NEW ISSUE Ratings: Moody’s Aaa

Financial Security Assurance Inc. Insured

Underlying Rating: Moody’s Aa3
See Ratings and Exhibit B

In the opinion of Squire, Sanders & Dempsey L.L.P., Bond Counsel, under existing law (i) assuming continuing 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) 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 activity tax, the net income base of the
Ohio corporate franchise tax, and municipal, school district and joint economic development 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 the tax aspects, see “TAX MATTERS” herein.

OFFICIAL STATEMENT
$8,620,000
CITY OF STOW, OHIO
GENERAL OBLIGATION (Limited Tax)
VARIOUS PURPOSE BONDS, SERIES 2008
Dated: Closing Date

The Bonds. The Bonds are general obligations of the City, issued to finance the permanent improvements described under The Bonds – Authorization and
Purpose. Principal and interest, 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 7.2-mill limitation provided by the Charter of the City.

Bond Insurance. The scheduled payment of principal of and interest on the Bonds when due will be insured by a municipal bond insurance policy to
be issued by Financial Security Assurance, Inc. simultaneously with the delivery of the Bonds (see Exhibit B).

Book Entry Only. The Bonds will be initially issued only as fully registered bonds, one for each maturity, issuable 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 of and interest on the Bonds will be payable to the registered owner (DTC), principal upon presentation and surrender at the
principal corporate trust office of The Huntington National Bank, Columbus, Ohio (the Bond Registrar), and interest transmitted by the Bond Registrar
on each interest payment date (June 1 and December 1 of each year, beginning December 1, 2008) to the registered owner (DTC) as of the 15th day of
the month preceding that interest payment date.

PRINCIPAL MATURITY SCHEDULE

ON DECEMBER 1

Interest CUSIP(a) Interest CUSIP(a)

Year Amount Rate Price No. 862386 Year Amount Rate Price No. 862386

2009 $200,000 3.25% 101.527% GL7 2019 $305,000 3.60% 100.000% GW3
2010 215,000 3.25 102.100 GM5 2020 320,000 3.65 100.000 GX1
2011 220,000 3.25 101.855 GN3 2021 335,000 3.70 100.000 GY9
2012 235,000 3.25 101.270 GP8 2022 345,000 3.75 100.000 GZ6
2013 245,000 3.25 101.015 GQ6 2023 360,000 4.00 101.448 HA0
2014 255,000 5.75 115.306 GR4 2024 375,000 4.00 101.083 HB8
2015 260,000 6.25 119.972 GS2 2025 385,000 4.00 100.719 HC6
2016 275,000 6.25 121.432 GT0 2026 405,000 4.00 100.000 HD4
2017 280,000 3.50 100.366 GU7 2027 420,000 4.00 100.000 HE2
2018 295,000 3.55 100.000 GV5

$ 890,000 4.05% TERM BONDS DUE 2029, Price 100.000% CUSIP(a) No. 862386 HG7
$2,000,000 4.10% TERM BONDS DUE 2033, Price 100.000% CUSIP(a) No. 862386 HL6

(a) See Regarding This Official Statement.

Prior Redemption. Bonds maturing on and after December 1, 2017, are subject to optional prior redemption by the City prior to maturity, beginning
December 1, 2016, as described in this Official Statement. 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 when, as and if issued, and accepted by Stifel, Nicolaus & Company, Inc. (the Underwriter), 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 to DTC or its agent on May 8, 2008.

STIFEL, NICOLAUS & COMPANY, INC.

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 May 5, 2008, and the information speaks only as of that date.
 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 Mayor and the Director of
Finance 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.

CUSIP data herein are provided by Standard & Poor’s, CUSIP Service Bureau, a division of
The McGraw-Hill Companies, Inc. CUSIP numbers have been assigned by an independent company not
affiliated with the City and are included solely for the convenience of the holders of the Bonds. The City
is not responsible for the selection or uses of these CUSIP numbers, and no representation is made as to
their correctness on the Bonds or as indicated above. The CUSIP number for a specific maturity is
subject to being changed after the issuance of the Bonds as a result of various subsequent actions.

The information approved and provided by the City in this Official Statement is the
information relating to the particular subjects provided by the City for the purpose. Reliance for the
purpose should not be placed on any other information publicly provided, in any format including
electronic, by the City for other purposes, including general information provided to the public or to
portions of the public.

Certain information contained in the Official Statement is attributed to the Ohio Municipal
Advisory Council (OMAC). OMAC compiles information from official and other sources. OMAC
believes the information it compiles is accurate and reliable, but OMAC does not independently confirm
or verify the information and does not guaranty its accuracy. OMAC has not reviewed this Official
Statement to confirm that the information attributed to it is information provided by OMAC or for any
other purpose.

UNDERWRITING

The Bonds are being purchased by Stifel, Nicolaus & Company, Inc. (the Underwriter), at a
price of $8,620,517.05, resulting in a gross underwriting spread of $179,566.70 from the offering prices
set forth on the cover page. The Underwriter has agreed to pay, from that gross underwriting spread,
$66,500.00 for the cost of the bond insurance premium. The Underwriter may offer and sell the Bonds to
certain dealers (including dealers depositing into investment trusts) and others at prices lower than the
public offering price. The public offering prices set forth on the cover page may be changed after the
initial offering by the Underwriter. The purchase of the Bonds by the Underwriter is subject to certain
conditions and requires that the Underwriter will purchase all the Bonds, if any are purchased.

2
 TABLE OF CONTENTS

Cover Page ................................................................................................................................ 1

Regarding this Official Statement............................................................................................. 2
Table of Contents...................................................................................................................... 3
Selected Summary Statement ................................................................................................... 5
Introductory Statement.............................................................................................................. 7
The Bonds – Authorization and Purpose .................................................................................. 7
Summary of Certain Terms of the Bonds ................................................................................. 8
General.......................................................................................................................... 8
Book Entry Method....................................................................................................... 8
Revision of Book Entry System; Replacement Bonds ..................................... 11
Prior Redemption .......................................................................................................... 11
Mandatory Redemption .................................................................................... 11
Optional Redemption ........................................................................................ 12
Selection of Bonds and Book Entry Interests to be Redeemed ........................ 12
Notice of Call for Redemption; Effect.............................................................. 12
Security and Sources of Payment ............................................................................................. 13
Bond Insurance ............................................................................................................. 13
Refunding...................................................................................................................... 14
The City .................................................................................................................................... 14
General Introduction ..................................................................................................... 14
City Government........................................................................................................... 16
Employees..................................................................................................................... 18
City Facilities ................................................................................................................ 19
Economic and Demographic Information..................................................................... 19
Population ......................................................................................................... 19
Commercial, Industrial and Residential Activity.............................................. 19
Employment and Income .................................................................................. 21
Housing and Building Permits .......................................................................... 22
Utilities; Public Safety and Services................................................................. 23
Financial Matters ...................................................................................................................... 23
Introduction................................................................................................................... 23
Budgeting, Tax Levy and Appropriations Procedures.................................................. 24
Financial Reports and Audits........................................................................................ 25
Financial Outlook.......................................................................................................... 25
General Fund............................................................................................................................. 26
Ad Valorem Property Taxes ..................................................................................................... 26
Assessed Valuation ....................................................................................................... 26
Overlapping Governmental Entities ............................................................................. 30
Tax Rates ...................................................................................................................... 30
Tax Table A: Overlapping Tax Rates .............................................................. 31
Tax Table B: City Tax Rates ........................................................................... 32
Collections .................................................................................................................... 32
Delinquencies................................................................................................................ 33
Other Major General Fund Revenue Sources ........................................................................... 34
Municipal Income Tax.................................................................................................. 34
Local Government Assistance Funds............................................................................ 35
City Debt and Other Long-Term Obligations........................................................................... 35
Security for General Obligation Debt ........................................................................... 36
Bonds and BANs........................................................................................................... 36
Statutory Direct Debt Limitations................................................................................. 36
Indirect Debt and Unvoted Property Tax Limitations .................................................. 38
Debt Outstanding .......................................................................................................... 39

3
 Bond Anticipation Notes............................................................................................... 40
Bond Retirement Fund.................................................................................................. 40
Future Financings.......................................................................................................... 40
Long-Term Financial Obligations Other Than Bonds and Notes................................. 41
Retirement Obligations ................................................................................................. 41
Litigation................................................................................................................................... 42
Legal Opinion ........................................................................................................................... 42
Tax Matters ............................................................................................................................... 43
Original Issue Premium ................................................................................................ 45
Eligibility for Investment and as Public Moneys Security ....................................................... 45
Transcript and Closing Certificates .......................................................................................... 46
Continuing Disclosure Agreement............................................................................................ 46
Ratings ...................................................................................................................................... 48
Financial Advisor...................................................................................................................... 49
Bond Registrar .......................................................................................................................... 49
Concluding Statement............................................................................................................... 50

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

Appendix A: Comparative Cash Basis Summary of General Fund Receipts and

Expenditures for Fiscal Years 2003 through 2007 and Budgeted Fiscal
Year 2008

Appendix B-1: All-Funds Summary 2006 (Cash Basis)

Appendix B-2: All-Funds Summary 2007 (Cash Basis)

Appendix C: Basic Financial Statements from the City’s Financial Report for Fiscal
Year 2006 (Audited)

Exhibit A: Proposed Text of Legal Opinion of Squire, Sanders & Dempsey L.L.P.

Exhibit B: Bond Insurance and Specimen Policy

4
 SELECTED SUMMARY STATEMENT

The following introduction and summary supplements certain of the information on

the cover page and summarizes selected other information in this Official Statement relating to
the Bonds. It is not intended as a substitute for the more detailed discussions in this Official
Statement, to which reference should be made.

ISSUER. City of Stow, Ohio.

SECURITY AND SOURCES OF PAYMENT. The Bonds are general obligations

of the City, the full faith and credit and general property 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 7.2-mill
limitation provided by the Charter of the City.

AUTHORIZATION. The Bonds are authorized by Chapter 133 of the Revised

Code, the City Charter, and legislation passed by City Council.

PURPOSE OF BONDS. The Bonds are issued for the purpose of (i) constructing,
furnishing and equipping a service maintenance center and parks maintenance and urban forestry
center and improving the sites therefor and (ii) constructing, furnishing and equipping two fire
stations, improving the sites therefor and acquiring any necessary real estate therefor.

PRIOR REDEMPTION. The Bonds maturing on or after December 1, 2017, are

subject to prior redemption, by and at the sole option of the City, either in whole or in part (as
selected by the City and in integral multiples of $5,000) on any date on or after December 1,
2016, at par, plus interest accrued to the redemption date. Term Bonds maturing in 2029 and
2033 are subject to mandatory prior redemption, as described in this Official Statement

FORM, AND MANNER OF MAKING PAYMENTS. The Bonds will be

originally issued only as fully registered bonds, one for each maturity, under a book entry only
method, and registered initially in the name of The Depository Trust Company, New York, New
York, 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.

Principal and interest will be payable to the registered owner (initially, DTC).
Principal will be payable on presentation and surrender at the principal corporate trust office of
the Bond Registrar. Interest will be transmitted by the Bond Registrar on each interest payment
date (June 1 and December 1, beginning December 1, 2008) to the registered owner as of the 15th
day of the month preceding the interest payment date.

TAX MATTERS. In the opinion of Bond Counsel, under existing law:

• Assuming continuing 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 alternative minimum tax imposed on individuals and corporations under the
Internal Revenue Code of 1986, as amended (the Code).

• The Bonds are “qualified tax-exempt obligations” as defined in Section 265(b)(3)

of the Code.

5
 • 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
activity tax, the net income base of the Ohio corporate franchise tax, and
municipal, school district and joint economic development district income taxes
in Ohio.

Interest may be subject to certain federal taxes imposed on certain corporations, including the
corporate alternative minimum tax on a portion of it. Certain of the Bonds may be offered and
sold to the public at an original issue discount or premium.

BOND COUNSEL. Squire, Sanders & Dempsey L.L.P.

BOND INSURER. Financial Security Assurance Inc.

BOND REGISTRAR. The Huntington National Bank.

FINANCIAL ADVISOR. Sudsina & Associates, LLC.

UNDERWRITER. Stifel, Nicolaus & Company, Inc. The Bonds have been purchased
by the Underwriter at a price of $8,620,517.05.

Questions regarding this Official Statement or the Bonds should be directed to the
City, John M. Baranek, Director of Finance, 3760 Darrow Road, Stow, Ohio 44224, telephone
(330) 689-2830.

THIS SPACE INTENTIONALLY LEFT BLANK

6
 INTRODUCTORY STATEMENT

This Official Statement has been prepared by the City of Stow, Ohio (the City), 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 and in
Underwriting and in Exhibit B. 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 charges” or “debt service” means principal of and interest on the

obligations referred to.

• “County” means Summit County.

• “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 2008”) 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,
and ordinances passed by the City Council and a certificate of award provided for by those
ordinances (collectively, the Authorizing Legislation).

The Bonds are being issued for the purpose of (i) constructing, furnishing and
equipping a service maintenance center and parks maintenance and urban forestry center and
improving the sites therefor and (ii) constructing, furnishing and equipping two fire stations,
improving the sites therefor and acquiring any necessary real estate therefor (together, the Project).

The principal of the Bonds, together with other funds available to the City, will be
used to retire the $9,220,000 portion of the City’s outstanding $17,145,000 Various Purpose
Notes, Series 2007, maturing on May 9, 2008 (the Outstanding Notes), related to the Project.

7
 Any accrued interest and premium received on the sale of the Bonds will be deposited
in the Bond Retirement Fund. Moneys in that Fund are used to pay debt charges on City debt
obligations.

SUMMARY OF CERTAIN TERMS OF THE BONDS

General

The Bonds will be dated, will be payable in the amounts and on the dates, will bear
interest (computed on the basis of a 360-day year consisting of 12 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 2.2 million issues of U.S. and non-U.S. equity
issues, corporate and municipal debt issues, and money market instruments from over 100
countries that DTC’s participants (Direct Participants) deposit with DTC. DTC also facilitates

8
the post-trade settlement among Direct Participants of sales and other securities transactions in
deposited securities, through electronic computerized book entry transfers and pledges between
Direct Participants’ accounts. This eliminates the need for physical movement of securities
certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly
owned subsidiary of The Depository Trust & Clearing Corporation (DTCC). DTCC, 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 and www.dtc.org.

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.

9
 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
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, including DTC, 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

10
 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.
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 City 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 City 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, and interest on 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 other Replacement Bonds of authorized

denominations, and transferable, at the office of the Bond Registrar without charge (except taxes
or governmental fees). Exchange or transfer of then redeemable Replacement Bonds is not
required to be made (i) between the 15th day preceding the mailing of notice of redemption of
Replacement Bonds and the date of that mailing, or (ii) of a particular Replacement Bond
selected for redemption (in whole or part).

Prior Redemption

The Bonds are subject to mandatory and optional redemption as follows.

Mandatory Redemption
The Bonds maturing on December 1, 2029 (the 2029 Term Bonds), and
December 1, 2033 (the 2033 Term Bonds, and together with the 2029 Term Bonds, the Term
Bonds), are subject to mandatory sinking fund redemption in part by lot pursuant to the terms of
the mandatory sinking fund redemption requirements of the Authorizing Legislation. That
mandatory redemption of the 2029 Term Bonds is to occur on December 1, 2028 (with the
balance of $455,000 to be paid at stated maturity on December 1, 2029), and of the 2033 Term
Bonds is to occur on December 1 in each of the years 2030 through 2032 (with the balance of
$530,000 to be paid at stated maturity on December 1, 2033), at a redemption price equal to
100% of the principal amount redeemed, plus accrued interest to the redemption date, according
to the following schedule:

11
 2029 Term Bonds 2033 Term Bonds

Year Amount Year Amount

2028 $435,000 2030 $470,000

2031 490,000
2032 510,000

Term Bonds redeemed by other than mandatory redemption, or purchased for

cancellation, may be credited against the applicable mandatory redemption requirement.

Optional Redemption

The Bonds maturing on or after December 1, 2017, are subject to prior redemption on
or after December 1, 2016, 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.

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 charges 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.

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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 Direct 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 7.2-mill limitation provided by the Charter of the City.
Under State law, and expressly under the City Charter, the levy for debt charges 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 those debt charges. 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 charges on
the Bonds as it becomes due, unless and to the extent those debt charges are paid from other
sources, such as described below.

The Authorizing Legislation provides further security by making a pledge of the full
faith and credit and the general property taxing power of the City for the payment of debt
charges 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 or expressly pledged to certain obligations, 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.

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 unvoted taxes to
pay debt charges, 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.

Bond Insurance

The scheduled payment when due of principal of and interest on the Bonds will be
guaranteed by a Municipal Bond Insurance Policy (the Policy) to be issued by Financial Security
Assurance Inc. (the Bond Insurer) concurrently with the delivery of the Bonds. For information
regarding the Bond Insurer and that Policy, see Exhibit B.

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Refunding

State law authorizes the refunding and advance refunding of all or a portion of the
Bonds. If the City places in escrow either money or direct obligations of or guaranteed as to
payment by the United States, or a combination of both, which with investment income thereon
will be sufficient for the payment of debt charges and any redemption premium on the refunded
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 charges on them will not be required. For this purpose direct obligations of or guaranteed
by the United States include both:

• Rights to receive payments or portions of payments of the principal of or

investment income on those U.S. obligations.

• Other obligations fully secured as to payment by those U.S. obligations and

investment income on those obligations.

THE CITY

General Introduction

The City is located in Summit County in northeastern Ohio, approximately eight

miles northeast of Akron and 30 miles southeast of Cleveland. It was incorporated as a village in
1957, and became a city in 1960.

The City is in the Akron Metropolitan Statistical Area (MSA), comprised of Summit
and Portage counties. It is also in the Cleveland-Akron-Lorain Consolidated Statistical Area
(CSA).

The City’s 2000 population was 32,139.

The City’s area is approximately 17.25 square miles, broken down by land use as
follows:

Percent of
Assessed
Valuation of
Real Property

Residential 78.86%
Commercial/Industrial 20.90
Public Utility 0.00
Agricultural 0.24
Undeveloped (a)
(a) Included in above categories.
Source: County Fiscal Officer.

The City is served by diversified transportation facilities, including three State

highways and convenient access to I-71, I-76, I-77, I-80 (the Ohio Turnpike) and I-271 (which
connects with I-90). It is served by Conrail and is adjacent to areas served by Amtrak, and has
access to passenger air services at Akron-Canton Regional Airport located in southern Summit

14
County and Cleveland Hopkins International Airport located in the City of Cleveland. Public
mass transit for the area is provided by the METRO Regional Transit Authority.

One daily newspaper and one weekly newspaper serve the City. The City is within
the broadcast area of 10 television stations and 40 AM and FM radio stations. Multi channel
cable TV service, including educational, governmental and public access channels, is provided
by Time-Warner Cable.

The area is served by the following hospitals located in the County: Akron City
Hospital, Cuyahoga Falls General Hospital and Saint Thomas Medical Center, which constitute
the Summa Health System (1,235 beds); Akron General Medical Center (537 beds); and Akron
Children’s Hospital (253 beds). The City is also in close proximity to world renowned hospitals
in the City of Cleveland.

Banking and financial services are provided to the City by local offices of
commercial banks and savings and loan associations, all of which have their principal offices
elsewhere.

Within commuting distance are several public and private two year and four year
colleges and universities providing a wide range of educational facilities and opportunities.
These include The University of Akron, Baldwin Wallace College, Case Western Reserve
University, the Cleveland Institute of Art, the Cleveland Institute of Music, Cleveland State
University, Cuyahoga Community College, Hiram College, John Carroll University, Kent State
University, Northeastern Ohio Universities College of Medicine, Notre Dame College and
Ursuline College.

Founded in 1924, the Stow Public Library is a vital resource within the community.
The Library well reflects the impressive growth of the City. Over the past decade, a completely
remodeled and expanded library has been built, circulation has more than doubled and reference
questions have tripled. Public use computers, internet service, online database searching and
interlibrary loans are available to all patrons. Circulating materials include books, magazines,
newspapers, video tapes, cassette tapes, CDs and pamphlets. The Stow Public Library offers
summer reading programs for children and young adults as well as book discussion groups and
jazz concerts for the community. Other special programs, services and events include tax
counseling for the elderly, story hours for children, The Friends’ Annual Book Sale, local artist
displays and exhibits and many related programs.

A comprehensive parks and recreation system exists in the region and is comprised of
the Cuyahoga Valley National Recreational Area, State parks, a County-wide metropolitan park
district and numerous City parks and recreational facilities. All offer year-round programs for all
age groups. The City parks include bike and hike trails and facilities for picnicking, fishing,
swimming, tennis, softball, basketball, winter sports and camping. Boating, water skiing and
snow skiing facilities are located within minutes of the City. Private recreational and cultural
facilities are abundantly available, including two public golf courses located within the City, one
of which is owned and operated by the City.

The 3,000-seat E.J. Thomas Performing Arts Hall, located on the campus of The
University of Akron, offers ballet, opera and symphony and band concerts, as well as musicals,
traveling theater productions and entertainment programs. The Hall is home to the 90-member
Akron Symphony Orchestra. The Ohio Ballet, a 20-member professional dance company in
residence at The University of Akron, performs for audiences locally and internationally.
Blossom Music Center, located in neighboring Cuyahoga Falls, is the summer home of the
internationally renowned Cleveland Orchestra and hosts a variety of musical programs

15
throughout the summer. The outdoor pavilion seats approximately 5,000 and the lawn
accommodates an additional 15,000.

Community theaters within the County include Weathervane Community Playhouse,

Goodyear Community Theatre, Coach House Theatre, Akron Children’s Theatre and the Stow
Players. The Carousel Dinner Theatre draws nationally renowned performers for its year-round
schedule. The University of Akron regularly stages plays and musicals.

The Akron Art Museum is one of a few in the country specializing in American art of
the 19th and 20th centuries. The museum presents works by nationally prominent artists in
addition to its permanent collection, and offers concerts and lectures.

A number of facilities of historic significance are located in the County, including

Hower House, a 122-year old restored High Victorian mansion on the campus of The University
of Akron, and Stan Hywet Hall, a 65-room manor house furnished with antiques and works of art
dating from the 14th century and considered the finest example of Tudor Revival architecture in
the United States. Hale Farm and Village, a working farm and community recreated from the
early 19th century, feature a homestead, restored buildings and live demonstrations of early
American crafts. The history of the rubber industry, from Charles Goodyear’s home laboratory
through the growth of a major corporation, is displayed in the Goodyear World of Rubber
Museum.

The Stow-Munroe Falls Chamber of Commerce (the Chamber), established in 1965,

is a non-profit coalition of more than 350 business, professional, civic and community leaders
working together to enhance the economic opportunities and quality of life in the region. For 40
years, the Chamber has served the community by being in the forefront in leadership and
business development. Chamber members serve as volunteers in many capacities, both within
the Chamber and in the community, and take pride in what has been accomplished collectively.

The Stow community, through its various service organizations and volunteers, holds
many special events, including the Fourth of July Pride Week celebration, which has numerous
activities throughout a two-week period, the Joshua Stow Fest, the Harvest Festival, the
Community Showcase, Aviation Day/Heritage Day and the July 4th Parade which attracts up to
50,000 people to the City.

City Government

The City operates under and is governed by its Charter, first adopted by the voters in
1958 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 Ohio 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 mayor-council form of government.

Legislative authority is vested in a seven member Council, of whom three are elected
at large and four are elected from wards, all for two year terms. The Council fixes the
compensation of City officials and employees, and enacts ordinances and resolutions relating to
City services, tax levies, appropriating and borrowing money, licensing and regulating
businesses and trades, and other municipal purposes. The presiding officer is the President of
Council, who is elected by the Council from among its members for a one year term. The
Charter establishes certain administrative departments; the Council may establish divisions of
those departments and additional departments.

The City’s chief executive and administrative officer is the Mayor, who is elected by
the voters specifically to that office for a four year term. The Mayor may veto any legislation

16
passed by Council. A veto may be overridden by the affirmative vote of five members of
Council. The other elected officials are the Director of Finance and the Director of Law, each
elected for a four year term. The Mayor currently serves as the Director of Public Safety and
appoints, subject to the approval of Council, the other directors of City departments. The Mayor
also appoints members to a number of boards and commissions, and appoints and removes, in
accordance with civil service requirements, all appointed officers and employees, except Council
officers and employees and the employees of the Departments of Finance and Law.

All elected officials, except Council serve full-time. The current elected officials, and
some of the major appointed officials, are:

ELECTED

Years in Vocation in
Office Name Office Private Life

Mayor Karen Fritschel(a) 4¼ Full-time position

Director of Finance John M. Baranek 12 ¼ Full-time position
Director of Law Brian A. Reali, Esq. ¼ Full-time position

Members of Council:

Ron Alexander 12 ¼ Attorney

Mary E. Bednar(b) 2¼ School Teacher
James M. Costello 4¼ Manager of Facilities Purchasing
Janet D’Antonio(c) 12 ¼ Retired
Sara L. Drew 2¼ Counselor
John Pribonic ¼ Retail Manager
Matt Riehl ¼ Government Employee
(a) Mayor Fritschel previously served as a member of Council for 12 years and as President of Council.
(b) Vice President.
(c) President.

APPOINTED

Years in Years Service

Office Name Position with the City

Clerk of Council Bonnie J. Emahiser 28 ½ 31

Planning Director Ken Trenner 10 ½ 17
Parks Director Nick Wren 8 8
Service Director Dano Koehler 7¾ 26
Engineer J. William Drew 18 ¼ 28 ¼
Tax Administrator Dennis Bernaciak 8½ 8½
Police Chief Louis A. Dirker, Jr. 5 5
Fire Chief Bill Kalbaugh 2½ 27

The present terms of all elected officials expire on January 2, 2012, except for the seven Council
members whose term expires on January 2, 2010. All non-protected appointed officials, except
the Clerk of Council, serve at the pleasure of the Mayor, Director of Finance or Director of Law,
respectively, according to who appointed them. The Clerk of Council serves at the pleasure of
Council.

