Okaloosa County BOCC — November 4, 2014 — Preliminary Official Statement — reading text

Source: Okaloosa County Finance Department. MUNICIPAL BOND INSURANCE The County has received a commitment from Build America Mutual Assurance Company (the "Insurer") to issue a Municipal Bond Insurance Policy (the "Policy") for the Series 2014 Bonds. As described on the cover hereof, the County will make a decision at pricing regarding which Series 2014 Bonds, if any, will be guaranteed under the Policy. Any such Series 2014 Bonds so insured are referred to herein as the "Insured Bonds". THE PROJECT The Project is the acquisition and construction of additional County facilities to be known as the "Southside Annex", improvements to the County Courthouse in Crestview, and other capital improvements. 25  INVESTMENT CONSIDERATIONS General The purchase of the Series 2014 Bonds involves a degree of risk, as is the case with all investments. Factors that could affect the County's ability to perform its obligations under the Resolution, including the timely payment of principal of and interest on the Series 2014 Bonds, include, but are not necessarily limited to, the following: Limited Special Obligations The Series 2014 Bonds are limited, special obligations of the County, the principal of, premium, if any, and interest on which are payable from and secured solely by a pledge of and lien on the Pledged Funds. THE SERIES 2014 BONDS DO NOT CONSTITUTE A GENERAL OBLIGATION OR INDEBTEDNESS OF THE COUNTY AND ARE NOT "SERIES 2014 BONDS" WITHIN THE MEANING OF THE CONSTITUTION OF THE STATE OF FLORIDA. NO REGISTERED OWNER OR BENEFICIAL OWNER OF ANY SERIES 2014 BONDS WILL EVER HAVE THE RIGHT (1) TO COMPEL THE LEVY OF AD VALOREM TAXES TO PAY PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2014 BONDS, OR (2) TO COMPEL THE COUNTY TO PAY THE PRINCIPAL, PREMIUM, IF ANY, AND INTEREST ON THE SERIES 2014 BONDS FROM ANY FUNDS OF THE COUNTY OTHER THAN THE PLEDGED FUNDS IN THE MANNER PROVIDED IN THE RESOLUTION. THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE SERIES 2014 BONDS DO NOT CONSTITUTE A LIEN ON ANY PROPERTY OF OR IN THE COUNTY OTHER THAN THE PLEDGED FUNDS IN THE MANNER PROVIDED IN THE RESOLUTION. Bond Insurance Although some or all of the Series 2014 Bonds may be insured by the Municipal Bond Insurance Policy issued by the Insurer which unconditionally guarantees the payment of that portion of the principal of and interest on Insured Bonds which has become due for payment, but which is unpaid by reason of nonpayment by the County, there can be no assurance that the Insurer will make such payments. In the event of default of the payment of principal or interest with respect to the Insured Bonds when all or some becomes due, any owner of the Insured Bonds shall have a claim under the Policy for such payments. However, in the event of any 26 acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments are to be made in such amounts and at such times as such payments would have been due had there not been any such acceleration. The Policy does not insure against redemption premium, if any. The payment of principal and interest in connection with mandatory or optional prepayment of the Insured Bonds by the County which is recovered by the County from the bond owner as a voidable preference under applicable bankruptcy law is covered by the insurance policy, however, such payments will be made by the Insurer at such time and in such amounts as would have been due absent such prepayment by the County unless the Insurer chooses to pay such amounts at an earlier date. Under most circumstances, default of payment of principal and interest does not obligate acceleration of the obligations of the Insurer without appropriate consent. The Insurer may direct and must consent to any remedies and the Insurer's consent may be required in connection with amendments to any applicable bond documents. In the event the Insurer is unable to make payment of principal and interest as such payments become due under the Policy, the Insured Bonds are payable solely from the moneys received pursuant to the Resolution. In the event the Insurer becomes obligated to make payments with respect to the Insured Bonds, no assurance is given that such event will not adversely affect the market price of the Insured Bonds or the marketability (liquidity) for the Insured Bonds. The long-term ratings on the Insured Bonds are dependent in part on the financial strength of the Insurer and its claim paying ability. The Insurer's financial strength and claims paying ability are predicated upon a number of factors which could change over time. No assurance is given that the long-term ratings of the Insurer and of the ratings on the Insured Bonds insured by the Insurer will not be subject to downgrade and such event could adversely affect the market price of the Insured Bonds or the marketability (liquidity) for the Insured Bonds. See "RATINGS" herein. The obligations of the Insurer are general obligations of the Insurer and in an event of default by the Insurer, the remedies available may be limited by applicable bankruptcy law or other similar laws related to insolvency. Neither the County nor the Underwriters have made independent investigation into the claims paying ability of the Insurer and no assurance or representation regarding the financial strength or projected financial strength of the Insurer is given. Thus, when making an investment decision, potential investors should