to City and overlapping general obligation debt allocations, and debt service.
            The following shows the principal amount of City general obligation debt outstanding
as of December 31 in the indicated years:
                                                                             GO Total
       Year               Exempt               Total                Voted               Unvoted
       2000             $8,046,311         $21,322,859           $        -0-        $21,322,859
       2001              8,770,253           28,356,451          5,985,000            22,371,451
       2002              7,915,322           27,512,810          5,785,000            21,727,810
       2003              9,969,660           29,084,569          5,575,000            23,509,569
       2004              9,189,581           31,070,113          5,360,000            25,710,113

Bond Anticipation Notes
           After the issuance of the Bonds and the retirement of the Outstanding Notes on
October 26, 2005, $5,615,000 of the debt of the City would be in the form of BANs (listed in Debt
Table D). BANs may be retired at maturity from the proceeds of the sale of renewal notes or of the
bonds anticipated by the BANs, or available funds of the City, or a combination of these sources.




                                                 - 30 -
Bond Retirement Fund
            The General Bond and Note Retirement Fund and the Special Assessment Bond
Retirement Debt Service Fund are the funds from which the City pays debt service on its general
obligation debt, and into which moneys required to be applied to those payments are deposited. The
following table is an unaudited combined summary of receipts and disbursements for those funds on
a cash basis for recent years.
         Year                  Jan. 1 Balance            Receipts              Disbursements
         2000                   $2,122,856              $3,662,474                $4,186,590(a)
         2001                    1,598,740                3,569,316                3,716,667
         2002                    1,451,389                1,557,033                1,820,114
         2003                    1,188,308                1,583,584                1,790,129
         2004                      981,763                1,761,267                2,078,547
(a)   Includes payment of debt charges on $860,000 BAN issued for library expansion and its retirement at its maturity.

Sewer Fund
            The City has paid and expects to pay debt service on obligations issued to construct
capital improvements to the City’s sewer system as well as the OWDA loans discussed under
Long Term Financial Obligations Other Than Bonds and Notes from revenues generated by
the sewer system from user charges, connection fees and payments under contracts with the
County for the provision of those services in certain areas. Those revenues have been sufficient
in the past to pay operating and maintenance expenses (not including depreciation expenses) of
the system and to pay debt service on those bonds. The City anticipates that those revenues will
be sufficient in the future for that purpose. The City Commission has authority to increase sewer
rates as may be necessary; see Sewer and Water Rates.
            In calendar year 2004, the City, as it has in the past, paid debt service on all its
outstanding bonds issued to construct capital improvements to the City’s sewer system from
revenues generated by the system. The 2004 net operating revenues of the system were
sufficient to exempt all of the bonds and notes issued for sewer system improvements from the
statutory direct debt limitations. (For a discussion of exempt debt, see Statutory Direct Debt
Limitations.)
            On January 31, 1995, the State filed a Complaint against the City in the Court of
Common Pleas for Erie County (Case No. 95-CV-053) alleging that the City had violated
Chapter 6111 of the Ohio Revised Code, the regulations adopted thereunder, and the City’s
applicable National Pollutant Discharge Elimination System (“NPDES”) permit. Pursuant to a
Consent Order filed February 27, 1995, the City paid a civil penalty of $30,000 and contributed
an additional $20,000 to the Ohio Division of Wildlife Wetlands Habitat Fund. In addition,
under the Consent Order, the City is required to undertake a number of tasks in order to ensure
adequate treatment of its discharge and to eliminate water quality impacts of combined sewer
overflows into Sandusky Bay. These tasks are generally described in the City’s General Plan for
Wastewater Improvements and Disinfection (“General Plan”), which was submitted in January
1997 to, and has been approved by, the Ohio Environmental Protection Agency.
            In a letter dated July 8, 1999, the State alleged that the City had been in violation of
the Consent Order since June 1997 by failing to meet certain milestone dates set forth in the
General Plan (relating primarily to projects dependent upon the outcome of the City’s
negotiations with the County as discussed below), and notified the City that the matter had been
referred to the State Attorney General’s Office for enforcement proceedings. Following an
initial meeting between the Ohio Attorney General’s Office and the City’s representatives (the
City’s legal counsel on this matter is Squire, Sanders & Dempsey L.L.P.) in September 1999, the
State agreed that the City should proceed with negotiations with the County regarding the
County’s participation in the City’s sewer system beyond 2010. In September 2000, the State
presented to the City an initial penalty demand of $100,000. The City submitted a proposed

                                                                 - 31 -
resolution of the Consent Order issues, including a response to the penalty demand, in June,
2001. Negotiations with the State are ongoing. The State has not initiated formal legal action
regarding the alleged violations of the Consent Order or the State’s water pollution control laws
and regulations. If the State of Ohio successfully proves its allegations, which allegations the
City contests, the Consent Order provides for stipulated penalties for noncompliance with certain
deadlines in amounts ranging from $500/day (for the first 30 days of noncompliance) to
$3,500/day (after the 90th day).
           Several of the projects identified in the General Plan, including stormwater
separation, an ultraviolet disinfection system and digester improvements, have been completed.
The City is currently proceeding with a major improvement and expansion project at the City’s
treatment plant, the elements of which are generally identified in the General Plan and required
pursuant to the Consent Order. The City began construction activities for what is referred to as
Phase I of this project in March 2002 following receipt of funding through the Ohio Water
Development Authority and an agreement in principle with the County as to the County’s future
allocated share of the costs for this project. Construction on Phase I was completed in 2004.
The need for and scope of additional projects pursuant to the Consent Order (beyond Phase I) is
dependent at least in part on completion of negotiations between the City and the County on
revising and extending the current Sewer Agreement between them, which expires in 2010. The
County’s final agreement to the negotiated cost allocation for certain projects that have already
been completed, the recently completed Phase I project, and additional projects beyond Phase I
that may be required pursuant to the Consent Order, is also dependent on completion of the
contract negotiations. Negotiations between the City and the County to discuss revisions to the
existing Sewer Agreement, including extending the County’s participation in the City’s sewer
system through 2040, are ongoing and agreements on substantial aspects of a new agreement
have been reached. The City is keeping the State generally apprised of those negotiations.

Water Fund
            The City has paid and expects to pay debt service on bonds issued to construct capital
improvements to the City’s water system as well as the OWDA loans discussed under Long
Term Financial Obligations Other Than Bonds and Notes from revenues generated by the
water system from user charges, connection fees and payments under contracts with the County
for the provision of those services in certain areas. Those revenues have been sufficient in the
past to pay operating and maintenance expenses (including depreciation expenses) of the system
and to pay debt service on those bonds. The City anticipates that those revenues will be
sufficient in the future for that purpose. The City Commission has authority to increase water
rates as may be necessary; see Sewer and Water Rates.
            In calendar year 2004, the City, as it has in the past, paid debt service on all its
outstanding bonds issued to construct capital improvements to the City’s water system from
revenues generated by the system. The 2004 net operating revenues of the system were
sufficient to exempt all of the bonds and notes issued for water system improvements from the
statutory direct debt limitations. (For a discussion of exempt debt, see Statutory Direct Debt
Limitations.)

Sewer and Water Rates
       The City sends out a single monthly bill to its retail water and sewer users. Those rates
increased an aggregate of 35% on March 1, 2001, an additional 30% in 2002, and an additional
25% in 2003. Prior to these rate increases, the average bill of a City retail user of these services
was $29.17 a month; that bill has now increased to $63.93. These rate increases were necessary
in order to finance current and planned improvements expected to total over $60 million for
those systems over the next decade.



                                               - 32 -
Future Financings
            In addition to issuing general obligation bonds or BANs in Fiscal Year 2005 to retire
BANs already outstanding, the City presently plans to issue an estimated $1.4 million of
additional unvoted general obligation debt in Fiscal Year 2005 for various capital projects. The
City has entered into, and plans to enter into additional, loan agreements with the Ohio Water
Development Authority (OWDA) for various utility projects currently planned to be undertaken
and completed over the next decade as discussed under Sewer and Water Rates, including
projects included in the General Plan, which loan agreements as discussed below, are payable
solely from utility system revenues. The City has loan agreements with the OWDA under
which, according to the OWDA and at December 31, 2004, approximately $14.7 million was
available to be disbursed for various utility projects. When a disbursement is made, it is added to
the aggregate outstanding principal balance of those loan agreements.

Long Term Financial Obligations Other Than Bonds and Notes
           The City has entered into a number of construction loan agreements with the OWDA
with repayment terms of 20 or 25 years for various utility projects, which had an aggregate
outstanding principal balance of almost $32.4 million as of December 31, 2004. Payments on
those loans are required to be made from City sewage and water system revenues after payment
of operation and maintenance expenses of those systems. The loan agreements grant no security
or property interest to OWDA in any property of the City, and do not pledge the general credit of
the City, or create a debt subject to the direct or indirect debt limitations, or require the
application of the general resources of the City for repayment.
           See Notes 2, 16 and 18 in the City’s Basic Financial Statements included in
Appendix C for a discussion of the City’s obligations for compensated absences.
           The City has no other long term financial obligations, other than the bonds and notes
described above.