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Employees

The City has 235 full-time and 125 part-time employees. The number of full-time
employees has increased by 13 since December 31, 2003. A statewide public employee
collective bargaining law applies generally to public employee relations and collective
bargaining.

Eligible full-time employees are represented by the following bargaining units:

Agreement Number of
Bargaining Unit Duration Employees

AFSCME 01/01/05 – 12/31/07(a) 62

Int’l Association of Fire Fighters 04/01/05 – 03/31/08(a) 51

Ohio Patrolmen’s Benevolent

Association (Dispatchers) 01/01/05 – 12/31/07(a) 10
(Police No. 1) 01/01/05 – 12/31/07(a) 9
(Police No. 2) 01/01/05 – 12/31/07(a) 31

(a) For a discussion of the status of negotiations for new contracts, see immediately below.

The remaining full-time City employees are not eligible to join a bargaining unit.

The City’s labor contract situation is very stable. The agreements with AFSCME and
OPBA Dispatchers, Police Patrolmen and Sergeants and Lieutenants expired at the end of 2007.
Negotiations for successor contracts have commenced and are ongoing. The AFSCME and
Police Patrolmen’s contracts are nearing completion. Although the differences between the City
and the bargaining units are not substantial, those contracts have been submitted to the impasse
procedure provided by State law. It is currently expected that those contracts will be finalized by
mid-year 2008. A successor contract to the Fire Fighters (IAFF) agreement, which expired on
March 31, 2008, is also being negotiated in 2008.

The Council by ordinance establishes wages and economic benefits for all non-
bargaining unit personnel. For those employees covered by bargaining units under state law, the
wages and economic benefits are mutually negotiated by the City and the respective labor unions
subject to ratification by Council and the impasse provisions of State law. Increases in wages
and benefits have been approved and implemented for City employees on an annual basis.

In the City’s judgment, its employee relations have been excellent.

The City’s partially self-funded employee group health benefit plan is financially
sound. It ended Fiscal Year 2007 with a cash reserve exceeding $1,450,000. The plan is
protected annually against catastrophic loss with both individual and total group stop-loss
insurance coverage. Total net annual expenditures for claims, all administrative costs and stop-
loss insurance amounted to $2,372,127 in the 2007 plan year. Funding for the plan in 2007
amounted to $2,349,546 plus $22,581 in plan reserves which were used to pay claims.

18
City Facilities

The City’s major facilities include:

City Facilities Estimated Value

Municipal Courthouse $10,000,000(a)

Safety Building 7,000,000
Service Center 7,000,000
City Hall 4,500,000
Park Maintenance Center 4,000,000
Water Tower 3,000,000
Fire Station No. 2 2,000,000
Fire Station No. 3 2,000,000
Various Park Facilities(b) 1,960,000
Pump Stations 1,400,000
Silver Springs Lodge 800,000
Fox Den Golf Course 500,000
Silver Springs Swim Pavilion 400,000
(a) Courthouse is currently under construction.
(b) Includes historical buildings.

The City currently carries real property and contents casualty insurance in the amount
of $40,000,000, with a deductible of $1,000.

Economic and Demographic Information

Population

Recent Census population has been:

Year City County MSA CSA

1970 20,061 553,371 679,239 3,098,513

1980 25,303 524,472 660,328 2,938,277
1990 27,702 514,990 657,575 2,859,644
2000 32,139 542,899 694,960 2,945,831

2000 Census figures show the following breakdown by age groups of the population
of the City:

Under 5 5-19 20-34 35-44 45-54 55-64 65+ Total

2,126 6,977 5,978 5,674 4,908 2,634 3,842 32,139

Commercial, Industrial and Residential Activity

Located in northern Summit County, the City is a dynamic community which has
experienced steady growth in the last decade. The City is conveniently located between the
Cities of Akron and Cleveland and offers excellent access to major highways. The City’s 2005
population of 34,335 represents a 7% increase since 2000 and makes it the third largest city in
the County.

19
 This growth is managed through the use of the City’s Zoning Code, Comprehensive
Plan and economic development policies. The City has long recognized the need for proper
balance between residential, commercial and industrial areas and adopted its first Comprehensive
Plan in 1960. It was updated in 1991, and again in 2001, in order to ensure that the land-use
policies and goals reflected current development patterns. This Comprehensive Plan is utilized
in conjunction with the Zoning Code to serve as a continuing guide in defining community land-
use objectives and policies. The City’s Zoning Code and Map divides the City into residential,
commercial and industrial districts and provides detailed regulations on the specific uses
permitted in those districts.

In 2006, the City adopted the Stow Economic Development Strategic Plan as a future
guide to economic development in the community. This is the City’s first economic
development plan and it sets the specific course of action for the City to follow over the next
several years in an attempt to build a stronger tax base. The City hired an Economic
Development Coordinator to spearhead the implementation of the Plan. The City has also
reactivated its Community Improvement Corporation (CIC) to serve as its development arm.
The City intends to allocate $1 million to the CIC over the next 10 years to finance its
development activities in the City.

Concurrently with the issuance of the Bonds, the City is issuing bond anticipation
notes (see Debt Table D), a portion of proceeds of which will finance the City’s portion of the
costs of constructing a new Seasons Road/State Route 8 interchange and the City’s portion of the
costs of improving the Steels Corners Road/State Route 8 interchange, both in cooperation with
the Director of Transportation of the State of Ohio. The Seasons Road interchange is scheduled
to be completed in August 2010. Economic development studies suggest that this interchange
could lead to the development of 2.6 million square feet of new building space to be located on
220 acres in the City and create approximately 2,450 jobs in the City. The City is sharing the
cost of the Seasons Road project with the adjacent City of Hudson, and the Federal Highway
Administration has committed to pay approximately $4 million of the overall project cost. The
Steels Corners Road project may be completed by December 2008 and will permit further
growth in this area and ease current and projected traffic congestion (see below).

One of the long standing goals of planning in the City has been to limit retail
development at major intersections throughout the City, in order to avoid “strip” retail
development along major roads. Currently, there are 14 shopping centers throughout the City,
with major anchors such as Target, Kohl’s, Kaufmann’s, CVS, Wal-Mart, Lowe’s and Sears
Hardware. Most recently, the Steels Corners Road/State Route 8 area has experienced
significant growth in commercial development to serve the industrial companies in the northwest
quadrant as well as the City’s increasing population. Several restaurants and other office/retail
uses have been constructed at the Steels Corners/State Route 8 interchange in the last three years,
and construction began in 2007 on the third hotel at this interchange, which is scheduled to open
in 2008. The City’s new $10 million courthouse, to be occupied by the Stow Municipal Court, is
also being constructed in the interchange area and is expected to be occupied by December 2008.
An additional major office building of approximately 38,000 square feet was recently approved
for the area.

Akron General Medical Center opened a 97,000 square foot health and wellness
center at this interchange in June 2007. This facility includes a fitness component, an emergency
room, physical therapy and diagnostic offices. Akron General has plans approved for a 40,000
square foot physicians’ office building adjacent to the health and wellness center. Construction
began in April 2008 on an additional 9,000 square foot medical building in the area. An 18,000
square foot medical building adjacent to this facility has also been approved.

20
 Other projects recently completed in the City include the renovation of the 130,000
square foot former Goodyear Mold plant for use by Noble Metal Processing of Ohio and Twin
Sisters Production; a 40,000 square foot addition by Akrochem; and the 120,000 square foot
Mickey Thompson Tire facility in the new Stow Commerce Center. Two previously vacant
industrial buildings have now become occupied due to the relocation of two new businesses to
Stow, Amweld Building Products and Karvo Paving Company.

A number of other industrial facilities were also recently constructed, including the
130,000 square foot addition to the Wrayco Industries facility; two new flex-space buildings in
the Hudson Drive Business Campus; a 44,000 square foot addition to VMI Americas building;
and a new office building for Alpha Freight Systems. The Business Campus continues to expand
and develop as two new 16,000 square foot office buildings have been approved for construction
in 2008.

The City offers a wide range of housing choices, including executive homes located
in golf course subdivisions, several medium priced subdivisions, condominiums and moderately
priced dwellings, as well as numerous apartment developments.

The business environment includes a diverse mix of employment in manufacturing,

retail goods, service establishments and public services. The City is home to companies
producing a variety of products, ranging from parts for the automotive, heavy construction and
aerospace industries, to adhesives, high-tech sound systems, machining and mold design and
production.

Growth of industrial, commercial and residential development reflects the City’s

willingness and desire to assist business development and promote future growth in the City. To
assist in new commercial and industrial development, and the expansion of existing industries,
the City offers a variety of tax incentives including an enterprise zone, community reinvestment
areas and a foreign trade zone.

Employment and Income

The following table shows comparative average monthly employment and

unemployment statistics for the indicated periods.

Employed in Unemployment Rate

Year(a) City County MSA City County MSA State U.S.

2003 18,100 266,200 347,800 5.0% 6.2% 6.1% 6.2% 6.0%

2004 18,400 269,500 351,900 4.7 6.1 6.0 6.1 5.5
2005 18,700 273,500 357,800 4.7 5.7 5.7 5.9 5.1
2006 19,000 278,600 364,400 4.3 5.3 5.3 5.4 4.6
2007 19,100 280,400 366,500 4.5 5.4 5.4 5.6 4.6
2008
Jan. 18,700 274,200 358,300 5.1 6.0 6.1 6.3 5.4
Feb. 18,900 277,400 362,500 4.7 5.6 5.7 6.0 5.2
(a) Not seasonally adjusted.
Source: Ohio Department of Job and Family Services.

Most City residents work outside the City. The following employers (private and
public) have the largest work forces within the City (as of December 2007):

21
 Approximate
Number of
Employer Nature of Activity or Business Employees

Stow-Munroe Falls City School

District Public education 1,000
Wrayco Industries Inc. Steel fabricating 267
MacTac-Morgan Adhesives Adhesives manufacturer 250
Matco Tools Distributor of professional grade tools 250
The City Municipal government 235
Stow-Glen Nursing Home Nursing home and retirement center 221
National Machine Co. Manufacturer of aircraft parts and
machining 184
Akron Wellness Center Medical and Fitness center 180
Maison Aine Alzheimer’s treatment center and
nursing home 142
Briarwood Skilled nursing facility 124
Source: The City.

Census reports show the 1999 median household income in the City was $57,525,
compared to County, State and national medians of $42,304, $40,956, and $41,994.

According to the Ohio Department of Taxation, the average federal adjusted gross
income for residents of Stow-Munroe City School District (which overlaps the City) filing Ohio
personal income tax returns for calendar year 2005 was $54,519, compared to the averages of
$60,663 for all Ohio school districts and $51,397 for all districts in the County.

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 $141,500 6.0% 10,462 12,852 +22.8%

County 109,100 22.0 211,477 230,880 +9.2
State 103,700 22.5 4,371,945 4,783,051 +9.4

County Fiscal Officer figures show the following average sales price of residential
property in the County and City:

Year County City

2003 $142,868 $154,662

2004 154,269 164,901
2005 166,564 173,175
2006 165,421 163,350
2007 176,207 179,667

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 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

2003 891 $43,094,062

2004 907 55,325,891
2005 703 28,390,400
2006 666 41,431,980
2007 672 59,582,633

Utilities; Public Safety and Services

Water service within the City is provided by the City (which procures water from the
City of Akron) and is purchased directly by consumers. In 2001, the City reacquired from the
County the portion of the County water system serving the City, which the City now owns and
operates. The City had transferred its water distribution system to the County in 1974 in
connection with the County’s agreement to provide water service. Sewage collection and
disposal is provided primarily by the County, with approximately 5% of the City being served by
the City of Akron’s sewer system. Electricity is obtained from FirstEnergy, and natural gas is
supplied primarily by the Dominion East Ohio Gas Company. Police and fire protection and
emergency medical services are provided by the City. Solid waste collection is provided by
private haulers. The City provides all customary general government services to its citizens.

FINANCIAL MATTERS

Introduction

The City’s Fiscal Year corresponds with the calendar year.

The main sources of City revenue have been and are property and income taxes, and
State distributions, as described below.

The responsibilities for the major financial functions of the City are divided among
the Mayor, the Director of Finance (the Fiscal Officer), and the Council.

Other important financial functions include general financial recommendations and

planning by the Mayor and Fiscal Officer; budget preparation by the Mayor with the assistance
of the Fiscal Officer; and express approval of appropriations by the Council.

The Fiscal Officer 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 Council, 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 Fiscal Officer is responsible for receiving, maintaining custody of, disbursing and investing
all City funds and moneys.

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 The Fiscal Officer has charge of the administration of the financial affairs of the City,
including the keeping and supervision of all City accounts and records. The Fiscal Officer is
elected and serves as financial advisor to the Mayor and Council.

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 Fiscal Officer 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), federal or federal agency securities, and repurchase
agreements (with the underlying securities held on the City’s behalf by FirstMerit Bank).

For property taxation purposes, assessment of real property is by the County Fiscal
Officer 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 charges on securities payable
from property taxes.

The law requires generally 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, which is comprised of the
county fiscal officer, treasurer and prosecuting attorney. However, in certain situations, a county
budget commission may waive the requirement for a tax budget and permit an alternative form
of tax budget with more limited information. The Summit County Budget Commission has
waived the requirement of a tax budget and permitted the City to file the alternative form. In
addition, the offices of the Summit County Fiscal Officer and Treasurer have been combined in
one fiscal office.

The County Budget Commission then determines and approves levies for debt
charges 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 Fiscal Officer of the tax rates outside and inside the ten-mill
limitation. Thereafter, and before the end of the then Fiscal Year, the taxing authority (the
Council in the case of the City) approves the tax levies and certifies them to the proper County
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 Council adopts an appropriation measure by the end of the Fiscal Year for the
subsequent Fiscal Year. 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 Fiscal Officer must certify that the City’s
appropriation measures do not appropriate moneys in excess of the amounts set forth in those
estimates. The County’s official estimate of resources may also be amended during the Fiscal
Year as circumstances change.

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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.

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. Beginning with Fiscal Year 1986, the records of these cash receipts and
expenditures have been converted annually for reporting purposes to a modified accrual basis of
accounting for governmental funds and an accrual basis for proprietary funds. These accounting
procedures conform to generally accepted accounting principles as prescribed by the
Governmental Accounting Standards Board (GASB). Those principles, 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 and Basic Financial Statements, for each of the Fiscal Years 2000 through
2006. The CAFRs through Fiscal Year 2006 were awarded the Government Finance Officers
Association’s Certificate of Achievement for Excellence in Financial Reporting, which is
awarded to those governmental reporting agencies that comply with the GFOA reporting
standards. The City has not yet submitted its 2007 CAFR 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 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 2006. No material findings, citations or items for
adjustment, or material weaknesses in internal controls, were noted as part of the audit. An audit
for Fiscal Year 2007 has commenced.

Annual financial reports are prepared by the City, and filed as required by law with
the State Auditor after the close of each Fiscal Year.

See Appendix A for an unaudited comparative cash basis summary, prepared by the
City, of General Fund receipts and expenditures for the last five Fiscal Years and budgeted for
Fiscal Year 2008. All funds receipts and expenditures for the two prior Fiscal Years are set forth
in Appendix B. See Appendix C for the audited Basic Financial Statements for Fiscal Year
2006.

The audited financial statements are public records, no consent to their inclusion is
required, and no bring-down procedures have been undertaken by the State Auditor (or CPA)
since their date.

Financial Outlook

The City’s General Fund cash balances as of December 31 for the years 2003 through
2007 and budgeted 2008 are shown in Appendix A.

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 The City currently anticipates a favorable financial outlook, although the current
economic climate could impact the City and may require short-term budgetary adjustments or
possible limited use of reserves. The City has taken significant steps over the past three to four
years to both enhance and broaden its revenue base to provide additional operating and capital
revenue to offset possible weaknesses in income due to changes in the national or regional
economy or other factors. Two new fees were enacted in 2004 to provide substantial
supplemental capital improvement revenue for water system projects and both capital
improvement and operating revenue for storm water management purposes. See City Debt and
Other Long-Term Obligations – Future Financings. The City limits growth in its operating
expenditures by prohibiting hiring without procedural scrutiny and full justification within the
operating budget and its incurrence of debt by, to the extent feasible, using a “pay-as-you-go”
(cash) financing approach for most capital projects. Although recent large highway projects
have required the issuance of debt by the City (see Commercial, Industrial and Residential
Activity and Debt Table D), historically, the City incurs special project debt only if such debt
can be repaid through a dedicated revenue stream. See Commercial, Industrial and
Residential Activity.

The City anticipates prioritizing economic development now and in the near future.
Through numerous policy initiatives and related supportive actions, the City expects to devote
considerable effort and resources to economic development in the City, including emphasis on
retention and expansion of, as well as attraction of new, businesses and industries. The City has
employed a full-time Economic Development Coordinator and appropriate consultants to
enhance its capacities in this area.

GENERAL FUND

The General Fund is the City’s main operating fund, from which most expenditures
are paid and into which most revenues are deposited. The General Fund receives moneys from
many sources, but primarily from ad valorem property taxes and income taxes levied by the City,
and State local government assistance distributions. For details, see Appendix A.

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.

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 Tax Total
Collection Tangible Public Assessed
Year Real(a) Personal(b)(c) Utility(d) Valuation

2004 $705,710,080 $47,772,680 $10,855,300 $764,338,060

2005 726,040,350 35,360,828 11,035,980 772,437,158
2006(e) 793,844,010 35,360,828 10,062,490 839,267,328
2007 807,864,530 24,319,941 11,680,280 843,864,751
2008 818,636,300 13,619,113 6,903,620 839,159,033
(a) Other than 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) Other than public utility.
(c) State legislation will reduce the valuation of tangible personal property of general businesses and railroads in 25% annual
increments to zero in 2009. That legislation similarly will reduce the valuation of tangible personal property of
telephone and telecommunications companies in varying increments to zero in 2011. See the further discussion of those
reductions and related State make-up payments below.
(d) Tangible personal property of all public utilities and real property of railroads. See footnote (a).
(e) Reflects triennial adjustment.

Source: County Fiscal Officer.

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 Fiscal Officer records of assessed valuations for the 2008 tax
collection year (2007 for tangible personal), the largest City ad valorem property tax payers are:

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Name of Taxpayer Nature of Business Assessed Valuation

Real

Heron Springs Associates LLC Apartment complex $8,382,140

Wyndham Ridge LTD Apartment complex 7,843,490
DDR Ohio Opportunity II LLC Shopping center 6,670,820
JVM Hidden Lake Apartments Limited Apartment Complex 4,653,450
Stow-Glen Properties Nursing home 4,606,350
SFC Enterprises LTD Real estate development 4,549,930
Morgan Adhesives Co. Adhesives manufacturer 4,314,820
Steels Corners Apartment Company LTD Apartment complex 3,731,030
Walmart Real Estate Business Trust Real estate investment trust 2,547,290
Stow Associates Apartment complex 2,261,500

Tangible Personal

Morgan Adhesives Co. Adhesives manufacturer $2,571,000

New Cingular Wireless Telecommunications 1,367,090
Audio Technician U.S. Inc. High end recording devices 1,165,660
GoJo Industries, Inc. Skin care products 1,060,030
Ohio Bell Telephone Telecommunications 994,750
Tamarkin Company Retail – grocery 921,850
Lowes Home Centers, Inc. Retail – home improvement 774,700
Wal-Mart Stores East, Inc. Retail – general merchandise 773,730
Marhofer Chevrolet, Inc. Automobile dealership 710,800
Wrayco Industries, Inc. Metal fabrications 698,180

Public Utility

Ohio Edison Company Electric $5,380,810

East Ohio Gas Company Natural gas 801,250
American Transmission Electric transmission 681,860

Pursuant to statutory requirements for sexennial reappraisals, in 2002 the County

Fiscal Officer adjusted the true value of taxable real property to reflect then current fair market
values. These adjustments were first reflected in the 2002 duplicate (collection year 2003) and in
the ad valorem taxes distributed to the City in 2003 and thereafter. The County Fiscal Officer 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.

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 The taxation of all tangible personal property used in business (except for certain
public utility tangible personal property) is being phased out over four years, from tax year 2006
to tax year 2009. Previously, machinery and equipment, and furniture and fixtures, were
generally taxed at 25% of true value, and inventory was taxed at 23%. These percentages are
being decreased as follows:

Tax Year Percentage

2006 18.75%
2007 12.50
2008 6.25
2009 0.00

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 (such as the City) from revenue
generated by a newly enacted commercial activity tax. Generally, these distributions are
expected to fully compensate taxing subdivisions for such tax revenue losses through 2010, with
gradual reductions in the reimbursement amount from 2011 through 2017. Reimbursements for
tax losses relating to levies for voted debt service are generally to continue at 100% until the debt
is retired, subject to a ½-mill threshold adjustment (for all fixed-sum levies). That adjustment
basically requires real property taxpayers to absorb up to ½ mill of increased property taxes (in
order to continue to generate a fixed dollar amount) due to the phaseout of tangible personal
property taxes. The State is to provide any necessary reimbursement above that amount.

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 such as the
City by the State from State resources.

Commencing in tax year 2006, the assessment rate for electric utility transmission
and distribution equipment was reduced from 88% to 85%, and the assessment rate for all
electric company taxable property was reduced from 25% to 24%, 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 historically been
exempted from taxation; reimbursement of resulting reduced local collections has been made in
the past from State sources, as referred to under Collections. This reimbursement is being
phased out such that no reimbursement payments are to be made after the State’s fiscal year
2009.

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

29
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 provide a specified dollar amount or to pay debt charges
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.

The City currently has tax abatement agreements with the following companies: FR
Gross, Printing Concepts, National Machine, Sadler Corporation, Waddell Manufacturing, Audio
Technica, LLFJAO (Courtyard by Marriott), Tyres International, Family Man Properties, LLC
(Alpha Freight), SP Stow Mt LLC (Mickey Thompson Tires), Wrayco Industries, GVI, LLC
(Vizmeg Landscape), Albrecht, Inc, City Machine, GB Weaver, LLC (Consolidated Plastics),
GAADY, LLC (Karvo Parking), Gibb Properties and Vision Landmarks, LLC (Northeast Ohio
Eye Surgeons). To date, the companies involved in these agreements have invested a total of
approximately $46.7 million in real property improvements, machinery and/or inventory and
have created or have committed to create 482 new jobs in the City and retain 604 jobs.

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.

• The County (functions allocated to counties by Ohio law, such as elections, health
and human services, and judicial). (6.56%)

• Stow-Munroe Falls City School District which includes 100% of the territory within
the City (K-12 educational responsibilities). (87.07%)

• METRO Regional Transit Authority (public mass transit). (6.56%)

• Muskingum Watershed Conservancy District. (2.14%)

• Stow Munroe Falls Library. (87.07%)

• Summit Metropolitan Park District. (6.93%)

Source: OMAC.

Each of these entities operates independently, with its own separate budget, taxing
power and sources of revenue. Only the County, school district and the RTA may 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 Charter provides that the maximum total tax rate that may be levied without a vote
of the electors for all purposes is 7.2 mills, plus an additional 2.3 mills only for the purposes of
paying staffing, operating, vehicle, equipment, facilities and other costs associated with the

30
provision of emergency medical services, including transportation, and fire protection. See Indirect
Debt and Unvoted Property Tax Limitations.

The following are the rates at which the City and overlapping taxing subdivisions have
in recent years levied ad valorem property taxes in that area of the City having the highest
overlapping tax rate.

TAX TABLE A:
Overlapping Tax Rates

Stow-Munroe Stow-Munroe
Collection Falls City School Falls Public
Year City County(a) District Library Total

2004 9.50 13.07 47.93 -0- 70.50

2005 9.50 13.07 47.88 -0- 70.45
2006 9.50 13.07 46.73 1.00 70.30
2007 9.50 14.57 45.62 1.00 70.69
2008 9.50 14.26 45.93 1.00 70.69
(a) Includes property taxes which are levied on behalf of the Akron Metropolitan Park District.

Source: County Fiscal Officer.

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 both:

• 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.

• 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 as Charter tax rates, 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 charges, 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
the 2008 tax collection year of 70.69 mills within the City (in the portion overlapping Stow-
Munroe Falls City School District) is reduced by reduction factors of 0.201122 for
residential/agricultural property and 0.193256 for all other real property, which results in
“effective tax rates” of 56.472700 mills for residential and agricultural property and 57.028725
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 10% “rollback” for certain commercial
and industrial real property has been eliminated effective for the 2005 tax year and thereafter (it
remains for all other real property). See Collections for a discussion of the reimbursement by
the State for this reduction.

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 The following are the rates at which the City levied property taxes for the general
categories of purposes for recent years, all inside the Charter tax rate limitation:

TAX TABLE B
City Tax Rates

Inside the Limitation

Collection Police and

Year Operating Fire Pension EMS Total

2004 6.60 0.60 2.30 9.50

2005 6.60 0.60 2.30 9.50
2006 6.60 0.60 2.30 9.50
2007 6.60 0.60 2.30 9.50
2008 6.60 0.60 2.30 9.50

Collections

The following are the amounts billed and collected for City ad valorem property taxes
and special assessments for recent tax collection years.

