5.1. ERMUSR 06-14-2016 - Laserfiche WebLink

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RISK FACTORS INVESTORS SHOULD BE AWARE THAT INVESTMENT IN THE BONDS MAY ENTAIL SOME DEGREE OF RISK. EACH PROSPECTIVE INVESTOR IN THE BONDS IS ENCOURAGED TO READ THIS OFFICIAL STATEMENT IN ITS ENTIRETY. PARTICULAR ATTENTION SHOULD BE GIVEN TO THE FACTORS DESCRIBED BELOW WHICH, AMONG OTHERS, COULD AFFECT THE PAYMENT OF PRINCIPAL AND INTEREST ON THE BONDS AND WHICH COULD ALSO AFFECT THE MARKET PRICE OF THE BONDS TO AN EXTENT THAT CANNOT BE DETERMINED. THIS DISCUSSION OF RISK FACTORS IS NOT,AND IS NOT INTENDED TO BE,EXHAUSTIVE. Limited Obligation The obligation of the City to pay the principal of and interest on the Parity Bonds is a limited obligation. The full faith and credit and taxing powers of the City are not pledged to pay the principal and interest on the Parity Bonds and the City has not pledged ad valorem property taxes to pay the principal and interest on the Parity Bonds. As further described elsewhere herein, the principal of and interest on the Parity Bonds is payable solely from Net Revenues of the Utility (as defined under "SECURITY AND FINANCING"herein). While it is believed that revenues of the Utility will be sufficient to pay operating and maintenance expenses of the Utility as well as the principal of and interest on the Bonds when due, a number of factors described below may affect the receipt of sufficient revenues from the Utility for such purposes, which may impair the ability of the City to make timely principal and interest payments on the Parity Bonds. General Factors that May Affect Sufficiency of Revenues As stated above, the City is obligated to pay the principal of and interest on the Bonds solely from Net Revenues of the Utility. A number of factors may have an adverse effect on the receipt of revenues in an amount sufficient to pay operating and maintenance expenses of the Utility as well as the principal and interest on the Parity Bonds. These include potential adverse changes in the economic condition of the City, including potential decreases in population that may arise from decisions by employers located in and around the City to relocate their operations elsewhere; and potential unemployment at a level that would preclude residents of the City from paying sufficient user fees in order to support the operations of the Utility and the payment of principal and interest on the Parity Bonds. The loss of any of the major electric or water users would also have an adverse effect on the revenues of the Utility. Unforeseen Problems with the Utility Payment of the principal of and interest on the Parity Bonds is dependent to a considerable degree upon the continued operation of the Utility for the purposes for which they were designed. While the City believes that the Utility has been designed and constructed in such a manner as to permit their continued operation without requiring unreasonable costs for maintenance or repairs and has provided under the terms of the Awarding Resolutions for the creation and maintenance of funds in amounts which the City believes to be sufficient to provide for the necessary repairs and maintenance of the Utility, there can be no assurance that such amounts will, in fact, be sufficient to assure the ongoing operation of the Utility. Although the Utility is covered by policies of insurance as otherwise described herein, casualties and other occurrences may result in damage to the Utility, which may not be covered by the net proceeds of any insurance award. Any material interruption of the operation of the Utility may have an adverse effect on the ability of the City to collect fees from users of the Utility and could, in turn, have a materially adverse effect on the ability of the Utility to make timely payments of principal and interest on the Bonds. -5 - 123