Office of the City Clerk - Record #: F2016-10

• Record #: F2016-10
• Type: Communication
• Status: Placed on File
• Intro date: 2/10/2016
• Final action: 2/10/2016
• Title: Notification of sale regarding General Obligation Refunding Bonds, Series 2015C
• Sponsors: Dept./Agency

Date	Journal Page Number	Action By	Action	Result
2/10/2016	17835	City Council	Placed on File

Department of Finance city of chicago


January 21, 2016


Susana Mendoza -e-
cn
City Clerk
121 North LaSalle Street, Room 107 Chicago, Illinois 60602

RE: City of Chicago, Illinois, $500,000,000 General Obligation Bonds Series 2015C (the "Bonds") Dear Ms. Mendoza,
Attached is the Notification of Sale which is required to be filed with your office pursuant to Section 12 of the ordinance authorizing the issuance of the Series 2015C Bonds, which was passed by the City Council on September 24, 2015.

Very Truly Yours,

Carole L. Brown Chief Financial Officer

















121 NORTH LASALLE STREET, SUITE 700, CHICAGO, ILLINOIS H0602


State of Illinois )
) SS
County of Cook )
Notification of Sale $500,000,000
General Obligation Refunding Bonds, Series 2015C Being Issued by the City of Chicago
To: The City Council of the City of Chicago

Please be advised that responsive to authority contained in an Ordinance (the "Ordinance") adopted by the City Council (the "City Council") of the City of Chicago (the "City") on September 24, 2015, authorizing the issuance of up to $500,000,000 aggregate principal amount of general obligation bonds of the City, plus original issue discount, a Bond Purchase Agreement dated January 12, 2016 (the "Bond Purchase Agreement"), providing for the sale of $500,000,000 aggregate principal amount of General Obligation Refunding Bonds, Series 2015C (the "Bonds"), was entered into by me as the Chief Financial Officer ofthe City, with the concurrence of the Chairman of the Committee on Finance of the City Council of the City, and the purchasers thereof named below (the "Underwriters"). The Bonds are being issued pursuant to the terms of a trust indenture dated as of January 1, 2016 (the "Indenture"), by and between the City and Zions Bank, a division of ZB, National Association, Chicago, Illinois, as Trustee, Bond Registrar and Paying Agent for the Bonds (the "Trustee ").

The Bonds were sold at a purchase price of $520,923,950.05 (representing the aggregate principal amount of the Bonds plus a reoffering premium of $23,892,352.00, less an underwriters' discount of $2,968,401.95). The Underwriters for the Bonds are Citigroup Global Markets Inc., Cabrera Capital Markets, PNC Capital Markets LLC, Backstrom McCarley Berry & Co., LLC, Drexel Hamilton, LLC, Harvestons Securities, Inc., North South Capital LLC, and Podesta & Co. The compensation (including all fees) of $2,968,401.95 being paid to the Underwriters in connection with the sale of the Bonds represents less than 5% of the aggregate principal amount of the Bonds.

Capitalized terms used herein without definition shall have the meanings assigned to such terms in the Ordinance.

The proceeds of the Series Bonds will be used to provide funds for the purpose of paying (i) costs of the Series 2015C Debt Management Project (as defined below), (ii) certain capitalized interest to become due on the Bonds through January 1, 2017, and (iii) expenses of issuance of the Bonds (including the Underwriters' discount). "Series 2015C Debt Management Project" means (i) the payment of costs of the Debt Management Purposes described in Schedule II attached hereto.

Attached hereto as Exhibits 1 through 3, respectively, are executed copies of the Bond Purchase Agreement, the Official Statement dated January 12, 2016 and the Indenture pursuant to which, the Bonds are being issued.

Pursuant to Section 12 ofthe Ordinance, the undersigned hereby makes the following determinations: (a) the principal amount of the Bonds is $500,000,000 and the designation of the Bonds and principal amount of the Bonds are set forth in the first paragraph hereof, (b) the Bonds are issued as Current Interest Bonds in denominations of $5,000 or any integral multiple thereof, none of which are sold as Direct Purchase Bonds, Capital Appreciation Bonds or Convertible Bonds, (c) the Bonds mature and are subject to redemption as set forth in Schedule I attached hereto, (d) the principal amounts and interest rates on the Bonds are set forth in Schedule I attached hereto, (e) a description of the Series 2015C Debt Management Project, including an identification of the Outstanding Indebtedness to be paid or refunded or interest on which is to be paid with proceeds of the Bonds and the date on and price or amount at which such Outstanding Indebtedness or interest thereon shall be paid or refunded, is set forth in Schedule II attached hereto,(f) No proceeds of the Bonds have been used to reimburse the Corporate Fund of the City for amounts expended therefrom in connection with the payment of debt service relating to Outstanding Indebtedness (g) None of the Bonds are insured, (h) the Underwriters of the Bonds and the compensation paid thereto are as set forth above, and such compensation does not exceed five percent of the principal amount of the Bonds, (i) the Bonds are issued in book-entry form; the book entry depository is The Depository Trust Company, (j) the sale price of the Bonds is as set forth in the second paragraph of this Notification of Sale, and such price with respect to the Bonds is not less than 85 percent of the principal amount of the Bonds, (k) the Trustee shall serve as Bond Registrar and The Bank of New York Mellon Trust Company, Amalgamated Bank of Chicago, Wells Fargo Bank, N.A., Seaway National Bank of Chicago and U.S. Bank, National Association shall serve as Escrow Trustees under the Series 2015C Debt Management Project for the respective issues of bonds being refunded or for which interest is being paid, and for which they are currently acting as trustees, as are set forth in Schedule II, and, (1) provisions relating to the transfer or exchange of Bonds are set forth in the Indenture.

Pursuant to Section 7 of the Bond Ordinance, the amount of taxes to be levied for the Bonds in each year will be less than the levy of taxes specified in Section 7 of the Bond Ordinance and I have determined, pursuant to the Ordinance, to abate the excess levy of taxes not necessary for the purpose of payment of the principal of and interest on the Bonds, as specified, together with the annual tax levy requirements for the payment of the principal and interest on the Bonds, in the Notification of Tax Abatement filed concurrently with the City Clerk, a copy of which is attached hereto as Schedule III.











_9_

Respectfully submitted as of this^L?tday of January, 2016.

Carole L. Brown Chief Financial Officer















































[Signature Page to Notification of Sale]
Exhibit 1 Bond Purchase Agreement

Bond Purchase Agreement
$500,000,000 CITY OF CHICAGO
General Obligation Refunding Bonds, Series 2015C

January 12, 2016

City of Chicago Office of the City Comptroller 121 North LaSalle Street, 7lh Floor Chicago, Illinois 60602 Attention: Chief Financial Officer
Ladies and Gentlemen:
The undersigned, Citigroup Global Markets Inc. (the "Representative"), on behalf of itself and the other underwriters listed below (collectively, the "Underwriters"), hereby offers to enter into this Bond Purchase Agreement (the "Agreement") with the City of Chicago (the "City"), for the purchase by the Underwriters, and sale by the City, of all but not less than all ofthe City's General Obligation Refunding Bonds, Series 2015C (the "Bonds"). This offer is made subject to the acceptance by the City, evidenced by the signature of a duly authorized officer of the City in the space provided below, on or before 5:00 P.M., Chicago time on the date hereof, and upon such acceptance this Agreement shall be in full force and effect in accordance with its terms and shall be binding on the City and the Underwriters.
The Representative is authorized, and hereby represents and warrants that it is authorized, to act as Representative of the Underwriters and to execute this Agreement and has full authority to take such action as it may deem advisable with respect to all matters pertaining to this Agreement. Each Underwriter hereby severally represents to the City that it is registered and in good standing under the Securities Exchange Act of 1934, as amended (the "1934 Act"), as a municipal securities dealer.

The primary role of the Underwriters is to purchase the Bonds, for resale to investors, in an arm's-length commercial transaction between the City and the Underwriters. The Underwriters have financial and other interests that differ from those of the City.
Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Preliminary Official Statement, as defined herein.

1. Agreement to Sell and Purchase.
(1) Upon the terms and conditions and based upon the representations, warranties and covenants herein set forth, the Underwriters, jointly and severally, hereby agree to purchase from the City and the City hereby agrees to sell to the Underwriters: the Bonds at a

price equal to $520,923,950.05 (which represents the aggregate principal amount of the Bonds less an Underwriters' discount of $2,968,401.95 and plus a re-offering premium of $23,892,352.00).
(2) It shall be a condition to the City's obligation to sell and deliver the Bonds that all the Bonds be purchased and paid for by the Underwriters at the Closing (as defined in Section 7 hereof) and a condition to the Underwriters' obligation to purchase and pay for the Bonds that all Bonds be issued, sold and delivered by the City at the Closing.
Bond Authorization. The Bonds are authorized by an ordinance of the City adopted by the City Council ofthe City (the "City Council") on September 24, 2015 (the "Ordinance"), and the Bonds will be issued pursuant to and secured by a Trust Indenture dated as of January 1,2016 (the "Trust Indenture"), between the City and Zions Bank, a division of ZB, National Association, as Trustee, Bond Registrar and Paying Agent for the Bonds (the "Trustee"). The Bonds of each Series will mature, bear interest and have such other terms and conditions as are set forth on Schedule I hereto.
The Preliminary Official Statement. Attached hereto as Exhibit A is a copy of the Preliminary Official Statement ofthe City, dated January 5,2016, relating to the Bonds (the "Preliminary Official Statement"). For purposes of Rule 15c2-12 ("Rule 15c2-12") adopted by the Securities and Exchange Commission (the "SEC") under the 1934 Act, the Preliminary Official Statement is "deemed final" by the City as of its date except for the omission of such information as is permitted by Rule 15c2-12(b)(1).
Public Offering Price. The Underwriters have agreed to make a bona fide public offering of the Bonds at the initial offering prices set forth on Schedule I. The Representative will provide the City and Co-Bond Counsel (as defined herein) with a closing certificate confirming the reoffering yields and prices of the Bonds and the Underwriters acknowledge that the City and Co-Bond Counsel will rely on such certificate and that such reliance is material to the City in entering into this Agreement and in connection with the delivery of the Bonds.
The Official Statement.

The City shall provide, or cause to be provided, at its expense, to the Underwriters no later than the earlier of (i) seven (7) business days after the date of this Agreement or (ii) one (1) day prior to the Closing, three copies of the Official Statement of the City, dated the date hereof, relating to the Bonds (the "Official Statement"), signed on behalf of the City by the Chief Financial Officer and the Official Statement so delivered shall be "final" for purposes of Rule 15c2-12. Such delivery of the Official Statement shall occur in sufficient time to accompany any confirmation that requests payment from any customer and in sufficient quantity to comply with the rules of the SEC and the Municipal Securities Rulemaking Board (the "MSRB").
If on or prior to the Closing or within twenty-five (25) days after the "end of the underwriting period" (as hereinafter defined) any event known to the City relating to or affecting the City, the Ordinance or the Bonds, shall occur which would cause any statement

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of a material fact contained in the Official Statement to be materially incorrect or materially incomplete, the City will promptly notify the Representative in writing of the circumstances and details of such event. If, as a result of such event, it is necessary, in the joint opinion of the City and the Representative to amend or supplement the Official Statement by stating or restating any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, the City will forthwith prepare and furnish to the Underwriters a reasonable number of copies of an amendment of or a supplement to such Official Statement in form and substance satisfactory to the City and the Representative, at the City's sole cost and expense, which will so amend or supplement such Official Statement so that, as amended or supplemented, the Official Statement will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. For purposes of this Agreement, the term "end of the underwriting period" shall mean the later of the date of Closing or the date on which an Underwriter no longer retains an unsold balance of the Bonds for sale to the public. The Underwriters agree that the date on which the end of the underwriting period shall occur shall be the date of the Closing, unless the Underwriters otherwise notify the City in writing prior to twenty-five (25) days after the date of the Closing that, to the best of their knowledge, the Underwriters retain for sale to the public an unsold balance of the Bonds, in which case the end of the underwriting period shall be extended for additional periods of thirty (30) days each upon receipt of additional written notification from the Underwriters that, to the best of their knowledge, there exists an unsold balance of the Bonds, but in no event shall the end of the underwriting period be extended longer than sixty (60) days after the date of Closing.
The Official Statement shall be provided for distribution, at the expense ofthe City, in such quantity as may be requested by the Underwriters as set forth above in order to permit the Underwriters to comply with Rule 15c2-12, and the applicable rules of the MSRB, with respect to distribution of the Official Statement. The City shall prepare the Official Statement, including any amendments thereto, in word-searchable PDF format as described in the MSRB Rule G-32 and shall provide the electronic copy of the word-searchable PDF format of the Official Statement to the Underwriters no later than one (1) business day prior to the Closing, to enable the Underwriters to comply with MSRB Rule G-32.
The City further agrees to provides the Underwriters with any advance refunding documents (as defined in MSRB Rule G-32) in a word-searchable PDF format as described in the MSRB Rule G-32 and shall provide such electronic copy of the word-searchable PDF format of the advance funding documents to the Underwriters no later than four (4) business days after the Closing, to enable the Underwriters to comply with MSRB Rule G-32.
(3) At or prior to the Closing, the Representative shall file, or cause to be filed, the Official Statement with the MSRB in compliance with the rules ofthe SEC and the MSRB. Promptly after the date after which the Underwriters are no longer obligated under Rule 15c2-12(b)(4) to deliver to potential customers the Official Statement, the Representative shall notify the City of such date.


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6. Representations, Warranties and Covenants of the City. The City represents and warrants to the Underwriters as of the date hereof that:
The City is a municipal corporation and home rule unit of local government, existing under the Constitution and laws of the State of Illinois (the "State").
The City Council has: (i) duly adopted the Ordinance, which remains in full force and effect; (ii) duly approved the execution and delivery of the Trust Indenture; (iii) duly authorized the use of the Preliminary Official Statement prior to the date hereof in connection with the public offering and sale of the Bonds and duly authorized the execution, delivery and distribution of the Official Statement in connection with the public offering and sale of the Bonds; and (iv) duly authorized and approved the execution and delivery of the Bonds, the escrow agreements to be executed and delivered by the City (collectively, the "Escrow Agreements") in connection with the refunding of the general obligation bonds of the City and the payment of interest as identified in Appendix G to the Official Statement (collectively, the "Refunded Bonds"), this Agreement and a continuing disclosure undertaking pursuant to the provisions of Section (b)(5) of Rule 15c2-12 (the "Undertaking").
With the exception of the disclosure described in the Preliminary Official Statement in the section titled "SECONDARY MARKET DISCLOSURE - Corrective Action Related to Certain Bond Disclosure Requirements", the City has not failed during the previous five years to comply in all material respects with any previous undertakings in a written continuing disclosure contract or agreement under Rule 15c2-12.
The City has full legal right, power and authority to: (i) adopt the Ordinance; (ii) execute and deliver this Agreement, the Trust Indenture, the Escrow Agreements, the Undertaking and the Official Statement; (iii) issue, sell and deliver the Bonds of each Series to the Underwriters pursuant to the Ordinance and the Trust Indenture and as provided in this Agreement; and (iv) pay for the Bonds from the sources pledged under the Ordinance and the Trust Indenture for their payment.
The adoption of the Ordinance and compliance with the provisions thereof do not, and the execution and delivery of this Agreement, the Trust Indenture, the Escrow Agreements, the Undertaking and the Official Statement will not, in any material manner, violate any applicable law or administrative regulation of the State or any department, division, agency or instrumentality thereof or of the United States of America (the "United States") or of any department, division, agency or instrumentality thereof, or any applicable judgment or decree to which the City is subject, or conflict with, in a material manner, or constitute a material breach of, or a material default under, any ordinance, agreement or other instrument to which the City is a party or is otherwise bound.
All approvals, consents and orders of, and filings (except, if any, under applicable state "blue sky" laws) with, any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to the performance by the City of its obligations under this Agreement, the Undertaking, the Ordinance, the Trust Indenture, the Escrow Agreements, and the Bonds have been obtained or made.

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The financial statements of the City contained in the Official Statement fairly present the financial position and results of operations of the City as of the date and for the periods therein set forth and the City has no reason to believe that such financial statements have not been prepared in accordance with generally accepted accounting principles as applied to governmental units, consistently applied except as otherwise noted therein.
The Official Statement (excluding any description of The Depository Trust Company ("DTC"), information under the captions "THE BONDS - Book-Entry System," "RATINGS," "CERTAIN VERIFICATIONS," "UNDERWRITING," "TAX MATTERS," APPENDIX A — "SUMMARY OF THE INDENTURE", APPENDIX B — "ECONOMIC AND DEMOGRAPHIC INFORMATION (with respect to the information under the headings "— Economy," "— Percentage of Total Non-Farm Employment by Major Industry Sector" and "and "— Housing Market," and information relating to population, per capita personal income and employment, and unemployment rate with respect to the United States, the State of Illinois, Cook County and the Chicago MSA), Tables 1-10 included in APPENDIX E — "RETIREMENT FUNDS," APPENDIX G — "OPINIONS OF CO-BOND COUNSEL," and information furnished by the Underwriters for use in the Official Statement) as of its date does not, and at the Closing will not, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading in any material respect.
Information in the Third Party Sourced Retirement Fund Tables (as defined in the Official Statement) is sourced from documents published by the Retirement Funds and the City takes no responsibility for the accuracy and completeness of such information; however, nothing has come to the attention of the City which would lead the City to believe that the Third Party Sourced Retirement Fund Tables are not true and correct in all material respects;
The Ordinance, the Trust Indenture, this Agreement, the Escrow Agreements, and the Undertaking, when duly executed and delivered by the parties thereto, as appropriate, will constitute legal, valid and binding obligations of the City enforceable in accordance with their terms (except to the extent that enforceability may be limited by bankruptcy, insolvency and other laws affecting creditors' rights or remedies and the availability of equitable remedies generally).
When delivered to the Representative, and paid for by the Underwriters at the Closing in accordance with the provisions of this Agreement, the Bonds will be duly authorized, executed and delivered and will constitute legal, valid and binding obligations of the City enforceable in accordance with their terms (except to the extent that enforceability may be limited by bankruptcy, insolvency and other laws affecting creditors' rights or remedies and the availability of equitable remedies generally).
Except as disclosed in the Official Statement, there is no action, suit or proceeding, at law or in equity, or before or by a court, public board or body, pending or, to the City's knowledge, threatened, against the City wherein an unfavorable decision, ruling or finding would materially adversely affect (i) the validity or enforceability of the Bonds, the

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Ordinance, the Trust Indenture, the Escrow Agreements, this Agreement, or the Undertaking or (ii) the excludability from federal income taxation of the interest on the Bonds under the Internal Revenue Code of 1986, as amended (the "Code").
The City has not taken, or omitted taking, and will not take or omit to take, any action, which action or omission would adversely affect the excludability from federal income taxation of the interest on the Bonds under the Code.
Any certificate signed by any Authorized Officer of the City and delivered to the Representative at the Closing in connection with the issuance or sale of the Bonds shall be deemed to be a representation and warranty by the City to the Underwriters as to the statements made therein as of the date so delivered.
The City will make available such information, execute such instruments and take such other action in cooperation with the Underwriters as the Representative may reasonably request to qualify the Bonds for offering and sale under the "blue sky" or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriters may designate in writing; provided, however, that nothing in this Section 6(o) shall require the City to consent to general service of process in any state or jurisdiction other than the State.
The City will apply the proceeds of the Bonds in accordance with the Ordinance and the Trust Indenture.
The City acknowledges and agrees that: (i) the transaction contemplated by this Agreement is an arm's length, commercial transaction between the City and the Underwriters in which the Underwriters are acting solely as a principal and not acting as a municipal advisor, financial advisor or fiduciary to the City; (ii) the Underwriters have not assumed any advisory or fiduciary responsibility to the City with respect to the transaction contemplated hereby and the discussions, undertakings and procedures leading thereto (irrespective of whether any Underwriter has provided other services or is currently providing other services to the City on other matters); (iii) the Underwriters have financial and other interests that differ from those of the City; and (iv) the City has consulted its own legal, account, tax, financial and other advisors, as applicable, to the extent it has deemed appropriate.
7. Closing. Subject to the conditions set forth in this Agreement, the closing (the "Closing") of the sale of the Bonds by the City and the purchase of the Bonds by the Underwriters, shall take place at approximately 9:00 a.m., Chicago time, on January 21,2016, at the offices of Ice Miller LLP, 200 West Madison Street, Suite 3500, Chicago, Illinois 60606 (or at such other time, date and place as the City and the Representative mutually agree).

(1) At the Closing, the City shall deliver or cause to be delivered to DTC, as
securities depository, for the account of the Underwriters one fully registered certificate for
each interest rate and maturity of the Bonds of each Series in the aggregate principal amount
thereof, registered in the name of Cede & Co., as nominee for DTC.
(2) Upon delivery of the Bonds to the Representative at the Closing, the City will
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deliver to the Representative the closing documents as set forth in Section 10 hereof.
(3) The Representative will accept delivery of the Bonds and pay the purchase price therefor at the Closing by delivering federal funds checks or making federal funds wire transfers or otherwise confirming deposits of same day funds, as the City shall direct, to the City's account at a bank specified by the City, in an aggregate amount equal to the purchase price of the Bonds pursuant to Section 1 hereof.
Reliance and Further Conditions ofthe Underwriters. The Underwriters have entered into this Agreement in reliance upon the representations, warranties and agreements of the City herein and the performance by the City of its obligations hereunder, both as ofthe date hereof and as of the date of the Closing. The Underwriters' obligations under this Agreement are and shall be subject to the following further condition that at the time ofthe Closing, the Ordinance, the Trust Indenture, the Escrow Agreements, the Undertaking, and this Agreement shall be in full force and effect and the Ordinance and the Official Statement shall not have been amended, modified or supplemented except as may have been agreed to with respect to the Official Statement pursuant to Section 5 hereof, and the City shall have duly adopted and there shall be in full force and effect such ordinances as, in the opinion of Ice Miller LLP, Chicago, Illinois, and Cotillas & Associates, Chicago, Illinois, as co-bond counsel ("Co-Bond Counsel") shall be necessary in connection with the transactions contemplated hereby and thereby.
Termination of Agreement.
(1) The Underwriters shall have the right to cancel their obligations to purchase the Bonds and have the further right to terminate this Agreement, without liability therefor, by written notice to the City from the Representative, if, between the date hereof and the Closing:
legislation shall be introduced in or enacted by the Congress of the United States or adopted by either House thereof or shall have been introduced and favorably reported for passage to either House by any committee of such House to which such legislation had been referred for consideration, or a decision shall have been rendered by or adopted by either House or a decision by a court ofthe United States or the United States Tax Court or an order, ruling or regulation shall have been issued or proposed by or on behalf of the Treasury Department of the United States or the Internal Revenue Service, with respect to federal income taxation upon interest received on obligations of the general character ofthe Bonds which, in the Representative's reasonable opinion, does materially adversely affect the market price or marketability of the Bonds or the ability of the Underwriters to enforce contracts for the sale, at the contemplated offering prices (or yields), of the Bonds, or
legislation shall have been enacted by the Congress of the United States to become effective on or prior to the Closing, or a decision of a court ofthe United States shall be rendered, or a stop order, ruling, regulation or proposed regulation by or on behalf of the SEC or other agency having jurisdiction over the

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subject matter shall be issued or made, to the effect that the issuance, sale and delivery of the Bonds, or any similar obligations of any similar public body of the general character of the City, is in violation of, or has the effect of requiring the contemplated offering, sale and distribution ofthe Bonds to be registered under the Securities Act of 1933, as amended, or the enactment of the Ordinance or any ordinance of similar character is in violation of the Trust Indenture Act of 1939, as amended, or with the purpose or effect of otherwise prohibiting the issuance, sale or delivery of the Bonds as contemplated hereby or by the Official Statement or of obligations of the general character of the Bonds which, in the Representative's reasonable opinion, does materially adversely affect the market price or marketability of the Bonds or the ability of the Underwriters to enforce contracts for the sale, at the contemplated offering prices (or yields), of the Bonds, or
there shall have occurred any event which in the Representative's reasonable opinion, after consultation with its legal counsel, makes the Official Statement either (A) contain an untrue statement of a material fact or (B) omit to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading in any material respect, and (a) the City fails to prepare or furnish or fails to cause to be prepared or furnished to the Underwriters an amendment or supplement to the Official Statement, pursuant to Section 5 hereof, which will amend or supplement the Official Statement so that, as amended or supplemented, the Official Statement will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading in a material respect, or (b) the effect of the Official Statement as so supplemented is, in the reasonable opinion of the Representative, to materially adversely affect the market for the Bonds or the sale, at the contemplated offering prices (or yields), ofthe Bonds by the Underwriters, or
there shall be in force a general suspension of trading on The New York Stock Exchange, Inc., or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in force on The New York Stock Exchange, Inc., whether by virtue of a determination by that Exchange or by order of the SEC or any other governmental authority having jurisdiction, or any national securities exchange shall have-imposed additional material restrictions not in force as of the date hereof with respect to trading in securities generally, or to the Bonds or similar obligations, or

a general banking moratorium shall have been declared by either federal, State or New York authorities having jurisdiction and be in force, or
any legislation, ordinance, rule or regulation shall be enacted by the City or State, or any department or agency thereof, or a decision by any court of competent jurisdiction within the State shall be rendered which, in the reasonable opinion of the Representative, would have a material adverse effect on the market price or marketability of the Bonds, or

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a war involving the United States, an outbreak or escalation of or adverse development in hostilities or terrorist activities or other national or international calamity or crisis shall have occurred which, in the reasonable opinion of the Representative, materially adversely affects the market price or marketability of the Bonds, or
there shall be any proceeding or threatened proceeding by the SEC against the City and such proceeding or threatened proceeding, in the reasonable opinion of the Representative, materially adversely affects the market price or marketability of the Bonds.
(2) If the City shall be unable to satisfy the conditions contained in this Agreement or if the Underwriters' obligations shall be terminated for any reason permitted by this Agreement, this Agreement shall terminate and neither the City nor the Underwriters shall have any further obligations hereunder.
10. Closing Conditions.
(1) The Underwriters' obligations to purchase, to accept delivery of and to pay for the Bonds at the Closing shall be conditioned upon the City's performance of its obligations under Sections 6, 7 and 8 hereof and the Underwriters' receipt of the following documents:
three copies of the Official Statement manually executed by the Chief Financial Officer;
the approving opinions, dated the date of the Closing, of Co-Bond Counsel to the City, substantially in the form attached to the Official Statement as Appendix G;
the opinions, dated the date of the Closing and addressed to the Representative on behalf of the Underwriters and to the City, of Co-Bond Counsel, substantially in the form attached hereto as Exhibit B-l;
the letters dated the date of the closing and addressed to the Representative on behalf of the Underwriters and to the City, of Co-Bond Counsel, substantially in the form attached hereto as Exhibit B-2;
a letter dated the date of the closing and addressed to the City of Chapman and Cutler LLP, Special Pension Disclosure Counsel to the City in connection with certain pension matters described in the Official Statement, substantially in the form attached hereto as Exhibit B-3, which letter shall also either be addressed to or accompanied by a reliance letter to the Representative on behalf of the Underwriters;
an opinion, dated the date of the Closing and addressed to the Representative on behalf of the Underwriters, ofthe Corporation Counsel of the City, substantially in the form attached hereto as Exhibit C;


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an opinion or opinions, dated the date of the Closing and addressed to the Representative on behalf of the Underwriters, of Kutak Rock LLP, Chicago, Illinois, as counsel for the Underwriters ("Underwriters' Counsel"), in form and substance satisfactory to the Representative;
an opinion or opinions, dated the date of the Closing and addressed to the Representative on behalf of the Underwriters, of Pugh, Jones & Johnson, P.C., Chicago, Illinois, and Shanahan & Shanahan LLP, Chicago, Illinois, Co-Disclosure Counsel to the City, substantially in the form attached hereto as Exhibit D;
(ix) a certificate, dated the date of the Closing, signed by the Chief
Financial Officer, to the effect that (A) the representations and warranties of the
City herein are correct in all material respects as of the date of the Closing; and (B)
there has been no material adverse change in the financial condition of the City
since December 31, 2014, as reflected in Appendix C to the Official Statement,
except as set forth in the Official Statement;
(x) a certificate of the Trustee to the effect that the Trustee has full legal
right, power and authority to act as the Trustee, Bond Registrar, and Paying Agent
under the Ordinance and the Trust Indenture;
(xi) a certificate, dated the date of the Closing, signed by the
Representative, in form and substance satisfactory to the City and Co-Bond
Counsel;
(xii) an executed copy of the Undertaking substantially in the form
summarized in the Official Statement under the heading "SECONDARY
MARKET DISCLOSURE";
an executed copy of the Trust Indenture;
a copy of an agreement between the City and DTC relating to the safekeeping and book-entry form of the Bonds;
(xv) a copy, duly certified by the City Clerk of the City, of the Ordinance,
as passed by the City Council and approved by the Mayor;
(xvi) evidence satisfactory to the Representative that the Bonds have
ratings of "BBB+" (negative outlook) by Standard & Poor's, a division of The
McGraw-Hill Companies, Inc., "BBB+" (negative outlook) by Fitch Ratings, and
"A-" (negative outlook) by Kroll Bond Rating Agency;
an executed copy of each of the Escrow Agreements;
a certificate from each escrow agent (collectively, the "Escrow Agents") to the effect that such Escrow Agent has the full legal right, power and authority to act as Escrow Agent under the related Escrow Agreement;



10

a verification report of Robert Thomas, CPA, LLC, Shawnee Mission, Kansas, dated the date of the Closing, as to the accuracy of certain calculations with respect to the Bonds and the Refunded Bonds; and
such additional closing certificates and agreements related to the Bonds, including such tax certifications and agreements relating to the Bonds, as Co-Bond Counsel shall reasonably determine to be necessary to deliver their opinions as provided hereinabove.
(2) All of the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Agreement will be deemed to be in compliance with the provisions hereof if, but only if, they are in form and substance satisfactory to the Representative, in its reasonable judgment. Payment for the Bonds and acceptance of the Bonds by the Underwriters shall constitute acknowledgment by the Underwriters of the City's full performance hereunder.
11. Expenses. The Underwriters shall be under no obligation to pay, and the City shall pay, any and all expenses incident to the performance of the City's obligations hereunder, including but not limited to: (a) the cost of the preparation and printing or other reproduction of the Ordinance, the Trust Indenture, the Preliminary Official Statement and the Official Statement, as well as the cost of shipping the Official Statement; (b) the cost of the preparation and printing of the Bonds; (c) the fees and disbursements of Co-Bond Counsel and Co-Disclosure Counsel; (d) the fees and disbursements of any experts or consultants retained by the City; (e) the fees of the Trustee and the Escrow Agents; (f) the fees for the municipal bond ratings on the Bonds; and (g) the fees of Digital Assurance Certification, L.L.C. for continuing disclosure undertaking compliance review. The City shall be responsible for any meal, travel and lodging expenses of its own officials and employees. The Underwriters will pay the expenses incurred by them or any of them in connection with their public offering and distribution of the Bonds, including, but not limited to, the CUSIP Service Bureau charges, the fees and expenses of Underwriters' Counsel and advertising expenses directly incurred by the Underwriters.
The City shall pay for any expenses (included in the expense component of the Underwriters' discount) incurred by the Underwriters on behalf of the City in connection with the marketing, issuance and delivery of the Bonds, including, but not limited to, meals, transportation, lodging, and entertainment of the City's employees and representatives.















11

Notices. Any notice or other communication to be given to the City under this Agreement shall be given by delivering the same in writing at the address set forth above, and any such notice or other communication to be given to the Underwriters shall be given by delivering the same in writing to the Representative at the following address:
Citigroup Global Markets Inc. 227 West Monroe Street Mail Stop 25-PFD Chicago, Illinois 60606
Attention: Samantha Costanzo, Managing Director
No Third Party Beneficiaries, Survival, Etc. This Agreement is made solely for the benefit of the City and the Underwriters (including the successors or assigns of any Underwriter), and no other person, partnership, association or corporation including any purchaser of the Bonds shall acquire or have any right hereunder or by virtue hereof. All of the representations and agreements by the City in this Agreement shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Underwriters and shall survive the delivery of and payment for the Bonds.
Governing Law. The rights and obligations of the parties to this Agreement shall be governed by, construed and enforced in accordance with the laws ofthe State, without giving effect to the conflict of laws provisions thereof.
Representations and Warranties of the Underwriters. The Underwriters represent and warrant that:

They have heretofore authorized the Representative to execute any document on behalf of or exercise any authority of and otherwise to act for, the Underwriters in all matters under or pertaining to this Agreement. Each Underwriter has warranted and confirmed to the Representative, and the Representative warrants and confirms to the City that: (i) it is duly registered under the 1934 Act, as a broker/dealer or municipal securities dealer and has duly paid the fee prescribed by MSRB Rule A-12 or is exempt from such requirements, (ii) it is (a) a member in good standing of the Financial Industry Regulatory Authority ("FINRA") or (b) otherwise eligible under FINRA rules to receive underwriting discounts and concessions available to such members with respect to underwriters of municipal securities, and (iii) it has complied with the dealer registration requirements, if any, of the various jurisdictions in which it offers Bonds for sale. The Underwriters represent, warrant and covenant that they are and will be in compliance with all applicable laws, rules and regulations in connection with the offering, issuance and sale of the Bonds.
To the knowledge of the Underwriters, no person holding office ofthe City, either by election or appointment, is in any manner financially interested, either directly in the officer's own name or indirectly in the name of any other person, association, trust or corporation, in any contract being entered into by the Underwriters or the performance of any work to be carried out by the Underwriters in connection with the issuance and sale of the Bonds upon which said officer may be called upon to act or vote.


12

Each Underwriter severally represents to the City that neither the Underwriter, nor any Affiliate thereof is listed on any of the following lists maintained by the Office of Foreign Assets Control of the United States Department of the Treasury, the Bureau of Industry and Security of the United States Department of Commerce, the United States Department of State or their successors, or on any other list of persons or entities with which the City may not do business under any applicable law, rule, regulation, order or judgment: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List, the List of Statutorily Debarred Parties and the Excluded Parties List. Such representation shall be provided to the City in the form attached hereto as Exhibit E.
For purposes of this representation, "Affiliate," when used to indicate a relationship with a specified person or entity, means a person or entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified person or entity, and a person or entity shall be deemed to be controlled by another person or entity, if controlled in any manner whatsoever that results in control in fact by that other person or entity (or that other person or entity and any persons or entities with whom that other person or entity is acting jointly or in concert), whether directly or indirectly and whether through share ownership, a trust, a contract or otherwise.
The Underwriters may enter into distribution agreements with certain financial institutions for the retail distribution of municipal securities, including the Bonds, at the initial public offering price. In accordance with such arrangements, the Underwriters may share a portion of its underwriting compensation.

Approval. The approval of the Underwriters when required hereunder or the determination of their satisfaction as to any document referred to herein shall be in writing signed by the Representative and delivered to the City.
Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the parties and their successors and assigns, and will not confer any rights upon any other person. The terms "successors" and "assigns" shall not include any purchaser of any Bond or Bonds from the Underwriters merely because of such purchase.
Enforceability. If any provision of this Agreement shall be held or deemed to be or shall, in fact, be invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions, or in all jurisdictions, because it conflicts with any provisions of any constitution, statute, rule or public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question invalid, inoperative or unenforceable in any other case or circumstances, or of rendering any other provision or provisions of this Agreement invalid, inoperative or unenforceable to any extent whatsoever.
Counterparts. This Agreement may be executed in several counterparts, each of which shall be regarded as the original and all of which shall constitute one and the same document.


13

20. Cooperation with City Inspector General. As acknowledged by each
Underwriters' Representation Letter, each Underwriter understands and agrees that it is
required to and will comply with the provisions of Chapter 2-56 of the Municipal Code of
Chicago. Pursuant to Section 2-56-090 of the Municipal Code of Chicago, it shall be the
duty of each Underwriter to cooperate with the inspector general in any investigation or
hearing undertaken pursuant to Chapter 2-56. Every Underwriter shall report, directly and
without undue delay, to the City's inspector general any and all information concerning
conduct by any person which such Underwriter knows to involve corrupt activity, pursuant
to Section 2-156-018(b) of the Municipal Code of Chicago. As acknowledged by each
Underwriters' Representation Letter, any Underwriter's knowing failure to report corrupt
activity as required in subsection (b) of Section 2-156-018 of the Municipal Code of
Chicago, shall constitute an event of default under this Agreement. For purposes of
subsection (b) of Section 2-156-018 of the Municipal Code of Chicago, "corrupt activity"
shall mean any conduct set forth in subparagraph (a)(1), (2) or (3) of Section 1-23-020 of
the Municipal Code of Chicago:
bribery or attempted bribery, or its equivalent under any local, state or federal law, of any public officer or employee of the City or of any sister agency; or
theft, fraud, forgery, perjury, dishonesty or deceit, or attempted theft, fraud, forgery, perjury, dishonesty or deceit, or its equivalent under any local, state or federal law, against the City or of any sister agency; or
conspiring to engage in any of the acts set forth in items (1) or (2) of above.
The Underwriter (individually and collectively) agrees and covenants that no payment, gratuity or offer of employment shall be made in connection with this Agreement, by or on behalf of a subcontractor to the Underwriter or any higher-tier subcontractor or any person associated therewith, as an inducement for the award of a subcontract or order related to this Agreement.
21. Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto with respect to the matters covered hereby, and supersedes all prior
agreements and understandings between the parties. This Agreement shall only be amended,
supplemented or modified in a writing signed by both of the parties hereto.
















14

IN WITNESS WHEREOF, the parties hereto have caused this Bond Purchase Agreement in connection with the City of Chicago General Obligation Refunding Bonds, Series 2015C to be executed by their duly authorized representatives as of the date first above written.
Very truly yours,
THE UNDERWRITERS
Citigroup Global Markets Inc.
Cabrera Capital Markets, LLC
PNC Capital Markets LLC
Backstrom McCarley Berry & Co., LLC
Drexel Hamilton, LLC
Harvestons Securities, Inc.
North South Capital LLC
Podesta & Co.

By: CITIGROUP GLOBAL MARKETS INC.
As Representative

Chief Financial Officer

ConcWed:
Byjy0^^^\>. ty)
'Edward M. Burke Chairman, Committee on Finance of the City Council

Schedule I

Terms Of Bonds

Aggregate Principal Amount: $500,000,000
Dated: Date of Issuance (Expected to be January 21, 2016)
Maturities, Principal Amounts, Interest Rates, Prices and CUSIP Numbers:
$500,000,000 General Obligation Refunding Bonds, Series 2015C
Maturity Interest
(January I) Principal Amount Rate
2020 $ 6,635,000 5.00%
7,695,000 5.00%
79,930,000 5.00%
78,965,000 5.00%
78,530,000 5.00%
63,285,000 5.00%
54,340,000 5.00%
11,415,000 5.00%
4,555,000 5.00%
4,895,000 5.00%
1,505,000 5.00%
3,595,000 5.00%
2035 14,425,000 5.00%
2038 90,230,000 5.00%
Price
105.366 106.147 106.165 106.008 105.873 105.758 105.530 104.870 104.051 103.483 103.080 102.598 101.405 100.972
CUSIP
167486WS4
167486WT2
167486WU9
167486WV7
I67486WW5
167486WX3
167486WY1
167486WZ8
167486XA2
167486XB0
167486XC8
167486.XD6
167486XE4
167486XF1

4. Redemption.

The Bonds are subject to both optional and mandatory redemption prior to maturity, as described below. The Bonds shall be redeemed only in principal amounts of $5,000 and integral multiples thereof.
Optional Redemption. The Bonds maturing on and after January 1, 2027, are subject to redemption prior to maturity at the option of the City, in whole or in part, on any date on or after January 1, 2026, and if less than all of the outstanding Bonds of a single maturity and interest rate are to be redeemed, the Bonds called shall be called by lot in such principal amounts and from such maturities and interest rates as the City shall determine, at a redemption price equal to the principal amount of the Bonds being redeemed plus accrued interest to the date fixed for redemption.

The City is authorized to sell or waive any right the City may have to call any of the Bonds for optional redemption, in whole or in part; provided, that such sale or waiver will not adversely affect the excludability of interest on the Bonds from gross income for federal income tax purposes.

Mandatory Redemption of the Bonds. The Bonds due January 1 in the years 2035 and 2038, are subject to mandatory redemption prior to maturity, at par and accrued interest to the date fixed for redemption, on January 1 of the following years and in the following principal amounts:
Term Bond Due January 1,2035
Year Principal Amount
$4,595,000
4,830,000
5,000,000*
Term Bond Due January 1,2038
Year Principal Amount
$35,490,000
37,265,000
17,475,000*

* Final Maturity
Exhibit A Preliminary Official Statement
PRELIMINARY OFFICIAL STATEMENT DATED JANUARY 5, 2016
NEW ISSUE-GLOBAL BOOK ENTRY RATINGS: See "RATINGS" herein.

Subject to compliance by the City of Chicago with certain covenants, in the respective opinions of Co-Bond Counsel, under present law, interest on the Series 2015C Bonds is not included in the gross income of their owners for federal income tax purposes and thus is exempt from present federal income taxes based on gross income. Interest on the Series 2015C Bonds is not an item of tax preference in computing the alternative minimum tax on individuals and corporations, but is taken into account in computing an adjustment used lo determine the alternative minimum tax for certain corporations. Interest on the Taxable Series 2015D Bonds is not excludable from gross income of the owners thereof for federal income tax purposes Interest oh the Bonds is not exempt from present Illinois income taxes. See "TAX MATTERS" herein for a more complete discussion

$500,000,000* CITY OF CHICAGO
$498,140,000* $1,860,000
General Obligation Refunding Bonds General Obligation Refunding Bonds
Series 2015C Taxable Series 2015D
Dated: Date of Delivery Due: January I, as shown on the inside front cover
The General Obligation Refunding Bonds, Series 2015C (the "Series 2015C Bonds") and the General Obligation Refunding Bonds, Taxable Series 2015D (the 'Taxable Series 2015D Bonds" and together with the Scries 2015C Bonds, the "Bonds") arc issuable as fully registered bonds and will be registered in the name of Cede & Co., as registered owner and nominee of I he Depository Trust Company, New York, New York ("'DTC"). DTC will act as securities depository for the Bonds. Purchasers of the Bonds will not receive certificates representing their interests in the Bonds purchased. Ownership by the beneficial owners of the Bonds will be evidenced by book-entry only . The Series 20I5C Bonds are issuable in denominations of $5,000 or any integral multiple thereof. The Taxable Scries 2015D Bonds are issuable in denominations of $1,000 or any integral multiple thereof.
Interest on the Bonds will accrue from the date of issuance and be payable on each January 1 and July 1, commencing July I, 2016.* Principal of and interest on the Bonds will be paid by Zions Bank, a division of ZB, National Association. Chicago. Illinois, as trustee under the Indenture described herein, to DTC, which in turn will remit such principal and interest payments to its participants for subsequent disbursement lo the beneficial owners ofthe Bonds. As long as Cede & Co. is the registered owner as nominee of DTC. payments on the Bonds will be made to such registered owner, and disbursal of such payments will be the responsibility of DTC and its participants. See "THE BONDS — Book-Entry System."
The proceeds of the Bonds will be used to (i) refund or pay interest on all or a portion of certain outstanding general obligation bonds ofthe City; (ii) fund certain capitalized interest on the Bonds; and (iii) pay costs of issuance ofthe Bonds. See "PLAN OF FINANCING" and "SOURCES AND USES OF FUNDS"
The Bonds are subject to redemption prior to maturity as described herein. See "THE BONDS — Redemption."
For maturities, principal amounts, interest rates, yields, prices and CUSIP numbers of the Bonds, see the inside front cover.
The Bonds are direct and general obligations of the City and all taxable property in the City is subject to the levy of ad valorem property taxes to pay the Bonds and the interest thereon without limitation as to rate or amount. The City has pledged its full faith and credit for the payment of the principal of and interest on the Bonds. See "SECURITY FOR THE BONDS" herein.
Prospective investors should read this Official Statement in its entirety prior to making an investment decision to purchase the Bonds.
The Bonds are being offered when, as and if issued, and subject to the delivery of approving legal opinions by lee Miller LLP,
Chicago, Illinois, and Cotillas and Associates. Chicago, Illinois, Co-Bond Counsel, and lo certain other conditions Certain legal
matters will be passed on for the City by (i) its Corporation Counsel, (ii) in connection with the preparation of this Official
Statement. Pugh, Jones & Johnson, P.C., Chicago, Illinois, and Shanahan & Shanahan LLP. Chicago. Illinois, Co-Disclosure
Counsel to the City, and (iii) in connection with certain pension matters described in this Official Statement, Chapman and Cutler
LLP, Chicago. Illinois, Special Disclosure Counsel to the City. Certain legal matters will be passed on for the Underwriters by
Kutak Rock LLP. Chicago, Illinois, Underwriters' Counsel. It is expected that the Bonds will be available for deliveiy through the
facilities of DTC on or about . 2016.
Citigroup
Cabrera Capital Markets, LLC PNC Capital Markets LLC
Backstrom McCarley Berry & Co., LLC Drexel Hamilton, LLC Harvestons Securities, Inc.
North South Capital LLC Podesta & Co.


Dated: ,2016



'Preliminary; subject to change 854960v14
MATURITIES, AMOUNTS, INTEREST RATES, YIELDS, PRICES AND CUSIP NUMBERS*




Maturity (January 1)
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031




Principal Amount
S 4,505,000 7,400,000 79,995,000 79,115,000 78,655,000 63,325,000 44,515,000 11,025,000 4,150,000 7,285,000 1,065,000 3,130,000
City of Chicago General Obligation Refunding Bonds
Series 2015C Interest Rate Yield

$12,885,000 %Term Bonds due January 1,2035, Yield
$101,090,000 %Term Bonds due January 1,2038, Yield
_%, Price _ _%, Price
_% CUSIP: 167486_ % CUSIP: 167486

Taxable Series 2015D

Maturity Principal
(January 1) Amount Interest Rate Yield Price CUSIP
2020 $1,860,000 167486























Preliminary; subject to change
t Copyright 2016, American Bankers Association. CUSIP data herein arc provided by Standard & Poor's, CUSIP Service Bureau, a Division of The McGraw-Hill Companies, Inc. The CUSIP numbers listed arc being provided solely for the convenience of the bondholders only at the time of sale ofthe Bonds and the City does not make any representation with respect to such numbers or undertake any responsibility for their accuracy now or at any time in the future. The CUSIP number for a specific maturity is subject to change after the sale of the Bonds as a result of various subsequent actions including, but not limited lo, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities ofthe Bonds.
CITY OF CHICAGO

MAYOR
Rahm Emanuel
CITY TREASURER
Kurt A. Summers, Jr.
CITY CLERK
Susana A. Mendoza
CITY COUNCIL COMMITTEE ON FINANCE
Edward M. Burke, Chairman
CHIEF FINANCIAL OFFICER
Carole L. Brown

CITY COMPTROLLER
Daniel Widawsky

BUDGET DIRECTOR
Alexandra Holt
CORPORATION COUNSEL
Stephen R. Patton, Esq.
CO-BOND COUNSEL
Ice Miller LLP Chicago, Illinois
Cotillas and Associates Chicago, Illinois

CO-DISCLOSURE COUNSEL
Pugh,Jones & Johnson, P.C. Chicago, Illinois
Shanahan & Shanahan LLP Chicago, Illinois
SPECIAL DISCLOSURE COUNSEL
Chapman and Cutler LLP Chicago, Illinois
CO-MUNICIPAL ADVISORS
TKG & Associates LLC Public Alternative Advisors, LLC

Certain information contained in, or incorporated by reference in, this Official Statement has been obtained by the City of Chicago (the ''City") from The Depository Trust Company and other sources that are deemed reliable. No representation or warranty is made, however, as to the accuracy or completeness of such information by the Underwriters or the City. The Underwriters have provided the following sentence for inclusion in this Official Statement: The Underwriters reviewed the information in this Official Statement in accordance with, and as part of, their respective responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. This Official Statement is being used in connection with the sale of securities as referred to herein and may not be used, in whole or in part, for any other purpose. The delivery of this Official Statement at any time does not imply that information herein is correct as of any time subsequent to its date.
No dealer, broker, salesperson or any other person has been authorized by the City or the Underwriters to give any information or to make any representation other than as contained in this Official Statement in connection with the offering of the Bonds described herein and, if given or made, such other information or representation must not be relied upon as having been authorized by any ofthe foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy any securities other than those described on the cover page, nor shall there be any offer to sell, solicitation of an offer to buy or sale of such securities in any jurisdiction in which il is unlawful to make such offer, solicitation or sale. Neither this Official Statement nor any statement that may have been made verbally or in writing is to be construed as a contract wilh ihe registered or beneficial owners ofthe Bonds.
This Official Statement, including the Appendices (except for certain information in (i) APPENDIX B—"'ECONOMIC AND DEMOGRAPHIC INFORMATION" and (ii) "Source Information" as defined and used in APPENDIX E—"RETIREMENT FUNDS," all of which is sourced to parties other than the City), contains certain opinions, estimates and forward-looking statements and information, including the estimates and projections set forth under the caption "FINANCIAL DISCUSSION AND ANALYSIS—General Fund—General Fund Financial Forecasts:' that are based on the City's beliefs as well as assumptions made by and information currently available to the City. Such opinions, estimates, projections and forward-looking statements set forth in this Official Statement were not prepared with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of the City, were prepared on a reasonable basis, reflect the best currently available estimates and judgments, and present, to the best ofthe City's knowledge and belief, the expected course of action and the expected future financial performance of the City. However, this information is not fact and should not be relied upon as being necessarily indicative of future results. Readers of this Official Statement are cautioned not to place undue reliance on such opinions, statements or prospective financial information.
The prospective financial information set forth in this Official Statement, except for certain information sourced to parties other than the City, is solely the product ofthe City. Neither the City's independent auditors, nor any other independent auditors, have compiled, examined, or performed any procedures with respect to, or been consulted in connection with the preparation of, the prospective financial information and forward-looking statements contained herein. The City's independent auditors assume no responsibility for the content of the prospective financial information set forth in this Official Statement, including any 2015 year-end estimates and 2016-2018 projections, disclaim any association with such prospective financial information, and have not, nor have any other independent auditors, expressed any opinion or any other form of assurance on such information or its achievability.
References to web site addresses presented in this Official Statement are for informational purposes only and may be in the form of a hyperlink solely for the reader's convenience. Unless specified otherwise, such web sites and the information or links contained therein are not incorporated into, and are not part of, this Official Statement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS IHE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE.
THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NOR HAS THE INDENTURE BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICA TION OF THE BONDS IN ACCORDANCE WI TH APPLICABLE PROVISIONS OF LAW OF THE STATES IN WHICH THE BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICA TION IN O THER STATES CANNOT BE REGARDED AS A RECOMMENDA TION THEREOF.
IN CONNEC TION WITH Tl IE OFFERING OF THE BONDS, THE UNDERWRI TERS MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE BONDS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE PRICES AND OTHER TERMS RESPECTING THE OFFERING AND SALE OF THE BONDS MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITERS AFTER THE BONDS ARE RELEASED FOR SALE, AND THE BONDS MAY BE OFFERED AND SOLD AT PRICES OTHER THAN THE INITIAL OFFERING PRICES, INCLUDING SALES TO DEALERS WHO MAY SELL THE BONDS INTO INVESTMEN T ACCOUN TS.

OFFICIAL STATEMENT SUMMARY
This summary is subject in all respects to the more complete information and definitions contained in this Official Statement. Prospective investors are cautioned not to rely solely upon this summary when considering whether to purchase the Bonds. Prospective investors should review this Official Statement in its entirety prior to purchasing the Bonds.
THE ISSUER City of Chicago (the "City"). See "THE CITY."
THE BONDS $500,000,000* City of Chicago General Obligation Refunding Bonds,
consisting of $498,140,000* General Obligation Refunding Bonds, Series 2015C (the "Series 2015C Bonds") and $1,860,000* Genera! Obligation Refunding Bonds, Taxable Series 2015D (the "Taxable Series 2015D Bonds" and together with the Series 2015C Bonds, the "Bonds"). The Bonds of each Series will be dated the date of their delivery and mature in the principal amounts and on the dates as set forth on the inside cover of this Official Statement. See "THE BONDS."
PAYMENT OF INTEREST Interest on the Bonds of each Series will accrue from the date of issuance and
be payable on each January 1 and July 1, commencing July I, 2016 . The Bonds of each Series will bear interest at the rates per year as set forth on the inside cover of this Official Statement. Interest on the Bonds of each Series is computed on the basis of a 360-day year consisting of twelve 30-day months. See "THE BONDS—General."
REDEMPTION Optional Redemption
The Series 2015C Bonds maturing on and after January 1, 20 are subject to
optional redemption, on any date occurring on or after January 1, 20 , at a
Redemption Price of 100% of the principal amount thereof being redeemed plus accrued interest, if any, to the date of redemption.
See "THE BONDS—Redemption—Optional Redemption of the Series 2015C Bonds."
The Taxable Series 2015D Bonds are subject to redemption prior to maturity at the option of the City, in whole or in part, on any Business Day at a Redemption Price equal to the greater of: (A) 100% of the principal amount of such Taxable Series 2015D Bonds to be redeemed, or (B) the sum of the present values of the remaining scheduled payments of principal and interest on such Bonds to be redeemed, not including any portion of those payments of interest accrued and unpaid as of the date such Bonds are to be redeemed, discounted to the date of redemption of such Bonds to be redeemed on a semiannual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Treasury Rate plus basis points plus, in each case, accrued
interest on such Bonds being redeemed to the date fixed for redemption.
See "THE BONDS—Redemption—Optional Redemption of the Taxable Series 2015D Bonds at Make-Whole Price. "
The Taxable Series 2015D Bonds maturing on and after January 1, 20 are
subject to optional redemption, on any date occurring on or after January 1,
20 , at a Redemption Price of 100% of the principal amount thereof being
redeemed plus accrued interest, if any, to the date of redemption.
See "THE BONDS—Redemption—Optional Redemption ofthe Taxable Series 2015D Bonds at Par."


Preliminary; subject to change

Mandatory Redemption The Series 2015C Bonds due January 1, 2035* are subject to mandatory
redemption prior to maturity, at par and accrued interest to the date fixed for redemption, on January 1 of the years 2033* and 2034*.
The Series 2015C Bonds due January 1, 2038* are subject to mandatory redemption prior to maturity, at par and accrued interest to the date fixed for redemption, on January 1 ofthe years 2036* and 2037*.
See "THE BONDS—Redemption—Mandatory Redemption."
AUTHORITY FOR ISSUANCE The Bonds are being issued under the authority granted to the City as a home
rule unit of local government under the Illinois Constitution of 1970 and are authorized by an ordinance adopted by the City Council ofthe City (the "City Council") on September 24, 2015 (the "Bond Ordinance"). The Bonds are being issued pursuant to a Trust Indenture, dated as of January 1, 2016, between the City and Zions Bank, a division of ZB, National Association, as trustee (the "Trustee").
USE OF PROCEEDS The proceeds of the Bonds will be used to (i) refund or pay interest on all or a
portion of certain outstanding general obligation bonds ofthe City for purposes of debt restructuring and achieving debt service savings; (ii) fund capitalized interest on the Bonds; and (iii) pay costs of issuance of the Bonds. For the last several years the City has annually issued general obligation debt to pay a portion of the near-term debt service on its outstanding general obligation bonds, in order to limit the annual property tax levy for debt service on such bonds. The City plans to continue this practice for annual property tax levies through and including the 2019 property tax levy, and thereafter discontinue issuing general obligation debt for such purpose. See "FINANCIAL DISCUSSION AND ANALYSIS—General Fund—2017-2018 General Fund Outlook."
SECURITY FOR THE BONDS The Bonds will be direct and general obligations ofthe City and all taxable
property in the City is subject to the levy of ad valorem property taxes to pay the Bonds and the interest thereon without limitation as to rate or amount. The Bonds shall be payable, as to principal and interest, from any moneys, revenues, receipts, income, assets or funds of the City legally available for such purpose, including, but not limited to, the proceeds of a direct annual tax levied by the City in the Bond Ordinance upon all taxable property located in the City sufficient to pay the principal of and interest on the Bonds. The City has pledged its full faith and credit to the payment of the Bonds. See "SECURITY FOR THE BONDS—General Obligation ofthe City."
For a discussion of the process by which property taxes are levied, billed, collected and remitted to the Trustee for payment of the principal of and interest on the Bonds, see "SECURITY FOR THE BONDS—Property Tax Collection Process for the Bonds."










*" ~~~~~~~~^——
Preliminary; subject to change

PENSIONS AND OTHER
POST EMPLOYMENT
BENEFITS
The City participates in four defined-benefit retirement funds (collectively, the "Retirement Funds"). The City's Retirement Funds have been actuarially determined to be significantly underfunded, with such Retirement Funds having a combined funded ratio of 35.5% and an unfunded actuarial accrued liability of $19.4 billion as of December 31, 2014. In recent years, the Illinois Genera] Assembly passed Public Act 096-1495 ("P.A. 96-1495"), which substantially increased the City's retirement contributions with respect to FABF and PABF (each as defined herein), and Public Act 098-641 ("P.A. 98-641"), which included certain pension reforms and increased the City's contributions to MEABF and LABF (each as defined herein). P.A. 98-641 was determined to be unconstitutional by the Circuit Court of Cook County on July 24, 2015. The City has appealed the decision to the Illinois Supreme Court.
In October 2015, the City Council approved a supplemental fiscal year 2015 budget and a fiscal year 2016 budget which provide for significantly increased pension contributions for such fiscal years, though such budgets assume the enactment of SB 777 (as defined herein) or similar legislation. For additional information, see APPENDIX E-" RETIRE MENT FUNDS" herein.
The City and the Retirement Funds share the cost of post-employment healthcare benefits available for certain retired City employees ("Health Plan"). The City has announced plans to phase-out such benefits by 2017 for certain retirees. Prior to June 30, 2013, the City contributed to the Health Plan pursuant to a settlement agreement between the City and the Retirement Funds and certain classes of retirees. After expiration of the settlement, certain ofthe affected participants filed a lawsuit to reactivate the litigation covered by the settlement, which lawsuit remains pending. For further information on the status of the Health Plan after June 30, 2013, including certain State and federal litigation relating to the Health Plan and the settlement agreement, see APPENDIX E-"RETIREMENT FUNDS-Payment for Other Post-Employment Benefits" herein.
INVESTMENT CONSIDERATIONS

There are a number of factors associated with owning the Bonds that prospective investors should consider prior to purchasing the Bonds. For a discussion of these factors, see "INVESTMENT CONSIDERATIONS."
TRUSTEE Zions Bank, a division of ZB, National Association, Chicago, Illinois, as
trustee under the Indenture.
TAX MATTERS Subject to compliance by the City with certain representations and covenants,
in the respective opinions of Co-Bond Counsel, under existing law, interest on the Series 2015C Bonds is not included in gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax for individuals and corporations but is taken into account in the calculation of adjusted current earnings for purposes of the federal alternative minimum tax imposed on corporations and in computing the "branch profits tax" imposed on certain foreign corporations. Interest on the Taxable Series 2015D Bonds is not excludable from the gross income of the owners thereof for federal income tax purposes. Interest on the Bonds is not exempt from present Illinois income taxes. See "TAX MATTERS."
RATINGS The Bonds are rated " " ( outlook) by Standard & Poor's Financial
Services LLC, " " ( outlook) by Fitch Ratings Inc., and " "
( outlook) by Kroll Bond Rating Agency. See "INVESTMENT
CONSIDERATIONS—Credit Rating Downgrades" and "RATINGS."



S-3

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TABLE OF CONTENTS

Page
OFFICIAL STATEMENT SUMMARY S-1
INTRODUCTION|9
10|THE CITY|9
10|General|9
10|Government|910|THE BONDS|910|General|910|Payment of the Bonds|910|Redemption|910|Book-Entry System|910|Bonds Not Presented for Payment 10
Registration and Transfers 10
Registered Owner Treated as Absolute Owner 11
SECURITY FOR THE BONDS 11
General Obligation of the City 11
Property Tax Collection Process for the Bonds 11
Lien and Security Interest Status 13
Additional General Obligation Debt 13
PLAN OF FINANCING 13
Refunding and Restructuring 14
SOURCES AND USES OF FUNDS 15
FINANCIAL DISCUSSION AND ANALYSIS 15
Annual Budget 15
City Fund Structure 19
General Fund 20
Service Concession and Reserve Fund 36
Capital Improvements 37
Property Taxes 38
City Workforce 47
Pensions 48
Overlapping Taxing Districts 55
Long-Term Leases, Concessions of City Facilities 55
Illinois Sports Facilities Authority 56
City Investment Policy 57
GENERAL OBLIGATION DEBT 57
Recent Developments 57
Long-Term General Obligation Bonds 57
Short Term Borrowing Program 61
MRL Financing LLC Promissory Note 62
USX South Works 62
INVESTMENT CONSIDERATIONS 63
Credit Rating Downgrades 63
Unfunded Pensions 63
Pension Reform Litigation 64
Overlapping Taxing Districts 64
Structural Deficit and Debt Restructuring 64

Loss of Liquidity 65
Increased Debt Levels 65
Financial Condition of Chicago Public Schools 65
Reductions and Delays in Receipt of State Revenues 65
Cap on Property Taxes 66
Adverse Change in Laws 66
Bankruptcy 66
Uncertain Enforcement Remedies 67
Force Majeure Events 67
Forward-Looking Statements 67
LITIGATION 67
INDEPENDENT AUDITORS 69
RATINGS 69
CO-MUNICIPAL ADVISORS, SPECIAL ADVISOR ON RATING STRATEGY AND
INDEPENDENT REGISTERED MUNICIPAL ADVISOR 70
CERTAIN VERIFICATIONS 70
UNDERWRITING 70
TAX MATTERS 72
The Series 2015C Bonds 72
The Taxable Series 2015D Bonds 74
State and Local Considerations 74
APPROVAL OF LEGAL MATTERS 74
SECONDARY MARKET DISCLOSURE 75
Annual Financial Information Disclosure 75
Reportable Events Disclosure 76
Consequences of Failure ofthe City to Provide Information 77
Amendment; Waiver 77
EMMA 77
Termination of Undertaking 78
Additional Information 78
Corrective Action Related to Certain Bond Disclosure Requirements 78
MISCELLANEOUS 80
APPENDIX A — SUMMARY OF THE INDENTURE
APPENDIX B — ECONOMIC AND DEMOGRAPHIC INFORMATION
APPENDIX C — CITY OF CHICAGO BASIC FINANCIAL STATEMENTS FOR
THE YEAR ENDED DECEMBER 31, 2014 APPENDIX D— PROPERTY TAXES APPENDIX E — RETIREMENT FUNDS APPENDIX F — OPINIONS OF CO-BOND COUNSEL APPENDIX G — REFUNDED AND INTEREST PAID BONDS












ii

OFFICIAL STATEMENT

$500,000,000* CITY OF CHICAGO
$498,140,000* General Obligation Refunding Bonds, Series 2015C
$1,860,000* General Obligation Refunding Bonds, Taxable Series 2015D

INTRODUCTION
This Official Statement is furnished by the City of Chicago (the "City") to provide information with respect to the City's General Obligation Refunding Bonds, Series 2015C (the "Series 2015C Bonds") and General Obligation Refunding Bonds, Taxable Series 2015D (the "Taxable Series 2015D Bonds" and together with the Series 2015C Bonds, the "Bonds"). Certain capitalized terms used in this Official Statement, unless otherwise defined, are defined in APPENDIX A—"SUMMARY OF THE INDENTURE—Glossary of Terms."
The Bonds are direct and general obligations of the City and all taxable property in the City is subject to the levy of ad valorem property taxes to pay the Bonds and the interest thereon without limitation as to rate or amount. The Bonds of each Series shall be payable, as to principal and interest, from any moneys, revenues, receipts, income, assets or funds of the City legally available for such purpose, including, but not limited to, the proceeds allocable to such Series of a direct annual tax levied by the City in the Bond Ordinance (hereinafter defined) upon all taxable property located in the City sufficient to pay the principal of and interest on the Bonds. The City has pledged its full faith and credit to the payment ofthe Bonds. See "SECURITY FOR THE BONDS."
The proceeds of the Bonds will be used to (i) refund or pay interest on all or a portion of certain outstanding general obligation bonds ofthe City for the purposes of debt restructuring and achieving debt service savings; (ii) fund capitalized interest on the Bonds; and (iii) pay costs of issuance of the Bonds. See "PLAN OF FINANCING" and "SOURCES AND USES OF FUNDS."
The Bonds are being issued under the authority granted to the City as a home rule unit of government under the Illinois Constitution of 1970 and are authorized by an ordinance adopted by the City Council of the City (the "City Council") on September 24, 2015 (the "Bond Ordinance"). The Bonds will be issued pursuant to a Trust Indenture, dated as of January 1, 2016 (the "Indenture") between the City and Zions Bank, a division of ZB, National Association, Chicago, Illinois, as trustee.

THE CITY
General
Chicago is the third largest city in the United States with a population of approximately 2.7 million. The City, located on the shores of Lake Michigan in the Midwestern United States, is the commercial and cultural center of a large and diverse regional economy that produced a gross domestic product of $610 billion in 2014. Trade, transportation, utilities, professional and business services, education and health services, government, leisure and hospitality and manufacturing are among the Chicago region's largest industry sectors. The City's transportation and distribution network includes Chicago O'Hare International Airport, ranked seventh worldwide and third in the United States in 2014 in terms of total passengers, rail traffic interchanges for the country's six largest freight railroad companies,
* ¦ |10
10|Preliminary; subject to change
and two ports capable of handling ocean-going ships and barges. Tourism and business travel to Chicago accounted for an estimated 50 million visitors in 2014. See APPENDIX B—"ECONOMIC AND DEMOGRAPHIC INFORMATION."
Government
The City was incorporated in 1837. The City is a municipal corporation and home rule unit of local government under the Illinois Constitution of 1970 and as such, "may exercise any power and perform any function pertaining to its government and affairs including, but not limited to, the power to regulate for the protection of the public health, safety, morals and welfare; to license; to tax; and to incur debt" except that it can "impose taxes upon or measured by income or earnings or upon occupation" only if authorized by statute.
The Mayor and the City Council govern the City. The City Clerk and the City Treasurer along with the Mayor are the only three citywide elected officials. The City is divided into fifty legislative districts, or wards. Each ward is represented by an alderman who is elected by their constituency. The citywide officials and the fifty aldermen are elected to serve coterminous four-year terms. The aldermen comprise the 50-person City Council, which serves as the legislative branch of government of the City. The legislative powers of the City Council are granted by the State legislature and by home rule provisions of the Illinois Constitution.
As the legislative body of the City, the City Council usually meets once every month to exercise general and specific powers delegated by state law. The City Council votes on loans extended by the City that exceed certain limits, bond issues, the City's short term borrowing programs (whether general obligation or revenue), land acquisitions and sales, zoning changes, traffic control issues, certain mayoral appointees, and financial appropriations. Its standing committees work with individual departments on the execution of city activities, and review proposed ordinances, resolutions and orders before they are voted on by the full City Council.
The Committee on Finance of the City Council considers ordinances, orders or resolutions that are referred or submitted to the Committee on Finance by aldermen, the Office ofthe Mayor, various City departments, and the general public. The Committee on Finance has jurisdiction over financial matters, including tax levies; general obligation bonds and revenue bonds; the financing of municipal services and capital improvements; matters generally affecting the Department of Finance, the City Comptroller, and the City Treasurer; claims under the Workmen's Compensation Act; the Condominium Refuse Rebate Program; and all pecuniary claims against the City.

THE BONDS
General
The Bonds mature on January 1 of the years and in the amounts set forth on the inside front cover of this Official Statement. The Bonds are fully registered bonds. The Series 2015C Bonds are issuable in denominations of $5,000 or any integral multiple thereof. The Taxable Series 2015D Bonds are issuable in denominations of $1,000 or any integral multiple thereof.
Each Bond will bear interest at the rates set forth on the inside cover of this Official Statement from the later of its date or the most recent Interest Payment Date to which interest has been paid or duly provided for, until the principal amount of such Bond is paid, such interest being payable on January 1 and July 1 of each year, commencing on July 1, 2016*. Interest on each Bond will be paid to the person

Preliminary; subject to change
|1010|in whose name such Bond is registered at the close of business on the Record Date next preceding the applicable Interest Payment Date.
The Trustee will serve as bond registrar and paying agent for the Bonds. The Bonds are registered through a book-entry only system operated by The Depository Trust Company, New York, New York ("DTC"). Details of payments of the Bonds when in the book-entry only system are described under "—Book-Entry System" below. Except as described under "— Book-Entry System—General" below, Beneficial Owners of the Bonds of a series will not receive or have the right to receive physical delivery of such Bonds, and will not be or be considered to be the Registered Owners thereof. Accordingly, Beneficial Owners must rely upon (i) the procedures of DTC and, if such Beneficial Owner is not a DTC "Direct Participant" or "Indirect Participant" (as defined below), the Direct or Indirect Participant who will act on behalf of such Beneficial Owner to receive notices and payments of principal and interest or Redemption Price of such Bonds, and to exercise voting rights and (ii) the records of DTC and, if such Beneficial Owner is not a Direct or Indirect Participant, such Beneficial Owner's Direct or Indirect Participant, to evidence its beneficial ownership of such Bonds. So long as DTC or its nominee is the Registered Owner of the Bonds of a series, references herein to Bondholders or Registered Owners of such Bonds mean DTC or its nominee and do not mean the Beneficial Owners of such Bonds. The laws of some states may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and laws may impair the ability to transfer beneficial interests in a Bond.
Payment ofthe Bonds
The principal of the Bonds and any redemption premium will be payable in lawful money ofthe United States of America which, at the respective dates of payment thereof, is legal tender for the payment of public and private debts, upon presentation and surrender thereof at the Designated Corporate Trust Office of the Trustee.
Interest on each Bond will be paid to the person in whose name such Bond is registered at the close of business on the Record Date next preceding the applicable Interest Payment Date, by check or draft of the Trustee, or, at the option of any registered owner of $1,000,000 or more in aggregate principal amount of Bonds of a Series, by wire transfer of immediately available funds lo such bank in the continental United States of America as the registered owner of such Bonds requests in writing to the Trustee.
Redemption
The Bonds are subject to both optional and mandatory redemption prior to maturity, as described below. The Series 2015C Bonds shall be redeemed only in principal amounts of $5,000 and integral multiples thereof. The Taxable Series 2015D Bonds shall be redeemed only in principal amounts of $1,000 and integral multiples thereof.
Optional Redemption of Series 2015C Bonds
The Series 2015C Bonds maturing on and after January 1, 20 , are subject to redemption prior
to maturity at the option of the City, in whole or in part, on any date on or after January 1, 20 , and if
less than all of the outstanding Series 2015C Bonds of a single maturity are to be redeemed the Series 2015C Bonds called shall be called by lot, in such principal amounts and from such maturities as the City shall determine, at a redemption price equal to the principal amount ofthe Series 2015C Bonds being redeemed plus accrued interest to the date fixed for redemption.


|1010|
The City is authorized to sell or waive any right the City may have to call any ofthe Series 2015C Bonds for optional redemption, in whole or in part; provided, that such sale or waiver will not adversely affect the excludability of interest on the Series 2015C Bonds from gross income for federal income tax purposes.
Optional Redemption of the Taxable Series 2015D Bonds at Make-Whole Price
The Taxable Series 2015D Bonds shall be subject to redemption prior to maturity at the option of the City, in whole or in part, and if in part from such maturities and interest rates as the City shall determine on any Business Day at a redemption price (the "Make-Whole Redemption Price") equal to the greater of: (A) 100% of the principal amount of such Taxable Series 2015D Bonds to be redeemed, or (B) the sum of the present values of the remaining scheduled payments of principal and interest on such Taxable Series 2015D Bonds to be redeemed, not including any portion of those payments of interest accrued and unpaid as of the date such Taxable Series 2015D Bonds are to be redeemed, discounted to the date of redemption of such Taxable Series 2015D Bonds to be redeemed on a semiannual basis (assuming
a 360-day year consisting of twelve 30-day months) at the Treasury Rate (defined below) plus basis
points plus, in each case, accrued interest on such Taxable Series 2015D Bonds being redeemed to the date fixed for redemption.
The Make-Whole Redemption Price for any Taxable Series 2015D Bonds to be redeemed will be calculated by an independent accounting firm, investment banking firm or municipal advisor (the "Calculation Agent") retained by the City at the City's expense. The Trustee and the City may rely on the Calculation Agent's determination of any Make-Whole Redemption Price and will not be liable for such reliance. An Authorized Officer shall confirm and transmit the Make-Whole Redemption Price as so calculated on such dates to the Trustee and to such parties as shall be necessary to effectuate such redemption.
The "Treasury Rate" is, as of any redemption date, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least four Business Days prior to the redemption date (excluding inflation indexed securities) (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to
(i) in the case of Taxable Series 2015D Bonds maturing on January 1 of the years 20 to 20 , inclusive,
the period from the redemption date to the maturity date of such Taxable Series 2015D Bonds to be
redeemed and (ii) in the case ofthe Taxable Series 2015D Bonds maturing on January 1, 20 , the then-
remaining average life of such maturity of the Taxable Series 2015D Bonds to be redeemed; provided,
however, that if the period from the redemption date to such maturity date is less than one year, the
weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity
of one year will be used. The Treasury Rate shall be determined by an independent accounting firm,
investment banking firm or municipal advisor retained by the City at the City's expense.
The Treasury Rate will be determined by the Calculation Agent or another independent accounting firm, investment banking firm or municipal advisor retained by the City at the City's expense.
The City is authorized to sell or waive any right the City may have to call the Taxable Series .2015D Bonds for optional redemption.
Optional Redemption of the Taxable Series 2015D Bonds at Par
The Taxable Series 2015D Bonds maturing on and after January 1, 20 , are subject to
redemption prior to maturity at the option of the City, in whole or in part, on any date on or after

|1010|
January 1, 20 , and if less than all of the outstanding Taxable Series 2015D Bonds of a single maturity
are to be redeemed the Taxable Series 2015D Bonds called shall be called by lot, in such principal amounts and from such maturities as the City shall determine, at a redemption price equal to the principal amount ofthe Taxable Series 2015D Bonds being redeemed plus accrued interest to the date fixed for redemption.
The City is authorized to sell or waive any right the City may have to call any ofthe Taxable Series 2015D Bonds for optional redemption, in whole or in part.
Mandatory Redemption
The Series 2015C Bonds maturing on January 1, 2035* are subject to mandatory redemption prior to maturity on January 1 of the years and in the amounts set forth below, at a Redemption Price equal to 100 percent ofthe principal amount thereof plus accrued interest to the date fixed for redemption:
Series 2015C Bonds due January 1, 2035*
Year Principal Amount
$4,110,000
4,315,000
4,460,000 (maturity)


The Series 2015C Bonds maturing on January 1, 2038* are subject to mandatory redemption prior to maturity on January 1 of the years and in the amounts set forth below, at a Redemption Price equal to 100 percent of the principal amount thereof plus accrued interest to the date fixed for redemption:
Series 2015C Bonds due January 1, 2038*
Year Principal Amount
$34,855,000
36,600,000
29,635,000 (maturity)


Reduction of Mandatory Redemption Amounts
The principal amount of the Series 2015C Bonds to be mandatorily redeemed in each year may be reduced through the earlier optional redemption thereof. Any partial optional redemption of Series 2015C Bonds of a maturity will be credited against future mandatory redemption requirements for that maturity in such order of the mandatory redemption dates as the City may determine.
In addition, on or prior to the sixtieth (60th) day preceding any mandatory redemption date, the Trustee, if directed by the City, shall purchase Series 2015C Bonds required to be retired on such mandatory redemption date at such prices as the City shall determine. Any Series 2015C Bond so purchased shall be canceled and the principal amount thereof shall be credited against the payment required on such next mandatory redemption date.







Preliminary: subject to change
|1010|
Selection of Bonds for Redemption
Series 2015C Bonds. While the Series 2015C Bonds are registered in the book-entry system and so long as DTC or a successor securities depository is the sole registered owner of the Series 2015C Bonds, if less than all of the Series 2015C Bonds of such maturity are to be redeemed prior to maturity, the particular Series 2015C Bonds or portions of such Bonds will be selected by lot by DTC or such successor securities depository in such manner as DTC or such successor securities depository may determine. See "THE BONDS — Book-Entry System." If the Series 2015C Bonds are not registered in the book-entry system, the following procedures for the selection of such Bonds shall apply.
If less than all the Series 2015C Bonds shall be called for redemption under any provision ofthe Indenture pursuant to which the Series 2015C Bonds are issued permitting such partial redemption, (i) such redemption shall be by lot in such manner as the Trustee may determine among such Bonds, and (ii) subject to other applicable provisions of such Indenture, the portion of any Series 2015C Bond to be redeemed shall be in a principal amount equal to an Authorized Denomination. In selecting Series 2015C Bonds for redemption, the Trustee shall assign to each Series 2015C Bond of like Maturity Date, a distinctive number for each minimum Authorized Denomination of such Bond and shall select by lot from the numbers so assigned as many numbers as, at such minimum Authorized Denomination for each number, shall equal the principal amount of such Bonds to be redeemed. In such case, the Series 2015C Bonds to be redeemed shall be those to which were assigned numbers so selected; provided that only so much of the principal amount of each Series 2015C Bond shall be redeemed as shall equal such minimum Authorized Denomination for each number assigned to it and so selected. If it is determined that one or more, but not all, of the integral multiples of the Authorized Denomination of principal amount represented by any Series 2015C Bond is to be called for redemption, then, upon notice of intention to redeem such integral multiple of an Authorized Denomination, the Registered Owner of such Bond shall forthwith surrender such Bond to the Trustee for (a) payment to such Registered Owner of the Redemption Price of the integral multiple of the Authorized Denomination of principal amount called for redemption, and (b) delivery to such Registered Owner of a new Series 2015C Bond or Bonds in the aggregate principal amount of the unredeemed balance of the principal amount of such Bond. New Series 2015C Bonds representing the unredeemed balance of the principal amount of such Bond shall be issued to the Registered Owner thereof without charge therefor.
Taxable Series 2015D Bonds. While the Taxable Series 2015D Bonds are registered in the book-entry system and so long as DTC or a successor securities depository is the sole registered owner of the Taxable Series 2015D Bonds, if less than all of the Taxable Series 2015D Bonds are to be redeemed prior to maturity, the particular Taxable Series 2015D Bonds or portions thereof to be redeemed will be selected on a pro-rata pass-through distribution of principal basis in accordance with DTC procedures, provided that, so long as the Taxable Series 2015D Bonds are registered in the book-entry system, the selection for redemption of such Bonds will be made in accordance with the operational arrangements of DTC then in effect and, if the DTC operational arrangements do not allow for redemption on a pro-rata pass-through distribution of principal basis, the Taxable Series 2015D Bonds subject to redemption will be selected for redemption pro-rata within each interest rate and maturity to be redeemed.

If the Taxable Series 2015D Bonds are not registered in the book-entry system, any redemption of less than all of such Bonds will be allocated by the Trustee among the registered owners of such Bonds on a pro-rata basis.
Notice of Redemption
Unless waived by any owner of Bonds of a Series to be redeemed, notice of the call for any such redemption shall be given by the Trustee on behalf of the City by mailing the redemption notice by first class mail at least 30 days and not more than 60 days prior to the date fixed for redemption to the

|1010|
Registered Owner of the Bond or Bonds to be redeemed at the address shown on the Bond Register or at such other address as is furnished in writing by such Registered Owner to the Trustee, but the failure to mail any such notice or any defect therein as to any Bond shall not affect the validity of the proceedings for the redemption of any other Bond. Any notice of redemption mailed as provided under the applicable Indenture shall be conclusively presumed to have been given whether or not actually received by the addressee. All notices of redemption with respect to the Bonds of a Series shall state: (1) the Series designation of the Bonds to be redeemed, (2) the redemption date, (3) the Redemption Price (or, for Taxable Series 2015D Bonds being redeemed at the Make-Whole Redemption Price, the formula for calculating the Make-Whole Redemption Price as of the redemption date), (4) if less than all outstanding Bonds of such Series are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts and interest rates) of the Bonds to be redeemed, (5) that on the redemption date the Redemption Price will become due and payable upon each such Bond or portion thereof called for redemption, and that interest thereon shall cease to accrue or compound from and after said date, (6) the place where such Bonds are to be surrendered for payment of the Redemption Price, and (7) such other information as shall be deemed necessary by the Trustee at the time such notice is given to comply with law, regulation or industry standard.
With respect to an optional redemption of Bonds of a Series, such notice may state that said redemption is conditioned upon the receipt by the Trustee on or prior to the date fixed for redemption of moneys sufficient to pay the applicable Redemption Price of such Bonds. If such moneys are not so received, such redemption notice shall be of no force and effect, the City shall not redeem such Bonds and such failure to deposit such funds shall not constitute an Event of Default under the Indenture. The Trustee shall give notice, in the same manner in which the notice of redemption was given, that such moneys were not so received and that such Bonds will not be redeemed. Unless the notice of redemption shall be made conditional as provided above, on or prior to any redemption date for the Bonds, the City shall deposit with the Trustee an amount of money sufficient to pay the applicable Redemption Price of all the Bonds of such Series or portions thereof which are to be redeemed on that date.
Book-Entry System
General
The following information concerning DTC has been furnished by DTC for use in this Official Statement and neither the City nor the Underwriters take any responsibility for its accuracy or completeness.
DTC will act as securities depository for the Bonds. The Bonds of each Series 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 each Series ofthe Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.
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 (the "Exchange Act"). DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical

|1010|
movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission (the "Commission"). More information about DTC can be found at www.dtcc.com .
Purchases of Bonds of a Series under the DTC system must be made by or through Direct Participants, which will receive a credit for such Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond of a Series ("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 ofthe 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 of a Series 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 of a Series, except in the event that use of the Book-Entry System for such Bonds is discontinued.
To facilitate subsequent transfers, all Bonds of a Series 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 ofthe 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.

Redemption notices shall be sent to DTC. If less than all of the Bonds of a Series are being redeemed, DTC's usual practice, which will apply to the Series 2015C Bonds, is to determine by lot the amount of the interest of each Direct Participant in the Series 2015C Bonds to be redeemed. In accordance with DTC's procedures, the City has directed the Trustee to notify DTC that in the event that less than all ofthe Taxable Series 2015D Bonds are redeemed any such redemption shall be on a pro-rata pass-through basis.
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 MMI 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).



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Redemption proceeds and principal and interest payments on the Bonds of a Series 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 Trustee, on the payment date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds and principal and interest payments 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 Trustee, 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 Bonds of either Series at any time by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered.
Discontinued Use of Book-Entry System
The City may decide to discontinue use ofthe 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.
Procedures May Change
Although DTC has agreed to these procedures in order to facilitate transfers of securities among DTC and its Participants, DTC is under no obligation to perform or continue to perform these procedures and these procedures may be discontinued and may be changed at any time by DTC.
The information in this section concerning DTC and the Book-Entry System has been obtained from sources that the City believes to be reliable, but neither the City nor the Underwriters take any responsibility for the accuracy thereof.
Additional Information
For every transfer and exchange of the Bonds, DTC, the Trustee and the Participants may charge the beneficial owner a sum sufficient to cover any tax, fee or other charge that may be imposed in relation thereto.
NEITHER THE CITY NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANTS, OR TO THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE BONDS OF A SERIES, OR TO ANY BENEFICIAL OWNER IN RESPECT OF THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT IN RESPECT OF THE PRINCIPAL OR INTEREST ON THE BONDS OF SUCH SERIES, OR ANY NOTICE WHICH IS PERMITTED OR REQUIRED TO BE GIVEN WITH RESPECT TO SUCH BONDS, INCLUDING ANY NOTICE OF REDEMPTION, THE SELECTION OF SPECIFIC BONDS FOR REDEMPTION, OR ANY OTHER ACTION TAKEN, BY DTC AS REGISTERED OWNER OF SUCH BONDS.



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In reading this Official Statement it should be understood that while the Bonds are in the Book-Entry System, references in other sections of this Official Statement to Registered Owners should be read to include the person for which a Participant acquires an interest in the Bonds, but (a) all rights of ownership must be exercised through DTC and the Book-Entry System, and (b) notices that are to be given to Registered Owners will be given only to DTC.
Bonds Not Presented for Payment
lf any Bond is not presented for payment when the principal amount thereof becomes due, either at maturity or at a date fixed for redemption thereof or otherwise, and if moneys sufficient to pay such Bond are held by the Trustee for the benefit of the Registered Owner of such Bond, the Trustee shall hold such moneys for the benefit of the Registered Owner of such Bond without liability to the Registered Owner for interest. The Registered Owner of such Bond thereafter shall be restricted exclusively to such funds for satisfaction of any claims relating to such Bond.