Pension Obligations
           Present and retired employees of the City are covered under two statewide public
retirement (including disability retirement) systems. The Police and Fire Pension Fund (PFPF)
covers uniformed members of the police and fire departments. All other eligible City employees are
covered by the Public Employees Retirement System (PERS).
           Employees covered by PERS contribute at a statutory rate of 8.5% of earnable salary
or compensation. The recent and current employer contribution rate is 13.55%.
           PFPF covered employees contribute at a statutory rate of 10% of gross earnings. The
City contributes at rates (actuarially established and fixed by the PFPF Board), applying to
earnable salary or compensation, of 19.5% for police personnel and 24% for fire personnel.
Until May, 2001, the City was also obligated to pay $93,502 per year through 2035 for the
unfunded accrued liability allocable to the City, which was determined in 1967 when this
statewide system was established; in 2001, the City issued its general obligation debt to provide
funds sufficient to satisfied that unfunded accrued liability by making a discounted lump sum
payment to PFPF.
           The City has implemented a “pick up” of employee contributions to PERS and PFPF
in accordance with Section 414(h)(2) of the Internal Revenue Code. Under a “pick up,” an
employee’s contributions are not currently subject to state or federal income taxes. For most
employees, the “pick up” is done by a “salary reduction” method, at no additional cost to the
City. However, for certain department heads, the “pick up” is done by the City paying additional
amounts to PERS or PFPF in lieu of such amounts being deducted from the compensation of the
department head.


                                              - 33 -
           Federal law requires City employees hired after March 31, 1986 to participate in the
federal Medicare program, which requires matching employer and employee contributions, each
being 1.45% of the wage base. Otherwise, City employees who are covered by a State
retirement system are not currently covered under the federal Social Security Act.
           The City’s current employer contributions to PERS and PFPF, and the payments
toward the accrued PFPF liability, have been treated as current expenses and included in the
City’s operating expenditures, except to the extent paid from the proceeds of the “Police and Fire
Pension” levy referred to above under Tax Rates.
           PFPF and PERS are not now subject to the funding and vesting requirements of the
federal Employee Retirement Income Security Act of 1974.
           Both PFPF and PERS are created by and operate pursuant to Ohio law. The General
Assembly could determine to amend the format of either fund and could revise rates or methods
of contributions to be made by the City into the pension funds and revise benefits or benefit
levels.

Insurance Coverages
            The City is a member of the Buckeye Ohio Risk Management Association
(BORMA), which includes the City and other Ohio municipalities, including, for purposes of
liability coverage, Bowling Green, Defiance, Huron, Napoleon and Willard. The City has
obtained property, liability and health insurance coverages through BORMA. See Notes 12 and
22 in the City’s Basic Financial Statements attached hereto as Appendix C for further
information as to such coverages.


                                             LITIGATION
            To the knowledge of the appropriate City officials, no litigation or administrative action
or proceeding is pending or threatened restraining or enjoining, or seeking to restrain or enjoin, the
issuance and delivery of the Bonds, or the levy and collection of taxes to pay the debt service on the
Bonds, or contesting or questioning the proceedings and authority under which the Bonds have been
authorized and are to be issued, sold, signed or delivered, or the validity of the Bonds. The City will
deliver to the successful bidder of the Bonds a certificate to that effect at the time of original
delivery of the Bonds to the successful bidder.
            The City is a party to various legal proceedings seeking damages or injunctive or other
relief and generally incidental to its operations. These proceedings are unrelated to the Bonds or the
security for the Bonds, or the permanent improvements being financed. The ultimate disposition of
these proceedings is not now determinable, but will not, in the opinion of the City Law Director,
have a material adverse effect on the Bonds, the security for the Bonds, or those improvements or
the City’s operating revenues.
            Under current Ohio law, City moneys, accounts and investments are not subject to
attachment to satisfy tort judgments in State courts against the City.


                                        LEGAL OPINION
            Legal matters incident to the issuance of the Bonds and with regard to the tax-exempt
status of the interest on the Bonds (see Tax Matters) are subject to the legal opinion of Squire,
Sanders & Dempsey L.L.P., whose legal services as Bond Counsel have been retained by the City.
The legal opinion, dated and premised on law in effect as of the date of original delivery of the
Bonds, will be delivered to the successful bidder at the time of original delivery and the text of the
opinion will be printed on the Bonds.


                                                - 34 -
            The proposed text of the legal opinion is set forth as Exhibit A. The legal opinion to be
delivered may vary from that text if necessary to reflect facts and law on the date of delivery. The
opinion will speak only as of its date, and subsequent distribution of it by recirculation of the
Official Statement or otherwise shall create no implication that Bond Counsel has reviewed or
expresses any opinion concerning any of the matters referred to in the opinion subsequent to its
date.
            Bond Counsel has drafted those portions of this Official Statement under the captions
Description of Certain Terms of the Bonds (excluding the information under Book Entry
Method), Security and Sources of Payment, and Tax Matters. Bond Counsel has assisted the
City with its preparation of certain other portions of this Official Statement. Bond Counsel,
however, has not been engaged to, and will not, independently confirm or verify that information or
any other information provided by the City or others, and will not express an opinion as to the
accuracy or fairness of any such information or any other reports, financial information, offering or
disclosure documents or other information pertaining to the Bonds that may be prepared or made
available by the City or others to the purchasers or owners of the Bonds or of book entry interests or
to others.
            In addition to rendering the legal opinion, Bond Counsel will assist in the preparation of
and advise the City concerning documents for the bond transcript.
            The City has also retained the legal services of that law firm from time to time as
special counsel in connection with matters that do not relate to City financings.

                                        TAX MATTERS
           In the opinion of Squire, Sanders & Dempsey L.L.P., Bond Counsel, under existing law:
               Interest on the Bonds is excluded from gross income for federal income tax purposes under Section
               103 of the Internal Revenue Code of 1986, as amended (the Code), and is not an item of tax
               preference for purposes of the federal alternative minimum tax imposed on individuals and
               corporations.
               The Bonds are “qualified tax-exempt obligations” as defined in Section 265(b)(3) of the Code.
               Interest on, and any profit made on the sale, exchange or other disposition of, the Bonds are exempt
               from the Ohio personal income tax, the Ohio commercial activities tax, the net income base of the
               Ohio corporate franchise tax, and municipal and school district income taxes in Ohio.

An opinion to those effects will be included in the legal opinion. Bond Counsel will express no
opinion as to any other tax consequences regarding the Bonds.
            The opinion on federal tax matters will be based on and will assume the accuracy of
certain representations and certifications, and compliance with certain covenants, of the City to be
contained in the transcript of proceedings and that are intended to evidence and assure the
foregoing, including that the Bonds are and will remain obligations the interest on which is
excluded from gross income for federal income tax purposes. Bond Counsel will not independently
verify the accuracy of those certifications and representations.
            The Code prescribes a number of qualifications and conditions for the interest on state
and local government obligations to be and to remain excluded from gross income for federal
income tax purposes, some of which require future or continued compliance after issuance of the
obligations in order for the interest to be and to continue to be so excluded from the date of
issuance. Noncompliance with these requirements by the City may cause the interest on the Bonds
to be included in gross income for federal income tax purposes and thus to be subject to federal
income tax retroactively to the date of issuance of the Bonds. The City has covenanted to take the
actions required of it for the interest on the Bonds to be and to remain excluded from gross income
for federal income tax purposes, and not to take any actions that would adversely affect that
exclusion.


                                                     - 35 -
            Under Code provisions applicable only to certain corporations (as defined for federal
income tax purposes), a portion of the excess of adjusted current earnings (which includes interest
on all tax-exempt obligations, including the Bonds) over other alternative minimum taxable income
is included in alternative minimum taxable income that may be subject to a corporate alternative
minimum tax. In addition, interest on the Bonds may be subject to a branch profits tax imposed on
certain foreign corporations doing business in the United States and to a tax imposed on excess net
passive income of certain S corporations.
            Under the Code, the exclusion of interest from gross income for federal income tax
purposes may have certain adverse federal income tax consequences on items of income, deduction
or credit for certain taxpayers, including financial institutions, certain insurance companies,
recipients of Social Security and Railroad Retirement benefits, those that are deemed to incur or
continue indebtedness to acquire or carry tax-exempt obligations, and individuals otherwise eligible
for the earned income credit. The applicability and extent of these or other tax consequences will
depend upon the particular tax status or other tax items of the owner of the Bonds. Bond Counsel
will express no opinion regarding those consequences.
            Purchasers of the Bonds at other than their original issuance at the respective prices
indicated on the cover of this Official Statement should consult their own tax advisers regarding
other tax considerations such as the consequences of market discount.