Collection Current Current Current Accumulated

Year Billed Collected % Collected Delinquent

Real and Public Utility

2003 $6,694,114 $6,499,566 97.09% $156,631

2004 6,817,956 6,644,645 97.46 213,809
2005 7,002,463 6,829,291 97.53 197,027
2006 7,636,480 7,449,227 97.55 213,735
2007 7,785,698 7,567,654 97.20 256,715

Tangible Personal Property

2003 $512,440 $493,442 96.29% $ 30,900

2004 478,285 454,698 95.07 70,721
2005 466,877 447,357 95.82 147,303
2006 359,000 353,528 98.48 111,270
2007 251,964 243,780 96.75 136,991

Special Assessments

2003 $ 88,887 $ 86,186 96.96% $ 2,701

2004 106,318 96,912 91.15 12,612
2005 128,900 103,704 80.45 22,155
2006 169,478 121,664 71.79 38,654
2007 167,632 166,421 99.28 13,380
Source: County Fiscal Officer.

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

32
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 2007 was $15,586
for the elderly/disabled homestead payment and $733,019 for the rollback payment. Also
included in 2007 was $9,668 received from the State as a reimbursement of reduced collections
resulting from the partial exemption of tangible personal property used in business. As described
under Ad Valorem Property Taxes – Assessed Valuation, the latter reimbursement is being
phased out and no such reimbursement will be made after the State’s fiscal year 2009.

The most recent State biennial budget bill expanded the homestead property tax
exemption. Under the new law, an Ohio resident homeowner who is (a) at least 65 years old, or
(b) is totally and permanently disabled, or (c) is the surviving spouse of a person who was
receiving the previous homestead exemption at the time of death and where the surviving spouse
was at least 59 years old on the date of death, may apply to exempt $25,000 of the market value
of the home from all local property taxes. This exemption is to commence with tax bills payable
in calendar year 2008. Local governments and school districts, such as the City, are to receive
payments from the State to make up for the property tax loss due to this expanded exemption.

Real property taxes are payable in two installments, the first usually in January and
the second in June. Tangible personal property taxes for taxpayers owning property in more than
one county are payable in September, and for taxpayers owning property in one county are
payable in two installments (usually in April and September).

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 fiscal officer’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.

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 fiscal officers 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.

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 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 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. In
1989 City electors authorized an income tax at the rate of 2%. The City, pursuant to Council
action and that voter authorization, currently levies the tax at the rate of 2%.

This tax on business income and individuals’ salaries and wages is collected and
administered by the City.

The tax is in effect for a continuing period of time. It could be reduced or terminated
by action of the Council, 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 general election for the office of
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 Council could unless restricted by a Charter provision reimpose a 1% tax
without authorization by the electors.

Income tax proceeds, after payment of collection expenses, have been allocated by
the Council since the inception of that tax in 1967 as follows: 40% to capital expenditures,
including payment of debt charges, and 60% to the General Fund.

Annual income tax receipts (all at 2.0%) have been and for 2008 are estimated to be:

Annual
Delinquency
Year Receipts Amounts(a)

2003 $11,379,877 $107,938

2004 11,463,338 145,272
2005 12,054,684 109,829
2006 11,886,630 209,750
2007 12,739,603 3,115
2008(est.) 13,625,000 -0-

(a) Delinquency amounts are not cumulative; they apply only to the year indicated.

Residents are currently permitted as a credit against their City income tax liability amounts paid
as municipal income tax at the rate of up to 2% on the same income to another municipal
corporation.

No single employer contributed, via corporate and withheld income taxes, more than
5% of the total of the 2007 income tax collections.

Certain of the income subject to the municipal income tax is also subject to State
income tax.

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Local Government Assistance Funds

Statutory state-level local government assistance funds are comprised of designated

State revenues.

Most 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 and for
2008 are estimated to be:

Year Receipts

2003 $1,752,906
2004 1,735,901
2005 1,740,342
2006 1,739,410
2007 1,740,522
2008(est.) 1,740,000

The amounts of and formula for distribution of these funds may be revised.

The State also distributes significant portions of the State estate tax to decedents’
communities of residence. Due to the very nature of this tax, the annual amounts received can
vary significantly. The City received $758,907 and $426,514 from this source in 2006 and 2007,
respectively, and projects receiving $400,000 in 2008. The City credits these distributions to its
General Fund. Recent amendments of this State tax provided for additional credits and increased
exemptions, and increased percentages of allocations to be distributed to localities. Due to the
difficulty of predicting the amount of receipts from the revised estate tax, the City Fiscal Officer
currently intends to assume the receipt of $300,000 from that source on the average for
budgeting purposes for the next several Fiscal Years.

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 of the City.

As used in the discussions that follow, the term “BANs” refers to notes issued in
anticipation of the issuance of general obligation bonds.

The Bonds are:

• Unvoted general obligations of the City. Certain overlapping subdivisions also

may issue general obligation debt.

• Subject to both of the direct debt limitations and entirely subject to the indirect
debt and related property tax limitation, all as described below.

The City has periodically issued industrial development revenue bonds for facilities
used by private corporations or other entities in order to promote economic and other
development in the City. The City is not obligated in any way to pay debt charges on those
bonds from any of its funds.

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 The City is not, and to the knowledge of current City officials has not ever been, in
default in the payment of debt charges 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 the industrial
development bonds referred to above.

Security for General Obligation Debt

The following describes the security for City general obligation debt, such as the
unvoted Bonds.

Bonds and BANs

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 charges 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 Charter tax limitation, and is to be in
sufficient amount to pay (to the extent not paid from other sources) as it comes due the debt charges
on the voted bonds (subject to the provisions of bankruptcy laws and other laws affecting creditors’
rights and to the exercise of judicial discretion).

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 Charter tax 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 charges 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 charges has priority over any levy for current expenses
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 Charter tax limitation, and
the priority of claim on it for debt charges on unvoted general obligation debt of the City.

BANs. Ohio law requires, while BANs are outstanding, 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 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.

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.

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 • The net principal amount of the unvoted nonexempt debt of a city may not exceed
5½% of that valuation.

These two limitations, which are referred to as “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”). (The City has $6,700,000 of such exempt debt outstanding.) Exempt debt includes, among
others:

° General obligation debt:

° 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 charges and other
requirements) issued for facilities for city utility systems, airports, railroads, mass transit
systems, parking, health care, solid waste, urban development, recreation, sports, convention,
museum and other public attractions, natural resource exploration, development, recovery, use
or sale, correctional and other related rehabilitation.

° For highway improvements if the municipality has covenanted to pay debt charges and
financing costs from distributions of motor vehicle license and fuel taxes.

° Issued in anticipation of the levy or collection of special assessments.

° To pay final judgments or court-approved settlements.

° Voted for water or sanitary or storm water sewerage facilities to the extent that another
subdivision has agreed to pay amounts equal to debt charges to the city.

° Unvoted general obligation bonds to the extent that debt charges will be met from payments in
lieu of taxes or from lawfully available municipal income taxes, to be applied to debt charges
pursuant to ordinance covenants.

° Revenue debt and mortgage revenue bonds to finance municipal utilities.

° Notes anticipating the collection of current revenues or the proceeds of a specific tax levy.

° Notes issued for certain energy conservation improvements or certain emergency purposes.

° 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.

° Voted debt for urban redevelopment purposes not in excess of 2% of the City’s assessed valuation.

° Debt issued to make a single payment on certain accrued liability to the statewide Police and Fire
Pension Fund.

° Debt issued for municipal educational and cultural facilities.

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 ° 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.

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 Bond Retirement Fund, and based on
outstanding debt and the Bonds, and current tax valuation, the City’s voted and unvoted
nonexempt debt capacities are:

Nonexempt Additional
Debt Debt Capacity
Limitation Outstanding Within Limitation
10½% = $88,111,698 $27,265,000 $60,846,698
5½% = $46,153,746 $27,265,000 $18,888,746

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 charges 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 notes are issued) of the City resulting in the highest tax required for such debt
charges,

in any year is 7.2 mills or less per $1.00 of assessed valuation. This indirect debt limitation is
imposed by the Charter.

In lieu of the ten-mill limitation briefly discussed below, the electors of a charter
municipality such as the City may authorize the levy of a tax at a rate subject to a different
limitation. The electors of the City have authorized the Council to levy each year a tax of up the
Charter tax rate limitation on all the taxable property in the City without further authorization from
the electors, but subject to change by further action of the electors.

In the case of BANs issued in anticipation of unvoted general obligation bonds, the
highest annual debt charges estimated for the anticipated bonds is used to calculate the millage
required.

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 Revenue bonds and notes and mortgage revenue bonds are not included in debt subject
to the indirect limitation since they are not general obligations, and the full faith and credit of the
issuer is not pledged for their payment.

The indirect limitation applies to all unvoted general obligation debt even if debt charges
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 $10,675,000 outstanding unvoted
general obligation BANs (see Debt Table D) the highest debt charges requirement in any year for
all City debt subject to the Charter tax limitation is estimated to be $2,927,395. That debt includes
the Bonds and unvoted general obligation bonds outstanding or bonds anticipated by BANs
outstanding (see Debt Table D). The payment of those annual debt charges would require a levy of
3.4885 mills based on current assessed valuation.

The total millage theoretically required by the City for its outstanding unvoted bonds
(including bonds in anticipation of which BANs are outstanding) is as shown above 3.4885 mills for
the year of the highest potential debt charges. There thus remains 3.7115 mills within the Charter
tax limitation which has yet to be allocated to debt charges by the City, and which is available to the
City in connection with the issuance of additional unvoted general obligation debt.

In the absence of the Charter tax rate limitation, the applicable indirect debt limitation
would be the product of what is commonly referred to as the “ten-mill limitation” imposed by a
combination of provisions of the Ohio Constitution and of the Revised Code. The ten-mill
limitation is the maximum aggregate millage for all purposes that may be levied without elector
approval on a single piece of property by all overlapping taxing subdivisions, with the 10 mills
being allocated among certain overlapping taxing subdivisions (including the cities) pursuant to a
statutory formula. The inside millage so allocated is required by Ohio law to be used first for the
payment of debt charges on unvoted general obligation debt of the subdivisions (unless provision
has been made for its payment from other sources) and the balance may be used for other purposes
of the subdivisions. If the ten-mill limitation applied to the City (that is, if the City did not have the
Charter tax rate limitation), unvoted obligations could not be issued by the City unless the tax
required to be imposed in any one year would be 10 mills or less per $1.00 of assessed valuation for
payment of annual debt charges on those obligations (if BANs, the bonds in anticipation of which
the 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 rate required for that debt charges. To the extent that
this inside millage is required for debt charges of a taxing subdivision (which may exceed the
formula allocation for that subdivision), the amount that would otherwise be available to that
subdivision or to other overlapping subdivisions for general fund purposes would be reduced. 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 charges on City unvoted debt before the formula allocations of the inside millage to
overlapping subdivisions can be invaded for that purpose.

Debt Outstanding

The attached Debt Tables list the City’s outstanding debt represented by bonds and
notes, information with respect to City and overlapping general obligation debt allocations, and
debt charges.

The following shows the principal amount of City general obligation debt outstanding
as of January 1 in the indicated years:

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 Year Total, all Unvoted

2004 $21,665,000
2005 20,745,000
2006 19,075,000
2007 24,800,000
2008 31,815,000

Bond Anticipation Notes

$10,675,000 of the debt of the City (excluding the Outstanding Notes) is currently 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.

Bond Retirement Fund

The Bond Retirement Fund is the fund from which the City pays debt charges on its
general obligation debt, and into which moneys required to be applied to those payments are
deposited. The following table is an unaudited summary of Bond Retirement Fund receipts and
disbursements (excluding proceeds of renewal or refunding obligations) for recent years and
budgeted for the current year.

Jan. 1
Year Balance Receipts(a) Disbursements

2003 -0- $ 563,445 $ 563,445

2004 -0- 552,076 552,076
2005 -0- 568,958 568,958
2006 -0- 566,558 566,558
2007 -0- 569,057 569,057
2008 -0- 1,222,527(b) 1,222,527(b)

(a) All from unvoted property taxes.

(b) Budgeted.

Future Financings

Simultaneously with the issuance of the Bonds, the City is issuing its $10,675,000
Various Purpose Notes, Series 2008, to pay costs of (i) acquiring fire trucks and rescue/fire
vehicles, (ii) improving the City’s waterworks system by acquiring and installing replacement
water meters and related metering equipment and constructing a fixed network automated radio
water meter reading system, (iii) paying a portion of the costs of constructing, furnishing,
equipping and otherwise improving a new Stow Municipal Court facility and equipping and
improving its site, (iv) paying the City’s portion of the costs of constructing a new Seasons
Road/State Route 8 interchange in cooperation with the Director of Transportation of the State of
Ohio including constructing, reconstructing, improving, widening, grading, draining,
landscaping, curbing, paving and changing the lines of highways and municipal roads, bridges,
and bikeways, and (v) paying the City’s portion of the costs of improving the Steels Corners
Road/Hudson Drive/Allen Road/State Route 8 interchange in cooperation with the Director of
Transportation of the State of Ohio by constructing, reconstructing, improving, widening,
grading, draining, landscaping, curbing, paving and changing the lines of highways and
municipal roads, bridges, and bikeways, and to retire, together with other funds available to the

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City, the balance of the City’s outstanding $17,145,000 Various Purpose Notes, Series 2007,
maturing on May 9, 2008, not being retired from Bond proceeds, all of which BANs will be
unvoted debt. See Financial Matters – Financial Outlook, The City – Economic and
Demographic Information – Commercial, Industrial and Residential Activity and Debt
Table D.

At this time, the City is considering and may undertake within a year (i) a major
capital improvement for a service facility for which it may borrow money or enter into a long-
term financial obligation of approximately $2-3 million and (ii) improvement of radio
communications facilities and upgrades to certain other equipment for which it may borrow
money or enter into a long-term financial obligation of up to $1.5 million.

Long-Term Financial Obligations Other Than Bonds and Notes

The City has entered into a $231,688 OPWC (Ohio Public Works Commission) loan
agreement for the Lillian Road Waterline Improvement. The City will make annual payments of
$5,792 through Fiscal Year 2025.

The City has the principal amount of $25,984 remaining for an OWDA (Ohio Water
Development Authority) loan agreement for water system construction and improvements. The
City will make two payments of $13,899 through Fiscal Year 2009, at which time the loan will
be paid off.

The City has no other long-term debt obligations, other than the bonds and notes
described above.

Retirement Obligations

Present and retired employees of the City are covered under two statewide public
retirement (including disability retirement) systems. The Ohio Police and Fire Pension Fund
(OPFPF) covers uniformed members of the police and fire departments. All other eligible City
employees are covered by the Ohio Public Employees Retirement System (OPERS).

Employees covered by OPERS contribute at a statutory rate of 9.5% of earnable

salary or compensation. The recent and current employer contribution rate is 14%. OPERS
reports total unfunded actuarial accrued pension liability (both State and local government
employees, but excluding health care) of $6.673 billion at December 31, 2005, the most recent
date as of which that information is available.

OP&F-covered employees contribute at a statutory rate of 10% of gross earnings.

The City contributes at rates (actuarially established and fixed by the OP&F Board), applying to
earnable salary or compensation, of 19.5% for police personnel and 24% for fire personnel.
OP&F reports, as of December 31, 2006, a total unfunded actuarial accrued liability of $2.8
billion.

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 OPERS and OP&F, and the payments
toward the accrued OP&F 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.

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 OP&F and OPERS are not subject to the funding and vesting requirements of the
federal Employee Retirement Income Security Act of 1974.

Both OP&F and OPERS 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.

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
charges 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 Underwriter a certificate to that effect at the time of
original delivery of the Bonds to the Underwriter.

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 Director of Law, 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.

The City maintains a variety of liability insurance coverages with varying

deductibles. The liability insurance on City vehicles has a combined single limit bodily injury
and property damage coverage in the amount of $1,000,000 per occurrence. The City also
carries public official and employee liability insurance coverage with a $1,000,000 limit of
liability (with $25,000 retention) for each loss. The City also carries $1,000,000 in law
enforcement coverage and $10,000,000 in umbrella coverage over all insurance components. All
policies are currently in full force and effect.

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 Underwriter at the time of original delivery and the text of the
opinion will be printed on the Bonds.

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
this 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.

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 Bond Counsel expresses no opinion as to the Statement of Insurance on the Bonds or
as to the insurance referred to in that Statement and in this Official Statement in Exhibit B.

Bond Counsel has drafted those portions of this Official Statement under the captions
Summary of Certain Terms of the Bonds (excluding the information under Book Entry
Method), Security and Sources of Payment (excluding Bond Insurance), 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.

Squire, Sanders also serves and has served as bond counsel for one or more of the
political subdivisions that the City territorially overlaps.

TAX MATTERS

In the opinion of Squire, Sanders & Dempsey L.L.P., Bond Counsel, under existing
law: (i) 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, and the Bonds are qualified tax-exempt obligations as defined in
Section 265(b)(3) of the Code; and (ii) 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 activity tax, the net income base of the Ohio corporate franchise tax, and municipal,
school district and joint economic development district income taxes in Ohio. Bond Counsel
expresses no opinion as to any other tax consequences regarding the Bonds.

The opinion on tax matters will be based on and will assume the accuracy of certain
representations and certifications, and continuing compliance with certain covenants, of the City
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 the City’s certifications and representations or the
continuing compliance with the City’s covenants.

The opinion of Bond Counsel is based on current legal authority and covers certain
matters not directly addressed by such authority. It represents Bond Counsel’s legal judgment as
to exclusion of interest on the Bonds from gross income for federal income tax purposes but is
not a guaranty of that conclusion. The opinion is not binding on the Internal Revenue Service
(IRS) or any court. Bond Counsel expresses no opinion about (i) the effect of future changes in
the Code and the applicable regulations under the Code or (ii) the interpretation and the
enforcement of the Code or those regulations by the IRS.

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 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. Noncompliance with these requirements by the City may cause loss
of such status and result in the interest on the Bonds being included in gross income for federal
income tax purposes 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. After the date of issuance of the Bonds, Bond Counsel will not undertake
to determine (or to so inform any person) whether any actions taken or not taken, or any events
occurring or not occurring, or any other matters coming to Bond Counsel’s attention, may
adversely affect the exclusion from gross income for federal income tax purposes of interest on
the Bonds or the market prices of the Bonds.

A portion of the interest on the Bonds earned by certain corporations may be subject
to a federal corporate alternative minimum tax. In addition, interest on the Bonds may be subject
to a federal branch profits tax imposed on certain foreign corporations doing business in the
United States and to a federal 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 tax credit. The applicability and extent of these and
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.

Payments of interest on tax-exempt obligations, including the Bonds, are generally

subject to IRS Form 1099-INT information reporting requirements. If a Bond owner is subject to
backup withholding under those requirements, then payments of interest will also be subject to
backup withholding. Those requirements do not affect the exclusion of such interest from gross
income for federal income tax purposes.

Legislation affecting tax-exempt obligations is regularly considered by the United

States Congress, and legislation affecting the exemption of interest or other income thereon for
purposes of taxation by the State may be considered by the State legislature. Court proceedings
may also be filed the outcome of which could modify the tax treatment of obligations such as the
Bonds. There can be no assurance that legislation enacted or proposed, or actions by a court,
after the date of issuance of the Bonds will not have an adverse effect on the tax status of interest
or other income on the Bonds or the market value of the Bonds.

On November 5, 2007, the United States Supreme Court heard oral arguments in
Dep’t of Revenue of Kentucky v. Davis. In the Davis case, the Kentucky Court of Appeals held
that Kentucky’s exemption from taxation of interest on bonds issued by Kentucky or its political
subdivisions and its taxation of interest on bonds issued by other states or their political
subdivisions violates the Commerce Clause of the United States Constitution. The State exempts
from taxation interest on bonds issued by the State or its political subdivisions and taxes interest
on bonds issued by other states or their political subdivisions. It is not possible to predict how the
United States Supreme Court will decide the Davis case or to predict any change in state law that
would be occasioned by the United States Supreme Court’s affirmance of the Davis decision, nor
is it possible to predict the effect, if any, of that affirmance or any change in state law on the tax
status of interest or other income on the Bonds for state tax purposes or on the market value of
the Bonds.

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 Prospective purchasers of the Bonds should consult their own tax advisers regarding
pending or proposed federal and state tax legislation, the Davis case and other court proceedings,
and prospective purchasers of the Bonds at other than their original issuance at the respective
prices indicated on the cover of this Official Statement should also consult their own tax advisers
regarding other tax considerations such as the consequences of market discount, as to all of
which Co-Bond Counsel expresses no opinion.

Bond Counsel’s engagement with respect to the Bonds ends with the issuance of the
Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the City or the
beneficial owners regarding the tax status of interest on the Bonds in the event of an audit
examination by the IRS. The IRS has a program to audit tax-exempt obligations to determine
whether the interest thereon is includible in gross income for federal income tax purposes. If the
IRS does audit the Bonds, under current IRS procedures, the IRS will treat the City as the
taxpayer and the beneficial owners of the Bonds will have only limited rights, if any, to obtain
and participate in judicial review of such audit. Any action of the IRS, including but not limited
to selection of the Bonds for audit, or the course or result of such audit, or an audit of other
obligations presenting similar tax issues, may affect the market prices for the Bonds.

Original Issue Premium

Certain of the Bonds (Premium Bonds) are being 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 in the initial public offering at the price for that
Premium Bond stated on the cover of this Official Statement who holds that Premium Bond to
maturity (or, in the case of a callable Premium 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 Premium Bonds should consult their own tax advisers as to the
determination for federal income tax purposes of the amount of bond premium properly
accruable in any period with respect to the Premium Bonds and as to other federal tax
consequences and the treatment of 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 share 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

45
funds of the State and State subdivisions and taxing districts, 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 CERTIFICATES

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
Underwriter. The City at that time will also provide to the Underwriter a certificate, signed by
the City officials who sign this Official Statement and addressed to the Underwriter, relating to
the accuracy and completeness of this 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:

It will provide 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), currently the Ohio Municipal Advisory Council:

• Annual Information for each City Fiscal Year ending on or after December 31,
2008, not later than the September 30 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 Ad Valorem Property Taxes –
Collections and – Delinquencies, Other Major General Fund Revenue
Sources, City Debt and Other Long-Term Obligations and Appendices A and
B, together with information as to aggregate assessed valuation of the City and
overlapping and City tax rates under Ad Valorem Property Taxes.

• When and if available, audited City financial statements for Fiscal Year 2007 and
each subsequent 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 Audits.

It will provide to each NRMSIR (or to the Municipal Securities Rulemaking Board),
and to the SID, in a timely manner, notice of:

46
 • The occurrence of any of the following events, within the meaning of the Rule,
with respect to the Bonds, if material:

• Principal and interest payment delinquencies

• Non-payment-related defaults

• Unscheduled draws on debt charges 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

• Any scheduled redemption of Bonds pursuant to any 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 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

∗
The City has not obtained or provided, and does not expect to obtain or provide, any debt service reserves, credit
enhancements (other than the Bond Insurer’s Policy) 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 and property may be substituted.

47
interpretations of the Rule, as well as any change in circumstances, and until the City shall have
received either:

• 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

• 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, by provision in the bond proceedings, will be

solely for the benefit of the holders and beneficial owners from time to time of the Bonds,
including holders of book entry interests in them. 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 either:

• 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

• 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 annual appropriation by Council 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 City has in a timely manner made all filings and given all notices required under
its prior continuing disclosure agreements (for purposes of the Rule) to which it is a party.

RATINGS

Moody’s Investors Service (Moody’s) is expected to assign its municipal bond rating
of “Aaa” to the Bonds with the understanding that concurrently with delivery of the Bonds a
Municipal Bond Insurance Policy insuring the scheduled payment when due of principal of and
interest on the Bonds will be issued by Financial Security Assurance, Inc. (See Exhibit B.)

An application for a rating of the Bonds in the absence of bond insurance was made
only to Moody’s, which assigned a rating of “Aa3” to the Bonds. No application for a rating has
been made by the City to any other rating service.

48
 The ratings reflect only the views of the rating service, and any explanation of the
meaning or significance of the ratings may only be obtained from the rating service. The City
furnished to the 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.

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 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, Aurora, Ohio (the Financial
Advisor), to provide financial advice in connection with 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 this 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

The Huntington National Bank, Columbus, Ohio, 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 bank. It 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.

49
 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 STOW, OHIO

By: /s/ Karen Fritschel

Mayor

/s/ John M. Baranek

Director Finance

50
 DEBT TABLE A

Principal Amounts of Outstanding Debt;

Leeway for Additional Debt Within Direct Debt Limitations

A. Total debt including the Bonds but

excluding the Outstanding Notes being
retired with the Bonds: $33,965,000

B. Exempt debt: $ 6,700,000

C. Total nonexempt debt [A minus B]: $27,265,000

D. 5½% of tax valuation (unvoted

nonexempt debt limitation): $46,153,746

E. Total nonexempt limited tax bonds and

notes outstanding:

Bonds (including a portion of $ 17,790,000

the Bonds)
Notes 9,475,000 $27,265,000

F. Debt leeway within 5½% unvoted debt

limitation [D minus E]: $18,888,746*

G. 10½% of tax valuation (voted and

unvoted debt limitation): $88,111,698

H. Total nonexempt bonds and notes

outstanding:

Bonds (including a portion of $ 17,790,000

the Bonds)
Notes 9,475,000 $27,265,000

I. Debt leeway within 10½% debt

limitation [G minus H]: $60,846,698*

* Debt leeway 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 Current
Amount Per Capita(a) Assessed Valuation(b)

City Nonexempt $27,265,000 $ 848.35 3.25%

GO Debt
Total City GO Debt 33,965,000 1,056.82 4.05
(exempt and nonexempt)
Highest Total Overlapping 45,147,311 1,404.75 5.38
GO Debt(c)

(a) Based on 2000 population of 32,139.

(b) The City’s current assessed valuation is $839,159,033.

(c) Includes, in addition to “Total City GO Debt,” allocations of total GO debt of overlapping debt issuing subdivisions
(as of May 8, 2008) 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:

$7,652,517 County (6.56%);

$3,487,154 Stow-Munroe Falls City School District (87.07%); and
$ 42,640 Akron Metro Regional Transit Authority (6.56%).