Registration and Transfers
The Bond Register for the registration and transfer of the Bonds of each Series will be kept at the Designated Corporate Trust Office of the Trustee, as the registrar for the City in connection with the Bonds of such Series. See 'THE BONDS—Book-Entry System" for a discussion of registration and transfer of the beneficial ownership interests in Bonds while they are in the Book-Entry System. The following provisions relate to the registration and transfer of Bonds of a Series when such Bonds are in certificated form.
Upon surrender for registration of transfer of any Bond of a Series at the Designated Corporate Trust Office of the Trustee, duly endorsed by, or accompanied by a written instrument or instruments of transfer in form satisfactory to the Trustee and duly executed by the Bondholder or such Bondholder's attorney duly authorized in writing in such form and with guarantee of signature as shall be satisfactory to the Trustee, the City shall execute, and the Trustee shall authenticate and deliver, in the name of the transferee or transferees, one or more fully registered Bonds of the same Series, interest rate and Maturity Date of Authorized Denominations, for a like principal amount bearing numbers not contemporaneously outstanding. Subject to the limitations described in the following paragraph, Bonds of each Series may be exchanged at the Designated Corporate Trust Office of the Trustee for a like aggregate principal amount of Bonds of the same Series, interest rate and Maturity Date of other Authorized Denominations bearing numbers not contemporaneously outstanding.
The Trustee shall not be required to transfer or exchange any Bond of a Series during the period commencing on the Record Date next preceding any Interest Payment Date of such Bond and ending on such Interest Payment Date, or to transfer or exchange such Bond after the mailing of notice calling such Bond for redemption has been made as provided in the Indenture or during the period of 15 days next preceding the giving of notice of redemption of Bonds ofthe same Series and Maturity Date.
No service charge shall be made for any transfer or exchange of Bonds, but the City or the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of such Bonds, except that no such payment may be required in the case of the issuance of a Bond or Bonds for the unredeemed portion of a Bond surrendered for redemption.
Bonds delivered upon any registration of transfer or exchange will be valid general obligations of the City, evidencing the same debt as the Bonds surrendered, will be secured by the Indenture and will be entitled to all of the security and benefits of the Indenture and of the Bond Ordinance to the same extent as such Bond surrendered.


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Registered Owner Treated as Absolute Owner
The City, the Trustee and any Paying Agent may treat the Registered Owner of any Bond as the absolute owner thereof for all purposes, whether or not such Bond shall be overdue, and shall not be bound by any notice to the contrary. All payments of or on account ofthe principal of, premium, if any, and interest on any such Bond as provided in the Indenture shall be made only to or upon the written order of the Registered Owner thereof or such Registered Owner's legal representative, but such registration may be changed as provided in the Indenture. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent ofthe sum or sums so paid.

SECURITY FOR THE BONDS
General Obligation of the City
The Bonds are direct and general obligations of the City and all taxable property in the City is subject to the levy of ad valorem property taxes to pay the Bonds and the interest thereon without limitation as to rate or amount. The Bonds shall be payable, as to principal and interest, from any moneys, revenues, receipts, income, assets or funds of the City legally available for such purpose, including, but not limited to, the proceeds of a direct annual tax levied by the City in the Bond Ordinance (the "Bond Property Tax Levy") upon all taxable property located in the City in an amount not less than the principal of, premium, if any, and interest on the Bonds. The Bond Ordinance also authorizes the City to use those proceeds of the Bond Property Tax Levy for other purposes, including (i) debt service on outstanding or future City general obligation commercial paper notes and lines of credit; (ii) costs of certain ongoing financing services related to outstanding City general obligation bonds and notes and outstanding or future general obligation commercial paper notes and lines of credit (such outstanding City general obligation bonds and notes and outstanding or future general obligation commercial paper notes and lines of credit, "Outstanding Indebtedness"); and (iii) amounts needed to reimburse the City's Corporate Fund for amounts expended to pay debt service on Outstanding Indebtedness. The Bond Property Tax Levy will be on file with the County Clerks of Cook and DuPage Counties, Illinois (the "County Clerks") at the time of issuance of the Bonds. See "FINANCIAL DISCUSSION AND ANALYSIS—Property Taxes" and APPENDIX D—"PROPERTY TAXES."
The City has pledged its full faith and credit to the payment of the Bonds. Under the Bond Ordinance, the City is obligated to appropriate amounts sufficient to pay principal of and interest on the Bonds for the years such amounts are due, and the City covenants in the Bond Ordinance to take timely action as required by law to carry out such obligation; however, if for any such year the City fails to do so, the Bond Ordinance constitutes a continuing appropriation of such amounts without any further action by the City.
If the revenues raised by the Bond Property Tax Levy are not available in time to make any payments of principal of or interest on the Bonds when due, then the appropriate fiscal officers of the City are directed in the Bond Ordinance to make such payments from any other moneys, revenues, receipts, income, assets or funds of the City that are legally available for that purpose in advance of the collection of the Bond Property Tax Levy.
Property Tax Collection Process for the Bonds
The City's annual aggregate property tax levy is used primarily to pay debt service on the City's general obligation debt and to fund City contributions to the City's pension plans. See "FINANCIAL DISCUSSION AND ANALYSIS—Property Taxes." The Bond Property Tax Levy is included in the calculation of the City's annual aggregate property tax levy.


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Set forth below is a general schematic of the process by which the Bond Property Tax Levy in Cook County (being the County in which approximately 99.99 percent of the taxable property in the City is located) is levied, billed, collected and remitted to the City and, ultimately, to the Trustee.
Tax Lew Series 2015 Bonds
The Bond Ordinance provides for the levy and collection of a direct annual tax upon all taxable property in the City in not less than the amount needed to make payments of debt service on the Bonds, and a certified copy of the Bond Ordinance is filed with the County Clerk prior to the issuance of the Bonds.

The City informs the County Clerk of its annual aggregate tax levy (which includes confirmation of the Bond Property Tax Levy), and the County Clerk determines the property tax for the City and all overlapping taxing districts for each City parcel.


The County Treasurer issues the tax bills, collects the property taxes, and remits the City's share of property taxes to the City Treasurer.

The City Treasurer deposits the portion of the property taxes earmarked for general obligation debt (including the Bonds) into the Bond Redemption and Interest Fund held by the City Treasurer described in the paragraph following this chart.

The City Treasurer remits from the Bond Redemption and Interest Fund an amount equal to the Principal and Interest Account Requirement for the Bonds to the Trustee for deposit into the applicable Bond Fund established under the Indenture sufficiently in advance to enable the Trustee to make debt service payments on the Bonds on or prior to the scheduled debt service payment dates. If property taxes are insufficient, payments to the Trustee are to be made from any other legally available revenues.


The Trustee makes the principal and interest payments for the Bonds to the Bondholders on the scheduled debt service payment dates.

As shown above, when property taxes are remitted by the Cook County Treasurer to the City, the property taxes for debt service are deposited and held in the Bond Redemption and Interest Fund maintained by the City Treasurer. The Bond Redemption and Interest Fund is used for the payment of debt service on all of the City's general obligation bonds, including the Bonds, for which the City has levied property taxes, and is one of a number of governmental funds used by the City to account for its governmental activities.

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Lien and Security Interest Status
Bondholders do not have a statutory lien on remittances from the Bond Property Tax Levy or any other funds on deposit in the Bond Redemption and Interest Fund. The Bond Redemption and Interest Fund is held by the City Treasurer. Until remittances from the Bond Property Tax Levy are deposited with the Trustee as required by the Indenture, any claim for payment made by Bondholders against such funds, or any other funds in the Bond Redemption and Interest Fund, will be subject to any competing claims which may exist against such funds. Once remittances from the Bond Property Tax Levy are deposited with the Trustee as required by the Indenture, such funds are subject to the Bondholders' security interest and may be used by the Trustee solely for the purposes authorized by the Indenture, including payment of principal and interest on the Bonds. See "INVESTMENT CONSIDERATIONS—Bankruptcy" and "—Uncertain Enforcement Remedies."
There is no guarantee that the flow of revenues from the Bond Property Tax Levy will always be maintained as described above. The City Council could alter the Bond Property Tax Levy or the City could use remittances from the Bond Property Tax Levy or other funds held in the Bond Redemption and Interest Fund for other uses besides debt service on the Bonds as authorized by the Bond Ordinance or as may be authorized in the future. The Illinois General Assembly could alter the procedure by which property taxes are extended and collected. However, since the Bonds are a general obligation ofthe City to which it has pledged its full faith and credit, if revenues from the Bond Property Tax Levy were insufficient to pay debt service on the Bonds, the City would still be obligated to find other sources of funds to remit to the Trustee for the payment of principal of and interest on the Bonds when due.
For additional information on real property assessment, tax levies and collections, see APPENDIX D—"PROPERTY TAXES."
Additional General Obligation Debt
The City has issued, and may from time to time issue, debt and incur other obligations that are general obligations of the City, including commercial paper and borrowings under revolving lines of credit which comprise the City's short term borrowing facilities (the "Short Term Borrowing Program"), all of which arc secured by the full faith and credit of the City. In 2016, the City expects to issue additional general obligation bonds, the size and timing of which have yet to be determined, to fund capital projects, to pay capitalized interest on such bonds and for debt restructuring. Depending on prevailing market conditions, the City may also issue additional general obligation refunding bonds for debt service savings.
For the last several years, in order to limit the annual property tax levy for debt service on its outstanding general obligation bonds, the City has annually issued general obligation debt to pay a portion of the near-term debt service on such bonds. The City plans to gradually curtail this practice, using it for annual property tax levies through and including the 2019 levy and thereafter discontinue issuing general obligation debt for such purpose.

PLAN OF FINANCING
The proceeds of the Bonds will be used to (i) refund or pay interest on all or a portion of certain outstanding general obligation bonds of the City for the purposes of debt restructuring and achieving debt
service savings; (ii) fund certain capitalized interest on the Series 2015C Bonds through ,
20 and certain capitalized interest on the Taxable Series 2015D Bonds through , 20 ; and
(iii) pay costs of issuance of the Bonds. For additional information, see "SOURCES AND USES OF FUNDS" below. The Taxable Series 2015 D Bonds are being issued to achieve debt restructuring of


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certain outstanding general obligation bonds of the City which cannot be advance refunded on a tax-exempt basis.
Refunding and Restructuring
A portion of the proceeds of the Bonds will be used to refund all or a portion ofthe principal of and interest on certain maturities of outstanding general obligation bonds of the City (the "Refunded Bonds"). See "SOURCES AND USES OF FUNDS." The Refunded Bonds are set forth in APPENDIX I-I - "REFUNDED AND INTEREST PAID BONDS."
Portions of the refunding will result in debt service savings to the City and extend the average maturity of the City's general obligation debt. See APPENDIX B - "FINANCIAL AND OTHER INFORMATION - Debt Service Schedule."
A portion of the proceeds of the Bonds will be used to pay interest on certain maturities of outstanding general obligation bonds of the City (the "Interest Paid Bonds") on certain respective payment dates. See "SOURCES AND USES OF FUNDS." The Interest Paid Bonds are set forth in APPENDIX H - "REFUNDED AND INTEREST PAID BONDS."
To provide for the payment and retirement of the Refunded Bonds and the payment of interest on the Interest Paid Bonds, certain proceeds of the Bonds will be used to purchase securities consisting of direct obligation of the United States of America (collectively, the "Government Obligations"). The principal of and interest on the Government Obligations, together with available cash deposits, will be sufficient (i) to pay when due the interest on the Refunded Bonds to their respective maturity or redemption dates, (ii) to pay or redeem the Refunded Bonds on their respective maturity or redemption dates at their respective principal amounts or redemption prices; and (iii) to pay the interest on the Interest Paid Bonds on the applicable interest payment dates.
The Government Obligations purchased with the proceeds of the Bonds, together with available cash deposits, will be held in escrow accounts with the respective paying agents for the Refunded Bonds and the Interest Paid Bonds or an escrow agent (collectively, the "Escrow Accounts"). Neither the cash on deposit, the maturing principal of the Government Obligations nor the interest to be earned thereon will serve as security or be available for the payment of the principal of or the interest on the Bonds.
The mathematical computation of (i) the adequacy of maturing principal of and interest earnings on the Government Obligations together with initial cash deposits in the Escrow Accounts to provide for payments on the Refunded Bonds and the Interest Paid Bonds as described above and (ii) the actuarial yields on the Series 2015C Bonds and the Government Obligations will be verified at the time ofthe delivery of the Bonds by Robert Thomas CPA, LLC, Shawnee Mission, Kansas, independent certified public accountants. See "CERTAIN VERIFICATIONS."














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SOURCES AND USES OF FUNDS
The following table sets forth the sources and uses of funds from the sale of the Bonds as described under "PLAN OF FINANCING."
Series 2015C Taxable Series
Bonds 2015D Bonds Total
SOURCES OF FUNDS:
Principal Amount of the Bonds $ $
Net Original Issue [Premium/Discount]
Total Sources of Funds § §
USES OF FUNDS:
Deposits to Escrow Accounts
Capitalized Interest
Costs of Issuance (including the Underwriters' discount).
Total Uses of Funds


FINANCIAL DISCUSSION AND ANALYSIS
Annual Budget
Fiscal Year 2016 Budget
The City Council adopted the budget for the City's 2016 fiscal year on October 28, 2015. The budget features a $318 million increase in property taxes, part of an overall increase in property taxes of $543 million to be phased in between 2015 and 2018, as well as increases in revenues from the imposition of a garbage collection fee, additional fees for ridesharing and taxi use and an e-cigarette tax. The budget also achieves savings on expenditures from, among other measures, phasing out funding for certain retiree healthcare benefits, utilization of zero-based budgeting, improvements to debt collection practices, reallocating surplus tax increment financing revenues and sweeping aging revenue accounts and grant funds. See "—General Fund—General Fund Financial Forecasts—General Fund 2015 Year-End Estimates and 2016 Budget" and "—Property Taxes—TIF Districts'" below.
The City's annual budget for the 2016 fiscal year is available on the City's web site at — documents.html. This link is included for informational purposes only; the City's annual budget for the 2016 fiscal year is not incorporated into this Official Statement by reference. The City's annual budget for the 2016 fiscal year was not prepared for investors in securities issued by the City, or intended to be a basis for making investment decisions with respect to any bonds, notes, or other debt obligations of the City, including the Bonds. Prospective purchasers of the Bonds are cautioned not to rely on any of the information in the City's annual budget for the 2016 fiscal year in connection with the offering of the Bonds.
Budget Process
Each year, the City prepares an annual budget that accounts for revenue from taxes and other sources and sets forth a plan for how the City intends to utilize those resources over the course of the following year. In accordance with the Illinois Municipal Code, the City produces a balanced budget,



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meaning that its appropriated expenditures do not exceed the amount of resources it estimates will be available for that year.
The budget process begins each summer, when City departments inform the Office of Budget and Management ("OBM") of their personnel and non-personnel needs for the upcoming year. Departments begin the budget process using a zero-based spending plan that encourages strategic and creative thinking to provide top quality services while cutting extraneous costs. OBM then prepares a preliminary budget based on the requests submitted by the departments and the resources OBM expects will be available to fund those needs.
Throughout the remainder of the summer, OBM continues the process of reviewing each department's operating and programmatic needs and developing detailed departmental budgets. OBM also estimates citywide expenses such as pension contributions, employee health care and debt service, and prepares estimates on the amount of revenue that the City will collect in the following year.
In the fall, the Mayor's Office and OBM work with departments to develop a final budget for the entire City government. OBM then compiles and balances the Mayor's proposed budget, which is introduced to the City Council on or before October 15 of each year. The City Council holds committee and public hearings on the Mayor's proposed budget and may propose amendments to it. Once the proposed budget, as amended, is adopted by the City Council, and approved by the Mayor, it becomes the Annual Appropriation Ordinance. The Annual Appropriation Ordinance is implemented on January Is' of the following year and represents the City's operating budget for that year.

































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Budget Documents
The documents prepared as part of the City's budget process are set forth below. Such documents are not prepared for investors in securities issued by the City, or intended to be a basis for making investment decisions with respect to any bonds, notes, or other debt obligations of the City, including the Bonds. Prospective purchasers of the Bonds are cautioned not to rely on any of the information in the budget documents in connection with the offering of the Bonds.

Annual Budget Documents
Document
Annual Financial Analysis
Provides a review of the City's revenues and expenditures for the past 10 years, a forecast of the City's finances for the next three years and analysis of the City's reserves, pension contribution, debt obligations and capital improvement program.

Provides a summary of the proposed budget and detailed information on the City's anticipated revenues, expenditures, and personnel.
Budget
Recommendations
Constitutes the Mayor's proposed budget to the City Council in accordance with Illinois state law.

Consolidated Plan & Action Plan
The five-year plan setting forth priorities for the City's housing and non-housing community needs based on housing and community development assessments.
The City's line-item budget as passed by the City Council.
Capital Improvement Program
A comprehensive list of capital improvements scheduled to occur in the City over the next five years.























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Budget Calendar
The general budget calendar of the City is presented in the following table.
Annual Budget Calendar
Month Action
June Departments submit preliminary revenue and expense estimates to
OBM.
August/September OBM receives detailed budget requests from City departments and
holds a series of meetings with each department regarding the department's needs for the coming year. OBM works with the Mayor's Office to match expenses with available resources and balance the next year's budget.
October On or before October 15, the Mayor submits a proposed budget to
the City Council, and the City Council conducts hearings on the budget, including at least one public hearing, to gather comments on the proposed budget.
November/December Additions or changes to the proposed budget are considered. The
City Council must approve a balanced budget by December 31, at which point the Budget Recommendations become the Annual Appropriation Ordinance. The Final Action Plan and Final Consolidated Plan is submitted annually to the U.S. Department of Housing and Urban Development for funding consideration.
January The City's Annual Appropriation Ordinance goes into effect.
Throughout The Year Throughout the year, OBM manages the resources allocated
through the Annual Appropriation Ordinance. OBM regularly reviews revenues, expenditures, and any trends or events that may affect City finances. On an ongoing basis, City departments provide information about the performance of City programs to ensure that City resources are used in a manner that maximizes taxpayer value and provides the highest quality services.

















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City Fund Structure
The City organizes its activities by funds, each of which is accounted for separately. Each fund has a specific set of revenue sources, which are utilized to support a specific set of city services and functions. Descriptions of the City's major governmental funds and its special revenue and proprietary funds are set forth below.
City Funds
Purpose
The General Fund is the City's general operating fund and supports essential City services and activities, such as police and fire protection, trash collection, and public health programs. The General Fund also supports a portion of the City's share of pension contributions for its employees. General Fund revenues come primarily from a variety of local and intergovernmental taxes, fees, and fines. See "—General Fund" below.
Federal, State and Local Grants Fund
Grant funding, largely from the state and federal governments, makes up a significant and recurring source of revenue for the City and is utilized to provide a range of City services and certain capital improvements.

Special Taxing Areas Fund
The Special Taxing Areas Fund accounts for expenditures for special area operations and maintenance and for redevelopment project costs as provided by tax levies on special areas, including tax increment financing districts.

Service Concession & Reserve Fund
Established in connection with the long-term lease/concession of City assets to create reserves for unexpected contingencies, emergencies, or revenue shortfalls. These reserves are not included in the City's annual operating budget. See "—Service Concession and Reserve Fund" below.

Bond, Note Redemption and Interest Fund
Accounts for the expenditures for principal and interest as provided by property tax, utility tax, sales tax, transportation tax, and investment income.

Community Development and Improvement Projects Fund
The Community Development and Improvement Projects Fund accounts for proceeds of debt used to acquire property, finance construction, and finance authorized expenditures and supporting services for various activities. See "—Capital Improvements" below.

Special Revenue Funds
The City's special revenue funds (the "Special Revenue Funds") are used to account for revenue from specific sources that by law are designated to finance particular functions, such as road repair, snow removal, the library system, emergency management and special events and tourism promotion.

The City's proprietary funds (the "Enterprise Funds") include the water fund, the sewer fund, and a separate fund for each of the City's major airports. These funds are self-supporting, in that each fund derives its revenue from charges and associated user fees.



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The revenue sources ofthe Federal, State and Local Grants Fund, the Community Development and Improvement Projects Fund and the Enterprise Funds are restricted as to use by law and those of the Special Revenue Funds are largely dedicated to specific services and functions. The revenues from these funds are not otherwise available to pay for general citywide expenses, including debt service on the City's general obligation bonds (including the Bonds) and the City's pension costs exceeding amounts properly allocable to the funds.
General Fund
The City has historically presented information on the City's Corporate Fund in connection with its general obligation bond issues. The Corporate Fund comprises approximately 99.0 percent of the City's General Fund, which is the City's primary operating fund and accounts for all of the City's sources and uses of general operating revenue. The General Fund, and not the Corporate Fund, is included in the City's basic financial statements. The City is presenting information in this Official Statement about the General Fund in order to facilitate the reader's review of the City's basic financial statements. See APPENDIX C—"CITY OF CHICAGO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,2014."
The General Fund does not account for the portion of the City's pension obligations that are paid from the City's property tax levy or the Enterprise Funds, nor does it account for the principal and interest payments on the City's long-term general obligation bonds that are paid from the property tax levy. For information regarding the use of the City's property taxes for the payment of pension costs and general obligation bond debt service, see "—Property Taxes—Use of City Property Tax Levy" below.
General Fund resources have changed over the past 5 years. In 2010, 59 percent of General Fund resources came from tax revenues, 25 percent from other revenues, and 16 percent from other financing sources. In 2014, in contrast, 68 percent of General Fund resources came from tax revenues, 31 percent from other revenues, and 1 percent from other financing sources. In the period from 2009 through 2011, an average of $487 million each year, or 15 percent of General Fund resources, came from non-recurring revenue sources including transfers in from the Service Concession and Reserve Fund. Beginning with the 2012 budget, the City phased out the use of reserves to subsidize the operating budget. See "— Service Concession and Reserve Fund" below.
Selected Financial Information

The following table sets forth revenues and other financing sources (collectively, "resources") and expenditures and other financing uses (collectively, "expenditures") for the General Fund on a historical basis for the years 2010 to 2014. The financial information is based on the modified accrual basis of accounting for the General Fund as reported in the City's audited basic financial statements for the years 2010 to 2014, respectively. This table should be read in conjunction with the financial information set forth in APPENDIX C—"CITY OF CHICAGO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014."












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General Fund'" For Fiscal Years Ended 2010-2014
($ in thousands)
2010 2011 2012 2013 2014
Revenues:
Utility Tax $ 467,411 $ 467,630 $ 462,475 $ 456,869 $473,496
Sales Tax 495,842 536,281 572,185 583,681 620,299
State Income Tax 282,011 236,521 282,779 308,899 278,031
Other Taxes 590,575 618,384 694,383 749,742 803,961
Federal/State Grants 1,735 1,294 1,074 1,871 2,335
Other Revenues'2' 773,278 921,056 907,760 929,429 998,028
Total Revenues 2,610,852 _ 2,781,166 2,920,656 3,030,491 3,176,150
Expenditures: Current:
Public Safety 1,828,984 1,895,404 1,956,152 1,953,572 2,020,072
General Government 903,890 863,622 864,556 885,268 929,918
Other'3' 296,063 278,561 258,501 267,852 270,899
Debt Service'4' 5,004 2,849 2,160 2,382 _]0_369_
Total Expenditures 3,033,941 3,040,436 3,081,369 3,109,074 "3,231,258
Revenues Under Expenditures " (423,089) " (259,270) (160,713)' (78,583) (55,108)
Other Financing Sources (Uses): Proceeds of Debt, Net of Original Discount/Including
Premium 16,500 95,000 55,000
Transfers In 502,502 372,744 31,617 21,018 39,700
Transfers Out (13,600) (14,357) (26,965) (10,583) (10,081)
Total Other Financing
Sources (Uses) 505,402 453,387 59,652 10,435 29,619
Revenues and Other Financing Sources Over (Under) Expenditures and Other
Financing Uses 82,313 194,117 (101,061) (68,148) (25,489)
Fund Balance-Beginning of Year 54,706 135,541 335,533 231,302 167,057
Change in Inventory (1,478) 5,875 (3,170) 3,903 ^290)
Fund Balance-End of Year $135,541 $ 335,533 $ 231,032 $167,057 $141,278


Source: City of Chicago Comprehensive Annual Financial Report (the "City CAFR"), Exhibit 4 for the respective years. The City CAFR is available upon request from the Department of Finance.
The General Fund is the chief operating fund ofthe City. It is comprised ofthe Corporate Fund as well as other non-major operating funds where fund balance is not restricted or committed as defined by the Government Accounting Standards Board (GASB).
u) Includes Internal Service, Licenses and Permits, Fines, Investment Income, Charges for Services and Miscellaneous Revenues.
(3) Includes Health, Streets and Sanitation. Transportation, Cultural and Recreational and Other Current Expenditures.
(4) Represents debt service on general obligation bonds that are not payable from a levy of property taxes. Sec "GENERAL
OBLIGATION DEBT—Long-Term General Obligation Bonds."







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General Fund Revenue
The General Fund's revenue sources consist of utility taxes, sales taxes, state income taxes, other taxes, federal and state grants, and other revenues. With the exception of federal and state grants, which are less than 1 percent of overall General Fund revenues, the various sources of General Fund revenues are described below.
Utility Taxes. Utility taxes consist of taxes on the purchase of telecommunications services, electricity, natural gas, and cable television. The following table sets forth the sources of utility tax revenue for the years 2010 through 2014:

Utility Tax Revenue 2010-2014
($ in thousands)
2010 2011 2012 2013 2014
Gas $114,254 $113,681 $ 98,791 $122,139 $153,274
Electric 99,265 98,100 98,015 98,557 96,353
Commonwealth Edison 91,714 90,655 90,814 90,602 90,202
Telecommunication 139,516 140,998 149,336 119,348 106,129
Infrastructure Maintenance 0 65|99910|Fiber Optics 0|999910|Cable Television 22,662 24,131 25,512 26,200 27,538
Total Utility Tax $467,411 $467,630 $462,475 $456,869 $473,496

Source: City CAFR, Schedule A-1 for the respective years.
These combined taxes have been 15 percent, on average, of total General Fund resources between 2010 and 2014. In 2010, utility taxes were $467.4 million, increasing to $473.5 million in 2014. The reasons for fluctuations within the major categories of utility taxes are discussed below. Infrastructure maintenance, fiber optics and cable television are excluded from the discussion because the amounts are immaterial.

Gas Tax. The City imposes natural gas-related taxes, the revenues of which are dependent upon weather conditions and price. Colder weather increases consumption and associated tax revenues, as natural gas is used to heat homes and buildings. In 2010, natural gas-related taxes generated $114.3 million, accounting for 4 percent of total General Fund resources. Prices averaged 55.1 cents per therm during 2010 and dropped to an average of 35.3 cents per therm in 2012. Natural gas prices began to rise in 2013, and by 2014, reached 72.2 cents per therm. Together with severely cold weather and the resulting increase in usage and higher gas prices, natural gas tax revenues rose to $153.3 million in 2014. Because the natural gas utility tax rate is a percentage of gross revenues as opposed to a per unit rate, these revenues are more directly impacted by price than electricity taxes, which are imposed entirely on a per unit basis.
Electric and Commonwealth Edison Taxes. The City's electricity taxes (shown in the table above under Electric and Commonwealth Edison) are charged based on the number of kilowatt hours of electricity used. Revenues from electricity taxes are dependent upon consumption and also weather conditions, particularly summer temperatures due to the electricity needed to cool homes and buildings. Electricity tax revenues have been 6 percent, on average, of total General Fund resources from 2010 to 2014, averaging $188.9 million each year, and have held relatively constant.
Telecommunications Tax. Revenue from telecommunications taxes, which are levied by the City on charges for telephone services in the City, has declined over the past decade, reflecting trends in the


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industry and consumer preferences. In 2010, telecommunications tax revenue was $139.5 million and made up 5 percent of General Fund resources. By 2014, telecommunications tax revenue had dropped to $106.1 million, accounting for 3 percent of total General Fund resources. The overall decline in revenues was due in part to the continuing reduction in the use of landlines as more customers rely solely on wireless services, and also a decline in the number of wireless accounts as use of online communication services such as Skype or other technologies increase. In addition, federal law exempts most wireless data services, such as mobile broadband, from taxation. Consequently, growth in the market for such wireless services has not resulted in increased telecommunications tax revenues for the City.
Sales Taxes. The following table sets forth sources of sales tax revenue for the years 2010 through 2014:
Sales Taxes 2010-2014
($ in thousands)
2010 2011 2012 2013 2014
Local Sales Taxes $229,202 $252,530 $272,312 $267,576 $285,773
State Sales Taxes 266,640 283,751 299,873 316,105 334,526
Total Sales Tax $495,842 $536,281 $572,185 $583,681 $620,299

Source: City CAFR, Schedule A-1 for the respective years.
Local Sales Taxes. Local sales tax revenues, as set forth in the table above, consist of four separate taxes imposed by the City pursuant to its home rule powers, the Municipal Code and state law (collectively, the "Local Sales Taxes"):
Home Rule Municipal Retailers' Occupation Tax. The Home Rule Municipal Retailers' Occupation Tax is a 1.25 percent tax imposed on the sale of most items of nontitled tangible personal property by retailers in the City. This tax is authorized by the Home Rule Municipal Retailers' Occupation Tax Act ofthe State. The tax must be imposed in increments of 0.25 percent, and can only be imposed if the City also imposes a municipal service occupation tax.
Home Rule Municipal Service Occupation Tax. The Home Rule Municipal Service Occupation Tax is a 1.25 percent tax imposed on the selling price of most items of tangible personal property acquired as an incident to the purchase of a service from service, providers in the City. This tax is authorized by the Home Rule Municipal Service Occupation Tax Act of the State and must be imposed at the same rate as the Home Rule Municipal Retailers Occupation Tax described above.
Home Rule Municipal Use Tax on Titled Personal Property. The Home Rule Municipal Use Tax on Titled Personal Property is a 1.25 percent tax imposed on the privilege of using within the City titled personal property that is purchased from a retailer and that is titled or registered at a location in the City. This tax is authorized by the Home Rule Municipal Use Tax Act of the State.
Home Rule Municipal Use Tax on Nontitled Personal Property. The Home Rule Municipal Use Tax on Nontitled Personal Property is a 1.0 percent tax imposed on the privilege of using within the City most items of nontitled personal property that are purchased from a retailer located outside the City. This tax is authorized by the Home Rule Municipal Use Tax Act of the State. The tax must be imposed in increments of 0.25 percent up to the maximum rate of 1.0 percent.
Currently there is no legal limit on the rate at which the City may impose the Home Rule Municipal Retailers' Occupation Tax, the Home Rule Municipal Service Occupation Tax or the Home



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Rule Municipal Use Tax on Titled Personal Property. Except for the Home Rule Municipal Use Tax on Nontitled Personal Property, the Local Sales Taxes are collected by the State on behalf of the City.
For purchases subject to the Home Rule Municipal Retailer's Occupation Tax and the Home Rule Municipal Use Tax on Titled Personal Property, most are subject to a combined tax rate that includes, in addition to the Local Sales Taxes and the State rate of 6.25 percent, a Regional Transportation Authority sales tax rate of 1.0 percent and a Cook County sales tax rate of .75 percent.
Revenue from the Local Sales Taxes that has been allocated to the General Fund after provision for sales tax revenue bonds debt service has accounted for an average of approximately 8 percent of total General Fund resources between 2010 and 2014. Beginning in the fall of 2008, receipts from Local Sales Taxes began to decline due to the recession, with revenues of $229.2 million by 2010. Moderate growth occurred from 2010 until 2012, with a modest decline in 2013, due to a larger portion of Local Sales Taxes allocated to sales tax bond debt service payments. Local Sales Taxes allocated to the General Fund were $285.8 million in 2014, accounting for 9 percent of General Fund resources.
Stale Sales Taxes. The City's share of State sales tax revenues, as set forth in the table above, consist of four separate taxes imposed by the State as follows (collectively, the "State Sales Taxes"):
Illinois Retailers' Occupation Tax. The Illinois Retailers' Occupation Tax is imposed by the State at the rate of 6.25 percent on the sale of most items of nontitled tangible personal property by retailers. The City receives 1 percent on the sale of such items by retailers in the City, representing 16 percent of the net receipts of this tax attributable to sales occurring in the City. With respect to tax on grocery food, drugs and medical appliances, the City receives 1 percent of the net receipts on the sale of grocery food, drugs and medical appliances, representing 100 percent of the net receipts of this tax attributable to sales occurring in the City.
ILLINOIS SERVICE OCCUPATION TAX. The Illinois Service Occupation Tax is imposed by the State at the rate of 6.25 percent on the sale of most items of nontitled tangible personal property by service providers. The City receives 1 percent on the sale of such items by retailers in the City, representing 16 percent of the net receipts of this tax attributable to sales occurring in the City. With respect to tax on grocery food, drugs and medical appliances, the City receives 1 percent of the net receipts on the sale of grocery food, drugs and medical appliances, representing 44.44 percent ofthe net receipts of this tax attributable to sales occurring in the City.

ILLINOIS USE Tax. The Illinois Use Tax is imposed by the State at the rate of 6.25 percent on the privilege of using most items of personal property purchased outside of the State. The City receives 4 percent of the net receipts of this tax collected on most items of nontitled personal property purchased outside ofthe State, subject to annual appropriation by the Illinois General Assembly. Subject to annual appropriation by the Illinois General Assembly, the City receives 20 percent of the net receipts of this tax imposed at the rate of 1 percent on grocery food, drugs and medical appliances purchased outside ofthe State. See "INVESTMENT CONSIDERATIONS - Reductions and Delays in Receipt of State Revenues."

ILLINOIS SERVICE USE TAX. The City currently receives 4 percent of the net receipts of the Illinois Service Use Tax which is imposed by the State at the rate of 6.25 percent on the privilege of using most items of tangible personal property acquired as an incident to the purchase of a service from a service provider in the State, subject to annual appropriation by the Illinois General Assembly. The City also receives 20 percent of the net receipts of this tax imposed at the rate of one percent on grocery food, drugs and medical appliances acquired as an incident to the purchase of a service from a service provider in the State, subject to annual appropriation by the Illinois General Assembly. See "INVESTMENT CONSIDERATIONS—Reductions and Delays in Receipt of State Revenues."


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Except as noted above, the City currently receives its share of State Sales Tax revenues without annual appropriation by the Illinois General Assembly. Any change in the tax rates or amount of net tax receipts allocated to the City from State Sales Tax revenues would require the enactment of legislation by the Illinois General Assembly.
Revenue from the State Sales Taxes has accounted for an average of approximately 10 percent of total General Fund resources between 2010 and 2014. Following the recession in 2008, revenues had declined to $266.6 million in 2010. Steady growth has continued since 2010, with State Sales Tax revenues increasing to $334.5 million in 2014, accounting for 10 percent of total General Fund resources.
State Income Tax. State income tax revenues consist of the City's share of the state income taxes, including personal property replacement taxes. The following table sets forth sources of state income tax revenue received by the General Fund for the years 2010 through 2014:

State Income Tax 2010-2014
($ in thousands)
Income Taxes
Personal Property Replacement Taxes
Total State Income Tax
2010 2011 2012 2013 2014
$231,531 $200,341 $245,193 $275,979 $250,279
50,480 36,180 37,586 32,920 27,752
$282,011 $236,521 $282,779 $308,899 $278,031
Source: City CAFR, Schedule A-1 for the respective years.
Income Tax. Like the Local Sales Taxes and the State Sales Taxes, the City's share of state income tax revenues experienced growth in pre-recession years and then, with the decline in the economy, the City's share of this tax declined to $201.0 million in 2009. The state income tax revenues received by the City increased in 2010 to $231.5 million, but then declined again in 2011 due to a combination of factors, including continued high state unemployment rates, the decline in population under the 2010 Census, a timing difference in the receipt of state distributions to the City and changes in 2010 to the Internal Revenue Code regarding bonus depreciation.
Beginning in the second half of 2011 and continuing into 2014, income tax collections gained momentum with the recovering economy. In addition, in both 2012 and 2013, due to the timing of the state distributions to catch up on back payments owed to the City, 13 payments were booked as revenue. 2013 collections were also pushed upward by a one-time surge in payments associated with businesses and individuals selling assets or receiving early dividends or bonuses in anticipation of higher federal tax rates. Consequently, City income tax revenues ended 2013 at the unusually high level of $276.0 million. With only 12 payments and no one-time surge in 2014, income tax revenues ended 2014 at $250.3 million.

In 2011, the State increased the personal income tax rate from 3 percent to 5 percent and the corporate income tax rate from 4.8 percent to 7 percent. However, municipalities did not receive a share of this increase because the State, concurrently with increasing tax rates, reduced the percentage of total income tax receipts that flow into the local government distribution fund from which municipalities are paid their share of state income tax revenue. As of January 1, 2015 the personal income tax rate was reduced to 3.75 percent and the corporate income tax rate was reduced to 5.25 percent.
Personal Property Replacement Tax. The personal property replacement tax derives its revenues primarily from an additional State income tax levied by the State on corporations, partnerships, trusts and S corporations. Currently, corporations pay a 2.5 percent tax on income, while partnerships, trusts, and S corporations pay a 1.5 percent tax on income. The personal property replacement tax also derives some


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i




I
of its revenues from various taxes imposed on utilities at various rates. The tax is collected by the State and paid to local governments in order to replace revenues that were lost when the State eliminated the authority of local governments to collect personal property taxes on business entities. The City has historically utilized its personal property replacement tax revenue in part to support the General Fund and in part to pay for the City's share of pension contributions. Beginning in 2015, the City has changed the way it records personal property replacement tax revenues in the General Fund. See "—Financial Forecasts—2015 General Fund Budget" below.
The personal property replacement tax has generally followed the same patterns as income tax revenues. The personal property replacement tax levied on utilities represents approximately 15 percent of the aggregate tax received and is less economically sensitive. In recent years, the expected increase in the amount of the personal property replacement tax received by the City due to the recovering economy has been negated in part by legislation enacted by the State since 2010 that allows the State to reallocate personal property replacement tax revenue for employment-related costs of certain State Board of Education personnel and state officials.
Other Taxes. Other tax revenues consist of various taxes imposed by the City, such as transportation taxes, transaction taxes, recreation taxes, business taxes as well as the City's share of the state auto rental tax. The following table sets forth sources of other tax revenue for the years 2010 through 2014.
Other Taxes 2010-2014
($ in thousands)
2010 2011 2012
Transportation Tax
Parking $ 92,306 $ 93,449 $119,169
Vehicle Fuel 49,800 49,367 49,818
Ground Transportation 8,600 9,111 8,903
Transaction Tax
Real Property 81,302 85,986 102,571
Personal Property Lease 108,357 123,523 132,503
Motor Vehicle Lessor 5,426 5,753 6,037
Recreation Tax
Amusement 85,682 86,055 87,843
Automatic Amusement 990 913 869
Liquor 31,508 31,584 - 32,620
Boat Mooring 1,317 1,439 1,361
Cigarette 19,326 18,666 18,015
Off Track Betting 929 837 694
Soft Drink 18,638 19,934 21,792
Business Tax
Hotel 54,348 60,082 85,634
Employers Expense 23,479 23,496 17,853
Foreign Fire Insurance 5,133 4,598 4,791
State Auto Rental Tax 3,434 3,591 3,910
Total Other Taxes $590,575 $618,384 $694,383

$124,384 49,089 9,070
141,907 140,227 6,249
96,739 631
32,048 1,275
16,268 604
21,564
89,851 11,261 4,601 3,974


2014

$126,516 48,161 10,399
157,194 152,576 6,431
112,895 584 32,113 1,309 24,022 547 22,210
100,407 0
4,422 4,175
$749,742 $803,961

Source: City CAFR, Schedule A-1 for the respective years.
With the exception of state auto rental taxes, which are immaterial, the various sources of other taxes are described below.

Transportation Taxes. Transportation tax revenues consist primarily of parking and vehicle fuel taxes. Parking taxes, which are imposed on parking garage operators, have consistently made up the

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largest portion of this category of revenues. Rate adjustments in 2009 and 2012 contributed to greater revenue growth in those years, with an overall increase from $92.3 million in 2010 to $126.5 million in 2014. Pursuant to a change in state law, the City changed this tax from a tiered flat rate structure to a percentage-based rate effective July 1, 2013, reducing the effective tax rate for low cost parking while increasing the effective rate for high cost parking.
The vehicle fuel tax is a 5 cent per gallon tax on the sale of vehicle fuel to a retailer doing business in the City, or who purchases fuel for use in the City. Vehicle fuel tax revenues declined from $49.8 million in 2010 to $48.2 million in 2014, due largely to declines in fuel consumption as gasoline prices rose, fuel economy standards became more stringent, and fuel-efficient vehicles became more prevalent.
Transaction Taxes. Transaction taxes include taxes on the transfer of real estate, the lease or rental of personal property, and the short term lease of motor vehicles within the city. Combined transaction taxes have constituted between 6 and 10 percent of total General Fund resources between 2010 and 2014. Fluctuations in these revenue sources track closely with the economy and the real estate market.
In the years leading up to the recession, real property transfer tax collections reached record levels. The decline in the real estate market reduced these collections to $61.9 million in 2009. While commercial real estate activity started to increase in 2010 and continued to improve in 2011, the residential real estate market was slower to recover and did not show sustained growth until 2012. By
home sales increased by 19 percent and median home prices increased by 10 percent from 2012, bringing overall real property transfer tax revenues to $141.9 million. During 2014, median home prices increased by 11 percent over 2013 while home sales decreased by 7 percent due largely to inventory shortages. Due to the increase in median home prices, 2014 revenues increased to $157.2 million.
As with other transaction and consumer-driven tax revenues, collections of personal property lease transaction taxes, imposed on the lease or rental of personal property at a rate of 9 percent of the lease or rental price, increased from 2010 to 2014, reflecting improving economies. In 2010, personal property lease transaction taxes generated $108.4 million. This revenue continued to grow, starting in. 2011, mainly due to enforcement efforts. Personal property lease tax revenues were $152.6 million in
accounting for 5 percent of total General Fund resources.

Recreation Taxes. Recreation taxes include taxes on amusement activities and devices, liquor, the mooring of boats, cigarettes, off-track betting and non-alcoholic beverages. In 2010, recreation taxes generated $158.4 million for the City, accounting for 5 percent of total General Fund resources. By 2014, this had grown to $193.7 million, accounting for 6 percent of total General Fund resources, primarily due to the increase in amusement tax revenues. Amusement tax, including Automatic Amusement tax, revenues for 2014 represent 59 percent of total recreation tax revenues.
Amusement taxes apply to most large sporting events, theater, and musical performances in the City. The overall increase in these revenues was due in part to a one percent increase in 2009. Amusement tax revenues also vary significantly from year to year based on the relative success of Chicago's professional sports teams and ticket prices for such sporting events.
Business Taxes. The City's business tax revenues consist primarily of taxes on hotel accommodations, and the employers' expense tax until it was phased out at the end of 2013. Revenues from the hotel tax experienced a sharp decline in 2009 and recovered slowly in 2010, coinciding with the recession's impact on tourism, business, and convention-related travel. In 2010, hotel tax revenues were $54.3 million. The second half of 2011, however, saw hotel sales and the related tax revenues begin to rebound, with strong growth in 2012, and further growth in 2013 and 2014. In 2014, revenue per


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|10
10|available room increased by 4 percent over 2013 and hotel tax revenues were $100.4 million accounting for 3 percent of total General Fund resources.
Other Revenues. Other revenues consist of internal service, licenses and permits, fines, investment income, charges for services, municipal utilities, leases, rentals and sales, and miscellaneous revenues. The following table sets forth the sources of other revenues for the years 2010 through 2014.
Other Revenues 2010-2014
($ in thousands)
2010 2011 2012 2013 2014
Internal Service $274,574 $306,126 $302,924 $306,523 $305,716
Licenses and Permits 96,240 102,702 117,568 123,633 119,940
Fines 258,802 263,288 290,799 313,506 338,329
Investment Income 4,200 3,378 5,439 1,436 1,573
Charges for Services 77,694 132,587 124,606 119,857 134,593
Municipal Utilities 6,405 9,060 8,415 6,429 7,257
Leases, Rentals and Sales 17,604 22,595 14,747 19,008 24,127
Miscellaneous 37,759 81,320 43,262 39,037 66,493
Total Other Revenues $773,278 $921,056 $907,760 $929,429 $998,028

Source: City CAFR, Schedule A-1 for the respective years.
With the exception of investment income and municipal utilities, which are immaterial sources, the various categories of other revenues, including major revenue types within the categories, are described below.

Internal Service. Internal service revenues are transfers to the General Fund for services provided to other City funds and departments, such as police, fire, and sanitation services provided to the City's Enterprise Funds. Such transfers constitute an average of 10 percent of General Fund resources, and have ranged from $274.6 million in 2010 to $305.7 million in 2014.
Licenses and Permits. License and permit-related revenue is generated through fees for business licenses, building permits, and various other licenses and permits. License and permit activity often reflects economic health, with more construction commencing and businesses starting up when the economy is strong.
In 2010, license and permit revenue was $96.2 million, decreasing from prior year levels as construction activity in the City declined during the recession. License and permit activity and related revenues began to recover in 2012 to $119.9 million in 2014.
Fines. Fines consist of fines, forfeitures, and penalties, including parking tickets, red-light and speed camera tickets, and fines for items such as building code violations. These revenues have increased steadily from $258.8 million in 2010 to $338.3 million in 2014. These revenues accounted for 11 percent of total 2014 General Fund resources. This steady increase in revenues is partly a result of the increased use of technology, including the implementation of on-line bill payment systems and additional parking enforcement field technology. Increases in fine and penalty rates and improved debt collection have also impacted overall fine, forfeiture, and penalty revenues.
Charges for Services. Charges for services include revenues generated by charging for activities such as inspections, emergency medical services (EMS), police services, and other services for private benefit. In 2010, these activities generated $77.7 million, increasing to $134.6 million in 2014, due largely to increased reimbursement for police services and EMS fee increases.

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!
Leases. Rentals and Sales. Leases, rentals and sales include revenues generated from activities such as the sale of vacant land and buildings, city-owned property that has been leased to the public, and sale of materials that are not used by the City. In 2010, these activities generated $17.6 million, increasing to $24.1 million in 2014, due primarily to the increase in the rental and lease of city-owned property.
Miscellaneous. Miscellaneous revenues include infrequent or one-time sources of revenues, such as insurance recoveries, settlements, and cash received from fund closeouts, as well as other revenues that do not fall into one of the revenue categories mentioned above, such as municipal marketing fees and tax increment financing ('TIF") surpluses. These activities generated $37.8 million in 2010 and $66.5 million in 2014. The amount of revenue varies from year to year primarily due to the availability of TIF surpluses.
General Fund Expenditures
Total General Fund expenditures, including other financing uses, have increased from $3.05 billion in 2010 to $3.24 billion in 2014. Generally, the relative proportion of total General Fund spending devoted to different activities and expense types has remained fairly consistent from year to year. Across all departments and city services, personnel-related expenditures (including salaries and wages and employee healthcare costs) make up the largest portion of the General Fund budget, averaging 83 percent of total General Fund expenditures from 2010 through 2014.
General Fund expenditures consist of current operating expenditures and debt service. Debt service expenditures in the General Fund relate to debt service payments with respect to an issuance by the City in 1997 of certain building acquisition certificates which arc not paid from property taxes and are not material. General Fund current expenditures are described below.
Public Safety. Each year, the largest portion of General Fund expenditures is dedicated to public safety functions, and includes departments such as Police, Fire, and the Office of Emergency Management and Communications. This also includes the activities of (i) the Department of Buildings, which ensures the safety of residential and commercial buildings in the City by enforcing design, construction, and maintenance standards and promoting conservation and rehabilitation through permitting and inspection processes, and (ii) the Department of Business Affairs and Consumer Protection, such as business licensing and support and consumer protection activities, including the regulation of the local taxicab industry. Public safety has remained a primary driver of expenditures, growing as a percentage of General Fund expenditures, from 60 percent in 2010 to 62 percent in 2014.
General Government. General government expenditures support functions necessary to provide essential city services, including accounting and finance, contract management, human resources, legal advice, administrative services, vehicle and facilities maintenance, community services, city development, technology and systems expertise. These expenditures have accounted for between 28 and 30 percent of General Fund expenditures, from 2010 through 2014.












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Other Current Expenditures. The following table sets forth the other current expenditures ofthe General Fund by function for the years 2010 through 2014.
Other Current Expenditures 2010-2014
($ in thousands)
2010 2011 2012 2013 2014
Health $ 35,593 $ 32,390 $ 24,371 $ 26,552 $ 25,902
Streets and Sanitation 177,950 175,829 178,065 186,992 195,390
Transportation 70,032 69,683 53,815 52,420 47,309
Cultural and Recreational 544 420 13|9910|Other 11,944 239 2,237 1,888 2,298
Total Other Current
Expenditures $296,063 $278,561 $258,501 $267,852 $270,899

Source: City CAFR, Exhibit 4 for the respective years.
With the exception of Cultural and Recreational and Other expenditures set forth in the table above, which are immaterial in amounts, the categories of Other Current Expenditures are described below.

Health. Health expenditures support the operations of the Department of Public Health, including providing health education to residents, access to care, guiding public health initiatives and monitoring and inspecting food establishments. Department of Public Health expenditures have accounted for, on average, 1 percent of General Fund expenditures from 2010 through 2014.

Streets and Sanitation. Streets and sanitation expenditures support the operations of the Department of Streets and Sanitation, including garbage and recycling collection, sweeping and plowing of streets, graffiti removal, cleaning of vacant lots, demolition of garages, towing of illegally parked vehicles, abatement of rodents and planting, trimming and removal of trees. Expenditures related to the Department of Streets and Sanitation have accounted for, on average, 6 percent of General Fund expenditures from 2010 through 2014.
Transportation. Transportation expenditures support the operations of the Department of Transportation and have averaged approximately 2 percent of annual General Fund expenditures between 2010 and 2014. These funds are used to build, repair, and maintain streets, sidewalks, and bridges and complete the planning and engineering behind the City's infrastructure. Much of the City's major infrastructure construction is funded through state and federal grants, general obligation bond financing, TIF revenues and other sources, and thus is not represented as a General Fund expenditure.
Budget Gaps
Each year, the City projects revenues and expenses for the coming year as part of its preliminary budget process. Any shortfall between revenue and expenses is referred to as the "budget gap." The budget gap is closed each year prior to the passage of the Annual Appropriation Ordinance, in which expenditures are balanced with forecasted available resources.









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Set forth below are the budget gaps that were projected for fiscal years 2012 through 2016.
Budget Gaps 2012-2016
($ in millions)
Amount
2012 2013 2014 2015 2016
$635.7 369.0 338.7 297.3 232.6


Source: City of Chicago, Office of Budget and Management.
The decreasing size of the gap from 2012 through 2016 is the result of the recovering economy's impact on revenues, as well as the cost reductions made as part of the past four budgets. Initiatives such as the introduction of managed competitions for City services, the transition to grid-based garbage collection, consolidation of information technology systems and software licenses, implementation of energy efficiency programs, sale of excess City-owned land, review and renegotiation of major contractual costs, and reforms that have reduced the City's healthcare costs have all decreased the City's structural deficit, bringing the City's expenses more closely in line with revenues.
The General Fund gap of $232.6 million for 2016 was less than had been projected by the City in prior years. The 2016 budget gap was closed in the Annual Appropriation Ordinance through savings and revenue enhancements in the following general categories: non-personnel savings and reforms ($61.1 million), personnel savings and reforms ($57.1 million), improved fiscal management ($57.9 million), improved debt collection ($23.4 million), growth in economically sensitive and other revenues ($7.8 million) and revenue enhancements ($125.3 million). Amounts in excess ofthe General Fund gap are expected to be allocated to debt service on outstanding general obligation bonds of the City.
Notwithstanding the gains achieved by the City in recent years in addressing its structural budget deficit, the budget gap in coming years is likely to widen from the 2016 level due largely to growing salaries and wages and funding requirements for City pension plans. See "—2017-2018 General Fund Outlook" below.
General Fund Financial Forecasts
This section includes a discussion of the City's year-end estimates for 2015 and projections for years 2016, 2017 and 2018 for the General Fund. The estimates and projections are based on expectations and assumptions which existed at the time such estimates and projections were prepared, including, among other factors, evaluations of historical revenue and expenditure data, known changes or events, analyses of economic trends and current and anticipated laws and legislation affecting the City's finances. While the City believes that the numerous assumptions underlying the estimates and projections are reasonable, they are subject to certain contingencies and periodic revisions which may involve substantial change. The City makes no representation or warranty that these estimates and projections will be realized. The estimates and projections discussed below and elsewhere herein were not prepared with a view towards compliance with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information. The estimates and projections assume that no substantive changes are made to City operations or the cost of City services. No cost-saving initiatives are incorporated into the estimates and projections. The estimates and projections are likely to change as future decisions are made in response to actual events, new or changing needs and City-wide priorities. No assurance can be given that actual results will conform to the estimates and

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projections provided. This prospective information is not fact and should not be relied upon as being necessarily indicative of future results. Purchasers of the Bonds are cautioned not to place undue reliance on this prospective financial information. See 'TNVESTMENT CONSIDERATIONS—Forward-Looking Statements."
General Fund 2015 Year-End Estimates and 2016 Budget. The following table sets forth resources and expenditures for the General Fund based on actual results for the year 2014, the 2015 budget, the year-end estimates for 2015 and the adopted budget for 2016.
General Fund Resources and Expenditures Budgetary Basis
($ in millions)
2015
2014 2015 Year-End 2016
Actual0' Budget'2' Estimates'3' Budget'
Tax Revenue
Utility Taxes and Fees $473.5 $451.9 $ 449.4 $ 441.0
Transaction Taxes 316.2 326.4 345.4 344.7
Transportation Taxes 185.1 188.0 191.1 240.4
Recreation Taxes 193.7 205.0 214.5 218.0
Business Taxes 104.8 110.9 111.8 113.9
Sales Taxes 620.3 647.9 651.3 677.8
State Income Taxes 278.0 420.0 440.8 435.7
Other Intergovernmental 6.5 5.8 6.2 6.2
Total Tax Revenue 2,178.1 2,355.9 2,410.5 2,477.7
Non-Tax Revenue
Licenses and Permits 119.9 136.9 129.3 124.8
Fines, Forfeitures and Penalties 338.3 369.5 338.7 350.5
Charges for Services 134.6 132.4 122.3 112.6
Municipal Parking 7.3 6.5 7.0 10.1
Leases, Rentals, Sales ' 24.1 30.2 25.0 36.0
Reimbursement, Interest & Other 373.8 470.2 460.3 432.9
Total Non-Tax Revenue 998.0 1,145.7 1,082.6 1,066.9
Proceeds and Transfers In 39.7 33.1 41.6 26.0
Total Revenue 3,215.8 3,534.7 3,534.7 3,570.6
Budgeted Prior Years' Surplus and 45.5 0.0 0.0 0.0
Reappropriations
Total General Fund Resources $3,261.3 $3,534.7 $3,534.7 $3,570.7
Total Expenditures S3,261.3 $3,534.7 $3,534.7 $3,570.7

(l) Source: Exhibit 6, City CAFR for the year ended December 31, 2014. '"' Source: 2015 Annual Appropriation, as amended.
t3) Source: 2016 Budget Overview, prepared in connection with the adoption ofthe City's budget for fiscal year 2016 on October 28, 2015. In accordance with generally accepted accounting principles, revenues and expenditures attributable to the 2015 fiscal year are continuing to be recorded, and will then be subject to an annual audit.
I4> Source: 2016 Annual Appropriation.
General Fund resources on a budgetary basis, which includes Budgeted Prior Years' Surplus and Reappropriations, if applicable, are expected to meet the budgeted target of $3,534.7 million in 2015. Economically sensitive revenues, such as sales taxes, personal property lease and amusement taxes, are estimated to outperform the budget due to the improving economy. State income taxes are also anticipated to be $20.8 million higher than the budget as noted below. Gains from these economically

32

sensitive revenues are estimated to be sufficient to offset losses in public utility taxes, permits, fees and charges for services.
General Fund resources are estimated to total $3,534.7 million in 2015, an increase of $273.3 million or almost 8 percent over 2014 actual resources of $3,261.3 million; $128.8 million of this increase is the result of a change in the way that the City accounts for its personal property replacement tax revenue, as discussed below. Excluding this amount, the growth in General Fund resources totals $144.5 million, or 4 percent over 2014 actual resources. General Fund resources are projected to increase by 1.1 percent in 2016 to approximately $3.57 billion.
Utility tax revenue is estimated to total $449.4 million in 2015, $24.1 million lower than the 2014 actual revenue of $473.5 million, and account for 13 percent of total 2015 estimated General Fund resources at year-end. The decline is due primarily to lower gas prices and anticipated cool weather during the summer months. Utility tax revenue is expected to decline further in 2016 due to continued decreases in telecommunication tax revenues and predictions that the summer and winter of 2016 will be milder than in 2015, resulting in lower electricity and natural gas fax revenues, respectively. These reductions are expected to offset anticipated gains in cable television tax revenues.
Business taxes, including hotel taxes, are estimated to generate $111.8 million in 2015, an increase of $7.0 million over the 2014 actual amount of $104.8 million. Estimates for 2015 anticipate an approximately 2 percent increase in hotel occupancy and a more than 6 percent increase in daily room rates. Revenues for 2016 are expected to exceed 2015 year-end estimates by $2.1 million.
Transportation taxes include taxes on garage parking, vehicle fuel purchases, and the provision of ground transportation for hire. Transportation taxes are expected to generate $240.4 million in 2016, up significantly from the 2015 year-end estimate of $191.1 million. The increase is due largely to an expected increase in ground transportation taxes to $60.8 million in 2016 due to a 40 cent per trip fee on rides provided by taxi and rideshare providers and an imposition of a surcharge on airport pick-ups by rideshare providers.

Recreation taxes include taxes on amusements, automatic amusement devices, the mooring of boats in the City's harbors, liquor purchases, cigarette purchases, e-cigarette fluid, purchases of non­alcoholic beverages, and off-track betting. Recreation taxes are expected to generate $218.0 million in 2016, an increase of $3.5 million from the 2015 year-end estimate. Amusement tax revenue is forecasted to total $139.0 million in 2016, an increase of $3.4 million over the 2015 year-end estimate.
As a result of the improving economy, the revenues collected from sales taxes allocated to the General Fund is estimated to total $651.3 million in 2015, an increase of $31.0 million over the 2014 actual revenue of $620.3 million. Sales tax revenue in 2015 is anticipated to grow by 5 percent over the 2014 actual levels. Sales tax revenue in 2016 is anticipated to grow by 4 percent of the 2015 year-end estimate to 677.8 million. Transaction tax revenues, including real property transfer taxes and personal property lease taxes, are estimated to increase at the rate of approximately 9 percent in 2015, due to strong recovery in the economy, including commercial real estate sales and housing markets in Chicago. Personal property lease tax revenues for 2016 are estimated to grow by 5.3 percent over anticipated 2015 year-end levels in line with increasing consumer confidence and continued economic recovery. Real property transfer taxes for 2016 are estimated to decline by 5.7 percent from anticipated 2015 year-end levels due to several unusually large commercial building transfers in 2015.
State income tax revenue, which includes personal property replacement tax revenue, is estimated to total $440.8 million in 2015, an increase of 59 percent over the 2014 actual revenue of $278.0 million; $128.8 million of the increase in 2015 state income tax revenue is the result of the change in how the City budgets its personal property replacement tax revenue. A portion of the estimated increase is, however,


33

due to actual anticipated growth in revenues as wages, capital gains, and corporate profits are expected to increase in 2015. These increases are estimated to be offset in part by the State's increasing use of personal property replacement tax revenues to pay for its own obligations. The City's income tax revenues are expected to decrease slightly in 2016 to $435.7 million, primarily due to a full year of lower income tax rates for individuals and businesses.
Local non-tax revenues are estimated to be $1,082.6 million in 2015, an 8 percent increase over 2014 local non-tax revenues of $998.0 million. Total revenue from licenses and permits is estimated to total $129.3 million in 2015, an increase of $9.4 million over the 2014 amount of $119.9 million. Total revenue from licenses and permits is projected to reach $124.8 million in 2016, an increase of $19.2 million over the 2015 year-end estimate. This will include a newly imposed garbage collection fee of $9.50 per month per household on single family homes and buildings with four units or less. The 2015 year-end estimate of fines revenue is $338.7 million, consistent with 2014 actual results. Fines revenues projected for 2016 are expected to be $350.5 million, an increase over projected 2015 year-end actual results but a decrease of 5 percent from the 2015 budgeted amount of $369.5 million. Revenues from Charges for Services are expected to decrease by 9 percent in 2015 to $122.3 million compared to the 2014 actual revenue of $134.6 million and to increase in 2016 to $112.6 million, due to redirecting the City's density bonus program revenues to the Affordable Housing Fund, offset by the increase in building permit fee revenue due to increased rates. The 2015 year-end estimate for reimbursements, interest, and other revenues is $460.3 million, an increase of $86.5 million, or 23 percent over the 2014 actual revenue of $373.8 million, due primarily to the increase in the 911 surcharge. This amount is projected to decline in 2016 to $432.3 million.

Year-end expenditures for 2015 are projected at $3,534.7 million, an increase of 8 percent over 2014 actual expenditures. Public safety expenditures are expected to increase by approximately 6 percent from actual 2014 public safety expenditures. The estimated expenditures account for actual changes to salaries and wages governed by collective bargaining agreements, employee benefits, contractual services and utilities and motor fuel. The City has budgeted increased contributions of $89.1 million to the MEABF and LABF (each as hereafter defined) pension plans in its 2015 budget and year-end estimates based on enacted pension reforms, with such increased contributions being payable in 2016.
Expenditures for 2016 are projected to grow over 2015 anticipated year-end expenditures by approximately $36 million, or 1 percent, to $3.57 billion. Under the 2016 proposed budget 81 percent of corporate fund expenses are for personnel-related costs, which include salaries and wages, pension contributions, healthcare, overtime pay and unemployment compensation. Other categories of expenditure, in decreasing order of amount, are debt service payments, contractual services and commodities and materials.

Notwithstanding the overall increase in budgeted expenditures for 2016, the City expects to achieve cost savings in individual areas of budgeted expenditure for 2016 of approximately $199.6 million. Non-personnel savings and reforms, including the implementation of zero based budgeting, improvements in energy and information technology systems, leasing and contractual reforms and sales of excess City-owned land, are expected to save approximately $61.1 million. Personnel savings and reforms, including the elimination of vacant positions, healthcare cost reduction and reductions in retiree healthcare benefits are expected to save approximately $57.1 million. The City expects to save approximately $57.9 million from improved fiscal management measures, such as sweeping aging revenue accounts and grant funds, proper allocation of costs to City-wide programs and funds and City Treasurer investment reforms. The City also expects to save approximately $23.4 million from improved debt collection measures.
In 2015, the City changed the way it accounts for the non-property tax portion of its pension contributions. Historically, the City's pension contributions not paid from property taxes have been paid


34

I
from personal property replacement tax revenues, which were recorded directly into the respective Retirement Funds (as hereafter defined) and did not flow through the General Fund. See APPENDIX E—"RETIREMENT FUNDS—Determination of City's Contributions." Going forward, the total receipt of personal property replacement tax revenues will be deposited into the General Fund, and a portion of the City's share of pension contributions will be paid out of the General Fund to the Retirement Funds. The effect of this change in the 2015 budget was $128.8 million. This change has the effect of increasing General Fund revenues by the amount of the personal property replacement taxes deposited into the General Fund, and increasing General Fund expenditures by a like amount. Another change relates to the way the Enterprise Funds pay their allocable share of pension fund costs. See APPENDIX E—"RETIREMENT FUNDS—Special Revenue and Enterprise Fund Allocation of Retirement Fund Costs." Historically, the City's pension contributions allocable to each of the Enterprise Funds were reimbursed by those Enterprise Funds to the General Fund. Going forward, the Enterprise Funds' allocable portions of the City's pension cost will be paid by the Enterprise Funds to the Retirement Funds.
2017-2018 General Fund Outlook. The City projects operating budget gaps for the General Fund of $334.9 million and $436.3 million for the years 2017 and 2018, respectively. Estimated increased contributions to the City's four pension funds are not included in the projected operating budget gaps for 2017 and 2018. Further, general obligation debt service payments using General Fund resources may increase significantly from 2015 levels as the City phases out the use of long-term general obligation bonds to pay near-term general obligation debt service. See "INVESTMENT CONSIDERATIONS— Structural Deficit and Debt Restructuring" and "—Increased Debt Levels." The City projects General Fund revenue growth of approximately one percent over the prior year in both 2017 and 2018 resulting in total General Fund revenues of $3.50 billion and $3.53 billion respectively.
These projections are based on the continuation of similar trends as discussed above with respect to 2016 for most revenue sources, including recreation and amusement taxes, transportation taxes, Local Sales Taxes, State Sales faxes and most local non-tax revenues, adjusting for anticipated variations in certain cases. A healthy rate of growth in real property transfer tax revenue is expected in 2017 and 2018, as the market stabilizes following rapid growth during the recovery years. Utility taxes are expected to remain mostly flat. Hotel tax revenues are projected to increase at approximately two percent each year in line with an improving labor market.
General Fund operating expenditures are projected to outpace General Fund revenue growth during this period, increasing at an average annual rate of 3.5 percent to $3.77 billion in 2017 and $3.90 billion in 2018. Most categories of expenditures, including worker's compensation, motor fuel, and settlement and judgment-related and other miscellaneous expenses, are assumed to grow at their long-term historical average rates. Less predictable expenditures, such as commodities and materials, contractual services and utilities are projected at a two percent growth rate. Salary and wage and healthcare expenditures, by far the largest portion of the City's operating expenses, are projected based on the assumption that the number of full-time equivalent positions will remain approximately flat, meaning, no significant hiring, layoffs, or vacancy eliminations will occur, and that the costs associated with those positions will experience growth in line with long-term historical trends.
For the last several years, in order to limit the annual property tax levy for debt service on its outstanding general obligation bonds, the City has annually issued general obligation debt to pay a portion of the near-term debt service on such bonds. The City plans to gradually curtail this practice, using it for annual property tax levies through and including the 2019 levy and thereafter discontinue issuing general obligation debt for such purpose.






35

Service Concession and Reserve Fund
The City has set aside reserves for unexpected contingencies, emergencies, or revenue shortfalls. These reserves, recorded in the Service Concession and Reserve Fund, are not included in the City's annual operating budget.
The City established long-term reserves of $500 million and $400 million, respectively, with proceeds of the upfront payments from the long-term lease or concession ofthe Chicago Skyway and the City's metered parking system ("Metered Parking System"). See "—Long-term Leases, Concessions of City Facilities" below.
The interest earned on the Skyway lease reserves was intended to be used for City operating expenses and has been utilized as planned. The principal balance remains $500 million and the earned interest has been transferred to the General Fund each year, with the dollar amount of the transfer reflecting variations in interest rates.
The reserves from the Metered Parking System were created to replace revenues that would have been generated from parking meters by transferring interest earnings on the reserves to the General Fund, with the principal remaining intact at $400 million. However, starting in 2009, the City began utilizing these long-term reserves to subsidize the City's operating budget. In 2009, $20 million was transferred to the General Fund, and in 2010, $160 million was used for City operating expenses. The 2011 budget included a $140 million transfer from the reserves for operating purposes. Utilizing these reserves reduced the principal balance substantially below the initial deposit and accordingly reduced the interest earnings generated by the reserves. The ordinance establishing the reserves directed that an annual transfer of $20 million be made from the reserve fund into the General Fund to replace lost meter revenue. In order to maintain these reserves, the City amended the ordinance in 2012 to state that only interest generated from the reserves, and not principal, must be transferred for this purpose. In addition, the City began to rebuild the reserves with a $20 million deposit in 2012, a $15 million deposit in 2013, a $5 million deposit in 2014 and a $5 million deposit in 2015. The City has included an additional deposit of $5 million into the long-term reserves in its fiscal year 2016 budget.

Set forth in the table below is information about the City's long-term reserves as of December 31 ofthe years 2009 through 2015.
Long-Term Reserves 2009-2015
($ in millions)
Metered Parking
Year Skyway System Total1
$500 $380 $880
500 220 720
500 80 580
500 100 600
500 115 615
500 120 620
500 125 625

Source: City of Chicago. Office of Budget and Management.
The amounts presented are based on cost of funds held in the Service Concession and Reserve Fund. The market value of the funds may vary depending on the market value of investments.





36

Capital Improvements
The City's capital improvement program (see "—Annual Budget—Budget Documents? above) funds the physical improvement or replacement of city-owned infrastructure and facilities with long useful lives, such as roads, buildings and green spaces. The capital improvements program is funded from general obligation bond issuances, revenue bond issuances (largely for water, sewer, and aviation improvements), state and federal funding, tax increment financing, and private funding through public/private ventures.
From 2010 to 2014, the City utilized proceeds from the issuance of general obligation bonds to fund $712.2 million in capital improvements. General obligation bonds were utilized to support the types of projects described in the table below.
Capital Improvement Projects'1'
Project
Greening Facilities


Infrastructure


Aldermanic menu projects
Description
Green ways, medians, trees, fountains, community gardens, neighborhood parks, wetlands, and other natural areas.
Improvement and construction of City buildings and operating facilities, police and fire stations, health clinics, senior centers, and libraries.
Construction and maintenance of streets, viaducts, alleys, lighting, ramps, sidewalks, bridge improvements, traffic signals, bike lanes, streetscapes, and shoreline work.
Selected by members of City Council, each of whom is annually allotted $1.32 million of general obligation bond funding to be spent at their discretion on a specific menu of improvements in their respective wards. These funds have been used primarily for sidewalks, residential street resurfacing, street lighting, and curb and gutter replacement, with portions of these funds contributed to the Chicago Park District ($13.5 million), Board of Education of the City of Chicago ($2.6 million), and the Chicago Transit Authority ($500,000). Also included in this category are costs related to the improvements selected by the alderman, such as design and engineering, utility adjustments and sidewalk ramps.


General obligation bonds have also funded a limited number of other uses, which are discussed under "'GENERAL OBLIGATION DEBT—Long-Term General Obligation Bonds--""--"'
















37

Set forth in the following table are the capital uses of general obligation bonds from 2010 through
2014.
Capital Uses of General Obligation Bonds 2010-2014
($ in millions)
2010 2011 2012 2013 2014

Greening $ 15.7 $ 5.8 $ 4.2 $ 4.4 $4.6
Facilities 40.0 24.9 12.7 3.6 4.6
Infrastructure 28.9 26.0 33.1 36.3 32.0
Aldermanic Menu 81.4 102.0 84.0 84.0 84.0
Total $166.0 $158.7 $134.0 $128.3 $125.2

Source: City of Chicago. Office of Budget and Management.
General obligation bond-funded capital improvements have decreased since 2010 as the debt service associated with the City's long-term general obligation debt has grown and the City has made efforts to cut overall costs.
The City's estimated program for neighborhood capital improvements over the period 2015 through 2019 is approximately $2.2 billion. The City has not determined how much of such neighborhood capital improvements will be paid from general obligation bonds.
Property Taxes
The City levies ad valorem real property taxes pursuant to its authority as a home rule unit of local government under the Illinois Constitution of 1970. Real property taxes represent the single largest revenue source for the City. As part of the City's budget process each year, the City determines the aggregate property tax levy that will be levied in the next fiscal year and collected in the following year.
EA V and Property Taxes
The City's aggregate property tax levy is divided by the equalized assessed value ("EAV") of all property in the City to determine the tax rate that will be applied to an individual taxpayer's property. The tax rate is applied to the EAV of the taxpayer's property to determine the tax bill. Changes in EAV do not affect the amount of the City's property tax revenue because the City's property taxes are levied at a flat dollar amount. For information on real property assessment, tax levy and tax collection in Cook County, see APPENDIX D—"PROPERTY TAXES."
The following tables present statistical data regarding the City's property tax base, tax rates, tax levies and tax collections from 2005 forward.












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Use of City Properly Tax Levy
Revenue from the City' property tax levy has been utilized primarily to pay the City's debt service and employer pension contributions. A small amount of the levy is allocated to the library system.
The amounts and tax rates of the City's property tax levy for debt service and employer pension contribution by Retirement Fund are set forth in the following tables for the years indicated.
Property Tax Levies 2010-2014(l)
($ in thousands)
2010 2011 Change 2012 Change 2013 Change 2014 Change
Note Redemption
and Interest'2' $ 73,377 $ 73,377 0.00% $ 73,481 0.14% $ 74,231 1.02% $ 97,061 30.76%
Bond Redemption
and Interest 409,979 411,905 0.47 411,489 (0.10) 411,807 0.08 412.139 0.08
PABF(3) 140,165 143,785 2.58 143,865 0.06 138,146 (3.98) 136.680 (1.06)
MEABF(3) 132.531 126.997 (4.18) 129.138 1.69 122.066 (5.48) 123,239 0.96
FABF(3) 64,323 66,125 2.80 65,461 ' (1.00) 81,518 24.53 81,363 (0.19)
LABF1'3' . . 13,714 11.759 (14.26) 11,202 (4.74) 10,486 (6.39) 10,934 4.27
$834,089 $833,948 (0.02)% $834,636 0.08% $838,254 0.43% $861,416 2.76%

Source: Cook County Clerk's Office.
(1) Does not include the levy for the School Building and Improvement Fund which is accounted for in an agency fund.
(2) Includes Corporate, Chicago Public Library Maintenance and Operations, Chicago Public Library Building and Sites, and
City Relief Funds.
(3) For information regarding the City's unfunded pension obligations, see —Pensions—Funded Status of the Retirement
Funds."


























41
Property Tax Rates Per $100 Of Equalized Assessed Valuation 2005-2014



Tax Levy Year



Tax Extension1"'2' (in thousands)


Bond, Note Redemption and Interest13'



Policemen's Annuity and Benefit


Municipal Employees' Annuity and Benefit



Firemen's Annuity and Benefit
Laborers'
and Retirement
Board Employees' Annuity and Benefit

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
$718,071 719,230 749,351 834,152 834,109 834,089 833,948 834,636 838,254 861,416
$0.696607 0.569261 0.588843 0.602842 0.570806 0.588774 0.645918 0.743122 0.778719 0.783368
$0.231467 0.194953 0.191548 0.172426 0.167552 0.170734 0.191381 0.220459 0.221494 0.210554
$0.231683 0.197399 0.174302 0.162182 0.153704 0.161435 0.169036 0.197892 0.195703 0.189848
$0.083243 0.099974 0.088581 0.080787 0.078184 0.078352 0.088014 0.100313 0.130700 0.125339


$0.011763 0.015754 0.016705 0.015651 0.017166 0.016813
' 0.016844
SI.243 1.062 1.044 1.030 0.986 1.016 1.110 1.279 1.343 1.327

Source: Cook County Clerk's Office.
(l ) Does not include levy for Special Service Areas and net of collections for TIF districts.
l2) Does not include the levy for the Schools Building and Improvement Fund, which is accounted for in an agency fund. (3) Includes rates from the Chicago Public Library Bond, Note Redemption and Interest Fund.
The estimated total tax levies for fiscal years 2015 and 2016 are approximately $1,186.3 million and $1,295.8 million, respectively. As part of its supplemental fiscal year 2015 budget adopted on October 28, 2015, the City has adopted a $318 million increase in property taxes, part of an overall increase of property taxes of $543 million to be phased in between 2015 and 2018.
As shown above, the aggregate property tax levies over the period 2008 through 2013 remained relatively constant. The increase in 2014 is primarily due to property tax surpluses from TIF district terminations and does not represent an increase in the total tax levy for that year. See li—TIF Districts" below.

As the City's debt service and pension expenses have increased, these costs have exceeded the City's property tax levy. From 2005 through 2014, an increasing portion ofthe pension contributions were paid with personal property replacement tax revenue and a portion of such year's long-term debt service was covered using other resources. In addition, for the past several years the City has issued general obligation refunding bonds in part to restructure some of its outstanding general obligation bonds. This has allowed the City to reduce the property tax levies for the refunded bonds and keep the aggregate property tax levy below a desired level for that year. Such debt restructuring has extended the property tax levies into the future in order to repay the refunding bonds.
The City is one of several taxing districts reflected on a Chicago resident's property tax bill. The amount of property taxes collected by Cook County is divided among these districts, with the City allocated approximately 20 percent of the total bill. For information on property taxes levied on real property within the City by overlapping taxing districts, see "—Overlapping Taxing Districts" below.






42

TIF Districts
In addition to the revenues the City receives from its general property tax levy, the City derives property tax revenue from the City's TIF districts. TIF revenue must be utilized for specific types of expenses in specific districts and is not available for non-specified governmental uses. The City's TIF program began in 1984 with the goal of promoting business, industrial, and residential development in areas of the City that struggled to attract or retain housing, jobs, or commercial activity. The program is governed by a State law that allows municipalities to capture property tax revenues derived from the EAV growth above the base EAV that existed before an area was designated as a TIF district for the term ofthe TIF district, and to use that money (the tax increment) for job training, public improvements and incentives to attract private investment to the area.
When a TIF district expires, terminates, is repealed, or the City, under certain circumstances, declares a surplus in the TIF district, the City returns the surplus funds to the Cook County Treasurer for distribution to the overlapping taxing districts based upon each district's share under the applicable tax code. Such surplus declaration occurs typically during the City's annual budget process.
Set forth in the following table is information about the amount of money returned to taxing districts from declared surplus or the expiration, repeal or termination of TIF districts from 2011 through 2015.
TIF Surplus 2011-2015
($ in millions)
2011 2012 2013 2014 2015
Declared $188.0 $82.9 $25.0 $39.1 $39.5
Expiration 15.1 13.7 8.4 25.4 44.3
Repeal 73.3 0.0 0.5 0.0 0.0
Termination 0.0 0.0 9.6 0.6 0.5
Total $276.4 $96.6 $43.5 $65.1 $84.3

Source: City of Chicago, Office of Budget and Management.

The City received approximately 20 percent of all surplus dollars distributed by the Cook County Treasurer to the overlapping taxing districts over the 2011 to 2015 period. As part of its budget for fiscal year 2016, the City has frozen new spending from TIF revenues in TIF districts located in the City's downtown area until current and committed projects in those districts payable from those revenues are paid in full, and declared the remaining revenues in those districts as surplus. This is expected to yield approximately $113 million in surplus for 2016. The City has allocated its $22 million share of this surplus to the reduction of operating expenses in its fiscal year 2016 budget, with the remainder being allocated to other local government units.
Upon the expiration, repeal or termination of TIF districts, the incremental EAV of the district becomes a part of the aggregate EAV that is available to all overlapping taxing districts. Taxing districts, including the City, have the ability to recover their portion of the revenue from the incremental EAV by adding it to their levy following a TIF district's dissolution. This practice yielded the City $1.1 million from three TIF districts in 2012, $3.3 million from 12 TIF districts in 2013 and $16.6 million from six TIF districts in 2014. The City will continue to receive TIF surplus on an annual basis as TIF districts are repealed, terminated or expire.





43

Overlapping Taxing Districts
Various governmental entities operate as separate, independent units of government and have authority to issue bonds and levy taxes on real property within the City. These governmental entities, or overlapping taxing districts, are the Board of Education of the City of Chicago ("CBOE"), Cook County, Illinois ("Cook County"), the Metropolitan Water Reclamation District of Greater Chicago ("MWRD"), the Chicago Park District (the "Park District"), Community College District Number 508, County of Cook and State of Illinois ("City Colleges"), and the Cook County Forest Preserve District ("Forest Preserve").
The combined property tax rates of the City and overlapping taxing districts are set forth in the following table for the years 2005 to 2014.











































44

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City Workforce
The City has decreased its workforce from 38,366 positions (40,318 full-time equivalents, or "FTEs") in 2005 to 32,959 positions (34,129 FTEs) in 2015, a decrease of approximately 14 percent. Approximately 91 percent of the City's workforce is represented by unions. The City is party to collective bargaining agreements with more than 40 different unions.
The two largest bargaining units are the Fraternal Order of Police ("FOP") and the Chicago Firefighters Union, currently with 16,096 combined sworn public safety positions. When police captains, lieutenants, and sergeants are included, the number of unionized sworn public safety positions comes to 17,539.
The next largest group of positions is associated with the Coalition of Union Public Employees ("COUPE"), which currently represents 6,754 trades positions (7,315 FTEs). The American Federation of State, County, and Municipal Employees ("AFSCME") is the fourth largest group, representing 3,479 positions (3,650 FTEs) that provide administrative support for City government and services, and the Service Employees International Union ("SEIU") currently represents 1,967 public safety civilian positions (2,717 FTEs), such as traffic control aides, detention aides, and police communication operators.
The collective bargaining agreements with each of these unions include regular salary increases, resulting in higher personnel costs each year. The current collective bargaining agreement between the City and the Fraternal Order of Police, Chicago Lodge No. 7 (FOP), covering the terms and conditions of employment of approximately 11,015 Chicago Police Officers for the period July 1, 2012 through June 30, 2017, was signed and became effective on November 18, 2014. This agreement succeeded the prior collective bargaining agreement which expired on June 30, 2012. The agreement provides for wage increases during the five (5) year term totaling approximately 10 percent, including retroactive increases effective during the period July 1, 2012 through November, 2014. The retroactively effective increases were as follows:
Effective July 1,2012 Effective January 1, 2013 Effective January 1,2014
2% 2% 2%
The City negotiated a limitation on the retroactive increases for the period July 1, 2012 through June 30, 2013, in that these increases were applicable only to officers' base pay/salary and excluded all overtime earned during this period. The retroactive increases have been paid by the City with borrowings under the Short Term Borrowing Program. These borrowings will be repaid with available resources from the General Fund.
An agreement with the Chicago Firefighters Union, providing for an 11 percent increase over the period 2012 to 2017, was ratified by the union in June 2014. The most recent agreement with COUPE provides for wage rates set at the prevailing rates established regularly by the Illinois Department of Labor for construction trades employees; for employees not subject to prevailing rate schedules, the agreement provides for 2 percent increases each year from 2013 through 2017. The most recent agreement with AFSCME, ratified in June 2014, provides for a 10% increase over the five-year period 2012 to 2017. The current SEIU agreement, ratified in August 2012, includes a 6 percent increase between 2011 and 2016. Agreements ratified by the unions representing police sergeants, lieutenants and captains in late 2013 and early 2014, each provide for an 8 percent salary increase between 2012 and
2016.




47

These increases are in addition to the raises based on time in service that most employees receive. Historically, non-union employees received salary increases equal to those negotiated for civilian positions; however, since 2009, the majority of non-represented employees have not received salary increases beyond normal step increases for time in service.

Pensions
The following is a summary of certain aspects of the City's Retirement Funds. Additional information regarding the Retirement Funds is available in APPENDIX E— "RETIREMENT FUNDS. "
General
The City contributes to four defined benefit retirement funds (the "Retirement Funds") which provide benefits upon retirement, death or disability to City employees and their beneficiaries. The Retirement Funds are established, administered and financed under the Illinois Pension Code (the "Pension Code") as separate legal entities and for the benefit of the members and beneficiaries of the Retirement Funds. The four Retirement Funds are: (i) the Municipal Employees' Annuity and Benefit Fund of Chicago ("MEABF"), which covers most civil servant employees of the City and non-teacher employees of the CBOE; (ii) the Laborers' and Retirement Board Employees' Annuity and Benefit Fund of Chicago ("LABF"), which covers City and certain Chicago Board of Education employees who are employed in a title recognized as labor service; (iii) the Firemen's Annuity and Benefit Fund of Chicago ("FABF"), which covers the City's sworn firefighters and paramedics; and (iv) the Policemen's Annuity and Benefit Fund of Chicago ("PABF"), which covers the City's sworn police officers, captains, lieutenants and sergeants. As of the end of 2014, there were over 114,000 members in the plans, including active and inactive employees, retirees and beneficiaries.
The benefits paid under the Retirement Funds, contributions to the Retirement Funds and investments by the Retirement Funds are governed by the Pension Code. As defined benefit pension plans, the Retirement Funds pay periodic benefits to beneficiaries, which generally consist of retired or disabled employees, their dependents and their survivors, in a fixed amount (subject to certain scheduled increases) for life. The amount of the benefit is determined at the time of retirement based, among other things, on the length of time worked and the salary earned. To fund benefits, both the City and the City's employees make contributions to the Retirement Funds. The Retirement Funds invest these contributions with the goal of achieving projected investment returns over time and increasing the assets of the Retirement Funds.
The Retirement Funds' actuaries perform separate actuarial valuations of each of the Retirement Funds on an annual basis. These actuarial valuations calculate, among other things, the employer contributions, assets and liabilities of the Retirement Funds. In the actuarial valuations, the actuaries make a variety of assumptions and employ actuarial methods to calculate such contributions, assets and liabilities. The assumptions and methods used by the actuary have a significant impact on the measures of financial position of the Retirement Funds and are further described in APPENDIX E—"RETIREMENT FUNDS."
Funded Status of the Retirement Funds

The Retirement Funds are presently significantly underfunded. The funded status of the Retirement Funds as of December 31, 2014 is set forth in the following table.