Original Issue Discount/Original Issue Premium
             Certain of the Bonds (Discount Bonds) may be offered and sold to the public at an
original issue discount (OID). OID is the excess of the stated redemption price at maturity (the
principal amount) over the “issue price” of a Discount Bond. The issue price of a Discount Bond is
the initial offering price to the public (other than to bond houses, brokers or similar persons acting in
the capacity of underwriters or wholesalers) at which a substantial amount of the Discount Bonds of
the same maturity are sold pursuant to that offering. For federal income tax purposes, OID accrues
to the owner of a Discount Bond over the period to maturity based on the constant yield method,
compounded semiannually (or over a shorter permitted compounding interval selected by the
owner). The portion of OID that accrues during the period of ownership of a Discount Bond
purchased in the initial offering at the price for such Discount Bond stated on the cover of this
Official Statement (i) is interest excludable from the owner’s gross income for federal income tax
purposes to the same extent, and subject to the same considerations discussed above, as other
interest on the Bonds, and (ii) is added to the owner’s tax basis for purposes of determining gain or
loss on the maturity, redemption, prior sale or other disposition of that Discount Bond. A purchaser
of a Discount Bond at its issue price in the initial public offering who holds that Discount Bond to
maturity will realize no gain or loss upon the retirement of that Discount Bond.
             Certain of the Bonds (Premium Bonds) may be offered and sold to the public at a price
in excess of their stated redemption price (the principal amount) at maturity. That excess constitutes
bond premium. For federal income tax purposes, bond premium is amortized over the period to
maturity of a Premium Bond, based on the yield to maturity of that Premium Bond (or, in the case
of a Premium Bond callable prior to its stated maturity, the amortization period and yield may be
required to be determined on the basis of an earlier call date that results in the lowest yield on that
Premium Bond), compounded semiannually. No portion of that bond premium is deductible by the
owner of a Premium Bond. For purposes of determining the owner’s gain or loss on the sale,
redemption (including redemption at maturity) or other disposition of a Premium Bond, the owner’s
tax basis in the Premium Bond is reduced by the amount of bond premium that accrues during the
period of ownership. As a result, an owner may realize taxable gain for federal income tax purposes
from the sale or other disposition of a Premium Bond for an amount equal to or less than the amount
paid by the owner for that Premium Bond. A purchaser of a Premium Bond at its issue price in the
initial offering who holds that Premium Bond to maturity (or, in the case of a callable Premium


                                                 - 36 -
Bond, to its earlier call date that results in the lowest yield on that Premium Bond) will realize no
gain or loss upon the retirement of that Premium Bond.
            Owners of Discount and Premium Bonds should consult their own tax advisers as to the
determination for federal income tax purposes of the amount of OID or bond premium properly
accruable in any period with respect to the Discount or Premium Bonds and as to other federal tax
consequences and the treatment of OID and bond premium for purposes of state and local taxes on,
or based on, income.

         ELIGIBILITY FOR INVESTMENT AND AS PUBLIC MONEYS SECURITY
             To the extent that the matter as to the particular investor is governed by Ohio law, and
subject to any applicable limitations under other provisions of Ohio law, the Bonds are lawful
investments for banks, savings and loan associations, credit union guaranty corporations, trust
companies, trustees, fiduciaries, insurance companies, including domestic life and domestic not for
life, trustees or other officers having charge of sinking and bond retirement or other funds of the
State, and subdivisions and taxing districts of the State, the Commissioners of the Sinking Fund, the
Administrator of Workers’ Compensation, and State retirement systems (Teachers, Public
Employees, Public School Employees, and Police and Firemen’s), notwithstanding any other
provisions of the Revised Code or rules adopted pursuant to those provisions by any State agency
with respect to investments by them.
             The Bonds are acceptable under Ohio law as security for the repayment of the deposit of
public moneys.
             Owners of book entry interests in the Bonds should make their own determination as to
such matters as legality of investment in or pledgability of book entry interests.


                          TRANSCRIPT AND CLOSING DOCUMENTS
             A complete transcript of proceedings and a certificate (described under Litigation)
relating to litigation will be delivered by the City when the Bonds are delivered by the City to the
successful bidder. The City at that time will also provide to the successful bidder a certificate,
signed by the City officials who sign this Official Statement and addressed to the successful bidder,
relating to the accuracy and completeness of the Official Statement and to its being a “final official
statement” in the judgment of the City for purposes of SEC Rule 15c2-12(b)(3).


                        CONTINUING DISCLOSURE AGREEMENT
            The City has agreed, for the benefit of the holders and beneficial owners from time to
time of the Bonds, in accordance with, and as the only obligated person with respect to the Bonds
under, SEC Rule 15c2-12 (the Rule), to provide or cause to be provided such financial information
and operating data (Annual Information), audited financial statements and notices, in such manner,
as may be required for purposes of paragraph (b)(5)(i) of the Rule (the Continuing Disclosure
Agreement), including specifically the following:
                To each nationally recognized municipal securities information repository
                designated from time to time by the SEC (NRMSIR) and to the Ohio state
                information depository (SID):
                     Annual Information for each City Fiscal Year ending on or after December 31,
                     2005, not later than October 1 of the year following the end of each Fiscal
                     Year, consisting of annual financial information and operating data of the type
                     included in this Official Statement under the captions Other Major City
                     General Fund Revenue Sources, Ad Valorem Property Taxes --


                                                - 37 -
                           Collections and Delinquencies, City Debt and Other Long Term
                           Obligations and Appendices A, B and C (but only with respect to such Fiscal
                           Year), together with information as to aggregate assessed valuation of the City
                           and overlapping and City tax rates as set forth in Tax Tables A and B under
                           Ad Valorem Property Taxes.
                           When and if available, audited City financial statements for each such Fiscal
                           Year. The City expects such financial statements to be prepared, that they will
                           be available separately from the Annual Information, and that the accounting
                           principles to be applied in their preparation will be as described under
                           Financial Reports and Examinations of Accounts.
                     To each NRMSIR or to the Municipal Securities Rulemaking Board (MSRB), and
                     to the SID, in a timely manner, notice of:
                           The occurrence of any of the following events, within the meaning of the Rule,
                           with respect to the Bonds (each a Specified Event), if material:
                                  Principal and interest payment delinquencies
                                  Nonpayment related defaults
                                  Unscheduled draws on debt service reserves reflecting financial
                                  difficulties*
                                  Unscheduled draws on credit enhancements reflecting financial
                                  difficulties*
                                  Substitution of credit or liquidity providers, or their failure to perform*
                                  Adverse tax opinions or events affecting the tax-exempt status of the
                                  Bonds
                                  Modifications to rights of holders or beneficial owners
                                  Bond calls
                                  Defeasances
                                  Release, substitution, or sale of property securing repayment of the
                                  Bonds*
                                  Rating changes.
                           The scheduled redemption of Bonds pursuant to mandatory sinking fund
                           redemption requirements does not constitute a Specified Event within the
                           meaning of the Rule; notice of any such call for redemption will be given as
                           described under Notice of Call for Redemption; Effect.
                           The City’s failure to provide the Annual Information within the time specified
                           above.
                           Any change in the accounting principles applied in the preparation of its annual
                           financial statements, any change in its Fiscal Year, its failure to appropriate
                           funds to meet costs to be incurred to perform the Agreement, and of the
                           termination of the Agreement.



*
    The City has not obtained or provided, and does not expect to obtain or provide, any debt service reserves, credit
    enhancements or credit or liquidity providers for the Bonds, and repayment of the Bonds is not secured by a lien on any
    property capable of release or sale or for which other property may be substituted.


                                                          - 38 -
             The City will reserve the right to amend the Continuing Disclosure Agreement, and to
obtain the waiver of noncompliance with any provision of the Agreement, as may be necessary or
appropriate to achieve its compliance with any applicable federal securities law or rule, to cure any
ambiguity, inconsistency or formal defect or omission, and to address any change in circumstances
arising from a change in legal requirements, change in law, or change in the identity, nature, or
status of the City, or type of business conducted by the City. Any such amendment or waiver will
not be effective unless the Agreement (as amended or taking into account such waiver) would have
complied with the requirements of the Rule at the time of the primary offering of the Bonds, after
taking into account any applicable amendments to or official interpretations of the Rule, as well as
any change in circumstances, and until the City shall have received either (i) a written opinion of
bond or other qualified independent special counsel selected by the City that the amendment or
waiver would not materially impair the interests of holders or beneficial owners of the Bonds, or (ii)
the written consent to the amendment or waiver of the holders of at least a majority of the principal
amount of the Bonds then outstanding.
             The Continuing Disclosure Agreement will be solely for the benefit of the holders and
beneficial owners from time to time of the Bonds. The exclusive remedy for any breach of the
Agreement by the City is to be limited to a right of holders and beneficial owners to institute and
maintain, or to cause to be instituted and maintained, such proceedings as may be authorized at law
or in equity to obtain the specific performance by the City of its obligations under the Agreement.
Any individual holder or beneficial owner may institute and maintain, or cause to be instituted and
maintained, such proceedings to require the City to provide or cause to be provided a pertinent filing
if such a filing is due and has not been made. Any such proceedings to require the City to perform
any other obligation under the Agreement (including any proceedings that contest the sufficiency of
any pertinent filing) may be instituted and maintained only by (i) a trustee appointed by the holders
and beneficial owners of not less than 25% in principal amount of the Bonds then outstanding,
which trustee may, and upon request of holders and beneficial owners of not less than 25% in
principal amount of the Bonds then outstanding would be required to, institute and maintain such
proceedings, or (ii) holders and beneficial owners of not less than 10% in principal amount of the
Bonds then outstanding.
             The performance by the City of the Continuing Disclosure Agreement will be subject to
the City’s annual appropriation of any funds that may be necessary to perform it.
             The Continuing Disclosure Agreement will remain in effect only for such period that the
Bonds are outstanding in accordance with their terms and the City remains an obligated person with
respect to the Bonds within the meaning of the Rule. The obligation of the City to provide the
Annual Information and notices of the events described above will terminate, if and when the City
no longer remains such an obligated person.
             The City has previously made continuing disclosure agreements for purposes of the Rule
with respect to its general obligation bonds; there has been no default by the City under those
continuing disclosure agreements since their inception.