Source of tax valuation and confirmation of GO debt figures for overlapping subdivisions: OMAC.

DT-2
 DEBT TABLE C
Projected Debt Charges Requirements on City GO Debt
Debt Charges on To be Paid from
Bonds
The Outstanding Anticipated by Limited Ad Income Tax Water System
Year Bonds Bonds BANS(a) Total Valorem Taxes Revenues Revenues

2008 $196,485.67 $1,222,526.18 $ 0.00 $1,419,011.85 $1,037,205.38 $381,806.47 $ 0.00

2009 548,447.50 1,204,530.00 373,625.00 2,126,602.50 1,710,425.00 374,177.50 42,000.00
2010 556,947.50 1,196,197.50 1,174,250.00 2,927,395.00 2,423,567.50 371,827.50 132,000.00
2011 554,960.00 1,190,495.00 1,142,225.00 2,887,680.00 2,390,065.00 369,215.00 128,400.00
2012 562,810.00 1,194,145.00 1,110,200.00 2,867,155.00 2,371,015.00 371,340.00 124,800.00
2013 565,172.50 1,190,660.00 1,078,175.00 2,834,007.50 2,344,867.50 367,940.00 121,200.00
2014 567,210.00 1,185,242.50 1,046,150.00 2,798,602.50 2,316,725.00 364,277.50 117,600.00
2015 557,547.50 1,178,292.50 1,014,125.00 2,749,965.00 2,275,612.50 360,352.50 114,000.00
2016 556,297.50 1,180,330.00 982,100.00 2,718,727.50 2,247,162.50 361,165.00 110,400.00
2017 544,110.00 1,179,980.00 950,075.00 2,674,165.00 2,208,045.00 359,320.00 106,800.00
2018 549,310.00 1,177,555.00 918,050.00 2,644,915.00 2,179,520.00 362,195.00 103,200.00
2019 548,837.50 618,537.50 886,025.00 2,053,400.00 1,594,205.00 359,595.00 99,600.00
2020 552,857.50 620,640.00 854,000.00 2,027,497.50 1,569,795.00 361,702.50 96,000.00
2021 556,177.50 622,077.50 821,975.00 2,000,230.00 1,544,458.75 363,371.25 92,400.00
2022 553,782.50 627,842.50 789,950.00 1,971,575.00 1,518,178.75 364,596.25 88,800.00
2023 555,845.00 627,827.50 757,925.00 1,941,597.50 1,490,966.25 365,431.25 85,200.00
2024 556,445.00 622,027.50 725,900.00 1,904,372.50 1,462,018.75 360,753.75 81,600.00
2025 551,445.00 620,627.50 693,875.00 1,865,947.50 1,427,193.75 360,753.75 78,000.00
2026 556,045.00 628,627.50 661,850.00 1,846,522.50 1,406,768.75 365,353.75 74,400.00
2027 554,845.00 625,627.50 629,825.00 1,810,297.50 1,375,143.75 364,353.75 70,800.00
2028 553,045.00 626,562.50 597,800.00 1,777,407.50 1,347,538.75 362,668.75 67,200.00
2029 555,427.50 626,556.25 565,775.00 1,747,758.75 1,318,658.75 365,500.00 63,600.00
2030 552,000.00 625,725.00 0.00 1,177,725.00 815,012.50 362,712.50 0.00
2031 552,730.00 628,412.50 0.00 1,181,142.50 817,030.00 364,112.50 0.00
2032 552,640.00 625,037.50 0.00 1,177,677.50 812,802.50 364,875.00 0.00
2033 551,730.00 260,812.50 0.00 812,542.50 812,542.50 0.00 0.00
2034 0.00 261,037.50 0.00 261,037.50 261,037.50 0.00 0.00
2035 0.00 265,837.50 0.00 265,837.50 265,837.50 0.00 0.00

(a) Assuming all BANs are retired with bonds having first interest payment in 2009 and first principal payments in 2010, being paid serially and over the number of years
referred to in the ordinance authorizing the BANs and at an estimated interest rate of 6.00%. See also Debt Table D.

DT-3
 DEBT TABLE D

Outstanding GO Bond Anticipation Notes(a)

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

Estimated Original Notes

General Purpose Principal Bond Maturity Year of Principal
of Issue(b) Amount Due Years Issuance Amount

Fire Vehicles $ 775,000 5/8/09 9 2002 $1,975,000

Waterworks System 1,200,000 5/8/09 40 2006 2,000,000

Municipal Court 5,000,000 5/8/09 28 2007 5,000,000

Street Improvements 3,700,000 5/8/09 20 2008 3,375,000

(a) Excluding the Outstanding Notes.

(b) Simultaneously with the issuance of the Bonds, the City is issuing its $10,675,000 Various Purpose Notes, Series
2008. See City Debt and Other Long-Term Obligations – Future Financings.

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 2003 through 2007 and Budgeted Fiscal Year 2008
Budgeted
2003 2004 2005 2006 2007 2008
Receipts
Municipal Income Tax $11,379,878 $ 7,095,459(a) $ 7,399,568 $7,481,940 $ 8,040,259 $ 8,305,900
Property Taxes 4,677,348 5,035,458 4,811,155 5,069,382 5,068,843 5,248,331
Charges for Services 334,014 291,260 356,107 297,264 343,164 308,000
Licenses and Permits 819,566 817,934 757,500 808,649 670,762 671,000
Fines and Forfeitures 88,609 144,955 119,556 129,478 147,071 150,000
Intergovernmental 2,735,733 2,662,950 2,867,884 3,414,199 3,208,060 2,765,080
Investment Income 215,216 193,510 362,062 753,083 1,281,896 784,000
Other 142,239 196,124 451,559 542,205 389,357 715,459
Total Receipts $20,392,603 $16,437,650 $17,125,391 $18,496,200 $ 19,149,412 $18,947,770

Expenditures
Current
General Government $ 4,484,410 $ 4,948,242 $ 5,165,354 $5,358,820 $ 5,400,027 $ 5,987,817
Security of Persons and
Property 7,505,303 7,926,105 7,739,978 8,431,104 8,726,396 8,826,839
Public Health and
Welfare 342,774 358,670 370,682 389,819 397,614 414,857
Transportation 730,284 780,716 592,197 541,612 535,453 506,941
Community
Environment 1,138,147 1,194,229 1,268,004 1,387,686 1,289,537 1,292,096
Leisure Time Activities 1,504,730 1,608,858 1,703,656 1,753,811 1,794,615 1,726,695
Capital Outlay 199,595 90,868 116,321 300,000 538,219 0
Total Expenditures $15,905,243 $16,907,688 $16,956,192 $18,162,852 $18,681,861 $18,755,245

Excess of Revenues Over

(Under) Expenditures $ 4,487,360 $ (470,038) $ 169,199 $ 333,348 $ 467,551 $ 192,525

Other Financing Sources

(Uses)
Other Financing Sources $ 40,302 $ 103,204 $ 0 $ 0 $ 0 $ 0
Other Financing Uses (9,071) (4,005) 0 0 0 0
Sale of Fixed Assets 34,474 0 0 0 0 0
Operating Transfers In 0 50,000 0 0 0 0
Operating Transfers Out ( 4,861,136) ( 659,941)(b) (571,188)(b) (569,879)(b) (691,853)(b) (701,948)
Total Other Financing
Sources (Uses) $( 4,795,431) $ ( 510,742) $ (571,188) $ (569,879) $ (691,853) $ (701,948)

Excess of Revenues and

Other Financing Sources
Over (Under)
Expenditures and Other $ (308,071) $ (980,780) $ (401,989) $ (236,531) $ (224,302) $ (509,423)
Financing Uses

Beginning Balance $ 4,372,933 $ 4,563,206 $ 4,115,977 $ 4,130,188 $ 4,358,207 $ 4,430,264

Residual Equity Transfers 0 0 0 0 0 0
Prior Year Encumbrances 498,344 533,551 416,200 464,550 296,359(c) 0
Ending Balance $ 4,563,206 $ 4,115,977 $ 4,130,188 $ 4,358,207 $ 4,430,264 $ 3,920,841(d)

(a) Reflects restated balance.

(b) Beginning in Fiscal Year 2004, the City changed its accounting methodology, and now allocates for accounting purposes a
portion of its income tax revenue directly in project and related funds instead of into its General Fund.
(c) This encumbrance total for 2007 represents the net of prior year and current year encumbrances.
(d) The City budgets and projects conservatively. The City’s current expectation is that a potential General Fund balance
decrease at year-end 2008 may occur, although it could be a more modest decrease than indicated above.

A-1
(This Page Intentionally Left Blank)
 APPENDIX B-1

All-Funds Summary 2006(a)

(Cash Basis)

Beginning Ending
Fund Balance Receipts Expenditures Balance

General $ 4,594,738 $22,900,890 $22,338,507 $ 5,157,121

Special Revenue 1,021,784 4,821,494 4,575,247 1,268,031

Debt Service 0 566,557 566,557 0

E M S Levy 243,026 5,708,072 5,794,555 156,543

Enterprise 4,224,809 22,214,605 20,791,686 5,647,728

Internal Service 1,575,127 2,424,423 2,354,538 1,645,012

Capital Projects 4,383,843 16,716,251 15,733,505 5,366,589

Agency 1,587,896 750,721 842,271 1,496,346

Fiduciary 950 0 0 950

Totals $17,632,173 $76,103,013 $72,996,866 $20,738,320

(a) The General Fund beginning and ending balances shown for 2006 in Appendix A are net balances and, therefore,
vary from the balances shown in Appendix B-1, which are gross balances and include encumbrances. The General
Fund receipts and expenditures shown for 2006 in Appendix B-1 vary from those shown for the General Fund in
Appendix A due to the fact that the financial activity for the General Fund shown in Appendix B-1 is presented on a
gross basis as part of the City’s total cash position. In Appendix B-1, the income tax revenue is reported entirely in
the General Fund and has not been allocated directly to the project funds per note (b) in Appendix A.

B-1
 APPENDIX B-2

All-Funds Summary 2007(a)

(Cash Basis)

Beginning Ending
Fund Balance Receipts Expenditures Balance

General $ 5,157,121 $23,848,756 $24,073,058 $ 4,932,820

Special Revenue 1,268,031 5,151,141 5,472,160 947,012

Debt Service 0 569,057 569,057 0

E M S Levy 156,543 5,298,487 5,321,589 133,440

Enterprise 5,647,728 17,164,859 19,034,684 3,777,903

Internal Service 1,645,012 2,269,250 2,428,856 1,485,406

Capital Projects 5,366,589 24,931,672 18,557,267 11,740,994

Agency 1,496,346 557,911 564,966 1,489,291

Fiduciary 950 0 0 950

Totals $20,738,320 $79,791,133 $76,021,637 $24,507,816

(a) The General Fund beginning and ending balances shown for 2007 in Appendix A are net balances and, therefore,
vary from the balances shown in Appendix B-2, which are gross balances and include encumbrances. The General
Fund receipts and expenditures shown for 2007 in Appendix B-2 vary from those shown for the General Fund in
Appendix A due to the fact that the financial activity for the General Fund shown in Appendix B-2 is presented on a
gross basis as part of the City’s total cash position. In Appendix B-2, the income tax revenue is reported entirely in
the General Fund and has not been allocated directly to the project funds per note (b) in Appendix A.

B-2
 APPENDIX C

Basic Financial Statements from

the City’s Financial Report for Fiscal Year 2006
(Audited)
(This Page Intentionally Left Blank)
 INDEPENDENT ACCOUNTANTS’ REPORT

City of Stow
Summit County
3760 Darrow Road
Stow, Ohio 44224

To the Honorable Mayor and City Council Members:

We have audited the accompanying financial statements of the governmental activities, the business-type
activities, each major fund, and the aggregate remaining fund information of the City of Stow, Summit
County, Ohio, (the City) as of and for the year ended December 31, 2006, which collectively comprise the
City’s basic financial statements as listed in the Table of Contents. These financial statements are the
responsibility of the City’s management. Our responsibility is to express opinions on these financial
statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in the Comptroller General of the
United States’ Government Auditing Standards. Those standards require that we plan and perform the
audit to reasonably assure whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe our
audit provides a reasonable basis for our opinions.

In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the business-type activities, each major fund,
and the aggregate remaining fund information of the City of Stow, Summit County, Ohio, as of December
31, 2006, and the respective changes in financial position and where applicable, cash flows, thereof and
the respective budgetary comparisons for the General and EMS/Fire Tax Levy Funds for the year then
ended in conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued our report dated June 27, 2007,
on our consideration of the City’s internal control over financial reporting and our tests of its compliance
with certain provisions of laws, regulations, contracts and grant agreements and other matters. While we
did not opine on the internal control over financial reporting or on compliance, that report describes the
scope of our testing of internal control over financial reporting and compliance and the results of that
testing. That report is an integral part of an audit performed in accordance with Government Auditing
Standards. You should read it in conjunction with this report in assessing the results of our audit.

Management’s Discussion and Analysis is not a required part of the basic financial statements but is
supplementary information accounting principles generally accepted in the United States of America
requires. We have applied certain limited procedures, consisting principally of inquiries of management
regarding the methods of measuring and presenting the required supplementary information. However,
we did not audit the information and express no opinion on it.

101ȱCentralȱPlazaȱSouthȱ/ȱ700ȱChaseȱTowerȱ/ȱCanton,ȱOHȱ44702Ȭ1509ȱ
Telephone:ȱȱ(330)ȱ438Ȭ0617ȱȱȱȱȱȱȱȱȱȱ(800)ȱ443Ȭ9272ȱȱȱȱȱȱȱȱȱȱFax:ȱȱ(330)ȱ471Ȭ0001ȱ
www.auditor.state.oh.usȱ

1
City of Stow
Summit County
Independent Accountants’ Report
Page 2

We conducted our audit to opine on the financial statements that collectively comprise the City’s basic
financial statements. The introductory section, combining nonmajor fund statements and schedules and
statistical tables provide additional information and are not a required part of the basic financial
statements. We subjected the combining nonmajor fund statements and schedules to the auditing
procedures applied in the audit of the basic financial statements. In our opinion, this information is fairly
stated in all material respects in relation to the basic financial statements taken as a whole. We did not
subject the introductory section and statistical tables to the auditing procedures applied in the audit of the
basic financial statements and, accordingly, we express no opinion on them.

Mary Taylor, CPA

Auditor of State

June 27, 2007

2
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 CITY OF STOW, OHIO

STATEMENT OF NET ASSETS

DECEMBER 31, 2006

Governmental Business-type
Activities Activities Total
Assets:
Equity in pooled cash and cash equivalents. . . . . . . . . $ 14,591,284 $ 5,647,728 $ 20,239,012
Receivables (net of allowances for uncollectibles):
Property taxes . . . . . . . . . . . . . . . . . . . . . . 8,278,680 - 8,278,680
Income taxes . . . . . . . . . . . . . . . . . . . . . . . 1,830,100 - 1,830,100
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 176,138 435,061 611,199
Intergovernmental . . . . . . . . . . . . . . . . . . . . 2,079,776 - 2,079,776
Accrued interest . . . . . . . . . . . . . . . . . . . . . 124,197 - 124,197
Special assessments . . . . . . . . . . . . . . . . . . . 67,469 - 67,469
Internal balances . . . . . . . . . . . . . . . . . . . . . . 288,276 (288,276) -
Materials and supplies inventory. . . . . . . . . . . . . . 467,123 79,095 546,218
Deferred charges . . . . . . . . . . . . . . . . . . . . . . 121,480 - 121,480
Capital assets:
Nondepreciable capital assets . . . . . . . . . . . . . . 11,199,640 6,520,370 17,720,010
Depreciable capital assets, net. . . . . . . . . . . . . . 33,596,469 20,847,664 54,444,133
Total capital assets. . . . . . . . . . . . . . . . . . . . 44,796,109 27,368,034 72,164,143
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . 72,820,632 33,241,642 106,062,274

Liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . 569,171 124,442 693,613
Accrued wages and benefits . . . . . . . . . . . . . . . . 69,212 9,707 78,919
Intergovernmental payable . . . . . . . . . . . . . . . . . 1,037,452 337,822 1,375,274
Unearned revenue. . . . . . . . . . . . . . . . . . . . . . 8,016,715 - 8,016,715
Accrued interest payable. . . . . . . . . . . . . . . . . . 315,007 260,680 575,687
Claims payable. . . . . . . . . . . . . . . . . . . . . . . 195,386 - 195,386
Long-term liabilities:
Due within one year . . . . . . . . . . . . . . . . . . . 1,796,545 1,007,923 2,804,468
Due in more than one year . . . . . . . . . . . . . . . 14,865,067 8,350,977 23,216,044
Total liabilities . . . . . . . . . . . . . . . . . . . . . . 26,864,555 10,091,551 36,956,106

Net assets:
Invested in capital assets, net of related debt . . . . . . . 29,534,790 18,074,614 47,609,404
Restricted for:
EMS/Fire protection . . . . . . . . . . . . . . . . . . 192,511 - 192,511
Police . . . . . . . . . . . . . . . . . . . . . . . . . . 105,072 - 105,072
Street repair and maintenance. . . . . . . . . . . . . . 1,786,390 - 1,786,390
Public health . . . . . . . . . . . . . . . . . . . . . . 184 - 184
Leisure time activities. . . . . . . . . . . . . . . . . . 496,834 - 496,834
Community and economic development. . . . . . . . . 358,542 - 358,542
Capital outlay . . . . . . . . . . . . . . . . . . . . . . 5,709,174 - 5,709,174
Other purposes . . . . . . . . . . . . . . . . . . . . . 208,767 - 208,767
Unrestricted . . . . . . . . . . . . . . . . . . . . . . . . 7,563,813 5,075,477 12,639,290
Total net assets . . . . . . . . . . . . . . . . . . . . . . $ 45,956,077 $ 23,150,091 $ 69,106,168

SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS

12
 CITY OF STOW, OHIO

STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2006

Program Revenues

Operating Capital
Charges for Grants and Grants and
Expenses Services Contributions Contributions
Governmental Activities:
General government. . . . . . . . . . . . . . . . . . $ 6,231,092 $ 878,026 $ - $ -
Security of persons and property . . . . . . . . . . . 13,210,277 564,625 413,210 -
Public health. . . . . . . . . . . . . . . . . . . . . . 443,480 50,759 5,000 -
Leisure time activities. . . . . . . . . . . . . . . . . 2,223,971 272,149 - -
Community and economic development . . . . . . . 1,521,061 252,718 - -
Transportation. . . . . . . . . . . . . . . . . . . . . 3,127,917 - 1,592,073 550,997
Interest and fiscal charges. . . . . . . . . . . . . . . 594,333 - - -

Total governmental activities . . . . . . . . . . . . . 27,352,131 2,018,277 2,010,283 550,997

Business-type Activities:
Water . . . . . . . . . . . . . . . . . . . . . . . . . 3,888,570 4,905,336 177,876 -
Golf Course . . . . . . . . . . . . . . . . . . . . . . 1,361,329 936,183 - -
Storm Water Utility. . . . . . . . . . . . . . . . . . 786,568 774,892 - -

Total business-type activities . . . . . . . . . . . . . . 6,036,467 6,616,411 177,876 -

Total primary government. . . . . . . . . . . . . . . . $ 33,388,598 $ 8,634,688 $ 2,188,159 $ 550,997

General Revenues:
Property taxes levied for:
General purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Municipal income taxes levied for:
General purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grants and entitlements not restricted to specific programs . . . . . . . . .
Investment earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total general revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . .

Change in net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net assets at beginning of year. . . . . . . . . . . . . . . . . . . . . . .

Net assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . .

SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS

13
 Net (Expense) Revenue and Changes in Net Assets

Governmental Business-type
Activities Activities Total

$ (5,353,066) $ - $ (5,353,066)
(12,232,442) - (12,232,442)
(387,721) - (387,721)
(1,951,822) - (1,951,822)
(1,268,343) - (1,268,343)
(984,847) - (984,847)
(594,333) - (594,333)

(22,772,574) - (22,772,574)

- 1,194,642 1,194,642
- (425,146) (425,146)
- (11,676) (11,676)

- 757,820 757,820

(22,772,574) 757,820 (22,014,754)

4,992,077 - 4,992,077
2,312,818 - 2,312,818
566,557 - 566,557

7,637,359 - 7,637,359
1,050,000 - 1,050,000
2,891,745 - 2,891,745
3,814,628 - 3,814,628
894,418 - 894,418
2,274,362 205,439 2,479,801

26,433,964 205,439 26,639,403

3,661,390 963,259 4,624,649

42,294,687 22,186,832 64,481,519

$ 45,956,077 $ 23,150,091 $ 69,106,168

14
 CITY OF STOW, OHIO

BALANCE SHEET
GOVERNMENTAL FUNDS
DECEMBER 31, 2006

General Other Total

EMS/Fire Capital Governmental Governmental
General Tax Levy Improvements Funds Funds
Assets:
Equity in pooled cash and cash equivalents . . . . $ 5,254,046 $ 156,543 $ 5,366,589 $ 2,169,094 $ 12,946,272
Receivables (net of allowance for uncollectibles):
Property taxes . . . . . . . . . . . . . . . . . . 5,731,422 1,997,313 - 549,945 8,278,680
Income taxes . . . . . . . . . . . . . . . . . . . 1,098,060 - 732,040 - 1,830,100
Accounts . . . . . . . . . . . . . . . . . . . . . 101,055 - - 70 101,125
Intergovernmental . . . . . . . . . . . . . . . . 1,252,900 102,000 - 724,876 2,079,776
Accrued interest . . . . . . . . . . . . . . . . . 124,197 - - - 124,197
Special assessments . . . . . . . . . . . . . . . - - 67,469 - 67,469
Loans to other funds . . . . . . . . . . . . . . . . 300,000 - 30,000 - 330,000
Materials and supplies . . . . . . . . . . . . . . . 60,087 - - 407,036 467,123

Total assets . . . . . . . . . . . . . . . . . . . . . $ 13,921,767 $ 2,255,856 $ 6,196,098 $ 3,851,021 $ 26,224,742

Liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . $ 167,900 $ 8,348 $ 302,969 $ 84,954 $ 564,171
Accrued wages and benefits . . . . . . . . . . . . 63,965 5,247 - - 69,212
Intergovernmental payable . . . . . . . . . . . . . 602,433 118,900 - 316,119 1,037,452
Deferred revenue . . . . . . . . . . . . . . . . . . 1,239,132 158,424 136,414 480,908 2,014,878
Unearned revenue . . . . . . . . . . . . . . . . . 5,569,508 1,940,889 - 506,318 8,016,715
Loans from other funds. . . . . . . . . . . . . . . - - - 30,000 30,000

Total liabilities . . . . . . . . . . . . . . . . . . . . 7,642,938 2,231,808 439,383 1,418,299 11,732,428

Fund Balances:
Reserved for encumbrances . . . . . . . . . . . . 643,338 21,617 1,532,887 248,390 2,446,232
Reserved for materials and supplies . . . . . . . . 60,087 - - 407,036 467,123
Reserved for loans . . . . . . . . . . . . . . . . . 300,000 - 30,000 - 330,000
Unreserved, undesignated, reported in:
General fund. . . . . . . . . . . . . . . . . . . 5,275,404 - - - 5,275,404
Special revenue funds . . . . . . . . . . . . . . - 2,431 - 1,777,296 1,779,727
Capital projects funds . . . . . . . . . . . . . . - - 4,193,828 - 4,193,828

Total fund balances. . . . . . . . . . . . . . . . . . 6,278,829 24,048 5,756,715 2,432,722 14,492,314

Total liabilities and fund balances . . . . . . . . . . $ 13,921,767 $ 2,255,856 $ 6,196,098 $ 3,851,021 $ 26,224,742

SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS

15
 CITY OF STOW, OHIO

RECONCILIATION OF TOTAL GOVERNMENTAL FUND BALANCES TO

NET ASSETS OF GOVERNMENTAL ACTIVITIES
DECEMBER 31, 2006

Total governmental fund balances $ 14,492,314

Amounts reported for governmental activities in the

statement of net assets are different because:

Capital assets used in governmental activities are not financial resources

and therefore are not reported in the funds. 44,796,109

Other long-term assets are not available to pay for current period
expenditures and therefore are deferred in the funds.
Delinquent property taxes $ 233,056
Municipal income taxes 341,034
Intergovernmental 1,400,886
Interest 39,902

Total 2,014,878

Long-term liabilities are not due and payable in the current period and
therefore are not reported in the funds. The long-term liabilities
are as follows:
Compensated absences (1,278,813)
General obligation bonds payable (4,959,599)
Construction notes payable (10,423,200)

Total (16,661,612)

In the statement of activities interest is accrued on outstanding bonds,

notes payable, whereas in governmental funds, interest expenditures
are reported when due. (315,007)

Bond issuance costs reported as an expenditure in the funds are allocated

as an expense over the life of the debt on a full accrual basis. 121,480

Internal service funds are used by management to charge the costs of

insurance to individual funds. The assets and liabilities of the internal
service funds are included in governmental activities in the statement of
net assets. 1,519,639

An internal balance is recorded in governmental activities to reflect

overpayments to the internal service fund by the business-type
actvities. (11,724)