carefully 27 consider the ability of the County to pay principal and interest on the Insured Bonds and the claims paying ability of the Insurer, particularly over the life of the investment. Economic Factors The Pledged Funds consist primarily of the Sales Tax Revenues received by the County. Worsening economic conditions could impact the County's ability to pay principal and interest on the Series 2014 Bonds. See "SALES TAX REVENUES" and "THE COUNTY - Eglin Complex" herein. THE COUNTY Background The County encompasses approximately 1,936 square miles, with approximately 24 miles of coastline along the Gulf of Mexico. It is bordered on the west by Santa Rosa County, on the north by the State of Alabama and on the east by Walton County. The County was created by an act of the legislature of Florida in 1915. The County seat is located at the City of Crestview in the northern portion of the County. Incorporated cities in the County include: Cinco Bayou, Crestview, Destin, Fort Walton Beach, Laurel Hill, Mary Esther, Niceville, Shalimar and Valpariso. Eglin Complex Eglin Air Force Base is the largest Air Force Base in the world, covering 724 square miles of land and approximately 123,000 square miles of water ranges in the Gulf of Mexico. The base actually encompasses three military installations; Eglin Air Force Base, Hurlburt Field and Duke Field, collectively known as the "Eglin Complex". Eglin Air Force Base was established in 1934 and is responsible for development, acquisition, testing, deployment and containment of all air-delivered weapons. Hurlburt Field is headquarters to the Air Force Special Operations Command and its mission is to support training and execution of worldwide special air operations. Duke Field houses the 9191 Special Operations Wing, the only special operations unit in the Air Force Reserve. The Eglin Complex is under the direction of the Air Material Command and the Air Armament Center. The Air Armament Center is responsible for planning, development, direction, testing and evaluation of U.S. and allied air armament, navigation/guidance systems, and command and central systems for all air-delivered weapons. The Eglin Complex houses over fifty associate units of the Air Force, including specialized schools, operations and tactical wings, laboratories and research units. 28  According to the Economic Development Council of Okaloosa County, approximately 41% of the land area of the County is covered by the Eglin Complex and approximately 70% of the County's economic activity comes from the military and civilian installations connected to the Eglin Complex. The economic viability of the County is directly dependent on the military. The County's military installations are the prime generators of economic activity that support active military, civil service, military dependents and retired military personnel and their families. Further, defense related spending in the County generates additional employment and wages and many of the largest defense contractors in Florida have operations in the County. In November, 2005, the United States Defense Base Realignment and Closure Commission, commonly referred to as "BRAC", ordered 22 major U.S. military bases closed. As a result of the closures and realignments, approximately 5,000 new military and civilian personnel will be living and working at the Eglin Complex, including the U.S. Army 7th Special Forces Group (Airborne) which will be relocated from Fort Bragg, North Carolina to the Eglin Complex. It is estimated that the population impact, including spouses and children, will be approximately 6,000 people. The F35 Joint Strike Fighter Initial Training Center will also come to the Eglin Complex. The first F35s are expected to arrive in 2010 and the estimated population impact through 2016 is estimated at 4,800. Population The total population of the County was 170,498 in 2000 according to the U.S. Census Bureau and was estimated to be 180,822 in 2012, according to the Florida Statistical Abstract 2012 published by the University of Florida, Bureau of Economic and Business Research. The population and commercial growth of the County is primarily in the coastal area of the County along the Gulf of Mexico within the cities of Fort Walton Beach and Destin at the hub of the population center. Government The County is governed by an elected five-member Board of County Commissioners (the "Board"). Each Commissioner is elected for a four-year term of office. The Board appoints a County Administrator to administer the County's programs. The Clerk of the Circuit Court of the County is the clerk, auditor and comptroller for the Board. The County seat is in Crestview, with a branch office in Shalimar. In addition to the courthouse facilities, service complexes are located in the north and southern sections of the County. Listed below are current members duly elected of the Board of County Commissioners and their term expiration dates. 29  Date Current Name Term Expires Kelly Windes, Chairman November 2016 Nathan Boyles, Vice Chairman November 2016 Wayne Harris November 2016 Dave Parisot November 2014 Don Amunds November 2014 Budgetary Process The County's annual budget is prepared pursuant to Chapters 129 and 200 of the Florida Statutes and represents the County's legal authority to levy taxes and expend funds for County purposes. The Board will be held personally liable and subject to penalty for making unbudgeted expenditures. On or before June 1 of each year