                                               RATING
            Moody’s Investors Service has assigned its rating of A2, with a negative outlook, to
the Bonds. No application for a rating was made by the City to any other rating agency.
            The rating reflects only the view of the rating organization, and any explanation of the
meaning or significance of the rating may only be obtained from the rating service. The City
furnished to that rating service certain information and materials, some of which may not have been
included in this Official Statement, relating to the Bonds and the City. Generally, rating services
base their ratings on such information and materials and on their own investigation, studies and
assumptions.



                                                - 39 -
            There can be no assurance that a rating when assigned will continue for any given period
of time or that it will not be lowered or withdrawn entirely by a rating service if in its judgment
circumstances so warrant. Any lowering or withdrawal of a rating may have an adverse effect on
the marketability or market price of the Bonds.
            The City expects to furnish the rating service with information and materials that may be
requested. However, the City assumes no obligation to furnish requested information and materials,
and may issue debt for which a rating is not requested. Failure to furnish requested information and
materials, or the issuance of debt for which a rating is not requested, may result in the suspension or
withdrawal of a rating on the Bonds.

                                      FINANCIAL ADVISOR
            The City has retained Sudsina & Associates, LLC (the Financial Advisor) in connection
with the preparation of the City’s issuance of the Bonds. The Financial Advisor is not obligated to
undertake, and has not undertaken to make, an independent verification or to assume responsibility
for the accuracy, completeness, or fairness of the information contained in the Official Statement.
The Financial Advisor is an independent advisory firm and is not engaged in the business of
underwriting, trading or distributing municipal securities or other public securities.

                                        BOND REGISTRAR
            U.S. Bank National Association will act as bond registrar, paying agent, and transfer and
authenticating agent for the Bonds (Bond Registrar). The Bond Registrar will keep all books and
records necessary for registration, exchange and transfer of the Bonds, in accordance with the terms
of agreements between it and the City. The Bond Registrar is a national banking association with
offices throughout the State and regularly acts as bond registrar for bond issues of Ohio local
governments. The Bond Registrar acts in a similar capacity in connection with other bonds and
notes of the City.

                                  CONCLUDING STATEMENT

            To the extent that any statements made in this Official Statement involve matters of
opinion or estimates, whether or not expressly stated to be such, they are made as such and not as
representations of fact or certainty and no representation is made that any of those statements have
been or will be realized. Information in this Official Statement has been derived by the City from
official and other sources and is believed by the City to be accurate and reliable. Information other
than that obtained from official records of the City has not been independently confirmed or verified
by the City and its accuracy is not guaranteed.
            Neither this Official Statement nor any statement that may have been or that may be
made orally or in writing is to be construed as or as part of a contract with the original purchasers or
subsequent owners of the Bonds, or book entry interests in those Bonds.
            This Official Statement has been prepared and delivered by the City and executed for
and on behalf of the City by its officials identified below.

                                                          CITY OF SANDUSKY


                                                          By: /s/ Michael J. Will
                                                              City Manager


                                                              /s/ Edward A. Widman
                                                              Finance Director


                                                 - 40 -
                                                DEBT TABLE A

                   Principal Amounts of Outstanding General Obligation Debt*;
                    Leeway for Additional Debt Within Direct Debt Limitations


A.       Total debt:                                                                        $   31,468,986

B.       Exempt debt:

                                                                      Outstanding
                      Category                                     Principal Amount

                  Special Assessment                                 $ 4,523,454
                  Water System                                           975,000
                  Sewer System                                         2,168,000
                  Final Judgment                                         240,000
                  Pension Prepayment                                   1,200,000

         Total exempt debt:                                                                 $     9,106,454

C.       Total nonexempt debt [A minus B]:                                                  $   22,362,532

D.       5-1/2% of tax valuation (unvoted
         nonexempt debt limitation):                                                        $   28,005,990

E.       Total nonexempt limited tax bonds
         and notes outstanding:

                  Bonds                                              $ 13,987,532
                  Notes                                              $ 3,015,000            $   17,002,532

F.       Debt leeway within 5-1/2%
         unvoted debt limitation
         [D minus E]:                                                                       $    11,003,458*

G.       10-1/2% of tax valuation
         (voted and unvoted debt
         limitation):                                                                       $   53,465,982

H.       Total nonexempt bonds
         and notes outstanding:

                  Bonds                                              $ 19,347,532
                  Notes                                              $ 3,015,000            $   22,362,532

I.       Debt leeway within 10-1/2%
         debt limitation [G minus H]:                                                       $   31,103,450
* Figures include the Bonds, but not the Outstanding Notes. Debt leeways in this table determined without considering
moneys in the Bond Retirement Fund.




                                                        DT-1
                                                DEBT TABLE B

                                   Various City and Overlapping
                               GO Debt Allocations (Principal Amounts)*

                                                                                                     % of City’s
                                                   Amount                 Per Capita(a)               Assessed
                                                                                                     Valuation(b)

City Nonexempt                                   $22,362,532                $ 803.14                      4.39%
   GO Debt

Total City GO Debt                                31,468,986                1,130.19                      6.18
   (exempt and nonexempt)

Highest Total Overlapping                         48,496,010                1,741.70                      9.52
   GO Debt(c)
*     Figures include the Bonds, but not the Outstanding Notes.

(a)   Based on 2000 population of 27,844.

(b)   Based on the City’s assessed valuation for collection year 2005 of $509,199,834.

(c)   Includes, in addition to “Total City GO Debt,” allocations of total GO debt of overlapping debt issuing subdivisions
      (as of August 1, 2005) resulting in the calculation of highest total overlapping debt based on percent of tax
      valuation of territory of the subdivisions located within the City (% figures are resulting percent of total debt of
      subdivisions allocated to the City in this manner), as follows:

      $16,332,024 County (26%); and
      $695,000 School District (100%).




                                                        DT-2
                                                                                DEBT TABLE C

                                                Projected Debt Service Requirements on City GO Debt*

                         Debt Service On                                                                  Portion Of Total Anticipated To Be Paid From
                                                   Bonds
                The          Outstanding         Anticipated                                 Ad Valorem Taxes                      Special               Water              Sewer
Year           Bonds**         Bonds             by BANS(a)             Total              Unlimited    Limited(b)               Assessments            Revenues           Revenues

 2006        $347,527          $2,054,823         $440,600           $2,842,950             $460,565           $1,348,550             $588,856            $236,825          $208,154
 2007          324,150          1,885,898          439,000             2,649,048             461,825             1,216,945             548,229             243,975           178,074
 2008          328,600          1,861,371          477,100             2,667,071             462,465             1,395,255             522,995             111,375           174,981
 2009          327,750          1,866,648          517,500             2,711,898             462,465             1,480,488             489,432             107,625           171,888
 2010          335,750          1,867,522          574,900             2,778,172             462,465             1,594,495             443,992             103,650           173,570
 2011          293,225          1,890,602          563,100             2,746,927             462,465             1,611,663             403,047               99,675          170,077
 2012          286,025          1,863,701          551,000             2,700,726             461,465             1,609,802             360,450               95,675          173,334
 2013          288,825          1,848,737          543,600             2,681,162             459,635             1,761,398             323,154               11,675          125,300
 2014          286,225          1,850,421          535,600             2,672,246             462,080             1,771,596             303,995               11,475          123,100
 2015          288,425          1,855,333          467,000             2,610,758             463,685             1,716,400             293,498               11,275          125,900
 2016          150,225          1,860,222          456,400             2,466,847             459,285             1,610,440             262,547               11,075          123,500
 2017          152,225          1,848,820          445,500             2,446,545             459,250             1,594,542             255,778               10,875          126,100
 2018          149,025          1,865,268          429,300             2,443,593             463,325             1,604,428             241,665               10,675          123,500
 2019          150,825          1,864,167          418,100             2,433,092             461,075             1,606,180             229,462               10,475          125,900
 2020          152,000          1,871,997          406,600             2,430,597             463,075             1,622,456             207,066               10,250          127,750
 2021          152,500             996,509         394,800             1,543,809             464,075               738,053             202,681               15,000          124,000
 2022          157,750             940,096         381,700             1,479,546             464,075               685,421             190,300               14,500          125,250
 2023          157,500             828,663         370,300             1,356,463             462,550               567,963             185,700               14,000          126,250
 2024          157,000             365,738         367,600               890,338                     0             559,038             190,800               13,500          127,000
 2025          156,250             364,594         169,000               689,844                     0             549,344                     0             13,000          127,500
 2026          140,250             362,681         161,200               664,131                     0             523,881                     0             12,500          127,750
 2027          139,750                     0       153,400               293,150                     0             153,400                     0             12,000          127,750
 2028          139,000                     0       145,600               284,600                     0             145,600                     0             11,500          127,500
 2029          138,000                     0       137,800               275,800                     0             137,800                     0             11,000          127,000
 2030          141,750                     0               0             141,750                     0                     0                   0             10,500          131,250

*      Figures include the Bonds, but not the Outstanding Notes.
**     Estimated.
(a)    Assumes all BANs with a maturity of one year or less from original date of issuance are retired with bonds dated as of December 1, 2005 and having first interest payment and
       first principal payment in 2006, being paid serially on the debt service basis and over the number of years and at the estimated interest rates all as referred to in the ordinance
       authorizing those BANs. Debt service for BANs with a final maturity of more than one year from original date of issuance is included based on actual maturing amounts and
       actual interest rates for those BANs. See also Debt Table D.