48

Funding Status ofthe Retirement Funds as of December 31, 2014(,)
($ in millions)

Total
Assets'2' MEABF.. $5,179.5
LABF 1,388.1
PABF 3,062.0
FABF 1,036.0
Total $10,665.6

Funded
Ratio(5) 42.1% 65.9 27.0 23.9
Unfunded Actuarial Accrued
Liabilityf4)
$7,127.6 719.0 8,272.8 3,302.6
$30,087.6 $19,422.0 35.5%

Source: Actuarial Valuations ofthe respective Retirement Funds for the fiscal year ended December 31, 2014.
(1) Columns may not sum due to rounding. /
(2) Measured at fair market value.
(3) "Actuarial Accrued Liability" is the dollar value of plan liabilities (as determined by an actuary). See APPF.NDIX E—
"RETIREMENT FUNDS—Actuarial Methods—Actuarial Accrued Liability."
(4) Unfunded Actuarial Accrued Liability" or '"UAAL" is the dollar value by which the plan's liabilities (as determined by an/
actuary) exceed the assets of such pension plan. See APPENDIX E—"RETIREMENT FUNDS—The Actuarial Valuation—
Actuaries and the Actuarial Process."'
,5) "Funded Ratio" represents the plan's assets divided by its liabilities (as assets and liabilities are determined by an actuary). See APPENDIX E—"RETIREMENT FUNDS—The Actuarial Valuation—Actuaries and the Actuarial Process"

The funded status ofthe Retirement Funds has deteriorated steadily over time, as demonstrated in the table below.




























49

Funded Status ofthe Retirement Funds 2005-2014'
($ in millions)

MEABF PABF FABF LABF TOTAL
Funded Funded Funded Funded Funded
Year UAAL Ratio UAAL Ratio UAAL Ratio UAAL Ratio UAAL Ratio
2005 $2,893.3 68.7% $3,767.9 51.2% $1,608.2 44.2% $83.2 95.2% $8,352.7 61.3%
2,635.0 72.2 3,747.5 52.8 1,696.6 45.1 28.0 98.4 8,107.1 63.6
2,958.7 70.3 3,887.1 52.7 1,746.4 45.7 25.5 98.6 8,617.8 62.9
5,642.6 45.7 5,481.6 35.4 2,397.1 27.6 726.7 62.1 14,248.0 40.9
5,663.9 47.7 5,410.1 38.1 2,377.2 30.7 642.8 67.5 14,094.0 43.6
6,393.1 46.0 5,770.4 37.3 2,548.9 30.3 602.8 70.3 15,315.2 42.7
7,239.7 41.1 6,346.9 33.4 2,858.1 25.8 839.3 61.0 17,284.0 37.9
8,292.7 38.5 6,839.4 32.0 2,987.7 25.7 965.1 58.7 19,083.9 36.1
8,407.2 39.2 7,017.1 31.8 3,012.0 27.0 925.8 61.2 19,362.2 36.8
7,127.6(2) 42.1(2) 8,272.8 27.0 3,302.6 23.9 719.0(2) 65.9(2) 19,422.0 35.5

Source: The Comprehensive Annual Financial Reports for the Retirement Funds (the "Retirement Fund CAFRs") for fiscal years 2005 through 2014.
All calculations based on the fair market value of assets. (2) Reduction in LABF and MEABF UAAL and increase in Funded Ratio are due in large part to the enactment of P.A. 98-641, which is subject lo legal challenge as to its constitutionality. See Appendix E—"RETIREMENT FUNDS — Legislative Changes—P.A. 98-641."
The City believes that the decrease in the Retirement Funds' funding levels over the past ten years is due to adverse economic factors (resulting in investment returns below assumed levels combined with a decreasing asset base), inadequacy of legislatively-mandated employee and City contributions, automatic annual increases ("AAIs") and changes in benefit levels, changes in actuarial assumptions and the changed demographic of both the City's workforce and retirees of the Funds.
Adverse Economic Factors. The financial downturns of 2001 and 2008 resulted in significant drops in the asset values of the Retirement Funds. From 2000 to 2002, the combined aggregate funded ratio of the Retirement Funds declined from approximately 87 percent to approximately 62 percent, due primarily to investment losses. Investment performance improved in the mid-2000s, but this growth was on a smaller asset pool due to prior losses. During 2008, the Retirement Funds sustained a more than $4.0 billion loss in asset value, and the combined Retirement Funds' funded ratio decreased from approximately 63 percent to approximately 41 percent. Although the investment performance of the Retirement Funds has recovered since 2008, the Retirement Funds' funded ratio continued to decline to approximately 36 percent in 2014.
Contribution Levels. City employees contribute a fixed percentage of their salary to the Retirement Funds. Historically, the City's contributions to the Retirement Funds had been determined on the basis of a formula established in the Pension Code. This formula required the City to levy an amount equal to the employee contributions two years prior to the year in which the tax was levied multiplied by a factor established by statute for each Retirement Fund (the "Multiplier"). The Multiplier is not related to the contribution which would be determined by an actuary pursuant to an actuarial valuation or the benefits actually earned by employees. Furthermore, the Multiplier does not adjust for changes in the economy affecting returns on pension fund investments, changes in demographics, inflation, or changes in benefits. As a result, the Multiplier for each Retirement Fund has been significantly lower than the Multiplier which would have been necessary to fully fund the Retirement Funds on an actuarial basis in recent years.


50

I
The following table compares the City's statutory contributions pursuant to the Pension Code to the amounts calculated by the Retirement Funds' actuaries to be needed to fully fund the Retirement Funds for the years 2005 through 2014.
Retirement Funds City Contribution Requirements 2005-2014°'
($ in thousands)
Percentage of Actuarially
Actuarially Required
Fiscal Required Actual City Contribution
Year Contribution Contribution'2' Contributed
$ 698,185 $423,515 60.7%
785,111 394,899 50.3
865,776 395,483 45.7
886,215 416,130 47.0
990,381 423,929 42.8
1,112,626 425,552 38.2
1,321,823 416,693 31.5
1,470,905 440,120 29.9
1,695,278 442,970 26.1
1,740,972 447,399 25.7

Sources: Actuarial Valuations ofthe Retirement Funds as of December 31 of the years 2010 through 2014.
(l' Data is presented in the aggregate for the Retirement Funds and uses assumptions and methods employed by each of the Retirement Funds. For the data presented as of December 31, 2005 and December 31, 2006, contribution information includes, amounts related to other post-employment benefits. Beginning in 2007, as a result of a change in GASB standards, contribution information is presented exclusive of amounts related to other post-employment benefits. I hc City began to report other post-employment benefits separately in the City CAFR beginning in 2006.
(2) Includes the portion ofthe personal property replacement tax contributed to the Retirement Funds in each year.

Changes in Benefits. Over time, additional benefits have accrued under or been written into the Pension Code. Most notably, AAls written into the Pension Code significantly increased the cost of benefits. AAls provide annual increases in pension payments regardless ofthe then prevailing inflation rates. Legislation passed by the State in 2010 reduced the AAls and instituted other cost saving provisions for all four pension funds for employees hired on or after January 1, 2011. See APPENDIX E—"RETIREMENT FUNDS—Legislative Changes—P.A. 96-0889."
Legislative changes to the Pension Code also increased the total cost of benefits owed, though to a lesser degree than the automatic AAls. Among other changes, certain benefit minimums were raised and the definition of pensionable pay was expanded.
Workforce and Retiree Demographics. In addition to investment losses and benefit increases, the makeup of the City's workforce and retirees has added to the unfunded liability of the Retirement Funds. The statutorily-set employee and employer contribution percentages did not change to account for shifts in basic demographic factors such as the longer lifespans of retirees and the projected future benefit costs. In addition, the City's prior early retirement incentive plans increased the number of retirees drawing benefits and decreased the number of employees contributing to the Retirement Funds.







51

Changes to PABF and FABF
Public Act 096-1495 ("P.A. 96-1495"), enacted in 2010, made changes to the Pension Code with respect to PABF and FABF. In addition to making some changes to benefits for PABF and FABF employees beginning employment on or after January 1, 2011, P.A. 96-1495 alters the manner in which the City contributes to PABF and FABF beginning in 2016. P.A. 96-1495 removes the Multiplier from the funding calculation, instead requiring the City to contribute to PABF and FABF the amount actuarially required to achieve a funded ratio of 90 percent by fiscal year 2040. P.A. 96-1495 will significantly increase the City's contributions to PABF and FABF in 2016. See "— City's 2015 and2016 Contributions to the Retirement Funds Pursuant to the Proposed Budget" herein and APPENDIX E— "RETIREMENT FUNDS—Legislative Changes—P.A. 96-1495."
The following table sets forth a projection ofthe funded ratios of and City contributions to PABF and FABF in future fiscal years.
Projected Funded Ratios and Contributions PABF AND FABF(,) ($ in thousands)

FABF
Fiscal Year
2015 2016 2017 2018 2019 2020 2025 2030 2035 2040
Funded Ratio
28.7%
30.3
32.0
33.6
35.3
36.9
45.5
55.9
70.4
90.0
Employer Contribution12'
$ 187,815 592,863 675,826 695,124 713,810 732,200 834,435 951,072 1,073,628 1,146,889
Funded Ratio
25.0%
26.6
28.2
29.8
31.5
33.2
42.6
54.9
70.4
90.0
Employer Contribution'2'
$109,813 246,132 284,086 292,439 301,752 311,205 363,224 414,140 442,417 463,527

Source: The Actuarial Valuations of PABF and FABF as of December 31, 2014.
(1) Projections are calculated on an accrual basis.
(2) Represents contributions expected to be made by the City during the llscal year.
Senate Bill 777 ("SB 777") passed both houses of the Illinois General Assembly as of May 31, 2015. SB 777 would extend the period by which the unfunded liabilities of PABF and FABF are amortized to a 90 percent Funded Ratio from 2040 to 2055 (the "Revised Amortization Period") and institute a phase-in period during 2016-2020 to reduce the City's required payment in the initial years to allow for a more gradual phase-in of the requirements of P.A. 96-1495 (the "Phase-in Period"). The Revised Amortization Period would reduce the annual funding obligation required to reach a 90 percent Funded Ratio, but extend the number of years over which such payments would need to be made. A motion to reconsider the vote on SB 777 was filed in the Illinois Senate on May 31, 2015, and, as such, SB 777 has not been sent to the Governor for consideration. In addition to, or in lieu of, a Revised Amortization Period or a Phase-in Period, the Illinois General Assembly may consider other legislation that could affect the City payment obligations for PABF and FABF and/or funding sources for those obligations, including a City-owned casino. The City makes no representation as to whether or when SB 777 or any such other legislation would be enacted.



52
Changes to MEABF and LABF
Public Act 098-641 ("P.A. 98-641"), enacted in June 2014, makes changes to the Pension Code with respect to MEABF and LABF. P.A. 98-641 is designed to address the underfunding, and projected insolvency, of MEABF and LABF through a combination of increases in the City's contributions, increases in employee contributions, and decreases in the AA1 adjustments. Among other changes, P.A. 98-641 increases employee contribution rates, makes changes to AAls and provides for AAls to be skipped in 2017, 2019 and 2025. Furthermore, P.A. 98-641 modifies the manner in which the City contributes to MEABF and FABF. P.A. 98-641 retains the Multiplier, with stepped increases in the applicable Multipliers, as the method of calculating the City's contribution through 2020. Beginning in 2021, the City will be required to contribute to MEABF and LABF the amount necessary, as determined by an actuary, to achieve a funded ratio of 90 percent by 2055. See APPENDIX E—"RETIREMENT FUNDS —Legislative Changes—P.A. 98-641."
P.A. 98-641 is currently subject to challenge in a lawsuit alleging its unconstitutionality. See "LITIGATION—City Pension Litigation" below and APPENDIX E—"RETIREMENT FUNDS— "Effect on MEABF and LABF if P.A. 98-641 found unconstitutional."
The following table sets forth a projection of the Funded Ratios of and City contributions to MEABF and LABF in future fiscal years.
Projected Funded Ratios and Contributions MEABF AND LABF(,) ($ in millions)

MEABF LABF
Employer
Funded Contribution Funded Employer
Fiscal Year Ratio (2) Ratio Contribution'
40.4% $156.1 63.5% $14.5
38.9 242.7 61.7 24.0
38.3 275.2 60.0 28.5
38.3 381.4 58.9 37.8
38.8 464.6 57.7 46.3
39.4 542.6 57.0 56.1
2025 41.7 596.9 55.8 76.4
2030 43.3 645.2 54.9 86.9
2035 44.8 701.8 54.9 97.6
2040 48.4 778.3 57.3 106.8

Source: The Actuarial Valuations of MEABF and LABF as of December 31,2014. (1> Projections calculated on a cash basis.
,2) Represents contributions expected lo be made by the City during ihe fiscal year.

City's 2016 Contributions to the Retirement Funds Pursuant to the Proposed Budget.
On October 28, 2015, the City Council approved its supplemental fiscal year 2015 budget (the "Supplemental Budget") and its fiscal year 2016 budget (the "FY 2016 Budget"). The Supplemental Budget increased the budgeted fiscal year 2015 contribution (payable to the Retirement Funds in 2016) to PABF and FABF by $328 million (the "Additional 2015 Contribution"), which increased the total contribution to all Retirement Funds to $886 million for such fiscal year (the "2015 Contribution"). The


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j i
t
I
FY 2016 Budget includes an additional increase in the contribution to the Retirement Funds which results in a total contribution for fiscal year 2016 (payable to the Retirement Funds in 2017) of $978 million (the "2016 Contribution"). The 2015 Contribution and the 2016 Contribution each assume the effectiveness of P.A. 98-641 and the enactment of SB 777.
The City's budget for fiscal year 2015, as amended by the Supplemental Budget (together the "Amended FY 2015 Budget"), provides that the increase in contributions to PABF and FABF be primarily generated through an increase in the City's property tax levy. Such property tax increase has been adopted by the City Council. However, the 2015 Contribution and the 2016 Contribution assume the enactment of SB 777, which would reduce the contribution currently required by the Pension Code under P.A. 96-1495. Specifically, with respect to fiscal year 2015, SB 777 would reduce the City's contribution to PABF and FABF from $839 million to $619 million. Because the Amended FY 2015 Budget assumes the enactment of SB 777, the FY 2015 Contribution included in the Amended FY 2015 Budget would be insufficient to fund the contribution required by the Pension Code should SB 777 not be enacted.
The City can give no assurance as to whether SB 777 or similar legislation will be adopted by the General Assembly. If SB 777 or similar legislation is not enacted and the City must contribute to PABF and FABF pursuant to the current provisions of the Pension Code, the City expects that it would fund such additional contributions through an increase in revenues, a decrease in expenditures or a combination thereof.

































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Overlapping Taxing Districts
The overlapping taxing districts within the City maintain five pension funds for their respective employees that are supported by local property taxes. Statistical data for the four City pension funds and the five overlapping taxing district's pension funds is set forth in the table below.
City and Overlapping Taxing Districts Pension Funds Supported by Local Property Taxes (,)

Unfunded
Actuarial Unfunded
Accrued Liability
Liability Per Funded
($ in millions) Capita 2' Ratio
Overlapping Taxing Districts
MWRD $ 1,033.2 $ 196 55.0%
Cook County 5,330.0 1,016 62.3%
Forest Preserve 96.0 18 66.4%
CBOE(3) 9,606.9 3,529 51.8%
Park District 507.1 97 43.7%
Subtotal $16,573.2 $ 4,856
City Pension Funds $19,748.4 $ 7,254 34.4%
TOTAL $36,321.6 $12,110('"


Source: Most recent audited financial statements, CAFR or actuarial valuation ofthe pension fund ofthe overlapping taxing district.
°' Excludes City Colleges, the employees of which are members of the State Universities Retirement System which is funded by the State; excludes the Chicago Transit Authority pension fund which is supported by local sales taxes, real estate transfer taxes, subsidies from the Regional Transportation Authority and fares.
(2) Per capita amounts are based on the U.S. Census Bureau's 2014 population estimate ofthe City (2.722,389) and of Cook County (5,246,456) as described in APPENDIX B—-'ECONOMIC AND DEMOGRAPHIC INFORMATION—Population." The City's population was used to calculate the per capita numbers for the City and for the CBOE and the Park District, each of which has boundaries coterminous wilh the City. Cook County's population was used to calculate the per capita numbers for Cook County, the Forest Preserve, which has boundaries coterminous with Cook County, and MWRD which, though not coterminous with Cook County, has boundaries which overlap in excess of 98% with the boundaries of Cook County, measured by EAV.
(3' CBOE makes contributions to the Chicago Teachers' Fund.
|4' Represents the average burden on a resident ofthe City as a result ofthe unfunded pension liabilities of the City and the overlapping taxing districts.
The information set forth in the preceding table may not incorporate the various reforms that have been adopted for certain of these pension funds, and should not be relied upon for the financial condition of the funds currently. The information is presented only to provide an indication of the magnitude of the unfunded pension liabilities of the overlapping taxing districts when combined with the unfunded pension liabilities of the City.
Long-Term Leases, Concessions of City Facilities
The City is a party to long-term lease or concession agreements with respect to certain City-owned facilities, as described below.




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In 2005, the City entered into a 99-year lease of the Chicago Skyway (the "Skyway Lease"), under which Skyway Concession Company, LLC, was granted the right to collect and retain toll revenue from the Skyway. In return, the City received an upfront payment of $1.83 billion.
In 2006, the City entered into the Chicago Downtown Public Parking System Concession and Lease Agreement (the "Parking Garages Lease Agreement") with Chicago Loop Parking, LLC ("CLP"), by which CLP was granted a 99-year concession to operate the public parking garages commonly referred to as Millennium Park, Grant Park North, Grant Park South and East Monroe (collectively the "Parking Garages"). Under the Parking Garages Lease Agreement, CLP was granted the right to operate and collect revenue from the Parking Garages in return for an upfront payment of $563 million to the City. The Parking Garages Lease transaction is in litigation; plaintiffs have challenged the validity ofthe lease. See "LITIGATION—Parking Garages Litigation."
In 2008, the City entered into the Chicago Metered Parking System Concession Agreement (the "Parking Meters Concession Agreement") with Chicago Parking Meters, LLC ("CPM"), by which CPM was granted a 75-year concession to operate the City's on-street metered parking system (the "Metered Parking System"), including the right to collect revenues derived from the metered parking spaces. In return, the City received an upfront payment of $1.15 billion.
The City established long-term reserves with portions of the upfront payments from the Skyway Lease and the Metered Parking System. See "—Service Concession and Reserve Fund" above.
Under each of the Skyway Lease, the Metered Parking Concession Agreement and the Parking Garages Lease, the lessee/concessionaire has the right to terminate the transaction and receive payment from the City for the fair market value of the respective City facilities in the event that the City, Cook County or the State were to take certain actions which materially adversely affected the value of the respective City facilities.
The Parking Garages Lease Agreement includes a provision by which certain events can require the City to compensate the lessee. One of those events is the granting of a license for the operation of a public garage that was not in existence as of the date of the Parking Garages Lease Agreement within a certain distance from the Parking Garages. In 2015, the City paid the lessee a judgment of approximately $62 million as compensation for granting a public garage license for a new parking garage within the specified distance from the Parking Garages.
The Parking Meters Concession Agreement includes a provision by which the City can be required to compensate CPM if usage of the Metered Parking System by vehicles displaying disabled parking placards (which are exempt from paying for on-street metered parking) exceeds a certain threshold. Pursuant to this provision, the City paid CPM $18.5 million for such usage by vehicles displaying a disabled parking placard during 2013. No such payments were paid pursuant to this provision in either 2014 or 2015.
Illinois Sports Facilities Authority
The Illinois Sports Facilities Authority ("ISFA") is a state agency authorized to construct and operate sports facilities and provide financial assistance for governmental owners of sports facilities or their tenants. Beginning in 1980, the ISFA issued various series of bonds (and refunding bonds) for the development of U.S. Cellular Field and a portion of the Chicago lakefront including Soldier Field. The ISFA bonds are payable from State and City annual subsidy payments of $5 million each, with the City's subsidy taken from the City's share of the local government distributive fund, and a 2 percent hotel tax imposed by the ISFA (the "ISFA Hotel Tax"). The State advances to the ISFA certified annual operating


56

expenses less the amount ofthe subsidies. The State withholds collections from the ISFA Hotel Tax to repay advanced amounts. If the ISFA Hotel Tax is not sufficient to repay the State advance, the deficiency is automatically withdrawn from the City's share of the local government distributive fund. During 2011, the ISFA hotel tax was inadequate to fully repay the State advance, and the deficiency of $185,009 was deducted from the City's share of the local government distributive fund. This is the only payment the City has made to date. Future City payments are dependent on hotel occupancy rates.

City Investment Policy
The investment of City funds is governed by the Municipal Code of Chicago (the "Municipal Code"). Pursuant to the Municipal Code, the City Treasurer has adopted a Statement of Investment Policy and Guidelines for the purpose of establishing written cash management and investment guidelines to be followed by the City Treasurer's office in the investment of City funds. See APPENDIX C— "CITY OF CHICAGO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,2014—Notes (1) and (4)."
Amounts in a variety of funds o f the City, including the General Fund, a re invested on a comingled basis, and are referred to as the City's "consolidated cash." Consolidated cash may be used for interfund borrowings among various funds ofthe City, including, but not limited to, the General Fund, and such use reduces the need for external borrowing by the City to meet the needs of its funds. The City has maintained its consolidated cash, including interfund borrowing, so as to meet the obligations of its funds, including the General Fund, in a timely manner.

GENERAL OBLIGATION DEBT
Recent Developments
On April 29, 2015, Mayor Emanuel announced a series of fiscal reforms to be implemented over the next four years to strengthen the City's financial practices. The reforms included (i) converting to fixed rate all of the City's outstanding general obligation variable rate bonds; (ii) terminating the interest rate swaps associated with the City's general obligation variable rate bonds; (iii) ending by 2019 the practice of paying near-term debt with long-term bonds; (iv) increasing operating budget funding for legal settlements and judgments; and (v) increasing the City's reserve funds.

In the first half of 2015, the City implemented the first two components of the Mayor's fiscal reform agenda by converting all of its general obligation variable rate bonds to fixed rates of interest and terminating the related interest rate swaps and liquidity support instruments.
Long-Term General Obligation Bonds
A significant portion of the City's long-term general obligation bonds, including the Bonds, are backed by the full faith and credit of the City, and all taxable property within the City is subject to the levy of taxes, without regard to rate or amount, to pay the principal of and interest on such general obligation bonds. As described below, certain general obligation bonds of the City do not have a property tax levy in place for their repayment.
The City has three types of long-term general obligation bonds outstanding. For a significant portion ofthe City's long-term general obligation bonds (including the Bonds), an annual property tax levy has been established to pay debt service on such bonds ("Tax Levy Bonds"). For certain other long-term general obligation bonds issued by the City (which make up a small subset of the City's general obligation bonds), either (i) an annual property tax levy has been established but is annually abated if


57

certain other specified revenues are available that year for payment of debt service ("Alternative Revenue Bonds"), or (ii) no annual property tax levy has been established for debt service and payments of debt service are appropriated from sources of revenue other than property taxes ("Pledge Bonds"). Alternative Revenue Bonds include the City's General Obligation Bonds (Modern Schools Across Chicago Program), Series 2007 A-K, Series 201 OA and Series 201 OB, and General Obligation Bonds (Emergency Telephone System), Series 1999 and Series 2004. Pledge Bonds include the City's General Obligation Building Acquisition Certificates (Limited Tax), Series 1997, and the general obligation note issued by the City in connection with the acquisition by the City of the former Michael Reese Hospital campus (the "MRL Note"). All other long-term general obligation bonds of the City are Tax Levy Bonds.
Long-term general obligation bonds are generally issued annually by the City to pay for capital projects, general obligation refundings for savings, general obligation debt restructuring, legal settlements and judgments, and, from time to time, the retroactive employment wage and salary increases (including related pension costs).
Over the last five years, the City has issued approximately $350 million of long-term general obligation bonds per year to fund capital improvements, equipment and legal judgments and settlements. For information on the use of long-term general obligation bonds for capital projects, see "FINANCIAL DISCUSSION AND ANALYSIS—Capital Improvements." The City currently intends to curtail the use of long-term general obligation bonds to fund settlements and judgments in future budgets.
For the last several years, proceeds from long-term general obligation bonds in the range of $90 million to $170 million per year have been used to pay a portion of the near-term debt service on outstanding general obligation bonds, in order to limit the annual property tax levy for debt service on the outstanding bonds. Approximately $208 million of the proceeds of the Bonds will be used for this purpose. The City plans to continue this practice for annual property tax levies through and including the 2019 property tax levy, and thereafter discontinue issuing general obligation debt for such purpose. See "INVESTMENT CONSIDERATIONS—Structural Deficit and Debt Restructuring."

Following are selected debt statistics regarding the City's long-term general obligation bonds from 2006 through 2015.























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Long-Term General Obligation Bonds Selected Debt Statistics 2006-2015
Aggregate Debt ($ in thousands)1
Ratio of Debt to Fair Cash Value'2
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
$ 5,422,232 5,805,921 6,126,295 6,866,270 7,328,452 7,628,222 7,939,682 7,670,298 8,339,626 9,041,892
$329,770,733 320,503,503 310,888,609 280,288,730 231,986,396 222,856,064 206,915,723 236,695,475
1.64% 1.81% 1.97% 2.45% 3.16% 3.42% 3.84% 3.24% 3.52% 3.82%
$1,872.31 2,004.80 2,115.42 2,370.94 2,718.67 2,829.88 2,945.43 2,845.49 3,093.79 3,354.32

Source: City of Chicago, Department of Finance.
Source: The Civic Federation. Excludes railroad property, pollution control facilities and portion of City in DuPage County. 2014 and 2015 information is not available al time of publication. The ratios of debt to fair cash value for 2014 and 2015 are based on 2013 estimated fair cash value.
Population source: U.S. Census Bureau. From 2006 through 2009. per capita calculation is based on the 2000 population of 2,896,016. From 2010 through 2015, per capita calculation is based on the 2010 population of 2,695,598.
The City's long-term general obligation debt service schedule for 2016 to 2043 is set forth in the
following table.






























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Short Term Borrowing Program
The City has issued commercial paper notes and maintains revolving lines of credit (the "Short Term Borrowing Program"). Borrowings under the Short Term Borrowing Program are general obligations of the City but do not have a specific property tax levy in place for their repayment.
The Short Term Borrowing Program is used by the City for working capital in anticipation of receipt of other revenue, to fund capital projects, debt refinancing or restructuring and to pay non-capital expenditures, such as settlements and judgments or retroactive payment of employment salaries and wages, which are typically repaid from proceeds of later issuances of general obligation bonds. '
The City has increased its borrowing capacity under the Short Term Borrowing Program over time. By ordinance, the current maximum aggregate principal amount of debt that can be outstanding under the Short Term Borrowing Program is $1.0 billion. The City has sized its borrowing capacity for interim funding in anticipation of receiving revenues or issuing long-term general obligation bonds and to cover General Fund operating expenses.
On September 24, 2015 the City terminated its then existing commitments under the Short Term Borrowing Program and entered into a Revolving Line of Credit Agreement, dated as of September 24, 2015 (the "Line of Credit") among the City and JPMorgan Chase Bank, National Association, Bank of China, Chicago Branch and BMO Harris Bank, N.A. The Line of Credit provides the City with borrowing authority of up to $750 million, to be allocated pro rata among the participating lenders. The City is evaluating increasing its total bank commitments under the Short Term Borrowing Program up to the total authorized amount discussed above to provide it with additional liquidity capacity.

The following table shows the City's lowest and highest outstanding balances and the total amount available for borrowing under the Short Term Borrowing Program for the years 2010 through 2015 and as of January 5, 2016.
Short Term Borrowings 2010-2016
($ in thousands)
Lowest Outstanding Highest Outstanding Total Available
Year Principal Amount Principal Amount Principal Amount
$27,448 $198,101 $ 200,000
30,092 198,112 200,000
32,676 166,513 300,000
72,517 415,256 500,000
77,294 415,294 900,000
2015(I) 263,174 835,042 1,000,000
2015,2) 93,837 239,131 750,000
2016 239,131 239,131 750,000

Source: City ot" Chicago, Department of Finance.
n) For the period January I, 2015 through September 24, 2015. l2) For the period September 24, 2015 through December 31, 2015.
The Line of Credit has an aggregate capacity of $750,000,000. Currently, the outstanding balance under the Line of Credit is $239,131,000.






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An event of default will occur under The Line of Credit if: (i) the long-term rating ofthe City's general obligations for borrowed money are lowered by any two of Fitch, Kroll and S&P, as follows: below "BBB-" (or its equivalent) by S&P, below "BBB-" (or its equivalent) by Fitch or below "BBB-" (or its equivalent) by Kroll, or (ii) a long-term rating of the City's general obligations for borrowed money is suspended, withdrawn or becomes unavailable by S&P, Kroll or Fitch. See "INVESTMENT CONSIDERATIONS—Loss of Liquidity."
MRL Financing LLC Promissory Note
In 2009, the City purchased the former Michael Reese Hospital campus in connection with the City's bid for the 2016 Summer Olympics. The purchase was implemented by the MRL Note issued by the City to the seller, which is currently outstanding in the amount of $81.9 million. The MRL Note is a general obligation of the City not supported by a property tax levy. Interest payments for the first five years were not required to be paid until June 30, 2014, at which time the City was required to either pay the accrued interest or add it to the outstanding principal amount. At that time, the City was also required to begin making quarterly interest payments and annual principal payments. The City used the Short Term Borrowing Program to make the accrued interest payment of $19.9 million on June 30, 2014, the first regularly scheduled interest payment of $1.4 million in September 2014, and the scheduled principal and interest payment of approximately $11 million on June 30, 2015. The quarterly interest amounts of $1.4 million for December 2014, and $1.3 million for March 2015, were paid from funds available in the General Fund. The City anticipates using the amounts available from the General Fund and/or the Short Term Borrowing Program to make continued debt service payments due under the MRL Note until such time as the property is sold, given that the funding costs of the Short Term Borrowing Program are less than having interest capitalized at the interest rate on the MRL Note (5.95 percent). When the property is sold, in whole or in part, the City currently expects to use such sale proceeds to pay the MRL Note.
USX South Works

The City entered into a tax-increment financing redevelopment agreement dated December 23, 2010 (the "Lakeside TIF Agreement") in connection with the redevelopment of the currently vacant former U.S. Steel plant along the shore of Lake Michigan on the southeast side ofthe City. The terms of the Lakeside TIF Agreement require the City, upon the fulfillment by the developer of certain specified leasing, sale, financing and other conditions, to issue a series of general obligation bonds secured by or otherwise payable from citywide property taxes and a series of special assessment bonds secured by or otherwise payable from a special assessment levy on the redevelopment project site. Pursuant to the Lakeside TIF Agreement, the proceeds of such general obligation and special assessment bonds may be used to pay for certain costs ofthe redevelopment project, located in the Chicago Lakeside Development-Phase 1 TIF Redevelopment Project Area (the "TIF Area"), including public infrastructure. If and when the general obligation and special assessment bonds are issued, the Lakeside TIF Agreement provides that such bonds will be paid from the incremental taxes collected in the TIF Area to the extent available rather than from citywide property taxes. The debt service on the general obligation bonds will be based on the first 50 percent of the incremental taxes projected at the time of issuance and have a first lien on the incremental taxes; the debt service on the special assessment bonds will be based on the second 50 percent of the incremental taxes projected at the time of issuance and have a second lien on the incremental taxes. If the incremental taxes are insufficient to pay the debt service on the general obligation and special assessments bonds: (1) debt service on the general obligation bonds will be paid first by a letter of credit posted by the developer in an amount equal to 100 percent of maximum annual debt service on the general obligation bonds and then if necessary by citywide property taxes; and (2) debt service on the special assessment bonds will be paid by the special assessment levy. The Lakeside TIF Agreement estimated that there will be approximately $96,000,000 of redevelopment project costs




62

eligible to be paid with the proceeds of the general obligation and special assessment bonds but did not otherwise estimate the principal amounts of the general obligation and special assessment bonds.

INVESTMENT CONSIDERATIONS
The following discussion of investment considerations should be reviewed by prospective investors prior to purchasing the Bonds. Any one or more of the investment considerations discussed herein could lead lo a decrease in the market value and the liquidity of the Bonds or, ultimately, a payment default on the Bonds. There can be no assurance that other factors not discussed herein will not become material in the future.
Credit Rating Downgrades
The interest rate the City pays on new issuances of general obligation debt is highly dependent on the City's credit ratings, and downward changes in the City's ratings have resulted and may continue to result in significantly higher interest rates payable by the City on bond issuances and other borrowings.
On May 12, 2015, Moody's downgraded to Bal from Baa2 its rating on the City's outstanding general obligation bonds and the outlook remained negative. On July 3, 2015, Fitch affirmed its BBB+ rating on the City's outstanding general obligation bonds with a negative outlook and removed the rating from negative rating watch. On July 7, 2015, Kroll affirmed its long-term rating of A- with a stable outlook on the City's general obligation bonds. On July 8, 2015, S&P lowered its rating to BBB+ from A- on the City's outstanding long-term fixed rate general obligation bonds with a negative outlook and removed the rating from negative credit watch.
The rating agencies have indicated that further downgrades to the City's credit rating could result from the courts declaring P.A. 98-641, the State law which changed the Pension Code for MEABF and LABF, unconstitutional, growth in the debt and unfunded pension liabilities of the City or overlapping governments, widening budget gaps, loss of liquidity, or draws on City reserve funds. The City cannot predict if or when, or on what basis, the rating agencies may take further action with respect to the City's credit ratings, and no assurances can be provided that the City's credit rating will not be subject to further downgrades as a result of the factors stated above or other factors.

Unfunded Pensions
The Retirement Funds have significant unfunded liabilities and low funding ratios. Under current law, the City's required contributions to PABF and FABF will significantly increase beginning in 2016. The Amended FY 2015 Budget and the FY 2016 Budget provide for such increases to be funded primarily through increases in the City's property tax levy. Further, the Amended FY 2015 Budget and the FY 2016 Budget assume the enactment of SB 777, which would reduce the contribution currently required by the Pension Code under P.A. 96-1495. If SB 777 or similar legislation is not enacted and the City must contribute to PABF and FABF in the higher amounts required by the current provisions ofthe Pension Code, the City expects that it would fund such additional contributions through an increase in revenues, a decrease in expenditures or a combination thereof.
Future required contribution increases beyond fiscal year 2016 may also require the City to increase its revenues, reduce its expenditures, or some combination thereof, which may impact the services provided by the City or limit the City's ability to generate additional revenues in the future.





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Pension Reform Litigation
On May 8, 2015, the Illinois Supreme Court determined that the State Pension Reform Act is unconstitutional. See "FINANCIAL DISCUSSION—Pensions—City and State Pension Litigation— State Pension Litigation." P.A. 98-641, the law which modified required contribution and benefit amounts for MEABF and LABF, remains subject to litigation which may be affected by the decision of the Supreme Court regarding the State Pension Reform Act. See "LITIGATION-Pension Litigation." The City believes P.A. 98-641 is distinguishable from the State Pension Reform Act. As a threshold matter, the City's position is that P.A. 98-641 does not violate the Pension Clause of the Illinois Constitution and protects benefits being paid from MEABF and LABF that are projected (in the absence of P.A. 98-641) to be insolvent in approximately 11 and 14 years, respectively. P.A. 98-641 was developed in consultation with numerous affected collective bargaining units.

If the courts determine that P.A. 98-641 is constitutional, the City would be required to make increased pension payments as set forth in APPENDIX E—"RETIREMENT FUNDS—Determination of City's Contributions—City's Required Contributions to LABF and MEABF Pursuant to P.A. 98-641." If the courts determine that P.A. 98-641 is unconstitutional, the City's obligation to fund MEABF and LABF may revert to the prior, lower levels of funding based on the multiplier formula set forth in the prior law. In that instance, the unfunded liabilities of MEABF and LABF would remain unresolved. See APPENDIX E—"RETIREMENT FUNDS—Effect on MEABF and LABF if P.A. 98-641 Found Unconstitutional."
If a court were to determine that P.A. 98-641 is unconstitutional, the City's credit ratings on its general obligation bonds, including the Bonds, could be downgraded. See "—Credit Rating Downgrades" above.
Overlapping Taxing Districts
A number of overlapping taxing districts whose jurisdictional limits overlap with the City have the power to raise taxes, including property taxes. See "FINANCIAL DISCUSSION AND ANALYSIS—Property Taxes—Overlapping Taxing Districts." The City does not control the amount or timing of the taxes levied by these overlapping taxing districts. Depending on the amount of such increase(s), an increase in the amount of taxes by these overlapping taxing districts could potentially be harmful to the City's economy and/or may make it more difficult for the City to increase taxes, including property taxes, to pay for its unfunded pensions.
Structural Deficit and Debt Restructuring
Over the past ten years, the City has experienced an imbalance of tax revenues relative to operating expenditures resulting in operating budget gaps. Since 2012, the City has reduced the General Fund budget gap each year through targeted cuts, revenue enhancements, and improved operating efficiencies. However, the City projects large budget gaps in 2016, 2017 and 2018 due to operating budget shortfalls and increased pension obligations. See "FINANCIAL DISCUSSION AND ANALYSIS—General Fund—General Fund Financial Forecasts—General Fund 2015 Year-End Estimates and 2016 Proposed Budget" and "—2017-2018 General Fund Outlook."
For the last several years, the City has annually issued general obligation debt to pay a portion of the near-term debt service on outstanding general obligation bonds, in order to limit the annual property tax levy for debt service on the outstanding bonds. The City expects to use approximately $208 million from proceeds of the Bonds to restructure annual debt service in this manner. See "GENERAL OBLIGATION DEBT—Long-Term General Obligation Bonds." This practice has the effect of



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extending and increasing the City's overall debt levels. Unless the City is able to pay its annual general obligation debt service from recurring revenue sources, the City's interest costs and outstanding debt are likely to continue to rise. The City plans to continue the practice for annual property tax levies through and including the 2019 property tax levy, and thereafter discontinue issuing general obligation debt for such purpose.
Recurring operating budget gaps and increases in the City's debt burden could result in the need for new or enhanced revenue sources, including tax increases, or reduction of essential city services.

Loss of Liquidity
The City utilizes the Short Term Borrowing Program for working capital and interim funding of capital projects, debt refinancing or restructuring and the payment of non-capital expenditures such as settlements and judgments. Further downgrades of the City's credit ratings by Fitch, S&P or Kroll could result in a default in the City's new credit arrangements, preventing further borrowing under the Short Term Borrowing Program. See "GENERAL OBLIGATION DEBT—Short Term Borrowing Program."

Increased Debt Levels
Upon issuance of the Bonds, the City's long-term general obligation debt will increase. In addition, the City expects to issue additional long-term general obligation debt in 2016. See "SECURITY FOR THE BONDS—Additional General Obligation Debt." The City's annual debt service on its long-term general obligation debt will increase accordingly. Further increases in the City's long-term general obligation debt and annual debt service could crowd out spending for other City services and/or require substantial increases in property taxes or other revenue sources. See "GENERAL OBLIGATION DEBT—Long-Term General Obligation Bonds."

Financial Condition of Chicago Public Schools
CBOE, which is responsible for the governance, organizational and financial oversight of Chicago Public Schools, has reported a substantial budget deficit for 2016 and increasing deficits in subsequent years, due in large part to CBOE's pension funding obligations. See "FINANCIAL DISCUSSION AND ANALYSIS—Pensions—Overlapping Taxing Districts:' While CBOE is a separate governmental entity and the City has no legal obligation to contribute financially to CBOE, any failure of CBOE to resolve its current and future deficits or resolving them by budget cuts and/or increases in property taxes, without State assistance, could have an adverse effect on the City's economy and/or property tax base.
Reductions and Delays in Receipt of State Revenues

State tax revenue received by the City includes the City's local share of the State's sales and use taxes, income tax and personal property replacement tax. The State is itself facing a substantial budget deficit and Governor Rauner has made a number of proposals to close the State's budget gap. Among them is a reduction in the local government distributive share of the State's income tax. If such a reduction were to become law, the City would lose significant income tax receipts. This proposal, or any other that reduces the State taxes received by the City, would have an immediate and adverse effect on the City's budget.
The State has in the past delayed by months the distribution to local governments of their respective shares of State taxes due to the State's own budget problems. Currently, the State is experiencing an impasse between the Governor and the Illinois General Assembly over the budget for the



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State's current fiscal year. This resulted in delays during 2015 in the City's receipt of both its local share of State motor fuel tax revenue and its local share of revenue from the State's use tax and service use tax, which is subject to appropriation by the Illinois General Assembly. Such delays did not affect the payment of principal of or interest on the City's outstanding general obligation bonds when due, or delay payments to vendors, service providers or other recipients of City funds. The City has since been fully reimbursed for all such amounts.
If the period of any future delay in receipt of State taxes were to continue for an extended period, the City could be forced to delay payments to vendors, service providers or other recipients of City funds if other legally available funds are not on hand.
Cap on Property Taxes
The Illinois Property Tax Code limits, among other things, the amount of property tax that can be extended for non-home rule units of local government located in Cook County and five adjacent Counties (the "State Tax Cap"). As a home rule unit of government, the City is not subject to the State Tax Cap. A number of bills have been introduced in the Illinois General Assembly to limit or freeze property taxes, including those imposed by home rule units of local government such as the City. The application of the State Tax Cap to the City or any other measure that would limit or freeze property taxes would require three-fifths vote of each house of the Illinois General Assembly. If the City were to become subject to a State-imposed property tax limitation restriction in the future similar to the State Tax Cap or any other restriction or freeze on property taxes, the City's ability to levy property taxes in amounts needed for its future funding needs may be adversely affected.
Adverse Change in Laws
There are a variety of State and federal laws, regulations and constitutional provisions that apply to the City's ability to raise taxes, fund its pension obligations or to reorganize its debts. There is no assurance that there will not be any change in, interpretation of, or addition to such applicable laws, regulations and provisions. Any such change, interpretation or addition may have a material adverse effect, either directly or indirectly, on the City or the taxing authority of the City, which could materially adversely affect the City's operations or financial condition.
Bankruptcy
Municipalities cannot file .for protection under Chapter 9 of the U.S. Bankruptcy Code (the "Bankruptcy Code") unless specifically authorized to be a debtor by state law or by a governmental officer or organization empowered by state law to authorize such entity to be a debtor in a bankruptcy proceeding. State law does not currently permit municipalities in Illinois, such as the City, to file for bankruptcy; however, legislation was recently introduced in the General Assembly of the State which, if enacted, would permit Illinois municipalities to file for bankruptcy under the U.S. Bankruptcy Code. The adoption of any such legislation and its potential impact are uncertain.

The Bond Redemption and Interest Fund is not held by the Trustee, and is not subject to a statutory lien in favor of the Bondholders. In addition, remittances of the Bond Property Tax Levy do not constitute "special revenues" within the meaning of the Bankruptcy Code. In the event of a change in State law allowing the City to file for bankruptcy, there is no guarantee that the bankruptcy court would consider the Bondholders to have a secured claim under the Bankruptcy Code with respect to remittances of the Bond Property Tax Levy or other moneys in the Bond Redemption and Interest Fund.





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Uncertain Enforcement Remedies
The Bonds are direct and general obligations of the City and all taxable property in the City is subject to levy to pay the debt service on the Bonds. The Bonds are not secured by a statutory lien on the Bond Interest and Redemption Fund, any real property in the City or any physical assets ofthe City. The maturity of the Bonds cannot be accelerated in the event that the City fails to pay any installment of interest on, or principal of, the Bonds when due.
The remedies available to bondholders upon nonpayment of principal of or interest on the Bonds are uncertain and in many respects dependent upon discretionary judicial actions. There currently is no established judicial precedent addressing the rights of bondholders to compel the City to levy taxes or to enforce any other bondholder remedy. See APPENDIX A—"SUMMARY OF THE INDENTURE—Default and Remedies."
Force Majeure Events
There are certain unanticipated events beyond the City's control that could have a material adverse impact on the City's operations and financial conditions if they were to occur. These events include fire, flood, earthquake, epidemic, adverse health conditions or other unavoidable casualties or acts of God, freight embargo, labor strikes or work stoppages, civil commotion, new acts of war or escalation of existing war conditions, sabotage, terrorism or enemy action, pollution, unknown subsurface or concealed conditions affecting the environment, and any similar causes. No assurance can be provided that such events will not occur, and, if any such events were to occur, no prediction can be provided as to the actual impact or severity of the impact on the City's operations and financial condition.
Forward-Looking Statements
This Official Statement contains certain statements relating to future results that are forward-looking statements. When used in this Official Statement, the words "estimate," "intend," "expect" and similar expressions identify forward-looking statements. Any forward-looking statement is subject to uncertainty and risks that could cause actual results to differ, possibly materially, from those contemplated in such forward-looking statements. Inevitably, some assumptions used to develop forward-looking statements will not be realized or unanticipated events and circumstances may occur. Therefore, bondholders and potential investors should be aware that there are likely to be differences between forward-looking statements and actual results; those differences could be material. The City does not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

LITIGATION
There is no litigation pending in any court or, to the knowledge of the City, threatened, questioning the corporate existence of the City, or which would restrain or enjoin the issuance or delivery of the Bonds, or which concerns the proceedings of the City taken in connection with the Bonds or the City's pledge of its full faith, credit and resources to the payment of the Bonds.

The City is a defendant in various pending and threatened individual and class action litigation relating principally to claims arising from contracts, personal injury, property damage, police conduct, discrimination, civil rights actions and other matters. The City believes that the ultimate resolution of these matters will not have a material adverse effect on the financial position of the City.




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Property Tax Rate Objections: 2005 and following. The City's property tax levies for 2005 and following have varied between approximately $720 million and $835 million annually, excluding the School Building and Improvement Fund levy. Objections have been filed in the Circuit Court of Cook County (the "Circuit Court") to these levies, which objections remain pending. The City is unable to predict the outcome of the proceedings concerning the objections.
E2 Nightclub Litigation. The City was a defendant in 57 wrongful death and personal injury lawsuits arising out of a stampede of patrons at the E2 Nightclub on February 17, 2003. The sole remaining claim against the City in this litigation was that police officers blocked, locked, or jammed access to the entry-exit door, causing a stampede of patrons to pile up on the only stairway leading to the door. On April 11, 2012, the Circuit Court granted the City's motion for summary judgment and dismissed the sole remaining claim against the City with prejudice. The City does not know whether the plaintiffs will appeal the issuance of summary judgment. If the plaintiffs do appeal, the City will vigorously defend the Circuit Court's judgment in the appellate court.
Automated Traffic Enforcement Ticketing Litigation. In July 2010, individual plaintiffs, seeking to maintain a class action, filed suit against the City and other defendants to challenge the City's use since 2003 of an automated red-light ticketing system. The plaintiffs allege, among other things, that the 2006 statute authorizing eight Illinois counties to enact red-light camera ordinances is unconstitutional local legislation and that the City lacks home-rule authority to enact a red-light camera ordinance and adjudicate violations administratively. The plaintiffs sought an injunction against the operation of the City's red-light ticketing system and restitution of fines paid. The Circuit Court granted the City's motion to dismiss the case; the Illinois Appellate Court affirmed in an unpublished decision. The Illinois Supreme Court took the case, but two justices recused themselves and a majority of the remaining justices did not reach a consensus. This had the effect of affirming the Appellate Court decision. While the appeal was pending, the same attorney filed another putative class action case in the Circuit Court, with different named plaintiffs raising similar claims about the automated red-light ticketing system. The City has filed a motion to dismiss that case, which is pending in the Circuit Court. The City will continue to defend this matter vigorously. On March 23, 2015, individual plaintiffs, seeking to maintain a class action, filed a separate lawsuit alleging that the City has exceeded its home rule authority and has violated Illinois state law and City ordinances by issuing notices of violation and determinations of liability for automated speed enforcement violations and automated red-light violations that allegedly do not comply with state and local requirements. They seek declaratory judgment, injunctive relief and, in an unjust enrichment claim, seek restitution of fines paid. The City filed a motion to dismiss on May 6, and will continue to defend this case vigorously.
Parking Garages Litigation. On February 13, 2013, Independent Voters of Illinois Independent Precinct Organization and an individual plaintiff filed a complaint challenging the facial validity of the Parking Garages Lease Agreement. The plaintiffs allege that certain compensation provisions in the Parking Garages Lease Agreement violate the legal prohibition against the delegation, by a governmental entity, of its police powers to a private party. On January 16, 2014, the Circuit Court dismissed the case, on motions by both the City and CLP. Plaintiffs have appealed; the appeal is pending. The City will continue to defend this case vigorously.
HUD Certifications Litigation. This is a False Claims Act case in which Albert C. Hanna (the "Relator") has sued the City in federal district court for the Northern District in Illinois (the "District Court") seeking to recover funds on behalf of the U.S. government. The Relator alleges that the City has an affirmative obligation to dismantle racial and ethnic segregation in housing under Title VI of the Civil Rights Act of 1964 and the Fair Housing Act and that the City has falsely claimed to do so in certifications made by the City to the U.S. Department of Housing and Urban Development ("HUD") as a condition of receiving federal funding through certain HUD-funded grant programs. The Relator seeks


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the return to the federal government of approximately $880 million in funds received by the City under these programs and asks the court to treble that amount, as allowed by statute. The City moved to dismiss the complaint and the District Court dismissed it with leave to amend. The plaintiff filed an amended complaint and the City has moved to dismiss that complaint. The City will continue to vigorously defend this case.
Pension Litigation. P.A. 98-641, which became law on June 9, 2014, reforms MEABF and LABF through a combination of increased employer contributions and changes to employee contributions and retiree benefits. In December 2014, shortly before P.A. 98-641 was to go into effect, two lawsuits were filed by plaintiffs, who are individual participants in the two affected pension funds and (in one of the lawsuits) unions representing participants, in the Circuit Court challenging the constitutionality of P.A. 98-641. Plaintiffs argued that P.A. 98-641 violates the Pension Clause of the Illinois Constitution and sought a preliminary and permanent injunction prohibiting its enforcement. The City was allowed to intervene to defend the constitutionality of P.A. 98-641. On July 24, 2015, the Circuit Court ruled that P.A. 98-641 violates the Pension Clause and was unconstitutional. The City appealed the decision to the Illinois Supreme Court. Oral argument on the City's appeal was held by the Illinois Supreme Court on November 17, 2015. The City has been defending and will continue to defend this matter vigorously.
Retiree Healthcare Litigation. In Underwood v. City of Chicago, retired employees of the City filed suit in State court to challenge planned changes to the healthcare benefits of retirees. The complaint advanced state law claims, including alleged violation of the Pension Clause ofthe Illinois Constitution, and federal law claims. The City removed the case to federal court based on the federal law claims. The federal district court dismissed the case in its entirety. As to plaintiffs' claim that the planned changes violate the Pension Clause, the district court predicted that the Illinois Supreme Court would rule in a separate case then pending before the Illinois Supreme Court that the healthcare benefits are not protected by the Pension Clause. Thereafter, the Illinois Supreme Court ruled in that separate case that the healthcare benefits in question, which were promised to State retirees, are protected under the Pension Clause. The City argued on appeal to the federal appellate court that it should affirm the district court dismissal, including the state law claims, on an alternative ground. On February 25, 2015, the federal appellate court affirmed the dismissal of the federal law claims and declined to rule on the state law claims on the ground that the state law claims involved a question of Illinois state law, which it ordered returned to the Illinois state court for decision. On June 22, 2015, the City and certain of the defendants each filed a motion to dismiss the remaining state law claims in the Circuit Court of Cook County. On December 13, 2015, the Circuit Court issued its ruling dismissing certain of the State law claims but gave the plaintiffs leave to amend the complaint with respect to such claims. With respect to the remaining State law claim, which sought a declaration that a reduction in the benefits provided by the Health Plan would violate the Pension Clause, the Circuit Court determined that such a declaration could be made only with respect to those employees hired prior to August 23, 1989. The City has been defending and will continue to defend this matter vigorously.
INDEPENDENT AUDITORS
The basic financial statements of the City as of and for the year ended December 31, 2014, included in APPENDIX C to this Official Statement, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing in APPENDIX C.

RATINGS
The Bonds are rated " " ( outlook) by S&P, " " ( outlook) by Fitch, and
"_" ( outlook) by Kroll.




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A rating reflects only the view of the rating agency giving such rating. A rating is not a recommendation to buy, sell or hold securities, and may be subject to revision or withdrawal at any time. An explanation of the significance of such rating may be obtained from such organization. There is no assurance that any rating will continue for any given period of time or that any rating will not be revised downward or withdrawn entirely if, in the judgment of the rating agency, circumstances so warrant. Any such downward revision or withdrawal of a rating may have adverse consequences for the City or an adverse effect on the price at which the Bonds may be resold. See "INVESTMENT CONSIDERATIONS—Credit Rating Downgrades."
CO-MUNICIPAL ADVISORS, SPECIAL ADVISOR ON RATING STRATEGY AND INDEPENDENT REGISTERED MUNICIPAL ADVISOR
The City has retained TKG & Associates LLC and Public Alternative Advisors, LLC to act as co-municipal advisors (the "Co-Municipal Advisors") in connection with the offering of the Bonds. The Co-Municipal Advisors are not obligated to undertake, and have not undertaken to make, an independent verification of, or to assume responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement. Each of the Co-Municipal Advisors is a "municipal advisor" as defined in Rule 15Bal-l ofthe Commission.
The City has retained Public Financial Management Inc. as a special advisor in connection with the offering of the Bonds.
The City has retained Martin J. Luby LLC as its independent registered municipal advisor (the "IRMA") pursuant to Rule 15Bal-l-(d)(3)(vi) of the Commission to evaluate financing proposals and recommendations in connection with the City's various bond issuance programs and other financing ideas being considered by the City; however, the IRMA will not advise on the investment of City funds held by the Office of the City Treasurer. The IRMA's compensation is not dependent on the offering of the Bonds.

CERTAIN VERIFICATIONS
Robert Thomas, CPA, LLC, Shawnee Mission, Kansas (the "Verifier"), upon delivery of the Bonds, will deliver to the City, Co-Bond Counsel and the Underwriters a report stating that the firm, at the request of the City and the Underwriters, has reviewed the mathematical accuracy of certain computations based on certain assumptions relating to (i) the sufficiency of the principal and interest received from the investment in Governmental Obligations, together with any initial cash deposit, to meet the timely payment of the applicable principal or redemption price of and interest on the Refunded Bonds and the Interest Paid Bonds, as described under "PLAN OF FINANCING" and (ii) the yields on the Series 2015C Bonds and on the Government Obligations.
The Verifier will express no opinion on the attainability of any assumptions or the tax-exempt status of the Series 2015C Bonds. The computations verified by the Verifier are intended in part to support conclusions of the City and Co-Bond Counsel concerning the federal income tax status of the Series 2015C Bonds.
UNDERWRITING
Citigroup Global Markets Inc., as representative on behalf of itself and the other underwriters listed on the cover of this Official Statement (the "Underwriters"), has agreed, subject to certain
conditions, to purchase the Series 2015C Bonds at a price equal to $ (which represents the
aggregate principal amount of the Series 2015C Bonds [plus/less] an Underwriters' discount of
$ and less a net original issue [premium/discount] of $ ), and the Taxable


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Series 2015D Bonds at a price equal to $ (which represents the aggregate principal amount
of the Taxable Series 2015D Bonds less an Underwriters' discount of $ and [plus/less] an
original issue discount of $ ).
The obligation of the Underwriters to accept delivery of the Bonds is subject to various
conditions set forth in a Bond Purchase Agreement dated , 2016, between the Underwriters
and the City. The Underwriters are obligated to purchase all of the Bonds if any of the Bonds are purchased.
The Underwriters and their respective affiliates are full service financial institutions engage in various activities, which may include sales and trading, commercial investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. Certain of the Underwriters and their respective affiliates have provided, and may in the future provide, a variety of these services to the City and to persons and entities with relationships with the City, for which they received or will receive customary fees and expenses.
Citigroup Global Markets Inc., an underwriter of the Bonds, has entered into a retail distribution agreement with each of TMC Bonds L.L.C. ("TMC") and UBS Financial Services Inc. ("UBSFS"). Under these distribution agreements, Citigroup Global Markets Inc. may distribute municipal securities to retail investors through the financial advisor network of UBSFS and the electronic primary offering platform of TMC. As part of this arrangement, Citigroup Global Markets Inc. may compensate TMC (and TMC may compensate its electronic platform member firms) and UBSFS for their selling efforts with respect to the Bonds.
Backstrom McCarley Berry & Co., LLC ("Backstrom") has entered into separate non-exclusive Distribution Agreements with Mesirow Financial, and D.A. Davidson & Co. (the "Firms") to augment both its institutional and retail marketing capabilities for the distribution of certain new issue municipal securities underwritten by or allocated to Backstrom, which includes the Bonds. Pursuant to the distribution agreements, the Firms may purchase bonds from Backstrom at the original issue price less a negotiated portion of the selling concession applicable to any Bonds that such Firm sells, or Backstrom may share with the Firms a portion of the fees or commission paid to Backstrom applicable to their disclosed transactions.
PNC Capital Markets LLC ("PNC") may offer to sell to its affiliate, PNC Investments, LLC ("PNC Investments") securities in PNC's inventory for resale to PNC Investments' customer, including securities such as those to be offered by the City. PNC Investments may share with PNC a portion of the fee or commission paid to PNC Investments if any Bonds are sold to customers of PNC.
In the ordinary course of their various business activity, the Underwriters and their respective affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and activity trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to assets, security and/or investments ofthe City (directly, as collateral security other obligations or otherwise and/or persons and entities with relationships with the City.








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TAX MATTERS

The Series 2015C Bonds
Federal tax law contains a number of requirements and restrictions that apply to the Series 2015C Bonds, including investment restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the proper use of bond proceeds and the facilities financed with such proceeds and certain other matters. The City has covenanted to comply with all requirements that must be satisfied in order for the interest on the Series 2015C Bonds to not be included in gross income for federal income tax purposes. Failure to comply with certain of such covenants could cause interest on the Series 2015C Bonds to become includible in gross income for federal income tax purposes retroactively to the date of issuance of the Series 2015C Bonds.
Subject to the City's compliance with the aforementioned covenants, under present law, in the separate opinions of Ice Miller LLP, Chicago, Illinois and Cotillas and Associates, Chicago, Illinois, Co-Bond Counsel, interest on the Series 2015C Bonds is not includable in the gross income of their owners for federal income tax purposes and thus will be exempt from present federal income taxes based on gross income, and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations. Interest on the Series 2015C Bonds is taken into account, however, in computing an adjustment used in determining the federal alternative minimum tax for certain corporations and in computing the "branch profits tax" imposed on certain foreign corporations.
The Internal Revenue Code of 1986, as amended (the "Code"), includes provisions for an alternative minimum tax ("AMV) for corporations in addition to the corporate regular tax in certain cases. The AMT, if any, depends upon the corporation's alternative minimum taxable income (ilAMTF), which is the corporation's taxable income with certain adjustments. One of the adjustment items used in computing the AMTI of a corporation (excluding S Corporations, Regulated Investment Companies, Real Estate Investment Trusts, REMICs and FASITs) is an amount equal to 75% of the excess of such corporation's "adjusted current earnings" over an amount equal to its AMTI (before such adjustment item and the alternative tax net operating loss deduction). "Adjusted current earnings" would include all tax-exempt interest, including interest on the Series 2015C Bonds.
Under the provisions of Section 884 ofthe Code, a branch profits tax is levied on the "effectively connected earnings and profits" of certain foreign corporations, which include tax-exempt interest such as interest on the Series 2015C Bonds.
Ownership of the Series 2015C Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, corporations subject to the branch profits tax, financial institutions, certain insurance companies, certain S corporations, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax-exempt obligations. Co-Bond Counsel will express no opinion with respect to any such collateral consequences with respect to the Series 2015C Bonds. Prospective purchasers of the Series 2015C Bonds should consult their tax advisors as to applicability of any such collateral consequences.
The issue price for each maturity of the Series 2015C Bonds is the price at which a substantial amount of such maturity is first sold to the general public (excluding bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers) (the "Issue Price"). The Issue Price of certain Series 2015C Bonds may be less than the stated amount payable on such Series 2015C Bonds at maturity ("OID Bonds"). The difference between (i) the stated amount payable at maturity of an OID Bond and (ii) the Issue Price of that OID Bond constitutes original issue discount ("Original Issue Discount") with respect to that OID Bond in the hands of the owner who purchased that OID Bond in the initial public offering.



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For federal income tax purposes, original issue discount on each OID Bond will accrue over the term of the OID Bond. The amount accrued will be based on a single rate of interest, compounded semiannually and, during each semi-annual period, the amount will accrue ratably on a daily basis. The original issue discount accrued during the period that an initial purchaser of an OID Bond owns it is added to that purchaser's tax basis for purpose of determining gain or loss at maturity, redemption, sale or disposition of that OID Bond. Therefore, for an OID Bond, accrued OID is treated as stated interest is treated for a tax-exempt bond, that is, is excludible from gross income for federal income tax purposes.
Purchasers of OID Bonds should consult their own tax advisors regarding the determination and treatment of original issue discount for federal income tax purposes and the state and local tax consequences of owning an OID Bond.
The Issue Price of certain Series 2015C Bonds may be greater than the stated amount payable on such Bonds at maturity ("Premium Bonds"). The difference between (i) the Issue Price of a Premium Bond and (ii) the stated amount payable at maturity of a Premium Bond with respect to that Premium Bond constitutes original issue premium in the hands of the owner who purchased that Premium Bond in the initial public offering of the Series 2015C Bonds ("Original Issue Premium").
For federal income tax purposes, Original Issue Premium on a Premium Bond must be amortized by an owner on a constant yield basis over the remaining term of a Premium Bond in a manner that takes into account potential call dates and call prices. An owner of a Premium Bond cannot deduct amortized Original Issue Premium relating to that Premium Bond. The amortized original issue premium for a Premium Bond is treated as a reduction in the tax exempt interest received. As Original Issue Premium is amortized on a Premium Bond, it reduces the owner's basis in the Premium Bond. As a result an owner of a Premium Bond, may realize taxable gain for federal income tax purposes from the sale or other disposition of such 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 Issue Price 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.
Purchasers of Premium Bonds should consult their own tax advisors regarding the determination and treatment of Original Issue Premium for federal income tax purposes and the state and local tax consequences of owning a Premium Bond.
There may be pending from time to time in the Congress of the United States legislative proposals, including some that carry retroactive effective dates, which, if enacted, could alter or amend the federal tax matters referred to above or adversely affect the market value or liquidity of the Series 2015C Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, it would apply to securities issued prior to enactment. Prospective purchasers ofthe Series 2015C Bonds should consult their tax advisors regarding any pending or proposed federal tax legislation. Co-Bond Counsel will express no opinion regarding any pending or proposed federal tax legislation.
The Internal Revenue Service ("IRS") conducts a program of audits of issues of tax-exempt obligations to determine whether, in the view of the IRS, interest on such obligations is properly excluded from the gross income of their owners for federal income tax purposes. Whether or not the IRS will decide to audit the Series 2015C Bonds cannot be predicted. If the IRS begins an audit of the Series 2015C Bonds, under current IRS procedures, the IRS will treat the City as the taxpayer subject to the audit and the holders of the Series 2015C Bonds may not have the right to participate in the audit proceedings. The fact that an audit of the Series 2015C Bonds is pending could adversely affect the liquidity or market price of the Series 2015C Bonds until the audit is concluded, even if the result of the audit is favorable.


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The opinions of Co-Bond Counsel and the descriptions of the tax law contained in this Official Statement will be based on statutes, judicial decisions, regulations, rulings and other official interpretations of law in existence on the date the Series 2015C Bonds are issued. There can be no assurance that such law or those interpretations will not be changed or that new provisions of law will not be enacted or promulgated at any time while the Series 2015C Bonds are outstanding in a manner that would adversely affect the value or the tax treatment of ownership of the Series 2015C Bonds. Co-Bond Counsel have not undertaken to provide advice with respect to any such future changes.
In rendering their opinions on tax exemption, Co-Bond Counsel will receive and rely upon certifications and representations of facts, estimates and expectations furnished by the City which Co-Bond Counsel will not have verified independently. Each Co-Bond Counsel's opinion represents its legal judgment based upon its review of the law and the facts that it deems relevant to render such opinion and is not a guarantee of a result if the validity or tax-exempt status of interest on the Series 2015C Bonds is challenged.
The Taxable Scries 2015D Bonds
Interest on the Taxable Series 2015D Bonds is not excludable from gross income for federal income purposes. Ownership of the Taxable Series 2015D Bonds may result in other federal income tax consequences to certain taxpayers. Taxable Series 2015D Bondholders should consult their tax advisors with respect to the inclusion of interest on the Taxable Series 2015D Bonds in gross income for federal income tax purposes and any collateral tax consequences.
The City may deposit moneys or securities with a Defeasance Escrow Agent pursuant to the terms of the Bond Ordinance in such amount and manner as to cause the Taxable Series 2015D Bonds to be deemed to be no longer secured by the Bond Ordinance and the Indenture (a "defeasance"). See APPENDIX A—"SUMMARY OF THE INDENTURE—Defeasance." A defeasance of the Taxable Series 2015D Bonds may be treated as an exchange of the Taxable Series 2015D Bonds by the holders thereof and may therefore result in gain or loss to the holders. Bondholders should consult their own tax advisors about the consequences (if any) of such a defeasance.
The Taxable Series 2015D Bonds maturing on January 1, 20 and January 1, 20 were sold
to the public at a price below par. The amount ofthe discount was less than the amount that would be treated under federal income tax law as creating original issue discount. Bondholders should consult their tax advisors concerning the accrual of income in each tax year.
State and Local Considerations
Interest with respect to the Bonds is not exempt from present Illinois income taxes. Ownership of the Bonds may result in other state and local tax consequences to certain taxpayers. Co-Bond Counsel will express no opinion regarding any such collateral consequences arising with respect to the Bonds. Prospective purchasers of the Bonds should consult their tax advisors regarding the applicability of any such state and local taxes.
APPROVAL OF LEGAL MATTERS
Certain legal matters incident to the authorization, issuance and sale of the Bonds are subject to the approving legal opinions of Co-Bond Counsel, who have been retained by, and act as, Bond Counsel to the City. Except as noted below, Co-Bond Counsel have not been retained or consulted on disclosure matters and have not undertaken to review or verify the accuracy, completeness or sufficiency of this Official Statement or other offering material relating to the Bonds and assume no responsibility for the statements or information contained in or incorporated by reference in this Official Statement, except that Co-Bond Counsel have, at the request and for the benefit of the City, reviewed only those portions of the Official Statement involving the description of the Bonds, the security for the Bonds (excluding forecasts,


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projections, estimates or any other financial or economic information in connection therewith) and the description of the federal tax status of interest on the Bonds. This review was undertaken solely at the request of the City and did not include any obligation to establish or confirm factual matters set forth herein.
Certain legal matters will be passed on for the City by (i) its Corporation Counsel, (ii) in connection with the preparation of this Official Statement, Pugh, Jones & Johnson, P.C., Chicago, Illinois, and Shanahan & Shanahan LLP, Chicago, Illinois, Co-Disclosure Counsel to the City, and (iii) in connection with certain pension matters described in this Official Statement, Chapman and Cutler LLP, Chicago, Illinois, Special Disclosure Counsel. Certain legal matters will be passed on for the Underwriters by Kutak Rock LLP, Chicago, Illinois, Underwriters' Counsel.

SECONDARY MARKET DISCLOSURE
The City will enter into a Continuing Disclosure Undertaking (the "Undertaking") for the benefit ofthe beneficial owners of the Bonds to send certain information annually and to provide notice of certain events to the Municipal Securities Rulemaking Board (the "MSRB") pursuant to the requirements of Section (b)(5) of Rule 15c2-12 (the "Rule") adopted by the Commission under the Exchange Act. The MSRB has designated its Electronic Municipal Market Access system, known as EMMA, as the system to be used for continuing disclosures to investors. The information to be provided on an annual basis, the events that will be noticed on an occurrence basis and a summary of other terms of the Undertaking, including termination, amendment and remedies, are set forth below.
A failure by the City to comply with the Undertaking will not constitute a default under the Bonds, either Indenture or the Bond Ordinance and beneficial owners of the Bonds are limited to the remedies; described in the Undertaking. See "—Consequences of Failure of the City to Provide Information" below. A failure by the City to comply with the Undertaking must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds and their market price.
The following is a brief summary of certain provisions of the Undertaking of the City and does not purport to be complete. The statements made under this caption are subject to the detailed provisions of the Undertaking, a copy of which is available upon request from the City.
Annual Financial Information Disclosure
The City covenants that it will disseminate its Annual Financial Information and its Audited Financial Statements (as described below) to the MSRB. The City is required to deliver such information so that the MSRB receives the information by the dates specified in the Undertaking.

"Annual Financial Information" means information generally consistent with that contained in (i) the financial table "General Fund" under the caption "FINANCIAL DISCUSSION AND ANALYSIS— General Fund—Selected Financial Information;" (ii) the financial tables included under the caption "FINANCIAL DISCUSSION AND ANALYSIS—Property Taxes—EAV and Property Taxes" and "—Use of City Property Tax Levy;" (iii) the financial tables included under the caption "GENERAL OBLIGATION DEBT" (except for the table "Short Term Borrowing 2010-2014"); and (iv) tables 1-10 included in APPENDIX E—"RETIREMENT FUNDS" (said tables collectively referred to as the "Third-Party Sourced Retirement Fund Tables"). The information contained in the Third-Party Sourced Retirement Fund Tables is sourced from documents published by MEABF, PABF, FABF and LABF, and the City takes no responsibility for the accuracy and completeness of such information. If the information


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contained in the Third-Party Sourced Retirement Fund Tables is no longer publicly available or is not publicly available in the form, manner or time that the Annual Financial Information is required to be disseminated by the City, the City shall, as part of its Annual Financial Information for the year in which such a lack of availability arises, include a statement to that effect and to the effect that it will promptly file such information as it becomes available.
"Audited Financial Statements" means the audited basic financial statements ofthe City prepared in accordance with generally accepted accounting principles applicable to governmental units as in effect from time to time.
Annual Financial Information exclusive of Audited Financial Statements will be provided to the MSRB not more than 210 days after the last day of the City's fiscal year, which currently is December 31. If Audited Financial Statements are not available when the Annual Financial Information is filed, unaudited financial statements will be included, and Audited Financial Statements will be filed within 30 days of availability to the City.
Reportable Events Disclosure

The City covenants that it will disseminate in a timely manner, not in excess of ten business days, to the MSRB the disclosure of the occurrence of a Reportable Event (defined below). Certain Reportable Events are required to be disclosed only to the extent that such Reportable Event is material, as materiality is interpreted under the Exchange Act. The "Reportable Events," certain of which may not be applicable to the Bonds, are:
principal and interest payment delinquencies;
non-payment related defaults, if material;
unscheduled draws on debt service reserves reflecting financial difficulties;
unscheduled draws on credit enhancements reflecting financial difficulties;
substitution of credit or liquidity providers, or their failure to perform;
adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, notices of proposed issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds;
modifications to rights of security holders, if material;
bond calls, if material, and tender offers;
(i) defeasances;
(J) release, substitution or sale ofproperty securing repayment of the securities, if material; (k) rating changes;
(1) bankruptcy, insolvency, receivership or similar event of the City (considered to have occurred in the following instances: the appointment of a receiver, fiscal agent or similar officer for the City in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in


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which a court or governmental authority has assumed jurisdiction over substantially all ofthe assets or business of the City, or if the jurisdiction of the City has been assumed by leaving the City Council and the City's officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City);
(m)the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets ofthe City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and
(n) appointment of a successor or additional trustee or the change of name of a trustee, if material.
Consequences of Failure of the City to Provide Information
The City shall give notice in a timely manner to the MSRB of any failure to provide disclosure of Annual Financial Information and Audited Financial Statements when the same are due under the Undertaking.
In the event of a failure of the City to comply with any provision of the Undertaking, the Beneficial Owner of any Bond may seek mandamus or specific performance by court order to cause the City to comply with its obligations under the Undertaking. The Undertaking provides that any court action must be initiated in the Circuit Court of Cook County, Illinois. A default under the Undertaking shall not be deemed a default under the Bonds, the Bond Ordinance or the applicable Indenture, and the sole remedy under the Undertaking in the event of any failure of the City to comply with the Undertaking shall be an action to compel performance.
Amendment; Waiver
Notwithstanding any other provision of the Undertaking, the City may amend the Undertaking, and any provision of the Undertaking may be waived, if:
(i) the amendment or the waiver is made in connection with a change in circumstances that arises 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; (ii) the Undertaking, as amended, or the provision, as waived, would have complied with the requirements of the Rule at the time of the offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (iii) the amendment or waiver does not materially impair the interests of the Beneficial Owners of the Bonds, as determined by a party unaffiliated with the City (such as the Trustee or Co-Bond Counsel), or by approving vote ofthe Beneficial Owners of the Bonds pursuant to the terms ofthe Indenture at the time of the amendment; or
the amendment or waiver is otherwise permitted by the Rule.
EMMA
All documents submitted to the MSRB through EMMA pursuant to the Undertaking shall be in electronic format and accompanied by identifying information as prescribed by the MSRB, in accordance with the Rule. All documents submitted to the MSRB through EMMA will be word-searchable PDFs, configured to permit documents to be saved, viewed, printed and electronically retransmitted.


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Termination of Undertaking
The Undertaking shall be terminated if the City shall no longer have any legal liability for any obligation on or relating to repayment of the Bonds under the Bond Ordinance or the Indenture.
Additional Information
Nothing in the Undertaking will be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in the Undertaking or any other means of communication, or including any other information in any Annual Financial Information or Audited Financial Statements or notice of occurrence of a Reportable Event, in addition to that which is required by the Undertaking. If the City chooses to include any information in any Annual Financial Information or Audited Financial Statements or notice of occurrence of a Reportable Event in addition to that which is specifically required by the Undertaking, the City shall have no obligation under the Undertaking to update such information or include it in any future Annual Financial Information or Audited Financial Statements or notice of occurrence of a Reportable Event.
Corrective Action Related to Certain Bond Disclosure Requirements
The City is in compliance in all material respects with undertakings previously entered into by it pursuant to the Rule, except insofar as any of the following paragraphs describe material non-compliance.
During the period from 1996 through 2007, the City issued multiple series of Collateralized Single Family Mortgage Revenue Bonds (the "Single Family Bonds"). The trustees for the respective series of the Single Family Bonds are responsible for continuing disclosure filings as the City's dissemination agent under the applicable continuing disclosure undertakings. A material event notice was not filed with respect to a tender offer occurring on June 29, 2011 with respect to the following series: 2006C, 20061, 2007A, 2007G, 2007-2A, 2007-2C and 2007-2E.
No annual report was filed by the City in 2010 with respect to one subseries ofthe City's General Obligation Direct Access Bonds. Annual reports were not filed by the City in 2010 with respect to one series of the City's Chicago O'Hare International Airport General Airport Revenue Bonds and one series of its Chicago O'Hare International Airport Passenger Facility Charge Revenue Bonds. Annual reports were not filed by the City in 2011 and 2012 with respect to two series of such bonds.
With respect to the City's Collateralized Single Family Mortgage Revenue Bonds, Series 2006A (the "Series 2006A Bonds"), S&P lowered its rating on the Series 2006A Bonds from "AA+" to "AA" and placed the Series 2006A Bonds on "Credit Watch with negative implications" effective December 16, 2011. The City did not cause the trustee as dissemination agent to file a notice of a reportable event with EMMA at that time. Subsequently, S&P upgraded the rating on the Series 2006A Bonds from "AA" to "AA+" effective March 12, 2012. On March 18, 2012, S&P removed the "Credit Watch with negative implications" characterization from the Series 2006A Bonds. The City caused the trustee, as dissemination agent, for the Series 2006A Bonds to file a notice of a reportable event with EMMA on March 26, 2012 disclosing the downgrade and subsequent upgrade of the Series 2006A Bonds by S&P.
With respect to the City's Chicago O'Hare International Airport General Airport Third Lien Revenue Bonds, Series 2011, American Airlines is an "obligated person" with respect to such bonds. On November 29, 2011, AMR Corporation (the parent company of American Airlines and American Eagle) and certain of its United States-based subsidiaries (including American Airlines and American Eagle) filed voluntary petitions for Chapter 11 reorganization in the United States Bankruptcy Court for the Southern District of New York. The City filed a notice with EMMA with respect to this event on March 30, 2012 (not within the ten business-day deadline imposed by the Rule). On December 9, 2013,


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American Airlines merged with US Airways. The City filed a notice with EMMA with respect to this event on August 25, 2014.
With respect to the City's Outstanding Motor Fuel Tax Revenue Bonds, the City's pledge of Additional City Revenues to the payment of such bonds (in addition to the pledge of Motor Fuel Tax Revenues) became effective as of March 19, 2013. The City filed a notice with EMMA describing the pledge of this additional source of revenue on May 16, 2013.
With respect to the City's Outstanding O'Hare International Airport Customer Facility Charge Senior Lien Revenue Bonds, Series 2013, Simply Wheelz, LLC d/b/a Advantage Rent A Car ("Advantage") is an "obligated person" with respect to such bonds. Advantage filed a voluntary bankruptcy petition in the Southern District of Mississippi on November 5, 2013. The City filed a notice with EMMA with respect to this event on December 5, 2013.
The Rating Agencies took certain rating actions with respect to the ratings of Ambac Assurance Corporation and Financial Security Assurance Inc. (collectively, the "Bond Insurers"). The Bond Insurers provided municipal bond insurance policies relating to certain series of the City's Chicago Midway Airport revenue bonds. Event notices with respect to such rating changes were not filed with EMMA. The City made such filings on May 22, 2014.
Ambac provided a municipal bond insurance policy relating to the City's Motor Fuel Tax Revenue Bonds, Series 2003A and Assured Guaranty Corp. provided municipal bond insurance policies relating to the City's Motor Fuel Tax Revenue Bonds, Series 2008. Event notices with respect to the rating changes taken by the Rating Agencies with respect to these insurers were not filed. The City made filings with EMMA on June 3, 2014 and August 22, 2014 with respect to these rating changes.
The City failed to file material event notices with respect to certain rating changes affecting the City's bonds subject to the Rule and for which the City is an "obligated person" under the Rule (collectively, the "Prior Bonds") or affecting bond insurance companies which insured any Prior Bonds (collectively, the "Bond Insurers"). The City filed with EMMA on August 29, 2014 a notice with respect to all rating changes known to the City and affecting the Prior Bonds (including certain Senior Lien Bonds and Second Lien Bonds) occurring over the prior ten years. The City filed with EMMA on August 27, 2014 a notice with respect to all rating changes known to the City and affecting the Bond Insurers occurring during the prior seven years.




















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MISCELLANEOUS
The summaries or descriptions contained herein of provisions of the Indenture and the Undertaking and all references to other materials not purporting to be quoted in full, are qualified in their entirety by reference to the complete provisions of the documents and other materials summarized or described. Copies of these documents may be obtained from the office of the Chief Financial Officer.
The Bonds are authorized and are being issued pursuant to the City Council's approval under the powers of the City as a home rule unit under Article VII ofthe Illinois Constitution.
CITY OF CHICAGO


By:
Carole L. Brown Chief Financial Officer







































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APPENDIX A SUMMARY OF THE INDENTURE
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SUMMARY OF THE INDENTURE
The following is a summary of certain provisions of the Indenture to which reference is made for a complete statement of the provisions and contents thereof. Copies of the Indenture are available for review prior to the sale and delivery of the Bonds at the office of the City's Chief Financial Officer and thereafter at the office of the Trustee.
Glossary of Terms
The following are definitions of certain terms used in the Indenture and this Official Statement. This glossary is provided for the convenience of the reader and does not purport to be comprehensive or definitive. All references herein to terms defined in the Indenture are qualified in their entirety by the definitions set forth in the Indenture.
"Authorized Denomination" means (a) with respect to Series 2015C Bonds, $5,000 and any integral multiple thereof, and (b) with respect to Taxable Series 2015D Bonds, $1,000 and any integral multiple thereof.
"Authorized Officer" means (a) the Mayor, the Chief Financial Officer, the City Comptroller or any other official of the City so designated by a Certificate signed by the Mayor or Chief Financial Officer and filed with the Trustee for so long as such designation shall be in effect, (b) the City Clerk with respect to the certification of any ordinance or resolution of the City Council or any other document filed in his or her office, and (c) the City Treasurer with respect to the investment of any moneys held pursuant to the Indenture.
"Beneficial Owner" means the owner of a beneficial interest in the Bonds registered in the name of Cede & Co., as nominee of DTC (or a successor securities depository or nominee for either of them).
"Bond Counsel" means the firm of Ice Miller LLP, Chicago, Illinois, and the firm of Cotillas and Associates, Chicago, Illinois, or any other firm or firms of nationally recognized bond counsel designated by the Corporation Counsel ofthe City.

"Bond Fund" means the Series 2015C Bond Fund or Series 2015D Bond Fund established and described in the Indenture, and together the "Bond Funds."

"Bondholder." "holder," or "owner of the Bonds" means the Registered Owner or Beneficial Owner of any Bond, as the case may be.
"Bond Ordinance" means the ordinance duly adopted by the City Council of the City on September 24, 2015 authorizing the issuance ofthe Bonds.

"Bond Register" means the registration books of the City kept by the Trustee to evidence the registration and transfer of Bonds.
"Bond Year" means a 12-month period commencing on January 2 of each calendar year and ending on January 1 of the next succeeding calendar year.
"Bonds" means the Series 2015C Bonds and the Taxable Series 2015D Bonds.
"Business Day" means any day other than (a) a Saturday or Sunday, (ii) a day on which banking institutions located in the city where the Designated Corporate Trust Office of the Trustee is located are


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authorized or required by law or executive order to close, and (iii) a day on which The New York. Stock Exchange, Inc., is closed.
"Certificate" means an instrument of the City in writing signed by an Authorized Officer. Any such instrument in writing and supporting opinions or representations, if any, may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed so as to form a single instrument. Any such instrument may be based, insofar as it relates to legal, accounting or engineering matters, upon the opinion or representation of counsel, accountants, or engineers, respectively, unless the officer signing such instrument knows that the opinion or representation with respect to the matters upon which such instrument may be based, as aforesaid, is erroneous. The same Authorized Officer, or the same counsel or accountant or other persons, as the case may be, need not certify to all of the matters required to be certified under any provision ofthe Indenture or any Supplemental Indenture, but different officers, counsel, accountants or other persons may certify to different facts, respectively.
"Chief Financial Officer" means the Chief Financial Officer appointed by the Mayor, or the City Comptroller of the City at any time a vacancy exists in the office of the Chief Financial Officer.
"City" means the City of Chicago, a municipal corporation and home rule unit of local government, organized and existing under the Constitution and laws ofthe State.
"City Clerk" means the duly qualified and acting City Clerk of the City or any Deputy City Clerk or other person that may lawfully take a specific action or perform a specific duty prescribed for the City Clerk pursuant to the Bond Ordinance.
"City Comptroller" means the City Comptroller of the City.
"City Council" means the City Council ofthe City.
"Code" means the United States Internal Revenue Code of 1986, as amended. References to the Code and to Sections of the Code shall include relevant final, temporary or proposed regulations thereunder as in effect from time to time and as applicable to obligations issued on the Date of Issuance.

"Contract of Purchase" means the bond purchase agreement(s) with respect to the sale of the Bonds to, or at the direction of, the Underwriters.