Net assets of governmental activities $ 45,956,077

SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS

16
 CITY OF STOW, OHIO

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2006

General Other Total

EMS/Fire Capital Governmental Governmental
General Tax Levy Improvements Funds Funds
Revenues:
Property and other taxes . . . . . . . . . . . . $ 5,069,382 $ 1,763,744 $ - $ 583,044 $ 7,416,170
Income taxes . . . . . . . . . . . . . . . . . . 7,557,838 - 2,838,730 1,616,557 12,013,125
Special assessments . . . . . . . . . . . . . . - - - 51,417 51,417
Charges for services . . . . . . . . . . . . . . 298,039 - - 531,262 829,301
Licenses and permits . . . . . . . . . . . . . . 812,102 - - 70 812,172
Fines and forfeitures . . . . . . . . . . . . . . 137,007 - - 6,815 143,822
Intergovernmental . . . . . . . . . . . . . . . 3,406,909 239,846 550,997 2,282,836 6,480,588
Investment income . . . . . . . . . . . . . . . 840,494 - - 33,261 873,755
Rent. . . . . . . . . . . . . . . . . . . . . . . 181,635 - - 82,935 264,570
Contributions and donations . . . . . . . . . . 110 - - 12,483 12,593
Other . . . . . . . . . . . . . . . . . . . . . . 363,140 368 1,715,177 100,079 2,178,764
Total revenues . . . . . . . . . . . . . . . . . 18,666,656 2,003,958 5,104,904 5,300,759 31,076,277

Expenditures:
Current:
General government. . . . . . . . . . . . . 5,126,246 - - - 5,126,246
Security of persons and property . . . . . . 8,259,032 2,076,095 - 1,333,599 11,668,726
Public health. . . . . . . . . . . . . . . . . 386,186 - - 14,335 400,521
Leisure time activities . . . . . . . . . . . . 1,694,296 - - 148,755 1,843,051
Community and economic development . . 1,345,612 - - 23,172 1,368,784
Transportation. . . . . . . . . . . . . . . . 537,121 - - 1,963,464 2,500,585
Capital outlay . . . . . . . . . . . . . . . . . - 17,087 3,434,099 768,863 4,220,049
Debt service:
Principal retirement . . . . . . . . . . . . . - 3,675,000 7,206,000 775,000 11,656,000
Interest and fiscal charges. . . . . . . . . . - 15,701 252,111 318,557 586,369
Total expenditures. . . . . . . . . . . . . . . 17,348,493 5,783,883 10,892,210 5,345,745 39,370,331

Excess (deficiency) of revenues

over (under) expenditures. . . . . . . . . . . . 1,318,163 (3,779,925) (5,787,306) (44,986) (8,294,054)

Other financing sources (uses):

Notes issued. . . . . . . . . . . . . . . . . . - 3,675,000 6,748,200 - 10,423,200
Premium on notes. . . . . . . . . . . . . . . - 28,514 53,332 - 81,846
Transfers in . . . . . . . . . . . . . . . . . . - - - 569,879 569,879
Transfers out . . . . . . . . . . . . . . . . . (569,879) - - - (569,879)
Total other financing sources (uses) . . . . . (569,879) 3,703,514 6,801,532 569,879 10,505,046

Net change in fund balances. . . . . . . . . . . 748,284 (76,411) 1,014,226 524,893 2,210,992

Fund balances at beginning of year . . . . . . . 5,530,545 100,459 4,742,489 1,907,829 12,281,322

Fund balances at end of year . . . . . . . . . . $ 6,278,829 $ 24,048 $ 5,756,715 $ 2,432,722 $ 14,492,314

SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS

17
 CITY OF STOW, OHIO

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2006

Net change in fund balances - total governmental funds $ 2,210,992

Amounts reported for governmental activities in the

statement of activities are different because:

Government funds report capital outlays as expenditures. However, in the

statement of activities, the cost of those assets are allocated over their
estimated useful lives as depreciation expense. This is the amount by which
depreciation exceeded capital outlays in the current period.
Capital asset additions 2,722,203
Current year depreciation (1,968,641)
Total 753,562

Governmental funds only report the disposal of capital assets to the

extent proceeds are received from the sale. In the statement of activities,
a gain or loss is reported for each disposal. (521,945)

Revenues in the statement of activities that do not provide current financial

resources are not reported as revenues in the funds.
Delinquent property taxes (111,275)
Intergovernmental (104,389)
Municipal income taxes 132,536
Interest 20,372
Total (62,756)

Repayment of long-term debt is an expenditure in the governmental funds,

but the repayment reduces long-term liabilities in the statement net assets. 11,656,000

In the statement of activities, interest is accrued on outstanding bonds,

whereas in governmental funds, interest is expensed when due.
Accrued interest (46,737)
Unamortized charges (32,950)
Bond issuance costs (10,123)
Total (89,810)

The issuance of of bonds and notes are recorded as revenue in the funds, however,
on the statement of activities, they are not reported as revenues as they
increase liabilities on the statement of net assets. (10,423,200)

Some expenses, such as compensated absences, reported in the statement

of activities do not require the use of financial resources and therefore are
not reported as expenditures in governmental funds. (49,086)

Internal service funds used by management to charge the cost of insurance,

to individual funds is not reported in the expenditures and related internal
service fund revenues are eliminated. The net revenue of the internal service
funds are allocated among the governmental activities 187,633

Change in net assets of governmental activities $ 3,661,390

SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS

18
 CITY OF STOW, OHIO

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN

FUND BALANCE - BUDGET AND ACTUAL (NON-GAAP BUDGETARY BASIS)
GENERAL FUND
FOR THE YEAR ENDED DECEMBER 31, 2006

Variance with
Budgeted Amounts Final Budget
Positive
Original Final Actual (Negative)
Revenues:
Property and other taxes. . . . . . . . . . . . . . $ 6,198,920 $ 5,046,914 $ 5,069,382 $ 22,468
Income taxes . . . . . . . . . . . . . . . . . . . . 10,790,990 8,785,595 7,481,940 (1,303,655)
Charges for services . . . . . . . . . . . . . . . . 450,526 366,800 297,264 (69,536)
Licenses and permits. . . . . . . . . . . . . . . . 1,150,265 936,500 808,649 (127,851)
Fines and forfeitures. . . . . . . . . . . . . . . . 186,941 152,200 129,478 (22,722)
Intergovernmental . . . . . . . . . . . . . . . . . 3,222,891 2,623,950 3,414,199 790,249
Investment income . . . . . . . . . . . . . . . . 951,901 775,000 753,083 (21,917)
Rental income . . . . . . . . . . . . . . . . . . . 256,706 209,000 182,435 (26,565)
Contributions and donations. . . . . . . . . . . . . 1,228 1,000 110 (890)
Other . . . . . . . . . . . . . . . . . . . . . . . 719,455 585,752 359,660 (226,092)
Total revenues. . . . . . . . . . . . . . . . . . . 23,929,823 19,482,711 18,496,200 (986,511)

Expenditures:
Current:
General government . . . . . . . . . . . . . . 5,960,070 5,960,070 5,358,820 601,250
Security of persons and property . . . . . . . . 9,377,057 9,377,057 8,431,104 945,953
Public health . . . . . . . . . . . . . . . . . 433,556 433,556 389,819 43,737
Leisure time activities. . . . . . . . . . . . . . 1,950,585 1,950,585 1,753,811 196,774
Community and economic environment . . . . . 1,543,382 1,543,382 1,387,686 155,696
Transportation . . . . . . . . . . . . . . . . . 602,380 602,380 541,612 60,768
Capital outlay . . . . . . . . . . . . . . . . . . 333,659 333,659 300,000 33,659
Total expenditures. . . . . . . . . . . . . . . . . 20,200,689 20,200,689 18,162,852 2,037,837

Excess (deficiency) of revenues

over (under) expenditures. . . . . . . . . . . 3,729,134 (717,978) 333,348 1,051,326

Other financing uses:

Transfers out . . . . . . . . . . . . . . . . . . . (633,818) (633,818) (569,879) 63,939
Total other financing uses. . . . . . . . . . . . . . (633,818) (633,818) (569,879) 63,939

Net change in fund balance . . . . . . . . . . . . . 3,095,316 (1,351,796) (236,531) 1,115,265

Fund balance at beginning of year . . . . . . . . 4,130,188 4,130,188 4,130,188 -

Prior year encumbrances appropriated. . . . . . 464,550 464,550 464,550 -

Fund balance at end of year . . . . . . . . . . . . $ 7,690,054 $ 3,242,942 $ 4,358,207 $ 1,115,265

SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS

19
 CITY OF STOW, OHIO

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN

FUND BALANCE - BUDGET AND ACTUAL (NON-GAAP BUDGETARY BASIS)
EMS/FIRE LEVY FUND
FOR THE YEAR ENDED DECEMBER 31, 2006

Variance with
Budgeted Amounts Final Budget
Positive
Original Final Actual (Negative)
Revenues:
Property and other local taxes . . . . . . . . . . $ 1,774,743 $ 1,755,915 $ 1,763,744 $ 7,829
Intergovernmental. . . . . . . . . . . . . . . . . 321,224 317,816 240,446 (77,370)
Other . . . . . . . . . . . . . . . . . . . . . . . 2,047,552 2,025,830 368 (2,025,462)
Total revenues . . . . . . . . . . . . . . . . . . 4,143,519 4,099,561 2,004,558 (2,095,003)

Expenditures:
Current:
Security of persons and property. . . . . . . . 2,161,451 2,153,729 2,115,571 38,158
Capital outlay. . . . . . . . . . . . . . . . . . . 18,046 18,577 18,248 329
Debt service:
Principal retirement . . . . . . . . . . . . . . 3,634,549 3,741,284 3,675,000 66,284
Interest and fiscal charges . . . . . . . . . . . 15,528 15,984 15,701 283
Total expenditures . . . . . . . . . . . . . . . . 5,829,574 5,929,574 5,824,520 105,054

Excess (deficiency) of revenues

over (under) expenditures. . . . . . . . . . . . . (1,686,055) (1,830,013) (3,819,962) (1,989,949)

Other financing sources:

Notes issued . . . . . . . . . . . . . . . . . . . 3,710,801 3,725,000 3,675,000 (50,000)
Premium on notes . . . . . . . . . . . . . . . . - - 28,514 28,514
Total other financing sources . . . . . . . . . . . . 3,710,801 3,725,000 3,703,514 (21,486)

Net change in fund balance . . . . . . . . . . . . . 2,024,746 1,894,987 (116,448) (2,011,435)

Fund balance at beginning of year . . . . . . . . 184,974 184,974 184,974 -

Prior year encumbrances appropriated. . . . . . 58,052 58,052 58,052 -

Fund balance at end of year . . . . . . . . . . . . $ 2,267,772 $ 2,138,013 $ 126,578 $ (2,011,435)

SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS

20
 CITY OF STOW, OHIO

STATEMENT OF FUND NET ASSETS

PROPRIETARY FUNDS
DECEMBER 31, 2006

Governmental
Business-type Activities -Enterprise Funds Activities -
Golf Storm Water Internal
Water Course Utility Total Service Funds
Assets:
Current assets:
Equity in pooled cash and cash equivalents . . . $ 5,198,729 $ 179,992 $ 269,007 $ 5,647,728 $ 1,645,012
Receivables (net of allowance for uncollectibles):
Accounts . . . . . . . . . . . . . . . . . . 353,114 - 81,947 435,061 75,013
Materials and supplies inventory . . . . . . . 79,095 - - 79,095 -
Total current assets . . . . . . . . . . . . . . 5,630,938 179,992 350,954 6,161,884 1,720,025
Noncurrent assets:
Capital assets:
Nondepreciable capital assets . . . . . . . . 1,405,005 5,115,365 - 6,520,370 -
Depreciable capital assets, net. . . . . . . . 15,432,741 157,103 5,257,820 20,847,664 -
Total noncurrent assets . . . . . . . . . . . . . . 16,837,746 5,272,468 5,257,820 27,368,034 -
Total assets . . . . . . . . . . . . . . . . . . . . 22,468,684 5,452,460 5,608,774 33,529,918 1,720,025

Liabilities:
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . 62,011 37,145 25,286 124,442 5,000
Accrued wages and benefits. . . . . . . . . . 7,342 486 1,879 9,707 -
Intergovernmental . . . . . . . . . . . . . . 303,801 22,169 11,852 337,822 -
Accrued interest payable. . . . . . . . . . . . 102,009 158,671 - 260,680 -
Claims payable. . . . . . . . . . . . . . . . . - - - - 195,386
Notes payable . . . . . . . . . . . . . . . . 942,200 - - 942,200 -
Current portion of OWDA loans. . . . . . . . 25,535 - - 25,535 -
Current portion of OPWC loan . . . . . . . . 11,584 - - 11,584 -
Current portion of compensated absences . . . 23,745 - 4,859 28,604 -
Total current liabilities . . . . . . . . . . . . . 1,478,227 218,471 43,876 1,740,574 200,386
Long-term liabilities:
Notes payable . . . . . . . . . . . . . . . . 2,579,600 5,500,000 - 8,079,600 -
OWDA loans . . . . . . . . . . . . . . . . 25,981 - - 25,981 -
OPWC loan . . . . . . . . . . . . . . . . . 208,520 - - 208,520 -
Loans from other funds . . . . . . . . . . . 300,000 - - 300,000 -
Compensated absences . . . . . . . . . . . . 30,678 - 6,198 36,876 -
Total long-term liabilities . . . . . . . . . . . . 3,144,779 5,500,000 6,198 8,650,977 -
Total liabilities . . . . . . . . . . . . . . . . . 4,623,006 5,718,471 50,074 10,391,551 200,386

Net assets:
Invested in capital assets, net of related debt. 13,044,326 (227,532) 5,257,820 18,074,614 -
Unrestricted. . . . . . . . . . . . . . . . . . 4,801,352 (38,479) 300,880 5,063,753 1,519,639
Total net assets . . . . . . . . . . . . . . . . . $ 17,845,678 $ (266,011) $ 5,558,700 23,138,367 $ 1,519,639

Adjustment to reflect the consolidation of the internal service funds activities related to
enterprise funds. 11,724

Net assets of business-type activities $ 23,150,091

SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS

21
 CITY OF STOW, OHIO

STATEMENT OF REVENUES, EXPENSES AND

CHANGES IN FUND NET ASSETS
PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2006

Governmental
Business-type Activities - Enterprise Funds Activities -
Golf Storm Water Internal
Water Course Utility Total Service Funds
Operating revenues:
Charges for services . . . . . . . . . . . . . . $ 4,729,503 $ 936,183 $ 774,892 $ 6,440,578 $ 2,418,540
Tap-in fees . . . . . . . . . . . . . . . . . . . 175,833 - - 175,833 -
Other. . . . . . . . . . . . . . . . . . . . . . 46,304 159,135 - 205,439 -

Total operating revenues . . . . . . . . . . . . . 4,951,640 1,095,318 774,892 6,821,850 2,418,540

Operating expenses:
Personal services . . . . . . . . . . . . . . . 992,151 414,620 269,885 1,676,656 -
Contract services . . . . . . . . . . . . . . . 2,573,866 465,145 252,242 3,291,253 279,424
Materials and supplies . . . . . . . . . . . . 55,376 307,957 30,870 394,203 -
Claims. . . . . . . . . . . . . . . . . . . . . - - - 1,957,406
Depreciation . . . . . . . . . . . . . . . . . 155,876 3,100 232,618 391,594 -

Total operating expenses . . . . . . . . . . . . 3,777,269 1,190,822 785,615 5,753,706 2,236,830

Operating income (loss) . . . . . . . . . . . . 1,174,371 (95,504) (10,723) 1,068,144 181,710

Nonoperating revenues (expenses):

Intergovernmental. . . . . . . . . . . . . . . 177,876 - - 177,876 -
Interest expense and fiscal charges . . . . . . (106,331) (170,507) - (276,838) -

Total nonoperating revenues (expenses) . . . 71,545 (170,507) - (98,962) -

Changes in net assets . . . . . . . . . . . . . . 1,245,916 (266,011) (10,723) 969,182 181,710

Net assets at beginning of year . . . . . . . . . 16,599,762 - 5,569,423 1,337,929

Net assets (deficit) at end of year . . . . . . . . $ 17,845,678 $ (266,011) $ 5,558,700 $ 1,519,639

Adjustment to reflect the consolidation of the internal service funds activities related to
enterprise funds. (5,923)

Changes in net assets of business-type activities $ 963,259

SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS

22
 CITY OF STOW, OHIO

STATEMENT OF CASH FLOWS

PROPRIETARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2006

Governmental
Business-type Activities - Enterprise Funds Activities -
Golf Storm Water Internal
Water Course Utility Total Service Funds
Cash flows from operating activities:
Cash received from customers . . . . . . . . . $ 4,719,361 $ 936,183 $ 772,624 $ 6,428,168 $ 2,424,423
Cash received from tap-in fees . . . . . . . . . 175,833 - - 175,833 -
Cash received from other operations. . . . . . 46,304 159,135 - 205,439 -
Cash payments for personal services . . . . . (993,397) (390,807) (269,578) (1,653,782) -
Cash payments for contract services . . . . . . (2,815,200) (460,737) (250,421) (3,526,358) (274,424)
Cash payments for materials and supplies . . . (70,019) (300,547) (34,170) (404,736) -
Cash payments for claims . . . . . . . . . . . - - - - (2,080,115)

Net cash provided by (used in)

operating activities. . . . . . . . . . . . . 1,062,882 (56,773) 218,455 1,224,564 69,884

Cash flows from noncapital financing activities:

Intergovernmental . . . . . . . . . . . . . . 177,876 - - 177,876 -

Net cash provided by noncapital

financing activities . . . . . . . . . . . . 177,876 - - 177,876 -

Cash flows from capital and related

financing activities:
Acquisition of capital assets. . . . . . . . . . (1,310,659) (5,251,399) (275,757) (6,837,815) -
Principal retirement . . . . . . . . . . . . . . (2,100,703) (5,500,000) - (7,600,703) -
Note issuance . . . . . . . . . . . . . . . . . 3,521,800 11,000,000 - 14,521,800 -
Premium on notes . . . . . . . . . . . . . . . 26,911 52,581 - 79,492 -
Interest and fiscal charges. . . . . . . . . . . (77,879) (64,417) - (142,296) -

Net cash provided by (used in) capital and

related financing activities . . . . . . . . 59,470 236,765 (275,757) 20,478 -

Net increase (decrease) in

cash and cash equivalents. . . . . . . . . . . . 1,300,228 179,992 (57,302) 1,422,918 69,884

Cash and cash equivalents at beginning of year . . 3,898,501 - 326,309 4,224,810 1,575,128
Cash and cash equivalents at end of year . . . $ 5,198,729 $ 179,992 $ 269,007 $ 5,647,728 $ 1,645,012

- - continued

23
 CITY OF STOW, OHIO

STATEMENT OF CASH FLOWS

PROPRIETARY FUNDS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2006

Governmental
Business-type Activities - Enterprise Funds Activities -
Golf Storm Water Internal
Water Course Utility Total Service Funds

Reconciliation of operating income (loss) to net

cash provided by (used in) operating activities:

Operating income (loss) . . . . . . . . . . . . . $ 1,174,371 $ (95,504) $ (10,723) $ 1,068,144 $ 181,710

Adjustments:
Depreciation . . . . . . . . . . . . . . . . . 155,876 3,100 232,618 391,594 -

Changes in assets and liabilities:

(Increase) in materials and
supplies inventory. . . . . . . . . . . . . . (12,205) - - (12,205) -
(Increase) decrease in accounts receivable . . (10,142) - (2,268) (12,410) 5,883
Increase (decrease) in accounts payable . . . (493,688) 12,976 (7,619) (488,331) 5,000
Increase (decrease) in accrued wages and benefits. . (326) 486 (897) (737) -
Increase in due to other governments. . . . . 254,198 22,169 3,784 280,151 -
Increase (decrease) in compensated
absences payable . . . . . . . . . . . . . . (5,202) - 3,560 (1,642) -
Decrease in claims payable. . . . . . . . . . - - - - (122,709)

Net cash provided by (used in)

operating activities. . . . . . . . . . . . . . . $ 1,062,882 $ (56,773) $ 218,455 $ 1,224,564 $ 69,884

During 2006, the Water, Golf Course and Storm Water Utility funds purchased $41,214, $24,169, and $246 of capital assets on account. During 2005, the
Water and Storm Water funds purchased $12,984 and $35,413 of capital assets on account.

SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS

24
 CITY OF STOW, OHIO

STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS
DECEMBER 31, 2006

Private
Purpose Trust Agency

Assets:
Equity in pooled cash and cash equivalents. . . . . . $ 1,250 $ 594,982
Receivables:
Accounts . . . . . . . . . . . . . . . . . . . . . . - 740

Total assets. . . . . . . . . . . . . . . . . . . . . . . 1,250 $ 595,722

Liabilities:
Undistributed monies . . . . . . . . . . . . . . . . . - $ 595,722

Total liabilities . . . . . . . . . . . . . . . . . . . . - $ 595,722

Net assets:
Held in trust. . . . . . . . . . . . . . . . . . . . . . 1,250

Total net assets . . . . . . . . . . . . . . . . . . . . $ 1,250

SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS

25
 CITY OF STOW, OHIO

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

FIDUCIARY FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2006

Private
Purpose Trust

Net assets at beginning of year . . . . . . . . . . . . . . $ 1,250

Net assets at end of year . . . . . . . . . . . . . . . . . $ 1,250

SEE ACCOMPANYING NOTES TO THE BASIC FINANCIAL STATEMENTS

26
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 1 - DESCRIPTION OF THE CITY

The City of Stow, Ohio, (the “City”) is a home rule municipal corporation which was established under the
laws of the State of Ohio and operates under its own charter. The current charter, which provides for a
Mayor/Council form of government, was adopted in 1958 and became effective January 2, 1960.
Amendments to the charter have been approved by the electorate in 1965, 1968, 1970, 1972, 1975, 1980,
1985, 1990, 1991, 1997, 1998, 2000 and 2002.

The City provides various services and consists of many different activities and smaller accounting entities
which include police, fire-fighting and EMS forces, street and highway maintenance, building and zoning
inspection, comprehensive community planning, various general government services and a water
distribution system. The City offers numerous parks and recreation programs and operates a park system,
three municipal cemeteries and a group of rental lodges available for public or private events.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The basic financial statements (BFS) of the City have been prepared in conformity with accounting
principles generally accepted in the United States of America (GAAP) as applied to local governmental
units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for
establishing governmental accounting and financial principles. The City also applies Financial Accounting
Standards Board (FASB) Statements and Interpretations issued on or before November 30, 1989, to its
governmental and business-type activities and its proprietary funds provided they do not conflict with or
contradict GASB pronouncements. The City has the option to also apply FASB Statements and
Interpretations issued after November 30, 1989 to its business-type activities and enterprise funds, subject
to this same limitation. The City has elected not to apply these FASB Statements and Interpretations. The
City’s significant accounting policies are described below.

A. Reporting Entity

A reporting entity is comprised of the primary government, component units and other organizations
that are included to ensure that the financial statements are not misleading. The primary government
of the City consists of all funds, departments, boards, agencies and commissions that are not legally
separate from the City.

Component units are legally separate organizations for which the City is financially accountable. The
City is financially accountable for an organization if the City appoints a voting majority of the
organization’s governing board and (1) the City is able to significantly influence the programs or
services performed or provided by the organization; or (2) the City is legally entitled to or can
otherwise access the organization’s resources; (3) the City is legally obligated or has otherwise
assumed the responsibility to finance deficits of, or provide financial support to, the organization; (4)
or the City is obligated for the debt of the organization. Component units may also include
organizations for which the City approves the budget, the issuance of debt, or the levying of taxes.
The City has no component units.

B. Basis of Presentation - Fund Accounting

The City’s BFS consist of government-wide statements, including a statement of net assets and a
statement of activities, and fund financial statements which provide a more detailed level of financial
information.

27
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)

Government-wide Financial Statements - The Statement of Net Assets and the Statement of Activities
display information about the City as a whole. These statements include the financial activities of the
primary government, except for fiduciary funds. The activities of the internal service funds are
eliminated to avoid “doubling up” revenues and expenses. The statements distinguish between those
activities of the City that are governmental and those that are considered business-type activities.

The Statement of Net Assets presents the financial condition of the governmental and business-type
activities of the City at year-end. The Statement of Activities presents a comparison between direct
expenses and program revenues for each program or function of the City’s governmental activities and
for the business-type activities of the City. Direct expenses are those that are specifically associated
with a service, program or department and therefore clearly identifiable to a particular function.
Program revenues include charges paid by the recipient of the goods or services offered by the
program, grants and contributions that are restricted to meeting the operational or capital requirements
of a particular program and interest earned on grants that is required to be used to support a particular
program. Revenues which are not classified as program revenues are presented as general revenues of
the City, with certain limited exceptions. The comparison of direct expenses with program revenues
identifies the extent to which each business segment or governmental functions are self-financing or
draw from the general revenues of the City.

Fund Financial Statements - During the year, the City segregates transactions related to certain City
functions or activities in separate funds in order to aid financial management and to demonstrate legal
compliance. Fund financial statements are designed to present financial information of the City at this
more detailed level. The focus of governmental and enterprise fund financial statements is on major
funds. Each major fund is presented in a separate column. Nonmajor funds are aggregated and
presented in a single column. The internal service funds are presented in a single column on the face
of the proprietary fund financial statements. Fiduciary funds are reported by type.

Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating
revenues and expenses generally result from providing services and producing and delivering goods in
connection with a proprietary fund’s principal ongoing operation. The principal operating revenues of
the City’s proprietary funds are charges for services. Operating expenses for the enterprise funds
include personnel and other expenses related to water, golf course and storm water operations and
operating expenses for the internal service funds include claims and administrative expenses. All
revenues and expenses not meeting these definitions are reported as nonoperating revenues and
expenses.