(b)    The City expects to pay a portion of such debt service from municipal income taxes deposited in the City’s General Bond and Note Retirement Fund. See Municipal Income
       Tax.




                                                                                       DT-3
                                                  DEBT TABLE D

                                   Outstanding GO Bond Anticipation Notes*


                 These BANs, or the bonds they anticipate, are reflected in Debt Tables A, B and C.


                                                                         Estimated       Original Notes
           General                                                         Bond
           Purpose                    Principal                          Maturity     Year of     Principal
           of Issue                   Amount        Dated       Due        Years     Issuance     Amount

Cold Creek                           $2,600,000    10-26-04   10-26-05      20         2003        $2,600,000
Bayfront Urban Revitalization         2,700,000    10-26-04   10-26-05      25         2004         2,700,000
Municipal Building                      315,000    10-26-04   10-26-05      10         2001           315,000

    * Not including the Outstanding Notes.

               The ability of the City to retire BANs from the proceeds of the sale of either bonds or
    renewal BANs will be dependent upon the marketability of those obligations under market
    conditions prevailing at the time of that sale. Under present laws applicable to the City, there is no
    statutory maximum interest rate applicable to those bonds or renewal BANs.




                                                       DT-4
                                                                   APPENDIX A


                       Comparative Cash Basis Summary of General Fund Receipts
             and Expenditures For Fiscal Years 2000 through 2004 and Budgeted Fiscal Year 2005



                                                                                                                                          BUDGETED
                                         2000                 2001                 2002                 2003                  2004            2005


BEGINNING BALANCE(a)                $ 3,493,344           $ 3,396,772          $   2,986,567       $    3,184,137      $     3,090,453    $   2,771,934


RECEIPTS


Property Tax                        $ 1,467,126           $ 1,481,014          $   1,593,407       $    1,573,804       $    1,884,967    $   1,933,683
Income Tax                              6,832,853            6,693,509             6,897,494            6,815,721            6,704,633        6,528,150
Admission Tax                           2,488,309            2,315,724             2,384,262            2,488,178            2,440,013        2,540,013
Hotel/Motel Tax                           865,913              913,060             1,011,412            1,021,399            1,040,898        1,240,898
Estate Tax                                793,292              436,582              216,097               177,278              576,706         217,000
Court/Licenses/Permits                  1,228,773            1,507,895             1,454,184            1,405,835            1,435,238        1,924,283
Local Government Funds                    980,313              969,382              942,266               909,747              890,698         724,422
Interest                                  957,762              706,639              378,985               302,650              279,405         400,000
Other/Reimb                             1,015,518              987,290             1,046,356            1,394,326            1,287,732         691,884


TOTAL REVENUES                      $ 16,629,859          $ 16,011,095         $ 15,924,463        $ 16,088,938         $ 16,540,289      $ 16,200,333


EXPENDITURES(a)


Police                              $ 3,608,717           $ 4,056,238          $   4,115,964       $    4,421,062       $    4,386,613    $   4,407,633
Fire                                    3,346,457            3,579,789             3,628,481            3,686,004            3,743,915        3,993,132
Street Lighting                           105,280               98,980              110,953               110,453              103,847         110,153
Community Development                     537,695              734,850              701,634               676,372              593,220         537,440
City Manager                            1,623,101            1,656,791             1,557,119            1,627,466            1,739,393        1,706,301
Administrative Services                   796,877            1,010,391             1,001,117              940,054              922,791         913,340
Finance                                   454,815              424,224              463,923              604,065(b)            475,310         495,595
Law                                       394,349              336,018              308,267               322,916              294,092         276,757
City Commission                           123,899              113,028              109,637                99,696              104,502          99,190
Municipal Court                           722,014              801,605              802,931               807,791              856,942         824,648
Engineering                               768,222              754,604              587,240               564,068              560,199         621,324
Administrative Support                  4,245,006            2,854,782             2,339,627            2,322,675            3,077,984        2,358,472


TOTAL EXPENDITURES(a)               $ 16,726,431          $ 16,421,300         $ 15,726,892        $ 16,182,622         $ 16,858,808      $ 16,343,985


ENDING BALANCE(a)                   $ 3,396,772           $ 2,986,567          $   3,184,137       $    3,090,453       $    2,771,934    $   2,628,282


    (a)       Does not include encumbrances.
       (b)    Includes extraordinary, one-time expenses incurred in transitioning to RITA as income tax collection agency for the City.
(THIS PAGE INTENTIONALLY LEFT BLANK)
                                                APPENDIX B

                                 All Funds Summaries for Fiscal Year 2003
                                        (Cash Basis – Unaudited)*


                                       BALANCE                                      BALANCE
 FUNDS                                   1-1-03       RECEIPTS     EXPENDITURES      12-31-03

 General Fund                          $ 3,184,137   $16,088,937     $16,182,621    $ 3,090,453
 Street Maintenance & Repair               105,484     1,244,647       1,330,643         19,488
 State Highway Improvement                  11,332        54,887          60,661          5,558
 Public Transit                             72,767       900,980         893,793         79,954
 Parks & Recreation                          6,949       528,921         523,771         12,099
 Fire Pension Transfer                           0       747,121         747,121              0
 Police Pension Transfer                         0       599,073         599,073              0
 State Grant                             1,113,719       937,028       1,094,803        955,944
 Federal Grant                           2,416,130       236,655         283,008      2,369,777
 Indigent Driver Alcohol Treatment          81,178        26,028          42,331         64,875
 Enforcement and Education                  86,810        11,762               0         98,572
 Court Computerization                      87,667        37,640          12,629        112,678
 Indigent Telephone Alt System              27,734         3,253           1,746         29,241
 Municipal Probation Service                74,310        29,201           7,364         96,147
 Capital Improvement                             0       242,179         242,179              0
 Capital Projects                        3,894,778     3,314,732       5,753,282      1,456,228
 Redevelopment Tax Increment                19,599        20,949          40,000            548
 Special Assessment Improvement            142,319     5,893,084         909,828      5,125,575
 General Bond Note Retirement              969,282     1,155,861       1,324,977        800,166
 Special Assessment Bond Retirement        219,026       427,723         465,152        181,597
 Water Works                             5,029,782    11,308,012       8,724,289      7,613,505
 Sewer                                   2,732,822    17,365,448      14,476,501      5,621,769
 General Trust                             225,969       144,435         210,623        159,781
 Park Endowed Trust                        103,474        17,358          15,412        105,420
 Oakland Cemetery                          693,293        48,608          45,531        696,370
 State Patrol Transfer                       3,252        40,044          37,248          6,048
 Guaranteed Deposits                        12,957        10,245               0         23,202
 Municipal Court Agency                    127,821     3,194,643       3,169,034        153,430
 BBS Assessment                                161         1,475           1,029            607
 Sandusky Income Tax Garnishment                61             0             (13)            74
 Employees Series EE Bonds                     605         7,980           8,050            535
 Deferred Compensation Fund              5,556,039       602,637               0      6,158,676
 Police Temporary Deposit                   10,535        28,908          21,957         17,486
 Section 125 Plan                              965        12,224          12,566            623

 TOTALS                                $27,010,957   $65,282,678     $57,237,209    $35,056,426



*Does not include encumbrances.
                                                       APPENDIX B

                                     All Funds Summaries for Fiscal Year 2004
                                            (Cash Basis – Unaudited)*


                                         BALANCE                                        BALANCE
FUNDS                                      1-1-04          RECEIPTS      EXPENDITURES    12-31-04