"Date of Issuance" means the date of issuance and delivery of the Bonds to the initial purchasers
thereof.
"Defeasance Obligations" means: (1) money; or (2) (A) direct obligations ofthe United States of America, (B) obligations of agencies of the United States of America, the timely payment of principal of and interest on which are guaranteed by the United States of America, (C) obligations of the following government-sponsored agencies that are not backed by the full faith and credit of the U.S. Government: Federal Home Loan Mortgage Corp. (FFILMC) debt obligations, Farm Credit System (formerly: Federal Land Banks, Federal Intermediate Credit Banks, and Banks for Cooperatives) debt obligations, Federal Home Loan Banks (FHL Banks) debt obligations, Fannie Mae debt obligations, Financing Corp. (FICO) debt obligations, Resolution Funding Corp. (REFCORP) debt obligations, and U.S. Agency for International Development (U.S. A.I.D.) Guaranteed notes, (D) pre-refunded municipal obligations defined as follows: any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of


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the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice, or (E) instruments evidencing an ownership interest in obligations described in the preceding clauses (A), (B) and (C); or (3) a combination ofthe investments described in clauses (1) and (2) above.
"Delivery Office" shall mean the following offices of the Trustee: For Notice Purposes:
Zions Bank, a division of ZB, National Association 111 W. Washington Street, Suite#1860 Chicago, Illinois 60602
Attn: Daryl Pomykala, Vice President/Senior Account Executive

For Presentation of Bonds for payment or transfers:

Zions Bank, a division of ZB, National Association One South Main Street, Suite# 1200 Salt Lake City, Utah 84133 Attn: Corporate Trust Services

"Designated Corporate Trust Office" means the corporate trust office of the Trustee located at the address of the Trustee set forth in the definition of "Delivery Office" in the Indenture, as such address may be changed from time to time by the Trustee.
"DTC" means The Depository Trust Company, New York, New York, or its nominee, and its successors and assigns, or any other depository performing similar functions.

"Escrow Agreements" mean each Refunding Escrow Agreement dated as of January 1, 2016, among the City, the Escrow Trustee and the bond registrar for the applicable Refunded Bonds and Interest Paid Bonds.

"Escrow Trustee" means Zions Bank, a division of ZB, National Association, in its capacity as Escrow Trustee.

"Escrow Verification Report" means the report of Robert Thomas, CPA, LLC, dated ,
2016.
"Federal Obligation" means any direct obligation of, or any obligation the full and timely payment of principal of and interest on which is guaranteed by, the United States of America.
"Fitch" means Fitch Ratings Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and assigns, and, if such corporation shall be dissolved or liquidated, or shall no longer perform the functions of a securities rating agency, "Fitch" shall be deemed to refer to any other nationally recognized securities rating agency designated by the City by notice to the Trustee.
"Indenture" means the Trust Indenture dated as of January 1, 2016, between the City and the
Trustee.

"Interest Paid Bonds" means those certain outstanding general obligation bonds of the City as described in Appendix G of the Official Statement.


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"Interest Payment Date" means each January 1 and July 1, commencing
"Kroll" means Kroll Bond Rating Agency, its successors and assigns, and, if Kroll shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Kroll" shall be deemed to refer to any other nationally recognized securities rating agency designated by the City by notice to the Trustee.
"Make-Whole Redemption Price" means the greater of (A) 100% of the principal amount of the Taxable Series 2015D Bonds to be redeemed or (B) the sum of the present values of the remaining scheduled payments of principal and interest on such Taxable Series 2015D Bonds to be redeemed, not including any portion of those payments of interest accrued and unpaid as of the date on which such Taxable Series 2015D Bonds are to be redeemed, discounted to the date of redemption of such Taxable Series 2015D Bonds to be redeemed on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Treasury Rate (as defined herein) plus basis points, plus, in each case,
accrued interest on such Taxable Series 2015D Bonds being redeemed to the date fixed for redemption. The Make-Whole Redemption Price for any Taxable Series 2015D Bonds to be redeemed will be calculated by an independent accounting firm, investment banking firm or financial advisor (the "Calculation Agent") retained by the City at the City's expense. The Trustee and the City may rely on the Calculation Agent's determination ofthe Make-Whole Redemption Price and will not be liable for such reliance. An Authorized Officer shall confirm and transmit the redemption price as so calculated on such dates to the Trustee and to such other parties as shall be necessary to effectuate such redemption.
"Maturity Date" means, for the Bonds of each series and each specified maturity, the applicable maturity date set forth on the inside front cover.
"Mayor" means the Mayor of the City.
"Municipal Code" means the Municipal Code of Chicago, as from time to time amended.
"Opinion of Bond Counsel" means a written opinion of Bond Counsel in form and substance acceptable to the City.

"Outstanding," means, when used with reference to any Bonds of a series, all of such obligations issued under the Indenture for that particular series that are unpaid, provided that such term does not include:
Bonds canceled at or prior to such date or delivered to or acquired by the Trustee or Paying Agent at or prior to such date for cancellation;
matured or redeemed Bonds which have not been presented for payment in accordance with the provisions of the Indenture and for the payment of which the City has deposited funds with the Trustee or the Paying Agent;
Bonds for which the City has provided for payment by depositing in an irrevocable trust or escrow, cash or Defeasance Obligations, in each case, the maturing principal of and interest on which will be sufficient to pay at maturity, or if called for redemption on the applicable redemption date, the principal of, redemption premium, if any, and interest on such Bonds;
Bonds in lieu of or in exchange or substitution for which other Bonds shall have been authenticated and delivered pursuant to the Indenture; and


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(e) Bonds owned by the City and tendered to the Trustee for cancellation. "Paying Agent" means the Trustee and any successor thereto.
"Permitted Investments" means any of the following obligations or securities permitted under the laws of the State and the Municipal Code:
interest-bearing general obligations of the United States of America, the State or the
City;
United States treasury bills and other non-interest bearing general obligations of the United States of America when offered for sale in the open market at a price below the face value of same, so as to afford the City a return on such investment in lieu of interest;
short term discount obligations of the United States Government or United States Government agencies;
certificates of deposit of national banks or banks located within the City which are either (i) fully collateralized at least 110 percent by marketable United States Government securities marked to market at least monthly or (ii) secured by a corporate surety bond issued by an insurance company licensed to do business in the State and having a claims-paying rating in the top rating category as rated by a nationally recognized statistical rating organization and maintaining such rating during the term of such investment;
banker's acceptances of banks and commercial paper of banks whose senior obligations are rated in the top two short term rating categories by at least two national rating agencies and maintaining such rating during the term of such investment;
tax-exempt securities exempt from federal arbitrage provisions applicable to investments of proceeds of the City's tax-exempt debt obligations;
domestic money market mutual funds regulated by and in good standing with the Securities and Exchange Commission, including any such fund for which the Trustee or any of its affiliates provides any service including any service for which a fee may be paid; and
any other suitable investment instrument permitted by State laws and the Municipal Code governing municipal investments generally, subject to the reasonable exercise of prudence in making investments of public funds.
"Principal and Interest Account" means (i) with respect to the Series 2015C Bonds, the Series 2015C Principal and Interest Account established within the Series 2015C Bond Fund, and (ii) with respect to the Taxable Series 2015D Bonds, the Series 2015D Principal and Interest Account established within the Series 2015D Bond Fund, each as described below under "—Funds and Accounts—Bond Fund."
"Principal and Interest Requirement" means, (i) with respect to the Series 2015C Bonds, the Series 2015C Principal and Interest Requirement, and (ii) with respect to and the Taxable Series 2015D Bonds, the Series 2015D Principal and Interest Requirement.





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"Qualified Collateral" means:
Federal Obligations;
direct and general obligations of any state of the United States of America or any political subdivision of the State which are rated not less than "AA" or "Aa2" or their equivalents by any Rating Agency; and
public housing bonds issued by public housing authorities and fully secured as to the payment of both principal and interest by a pledge of annual contributions under an annual contributions contract or contracts with the United States of America, or project notes issued by public housing authorities, or project notes issued by local public agencies, in each case fully secured as to the payment of both principal and interest by a requisition or payment agreement with the United States of America.
"Rating Agency" means any of Fitch, S&P and Kroll, or another rating agency that has a credit rating assigned to the Bonds at the request of the City.
"Record Date" means each June 15 and December 15 (whether or not a Business Day).

"Redemption Price" means (a) with respect to the Series 2015C Bonds, the principal amount thereof plus the applicable premium, if any, payable upon redemption thereof pursuant to the provisions of such Series 2015C Bonds, and (b) with respect to the Series 2015D Bonds, the Make-Whole Redemption Price.

"Refunded Bonds" means those certain outstanding general obligation bonds of the City as described in Appendix G ofthe Official Statement

"Registered Owner" or "Owner" means the person or persons in whose name or names a Bond shall be registered in the Bond Register.
"Securities Depository" means DTC and any other securities depository registered as a clearing agency with the Securities and Exchange Commission pursuant to Section 17A of the Securities Exchange Act of 1934, as amended, and appointed as the securities depository for the Bonds.
"Series 2015C Bonds" means the General Obligation Refunding Bonds, Series 2015C.
"Series 2015C Capitalized Interest Account" means the account of that name established within the Series 2015C Bond Fund and described below under "—Funds and Accounts—Capitalized Interest Account:'
"Series 2015C Principal and Interest Requirement" means an amount equal to the total principal installment and interest due on the Series 2015C Bonds as of each January 1 and July 1 (including any mandatory redemption of such Bonds), which amount shall be deposited in the Series 2015C Principal and Interest Account not later than the Business Day prior to such January 1 and July 1.

"Series 2015D Capitalized Interest Account" means the account of that name established within the Series 2015D Bond Fund and described below under "—Funds and Accounts—Capitalized Interest Account:'




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"Series 2015D Principal and Interest Requirement" means an amount equal to the total principal installment and interest due on the Taxable Series 2015D Bonds as of each January 1 and July 1, which amount shall be deposited in the Series 2015D Principal and Interest Account not later than the Business Day prior to such January 1 and July 1.
"S&P" means Standard & Poor's Financial Services LLC, a division of McGraw Hill Financial, Inc., its successors and assigns, and, if S&P shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the City by notice to the Trustee.
"State" means the State of Illinois.
"Supplemental Indenture" means any indenture modifying, altering, amending, supplementing or confirming the Indenture duly entered into in accordance with the terms thereof.
"Tax Agreement" means the Tax Exemption Certificate and Agreement of the City, dated the date of issuance of the Series 2015C Bonds.
"Taxable Series 2015D Bonds" means the General Obligation Refunding Bonds, Taxable Series
2015D.
"Trust Estate" means the property conveyed to the Trustee pursuant to the Granting Clauses of the Indenture.
"Trustee" means Zions Bank, a division of ZB, National Association, a national banking association with trust powers, and its successors and any entity resulting from or surviving any consolidation or merger to which it or its successors may be a party, and any successor Trustee at the time serving as successor trustee under the Indenture.

"Underwriters" means an underwriter or group of underwriters selected by the City pursuant to the Bond Ordinance and set forth on the front cover.

Source of Payment of Bonds
Pursuant to the Bond Ordinance, the Bonds constitute direct and general obligations of the City for the payment of which the City pledges its full faith and credit. See "SECURITY FOR THE BONDS."

Funds and Accounts
Bond Fund
Pursuant to the Indenture, the City has established with the Trustee two separate trust funds designated "City of Chicago General Obligation Bonds, Series 2015C Bond Fund" and "City of Chicago General Obligation Bonds, Series 2015D (Taxable) Bond Fund. At each such time as required under the Indenture, the City shall deposit into (a) the Series 2015C Bond Fund, from funds of the City legally available therefor, an amount sufficient to satisfy the Series 2015C Principal and Interest Account Requirement and (b) the Series 2015D Bond Fund, from funds of the City legally available therefor, an amount sufficient to satisfy the Series 2015D Principal and Interest Account Requirement. Money on deposit in the Series 2015C Bond Fund and Series 2015D Bond Fund shall be applied by the Trustee to pay the principal of (whether due at maturity or by mandatory redemption) and interest on the Series 2015C Bonds and Taxable Series 2015D Bonds, as applicable, as the same become due. Pending the use


A-7

of moneys held in the Bond Funds, the Trustee shall invest such moneys in Permitted Investments upon the direction of an Authorized Officer or any person designated by an Authorized Officer. Income from such investments shall be credited to the applicable Bond Fund. The Indenture also provides that an account within the Series 2015C Bond Fund, designated as the "Series 2015C Principal and Interest Account" and an account within the Series 2015D Bond Fund, designated as the "Series 2015D Principal and Interest Account" (together, the "Principal and Interest Accounts") to be used in connection with the redemption of any Series 2015C Bonds and Taxable Series 2015D Bonds, respectively.
Not later than the Business Day prior to each Interest Payment Date, commencing January 1,
20 (each such date referred to herein as the "Deposit Date") there shall be on deposit in the (i) Series
2015C Bond Fund an amount equal to the Series 20I5C Principal and Interest Account Requirement (such amount with respect to any Deposit Date being referred to herein as the "Series 2015C Deposit Requirement") and (ii) Series 2015D Bond Fund an amount equal to the Series 2015D Principal and Interest Account Requirement (such amount with respect to any Deposit Date being referred to herein as the "Series 2015D Deposit Requirement").
In addition to the Series 2015C Deposit Requirement and Series 2015D Deposit Requirement, there shall be deposited into the applicable Bond Fund any other moneys received by the Trustee under and pursuant to the Indenture, when accompanied by directions from the person depositing such moneys that such moneys are to be paid into such Bond Fund and to one or more accounts therein.
Upon calculation by the Trustee of each Series 2015C Deposit Requirement and Series 2015D Deposit Requirement, the Trustee shall notify the City of the Series 2015C Deposit Requirement and the Series 2015D Deposit Requirement, along with the applicable Deposit Date to which it relates, and shall provide the City with such supporting documentation and calculations as the City may reasonably request
Capitalized Interest Account

Pursuant to the Indenture, the City has established with the Trustee a trust account (i) within the Series 2015C Bond Fund, designated as the "Series 2015C Capitalized Interest Account," to hold certain proceeds of sale of the Series 2015C Bonds, and (ii) within the Series 2015D Bond Fund, designated as the "Series 2015D Capitalized Interest Account," to hold certain proceeds of sale of the Taxable Series 2015D Bonds.
Moneys on deposit in the Series 2015C Capitalized Interest Account and the Series 2015D Capitalized Interest Account shall be withdrawn by the Trustee on the Business Day prior to each of the
Interest Payment Dates occurring on and before January 1, 20 and deposited into the Series 2015C
Bond Fund and Series 2015D Bond Fund, respectively, for application to the payment of the interest due on the applicable Bonds on the Interest Payment Dates.

Pending the use of moneys held in the Series 2015C Capitalized Interest Account and the Series 2015D Capitalized Interest Account, the Trustee shall invest such moneys in Permitted Investments upon the direction of an Authorized Officer or any person designated by an Authorized Officer. Income from such investments shall be retained in the Series 2015C Capitalized Interest Account and the Series 2015D Capitalized Interest Account, as applicable. Any amount remaining in the Series 2015C Capitalized
Interest Account and the Series 2015D Capitalized Interest Account on January , 20 , shall be
withdrawn therefrom and deposited into the Series 2015C Bond Fund and Series 2015D Bond Fund, respectively.





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I
Supplemental Indentures
A Supplemental Indenture may be authorized at any time by ordinance of the City Council and shall be fully effective in accordance with its terms and not subject to consent by the Owners ofthe Bonds for the following purposes: (a) to add to the covenants and agreements ofthe City in the Indenture other covenants and agreements to be observed by the City which are not contrary to or inconsistent with the Indenture as theretofore in effect; (b) to add to the limitations and restrictions in the Indenture other limitations and restrictions to be observed by the City which are not contrary to or inconsistent with the Indenture as theretofore in effect; (c) to surrender any right, power or privilege reserved to or conferred upon the City by the terms of the Indenture, but only if the surrender of such right, power or privilege is not contrary to or inconsistent with the covenants and agreements of the City contained in the Indenture;
to confirm, as further assurance, the pledge under the Indenture, and the subjection of, additional properties, taxes or other collateral to any lien, claim or pledge created or to be created by, the Indenture;
to cure any ambiguity, supply any omission, or cure or correct any defect or inconsistent provision in the Indenture; (f) to insert such provisions clarifying matters or questions arising under the Indenture as are necessary or desirable and are not contrary to or inconsistent with the Indenture as theretofore in effect; or (g) to provide additional duties of the Trustee under the Indenture.
The Indenture shall not be modified or amended in any respect except as provided therein. Nothing in the Indenture shall affect or limit the right or obligation of the City to adopt, make, do, execute, acknowledge or deliver any ordinance, resolution, act or other instrument pursuant to the provisions of the Indenture or the right or obligation of the City to execute and deliver to the Trustee any instrument which is required to be delivered to the Trustee pursuant to the Indenture.

Every Supplemental Indenture delivered to the Trustee for execution shall be accompanied by an opinion of counsel stating that such Supplemental Indenture has been duly and lawfully authorized by the City Council and executed by the City in accordance with the provisions of the Indenture, is authorized or permitted by the Indenture, and will, when executed and delivered by the Trustee, be valid and binding upon the City and enforceable in accordance with its terms.

The Trustee is authorized to enter into, execute and deliver a Supplemental Indenture and to make all further agreements and stipulations which may be therein contained, and the Trustee in taking such action shall be fully protected in relying on an opinion of counsel that such Supplemental Indenture is authorized or permitted by the provisions of the Indenture.
No Supplemental Indenture shall change or modify any of the rights or obligations of the Trustee without its written assent thereto.
No Supplemental Indenture supplementing the Indenture authorizing the Series 2015C Bonds shall take effect unless and until there has been delivered to the Trustee an Opinion of Bond Counsel to the effect that such Supplemental Indenture does not adversely affect the exclusion from gross income for federal income tax purposes to which interest on the Series 2015C Bonds would otherwise be entitled.
Supplemental Indentures Requiring Bondholder Consent
At any time or from time to time, a Supplemental Indenture may be authorized by an ordinance adopted by the City Council, subject to consent by the owners of Bonds in accordance with and subject to the provisions of the Indenture, which Supplemental Indenture, upon the filing with the Trustee of a copy of such ordinance certified by the City Clerk, upon compliance with the provisions ofthe Indenture, and upon execution and delivery of such Supplemental Indenture by the City and the Trustee, shall become fully effective in accordance with its terms.


A-9

Any modification or amendment of the Indenture or of the rights and obligations ofthe City and of the owners of Bonds, in particular, which requires the consent of the Bondholders, may be made by a Supplemental Indenture, with the written consent given as provided in the Indenture: (a) of the Owners of a majority in principal amount of the Bonds Outstanding at the time such consent is given; or (b) in case less than all of the then Outstanding Bonds are affected by the modification or amendment, of the Owners of a majority in principal amount of the then Outstanding Bonds so affected. No such modification or amendment shall permit a change in the terms of redemption or maturity of the principal of any outstanding Bonds or of any installment of interest thereon or a reduction in the principal amount or the applicable Redemption Price thereof or in the rate of interest thereon, or in terms of purchase or the purchase price thereof, without the consent of the Owner of such Bonds, or shall reduce the percentages or otherwise affect the classes of Bonds the consent of the Owners of which is required to effect any such modification or amendment, or shall change or modify any of the rights or obligations of the Trustee without its written assent thereto. A Bond shall be deemed to be affected by a modification or amendment of the Indenture if the same adversely affects or diminishes the rights of the Owners of such Bond.
Default and Remedies
Each ofthe following events is an "Event of Default" under the Indenture:
payment of the principal or Redemption Price, if any, of any Bonds shall not be made when and as the same shall become due, whether at maturity or upon call for redemption or otherwise;
payment of any installment of interest on any Bonds shall not be made when and as the same shall become due; or
the City shall fail or refuse to comply with the provisions of the Indenture, or shall default in the performance or observance of any of the covenants, agreements or conditions on its part contained in the Indenture or in the Bonds, which materially affects the rights of the owners of the Bonds and such failure, refusal or default shall continue for a period of 45 days after written notice thereof by the Trustee or the owners of not less than 25 percent in principal amount of the Outstanding Bonds; provided, however, that in the case of any such default which can be cured by due diligence but which cannot be cured within the 45-day period, the time to cure shall be extended for such period as may be necessary to remedy the default with all diligence.
Upon the happening and continuance of any Event of Default specified in paragraph (a) or (b) above, the Trustee shall proceed, or upon the happening and continuance of any Event of Default (beyond the time periods specified therein) specified in paragraph (c) above, the Trustee may proceed, and upon the written request of the owners of not less than 25 percent in principal amount of the Outstanding Bonds, shall proceed, in its own name, to protect and enforce its rights and the rights of the owners ofthe Bonds by such of the following remedies as the Trustee, being advised by counsel, shall deem most effectual to protect and enforce such rights:
by mandamus or other suit, action or proceeding at law or in equity, to enforce all rights of the owners of the Bonds including the right to require the City to receive and collect taxes adequate to carry out the covenants and agreements as to such taxes and to require the City to carry out any other covenant or agreement with the owners of the Bonds and to perform its duties under the Indenture;
by bringing suit upon the Bonds;



A-10

by action or suit in equity, require the City to account as if it were the trustee of an express trust for the owners of the Bonds; and/or
by action or suit in equity, enjoin any acts or things which may be unlawful or in violation of the rights ofthe owners of the Bonds.
In the enforcement of any rights and remedies under the Indenture, the Trustee shall be entitled to sue for, enforce payment of and receive any and all amounts then or during any default becoming, and at any time remaining, due from the City but only out of moneys pledged as security for the Bonds for principal, Redemption Price, interest or otherwise, under any provision of the Indenture or of the Bonds, and unpaid, with interest on overdue payments at the rate or rates of interest specified in such Bonds, together with any and all costs and expenses of collection and of all proceedings hereunder and under such Bonds without prejudice to any other right or remedy of the Trustee or of the owners ofthe Bonds, and to recover and enforce a judgment or decree against the City for any portion of such amounts remaining unpaid, with interest, costs and expenses, and to collect from any moneys available under the Indenture for such purpose, in any manner provided by law, the moneys adjudged or decreed to be payable.
Under no circumstance may the Trustee declare the principal of or interest on the Bonds to be due and payable prior to the Maturity Date following the occurrence of an Event of Default under the Indenture.
Resignation or Removal of the Trustee; Successors
The Trustee may at any time resign and be discharged of its duties and obligations created by the Indenture by giving not fewer than 60 days' written notice to the City and mailing notice thereof to the owners of Bonds at their addresses shown on the registration books kept by the Trustee within 20 days after the giving of such written notice. Such resignation shall take effect upon the appointment and acceptance of appointment of a successor by the City or the Owners of Bonds as provided in the Indenture.
The Trustee may be removed at any time by the Owners of a majority in principal amount of the Bonds then Outstanding, excluding any Bonds held by or for the account of the City, by an instrument or concurrent instruments in writing signed and duly acknowledged by such Owners of Bonds or by their attorneys duly authorized in writing and delivered to the City. Copies of each such instrument shall be delivered by the City to the Trustee and any successor. The City may remove the Trustee at any time, except during the existence of an Event of Default, for such cause (or upon 30 days' notice for any reason) as shall be determined in the sole discretion of the City by filing with the Trustee an instrument signed by an Authorized Officer and by mailing notice thereof to the Owners of Bonds at their addresses shown on the registration books kept by the Trustee. Any removal of the Trustee shall take effect upon the appointment and acceptance of appointment of a successor Trustee.
In case at any time the Trustee shall resign or shall be removed or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or if a receiver, liquidator or conservator of the Trustee or of its property shall be appointed, or if any public officer shall take charge or control ofthe Trustee or of its property or affairs, a successor may be appointed by the Owners of a majority in principal amount of the Bonds then Outstanding, excluding any Bonds held by or for the account of the City, by an instrument or concurrent instruments in writing signed by such Owners or their attorneys duly authorized in writing and delivered to such successor Trustee, notification thereof being given to the City and the predecessor Trustee. Pending such appointment, the City shall forthwith appoint a Trustee to fill such vacancy until a successor Trustee (if any) shall be appointed by the Owners of Bonds as authorized


A-11

in the Indenture. The City shall mail notice to Owners of Bonds of any such appointment within 20 days after such appointment. Any successor Trustee appointed by the City shall, immediately and without further act, be superseded by a Trustee appointed by the Owners of Bonds. If in a proper case no appointment of a successor Trustee shall be made within 45 days after the Trustee shall have given to the City written notice of resignation or after the occurrence of any other event requiring or authorizing such appointment, the Trustee, any Owner of Bonds may apply to any court of competent jurisdiction to appoint a successor. Said court may thereupon, after such notice, if any, as said court may deem proper and prescribe, appoint such successor Trustee. Any Trustee appointed shall be a bank, trust company or national banking association, in any such case having corporate trust powers, doing business and having a corporate trust office in the City.
Any successor Trustee appointed under the Indenture shall execute, acknowledge and deliver to its predecessor Trustee, and also to the City, a written instrument of acceptance respecting such appointment, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become fully vested with all moneys, estates, properties, rights, powers, duties and obligations of such predecessor Trustee, with like effect as if originally named as Trustee; but the Trustee ceasing to act shall nevertheless, on the request of the City, or of the successor Trustee, execute, acknowledge and deliver such instruments of conveyance and further assurance and do such other things as may reasonably be required for more fully and certainly vesting and confirming in such successor Trustee all the right, title and interest of the predecessor Trustee in and to any property held by it under the Indenture, and shall pay over, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions set forth in the Indenture. Should any deed, conveyance or instrument in writing from the City be required by such successor Trustee for more fully and certainly vesting in and confirming to such successor Trustee any such estates, rights, powers and duties, any and all such deeds, conveyances and instruments in writing shall, on request, and so far as may be authorized by law, be executed, acknowledged and delivered by the City.

Defeasance
The Indenture provides that if the City will pay to the Registered Owners of the Bonds or either Series thereof, or provide for the payment of, the principal, premium, if any, and interest to become due on such Bonds, then the Indenture and the Bond Ordinance will be fully discharged and satisfied with respect to such Bonds. Upon the satisfaction and discharge of the Indenture, the Trustee will, upon the request of the City, execute and deliver to the City all such instruments as may be desirable to evidence such discharge and satisfaction, and all fiduciaries will pay over or deliver to the City all funds, accounts and other moneys or securities held by them pursuant to the Indenture which are not required for the payment or redemption of the Bonds. If payment or provision for payment is made, to or for the Registered Owners of all or a portion of the Bonds, of the principal of and interest due and to become due on any Bond at the times and in the manner stipulated therein, and there is paid or caused to be paid to the Trustee, all sums of money due and to become due according to the provisions of the Indenture, then these presents and the estate and rights thereby granted under the Indenture and the Bond Ordinance shall cease, terminate and be void as to those Bonds or portions thereof except for purposes of registration, transfer and exchange of Bonds and any such payment from such moneys or obligations. Any Bond will be deemed to be paid when payment of the principal of any such Bond, plus interest thereon to the due date thereof (whether such due date be by reason of maturity or upon redemption as provided in the Indenture or otherwise), either (a) will have been made or caused to have been made in accordance with the terms thereof, or (b) will have been provided for by irrevocably depositing with the Trustee, in trust and exclusively for such payment, (1) moneys sufficient to make such payment or (2) Defeasance Obligations, or (3) a combination of the investments described in clauses (1) and (2) above, such amounts so deposited being available or maturing as to principal and interest in such amounts and at such times, without consideration of any reinvestment thereof, as will insure the availability of sufficient moneys to

A-12

make such payment (all as confirmed by a nationally recognized firm of independent public accountants). If the City will pay and discharge a portion of the Bonds as aforesaid, such portion shall cease to be entitled to any lien, benefit or security under the Indenture and the Bond Ordinance. The liability ofthe City with respect to such Bonds will continue, but the Registered Owners thereof shall thereafter be entitled to payment (to the exclusion of all other Bondholders) only out of the Defeasance Obligations deposited with the Trustee under the Indenture.
No deposit pursuant to the paragraph above shall be made or accepted with respect to the Series 2015C Bonds and no use made of any such deposit unless the Trustee shall have received an Opinion of Bond Counsel to the effect that such deposit and use would not cause any of such Series 2015C Bonds to be treated as "arbitrage bonds" within the meaning of Section 148 of the Code or any successor provision thereto.
A defeasance deposit of escrow securities may be subject to a subsequent sale of such escrow securities and reinvestment of all or a portion of the proceeds of that sale in escrow securities which, together with money to remain so held in trust, shall be sufficient to provide for payment of principal, redemption premium, if any, and interest on any ofthe defeased Bonds. Amounts held by the Trustee in excess of the amounts needed so to provide for payment of the defeased Bonds may be subject to withdrawal by the City.



































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APPENDIX B ECONOMIC AND DEMOGRAPHIC INFORMATION
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ECONOMIC AND DEMOGRAPHIC INFORMATION
Set forth below is certain economic and demographic information regarding the City. Sources of information are set forth in footnotes at the end of this Appendix. With respect to non-City sources, the City considers these sources to be reliable but has made no independent verification of the information provided and does not warrant its accuracy.

Economy
The Chicago metropolitan area has a population of 9.5 million people, with over 4.5 million employees.1,2 Chicago's large and diverse economy contributed to a gross regional product of more than $610 billion in 2014.^

Chicago's transportation and distribution network offers access to air, rail, and water, with two ports capable of handling ocean-going ships and barges, and an airport system that moves 1.5 million tons of freight, mail, and goods annually.4

The Chicago metropolitan area's largest industry sectors by employment include trade, transportation and utilities, professional and business services, education and health services, government, leisure and hospitality and manufacturing.5

Population
Chicago is home to over 2.7 million people that live in more than one million households.6 The City's population increased nearly 1.0 percent since the 2010 Census.7
The population of the United States, the State of Illinois, Cook County and the City for the census years from 1980 to 2010 and the estimate for 2014 is set forth below.
Population8 1980—2014
Year United States State of Illinois Cook County Chicago
1980 226,545,805 11,427,409 5,253,655 3,005,072
1990 248,709,873 11,430,602 5,105,067 2,783,726
2000 281,421,906 12,419,293 5,376,741 2,896,016
2010 308,74.5,538 12,830,632 5,194,675 2,695,598
2014 Estimate 318,857,056 12,880,580 5,246,456 2,722,389
34.2 percent of Chicago's residents (age 25 or older) have bachelor's degrees, which is higher
than the national average of 28.8 percent.9












B-1

Per Capita Income and Wages
The per capita personal income (estimated annual earnings) for the United States, the State of Illinois, Cook County and the Chicago MSA is set forth below for the years 2005 through 2014.
Per Capita Income10 2005—2014
Year
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
United States
$ 35,888 38,127 39,804 40,873 39,379 40,144 42,332 44,200 44,765 46,049
State of Illinois
$ 37,697 40,184 42,260 43,327 41,545 42,033 44,169 46,009 46,980 47,643
Cook County
$ 40,648 43,701 46,436 47,046 44,824 45,213 47,966 48,948 49,661 Unavailable
Chicago MSA
$ 40,470 43,276 45,459 46,138 43,847 44,186 46,279 48,447 49,071 Unavailable
Chicago's 2013 median household income is $47,270, compared to $56,797 in Illinois and $53,046 in the U.S., and Chicago ranks 36th among other major metropolitan areas on the cost of living index.11-12
Employment
Total employment for the State of Illinois, the Chicago MSA, Cook County and the City for the years 2005 through 2014 is set forth below.


Employment (in thousands)13 2005-2014
Year Chicago Cook County Chicago MSA State of Illinois
1,199 2,393 4,461 5,862
1,228 2,453 4,519 5,933
1,249 2,491 4,557 5,980
1,238 2,461 4,528 5,949
1,172 2,327 4,291 5,657
1,117 2,301 4,246 5,613
1,120 2,316 4,305 5,677
1,141 2,359 4,375 5,751
1,144 2,365 4,443 5,805
1,185 2,450 4,502 5,873
The percentage of total (nonfarm) employment by sector for the Chicago MSA, State of Illinois and the United States for November 2015 is shown in the following table.






B-2

Percentage of Total Non-Farm Employment by Major Industry Sector
November 2015u 15
Sector
Trade, Transportation and Utilities
Education and Health Services
Government
Professional and Business Services.
Leisure and Hospitality
Manufacturing
Financial Activities
Construction
Other Services
Information
Mining and Logging
Total
Chicago MSA
20.3% 15.4% 12.2% 17.8% 9.4% 8.8% 6.3% 3.7% 4.3% 1.8% 0.0%
100.0%

Illinois
20.0% 15.3% 14.0% 15.8% 9.5% 9.6% 6.2% 3.5% 4.3% 1.7% 0.2%
100.0%
United States
18.9% 15.6% 15.4% 14.0% 10.7% 8.7% 5.7% 4.5% 4.0% 2.0% 0.6% 100.0%
The City of Chicago's average annual unemployment rate decreased from 11.2 percent in 2010 to 7.7 percent in 2014, while statewide, Illinois' unemployment rate dropped from 10.4 percent in 2010 to 7.1 percent in 2014."' In November 2015, the Chicago MSA's preliminary unemployment rate before seasonal adjustment was 5.4 percent.'7
The annual unemployment rates (percent of population, not seasonally adjusted) for the United States, the State of Illinois, Cook County, the Chicago MSA and the City is set forth below for the years 2005 through year-to-date for 2015.
Annual Unemployment Rates18 2005—2015

Year
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*

Chicago
7.1%
5.4
5.8
7.0 11.1 11.2 10.8 10.0 10.0
7.7
5.8
Cook County
6.4%
4.9
5.3
6.4 10.5 10.9 10.4
9.6
9.6
7.4
5.5
Chicago MSA
5.9%
4.6
4.9
6.1 10.2 10.6
9.9
9.1
9.0
7.0
5.4
State of Illinois
5.7%
4.5
5.0
6.3 10.2 10.4
9.7
9.0
9.1
7.1
5.8
United States
5.1%
4.6
4.6
5.8
9.3
9.6
8.9
8.1
7.4
6.2
4.8
Preliminary' November 2015 data.

Employers
The companies employing the greatest number of workers in the Chicago MSA as of the end of 2014 are set forth below.
Largest Employers in Chicago MSA19 2014
Percentage of
Number of Total
Employer Employees Employment
Advocate Health Care 18,556 1.47%
University of Chicago 16,025 1.27
J.P. Morgan Chase 15,015 1.19
Northwestern Memorial Healthcare 14,550 1.15
United Continental Holdings Inc. 14,000 1.11
Walgreen Co. 13,797 1.09
AT&T 13,000 1.03
Presence Health 11,279 0.89
University of Illinois at Chicago 10,100 0.80
Abbott Laboratories 10,000 0.79
Top Tax Payers
The top property tax payers in the City in 2013 based on 2013 EAV are shown in the following
table.

Top Ten Property Tax Payers 20132H
($ in thousands)
% of Total
Rank Property 2013 EAV EAV
Willis Tower $ 370,197 0.59%
AON Center 248,906 0.40
Blue Cross Blue Shield Tower 201,987 0.32
One Prudential Plaza 193,495 0.31
Water Tower Place 190,952 0.31
Chase Tower 190,441 0.31
AT&T Corp. Center 183,1 13 0.29
Three First National Plaza 177,863 0.29
Citadel Center 177,008 0.28
300 N. LaSalle 159,537 0.26
Total $2,093,499 3.36%

As shown in the table, the top ten taxpayers account for less than 4 percent of the City's total tax
base.
Transportation
According to statistics compiled by Airports Council International in 2014, O'Hare ranked seventh worldwide and third in the United States in terms of total passengers while Midway ranked 26,h in the United States.21 According to the Chicago Department of Aviation, O'Hare and Midway had 70.1

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and 21.2 million in total passenger volume in 2014, respectively. O'Hare supports substantial international service with international passengers constituting approximately 15 percent of total enplaned passengers in 2014."
The Chicago Transit Authority operates the second largest public transportation system in the nation, with: 1,865 buses operating over 128 routes and 1,354 route miles, making 19,000 trips per day and serving 11,104 bus stops; 1,356 rail cars operating over eight routes and 224 miles of track, making 2,250 trips each day and serving 146 stations; and 1.7 million rides on an average weekday and over 529 million rides a year (bus and train combined).23
Schools
The Chicago Public School system is the third largest school district in the nation, serving approximately 396,683 students.24 CPS is comprised of 422 elementary schools, 95 high schools, 6 combination schools (schools that serve both elementary and high school grade levels), 9 contract high schools, and 130 charter school campuses.25 The City Colleges of Chicago operate seven colleges and serve approximately 109,358 students.26
Government
The number of full-time employees of the City for the years 2006 through 2015 is included in the following table.
,27
City Full-Time Employees 2006—2014

Budgeted Full-Tim e Equivalent Positions
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
40,353 40,264 40,108 37,485 36,970 36,617 33,744 33,554 34,045 34,129














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Housing Market
The monthly home sales and the median home sale prices for Chicago for the years 2009 through November, 2015 are shown below.
Chicago Monthly Home Sales28 2009—November 2015

January
February
March
April
May
June
July
August
September
October
November
December
2009
917 866 1,212 1407 1,557 1,981 1,975 1,927 1,918 2,012 1,859 1,767
2010
1,202 1,225 1,814 1,984 2,057 2,526 1,588 1,486 1,403 1,216 1,144 1,444
2011
1,034 1,056 1,450 1,466 1,703 1,841 1,655 1,787 1,498 1,312 1,429 1,576
2012
1,123 1,250 1,664 1,816 2,125 2,332 2,164 2,293 1,906 2,076 1,798 1,849
2013
1,485 1,378 1,894 2,331 2,762 2,623 2,838 2,797 2,352 2,231 1,800 2,080
2014
1,383 1,361 1,819 2,210 2,390 2,761 2,664 2,414 2,187 2,082 1,632 1,992
2015
1,295 1,448 2,118 2,386 2,700 3,110 2,989 2,629 2,358 2,109 1,615

Chicago Median Home Sale Prices 2009—November 2015

January
February
March
April
May
June
July
August
September
October
November
December
2009
$205,000 218,625 219,000 218,000 225,000 242,050 245,000 229,900 225,000 215,000 215,000 210,000
2010
S195,000 176,500 209,000 225,000 230,000 234,250 196,500 200,000 180,000 183,000 182,500 166,250
2011
$150,000 150,000 163,200 169,000 190,000 207,000 210,000 192,500 190,000 162,000 157,000 155,000
2012
$148,000 140,000 172,000 182,000 200,000 217,000 200,000 200,000 188,400 175,000 180,000 185,000
2013
$159,000 158,000 187,500 222,000 234,000 254,900 250,000 245,000 231,000 218,500 200,000 210,000
2014
$200,750 175,000 237,000 250,000 270,000 275,000 270,000 250,000 250,000 237,500 230,000 229,250
2015
$222,000
212,000
235,000
275,000
287,500
290,000
285,000
270,000
250,000
240,000
235,000


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|10
9|U.S. Census, "Annual Estimates of the Resident Population: April 1, 2010 to July 2014," .|109|U.S. Bureau of Labor Statistics, "Employees on Nonfarm Payrolls by State and Metropolitan Area," .|109|U.S. Bureau of Economic Analysis, "Table 1. Current-Dollar Gross Domestic Product (GDP) by Metropolitan Area," metro/2015/pdf/gdp metro0915.pdf.|109|Chicago Department of Aviation, "Monthly Operations, Passengers, Cargo Summary By Class, December 2014," www.t1vchicago.com .|109|U.S. Bureau of Labor Statistics, "Chicago Area Economic Summary, November 3, 2015," chicago.pdf.|109|U.S. Census Bureau, "State and County QuickFacts—Chicago (city), Illinois," (accessed December 30, 2015).|109|U.S. Census Bureau, "State and County QuickFacts—Chicago (city), Illinois," (accessed December 30, 2015).|109|U.S. Census Bureau, "State and County QuickFacts—USA," : "State and County QuickFacts—Cook County, Illinois," ; "State and County QuickFacts—Chicago (city), Illinois," (accessed December 30, 2015).|10 9|U.S. Census Bureau, "State and County QuickFacts—Chicago (city), Illinois," (accessed December 30, 2015).
10 U.S. Bureau of Economic Analysis, "Interactive Data,"
ReqID=70&step= 1 #reqid=70&step= 1 &isuri= 1 (accessed December 30, 2015).
" U.S. Census Bureau, "State and County QuickFacts—Chicago (city), Illinois," (accessed December 30, 2015).
12 U.S. Census Bureau, "Table 728. Cost of Living Index—Selected Urban Areas: Annual Average 2010"
lpubs/12statab/prices.pdf?cssp=SERP (accessed December 30, 2015).
13 U.S. Bureau of Labor Statistics, "State and Metro Area Employment, Hours, & Earnings,"
(accessed December 30, 2015).
14 U.S. Bureau of Labor Statistics, Chicago md.htm (accessed December 30,
2015).
15 U.S. Bureau of Labor Statistics, "Current Employment Statistics (National),"
(accessed December 30, 2015).
16 U.S. Bureau of Labor Statistics, "Local Area Employment Statistics," http://www.bls.gOv/lau/#tables (accessed
December 30, 2015).
17 U.S. Bureau of Labor Statistics, "Local Area Employment Statistics,"
(accessed December 30, 2015).
18 U.S. Bureau of Labor Statistics, "Local Area Employment Statistics," (accessed
December 30, 2015).
19 Crain's Chicago Business, Crain Communications, Inc. The data represents the largest employers in the six-
county area (Cook County, Will County, Kane County, Lake County, DuPage County, and McHenry County).
20 Chicago Comprehensive Annual Financial Report for the year ended December 31, 2014,
info/comprehensive annualfinancialstatements/2014-
Financial-Statements.html
21 Airports Council International "2014 North American (ACI-NA) Top 50 Airports,"
.
22 Chicago Department of Aviation Airport Budget Statistics, "Air Traffic Data," .
23 Chicago Transit Authority, "CTA Facts at a Glance, Spring 2014,"
htlp://vvwvv.transitchicago.com/about/facts.aspx (accessed December 30, 2015).
24 Chicago Public Schools, "Stats and Facts," CPS/At-a-glance/Pages/Stats and facts.aspx
(accessed December 30, 2015).
25 Chicago Public Schools, "Stats and Facts," CPS/At-a-glance/Pages/Stats_and_facts.aspx
(accessed December 30, 2015).
26 City Colleges of Chicago, "Fiscal Year 2014 Statistical Digest,"
statistics.aspx.



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" City of Chicago Annual Financial Analysis 2015, info/2016Budget/AFA%20-%202015%20(With%20Press%20Release).pdf.
28 Illinois Association of Realtors, "Illinois Market Stats Archives,"
(accessed December 30, 2015).
29 Illinois Association of Realtors, "Illinois Market Stats Archives,"
(accessed December 30, 2015).















































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APPENDIX C

CITY OF CHICAGO
BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
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APPENDIX D PROPERTY TAXES
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PROPERTY TAXES
Real Property Assessment, Tax Levy and Collection Procedures
General
Information under this caption provides a general summary of the current procedures for real property assessment, tax levy and tax collection in Cook County (the "County"). The following is not an exhaustive discussion, nor can there be any assurance that the procedures described under this caption will not be changed either retroactively or prospectively. The Illinois laws relating to real property taxation are contained in the Illinois Property Tax Code (the "Property Tax Code").
Substantially all (approximately 99.99 percent) of the "Equalized Assessed Valuation" (described below) of taxable property in the City is located in the County. The remainder is located in DuPage County. Accordingly, unless otherwise indicated, the information set forth under this caption and elsewhere in this Official Statement with respect to taxable property in the City does not reflect the portion situated in DuPage County.
Assessment
The Cook County Assessor (the "Assessor") is responsible for the assessment of all taxable real property within the County, except for certain railroad property and pollution control equipment assessed directly by the State. One-third of the real property in the County is reassessed each year on a repeating triennial schedule established by the Assessor. The suburbs in the northern and northwestern portions of the County were reassessed in 2013. The suburbs in the western and southern portions of the County were reassessed in 2014. The City was reassessed in 2015.
Real property in the County is separated into various classifications for assessment purposes. After the Assessor establishes the fair cash value of a parcel of land, that value is multiplied by one of the classification percentages to arrive at the assessed valuation (the "Assessed Valuation") for the parcel. Beginning with the 2009 tax year, the classification percentages range from 10 to 25 percent depending on the type of property (e.g., residential, industrial, commercial) and whether it qualifies for certain incentives for reduced rates. For prior years, the classification percentages ranged from 16 to 38 percent.
The Cook County Board of Commissioners has adopted various amendments to the County's Real Property Assessment Classification Ordinance (the "Classification Ordinance"), pursuant to which the Assessed Valuation of real property is established. Among other things, these amendments have reduced certain property classification percentages, lengthened certain renewal periods of classifications and created new property classifications.
The Assessor has established procedures enabling taxpayers to contest the Assessor's tentative Assessed Valuations. Once the Assessor certifies final Assessed Valuations, a taxpayer can seek review of its assessment by the Cook County Board of Review (the "Board of Review"). The Board of Review has powers to review and adjust Assessed Valuations set by the Assessor. Owners of property are able to appeal decisions ofthe Board of Review to the Illinois Property Tax Appeal Board (the "PTAB"), a state­wide administrative body, or to the Circuit Court of Cook County (the "Circuit Court"). The PTAB has the power to determine the Assessed Valuation of real property based on equity and the weight of the evidence. Based on the amount of the proposed change in assessed valuation, taxpayers may appeal decisions of the PTAB to either the Circuit Court or the Illinois Appellate Court under the Illinois Administrative Review Law.




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] ]
In a series of PTAB decisions, the PTAB reduced the assessed valuations of certain commercial and industrial property in the County based upon the application of median levels of assessment derived from Illinois Department of Revenue sales-ratio studies instead of utilizing the assessment percentages provided in the Classification Ordinance. On appeal, the Illinois Appellate Court determined that it was improper for the PTAB, on its own initiative, to use the sales-ratio studies when such studies were not even raised as an issue by the taxpayer before the Board of Review or in its appeal to the PTAB.
The Appellate Court decisions do not preclude a taxpayer in a properly presented case from introducing into evidence sales-ratio studies for the purpose of obtaining an assessment below that which would result from application of the Classification Ordinance. No prediction can be made whether any currently pending or future case would be successful. The City believes that the impact of any such case on the City would be minimal, as the City's ability to levy or collect real property taxes would be unaffected.
As an alternative to seeking review of Assessed Valuations by the PTAB, taxpayers who have first exhausted their remedies before the Board of Review may file an objection in the Circuit Court. The City filed a petition to intervene in certain of these proceedings for the first time in 2003, but the Circuit Court denied the City's petition in early 2004. The City appealed the Circuit Court decision. On appeal, the Circuit Court decision was reversed and the matter was remanded to the Circuit Court with instructions to allow the City to proceed with its petitions to intervene. In addition, in cases where the Assessor agrees that an assessment error has been made after tax bills have been issued, the Assessor can correct the Assessed Valuation, and thus reduce the amount of taxes due, by issuing a Certificate of Error.
Equalization
After the Assessed Valuation for each parcel of real estate in a county has been determined for a given year including any revisions made by the Board of Review, the Illinois Department of Revenue reviews the assessments and determines an equalization factor (the "Equalization Factor"), commonly called the "multiplier," for each county. The purpose of equalization is to bring the aggregate assessed value of all real property, except farmland, wind turbines with a nameplate capacity of at least 0.5 megawatts and undeveloped coal, in each county to the statutory requirement of 33-1/3 percent of estimated fair cash value. Adjustments in Assessed Valuation made by the PTAB or the courts are not reflected in the Equalization Factor. The Assessed Valuation of each parcel of real estate in the County is multiplied by the County's Equalization Factor to determine the parcel's equalized assessed valuation (the "Equalized Assessed Valuation").

The Equalized Assessed Valuation for each parcel is the final property valuation used for determination of tax liability. The aggregate Equalized Assessed Valuation for all parcels in any taxing body's jurisdiction, after reduction for all applicable exemptions, plus the valuation of property assessed directly by the State, constitutes the total real estate tax base for the taxing body and is the figure used to calculate tax rates (the "Assessment Base"). The Equalization Factor for a given year is used in computing the taxes extended for collection in the following year. The Equalization Factors for each of the last 11 tax levy years, from 2003 through 2013 (the most recent years available), are listed in this Official Statement under "FINANCIAL DISCUSSION AND ANALYSIS—Property Taxes" (see the table captioned "Assessed, Equalized Assessed and Estimated Value of All Taxable Property 2003-2014").
In 1991, legislation was enacted by the State which provided that for 1992 and for subsequent years' tax levies, the Equalized Assessed Valuation used to determine any applicable tax limits is the one for the immediately preceding year and not the current year. This legislation impacts taxing districts with




D-2

rate limits only and currently does not apply to the City. See "—Property Tax Limit Considerations" below.
Exemptions
The Illinois Constitution allows homestead exemptions for residential property. Pursuant to the Illinois Property Tax Code, property must be occupied by the owner as a principal residence on January 1 of the tax year for which the exemption will be claimed.
The annual general homestead exemption provides for the reduction of the Equalized Assessed Valuation ("EAV") of certain property owned and used exclusively for residential purposes by the amount of the increase over the 1977 EAV, currently up to a maximum reduction of $7,000 in Cook County and $6,000 in all other counties. There is an additional homestead exemption for senior citizens (individuals at least 65 years of age), for whom the Assessor is authorized to reduce the EAV by $5,000. There is also an exemption available for homes owned and exclusively used for residential purposes by disabled veterans or their spouses, for whom the Assessor is authorized to annually exempt up to $70,000 of the Assessed Valuation. An additional exemption is available for disabled persons, for whom the Assessor is authorized to reduce the EAV by $2,000. An exemption is available for homestead improvements by an owner of a single family residence of up to $75,000 ofthe increase in the fair cash value of a home due to certain home improvements to an existing structure for at least four years from the date the improvement is completed and occupied. Senior citizens whose household income is $55,000 or less, and who are either the owner of record or have a legal or equitable interest in the property, qualify to have the EAV of their property frozen in the year in which they first qualify for the so-called "freeze" and each year thereafter in which the qualifying criteria are maintained. Each year applicants for the Senior Citizens Assessment Freeze Homestead Exemption must file the appropriate application and affidavit with the chief county assessment office.
Aside from homestead exemptions, upon application, review and approval by the Board of Review, or upon an appeal to the Illinois Department of Revenue, there are exemptions generally available for properties of religious, charitable (including qualifying not-for-profit hospitals), and educational organizations, as well as units of federal, state and local governments.
Additionally, counties have been authorized to create special property tax exemptions in long-established residential areas or in areas of deteriorated, vacant or abandoned homes and properties. Under such an exemption, long-time, residential owner-occupants in eligible areas would be entitled to a deferral or exemption from that portion of property taxes resulting from an increase in market value because of refurbishment or renovation of other residences or construction of new residences in the area. On June 5, 2001, the County enacted the Longtime Flomeowner Exemption Ordinance, which provides property tax relief from dramatic rises in property taxes directly or indirectly attributable to gentrification in the form of an exemption. This is generally applicable to homeowners: (i) who have resided in their homes for 10 consecutive years (or five consecutive years for homeowners who have received assistance in the acquisition of the property as part of a government or nonprofit housing program), (ii) whose annual household income for the year of the homeowner's triennial assessment does not exceed 115 percent of the Chicago Primary Metropolitan Statistical Area median income as defined by the United States Department of Housing and Urban Development, (iii) whose property has increased in assessed value to a level exceeding 150 percent of the current average assessed value for properties in the assessment district where the property is located, (iv) whose property has a market value for assessment purposes of $300,000 or less in the current reassessment year, and (v) who, for any triennial assessment cycle, did not cause a substantial improvement which resulted in an increase in the property's fair cash value in excess ofthe $45,000 allowance set forth in the Property Tax Code.




D-3

Tax Levy
There are over 800 units of local government (the "Units") located in whole or in part in the County that have taxing power. The major Units having taxing power over property within the City are the City, the Chicago Park District, the Board of Education of the City of Chicago, the School Finance Authority, Community College District No. 508, the Metropolitan Water Reclamation District of Greater Chicago, the County and the Forest Preserve District of Cook County.
As part of the annual budgetary process of the Units, each year in which the determination is made to levy real estate taxes, proceedings are adopted by the governing body for each Unit. The tax levy proceedings impose the Units' respective real estate taxes in terms of a dollar amount. Each Unit certifies its real estate tax levy, as established by the proceedings, to the County Clerk's Office. The remaining administration and collection ofthe real estate taxes is statutorily assigned to the County Clerk and the County Treasurer, who is also the County Collector (the "County Collector").
After the Units file their annual tax levies, the County Clerk computes the annual tax rate for each Unit by dividing the levy of each Unit by the Assessment Base of the respective Unit. If any tax rate thus calculated or any component of such a tax rate (such as a levy for a particular fund) exceeds any applicable statutory rate limit, the County Clerk disregards the excessive rate and applies the maximum rate permitted by law.
The County Clerk then computes the total tax rate applicable to each parcel of real property by aggregating the tax rates of all the Units having jurisdiction over the particular parcel. The County Clerk enters in the books prepared for the County Collector (the "Warrant Books") the tax (determined by multiplying that total tax rate by the Equalized Assessed Valuation of that parcel), along with the tax rates, the Assessed Valuation and the Equalized Assessed Valuation. The Warrant Books are the County Collector's authority for the collection of taxes and are used by the County Collector as the basis for issuing tax bills to all property owners.

The Illinois Truth in Taxation Law (the "Truth in Taxation Law") contained within the Property Tax Code imposes procedural limitations on a Unit's real estate taxing powers and requires that a notice in a prescribed form must be published if the aggregate annual levy is estimated to exceed 105 percent of the levy ofthe preceding year, exclusive of levies for debt service, levies made for the purpose of paying amounts due under public building commission leases and election costs. A public hearing must also be held, which may not be in conjunction with the budget hearing of the Unit on the adoption of the annual levy. No amount in excess of 105 percent of the preceding year's levy may be used as the basis for issuing tax bills to property owners unless the levy is accompanied by certification of compliance with the foregoing procedures. The Truth in Taxation Law does not impose any limitations on the rate or amount of the levy to pay principal of and interest on the general obligations bonds and notes ofthe City.
Collection
Property taxes are collected by the County Collector, who remits to each Unit its share of the collections. Taxes levied in one year become payable during the following year in two installments, the first due on March 1 and the second on the later of August 1 or 30 days after the mailing of the tax bills. The first installment is an estimated bill calculated at 55 percent of the prior year's tax bill. The second installment is for the balance ofthe current year's tax bill, and is based on the current levy, assessed value and Equalization Factor and applicable tax rates, and reflects any changes from the prior year in those factors. Taxes on railroad real property used for transportation purposes are payable in one lump sum on the same date as the second installment.




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The following table sets forth the second installment penalty date for the tax years 2005 to 2014; the first installment penalty date has been March 2 or March 3 for all years.
Second Installment
Tax Year
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Penalty Date
August 3, 2015 August 1, 2014 August 1, 2013
November 1, 2012 November 1, 2011 December 13, 2010 December 1,2009 November 3, 2008 December 3, 2007 September 1,2006

The County may provide for tax bills to be payable in four installments instead of two. The County has not determined to require payment of tax bills in four installments. During the periods of peak collections, tax receipts are forwarded to each Unit not less than weekly.
At the end of each collection year, the County Collector presents the Warrant Books to the Circuit Court and applies for a judgment for all unpaid taxes. The court order resulting from the application for judgment provides for an annual sale of all unpaid taxes shown on the year's Warrant Books (the "Annual Tax Sale"). The Annual Tax Sale is a public sale, at which time successful tax buyers pay the unpaid taxes plus penalties. Unpaid taxes accrue interest at the rate of 1.5 percent per month from their due date until the date of sale. Taxpayers can redeem their property by paying the amount paid at the sale, plus an additional penalty fee calculated from the penalty bid at sale times a certain multiplier based on each six-month period after the sale, lf no redemption is made within the applicable redemption period (ranging from six months to two and one-half years depending on the type and occupancy of the property) and the tax buyer files a petition in Circuit Court, notifying the necessary parties in accordance with applicable law, the tax buyer receives a deed to the property. In addition, there are miscellaneous statutory provisions for foreclosure of tax liens.
If there is no sale of the tax lien on a parcel of property at the Annual Tax Sale, the taxes are forfeited and eligible to be purchased at any time thereafter at an amount equal to all delinquent taxes, interest and certain other costs to the date of purchase. Redemption periods and procedures are the same as applicable to the Annual Tax Sale, except that a different penalty rate may apply depending on the length of the redemption period.
A scavenger sale (the "Scavenger Sale"), like the Annual Tax Sale, is a sale of unpaid taxes. A Scavenger Sale must be held, at a minimum, every two years on all property in which taxes are delinquent for two or more years. The sale price of the unpaid taxes is the amount bid at the Scavenger Sale, which may be less than the amount of the delinquent taxes. Redemption periods vary from six months to two and one-half years depending upon the type and occupancy of the property.
The annual appropriation ordinance ofthe City has a provision for an allowance for uncollectible taxes. The City reviews this provision annually to determine whether adjustments are appropriate. For tax year 2015, collectible in 2016, the allowance for uncollectible taxes is about four percent ofthe estimated gross tax levy. For financial reporting purposes, uncollected taxes are written off by the City after four years, but are fully reserved after one year.




D-5

I




I
I
Property Tax Limit Considerations
State of Illinois. The Property Tax Code limits (a) the amount of property taxes that can be extended for non-home rule units of local government located in the County and five adjacent counties and (b) the ability of those entities to issue general obligation bonds without voter approval (collectively, the "State Tax Cap"). Generally, the extension ofproperty taxes for a unit of local government subject to the State Tax Cap may increase in any year by five percent or the percent increase in the Consumer Price Index for the preceding year, whichever is less, or the amount approved by referendum. The State Tax Cap does not apply to "limited bonds" payable from a unit's "debt service extension base" or to "double-barreled alternate bonds" issued pursuant to Section 15 of the Local Government Debt Reform Act.
As a home rule unit of government, the City is not subject to the State Tax Cap. Under the Illinois Constitution of 1970, the enactment of legislation applying the State Tax Cap to the City and other home rule municipalities would require a law approved by the vote of three-fifths of the members of each house of the Illinois General Assembly and the concurrence of the Governor of the State of Illinois. It is not possible to predict whether, or in what form, any property tax limitations applicable to the City would be enacted by the Illinois General Assembly. The adoption of any such limits on the extension of real property taxes by the Illinois General Assembly may, in future years, adversely affect the City's ability to levy property taxes to finance operations at current levels and the City's power to issue additional general obligation debt without the prior approval of voters.
As a home rule unit of government, the City is not limited as to the amount of debt it may issue payable from ad valorem property taxes. The General Assembly may limit by law the amount and require referendum approval of such debt, but only to the extent such debt, in the aggregate, exceeds three percent of the assessed value of all taxable property in the City.
State law imposes certain notice and public hearing requirements on non-home rule units of local government that propose to issue general obligation debt. These requirements do not apply to the City.

The City. In 1993, the City Council of the City adopted an ordinance (the "Chicago Property Tax Limitation Ordinance") limiting, beginning in 1994, the City's aggregate properly tax levy to an amount equal to the prior year's aggregate property tax levy (subject to certain adjustments) plus the lesser of (a) five percent or (b) the percentage increase in the annualized Consumer Price Index for all urban consumers for all items, as published by the United States Department of Labor, during the 12-month period most recently announced prior to the filing of the preliminary budget estimate report. The Chicago Property Tax Limitation Ordinance also provides that such limitation shall not reduce that portion of each levy attributable to the greater of: (i) for any levy year, interest and principal on general obligation notes and bonds of the City outstanding on January 1, 1994, to be paid from collections of the levy made for such levy year, or (ii) the amount of the aggregate interest and principal payments on the City's general obligation bonds and notes during the 12-month period ended January 1, 1994, subject to annual increase in the manner described above for the aggregate levy (the "Safe Harbor"). Additional safe harbors are provided for portions of any levy attributable to payments under installment contracts or public building commission leases or attributable to payments due as a result of the refunding of general obligation bonds or notes or of such installment contracts or leases.
Pursuant to the Bond Ordinance, the taxes levied by the City for the payment of principal and interest on the Bonds are not subject to the limitations contained in the City Property Tax Limitation Ordinance.






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APPENDIX E RETIREMENT FUNDS
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RETIREMENT FUNDS TABLE OF CONTENTS
Page
RETIREMENT FUNDS E-l
General E-l
Source Information E-2
Background Information Regarding the Retirement Funds E-3
Determination of Employee Contributions E-7
Determination of City's Contributions E-8
The Actuarial Valuation E-l 1
Actuarial Methods E-l4
Actuarial Assumptions E-l6
Funded Status ofthe Retirement Funds E-l7
Net Pension Liability and Discount Rate E-26
Projection of Funded Status E-27
Legislative Changes E-33
Diversion of Grant Money to the Retirement Funds Under P.A. 96-1495 and P.A. 98-641 E-36
Effect on MEABF and LABF If P.A. 98-641 Found Unconstitutional E-36
Future Legislation E-40
Report and Recommendations of the Commission to Strengthen Chicago's Pension Funds E-41
Special Revenue and Enterprise Fund Allocation of Retirement Fund Costs E-41
Impact of Retirement Funds' Unfunded Liability on the City's Bond Ratings E-41
PAYMENT FOR OTHER POST-EMPLOYMENT BENEFITS E-43
General E-43
The Settlement E-43
City Financing ofthe Health Plan E-44
Actuarial Considerations E-44
Funded Status E-45
Retiree Health Benefits Commission E-46
Status of Healthcare Benefits After the Settlement Period E-46
Page Intentionally Left Blank]
RETIREMENT FUNDS

General
Pursuant to the Illinois Pension Code, as revised from time to time (the "Pension Code"), the City contributes to four retirement funds (collectively, the "Retirement Funds"), which provide benefits upon retirement, death or disability to members of the Retirement Funds and their beneficiaries. The Retirement Funds are, in order from largest to smallest membership: (i) the Municipal Employees' Annuity and Benefit Fund of Chicago ("MEABF"); (ii) the Policemen's Annuity and Benefit Fund of Chicago ("PABF"); (iii) the Firemen's Annuity and Benefit Fund of Chicago ("FABF"); and (iv) the Laborers' and Retirement Board Employees' Annuity and Benefit Fund of Chicago ("LABF"). The Retirement Funds' membership consists primarily of current and former employees ofthe City and their beneficiaries.
The Retirement Funds are established, administered and financed under the Pension Code, as separate bodies politic and corporate and for the benefit of the members of the Retirement Funds and their beneficiaries. The City's contributions to the Retirement Funds, and benefits for members of the Retirement Funds and their beneficiaries, are governed by the provisions of the Pension Code. See "— Determination of City's Contributions" below. This Appendix describes, among other things, the current provisions of the Pension Code applicable to the City's funding of the Retirement Funds. No assurance can be made that the Pension Code will not be amended in the future.
The Retirement Funds' funding sources are the City's contributions, the employees' contributions and investment income on the Retirement Funds' assets. The City's and employees' contribution levels are determined pursuant to the Pension Code.
The Retirement Funds have been actuarially determined to be significantly underfunded. See "— Funded Status of the Retirement Funds" and "— Projection of Funded Status" below. The funded status of the Retirement Funds has adversely impacted, and may further adversely impact, the City and its taxpayers in several ways, certain of which are described in this paragraph and throughout this Appendix. First, the City's bond ratings have declined based, according to the reports ofthe rating agencies issued with respect to such downgrades, in part on the size ofthe Retirement Funds' unfunded liabilities and the projected impact of future City contributions to the Retirement Funds on the City. See "Impact of Retirement Funds' Unfunded Liabilities on the City's Bond Ratings" below. In addition, as described in the following paragraphs, the magnitude ofthe Retirement Funds' underfunding has prompted the Illinois General Assembly to pass legislation which increases the City's contributions to the Retirement Funds. As a result, the City increased its property tax levy in October 2015 to generate the revenues necessary to make certain additional contributions to the Retirement Funds under such legislation, and the City may be required to further increase its revenues, to reduce its expenditures, or both, to provide the funds necessary to pay increased contributions in the future. Further, the governmental units with which the tax base of the City overlaps, which include, but are not limited to, the Chicago Board of Education ofthe City of Chicago (the "Board of Education"), the Chicago Park District ("CPD"), the County of Cook (the "County") and the State of Illinois (the "State") (collectively, all such other units are referred to herein as the "Governmental Units"), described herein, also have significantly underfunded pe nsion liabilities which, in combination with the current financial position of the Retirement Funds, may place a substantial burden on the City's taxpayers if such Governmental Units are required to make increased contributions to their respective retirement funds in the future as a result of such underfunding. See "—Background Information Regarding the Retirement Funds—Overlapping Tax Bodies" below.
As noted above, in an effort to improve the funded status of the Retirement Funds, the Illinois General Assembly passed two statutes designed to improve the funding levels of the Retirement Funds:


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P.A. 98-641 (which is defined and described herein), which modifies provisions of the Pension Code related to MEABF and LABF, and P.A. 96-1495 (which is defined and described herein), which modifies provisions of the Pension Code with respect to PABF and FABF.
P.A. 98-641 would make significant changes to the City's contributions to MEABF and LABF and would make other adjustments that would cause the unfunded liabilities of MEABF and LABF to decrease on its effective date and would cause such unfunded liabilities to decrease further over time. See "—Determination of City's Contributions"—City's Required Contributions to LABF and MEABF Pursuant to P.A. 98-641" below. Information regarding projected future City contributions to LABF and MEABF pursuant to P.A. 98-641 is set forth in TABLE 13—"Projection of Future Funding Status— MEABF," TABLE 14—"Projection of Future Funding Status—LABF" and TABLE 18—"Projected Contributions: MEABF and LABF" below. P.A. 98-641 was determined to be unconstitutional by the Circuit Court of Cook County, Illinois (the "Circuit Court"). The City appealed this decision to the Illinois Supreme Court. See "—Legislative Changes—P.A. 98-641" below.
P.A. 96-1495 is expected to reduce the unfunded liabilities of PABF and FABF because it significantly increases future City contributions to be made by the City to PABF and FABF. See "— Determination of City's Contributions—City's Required Contributions to PABF and FABF Beginning in 2016" below. Unless modified by SB 777 (as defined and described herein) or similar legislation, P.A. 96-1495 has been projected to require an increase in the City's contributions to PABF and FABF from approximately $290 million in 2015 to approximately $839 million in 2016, with an increase of approximately three percent each year thereafter. See TABLE 15—"PROJECTION OF FUTURE FUNDING STATUS—FABF" and TABLE 16—"PROJECTION OF FUTURE FUNDING STATUS— PABF" below. In addition, as a result of certain changes to PABF's actuarial assumptions beginning with the 2014 Actuarial Valuation (as defined and described herein), the City's contributions to PABF are expected to increase by approximately $62 million for the 2017 Contribution. Increases in the City's contributions to PABF and FABF mandated by P.A. 96-1495 caused the City to significantly increase its property tax levy beginning in levy year 2015 (to be collected in 2016). Should the City's required contributions increase in the future, through the implementation of P.A. 96-1495 without modification by SB 777 or similar legislation, or otherwise, the City may be required to further raise its revenues, to reduce its expenditures, or some combination thereof, to provide for such contributions.
Certain statements made in this Appendix are based on projections, are forward-looking in nature and are developed using assumptions and information currently available. Such statements are subject to certain risks and uncertainties. The projections set forth in this Appendix rely on information produced by the Retirement Funds' independent actuaries (except where specifically noted otherwise) and were not prepared with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information. This information is not fact and should not be relied upon as being necessarily indicative of future results. Readers of this Appendix are cautioned not to place undue reliance on the prospective financial information. Neither the City, the City's independent auditors, nor any other independent accountants have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information.
Source Information
The information contained in this Appendix relies in part on information produced by the Retirement Funds, their independent accountants and their independent actuaries (the "Source Information"). Neither the City nor the City's independent auditors have independently verified the



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Source Information and make no representations nor express any opinion as to the accuracy ofthe Source Information.
Furthermore, where the tables in this Appendix present aggregate information regarding the Retirement Funds, such combined information results solely from the application of arithmetic to the data presented in the Source Information and may not conform to the requirements for the presentation of such information by the Governmental Accounting Standards Board ("GASB") or the Pension Code.
Certain of the comprehensive annual financial reports of the Retirement Funds (each a "CAFR" and together the "CAFRs"), and certain of the actuarial valuations of the Retirement Funds (each, an "Actuarial Valuation" and together, the "Actuarial Valuations"), may be obtained by contacting the Retirement Funds. Certain of these reports may also be available on the Retirement Funds' websites (www.meabf.org ; www.chipabf.org ; www.labfchicago.org ; and www.fabf.org ); provided, however, that the contents of these reports and of the Retirement Funds' websites are not incorporated herein by such reference.
The Retirement Funds typically release their Actuarial Valuations in the April or May following the close of their respective fiscal years on December 31. All of the Retirement Systems have released their 2014 Actuarial Valuations.

Background Information Regarding the Retirement Funds
General
Each ofthe Retirement Funds is a single-employer, defined-benefit public employee retirement system, "Single-employer" refers to the fact that there is a single plan sponsor, in this case, the City. "Defined-benefit" refers to the fact that the Retirement Funds pay a periodic benefit to employees upon retirement and survivors in a fixed amount determined at the time of retirement. The amount of the periodic benefit is generally determined on the basis of service credits and salary. Eligible employees receive the defined benefit on a periodic basis for life, along with certain benefits to spouses and children that survive the death of the employee.
To fund the benefits to be paid by a defined-benefit pension plan, both employees and employers make contributions to the plan. Generally in a defined-benefit pension plan, employees contribute a fixed percentage of their annual salary and employers contribute the additional amounts required (which amounts may be determined pursuant to statute, as in the case of the City), when combined with the investment earnings on plan assets, to pay the benefits under the pension plan. See "Table 1 -Membership," "—Determination of Employee Contributions" and "—Determination of City's Contributions" below.
The benefits available under the Retirement Funds accrue throughout the time an employee is employed by the City. Although the benefits accrue during employment, certain age and service requirements must be achieved by an employee to generate a retirement or survivor's periodic defined benefit payment upon retirement or termination from the City. The Retirement Funds also provide certain disability benefits and, until the later of the date on which the City no longer provides a health care plan for the annuitants or December 31, 2016, retiree healthcare benefits to eligible members.
Section 5 of Article XIII of the Illinois Constitution (the "Pension Clause") provides as follows:

"Membership in any pension retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable


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contractual relationship, the benefits of which shall not be diminished or impaired."
References in this Appendix to "member" are references to the active, inactive and retired employees of the City and their beneficiaries, the active, inactive and retired employees ofthe Retirement Funds participating in the Retirement Funds and their beneficiaries, and with regard to MEABF, certain employees of the Board of Education who are members of MEABF as described below, and their beneficiaries.
The Retirement Funds
Municipal Employees' Annuity and Benefit Fund of Chicago. MEABF is established by and administered under Article 8 of the Pension Code. MEABF provides age and service retirement benefits, survivor benefits and disability benefits to all eligible members. MEABF is administered under the direction of a five-member board of trustees (the "MEABF Board"), whose members are responsible for managing and administering MEABF for the benefit of its members. In addition to City and Retirement Fund employees, former employees and survivors, MEABF's membership includes non-instructional employees of the Board of Education ("CBOE Employees"). With respect to MEABF, the terms "employee" and "member" include the CBOE Employees. The CBOE Employees account for almost half of MEABF's membership. The Mayor of the City, the City Clerk, the City Treasurer, and members ofthe City Council may participate in MEABF if such persons file, while in office, written application to the MEABF Board.
Policemen's Annuity and Benefit Fund of Chicago. PABF is established by and administered under Article 5 of the Pension Code. PABF provides retirement and disability benefits to the police officers of the City, their surviving spouses and their children. PABF is administered by an eight-member board of trustees (the "PABF Board"). Members of the PABF Board are charged with administering the PABF under the Pension Code for the benefit of its members.
Firemen's Annuity and Benefit Fund of Chicago. FABF is established by and administered under Article 6 of the Pension Code. FABF provides retirement and disability benefits to fire service employees and their survivors. FABF is governed by an eight-member board of trustees (the "FABF Board"). Members of the FABF Board are statutorily mandated to discharge their duties solely in the interest of FABF's members.
Laborers' and Retirement Board Employees' Annuity and Benefit Fund of Chicago. LABF is established by and administered under Article 11 of the Pension Code. LABF provides retirement and disability benefits for employees of the City and the Board of Education who are employed in a title recognized by the City as labor service and for the survivors of such employees. LABF is governed by an eight-member board of trustees (the "LABF Board" and, together with the MEABF Board, the PABF Board and the FABF Board, the "Retirement Fund Boards"). Members of the LABF Board are statutorily mandated to discharge their duties solely in the interest of LABF's members.
The membership of the Retirement Funds as of December 31, 2014, was as follows:










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TABLE 1 - MEMBERSHIP

Retirement Fund

Active Members
Inactive/ Entitled to Benefits

Retirees and Beneficiaries
MEABF
PABF
FABF
LABF
Total
30,160 12,020 4,809 2,837
49,826
15,495 630 65 1,449
17,639
24,855 13,230 4,703 3,902
46,690
70,510 25,880 9,577 8,188
114,155
Source: Actuarial Valuations of the Retirement Systems as of December 31, 2014.
Overlapping Taxing Bodies
The City's tax base overlaps with the Governmental Units, which includes, but is not limited to, the Board of Education, the CPD, the County and the State. Certain of the Governmental Units maintain their own defined benefit pension plans (collectively, all such other plans are referred to herein as the "Other Retirement Funds"), many of which are also significantly underfunded. The unfunded liabilities of the Other Retirement Funds may impose an additional burden on the City's taxpayers if the Governmental Units need additional revenue to fund contributions to the Other Retirement Funds.
State Pension Reform Act and Litigation. On May 8, 2015, the Illinois Supreme Court affirmed the decision of the Sangamon County Circuit Court that Public Act 98-0599 (the "State Pension Reform Act") is unconstitutional. The State Pension Reform Act would have provided for certain cost-saving and other reforms to the State's four largest pension plans, including, but not limited to, changes to the employee and employer contribution formula, cost of living adjustments, retirement ages and employee contributions. The State Pension Reform Act was challenged on behalf of various classes of annuitants, current and former workers, and labor organizations, alleging, among other things, that the legislation violates the Pension Clause.
Chicago Park District Pension Reform. On January 7, 2014, then Governor Pat Quinn signed Public Act 98-0622 into law (the "CPD Pension Reform Act"). The CPD Pension Reform Act provides for certain cost-saving and other reforms to CPD's pension plan, including, but not limited to, changes to the employee and employer contribution formula, cost of living adjustments, retirement ages and employee contributions. Such changes became effective on June 1, 2014. On October 8, 2015, participants in CPD's pension plan filed a lawsuit challenging the legality of the CPD Pension Reform Act by alleging, among other things, that the legislation violates the Illinois Pension Clause.
For more information on these Other Retirement Funds, please refer to the State's Commission on Government Forecasting and Accountability ("COGFA") website at ; provided, however, that the contents of the COGFA website are not incorporated herein by such reference.










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Certain Duties
Each Retirement Fund Board is a fiduciary of its respective Retirement Fund and is authorized to perform all functions necessary for operation of such Retirement Fund. The Pension Code authorizes each Retirement Fund Board to make certain decisions, including decisions regarding the investment of funds, the management of assets, the disbursement of benefits, and the hiring of staff, financial advisors and asset managers.
Each Retirement Fund Board is authorized to promulgate rules and procedures regarding the administration of benefits and other matters in accordance with the Illinois Administrative Procedure Act, and decisions awarding, limiting, or denying benefits are subject to the Illinois Administrative Procedure Act. Certain aspects of the Retirement Funds, however, including the defined benefits and the employer and employee contribution levels, are established in the Pension Code and may be amended only by an amendment to the Pension Code.
The Pension Code provides that the expenses incurred in connection with the administration of the Retirement Funds are not construed to be debt imposed upon the City. Such expenses are the obligation of the Retirement Funds exclusively, as separate bodies politic and corporate.
The Illinois Attorney General and annuitants may bring a civil action to obtain relief for violations of a fiduciary duty to the Retirement Funds or any act or practice which violates any provision of the Pension Code.
Investments
Each Retirement Fund Board manages the investments of its respective Retirement Fund. State law regulates the types of investments in which the Retirement Funds' assets may be invested. Furthermore, the Retirement Fund Boards invest the Retirement Funds' assets in accordance with the prudent person rule, which requires members of the Retirement Fund Boards, who are fiduciaries ofthe Retirement Funds, to discharge their duties with the care, prudence and diligence that a prudent person acting in a like capacity and familiar with such matters would use in a similar situation.
In carrying out their investment duty, the Retirement Fund Boards may appoint and review investment managers as fiduciaries to manage the investment assets of the Retirement Funds. Such investment managers are granted discretionary authority to manage the Retirement Funds' assets. Additional information regarding the Retirement Funds' investments and investment management may be found on the Retirement Funds' websites; provided, however, that the contents of such websites are not incorporated into this Appendix by such reference.
Table 2 provides information on the investment returns experienced by each of the Retirement
Funds.













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TABLE 2 - INVESTMENT RATES OF RETURN, 2005-2014
Fiscal
Year MEABF FABF LABF PABF
6.6% 9.5% 7.8% 7.3%
12.7 14.0 11.2 12.1
7.3 11.0 8.0 8.8
(28.7) (33.8) (29.2) (27.8)
19.6 23.7 21.5 21.5
14.2 17.7 15.5 12.7
0.1 (2.0) (0.3) 0.8
12.8 16.2 14.6 12.4
16.1 19.5 15.8 13.7
4.7 2.9 3.8 5.9
Assumed Rate0> 7.5 8.0 7.5 7.5

Source: For FABF, Ihe audited financial statements of FABF for fiscal years 2005-2012 and the Actuarial Valuations of FABF for fiscal years 2013 and 2014. For MEABF, the Actuarial Valuation of MEABF as of December 31, 2014. For LABF and PABF, the respective CAFRs of such Retirement Funds for the fiscal years 2005-2012 and the respective Actuarial Valuations of such Retirement Funds for fiscal years 2013 and 2014.
(1) Reflects the assumed rate of return in the respective Actuarial Valuations ofthe Retirement Funds measured as of December 31, 2014, as discussed in further detail under "'Actuarial Assumptions—Assumed Investment Rate of Return" below.

Determination of Employee Contributions
Employees are required to contribute to their respective Retirement Fund as set forth in the Pension Code.
Prior to the implementation of P.A. 98-641 on January 1, 2015, and since the date of the Circuit Court Ruling (as hereinafter defined), MEABF employees contributed 8.5 percent of their salary to MEABF (consisting of a 6.5 percent contribution for employee benefits, a 1.5 percent contribution for spouse benefits, and a 0.5 percent contribution for an annuity increase benefit). For a summary of the increases in employee contributions that take effect under P.A. 98-641, see "—Legislative Changes — P.A. 98-641."
PABF employees contribute 9.0 percent of their salary to PABF (consisting of a 7.0 percent contribution for employee benefits, a 1.5 percent contribution for spouse benefits and a 0.5 percent contribution for an annuity increase benefit).
FABF employees contribute 9.125 percent of their salary to FABF (consisting of a 7.125 percent contribution for employee benefits, a 1.5 percent contribution for spouse benefits, a 0.375 percent contribution for an annuity increase benefit and a 0.125% contribution for disability benefits).
Prior to the implementation of P.A. 98-641 on January 1, 2015, and since the date ofthe Circuit Court Ruling, LABF employees contributed 8.5 percent of their salary to LABF (consisting of a 6.5 percent contribution for employee benefits, a 1.5 percent contribution for spouse benefits, and a 0.5 percent contribution for an annuity increase benefit). For a summary of the increases in employee contributions that took effect under P.A. 98-641, see "—Legislative Changes—P.A. 98-641 "


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For each Retirement Fund, if an employee leaves without qualifying for an annuity, accumulated employee contributions are refunded.
Determination of City's Contributions
Under the Pension Code, the City's contributions to the Retirement Funds are determined pursuant to a statutory formula on an annual basis. The City's contributions prior to the 2016 Contribution equaled the Multiplier Funding (as defined below) and certain other amounts as required by the Pension Code. "Multiplier Funding" is equal to the product of a multiplier established by the Pension Code for each Retirement Fund (each, a "Multiplier") and the amount contributed by the City's employees two years prior to the year in which the tax is levied. With respect to the City's 2015 contribution, the Multiplier for each Retirement Fund was as follows: 1.25 for MEABF; 2.00 for PABF; 2.26 for FABF; and 1.00 for LABF. The City's contributions pursuant to the Multiplier were governed by the Pension Code and were not based on the Actuarially Required Contribution (as hereinafter defined). See "—The Actuarial Val uation—City's Contributions Not Related to GASB Standards" below. Beginning in 2016, the City's contributions to PABF and FABF are determined pursuant to the P.A. 96-1495 Funding Plan (as hereinafter defined) rather than the Multiplier Funding system. See "— City's Contributions to PABF and FABF Beginning in 2016" below. P.A. 98-641 would change the manner of contributing to MEABF and LABF if the Illinois Supreme Court determines the law to be constitutional upon appeal. Under P.A. 98-641, beginning in 2021, the City's contributions to MEABF and LABF would be determined pursuant to the P.A. 98-641 Funding Plan (as hereinafter defined) rather than the Multiplier Funding system. See "—City's Required Contributions to LABF and MEABF Pursuant to P.A. 98-641" below.
The Pension Code provides that each Retirement Fund Board must annually certify to the City Council a determination ofthe required City contribution to such Retirement Fund. In making its request for the City's annual contribution, each Retirement Fund, acting through its Retirement Fund Board, annually approves and then submits a resolution to the City Council requesting that the City Council levy for a particular contribution amount. The City has generally paid the amounts so requested.*

The City's contributions to the Retirement Funds have historically been made primarily from the proceeds of an annual levy of property taxes for each of the Retirement Funds (collectively, the "Pension Levy") by the City solely for such purpose, as provided by the Pension Code. However, the Pension Code allows the City to use any other legally available funds (collectively, the "Other Available Funds," as described below) in lieu ofthe Pension Levy to make its contributions to the Retirement Funds. The amount of the Pension Levy, like any City property tax levy, must be approved by the City Council. The Pension Levy is exclusive of and in addition to the amount of property taxes which the City levies for other purposes.
If Other Available Funds are being utilized to pay a portion of the City's contributions, such funds are to be deposited with the City Treasurer to be used for the same purpose as the Pension Levy. The City's practice has been to use a portion of the City's Personal Property Replacement Tax revenue ("PPRT") to pay a portion of the City's contributions. PPRT revenue is paid by the State of Illinois (the "State") to the City from the Personal Property Replacement Tax Fund of the State pursuant to Section 12 of the Revenue Sharing Act ofthe State. Since 2003, the amount of PPRT contributed by the City to the Retirement Funds in the aggregate has averaged approximately $78,387,000 annually. In 2012, 2013 and

With respect to the contribution to be made in 2015T FABF requested a contribution from the City which ihe City determined exceeded the amount required by the Pension Code by $18,147,000. The FABF Board has made similar requests for amounts in excess of ihe amount the City has determined lo be the statutory requirement in each ofthe last several years. In each such year, including the current year, the City has indicated that it will not contribute amounts in .excess ofthe amount the City has determined to be the statutory contribution requirement for the City to FABF.


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2014, the amounts of PPRT contributed to the Retirement Funds in the aggregate were approximately $101,875,000, $126,639,000 and $127,239,000 respectively. For those same years, the City's total distributive share of PPRT was $139,461,000, $159,559,000 and $158,547,000, respectively.
The City's contributions to the Retirement Funds in accordance with the Pension Code have not been sufficient, when combined with employee contributions and investment returns, to offset increases in the Retirement Funds' liabilities, which has contributed to the significant underfunding of the Retirement Funds. Moreover, the contributions to the Retirement Funds in accordance with the Pension Code have had the effect of deferring the funding of the Retirement Funds' liabilities, which increases the costs of such liabilities and the associated financial risks, including the risk that each Retirement Fund will not be able to pay its obligations as they become due. Furthermore, increases in the City's contributions to the Retirement Funds (such as those scheduled to occur under P.A. 96-1495 and P.A. 98-641 if the latter is determined to be constitutional) may require the City to increase its revenues, reduce its expenditures, or some combination thereof, which may impact the services provided by the City or limit the City's ability to generate additional revenues in the future. The City's contributions to FABF and PABF are projected to increase in fiscal year 2016, when compared to fiscal year 2015, by approximately $134 million and $404 million, respectively, pursuant to the provisions of P.A. 96-1495. In addition, the City's contributions to MEABF and LABF would increase in fiscal year 2016, when compared to the City's contributions in fiscal year 2015, by approximately $80 million and $9 million, respectively pursuant to the provisions of P.A. 98-641, if such act is determined to be constitutional.
City's Required Contributions to PABF and FABF Beginning in 2016
Public Act 096-1495 ("P.A. 96-1495") was signed into law on December 30, 2010. Among other things, P.A. 96-1495 created a new method of determining the contributions to be made by the City to PABF and FABF. P.A. 96-1495 requires that, beginning in 2016, the City's contributions each year for PABF and FABF (the "P.A. 96-1495 Contribution") will be equal to the amount necessary to achieve a Funded Ratio (as hereafter defined) of 90 percent in PABF and FABF by the end of fiscal year 2040 (the "P.A. 96-1495 Funding Plan").