C. Fund Accounting

The City uses funds to maintain its financial records during the year. A fund is defined as a fiscal and
accounting entity with a self balancing set of accounts. There are three categories of funds:
governmental, proprietary and fiduciary. The following categories are used by the City:

Governmental Funds - Governmental funds are those through which most governmental functions
typically are financed. Governmental fund reporting focuses on the sources, uses and balances of
current financial resources. Expendable assets are assigned to the various governmental funds
according to the purposes for which they may or must be used. Current liabilities are assigned to the
fund from which they will be paid. The difference between governmental fund assets and liabilities is
reported as fund balance. The following are the City's major governmental funds:

28
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)

General Fund - The general fund accounts for all financial resources except those required to be
accounted for in another fund. The general fund balance is available to the City for any purpose
provided it is expended or transferred according to the charter of the City of Stow and/or the
general laws of Ohio.

EMS/Fire Tax Levy Fund - The EMS/Fire Tax Levy fund is a special revenue fund that accounts
for proceeds of levy money that is legally restricted to expenditures to provide EMS and fire
protection services.

General Capital Improvements Fund - The General Capital Improvements fund accounts for the
portion of municipal income tax designated by Council for the purpose of improving, constructing,
maintaining, and purchasing the capital items necessary to enhance the operation of the City.

Other governmental funds of the City are used to account for grants and other resources whose use is
restricted to a particular purpose.

Proprietary Funds - Proprietary fund reporting focuses on changes in net assets, financial position and
cash flows. Proprietary funds are classified as either enterprise or internal service.

Enterprise Funds - The enterprise funds may be used to account for any activity for which a fee is
charged to external users for goods or services. The following are the City’s major enterprise funds:

Water Fund - This fund accounts for revenues generated from the charges for the treatment and
provisions of water to the residents and commercial users of the City.

Storm Water Utility Fund - The storm water utility fund accounts for the provision of storm
drainage runoff service to the residents and commercial users located within the City.

Golf Course Fund – The golf course fund accounts for revenues generated and expenses for the
Fox Den Golf Course.

Internal Service Fund - Internal service funds account for the financing of services provided by one
department or agency to other departments or agencies of the City on a cost-reimbursement basis. The
City’s internal service funds are the Administrative Insurance fund and the Self-Insurance fund which
report on the administrative costs and the payments of premiums and claims for healthcare.

Fiduciary Funds - Fiduciary fund reporting focuses on net assets and changes in net assets. The
fiduciary fund category is split into four classifications: pension trust funds, investment trust funds,
private-purpose trust funds and agency funds. Trust funds are used to account for assets held by the
City under a trust agreement for individuals, private organizations, or other governments and are
therefore not available to support the City’s own programs. The City’s trust funds are private-purpose
trust funds established to account for funds bequeathed and donated to the City for the Wells Perkins
Cemetery and scholarships. The City’s agency funds are purely custodial (assets equal liabilities) and
thus do not involve measurement of results of operations. The City’s agency funds account for
building permit fees collected on behalf of the State, municipal court collections that are distributed to
various local governments and performance bonds pledged by contractors. The City does not have
pension trust funds or investment trust funds.

29
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)

D. Measurement Focus

Government-wide Financial Statements - The government-wide financial statements are prepared

using the economic resources measurement focus. All non-fiduciary assets and all liabilities associated
with the operation of the City are included on the Statement of Net Assets. The Statement of Activities
presents increases (e.g. revenues) and decreases (e.g. expenses) in total net assets.

Fund Financial Statements - All governmental funds are accounted for using a flow of current
financial resources measurement focus. With this measurement focus, only current assets and current
liabilities generally are included on the balance sheet. The statement of revenues, expenditures and
changes in fund balances reports on the sources (i.e., revenues and other financing sources) and uses
(i.e., expenditures and other financing uses) of current financial resources. This approach differs from
the manner in which the governmental activities of the government-wide financial statements are
prepared. Governmental fund financial statements therefore include a reconciliation with brief
explanations to better identify the relationship between the government-wide statements and the
financial statements for governmental funds.

Like the government-wide statements, all proprietary funds are accounted for on a flow of economic
resources measurement focus. All assets and all liabilities associated with the operation of these funds
are included on the statement of net assets. The statement of changes in fund net assets presents
increases (i.e., revenues) and decreases (i.e., expenses) in total net assets. The statement of cash flows
provides information about how the City finances and meets the cash flow needs of its proprietary
activities. The private-purpose trust fund is accounted for using the flow of economic resources
measurement focus.

The agency funds do not report on a measurement focus as they do not report operations.

E. Basis of Accounting

Basis of accounting determines when transactions are recorded in the financial records and reported on
the financial statements. Government-wide financial statements are prepared using the accrual basis of
accounting. Governmental funds use the modified accrual basis of accounting. Proprietary and agency
funds also use the accrual basis of accounting. Differences in the accrual and modified accrual basis of
accounting arise in the recognition of revenue, the recording of deferred revenue and in the
presentation of expenses versus expenditures.

Revenues - Exchange and Non-exchange Transactions - Revenue resulting from exchange

transactions, in which each party gives and receives essentially equal value, is recorded on the accrual
basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal
year in which the resources are measurable and become available. Available means that the resources
will be collected within the current fiscal year or are expected to be collected soon enough thereafter to
be used to pay liabilities of the current fiscal year. For the City, available means expected to be
received within sixty days of year-end.

30
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)

Nonexchange transactions, in which the City receives value without directly giving equal value in
return, include income taxes, property taxes, grants, entitlements and donations. On an accrual basis,
revenue from income taxes is recognized in the period in which the income is earned (see Note 8).
Revenue from property taxes is recognized in the year for which the taxes are levied (see Note 7).
Revenue from grants, entitlements and donations is recognized in the year in which all eligibility
requirements have been satisfied. Eligibility requirements include timing requirements, which specify
the year when the resources are required to be used or the year when use is first permitted, matching
requirements, in which the City must provide local resources to be used for a specified purpose, and
expenditure requirements, in which the resources are provided to the City on a reimbursement basis.
On a modified accrual basis, revenue from nonexchange transactions must also be available before it
can be recognized.

Under the modified accrual basis, the following revenue sources are considered to be both measurable
and available at year-end: income tax, state-levied locally shared taxes (including gasoline tax, local
government funds and permissive tax), interest, grants, fees and rentals.

Unearned/Deferred Revenue - Deferred revenue arises when assets are recognized before revenue
recognition criteria have been satisfied.

Property taxes for which there is an enforceable legal claim as of December 31, 2006, but which were
levied to finance year 2007 operations, have been recorded as unearned revenue. Special assessments
not received within the available period and grants and entitlements received before the eligibility
requirements are met are also recorded as deferred revenue.

On governmental fund financial statements, receivables that will not be collected within the available
period have also been reported as deferred revenue.

Expenses/Expenditures - On the accrual basis of accounting, expenses are recognized at the time they
are incurred.

The measurement focus of governmental fund accounting is on decreases in net financial resources
(expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in
which the related fund liability is incurred, if measurable. Allocations of cost, such as depreciation and
amortization, are not recognized in governmental funds.

F. Budgetary Process

The budgetary process is prescribed by provisions of the Ohio Revised Code and entails the
preparation of budgetary documents within an established timetable. The major documents prepared
are the Tax Budget (or the Alternative Tax Budget as permitted by law), the Certificate of Estimated
Resources, and the Annual Appropriation Ordinance, all of which are prepared on the budgetary basis
of accounting. The Certificate of Estimated Resources and the Annual Appropriation Ordinance are
subject to amendment throughout the year with the legal restriction that appropriations cannot exceed
estimated resources, as certified. All funds, other than agency funds, are legally required to be
budgeted and appropriated. The legal level of budgetary control is at the fund level. The Finance
Director has been authorized to allocate appropriations to the department and object level within each
fund.

31
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)

Estimated Resources - The County Budget Commission determines if the budget substantiates a need
to levy all or part of previously authorized taxes and reviews estimated revenue. The Commission
certifies its actions to the City by September 1. As part of this certification, the City receives the
official Certificate of Estimated Resources, which states the projected revenue of each fund. Prior to
December 31, the City must revise its budget so that the total contemplated expenditures from any
fund during the ensuing year will not exceed the amount available as stated in the Certificate of
Estimated Resources. The revised budget then serves as the basis for the Annual Appropriation
Ordinance. On or about January 1, the Certificate of Estimated Resources is amended to include
unencumbered fund balances at December 31 of the preceding year. The Certificate may be further
amended during the year if the Finance Director determines, and the Budget Commission agrees, that
an estimate needs to be either increased or decreased. The amounts reported on the budgetary
statements reflect the amounts in the original and final amended official Certificate of Estimated
Resources issued during 2006.

Appropriations - For management, a temporary appropriation ordinance to control expenditures may

be passed on or about January 1 of each year for the period January 1 to March 31. The Annual
Appropriation Ordinance must be passed by April 1 of each year for the period January 1 to December
31. Appropriations by fund must be within the estimated resources as certified by the County Budget
Commission and the total of expenditures and encumbrances may not exceed the appropriations at any
level of control.

Any revisions that alter the appropriations of the legal level of budgetary control within a fund must
first be approved by City Council. Council may pass supplemental fund appropriations so long as the
total appropriations by fund do not exceed the amounts set forth in the most recent Certificate of
Estimated Resources.

Formal budgetary integration is employed as a management control device during the year for all funds
consistent with statutory provisions. Appropriation amounts are as originally adopted, or as amended
by City Council throughout the year by supplemental appropriations which either reallocate or increase
the original appropriation amounts. During the year, supplemental appropriation measures were legally
enacted; however, none of these amendments were significant. The budgetary figures which appear in
the statements of budgetary comparisons represent the original and final appropriation amounts,
including all amendments and modifications.

Encumbrances - As part of formal budgetary control, purchase orders, contracts and other
commitments for the expenditure of monies are recorded as the equivalent of expenditures on the non-
GAAP budgetary basis in order to reserve that portion of the applicable appropriation and to determine
and maintain legal compliance. The Ohio Revised Code prohibits expenditures plus encumbrances
from exceeding appropriations at the legal level of budgetary control. On the GAAP basis,
encumbrances outstanding at year end are reported as reservations of fund balances for subsequent-
year expenditures for governmental funds.

Lapsing of Appropriations - At the close of each year, the unencumbered balance of each
appropriation reverts to the respective fund from which it was appropriated and becomes subject to
future appropriations. The encumbered appropriation balance is carried forward to the succeeding year
and is not reappropriated.

32
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)

G. Cash, Cash Equivalents and Investments

To improve cash management, cash received by the City is pooled. Monies for all funds, including
proprietary funds, are maintained in this pool. Individual fund integrity is maintained through the
City’s records. Each fund’s interest in the pool is presented as “Equity in Pooled Cash and Cash
Equivalents” on the financial statements.

During fiscal year 2006, investments were limited to the State Treasury Asset Reserve of Ohio (STAR
Ohio), repurchase agreements, and federal agency securities.

Except for nonparticipating investment contracts, investments are reported at fair value which is based
on quoted market prices. Nonparticipating investment contracts such as repurchase agreements are
reported at cost.

STAR Ohio is an investment pool managed by the State Treasurer’s Office which allows governments
within the state to pool their funds for investment purposes. STAR Ohio is not registered with the SEC
as an investment company, but does operate in a manner consistent with Rule 2a7 of the Investment
Company Act of 1940. Investments in STAR Ohio are valued at STAR Ohio’s share price which is
the price the investment could be sold for on December 31, 2006.

Following Ohio statutes, the City has, by resolution, specified the funds to receive an allocation of
interest earnings. Interest revenue credited to the general fund during 2006 amounted to $840,494 of
which $618,429 was assigned from other City funds.

Investments with an original maturity of three months or less and investments of the cash management
pool are presented on the financial statements as cash equivalents.

An analysis of the City's investment account at year-end is provided in Note 4.

H. Interfund Balances

On fund financial statements, long-term interfund loans are classified as “loans to/from other funds.”
These amounts are eliminated in the governmental and business-type activities columns of the
Statement of Net Assets, except for any net residual amounts due between governmental and business-
type activities, which are presented as internal balances.

I. Inventory

Inventories of all funds are stated at cost which is determined on a first-in, first-out basis. Inventory in
governmental funds consists of expendable supplies held for consumption. The cost of inventory items
is recorded as expenditures in the governmental fund types and as expenses in the proprietary fund
type.

J. Capital Assets

General capital assets are those assets not specifically related to activities reported in the proprietary
funds. These assets generally result from expenditures in the governmental funds. These assets are
reported in the governmental activities column of the government-wide statement of net assets but are
not reported in the fund financial statements. Capital assets utilized by the proprietary funds are
reported both in the business-type activities column of the government-wide Statement of Net Assets
and in the respective funds.

33
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)

All capital assets are capitalized at cost (or estimated historical cost) and updated for additions and
retirements during the year. The City was able to estimate the historical cost for the initial reporting of
infrastructure by back trending (i.e. estimating the current replacement cost of the infrastructure to be
capitalized and using an appropriate price-level index to deflate the cost of the acquisition year or
estimated acquisition year. Donated capital assets are recorded at their fair market values as of the date
received. The City maintains a capitalization threshold of $5,000. The City’s infrastructure consists of
bridges, culverts, curbs, storm sewers, streets, irrigation systems, water and sewer lines and
infrastructure acquired after December 31, 1980. Improvements are capitalized; the costs of normal
maintenance and repairs that do not add to the value of the asset or materially extend an asset’s life are
not. Interest incurred during the construction of capital assets is also capitalized for business-type
activities.

All reported capital assets are depreciated except for land and construction in progress. Improvements
are depreciated over the remaining useful lives of the related capital assets. Useful lives for
infrastructure were estimated based on the City’s historical records of necessary improvements and
replacement. Depreciation is computed using the straight-line method over the following useful lives:

Governmental Business-Type
Activities Activities
Description Estimated Lives Estimated Lives
Buildings and Improvements 4 to 50 years 4 to 50 years
Infrastructure 20 to 75 years 20 to 75 years
Equipment, Furniture and Fixtures 3 to 10 years 3 to 10 years
Vehicles 15 years 15 years
K. Compensated Absences

Vacation benefits are accrued as a liability as the benefits are earned if the employee’s rights to receive
compensation are attributable to services already rendered and it is probable that the City will
compensate the employees for the benefits through paid time off or some other means. The City
records a liability for accumulated unused vacation time when earned for all employees with more than
one year of service.

Sick leave benefits are accrued as a liability using the termination method. An accrual for sick leave is
made to the extent that it is probable that benefits will result in termination payments. The liability is
an estimate based on the City’s past experience of making termination payments. In proprietary funds,
the entire amount of compensated absences is reported as a fund liability.

The entire compensated absence liability is reported on the government-wide financial statements.

For governmental funds, the current portion of unpaid compensated absences is the amount expected to
be paid using expendable available resources based upon the occurrence of employee resignations and
retirements. These amounts are recorded in the account “Compensated Absences Payable” in the fund
from which the employees who have accumulated unpaid leave are paid.

L. Accrued Liabilities and Long-Term Obligations

All payables, accrued liabilities and long-term obligations are reported in the government-wide
financial statements, and all payables, accrued liabilities and long-term obligations payable from
proprietary funds are reported on the proprietary fund financial statements.

34
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)

In general, governmental fund payables and accrued liabilities that, once incurred, are paid in a timely
manner and in full from current financial resources, are reported as obligations of the funds. However,
claims and judgments and compensated absences that will be paid from governmental funds are
reported as a liability in the fund financial statements only to the extent that they are due for payment
during the current year. Bonds, leases and long-term notes are recognized as a liability on the
governmental fund financial statements when due.

M. Fund Balance Reserves

The City reserves those portions of fund balance which are legally segregated for a specific future use
or which do not represent expendable resources and therefore are not available for appropriation or
expenditures. Fund balance reserves have been established for encumbrances, loans and materials and
supplies.

N. Net Assets

Net assets represent the difference between assets and liabilities. Net assets invested in capital assets,
net of related debt consists of capital assets, net of accumulated depreciation, reduced by the
outstanding balances of any borrowing used for the acquisition, construction or improvement of those
assets. Net assets are reported as restricted when there are limitations imposed on their use either
through the enabling legislation adopted by the City or through external restrictions imposed by
creditors, grantors or laws or regulations of other governments.

The City applies restricted resources when an expense is incurred for purposes for which both
restricted and unrestricted net assets are available.

O. Unamortized Issuance Costs/Accounting Gain or Loss

On government-wide financial statements, issuance costs are deferred and amortized over the term of
the bonds using the straight line method, which approximates the effective interest method. Issuance
costs are recorded as deferred charges.

For advance refundings resulting in the defeasance of debt reported in the proprietary funds, the
difference between the reacquisition price and the net carrying amount of the old debt is deferred and
amortized as a component of interest expense. This accounting gain or loss is amortized over the
remaining life of the old debt or the life of the new debt, whichever is shorter, and is presented as an
addition to or reduction from the face amount of the new debt.

On the governmental fund financial statements, issuance costs are recognized in the current period.

P. Operating Revenues and Expenses

Operating revenues are those revenues that are generated directly from the primary activity of the
proprietary funds. For the City, these revenues are for water, golf course, storm water and self-
insurance programs. Operating expenses are necessary costs incurred to provide the goods or services
that are the primary activity of the funds. All revenues and expenses not meeting these definitions are
reported as non-operating.

35
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)

Q. Contributions of Capital

Contributions of capital in proprietary fund financial statements arise from outside contributions of
capital assets or from grants or outside contributions of resources restricted to capital acquisition and
construction.

R. Interfund Activity

Transfers between governmental and business-type activities on the government-wide statements are
reported in the same manner as general revenues.

Exchange transactions between funds are reported as revenues in the seller funds and as
expenditures/expenses in the purchaser funds. Flows of cash or goods from one fund to another
without a requirement for repayment are reported as interfund transfers. Interfund transfers are
reported as other financing sources/uses in governmental funds and after nonoperating
revenues/expenses in proprietary funds. Repayments from funds responsible for particular
expenditures/expenses to the funds that initially paid for them are not presented on the Basic Financial
Statements (“BFS”).

S. Extraordinary and Special Items

Extraordinary items are transactions or events that are both unusual in nature and infrequent in
occurrence. Special items are transactions or events that are within the control of the City
Administration and that are either unusual in nature or infrequent in occurrence. Neither type of
transaction occurred during 2006.

T. Estimates

The preparation of the BFS in conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the BFS and accompanying notes. Actual results may
differ from those estimates.

NOTE 3 - ACCOUNTABILITY AND COMPLIANCE

A. Change in Accounting Principles

For fiscal year 2006, the City has implemented GASB Statement No. 44, “Economic Condition
Reporting: The Statistical Section”, GASB Statement No. 46, “Net Assets Restricted by Enabling
Legislation” and GASB Statement No. 47, “Accounting for Termination Benefits”.

The purpose of GASB Statement No. 44 is to improve the understandability and usefulness of the
information that state and local governments present as supplementary information in the statistical
section.

GASB Statement No. 46 defines enabling legislation and specifies how net assets should be reported in
the financial statements when there are changes in such legislation. The Statement also requires
governments to disclose in the notes to the financial statements the amount of net assets restricted by
enabling legislation.

GASB Statement No. 47 establishes accounting standards for termination benefits.

36
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 3 - ACCOUNTABILITY AND COMPLIANCE (Continued)

The implementation of GASB Statement No. 46 and GASB Statement No. 47 did not have an effect on
the fund balances/net assets of the City as previously reported at December 31, 2005.

B. Deficit Fund Balances

Fund balances/net assets, at December 31, 2006 included the following individual fund deficits:

Deficit
Major Funds
Golf Course $ 266,011

Nonmajor Funds
Police Pension and Disability 134,416
Fire Pension and Disability 144,827
Building Education/Seminar 13

These funds complied with Ohio state law, which does not permit a cash basis deficit at year-end. The
general fund is liable for any deficits in these funds and provides transfers when cash is required, not
when accruals occur. The deficit fund balances results from adjustments for accrued liabilities.

NOTE 4 - DEPOSITS AND INVESTMENTS

State statutes classify monies held by the City into three categories:

Active deposits are public deposits necessary to meet current demands on the treasury. Such monies must
be maintained either as cash in the City Treasury, in commercial accounts payable or withdrawable on
demand, including negotiable order of withdrawal (NOW) accounts, or in money market deposit accounts.

Inactive deposits are public deposits that Council has identified as not required for use within the current
five year period of designation of depositories. Inactive deposits must either be evidenced by certificates of
deposit maturing not later than the end of the current period of designation of depositories, or by savings or
deposit accounts including, but not limited to, passbook accounts.

Interim deposits are deposits in interim monies. Interim monies are those monies which are not needed for
immediate use but which will be needed before the end of the current period of designation of depositories.
Interim deposits must be evidenced by time certificates of deposit maturing not more than one year from
the date of deposit or by savings or deposit accounts including passbook accounts.

Protection of the City’s deposits is provided by the Federal Deposit Insurance Corporation (FDIC), by
eligible securities pledged by the financial institution as security for repayment, by surety company bonds
deposited with the finance director by the financial institution or by a single collateral pool established by
the financial institution to secure the repayment of all public monies deposited with the institution. Interim
monies to be deposited or invested in the following securities:

1. United States Treasury Notes, Bills, Bonds, or any other obligation or security issued by the United
States Treasury or any other obligation guaranteed as to principal or interest by the United States;

37
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 4 - DEPOSITS AND INVESTMENTS - (Continued)

2. Bonds, notes, debentures, or any other obligations or securities issued by any federal government
agency or instrumentality, including but not limited to, the Federal National Mortgage Association,
Federal Home Loan Bank, Federal Farm Credit Bank, Federal Home Loan Mortgage Corporation,
Government National Mortgage Association, and Student Loan Marketing Association. All federal
agency securities shall be direct issuances of federal government agencies or instrumentalities;

3. Written repurchase agreements in the securities listed above provided that the market value of the
securities subject to the repurchase agreement must exceed the principal value of the agreement by at
least two percent and be marked to market daily, and that the term of the agreement must not exceed
thirty days;

4. Bonds and other obligations of the State of Ohio;

5. No-load money market mutual funds consisting exclusively of obligations described in division (1) or
(2) and repurchase agreements secured by such obligations, provided that investments in securities
described in this division are made only through eligible institutions;

6. The State Treasurer’s investment pool (STAR Ohio);

7. High grade commercial paper for a period not to exceed 180 days in an amount not to exceed twenty-
five percent of the City’s interim monies available for investment; and

8. Bankers acceptances for a period not to exceed 180 days and in an amount not to exceed twenty-five
percent of the City’s interim monies available for investment.

The City may also invest any monies not required to be used for a period of six months or more in the
following:

1. Bonds of the State of Ohio;

2. Bonds of any municipal corporation, village, county, township, or other political subdivision of this
State, as to which there is no default of principal, interest or coupons;

3. Obligations of the City.

Investments in stripped principal or interest obligations, reverse repurchase agreements and derivatives are
prohibited. The issuance of taxable notes for the purpose of arbitrage, the use of leverage and short selling
are also prohibited. An investment must mature within five years from the date of purchase unless matched
to a specific obligation or debt of the City, and must be purchased with the expectation that it will be held
to maturity. Investments may only be made through specified dealers and institutions. Payment for
investments may be made only upon delivery of the securities representing the investments to the treasurer
or qualified trustee or, if the securities are not represented by a certificate, upon receipt of confirmation of
transfer from the custodian.

A. Deposits with Financial Institutions

At December 31, 2006, the carrying amount of all City deposits was $151,640 exclusive of the
$2,465,000 repurchase agreement included in investments below. As of December 31, 2006, the
City’s bank balance of $311,669 was exposed to custodial risk as discussed below, while $100,000 was
covered by Federal Deposit Insurance Corporation.

38
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 4 - DEPOSITS AND INVESTMENTS - (Continued)

Custodial credit risk is the risk that, in the event of bank failure, the City will not be able to recover
deposits or collateral securities that are in the possession of an outside party. As permitted by Ohio
Revised Code, the City’s deposits are collateralized by a pool of eligible securities deposited with
Federal Reserve Banks, or at member banks of the Federal Reserve System, in the name of the
depository bank and pledged as a pool of collateral against all public deposits held by the depository.
The City has no deposit policy for custodial credit risk beyond the requirements of State statute.
Although the securities were held by the pledging institutions’ trust department and all statutory
requirements for the deposit of money had been followed, noncompliance with federal requirements
could potentially subject the City to a successful claim by the FDIC.

B. Investments

As of December 31, 2006, the City had the following investments and maturities:

Investment Maturities
6 months or 7 to 12 13 to 18 19 to 24
Investment type Fair Value less months months months

FHLB $ 1,973,595 $ - $ 500,000 $ 1,473,595 $ -

FHLMC 2,484,915 997,925 987,730 - 499,260
FNMA 1,483,565 489,500 495,625 - 498,440
STAR Ohio 12,276,529 12,276,529 - - -
Repurchase Agreement 2,465,000 2,465,000 - - -

$ 20,683,604 $ 16,228,954 $ 1,983,355 $ 1,473,595 $ 997,700

The weighted average maturity of the City’s investments is 0.27.

Interest Rate Risk: The Ohio Revised Code generally limits security purchases to those that mature
within five years of the settlement date. Interest rate risk arises because potential purchasers of debt
securities will not agree to pay face value for those securities if interest rates subsequently increase.
The City’s investment policy addresses interest rate risk by requiring the consideration of market
conditions and cash flow requirements in determining the term of an investment.

Custodial Credit Risk: For an investment, custodial credit risk is the risk that, in the event of the
failure of the counterparty, the City will not be able to recover the value of its investment or collateral
securities that are in the possession of an outside party. The City has no investment policy dealing
with investment custodial risk beyond the requirement in Ohio law that prohibits payments for
investments prior to the delivery of the securities representing such investments to the treasurer or
qualified trustee. The City’s investment in repurchase agreements is collateralized by underlying
securities pledged by the investment’s counterparty, not in the name of the City. Ohio law requires the
market value of the securities subject to a repurchase agreement must exceed the principal value of
securities subject to a repurchase agreement by 2%.