General Fund                             $ 3,090,453       $16,540,290    $16,858,808    $2,771,935
Street Maintenance & Repair                   19,488         1,317,510      1,233,642       103,356
State Highway Improvement                      5,558            67,906         63,134        10,332
Public Transit                                79,954           747,526        708,734       118,746
Parks & Recreation                            12,099           379,542        383,540         8,101
Fire Pension Transfer                              0           765,745        765,745             0
Police Pension Transfer                            0           611,691        611,691             0
State Grant                                  955,944           527,464        447,436     1,035,972
Federal Grant                              2,369,777           416,035        511,100     2,274,712
Indigent Driver Alcohol Treatment             64,875            19,783          5,293        79,365
Enforcement and Education                     98,572            12,278          1,481       109,369
Court Computerization                        112,678            31,153         19,924       123,907
Indigent Telephone Alt System                 29,241               582          2,667        27,156
Municipal Probation Service                   96,147            25,520          3,726       117,939
Capital Improvement                                0           739,743        739,709            34
Capital Projects                           1,456,228         8,962,854      8,916,472     1,502,610
Redevelopment Tax Increment                      548            21,177              0        21,725
Special Assessment Improvement             5,125,575         3,231,396      8,021,616       335,355
General Bond Note Retirement                 800,166         1,240,128      1,553,805       486,489
Special Assessment Bond Retirement           181,597           521,139        524,742       177,994
Water Works                                7,613,505         9,183,387      8,423,475     8,373,417
Sewer                                      5,621,769        10,476,308     11,784,833     4,313,244
General Trust                                159,781           199,326        122,382       236,725
Park Endowed Trust                           105,420             6,536          5,917       106,039
Oakland Cemetery                             696,370            54,480         44,077       706,773
State Patrol Transfer                          6,048            37,777         37,690         6,135
Guaranteed Deposits                           23,202            10,368             50        33,520
Municipal Court Agency                       153,430         4,072,717      4,139,093        87,054
BBS Assessment                                   607             3,406          3,713           300
Sandusky Income Tax Garnishment                   74                 0              9            65
Employees Series EE Bonds                        535             8,610          8,900           245
Deferred Compensation Fund                 6,158,676           626,968              0     6,785,644
Police Temporary Deposit                      17,486             7,448         23,031         1,903
Section 125 Plan                                 623            17,556         15,903         2,276

TOTALS                                   $35,056,426       $60,884,349    $65,982,338   $29,958,437




*Does not include encumbrances.
             APPENDIX C

     BASIC FINANCIAL STATEMENTS
     UNDER GASB STATEMENT NO. 34

              (AUDITED)

FROM THE CITY’S COMPREHENSIVE ANNUAL
 FINANCIAL REPORT FOR FISCAL YEAR 2003
(THIS PAGE INTENTIONALLY LEFT BLANK)
                            EXHIBIT A
 PROPOSE TEXT OF LEGAL OPINION OF SQUIRE, SANDERS & DEMPSEY L.L.P.
         We have examined the transcript of proceedings relating to the issuance by the City of Sandusky, Ohio, of its
$3,470,000 Various Purpose Improvement Bonds, Series 2005, dated the date hereof, and issued for the purpose of:
improving the municipal wastewater system by acquiring real estate and interests therein for the expansion of the
wastewater treatment facilities, by acquiring a combination sewer cleaner, cab and chassis, by separating combined
sewers into separate sanitary sewers and storm sewers, together with all other improvements incidental or related thereto,
in order to reduce infiltration and inflow to the municipal wastewater system, and by constructing, reconstructing and
rehabilitating local sewer collection systems, all together with the necessary appurtenances thereto; improving the
municipal water system by renovating, rehabilitating and otherwise improving the Big Island Water Works Building;
acquiring two triple combination fire pumper trucks and appurtenant equipment for the Fire Department; eliminating
grade crossings by constructing the US 6/State Route 101 Grade Separation Project; improving the Shelby Street Boat
Launch Ramp Facility by dredging in order to improve access thereto and the utilization thereof, and otherwise
improving the same, all together with the necessary appurtenances thereto; paying the property owners’ portion, in
anticipation of the collection of special assessments heretofore levied, of the cost of the City’s 2003 Program of
constructing, re-laying and repairing certain sidewalks and constructing certain curbs and gutters and approaches. We
have also examined a conformed copy of a signed and authenticated Bond of the first maturity.
        Based on this examination we are of the opinion that, under existing law:
         1. The Bonds constitute valid and legal general obligations of the City, and the principal of and interest on the
Bonds, unless paid from other sources and subject to bankruptcy laws and other laws affecting creditors’ rights and to the
exercise of judicial discretion, are to be paid from the proceeds of the levy of ad valorem taxes, within the ten-mill
limitation imposed by law, on all property subject to ad valorem taxes levied by the City.
         2. The interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103
of the Internal Revenue Code of 1986, as amended (the Code), and is not treated as an item of tax preference under
Section 57 of the Code for purposes of the alternative minimum tax imposed on individuals and corporations. The
interest on the Bonds, and any profit made on their sale, exchange or other disposition, are exempt from the Ohio
personal income tax, the Ohio commercial activities tax, the net income base of the Ohio corporate franchise tax, and
municipal and school district income taxes in Ohio. The Bonds are “qualified tax-exempt obligations” as defined in
Section 265(b)(3) of the Code. We express no opinion as to any other tax consequences regarding the Bonds.
         In giving the foregoing opinion with respect to the treatment of the interest on the Bonds and the status of the
Bonds under the federal tax laws, we have assumed and relied upon compliance with the City’s covenants and the
accuracy, which we have not independently verified, of the City’s representations and certifications, all as contained in
the transcript. The accuracy of those representations and certifications, and compliance by the City with those
covenants, may be necessary for the interest to be and to remain excluded from gross income for federal income tax
purposes and for other federal tax effects stated above. Failure to comply with certain of those covenants subsequent to
issuance could cause the interest on the Bonds to be included in gross income for federal income tax purposes
retroactively to their date of issuance.
        Under the Code, portions of the interest on the Bonds earned by certain corporations may be subject to a
corporate alternative minimum tax, and interest on the Bonds may be subject to a branch profits tax imposed on certain
foreign corporations doing business in the United States and to a tax imposed on excess net passive income of certain S
corporations.
                                                                                    Respectfully submitted,
(THIS PAGE INTENTIONALLY LEFT BLANK)
                                              EXHIBIT B




                                       $3,470,000
                               CITY OF SANDUSKY, OHIO
                          GENERAL OBLIGATION (LIMITED TAX)
                    VARIOUS PURPOSE IMPROVEMENT BONDS, SERIES 2005

                    ____________________________________________________


                                    OFFICIAL NOTICE OF SALE

                    ____________________________________________________




        The captioned Bonds are being offered for sale in accordance with this Official Notice of Sale.
The City of Sandusky, Ohio will accept facsimile and electronic bids, as explained below, for the
purchase of all, but not less than all, of the entire principal amount of the Bonds until 11:00 a.m., Ohio
time, on Thursday, September 15, 2005.



                                           September 6, 2005
                                    OFFICIAL NOTICE OF SALE
                                        $3,470,000
                                CITY OF SANDUSKY, OHIO
                           GENERAL OBLIGATION (LIMITED TAX)
                     VARIOUS PURPOSE IMPROVEMENT BONDS, SERIES 2005

        Notice is given that the captioned bonds (the “Bonds”) are being offered for sale in accordance
with this Official Notice of Sale. The City of Sandusky, Ohio (the “City”) will accept facsimile and
electronic bids, as explained below, for the purchase of all, but not less than all, of the entire principal
amount of the Bonds until 11:00 a.m., Ohio time, on Thursday, September 15, 2005.

                              FORM, MATURITY AND PAYMENT OF BONDS
         The Bonds shall be issued in fully registered form in the denominations of $5,000 or any integral
multiple thereof; shall be dated as of their date of issuance (expected to be September 29, 2005); will bear
interest from their dated date, payable on June 1 and December 1 of each year, commencing June 1, 2006;
and shall mature on December 1 in the years 2006 through 2030 in the following principal amounts:
         Year             Principal Amount                        Year           Principal Amount
         2006                $165,000                             2019                $ 85,000
         2007                 185,000                             2020                  90,000
         2008                 195,000                             2021                  95,000
         2009                 200,000                             2022                 105,000
         2010                 215,000                             2023                 110,000
         2011                 180,000                             2024                 115,000
         2012                 180,000                             2025                 120,000
         2013                 190,000                             2026                 110,000
         2014                 195,000                             2027                 115,000
         2015                 205,000                             2028                 120,000
         2016                  75,000                             2029                 125,000
         2017                  80,000                             2030                 135,000
         2018                  80,000

                                   BOOK-ENTRY ONLY SYSTEM
        The Bonds will be initially registered in the name of Cede & Co., as registered owner and
nominee for The Depository Trust Company, New York, New York (“DTC”) under DTC’s Book-Entry
Only system of registration. Purchasers of interests in the Bonds (the “Beneficial Owners”) will not
receive physical delivery of bond certificates and ownership by the Beneficial Owners of the Bonds will
be evidenced by book-entry-only. As long as Cede & Co. is the registered owner of the Bonds as
nominee of DTC, payments of principal and interest will be made directly to such registered owner which
in turn will remit, according to DTC’s rules and regulations, such payments to the DTC participants for
subsequent disbursement to the Beneficial Owners.

                                 PAYING AGENT AND REGISTRAR
        The Paying Agent and Registrar for the Bonds will be U.S. Bank National Association.