Pursuant to the P.A. 96-1495 Funding Plan, the P.A. 96-1495 Contribution for PABF and FABF will be calculated as the level percentage of payroll necessary to reach the 90 percent Funded Ratio target by 2040. In Cook and DuPage Counties (in which the City is located), property taxes levied in one year become payable during the following year in two installments. As described in further detail under "City's Contributions to the Retirement Funds for Fiscal Years 2015 and 2016" herein, the City increased its property tax levy for the purpose of making increased pension payments during calendar year 2015, with the collection of such increased levy to occur during calendar year 2016.
Unless amended by the Illinois General Assembly, the P.A. 96-1495 Funding Plan will significantly increase the City's required contributions to PABF and FABF beginning in 2016. See "— City Contributions to the Retirement Funds for Fiscal Years 2015 and 2016" herein. Senate Bill 777 ("SB 777") passed both houses ofthe Illinois General Assembly as of May 31, 2015. SB 777 would extend the period by which the unfunded liabilities of PABF and FABF are amortized to a 90 percent Funded Ratio from 2040 to 2055 (the "Revised Amortization Period") and institute a phase-in period during 2016-2020 to reduce the City's required payment in the initial years to allow for a more gradual phase-in ofthe requirements of P.A. 96-1495 (the "Phase-in Period"). The Revised Amortization Period would reduce the annual funding obligation required to reach a 90 percent Funded Ratio, but extend the number of years over which such payments would need to be made. A motion to reconsider the vote on SB 777 was filed in the Illinois Senate on May 31, 2015, and, as such, SB 777 has not yet been sent to the Governor for consideration. In addition to, or in lieu of, a Revised Amortization Period or a Phase-in Period, the Illinois General Assembly may consider other legislation that could affect the City payment


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obligations for PABF and FABF and/or funding sources for those obligations, including a City-owned casino. The City makes no representation as to whether or when SB 777 or any such other legislation would be enacted into law.
Any change to the P.A. 96-1495 Funding Plan which would reduce the contributions required of the City, such as a Revised Amortization Period or a Phase-in Period, would have the effect of increasing the unfunded liabilities and decreasing the Funded Ratios of PABF and FABF when compared to the projected unfunded liabilities and Funded Ratios of such Retirement Funds set forth in Tables 15 and 16 below.
City's Required Contributions to LABF and MEABF Pursuant to P.A. 98-641
P.A. 98-641, which was determined to be unconstitutional by the Circuit Court, would modify the manner in which the City's contributions to LABF and MEABF are calculated. If P.A. 98-641 became effective, the Multiplier Funding system would be retained to calculate the City's contributions to LABF and MEABF for payment years 2016 through 2020 (unless the amount determined pursuant to the Multiplier Funding system for any year is more than the Normal Cost (as hereinafter defined) for such year plus the amount, determined on a level percentage of payroll basis, that is sufficient to achieve a Funded Ratio of 90 percent by the end of contribution year 2055). During this period, P.A. 98-641 would increase the Multiplier as follows: for the contribution made in 2016, 1.60 (LABF) and 1.85 (MEABF); for the contribution made in 2017, 1.90 (LABF) and 2.15 (MEABF); for the contribution made in 2018, 2.20 (LABF) and 2.45 (MEABF); for the contribution made in 2019, 2.50 (LABF) and 2.75 (MEABF); and for the contribution made in 2020, 2.80 (LABF) and 3.05 (MEABF). Beginning in 2021, the City's contributions for LABF and MEABF would equal the Normal Cost for such year plus the amount, determined on a level percentage of payroll basis, that is sufficient to achieve a Funded Ratio of 90 percent in LABF and MEABF by the end of contribution year 2055 (the "P.A. 98-641 Funding Plan").
The Circuit Court determined P.A. 98-641 to be unconstitutional on July 24, 2015 (the "Circuit Court Ruling"). The City has appealed the Circuit Court's decision to the Illinois Supreme Court. See "Legislative Changes—P.A. 98-641" below. A decision by the Illinois Supreme Court to uphold the Circuit Court's decision regarding the constitutionality of P.A. 98-641 would have the effect of increasing the UAAL (as hereinafter defined) and decreasing the Funded Ratio of MEABF and LABF when compared to the law as modified by P.A. 98-641. See "—Effect on MEABF and LABF if P.A. 98-641 Found Unconstitutional" below for additional information regarding the effect of P.A. 98-641 being overturned on the funded status of MEABF and LABF.
City's 2016 Contributions to the Retirement Funds for Fiscal Years 2015 and 2016
On October 28, 2015, the City Council approved its supplemental fiscal year 2015 budget (the "Supplemental Budget") and its fiscal year 2016 budget (the "FY 2016 Budget"). The Supplemental Budget increased the budgeted fiscal year 2015 contribution (payable to the Retirement Funds in 2016) to PABF and FABF by $328 million (the "Additional 2015 Contribution") which increased the total contribution to the Retirement Funds to $886 million for such fiscal year (the "2015 Contribution"). The FY 2016 Budget includes an additional increase in the contribution to PABF and FABF which results in a total contribution for fiscal year 2016 (payable to the Retirement Funds in 2017) of $978 million (the "2016 Contribution"). The 2015 Contribution and the 2016 Contribution each assume the effectiveness of P.A. 98-641 and the enactment of SB 777.
The City's budget for fiscal year 2015, as amended by the Supplemental Budget (together the "Amended FY 2015 Budget"), provides that the increase in contributions to PABF and FABF be primarily generated through an increase in the City's property tax levy. Such property tax increase has


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been adopted by the City Council. However, the 2015 Contribution and the 2016 Contribution assume the enactment of SB 777, which would reduce the contribution currently required by the Pension Code under P.A. 96-1495. Specifically, with respect to fiscal year 2015, SB 777 would reduce the City's contribution to PABF and FABF from $839 million to $619 million. Because the Amended FY 2015 Budget assumes the enactment of SB 777, the FY 2015 Contribution included in the Amended FY 2015 Budget would be insufficient to fund the contribution required-by the Pension Code should SB 777 not be enacted.
The City can give no assurance as to whether SB 777 or similar legislation will be adopted by the General Assembly. If SB 777 or similar legislation is not enacted and the City must contribute to PABF and FABF pursuant to the current provisions of the Pension Code, the City expects that it would fund such additional contributions through an increase in revenues, a decrease in expenditures or a combination thereof.
The Actuarial Valuation
General
The Pension Code requires that the Retirement Funds annually submit to the City Council a report containing a detailed statement of the affairs of such Retirement Fund, its income and expenditures, and assets and liabilities, which consists of the Actuarial Valuation. With respect to the Retirement Funds, the Actuarial Valuation measures the financial position of a Retirement Fund, determines the amount to be contributed by the City to such Retirement Fund pursuant to the statutory requirements described above, and produces certain information mandated by the financial reporting standards issued by the Governmental Accounting Standards Board, as described below.
In producing the Actuarial Valuations, the Retirement Funds' actuaries use demographic data (including employee age, salary and service credits), economic assumptions (including estimated future salary and interest rates), and decrement assumptions (including employee turnover, mortality and retirement rates) to produce the information required by the Prior GASB Standards or the New GASB Standards, each as hereinafter defined. The Retirement Funds' Actuarial Valuations are publicly available and may be obtained from the Retirement Funds. See "—Source Information" above. A description of the statistics generated by the Retirement Funds' actuaries in the Actuarial Valuations follows in the next few paragraphs. This information was derived from the Source Information.
GASB, which is part of a private non-profit corporation known as the Financial Accounting Foundation, promulgates standards regarding accounting and financial reporting for governmental entities. These principles have no legal effect and do not impose any legal liability on the City. The references to GASB principles in this Appendix do not suggest and should not be construed to suggest otherwise.
Prior GASB Standards
For the fiscal years discussed in this Appendix prior to and including December 31, 2013, the applicable GASB financial reporting standards were GASB Statement No. 25 ("GASB 25") and GASB Statement No. 27 ("GASB 27" and, together with GASB 25, the Prior GASB Standards"). The Prior GASB Standards required the determination ofthe Actuarially Required Contribution and the calculation of pension funding statistics such as the UAAL and the Funded Ratio in the Actuarial Valuation. In addition, the Prior GASB Standards allowed pension plans to prepare financial reports pursuant to a variety of approved actuarial methods, certain of which are described in "—Actuarial Methods" below.



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GASB 25 required disclosure of an "Actuarially Required Contribution," which was such pronouncement's method for calculating the annual amounts needed to fully fund the Retirement Funds, though the Actuarially Required Contribution was a financial reporting requirement and not a funding requirement. The Prior GASB Standards referred to the Actuarially Required Contribution as the "Annual Required Contribution"; however, this Appendix refers to the concept as the Actuarially Required Contribution to denote the fact that the Actuarially Required Contribution is the amount an actuary would calculate pursuant to the Prior GASB Standards to be contributed in a given year, to differentiate it from the amount the City will be required to contribute under the Pension Code.
The Actuarially Required Contribution as defined in GASB 25, consisted of two components: (1) that portion of the present value of pension plan benefits which is allocated to the valuation year by the actuarial cost method (as described in "—Actuarial Methods—Actuarial Accrued Liability" below), termed the "Normal Cost"; and (2) an amortized portion of any UAAL.
The Actuarial Accrued Liability was an estimate of the present value of the benefits each Retirement Fund must pay to members as a result of past employment with the City and participation in such Retirement Fund. The Actuarial Accrued Liability was calculated by use of a variety of demographic and other data (such as employee age, salary and service credits) and various assumptions (such as estimated salary increases, interest rates, employee turnover, retirement date and age and mortality and disability rates). The Actuarial Value of Assets reflected the value of the investments and other assets held by each Retirement Fund. Various methods existed under the Prior GASB Standards for calculating the Actuarial Value of Assets and the Actuarial Accrued Liability. For a discussion of the methods and assumptions used to calculate the Retirement Funds' Actuarial Accrued Liability and Actuarial Value of Assets under GASB 25, see "—Actuarial Methods" and "—Actuarial Assumptions" below.

Any shortfall between the Actuarial Value of Assets and the Actuarial Accrued Liability was referred to as the "Unfunded Actuarial Accrued Liability" or "UAAL." The UAAL represented the present value of benefits attributed to past service that are in excess of plan assets. In addition, the actuary computed the "Funded Ratio," which was the Actuarial Value of Assets divided by the Actuarial Accrued Liability, expressed as a percentage. The Funded Ratio and the UAAL provide one way of measuring the financial health of a pension plan.
New GASB Standards

Beginning with the fiscal year ended December 31, 2014, GASB 25 was replaced with GASB Statement No. 67 ("GASB 67"), and GASB 27 will be replaced with GASB Statement No. 68 beginning with the fiscal year ending December 31, 2015 ("GASB 68" and, together with GASB 67, the "New GASB Standards"). Unlike the Prior GASB Standards, the New GASB Standards do not establish approaches to funding pension plans. Instead, the New GASB Standards provide standards solely for financial reporting and accounting related to pension plans. The New GASB Standards require calculation and disclosure of a "Net Pension Liability," which is the difference between the actuarial present value of projected benefit payments that is attributed to past periods of employee service calculated pursuant to the methods and assumptions set forth in the New GASB Standards (referred to in such statements as the "Total Pension Liability") and the fair market value of the pension plan's assets (referred to as the "Fiduciary Net Position"). This concept is similar to the UAAL, which was calculated under the Prior GASB Standards, but most likely will differ from the UAAL on any calculation date because the Fiduciary Net Position is calculated at fair market value and because ofthe differences in the manner of calculating the Total Pension Liability as compared to the Actuarial Accrued Liability under the Prior GASB Standards.



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Furthermore, the New GASB Standards employ a rate, referred to in such statements as the "Discount Rate," which is used to discount projected benefit payments to their actuarial present values. The Discount Rate may be a blended rate comprised of (1) a long-term expected rate of return on a Retirement Fund's investments (to the extent that such assets are projected to be sufficient to pay benefits), and (2) a tax-exempt municipal bond rate meeting certain specifications set forth in the New GASB Standards. Therefore, in certain cases in which the assets of a Retirement Fund are not expected to be sufficient to pay the projected benefits of such Retirement Fund, the Discount Rate calculated pursuant to the New GASB Standards may differ from the assumed investment rate of return used in reporting pursuant to the Prior GASB Standards.
Finally, the New GASB Standards require that the Net Pension Liability be disclosed in the notes to the financial statements of the pension system and that a proportionate share of the Net Pension Liability be recognized on the balance sheets of the employer. In addition, the New GASB Standards require an expense (the "Pension Expense") to be recognized on the income statement of the City. The recognition of the Net Pension Liability and the Pension Expense do not measure the manner in which a Retirement Fund is funded and therefore do not conflict with the various manners of funding the Retirement Funds described in this Appendix.
As stated above, GASB 67 was first applied with respect to the Actuarial Valuation for the fiscal year ended December 31, 2014. The City expects that the New GASB Standards may significantly alter the financial statements produced by the City. For example, the Retirement Funds disclosed a combined Net Pension Liability of $20.1 billion as of December 31, 2014, which will impact the City's balance sheet in future years. However, because the City contributes to the Retirement Funds pursuant to the methods established in the Pension Code, the New GASB Statements will not materially impact the contributions made by the City without legislative action.
City's Contributions Not Related to GASB Standards
The City's contributions to the Retirement Funds are not based on the contribution calculations promulgated by GASB for reporting purposes. Instead, the City's contributions are calculated pursuant to the formulas established in the Pension Code. See "— Determination of City's Contributions" above.
The methods for contributing to the Retirement Funds set forth in the Pension Code do not conform to the manner of funding established by the Prior GASB Standards which funding was based on the Actuarially Required Contribution. The difference between the City's actual contributions and the Actuarially Required Contribution (as calculated by the Retirement Funds' actuaries) for fiscal years 2005-2014 is shown in TABLE 4—"Information Regarding City's Contributions—Aggregated" below. Each Retirement Fund's Actuarially Required Contribution is equal to its Normal Cost plus an amortization of the Retirement Funds' UAAL over a 30-year period. MEABF, LABF and FABF amortize the UAAL on a level dollar basis, whereas PABF amortizes the UAAL on a level percent of payroll basis. P.A. 98-641 would require amortization for LABF and MEABF on a level percent of payroll basis. Both methods of calculating the Actuarially Required Contribution were acceptable under the Prior GASB Standards.
Furthermore, beginning in 2016 with respect to PABF and FABF under the P.A. 96-1495 Funding Plan and, if P.A. 98-641 is determined to be constitutional, not later than 2021 with respect to MEABF and LABF under the P.A. 98-641 Funding Plan, the City will contribute an actuarially determined amount, as opposed to the current, non-actuarial, multiplier-based approach, as set forth in the Pension Code. The P.A. 96-1495 Funding Plan and the P.A. 98-641 Funding Plan differ from the manner of calculation required by the Prior GASB Standards for financial reporting purposes, primarily because the goal of such funding plans is to reach a Funded Ratio in the respective Retirement Funds of 90 percent


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whereas the Prior GASB Standards required the Retirement Funds to amortize the UAAL towards attainment of a 100 percent Funded Ratio.
The New GASB Standards do not require calculation of an Actuarially Required Contribution.

Actuarial Methods
The Retirement Funds' actuaries employ a variety of actuarial methods to arrive at the pension statistics required by the Prior GASB Standards and the New GASB Standards. Certain of these methods are discussed in the following sections.
Actuarial Value of Assets
Under the Prior GASB Standards, the Retirement Funds calculate their respective Actuarial Value of Assets by smoothing investment gains and losses over a period of five years, a method of valuation referred to as the "Asset Smoothing Method." Under the Asset Smoothing Method, the Retirement Funds recognize in the current year 20 percent of the investment gain or loss realized in that year and each ofthe previous four years. The Asset Smoothing Method was an allowable method of calculating the Actuarial Value of Assets under the Prior GASB Standards.
The Asset Smoothing Method lessens the immediate impact of market fluctuations on the Actuarial Value of Assets, which is used to calculate the UAAL and the Funded Ratio, that may otherwise occur as a result of market volatility. However, asset smoothing delays recognition of gains and losses, thereby providing an Actuarial Value of Assets that differs from the market value of pension plan assets at the time of measurement. As a result, presenting the Actuarial Value of Assets as determined under the Asset Smoothing Method might provide a more or less favorable presentation of the current financial position of a pension plan than would a method that recognizes investment gains and losses annually.
As described above, under the New GASB Standards, the Fiduciary Net Position is equal to the fair market value of a pension plan's assets as of the date of determination. As such, the Asset Smoothing Method does not apply to the determination of the Fiduciary Net Position under the New GASB Standards.
Table 3 provides a comparison of the assets of the Retirement Funds (as aggregated) on a fair value basis and after application of the Asset Smoothing Method.



















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TABLE 3 - ACTUARIAL VALUE OF ASSETS VS. FAIR VALUE OF NET ASSETS -
AGGREGATED*0
Actuarial Value as
Fiscal Actuarial Value Fair Value of a Percentage of
Year of Assets(2) Net Assets Fair Value
$13,086,060 $13,245,445 98.80%
13,435,692 14,164,347 94.86
14,254,816 14,595,514 97.67
13,797,344 9,844,339 140.16
13,051,349 10,876,846 119.99
12,449,863 11,408,555 109.13
11,521,138 10,536,135 109.35
10,531,447 10,799,603 97.52
10,513,564 11,261,254 93.36
10,339,208 10,665,597 96.94

Source: 2005 through 2010 data is from the Actuarial Valuations ofthe Retirement funds as of December 31, 2010, and from the Retirement Fund CAFRs for the fiscal year ended December 31, 2010. Data from 2011 through 2014 is from the Actuarial Valuations of the Retirement Funds for the fiscal years 2011 through 2014.
In thousands of dollars. Data is presented in the aggregate for the Retirement Funds.
The Actuarial Value of Assets is calculated through use ofthe Asset Smoothing Method.
Actuarial Accrued Liability
As the final step in the calculation of actuarial liabilities, the actuary applies a cost method to allocate the total value of benefits to past, present and future periods of employee service. This allocation is accomplished by the development of the Actuarial Accrued Liability and the Normal Cost under the Prior GASB Standards and the Pension Code and the Total Pension Liability under the New GASB Standards. Currently, all of the Retirement Funds use the entry age normal actuarial cost method (the "EAN Method") with costs allocated on the basis of earnings. The EAN Method was an approved actuarial cost method under the Prior GASB Standards and is the only allowable actuarial cost method under the New GASB Standards.
Under the EAN Method, the present value of each employee's projected pension is assumed to be funded by annual installments equal to a level percentage of the employee's earnings for each year between entry age and assumed exit age. Each employee's Normal Cost, as calculated pursuant to the Prior GASB Standards, for the current year is equal to the portion of the value so determined, assigned to the current year. Therefore, the Normal Cost for the plan for the year is the sum ofthe Normal Costs of all employees.
P.A. 96-1495 requires that, beginning in 2016, PABF and FABF calculate the Actuarial Accrued Liability pursuant to the projected unit credit actuarial cost method (the "PUC Method"). Under the PUC Method, Normal Cost represents the actuarial present value of that portion of an employee's projected benefit that is attributable to service in the current year, based on future compensation projected to retirement. Under this method, the Actuarial Accrued Liability equals the actuarial present value of that portion of a member's projected benefit that is attributable to service to date, again, on the basis of future compensation projected to retirement.





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Under either cost method, the Actuarial Accrued Liability is the portion of the present value of benefits assigned by the cost method to years of service up to the valuation date, i.e., for past service. This value changes as the employee's salary changes and years of service increase, and as some employees leave and new employees are hired. Future Normal Cost is the portion ofthe present value of benefits assigned to future years of service and is assumed to be funded annually.
As compared to the EAN Method, the PUC Method will produce a more back-loaded growth in liabilities because the PUC Method allocates a higher portion of retirement costs closer to the time of retirement. Therefore, the PUC Method results in a slower accumulation of assets, which in turn requires smaller initial, and larger future, contributions (assuming funding is actuarially based, as under the P.A. 96-1495 Funding Plan and under P.A. 98-641). Deferring contributions in this manner increases the cost ofthe liabilities and the associated financial risks for PABF and FABF.

Actuarial Assumptions
The Actuarial Valuations of the Retirement Funds use a variety of assumptions in order to calculate the statistics required by the Prior GASB Standards and the New GASB Standards. Although several of the assumptions are the same across all of the Retirement Funds, each Retirement Fund determines, within actuarial standards, the assumptions to be used in its Actuarial Valuation unless a specific assumption is fixed by the Pension Code. No assurance can be given that any of the assumptions underlying the Actuarial Valuations will reflect the actual results experienced by the Retirement Funds. Variances between the assumptions and actual results may cause increases or decreases in the statistics calculated pursuant to the Prior GASB Standards or the New GASB Standards. Additional information on each Retirement Fund's actuarial assumptions is available in the respective 2014 Actuarial Valuations of the Retirement Funds. See "—Source Information" above.
The actuarial assumptions used by the Retirement Funds are determined by the individual Retirement Fund Boards upon the advice of the actuary for each Retirement Fund Board. The Retirement Funds periodically perform experience studies to evaluate the actuarial assumptions in use. The purpose of an experience study is to validate that the actuarial assumptions used in the Actuarial Valuation continue to reasonably estimate the actual experience of the pension plan or, if necessary, to develop recommendations for modifications to the actuarial assumptions to ensure their continuing appropriateness.
Assumed Investment Rate of Return
The Actuarial Valuations assume an investment rate of return on the assets in each Retirement Fund. The average long-term investment rates of return currently assumed by the Retirement Funds are described in Table 2 above. Due to the volatility of the marketplace, however, the actual rate of return earned by the Retirement Funds on their assets in any year may be higher or lower than the assumed rate. Changes in the Retirement Funds' assets as a result of market performance will lead to an increase or decrease in the UAAL and the Funded Ratio. As a result of the Retirement Funds' use of the Asset Smoothing Method, however, only a portion of these increases or decreases will be recognized in the current year, with the remaining gain or loss spread over the remaining four years. See "—Actuarial Methods—Actuarial Value of Assets" above.
The assumed investment rate of return is used by each Retirement Fund's actuary as the discount rate to determine the present value of future payments to such Retirement Fund's members. Such a determination is part of the actuary's process to develop the Actuarial Accrued Liability under the Prior GASB Standards. Reducing the assumed investment rate of return will, taken independently of other changes, produce a larger Actuarial Accrued Liability for each Retirement Fund. Furthermore, as


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discussed above, an increase in the Actuarial Accrued Liability will, taken independently, increase the UAAL, decrease the Funded Ratio and increase the Actuarially Required Contribution.
Under the New GASB Standards, each Retirement Fund's actuary will calculate the Discount Rate, as described under "—Actuarial Valuation" above, a reduction in which will, taken independently of other factors, produce a larger Total Pension Liability for each Retirement Fund. Information regarding the Discount Rate and the sensitivity of the Total Pension Liability to changes in the Discount Rate is provided below in Table 12.
Beginning with calendar year 2012, the Retirement Fund Boards of MEABF, LABF and PABF reduced the assumed investment rate of return to be used by their respective actuaries in preparing future actuarial valuations. For MEABF and LABF, the assumed investment rate of return has been decreased to 7.50 percent beginning with calendar year 2012. For PABF, the assumed investment rate of return was decreased to 7.75 percent for calendar year 2012 and to 7.50 percent for calendar year 2014. FABF continues to assume an investment rate of return of 8.0 percent. For a discussion of the rate to be used by Moody's Investors Service ("Moody's") in analyzing public pension plans, see "—Impact of Retirement Funds' Unfunded Liability on the City's Bond Ratings" below.
These changes to the assumed investment rate of return will not impact contributions by the City to Retirement Funds when such contributions are determined pursuant to the Multiplier Funding System. However, beginning in 2016 with respect to PABF and FABF, when P.A. 96-1495 becomes effective, and, if P.A. 98-641 is determined to be constitutional, no later than 2021 with respect to MEABF and LABF, which require the City to contribute to the Retirement Funds on an actuarial basis, such changes in the assumed investment rate of return will, taken independently of other facts, increase the City's contributions to such Retirement Funds because the respective UAALs of PABF, LABF and MEABF will increase as described above and the P.A. 96-1495 Funding Plan and the P.A. 98-641 Funding Plan require an amortization of the UAAL to reach a 90 percent funding target by 2040 and 2054, respectively.
Funded Status of the Retirement Funds

In recent years, the City has contributed to the Retirement Funds the full amount of Multiplier Funding and certain other amounts determined by the City to be required by the Pension Code through a
combination of property tax revenues (through the Pension Levy) and PPRT funds. However, these amounts have not been sufficient, when combined with employee contributions and investment returns, to offset increases in the liabilities of the Retirement Funds. Moreover, expenses related to the Health Plan (as defined below) are paid from the City's contributions, which has the effect of reducing the Actuarial Value of Assets and decreasing the Funded Ratio.
Furthermore, the income from all sources (including employee contributions, City contributions and investment earnings) to the Retirement Funds has been lower than the cash outlays of the Retirement Funds in some recent years. As a result, the Retirement Funds have liquidated investments and used assets of the Retirement Funds to satisfy these cash outlays. The use of investment earnings or assets of the Retirement Funds for these purposes reduces the amount of assets on hand to pay benefits in the future and prevents the Retirement Funds from recognizing the full benefits of compounding investment returns.
Table 4 provides information on the Actuarially Required Contribution, the City's actual

As discussed under •'— Determination of City's Contributions" above, the City and FABF have disagreed over whether certain amounts are required under the Pension Code. In addition, pursuant to the Pension Code, the City did not make any contributions to LABF in fiscal years 2001 through 2006 because LABF had funds on hand in excess of its liabilities. The Pension Code provides that the City will cease to make contributions to LABF in such a situation. I he City continued to make contributions to the other Retirement Funds during those years.


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contributions in accordance with the Pension Code and the percentage of the Actuarially Required Contribution made in each year.
TABLE 4 - INFORMATION REGARDING CITY'S CONTRIBUTIONS0 - AGGREGATED
Percentage of Actuarially
Actuarially Required
Fiscal Required Actual Employer Contribution
Year Contribution Contribution*2' Contributed*3'
2005 $ 698,185 $423,515 60.7%
2006(4) 785,111 394,899 50.3
2007(4) . 865,776 395,483 45.7
2008(4) 886,215 416,130 47.0
2009(4) 990,381 423,929 42.8
2010(4) 1,112,626 425,552 38.2
2011|4) 1,321,823 416,693 31.5
2012(4) 1,470,905 440,120 ¦ 29.9
2013(4) 1,695,278 442,970 26.1
2014(4) 1,740,973 447,400 25.7

Sources: Actuarial Valuations of the Retirement Funds as of December 31, 2010, December 31, 2011, December 31. 2012.
December 31. 2013, and December 31, 2014, the Fund CAFRs for the fiscal year ended December 31, 2010, and the City CAFRs for the fiscal years ended December 31. 2011. December 31, 2012 and December 31. 2013.
In thousands of dollars. Data is presented in the aggregate for the Retirement Funds and uses assumptions and methods employed by each ofthe Retirement Funds. For the data presented as of December 31, 2005 and December 31, 2006. contribution information includes amounts related to other post-employment benefits. Beginning in 2007, as a result of a change in GASB standards, contribution information is presented exclusive of amounts related to other post-employment benefits.
Includes the portion ofthe PPRT contributed to the Retirement Funds in each year.
The estimated multipliers that would have been necessary for FABF, LABF and PABF to make the full Actuarially Required Contribution in 2014 were as follows: 7.98 for FABF; 4.87 for LABF; and 7.94 for PABF. The estimated multiplier that would have been necessary for MEABF to make the full Actuarially Required Contribution in 2014 has not been publicly disclosed, however the necessary contribution multiple for 2013 was 4.52. Beginning in 2016, the City's contributions to PABF and FABF will not be calculated in accordance with the Multiplier Funding system. If P.A. 98-641 is determined to be constitutional, the City's contributions to LABF and MEABF will not be calculated in accordance with the Multiplier Funding system beginning in 2021. See "—Determination of City's Contributions" above.
Beginning in 2006, as a result of a change in GASB standards, the information in this Table 4 does not include other post-employment benefits, which the City's Comprehensive Annual Financial Report presents separately.
PABF changed certain actuarial assumptions beginning with the fiscal year ended December 31, 2014. Specifically, PABF reduced its assumed investment rate of return from 7.75 percent to 7.50 percent and changed the mortality table used by its actuary to RP-2014, which projects longer lives for PABF members. Considered independently of other factors, these changes increased the GASB 25 Actuarial Accrued Liability, and, as a result, increased PABF's UAAL and Actuarially Required Contribution. With respect to the City's 2017 contribution to PABF, these changes are expected to result in an additional contribution of $62 million.

The continued decline in the percentage of the Actuarially Required Contribution contributed by the City, as shown in Table 4 above, results, in part, from the fact that the actuarial liability continues to grow due to the delayed recognition of gains and losses resulting from the Retirement Funds' use of the Asset Smoothing Method for financial reporting purposes under the Prior GASB Standards. See "— Actuarial Methods—Value of Assets" above.



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The following tables summarize the financial condition and the funding trends ofthe Retirement
Funds.





















































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A variety of factors impact the Retirement Funds' UAAL and Funded Ratio. A lower return on investment than that assumed by the Retirement Funds, and insufficient contributions when compared to the Normal Cost plus interest will all cause an increase in the UAAL and a decrease in the Funded Ratio. Conversely, higher returns on investment than assumed, and contributions in excess of Normal Cost plus interest will decrease the UAAL and increase the Funded Ratio. In addition, legislative amendments, changes in actuarial assumptions and certain other factors (including, but not limited to, higher or lower incidences of retirement, disability, in-service mortality, retiree mortality or terminations than assumed) will have an impact on the UAAL and the Funded Ratio.
Net Pension Liability and Discount Rate
As described in "—Actuarial Valuation—New GASB Standards'" above, the New GASB Standards require the calculation of the Net Pension Liability, which is the difference between the Total Pension Liability and the Fiduciary Net Position. Furthermore, the Discount Rate is the blended rate at which the actuaries of the Retirement Funds discount projected benefit payments to their actuarial present values. The following tables present information on the Net Pension Liability and the components thereof and the Discount Rate and the sensitivity of the Net Pension Liability to changes in the Discount Rate. As described in this Appendix, the fiscal year ended December 31, 2014 is the first fiscal year for which GASB 67 is effective and, as such, comparative historical information is not yet available with respect to the information provided in these tables.





MEABF LABF PABF FABF Total

Plan Net Position
TABLE 11- NET PENSION LIABILITY ($ IN THOUSANDS)
$7,127,608 774,813 8,711,417 3,476,752
$5,179,486 1,388,093 3,062,014 1,036,008

Total Pension Liability
$20,090,590
$10,665,601
$12,307,094 2,162,906 11,773,431 4,512,760
$30,756,191


Plan Net Position as a Percentage of Total Pension Liability
42.09% 64.18 26.01 22.96
34.68%
Source: The Actuarial Valuations ofthe Retirement Funds for the fiscal year ended December 31, 2014.






















E-26

TABLE 12- SENSITIVITY OF NET PENSION LIABILITY TO CHANGES IN THE DISCOUNT
RATE'"

MEABF Discount Rate Net Pension Liability
LABF Discount Rate Net Pension Liability
PABF Discount Rate Net Pension Liability
FABF Discount Rate Net Pension Liability
1% Decrease

6.50% $8,511,386

6.24% $1,013,951

6.15% $10,123,094

6.60% $3,963,803
Current

7.50% $7,127,608

7.24% $774,813

7.15% $8,711,417

7.60% $3,476,752
1% Increase

8.50% $5,955,121

8.24% $572,792

8.15% $7,524,224

8.60% $3,060,757
Source- Ihc Actuarial Valuations ofthe Retirement Funds for the fiscal year ended December 31, 2014. (I) In thousands


Projection of Funded Status
The Retirement Funds' funding level has decreased in recent years due to a combination of factors, including: adverse market conditions and investment returns as a result of the financial downturns experienced in 2001 and in 2008 and beyond; and contributions that are lower than the Actuarially Required Contribution. With respect to MEABF and LABF, the funding level increased for fiscal year 2014 as a result of the implementation of P.A. 98-641. The manner of funding MEABF and LABF reverted to the law in effect prior to the implementation of P.A. 98-641 after the Circuit Court determined P.A. 98-641 to be unconstitutional.
The following projections (collectively, the "Projections") are based upon numerous variables that are subject to change. The Projections are forward-looking statements regarding future events based on the Retirement Funds' actuarial assumptions and assumptions made regarding such future events, including that there are no changes to the current legislative structure and that all projected contributions to the Retirement Funds are made as required. No assurance can be given that these assumptions will be realized or that actual events will not cause material changes to the data presented in this subsection.
The Projections are based on data as of December 31, 2014, and are provided to indicate expected trends in the funded status of the Retirement Funds under the applicable law. The Projections provided in this section with respect to MEABF combine pension and other post-employment benefit ("OPEB") liabilities together in a single projection, whereas the Projections included with respect to the other Retirement Funds exclude OPEB liabilities. Therefore, with respect to MEABF, such projections overstate the Actuarial Accrued Liability with respect to pension benefits by the amount of such OPEB liability. In addition, the City believes that the liability related to OPEB may be reduced based upon the outcome of the Lawsuit (as hereinafter defined). See "—Payment for Other Post-Employment Benefits— Status of Healthcare Benefits after the Settlement Period" herein. The Projections reflect the implementation of both P.A. 96-1495 and P.A. 98-641. However, P.A. 98-641 has been determined to be unconstitutional by the Circuit Court. For projections regarding MEABF and LABF under the law in effect prior to the enactment of P.A. 98-641, see "—Effect on MEABF and LABF if P.A. 98-641 Found



E-27

Unconstitutional" herein. In addition, the Projections do not consider the potential impact of SB 777 or any similar legislation impacting the P.A. 96-1495 Funding Plan.



TABLE 13 - PROJECTION OF FUTURE FUNDING STATUS - MEABF1 ,f



Fiscal Year
Market
Actuarial Unfunded Accrued Market
Accrued Market Actuarial Liabilities Funded
Liability Assets (UAAL) Ratio
($) ($) ($) (%)
(a) (b) (a-b) (b/a)


Employer Contribution*2'
($)

2015 $12,623,220 $5,099,126
12,944,628 5,040,865
13,288,088 5,093,774
13,634,558 5,222,804
13,991,237 5,435,586
14,346,358 5,649,839
14,697,099 5,862,858
15,040,872 6,071,971
15,377,568 6,277,293
15,704,963 6,476,772
16,032,289 6,679,887
16,345,527 6,872,954
16,643,231 7,055,253
16,926,173 7,228,381
17,194,166 7,393,218
17,446,425 7,550,013
17,682,375 7,699,294
17,903,431 7,843,902
18,111,649 7,987,600
18,309,447 8,134,674
18,510,692 8,300,829
18,708,637 8,481,310
18,906,845 8,681,906
19,109,525 8,908,258
19,320,602 9,170,030
19,529,562 9,456,586
$7,524,094 40.4% $158,798
7,903,763 38.9 242,700
8,194,314 38.3 275,248
8,411,754 38.3 381,424
8,555,651 38.8 464,616
8,696,519 39.4 542,585
8,834,241 39.9 554,376
8,968,901 40.4 565,732
9,100,275 40.8 576,324
9,228,191 41.2 586,751
9,352,402 41.7 596,887
9,472,573 42.0 606,555
9,587,978 42.4 615,840
9,697,792 42.7 . 625,322
9,800,948 43.0 635,022
9,896,412 43.3 645,219
9,983,081 43.5 655,655
10,059,529 43.8 666,177
10,124,049 44.1 677,231
10,174,773 44.4 689,120
10,209,863 44.8 701,813
10,227,327 45.3 715,218
10,224,939 45.9 729,451
10,201,267 46.6 744,700
10,150,572 47.5 760,983
10,072,976 48.4 778,333

Source: Actuarial Valuation of MEABF as of December 31, 2014.
Note: Reflects the implementation of P.A. 98-641, which was found unconstitutional by the Circuit Court. Such decision is being appealed to the Illinois Supreme Court. In addition, this Table includes OPEB liabilities. Therefore, such projections overstate the Actuarial Accrued Liability with respect to pension benefits by the amount of such OPEB liability. In addition, the City believes that the liability related to OPEB may be reduced based upon the outcome of the Lawsuit. See "—Payment for Other Post-Employment Benefits—Status of Healthcare Benefits after the Settlement Period" herein.
In thousands of dollars. Projections calculated on a cash basis.
Represents contributions expected to be made by the City during the fiscal year.







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TABLE 14 - PROJECTION OF FUTURE FUNDING STATUS - LABF




Fiscal Year

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

Actuarial Accrued Liability
($)
(a)
$2,145,052 2,175,622 2,208,991 2,231,152 2,273,671 2,304,497 2,333,490 2,360,554 2,385,406 2,407,534 2,429,710 2,449,606 2,466,633 2,480,723 2,491,848 2,500,071 2,505,962 2,510,086 2,513,040 2,515,720 2,518,676 2,522,349 2,527,430 2,534,183 2,542,950 2,554,422


Market Assets
($) (b)
$1,363,097 1,342,036 1,325,498 1,314,693 1,311,023 1,313,146 1,324,203 1,333,970 1,342,241 1,348,670 1,356,183 1,362,569 1,367,354 1,370,612 1,372,411 1,372,908 1,372,824 1,372,877 1,373,840 1,376,709 1,381,940 1,390,066 1,401,875 1,417,752 1,438,244 1,464,246
Market Unfunded Accrued
Actuarial Market
Liabilities Funded
(UAAL) Ratio
($) (%)
(a-b) (b/a)
$ 781,955 63.5%
833,586 61.7
883,493 60.0
916,459 58.9
962,648 57.7
991,351 57.0
,009,287 56.7
,026,584 56.5
,043,165 56.3
,058,864 56.0
,073,527 55.8
,087,037 55.6
,099,279 55.4
,110,111 55.3
,119,437 55.1
,127,163 54.9
,133,138 54.8
,137,209 54.7
,139,200 54.7
,139,011 54.7
,136,736 54.9
,132,283 55.1
,125,555 55.5
,116,431 55.9
,104,706 56.6
,090,176 57.3



Employer Contribution12' ($)
$ 14,472.
24,019
28,536
37,768
46,280
56,096
68,520
70,398
72,308
74,296
76,371
78,462
80,560
82,695
84,830
86,915
89,060
91,245
93,475
95,647
97,562
99,442 101,274 103,084 104,922 106,793

Source: Actuarial Valuation of LABF as of December 31, 2014.
Note: Reflects the implementation of P.A. 98-641, which was found unconstitutional by the Circuit Court. Such decision is being appealed to the Illinois Supreme Court.
In thousands of dollars. Projections calculated on a cash basis.
Represents contributions expected to be made by the City during the fiscal year.














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TABLE 15 — PROJECTION OF FUTURE FUNDING STATUS - FABF(I)



Fiscal Year
Market
Actuarial Unfunded Accrued Market
Accrued Market Actuarial Liabilities Funded
Liability Assets (UAAL) Ratio
($) ($) ($) (%)
(a) (b) (a-b) (b/a)


Employer Contribution'"' ($)

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
$4,434,859 4,577,294 4,722,294 4,866,705 5,009,665 5,150,374 5,288,603 5,423,461 5,555,176 5,682,352 5,804,282 5,920,962 6,033,745 6,144,159 6,253,408 6,362,319 6,469,132 6,573,937 6,676,785 6,777,422 6,877,220 6,976,596 7,077,715 7,181,432 7,288,756 7,401,532
$1,109,401 1,217,224 1,331,697 1,451,676 1,577,203 1,708,420 1,845,600 1,989,064 2,141,193 2,301,929 2,471,585 2,650,813 2,840,666 3,043,394 3,259,857 3,491,000 3,734,518 3,990,843 4,261,086 4,545,008 4,844,498 5,160,943 5,497,989 5,858,397 6,244,911 6,661,361
$3,325,458 3,360,070 3,390,597 3,415,029 3,432,462 3,441,954 3,443,003 3,434,397 3,413,983 3,380,423 3,332,697 3,270,149 3,193,079 3,100,765 2,993,551 2,871,319 2,734,614 2,583,094 2,415,699 2,232,414 2,032,722 1,815,653 1,579,726 1,323,035 1,043,845 740,171
25.0%
26.6
28.2
29.8
31.5
33.2
34.9
36.7
38.5
40.5
42.6
44.8
47.1
49.5
52.1
54.9
57.7
60.7
63.8
67.1
70.4
74.0
77.7
81.6
85.7
90.0
$109,813(3) 246,132 284,086 292,439 301,752 311,205 320,955 330,536 340,547 351,861 363,224 374,623 385,647 395,621 405,505 414,140 421,833 427,568 432,905 438,176 442,417 446,354 450,005 454,185 458,737 463,527

Source: The Actuarial Valuation of FABF as of December 31, 2014.
In thousands of dollars. Projections are calculated by GRS on an accrual basis. However, with respect to the Employer Contribution column, the City has presented the data based on the year the employer contribution is actually made, rather than the preceding budget year.
Represents contributions expected to be made by the City during the fiscal year.
The City's budgeted contribution for 2015 is $96,300 (rounded to thousands of dollars).














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TABLE 16 - PROJECTION OF FUTURE FUNDING STATUS - PABF



Fiscal Year
Market
Actuarial Unfunded Accrued Market
Accrued Market Actuarial Liabilities Funded
Liability Assets (UAAL) Ratio
($) ($) ($) (%)
(a) (b) (a-b) (b/a)


Employer Contribution12'
($)

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
511,411,836 11,781,145 12,163,551 12,548,773 12,933,725 13,316,644 13,696,272 14,071,381 14,439,986 14,799,878 15,148,088 15,481,802 15,799,359 16,100,434 16,385,906 16,656,508 16,913,448 17,157,541 17,389,628 17,611,490 17,826,154 18,036,195 18,244,281 18,452,509 18,662,552 18,875,443
$3,278,525 3,572,979 3,889,364 4,219,011 4,560,317 4,914,566 5,281,951 5,663,586 6,059,763 6,470,260 6,895,984 7,337,188 7,795,756 8,273,986 8,777,064 9,311,291 9,882,460 10,492,841 11,140,748 11,825,203 12,551,460 13,323,888 14,148,326 15,030,205 15,974,830 16,987,488
$8,133,311 8,208,166 8,274,187 8,329,762 8,373,408 8,402,078 8,414,321 8,407,795 8,380,223 8,329,618 8,252,104 8,144,614 8,003,603 7,826,448 7,608,842 7,345,217 7,030,988 6,664,700 6,248,880 5,786,287 5,274,694 4,712,307 4,095,955 3,422,304 2,687,722 1,887,955
28.7%
30.3
32.0
33.6
35.3
36.9
38.6
40.2
42.0
43.7
45.5
47.4
49.3
51.4
53.6
55.9
58.4
61.2
64.1
67.1
70.4
73.9
77.5
81.5
85.6
90.0
$187,815(3) 592,863 675,826 695,124 713,810 732,200 752,090 772,004 792,595 813,531 834,435 856,465 878,925 902,286 925,836 951,072 978,674 1,007,732 1,034,971 1,056,933 1,073,628 1,089,551 1,104,206 1,118,732 1,132,916 1,146,889

Source: The Actuarial Valuation of PABF as of December 31, 2014.
In thousands of dollars. Projections are calculated by GRS on an accrual basis. However, with respect to the Employer Contribution column, the City has presented the data based on the year the employer contribution is actually made, rather than the preceding budget year.
Represents contributions expected to be made by the City during the fiscal year.
The City's budgeted contribution for 2015 is $194,122 (rounded to thousands of dollars).















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TABLE 17 - PROJECTION OF FUTURE FUNDING STATUS - AGGREGATE
Market Unfunded Accrued
Actuarial Actuarial Market
Accrued Market Liabilities Funded
Liability Assets (UAAL) Ratio Employer
Fiscal ($) ($) (S) (%) Contribution'3'
Year (a) (b) (a-b) (b/a) (S)
$30,614,967 $10,850,149 $19,764,818 35.4% $470,898
31,478,689 11,173,104 20,305,585 35.5 1,105,714
32,382,924 11,640,333 20,742,591 35.9 1,163,696
33,281,188 12,208,184 21,073,004 36.7 1,406,755
34,208,298 12,884,129 21,324,169 37.7 1,526,458
35,117,873 13,585,971 21,531,902 38.7 1,642,086
36,015,464 14,314,612 21,700,852 39.7 1,695,941
36,896,268 15,058,591 21,837,677 40.8 1,738,670
37,758,136 15,820,490 21,937,646 41.9 1,781,774
38,594,727 16,597,631 21,997,096 43.0 1,826,439
39,414,369 17,403,639 22,010,730 44.2 1,870,917
40,197,897 18,223,524 21,974,373 45.3 1,916,105
40,942,968 19,059,029 21,883,939 46.6 1,960,972
41,651,489 19,916,373 21,735,116 47.8 2,005,924
42,325,328 20,802,550 21,522,778 49.1 2,051,193
42,965,323 21,725,212 21,240,111 50.6 2,097,346
43,570,917 22,689,096 20,881,821 52.1 2,145,222
44,144,995 23,700,463 20,444,532 53.7 2,192,722
44,691,102 24,763,274 19,927,828 55.4 2,238,582
45,214,079 25,881,594 19,332,485 57.2 2,279,876
45,732,742 27,078,727 18,654,015 59.2 2,315,420
46,243,777 28,356,207 17,887,570 61.3 2,350,565
46,756,271 29,730,096 17,026,175 63.6 2,384,936
47,277,649 31,214,612 16,063,037 66.0 2,420,701
47,814,860 32,828,015 14,986,845 68.7 2,457,558
48,360,959 34,569,681 13,791,278 71.5 2,495,542

Source: The aggregated information presented in this table is derived from the projections presented in Tables 13-
16. Please refer to Tables 13-16 for source information. Note: Reflects the implementation of P.A. 98-641, which was found unconstitutional by the Circuit Court. Such
decision is being appealed to the Illinois Supreme Court. Includes OPEB liabilities with respect to
MEABF. See Note to Table 13 for additional infonnation.
In thousands of dollars. Projections for MEABF and LABF are calculated on a cash basis. Projections for PABF and FABF are calculated on an accrual basis, however, with respect to the Employer Contribution column, the City has presented the data based on the year the employer contribution is actually made, rather than the preceding budget year.
Aggregate data presented in this table includes data for all four Retirement Funds.
Represents contributions expected to be made by the City during the fiscal year.
The projections in Tables 15 and 16 show that the assets of both FABF and PABF will, under current law, begin to increase in 2016. This increase assumes the implementation of the P.A. 96-1495 Funding Plan. This projection does not consider the impact of any bill delaying the impact of P.A. 96-1495, such as SB777. See "—Determination of City's Contributions—City's Required Contributions to PABF and FABF Beginning in 2016" herein. The City projects that, should such a delay bill be enacted,




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the purpose of such bill would be extend the period over which the City implements such increases in the contributions currently projected to occur pursuant to P.A. 96-1495, which would most likely have the effect of delaying the increases in the Funded Ratio with respect to such Retirement Funds during the period in which the contributions established pursuant to such delay bill are lower than those under P.A. 96-1495. See "—Determination of City's Contributions—City's Required Contributions to PABF and FABF Beginning in 2016" herein.
Legislative Changes
P.A. 96-0889
On April 14, 2010, then Governor Quinn signed Public Act 96-0889 (the "Pension Reform Act") into law. The Pension Reform Act establishes a "two-tier" benefit system with less generous benefits for employees who become members of MEABF and LABF on or after January 1, 2011 ("Tier II Members") as compared to those provided to employees prior to such date ("Tier I Members"). The Pension Reform Act does not impact persons who first became employees prior to its effective date of January 1, 2011.
Among other changes, the Pension Reform Act: (i) increases the minimum age at which an employee may retire with unreduced benefits to age 67 from age 60 or younger based on a formula combining the age of the employee and the number of years of service; (ii) increases the minimum age at which an active employee may retire with reduced benefits to age 62 from age 50; (iii) provides that final average salary is based on 96 consecutive months within the last 120 months of employment (instead of 48 months of the last 120 months); (iv) reduces the annual cost of living adjustment to the lower of 3 percent or 50 percent of the change in the consumer price index for all urban consumers, whichever is lower, and eliminates compounding for employees hired after January 1, 2011, compared with a cost of living adjustment of 3 percent, compounded, under prior law; and (v) caps the salary on which a pension may be calculated at $106,800 (subject to certain adjustments for inflation).
The Pension Reform Act as described in this subsection, taken independently of any other legislative or market effects, is expected to reduce benefits afforded new hires and therefore reduce over time the growth in the Actuarial Accrued Liability, the UAAL and the Actuarially Required Contribution for MEABF and LABF. In calculating the Actuarial Accrued Liability, the actuaries make assumptions about future benefit levels. As the value of future benefits decreases over time, and as a greater percentage ofthe City's workforce is covered by the Pension Reform Act, the Actuarial Accrued Liability is expected to decrease compared to what it would have been under previous law. Consequently, the UAAL is expected to grow more slowly and the Funded Ratio to increase. As the growth in the UAAL slows, the Actuarially Required Contribution is expected to be reduced as the amount of UAAL to be amortized decreases. However, no assurance can be given that these expectations will be the actual experience going forward.
P.A. 96-1495
P.A. 96-1495 makes changes to the Pension Code with respect to PABF and FABF. See "— Determination of City's Contributions—City's Required Contributions to PABF and FABF Beginning in 2016" for additional information regarding the impact ofthe changes imposed by P.A. 96-1495. The P.A. 96-1495 Funding Plan will significantly increase the City's contributions to PABF and FABF because, among other things, such contributions will no longer be determined pursuant to the Multiplier Funding system and because the P.A. 96-1495 Funding Plan is designed to require larger contributions by the City.

In addition, P.A. 96-1495 makes changes to benefits for police officers and firefighters first participating in PABF and FABF on or after January 1, 2011. Among other changes, P.A. 96-1495: (i)



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increases the minimum eligibility age for unreduced retirement benefits from 50 (with ten years of service) to 55 (with ten years of service); (ii) provides for retirement at age 50 (with ten years of service) with the annuity reduced by 0.5 percent per month; (iii) provides that final average salary is based on 96 consecutive months within the last 120 months of employment (instead of 48 months ofthe last 120 months); (iv) reduces the cost of living adjustment to the lower of 3 percent or 50 percent ofthe change in the consumer price index for all urban consumers ("CPl-u"), whichever is lower, commencing at age 60;
provides that widow benefits are 66 2/3 percent of the employee's annuity at the date of death; and
caps the salary on which a pension may be calculated at $106,800 (subject to certain adjustments for inflation).
See —"Projection of Funded Status" herein for a projection of future contributions, the UAAL and the Funded Ratio of PABF and FABF following the implementation of P.A. 96-1495. P.A. 98-641
If determined by the Illinois Supreme Court to be constitutional, P.A. 98-641 would make significant changes to LABF and MEABF. Certain provisions relating to the City's contributions to LABF and MEABF under P.A. 98-641 are discussed above in "—Determination of City's Contributions—City's Required Contributions to LABF and MEABF Pursuant to P.A. 98-641 " The P.A. 98-641 Funding Plan would have the effect of significantly increasing the City's contributions to LABF and MEABF.
In addition, with respect to LABF and MEABF, P.A. 98-641:
Skips automatic annual increases ("AAI") in 2017, 2019 and 2025 for retired members that would otherwise be entitled to receive them and who have an annuity greater than $22,000;
Provides that members who retire after the effective date of P.A. 98-641 are not eligible to receive an AAI until one full year after they otherwise would have;
Reduces the AAI rate for Tier 1 Members to the lesser of 3.0 percent or 50 percent of the CPI-u, except that retirees with an annual annuity of less than $22,000 will receive at least a 1 percent AAI in each year, including in the AAI skip years described above;
Reduces for Tier II Members the minimum eligibility age for unreduced retirement benefits to 65 with 10 years of service and, for reduced retirement benefits, to age 60 with 10 years of service;
Increases employee contribution rates for both Tier I Members and Tier II Members to 9.0 percent in calendar year 2015, 9.5 percent in calendar year 2016, 10.0 percent in calendar year 2017, 10.5 percent in calendar year 2018 and 11.0 percent for calendar year 2019 and after until the respective Retirement Fund reaches a 90 percent Funded Ratio, at which point the employee contribution rate is reduced to 9.75 percent and
Institutes the Recapture Provisions with respect to MEABF and LABF.
Gabriel Roeder Smith & Company ("GRS") has prepared projections of City contributions and funded status of LABF and MEABF based on the enactment of P.A. 98-641. Such projections are based on the data, assumptions and methods used in the actuarial valuations for LABF and MEABF as of December 1, 2013. Tables 18 and 19 provide such projections as compared to projected results under current Pension Code provisions.




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!
TABLE 18 - PROJECTED CONTRIBUTIONS: MEABF AND LABF



Contribution Year


Contributions to LABF Before P.A. 98-641
LABF

Contributions to LABF Under P.A. 98-641

Increase in Contributions to LABF Under P.A. 98-641


Contributions to MEABF Before P.A. 98-641
MEABF

Contributions to MEABF Under P.A. 98-641

Increase in Contributions to MEABF Under P.A. 98-641

2015 2016 2017 2018 2019 2020 2021 2022 2030 2040 2050 2055
$ 14.5 14.4 15.4 15.7 16.2 16.7 17.2 17.8 232.6 244.8 217.1 218.1
14.5 24.0 30.5 38.2 47.1 57.3 67.7 69.6 86.2 105.5 124.3 135.3
$ 0.0 9.6 15.1 22.5 30.9 40.6 50.5 51.8 (146.4) (139.3) (92.8) (82.8)
$ 156.1 157.4 161.9 167.1 172.6 178.2 184.0 189.9 1,325.3 1,598.9 1,530.1 1,519.9
156.1 242.7 290.1 361.2 442.1 533.0 585.6 600.3 724.7 917.4 ,184.5
1,332.2
0.0 85.3 128.2 194.1 269.5 354.8 401.6 410.4 (600.6) (681.5) (345.6) (187.7)

Source: GRS. Projection derived from actuarial data as of December 31, 2013. (1) In millions of dollars. Projections are calculated on a cash basis.

TABLE 19 - PROJECTED FUNDED RATIOS: MEABF AND LABF'
LABF MEABF
Funded Ratio Funded Funded Funded
Contribution Before P.A. Ratio Under Ratio Before Ratio Under
Year 98-641 P.A. 98-641 P.A. 98-641 P.A. 98-641
2015 2016 2017 2018 2019 2020 2021 2022 2030 2040 2050 2055
53.9%
52.8
50.9
48.0
44.9
41.6
38.1
34.3
0.0
0.0
0.0
0.0
62.5%
62.3
61.7
60.5
59.5
59.0
58.7
58.5
57.2
60.2
76.5
90.0
33.1%
31.3
29.1
26.3
23.3
20.1
16.6
12.9
0.0
0.0
0.0
0.0
38.5%
37.6
36.8
35.8
35.4
35.6
35.9
36.2
38.8
45.0
68.7
90.0

Source: GRS. Projection derived from actuarial data as of December 31, 2013. (1) In millions of dollars. Projections are calculated on a cash basis.
P.A. 98-641 would also provide that the Retirement Board of LABF or MEABF may bring a mandamus action to compel the City to make the contributions required by the Pension Code, in addition to other remedies that may be available by law. P.A. 98-641 would further provide that the court may order a reasonable payment schedule to enable the City to make payments without imperiling the City's public health, safety, or welfare.




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Under P.A. 98-641, such payments are expressly subordinated to the payment ofthe principal, interest, premium, if any, and other payments on or related to any bonded debt obligation of the City, either currently outstanding or to be issued, for which the source of repayment or security thereon is derived directly or indirectly from any funds collected or received by the City or collected or received on behalf of the City. Per P.A. 98-641, such payments on bonded debt obligations include any statutory fund transfers or other prefunding mechanisms or formulas set forth, now or hereafter, in State law, City ordinance, or bond indentures, into debt service funds or accounts of the City related to such bonded debt obligations, consistent with the payment schedules associated with such obligations.
In December 2014, shortly before P.A. 98-641 was to take effect, two lawsuits were filed in the Circuit Court challenging the constitutionality of P.A. 98-641. Plaintiffs argue that P.A. 98-641 violates the Pension Clause and seek a preliminary and permanent injunction prohibiting its enforcement. The City was allowed to intervene in both lawsuits to defend the constitutionality of P.A. 98-641. On July 24, 2015, the Circuit Court entered a decision in these lawsuits determining that P.A. 98-641 is unconstitutional and void in its entirety. The City has appealed the Circuit Court's decision to the Illinois Supreme Court, and oral arguments regarding such appeal were heard on November 17, 2015. The City has been defending and will continue to defend this matter vigorously. The City can give no assurance as to the ultimate outcome of the lawsuit.
Should the Illinois Supreme Court affirm the Circuit Court's decision finding P.A. 98-641 unconstitutional, MEABF and LABF are projected to become insolvent beginning in 2026 and 2029, respectively. See "—Effect on MEABF and LABF if P.A. 98-641 Found Unconstitutional" below for additional information. Should the Circuit Court's decision regarding P.A. 98-641 be affirmed, it is not clear whether or how the unfunded status or insolvency of MEABF and LABF might be resolved or what, if any, impact such a resolution may have on the City.
Diversion of Grant Money to the Retirement Funds Under P.A. 96-1495 and P.A. 98-641
P.A. 96-1495 and, if determined to be constitutional, P.A. 98-641 allow the State Comptroller to divert State grant money intended for the City to the Retirement Funds to satisfy contribution shortfalls by the City (the "Recapture Provisions"). If the City fails to contribute to the Retirement Funds as required by the Pension Code, the City will be subject to a reallocation of grants of State funds to the City if (i) the City fails to make the required payment in a timely manner as set forth in the respective statute, (ii) the subject Retirement Fund gives notice of the failure to the City, and (iii) such Retirement Fund certifies to the State Comptroller that such payment has not been made. Upon the occurrence of these events, the State Comptroller will withhold grants of State funds from the City in an amount not in excess of the delinquent payment amount in the following proportions: (i) in fiscal year 2016, one-third ofthe City's State grant money, (ii) in fiscal year 2017, two-thirds of the City's State grant money, and (iii) in fiscal year 2018 and in each fiscal year thereafter, 100 percent of the City's State grant money. Should the Recapture Provisions in either of P.A. 96-1495 or, if determined to be constitutional, P.A. 98-641, be invoked as a result of the City's failure to contribute all or a portion of its required contribution, a reduction in State grant money may have a significant adverse impact on the City's finances.
Effect on MEABF and LABF If P.A. 98-641 Found Unconstitutional

As described in "—Legislative Changes—P.A. 98-641" above, P.A. 98-641 has been determined to be unconstitutional by the Circuit Court. If the Circuit Court's decision regarding the constitutionality of P.A. 98-641 is not overturned and the law in effect at the time ofthe enactment of P.A. 98-641 is effective, the City's consulting actuaries project that MEABF and LABF will not have assets on hand to make payments to beneficiaries beginning in 2026 and 2029, respectively. Tables 20 and 21 provide current projections of the Actuarial Accrued Liability, Market Value of Assets, UAAL, Funded Ratio and



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Employer Contribution with respect to MEABF and LABF in the absence of P.A. 98-641. Table 22 combines the projections in Tables 20 and 21 with the projections in Tables 15 and 16 for FABF and PABF, respectively, to provide an aggregate projection of Actuarial Accrued Liability, Market Value of Assets UAAL, Funded Ratio and Employer Contribution for the four Retirement Funds in the absence of P.A. 98-641.

TABLE 20 - PROJECTION OF FUTURE FUNDING STATUS - MEABF
Market
Actuarial Unfunded Accrued Market
Employer Contribution(2> ($)
Accrued Market Actuarial Liabilities Funded
Fiscal Year
Liability Assets (UAAL) Ratio
($) ($) ($) (%)
(a) (b) (a-b) (b/a)
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
; 14,788,983 15,257,262 15,736,491 16,213,945 16,686,091 17,149,388 17,600,400 18,038,164 18,459,401 18,874,417 19,269,819 19,644,224 19,996,084 20,324,749 20,628,151 20,904,445 21,153,680 21,376,674 21,574,935 21,750,671 21,906,148 22,043,770 22,166,160 22,275,941 22,376,201 22,470,299
$ 5,088,720 4,855,643 4,585,770 4,264,599 3,885,513 3,441,412 2,925,154 2,331,452 1,652,472 893,662 36,495
$ 9,700,263 10,401,619 11,150,721 11,949,346 12,800,578 13,707,976 14,675,246 15,706,712 16,806,929 17,980,755 19,233,324 19,644,224 19,996,084 20,324,749 20,628,151 20,904,445 21,153,680 21,376,674 21,574,935 21,750,671 21,906,148 22,043,770 22,166,160 22,275,941 22,376,201 22,470,299
33.1%
31.3
29.1
26.3
23.3
20.1
16.6
12.9
9.0
4.7
0.2
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
$ 156,091 157,427 161,916 167,069 172,600 178,248 184,018 189,873 195,848 201,863 208,088 214,489 220,984 227,654 234,442 241,387 248,481 255,727 263,007 270,436 278,088 285,948 293,986 302,297 310,857 319,656

Source: GRS. Projections derived from actuarial data as of December 31, 2013. Such projections assume that the City will continue to contribute to MEABF pursuant to the Multiplier Funding system upon the insolvency of MEABF.
Note: Does not include OPEB liabilities.
In thousands of dollars. Projections calculated on a cash basis.
Represents contributions expected to be made by the City during the fiscal year.










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TABLE 21 - PROJECTION OF FUTURE FUNDING STATUS
Market
Actuarial Unfunded Accrued Market
Accrued Market Actuarial Liabilities Funded
Liability Assets (UAAL) Ratio
Fiscal ($) ($) (S) (%)
Year (a) (b) (a-b) (b/a)
LABF



Employer Contribution'2' ($)

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
; 2,504,477 2,558,009 2,612,627 2,665,643 2,716,750 2,765,274 2,811,041 2,853,770 2,892,919 2,929,006 2,961,105 2,988,935 3,012,165 3,030,629 3,044,169 3,052,779 3,056,992 3,057,367 3,054,510 3,049,319 3,042,417 3,034,418 3,026,025 3,017,590 3,009,528 3,002,648
$ 1,408,178 1,371,220 1,329,444 1,279,237 1,219,905 1,150,320 1,069,824 977,541 872,303 753,999 620,990 472,234 306,567 122,928
$ 1,096,299 1,186,789 1,283,183 1,386,406 1,496,845 1,614,954 1,741,217 1,876,229 2,020,616 2,175,007 2,340,1 15 2,516,701 2,705,598 2,907,701 3,044,169 3,052,779 3,056,992 3,057,367 3,054,510 3,049,319 3,042,417 3,034,418 3,026,025 3,017,590 3,009,528 3,002,648
53.9%
52.8
50.9
48.0
44.9
41.6
38.1
34.3
30.2
25.7
21.0
15.8
10.2
4.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
$ 14,472 14,411 15,387 15,722 16,168 16,675 17,228 17,813 18,431 19,075 19,752 20,462 21,185 21,941 22,725 23,521 24,337 25,179 26,018 26,845 27,688 28,540 29,395 30,184 30,909 31,610

Source: GRS. Projections derived from actuarial data as of December 31. 2013. Such projections assume that the City will continue to contribute to LABF pursuant to the Multiplier Funding system upon the insolvency of LABF.
Note: Does not include OP1ZB liabilities.
In thousands of dollars. Projections calculated on a cash basis.
Represents contributions expected to be made by the City during the fiscal year.















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TABLE 22 - PROJECTION OF FUTURE FUNDING STATUS - AGGREGATE0




Fiscal Year
Market Unfunded Accrued
Actuarial Actuarial Market
Accrued Market Liabilities Funded
Liability Assets (UAAL) Ratio
($) ($) ($) (%)
(a) (b) (a-b) (b/a)



Employer Contribution'1'
($)

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
$33,140,155 34,173,710 35,234,963 36,295,066 37,346,231 38,381,680 39,396,316 40,386,776 41,347,483 42,285,654 43,183,294 44,035,923 44,841,352 45,599,971 46,311,634 46,976,052 47,593,251 48,165,519 48,695,858 49,188,902 49,651,939 50,090,978 50,514,180 50,927,472 51,337,037 51,749,922
$10,884,824 11,017,066 11,136,275 11,214,523 11,242,938 11,214,718 11,122,529 10,961,643 10,725,731 10,419,850 10,025,054 10,460,235 10,942,989 11,440,308 12,036,921 12,802,291 13,616,978 14,483,684 15,401,834 16,370,211 17,395,958 18,484,831 19,646,315 20,888,602 22,219,741 23,648,849
$22,255,331 23,156,644 24,098,688 25,080,543 26,103,293 27,166,962 28,273,787 29,425,133 30,621,752 31,865,804 33,158,240 33,575,688 33,898,363 34,159,663 34,274,713 34,173,761 33,976,273 33,681,835 33,294,024 32,818,691 32,255,981 31,606,147 30,867,865 30,038,870 29,117,296 28,101,073
32.8%
32.2
31.6
30.9
30.1
29.2
28.2
27.1
25.9
24.6
23.2
23.8
24.4
25.1
26.0
27.3
28.6
30.1
31.6
33.3
35.0
36.9
38.9
41.0
43.3
45.7
$ 468,191 1,010,833 1,037,215 1,170,354 1,204,330 1,238,328 1,274,291 1,310,226 1,347,421 1,386,330 1,425,499 1,466,039 1,506,741 1,547,502 1,588,508 1,630,120 1,673,325 1,716,206 1,756,901 1,792,390 1,821,821 1,850,393 1,877,592 1,905,398 1,933,419 1,961,682
Source: The aggregated information presented in this table is derived from the projections presented in Tables 15, 16, 20 and 21. Please refer to Tables 13-16 for source information. Tables 15 and 16 were based on actuarial data as of December 31, 2014 and Tables 20 and 21 were based on actuarial data as of December 31, 2013 (the most recent data available).
Note: Does not include OPEB liabilities.
In thousands of dollars. Projections for MEABF and LABF are calculated on a cash basis. Projections for PABF and FABF are calculated on an accrual basis, however, with respect to the Employer Contribution column, the City has presented the data based on the year the employer contribution is actually made, rather than the preceding budget year.
Aggregate data presented in this table includes data for all four Retirement Funds.
Represents contributions expected to be made by the City during the fiscal year.


The City cannot predict the impact that the insolvency of MEABF or LABF would have on its contributions to these Retirement Funds. Under the current provisions of the Pension Code, the City would revert to contributing the Multiplier Funding amount to MEABF and LABF. The contributions calculated pursuant to Multiplier Funding most likely would be insufficient to make all necessary payments to beneficiaries. One possibility upon insolvency of MEABF or LABF would be changes in the



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Pension Code to provide for pay-as-you-go funding. Under pay-as-you-go funding, the employer contribution equals the amount necessary, when added to other income, specifically employee contributions, to fund the current year benefits to be paid by the retirement fund. GRS projects that, should the City be required to adopt pay-as-you-go funding to ensure that payments to beneficiaries are made to MEABF and LABF beneficiaries following the insolvency of such Retirement Funds, the City's contributions to such Retirement Funds would increase substantially. With respect to MEABF, GRS projects that pay-as-you-go funding would increase the City's contribution from approximately $208 million in 2025 to $1,107 billion in 2026, $1,607 billion in 2042 and $1,581 billion in 2060. With respect to LABF, GRS projects that pay-as-you-go funding would increase the City's contribution from approximately $21.9 million in 2028 to $99.6 million in 2029, $248 million in 2036 and $231 million in 2060. Such large increases in the City's contributions would likely have a material adverse impact on the City's financial condition.
Additionally, the City cannot predict if or when changes to the Pension Code or judicial decisions relevant to its contributions will be enacted or decided, respectively, and the impact any such legislation or judicial decisions would have on the manner in which it contributes to the Retirement Funds. Contributing pursuant to Multiplier Funding or pay-as-you-go funding, as discussed in this subsection, represent two possible outcomes; however, the City can make no representation that some other method of determining contributions, including payments that are possibly even larger than pay-as-you-go funding, would not be required.

Future Legislation
The City continues to believe that additional legislative changes may be necessary to properly fund the Retirement Funds. With respect to PABF and FABF, the City believes that legislation, such SB 777, is necessary to allow the City and its taxpayers to absorb the impact of substantially increased pension payments over a longer period of time, such impact consisting of increases in the City's revenues, a reduction in the City's expenditures or some combination thereof. Furthermore, should the Illinois Supreme Court determine that P.A. 98-641 is unconstitutional, additional legislation may be necessary to prevent MEABF and LABF from becoming insolvent, as described in "Effect on MEABF and LABF if P.A. 98-641 Found Unconstitutional" herein. Such legislation may include provisions for increased contributions by the City in future years, which may require the City to increase revenues, reduce expenditures or some combination thereof. The City gives no assurance as to whether any of such legislation with respect to any of the Retirement Funds will be enacted, and no assurance can be given that such legislation, if adopted, will be upheld upon a legal challenge.




















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I
Report and Recommendations of the Commission to Strengthen Chicago's Pension Funds
On January 11, 2008, then Mayor Richard M. Daley announced the formation of the Commission to Strengthen Chicago's Pension Funds (the "CSCP"), which was composed of a broad cross-section of City officials, union leaders, pension fund executives, and business and civic professionals. The CSCP was charged with examining the Retirement Funds and recommending ways to improve the Funded Ratio of each Retirement Fund. The CSCP met several times in 2008 through 2010, and at the CSCP's final meeting on March 24, 2010, the CSCP endorsed its final report, with three commissioners dissenting. The CSCP's final report, which included letters from the dissenting commissioners, was submitted to Mayor Daley on April 30, 2010 (the "Final Report"). The Final Report is available at _VoI.l_4.30.2010.pdf; however, the content of the Final Report and such website are not incorporated herein by such reference. The City makes no representation nor expresses any opinion as to the accuracy of the Final Report, the statements made or the information therein, some of which may be conflicting. Furthermore, information about the Final Report is being provided for historical purposes only.

The CSCP's approval of the Final Report occurred before the enactment of the Pension Reform Act, P.A. 96-0889, P.A. 96-1495 and P.A. 98-641; the Final Report, accordingly, does not consider the impact of these acts on the Retirement Funds. See "—Determination of City's Contributions" above and "—Legislative Changes" above for additional information on these acts. Certain ofthe CSCP's findings and recommendations as contained in the Final Report are addressed by these acts.
Special Revenue and Enterprise Fund Allocation of Retirement Fund Costs
The City allocates to its special revenue and enterprise funds their share of the City's annual contribution to the Retirement Funds based upon the amount of services provided by City employees to the functions or enterprises related to or paid out of those funds. The special revenue and enterprise funds account for their allocable share of the City's contributions to the Retirement Funds as operating and maintenance expenses. For budget year 2015, the City has budgeted for the special revenue and enterprise funds to reimburse the City approximately $74 million for their allocable share ofthe City's pension contribution.
The allocations described in this subsection are not required by statute but represent the City's current method of allocating its pension costs. The City may alter the manner in which it allocates its pension costs to these funds at any time.
Impact of Retirement Funds' Unfunded Liability on the City's Bond Ratings
The financial health of the Retirement Funds and the projected impact ofthe Retirement Funds' underfunding on future contributions to be made by the City have impacted the rating agencies' determination of the City's creditworthiness. On April 17, 2013, Moody's issued a release (the "Release") announcing a new approach to analyzing state and local government pensions. The method of evaluating public pension plans established in the Release is intended to be a method of standardizing information among public pension plans and does not impact the City's required contributions, the value of the Retirement Funds' assets, or the liabilities owed by the Retirement Funds. The City does not endorse the method of analysis adopted by Moody's in the Release.
Moody's new pension analysis appears to include, among other things, adjusting pension plan Actuarial Accrued Liabilities by using certain common assumptions, such as the discount rate and amortization period. Certain other actuarial assumptions, such as mortality and salary growth rates, were not standardized across governmental plans. To accomplish its review, Moody's stated that it will use a



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discount rate based on Citibank's Pension Liability Index discount rate as of a pension plan's valuation date. Such a discount rate will be lower than the discount rate currently used by the Retirement Funds and is closer to the discount rate for a typical pension plan in the private sector. The City estimates that Moody's new method of analysis would result in the following Funded Ratios ofthe Retirement Funds (based on projected December 31, 2014 assets and liabilities provided in the actuarial valuations ofthe Retirement Funds as of December 31, 2013): 27.4 percent for MEABF, 43.5 percent for LABF, 18.8 percent for PABF, and 15.5 percent for FABF. See Tables 5 through 8 above for information on the Retirement Funds' historical Funded Ratios. For information regarding the Retirement Funds' discount rate, see "—Actuarial Assumptions—Assumed Investment Rate of Return" above. The Release can be obtained from Moody's; provided, however, that the Release is not incorporated herein by such reference.
On May 12, 2015, Moody's issued a ratings action report (the "Rating Report") downgrading the ratings of the City's general obligation bonds and sales tax revenue bonds from "Baa2" to "Bal," the City's water senior lien revenue bonds from "A2" to "Baal," the City's wastewater senior lien revenue bonds from "A3" to "Baa2," the City's water second lien revenue bonds from "A3" to "Baa2," the City's wastewater second lien revenue bonds from "Baal" to "Baa3," and placed all such ratings on negative outlook. This follows previous downgrades of the City's ratings by Moody's on February 27, 2015, March 4, 2014, and July 17, 2013. Moody's indicated in the Rating Report that the May 12, 2015 downgrades reflected the expected continued growth in the unfunded liabilities of the Retirement Funds and the narrowing of the City's options for curbing such growth as a result of the Illinois Supreme Court's decision finding the State Pension Reform Act unconstitutional. Moody's indicated that further downgrades could follow if, among other things, (i) P.A. 98-641 was found to be unconstitutional, or (ii) the Retirement Funds' UAAL continues to grow. The City makes no prediction as to whether the Moody's rating action described above will result in additional downgrades, or the impact that the financial condition ofthe Retirement Funds will have on Moody's or any other rating agency's judgment ofthe City's creditworthiness or on the City's future financing costs. The Rating Report can be obtained from Moody's; provided, however, that the report is not incorporated herein by such reference.
On May 15, 2015, Fitch Ratings, Inc. ("Fitch") downgraded the City's general obligation bond and sales tax bond ratings from "A-"'to "BBB+" and placed each rating on negative watch. In announcing these ratings downgrades, Fitch cited, among other things, increased fiscal pressures as a result of the Illinois Supreme Court decision finding the State Pension Reform Act unconstitutional. Fitch further indicated that a determination that P.A. 98-641 is unconstitutional would likely lead to additional downgrades. On July 3, 2015, Fitch removed the negative watch from the City's general obligation bond and sales tax bond ratings and placed such ratings on negative outlook
On July 8, 2015, Standard & Poor's Ratings Group ("S&P") downgraded the City's general obligation bond rating from "A-" to "BBB+" with a negative outlook and removed the rating from negative watch. In downgrading the City's general obligation bond rating, S&P cited, among other things, the City's pension liabilities, the impact on the City's budget of scheduled future increases in pension contributions, and "the City's lack of progress in unveiling a sustainable funding mechanism" for PABF and FABF.
On July 7, 2015, Kroll Bond Rating Agency ("Kroll") affirmed its long term rating of "A-" with a stable outlook on the City's general obligation bonds. In its report affirming the City's rating, Kroll indicated that the budgetary pressure exerted by the funding of the Retirement Funds and the future increase in contributions to PABF and FABF under P.A. 96-1495 constitute key concerns with respect to its rating of the City's general obligation bonds.
In addition, other rating agencies may have established, or may establish in the future, methods for evaluating the financial health of the Retirement Funds and their impact on the City's creditworthiness



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I I
that are different from the information provided in this Appendix. Further downgrades of the City's bond ratings may have a material adverse impact on the City's finances. See "INVESTMENT CONSIDERATIONS—Credit Rating Downgrades" for additional information.



PAYMENT FOR OTHER POST-EMPLOYMENT BENEFITS

General
The City and the Retirement Funds share the cost of post-employment healthcare benefits available to City employees participating in the Retirement Funds through a single-employer, defined benefit healthcare plan (the "Health Plan"), which is administered by the City. Prior to June 30, 2013, the costs of the Health Plan were shared pursuant to a settlement agreement (as amended, the "Settlement") entered into between the City and the Retirement Funds regarding the responsibility for payment of these health benefits as described below under"—The Settlement."
MEABF and LABF participants older than 55 with at least 20 years of service and PABF and FABF participants older than 50 with at least 10 years of service may become eligible for the Health Plan if they eventually become an annuitant.3 The Health Plan provides basic health benefits to non-Medicare eligible annuitants and provides supplemental health benefits to Medicare-eligible annuitants.
The City contributes a percentage toward the cost of the Health Plan for each eligible annuitant. The annuitants are responsible for contributing the difference between the cost of their health benefits and the sum of the subsidies provided by the City and the related Retirement Fund. Until June 30, 2013, annuitants who retired prior to July 1, 2005 received a 55 percent subsidy from the City, whereas annuitants retiring on or after such date received a subsidy equal to 50 percent, 45 percent, 40 percent or zero percent based on the annuitant's length of actual employment with the City pursuant to the Settlement. The Retirement Funds contributed a fixed dollar amount monthly ($65 for each Medicare-eligible annuitant and $95 for each non-Medicare eligible annuitant) for each of their annuitants. For a description of benefits after the expiration of the Settlement, see "—Status of Healthcare Benefits After the Settlement Period" herein.

The Retirement Funds' subsidies are paid from the City contribution, as provided in the Pension Code and described in "Retirement Funds—Determination of City's Contributions" above. These payments therefore reduce the amounts available in the Retirement Funds to make payments on pension liabilities. See Tables 5-9 in "Retirement Funds—Funded Status of Retirement Funds" above for Retirement Funds' statement of net assets, which incorporates the expense related to the Health Plan as part ofthe "Administration" line item.
The Settlement
In 1987, the City sued the Retirement Funds asserting, among other things, that the City was not obligated to provide healthcare benefits to certain retired City employees. Certain retired employees intervened as a class in the litigation, and the Retirement Funds countersued the City. To avoid the risk and expense of protracted litigation, the City and the other parties entered into the Settlement, the terms of

Under their respective collective bargaining agreements, which were renegotiated in 2012. certain retired PABF and FABF participants are eligible to enroll themselves and their dependents in the City's healthcare plan tor active members until they reach the age of Medicare eligibility ("Special CBA Benefit"). These members do not contribute towards the cost of coverage for this plan. PABF contributes $95 per month for these members; FABF does not contribute for these members. The Special CBA Benefit expires in 2016, at which time the City expects it will be phased out permanently.



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which have been renegotiated over time. The City contributed to the Health Plan as a result of the obligation established by the Settlement during the term of the Settlement (the "Settlement Period"). The Settlement expired on June 30, 2013. For the status of the Health Plan after the Settlement Period, see "—Status of Healthcare Benefits After the Settlement Period" below.

City Financing of the Health Plan
The City funds its share of the Health Plan's costs on a pay-as-you-go basis. Pay-as-you-go funding refers to the fact that assets are not accumulated or dedicated to funding the Health Plan. Instead, the City contributes the amount necessary to fund its share of the current year costs of the Health Plan. See Table 24 below for a schedule of historical contributions made by the City to the Health Plan.
Actuarial Considerations
City Obligation
The City has an Actuarial Valuation completed for its contributions to the Health Plan annually. The purpose and process behind an Actuarial Valuation is described above in "Retirement Funds— Actuarial Valuation —Actuaries and the Actuarial Process:'' In addition, the Retirement Funds produce an Actuarial Valuation for the liability of such Retirement Fund to its retirees for the benefits provided under the Health Plan.
Although these Actuarial Valuations all refer to the liability owed for the same benefits, the results of the Retirement Funds' Actuarial Valuations differ significantly from the City's Actuarial Valuation for two reasons. First, the City's Actuarial Valuation only reflects the portion of liabilities the City owes under the Settlement. Second, the Actuarial Valuations of the City and the Retirement Funds differ because the actuarial methods and assumptions used for each purpose vary.
This Appendix addresses the funded status of the City's obligation to make payments for the Health Plan. For additional information on the amounts owed to members of the Retirement Funds for retiree healthcare benefits, see the Actuarial Valuations of the Retirement Funds, which are available as described in "Retirement Funds — Source Information" above, and Note 12 to the City's Basic Audited Financial Statements, which are available on the City's website at ; provided, however, that the contents of the City's website are not incorporated herein by such reference.
Actuarial Methods and Assumptions
The Actuarial Valuation for the City's obligation to the Health Plan utilizes various actuarial methods and assumptions similar to those described in "Retirement Funds" above with respect to the Retirement Funds. The City does not use an Actuarial Method to calculate the Actuarial Value of Assets of the Health Plan because no assets are accumulated therein for payment of future benefits. As such, the Actuarial Value of Assets for the Health Plan is always zero.
The City's 2012 Actuarial Valuation ("2012 Actuarial Valuation") amortizes the City's retiree healthcare UAAL over a closed 1-year period, in order to reflect the remainder of the Settlement Period and the Special CBA Benefit that was set to expire in 2012 under collective bargaining agreements that were in place at that time. The use of a closed, 1-year period has the effect of increasing the Actuarially Required Contribution as compared to the typical 30-year open amortization period because (i) the period of time over which the UAAL will be amortized is shorter, and (ii) the amortization period is one year as opposed to repeating 30-year periods. The 2012 Actuarial Valuation employed the PUC Method to



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I
I
I
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allocate the City's retiree healthcare obligations. For more information on the PUC Method, see "Retirement Funds—Actuarial Methods" above.
The City's 2013 Actuarial Valuation ("2013 Actuarial Valuation") and 2014 Actuarial Valuation (the "2014 Actuarial Valuation") amortizes the City's retiree healthcare UAAL over a closed 10-year period, in order to reflect (i) the City's extension of healthcare coverage for members that had participated in the Settlement (with such coverage varying based on retirement date), and (ii) the provision of the Special CBA Benefit. For details on the Health Plan after the Settlement Period, see "— Status of Healthcare Benefits After the Settlement Period" below. The use of a closed, 10-year period rather than a closed, 1-year period has the effect of decreasing the Actuarially Required Contribution because the period of time over which the UAAL will be amortized is longer. In addition, the 2013 Actuarial Valuation and the 2014 Actuarial Valuation employed the EAN Method, rather than the PUC Method, to allocate the City's retiree healthcare obligations. For more information on the EAN Method and the PUC Method, see "Retirement Funds—Actuarial Methods" above.

Funded Status
The following tables provide information on the financial health of the Health Plan. The Health Plan is funded on a pay-as-you-go basis, which means no assets are accumulated to pay for the liabilities of the Health Plan. As such, the Funded Ratio with respect to the Health Plan is perpetually zero.
Table 23 summarizes the current financial condition and the funding progress of the Health Plan. TABLE 23- SCHEDULE OF FUNDING PROGRESS0)<2)


Actuarial Unfunded
Valuation Actuarial Actuarial Actuarial UAAL as a
Date Value of Accrued Accrued Funded Covered Percentage of
(Dec. 31) Assets Liability Liability Ratio Payroll Payroll
$0 $1,062,864 $1,062,864 0% $2,562,007 41.5%|109|787,395 787,395|99|2,475,107 31.8|109|533,387 533,387|99|2,546,961 20.9|109|390,611 390,611|99|2,475,000 15.8|109|470,952 470,952|99|2,518,735 18.7|109|997,281 997,281|99|2,385,198 41.8|109|964,626 964,626|99|2,425,000 39.8

Sources: Comprehensive Annual Financial Report ofthe City for the fiscal years ending December 31. 2010-2014. (l) In thousands of dollars.
l2) The City, as required, adopted GASB Statement No. 45 in fiscal year 2007. The information provided in this table was produced in 2007 or later.













E-45

Table 24 shows the net expense to the City for providing benefits under the Health Plan. TABLE 24 - HISTORY OF CITY'S CONTRIBUTIONS03

Actual City Contribution
$ 98,065
98,000
107,431
99,091
97,531
97,500
79,300
Sources: Comprehensive Annual Financial Report ofthe City for the fiscal years ending 2008-2014. (1> In thousands of dollars. 2013 and 2014 contribution amounts are approximate.