Credit Risk: STAR Ohio carries a rating of AAAm by Standard & Poor’s. Ohio law requires that
STAR Ohio maintain the highest rating provided by at least one nationally recognized standard service
rating. The City’s other investments carry a rating of AAA by Standard & Poor’s.

Concentration of Credit Risk: The City’s investment policy addresses concentration of credit risk by
requiring investments to be diversified to reduce the risk of loss resulting from over concentration of
assets in a specific issue or specific class of securities. The following table includes the percentage of
each investment type held by the City at December 31, 2006:
39
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 4 - DEPOSITS AND INVESTMENTS - (Continued)

Investment type Fair Value % of Total

FHLB $ 1,973,595 9.54

FNMA 1,483,565 7.17
FHLMC 2,484,915 12.01
STAR Ohio 12,276,529 59.35
Repurchase Agreement 2,465,000 11.93

$ 20,683,604 100.00

C. Reconciliation of Cash and Investment to the Statement of Net Assets

The following is a reconciliation of cash and investments as reported in the footnote above to cash and
investments as reported on the statement of net assets as of December 31, 2006:

Cash and Investments per footnote

Carrying amount of deposits $ 151,640
Investments 20,683,604
Total $ 20,835,244

Cash and investments per Statement of Net Assets

Governmental activities $ 14,591,284
Business type activities 5,647,728
Private purpose trust funds 1,250
Agency funds 594,982
Total $ 20,835,244

NOTE 5 - INTERFUND TRANSACTIONS

Interfund loan receivables/payables balances at December 31, 2006, consist of the following individual
fund receivables and payables:

Receivable Funds
General
Capital
Payable Fund General Improvements

Nonmajor governmental $ - $ 30,000

Water 300,000 -

$ 300,000 $ 30,000

40
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 5 - INTERFUND TRANSACTIONS - (Continued)

These interfund loans will be repaid in the next fiscal year as resources become available. Interfund loan
balances between governmental funds are eliminated for reporting on the government-wide statement of net
assets. Interfund loan balances between governmental activities and business-type activities are reported as
a component of the “internal balances” reported on the Statement of Net Assets.

Interfund transfers for the year ended December 31, 2006, consisted of the following:

Transfers From
Transfer To
General

Nonmajor Governmental $ 569,879

Transfers are used to move revenues from the fund that statute or budget requires to collect them to the
fund that statute or budget requires to expend them; to move unrestricted revenues collected in the general
fund to finance various programs accounted for in other funds in accordance with budgetary authorizations;
to segregate money for anticipated capital projects; to provide additional resources for current operations or
debt service; and to return money to the fund from which it was originally provided once a project is
completed.

NOTE 6 - RECEIVABLES

Receivables at December 31, 2006, consisted primarily of taxes, accounts (billings for user charged
services, rents and royalties), special assessments, accrued interest, loans receivable and intergovernmental
receivables arising from grants, entitlements, and shared revenues. All receivables are deemed collectible
in full.

NOTE 7 - PROPERTY TAXES

Property taxes include amounts levied against all real, public utility, and tangible personal property located
in the City. Property tax revenues received during 2006 for real and public utility property taxes represents
collections of 2005 taxes. Property tax payments received during 2006 for tangible personal property
(other than public utility property) are for 2006 taxes.

2006 real property taxes are levied after October 1, 2006, on the assessed values as of January 1, 2006, the
lien date. Assessed values are established by State law at 35 percent of appraised market value. 2006 real
property taxes are collected in and intended to finance 2007.

Public utility tangible personal property currently is assessed at varying percentages of true value; public
utility real property is assessed at 35 percent of true value. 2006 public utility property taxes which became
a lien December 31, 2005, are levied after October 1, 2006 and collected in 2007 real property taxes.

41
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 7 - PROPERTY TAXES - (Continued)

Tangible personal property tax revenues received in 2006 (other than public utility property) represent the
collection of 2006 taxes. Tangible personal property taxes received in 2006 were levied after October 1,
2005, on the true value as of December 31, 2005. In prior years, tangible personal property assessments
were twenty-five percent of true value for capital assets and twenty-three percent of true value for
inventory. Tangible personal property tax is being phased out - the assessment percentage for property,
including inventory, is 18.75% for 2006. This percentage will be reduced to 12.5% for 2007, 6.25% for
2008, and zero for 2009. Amounts paid by multi-county taxpayers are due September 20. Single county
taxpayers may pay annually or semiannually. If paid annually, the first payment is due April 30; if paid
semiannually, the first payment is due April 30, with the remainder payable by September 20.

House Bill No. 66 was signed into law on June 30, 2005. House Bill No. 66 phases out the tax on tangible
personal property of general businesses, telephone and telecommunications companies, and railroads. The tax
on general business and railroad property will be eliminated by calendar year 2009, and the tax on telephone
and telecommunications property will be eliminated by calendar year 2011. The tax is phased out by reducing
the assessment rate on the property each year. The bill replaces the revenue lost by the City due to the phasing
out of the tax. In calendar years 2006-2010, the City will be fully reimbursed for the lost revenue. In calendar
years 2011-2017, the reimbursements will be phased out.

The tax rate for all City operations for the year ended December 31, 2006, was $9.50 per $1,000 of
assessed value. The assessed values of real and tangible personal property upon which 2006 property tax
receipts were based are as follows:

Real Property $ 785,872,830

Tangible Personal Property 47,772,680
Public Utility Property 10,062,490

Total $ 843,708,000

Real property taxes are payable annually and semi-annually. If paid annually, payment is due December
31; if paid semi-annually, the first payment is due December 31, with the remainder payable by June 20.
Under certain circumstances, State statute permits later payment dates to be established.

Tangible personal property taxes paid by multi-county taxpayers are due September 20. Single county
taxpayers may pay annually or semi-annually. If paid annually, payment is due April 30; if paid semi-
annually, the first payment is due April 30, with the remainder payable at September 20.

The County Fiscal Officer collects property taxes on behalf of all taxing districts within the County,
including the City of Stow. The County Fiscal Officer periodically remits to the City its portion of the
taxes collected. Property taxes receivable represents real and tangible personal property taxes, public
utility taxes and outstanding delinquencies which are measurable as of December 31, 2006 and for which
there is an enforceable legal claim. In the general fund, EMS/fire levy, police pension and fire pension
special revenue funds, the entire receivable has been offset by deferred revenue since the current taxes were
not levied to finance 2006 operations and the collection of delinquent taxes during the available period is
not subject to reasonable estimation. On a full accrual basis, collectible delinquent property taxes have
been recorded as revenue while the remainder of the receivable is deferred.

42
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 8 - INCOME TAX

The City levies and collects a municipal income tax of two percent on all income earned within the City as
well as on income of residents earned outside of the City. In the latter case, the City allows a credit of 100
percent on the income earned outside of the City and paid to another municipality. Employers within the
City are required to withhold income tax on employee earnings and remit the tax to the City at least
quarterly. Corporations and other individual taxpayers are required to pay their estimated tax at least
quarterly and file a final return annually.

Income tax revenues are distributed among the General Fund (60 percent) and the General Capital
Improvement Fund and further distribution to other funds, including the Street Construction Fund to be
used for existing and future Capital Projects and/or expansion or for Debt Service for existing and future
Capital Improvements (40 percent). In accordance with the City’s Charter, all income tax revenues are first
recorded in the General Fund. Subsequently, 40 percent of those revenues, net of collection expenses, are
distributed to the Capital Improvement Fund and other funds mentioned above.

Accordingly, the Capital Projects portion of income tax revenues, approximated $2,838,730, the Street
Construction Fund portion was $1,050,000, and the General Bond Retirement Fund was $566,557 for 2006.
Initially, all income tax receivable amounts are reported within the General Fund. The portion of the
receivable to be later distributed to the Capital Projects Funds approximates $732,040.

43
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 9 - CAPITAL ASSETS

A. Capital asset activity for the year ended December 31, 2006, was as follows:

Balance Balance
Governmental Activities: 12/31/05 Additions Deductions 12/31/06

Capital assets, not being depreciated:

Land $ 10,157,855 $ - $ (30,000) $ 10,127,855
Construction in progress 2,755,424 1,082,266 (2,765,905) 1,071,785

Total capital assets, not being

depreciated 12,913,279 1,082,266 (2,795,905) 11,199,640

Capital assets, being depreciated:

Buildings and building improvements 22,784,783 50,710 (82,962) 22,752,531
Vehicles 7,043,447 359,089 (398,226) 7,004,310
Equipment, furniture and fixtures 4,175,837 311,111 (63,398) 4,423,550
Infrastructure 16,704,928 3,684,932 (979,433) 19,410,427

Total capital assets, being depreciated 50,708,995 4,405,842 (1,524,019) 53,590,818

Less: accumulated depreciation:

Buildings and building improvements (4,991,598) (755,472) 82,934 (5,664,136)
Vehicles (4,111,786) (359,050) 398,226 (4,072,610)
Equipment, furniture and fixtures (2,992,078) (214,433) 63,398 (3,143,113)
Infrastructure (6,962,320) (639,686) 487,516 (7,114,490)

Total accumulated depreciation (19,057,782) (1,968,641) 1,032,074 (19,994,349)

Total capital assets, being

depreciated, net 31,651,213 2,437,201 (491,945) 33,596,469

Governmental activities capital

assets, net $ 44,564,492 $ 3,519,467 $ (3,287,850) $ 44,796,109

Depreciation expense was charged to governmental activities as follows:

General government $ 209,051

Security of persons and property 852,018
Public health and welfare 8,166
Transportation 699,403
Community environment 49,265
Leisure time activity 150,738
Total depreciation expense $ 1,968,641

44
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 9 - CAPITAL ASSETS - (Continued)

B. Capital asset activity for the year ended December 31, 2006 was as follows:

Balance Balance
Business-type Activities: 12/31/05 Additions Disposals 12/31/06

Capital assets, not being depreciated:

Land $ 262,011 $ 5,115,365 $ - $ 5,377,376
Construction in progress - 1,142,994 - 1,142,994

Total capital assets, not being

depreciated 262,011 6,258,359 - 6,520,370

Capital assets, being depreciated:

Buildings and building improvements 3,259,288 149,303 - 3,408,591
Vehicles 199,508 244,491 - 443,999
Equipment, furniture and fixtures 265,601 10,900 - 276,501
Infrastructure 21,318,972 191,994 - 21,510,966

Total capital assets, being depreciated 25,043,369 596,688 - 25,640,057

Less: accumulated depreciation:

Buildings and building improvements (342,939) (91,064) - (434,003)
Vehicles (141,270) (18,152) - (159,422)
Equipment, furniture and fixtures (198,296) (26,821) - (225,117)
Infrastructure (3,718,294) (255,557) - (3,973,851)

Total accumulated depreciation (4,400,799) (391,594) - (4,792,393)

Total capital assets, being

depreciated, net 20,642,570 205,094 - 20,847,664

Business-type activities capital

assets, net $ 20,904,581 $ 6,463,453 $ - $ 27,368,034

Depreciation expense was charged to business - type activities as follows:

Water $ 155,876
Storm Water 232,618
Golf 3,100
Total depreciation expense $ 391,594

45
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 10 - LONG-TERM OBLIGATIONS

The original issue date, interest rate, original issue amount and date of maturity of each of the City’s debt
issues follows:

Interest Original Date of

Debt Issue Rate Issue Amount Maturity

Business-Type Activities
OWDA Water Construction Loan 8.09% $ 120,663 1/1/2009
OWDA Water Maintenance Loan 7.86% 10,127 7/1/2007
OPWC Lillian Road Waterline Improvement 0.00% 231,688 7/1/2025
2005 Water System Anticipation 3.50% 1,400,000 5/11/2006
2005 Service and Parks Maintenance
Center Construction Note 3.50% 664,000 5/11/2006
2006 Water System Anticipation 4.50% 900,000 5/10/2007
2006 Service and Parks Maintenance
Center Construction Note 4.50% 621,800 5/10/2007
2006 Water Meter Reading System Notes 4.50% 2,000,000 5/10/2007
2006 Golf Course Notes 4.00% 5,500,000 5/11/2006
2006 Golf Course Notes 4.50% 5,500,000 5/10/2007

Governmental Activities
Safety Center Construction General
Obligation Bond 2.00%-4.05% 6,440,000 12/1/2018
2005 Fire Station Construction/
Equipment Note 3.50% 4,075,000 5/11/2006
2005 Service and Parks Maintenance
Center Construction Note 3.50% 7,206,000 5/11/2006
2006 Fire Station Construction/
Equipment Note 4.50% 3,675,000 5/10/2007
2006 Service and Parks Maintenance
Center Construction Note 4.50% 6,748,200 5/10/2007

46
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 10 - LONG-TERM OBLIGATIONS - (Continued)

The changes in long-term obligations during the year were as follows:

Amounts
Balance Balance at Due in
Governmental Activities: 12/31/05 Increase Decrease 12/31/06 One Year

General Obligation Refunding Bonds

Safety Center Construction General
Obligation Bonds $ 5,730,000 $ - $ (375,000) $ 5,355,000 $ 385,000
Less Deferred Unamortized Charges (428,351) 32,950 - (395,401) -

Total General Obligation Bonds 5,301,649 32,950 (375,000) 4,959,599 385,000

Long-Term Notes:
2005 Construction Note 4,075,000 - (4,075,000) - -
2005 Construction Note 7,206,000 - (7,206,000) - -
2006 Construction Note - 3,675,000 - 3,675,000 400,000
2006 Construction Note - 6,748,200 - 6,748,200 457,800

Total Long-Term Notes 11,281,000 10,423,200 (11,281,000) 10,423,200 857,800

Other Debt:
Compensated Absences 1,229,727 228,551 (179,465) 1,278,813 553,745

Total Other Debt 1,229,727 228,551 (179,465) 1,278,813 553,745

Total Governmental Activities $ 17,812,376 $ 10,684,701 $(11,835,465) $ 16,661,612 $ 1,796,545

47
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 10 - LONG-TERM OBLIGATIONS - (Continued)

Amounts
Balance Balance at Due in
Business-Type Activities 12/31/2005 Increase Decrease 12/31/2006 One Year

OWDA Loans
OWDA Water Construction $ 72,255 $ - $ (22,236) $ 50,019 $ 24,038
OWDA Water Maintenance 4,380 - (2,883) 1,497 1,497

Total OWDA Loans 76,635 - (25,119) 51,516 25,535

OPWC Loan
OPWC Lillian Road Water Line
Improvement 231,688 - (11,584) 220,104 11,584

Total OPWC Loans 231,688 - (11,584) 220,104 11,584

Long-Term Notes:
2005 Water System Anticipation 1,400,000 - (1,400,000) - -
2005 Construction Note 664,000 - (664,000) - -
2006 Water System Anticipation - 900,000 - 900,000 500,000
2006 Construction Note - 621,800 - 621,800 42,200
2006 Water Meter Note - 2,000,000 - 2,000,000 400,000
2006 Golf Course Note - 11,000,000 (5,500,000) 5,500,000 -

Total Long-Term Notes 2,064,000 14,521,800 (7,564,000) 9,021,800 942,200

Other Debt:
Compensated Absences 59,112 6,368 65,480 28,604

Total Other Debt 59,112 6,368 - 65,480 28,604

Total Business-Type Activities $ 2,431,435 $14,528,168 $ (7,600,703) $ 9,358,900 $ 1,007,923

General Obligation Bonds, Loans and Notes

The government issues general obligation bonds to provide funds for the acquisition and construction of
major capital facilities. General obligation bonds have been issued for governmental activities. During
2004, general obligation bonds totaling $6,440,000 were issued to refund general obligation bonds of
$5,820,000. General obligation bonds are direct obligations and pledge the full faith and credit of the
government.

The general obligation refunding bonds will be repaid from income tax monies allocated into the debt
service fund from the capital projects funds. Compensated absences will be paid from the funds, which the
employees’ salaries are paid. The OWDA and the OPWC Loans will be repaid with operating revenue from
the water fund. The OWDA Loan was assumed by the City from Summit County.

48
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 10 - LONG-TERM OBLIGATIONS - (Continued)

Approximately 8.44 percent of the total original issue amount of $7,370,000 of the 2006 Service and Parks
Maintenance Center Construction Note is being used to finance the Water Department Maintenance and
Operational areas of the New Service Building. Therefore $621,800 (approximately 8.44 percent) of the
above mentioned note will be allocated to the Water Fund. The remaining $6,748,200 will be paid from the
Capital Improvement Fund. The $3,675,000 note in governmental activities is being used to finance fire
station improvements and the purchase of fire/rescue vehicles and is accounted for in the EMS/Fire Levy
fund. The $900,000 note in the Water fund is being used to finance water system improvements.

The $2,000,000 note in the Water fund is being used to finance the installation of the automated water
meter reading system. The City issued $11,000,000 in notes during 2006, of which $5,500,000 was repaid
by December 31, 2006, to finance the purchase of the Fox Den Golf Course. These notes to not have an
accurate repayment schedule, and are not included in the schedule of future annual debt service
requirements.

As of December 31, 2006, the City’s overall legal debt margin (the ability to issue additional amounts of
general obligation debt) was $83,234,340 and the unvoted legal debt margin was $41,048,940.

The annual requirements to amortize all long-term debt outstanding as of December 31, 2006 are as
follows:

Governmental Activities Business-Type Activities

Safety Center Construction
General Obligation Bonds OWDA Loans OPWC Loan

Year Principal Interest Principal Interest Principal Interest

2007 $ 385,000 $ 184,057 $ 25,535 $ 4,164 $ 11,584 $ -

2008 385,000 175,972 25,981 2,098 11,584 -
2009 395,000 166,155 - - 11,584 -
2010 405,000 154,897 - - 11,584 -
2011 415,000 141,533 - - 11,584 -
2012 - 2016 2,315,000 479,657 - - 57,920 -
2017 - 2021 1,055,000 64,136 - - 57,924 -
2022 - 2025 - - - - 46,340 -

Total $ 5,355,000 $ 1,366,407 $ 51,516 $ 6,262 $ 220,104 $ -

NOTE 11 - RISK MANAGEMENT

A. Liability Insurance

The City is exposed to various risks of loss related to torts, theft, damage to or destruction of assets,
errors and omissions, employee injuries, and natural disasters. The City has a comprehensive property
and casualty policy with a deductible of $1,000 per incident. The City’s vehicle liability insurance
policy limit is $1,000,000 with a $500 collision deductible; vehicles with a cost of over $100,000 have
a $2,000 deductible. All Council members, administrators and employees are covered under a City
liability policy. The limits of this coverage are $1,000,000 per occurrence and $1,000,000 in aggregate
with a $10,000,000 umbrella over all coverages. The general liability aggregate is $2,000,000 and is
also covered by the $10,000,000 umbrella. Settled claims have not exceeded this commercial coverage
in any of the past three years. Although the amount of coverage has been adjusted, there has not been a
significant reduction of coverage from the prior year.

49
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 11 - RISK MANAGEMENT - (Continued)

B. Fidelity Bond

The Finance Director, Assistant Finance Director and Tax Administrator have a $100,000 position
bond. All other City employees who are specifically bonded are covered by a $100,000 general faithful
performance and honesty blanket position bond.

C. Workers’ Compensation

The City pays the State Workers’ Compensation System, an insurance purchasing pool, a premium
based on a rate per $100 of salaries. This rate is calculated based on accident history and administrative
costs.

D. Employee Health Insurance

The City has elected to provide employee medical, prescription and dental benefits through a self-
insurance program. The City maintains a self-insurance internal service fund to account for and finance
its uninsured risk of loss in this program. This plan provides a medical plan with a $500.00 family and
$250.00 single deductible and a dental plan with a $75.00 family and $25.00 single deductible. A third
party administrator, Klais & Company, Inc., reviews all medical and dental claims which are then paid
by the City. The City has purchased stop-loss coverage of $100,000 per employee and for claims in
excess of $1,939,669 in the aggregate from Companion Life Insurance Company. The City pays into
the self-insurance internal service fund $715.61 per month for each employee with family medical
coverage and $216.95 per month for each employee with individual medical coverage. Premiums for
dental coverage are $79.53 monthly for each employee with family coverage and $37.69 monthly for
each employee with individual coverage. All premiums are paid by the fund that pays the salary for the
employee.

The claims liability of $195,386 reported in the self-insurance internal service fund at December 31,
2006 is based on the requirements of GASB Statement No. 10, “Accounting and Financial Reporting
for Risk Financing and Related Insurance Services”, which requires that a liability for unpaid claim
costs, including estimates of costs relating to incurred but not reported claims, be reported. The claims
liability is based on an estimate supplied by the City’s third party administrator. A summary of the
fund’s claims liability during the past two years are as follows:

Balance at
Beginning Current Claims Balance at
of Year Claims Payment End of Year

2005 $ 387,932 $ 1,780,207 $ (1,850,044) $ 318,095

2006 318,095 1,957,406 (2,080,115) 195,386

50
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 12 - DEFINED BENEFIT PENSION PLANS

A. Ohio Public Employees Retirement System

The City participates in the Ohio Public Employees Retirement System (OPERS). OPERS administers
three separate pension plans. The traditional plan is a cost-sharing, multiple-employer defined benefit
pension plan. The member-directed plan is a defined contribution plan in which the member invests
both member and employer contributions (employer contributions vest over five years at 20% per
year). Under the member directed plan, members accumulate retirement assets equal to the value of
the member and vested employer contributions plus any investment earnings. The combined plan is a
cost-sharing, multiple-employer defined benefit pension plan that has elements of both a defined
benefit and a defined contribution plan. Under the combined plan, employer contributions are invested
by the retirement system to provide a formula retirement benefit similar to the traditional plan benefit.
Member contributions, whose investment is self-directed by the member, accumulate retirement assets
in a manner similar to the member-directed plan.

OPERS provides retirement, disability, survivor and death benefits and annual cost of living
adjustments to members of the traditional and combined plans. Members of the member- directed plan
do not qualify for ancillary benefits. Authority to established and amend benefits is provided by
Chapter 145 of the Ohio Revised Code. OPERS issues a stand-alone financial report that may be
obtained by writing to OPERS, 277 E. Town St., Columbus, OH 43215-4642 or by calling (614) 222-
5601 or (800) 222-7377.

For the year ended December 31, 2006, the members of all three plans, except those in law
enforcement under the traditional plan, were required to contribute 9.0% of their annual covered
salaries. Members participating in the traditional plan that were in law enforcement contributed 10.1%
of their annual covered salary. The City’s contribution rate for pension benefits for 2006 was 13.70%,
except for those plan members in law enforcement and public safety. For those classifications, the
City’s pension contributions were 16.93% of covered payroll. The Ohio Revised Code provides
statutory authority for member and employer contributions. The City’s required contributions for
pension obligations to the traditional and combined plans for the years ended December 31, 2006,
2005, and 2004 were $739,293, $988,832, and $936,041, respectively; 72.76% has been contributed
for 2006 and 100% has been contributed for 2005 and 2004 The City and plan members did not make
any contributions to the member-directed plan for 2006.

B. Ohio Police and Fire Pension Fund

The City contributes to the Ohio Police and Fire Pension Fund (OP&F), a cost-sharing multiple-
employer defined benefit pension plan. OP&F provides retirement and disability benefits, annual cost-
of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are
established by the Ohio State Legislature and are codified in Chapter 742 of the Ohio Revised Code.
OP&F issues a publicly available financial report that includes financial statements and required
supplementary information for the plan. That report may be obtained by writing to the Ohio Police and
Fire Pension Fund, 140 East Town Street, Columbus, Ohio 43215-5164.

Plan members are required to contribute 10.0% of their annual covered salary, while the City is
required to contribute 19.50% and 24.0% for police officers and firefighters, respectively. The portion
of the City’s contributions to fund pension obligations was 11.75% for police officers and 16.25% for
firefighters. The City’s contributions to the fund for police and firefighters were $317,591 and
$557,820 for the year ended December 31, 2006, $283,225 and $537,866 for the year ended December
31, 2005, and $273,234 and $387,267 for the year ended December 31, 2004. The full amount has
been contributed for 2005 and 2004. 74.48% and 74.02%, respectively, have been contributed for
2006 with the remainder being reported as a liability.

51
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 13 - POSTRETIREMENT BENEFIT PLANS

A. Ohio Public Employees Retirement System

The Ohio Public Employees Retirement System (OPERS) provides postretirement health care
coverage to age and service retirees with ten or more years of qualifying Ohio service credit with either
the traditional or combined plans. Health care coverage for disability recipients and primary survivor
recipients is available. Members of the member-directed plan do not qualify for postretirement health
care coverage. The health care coverage provided by the retirement system is considered an Other
Postemployment Benefit as described in GASB Statement No. 12, “Disclosure of Information on
Postemployment Benefits other than Pension Benefits by State and Local Government Employers”. A
portion of each employer's contribution to the traditional or combined plans is set aside for the funding
of postretirement health care based on authority granted by State statute. The 2006 local government
employer contribution rate was 13.70% of covered payroll (16.93% for public safety and law
enforcement); 4.50% of covered payroll was the portion that was used to fund health care.

Benefits are advance-funded using the entry age actuarial cost method. Significant actuarial
assumptions, based on OPERS’s latest actuarial review performed as of December 31, 2005, include a
rate of return on investments of 6.50%, an annual increase in active employee total payroll of 4.00%
compounded annually (assuming no change in the number of active employees) and an additional
increase in total payroll of between .50% and 6.30% based on additional annual pay increases. Health
care premiums were assumed to increase at the projected wage inflation rate (4.00%) plus and an
additional factor ranging from .50% to 6.00% for the next nine years. In subsequent years, (10 and
beyond) health care costs were assumed to increase at 4.00%.

All investments are carried at market value. For actuarial valuation purposes, a smoothed market
approach is used. Under this approach, assets are adjusted to reflect 25% of unrealized market
appreciation or depreciation on investment assets annually, not to exceed a 12% corridor.