                                        TERM BONDS OPTIONS
         Any bidder may, at its option, specify that particular maturities of the Bonds for which the same
rate of interest is specified in its bid shall be issued as term bonds subject to mandatory sinking fund
redemption by the City in consecutive years immediately preceding the maturity thereof (a “Term
Bond”). In the event that the successful bidder specifies that any maturity of the Bonds shall be issued as
a Term Bond, that Term Bond shall be subject to mandatory sinking fund redemption on December 1, in
each applicable year, in the principal amount for such year as set forth above under the heading “FORM,
MATURITY AND PAYMENT OF BONDS,” at a redemption price equal to the principal amount to be
redeemed, plus interest accrued thereon to the redemption date, without premium. A bidder may so
specify up to five Term Bonds.

                                                   B-2
                              OPTIONAL REDEMPTION PROVISIONS
         Any Bonds maturing on or before December 1, 2013, will not be subject to redemption at the
City’s option prior to their respective stated maturity dates. Bonds maturing on or after December 1,
2014 are subject to prior redemption on or after December 1, 2013, by and at the sole option of the City,
either in whole or in part on any date and in integral multiples of $5,000, at a redemption price of 100%
of the principal amount to be redeemed, plus interest accrued thereon to the redemption date.

                                     AUTHORITY AND PURPOSE
              The Bonds are to be issued pursuant to Chapter 133 of the Ohio Revised Code, an ordinance
passed by the City Commission of the City, and a certificate of award for which provision is made by the
ordinance (collectively, the Authorizing Legislation), for the purpose of: improving the municipal
wastewater system by acquiring real estate and interests therein for the expansion of the wastewater treatment
facilities, by acquiring a combination sewer cleaner, cab and chassis, by separating combined sewers into
separate sanitary sewers and storm sewers, together with all other improvements incidental or related thereto,
in order to reduce infiltration and inflow to the municipal wastewater system, and by constructing,
reconstructing and rehabilitating local sewer collection systems, all together with the necessary appurtenances
thereto; improving the municipal water system by renovating, rehabilitating and otherwise improving the Big
Island Water Works Building; acquiring two triple combination fire pumper trucks and appurtenant
equipment for the Fire Department; eliminating grade crossings by constructing the US 6/State Route 101
Grade Separation Project; improving the Shelby Street Boat Launch Ramp Facility by dredging in order to
improve access thereto and the utilization thereof, and otherwise improving the same, all together with the
necessary appurtenances thereto; paying the property owners’ portion, in anticipation of the collection of
special assessments heretofore levied, of the cost of the City’s 2003 Program of constructing, re-laying and
repairing certain sidewalks and constructing certain curbs and gutters and approaches.
                              SECURITY AND SOURCE OF PAYMENT

        The Bonds are general obligations of the City, the full faith and credit and general taxing power
of which are pledged to the payment of debt charges. Unless paid from other sources, debt charges are to
be paid from the proceeds of the City’s levy of ad valorem property taxes, which taxes are within the 10-
mill limitation imposed by Ohio law.

                                                  RATING
       Moody’s Investors Service has assigned its rating of A2, with a negative outlook, to the Bonds.
No application for a rating was made by the City to any other rating service.

                                               INSURANCE
         The City has applied to Ambac Assurance Corporation, Financial Guaranty Insurance Company,
Financial Security Assurance Inc., MBIA Insurance Corporation, XL Capital Assurance Inc. and CIFG
Assurance North America, Inc. to qualify the Bonds for municipal bond insurance. Any bidder wishing
to insure the Bonds should contact the above-referenced insurance companies directly for premium
information. The premium and any related fees or expenses for such municipal bond insurance shall be
the sole responsibility of the successful bidder. The City will comply fully with the applicable customary
requirements of any of the above-referenced insurance companies, provided that no later than 5:00 p.m.,
Ohio time, on the day of the sale, the successful bidder notifies the City that the Bonds will be insured
and identifies the bond insurance company.
                                            INTEREST RATES
        The Bonds will bear interest (computed on the basis of a 360-day year consisting of 12 30-day
months) payable on June 1 and December 1 of each year (the Interest Payment Dates), commencing June
1, 2006. Bids shall specify the rate or rates of interest (multiples of 1/8 or 1/100 of 1%) that the Bonds
are to bear, but only one rate shall be specified for all Bonds maturing on the same date which rate may
not exceed 6% per year, and the maximum difference between the highest rate and the lowest rate stated
in a bid shall not exceed 400 basis points. No rate shall be less than the rate stated for any earlier
maturity.


                                                     B-3
                                         GOOD FAITH DEPOSIT
        A good faith deposit is not required.

  SUCCESSFUL BIDDER TO PAY FEES OF FINANCIAL ADVISOR AND BOND COUNSEL
          In addition to the par amount of the Bonds and any premium which may be bid, the successful bidder
shall, at the closing, also pay (by separate wire transfers of immediately available funds) the fee of Sudsina &
Associates, LLC, the Financial Advisor to the City, in the amount of $31,500, and the fee of Squire, Sanders
& Dempsey L.L.P., the Bond Counsel to the City, in the amount of $25,000.

                                                OMAC FEES
       The successful bidder shall also be responsible for any applicable fees of the Ohio Municipal
Advisory Council (OMAC); for information concerning such fees call OMAC at 1-800-969-6622.

                                        BIDDING PROCEDURES
Facsimile Bidding
        Facsimile bids must be submitted on the attached Bid Form furnished by the City. Facsimile bids
should not be preceded by a cover sheet and should be sent to both (419) 627-5892 and (330) 562-0863.
You may confirm receipt of your facsimile bid by calling Edward A. Widman at (419) 627-5888 and/or
Michael Sudsina, Sudsina & Associates, LLC, at (216) 215-7753. Any bidder that attempts to use
facsimile transmission assumes the risk that the bid is not received or that the bidder is unable to
communicate on a facsimile basis, whether such inability is by reason of equipment malfunction,
human error, prior use of facsimile or any other cause whatsoever.

Electronic Bidding Procedures
         Electronic bids must be submitted via PARITY and in accordance with the provisions of this
Official Notice of Sale. No other form of electronic bid or provider of electronic bidding services will be
accepted. For purposes of the electronic bidding process, the time as maintained by PARITY shall
constitute the official time with respect to all bids submitted electronically. To the extent any instructions
or directions set forth in PARITY conflict with this Official Notice of Sale, the terms of this Official
Notice of Sale shall control. Each bidder submitting an electronic bid agrees that: (i) it is solely
responsible for all arrangements with PARITY; (ii) PARITY is not acting as the agent of the City; and (iii)
the City is not responsible for ensuring or verifying bidder compliance with any of the procedures of
PARITY. The City assumes no responsibility for, and each bidder expressly assumes the risks of and
responsibility for, any incomplete, inaccurate or untimely bid submitted by the bidder through PARITY.
Each bidder shall be solely responsible for making necessary arrangements to access the PARITY system
for the purpose of submitting its bid in a timely manner and in compliance with the requirements of this
Official Notice of Sale. The City shall not: (i) have any duty or obligation to provide or assure such
access to any bidder; or (ii) be responsible for the proper operation of, or have any liability for, any delays
or interruptions of, or any damages caused by, PARITY.
         Prospective bidders who intend to submit their bid electronically must be contracted customers of
i-Deal LLC’s BiDCOMP Competitive Bidding System. If you do not have a contract with BiDCOMP,
call (212) 806-8304. By submitting a bid for the Bonds, a prospective bidder represents and warrants to
the City that such bidder’s bid for the purchase of the Bonds (if a bid is submitted in connection with the
sale) is submitted for and on behalf of such prospective bidder by an officer or agent who is duly
authorized to bind the prospective bidder to a legal, valid, binding and enforceable contract for the
purchase of the Bonds. By contracting with BiDCOMP, a prospective bidder is not obligated to submit a
bid in connection with the sale.
                                       ALL-OR-NONE BIDS ONLY
        Bidders may bid only to purchase all Bond maturities. A bid that does not offer to purchase all of
the Bonds will not be considered. Each bid must specify an annual rate of interest for each maturity and a
dollar purchase price for the entire issue of Bonds.



                                                     B-4
                                            BASIS OF AWARD
       Bidders must specify a purchase price of not less than 100% of the aggregate principal amount of
the Bonds, plus any accrued interest to the date of delivery. Purchasers must pay any accrued interest,
computed on a 30/360-day basis, from the date of the Bonds to their date of delivery.
       The Bonds will be awarded by the Finance Director of the City to the best bidder whose bid
produces the lowest overall TIC for the City.
        TIC for the Bonds (expressed as an annual interest rate) will be that annual interest rate equal to
twice the discount rate, compounded semiannually, that when applied to each semiannual debt service
payment (interest, or principal and interest, as due) for the Bonds will cause the sum of those discounted
semiannual payments to equal the bid price (exclusive of any accrued interest). Semiannual debt service
payments begin on June 1, 2006. The TIC shall be calculated from the proposed dated date of the Bonds
(September 29, 2005) and shall be based upon the respective principal amounts of Bonds and maturities
thereof set forth above in this Official Notice of Sale, and the interest rates for the Bonds and bid price
submitted in accordance with this Official Notice of Sale.
        In the event of tie bids, the successful bid will be selected by lot in a manner determined by the
Finance Director. Any informality or failure to conform to the instructions contained in this Notice of
Sale may be waived by the Finance Director, and the Finance Director may reject any or all of the bids
submitted. All determinations and the award by the Finance Director shall be final.