Retiree Health Benefits Commission
The Settlement provided for the creation of the Retiree Health Benefits Commission (the "RHBC"), which was tasked with, among other things, making recommendations concerning retiree health benefits after June 30, 2013. The RHBC's members were appointed by the Mayor for terms that do not expire. The Settlement required that the RHBC be composed of experts who will be objective and fair-minded as to the interest of both retirees and taxpayers, and include a representative of the City and a representative of the Retirement Funds.
On January 11, 2013, the RHBC released its "Report to the Mayor's Office on the State of Retiree Healthcare" (the "RHBC Report"). The RHBC Report can be found on the City's website at commissionreporttothemayor.html; provided, however, that the contents of the RHBC Report and of the City's website are not incorporated herein by such reference.
The RHBC Report concluded that maintaining the funding arrangement then in place for the Health Plan was untenable, would prevent the City from continuing to provide the current level of benefits to retirees in the future, and could result in other financial consequences, such as changes to the City's bond rating and its creditworthiness. The RHBC Report presented several options for the Mayor to consider which would reduce the level of spending with respect to the Health Plan from approximately $108 million annually to between $90 million and $12.5 million annually depending on the option.

Status of Healthcare Benefits After the Settlement Period
On May 15, 2013, the City announced plans to, among other things: (i) provide a lifetime healthcare plan to employees who retired before August 23, 1989 with a contribution from the City of up to 55 percent ofthe cost of that plan; and (ii) beginning January 1, 2014, provide employees who retired on or after August 23, 1989 with healthcare benefits but with significant changes to the terms provided by the Health Plan, including increases in premiums and deductibles, reduced benefits and the phase-out of the entire Health Plan for such employees by the beginning of 2017. If the City prevails in the Lawsuit (defined below), it expects a reduction in expenses of approximately $90 to $95 million annually beginning in 2017 as a result of the phase-out of the Health Plan.
On May 30, 2013, the General Assembly passed Senate Bill 1584, which was signed into law by



E-46

the Governor on June 28, 2013. Senate Bill 1584 extends the Retirement Funds' subsidies for retiree healthcare costs until such time as the City no longer provides a health care plan for annuitants or December 31,2016, whichever comes first.
After the June 30, 2013 expiration ofthe Settlement, on July 5, 2013, certain participants in the Health Plan filed a motion to "re-activate" the 1987 litigation covered by the Settlement. On July 17, 2013, the Circuit Court denied that motion. On July 23, 2013, certain ofthe participants filed a new lawsuit, Underwood v. Chicago (the "Lawsuit"), in the Circuit Court against the City and the Trustees of each of the four Retirement Fund Boards, seeking to bring a class action on behalf of former and current City employees who previously contributed or now contribute to one of the four Retirement Funds.
The complaint advanced state law claims, including alleged violation of the Pension Clause, and federal law claims. The City removed the case to federal court based on the federal law claims. The federal district court dismissed the case in its entirety. As to plaintiffs' claim that the planned changes violate the Pension Clause, the district court predicted that the Illinois Supreme Court would rule in a separate case, Kanerva v. Weems ("Kanerva"), then pending before the Illinois Supreme Court that healthcare benefits are not protected by the Pension Clause. However, on July 3, 2014, the Supreme Court of Illinois issued an opinion in Kanerva determining that retiree healthcare benefits provided to State retirees are protected under the Pension Clause. The City argued on appeal to the federal appellate court that it should affirm the district court dismissal, including the state law claims, on an alternative ground. On February 25, 2015, the federal appellate court affirmed the dismissal of the federal law claims and declined to rule on the state law claims on the ground that the state law claims involved a question of State law, which it ordered returned to the Illinois state court for decision. On June 22, 2015, the City and certain of the defendants each filed a motion to dismiss the remaining state law claims in the Circuit Court of Cook County. On December 13, 2015, the Circuit Court issued its ruling dismissing certain ofthe State law claims but gave the plaintiffs leave to amend the complaint with respect to such claims. With respect to the remaining State law claim, which sought a declaration that a reduction in the benefits provided by the Health Plan would violate the Pension Clause, the Circuit Court determined that such a declaration could be made only with respect to those employees hired prior to August 23, 1989. The City has been defending and will continue to defend this matter vigorously. The City can give no assurance as to the ultimate outcome of the Lawsuit.
























E-47

I I
APPENDIX F OPINIONS OF CO-BOND COUNSEL

[This Page Intentionally Left Blank]
Proposed Forms of Opinions of Co-Bond Counsel [Series 2015C Bonds) [Letterhead of Co-Bond Counsel] [to be dated Closing Date]

City of Chicago Citigroup Global Markets Inc.,
Chicago, Illinois as representative of the underwriters named in
Zions Bank, a division of ZB, National the Bond Purchase Agreement dated December
Association, as trustee January , 2016
Chicago, Illinois
Re: City of Chicago
General Obligation Refunding Bonds. Series 2015C
We have acted as bond counsel in connection with the issuance by the City of its fully registered General Obligation Refunding Bonds, Series 2015C, in the aggregate principal amount
of $ (the "Series 2015C Bonds"), dated the date hereof, due on January 1 of
the years and in the amounts and bearing interest as follows:


YEAR PRINCIPAL INTEREST YEAR PRINCIPAL INTEREST
(JANUARY 1) AMOUNT RATE (JANUARY 1) AMOUNT RATE
20_ $ % 20_ $ %
20__ 20__
20__ 20_
20_ 20__
20_ 20__
20_ 20__
20_ 20__
20 20

The Series 2015C Bonds are authorized and issued pursuant to the provisions of Section 6 of Article VII ofthe Illinois Constitution of 1970 and by virtue of an ordinance adopted by the City Council of the City on the 24th day of September, 2015 (the "Bond Ordinance"), as
supplemented by a Notification of Sale dated January ,2016 (the "Notification of Sale"), and a
Trust Indenture dated as of January 1, 2016 (the "Indenture") between the City and Zions Bank, a division of ZB, National Association, as trustee (the 'Trustee"). Capitalized terms used herein without definition shall have the meanings assigned to such terms in the Indenture.

The Series 2015C Bonds are subject to mandatory and optional redemption prior to maturity as provided in the Indenture.
In our capacity as bond counsel, we have examined the following:


F-1

a certified copy of the proceedings of the City Council adopting the Bond Ordinance and authorizing, among other things, the execution and delivery of the Indenture and the issuance ofthe Series 2015C Bonds;
a certified copy ofthe Bond Ordinance, an executed copy of the Notification of Sale and an executed counterpart of the Indenture; and
such other certifications, documents, showings and related matters of law as we have deemed necessary in order to render this opinion.

Based upon the foregoing we are ofthe opinion that:
The City has full power and authority and has taken all necessary corporate action to authorize the issuance of the Series 2015C Bonds and the execution and delivery ofthe Indenture.
The Indenture has been duly and lawfully executed and delivered by the City and, assuming the due authorization, execution and delivery by, and the binding effect on, the Trustee, the Indenture is a legal, valid and binding obligation of the City and, except as provided below, enforceable against the City in accordance with its terms.
The Series 2015C Bonds have been duly and validly authorized and issued in accordance with law and the Series 2015C Bonds, to the amount named, are valid and legally binding upon the City and, except as provided below, enforceable in accordance with their terms and the terms ofthe Indenture.
The Series 2015C Bonds are payable from any funds ofthe City legally available for such purpose, and all taxable property in the City is subject to the levy of taxes by the City to pay the same without limitation as to rate or amount. The Series 2015C Bonds are secured by the other moneys, securities and funds pledged under the Indenture.
Subject to the City's compliance with certain covenants, under present law, interest on the Series 2015C Bonds is excludable from gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the alternative minimum tax for individuals and corporations under the Internal Revenue Code of 1986, but is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. Failure to comply with certain of such City covenants could cause interest on the Series 2015C Bonds to be includible in gross income for federal income tax purposes retroactively to the date of issuance ofthe Series 2015C Bonds. Ownership of the Series 2015C Bonds may result in other federal tax consequences to certain taxpayers, and we express no opinion regarding any such collateral consequences arising with respect to the Series 2015C Bonds.
Interest on the Series 2015C Bonds is not exempt from present State of Illinois income taxes. Ownership ofthe Series 2015C Bonds may result in other state and local tax consequences to certain taxpayers, and we express no opinion regarding any such collateral consequences arising with respect to the Series 2015C Bonds.
In rendering the foregoing opinion, we advise you that the enforceability (but not the validity or binding effect) of the Series 2015C Bonds and the Indenture (i) may be limited by any applicable bankruptcy, insolvency or other laws affecting the rights or remedies of creditors generally now or hereafter in effect and (ii) is subject to principles of equity in the event that equitable remedies are sought, either in an action at law or in equity.



F-2

In rendering this opinion, we have relied upon certifications of the City with respect to certain material facts within the City's knowledge. With respect to the exclusion, from gross income for Federal income tax purposes, of interest on the Series 2015C Bonds, we have relied on the verification report of Robert Thomas, CPA LLC, certified public accountants, regarding the computation of the arbitrage yield on the Series 2015C Bonds and of certain investments made with the proceeds ofthe Series 2015C Bonds.
This opinion is based upon laws, regulations, rulings and decisions in effect on the date hereof. We assume no responsibility for updating this opinion to take into account any event, action, interpretation or change of law occurring subsequent to the date hereof that may affect the validity of any of the opinions expressed herein. We express no opinion herein as to the accuracy, adequacy or completeness of any information furnished to any person in connection with any offer or sale ofthe Series 2015C Bonds.








































F-3

[Taxable Series 2015D Bonds)
ILetterhead of Co-Bond Counsel) [to be dated Closing Date]

City of Chicago Citigroup Global Markets Inc.,
Chicago, Illinois as representative of the underwriters named in
Zions Bank, a division of ZB, National the Bond Purchase Agreement dated January
Association, as trustee ,2016
Chicago, Illinois

Re: City of Chicago

General Obligation Refunding Bonds, Taxable Series 2015D

We have acted as bond counsel in connection with the issuance by the City of its fully registered General Obligation Refunding Bonds, Taxable Series 2015D, in the aggregate principal amount of
$ (the "Taxable Series 2015D Bonds"), dated the date hereof, due on January 1 of the years
and in the amounts and bearing interest as follows:
YEAR PRINCIPAL INTEREST
(JANUARY 1) AMOUNT RATE
20_ $ %
20_
20_
20_
20__
20_
20

The Taxable Series 2015D Bonds are authorized and issued pursuant to the provisions of Section 6 of Article VII ofthe Illinois Constitution of 1970 and by virtue of an ordinance adopted by the City Council of the City on the 241'1 day of September, 2015 (the "Bond Ordinance"), as supplemented by a
Notification of Sale dated January , 2016 (the "Notification of Sale"), and a Trust Indenture dated as
of January 1, 2016 (the "Indenture") between the City and Zions Bank, a division of ZB, National Association, as trustee (the "Trustee"). Capitalized terms used herein without definition shall have the meanings assigned to such terms in the Indenture.

The Taxable Series 2015D Bonds are subject to optional redemption prior to maturity in accordance with the Indenture.
In our capacity as bond counsel, we have examined, among other things, the following:
(a) certified copy ofthe proceedings of the City Council adopting the Bond Ordinance and authorizing, among other things, the execution and delivery ofthe Indenture and the issuance of the Taxable Series 2015D Bonds;





F-4

a certified copy of the Bond Ordinance, an executed copy ofthe Notification of Sale and an executed counterpart of the Indenture;
such other certifications, documents, showings and related matters of law as we have deemed necessary in order to render this opinion.
Based upon the foregoing we are of the opinion that:
The City has full power and authority and has taken all necessary corporate action to authorize the issuance ofthe Taxable Series 2015D Bonds and the execution and delivery ofthe Indenture.
The Indenture has been duly and lawfully executed and delivered by the City and, assuming the due authorization, execution and delivery by, and the binding effect on, the Trustee, the Indenture is a legal, valid and binding obligation of the City and, except as provided below, enforceable against the City in accordance with its terms.
The Taxable Series 2015D Bonds have been duly and validly authorized and issued in accordance with law and the Taxable Series 2015D Bonds, to the amount named, are valid and legally binding upon the City and, except as provided below, enforceable in accordance with their terms and the terms of the Indenture.
The Taxable Series 2015D Bonds are payable from any funds ofthe City legally available for such purpose, and all taxable property in the City is subject to the levy of taxes by the City to pay the same without limitation as to rate or amount. The Taxable Series 2015D Bonds are secured by the other moneys, securities and funds pledged under the Indenture.
Under present law, interest on the Taxable Series 2015D Bonds is includible in gross income ofthe owners thereof for federal income tax purposes. Ownership of the Taxable Series 2015D Bonds may result in other federal tax consequences to certain taxpayers, and we express no opinion regarding any such collateral consequences arising with respect to the Taxable Series 2015D Bonds.
Interest on the Taxable Series 2015D Bonds is not exempt from present State of Illinois income taxes. Ownership of the Taxable Series 2015D Bonds may result in other state and local tax consequences to certain taxpayers, and we express no opinion regarding any such collateral consequences arising with respect to the Taxable Series 2015D Bonds.
In rendering the foregoing opinion, we advise you that the enforceability (but not the validity or binding effect) of the Taxable Series 2015D Bonds and the Indenture (i) may be limited by any applicable bankruptcy, insolvency or other laws affecting the rights or remedies of creditors generally now or hereafter in effect and (ii) is subject to principles of equity in the event that equitable remedies are sought, either in an action at law or in equity.
In rendering this opinion, we have relied upon certifications of the City with respect to certain material facts within the City's knowledge and on the verification report of Robert Thomas, CPA LLC, certified public accountants regarding the computation of certain investments made with the proceeds of the Taxable Series 2015D Bonds.
This opinion is based upon laws, regulations, rulings and decisions in effect on the date hereof. We assume no responsibility for updating this opinion to take into account any event, action, interpretation or change of law occurring subsequent to the date hereof that may affect the validity of any



F-5

of the opinions expressed herein. We express no opinion herein as to the accuracy, adequacy or completeness of any information furnished to any person in connection with any offer or sale of the Taxable Series 2015D Bonds.





















































F-6

APPENDIX G REFUNDED AND INTEREST PAID BONDS
[This Page Intentionally Left Blank]
[TO BE PROVIDED]
Exhibit B-1 Supplemental Opinion of Co-Bond Counsel


January , 2016
Citigroup Global Markets Inc.,
Chicago, Illinois as Representative of the Underwriters named in the Bond Purchase Agreement described below (the "Underwriters")
City of Chicago
121 North LaSalle Street, 7th Floor Chicago, Illinois 60602

Re: City of Chicago
$500,000,000 General Obligation Bonds, Series 2015C (the "Series 2015CBonds")
Ladies and Gentlemen:

We have on this date delivered to you our approving opinion (the "Approving Opinion") in connection with the issuance by the City of Chicago (the "City") of the above-referenced obligations (the "Bonds "). The Bonds have been delivered this date to the Underwriters pursuant to the terms of the Bond Purchase Agreement dated January 12, 2016, between the City and the Underwriters (the "Bond Purchase Agreement"). Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Purchase Agreement.

Based upon our examination as Bond Counsel of the proceedings described in the Approving Opinion, we are of the opinion that:

1. Pursuant to an ordinance adopted by the City Council on the 24th
day of September, 2015, authorizing the issuance of the Bonds (as supplemented
by a Notification of Sale, the "Bond Ordinance "), the City has duly authorized,
executed and delivered the Bond Purchase Agreement, the Indenture and the
Undertaking (together with the Bond Purchase Agreement and the Indenture, the
"City Documents"), and, assuming the due authorization, execution, delivery and
the binding effect on the other parties thereto, each of the City Documents
constitutes a legal, valid and binding obligation of the City, enforceable against the
City in accordance with its respective terms, except that the enforceability of the
City Documents may be limited by bankruptcy, insolvency, moratorium,
reorganization and other similar laws affecting creditors' rights and by equitable
principles, whether considered at law or in equity, including the exercise of judicial
discretion.

2. Based upon our examination of such documents and questions of

law as we have deemed relevant in connection with the offering and sale of the Bonds under the circumstances described in the Official Statement relating to the Bonds and dated January 12, 2016, we are ofthe opinion that, under existing law, the Bonds are not required to be registered under the Securities Act of 1933, as amended, and the Bond Ordinance and the Trust Indenture are not required to be qualified under the Trust Indenture Act of 1939, as amended.

Our opinion represents our legal judgment based upon our review of the law and the facts that we deem relevant to render such opinion, and is not a guarantee of a result. This opinion is given as of the date hereof and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur.

This opinion is furnished by us as Bond Counsel to the City. No attorney-client relationship has existed or exists between our firm and the Underwriters in connection with the Bonds or by virtue of this opinion. This opinion is solely for the benefit of the Underwriters and the City and may not be used, quoted, relied upon or otherwise referred to for any other purpose or by any other person (including any person purchasing any of the Bonds from the Underwriters) without our prior written consent.

Very truly yours,
Exhibit B-2 Letter of Co-Bond Counsel


January , 2016
Citigroup Global Markets Inc.,
Chicago, Illinois as Representative of the Underwriters named in the Bond Purchase Agreement described below (the "Underwriters")
City of Chicago
121 North LaSalle Street, 7th Floor Chicago, Illinois 60602

Re: City of Chicago
$500,000,000 General Obligation Bonds, Series 2015C (the "Series 2015CBonds")
Ladies and Gentlemen:

We have acted as Bond Counsel in connection with the sale and issuance by the City of Chicago (the "City") of the above-referenced obligations (the "Bonds"). We have rendered our separate opinion, dated the date hereof, as to the validity, enforceability and tax status of interest on the Bonds. The Bonds have been delivered this date to the Underwriters pursuant to the terms of the Bond Purchase Agreement dated January 12, 2016, between the City and the Underwriters (the "Bond Purchase Agreement"). Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Bond Purchase Agreement.

We have not been engaged nor have we undertaken to review or verify the accuracy, completeness or sufficiency of the information contained in or appended to the Official Statement dated January 12, 2016 (the "Official Statement ") or other offering material relating to the Bonds, except that in our capacity as Bond Counsel in connection with the issuance of the Bonds we have reviewed the information contained in the Official Statement under the captions "Official Statement Summary," "The Bonds" (except for the information relating to The Depository Trust Company and its book-entry system and operations), "Security FOR the Bonds - General Obligation of the City" (except for any information referenced under such caption contained under the heading "Financial Discussion and Analysis" and in Appendix D - "Property Taxes") and Appendix A -"Summary of the Indenture," solely to determine whether such information and summaries conform to the Bonds, the ordinance adopted by the City Council of the City on the 24th day of September, 2015, authorizing the issuance of the Bonds (as
supplemented by the Notification of Sale dated January , 2016 delivered by the Chief
Financial Officer of the City, the "Bond Ordinance ") and the Trust Indenture. The purpose of our professional engagement was not to establish or confirm factual matters in the Official Statement, and we have not undertaken any obligation to verify independently any

of the factual matters set forth under these captions and reviewed by us. Subject to the foregoing, the summary descriptions in the Official Statement under such captions excepting those matters set forth above, as of the date of the Official Statement and as of the date hereof, insofar as such descriptions purport to describe or summarize certain provisions of the Bonds, the Bond Ordinance and the Trust Indenture, are accurate summaries of such provisions in all material respects. Further, we confirm the opinion attributed to us in the Official Statement and consent to the references to such opinion contained therein. In addition, the information in the Official Statement under the caption "Tax Matters" purporting to describe or summarize our opinion concerning certain federal tax matters relating to the Bonds has been reviewed by us and is an accurate summary in all material respects. Except as specifically described in this paragraph, we express no opinion herein with respect to and have not undertaken to determine independently the accuracy, fairness or completeness of any statements contained, appended or incorporated by reference in the Official Statement.

By acceptance of this letter you recognize and acknowledge that: (i) the preceding paragraph is not a legal opinion but is rather in the nature of observations based on certain limited activities performed by specific lawyers in our firm in our role as Bond Counsel to the City; (ii) the scope of those activities performed by us for purposes of delivering this letter was inherently limited and does not purport to encompass all activities necessary for compliance with applicable securities laws; (iii) those activities performed by us rely on third party representations, warranties, certifications, statements and opinions, including and primarily, representations, warranties and certifications made by the City, and are otherwise subject to the conditions set forth herein; (iv) we have not been engaged to act, and have not acted, as counsel to the Underwriters for any purpose in connection with the issuance of the Bonds; (v) no attorney-client relationship exists or has at any time existed between us and the Underwriters in connection with the Bonds or by virtue of this letter; and (vi) this letter is based upon our review of proceedings and other documents undertaken as part of our engagement with the City, and in order to deliver this letter we neither undertook any duties or responsibilities to the Underwriters nor conducted any activities in addition to those undertaken or conducted for the benefit of, and requested by, the City. Consequently, we make no representation that our review has been adequate for the Underwriters' purposes.

This letter is given as of the date hereof and we assume no obligation to revise or supplement this letter to reflect any facts or circumstances that may hereafter come to our attention. This letter is furnished by us as Bond Counsel to the City. This letter is solely for the benefit of the Underwriters and the City and may not be used, quoted, relied upon or otherwise referred to for any other purpose or by any other person (including any person purchasing any of the Bonds from the Underwriters) without our prior written consent.

Very truly yours,

Exhibit B-3
Letters of Special Pension Disclosure Counsel Letter to City [Letterhead of Chapman and Cutler llp] [to be dated Closing Date]


City of Chicago
121 North LaSalle Street
Chicago, Illinois 60602

Re: $500,000,000 City of Chicago
General Obligation Refunding Bonds, Series 2015C (the "Bonds")

Ladies and Gentlemen:

We have acted as special disclosure counsel to you, the City of Chicago (the "City "), solely in connection with the information contained under the caption "Financial Discussion and Analysis - Pensions" and in Appendix E — "Retirement Funds" (together, the "Pension Sections") of the Preliminary Official Statement dated January 5, 2016 (the "Preliminary Official Statement") and the Official Statement dated January 12, 2016 (the "Official Statement "), each relating to the Bonds issued by the City on this date.

In accordance with our understanding with the City, we have reviewed the Pension Sections, certificates of officers of the City and other appropriate persons, and such other records, reports, opinions and documents, and we have made such investigations of law, as we have deemed appropriate as a basis for the conclusion hereinafter expressed. As to facts material to the views expressed herein, we have, with your consent, relied upon oral or written statements or representations of officers or other representatives or agents of or consultants to the City and of or to the Municipal Employees' Annuity and Benefit Fund of Chicago, the Policemen's Annuity and Benefit Fund of Chicago, the Firemen's Annuity and Benefit Fund of Chicago, and the Laborers' and Retirement Board Employees' Annuity and Benefit Fund of Chicago (collectively, the "Retirement Funds "), including the representations and warranties of the City in the Bond Purchase Agreement dated January 12, 2016, with respect to the Bonds, between the City and Citigroup Global Markets Inc., on behalf of itself and the other underwriters named therein (collectively, the "Underwriters "). We have not independently verified such matters. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Official Statement.

In arriving at the conclusion hereinafter expressed, we are not expressing any opinion or view on, and with your permission are assuming and relying on, the validity,

accuracy and sufficiency of the records, reports, documents, certificates and opinions referred to above (including the accuracy of all factual matters represented and legal conclusions contained therein, including, without limitation, any representations and legal conclusions regarding the due authorization, issuance, delivery, validity and enforceability of the Bonds, the tax treatment of interest on the Bonds for federal income tax purposes, and the application of Bond proceeds in accordance with the authorization therefor). We have assumed that all records, reports, documents, certificates and opinions that we have reviewed, and the signatures thereto, are genuine.

We are not passing upon, and do not assume any responsibility for, the accuracy, completeness or fairness of any of the statements contained in the Pension Sections and make no representation that we have independently verified the accuracy, completeness or fairness of any such statements. In our capacity as special disclosure counsel to the City, to assist you in discharging your responsibility with respect to the Pension Sections, we participated in conferences and correspondence with representatives of the City, the City's attorneys, Co-Disclosure Counsel to the City, the Underwriters, counsel to the Underwriters, and other persons involved in the preparation of information for the Pension Sections, during which the contents of the Pension Sections and related matters were discussed and revised. The purpose of our professional engagement was not to establish or confirm factual matters set forth in the Pension Sections, and we have not undertaken any obligation to verify independently any of the factual matters set forth therein. Moreover, many of the determinations required to be made in the preparation of the Pension Sections involve matters of a non-legal nature. Based on our participation in the above-mentioned conferences and correspondence, and in reliance thereon and on our limited review of the records, reports, documents, certificates, statements, representations, warranties, opinions and matters mentioned above, without independent verification, we advise you as a matter of fact and not opinion that, during our engagement as special disclosure counsel to the City in connection with the Pension Sections, no facts came to the attention of the attorneys in our firm rendering legal services in connection with such limited role which caused us to believe that the Pension Sections (apart from the financial statements or other financial, operating, numerical, accounting or statistical data or forecasts, estimates, projections, assumptions or expressions of opinion, or matters of litigation contained or incorporated therein, as to which we do not express any conclusion or belief) contained as of the dates of the Preliminary Official Statement and the Official Statement or contains as of the date hereof any untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. No responsibility is undertaken or statement rendered herein with respect to any other portions of the Preliminary Official Statement or the Official Statement or any other disclosure document, materials or activity, or as to any information from another document or source referred to by or incorporated by reference in the Preliminary Official Statement or the Official Statement.

By acceptance of this letter you recognize and acknowledge that: (i) the preceding paragraph is not a legal opinion but is rather in the nature of negative observations based on certain limited activities performed by specific lawyers in our firm during our

engagement to the City as special disclosure counsel in connection with the Pension Sections; (ii) the scope of those activities performed by us for purposes of delivering this letter was inherently limited and does not purport to encompass all activities necessary for compliance with applicable securities laws; and (iii) those activities performed by us rely on third party representations, warranties, certifications, statements and opinions, including and primarily, representations, warranties and certifications made by the City, and are otherwise subject to the conditions set forth herein.
We express herein no opinion or belief herein with respect to the validity of the Bonds or the taxation thereof or of the interest thereon, and our expression of belief with respect to the Pension Sections assumes the validity of the Bonds and the tax treatment of the interest payable thereon for federal income tax purposes, all as set forth in the opinions of Co-Bond Counsel.

This letter is furnished by us in our limited capacity as special disclosure counsel to the City in connection with the Pension Sections. This letter may not be used, quoted, relied upon or otherwise referred to for any other purpose or by any other person (including any person purchasing any of the Bonds from the Underwriters) without our prior written consent, except that such letter may be referenced in the Preliminary Official Statement, the Official Statement and each of the Bond Purchase Agreements with respect to the Bonds and included in the transcript of proceedings for the Bonds. This letter is given as of the date hereof and we assume no obligation to revise or supplement this letter to reflect any facts or circumstances that may hereafter come to our attention.

Respectfully submitted,
Letter to Underwriters

[Letterhead of Chapman and Cutler llp]

[to be dated Closing Date]

Citigroup Global Markets Inc. as Representative of the Underwriters named in the Bond Purchase Agreement described below

Re: $500,000,000 City of Chicago
General Obligation Refunding Bonds, Series 2015C (the "Bonds")

Ladies and Gentlemen:
We have acted as special disclosure counsel to the City of Chicago (the "City"), solely in connection with the information contained under the caption "Financial Discussion and Analysis - Pensions" and in Appendix E — "Retirement Funds" (together, the "Pension Sections") ofthe Preliminary Official Statement dated January 5, 2016 (the "Preliminary Official Statement") and the Official Statement dated January 12, 2016 (the "Official Statement "), each relating to the Bonds issued by the City on this date.

In accordance with our understanding with the City, we have reviewed the Pension Sections, certificates of officers of the City and other appropriate persons, and such other records, reports, opinions and documents, and we have made such investigations of law, as we have deemed appropriate as a basis for the conclusion hereinafter expressed. As to facts material to the views expressed herein, we have, with your consent, relied upon oral or written statements or representations of officers or other representatives or agents of or consultants to the City and of or to the Municipal Employees' Annuity and Benefit Fund of Chicago, the Policemen's Annuity and Benefit Fund of Chicago, the Firemen's Annuity and Benefit Fund of Chicago, and the Laborers' and Retirement Board Employees' Annuity and Benefit Fund of Chicago (collectively, the "Retirement Funds "), including the representations and warranties of the City in the Bond Purchase Agreement dated January 12, 2016, with respect to the Bonds, between the City and Citigroup Global Markets Inc, on behalf of itself and the other underwriters named therein (collectively, the " Underwriters "). We have not independently verified such matters. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Official Statement.

In arriving at the conclusion hereinafter expressed, we are not expressing any opinion or view on, and with your permission are assuming and relying on, the validity, accuracy and sufficiency of the records, reports, documents, certificates and opinions referred to above (including the accuracy of all factual matters represented and legal conclusions contained therein). We have assumed that all records, reports, documents, certificates and opinions that we have reviewed, and the signatures thereto, are genuine.

We are not passing upon, and do not assume any responsibility for, the accuracy, completeness or fairness of any of the statements contained in the Pension Sections and make no representation that we have independently verified the accuracy, completeness or fairness of any such statements. In our capacity as special disclosure counsel to the City, to assist it in discharging its responsibility with respect to the Pension Sections, we participated in conferences and correspondence with your representatives, representatives of the City, the City's attorneys, Co-Disclosure Counsel to the City, counsel to the Underwriters, and other persons involved in the preparation of information for the Pension Sections, during which the contents of the Pension Sections and related matters were discussed and revised. The purpose of our professional engagement was not to establish or confirm factual matters set forth in the Pension Sections, and we have not undertaken any obligation to verify independently any of the factual matters set forth therein. Moreover, many of the determinations required to be made in the preparation of the Pension Sections involve matters of a non-legal nature. Based on our participation in the above-mentioned conferences and correspondence, and in reliance thereon and on our limited review of the records, reports, documents, certificates, statements, representations, warranties, opinions and matters mentioned above, without independent verification, we advise you as a matter of fact and not opinion that, during our engagement as special disclosure counsel to the City in connection with the Pension Sections, no facts came to the attention of the attorneys in our firm rendering legal services in connection with such limited role which caused us to believe that the Pension Sections (apart from the financial statements or other financial, operating, numerical, accounting or statistical data or forecasts, estimates, projections, assumptions or expressions of opinion, or matters of litigation contained or incorporated therein, as to which we do not express any conclusion or belief) contained as of the dates of the Preliminary Official Statement and the Official Statement or contains as of the date hereof any untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. No responsibility is undertaken or statement rendered herein with respect to any other portions of the Preliminary Official Statement or the Official Statement or any other disclosure document, materials or activity, or as to any information from another document or source referred to by or incorporated by reference in the Preliminary Official Statement or the Official Statement.

By acceptance of this letter you recognize and acknowledge that: (i) the preceding paragraph is not a legal opinion but is rather in the nature of negative observations based on certain limited activities performed by specific lawyers in our firm during our engagement to the City as special disclosure counsel in connection with the Pension Sections; (ii) the scope of those activities performed by us for purposes of delivering this letter was inherently limited and does not purport to encompass all activities necessary for compliance with applicable securities laws; (iii) those activities performed by us rely on third party representations, warranties, certifications, statements and opinions, including and primarily, representations, warranties and certifications made by the City, and are otherwise subject to the conditions set forth herein; (iv) we have not been engaged to act, and have not acted, as your counsel for any purpose in connection with the issuance of the Bonds; (v) no attorney-client relationship exists or has at any time existed between us in

connection with the Bonds or by virtue of this letter; and (vi) this letter is based upon our review of proceedings and other documents undertaken as part of our engagement with the City, and in order to deliver this letter we neither undertook any duties or responsibilities to you nor conducted any activities in addition to those undertaken or conducted for the benefit of, and requested by, the City. Consequently, we make no representation that our review has been adequate for your purposes.
We express herein no opinion or belief herein with respect to the validity of the Bonds or the taxation thereof or of the interest thereon, and our expression of belief with respect to the Pension Sections assumes the validity of the Bonds and the tax treatment of the interest payable thereon for federal income tax purposes, all as set forth in the opinions of Co-Bond Counsel.

This letter is furnished by us in our limited capacity as special disclosure counsel to the City in connection with the Pension Sections and is solely for the benefit of the Underwriters. This letter may not be used, quoted, relied upon or otherwise referred to for any other purpose or by any other person (including any person purchasing any of the Bonds from the Underwriters) without our prior written consent, except that such letter may be referenced in the Preliminary Official Statement, the Official Statement and each of the Bond Purchase Agreements with respect to the Bonds and included in the transcript of proceedings for the Bonds. This letter is given as of the date hereof and we assume no obligation to revise or supplement this letter to reflect any facts or circumstances that may hereafter come to our attention.

Respectfully submitted,
Exhibit C
Opinion of Corporation Counsel of the City January 21, 2016

Citigroup Global Markets Inc., as Representative of the Underwriters named in the Bond Purchase Agreement, dated January 12, 2016, between such Underwriters and the City of Chicago



Ladies and Gentlemen:

This opinion is given to you pursuant to Section 10(a)(vi) of that certain Bond Purchase Agreement dated January 12, 2016 (the "Bond Purchase Agreement"), between the City of Chicago (the "City") and Citigroup Global Markets Inc., as representative of a group of underwriters (the "Representative"), with respect to the purchase of the City of Chicago General Obligation Bonds, Refunding Series 2015C between the City and the Representative (the "Bonds"). The Bonds are being issued in accordance with the Trust Indenture between the City and Zions First, a division of ZB, National Bank, as trustee (the "Trustee") dated as of January 1, 2016 (the "Indenture"). The Bonds are authorized by an ordinance of the City adopted by the City Council of the City (the "City Council") on September 24, 2015 (the "Ordinance"). Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to them in the Bond Purchase Agreements.

In connection with the issuance of the Bonds, I have caused to be examined a certified copy of the record of proceedings of the City Council pertaining to the issuance of the Bonds by the City, and executed counterparts, where applicable, of the following documents:
the Ordinance;
the Indenture;
the Bond Purchase Agreement;
that certain Continuing Disclosure Undertaking dated the date hereof pursuant to the requirements of Section (b)(5) of Rule 15c-12 of the Securities and Exchange Commission (the "Undertaking"); and
Escrow Agreements dated the date hereof between the City and Amalgamated Bank of Chicago, U.S. Bank National Association, Seaway National Bank of Chicago, Wells Fargo Bank, N.A., The Bank of New York Mellon Trust Company, N.A., and Deutsche Bank National Trust Company, each as as escrow agents (the "Escrow

Agreements");

On the basis of such examination and review of such other information, records and documents as was deemed necessary or advisable, I am of the opinion that:
The City is a home rule unit of local government duly organized and existing under the Constitution and laws of the State of Illinois with full power and authority, among other things, to adopt the Ordinance, to authorize the issuance of the Bonds, and to execute and deliver the Indenture, the Bond Purchase Agreement, the Undertaking and the Escrow Agreements.
The Bond Purchase Agreement, the Indenture, the Undertaking and the Escrow Agreements have been duly authorized, executed and delivered by, and the Ordinance has been duly adopted by, the City, and, assuming the due execution and delivery by the other parties thereto, as appropriate, such instruments constitute legal and valid obligations of the City in each case enforceable in accordance with their respective terms except as may be limited by bankruptcy, insolvency and other laws affecting creditors' rights or remedies and the availability of equitable remedies generally.
To my knowledge, compliance with the provisions of the Bonds, the Ordinance, the Indenture, the Bond Purchase Agreement, the Undertaking and the Escrow Agreements does not conflict in a material manner with, or constitute a material breach of or material default under, any applicable law, administrative regulation, court order or consent decree of the State of Illinois, or any department, division, agency or instrumentality thereof or of the United States of America or any ordinance, agreement or other instrument to which the City is a party or is otherwise subject.
To my knowledge, all approvals, consents and orders of and filings (except with respect to state "blue sky" or securities laws) with any governmental authority, board, agency or commission having jurisdiction which would constitute conditions precedent to the performance by the City of its obligations under the Ordinance, the Indenture, the Bond Purchase Agreement, the Undertaking, the Escrow Agreements and the Bonds have been obtained.
There is no litigation or proceeding pending, or to my knowledge, threatened, materially affecting the existence of the City or seeking to restrain or enjoin the issuance of the Bonds, or contesting the validity or enforceability of the Bonds, the Ordinance, the Indenture, the Bond Purchase Agreement, the Undertaking, or the Escrow Agreements or the completeness or accuracy of the Official Statement, or the powers of the City or its authority with respect to the Bonds, the Ordinance, the Indenture, the Bond Purchase Agreement or the Undertaking.

Nothing has come to my attention which would lead me to believe that the Official Statement (excluding information under the captions "THE BONDS - Book-Entry System" relating to the Depository Trust Company ("DTC"), "RATINGS," "UNDERWRITING," "TAX MATTERS," "APPENDIX B-ECONOMIC AND DEMOGRAPHIC INFORMATION" and "APPENDIX F - OPINIONS OF CO-BOND COUNSEL,"

information sourced to sources other than the City or departments thereof, any information in or omitted from the Official Statement relating to DTC, any information in or omitted from the Official Statement relating to any information furnished by the Underwriters for use in the Official Statement, the financial statements and all other financial and statistical data contained in the Official Statement, including the Appendices thereto) contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading in any material respect.
No opinion is expressed as to any "blue sky" or other securities laws or as to the laws regarding taxation of any state or the United States of America, or any disclosure or compliance related thereto.

The statements contained herein are made in an official capacity and not personally and no personal responsibility shall derive from them. Further, the only opinions that are expressed are the opinions specifically set forth herein, and no opinion is implied or should be inferred as to any other matter or transaction.


No one other than you shall be entitled to rely on this opinion.

Very truly yours,




Stephen R. Patton Corporation Counsel
Citigroup Global Markets Inc. Chicago, Illinois
Exhibit D Opinion of Co-Disclosure Counsel [to be dated Closing Date]


City of Chicago Chicago, Illinois

Ladies and Gentlemen:
We have acted as co-disclosure counsel to the City of Chicago, Illinois (the "City")
in connection with the issuance of $ aggregate principal amount of its General
Obligation Refunding Bonds, Series 2015C (the "Bonds") offered pursuant to the Bond Purchase Agreement dated January 12, 2016 (the "Bond Purchase Agreement"), between the City and Citigroup Global Markets Inc., on behalf of itself and the other underwriters named in the Bond Purchase Agreement. Capitalized terms used herein without definition shall have the meanings assigned to such terms in the Bond Purchase Agreement.
We have participated in the preparation or review of the Bond Purchase Agreement and the Continuing Disclosure Undertaking dated the date hereof, from the City (the "Undertaking"), (collectively, the "Documents'''). We have also participated in the preparation or review of the Preliminary Official Statement dated January 5, 2016 (the "Preliminary Official Statement") and the Official Statement dated January 12, 2016 (the "Official Statement") relating to the Bonds.
We have conferred with Co-Bond Counsel, Special Pension Disclosure Counsel and Corporation Counsel of the City and reviewed the opinions or letters rendered by such counsel pursuant to the Bond Purchase Agreement and we have conferred with certain officials, employees and agents of the City, including the City's co-municipal advisors with respect to the issuance of the Bonds (the "Co-Municipal Advisors"). We also have examined originals, executed counterparts or copies represented to have been validly executed of such other agreements, documents, proceedings, records, instruments and certificates, certificates of public authorities and such matters of law as we have deemed necessary for the purpose of rendering this opinion. We have assumed the genuineness of all signatures, the legal capacity of all individuals who have executed the Documents and all other documents we have reviewed, the authenticity of all documents submitted to us as originals and the conformity to original documents of all documents submitted to us as certified, photostatic, reproduced or conformed copies.
Based upon and subject to our examination as described above and subject to the qualifications set forth herein, we are of the opinion that:
1. The Bonds constitute exempt securities within the meaning of Section 3(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), and Section 304(a)(4)(A) ofthe Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"),

and it is not necessary, in connection with the public reoffering and sale of the Bonds, to register the Bonds under said Securities Act or qualify the Ordinance under the Trust Indenture Act.
The Undertaking complies with the requirements of Section (b)(5) of Rule 15c2-12 in effect as of the date hereof.
The information contained in the Preliminary Official Statement and Official Statement under the caption entitled "SECONDARY MARKET DISCLOSURE" (but excluding the information contained in such caption under the sub-caption "— Corrective Action Related to Certain Bond Disclosure Requirements") as of the respective dates of the Preliminary Official Statement and the Official Statement and as of the date hereof, insofar as such information purports to describe or summarize certain provisions of the Undertaking, presents a fair and accurate summary of the information purported to be shown in all material respects.
We are not passing upon, and assume no responsibility for, the accuracy, completeness or fairness of the statements contained in the Preliminary Official Statement or the Official Statement. During the preparation of the Preliminary Official Statement and the Official Statement, however, we examined various documents and other certificates, and participated in conferences with representatives of the City, the Co-Municipal Advisors and Co-Bond Counsel, Special Pension Disclosure Counsel and Corporation Counsel of the City, at which conferences the contents of the Preliminary Official Statement and the Official Statement and related matters were discussed. We have also made the examination described above of the certificates and other documents delivered pursuant to the Bond Purchase Agreement. On the basis of the foregoing, but without having undertaken to determine independently the accuracy or completeness of the statements contained in the Preliminary Official Statement or the Official Statement, we have no reason to believe that either the Preliminary Official Statement, as of its date or as of the date of the Bond Purchase Agreement, or the Official Statement, as of its date or as of the date of this opinion, contained or contains any untrue statement of a material fact or omitted or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, that we express no view as to (i) any financial, actuarial, forecast, technical, operational or statistical data included in the Preliminary Official Statement or the Official Statement including the financial statements of the City contained in Appendix C, the demographic and economic information in Appendix B and the financial and actuarial data concerning the retirement funds for City employees contained in Appendix E, (ii) the descriptions of DTC and the operation of the book-entry system operated by DTC, included in the Preliminary Official Statement or the Official Statement or (iii) information contained in the Preliminary Official Statement or Official Statement under the captions "INDEPENDENT AUDITORS," "CO-MUNICIPAL ADVISORS, SPECIAL ADVISOR ON RATING STRATEGY AND INDEPENDENT REGISTERED MUNICIPAL ADVISOR," "UNDERWRITING," and "TAX MATTERS," or any other information therein relating to the tax-exempt status of the Bonds, including Appendix F.
We assume no responsibility for updating this opinion to take into account any

event, action, interpretation or change of law occurring subsequent to the date hereof that may affect the validity of any of the opinions expressed herein. This opinion is furnished by us solely for the benefit of the addressees for use in connection with the transactions contemplated by the Bond Purchase Agreement and it may not be furnished or quoted to, or relied upon by, any other person, without our prior written consent.
Respectfully submitted,
Exhibit E
Representation Letter
City of Chicago
Department of Finance
121 North LaSalle Street, 7th Floor
Chicago, Illinois 60602
Attn.: Deputy Comptroller of Financial Policy
Citigroup Global Markets Inc. as Representative of the Underwriters named in the Bond Purchase Agreement, dated January 12, 2016, between such Underwriters and the City of Chicago


Pursuant to the Bond Purchase Agreement dated January 12, 2016 (the "Purchase Agreement"), among the City of Chicago (the "City") and Citigroup Global Markets Inc., as representative (the "Representative") of the underwriters named therein (each an "Underwriter") relating to the City's General Obligation Refunding Bonds, Series 2015C (the "Bonds"), each of the undersigned Underwriters severally represents to the City that:
Neither the Underwriter, nor any Affiliate thereof is listed on any of the following lists maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the Bureau of Industry and Security of the U.S. Department of Commerce, the U.S. Department of State or their successors, or on any other list of persons or entities with which the City may not do business under any applicable law, rule, regulation, order or judgment: the Specially Designated Nationals List, the Denied Persons List, the Unverified List, the Entity List, the List of Statutorily Debarred Parties and the Excluded Parties List.
For purposes of this representation, "Affiliate," when used to indicate a relationship with a specified person or entity, means a person or entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified person or entity, and a person or entity shall be deemed to be controlled by another person or entity, if controlled in any manner whatsoever that results in control in fact by that other person or entity (or that other person or entity and any persons or entities with whom that other person or entity is acting jointly or in concert), whether directly or indirectly and whether through share ownership, a trust, a contract or otherwise.
The undersigned Underwriters agree that in the event that any Underwriter or any of its Affiliates appears on any of the lists described in paragraph (1) above, at any time prior to the Closing (as defined in the Purchase Agreement) with respect to the Bonds, that Underwriter shall be deemed to have submitted to the Representative its Withdrawal From Agreement Among Underwriters.
Each undersigned Underwriter understands and agrees that it is required to and will comply with the provisions of Chapter 2-56 of the Municipal Code of Chicago. Pursuant to Section 2-56-090 of the Municipal Code of Chicago, it shall be the duty of each Underwriter to cooperate with the inspector general in any investigation or hearing undertaken pursuant to Chapter 2-56. Every Underwriter shall report, directly and

without undue delay, to the City's inspector general any and all information concerning conduct by any person which such Underwriter knows to involve corrupt activity, pursuant to Section 2-156-018(b) of the Municipal Code of Chicago. Any Underwriter's knowing failure to report corrupt activity as required in subsection (b) of Section 2-156-018 of the Municipal Code of Chicago, shall constitute an event of default under the Purchase Agreement. For purposes of subsection (b) of Section 2-156-018 of the Municipal Code of Chicago, "corrupt activity" shall mean any conduct set forth in subparagraph (a)(1), (2) or (3) of Section 1-23-020 of the Municipal Code of Chicago:
bribery or attempted bribery, or its equivalent under any local, state or federal law, of any public officer or employee of the City or of any sister agency; or
theft, fraud, forgery, perjury, dishonesty or deceit, or attempted theft, fraud, forgery, perjury, dishonesty or deceit, or its equivalent under any local, state or federal law, against the City or of any sister agency; or
conspiring to engage in any of the acts set forth in items (1) or (2) of above.
The Underwriters (individually and collectively) agree and covenant that no payment, gratuity or offer of employment shall be made in connection with the Purchase Agreement, by or on behalf of a subcontractor to the Underwriter or any higher-tier subcontractor or any person associated therewith, as an inducement for the award of a subcontract or order related to this Purchase Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Representation Letter in connection with the Bonds to be executed by their duly authorized representatives as of the date written below.
Dated: January 21, 2016

CITIGROUP GLOBAL MARKETS INC. CABRERA CAPITAL MARKETS LLC By:
Its: Man^irig^rjirector^^^ (J Its:
PNC CAPITAL MARKETS LLC By: BACKSTROM MCCARLEY BERRY & CO., LLC By:
Its: Its:

DREXEL HAMILTON, LLC By: HARVESTONS SECURITIES, INC. By:
Its: Its:

NORTH SOUTH CAPITAL LLC By: PODESTA & CO. By:
Its: Its:

IN WITNESS WHEREOF, the parties hereto have caused this Representation Letter in connection with the Bonds to be executed by their duly authorized representatives as of the date written below.
Dated: January 21, 2016

CITIGROUP GLOBAL MARKETS INC. By: CABRERA CAPITAL MARKETS LLC By:
Its: Managing Director Its:
PNC CAPITAL MARKETS LLC By: AdC Its: TW(1Y>/ BACKSTROM MCCARLEY BERRY & CO., LLC By: Its:
DREXEL HAMILTON, LLC By: HARVESTONS SECURITIES, INC. By:
Its: Its:

NORTH SOUTH CAPITAL LLC By: PODESTA & CO. By:
Its: Its:

IN WITNESS WHEREOF, the parties hereto have caused this Representation Letter in connection with the Bonds to be executed by their duly authorized representatives as of the date written below.
Dated: January 21, 2016

CITIGROUP GLOBAL MARKETS INC. By: CABRERA CAPITAL MARKETS LLC By:
Its: Managing Director Its:
PNC CAPITAL MARKETS LLC By: BACKSTROM MCCARLEY BERRY & CO., LLC By:
Its: Its:

DREXEL HAMILTON, LLC By: ^^L^^ HARVESTONS SECURITIES, INC. By:
its: vice peerSib&jT Its:

NORTH SOUTH CAPITAL LLC By: PODESTA & CO. By:
Its: Its:


IN WITNESS WHEREOF, the parties hereto have caused this Representation Letter in connection with the Bonds to be executed by their duly authorized representatives as of the date written below.

Dated: January 21, 2016

CITIGROUP GLOBAL MARKETS INC. By: CABRERA CAPITAL MARKETS LLC By:
Its: Managing Director Its:
PNC CAPITAL MARKETS LLC By: BACKSTROM MCCARLEY BERRY & CO., LLC By:
Its: Its:

DREXEL HAMILTON, LLC By: HARVESTONS SECURITIES, INC. By:
Its: . . Its:

NORTHSOUTH CAPITAL LLC By: (laJ?0,(3/Jrb PODESTA & CO. By:
Its: ^3 President Its:

IN WITNESS WHEREOF, the parties hereto have caused this Representation Letter in connection with the Bonds to be executed by their duly authorized representatives as of the date written below.

Dated: January 21, 2016

CITIGROUP GLOBAL MARKETS INC. By: CABRER>£€APITAL MARKETS LLC
Its: Managing Director Its: Chief Operating /afficer
PNC CAPITAL MARKETS LLC By: BACKSTROM MCCARLEY BERRY & CO., LLC By:
Its: Its:

DREXEL HAMILTON, LLC By: HARVESTONS SECURITIES, INC. By:
Its: Its:

NORTH SOUTH CAPITAL LLC By: PODESTA & CO. By:
Its: Its:

IN WITNESS WHEREOF, the parties hereto have caused this Representation Letter in connection with the Bonds to be executed by their duly authorized representatives as of the date written below.
Dated: January 21, 2016

CITIGROUP GLOBAL MARKETS INC. By: CABRERA CAPITAL MARKETS LLC By:
Its: Managing Director Its:
PNC CAPITAL MARKETS LLC By: BACKSTROM MCCARLEY BERRY & By: /-"tC-^t/V-u--^*^
Its: Its: Managing Director \

DREXEL HAMILTON, LLC By: HARVESTONS SECURITIES, INC. By:
Its: Its:

NORTH SOUTH CAPITAL LLC By: PODESTA & CO. By:
Its: Its:

IN WITNESS WHEREOF, the parties hereto have caused this Representation Letter in connection with the Bonds to be executed by their duly authorized representatives as of the date written below.

Dated: January 21, 2016

CITIGROUP GLOBAL MARKETS INC. By: CABRERA CAPITAL MARKETS LLC Bv:
Its: Managing Director Its:
PNC CAPITAL MARKETS LLC By: BACKSTROM MCCARLEY BERRY & CO., LLC By:
Its: Its:

DREXEL HAMILTON, LLC By: HARVESTONS SECURITIES, INC. By: 04-
Its: Its: President/CEO ~

NORTH SOUTH CAPITAL LLC By: PODESTA & CO. By:
Its: Its:

IN WITNESS WHEREOF, the parties hereto have caused this Representation Letter in connection with the Bonds to be executed by their duly authorized representatives as of the date written below.
Dated: January 21, 2016

CITIGROUP GLOBAL MARKETS INC. By: CABRERA CAPITAL MARKETS LLC Bv:
Its: Managing Director Its:
PNC CAPITAL MARKETS LLC Bv: BACKSTROM MCCARLEY BERRY & CO., LLC By:
Its: Its:

DREXEL HAMILTON, LLC By: HARVESTONS SECURITIES, INC. By:
Its: Its:

NORTH SOUTH CAPITAL LLC By: PODESTA & CO. Bv: duuA M>&-
Its: Its:
Exhibit 2

Official Statement Dated January 12,2016
NEW ISSUE-GLOBAL BOOK ENTRY
Subject to compliance by the City of Chicago with certain covenants, in the respective opinions of Co-Bond Counsel, under present law, interest on the Bonds is not included in the gross income of their owners for federal income tax purposes and thus is exempt from present federal income taxes based on gross income. Interest on the Bonds is not an item of tax preference in computing the alternative minimum tax on individuals and corporations, but is taken into account in computing an adjustment used to determine the alternative minimum tax for certain corporations. Interest on the Bonds is not exempt from present Illinois income taxes. See "TAX MATTERS" herein for a more complete discussion.
$500,000,000 CITY OF CHICAGO General Obligation Refunding Bonds Series 2015C
Due: January 1, as shown on the inside front cover
The General Obligation Refunding Bonds, Series 2015C (the "Bonds") are issuable as fully registered bonds and will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, New York ("DTC"). DTC will act as securities depository for the Bonds. Purchasers ofthe Bonds will not receive certificates representing their interests in the Bonds purchased. Ownership by the beneficial owners of the Bonds will be evidenced by book-entry only. The Bonds are issuable in denominations of $5,000 or any integral multiple thereof.
Interest on the Bonds will accrue from the date of issuance and be payable on each January 1 and July 1, commencing July 1, 2016. Principal of and interest on the Bonds will be paid by Zions Bank, a division of ZB, National Association, Chicago, Illinois, as trustee under the Indenture described herein, to DTC, which in turn will remit such principal and interest payments to its participants for subsequent disbursement to the beneficial owners of the Bonds. As long as Cede & Co. is the registered owner as nominee of DTC, payments on the Bonds will be made to such registered owner, and disbursal of such payments will be the responsibility of DTC and its participants. See "THE BONDS — Book-Entry System."
The proceeds of the Bonds will be used to (i) refund or pay interest on all or a portion of certain outstanding general obligation bonds of the City; (ii) fund certain capitalized interest on the Bonds; and (iii) pay costs of issuance ofthe Bonds. See "PLAN OF FINANCING" and "SOURCES AND USES OF FUNDS."
The Bonds are subject to redemption prior to maturity as described herein. See "THE BONDS — Redemption."
For maturities, principal amounts, interest rates, yields, prices and CUSIP numbers of the Bonds, see the inside front cover.
The Bonds are direct and general obligations of the City and all taxable property in the City is subject to the levy of ad valorem property taxes to pay the Bonds and the interest thereon without, limitation as to rate or amount. The City has pledged its full faith and credit for the payment of the principal of and interest on the Bonds. See "SECURITY FOR THE BONDS" herein.
Prospective investors should read this Official Statement in its entirety prior to making an investment decision to purchase the Bonds.
The Bonds are being offered when, as and if issued, and subject to the delivery of approving legal opinions by Ice Miller LLP, Chicago, Illinois, and Cotillas and Associates, Chicago, Illinois, Co-Bond Counsel, and to certain other conditions. Certain legal matters will be passed on for the City by (i) its Corporation Counsel, (ii) in connection with the preparation of this Official Statement, Pugh, Jones & Johnson, P.C., Chicago, Illinois, and Shanahan & Shanahan LLP, Chicago, Illinois, Co-Disclosure Counsel to the City, and (iii) in connection with certain pension matters described in this Official Statement, Chapman and Cutler LLP, Chicago, Illinois, Special Disclosure Counsel to the City. Certain legal matters ivill be passed on for the Underwriters by Kulak Rock LLP, Chicago, Illinois, Undertvriters' Counsel. It is expected that the Bonds will be available for delivery through the facilities of DTC on or about January 21, 2016.

Cabrera Capital Markets, LLC Backstrom McCarley Berry & Co., LLC North South Capital LLC

PNC Capital Markets LLC Harvestons Securities, Inc. Podesta & Co.
Dated: January 12, 2016
MATURITIES, AMOUNTS, INTEREST RATES, YIELDS, PRICES AND CUSIP NUMBERS
City of Chicago General Obligation Refunding Bonds Series 2015C
Maturity (January 1)
Principal Amount
2020
2021
2022
2023
2024
2025
2026
2027f
2028f
2029f
2030f
2031*
S 6,635,000 7,695,000 79,930,000 78,965,000 78,530,000 63,285,000 54,340,000 11,415,000 4,555,000 4,895,000 1,505,000 3,595,000
5.000% 5.000% 5.000% 5.000% 5.000% 5.000% 5.000% 5.000% 5.000% 5.000% 5.000% 5.000%
3.530% 3.630% 3.830% 4.000% 4.125%) 4.220%) 4.310% 4.390% 4.490% 4.560% 4.610% 4.670%
105.366%. 106.147% 106.165% 106.008% 105.873% 105.758% 105.530% 104.870% 104.051%) 103.483% 103.080% 102.598%
167486WS4 167486WT2 167486WU9 167486WV7 167486WW5 167486WX3 167486WY1 167486WZ8 167486XA2 167486XB0 167486XC8 167486XD6
$14,425,000f 5.000% Term Bonds due January 1, 2035, Yield 4.820%, Price 101.405% CUSIP: 167486XE4 $90,230,000t 5.000% Term Bonds due January 1, 2038, Yield 4.875%, Price 100.972% CUSIP: 167486XF1

* Priced to the first optional redemption date of January 1, 2026.

























* Copyright 2016, American Bankers Association. CUSIP data herein are provided by Standard & Poor's, CUSIP Service Bureau, a Division of The McGraw-Hill Companies, Inc. The CUSIP numbers listed are being provided solely for the convenience ofthe bondholders only at the time of sale of the Bonds and the City does not make any representation with respect to such numbers or undertake any responsibility for their accuracy now or at any time in the future. The CUSIP number for a specific maturity is subject to change after the sale of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result ofthe procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds.

CITY OF CHICAGO

MAYOR
Rahm Emanuel
CITY TREASURER
Kurt A. Summers, Jr.
CITY CLERK
Susana A. Mendoza
CITY COUNCIL COMMITTEE ON FINANCE
Edward M. Burke, Chairman
CHIEF FINANCIAL OFFICER
Carole L. Brown
CITY COMPTROLLER
Daniel Widawsky
BUDGET DIRECTOR
Alexandra Holt
CORPORATION COUNSEL
Stephen R. Patton, Esq.
CO-BOND COUNSEL
Ice Miller LLP Chicago, Illinois
Cotillas and Associates Chicago, Illinois
CO-DISCLOSURE COUNSEL
Pugh,Jones & Johnson, P.C. Chicago, Illinois
Shanahan & Shanahan LLP Chicago, Illinois
SPECIAL DISCLOSURE COUNSEL
Chapman and Cutler LLP Chicago, Illinois
CO-MUNICIPAL ADVISORS
TKG & Associates LLC Public Alternative Advisors, LLC

Certain information contained in, or incorporated by reference in, this Official Statement has been obtained by the City of Chicago (the "City") from The Depository Trust Company and other sources that are deemed reliable. No representation or warranty is made, however, as to the accuracy or completeness of such information by the Underwriters or the City. The Underwriters have provided the following sentence for inclusion in this Official Statement: The Underwriters reviewed the information in this Official Statement in accordance with, and as part of, their respective responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. This Official Statement is being used in connection with the sale of securities as referred to herein and may not be used, in whole or in part, for any other purpose. The delivery of this Official Statement at any time does not imply that information herein is correct as of any time subsequent to its date.
No dealer, broker, salesperson or any other person has been authorized by the City or the Underwriters to give any information or to make any representation other than as contained in this Official Statement in connection with the offering ofthe Bonds described herein and, if given or made, such other information or representation must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy any securities other than those described on the cover page, nor shall there be any offer to sell, solicitation of an offer to buy or sale of such securities in any jurisdiction in which it is unlawful to make such offer, solicitation or sale. Neither this Official Statement nor any statement that may have been made verbally or in writing is to be construed as a contract with the registered or beneficial owners ofthe Bonds.
This Official Statement, including the Appendices (except for certain information in (i) APPENDIX B—"ECONOMIC AND DEMOGRAPHIC INFORMATION" and (ii) "Source Information" as defined and used in APPENDIX E—"RETIREMENT FUNDS," all of which is sourced to parties other than the City), contains certain opinions, estimates and forward-looking statements and information, including the estimates and projections set forth under the caption "FINANCIAL DISCUSSION AND ANALYSIS—General Fund—General Fund Financial Forecasts" that arc based on the City's beliefs as well as assumptions made by and information currently available to the City. Such opinions, estimates, projections and forward-looking statements set forth in this Official Statement were not prepared with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view ofthe City, were prepared on a reasonable basis, reflect the best currently available estimates and judgments, and present, to the best of the City's knowledge and belief, the expected course of action and the expected future financial performance ofthe City. However, this information is not fact and should not be relied upon as being necessarily indicative of future results. Readers of this Official Statement arc cautioned not to place undue reliance on such opinions, statements or prospective financial information.
The prospective financial information set forth in this Official Statement, except for certain information sourced to parties other than the City, is solely the product ofthe City. Neither the City's independent auditors, nor any other independent auditors, have compiled, examined, or performed any procedures with respect to, or been consulted in connection with the preparation of, the prospective financial information and forward-looking statements contained herein. The City's independent auditors assume no responsibility for the content of" the prospective financial information set forth in this Official Statement, including any 2015 year-end estimates and 2016-2018 projections, disclaim any association with such prospective financial information, and have not, nor have any other independent auditors, expressed any opinion or any other form of assurance on such information or its achicvability.
References to web site addresses presented in this Official Statement are for informational purposes only and may be in the form of a hyperlink solely for the reader's convenience. Unless specified otherwise, such web sites and the information or links contained therein arc not incorporated into, and arc not part of, this Official Statement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE.
THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAS THE INDENTURE BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF LAW OF THE STATES IN WHICH THE BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF.
IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE BONDS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING. IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE PRICES AND OTHER TERMS RESPECTING THE OFFERING AND SALE OF THE BONDS MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITERS AFTER THE BONDS ARE RELEASED FOR SALE, AND THE BONDS MAY BE OFFERED AND SOLD AT PRICES OTHER THAN THE INITIAL OFFERING PRICES, INCLUDING SALES TO DEALERS WHO MAY SELL THE BONDS INTO INVESTMENT ACCOUNTS.

OFFICIAL STATEMENT SUMMARY
This summary is subject in all respects to .the more complete information and definitions contained in this Official Statement. Prospective investors are cautioned not to rely solely upon this summaty when considering whether to purchase the Bonds. Prospective investors should review this Official Statement in its entirety prior to purchasing the Bonds.
THE ISSUER City of Chicago (the "City"). Sec "THE CITY."
THE BONDS $500,000,000 City of Chicago General Obligation Refunding Bonds, Scries
2015C (the "Bonds"). The Bonds will be dated the dale of their delivery and mature in the principal amounts and on the dates as set forth on the inside cover of this Official Statement. See "THE BONDS."
PAYMENT OF INTEREST Interest on the Bonds will accrue from the date of issuance and be payable on
each January 1 and July 1, commencing July 1, 2016. The Bonds will bear interest at the rates per year as set forth on the inside cover of this Official Statement. Interest on the Bonds is computed on the basis of a 360-day year consisting of twelve 30-day months. See "THE BONDS—General."
REDEMPTION Optional Redemption
The Bonds maturing on and after January 1, 2027 are subject to optional redemption, on any date occurring on or after January 1, 2026, at a Redemption Price of 100% of the principal amount thereof being redeemed plus accrued interest, if any, to the date of redemption.
See "THE BONDS—Redemption—Optional Redemption
Mandatory Redemption The Bonds due January 1, 2035 are subject to mandatory redemption prior to
maturity, at par and accrued interest to the date fixed for redemption, on January 1 of the years 2033 and 2034.
The Bonds due January 1, 2038 are subject to mandatory redemption prior to maturity, at par and accrued interest to the date fixed for redemption, on January 1 of the years 2036 and 2037.
See "THE BONDS—Redemption—Mandatory Redemption."
AUTHORITY FOR ISSUANCE The Bonds arc being issued under the authority granted to the City as a home
rule unit of local government under the Illinois Constitution of 1970 and are authorized by an ordinance adopted by the City Council of the City (the "City Council") on September 24, 2015 (the "Bond Ordinance"). The Bonds are being issued pursuant to a Trust Indenture, dated as of January 1, 2016, between the City and Zions Bank, a division of ZB, National Association, as trustee (the "Trustee").
USE OF PROCEEDS The proceeds of the Bonds will be used to (i) refund or pay interest on all or a
portion of certain outstanding general obligation bonds ofthe City for purposes of debt restructuring and achieving debt service savings; (ii) fund capitalized interest on the Bonds; and (iii) pay costs of issuance of the Bonds. For the last several years the City has annually issued general obligation debt to pay a portion of the near-term debt service on its outstanding general obligation bonds, in order to limit the annual property tax levy for debt service on such bonds. The City plans to continue this practice for annual property tax levies through and including the 2019 property tax levy, and thereafter discontinue issuing general obligation debt for such purpose. Sec "FINANCIAL DISCUSSION AND ANALYSIS—General Fund—General Fund Financial Forecasts—2017-2018 General Fund Outlook."


S-1

SECURITY FOR THE BONDS The Bonds will be direct and general obligations of the City and all taxable
property in the City is subject to the levy of ad valorem property taxes to pay the Bonds and the interest thereon without limitation as to rale or amount. The Bonds shall be payable, as to principal and interest, from any moneys, revenues, receipts, income, assets or funds of the City legally available for such purpose, including, but not limited to, the proceeds of a direct annual lax levied by Ihe City in the Bond Ordinance upon all taxable property located in the City sufficient to pay the principal of and interest on the Bonds. The City has pledged its full faith and credit to the payment ofthe Bonds. See "SECURITY FOR THE BONDS—General Obligation ofthe City."
For a discussion of the process by which property taxes arc levied, billed, collected and remitted lo the Trustee for payment of Ihc principal of and interest on the Bonds, sec "SECURITY FOR THE BONDS—Properly Tax Collection Process for the Bonds."
PENSIONS AND OTHER
POST-EMPLOYMENT
BENEFITS
The City participates in four defined-benefit retirement funds (collectively, the "Retirement Funds"). The City's Retirement Funds have been actuarially determined lo be significantly underfunded, with such Retirement Funds having a combined funded ratio of 35.5% and an unfunded actuarial accrued liability of S19.4 billion as of December 31, 2014. In recent years, the Illinois General Assembly passed Public Act 096-1495 ("P.A. 96-1495"), which substantially increased the City's retirement contributions with respect to FABF and PABF (each as defined herein), and Public Act 098-641 ("P.A. 98-641"), which included certain pension reforms and increased the City's contributions to MEABF and LABF (each as defined herein). P.A. 98-641 was determined to be unconstitutional by the Circuit Court of Cook County on July 24, 2015. The City has appealed the decision to the Illinois Supreme Court.
In October 2015, the City Council approved a supplemental fiscal year 2015 budget and a fiscal year 2016 budget which provide for significantly increased pension contributions for such fiscal years, though such budgets assume the enactment of SB 777 (as defined herein) or similar legislation. For additional information, see APPENDIX E-"RETIREMENT FUNDS" herein.
The City and the Retirement Funds share the cost of post-employment healthcare benefits available for certain retired City employees ("Health Plan"). The City has announced plans to phase out such benefits by 2017 for certain retirees. Prior to June 30, 2013, the City contributed to the Health Plan pursuant to a settlement agreement between the City and the Retirement Funds and certain classes of retirees. After expiration ofthe settlement, certain ofthe affected participants filed a new lawsuit regarding post-employment healthcare benefits for retired City employees, which lawsuit remains pending. For further information on the status of the Health Plan after June 30, 2013, including certain Stale and federal litigation relating to the Health Plan and the settlement agreement, see APPENDIX E-"RETIREMENT FUNDS-Payment for Other Post-Employmenl Benefits" herein.
INVESTMENT CONSIDERATIONS

There are a number of factors associated with owning the Bonds that prospective investors should consider prior to purchasing the Bonds. For a discussion of these factors, see "INVESTMENT CONSIDERATIONS."







S-2

Zions Bank, a division of ZB, National Association, Chicago, Illinois, as trustee under the Indenture.
Subject to compliance by the City with certain representations and covenants, in the respective opinions of Co-Bond Counsel, under existing law, interest on the Bonds is not included in gross income for federal income tax purposes and is not an item of tax preference for purposes ofthe federal alternative minimum tax for individuals and corporations but is taken into account in the calculation of adjusted current earnings for purposes of the federal alternative minimum lax imposed on corporations and in computing the "branch profits tax" imposed on certain foreign corporations. Interest on the Bonds is not exempt from present Illinois income taxes. See "TAX MATTERS."
The Bonds are rated "BBB+" (negative outlook) by Standard & Poor's Financial Services LLC, "BBB+" (negative outlook) by Fitch Ratings Inc., and "A-" (negative outlook) by Kroll Bond Rating Agency. See "INVESTMENT CONSIDERATIONS—Credit Rating Downgrades" and "RATINGS."
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TABLE OF CONTENTS

Page
OFFICIAL STATEMENT SUMMARY S-1
INTRODUCTION|9
10|THE CITY|9
10|General|9
10|Government|910|THE BONDS|910|General|910|Payment of the Bonds|910|Redemption|910|Book-Entry System|910|Bonds Not Presented for Payment|910|Registration and Transfers|910|Registered Owner Treated as Absolute Owner 9
SECURITY FOR THE BONDS 9
General Obligation of the City 9
Property Tax Collection Process for the Bonds 9
Lien and Security Interest Status 11
Additional General Obligation Debt 11
PLAN OF FINANCING 12
Refunding and Restructuring 12
SOURCES AND USES OF FUNDS 13
FINANCIAL DISCUSSION AND ANALYSIS 13
Annual Budget 13
City Fund Structure 16
General Fund 17
Service Concession and Reserve Fund 32
Capital Improvements 34
Property Taxes 35
City Workforce 44
Pensions 45
Overlapping Taxing Districts 52
Long-Term Leases, Concessions of City Facilities 52
Illinois Sports Facilities Authority 53
City Investment Policy 54
GENERAL OBLIGATION DEBT 54
Recent Developments 54
Long-Term General Obligation Bonds 54
Short-Term Borrowing Program 58
MRL Financing LLC Promissory Note 59
USX South Works 59
INVESTMENT CONSIDERATIONS 60
Credit Rating Downgrades 60
Unfunded Pensions 60
Pension Reform Litigation 61
Overlapping Taxing Districts 61
Structural Deficit and Debt Restructuring 61

Loss of Liquidity 62
Increased Debt Levels 62
Financial Condition of Chicago Public Schools 62
Reductions and Delays in Receipt of Stale Revenues 62
Cap on Properly Taxes 63
Adverse Change in Laws 63
Bankruptcy 63
Uncertain Enforcement Remedies 64
Force Majeure Events 64
Forward-Looking Statements 64
LITIGATION 64
INDEPENDENT AUDITORS 66
RATINGS 67
CO-MUNICIPAL ADVISORS, SPECIAL ADVISOR ON RATING STRATEGY AND
INDEPENDENT REGISTERED MUNICIPAL ADVISOR 67
CERTAIN VERIFICATIONS 67
UNDERWRITING 68
TAX MATTERS 69
The Bonds 69
State and Local Considerations 70
APPROVAL OF LEGAL MATTERS 71
SECONDARY MARKET DISCLOSURE 71
Annual Financial Information Disclosure 71
Reportable Events Disclosure 72
Consequences of Failure ofthe City to Provide Information 73
Amendment; Waiver 73
EMMA 74
Termination of Undertaking 74
Additional Information 74
Corrective Action Related to Certain Bond Disclosure Requirements 74
MISCELLANEOUS 76
APPENDIX A — SUMMARY OF THE INDENTURE
APPENDIX B — ECONOMIC AND DEMOGRAPHIC INFORMATION
APPENDIX C — CITY OF CHICAGO BASIC FINANCIAL STATEMENTS FOR
THE YEAR ENDED DECEMBER 31, 2014 APPENDIX D — PROPERTY TAXES APPENDIX E — RETIREMENT FUNDS APPENDIX F — OPINIONS OF CO-BOND COUNSEL APPENDIX G — REFUNDED AND INTEREST PAID BONDS












ii

OFFICIAL STATEMENT

$500,000,000 CITY OF CHICAGO General Obligation Refunding Bonds, Series 2015C


INTRODUCTION
This Official Statement is furnished by the City of Chicago (the "City") to provide information with respect to the City's General Obligation Refunding Bonds, Series 2015C (the "Bonds"). Certain capitalized terms used in this Official Statement, unless otherwise defined, are defined in APPENDIX A—"SUMMARY OF THE INDENTURE—Glossary of Terms."
The Bonds are direct and general obligations of the City and all taxable property in the City is subject to the levy of ad valorem property taxes to pay the Bonds and the interest thereon without limitation as to rate or amount. The Bonds shall be payable, as to principal and interest, from any moneys, revenues, receipts, income, assets or funds of the City legally available for such purpose, including, but not limited to, the proceeds of a direct annual tax levied by the City in the Bond Ordinance (hereinafter defined) upon all taxable properly located in the City sufficient to pay the principal of and interest on the Bonds. The City has pledged its full faith and credit to the payment of the Bonds. See "SECURITY FOR THE BONDS."
The proceeds of the Bonds will be used to (i) refund or pay interest on all or a portion of certain outstanding general obligation bonds of the City for the purposes of debt restructuring and achieving debt service savings; (ii) fund capitalized interest on the Bonds; and (iii) pay costs of issuance of the Bonds. See "PLAN OF FINANCING" and "SOURCES AND USES OF FUNDS."
The Bonds are being issued under the authority granted to the City as a home rule unit of government under the Illinois Constitution of 1970 and are authorized by an ordinance adopted by the City Council of the City (the "City Council") on September 24, 2015 (the "Bond Ordinance"). The Bonds will be issued pursuant lo a Trust Indenture, dated as of January I, 2016 (the "Indenture") between the City and Zions Bank, a division of ZB, National Association, Chicago, Illinois, as trustee.

THE CITY
General
Chicago is the third largest city in the United States wilh a population of approximately 2.7 million. The City, located on the shores of Lake Michigan in the Midwestern United States, is the commercial and cultural center of a large and diverse regional economy that produced a gross domestic product of $610 billion in 2014. Trade, transportation, utilities, professional and business services, education and health services, government, leisure and hospitality and manufacturing arc among the Chicago region's largest industry sectors. The City's transportation and distribution network includes Chicago O'Hare International Airport, ranked seventh worldwide and third in the United States in 2014 in terms of total passengers, rail traffic interchanges for the country's six largest freight railroad companies, and two ports capable of handling ocean-going ships and barges. Tourism and business travel to Chicago accounted for an estimated 50 million visitors in 2014. Sec APPENDIX B—"ECONOMIC AND DEMOGRAPHIC INFORMATION."


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Government
The City was incorporated in 1837. The City is a municipal corporation and home rule unit of local government under the Illinois Constitution of 1970 and as such, "may exercise any power and perform any function pertaining to its government and affairs including, but not limited lo, the power to regulate for the protection of the public health, safety, morals and welfare; to license; to tax; and to incur debt" except that it can "impose taxes upon or measured by income or earnings or upon occupation" only if authorized by statute.
The Mayor and the City Council govern the City. The City Clerk and the City Treasurer along with the Mayor are the only three Citywide elected officials. The City is divided into fifty legislative districts, or wards. Each ward is represented by an alderman who is elected by their constituency. The citywide officials and the fifty aldermen are elected to serve coterminous four-year terms. The aldermen comprise the 50-person City Council, which serves as the legislative branch of government of the City. The legislative powers of the City Council are granted by the Stale legislature and by home rule provisions ofthe Illinois Constitution.
As the legislative body of the City, the City Council usually meets once every month to exercise general and specific powers delegated by State law. The City Council votes on loans extended by the City that exceed certain limits, bond issues, the City's short-term borrowing programs (whether general obligation or revenue), land acquisitions and sales, zoning changes, traffic control issues, certain mayoral appointees, and financial appropriations. Its standing committees work with individual departments on the execution of City activities, and review proposed ordinances, resolutions and orders before they arc voted on by the full City Council.
The Committee on Finance of the City Council considers ordinances, orders or resolutions that are referred or submitted to the Committee on Finance by aldermen, the Office of the Mayor, various City departments, and the general public. The Committee on Finance has jurisdiction over financial matters, including tax levies; general obligation bonds and revenue bonds; the financing of municipal services and capital improvements; matters generally affecting the Department of Finance, the City Comptroller, and the City Treasurer; claims under the Workmen's Compensalion Act; the Condominium Refuse Rebate Program; and all pecuniary claims against the City.

THE BONDS
General
The Bonds mature on January 1 of the years and in the amounts set forth on the inside front cover of this Official Statement. The Bonds are fully registered bonds. The Bonds arc issuable in denominations of $5,000 or any integral multiple thereof.
Each Bond will bear interest at the rates set forth on the inside cover of this Official Statement from the later of its date or the most recent Interest Payment Date lo which interest has been paid or duly provided for, until the principal amount of such Bond is paid, such interest being payable on January 1 and July 1 of each year, commencing on July 1, 2016. Interest on each Bond will be paid to the person in whose name such Bond is registered at the close of business on the Record Date next preceding the applicable Interest Payment Dale.
The Trustee will serve as bond registrar and paying agent for the Bonds. The Bonds are registered through a book-entry only system operated by The Depository Trust Company, New York, New York ("DTC"). Details of payments of the Bonds when in the book-entry only system are described under "—Book-Entry System" below. Except as described under "— Book-Entry System—General"
|1010|
below, Beneficial Owners of the Bonds will not receive or have the right to receive physical delivery of such Bonds, and will not be or be considered to be the Registered Owners thereof. Accordingly, Beneficial Owners must rely upon (i) the procedures of DTC and, if such Beneficial Owner is not a DTC "Direct Participant" or "Indirect Participant" (as defined below), the Direct or Indirect Participant who will act on behalf of such Beneficial Owner to receive notices and payments of principal and interest or Redemption Price of such Bonds, and to exercise voting rights and (ii) the records of DTC and, if such Beneficial Owner is not a Direct or Indirect Participant, such Beneficial Owner's Direct or Indirect Participant, to evidence its beneficial ownership of such Bonds. So long as DTC or its nominee is the Registered Owner of the Bonds, references herein to Bondholders or Registered Owners of such Bonds mean DTC or its nominee and do not mean the Beneficial Owners of such Bonds. The laws of some stales may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limils and laws may impair the ability to transfer beneficial interests in a Bond.
Payment of the Bonds
The principal of the Bonds will be payable in lawful money of the United States of America which, at the respective dates of payment thereof, is legal tender for the payment of public and private debts, upon presentation and surrender thereof at the Designated Corporate Trust Office ofthe Trustee.
Interest on each Bond will be paid to the person in whose name such Bond is registered at the close of business on the Record Date next preceding the applicable Interest Payment Date, by check or draft of the Trustee, or, at the option of any registered owner of $1,000,000 or more in aggregate principal amount of Bonds, by wire transfer of immediately available funds lo such bank in the continental United Slates of America as the registered owner of such Bonds requests in writing to the Trustee.
Redemption
The Bonds are subject to both optional and mandatory redemption prior lo maturity, as described below. The Bonds shall be redeemed only in principal amounts of $5,000 and integral multiples thereof.
Optional Redemption
The Bonds maturing on and after January 1, 2027, are subject to redemption prior to maturity at the option of the City, in whole or in part, on any date on or after January 1, 2026, and if less than all of the outstanding Bonds of a single maturity are to be redeemed the Bonds called shall be called by lot, in such principal amounts and from such maturities as the City shall determine, at a redemption price equal to the principal amount of the Bonds being redeemed plus accrued interest to the date fixed for redemption.
The City is authorized to sell or waive any right the City may have to call any of the Bonds for optional redemption, in whole or in part; provided, that such sale or waiver will not adversely affect the excludability of interest on the Bonds from gross income for federal income tax purposes.
Mandatory Redemption
The Bonds maturing on January 1, 2035 are subject to mandatory redemption prior to maturity on January 1 of the years and in the amounts set forth below, at a Redemption Price equal to 100 percent of the principal amount thereof plus accrued interest to the dale fixed for redemption:





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Bonds due January 1, 2035
Year Principal Amount
$4,595,000
4,830,000
5,000,000 (maturity)

The Bonds maturing on January 1, 2038 are subject to mandatory redemption prior to maturity on January 1 of the years and in the amounts set forth below, at a Redemption Price equal to 100 percent of the principal amount thereof plus accrued interest to the date fixed for redemption:
Bonds due January 1, 2038
Year Principal Amount
S35,490,000
37,265,000
17,475,000 (maturity)

Reduction of Mandatory Redemption Amounts
The principal amount of the Bonds to be mandatorily redeemed in each year may be reduced through the earlier optional redemption thereof. Any partial optional redemption of Bonds of a maturity will be credited against future mandatory redemption requirements for that maturity in such order of the mandatory redemption dates as the City may determine.
In addition, on or prior to the sixtieth (60th) day preceding any mandatory redemption date, the Trustee, if directed by the City, shall purchase Bonds required lo be retired on such mandatory redemption date at such prices as the City shall determine. Any Bond so purchased shall be canceled and the principal amount thereof shall be credited against the payment required on such next mandatory redemption dale.
Selection of Bonds for Redemption
While the Bonds are registered in the book-entry system and so long as DTC or a successor securities depository is the sole registered owner of the Bonds, if less than all of the Bonds of such maturity arc to be redeemed prior to maturity, the particular Bonds or portions of such Bonds will be selected by lot by DTC or such successor securities depository in such manner as DTC or such successor securities depository may determine. See "THE BONDS — Book-Entry System." If the Bonds are not registered in the book-entry system, the following procedures for the selection of such Bonds shall apply.
If less than all the Bonds shall be called for redemption under any provision of the Indenture pursuant to which the Bonds are issued permitting such partial redemption, (i) such redemption shall be by lot in such manner as the Trustee may determine among such Bonds, and (ii) subject to other applicable provisions of the Indenture, the portion of any Bond to be redeemed shall be in a principal amount equal to an Authorized Denomination. In selecting Bonds for redemption, the Trustee shall assign lo each Bond of like Maturity Date, a distinctive number for each minimum Authorized Denomination of such Bond and shall select by lot from the numbers so assigned as many numbers as, at such minimum Authorized Denomination for each number, shall equal the principal amount of such Bonds to be redeemed. In such case, the Bonds to be redeemed shall be those to which were assigned numbers so selected; provided that only so much of the principal amount of each Bond shall be redeemed as shall equal such minimum Authorized Denomination for each number assigned to it and so selected. If it is determined that one or more, but not all, of the integral multiples of the Authorized Denomination of principal amount represented by any Bond is lo be called for redemption, then, upon notice of intention lo|1010|
redeem such integral multiple of an Authorized Denomination, the Registered Owner of such Bond shall forthwith surrender such Bond to the Trustee for (a) payment to such Registered Owner of the Redemption Price of the integral multiple of the Authorized Denomination of principal amount called for redemption, and (b) delivery to such Registered Owner of a new Bond or Bonds in the aggregate principal amount of the unredeemed balance of the principal amount of such Bond. New Bonds representing the unredeemed balance of the principal amount of such Bond shall be issued to the Registered Owner thereof without charge therefor.
Notice of Redemption
Unless waived by any owner of Bonds to be redeemed, notice of the call for any such redemption shall be given by the Trustee on behalf of the City by mailing the redemption notice by first class mail at least 30 days and not more than 60 days prior to the date fixed for redemption to the Registered Owner of the Bond or Bonds to be redeemed at the address shown on the Bond Register or at such other address as is furnished in writing by such Registered Owner to the Trustee, but the failure to mail any such notice or any defect therein as to any Bond shall not affect the validity of the proceedings for the redemption of any other Bond. Any notice of redemption mailed as provided under the Indenture shall be conclusively presumed to have been given whether or not actually received by the addressee. All notices of redemption wilh respect to the Bonds shall slate: (1) the redemption date, (2) the Redemption Price, (3) if less than all outstanding Bonds arc to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts and interest rates) of the Bonds to be redeemed, (4) that on the redemption date the Redemption Price will become due and payable upon each such Bond or portion thereof called for redemption, and that interest thereon shall cease lo accrue or compound from and after said date, (5) the place where such Bonds arc to be surrendered for payment ofthe Redemption Price, and (6) such other information as shall be deemed necessary by the Trustee at the time such notice is given lo comply wilh law, regulation or industry standard.
With respect to an optional redemption of Bonds, such notice may state that said redemption is conditioned upon the receipt by the Trustee on or prior to the date fixed for redemption of moneys sufficient to pay the applicable Redemption Price of such Bonds. If such moneys are not so received, such redemption notice shall be of no force and effect, the City shall not redeem such Bonds and such failure to deposit such funds shall not constitute an Event of Default under the Indenture. The Trustee shall give notice, in the same manner in which the notice of redemption was given, that such moneys were not so received and that such Bonds will not be redeemed. Unless the notice of redemption shall be made conditional as provided above, on or prior to any redemption date for the Bonds, the City shall deposit with the Trustee an amount of money sufficient to pay the applicable Redemption Price of all the Bonds or portions thereof which are lo be redeemed on that date.
Book-Entry System
General
The following information concerning DTC has been furnished by DTC for use in this Official Statement and neither the City nor the Underwriters take any responsibility for its accuracy or completeness.
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, each in the aggregate principal amount of such maturity, and will be deposited with DTC.


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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 (the "Exchange Act"). DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access lo 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 a Standard & Poor's rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission (the "Commission"). More information about DTC can be found at www.dtcc.com .
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for such 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 arc, 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 such 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 lo Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants lo 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.
Redemption notices shall be sent to DTC. If less than all of the Bonds are being redeemed, DTC's usual practice, which will apply to the Bonds, is to determine by lot the amount of the interest of each Direct Participant in the Bonds to be redeemed.