The number of active contributing participants in the traditional and combined plans was 369,214 as of
December 31, 2006. The City’s actual employer contributions for 2006 which were used to fund
postemployment benefits were $361,611. The actual contribution and the actuarially required
contribution amounts are the same. OPERS’s net assets available for payment of benefits at December
31, 2005 (the latest information available) were $11.1 billion. At December 31, 2005 (the latest
information available), the actuarially accrued liability and the unfunded actuarial accrued liability
were $31.3 billion and $20.2 billion, respectively.

The Health Care Preservation Plan (HCPP) adopted by the OPERS Retirement Board on September 9,
2004, is effective on January 1, 2007. OPERS took additional actions to improve the solvency of the
Health care Fund in 2005 by creating a separate investment pool for health care assets. Member and
employer contribution rates increased as of January 1, 2006, and January 1, 2007, which will allow
additional fund to be allocated to the health care plan.

B. Ohio Police and Fire Pension Fund

The Ohio Police and Fire Pension Fund (OP&F) provides postretirement health care coverage to any
person who receives or is eligible to receive a monthly service, disability or survivor benefit check or
is a spouse or eligible dependent child of such person. An eligible dependent child is any child under
the age of 18 whether or not the child is attending school, or under the age of 22 if attending school
full-time or on a 2/3 basis.

The health care coverage provided by the retirement system is considered an Other Postemployment
Benefit (OPEB) as described in GASB Statement No. 12, “Disclosure of Information on
Postemployment Benefits other than Pension Benefits by State and Local Government Employers”.
52
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 13 - POSTRETIREMENT BENEFIT PLANS - (Continued)

The Ohio Revised Code provides the authority allowing the Ohio Police and Fire Pension Fund’s
board of trustees to provide health care coverage and states that health care costs paid from the funds
of OP&F shall be included in the employer’s contribution rate. Health care funding and accounting is
on a pay-as-you-go basis. The total police employer contribution rate is 19.5% of covered payroll and
the total firefighter employer contribution rate is 24% of covered payroll, of which 7.75% of covered
payroll was applied to the postemployment health care program during 2005 and 2006. In addition,
since July 1, 1992, most retirees have been required to contribute a portion of the cost of their health
care coverage through a deduction from their monthly benefit payment. Beginning in 2001, all retirees
and survivors have monthly health care contributions.

The City’s actual contributions for 2006 that were used to fund postemployment benefits were
$209,094 for police and $266,139 for firefighters. The OP&F’s total health care expense for the year
ended December 31, 2005 (the latest information available) was $108.039 million, which was net of
member contributions of $55.272 million. The number of OP&F participants eligible to receive health
care benefits as of December 31, 2005 (the latest information available), was 13,922 for police and
10,537 for firefighters.

NOTE 14 - COMPENSATED ABSENCES

Full-time City employees earn and accumulate paid vacation leave for each work hour or paid service hour
completed for the City. The maximum base used for accumulation of vacation pay is eighty hours per pay
period. Based upon length of service, employees can earn vacation at rates varying from two weeks to six
weeks per year. Part-time employees may earn partial vacation credits while seasonal employees are
ineligible for vacation benefits. Upon termination from the City, an employee is entitled to compensation a
his or her current base rate of pay for all earned, but unused vacation leave to his or her credit at the time of
termination, subject to the maximum amount which can be accumulated at any time, provided the 50th week
of employment had been reached. In the case of death, unused vacation leave is paid in the name of the
employee to his or her spouse.

Full-time City employees and certain part-time employees earn sick leave at the rate of .05769 hours for
every paid service hour completed for the City. The maximum base used for accumulation of sick pay is
80 hours per pay period. Sick leave to be paid for time away from work due to illness may be accumulated
without limit. For employees hired prior to July 1, 1996, an employee or his/her estate is paid upon
retirement or death 100 percent of the unused amount accumulated equivalent up to 1,000 hours and 50
percent of unused sick leave up to a maximum hours of an additional 1,000 hours at the current base rate,
but only to the extent such benefits have been earned as employees of the City. In the case of retirement or
death of an employee hired on or after July 1, 1996, the employee or his/her estate is paid 100 percent of
the unused amount accumulated to a maximum of 1,000 hours and is not eligible to receive cash payment
of 50 percent of unused sick leave up to a maximum of an additional 1,000 hours. The entitlement award
for firefighters is prorated according to their respective work year.

Full-time police officers, communication specialists and firefighters are permitted to accumulate holiday
time. Police department employees must use their accumulated holiday time prior to April 1 of the
following year and the employees of the fire department by July 1 of the following year.

As of December 31, 2006, the liability for compensated absences was $1,344,293 for the entire City.

53
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 15 - BUDGETARY BASIS OF ACCOUNTING

While the City is reporting financial position, results of operations and changes in fund balance on the basis
of generally accepted accounting principles (GAAP), the budgetary basis as provided by law is based upon
accounting for certain transactions on a basis of cash receipts, disbursements and encumbrances. The
Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (Non-GAAP
Budgetary Basis) presented for the general fund and EMS/Fire Tax Levy fund is presented on the
budgetary basis to provide a meaningful comparison of actual results with the budget. The major
differences between the budget basis and GAAP basis are as follows:

1. Revenues are recorded when received in cash (budget) as opposed to when susceptible to accrual
(GAAP).

2. Expenditures/expenses are recorded when paid in cash (budget) as opposed to when the liability is
incurred (GAAP).

3. Encumbrances are treated as expenditures (budget) rather than as a reservation of fund balance
(GAAP).

4. Unreported cash represents amounts received but not included as revenue on the budget basis operating
statements. These amounts are included as revenue on the GAAP basis operating statement.

The following table summarizes the adjustments necessary to reconcile the GAAP basis statements (as
reported in the fund financial statements) to the budgetary basis statements for the general fund and major
special revenue fund.

Net Change in Fund Balance

EMS/Fire
General Tax Levy

Budget basis $ (236,531) $ (116,448)

Net adjustment for revenue accruals 170,456 (600)

Net adjustment for expenditure accruals 15,444 10,672

Adjustment for encumbrances 798,915 29,965

GAAP basis $ 748,284 $ (76,411)

NOTE 16 - CONTINGENCIES

A. Grants

The City receives significant financial assistance from numerous Federal and State agencies in the
form of grants. The disbursement of funds received under these programs generally requires
compliance with terms and conditions specified in the grant agreements and is subject to audit by the
grantor agencies. Any disallowed claims resulting from such audits could become a liability of the
general fund or other applicable funds. However, in the opinion of management, any such disallowed
claims will not have a material effect on any of the financial statements of the reporting units included
herein or on the overall financial position of the City at December 31, 2006.

54
 CITY OF STOW, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2006

NOTE 16 – CONTINGENCIES - (Continued)

B. Litigation

The City is a party to legal proceedings. The City management is of the opinion that ultimate
disposition of these claims and legal proceedings will not have a material effect, if any, on the financial
condition of the City.

NOTE 17 - SIGNIFICANT SUBSEQUENT EVENTS

The following notes were due and refinanced in 2007:

x The $900,000 2006 Water System Anticipation Note was retired and $400,000 was refinanced on
May 10, 2007.
x The $7,370,000 2006 Construction Note was retired and $6,870,000 was refinanced on May 10,
2007.
x The $3,675,000 2006 Construction and Equipment Note was retired and $3,275,000 was
refinanced on May 10, 2007.
x The $5,500,000 2006 Golf Course Notes were retired and $5,500,000 in bonds were issued on
May 9, 2007.
x The $2,000,000 2006 Water Meter Note was retired and $1,600,000 was refinanced on May 10,
2007.

The City also issued the following bonds and notes in 2007:

x $5,000,000 in notes on May 9, 2007 to finance the construction of the Municipal Courthouse.
x $4,200,000 in bonds on May 9, 2007 to finance the construction of the Municipal Courthouse.

55
THIS PAGE IS INTENTIONALLY LEFT BLANK
 INDEPENDENT ACCOUNTANTS’ REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
REQUIRED BY GOVERNMENT AUDITING STANDARDS

City of Stow
Summit County
3760 Darrow Road
Stow, Ohio 44224

To the Honorable Mayor and City Council Members:

We have audited the financial statements of the governmental activities, the business-type activities,
each major fund, and the aggregate remaining fund information of the City of Stow, Summit County, Ohio,
(the City) as of and for the year ended December 31, 2006, which collectively comprise the City’s basic
financial statements and have issued our report thereon dated June 27, 2007. We conducted our audit in
accordance with auditing standards generally accepted in the United States of America and the standards
applicable to financial audits contained in the Comptroller General of the United States’ Government
Auditing Standards.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered the City’s internal control over financial reporting as
a basis for designing our audit procedures for expressing our opinions on the financial statements, but not
to opine on the effectiveness of the City’s internal control over financial reporting. Accordingly, we have
not opined on the effectiveness of the City’s internal control over financial reporting.

Our consideration of internal control over financial reporting was for the limited purpose described in the
preceding paragraph and would not necessarily identify all deficiencies in internal control over financial
reporting that might be significant deficiencies or material weaknesses. However, as discussed below,
we identified a certain deficiency in internal control over financial reporting that we consider a significant
deficiency.

A control deficiency exists when the design or operation of a control does not allow management or
employees, in performing their assigned functions, to prevent or detect misstatements on a timely basis.
A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely
affects the City’s ability to initiate, authorize, record, process, or report financial data reliably in
accordance with its applicable accounting basis, such that there is more than a remote likelihood that the
City’s internal control will not prevent or detect a more-than-inconsequential financial statement
misstatement.

We consider the following deficiency described in the accompanying Schedule of Findings to be a

significant deficiency in internal control over financial reporting: 2006-001.

A material weakness is a significant deficiency, or combination of significant deficiencies resulting in more

than a remote likelihood that the City’s internal control will not prevent or detect a material financial
statement misstatement.

101ȱCentralȱPlazaȱSouthȱ/ȱ700ȱChaseȱTowerȱ/ȱCanton,ȱOHȱ44702Ȭ1509ȱ
Telephone:ȱȱ(330)ȱ438Ȭ0617ȱȱȱȱȱȱȱȱȱȱ(800)ȱ443Ȭ9272ȱȱȱȱȱȱȱȱȱȱFax:ȱȱ(330)ȱ471Ȭ0001ȱ
www.auditor.state.oh.usȱ

1
City of Stow
Summit County
Independent Accountants’ Report on Internal Control Over
Financial Reporting and on Compliance and Other Matters
Required By Government Auditing Standards
Page 2

Our consideration of internal control over financial reporting was for the limited purpose described in the
first paragraph of this section and would not necessarily identify all deficiencies in the internal control that
might be significant deficiencies and accordingly, would not necessarily disclose all significant
deficiencies that are also material weaknesses. We do not believe the significant deficiency described
above is a material weakness.

We also noted certain internal control matters that we reported to the City’s management in a separate
letter dated June 27, 2007.

Compliance and Other Matters

As part of reasonably assuring whether the City’s financial statements are free of material misstatement,
we tested its compliance with certain provisions of laws, regulations, contracts, and grant agreements,
noncompliance with which could directly and materially affect the determination of financial statement
amounts. However, providing an opinion on compliance with those provisions was not an objective of our
audit and accordingly, we do not express an opinion. The results of our tests disclosed no instances of
noncompliance or other matters we must report under Government Auditing Standards.

We did note certain noncompliance or other matters that we reported to the City’s management in a
separate letter dated June 27, 2007.

The City’s response to the finding identified in our audit is described in the accompanying Schedule of
Findings. We did not audit the City’s response and, accordingly, we express no opinion on it.

We intend this report solely for the information and use of the City Council, audit committee, and
management. We intend it for no one other than these specified parties.

Mary Taylor, CPA

Auditor of State

June 27, 2007

2
 CITY OF STOW
SUMMIT COUNTY

SCHEDULE OF FINDINGS
DECEMBER 31, 2006

2. FINDINGS RELATED TO THE FINANCIAL STATEMENTS

REQUIRED TO BE REPORTED IN ACCORDANCE WITH GAGAS

FINDING NUMBER 2006-001

Significant Deficiency - Capital Assets

During Capital Assets testing, the following deficiencies were noted:

x In practice, the City only capitalizes new roads or roads that are fully replaced; however, the City’s
Capital Asset Policy does not specifically outline a capitalization threshold for roads and/or other
infrastructure assets.
x The City capitalized seven storm sewer assets that were valued at less than $5,000 (the capitalization
threshold for all other asset classes).
x In practice, the City depreciates roads for 20 – 30 years and storm sewers for 25 – 40 years,
depending on the materials used; however, the City’s Capital Asset Policy does not specifically outline
useful lives for these infrastructure assets.
x Net adjustments to road accumulated depreciation totaled approximately $83,629 due to depreciation
calculations utilizing the original asset values as opposed to the replaced values, and improperly
including an additional year of depreciation.
x The City’s master capital asset listing contains numerous assets which are fully depreciated.
x The City changed the useful lives of various asset classes from 6 years to 15 years and from 30 years
to 50 years; however, depreciation on assets within those asset classes was calculated using the
original useful lives, resulting in net adjustments to accumulated depreciation totaling $382,331.
x Due to a capital asset worksheet that was inadvertently excluded from the GAAP conversion process,
$1,142,994 in construction in progress related to Water Fund infrastructure assets including the City’s
installation of a new Water Meter Reading system, North Main Pump Station, and various water lines
were improperly excluded from construction in progress additions. Additionally, six out of 30 assets
tested were improperly excluded from the City’s Master Capital Asset Listing and not recorded on the
City’s capital asset system resulting in proposed audit adjustments $483,903.
x The City updates the Storm Sewer Inventory Sheets utilizing the engineer’s cost estimates, estimated
prices for materials used, and linear footage estimates; however, when the project is finished, no
comparison is made to ensure the Storm Sewer Inventory reflects the actual costs.

To help improve the accountability and reporting of the capital assets, the City should:

x Review and update its Capital Asset Policy to reflect the capitalization threshold(s) for infrastructure
assets.
x Ensure capitalization thresholds are reasonable and are followed in a consistent manner.
x Review and update its Capital Asset Policy to reflect the useful lives including infrastructure.
x Review its calculation of road infrastructure depreciation to ensure they are properly calculated using
the correct asset values and reflect the proper number of years.
x Consider removing from the capital asset system assets that are fully depreciated and no longer in
use or revising the useful lives of the assets to more accurately reflect the life of the asset.
x Review the capital asset system reports to ensure proper asset useful lives are being reflected in
order for depreciation to be calculated in accordance with the City’s Capital Asset Policy.
x Develop internal control procedures to identify, monitor, and compile additions to the City’s Capital
Assets and ensure all amounts are included within the financial statements. For example, the City
should run and review an Expense Audit Trail report showing expenditures classified as Capital
Outlay to help ensure all amounts which should be capitalized are properly included as Capital
Assets.
x Track the actual cost of materials used in Waterline and Storm Sewer assets as they are purchased
as well as determining the actual linear footage of materials installed.

3
City of Stow
Summit County
Schedule of Findings
Page 2

FINDING NUMBER 2006-001 (Continued)

Officials’ Response: In response to the Auditor’s Finding 2006-001, the Finance Director will be updating the
City’s current Fixed Asset Policy, dated March 28, 2007. The current policy reflects a detailed schedule of
useful lives for the fixed assets being capitalized in the General Fund, Water Fund and Storm Water Fund. In
addition, the Finance Director will be updating the policy to refine the capitalization requirements and
thresholds for all City fixed assets including roads, water and storm water infrastructure assets.

During the revision process, the policy will be expanded to include periodic audits of departmental assets
during the year. Included in this process will be running detailed expense audit reports along with the City’s
querry report for assets over the $5,000 threshold for capitalization. In addition, all storm sewer assets that
are to be capitalized will be done at actual expense rather than engineer’s estimate. As part of the Finance
Department’s updating, a procedure will be developed to evaluate depreciation along with assets that are fully
depreciated.

4
 CITY OF STOW
SUMMIT COUNTY

SCHEDULE OF PRIOR AUDIT FINDINGS

DECEMBER 31, 2006

Not Corrected, Partially Corrected;

Significantly Different Corrective Action
Finding Finding Fully Taken; or Finding No Longer Valid;
Number Summary Corrected? Explain:
2005-001 Cash Reconciliation – No Partially Corrected, See Management
discrepancies Letter Recommendation #1.
included an
unreconciled amount
totaling $1,160, stale
dated checks,
uncollected NSF,
timely recording of
transactions and
timely reconciliation

5
THIS PAGE IS INTENTIONALLY LEFT BLANK
 EXHIBIT A

Proposed 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
Stow, Ohio, of its $8,620,000 Various Purpose Bonds, Series 2008, dated May 8, 2008, and
issued for the purpose of (i) constructing, furnishing and equipping a service maintenance center
and parks maintenance and urban forestry center and improving the sites therefor and (ii)
constructing, furnishing and equipping two fire stations, improving the sites therefor and acquiring
any necessary real estate therefor. We have also examined a conformed copy of the 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 7.2-mill limitation provided by the Charter
of the City, 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 activity tax, the net income base of the Ohio corporate franchise tax and
municipal, school district and joint economic development 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
requirements subsequent to issuance of the Bonds could cause the interest to be included in gross
income for federal income tax purposes retroactively to their date of issuance.

Under the Code, portions of the interest 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.

We express no opinion as to the Statement of Insurance printed on the Bonds referring to

the Municipal Bond Insurance Policy issued by Financial Security Assurance Inc. or as to the
insurance referred to in that Statement.

Respectfully submitted,

/s/ Squire, Sanders & Dempsey L.L.P.

EX-A-1
(This Page Intentionally Left Blank)
 EXHIBIT B

Bond Insurance and Specimen Policy

The following information has been provided by Financial Security Assurance Inc.
(Financial Security) for use in this Official Statement.

Bond Insurance Policy

Concurrently with the issuance of the Bonds, Financial Security will issue its Municipal
Bond Insurance Policy for the Bonds (the Policy). The Policy guarantees the scheduled payment
of principal of and interest on the Bonds when due as set forth in the form of the Policy included
in this Exhibit B.

The Policy is not covered by any insurance security or guaranty fund established under
New York, California, Connecticut or Florida insurance law.

Financial Security Assurance Inc.

Financial Security is a New York domiciled financial guaranty insurance company and a
wholly owned subsidiary of Financial Security Assurance Holdings Ltd. (Holdings). Holdings is
an indirect subsidiary of Dexia, S.A., a publicly held Belgian corporation, and of Dexia Credit
Local, a direct wholly-owned subsidiary of Dexia, S.A. Dexia, S.A., through its bank
subsidiaries, is primarily engaged in the business of public finance, banking and asset
management in France, Belgium and other European countries. No shareholder of Holdings or
Financial Security is liable for the obligations of Financial Security.

At December 31, 2007, Financial Security’s consolidated policyholders’ surplus and

contingency reserves were approximately $2,703,119,716 and its total net unearned premium
reserve was approximately $2,274,576,959 in accordance with statutory accounting principles.
At December 31, 2007, Financial Security's consolidated shareholder’s equity was
approximately $2,962,301,379 and its total net unearned premium reserve was approximately
$1,796,984,819 in accordance with generally accepted accounting principles.

The consolidated financial statements of Financial Security included in, or as exhibits to,
the annual and quarterly reports filed after December 31, 2007 by Holdings with the Securities
and Exchange Commission are hereby incorporated by reference into this Official Statement.
All financial statements of Financial Security included in, or as exhibits to, documents filed by
Holdings pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
after the date of this Official Statement and before the termination of the offering of the Bonds
shall be deemed incorporated by reference into this Official Statement. Copies of materials
incorporated by reference will be provided upon request to Financial Security Assurance Inc.: 31
West 52nd Street, New York, New York 10019, Attention: Communications Department
(telephone (212) 826-0100).

The Policy does not protect investors against changes in market value of the Bonds,
which market value may be impaired as a result of changes in prevailing interest rates, changes
in applicable ratings or other causes. Financial Security makes no representation regarding the
Bonds or the advisability of investing in the Bonds. Financial Security makes no representation
regarding the Official Statement, nor has it participated in the preparation thereof, except that
Financial Security has provided to the Issuer the information presented under this caption for
inclusion in the Official Statement.

EX-B-1
(This Page Intentionally Left Blank)
 FINANCIAL MUNICIPAL BOND
SECURITY INSURANCE POLICY
ASSURANCE®

ISSUER: Policy No.: -N

BONDS: Effective Date:

Premium: $

FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for consideration received,

hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or
paying agent (the "Paying Agent") (as set forth in the documentation providing for the issuance of and
securing the Bonds) for the Bonds, for the benefit of the Owners or, at the election of Financial
Security, directly to each Owner, subject only to the terms of this Policy (which includes each
endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due
for Payment but shall be unpaid by reason of Nonpayment by the Issuer.

On the later of the day on which such principal and interest becomes Due for Payment or the
Business Day next following the Business Day on which Financial Security shall have received Notice of
Nonpayment, Financial Security will disburse to or for the benefit of each Owner of a Bond the face
amount of principal of and interest on the Bond that is then Due for Payment but is then unpaid by
reason of Nonpayment by the Issuer, but only upon receipt by Financial Security, in a form reasonably
satisfactory to it, of (a) evidence of the Owner's right to receive payment of the principal or interest then
Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the
Owner's rights with respect to payment of such principal or interest that is Due for Payment shall
thereupon vest in Financial Security. A Notice of Nonpayment will be deemed received on a given
Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will
be deemed received on the next Business Day. If any Notice of Nonpayment received by Financial
Security is incomplete, it shall be deemed not to have been received by Financial Security for purposes
of the preceding sentence and Financial Security shall promptly so advise the Trustee, Paying Agent or
Owner, as appropriate, who may submit an amended Notice of Nonpayment. Upon disbursement in
respect of a Bond, Financial Security shall become the owner of the Bond, any appurtenant coupon to
the Bond or right to receipt of payment of principal of or interest on the Bond and shall be fully
subrogated to the rights of the Owner, including the Owner's right to receive payments under the Bond,
to the extent of any payment by Financial Security hereunder. Payment by Financial Security to the
Trustee or Paying Agent for the benefit of the Owners shall, to the extent thereof, discharge the
obligation of Financial Security under this Policy.

Except to the extent expressly modified by an endorsement hereto, the following terms shall have
the meanings specified for all purposes of this Policy. "Business Day" means any day other than (a) a
Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer's
Fiscal Agent are authorized or required by law or executive order to remain closed. "Due for Payment"
means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the
date on which the same shall have been duly called for mandatory sinking fund redemption and does
not refer to any earlier date on which payment is due by reason of call for redemption (other than by
mandatory sinking fund redemption), acceleration or other advancement of maturity unless Financial
Security shall elect, in its sole discretion, to pay such principal due upon such acceleration together with
any accrued interest to the date of acceleration and (b) when referring to interest on a Bond, payable on
the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the
Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for
payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shall
also include, in respect of a Bond, any payment of principal or interest that is Due for Payment
 Page 2 of 2
Policy No. -N

made to an Owner by or on behalf of the Issuer which has been recovered from such Owner pursuant to
the United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable
order of a court having competent jurisdiction. "Notice" means telephonic or telecopied notice,
subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an Owner,
the Trustee or the Paying Agent to Financial Security which notice shall specify (a) the person or entity
making the claim, (b) the Policy Number, (c) the claimed amount and (d) the date such claimed amount
became Due for Payment. "Owner" means, in respect of a Bond, the person or entity who, at the time of
Nonpayment, is entitled under the terms of such Bond to payment thereof, except that "Owner" shall not
include the Issuer or any person or entity whose direct or indirect obligation constitutes the underlying
security for the Bonds.

Financial Security may appoint a fiscal agent (the "Insurer's Fiscal Agent") for purposes of this Policy
by giving written notice to the Trustee and the Paying Agent specifying the name and notice address of the
Insurer's Fiscal Agent. From and after the date of receipt of such notice by the Trustee and the Paying
Agent, (a) copies of all notices required to be delivered to Financial Security pursuant to this Policy shall be
simultaneously delivered to the Insurer's Fiscal Agent and to Financial Security and shall not be deemed
received until received by both and (b) all payments required to be made by Financial Security under this
Policy may be made directly by Financial Security or by the Insurer's Fiscal Agent on behalf of Financial
Security. The Insurer's Fiscal Agent is the agent of Financial Security only and the Insurer's Fiscal Agent
shall in no event be liable to any Owner for any act of the Insurer's Fiscal Agent or any failure of Financial
Security to deposit or cause to be deposited sufficient funds to make payments due under this Policy.

To the fullest extent permitted by applicable law, Financial Security agrees not to assert, and hereby
waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment
or otherwise, to the extent that such rights and defenses may be available to Financial Security to avoid
payment of its obligations under this Policy in accordance with the express provisions of this Policy.

This Policy sets forth in full the undertaking of Financial Security, and shall not be modified, altered or
affected by any other agreement or instrument, including any modification or amendment thereto. Except
to the extent expressly modified by an endorsement hereto, (a) any premium paid in respect of this Policy
is nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of
the Bonds prior to maturity and (b) this Policy may not be canceled or revoked. THIS POLICY IS NOT
COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76
OF THE NEW YORK INSURANCE LAW.

In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this Policy to be executed
on its behalf by its Authorized Officer.

[Countersignature] FINANCIAL SECURITY ASSURANCE INC.

By By
Authorized Officer

A subsidiary of Financial Security Assurance Holdings Ltd. (212) 826-0100

31 West 52nd Street, New York, N.Y. 10019

Form 500NY (5/90)

(This Page Intentionally Left Blank)
 OFFICIAL STATEMENT
$8,620,000
CITY OF STOW, OHIO
GENERAL OBLIGATION (Limited Tax)
VARIOUS PURPOSE BONDS, SERIES 2008

FINANCIAL ADVISOR:

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