                              CUSIP NUMBERS AND DTC ELIGIBILITY
         It is anticipated that CUSIP identification numbers will be printed on the Bonds, but neither the
failure to print such number on any Bonds nor any error with respect thereto shall constitute cause for
failure or refusal by the successful bidder to accept delivery of and pay for the Bonds in accordance with
its agreement to purchase the Bonds. It shall be the responsibility of the successful bidder to timely
obtain and pay for the assignment of such CUSIP numbers.
          It is anticipated that the Bonds will be issued in book-entry only form and eligible for custodial
deposit with DTC; however, it will be the responsibility of the successful bidder to obtain such eligibility
and to pay any fees and expenses imposed by DTC. Failure of the successful bidder to obtain DTC
eligibility shall not constitute cause for failure or refusal by the successful bidder to accept delivery of and
pay for the Bonds in accordance with its agreement to purchase the Bonds.

                                          DELIVERY OF BONDS
         The City will pay the cost of preparing the Bonds. The Bonds will be delivered to DTC or its
agent on September 29, 2005, or at such other time and to such other place as may be mutually acceptable
to the successful bidder and the City. Payment of the full purchase price, plus any accrued interest, shall
be made to the City on the date of delivery, in Federal Reserve funds of the United States of America, by
wire transfer not later than 10:00 a.m., Ohio time, to a bank account to be designated by the City, without
cost to the City. As stated above, the successful bidder must also by that time on that date pay to the
Financial Advisor and to Bond Counsel their respective fees by separate wire transfers of immediately
available funds.
        The legal opinion of Squire, Sanders & Dempsey L.L.P. (Bond Counsel) will be provided at the
successful bidder’s expense as stated above at the time of delivery of the Bonds. The text of the proposed
form of that opinion is attached as Exhibit A to the Official Statement for the Bonds.
         There will also be furnished at the time of delivery of the Bonds, (1) a certificate relating to the
accuracy and completeness of the Official Statement and stating that the initial Official Statement was
“deemed final” (except for permitted omissions) by the City in accordance with SEC Rule 15c2-12 and
(2) a certificate that to the knowledge of the signers no litigation or administrative action or proceeding is
pending or threatened at the time of delivery of the Bonds to restrain or enjoin, or seeking to restrain or
enjoin, the issuance and delivery of the Bonds or the levy and collection of taxes for their payment, or to
contest or question the proceedings and authority under which the Bonds have been authorized, issued,
sold, signed or delivered or the validity of the Bonds.

                                                     B-5
         The successful bidder, by submitting its bid, agrees to furnish to the City and Bond Counsel, a
certificate verifying information as to the bona fide initial offering prices of the Bonds to the public and
sales of the Bonds appropriate for determination of the issue price of, and the yield on, the Bonds under
the Internal Revenue Code of 1986, as amended, and such other documentation as and at the time
requested by Bond Counsel.

                              DISCLOSURE; OFFICIAL STATEMENT
        This Official Notice of Sale is not intended as a disclosure document and bidders are required to
obtain and carefully review the initial Official Statement relating to the Bonds, dated September 6, 2005,
before submitting a bid.
        Copies of that initial Official Statement, “deemed final” (except for permitted omissions) by the
City in accordance with SEC Rule 15c2-12 and the Official Bid Form (if not printed on the back or as an
attachment to this Official Notice of Sale) must be obtained from Edward A. Widman, Finance Director
of the City at (419) 627-5888; or from the financial advisor to the City, Sudsina & Associates, LLC, at
(216) 215-7753, before a bid is submitted.
        The City shall furnish to the successful bidder five copies of the final Official Statement within
seven business days after the sale date. The successful bidder may arrange for additional copies of the
final Official Statement at its expense.

                                     CONTINUING DISCLOSURE
         In order to assist bidders in complying with SEC Rule 15c2-12, the City will undertake to
provide, or cause to be provided, certain financial information and operating data and to provide notices
of certain events, if material. Such information will be filed with each Nationally Recognized Municipal
Securities Information Repository (“NRMSIR”). Notices of material events will be filed with each
NRMSIR or with the Municipal Securities Rulemaking Board. A summary of such undertaking is
contained in the initial Official Statement.

                                                          CITY OF SANDUSKY, OHIO

                                                           By: Edward A. Widman, Finance Director




                                                   B-6
                                                    OFFICIAL BID FORM
                                                       (All-or-None Bid)
                                         (Not Less Than Par Plus Any Accrued Interest)
                                                     $3,470,000
                                             CITY OF SANDUSKY, OHIO
                                        GENERAL OBLIGATION (LIMITED TAX)
                                  VARIOUS PURPOSE IMPROVEMENT BONDS, SERIES 2005
City of Sandusky, Ohio                                                                                          September ___, 2005
222 Meigs Street – City Building
Sandusky, Ohio 44870
Attention: Finance Director
          On behalf of the undersigned and any underwriting syndicate which we have formed and lead, and in accordance with
the terms and conditions of the attached Official Notice of Sale, dated September 6, 2005, which is hereby made a part of this
bid, we offer to purchase all of $3,470,000 City of Sandusky, Ohio General Obligation (Limited Tax) Various Purpose
Improvement Bonds, Series 2005 (the “Bonds”). We will pay as the purchase price thereof, the aggregate sum of
_______________________________________________ Dollars ($______________), together with any accrued interest from
the dated date of the Bonds to the date of delivery of the Bonds, in immediately available Federal Funds.
          The Bonds will be dated as of their date of issuance (expected to be September 29, 2005), and shall bear interest from
such date and shall be payable semiannually commencing on June 1, 2006, and on each June 1 and December 1 until maturity or
prior redemption. The Bonds shall mature in the years and be subject to mandatory sinking fund redemption (if Term Bonds are
specified below by the bidder) in the amounts, and bear interest at the respective interest rates per annum, all as stated in the
following schedule (provided that, as stated in the Official Notice of Sale, no interest rate for any maturity shall exceed 6% per
year, no rate stated shall be less than the rate stated for any earlier maturity, and the different between the highest and lowest rate
stated shall not exceed 400 basis points):
  Maturity         Principal         Interest          Price/          Maturity         Principal         Interest          Price/
(December 1)       Payment            Rate             Yield         (December 1)        Payment            Rate            Yield
   2006           $165,000         __________       __________           2019          $ 85,000         __________       __________
    2007            185,000        __________       __________            2020            90,000        __________       __________
    2008            195,000        __________       __________            2021            95,000        __________       __________
    2009            200,000        __________       __________            2022           105,000        __________       __________
    2010            215,000        __________       __________            2023           110,000        __________       __________
    2011            180,000        __________       __________            2024           115,000        __________       __________
    2012            180,000        __________       __________            2025           120,000        __________       __________
    2013            190,000        __________       __________            2026           110,000        __________       __________
    2014            195,000        __________       __________            2027           115,000        __________       __________
    2015            205,000        __________       __________            2028           120,000        __________       __________
    2016             75,000        __________       __________            2029           125,000        __________       __________
    2017             80,000        __________       __________            2030           135,000        __________       __________
    2018             80,000        __________       __________

        The principal installments for the Bonds indicated above, shall be applied for the mandatory retirement of up to five
Term Bonds maturing in the years and amounts and bearing interest as follows:

             $___________ Term Bonds maturing on December 1, ____ at _____% per annum to yield ___% per annum.
             $___________ Term Bonds maturing on December 1, ____ at _____% per annum to yield ___% per annum.
             $___________ Term Bonds maturing on December 1, ____ at _____% per annum to yield ___% per annum.
             $___________ Term Bonds maturing on December 1, ____ at _____% per annum to yield ___% per annum.
             $___________ Term Bonds maturing on December 1, ____ at _____% per annum to yield ___% per annum.

          Subject to your acceptance of our Official Bid, we agree to make a bona fide public offering of all the Bonds at
prices/yields not lower than those set forth in the above Schedule of Maturities, Principal Payments, Interest Rates and Prices or
Yields. Our calculation, made as provided in the Official Notice of Sale, of the true interest cost to the City is
_________________%. This estimate is for information purposes only and is not binding on the City or the undersigned.




                                                                B-7
          We hereby acknowledge receipt of the initial Official Statement dated September 6, 2005 for the Bonds “deemed final”
(except for permitted omissions) by the City. It is understood and agreed that an award will be made for all or none of the Bonds
as provided in the Official Notice of Sale.
          This bid is made in accordance with and subject to the terms and conditions provided in the Official Notice of Sale,
which are incorporated herein by reference and made a part of this bid. The bidder hereby specifically acknowledges that the
bidder, in accordance with Official Notice of Sale, will at closing also pay to the Financial Advisor and to Bond Counsel their
respective fees by separate wire transfers of immediately available funds.
                                                                               Respectfully submitted,



                                                                               Bidder
(No addition or alteration, except as provided above, is to be made to this Official Bid Form)