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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 MMI 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 and principal and interest 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 Trustee, on the payment date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds and principal and interest payments 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 Trustee, 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 Bonds at any time by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered.
Discontinued Use of Book-Entry System
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.
Procedures May Change
Although DTC has agreed to these procedures in order to facilitate transfers of securities among DTC and its Participants, DTC is under no obligation to perform or continue to perform these procedures and these procedures may be discontinued and may be changed at any time by DTC.
The information in this section concerning DTC and the Book-Entry System has been obtained from sources that the City believes to be reliable, but neither the City nor the Underwriters take any responsibility for the accuracy thereof.
Additional Information
For every transfer and exchange of the Bonds, DTC, the Trustee and the Participants may charge the beneficial owner a sum sufficient to cover any tax, fee or other charge that may be imposed in relation thereto.
NEITHER THE CITY NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANTS, OR TO THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE BONDS, OR TO ANY BENEFICIAL OWNER IN RESPECT OF THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT IN RESPECT OF THE PRINCIPAL OR INTEREST ON THE BONDS, OR ANY NOTICE WHICH IS PERMITTED OR REQUIRED TO BE GIVEN WITH RESPECT TO THE BONDS, INCLUDING ANY NOTICE OF REDEMPTION, THE SELECTION OF
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SPECIFIC BONDS FOR REDEMPTION, OR ANY OTHER ACTION TAKEN, BY DTC AS REGISTERED OWNER OF THE BONDS.
In reading this Official Statement it should be understood that while the Bonds are in the Book-Entry System, references in other sections of this Official Statement to Registered Owners should be read to include the person for which a Participant acquires an interest in the Bonds, but (a) all rights of ownership must be exercised through DTC and the Book-Entry System, and (b) notices that are to be given to Registered Owners will be given only lo DTC.
Bonds Not Presented for Payment
If any Bond is not presented for payment when the principal amount thereof becomes due, either at maturity or at a date fixed for redemption thereof or otherwise, and if moneys sufficient to pay such Bond arc held by the Trustee for the benefit ofthe Registered Owner of such Bond, the Trustee shall,hold such moneys for the benefit of the Registered Owner of such Bond without liability to the Registered Owner for interest. The Registered Owner of such Bond thereafter shall be restricted exclusively to such funds for satisfaction of any claims relating to such Bond.
Registration and Transfers
The Bond Register for the registration and transfer of the Bonds will be kept at the Designated Corporate Trust Office of the Trustee, as Ihe registrar for the City in connection with the Bonds. See "THE BONDS—Book-Entry System" for a discussion of registration and transfer of the beneficial ownership interests in Bonds while they are in the Book-Entry System. The following provisions relate to the registration and transfer of Bonds when such Bonds are in certificated form.
Upon surrender for registration of transfer of any Bond at the Designated Corporate Trust Office of the Trustee, duly endorsed by, or accompanied by a written instrument or instruments of transfer in form satisfactory lo the Trustee and duly executed by the Bondholder or such Bondholder's attorney duly authorized in writing in such form and with guarantee of signature as shall be satisfactory to the Trustee, the City shall execute, and the Trustee shall authenticate and deliver, in the name of the transferee or transferees, one or more fully registered Bonds of the same Maturity Date of Authorized Denominations, for a like principal amount bearing numbers not contemporaneously outstanding. Subject to the limitations described in the following paragraph, Bonds may be exchanged at the Designated Corporate Trust Office of the Trustee for a like aggregate principal amount of Bonds of the same Maturity Date of other Authorized Denominations bearing numbers not contemporaneously outstanding.
The Trustee shall not be required to transfer or exchange any Bond during the period commencing on the Record Date next preceding any Interest Payment Date of such Bond and ending on such Interest Payment Date, or to transfer or exchange such Bond after the mailing of notice calling such Bond for redemption has been made as provided in the Indenture or during the period of 15 days next preceding the giving of notice of redemption of Bonds of the same Maturity Date.
No service charge shall be made for any transfer or exchange of Bonds, but the City or the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of such Bonds, except that no such payment may be required in the case of the issuance of a Bond or Bonds for the unredeemed portion of a Bond surrendered for redemption.
Bonds delivered upon any registration of transfer or exchange will be valid general obligations of the City, evidencing the same debt as the Bonds surrendered, will be secured by the Indenture and will be entitled to all of the security and benefits of the Indenture and of the Bond Ordinance to the same extent as such Bond surrendered.
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Registered Owner Treated as Absolute Owner
The City, the Trustee and any Paying Agent may treat the Registered Owner of any Bond as the absolute owner thereof for all purposes, whether or not such Bond shall be overdue, and shall not be bound by any notice to the contrary. All payments of or on account of the principal of and interest on any such Bond as provided in the Indenture shall be made only to or upon the written order of the Registered Owner thereof or such Registered Owner's legal representative, but such registration may be changed as provided in the Indenture. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid.

SECURITY FOR THE BONDS
General Obligation of the City
The Bonds are direct and general obligations of the City and all taxable property in the City is subject to the levy of ad valorem property taxes to pay the Bonds and the interest thereon without limitation as to rate or amount. The Bonds shall be payable, as to principal and interest, from any moneys, revenues, receipts, income, assets or funds of the City legally available for such purpose, including, but not limited to, the proceeds of a direct annual tax levied by the City in the Bond Ordinance (the "Bond Property Tax Levy") upon all taxable property located in the City in an amount not less than the principal of and interest on the Bonds. The Bond Ordinance also authorizes the City to use those proceeds ofthe Bond Property Tax Levy for other purposes, including (i) debt service on outstanding or future City general obligation commercial paper notes and lines of credit; (ii) costs of certain ongoing financing services related to outstanding City general obligation bonds and notes and outstanding or future general obligation commercial paper notes and lines of credit (such outstanding City general obligation bonds and notes and outstanding or future general obligation commercial paper notes and lines of credit, "Outstanding Indebtedness"); and (iii) amounts needed to reimburse the City's Corporate Fund for amounts expended to pay debt service on Outstanding Indebtedness. The Bond Property Tax Levy will be on file with the County Clerks of Cook and DuPage Counties, Illinois (the "County Clerks") al the time of issuance of the Bonds. Sec "FINANCIAL DISCUSSION AND ANALYSIS—Property Taxes" and APPENDIX D—"PROPERTY TAXES."
The City has pledged its full faith and credit to the payment of the Bonds. Under the Bond Ordinance, the Cily is obligated to appropriate amounts sufficient to pay principal of and interest on the Bonds for ihc years such amounts arc due, and the City covenants in the Bond Ordinance to take timely action as required by law to carry out such obligation; however, if for any such year the City fails to do so, the Bond Ordinance constitutes a continuing appropriation of such amounts without any further action by the City.
If the revenues raised by the Bond Property Tax Levy arc not available in time to make any payments of principal of or interest on the Bonds when due, then the appropriate fiscal officers of the City are directed in the Bond Ordinance lo make such payments from any other moneys, revenues, receipts, income, assets or funds of the City that are legally available for that purpose in advance of the collection of the Bond Property Tax Levy.
Property Tax Collection Process for the Bonds
The City's annual aggregate property lax levy is used primarily lo pay debt service on the City's general obligation debt and to fund City contributions to the City's pension plans. See "FINANCIAL DISCUSSION AND ANALYSIS—Property Taxes." The Bond Property Tax Levy is included in the calculation of the City's annual aggregate properly tax levy.

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Set forth below is a general schematic of the process by which the Bond Property Tax Levy in Cook County (being the County in which approximately 99.99 percent of the taxable property in the City is located) is levied, billed, collected and remitted to the City and, ultimately, to the Trustee.


Tax Levy Skkiks2015 Bonds
The Bond Ordinance provides for the levy and collection of a direct annual tax upon all taxable property in the City in not less than the amount needed to make payments of debt service on the Bonds, and a certified copy of the Bond Ordinance is filed with the County Clerk prior to the issuance ofthe Bonds.

The City informs the County Clerk of its annual aggregate tax levy (which includes confirmation of the Bond Property Tax Levy), and the County Clerk determines the property tax for the City and all overlapping taxing districts for each City parcel.


The County Treasurer issues the tax bills, collects the property taxes, and remits the City's share of property taxes to the City Treasurer.


The City Treasurer deposits the portion of the property taxes earmarked for general obligation debt (including the Bonds) into the Bond, Note Redemption and Interest Fund held by the City Treasurer described in the paragraph following this chart.

The City Treasurer remits from the Bond, Note Redemption and Interest Fund an amount equal to the Principal and Interest Account Requirement for the Bonds to the Trustee for deposit into the Bond Fund established under the Indenture sufficiently in advance to enable the Trustee to make debt service payments on the Bonds on or prior to the scheduled debt service payment dates. If property taxes are insufficient, payments to the Trustee arc to be made from any other legally available revenues.


The Trustee makes the principal and interest payments for the Bonds to the Bondholders on the scheduled debt service payment dates.









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As shown above, when property taxes are remitted by the Cook County Treasurer to the City, (he property taxes for debt service are deposited and held in the Bond, Note Redemption and Interest Fund maintained by the City Treasurer. The Bond, Note Redemption and Interest Fund is used for the payment of debt service on all ofthe City's general obligation bonds, including the Bonds, for which the City has levied property taxes, and is one of a number of governmental funds used by the City to account for its governmental activities.
Lien and Security Interest Status
Bondholders do not have a statutory lien on remittances from the Bond Properly Tax Levy or any other funds on deposit in the Bond, Note Redemption and Interest Fund. The Bond, Note Redemption and Interest Fund is held by the City Treasurer. Until remittances from the Bond Property Tax Levy are deposited with the Trustee as required by the Indenture, any claim for payment made by Bondholders against such funds, or any other funds in the Bond, Note Redemption and Interest Fund, will be subject to any competing claims which may exist against such funds. Once remittances from the Bond Property Tax Levy are deposited with the Trustee as required by the Indenture, such funds are subject to the Bondholders' security interest and may be used by the Trustee solely for the purposes authorized by the Indenture, including payment of principal of and interest on the Bonds. See "INVESTMENT CONSIDERATIONS—Bankruptcy" and "—Uncertain Enforcement Remedies."
There is no guarantee that the flow of revenues from the Bond Properly Tax Levy will always be maintained as described above. The City Council could alter the Bond Property Tax Levy or the City could use remittances from the Bond Property Tax Levy or other funds held in the Bond, Note Redemption and Interest Fund for other uses besides debt service on the Bonds as authorized by the Bond Ordinance or as may be authorized in the future. The Illinois General Assembly could alter the procedure by which property taxes are extended and collected. However, since the Bonds are a general obligation of the City to which it has pledged its full faith and credit, if revenues from the Bond Property Tax Levy were insufficient to pay debt service on the Bonds, the City would still be obligated to find other sources of funds to remit to the Trustee for the payment of principal of and interest on the Bonds when due.
For additional information on real property assessment, tax levies and collections, see APPENDIX D—"PROPERTY TAXES."
Additional General Obligation Debt
The City has issued, and may from time to time issue, debt and incur other obligations that are general obligations of the City, including commercial paper and borrowings under revolving lines of credit which comprise the City's short-term borrowing facilities (the "Short-Term Borrowing Program"), all of which are secured by the full faith and credit of the City. In 2016, the City expects to issue additional general obligation bonds, the size and timing of which have yet to be determined, to fund capital projects, to pay capitalized interest on such bonds and for debt restructuring. Depending on prevailing market conditions, the City may also issue additional general obligation refunding bonds for debt service savings.
For the last several years, in order to limit the annual property tax levy for debt service on its outstanding general obligation bonds, the Cily has annually issued general obligation debt to pay a portion of the near-term debt service on such bonds. The City plans to gradually curtail this practice, using il for annual properly tax levies through and including the 2019 levy and thereafter discontinue issuing general obligation debt for such purpose.





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PLAN OF FINANCING
The proceeds of the Bonds will be used lo (i) refund or pay interest on all or a portion of certain outstanding general obligation bonds ofthe City for the purposes of debt restructuring and achieving debt service savings; (ii) fund certain capitalized interest on the Bonds through January 1, 2017; and (iii) pay costs of issuance of the Bonds. For additional information, see "SOURCES AND USES OF FUNDS" below.
Refunding and Restructuring
A portion ofthe proceeds of the Bonds will be used to refund all or a portion ofthe principal of and interest on certain maturities of outstanding general obligation bonds of the City (the "Refunded Bonds"). See "SOURCES AND USES OF FUNDS." The Refunded Bonds are set forth in APPENDIX G - "REFUNDED AND INTEREST PAID BONDS."
Portions of the refunding will result in debt service savings to the City and extend the average maturity of the City's genera! obligation debt. See "GENERAL OBLIGATION DEBT — Long-Term General Obligation Bonds — Debt Service Schedule."
A portion of Ihe proceeds of the Bonds will be used to pay inleresl on certain maturities of outstanding general obligation bonds of the City (the "Interest Paid Bonds") on certain respective payment dates. See "SOURCES AND USES OF FUNDS." The Interest Paid Bonds are set forth in APPENDIX G - "REFUNDED AND INTEREST PAID BONDS."
To provide for the payment and retirement of the Refunded Bonds and the payment of interest on the Interest Paid Bonds, certain proceeds of the Bonds will be used to purchase securities consisting of direct obligation of the United States of America (collectively, the "Government Obligations"). The principal of and interest on the Government Obligations, together wilh available cash deposits, will be sufficient (i) to pay when due the interest on the Refunded Bonds to their respective maturity or redemption dales, (ii) lo pay or redeem the Refunded Bonds on their respective maturity or redemption dales al their respective principal amounts or redemption prices; and (iii) to pay the interest on the Interest Paid Bonds on the applicable interest payment dates.
The Government Obligations purchased with the proceeds of the Bonds, together with available cash deposits, will be held in escrow accounts with the respective paying agents for the Refunded Bonds and the Interest Paid Bonds or an escrow agent (collectively, the "Escrow Accounts"). Neither the cash on deposit, the maturing principal of the Govcrnmcnl Obligations nor the interest to be earned thereon will serve as security or be available for the payment of the principal of or the interest on the Bonds.
The mathematical computation of (i) the adequacy of maturing principal of and interest earnings on the Government Obligations together with initial cash deposits in the Escrow Accounts to provide for payments on the Refunded Bonds and the Interest Paid Bonds as described above and (ii) the actuarial yields on the Bonds and the Government Obligations will be verified at the time of the delivery of the Bonds by Robert Thomas, CPA, LLC, Shawnee Mission, Kansas, independent certified public accountants. Sec "CERTAIN VERIFICATIONS."









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SOURCES AND USES OF FUNDS
The following table sets forth the sources and uses of funds from the sale of the Bonds as described under "PLAN OF FINANCING."
SOURCES OF FUNDS:
Principal Amount ofthe Bonds $500,000,000
Original Issue Premium 23,892,352
Total Sources of Funds $523,892,352
USES OF FUNDS:
Deposits to Escrow Accounts $502,472,814
Capitalized Interest 17,499,201
Costs oflssuance (including the Underwriters' discount) 3,920,337
Total Uses of Funds $523,892,352

FINANCIAL DISCUSSION AND ANALYSIS
Annual Budget
Fiscal Year 2016 Budget
The City Council adopted the budget for the City's 2016 fiscal year on October 28, 2015. The budget features a $318 million increase in property taxes, part of an overall increase in property taxes of $543 million to be phased in between 2015 and 2018, as well as increases in revenues from the imposition of a garbage collection fee, additional fees for ridesharing and taxi use and an e-cigarette tax. The budget also achieves savings on expenditures from, among other measures, phasing out funding for certain retiree healthcare benefits, utilization of zero-based budgeting, improvements to debt collection practices, reallocating surplus tax increment financing revenues and sweeping aging revenue accounts and grant funds. See "—General Fund—General Fund Financial Forecasts—General Fund 2015 Year-End Estimates and 2016 Budget" and "—Property Taxes—TIF Districts" below.
The City's annual budget for the 2016 fiscal year is available on the City's web site at — documents.html. This link is included for informational purposes only; the City's annual budget for the 2016 fiscal year is not incorporated into this Official Statement by reference. The City's annual budget for the 2016 fiscal year was not prepared for investors in securities issued by the City, or intended to be a basis for making investment decisions with respect to any bonds, notes, or other debt obligations of the City, including the Bonds. Prospec tive purchasers of the Bonds are cautioned not to rely on any of the information in the City's annual budget for the 2016 fiscal year in connection with the offering of the Bonds.
Budget Process
Each year, the City prepares an annual budget that accounts for revenue from taxes and other sources and sets forth a plan for how the City intends to utilize those resources over the course of the following year. In accordance with the Illinois Municipal Code, the City produces a balanced budget, meaning that its appropriated expenditures do not exceed the amount of resources it estimates will be available for that year.




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The budget process begins each summer, when City departments inform the Office of Budget and Management ("OBM") of their personnel and non-personnel needs for the upcoming year. Departments begin the budget process using a zero-based spending plan that encourages strategic and creative thinking to provide lop quality services while cutting extraneous costs. OBM then prepares a preliminary budget based on ihc requests submitted by the departments and the resources OBM expects will be available to fund those needs.
Throughout the remainder of the summer, OBM continues the process of reviewing each department's operating and programmatic need's and developing detailed departmental budgets. OBM also estimates Citywide expenses such as pension contributions, employee health care and debt service, and prepares estimates on the amount of revenue that the City will collect in the following year.
In the fall, the Mayor's Office and OBM work with departments lo develop a final budget for the entire City government. OBM then compiles and balances the Mayor's proposed budget, which is introduced to the City Council on or before October 15 of each year. The City Council holds committee and public hearings on the Mayor's proposed budget and may propose amendments to it. Once the proposed budget, as amended, is adopted by the City Council, and approved by the Mayor, it becomes the Annual Appropriation Ordinance. The Annual Appropriation Ordinance is implemented on January Is' of the following year and represents the City's operating budget for that year.
Budget Documents
The documents prepared as part of the City's budget process are set forth below. Such documents are not prepared for investors in securities issued by the City, or intended to be a basis for making investment decisions with respect to any bonds, notes, or other debt obligations of the City, including the Bonds. Prospective purchasers of the Bonds are cautioned not to rely on any of the information in the budget documents in connection with the offering ofthe Bonds.
Annual Budget Documents
Document
Annual Financial Analysis
Provides a review of the City's revenues and expenditures for the past 10 years, a forecast of the City's finances for the next three years and analysis of Ihe City's reserves, pension contributions, debt obligations and capital improvement program.

Provides a summary of the proposed budget and detailed information on the City's anticipated revenues, expenditures, and personnel.
Budget
Recommendations
Constitutes the Mayor's proposed budget to Ihe City Council in accordance with Illinois state law.

Consolidated Plan & Action Plan
The five-year plan setting forth priorities for the City's housing and non-housing community needs based on housing and community development assessments.
Annual Appropriation The City's line-item budget as passed by the City Council. Ordinance
Capital Improvement A comprehensive list of capital improvements scheduled to occur
Program in the City over the next five years.


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Budget Calendar
The general budget calendar ofthe City is presented in the following table.
Annual Budget Calendar Month Action
Departments submit preliminary revenue and expense estimates to OBM.
OBM receives detailed budget requests from City departments and holds a series of meetings with each department regarding the department's needs for the coming year. OBM works with the Mayor's Office to match expenses with available resources and balance the next year's budget.
On or before October 15, the Mayor submits a proposed budget to the City Council, and the City Council conducts hearings on the budget, including at least one public hearing, to gather comments on the proposed budget.
Additions or changes to the proposed budget arc considered. The City Council must approve a balanced budget by December 31, at which point the Budget Recommendations become the Annual Appropriation Ordinance. The Final Action Plan and Final Consolidated Plan arc submitted annually to the U.S. Department of Housing and Urban Development for funding consideration.
January The City's Annual Appropriation Ordinance goes into effect.
Throughout The Year Throughout the year, OBM manages the resources allocated through the Annual Appropriation Ordinance. OBM regularly reviews revenues, expenditures, and any trends or events that may affect City finances. On an ongoing basis, City departments provide information about the performance of City programs to ensure that City resources are used in a manner that maximizes taxpayer value and provides the highest quality services.
















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City Fund Structure
The City organizes its activities by funds, each of which is accounted for separately. Each fund has a specific set of revenue sources, which are utilized to support a specific set of City services and functions. Descriptions of the City's major governmental funds and its special revenue and proprietary funds are set forth below.
City Funds
Fund Purpose
General Fund The General Fund is the City's general operating fund and supports
essential City services and activities, such as police and fire protection, trash collection, and public health programs. The General Fund also supports a portion ofthe City's share of pension contributions for its employees. General Fund revenues come primarily from a variety of local and intergovernmental taxes, fees, and fines. Sec "—General Fund" below.
Federal, State and Local Grants Fund
Grant funding, largely from the state and federal governments, makes up a significant and recurring source of revenue for the City and is utilized to provide a range of City services and certain capital improvements.

Special Taxing Areas Fund
The Special Taxing Areas Fund accounts for expenditures for special area operations and maintenance and for redevelopment project costs as provided by lax levies on special areas, including tax increment financing districts.

Service Concession & Reserve Fund
Established in connection with Ihc long-term lease/concession of City assets to create reserves for unexpected contingencies, emergencies, or revenue shortfalls. These reserves are not included in the City's annual operating budget. See "—Service Concession and Reserve Fund" below.

Bond, Note Redemption and Interest Fund
Accounts for the expenditures for principal and interest as provided by property tax, utility tax, sales tax, transportation tax, and investment income.

Community Development and Improvement Projects Fund
The Community Development and Improvement Projects Fund accounts for proceeds of debt used lo acquire property, finance construction, and finance authorized expenditures and supporting services for various activities. See "—Capital Improvements" below.

Special Revenue Funds
The City's special revenue funds (the "Special Revenue Funds") arc used to account for revenue from specific sources that by law are designated lo finance particular functions, such as road repair, snow removal, the library system, emergency management and special events and tourism promotion.
The City's proprietary funds (the "Enterprise Funds") include the water fund, the sewer fund, and a separate fund for each of the City's major airports. These funds are self-supporting, in that each fund derives its revenue from charges and associated user fees.



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The revenue sources of the Federal, State and Local Grants Fund, the Community Development and Improvement Projects Fund and the Enterprise Funds arc restricted as to use by law and those of the Special Revenue Funds are largely dedicated to specific services and functions. The revenues from these funds are not otherwise available to pay for general Citywide expenses, including debt service on the City's general obligation bonds (including the Bonds) and the City's pension costs exceeding amounts properly allocable to the funds.
General Fund
The City has historically presented information on the City's Corporate Fund in connection with its general obligation bond issues. The Corporate Fund comprises approximately 99.0 percent of the City's General Fund, which is the City's primary operating fund and accounts for all ofthe City's sources and uses of general operating revenue. The General Fund, and not the Corporate Fund, is included in the City's basic financial statements. The City is presenting information in this Official Statement about the General Fund in order to facilitate the reader's review of the City's basic financial statements. See APPENDIX C—"CITY OF CHICAGO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014."
The General Fund docs not account for the portion of the City's pension obligations that are paid from the City's property tax levy or the Enterprise Funds, nor does it account for the principal and interest payments on the City's long-term general obligation bonds that are paid from the property tax levy. For information regarding the use of the City's property taxes for the payment of pension costs and general obligation bond debt service, see "—Properly Taxes—i7.se of City Property Tax Levy" below.
General Fund resources have changed over the past 5 years. In 2010, 59 percent of General Fund resources came from tax revenues, 25 percent from other revenues, and 16 percent from other financing sources. In 2014, in contrast, 68 percent of General Fund resources came from tax revenues, 31 percent from other revenues, and 1 percent from other financing sources. In the period from 2009 through 2011, an average of $487 million each year, or 15 percent of General Fund resources, came from non-recurring revenue sources including transfers in from the Service Concession and Reserve Fund. Beginning with the 2012 budget, the City phased out the use of reserves to subsidize the operating budget. See "— Service Concession and Reserve Fund" below.
Selected Financial Information
The following table sets forth revenues and other financing sources (collectively, "resources") and expenditures and other financing uses (collectively, "expenditures") for the General Fund on a historical basis for the years 2010 to 2014. The financial information is based on the modified accrual basis of accounting for the General Fund as reported in the City's audited basic financial statements for the years 2010 to 2014, respectively. This table should be read in conjunction with the financial information set forth in APPENDIX C—"CITY OF CHICAGO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014."











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General Fund1' For Fiscal Years Ended 2010-2014
($ in thousands)
2010 2011 2012 2013 2014
Revenues:
Utility Tax $ 467,411 $ 467,630 5 462,475 $ 456,869 $473,496
Sales Tax 495,842 536,281 572,185 583,681 620,299
State Income Tax 282,011 236,521 282,779 308,899 278,031
Other Taxes 590,575 618,384 694,383 749,742 803,961
Federal/State Grants 1,735 1,294 1,074 1,871 2,335
Other Revenues*2' 773,278 921,056 907,760 929,429 998,028
Total Revenues 2,610,852 2,781,166 2,920,656 3,030,491 3,1767150
Expenditures: Current:
Public Safety 1,828,984 1,895,404 1,956,152 1,953,572 2,020,072
General Government 903,890 863,622 864,556 885,268 929,918
Other(3) 296,063 278,561 258,501 267,852 270,899
Debt Service*4' 5,004 2,849 2,160 2,382 10,369
Total Expenditures 3,033,941 3,040,436 3,081,369 3,109,074 3,231,258
Revenues Under Expenditures (423,089) (259,270) (160,713) (78,583_ (55,108)
Other Financing Sources (Uses): Proceeds of Debt, Net of Original Discount/Including
Premium 16,500 95,000 55,000
Transfers In 502,502 372,744 31,617 21,018 39,700
Transfers Out (13,600) (14,357) (26,965) (10,583) (10,081)
Total Other Financing
Sources (Uses) 505,402 453,387 59,652 10,435 29,619
Revenues and Other Financing Sources Over (Under) Expenditures and Other
Financing Uses 82,313 194,117 (101,061) (68,148) (25,489)
Fund Balance-Beginning of Year 54,706 135,541 335,533 231,302 167,057
Change in Inventory (1,478) 5,875 (3,170) 3^903_ (290)
Fund Balance - End of Year $ 135,541 $ 335,533 $ 231,032 $ 167,057 Tl 41,278


Source: City of Chicago Comprehensive Annual Financial Report (the "City CAFR"), Exhibit 4 for the respective years. The
City CAFR is available upon request from the Department of Finance. (1) The General Fund is the chief operating fund of the City. It is comprised of the Corporate Fund as well as other non-major
operating funds where the fund balance is not restricted or committed as defined by the Government Accounting Standards
Board (GASB).
Includes Internal Service, Licenses and Permits, Fines, Investment Income, Charges for Services and Miscellaneous Revenues.
(" Includes Health, Streets and Sanitation, Transportation, Cultural and Recreational and Other Current Expenditures. (4) Represents debt service on general obligation bonds that arc not payable from a levy of property taxes. Sec "GENERAL OBLIGATION DEBT—Long-Term General Obligation Bonds."






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General Fund Revenue
The General Fund's revenue sources consist of utility taxes, sales taxes, State income taxes, other taxes, federal and State grants, and other revenues. With the exception of federal and State grants, which are less than 1 percent of overall General Fund revenues, the various sources of General Fund revenues are described below.
Utility Taxes. Utility taxes consist of taxes on the purchase of telecommunications services, electricity, natural gas, and cable television. The following table sets forth the sources of utility lax revenue for the years 2010 through 2014:

Utility Tax Revenue 2010-2014
($ in thousands)
_ 2010_ 2011 2012 2013 2014
Gas $114,254 $113,681 $98,791 $122,139 $153,274
Electric 99,265 98,100 98,015 98,557 96,353
Commonwealth Edison 91,714 90,655 90,814 90,602 90,202
Telecommunications 139,516 140,998 149,336 119,348 106,129
Infrastructure Maintenance 0 65|99910|Fiber Optics 0|999910|Cable Television 22,662 24,131 25,512 26,200 27,538
Total Utility Tax $467,411 $467,630 $462,475 $456,869 $473,496

Source: City CAFR, Schedule A-1 for the respective years.
These combined taxes have been 15 percent, on average, of total General Fund resources between 2010 and 2014. In 2010, utility taxes were $467.4 million, increasing to $473.5 million in 2014. The reasons for fluctuations within the major categories of utility taxes are discussed below. Infrastructure maintenance, fiber optics and cable television arc excluded from the discussion because the amounts are immaterial.
Gas Tax. The City imposes natural gas-related taxes, the revenues of which are dependent upon weather conditions and price. Colder weather increases consumption and associated tax revenues, as natural gas is used to heat homes and buildings. In 2010, natural gas-related taxes generated $114.3 million, accounting for 4 percent of total General Fund resources. Prices averaged 55.1 cents per therm during 2010 and dropped to an average of 35.3 cents per therm in 2012. Natural gas prices began to rise in 2013, and by 2014, reached 72.2 cents per therm. Together wilh severely cold weather and the resulting increase in usage and higher gas prices, natural gas tax revenues rose to $153.3 million in 2014. Because the natural gas utility tax rate is a percentage of gross revenues as opposed to a per-unit rate, these revenues are more directly impacted by price than electricity taxes, which are imposed entirely on a per -unit basis.
Electric and Commonwealth Edison Taxes. The City's electricity taxes (shown in the table above under Electric and Commonwealth Edison) are charged based on the number of kilowatt hours of electricity used. Revenues from electricity taxes are dependent upon consumption and also weather conditions, particularly summer temperatures due to the electricity needed to cool homes and buildings. Electricity tax revenues have been 6 percent, on average, of total General Fund resources from 2010 to 2014, averaging $188.9 million each year, and have held relatively constant.
Telecommunications Tax. Revenue from telecommunications taxes, which are levied by the City on charges for telephone services in the City, has declined over the past decade, reflecting trends in the industry and consumer preferences. In 2010, telecommunications tax revenue was $139.5 million and

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made up 5 percent of General Fund resources. By 2014, telecommunications tax revenue had dropped to $106.1 million, accounting for 3 percent of total General Fund resources. The overall decline in revenues was due in part to the continuing reduction in the use of landlines as more customers rely solely on wireless services, and also a decline in the number of wireless accounts as use of online communication services such as Skype or other technologies increased. In addition, federal law exempts most wireless data services, such as mobile broadband, from taxation. Consequently, growth in the market for such wireless services has not resulted in increased telecommunications tax revenues for the City.
Sales Taxes. The following table sets forth sources of sales tax revenue for the years 2010 through 2014:
Sales Taxes 2010-2014
($ in thousands)
2010 2011 2012 2013 2014
Local Sales Taxes $229,202 5252,530 S272,312 S267,576 S285,773
State Sales Taxes 266,640 283,751 299.873 316,105 334,526
Total Sales Tax $495,842 $536,281 5572,185 $583,681 $620,299

Source: City CAFR, Schedule A-1 for the respective years.
Local Sales Taxes. Local sales tax revenues, as set forth in the table above, consist of four separate taxes imposed by the City pursuant to its home rule powers, the Municipal Code and State law (collectively, the "Local Sales Taxes"):
Home Rule Municipal Retailers' Occupation Tax. The Home Rule Municipal Retailers' Occupation Tax is a 1.25 percent tax imposed on the sale of most items of nontitled tangible personal property by retailers in the City. This tax is authorized by the Home Rule Municipal Retailers' Occupation Tax Act of the State. The tax must be imposed in increments of 0.25 percent, and can only be imposed if the City also imposes a municipal service occupation tax.
Home Rule Municipal Service Occupation Tax. The Home Rule Municipal Service Occupation Tax is a 1.25 percent tax imposed on the selling price of most items of tangible personal properly acquired as an incident to the purchase of a service from service providers in the City. This tax is authorized by the Home Rule Municipal Service Occupation Tax Act of the State and must be imposed at the same rate as the Home Rule Municipal Retailers Occupation Tax described above.
Home Rule Municipal Use Tax on Titled Personal Property. The Home Rule Municipal Use Tax on Titled Personal Property is a 1.25 percent tax imposed on the privilege of using within the City titled personal property that is purchased from a retailer and that is titled or registered at a location in the City. This tax is authorized by the Home Rule Municipal Use Tax" Act of the State.
Home Rule Municipal Use Tax on Nontitled Personal Property. The Home Rule Municipal Use Tax on Nontitled Personal Property is a 1.0 percent tax imposed on the privilege of using within the City most items of nontitled personal property that are purchased from a retailer located outside the City. This tax is authorized by the Home Rule Municipal Use Tax Act of ihe State. The tax must be imposed in increments of 0.25 percent up to the maximum rate of 1.0 percent.
Currently there is no legal limit on the rate at which the City may impose the Home Rule Municipal Retailers' Occupation Tax, the Home Rule Municipal Service Occupation Tax or the Home Rule Municipal Use Tax on Titled Personal Property. Except for the Home Rule Municipal Use Tax on Nontitled Personal Property, the Local Sales Taxes are collected by the State on behalf of the City.


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For purchases subject to the Home Rule Municipal Retailer's Occupation Tax and the Home Rule Municipal Use Tax on Tilled Personal Property, most are subject to a combined tax rate that includes, in addition to the Local Sales Taxes and the Stale rate of 6.25 percent, a Regional Transportation Authority sales tax rate of 1.0 percent and a Cook County sales tax rate of 1.75 percent.
Revenue from the Local Sales Taxes that has been allocated to the General Fund after provision for sales tax revenue bond debt service has accounted for an average of approximately 8 percent of total General Fund resources between 2010 and 2014. Beginning in the fall of 2008, receipts from Local Sales Taxes began lo decline due to the recession, with revenues of $229.2 million by 2010. Moderate growth occurred from 2010 until 2012, with a modest decline in 2013, due to a larger portion of Local Sales Taxes allocated to sales tax revenue bond debt service payments. Local Sales Taxes allocated to the General Fund were $285.8 million in 2014, accounting for 9 percent of General Fund resources.
State Sales Taxes. The City's share of Slate sales tax revenues, as set forth in the table above, consist of four separate taxes imposed by the State as follows (collectively, the "State Sales Taxes"):
Illinois Retailers' Occupation Tax. The Illinois Retailers' Occupation Tax is imposed by the State at the rate of 6.25 percent on the sale of most items of nontitled tangible personal property by retailers. The City receives 1 percent on the sale of such items by retailers in the City, representing 16 percent of the net receipts of this tax attributable to sales occurring in the City. With respect lo lax on grocery food, drugs and medical appliances, the City receives 1 percent of the net receipts on the sale of grocery food, drugs and medical appliances, representing 100 percent of the net receipts of this tax attributable to sales occurring in the City.
Illinois Service Occupation Tax. The Illinois Service Occupation Tax is imposed by the State at the rate of 6.25 percent on the sale of most items of nontitled tangible personal property by service providers. The City receives 1 percent on the sale of such items by retailers in the City, representing 16 percent of the net receipts of this tax attributable to sales occurring in the City. With respect to tax on grocery food, drugs and medical appliances, the City receives 1 percent of the net receipts on the sale of grocery food, drugs and medical appliances, representing 44.44 percent of the net receipts of this tax attributable lo sales occurring in the City.
ILLINOIS USE Tax. The Illinois Use Tax is imposed by the State al the rale of 6.25 percent on the privilege of using most items of personal property purchased outside of the State. The City receives 4 percent of the net receipts of this tax collected on most items of nontitled personal property purchased outside of the Slate, subject to annual appropriation by the Illinois General Assembly. Subject to annual appropriation by the Illinois General Assembly, the City receives 20 percent of the net receipts of this tax imposed at the rate of 1 percent on grocery food, drugs and medical appliances purchased outside of the State. See "INVESTMENT CONSIDERATIONS - Reductions and Delays in Receipt of State Revenues."
ILLINOIS Service USE Tax. The City currently receives 4 percent of the net receipts of the Illinois Service Use Tax which is imposed by the State at the rate of 6.25 percent on the privilege of using most items of tangible personal property acquired as an incident to the purchase of a service from a service provider in the State, subject to annual appropriation by ihe Illinois General Assembly. The City also receives 20 percent of the net receipts of this tax imposed at the rate of one percent on grocery food, drugs and medical appliances acquired as an incident to the purchase of a service from a service provider in the State, subject to annual appropriation by the Illinois General Assembly. Sec "INVESTMENT CONSIDERATIONS—Reductions and Delays in Receipt of Slate Revenues."
Except as noted above, the City currently receives its share of Stale Sales Tax revenues without annual appropriation by the Illinois General Assembly. Any change in the tax rates or amount of net lax


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receipts allocated to the City from State Sales Tax revenues would require the enactment of legislation by the Illinois General Assembly.
Revenue from the State Sales Taxes has accounted for an average of approximately 10 percent of total General Fund resources between 2010 and 2014. Following the recession in 2008, revenues had declined lo $266.6 million in 2010. Steady growth has continued since 2010, with State Sales Tax revenues increasing to $334.5 million in 2014, accounting for 10 percent of total General Fund resources.
State Income Tax. State income tax revenues consist of the City's share of Ihe Slate income taxes, including personal property replacement taxes. The following table sets forth sources of State income tax revenue received by the General Fund for the years 2010 through 2014:

State Income Tax 2010-2014
($ in thousands)
2010 2011 2012 2013 2014
Income Taxes $231,531 S200,341 $245,193 S275,979 $250,279
Personal Property Replacement Taxes 50,480 36,180 37,586 32,920 27,752
Total Slate Income Tax S282,011 S236,521 $282,779 S308,899 $278.031

Source: City CAFR, Schedule A-1 for the respective years.
Income Tax. Like the Local Sales Taxes and the Slate Sales Taxes, the City's share of State income tax revenues experienced growth in pre-recession years and then, with the decline in the economy, the City's share of this tax declined to $201.0 million in 2009. The State income tax revenues received by the City increased in 2010 to $231.5 million, but then declined again in 2011 due to a combination of factors, including continued high State unemployment rates, the decline in population under the 2010 Census, a timing difference in the receipt of State distributions to the City and changes in 2010 to the Internal Revenue Code regarding bonus depreciation.
Beginning in the second half of 2011 and continuing into 2014, income tax collections gained momentum with the recovering economy. In addition, in both 2012 and 2013, due to the timing of the State distributions to catch up on back payments owed to Ihe City, 13 payments were booked as revenue. 2013 collections were also pushed upward by a one-time surge in payments associated with businesses and individuals selling assets or receiving early dividends or bonuses in anticipation of higher federal tax rates. Consequently, City income tax revenues ended 2013 at the unusually high level of $276.0 million. With only 12 payments and no one-time surge in 2014, income lax revenues ended 2014 at $250.3 million.
In 2011, the State increased the personal income tax rate from 3 percent to 5 percent and the corporate income tax rate from 4.8 percent to 7 percent. However, municipalities did not receive a share of this increase because the Slate, concurrently with increasing tax rates, reduced the percentage of total income tax receipts that flow into the local government distributive fund from which municipalities are paid their share of Slate income lax revenue. As of January 1, 2015, the personal income lax rate was reduced to 3.75 percent and the corporate income tax rate was reduced to 5.25 percent.
Personal Property Replacement Tax. The personal property replacement tax derives its revenues primarily from an additional State income tax levied by the Slate on corporations, partnerships, trusts and S corporations. Currently, corporations pay a 2.5 percent tax on income, while partnerships, trusts, and S corporations pay a 1.5 percent tax on income. The personal property replacement tax also derives some of its revenues from various taxes imposed on utilities at various rates. The lax is collected by the State and paid to local governments in order to replace revenues that were lost when the State eliminated the authority of local governments to collect personal property taxes on business entities. The City has

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historically utilized its personal property replacement tax revenue in part to support the General Fund and in part to pay for the City's share of pension contributions. Beginning in 2015, the City changed the way it records personal property replacement tax revenues in the General Fund. See "—General Fund Financial Forecasts—General Fund 2015 Year-End Estimates and 2016 Budget" below.
The personal property replacement tax has generally followed the same patterns as income lax revenues. The personal property replacement tax levied on utilities represents approximately 15 percent of the aggregate tax received and is less economically sensitive. In recent years, the expected increase in the amount of the personal properly replacement tax received by the City due lo the recovering economy has been negated in part by legislation enacted by the Slate since 2010 that allows the State lo reallocate personal property replacement tax revenue for employment-related costs of certain State Board of Education personnel and Stale officials.
Other Taxes. Other tax revenues consist of various taxes imposed by the City, such as transportation taxes, transaction taxes, recreation taxes, business taxes as well as the City's share of the State auto rental tax. The following table sets forth sources of other lax revenue for the years 2010 through 2014.
Other Taxes 2010-2014
($ in thousands)
2010 2011 2012 2013 2014
Transportation Tax
Parking $ 92,306 S 93,449 SI 19,169 $124,384 $126,516
Vehicle Fuel 49,800 49,367 49,818 49,089 48,161
Ground Transportation 8,600 9,111 8,903 9,070 10,399
Transaction Tax
Real Property 81,302 85,986 102,571 141,907 157,194
Personal Property Lease 108,357 123,523 132,503 140,227 152,576
Motor Vehicle Lessor 5,426 5,753 6,037 6,249 6,431
Recreation Tax
Amusement 85,682 86,055 87,843 96,739 112,895
Automatic Amusement 990 913 869 631 584
Liquor 31,508 31,584 32,620 32,048 32,113
Boat Mooring 1,317 1,439 1,361 1,275 1,309
Cigarette 19,326 18,666 18,015 16,268 24,022
Off Track Betting 929 837 694 604 547
Soft Drink 18,638 19,934 21,792 21,564 22,210
Business Tax
Hotel 54,348 60,082 85,634 89,851 100,407
Employers Expense 23,479 23,496 17,853 11,261|910|Foreign Fire Insurance ; 5,133 4,598 4,791 4,601 4,422
State Auto Rental Tax 3,434 3,591 3,910 3,974 4.175
Total Other Taxes $590,575 5618,384 $694,383 $749,742 $803,961

Source: City CAFR, Schedule A-1 for the respective years.
With the exception of State auto rental taxes, which are immaterial, the various sources of other taxes are described below.
Transportation Taxes. Transportation tax revenues consist primarily of parking and vehicle fuel taxes. Parking taxes, which are imposed on parking garage operators, have consistently made up the largest portion of this category of revenues. Rate adjustments in 2009 and 2012 contributed lo greater revenue growth in those years, with an overall increase from $92.3 million in 2010 to $126.5 million in 2014. Pursuant to a change in State law, the City changed this lax from a liered flat rale structure to a

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percenlage-bascd rate effective July 1, 2013, reducing the effective tax rate for low-cost parking while increasing the effective rate for high-cost parking.
The vehicle fuel tax is a 5 cent per gallon tax on the sale of vehicle fuel to a retailer doing business in the City, or who purchases fuel for use in the City. Vehicle fuel tax revenues declined from $49.8 million in 2010 to $48.2 million in 2014, due largely to declines in fuel consumption as gasoline prices rose, fuel economy standards became more stringent, and fuel-efficient vehicles became more prevalent.
Transaction Taxes. Transaction taxes include taxes on the transfer of real estate, the lease or rental of personal property, and the short-term lease of motor vehicles within the City. Combined transaction taxes have constituted between 6 and 10 percent of total General Fund resources between 2010 and 2014. Fluctuations in these revenue sources track closely with the economy and the real estate market.
In the years leading up to the recession, real property transfer tax collections reached record levels. The decline in the real estate market reduced these collections to $61.9 million in 2009. While commercial real estate activity started to increase in 2010 and continued to improve in 2011, the residential real estate market was slower to recover and did not show sustained growth until 2012. By
home sales increased by 19 percent and median home prices increased by 10 percent from 2012, bringing overall real property transfer tax revenues to $141.9 million. During 2014, median home prices increased by 11 percent over 2013 while home sales decreased by 7 percent due largely to inventory shortages. Due to the increase in median home prices, 2014 revenues increased to $157.2 million.
As with other transaction and consumer-driven tax revenues, collections of personal property lease transaction taxes, imposed on the lease or rental of personal property at a rate of 8 percent of the lease or rental price, increased from 2010 to 2014, reflecting improving economies. In 2010, personal property lease transaction taxes generated $108.4 million. This revenue continued to grow, starting in 2011, mainly due to enforcement efforts. Personal property lease tax revenues were $152.6 million in
accounting for 5 percent of total General Fund resources. As of January 1, 2015, the personal properly lease transaction tax rate was increased from 8 percent to 9 percent.
Recreation Taxes. Recreation taxes include taxes on amusement activities and devices, liquor, the mooring of boats, cigarettes, off-track belting and non-alcoholic beverages. In 2010, recreation taxes generated $158.4 million for the City, accounting for 5 percent of total General Fund resources. By 2014, this had grown to $193.7 million, accounting for 6 percent of total General Fund resources, primarily due to the increase in amusement tax revenues. Amusement lax, including Automatic Amusement tax, revenues for 2014 represent 59 percent of total recreation tax revenues.
Amusement taxes apply to most large sporting events, theater, and musical performances in the City. The overall increase in these revenues was due in part to a one percent increase in 2009. Amusement tax revenues also vary significantly from year lo year based on the relative success of Chicago's professional sports teams and ticket prices for such sporting events.
Business Taxes. The City's business tax revenues consist primarily of taxes on hotel accommodations, and the employers' expense tax until it was phased out at the end of 2013. Revenues from the hotel tax experienced a sharp decline in 2009 and recovered slowly in 2010, coinciding with the recession's impact on tourism, business, and convention-related travel. In 2010, hotel tax revenues were $54.3 million. The second half of 2011, however, saw hotel sales and the related tax revenues begin to rebound, with strong growth in 2012, and further growth in 2013 and 2014. In 2014, revenue per available room increased by 4 percent over 2013 and hotel tax revenues were $100.4 million accounting for 3 percent of total General Fund resources.


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Other Revenues. Other revenues consist of internal service, licenses and permits, fines, investment income, charges for services, municipal utilities, leases, rentals and sales, and miscellaneous revenues. The following table sets forth the sources of other revenues for the years 2010 through 2014.
Other Revenues 2010-2014
($ in thousands)
2010 2011 2012 2013 2014
Internal Service S274,574 $306,126 $302,924 $306,523 $305,716
Licenses and Permits 96,240 102,702 117,568 123,633 119,940
Fines 258,802 263,288 290,799 313,506 338,329
Investment Income 4,200 3,378 5,439 1,436 1,573
Charges for Services 77,694 132,587 124,606 119,857 134,593
Municipal Utilities 6,405 9,060 8,415 6,429 7,257
Leases, Rentals and Sales 17,604 22,595 14,747 19,008 24,127
Miscellaneous 37,759 81,320 43,262 39,037 66,493
Total Other Revenues $773,278 S921,056 $907,760 $929,429 $998,028

Source: City CAFR, Schedule A-1 for the respective years.
With the exception of investment income and municipal utilities, which are immaterial sources, the various categories of other revenues, including major revenue types within the categories, are described below.
Internal Service. Internal service revenues are transfers to the General Fund for services provided to other City funds and departments, such as police, fire, and sanitation services provided to the City's Enterprise Funds. Such transfers constitute an average of 10 percent of General Fund resources, and have ranged from $274.6 million in 2010 to $305.7 million in 2014.
Licenses and Permits. License and permit-related revenue is generated through fees for business licenses, building permits, and various other licenses and permits. License and permit activity often reflects economic health, with more construction commencing and businesses starting up when the economy is strong.
In 2010, license and permit revenue was $96.2 million, decreasing from prior year levels as construction activity in the City declined during the recession. License and permit activity and related revenues began to recover in 2012 to $119.9 million in 2014.
Fines. Fines consist of fines, forfeitures, and penalties, including parking tickets, red-light and speed camera tickets, and fines for items such as building code violations. These revenues have increased steadily from $258.8 million in 2010 to $338.3 million in 2014. These revenues accounted for 11 percent of total 2014 General Fund resources. This steady increase in revenues is partly a result ofthe increased use of technology, including the implementation of on-line bill payment systems and additional parking enforcement field technology. Increases in fine and penalty rates and improved debt collection have also impacted overall fine, forfeiture, and penalty revenues.
Charges for Services. Charges for services include revenues generated by charging for activities such as inspections, emergency medical services (EMS), police services, and other services for private benefit. In 2010, these activities generated $77.7 million, increasing to $134.6 million in 2014, due largely to increased reimbursement for police services and EMS fee increases.
Leases. Rentals and Sales. Leases, rentals and sales include revenues generated from activities such as the sale of vacant land and buildings, City-owned property that has been leased lo the public, and sale of materials that arc not used by the City. In 2010, these activities generated $17.6 million,
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increasing to $24.1 million in 2014, due primarily to the increase in the rental and lease of City-owned property.
Miscellaneous. Miscellaneous revenues include infrequent or.one-time sources of revenues, such as insurance recoveries, settlements, and cash received from fund closeouts, as well as other revenues that do not fall into one of the revenue categories mentioned above, such as municipal marketing fees and tax increment financing ("TIF") surpluses. These activities generated $37.8 million in 2010 and $66.5 million in 2014. The amount of revenue varies from year to year primarily due to the availability of TIF surpluses.
General Fund Expenditures
Total General Fund expenditures, including other financing uses, have increased from $3.05 billion in 2010 to $3.24 billion in 2014. Generally, the relative proportion of total General Fund spending devoted to different activities and expense types has remained fairly consistent from year to year. Across all departments and City services, personnel-related expenditures (including salaries and wages and employee healthcare costs) make up the largest portion of the General Fund budget, averaging 83 percent of total General Fund expenditures from 2010 through 2014.
General Fund expenditures consist of current operating expenditures and debt service. Debt service expenditures in the General Fund relate to debt service payments with respect to an issuance by the City in 1997 of certain building acquisition certificates which are not paid from properly taxes and arc not material. General Fund current expenditures are described below.
Public Safety. Each year, the largest portion of General Fund expenditures is dedicated to public safety functions, and includes departments such as Police, Fire, and the Office of Emergency Management and Communications. This also includes the activities of (i) the Department of Buildings, which ensures the safely of residential and commercial buildings in the City by enforcing design, construction, and maintenance standards and promoting conservation and rehabilitation through permitting and inspection processes, and (ii) the Department of Business Affairs and Consumer Protection, such as business licensing and support and consumer protection activities, including the regulation of the local taxicab industry. Public safety has remained a primary driver of expenditures, growing as a percentage of General Fund expenditures, from 60 percent in 2010 to 62 percent in 2014.
General Government. General government expenditures support functions necessary to provide essential City services, including accounting and finance, contract management, human resources, legal advice, administrative services, vehicle and facilities maintenance, community services, City development, technology and systems expertise. These expenditures have accounted for between 28 and 30 percent of General Fund expenditures, from 2010 through 2014.














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Other Current Expenditures. The following table sets forth the other current expenditures of the General Fund by function for the years 2010 through 2014.
Other Current Expenditures 2010-2014
($ in thousands)
2010 2011 2012 2013 2014
Health $ 35,593 $ 32,390 $ 24,371 $ 26,552 $ 25,902
Streets and Sanitation 177,950 175,829 178,065 186,992 195,390
Transportation 70,032 69,683 53,815 52,420 47,309
Cultural and Recreational 544 420 13|9910|Other 11,944 239 2,237 1,888 2,298
Total Other Current
Expenditures $296,063 S278.561 $258,501 S267,852 $270,899

Source: City CAFR, Exhibit 4 for the respective years.
With the exception of Cultural and Recreational and Other expenditures set forth in the table above, which are immaterial in amounts, the categories of Other Current Expenditures are described below.
Health. Health expenditures support the operations of the Department of Public Health, including providing health education to residents, access to care, guiding public health initiatives and monitoring and inspecting food establishments. Department of Public Health expenditures have accounted for, on average, 1 percent of General Fund expenditures from 2010 through 2014.
Streets and Sanitation. Streets and sanitation expenditures support the operations of the Department of Streets and Sanitation, including garbage and recycling collection, sweeping and plowing of streets, graffiti removal, cleaning of vacant lots, demolition of garages, towing of illegally parked vehicles, abatement of rodents and planting, trimming and removal of trees. Expenditures related to the Department of Streets and Sanitation have accounted for, on average, 6 percent of General Fund expenditures from 2010 through 2014.
Transportation. Transportation expenditures support the operations of the Department of Transportation and have averaged approximately 2 percent of annual General Fund expenditures between 2010 and 2014. These funds are used to build, repair, and maintain streets, sidewalks, and bridges and complete the planning and engineering behind the City's infrastructure. Much of the City's major infrastructure construction is funded through State and federal grants, general obligation bond financing, TIF revenues and other sources, and thus is not represented as a General Fund expenditure.
Budget Gaps
Each year, the City projects revenues and expenses for the coming year as part of its preliminary budget process. Any shortfall between revenue and expenses is referred to as the "budget gap." The budget gap is closed each year prior to the passage of the Annual Appropriation Ordinance, in which expenditures are balanced with forecasted available resources.








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Set forth below arc the budget gaps that were projected for fiscal years 2012 through 2016.
Budget Gaps 2012-2016
($ in millions)
Amount
2012 2013 2014 2015 2016
S635.7 369.0 338.7 297.3 232.6


Source: City of Chicago, Office of Budget and Management.
The decreasing size ofthe gap from 2012 through 2016 is the result of the recovering economy's impact on revenues, as well as the cost reductions made as part of the past four budgets. Initiatives such as the introduction of managed competitions for City services, the transition to grid-based garbage collection, consolidation of information technology systems and software licenses, implementation of energy efficiency programs, sale of excess City-owned land, review and renegotiation of major contractual costs, and reforms that have reduced the City's healthcare costs have all decreased the City's structural deficit, bringing the City's expenses more closely in line with revenues.
The General Fund gap of $232.6 million for 2016 was less than had been projected by the City in prior years. The 2016 budget gap was closed in the Annual Appropriation Ordinance through savings and revenue enhancements in the following general categories: non-personnel savings and reforms ($61.1 million), personnel savings and reforms ($57.1 million), improved fiscal management ($57.9 million), improved debt collection ($23.4 million), growth in economically sensitive and other revenues ($7.8 million) and revenue enhancements ($125.3 million). Amounts in excess of the General Fund gap arc expected to be allocated to debt service on outstanding general obligation bonds ofthe City.
Notwithstanding the gains achieved by the City in recent years in addressing its structural budget deficit, the budget gap in coming years is likely to widen from the 2016 level due largely to growing salaries and wages and funding requirements for City pension plans. See "—2017-2018 General Fund Outlook" below.
General Fund Financial Forecasts
This section includes a discussion of the City's year-end estimates for 2015 and projections for years 2016, 2017 and 2018 for the General Fund. The estimates and projections are based on expectations and assumptions which existed at the lime such estimates and projections were prepared, including, among other factors, evaluations of historical revenue and expenditure data, known changes or events, analyses of economic trends and current and anticipated laws and legislation affecting the City's finances. While the City believes that the numerous assumptions underlying the estimates and projections are reasonable, they are subject to certain contingencies and periodic revisions which may involve substantial change. The City makes no rcprcsentalion or warranty that these estimates and projections will be realized. The estimates and projections discussed below and elsewhere herein were not prepared with a view towards compliance with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information. The estimates and projections assume that no substantive changes arc made to City operations or the cost of City services. No cost-saving initiatives are incorporated into the estimates and projections. The estimates and projections are likely lo change as future decisions are made in response to actual events, new or changing needs and Citywide priorities. No assurance can be given that actual results will conform to the estimates and projections provided. This prospective information is not fact and should not be relied upon as being
28

necessarily indicative of future results. Purchasers of the Bonds are cautioned not to place undue reliance on this prospective financial information. See "INVESTMENT CONSIDERATIONS—Forward-Looking Statements."
General Fund 2015 Year-End Estimates and 2016 Budget. The following table sets forth resources and expenditures for the General Fund based on actual results for the year 2014, the 2015 budget, the year-end estimates for 2015 and the adopted budget for 2016.
General Fund Resources and Expenditures Budgetary Basis
($ in millions)
2015
2014 2015 Year-End 2016
Actual'" Budget'2' Estimates'3' Budget1
Tax Revenue
Utility Taxes and Fees $473.5 $451.9 $ 449.4 $ 441.0
Transaction Taxes 316.2 326.4 345.4 344.7
Transportation Taxes 185.1 188.0 191.1 240.4
Recreation Taxes 193.7 205.0 214.5 218.0
Business Taxes 104.8 110.9 111.8 113.9
Sales Taxes 620.3 647.9 651.3 677.8
State Income Taxes 278.0 420.0 440.8 435.7
Other Intergovernmental 6.5 5^ 6.2 6.2
Total Tax Revenue 2,178.1 2,355.9 2,410.5 2,477.7
Non-Tax Revenue
Licenses and Permits 119.9 136.9 129.3 124.8
Fines, Forfeitures and Penalties 338.3 369.5 338.7 350.5
Charges for Services 134.6 132.4 122.3 112.6
Municipal Parking 7.3 6.5 7.0 10.1
Leases, Rentals, Sales 24.1 30.2 25.0 36.0
Reimbursement, Interest & Other 373.8 470.2 460.3 432.9
Total Non-Tax Revenue 998.0 1,145.7 1,082.6 1,066.9
Proceeds and Transfers In 39.7 33.1 41.6 26.0
Total Revenue 3,215.8 3,534.7 3,534.7 3,570.6
Budgeted Prior Years' Surplus and 45.5 0.0 0.0 0 0
Reappropriations
Total General Fund Resources $3,261.3 $3,534.7 S3.534.7 S3,570.7
Total Expenditures $3,261.3 $3,534.7 $3,534.7 S3,570.7

l" Source: Exhibit 6, City CAFR for the year ended December 31, 2014. l2) Source: 2015 Annual Appropriation, as amended.
(3) Source: 2016 Budget Overview, prepared in connection with the adoption ofthe City's budget for fiscal year 2016 on October 28, 2015. In accordance with generally accepted accounting principles, revenues and expenditures attributable to the 2015 fiscal year arc continuing to be recorded, and will then be subject to an annual audit.
(J) Source: 2016 Annual Appropriation.
General Fund resources on a budgetary basis, which includes Budgeted Prior Years' Surplus and Reappropriations, if applicable, are expected to meet the budgeted target of $3,534.7 million in 2015. Economically sensitive revenues, such as sales taxes, personal property lease and amusement taxes, are estimated to outperform the budget due to the improving economy. State income taxes are also anticipated to be $20.8 million higher than the budget as noted below. Gains from these economically


29

sensitive revenues are estimated lo be sufficient to offset losses in public utility taxes, permits, fees and charges for services.
General Fund resources arc estimated to total $3,534.7 million in 2015, an increase of $273.3 million or almost 8 percent over 2014 actual resources of $3,261.3 million; $128.8 million of this increase is the result of a change in the way that the City accounts for its personal property replacement tax revenue, as discussed below. Excluding this amount, the growth in General Fund resources totals $144.5 million, or 4 percent over 2014 actual resources. General Fund resources are projected to increase by 1.1 percent in 2016 to approximately $3.57 billion.
Utility lax revenue is estimated to total $449.4 million in 2015, $24.1 million lower than the 2014 actual revenue of $473.5 million, and account for 13 percent of total 2015 estimated General Fund resources at year-end. The decline is due primarily to lower gas prices and cool weather during the summer months. Utility tax revenue is expected to decline further in 2016 due to continued decreases in telecommunication tax revenues and predictions that the summer and winter of 2016 will be milder than in 2015, resulting in lower electricity and natural gas tax revenues, respectively. These reductions are expected to offset anticipated gains in cable television tax revenues.
Business taxes, including hotel taxes, are estimated to generate $111.8 million in 2015, an increase of $7.0 million over the 2014 actual amount of $104.8 million. Estimates for 2015 anticipate an approximately 2 percent increase in hotel occupancy and a more than 6 percent increase in daily room rates. Revenues for 2016 are expected to exceed 2015 year-end estimates by $2.1 million.
Transportation taxes include taxes on garage parking, vehicle fuel purchases, and the provision of ground transportation for hire. Transportation taxes are expected to generate $240.4 million in 2016, up significantly from the 2015 year-end estimate of $191.1 million. The increase is due largely to an expected increase in ground transportation taxes to $60.8 million in 2016 due to a 40-ccnt per-trip fee on rides provided by taxi and rideshare providers and an imposition of a surcharge on airport pick-ups by rideshare providers.
Recreation taxes include taxes on amusements, automatic amusement devices, the mooring of boats in the City's harbors, liquor purchases, cigarette purchases, e-cigarette fluid, purchases of non­alcoholic beverages, and off-track betting. Recreation taxes are expected to generate $218.0 million in 2016, an increase of $3.5 million from the 2015 year-end estimate. Amusement tax revenue is forecasted to total $139.0 million in 2016, an increase of $3.4 million over the 2015 year-end estimate.
As a result of the improving economy, the revenues collected from sales taxes allocated lo the General Fund arc estimated to total $651.3 million in 2015, an increase of $31.0 million over the 2014 actual revenue of $620.3 million. Sales tax revenue in 2015 is anticipated to grow by 5 percent over the 2014 actual levels. Sales tax revenue in 2016 is anticipated to grow by 4 percent of the 2015 year-end estimate to 677.8 million. Transaction tax revenues, including real property transfer taxes and personal property lease taxes, are estimated to increase at the rate of approximately 9 percent in 2015, due lo strong recovery in the economy, including commercial real estate sales and housing markets in Chicago. Personal property lease tax revenues for 2016 arc estimated to grow by 5.3 percent over anticipated 2015 year-end levels in line with increasing consumer confidence and continued economic recovery. Real property transfer taxes for 2016 are estimated to decline by 5.7 percent from anticipated 2015 year-end levels due to several unusually large commercial building transfers in 2015.
State income tax revenue, which includes personal property replacement tax revenue, is estimated to total $440.8 million in 2015, an increase of 59 percent over the 2014 actual revenue of $278.0 million; $128.8 million of the increase in 2015 State income lax revenue is the result of the change in how the City budgets its personal property replacement lax revenue. A portion of the estimated increase is, however, due to actual anticipated growth in revenues as wages, capital gains, and corporate profits arc expected to

30

increase in 2015. These increases are estimated to be offset in part by the State's increasing use of personal properly replacement tax revenues to pay for its own obligations. The City's income tax revenues are expected to decrease slightly in 2016 lo $435.7 million, primarily due to a full year of lower income tax rates for individuals and businesses.
Local non-lax revenues are estimated to be $1,082.6 million in 2015, an 8 percent increase over 2014 local non-tax revenues of $998.0 million. Total revenue from licenses and permits is estimated to total $129.3 million in 2015, an increase of $9.4 million over the 2014 amount of $119.9 million. Total revenue from licenses and permits is projected to reach $124.8 million in 2016, an increase of $19.2 million over the 2015 year-end estimate. This will include a newly imposed garbage collection fee of $9.50 per month per household on single family homes and buildings with four units or less. The 2015 year-end estimate of fines revenue is $338.7 million, consistent with 2014 actual results. Fines revenues projected for 2016 are expected to be $350.5 million, an increase over projected 2015 year-end actual results but a decrease of 5 percent from the 2015 budgeted amount of $369.5 million. Revenues from Charges for Services are expected to decrease by 9 percent in 2015 to $122.3 million compared to the 2014 actual revenue of $134.6 million and to increase in 2016 lo $112.6 million, due to redirecting the City's density bonus program revenues to the Affordable Housing Fund, offset by the increase in building permit fee revenue due to increased rates. The 2015 year-end estimate for reimbursements, interest, and other revenues is $460.3 million, an increase of $86.5 million, or 23 percent over the 2014 actual revenue of $373.8 million, due primarily to the increase in the 911 surcharge. This amount is projected to decline in 2016 to $432.3 million.
Year-end expenditures for 2015 arc projected at $3,534.7 million, an increase of 8 percent over 2014 actual expenditures. Public safety expenditures are expected to increase by approximately 6 percent from actual 2014 public safety expenditures. The estimated expenditures account for actual changes to salaries and wages governed by collective bargaining agreements, employee benefits, contractual services and utilities and motor fuel. The City has budgeted increased contributions of $89.1 million to the MEABF and LABF (each as hereafter defined) pension plans in its 2015 budget and year-end estimates based on enacted pension reforms, with such increased contributions being payable in 2016.
Expenditures for 2016 arc projected to grow over 2015 anticipated year-end expenditures by approximately $36 million, or 1 percent, to $3.57 billion. Under the 2016 proposed budget, 81 percent of corporate fund expenses are for personnel-related costs, which include salaries and wages, pension contributions, healthcare, overtime pay and unemployment compensation. Other categories of expenditure, in decreasing order of amount, are debt service payments, contractual services and commodities and materials.
Notwithstanding the overall increase in budgeted expenditures for 2016, the City expects lo achieve cost savings in individual areas of budgeted expenditure for 2016 of approximately $199.6 million. Non-personnel savings and reforms, including the implementation of zero based budgeting, improvements in energy and information technology systems, leasing and contractual reforms and sales of excess City-owned land, arc expected to save approximately $61.1 million. Personnel savings and. reforms, including the elimination of vacant positions, healthcare cost reduction and reductions in retiree healthcare benefits are expected to save approximately $57.1 million. The City expects to save approximately $57.9 million from improved fiscal management measures, such as sweeping aging revenue accounts and grant funds, proper allocation of costs to City-wide programs and funds and City Treasurer investment reforms. The City also expects to save approximately $23.4 million from improved debt collection measures.
In 2015, the City changed the way it accounts for the non-property tax portion of its pension contributions. Historically, the City's pension contributions not paid from property taxes have been paid from personal property replacement tax revenues, which were recorded directly into the respective Retirement Funds (as hereafter defined) and did not flow through the General Fund. See
31

APPENDIX E—"RETIREMENT FUNDS—Determination of City's Contributions." Going forward, the total receipt of personal property replacement tax revenues will be deposited into the General Fund, and a portion of the City's share of pension contributions will be paid out of the General Fund to the Retirement Funds. The effect of this change in the 2015 budget was $128.8 million. This change has the effect of increasing General Fund revenues by the amount of the personal property replacement taxes deposited into the General Fund, and increasing General Fund expenditures by a like amount. Another change relates to the way the Enterprise Funds pay their allocable share of pension fund costs. Sec APPENDIX E—"RETIREMENT FUNDS—Special Revenue and Enterprise Fund Allocation of Retirement Fund Costs." Historically, the City's pension contributions allocable lo each of the Enterprise Funds were reimbursed by those Enterprise Funds to the General Fund. Going forward, the Enterprise Funds' allocable portions of the City's pension cost will be paid by the Enterprise Funds to the Retirement Funds.
2017-2018 General Fund Outlook. The City projects operating budget gaps for the General Fund of $334.9 million and $436.3 million for the years 2017 and 2018, respectively. Estimated increased contributions to the City's four pension funds arc not included in the projected operating budget gaps for 2017 and 2018. Further, general obligation debt service payments using General Fund resources may increase significantly from 2015 levels as the City phases out the use of long-term general obligation bonds lo pay near-term general obligation debt service. See "INVESTMENT CONSIDERATIONS— Structural Deficit and Debt Restructuring" and "—Increased Debt Levels." The City projects General Fund revenue growth of approximately one percent over the prior year in both 2017 and 2018 resulting in total General Fund revenues of $3.50 billion and $3.53 billion respectively.
These projections are based on the continuation of similar trends as discussed above with respect to 2016 for most revenue sources, including recreation and amusement taxes, transportation taxes, Local Sales Taxes, State Sales Taxes and most local non-tax revenues, adjusting for anticipated variations in certain cases. A healthy rate of growth in real property transfer tax revenue is expected in 2017 and 2018, as the market stabilizes following rapid growth during the recovery years. Utility taxes are expected to remain mostly flat. Hotel tax revenues are projected lo increase at approximately two percent each year in line wilh an improving labor market.
General Fund operating expenditures are projected to outpace General Fund revenue growth during this period, increasing at an average annual rate of 3.5 percent to $3.77 billion in 2017 and $3.90 billion in 2018. Most categories of expenditures, including worker's compensation, motor fuel, and settlement and judgment-related and other miscellaneous expenses, arc assumed to grow at their long-term historical average rates. Less predictable expenditures, such as commodities and materials, contractual services and utilities are projected at a Iwo percent growth rate. Salary and wage and healthcare expenditures, by far the largest portion of the City's operating expenses, arc projected based on the assumption that the number of full-time equivalent positions will remain approximately flat, meaning, no significant hiring, layoffs, or vacancy eliminations will occur, and that the costs associated with those positions will experience growth in line with long-term historical trends.
For the last several years, in order to limit the annual property lax levy for debl service on its outstanding general obligation bonds, the City has annually issued general obligation debt to pay a portion of the near-term debt service on such bonds. The City plans lo gradually curtail this practice, using it for annual property tax levies through and including the 2019 levy and thereafter discontinue issuing general obligation debt for such purpose.
Service Concession and Reserve Fund
The City has set aside reserves for unexpected contingencies, emergencies, or revenue shortfalls. These reserves, recorded in the Service Concession and Reserve Fund, are not included in the City's annual operating budget.


32

i
The City established long-term reserves of $500 million and $400 million, respectively, with proceeds of the upfront payments from the long-term lease or concession of the Chicago Skyway and the City's metered parking system ("Metered Parking System"). Sec "—Long-term Leases, Concessions of City Facilities" below.
The interest earned on the Skyway lease reserves was intended lo be used for City operating expenses and has been utilized as planned. The principal balance remains $500 million and the earned interest has been transferred to the General Fund each year, with the dollar amount of the transfer reflecting variations in interest rates.
The reserves from the Metered Parking System were created to replace revenues that would have been generated from parking meters by transferring interest earnings on the reserves to the General Fund, with the principal remaining intact at $400 million. However, starting in 2009, the City began utilizing these long-term reserves to subsidize the City's operating budget. In 2009, $20 million was transferred to the General Fund, and in 2010, $160 million was used for City operating expenses. The 2011 budget included a $140 million transfer from the reserves for operating purposes. Utilizing these reserves reduced the principal balance substantially below the initial deposit and accordingly reduced ihe interest earnings generated by the reserves. The ordinance establishing the reserves directed that an annual transfer of $20 million be made from the reserve fund into the General Fund to replace lost meter revenue. In order to maintain these reserves, the City amended the ordinance in 2012 to state that only interest generated from the reserves, and not principal, must be transferred for this purpose. In addition, the City began to rebuild the reserves with a $20 million deposit in 2012, a $15 million deposit in 2013, a $5 million deposit in 2014 and a $5 million deposit in 2015. The City has included an additional deposit of $5 million into the long-term reserves in its fiscal year 2016 budget.
Set forth in the table below is information about the City's long-term reserves as of December 31 ofthe years 2009 through 2015.
Long-Term Reserves 2009-2015
($ in millions)
Metered Parking
Year Skyway System Total"'
$500 S380 $880
500 220 720
500 80 580
500 100 600
500 115 615
500 120 620
500 125 625

Source: City of Chicago, Office of Budget and Management.
111 The amounts presented are based on cost of funds held in the Service Concession and Reserve Fund. The market value of the funds may vary depending on the market value of investments.










33

Capital Improvements
The City's capital improvement program (see "—Annual Budget—Budget Documents" above) funds the physical improvement or replacement of City-owned infrastructure and facilities with long useful lives, such as roads, buildings and green spaces. The capital improvements program is funded from general obligation bond issuances, revenue bond issuances (largely for water, sewer, and aviation improvements), Slate and federal funding, tax increment financing, and private funding through public/private ventures.
From 2010 to 2014, the City utilized proceeds from the issuance of general obligation bonds to fund $712.2 million in capital improvements. General obligation bonds were utilized to support the types of projects described in the table below.
Capital Improvement Projects"'
Description
Greening

Facilities


Infrastructure


Aldermanic menu projects
Green ways, medians, trees, fountains, community gardens, neighborhood parks, wetlands, and other natural areas.
Improvement and construction of City buildings and operating facilities, police and fire stations, health clinics, senior centers, and libraries.
Construction and maintenance of streets, viaducts, alleys, lighting, ramps, sidewalks, bridge improvements, traffic signals, bike lanes, slreetscapcs, and shoreline work.
Selected by members of City Council, each of whom is annually allotted $1.32 million of general obligation bond funding to be spent at their discretion on a specific menu of improvements in their respective wards. These funds have been used primarily for sidewalks, residential street resurfacing, street lighting, and curb and gutter replacement, with portions of these funds contributed to the Chicago Park District (S13.5 million), Board of Education of the City of Chicago ($2.6 million), and the Chicago Transit Authority ($500,000). Also included in this category are costs related to the improvements selected by the alderman, such as design and engineering, utility adjustments and sidewalk ramps.


General obligation bonds have also funded a limited number of other uses, which are discussed under "GENERAL OBLIGATION DEBT—Long-Term General Obligation Bonds."















34

Set forth in the following table are the capital uses of general obligation bonds from 2010 through
2014.
Capital Uses of General Obligation Bonds 2010-2014
($ in millions)
2010 2011 2012 2013 2014

Greening $ 15.7 $ 5.8 $ 4.2 $ 4.4 $4.6
Facilities 40.0 24.9 12.7 3.6 4.6
Infrastructure 28.9 26.0 33.1 36.3 32.0
Aldermanic Menu 81.4 102.0 84.0 84.0 84.0
Total $166.0 $158.7 S134.0 $128.3 $125.2

Source: City of Chicago, Office of Budget and Management.
General obligation bond-funded capital improvements have decreased since 2010 as the debt service associated with the City's long-term general obligation debt has grown and the City has made efforts to cut overall costs.
The City's estimated program for neighborhood capital improvements over the period 2015 through 2019 is approximately $2.2 billion. The City has not determined how much of such neighborhood capital improvements will be paid from general obligation bonds.
Property Taxes »
The City levies ad valorem real property taxes pursuant to its authority as a home rule unit of local government under the Illinois Constitution of 1970. Real property taxes represent the single largest revenue source for the City. As part of the City's budget process each year, the City determines the aggregate property tax levy that will be levied in the next fiscal year and collected in the following year.
EA V and Property Taxes
The City's aggregate property tax levy is divided by the equalized assessed value ("EAV") of all property in the City to determine the tax rale lhal will be applied to an individual taxpayer's properly. The tax rate is applied lo the EAV ofthe taxpayer's property to determine the tax bill. Changes in EAV do not affect the amount of the City's property tax revenue because the City's property taxes are levied at a flat dollar amount. For information on real property assessment, tax levy and tax collection in Cook County, see APPENDIX D—"PROPERTY TAXES."
The following tables present statistical data regarding the City's property tax base, tax rates, tax levies and tax collections from 2005 forward.












35
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Use of City Property Tax Levy
Revenue from the City' property tax levy has been utilized primarily to pay the City's debt service and employer pension contributions. A small amount of the levy is allocated to the library system.
The amounts and tax rates of the City's property tax levy for debt service and employer pension contribution by Retirement Fund are set forth in the following tables for the years indicated.
Property Tax Levies 2010-2014(,)
($ in thousands)
2010 2011 Change 2012 Change 2013 Change 2014 Change
Note Redemption
and Interest121 S 73,377 $ 73,377 0.00% S 73,481 0.14% $ 74,231 1.02% S 97,061 3076%
Bond Redemption
and Interest 409,979 411,905 0.47 411,489 .(0.10) 411,807 0.08 412,139 0.08
PABF(3) 140,165 143,785 2.58 143,865 0.06 138,146 (3.98) 136,680 (1.06)
MEABF,3) 132,531 126,997 (4.18) 129.138 1.69 122,066 (5.48) 123,239 0.96
FABF131 64,323 66,125 2.80 65,461 (1.00) 81,518 24.53 81,363 (0.19)
LABF131 13,714 11,759 (14.26) 11,202 (4.74) 10,486 (6.39) 10,934 4.27
$834,089 $833,948 (0.02)% S834.636 0 08% S838.254 0.43% S86I.4I6 2.76%

Source: Cook County Clerk's Office.
Docs not include the levy for the School Building and Improvement Fund which is accounted for in an agency fund.
(2) Includes Corporate, Chicago Public Library Maintenance and Operations, Chicago Public Library Building and Sites, and
City Relief Funds.
(3) For information regarding the City's unfunded pension obligations, sec "—Pensions—Funded Status of the Retirement
Funds."

























38

Property Tax Rates Per $100 Of Equalized Assessed Valuation 2005-2014



Tax Levy Year



Tax Extension0112' (in thousands)


Bond, Note Redemption and Interest1"



Policemen's Annuity and Benefit


Municipal Employees1 Annuity and Benefit



Firemen's Annuity and Benefit
Laborers'
and Retirement
Board Employees' Annuity and Benefit

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
$718,071 719,230 749,351 834,152 834,109 834,089 833,948 834,636 838,254 861,416
$0.696607 0.569261 0.588843 0.602842 0.570806 0.588774 0.645918 0.743122 0.778719 0.783368
$0.231467 0.194953 0.191548 0.172426 0.167552 0.170734 0.191381 0.220459 0.221494 0.210554
$0.231683 0.197399 0.174302 0.162182 0.153704 0.161435 0.169036 0.197892 0.195703 0.189848
$0.083243 0.099974 0.088581 0.080787 0.078184 0.078352 0.088014 0.100313 0.130700 0.125339


$0.011763 0.015754 0.016705 0.015651 0.017166 0.016813 0.016844
$1,243 1.062 1.044 1.030 0.986 1.016 1.110 1.279 1.343 1.327

Source: Cook County Clerk's Office.
(l) Docs not include levy for Special Service Areas and net of collections for TIF districts.
t2) Docs not include the levy for the Schools Building and Improvement Fund, which is accounted for in an agency fund. (3) Includes rates from the Chicago Public Library Bond, Note Redemption and Interest Fund.
The estimated total tax levies for fiscal years 2015 arid 2016 are approximately $1,186.3 million and $1,295.8 million, respectively. As part of its supplemental fiscal year 2015 budget adopted on October 28, 2015, the City has adopted a $318 million increase in property taxes, part of an overall increase ofproperty taxes of $543 million lo be phased in between 2015 and 2018.
As shown above, the aggregate property tax levies over the period 2008 through 2013 remained relatively constant. The increase in 2014 is primarily due lo property tax surpluses from TIF district terminations and does not represent an increase in the total tax levy for that year. Sec "—TIF Districts" below.
As the City's debt service and pension expenses have increased, these costs have exceeded the City's properly tax levy. From 2005 through 2014, an increasing portion ofthe pension contributions were paid with personal property replacement tax revenue and a portion of such year's long-term debt service was covered using other resources. In addition, for the past several years the City has issued general obligation refunding bonds in part to restructure some of its outstanding general obligation bonds. This has allowed the City to reduce the property tax levies for the refunded bonds and keep the aggregate properly tax levy below a desired level for that year. Such debt restructuring has extended the property tax levies into the future in order to repay the refunding bonds.
The City is one of several taxing districts reflected on a Chicago resident's properly tax bill. The amount of property taxes collected by Cook County is divided among these districts, with the City allocated approximately 20 percent of the total bill. For information on property taxes levied on real property within the City by overlapping taxing districts, see "—Overlapping Taxing Districts" below.






39

TIF Districts
In addilion to the revenues the City receives from its general property tax levy, the City derives property tax revenue from the City's TIF districts. TIF revenue must be utilized for specific types of expenses in specific districts and is not available for non-specified governmental uses. The City's TIF program began in 1984 with the goal of promoting business, industrial, and residential development in areas ofthe City that struggled lo attract or retain housing, jobs, or commercial activity. The program is governed by a State law that allows municipalities to capture property tax revenues derived from the EAV growth above the base EAV that existed before an area was designated as a TIF district for the term ofthe TIF district, and to use that money (the tax increment) for job training, public improvements and incentives to attract private investment to the area.
When a TIF district expires, terminates, is repealed, or the City, under certain circumstances, declares a surplus in the TIF district, the City returns the surplus funds to the Cook County Treasurer for distribution to the overlapping taxing districts based upon each district's share under the applicable tax code. Such surplus declaration occurs typically during the City's annual budget process.
Set forth in the following table is information about the amount of money returned to taxing districts from declared surplus or the expiration, repeal or termination of TIF districts from 2011 through 2015.
TIF Surplus 2011-2015
($ in millions)
2011 2012 2013 2014 2015
Declared S188.0 $82.9 $25.0 $39.1 $39.5
Expiration 15.1 13.7 8.4 25.4 44.3
Repeal 73.3 0.0 0.5 0.0 0.0
Termination 0.0 0.0 9.6 0.6 0.5
Total S276.4 $96.6 $43.5 $65.1 $84.3

Source: City of Chicago, Office of Budget and Management.
The City received approximately 20 percent of all surplus dollars distributed by the Cook County Treasurer to the overlapping taxing districts over the 2011 to 2015 period. As part of its budget for fiscal year 2016, the City has frozen new spending from TIF revenues in TIF districts located in the City's downtown area until current and committed projects in those districts payable from those revenues are paid in full, and declared the remaining revenues in those districts as surplus. This is expected to yield approximately $113 million in surplus for 2016. The City has allocated its $22 million share of this surplus to the reduction of operating expenses in its fiscal year 2016 budget, with the remainder being allocated to other local government units.
Upon the expiration, repeal or termination of TIF districts, the incremental EAV of the district becomes a part of the aggregate EAV that is available to all overlapping taxing districts. Taxing districts, including the City, have the ability to recover their portion ofthe revenue from the incremental EAV by adding it to their levy following a TIF district's dissolution. This practice yielded the City $1.1 million from three TIF districts in 2012, $3.3 million from 12 TIF districts in 2013 and $16.6 million from six TIF districts in 2014. The City will continue lo receive TIF surplus on an annual basis as TIF districts arc repealed, terminated or expire.




40

Overlapping Taxing Districts
Various governmental entities operate as separate, independent units of government and have authority to issue bonds and levy taxes on real properly within the City. These governmental entities, or overlapping taxing districts, are the Board of Education of the City of Chicago ("CBOE"), Cook County, Illinois ("Cook County"), the Metropolitan Water Reclamation District of Greater Chicago ("MWRD"), the Chicago Park District (the "Park District"), Community College District Number 508, County of Cook and State of Illinois ("City Colleges"), and the Cook County Forest Preserve District ("Forest Preserve").
The combined property tax rates of the City and overlapping taxing districts arc set forth in the following table for the years 2005 to 2014.









































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City Workforce
The City has decreased its workforce from 38,366 positions (40,318 full-time equivalents, or "FTEs") in 2005 to 32,959 positions (34,129 FTEs) in 2015, a decrease of approximately 14 percent. Approximately 91 percent of the City's workforce is represented by unions. The City is party to collective bargaining agreements with more than 40 different unions.
The two largest bargaining units are the Fraternal Order of Police ("FOP") and the Chicago Firefighters Union, currently with 16,096 combined sworn public safety positions. When police captains, lieutenants, and sergeants are included, the number of unionized sworn public safety positions comes to 17,539.
The next largest group of positions is associated with the Coalition of Union Public Employees ("COUPE"), which currently represents 6,754 trades positions (7,315 FTEs). The American Federation of State, County, and Municipal Employees ("AFSCME") is the fourth largest group, representing 3,479 positions (3,650 FTEs) that provide administrative support for City government and services, and the Service Employees International Union ("SEIU") currently represents 1,967 public safety civilian positions (2,717 FTEs), such as traffic control aides, detention aides, and police communication operators.
The collective bargaining agreements with each of these unions include regular salary increases, resulting in higher personnel costs each year. The current collective bargaining agreement between the City and the Fraternal Order of Police, Chicago Lodge No. 7 (FOP), covering the terms and conditions of employment of approximately 11,015 Chicago Police Officers for the period July 1, 2012 through June 30, 2017, was signed and became effective on November 18, 2014. This agreement succeeded the prior collective bargaining agreement which expired on June 30, 2012. The agreement provides for wage increases during the five (5) year term totaling approximately 10 percent, including retroactive increases effective during the period July 1, 2012 through November, 2014. The retroactively effective increases were as follows:
Effective July 1, 2012 Effective January 1, 2013 Effective January 1, 2014
2% 2% 2%
The City negotiated a limitation on the retroactive increases for the period July 1, 2012 through June 30, 2013, in that these increases were applicable only to officers' base pay/salary and excluded all overtime earned during this period. The retroactive increases have been paid by the City with borrowings under the Short-Term Borrowing Program. These borrowings will be repaid with available resources from the General Fund.
An agreement with the Chicago Firefighters Union, providing for an 11 percent increase over the period 2012 to 2017, was ratified by the union in June 2014. The most recent agreement with COUPE provides for wage rales set at the prevailing rates established regularly by the Illinois Department of Labor for construction trades employees; for employees not subject to prevailing rale schedules, the agreement provides for 2 percent increases each year from 2013 through 2017. The most recent agreement with AFSCME, ratified in June 2014, provides for a 10% increase over the five-year period 2012 to 2017. The current SEIU agreement, ratified in August 2012, includes a 6 percent increase between 2011 and 2016. Agreements ratified by the unions representing police sergeants, lieutenants and captains in late 2013 and early 2014, each provide for an 8 percent salary increase between 2012 and
2016.




44

These increases are in addition to the raises based on time in service that most employees receive. Historically, non-union employees received salary increases equal to those negotiated for civilian positions; however, since 2009, the majority of non-represented employees have not received salary increases beyond normal step increases for time in service.
Pensions
The following is a summary of certain aspects of the City's Retirement Funds. Additional information regarding the Retirement Funds is available in APPENDIX E—"RETIREMENT FUNDS. "
General
The City contributes to four defined benefit retirement funds (the "Retirement Funds") which provide benefits upon retirement, death or disability to City employees and their beneficiaries. The Retirement Funds are established, administered and financed under the Illinois Pension Code (the "Pension Code") as separate legal entities and for the benefit of the members and beneficiaries of the Retirement Funds. The four Retirement Funds are: (i) the Municipal Employees' Annuity and Benefit Fund of Chicago ("MEABF"), which covers most civil servant employees of the City and non-teacher employees ofthe CBOE; (ii) the Laborers' and Retirement Board Employees' Annuity and Benefit Fund of Chicago ("LABF"), which covers City and certain CBOE employees who are employed in a title recognized as labor service; (iii) the Firemen's Annuity and Benefit Fund of Chicago ("FABF"), which covers the City's sworn firefighters and paramedics; and (iv) the Policemen's Annuity and Benefit Fund of Chicago ("PABF"), which covers the City's sworn police officers, captains, lieutenants and sergeants. As of the end of 2014, there were over 114,000 members in the plans, including active and inactive employees, retirees and beneficiaries.
The benefits paid under the Retirement Funds, contributions to the Retirement Funds and investments by the Retirement Funds arc governed by the Pension Code. As defined benefit pension plans, the Retirement Funds pay periodic benefits to beneficiaries, which generally consist of retired or disabled employees, their dependents and their survivors, in a fixed amount (subject to certain scheduled increases) for life. The amount of the benefit is determined al the lime of retirement based, among other things, on Ihe length of time worked and the salary earned. To fund benefits, both the City and the City's employees make contributions lo the Retirement Funds. The Retirement Funds invest these contributions with the goal of achieving projected investment returns over time and increasing the assets of the Retirement Funds.
The Retirement Funds' actuaries perform separate actuarial valuations of each ofthe Retirement Funds on an annual basis. These actuarial valuations calculate, among other things, the employer contributions, assets and liabilities of the Retirement Funds. In the actuarial valuations, the actuaries make a variety of assumptions and employ actuarial methods to calculate such contributions, assets and liabilities. The assumptions and methods used by the actuary have a significant impact on the measures of financial position of the Retirement Funds and are further described in APPENDIX E—"RETIREMENT FUNDS."
Funded Status ofthe Retirement Funds
The Retirement Funds are presently significantly underfunded. The funded status of the Retirement Funds as of December 31, 2014 is set forth in the following table.





45

Funding Status of the Retirement Funds as of December 31, 2014(l)
($ in millions)

Total
Assets12' MEABF.. S5,179.5
LABF 1,388.1
PABF 3,062.0
FABF 1,036.0
Total $10,665.6

Funded
Ratio(3) 42.1% 65.9 27.0 23.9
Unfunded Actuarial Accrued
Liability'4'
$7,127.6 719.0 8,272.8 3,302.6
$30,087.6 $19,422.0 35.5%

Source: Actuarial Valuations ofthe respective Retirement Funds for the fiscal year ended December 31, 2014. l" Columns may not sum due to rounding. 121 Measured at fair market value.
131 "Actuarial Accrued Liability" is the dollar value of plan liabilities (as determined by an actuary). Sec APPENDIX E—
"RETIREMENT FUNDS—Actuarial Methods—Actuarial Accrued Liability." (4) Unfunded Actuarial Accrued Liability" or "UAAL" is the dollar value by which the plan's liabilities (as determined by an
actuary) exceed the assets of such pension plan. Sec APPENDIX E—"RETIREMENT FUNDS—The Actuarial Valuation—
Prior GASB Standards."
I5) "Funded Ratio" represents the plan's assets divided by its liabilities (as assets and liabilities are determined by an actuary). Sec APPENDIX E—"RETIREMENT FUNDS—The Actuarial Valuation— Prior GASB Standards."

The funded status of the Retirement Funds has deteriorated steadily over lime, as demonstrated in the table below.
Funded Status ofthe Retirement Funds 2005-20141"
($ in millions)
MEABF
UAAL
Funded Ratio
Year
2005 $2,893.3 68.7%
2,635.0 72.2
2,958.7 70.3
5,642.6 45.7
5,663.9 47.7
6,393.1 46.0
7,239.7 41.1
8,292.7 38.5
8,407.2 39.2
7,127.6(2) 42.1(2)
Funded
UAAL Ratio
$3,767.9 51.2%
52.8
3,887.1 52.7
35.4
5,410.1 38.1
5,770.4 37.3
6,346.9 33.4
6,839.4 32.0
7,017.1 31.8
8,272.8 27.0
Funded
UAAL Ratio
$1,608.2 44.2%
1.696.6 45.1
1,746.4 45.7
27.6
30.7
2,548.9 30.3
2,858.1 25.8
2.987.7 25.7
3,012.0 27.0
3,302.6 23.9
Funded
UAAL Ratio
$83.2 95.2%)
28.0 98.4
25.5 98.6
62.1
67.5
602.8 70.3
839.3 61.0
965.1 58.7
925.8 61.2
719.012' 65.9(2'
Funded
UAAL Ratio
$8,352.7 61.3%
8,107.1 63.6
8,617.8 62.9
14,248.0 40.9
14,094.0 43.6
15,315.2 42.7
17,284.0 37.9
19,083.9 36.1
19,362.2 36.8
19,422.0 35.5

Source: The Comprehensive Annual Financial Reports for the Retirement Funds (the "Retirement Fund CAFRs") for fiscal
years 2005 through 2014. "'All calculations based on the fair market value of assets.
("' Reduction in LABF and MEABF UAAL and increase in Funded Ratio are due in large part to the enactment of P.A. 98-641, which is subject to legal challenge as to its constitutionality. See Appendix E—"RETIREMENT FUNDS — Legislative Changes—P.A. 98-641."



46

The City believes that the decrease in the Retirement Funds' funding levels over the past ten years is due to adverse economic factors (resulting in investment returns below assumed levels combined with a decreasing asset base), inadequacy of legislatively-mandated employee and City contributions, automatic annual increases ("AAls") and changes in benefit levels, changes in actuarial assumptions and the changed demographic of both the City's workforce and retirees ofthe Funds.
Adverse Economic Factors. The financial downturns of 2001 and 2008 resulted in significant drops in the asset values of the Retirement Funds. From 2000 to 2002, the combined aggregate funded ratio of the Retirement Funds declined from approximately 87 percent to approximately 62 percent, due primarily to investment losses. Investment performance improved in the mid-2000s, but this growth was on a smaller asset pool due to prior losses. During 2008, the Retirement Funds sustained a more than $4.0 billion loss in asset value, and the combined Retirement Funds' funded ratio decreased from approximately 63 percent to approximately 41 percent. Although the investment performance of the Retirement Funds has recovered since 2008, the Retirement Funds' funded ratio continued to decline to approximately 36 percent in 2014.
Contribution Levels. City employees contribute a fixed percentage of their salary to the Retirement Funds. Historically, the City's contributions to the Retirement Funds had been determined on the basis of a formula established in the Pension Code. This formula required the City to levy an amount equal to the employee contributions two years prior to the year in which the lax was levied multiplied by a factor established by statute for each Retirement Fund (the "Multiplier"). The Multiplier is not related to the contribution which would be determined by an actuary pursuant to an actuarial valuation or the benefits actually earned by employees. Furthermore, the Multiplier does not adjust for changes in the economy affecting returns on pension fund investments, changes in demographics, inflation, or changes in benefits. As a result, the Multiplier for each Retirement Fund has been significantly lower than the Multiplier which would have been necessary lo fully fund the Retirement Funds on an actuarial basis in recent years.

























47

The following table compares the City's statutory contributions pursuant to the Pension Code to the amounts calculated by the Retirement Funds' actuaries lo be needed lo fully fund the Retirement Funds for the years 2005 through 2014.
Retirement Funds City Contribution Requirements 2005-2014("
($ in thousands)
Percentage of Actuarially
Actuarially Required
Fiscal Required Actual City Contribution
Year Contribution Contribution'2' Contributed
$ 698,185 $423,515 60.7%
785,111 394,899 50.3
865,776 395,483 45.7
886,215 416,130 47.0
990,381 423,929 42.8
1,112,626 425,552 38.2
1,321,823 416,693 31.5
1,470,905 440,120 29.9
1,695,278 442,970 26.1
1,740,972 447,399 25.7

Sources: Actuarial Valuations of the Retirement Funds as of December 31 ofthe years 2010 through 2014 111 Data is presented in the aggregate for the Retirement Funds and uses assumptions and methods employed by each ofthe Retirement Funds. For the data presented as of December 31, 2005 and December 31, 2006, contribution information includes amounts related to other post-employment benefits. Beginning in 2007, as a result of a change in GASB standards, contribution information is presented exclusive of amounts related to other post-employment benefits. The City began to report other post-employment benefits separately in the City CAFR beginning in 2006. l") Includes the portion ofthe personal property replacement tax contributed to the Retirement Funds in each year.

Changes in Benefits. Over time, additional benefits have accrued under or been written into the Pension Code. Most notably, AAls written into the Pension Code significantly increased the cost of benefits. AAls provide annual increases in pension payments regardless of the then prevailing inflation rales. Legislation passed by the State in 2010 reduced the AAls and instituted other cost saving provisions for all four pension funds for employees hired on or after January 1, 2011. See APPENDIX E—"RETIREMENT FUNDS—Legislative Changes—P.A. 96-0889."
Legislative changes to the Pension Code also increased the total cost of benefits owed, though to a lesser degree lhan the automatic AAls. Among other changes, certain benefit minimums were raised and the definition of pensionable pay was expanded.
Workforce and Retiree Demographics. In addition lo investment losses and benefit increases, the makeup of the City's workforce and retirees has added to the unfunded liability of the Retirement Funds. The statutorily-set employee and employer contribution percentages did not change to account for shifts in basic demographic factors such as the longer lifespans of retirees and the projected future benefit costs. In addition, the City's prior early retirement incentive plans increased the number of retirees drawing benefits and decreased the number of employees contributing to the Retirement Funds.






48

Changes to PABF and FABF
Public Act 096-1495 ("P.A. 96-1495"), enacted in 2010, made changes to the Pension Code with respect to PABF and FABF. In addition to making some changes to benefits for PABF and FABF employees beginning employment on or after January 1, 2011, P.A. 96-1495 alters the manner in which the City contributes to PABF and FABF beginning in 2016. P.A. 96-1495 removes the Multiplier from the funding calculation, instead requiring the City lo contribute to PABF and FABF the amount actuarially required to achieve a funded ratio of 90 percent by fiscal year 2040. P.A. 96-1495 will significantly increase the City's contributions to PABF and FABF in 2016. See "— City's 2015 and 2016 Contributions to the Retirement Funds Pursuant to the Proposed Budget" herein and APPENDIX E— "RETIREMENT FUNDS—Legislative Changes—P./!. 96-1495."
The following table sets forth a projection of the funded ratios of and City contributions lo PABF and FABF in future fiscal years.
Projected Funded Ratios and Contributions PABF AND FABF(1) ($ in thousands)

FABF
Fiscal Year
2015 2016 2017 2018 2019 2020 2025 2030 2035 2040
Funded Ratio
28.7%
30.3
32.0
33.6
35.3
36.9
45.5
55.9
70.4
90.0
Employer Contribution'21
$ 187,815 592,863 675,826 695,124 713,810 732,200 834,435 951,072 1,073,628 1,146,889
Funded Ratio
25.0%
26.6
28.2
29.8
31.5
33.2
42.6
54.9
70.4
90.0
Employer Contribution'2'
$109,813 246,132 284,086 292,439 301,752 311,205 363,224 414,140 442,417 463,527

Source: The Actuarial Valuations of PABF and FABF as of December 31, 2014. "' Projections are calculated on an accrual basis.
(2) Represents contributions expected to be made by the City during the fiscal year.
Senate Bill 777 ("SB 777") passed both houses of the Illinois General Assembly as of May 31, 2015. SB 777 would extend the period by which the unfunded liabilities of PABF and FABF are amortized to a 90 percent Funded Ratio from 2040 to 2055 (the "Revised Amortization Period") and institute a phase-in period during 2016-2020 to reduce the City's required payment in the initial years to allow for a more gradual phase-in of the requirements of P.A. 96-1495 (the "Phase-in Period"). The Revised Amortization Period would reduce the annual funding obligation required to reach a 90 percent Funded Ratio, but extend the number of years over which such payments would need to be made. A motion to reconsider the vole on SB 777 was filed in the Illinois Senate on May 31, 2015, and, as such, SB 777 has not been sent to the Governor for consideration. In addition to, or in lieu of, a Revised Amortization Period or a Phase-in Period, the Illinois General Assembly may consider other legislation that could affect the City payment obligations for PABF and FABF and/or funding sources for those obligations, including a City-owned casino. The City makes no representation as to whether or when SB 777 or any such other legislation would be enacted.



49

Changes to MEABF and LABF
Public Act 098-641 ("P.A. 98-641"), enacted in June 2014, makes changes to the Pension Code with respect to MEABF and LABF. P.A. 98-641 is designed to address the underfunding, and projected insolvency, of MEABF and LABF through a combination of increases in the City's contributions, increases in employee contributions, and decreases in the AAI adjustments. Among other changes, P.A. 98-641 increases employee contribution rates, makes changes to AAls and provides for AAls to be skipped in 2017, 2019 and 2025. Furthermore, P.A. 98-641 modifies the manner in which the City contributes to MEABF and FABF. P.A. 98-641 retains the Multiplier, with stepped increases in the applicable Multipliers, as the method of calculating the City's contribution through 2020. Beginning in 2021, the City will be required to contribute to MEABF and LABF the amount necessary, as determined by an actuary, to achieve a funded ratio of 90 percent by 2055. See APPENDIX E—"RETIREMENT FUNDS —Legislative Changes—P.A. 98-641."
P.A. 98-641 is currently subject to challenge in a lawsuit alleging its unconstitutionality. See "LITIGATION—City Pension Litigation" below and APPENDIX E—"RETIREMENT FUNDS— "Effect on MEABF and LABF If P.A. 98-641 Found Unconstitutional."
The following table sets forth a projection of the Funded Ratios of and City contributions to MEABF and LABF in future fiscal years.
Projected Funded Ratios and Contributions MEABF AND LABF(I) ($ in millions)

Fiscal Year
2015 2016 2017 2018 2019 2020 2025 2030 2035 2040

Funded Ratio
40.4%
38.9
38.3
38.3
38.8
39.4
41.7
43.3
44.8
48.4
MEABF
Employer Contribution (2)
$ 156.1 242.7 275.2 381.4 464.6 542.6 596.9 645.2 701.8 778.3

Funded Ratio
63.5%
61.7
60.0
58.9
57.7
57.0
55.8
54.9
54.9
57.3
LABF
Employer Contribution
$ 14.5 24.0 28.5 37.8 46.3 56.1 76.4 86.9 97.6 106.8

Source: The Actuarial Valuations of MEABF and LABF as of December 31, 2014. (l) Projections calculated on a cash basis.
'"' Represents contributions expected to be made by the City during the fiscal year.

City's 2016 Contributions to the Retirement Funds Pursuant to the Proposed Budget.
On October 28, 2015, the City Council approved its supplemental'fiscal year 2015 budget (the "Supplemental Budget") and its fiscal year 2016 budget (the "FY 2016 Budget"). The Supplemental Budget increased the budgeted fiscal year 2015 contribution (payable to the Retirement Funds in 2016) to PABF and FABF by $328 million (the "Additional 2015 Contribution"), which increased the total contribution to all Retirement Funds to $886 million for such fiscal year (the "2015 Contribution"). The FY 2016 Budget includes an additional increase in the contribution to the Retirement Funds which results


50

in a total contribution for fiscal year 2016 (payable to the Retirement Funds in 2017) of $978 million (the "2016 Contribution"). The 2015 Contribution and the 2016 Contribution each assume the effectiveness of P.A. 98-641 and the enactment of SB 777.
The City's budget for fiscal year 2015, as amended by the Supplemental Budget (together the "Amended FY 2015 Budget"), provides that the increase in contributions to PABF and FABF be primarily generated through an increase in the City's property tax levy. Such property tax increase has been adopted by the City Council. However, the 2015 Contribution and the 2016 Contribution assume the enactment of SB 777, which would reduce the contribution currently required by the Pension Code under P.A. 96-1495. Specifically, with respect to fiscal year 2015, SB 777 would reduce the City's contribution to PABF and FABF from $839 million to $619 million. Because the Amended FY 2015 Budget assumes the enactment of SB 777, the FY 2015 Contribution included in the Amended FY 2015 Budget would be insufficient to fund the contribution required by the Pension Code should SB 777 not be enacted.
The City can give no assurance as to whether SB 777 or similar legislation will be adopted by the General Assembly. If SB 777 or similar legislation is not enacted and the City must contribute to PABF and FABF pursuant to the current provisions of the Pension Code, the City expects that it would fund such additional contributions through an increase in revenues, a decrease in expenditures or a combination thereof.
































51

Overlapping Taxing Districts
The overlapping taxing districts within the City maintain five pension funds for their respective employees that arc supported by local property taxes. Statistical data for the four City pension funds and the five overlapping taxing district's pension funds is set forth in the table below.
City and Overlapping Taxing Districts Pension Funds Supported by Local Property Taxes (l)

Unfunded
Actuarial Unfunded
Accrued Liability
Liability Per Funded
($ in millions) Capita'21 Ratio
Overlapping Taxing Districts
MWRD $ 1,033.2 $ 196 55.0%
Cook County 5,330.0 1,016 62.3%
Forest Preserve 96.0 18 66.4%
CBOEl3) 9,606.9 3,529 51.8%
Park District 507.1 97_ 43.7%
Subtotal SI6,573.2 $ 4,856
City Pension Funds $19,748.4 $ 7,254 34.4%,
TOTAL $36,321.6 $12,110,")


Source: Most recent audited financial statements, CAFR or actuarial valuation of the pension fund of the overlapping taxing district.
in Excludes City Colleges, the employees of which are members of the State Universities Retirement System which is funded by the State; excludes the Chicago Transit Authority pension fund which is supported by local sales taxes, real estate transfer taxes, subsidies from the Regional Transportation Authority and fares.
f2) Per capita amounts arc based on the U.S. Census Bureau's 2014 population estimate of the City (2,722,389) and of Cook County (5,246,456) as described in APPENDIX B—"ECONOMIC AND DEMOGRAPHIC INFORMATION—Population." The City's population was used to calculate the per capita numbers for the City and for the CBOE and the Park District, each of which has boundaries coterminous with the City. Cook County's population was used to calculate the per capita numbers for Cook County, the Forest Preserve, which has boundaries coterminous with Cook County, and MWRD which, though not coterminous with Cook County, has boundaries which overlap in excess of 98% with the boundaries of Cook County, measured by EAV.
1,1 CBOE makes contributions to the Chicago Teachers' Fund.
141 Represents the average burden on a resident of the City as a result of the unfunded pension liabilities of the City and the overlapping taxing districts.
The information set forth in the preceding table may not incorporate the various reforms that have been adopted for certain of these pension funds, and should not be relied upon for the financial condition ofthe funds currently. The information is presented only to provide an indication of the magnitude of the unfunded pension liabilities ofthe overlapping taxing districts when combined with the unfunded pension liabilities of the City.
Long-Term Leases, Concessions of City Facilities
The City is a parly to long-term lease or concession agreements with respect to certain City-owned facilities, as described below.




52

In 2005, the City entered into a 99-ycar lease of the Chicago Skyway (the "Skyway Lease"), under which Skyway Concession Company, LLC, was granted the right to collect and retain toll revenue from the Skyway. In return, the City received an upfront payment of $1.83 billion.
In 2006, the City entered into the Chicago Downtown Public Parking System Concession and Lease Agreement (the "Parking Garages Lease Agreement") with Chicago Loop Parking, LLC ("CLP"), by which CLP was granted a 99-year concession to operate the public parking garages commonly referred to as Millennium Park, Grant Park North, Grant Park South and East Monroe (collectively the "Parking Garages"). Under the Parking Garages Lease Agreement, CLP was granted the right to operate and collect revenue from the Parking Garages in return for an upfront payment of $563 million to the City. The Parking Garages Lease transaction is in litigation; plaintiffs have challenged the validity of the lease. See "LITIGATION—Parking Garages Litigation."
In 2008, the City entered into the Chicago Metered Parking System Concession Agreement (the "Parking Meters Concession Agreement") with Chicago Parking Meters, LLC ("CPM"), by which CPM was granted a 75-year concession to operate the City's on-strcct metered parking system (the "Metered Parking System"), including the right to collect revenues derived from the metered parking spaces. In return, the City received an upfront payment of $1.15 billion.
The City established long-term reserves with portions ofthe upfront payments from the Skyway Lease and the Metered Parking System. Sec "—Service Concession and Reserve Fund" above.
Under each of the Skyway Lease, the Metered Parking Concession Agreement and the Parking Garages Lease, the lessee/concessionaire has the right to terminate the transaction and receive payment from the City for the fair market value of the respective City facilities in the event that the City, Cook County or the State were to take certain actions which materially adversely affected the value of the respective City facilities.
The Parking Garages Lease Agreement includes a provision by which certain events can require the City to compensate the lessee. One of those events is the granting of a license for the operation of a public garage that was not in existence as of the date of the Parking Garages Lease Agreement within a certain distance from the Parking Garages. In 2015, the City paid the lessee a judgment of approximately $62 million as compensation for granting a public garage license for a new parking garage within the specified distance from the Parking Garages.
The Parking Meters Concession Agreement includes a provision by which the City can be required to compensate CPM if usage of the Metered Parking System by vehicles displaying disabled parking placards (which are exempt from paying for on-street metered parking) exceeds a certain threshold. Pursuant to this provision, the City paid CPM $18.5 million for such usage by vehicles displaying a disabled parking placard during 2013. No such payments were paid pursuant to this provision in either 2014 or 2015.
Illinois Sports Facilities Authority
The Illinois Sports Facilities Authority ("ISFA") is a State agency authorized to construct and operate sports facilities and provide financial assistance for governmental owners of sports facilities or their tenants. Beginning in 1980, the ISFA issued various series of bonds (and refunding bonds) for the development of U.S. Cellular Field and a portion of the Chicago lakefront including Soldier Field. The ISFA bonds are payable from State and City annual subsidy payments of $5 million each, with the City's subsidy taken from the City's share ofthe local government distributive fund, and a 2 percent hotel tax imposed by the ISFA (the "ISFA Hotel Tax"). The Stale advances to the ISFA certified annual operating


53

expenses less the amount of the subsidies. The State withholds collections from the ISFA Hotel Tax to repay advanced amounts. If the ISFA Hotel Tax is not sufficient to repay the Stale advance, the deficiency is automatically withdrawn from the City's share of the local government distributive fund. During 2011, the ISFA hotel tax was inadequate to fully repay the State advance, and the deficiency of $185,009 was deducted from the City's share of the local government distributive fund. This is the only payment the City has made to date. Future City payments are dependent on hotel occupancy rates.
City Investment Policy
The investment of City funds is governed by the Municipal Code. Pursuant to the Municipal Code, the City Treasurer has adopted a Statement of Investment Policy and Guidelines for the purpose of establishing written cash management and investment guidelines to be followed by the City Treasurer's office in the investment of City funds. See APPENDIX C—"CITY OF CHICAGO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014—Notes (1) and (4)."
Amounts in a variety of funds of the City, including the General Fund, arc invested on a cominglcd basis, and are referred to as the City's "consolidated cash." Consolidated cash may be used for interfund borrowings among various funds of the City, including, but not limited to, the General Fund, and such use reduces the need for external borrowing by the City to meet the needs of its funds. The City has maintained its consolidated cash, including interfund borrowing, so as to meet the obligations of its funds, including the General Fund, in a timely manner.

GENERAL OBLIGATION DEBT
Recent Developments
On April 29, 2015, Mayor Emanuel announced a scries of fiscal reforms to be implemented over the next four years to strengthen the City's financial practices. The reforms included (i) converting to fixed rate all ofthe City's outstanding general obligation variable rate bonds; (ii) terminating the interest rate swaps associated with the City's general obligation variable rate bonds; (iii) ending by 2019 the practice of paying near-term debt with long-term bonds; (iv) increasing operating budget funding for legal settlements and judgments; and (v) increasing the City's reserve funds.
In the first half of 2015, the City implemented the first two components of the Mayor's fiscal reform agenda by converting all of its general obligation variable rate bonds to fixed rates of interest and terminating the related interest rate swaps and liquidity support instruments.
Long-Term General Obligation Bonds
A significant portion of the City's long-term general obligation bonds, including the Bonds, are backed by the full faith and credit of the City, and all taxable property within the City is subject to the levy of taxes, without regard to rate or amount, lo pay the principal of and interest on such general obligation bonds. As described below, certain general obligation bonds of the City do not have a property tax levy in place for their repayment.
The City has three types of long-term general obligation bonds outstanding. For a significant portion of the City's long-term general obligation bonds (including Ihc Bonds), an annual properly tax levy has been established lo pay debt service on such bonds ("Tax Levy Bonds"). For certain other long-term general obligation bonds issued by Ihc City (which make up a small subset of the City's general obligation bonds), either (i) an annual property tax levy has been established but is annually abated if certain other specified revenues are available that year for payment of debt service ("Alternative Revenue


54

Bonds"), or (ii) no annual property tax levy has been established for debt service and payments of debt service are appropriated from sources of revenue other than property taxes ("Pledge Bonds"). Alternative Revenue Bonds include the City's General Obligation Bonds (Modern Schools Across Chicago Program), Series 2007 A-K, Series 2010A and Series 2010B, and General Obligation Bonds (Emergency Telephone System), Series 1999 and Series 2004. Pledge Bonds include the City's General Obligation Building Acquisition Certificates (Limited Tax), Scries 1997, and the general obligation note issued by the City in connection with the acquisition by the City of the former Michael Reese Hospital campus (the "MRL Note"). All other long-term general obligation bonds of the City are Tax Levy Bonds.
Long-term general obligation bonds are generally issued annually by the City to pay for capital projects, general obligation refundings for savings, general obligation debt restructuring, legal settlements and judgments, and, from time to time, the retroactive employment wage and salary increases (including related pension costs).
Over the last five years, the City has issued approximately $350 million of long-term general obligation bonds per year to fund capital improvements, equipment and legal judgments and settlements. For information on the use of long-term general obligation bonds for capital projects, see "FINANCIAL DISCUSSION AND ANALYSIS—Capital Improvements." The City currently intends lo curtail the use of long-term general obligation bonds to fund settlements and judgments in future budgets.
For the last several years, proceeds from long-term general obligation bonds have been used to pay a portion of the near-term debt service on outstanding general obligation bonds reducing the property tax levy in those years by $90 million to $170 million per year. A portion of the proceeds of the Bonds will be used for this purpose, reducing the debt service on outstanding general obligation bonds otherwise payable from the annual property tax levy for the 2015 levy year by approximately $215 million. The City plans to continue this practice for annual property tax levies through and including the 2019 property tax levy, and thereafter discontinue issuing general obligation debt for such purpose. See "INVESTMENT CONSIDERATIONS—Structural Deficit and Debt Restructuring."
Following are selected debt statistics regarding the City's long-term general obligation bonds from 2006 through 2015.






















55

Long-Term General Obligation Bonds Selected Debt Statistics 2006-2015

Year
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Aggregate Debt ($ in thousands)1
S 5,422,232 5,805,921 6,126,295 6,866,270 7,328,452 7,628,222 7,939,682 7,670,298 8,339,626 9,041,892
Total Est. Fair Cash Value'21 ($ in thousands)
$329,770,733 320,503,503 310,888,609 280,288,730 231,986,396 222,856,064 206,915,723 236,695,475
Ratio of Debt to Fair Cash Valuc';
1.64% 1.81% 1.97% 2.45% 3.16% 3.42% 3.84% 3.24% 3.52%, 3.82%
Per Capita1
$1,872.31 2,004.80 2,115.42 2,370.94 2,718.67 2,829.88 2,945.43 2,845.49 3,093.79 3,354.32

Source: City of Chicago, Department of Finance. 121 Source: The Civic Federation. Excludes railroad property, pollution control facilities and the portion of the City in DuPage
County. 2014 and 2015 information is not available at time of publication. The ratios of debt to fair cash value for 2014 and
2015 arc based on 2013 estimated fair cash value. ,3) Population source: U.S. Census Bureau. From 2006 through 2009, per capita calculation is based on the 2000 population of
2,896,016. From 2010 through 2015, per capita calculation is based on the 2010 population of 2,695,598.
The City's long-term general obligation debt service schedule for 2016 to 2043 is set forth in the
following table.




























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Short-Term Borrowing Program
The City has issued commercial paper notes and maintains revolving lines of credit (the "Short-Term Borrowing Program"). Borrowings under the Short-Term Borrowing Program are general obligations of the City but do not have a specific property tax levy in place for their repayment.
The Short-Term Borrowing Program is used by the City for working capital in anticipation of receipt of other revenue, to fund capital projects, debt refinancing or restructuring and to pay non-capital expenditures, such as settlements and judgments or retroactive payment of employment salaries and wages, which are typically repaid from proceeds of later issuances of general obligation bonds.
The City has increased its borrowing capacity under the Short-Term Borrowing Program over time. By ordinance, the current maximum aggregate principal amount of debt that can be outstanding under the Short-Term Borrowing Program is $1.0 billion. The City has sized its borrowing capacity for interim funding in anticipation of receiving revenues or issuing long-term general obligation bonds and to cover General Fund operating expenses.
On September 24, 2015 the City terminated its then existing commitments under the Short-Term Borrowing Program and entered into a Revolving Line of Credit Agreement, dated as of September 24, 2015 (the "Line of Credit") among the City and JPMorgan Chase Bank, National Association; Bank of China, Chicago Branch and BMO Harris Bank, N.A. The Line of Credit provides the City with borrowing authority of up to $750 million, to be allocated pro rata among the participating lenders. The City is evaluating increasing its total bank commitments under the Short-Term Borrowing Program up to the total authorized amount discussed above to provide it with additional liquidity capacity.
The following table shows the City's lowest and highest outstanding balances and the total amount available for borrowing under the Short-Term Borrowing Program for the years 2010 through 2015 and as of January 12,2016.

Short-Term Borrowings 2010-2016
($ in thousands)
Lowest Outstanding Highest Outstanding Total Available
Year Principal Amount Principal Amount Principal Amount
$27,448 $198,101 $ 200,000
30,092 198,112 200,000
32,676 166,513 300,000
72,517 415,256 500,000
77,294 415,294 900,000
2015tn 263,174 835,042 1,000,000
201512' 93,837 239,131 750,000
2016 239,131 239,131 750,000

Source: City of Chicago, Department of Finance.
0' For the period January 1, 2015 through September 24, 2015. (2) For the period September 24, 2015 through December 31, 2015.
The Line of Credit has an aggregate capacity of $750,000,000. Currently, the outstanding balance under the Line of Credit is $239,131,000. The City expects to repay approximately $23 million of this outstanding balance in January, 2016.





58

An event of default will occur under the Line of Credit if: (i) the long-term rating of the City's general obligations for borrowed money are lowered by any two of Fitch, Kroll and S&P, as follows: below "BBB-" (or its equivalent) by S&P, below "BBB-" (or its equivalent) by Fitch or below "BBB-" (or its equivalent) by Kroll, or (ii) a long-term rating of the City's general obligations for borrowed money is suspended, withdrawn or becomes unavailable by S&P, Kroll or Fitch. See "INVESTMENT CONSIDERATIONS—Loss of Liquidity."
MRL Financing LLC Promissory Note
In 2009, the City purchased the former Michael Reese Hospital campus in connection with the City's bid for the 2016 Summer Olympics. The purchase was implemented by the MRL Note issued by the City to the seller, which is currently outstanding in the amount of $81.9 million. The MRL Note is a general obligation of the City not supported by a property tax levy. Interest payments for the first five years were not required to be paid until June 30, 2014, at which time the City was required to cither pay the accrued interest or add it to the outstanding principal amount. At that time, the City was also required to begin making quarterly interest payments and annual principal payments. The City used the Short-Term Borrowing Program to make the accrued interest payment of $19.9 million on June 30, 2014, the first regularly scheduled interest payment of $1.4 million in September 2014, and the scheduled principal and interest payment of approximately $11 million on June 30, 2015. The quarterly interest amounts of $1.4 million for December 2014, $1.3 million for March 2015, $1.2 million for September 2015 and $1.2 million for December 2015 were paid from funds available in the General Fund. The City anticipates using the amounts available from the General Fund and/or the Short-Term Borrowing Program to make continued debt service payments due under the MRL Note until such time as the property is sold, given that the funding costs of the Short-Term Borrowing Program arc less than having interest capitalized at the interest rate on the MRL Note (5.95 percent). When the property is sold, in whole or in part, the City currently expects to use such sale proceeds to pay the MRL Note.
USX South Works
The City entered into a lax-increment financing redevelopment agreement dated December 23, 2010 (the "Lakeside TIF Agreement") in connection with the redevelopment of the currently vacant former U.S. Steel plant along the shore of Lake Michigan on the southeast side of the City. The terms of the Lakeside TIF Agreement require the City, upon the fulfillment by the developer of certain specified leasing, sale, financing and other conditions, to issue a series of general obligation bonds secured by or otherwise payable from Citywide property taxes and a series of special assessment bonds secured by or otherwise payable from a special assessment levy on the redevelopment project site. Pursuant to the Lakeside TIF Agreement, the proceeds of such general obligation and special assessment bonds may be used to pay for certain costs ofthe redevelopment project, located in the Chicago Lakeside Development-Phase 1 TIF Redevelopment Project Area (the "TIF Area"), including public infrastructure. If and when the general obligation and special assessment bonds are issued, the Lakeside TIF Agreement provides that such bonds will be paid from the incremental taxes collected in the TIF Area to the extent available rather than from Citywide property taxes. The debt service on the general obligation bonds will be based on the first 50 percent of the incremental taxes projected al the time of issuance and have a first lien on the incremental taxes; the debt service on the special assessment bonds will be based on the second 50 percent of the incremental taxes projected at the time of issuance and have a second lien on the incremental taxes. If the incremental taxes are insufficient lo pay the debt service on the general obligation and special assessments bonds: (1) debt service on the general obligation bonds will be paid first by a letter of credit posted by the developer in an amount equal to 100 percent of maximum annual debt service on the general obligation bonds and then if necessary by Citywide property taxes; and (2) debt service on the special assessment bonds will be paid by the special assessment levy. The Lakeside TIF Agreement estimated that there will be approximately $96,000,000 of redevelopment project costs


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eligible to be paid with the proceeds of the general obligation and special assessment bonds but did not otherwise estimate the principal amounts ofthe general obligation and special assessment bonds.

INVESTMENT CONSIDERATIONS
The following discussion of investment considerations should be reviewed by prospective investors prior to purchasing the Bonds. Any one or more of the investment considerations discussed herein could lead to a decrease in the market value and the liquidity of the Bonds or, ultimately, a payment default on the Bonds. There can be no assurance that other factors not discussed herein will not become material in the future.
Credit Rating Downgrades
The interest rate the City pays on new issuances of general obligation debt is highly dependent on the City's credit ratings, and downward changes in the City's ratings have resulted and may continue to result in significantly higher interest rates payable by the City on bond issuances and other borrowings.
In mid-2015, the City experienced a number of rating downgrades. On May 12, 2015, Moody's downgraded to Bal from Baa2 its rating on the City's outstanding general obligation bonds and the outlook remained negative. On July 3, 2015, Fitch affirmed its BBB+ rating on the City's outstanding general obligation bonds with a negative outlook and removed the rating from negative rating watch. On July 7, 2015, Kroll affirmed its long-term rating of A- with a stable outlook on the City's general obligation bonds. On July 8, 2015, S&P lowered its rating to BBB+ from A- on the City's outstanding long-term fixed rate general obligation bonds with a negative outlook and removed the rating from negative credit watch.
Prior to the issuance ofthe Bonds, Fitch and S&P reaffirmed their existing ratings and outlooks of BBB+ (negative) and BBB+ (negative), respectively, on the City's outstanding general obligation bonds on January 11, 2016. On the same date, Kroll affirmed its long-term rating of A- on the City's outstanding general obligation bonds, but changed its outlook from stable to negative.
The rating agencies have indicated that further downgrades to the City's credit rating could result from the courts declaring P.A. 98-641, the State law which changed the Pension Code for MEABF and LABF, unconstitutional, growth in the debt and unfunded pension liabilities of the City or overlapping governments, widening budget gaps, loss of liquidity, or draws on City reserve funds. The City cannot predict if or when, or on what basis, the rating agencies may take further action with respect to the City's credit ratings, and no assurances can be provided that the City's credit rating will not be subject to further downgrades as a result of the factors stated above or other factors.
Unfunded Pensions
The Retirement Funds have significant unfunded liabilities and low funding ratios. Under current law, the City's required contributions to PABF and FABF will significantly increase beginning in 2016. The Amended FY 2015 Budget and the FY 2016 Budget provide for such increases to be funded primarily through increases in the City's property tax levy. Further, the Amended FY 2015 Budget and the FY 2016 Budget assume the enactment of SB 777, which would reduce the contribution currently required by the Pension Code under P.A. 96-1495. If SB 777 or similar legislation is not enacted and the City must contribute to PABF and FABF in the higher amounts required by the current provisions ofthe Pension Code, the City expects that it would fund such additional contributions through an increase in revenues, a decrease in expenditures or a combination thereof.



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Future required contribution increases beyond fiscal year 2016 may also require the City to increase its revenues, reduce its expenditures, or some combination thereof, which may impact the services provided by the City or limit the City's ability to generate additional revenues in the future.
Pension Reform Litigation
On May 8, 2015, the Illinois Supreme Court determined that the State Pension Reform Act is unconstitutional. See APPENDIX E — "RETIREMENT FUNDS—Background Information Regarding the Retirement Funds—Overlapping Taxing Bodies." P.A. 98-641, the law which modified required contribution and benefit amounts for MEABF and LABF, remains subject to litigation which may be affected by the decision of the Supreme Court regarding the State Pension Reform Act. Sec "LITIGATION-Pension Litigation." The City believes P.A. 98-641 is distinguishable from the State Pension Reform Act. As a threshold matter, the City's position is that P.A. 98-641 does not violate the Pension Clause of the Illinois Constitution and protects benefits being paid from MEABF and LABF that are projected (in the absence of P.A. 98-641) lo be insolvent in approximately 11 and 14 years, respectively. P.A. 98-641 was developed in consultation with numerous affected collective bargaining units.
If the courts determine that P.A. 98-641 is constitutional, the City would be required to make increased pension payments as set forth in APPENDIX E — "RETIREMENT FUNDS—Determination of City's Contributions—City's Required Contributions to LABF and MEABF Pursuant lo P.A. 98-641." If the courts determine that P.A. 98-641 is unconstitutional, the City's obligation to fund MEABF and LABF may revert to the prior, lower levels of funding based on the multiplier formula set forth in the prior law. In that instance, the unfunded liabilities of MEABF and LABF would remain unresolved. Sec APPENDIX E — "RETIREMENT FUNDS—Effect on MEABF and LABF If P.A. 98-641 Found Unconstitutional."
If a court were to determine that P.A. 98-641 is unconstitutional, the City's credit ratings on its general obligation bonds, including the Bonds, could be downgraded. See "—Credit Rating Downgrades" above.
Overlapping Taxing Districts
A number of overlapping taxing districts whose jurisdictional limits overlap with the City have the power to raise taxes, including property taxes. See "FINANCIAL DISCUSSION AND ANALYSIS—Property Taxes—Overlapping Taxing Districts" The City does not control the amount or timing of the taxes levied by these overlapping taxing districts. Depending on the amount of such increasc(s), an increase in the amount of taxes by these overlapping taxing districts could potentially be harmful to the City's economy and/or may make it more difficult for the City to increase taxes, including property taxes, to pay for its unfunded pensions.
Structural Deficit and Debt Restructuring
Over the past ten years, the City has experienced an imbalance of tax revenues relative to operating expenditures resulting in operating budget gaps. Since 2012, the City has reduced the General Fund budget gap each year through targeted cuts, revenue enhancements, and improved > operating efficiencies. However, the City projects large budget gaps in 2016, 2017 and 2018 due to operating budget shortfalls and increased pension obligations. See "FINANCIAL DISCUSSION AND ANALYSIS—General Fund—General Fund Financial Forecasts—General Fund 2015 Year-End Estimates and 2016 Proposed Budget" and "—2017-2018 General Fund Outlook."




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For the last several years, the City has annually issued general obligation debt to pay a portion of the near-term debt service on outstanding general obligation bonds, in order to limit the annual property tax levy for debt service on the outstanding bonds. A portion of the proceeds ofthe Bonds will be used for this purpose, reducing the debt service on outstanding general obligation bonds otherwise payable from the annual property lax levy for the 2015 levy year by approximately $215 million. Sec "GENERAL OBLIGATION DEBT—Long-Term General Obligation Bonds." This practice has the effect of extending and increasing the City's overall debt levels. Unless the City is able to pay its annual general obligation debt service from recurring revenue sources, the City's interest costs and outstanding debt arc likely to continue to rise. The City plans to continue the practice for annual property tax levies through and including the 2019 property lax levy, and thereafter discontinue issuing general obligation debt for such purpose.
Recurring operating budget gaps and increases in the City's debt burden could result in the need for new or enhanced revenue sources, including tax increases, or reduction of essential City services.
Loss of Liquidity
The City utilizes the Short-Term Borrowing Program for working capital and interim funding of capital projects, debt refinancing or restructuring and the payment of non-capital expenditures such as settlements and judgments. Further downgrades ofthe City's credit ratings by Fitch, S&P or Kroll could result in a default in the City's new credit arrangements, preventing further borrowing under the Short-Term Borrowing Program. See "GENERAL OBLIGATION DEBT—Short-Term Borrowing Program."
Increased Debt Levels
Upon issuance of the Bonds, the City's long-term general obligation debt will increase. In addition, the City expects to issue additional long-term general obligation debt in 2016. Sec "SECURITY FOR THE BONDS—Additional General Obligation Debt." The City's annual debt service on its long-term general obligation debt will increase accordingly. Further increases in the City's long-term general obligation debt and annual debt service could crowd out spending for other City services and/or require substantial increases in property taxes or other revenue sources. See "GENERAL OBLIGATION DEBT—Long-Term General Obligation Bonds."
Financial Condition of Chicago Public Schools
CBOE, which is responsible for the governance, organizational and financial oversight of Chicago Public Schools, has reported a substantial budget deficit for 2016 and increasing deficits in subsequent years, due in large part to CBOE's pension funding obligations. Sec "FFNANCIAL DISCUSSION AND ANALYSIS—Pensions—Overlapping Taxing Districts" While CBOE is a separate governmental entity and the City has no legal obligation to contribute financially to CBOE, any failure of CBOE to resolve its current and future deficits or resolving them by budget cuts and/or increases in property taxes, without State assistance, could have an adverse effect on the City's economy and/or property tax base.
Reductions and Delays in Receipt of State Revenues
State tax revenue received by the City includes the City's local share of Ihe Stale's sales and use taxes, income tax and personal property replacement tax. The State is itself facing a substantial budget deficit and Governor Rauner has made a number of proposals to close the State's budget gap. Among them is a reduction in the local government distributive share of the Slate's income tax. If such a reduction were to become law, the City would lose significant income tax receipts. This proposal, or any



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other that reduces the State taxes received by the City, would have an immediate and adverse effect on the City's budget.
The State has in the past delayed by months the distribution to local governments of their respective shares of State taxes due to the State's own budget problems. Currently, the State is experiencing an impasse between the Governor and the Illinois General Assembly over the budget for the State's current fiscal year. This resulted in delays during 2015 in the City's receipt of both its local share of State motor fuel tax revenue and its local share of revenue from the State's use tax and service use tax, which is subject to appropriation by the Illinois General Assembly. Such delays did not affect the payment of principal of or interest on the City's outstanding general obligation bonds or sales tax revenue bonds when due, or delay payments to vendors, service providers or other recipients of City funds. The City has since been fully reimbursed for all such amounts.
If the period of any future delay in receipt of State taxes were to continue for an extended period, the City could be forced to delay payments to vendors, service providers or other recipients of City funds if other legally available funds arc not on hand.
Cap on Property Taxes
The Illinois Property Tax Code limits, among other things, the amount of property lax that can be extended for non-home rule units of local government located in Cook County and five adjacent counties (the "State Tax Cap"). As a home rule unit of government, the City is not subject to the State Tax Cap. A number of bills have been introduced in the Illinois General Assembly to limit or freeze property taxes, including those imposed by home rule units of local government such as the City. The application of the State Tax Cap to the City or any other measure that would limit or freeze property taxes would require three-fifths vole of each house of the Illinois General Assembly. If the City were to become subject lo a State-imposed property tax limitation restriction in the future similar to the State Tax Cap or any other restriction or freeze on property taxes, the City's ability to levy property taxes in amounts needed for its future funding needs may be adversely affected.
Adverse Change in Laws
There are a variety of State and federal laws, regulations and constitutional provisions that apply to the City's ability to raise taxes, fund its pension obligations or to reorganize its debts. There is no assurance that there will not be any change in, interpretation of, or addition to such applicable laws, regulations and provisions. Any such change, interpretation or addition may have a material adverse effect, either directly or indirectly, on the City or the taxing authority of the City, which could materially adversely affect the City's operations or financial condition.
Bankruptcy
Municipalities cannot file for protection under Chapter 9 of the U.S. Bankruptcy Code (the "Bankruptcy Code") unless specifically authorized to be a debtor by slate law or by a governmental officer or organization empowered by state law to authorize such entity to be a debtor in a bankruptcy proceeding. Slate law does not currently permit municipalities in Illinois, such as the City, to file for bankruptcy; however, legislation was recently introduced in the General Assembly of the State which, if enacted, would permit Illinois municipalities to file for bankruptcy under the U.S. Bankruptcy Code. The adoption of any such legislation and its potential impact arc uncertain.
The Bond, Note Redemption and Interest Fund is not held by the Trustee, and is not subject to a statutory lien in favor of the Bondholders. In addition, remittances of the Bond Property Tax Levy do not



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constitute "special revenues" within the meaning of the Bankruptcy Code. In the event of a change in State law allowing the City to file for bankruptcy, there is no guarantee that the bankruptcy court would consider the Bondholders to have a secured claim under the Bankruptcy Code wilh respect to remittances ofthe Bond Property Tax Levy or other moneys in the Bond, Note Redemption and Interest Fund.
Uncertain Enforcement Remedies
The Bonds arc direct and general obligations of the City and all taxable property in the City is subject to levy to pay the debt service on the Bonds. The Bonds are not secured by a statutory lien on the Bond, Note Redemption and Interest Fund, any real property in the City or any physical assets of the City. The maturity of the Bonds cannot be accelerated in the event that the City fails to pay any installment of interest on, or principal of, the Bonds when due.
The remedies available to Bondholders upon nonpayment of principal of or interest on the Bonds are uncertain and in many respects dependent upon discretionary judicial actions. There currently is no established judicial precedent addressing the rights of Bondholders to compel the City lo levy taxes or to enforce any other Bondholder remedy. See APPENDIX A—"SUMMARY OF THE INDENTURE—Default and Remedies."
Force Majeure Events
There are certain unanticipated events beyond the City's control that could have a material adverse impact on the City's operations and financial conditions if they were to occur. These events include fire, flood, earthquake, epidemic, adverse health conditions or other unavoidable casualties or acts of God, freight embargo, labor strikes or work stoppages, civil commotion, new acts of war or escalation of existing war conditions, sabotage, terrorism or enemy action, pollution, unknown subsurface or concealed conditions affecting the environment, and any similar causes. No assurance can be provided that such events will not occur, and, if any such events were to occur, no prediction can be provided as to the actual impact or severity of the impact on the City's operations and financial condition.
Forward-Looking Statements
This Official Statement contains certain statements relating to future results that arc forward-looking statements. When used in this Official Statement, the words "estimate," "intend," "expect" and similar expressions identify forward-looking statements. Any forward-looking statement is subject to uncertainty and risks that could cause actual results to differ, possibly materially, from those contemplated in such forward-looking statements. Inevitably, some assumptions used to develop forward-looking statements will not be realized or unanticipated events and circumstances may occur. Therefore, Bondholders and potential investors should be aware that there are likely to be differences between forward-looking statements and actual results; those differences could be material. The City does not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. _

LITIGATION
There is no litigation pending in any court or, to the knowledge of the City, threatened, questioning the corporate existence of the City, or which would restrain or enjoin the issuance or delivery of the Bonds, or which concerns the proceedings of the City taken in connection with the Bonds or the City's pledge of its full faith, credit and resources to the payment ofthe Bonds.




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The City is a defendant in various pending and threatened individual and class action litigation relating principally to claims arising from contracts, personal injury, property damage, police conduct, discrimination, civil rights actions and other matters. The City believes that the ultimate resolution of these matters will not have a material adverse effect on the financial position ofthe City.
Property Tax Rate Objections: 2005 and following. The City's property tax levies for 2005 and following have varied between approximately $720 million and $835 million annually, excluding the School Building and Improvement Fund levy. Objections have been filed in the Circuit Court of Cook County (the "Circuit Court") to these levies, which objections remain pending. The City is unable to predict the outcome of the proceedings concerning the objections.
E2 Nightclub Litigation. The City was a defendant in 57 wrongful death and personal injury lawsuits arising out of a stampede of patrons al the E2 Nightclub on February 17, 2003. The sole remaining claim against the City in this litigation was that police officers blocked, locked, or jammed access to the entry-exit door, causing a stampede of patrons to pile up on the only stairway leading to the door. On April 11, 2012, the Circuit Court granted the City's motion for summary judgment and dismissed the sole remaining claim against the City with prejudice. The City does not know whether the plaintiffs will appeal the issuance of summary judgment. If the plaintiffs do appeal, the City will vigorously defend the Circuit Court's judgment in the appellate court.
Automated Traffic Enforcement Ticketing Litigation. In July 2010, individual plaintiffs, seeking to maintain a class action, filed suit against the City and other defendants to challenge the City's use since 2003 of an automated red-light ticketing system. The plaintiffs allege, among other things, that the 2006 statute authorizing eight Illinois counties to enact red-light camera ordinances is unconstitutional local legislation and that the City lacks home-rule authority to enact a red-light camera ordinance and adjudicate violations administratively. The plaintiffs sought an injunction against the operation of the City's red-light ticketing system and restitution of fines paid. The Circuit Court granted the City's motion to dismiss the case; the Illinois Appellate Court affirmed in an unpublished decision. The Illinois Supreme Court took the case, but two justices recused themselves and a majority ofthe remaining justices did not reach a consensus. This had the effect of affirming the Appellate Court decision. While the appeal was pending, the same attorney filed another putative class action case in the Circuit Court, with different named plaintiffs raising similar claims about the automated red-light ticketing system. The City has filed a motion to dismiss that case, which is pending in the Circuit Court. The City will continue to defend this matter vigorously. On March 23, 2015, individual plaintiffs, seeking to maintain a class action, filed a separate lawsuit alleging that the City has exceeded its home rule authority and has violated State law and City ordinances by issuing notices of violation and determinations of liability for automated speed enforcement violations and automated red-light violations lhal allegedly do not comply wilh State and local requirements. They seek declaratory judgment, injunctive relief and, in an unjust enrichment claim, seek restitution of fines paid. The City filed a motion to dismiss on May 6, 2015 and will continue lo defend this case vigorously.
Parking Garages Litigation. On February 13, 2013, Independent Voters of Illinois Independent Precinct Organization and an individual plaintiff filed a complaint challenging the facial validity of the Parking Garages Lease Agreement. The plaintiffs allege that certain compensation provisions in the Parking Garages Lease Agreement violate the legal prohibition against the delegation, by a governmental entity, of its police powers to a private party. On January 16, 2014, the Circuit Court dismissed ihe case, on motions by both the City and CLP. Plaintiffs have appealed; the appeal is pending. The City will continue to defend this case vigorously.
HUD Certifications Litigation. This is a False Claims Act case in which Albert C. Hanna (the "Relator") has sued the City in federal district court for the Northern District in Illinois (the "District


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Court") seeking to recover funds on behalf of the U.S. government. The Relator alleges that the City has an affirmative obligation to dismantle racial and ethnic segregation in housing under Title VI ofthe Civil Rights Act of 1964 and the Fair Housing Act and that the City has falsely claimed to do so in certifications made by the City to the U.S. Department of Housing and Urban Development ("HUD") as a condition of receiving federal funding through certain HUD-funded grant programs. The Relator seeks the return to the federal government of approximately $880 million in funds received by the City under these programs and asks the court to treble that amount, as allowed by statute. The City moved to dismiss the complaint and the District Court dismissed it with leave to amend. The plaintiff filed an amended complaint and the City has moved to dismiss that complaint. The City will continue to vigorously defend this case.
Pension Litigation. P.A. 98-641, which became law on June 9, 2014, reforms MEABF and LABF through a combination of increased employer contributions and changes to employee contributions and retiree benefits. In December 2014, shortly before P.A. 98-641 was to go into effect, two lawsuits were filed by plaintiffs, who are individual participants in the two affected pension funds and (in one of the lawsuits) unions representing participants, in the Circuit Court challenging the constitutionality of P.A. 98-641. Plaintiffs argued that P.A. 98-641 violates the Pension Clause ofthe Illinois Constitution and sought a preliminary and permanent injunction prohibiting its enforcement. The City was allowed to intervene to defend the constitutionality of P.A. 98-641. On July 24, 2015, the Circuit Court ruled that P.A. 98-641 violates the Pension Clause and was unconstitutional. The City appealed the decision to the Illinois Supreme Court. Oral argument on the City's appeal was held by the Illinois Supreme Court on November 17, 2015. The City has been defending and will continue to defend this matter vigorously.
Retiree Healthcare Litigation. In Underwood v. City of Chicago, retired employees of the City filed suit in State court to challenge planned changes lo the healthcare benefits of retirees. The complaint advanced State law claims, including alleged violation of the Pension Clause ofthe Illinois Constitution, and federal law claims. The City removed the case to federal court based on the federal law claims. The federal district court dismissed the case in ils entirety. As to plaintiffs' claim that the planned changes violate the Pension Clause, the district court predicted that the Illinois Supreme Court would rule in a separate case then pending before the Illinois Supreme Court lhat the healthcare benefits are not protected by the Pension Clause. Thereafter, the Illinois Supreme Court ruled in that separate case that the healthcare benefits in question, which were promised to Stale retirees, are protected under the Pension Clause. The City argued on appeal to the federal appellate court that it should affirm the district court dismissal, including the Slate law claims, on an alternative ground. On February 25, 2015, the federal appellate court affirmed the dismissal of the federal law claims and declined to rule on Ihe State law claims on the ground lhat the State law claims involved a question of State law, which it ordered returned to the State court for decision. On June 22, 2015, the City and certain of the defendants each filed a motion to dismiss the remaining State law claims in the Circuit Court of Cook County. On December 13, 2015, the Circuit Court issued its ruling dismissing certain of the State law claims but gave the plaintiffs leave to amend the complaint with respect to such claims. With respect to the remaining Stale law claim, which sought a declaration that a reduction in Ihe benefits provided by the Health Plan would violate the Pension Clause, the Circuit Court determined that such a declaration could be made only with respect to those employees hired prior lo August 23, 1989. The City has been defending and will continue to defend this matter vigorously.
INDEPENDENT AUDITORS
The basic financial statements of the City as of and for the year ended December 31, 2014, included in APPENDIX C to this Official Statement, have been audited by Deloitle & Touche LLP, independent auditors, as stated in their report appearing in APPENDIX C.



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RATINGS
The Bonds are rated "BBB+" (negative outlook) by S&P, "BBB+" (negative outlook) by Fitch, and "A-" (negative outlook) by Kroll.
A rating reflects only the view of the rating agency giving such rating. A rating is not a recommendation to buy, sell or hold securities, and may be subject lo revision or withdrawal at any time. An explanation of the significance of such rating may be obtained from such organization. There is no assurance that any rating will continue for any given period of time or that any rating will not be revised downward or withdrawn entirely if, in the judgment of the rating agency, circumstances so warrant. Any such downward revision or withdrawal of a rating may have adverse consequences for the City or an adverse effect on the price at which the Bonds may be resold. See "INVESTMENT CONSIDERATIONS—Credit Rating Downgrades."
CO-MUNICIPAL ADVISORS, SPECIAL ADVISOR ON RATING STRATEGY AND INDEPENDENT REGISTERED MUNICIPAL ADVISOR
The City has retained TKG & Associates LLC and Public Alternative Advisors, LLC lo act as co-municipal advisors (the "Co-Municipal Advisors") in connection with the offering ofthe Bonds. The Co-Municipal Advisors are not obligated to undertake, and have not undertaken lo make, an independent verification of, or to assume responsibility for ihc accuracy, completeness or fairness of the information contained in this Official Statement. Each of the Co-Municipal Advisors is a "municipal advisor" as defined in Rule 15Bal-l of ihc Commission.
The Cily has retained Public Financial Management Inc. as a special advisor in connection with the offering of the Bonds.
The City has retained Martin J. Luby LLC as its independent registered municipal advisor (the "IRMA") pursuant to Rule 15Bal-l-(d)(3)(vi) ofthe Commission to evaluate financing proposals and recommendations in connection wilh the City's various bond issuance programs and other financing ideas being considered by Ihc City; however, the IRMA will not advise on the investment of City funds held by the Office of the City Treasurer. The IRMA's compensation is not dependent on the offering of the Bonds.

CERTAIN VERIFICATIONS
Robert Thomas, CPA, LLC, Shawnee Mission, Kansas (the "Verifier"), upon delivery of the Bonds, will deliver to the City, Co-Bond Counsel and the Underwriters a report stating that the firm, at the request of the City and the Underwriters, has reviewed the mathematical accuracy of certain computations based on certain assumptions relating to (i) the sufficiency of the principal and interest received from the investment in Governmental Obligations, together with any initial cash deposit, to meet the timely payment of the applicable principal or redemption price of and interest on the Refunded Bonds and the Interest Paid Bonds, as described under "PLAN OF FINANCING" and (ii) the yields on the Bonds and on the Government Obligations.
The Verifier will express no opinion on the attainability of any assumptions or the tax-exempt status ofthe Bonds. The computations verified by the Verifier are intended in part to support conclusions ofthe City and Co-Bond Counsel concerning the federal income tax status of the Bonds.






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UNDERWRITING
Citigroup Global Markets Inc., as representative on behalf of itself and the other underwriters listed on the cover of this Official Statement (the "Underwriters"), has agreed, subject to certain conditions, to purchase the Bonds al a price equal to $520,923,950.05 (which represents the aggregate principal amount of the Bonds less an Underwriters' discount of $2,968,401.95 and plus original issue premium of $23,892,352.00.
The obligation of the Underwriters to accept delivery of the Bonds is subject to various conditions set forth in a Bond Purchase Agreement dated January 12, 2016, between the Underwriters and the City. The Underwriters are obligated to purchase all of the Bonds if any ofthe Bonds are purchased.
The Underwriters and their respective affiliates are full service financial institutions engage in various activities, which may include sales and trading, commercial investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. Certain of the Underwriters and their respective affiliates have provided, and may in the future provide, a variety of these services to the City and to persons and entities with relationships with the City, for which they received or will receive customary fees and expenses.
Citigroup Global Markets Inc., an underwriter of the Bonds, has entered into a retail distribution agreement with each of TMC Bonds L.L.C. ("TMC") and UBS Financial Services Inc. ("UBSFS"). Under these distribution agreements, Citigroup Global Markets Inc. may distribute municipal securities to retail investors through the financial advisor network of UBSFS and the electronic primary offering platform of TMC. As part of this arrangement, Citigroup Global Markets Inc. may compensate TMC (and TMC may compensate its electronic platform member firms) and UBSFS for their selling efforts with respect to the Bonds.
Backstrom McCarley Berry & Co., LLC ("Backstrom") has entered into separate non-exclusive Distribution Agreements with Mesirow Financial, and D.A. Davidson & Co. (the "Firms") to augment both its institutional and retail marketing capabilities for the distribution of certain new issue municipal securities underwritten by or allocated to Backstrom, which includes the Bonds. Pursuant to the distribution agreements, the Firms may purchase bonds from Backstrom at the original issue price less a negotiated portion of the selling concession applicable to any Bonds that such Firm sells, or Backstrom may share wilh the Firms a portion of the fees or commission paid to Backstrom applicable to their disclosed transactions.
PNC Capital Markets LLC ("PNC") may offer to sell to its affiliate, PNC Investments, LLC ("PNC Investments") securities in PNC's inventory for resale to PNC Investments' customer, including securities such as those to be offered by the City. PNC Investments may share with PNC a portion of the fee or commission paid to PNC Investments if any Bonds are sold to customers of PNC.
In the ordinary course of their various business activity, the Underwriters and their respective affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and activity trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to assets, security and/or investments of the City (directly, as collateral security other obligations or otherwise and/or persons and entities with relationships with the City.




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TAX MATTERS

The Bonds
Federal lax law contains a number of requirements and restrictions that apply to the Bonds, including investment restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the proper use of bond proceeds and the facilities financed with such proceeds and certain other matters. The City has covenanted to comply with all requirements that must be satisfied in order for the interest on the Bonds to not be included in gross income for federal income tax purposes. Failure to comply with certain of such covenants could cause interest on the Bonds lo become includible in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds.
Subject to ihc City's compliance with the aforementioned covenants, under present law, in the separate opinions of Ice Miller LLP, Chicago, Illinois and Cotillas and Associates, Chicago, Illinois, Co-Bond Counsel, interest on the Bonds is not includable in the gross income of their owners for federal income tax purposes and thus will be exempt from present federal income taxes based on gross income, and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations. Interest on the Bonds is taken into account, however, in computing an adjustment used in determining the federal alternative minimum tax for certain corporations and in computing ihc "branch profits tax" imposed on certain foreign corporations.
The Internal Revenue Code of 1986, as amended (the "Code"), includes provisions for an alternative minimum tax ("AMTr) for corporations in addition to the corporate regular tax in certain cases. The AMT, if any, depends upon the corporation's alternative minimum taxable income ("AMTr), which is the corporation's taxable income with certain adjustments. One of the adjustment items used in computing the AMTI of a corporation (excluding S Corporations, Regulated Investment Companies, Real Estate Investment Trusts, REMICs and FASITs) is an amount equal to 75% of the excess of such corporation's "adjusted current earnings" over an amount equal to its AMTI (before such adjustment item and the alternative tax net operating loss deduction). "Adjusted current earnings" would include all tax-exempt interest, including interest on the Bonds.
Under the provisions of Section 884 ofthe Code, a branch profits lax is levied on the "effectively connected earnings and profits" of certain foreign corporations, which include tax-exempt interest such as interest on the Bonds.
Ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, corporations subject to the branch profits tax, financial institutions, certain insurance companies, certain S corporations, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax-exempt obligations. Co-Bond Counsel will express no opinion with respect to any such collateral consequences with respect to the Bonds. Prospective purchasers of the Bonds should consult their tax advisors as to applicability of any such collateral consequences.
The issue price for each maturity of the Bonds is the price at which a substantial amount of such maturity is first sold to the general public (excluding bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers) (the "Issue Price"). The Issue Price of certain Bonds may be greater than the stated amount payable on such Bonds at maturity ("Premium Bonds"). The difference between (i) the Issue Price of a Premium Bond and (ii) the stated amount payable at maturity of a Premium Bond with respect to that Premium Bond constitutes original issue premium in the hands of the owner who purchased that Premium Bond in the initial public offering of the Bonds ("Original Issue Premium").
For federal income tax purposes, Original Issue Premium on a Premium Bond must be amortized by an owner on a constant yield basis over the remaining term of a Premium Bond in a manner that takes


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into account potential call dates and call prices. An owner of a Premium Bond cannot deduct amortized Original Issue Premium relating to that Premium Bond. The amortized original issue premium for a Premium Bond is treated as a reduction in the tax exempt interest received. As Original Issue Premium is amortized on a Premium Bond, it reduces the owner's basis in the Premium Bond. As a result an owner of a Premium Bond may realize taxable gain for federal income tax purposes from the sale or other disposition of such 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 Issue Price 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.
Purchasers of Premium Bonds should consult their own tax advisors regarding the determination and treatment of Original Issue Premium for federal income tax purposes and the state and local tax consequences of owning a Premium Bond.
There may be pending from time to time in the Congress of the United States legislative proposals, including some that carry retroactive effective dates, which, if enacted, could alter or amend the federal tax matters referred to above or adversely affect the market value or liquidity ofthe Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, it would apply to securities issued prior to enactment. Prospective purchasers ofthe Bonds should consult their tax advisors regarding any pending or proposed federal tax legislation. Co-Bond Counsel will express no opinion regarding any pending or proposed federal tax legislation.
The Internal Revenue Service ("IRS") conducts a program of audits of issues of lax-exempt obligations to determine whether, in the view ofthe IRS, interest on such obligations is properly excluded from the gross income of their owners for federal income tax purposes. Whether or not the IRS will decide to audit the Bonds cannot be predicted. If the IRS begins an audit of the Bonds, under current IRS procedures, the IRS will treat the City as the taxpayer subject to the audit and the holders of the Bonds may not have the right to participate in the audit proceedings. The fact that an audit of the Bonds is pending could adversely affect the liquidity or market price of the Bonds until the audit is concluded, even if the result of the audit is favorable.
The opinions of Co-Bond Counsel and the descriptions ofthe tax law contained in this Official Statement will be based on statutes, judicial decisions, regulations, rulings and other official interpretations of law in existence on the date the Bonds are issued. There can be no assurance that such law or those interpretations will not be changed or that new provisions of law will not be enacted or promulgated at any lime while the Bonds are outstanding in a manner that would adversely affect the value or the lax treatment of ownership of the Bonds. Co-Bond Counsel have not undertaken to provide advice with respect to any such future changes.
In rendering their opinions on tax exemption, Co-Bond Counsel will receive and rely upon certifications and representations of facts, estimates and expectations furnished by the City which Co-Bond Counsel will not have verified independently. Each Co-Bond Counsel's opinion represents its legal judgment based upon its review of the law and the facts that it deems relevant to render such opinion and is not a guarantee of a result if the validity or tax-exempt status of interest on the Bonds is challenged.
State and Local Considerations
Interest with respect to the Bonds is not exempt from present Illinois income taxes. Ownership of the Bonds may result in other stale and local tax consequences to certain taxpayers. Co-Bond Counsel will express no opinion regarding any such collateral consequences arising wilh respect to the Bonds. Prospective purchasers of the Bonds should consult their tax advisors regarding the applicability of any such state and local taxes.



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APPROVAL OF LEGAL MATTERS
Certain legal matters incident to the authorization, issuance and sale of the Bonds are subject to the approving legal opinions of Co-Bond Counsel, who have been retained by, and act-as, Bond Counsel to the City. Except as noted below, Co-Bond Counsel have not been retained or consulted on disclosure matters and have not undertaken to review or verify the accuracy, completeness or sufficiency of this Official Statement or other offering material relating to the Bonds and assume no responsibility for the statements or information contained in or incorporated by reference in this Official Statement, except that Co-Bond Counsel have, at the request and for the benefit of the City, reviewed only those portions of the Official Statement involving the description of the Bonds, the Indenture, the security for the Bonds (excluding forecasts, projections, estimates or any other financial or economic information in connection therewith) and the description of the federal tax status of interest on the Bonds. This review was undertaken solely at the request of the City and did not include any obligation to establish or confirm factual matters set forth herein.
Certain legal matters will be passed on for the City by (i) its Corporation Counsel, (ii) in connection with the preparation of this Official Statement, Pugh, Jones & Johnson, P.C., Chicago, Illinois, and Shanahan & Shanahan LLP, Chicago, Illinois, Co-Disclosure Counsel to the City, and (iii) in connection with certain pension matters described in this Official Statement, Chapman and Cutler LLP, Chicago, Illinois, Special Disclosure Counsel. Certain legal matters will be passed on for the Underwriters by Kulak Rock LLP, Chicago, Illinois, Underwriters' Counsel.

SECONDARY MARKET DISCLOSURE
The City will enter into a Continuing Disclosure Undertaking (the "Undertaking") for the benefit of the beneficial owners of the Bonds to send certain information annually and to provide notice of certain events to the Municipal Securities Rulemaking Board (the "MSRB") pursuant to the requirements of Section (b)(5) of Rule 15c2-12 (the "Rule") adopted by the Commission under the Exchange Act. The MSRB has designated its Electronic Municipal Market Access system, known as EMMA, as the system to be used for continuing disclosures to investors. The information to be provided on an annual basis, the events that will be noticed on an occurrence basis and a summary of other terms of the Undertaking, including termination, amendment and remedies, are set forth below.
A failure by the City to comply with the Undertaking will not constitute a default under the Bonds, the Indenture or the Bond Ordinance and beneficial owners of the Bonds are limited to the remedies described in the Undertaking. See "—Consequences of Failure of the City lo Provide Information" below. A failure by the City to comply with the Undertaking must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds and their market price.
The following is a brief summary of certain provisions of the Undertaking of the City and docs not purport to be complete. The statements made under this caption are subject to the detailed provisions of the Undertaking, a copy of which is available upon request from the City.
Annual Financial Information Disclosure
The City covenants that it will disseminate its Annual Financial Information and its Audited Financial Statements (as described below) lo the MSRB. The City is required to deliver such information so that the MSRB receives the information by the dates specified in the Undertaking.



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"Annual Financial Information" means information generally consistent with that contained in (i) the financial table "General Fund" under the caption "FINANCIAL DISCUSSION AND ANALYSIS— General Fund—Selected Financial Information " (ii) the financial tables included under the caption "FINANCIAL DISCUSSION AND ANALYSIS—Property Taxes—EAV and Property Taxes" and "—Use of City Property Tax Levy" (iii) the financial tables included under the caption "GENERAL OBLIGATION DEBT" (except for the table "Short-Term Borrowing 2010-2014"); and (iv) tables 1-10 included in APPENDIX E—"RETIREMENT FUNDS" (said tables collectively referred to as the "Third-Party Sourced Retirement Fund Tables"). The information contained in the Third-Party Sourced Retirement Fund Tables is sourced from documents published by MEABF, PABF, FABF and LABF, and the City takes no responsibility for the accuracy and completeness of such information. If the information contained in the Third-Party Sourced Retirement Fund Tables is no longer publicly available or is not publicly available in the form, manner or time that the Annual Financial Information is required to be disseminated by the City, the City shall, as part of its Annual Financial Information for the year in which such a lack of availability arises, include a statement to that effect and to the effect that it will promptly file such information as it becomes available.
"Audited Financial Statements" means the audited basic financial statements of the City prepared in accordance with generally accepted accounting principles applicable to governmental units as in effect from time to time.
Annual Financial Information exclusive of Audited Financial Statements will be provided to the MSRB not more than 210 days after the last day of the City's fiscal year, which currently is December 31. If Audited Financial Statements arc not available when the Annual Financial Information is filed, unaudited financial statements will be included, and Audited Financial Statements will be filed within 30 days of availability to the City.
Reportable Events Disclosure
The City covenants that it will disseminate in a timely manner, not in excess often business days, lo the MSRB the disclosure ofthe occurrence of a Reportable Event (defined below). Certain Reportable Events are required lo be disclosed only to the extent that such Reportable Event is material, as materiality is interpreted under the Exchange Act. The "Reportable Events," certain of which may not be applicable to the Bonds, are:
principal and interest payment delinquencies;
non-payment related defaults, if material;
unscheduled draws on debt service reserves reflecting financial difficulties;
unscheduled draws on credit enhancements reflecting financial difficulties;
substitution of credit or liquidity providers, or their failure to perform;
(0 adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, notices of proposed issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds;
modifications lo rights of security holders, if material;
bond calls, if material, and tender offers;


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(i) defeasances;
(j) release, substitution or sale of property securing repayment ofthe securities, if material; (k) rating changes;
(1) bankruptcy, insolvency, receivership or similar event of the City (considered to have occurred in the following instances: the appointment of a receiver, fiscal agent or similar officer for the City in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if the jurisdiction ofthe City has been assumed by leaving the City Council and the City's officials or officers in possession but subject lo the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all ofthe assets or business ofthe City);
(m)lhc consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all ofthe assets ofthe City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and
(n) appointment of a successor or additional trustee or the change of name of a trustee, if material.
Consequences of Failure ofthe City to Provide Information
The City shall give notice in a timely manner to the MSRB of any failure to provide disclosure of Annual Financial Information and Audited Financial Statements when the same are due under the Undertaking.
In the event of a failure of the City to comply wilh any provision of the Undertaking, the Beneficial Owner of any Bond may seek mandamus or specific performance by court order to cause the City to comply with ils obligations under the Undertaking. The Undertaking provides that any court action must be initiated in the Circuit Court. A default under the Undertaking shall not be deemed a default under the Bonds, the Bond Ordinance or the Indenture, and the sole remedy under the Undertaking in the event of any failure of the City to comply with the Undertaking shall be an action to compel performance.
Amendment; Waiver
Notwithstanding any other provision of the Undertaking, the City may amend the Undertaking, and any provision ofthe Undertaking may be waived, if:
(a) (i) the amendment or the waiver is made in connection wilh a change in circumstances that arises 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; (ii) the Undertaking, as amended, or the provision, as waived, would have complied with the requirements of the Rule at the time of the offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (iii) the amendment or waiver does not materially impair the interests of the Beneficial Owners ofthe Bonds, as determined by a party unaffiliated with the City (such as the Trustee or Co-Bond Counsel), or by approving vote ofthe Beneficial Owners of the Bonds pursuant to the terms of the Indenture at the time of the amendment; or


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(b) the amendment or waiver is otherwise permitted by the Rule.

EMMA
All documents submitted to the MSRB through EMMA pursuant to the Undertaking shall be in electronic format and accompanied by identifying information as prescribed by the MSRB, in accordance with the Rule. All documents submitted to the MSRB through EMMA will be word-searchable PDFs, configured to permit documents to be saved, viewed, printed and electronically retransmitted.
Termination of Undertaking
The Undertaking shall be terminated if the City shall no longer have any legal liability for any obligation on or relating to repayment of the Bonds under the Bond Ordinance or the Indenture.
Additional Information
Nothing in the Undertaking will be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in the Undertaking or any other means of communication, or including any other information in any Annual Financial Information or Audited Financial Statements or notice of occurrence of a Reportable Event, in addition to that which is required by the Undertaking. If the City chooses to include any information in any Annual Financial Information or Audited Financial Statements or notice of occurrence of a Reportable Event in addition to that which is specifically required by the Undertaking, the City shall have no obligation under the Undertaking to update such information or include it in any future Annual Financial Information or Audited Financial Statements or notice of occurrence of a Reportable Event.
Corrective Action Related to Certain Bond Disclosure Requirements
The City is in compliance in all material respects with undertakings previously entered into by it pursuant to the Rule, except insofar as any of the following paragraphs describe material non-compliance.
During the period from 1996 through 2007, the City issued multiple series of Collateralized Single Family Mortgage Revenue Bonds (the "Single Family Bonds"). The trustees for the respective series of the Single Family Bonds arc responsible for continuing disclosure filings as the City's dissemination agent under the applicable continuing disclosure undertakings. A material event notice was not filed with respect to a lender offer occurring on June 29, 2011 with respect to the following scries: 2006C, 20061, 2007A, 2007G,.2007-2A, 2007-2C and 2007-2E.
No annual report was filed by the City in 2010 with respect to one subseries of the City's General Obligation Direct Access Bonds. Annual reports were not filed by the City in 2010 with respcel lo one series ofthe City's Chicago O'Hare International Airport General Airport Revenue Bonds and one series of its Chicago O'Hare International Airport Passenger Facility Charge Revenue Bonds. Annual reports were not filed by the City in 2011 and 2012 with respect to two series of such bonds.
With respect to the City's Collateralized Single Family Mortgage Revenue Bonds, Series 2006A (the "Series 2006A Bonds"), S&P lowered its rating on the Series 2006A Bonds from "AA+" to "AA" and placed the Series 2006A Bonds on "Credit Watch with negative implications" effective December 16, 2011. The City did not cause the trustee as dissemination agent to file a notice of a reportable event with EMMA at lhat time. Subsequently, S&P upgraded the rating on the Series 2006A Bonds from "AA" to "AA+" effective March 12, 2012. On March 18, 2012, S&P removed the "Credit Watch with negative implications" characterization from the Series 2006A Bonds. The City caused the trustee, as



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dissemination agent, for the Series 2006A Bonds to file a notice of a reportable event with EMMA on March 26, 2012 disclosing the downgrade and subsequent upgrade ofthe Series 2006A Bonds by S&P.
Wilh respect to Ihe City's Chicago O'Hare International Airport General Airport' Third Lien Revenue Bonds, Series 2011, American Airlines is an "obligated person" with respect to such bonds. On November 29, 2011, AMR Corporation (the parent company of American Airlines and American Eagle) and certain of its United States-based subsidiaries (including American Airlines and American Eagle) filed voluntary petitions for Chapter 11 reorganization in the United States Bankruptcy Court for the Southern District of New York. The City filed a notice with EMMA wilh respect to this event on March 30, 2012 (nol within the ten business-day deadline imposed by the Rule). On December 9, 2013, American Airlines merged wilh US Airways. The City filed a notice with EMMA with respect to this event on August 25, 2014.
With respect to the City's Outstanding Motor Fuel Tax Revenue Bonds, the City's pledge of Additional City Revenues to the payment of such bonds (in addition to the pledge of Motor Fuel Tax Revenues) became effective as of March 19, 2013. The City filed a notice with EMMA describing the pledge of this additional source of revenue on May 16, 2013.
With respect to the City's Outstanding O'Hare International Airport Customer Facility Charge Senior Lien Revenue Bonds, Scries 2013, Simply Whcelz, LLC d/b/a Advantage Rent A Car ("Advantage") is an "obligated person" with respect to such bonds. Advantage filed a voluntary bankruptcy petition in the Southern District of Mississippi on November 5, 2013. The City filed a notice with EMMA with respect to this event on December 5, 2013.
The Rating Agencies took certain rating actions with respect to the ratings of Ambac Assurance Corporation and Financial Security Assurance Inc. (collectively, the "Bond Insurers"). The Bond Insurers provided municipal bond insurance policies relating to certain series of the City's Chicago Midway Airport revenue bonds. Event notices with respect to such rating changes were not filed with EMMA. The City made such filings on May 22, 2014.
Ambac provided a municipal bond insurance policy relating to the City's Motor Fuel Tax Revenue Bonds, Series 2003A and Assured Guaranty Corp. provided municipal bond insurance policies relating to the City's Motor Fuel Tax Revenue Bonds, Series 2008. Event notices with respect to the rating changes taken by the Rating Agencies wilh respect to these insurers were not filed. The City made filings with EMMA on June 3, 2014 and August 22, 2014 wilh respect to these rating changes.
The City failed to file material event notices with respect to certain rating changes affecting the City's bonds subject to the Rule and for which the City is an "obligated person" under the Rule (collectively, the "Prior Bonds") or affecting bond insurance companies which insured any Prior Bonds (collectively, the "Bond Insurers"). The City filed wilh EMMA on August 29, 2014 a notice with respect to all rating changes known to the City and affecting the Prior Bonds (including certain Senior Lien Bonds and Second Lien Bonds) occurring over the prior 10 years. The City filed with EMMA on August 27, 2014 a notice with respect to all rating changes known to the City and affecting the Bond Insurers occurring during the prior seven years.









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MISCELLANEOUS
The summaries or descriptions contained herein of provisions of the Indenture and the Undertaking and all references to other materials not purporting to be quoted in full, are qualified in their entirety by reference to the complete provisions of the documents and other materials summarized or described. Copies of these documents may be obtained from the office of the Chief Financial Officer.
The Bonds are authorized and are being issued pursuant to the City Council's approval under the powers of the City as a home rule unit under Article VII ofthe Illinois Constitution.

Carole L. Brown Chief Financial Officer







































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APPENDIX A SUMMARY OF THE INDENTURE
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[This Page Intentionally Left Blank]
SUMMARY OF THE INDENTURE
The following is a summary of certain provisions of the Indenture to which reference is made for a complete statement of the provisions and contents thereof. Copies of the Indenture are available for review prior to the sale and delivery ofthe Bonds at the office ofthe City's Chief Financial Officer and thereafter at the office ofthe Trustee.
Glossary of Terms
The following are definitions of certain terms used in the Indenture and this Official Statement. This glossary is provided for the convenience ofthe reader and does not purport to be comprehensive or definitive. All references herein to terms defined in the Indenture are qualified in their entirety by the definitions set forth in the Indenture.
"Authorized Denomination" means $5,000 and any integral multiple thereof.
"Authorized Officer" means (a) the Mayor, the Chief Financial Officer, the City Comptroller or any other official of the City so designated by a Certificate signed by the Mayor or Chief Financial Officer and filed with the Trustee for so long as such designation shall be in effect, (b) the City Clerk with respect to the certification of any ordinance or resolution of the City Council or any other document filed in his or her office, and (c) the City Treasurer with respect to the investment of any moneys held pursuant to the Indenture.
"Beneficial Owner" means the owner of a beneficial interest in the Bonds registered in the name of Cede & Co., as nominee of DTC (or a successor securities depository or nominee for either of them).
"Bond Counsel" means the firm of Ice Miller LLP, Chicago, Illinois, and the firm of Cotillas and Associates, Chicago, Illinois, or any other firm or firms of nationally recognized bond counsel designated by the Corporation Counsel ofthe City.
"Bond Fund" means the Bond Fund established and described in the Indenture.
"Bondholder." "holder," or "owner of the Bonds" means the Registered Owner or Beneficial Owner of any Bond, as the case may be.
"Bond Ordinance" means the ordinance duly adopted by the City Council of the City on September 24, 2015 authorizing the issuance of the Bonds.
"Bond Register" means the registration books of the City kept by the Trustee to evidence the registration and transfer of Bonds.
"Bond Year" means a 12-month period commencing on January 2 of each calendar year and ending on January 1 of the next succeeding calendar year.
"Bonds" means the General Obligation Refunding Bonds, Series 2015C.
"Business Day" means any day other than (a) a Saturday or Sunday, (ii) a day on which banking institutions located in the city where the Designated Corporate Trust Office of the Trustee is located are authorized or required by law or executive order to close, and (iii) a day on which The New York Stock Exchange, Inc., is closed.



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"Capitalized Interest Account" means the account of that name established within the Bond Fund and described below under"—Funds and Accounts—Capitalized Interest Account"
"Certificate" means an instrument of the City in writing signed by an Authorized Officer. Any such instrument in writing and supporting opinions or representations, if any, may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed so as to form a single instrument. Any such instrument may be based, insofar as it relates to legal, accounting or engineering matters, upon the opinion or representation of counsel, accountants, or engineers, respectively, unless the officer signing such instrument knows that the opinion or representation with respect to the matters upon which such instrument may be based, as aforesaid, is erroneous. The same Authorized Officer, or the same counsel or accountant or other persons, as the case may be, need not certify lo all of the matters required to be certified under any provision of the Indenture or any Supplemental Indenture, but different officers, counsel, accountants or other persons may certify to different facts, respectively.
"Chief Financial Officer" means the Chief Financial Officer appointed by the Mayor, or the City Comptroller of the City at any time a vacancy exists in the office of the Chief Financial Officer.
"City" means the Cily of Chicago, a municipal corporation and home rule unit of local government, organized and existing under the Constitution and laws of the State.
"City Clerk" means the duly qualified and acting Cily Clerk of the City or any Deputy Cily Clerk or other person that may lawfully take a specific action or perform a specific duty prescribed for the City Clerk pursuant to the Bond Ordinance.
"City Comptroller" means the City Comptroller of the City.
"City Council" means the City Council of the Cily.
"Code" means the United States Internal Revenue Code of 1986, as amended. References to the Code and to Sections of the Code shall include relevant final, temporary or proposed regulations thereunder as in effect from time to time and as applicable to obligations issued on the Date of Issuance.

"Contract of Purchase" means the bond purchase agrccment(s) with respect to the sale of the Bonds to, or al the direction of, the Underwriters.

"Date of Issuance" means the date of issuance and delivery ofthe Bonds to the initial purchasers
thereof.
"Defeasance Obligations" means: (1) money; or (2) (A) direct obligations ofthe United States of America, (B) obligations of agencies of the United States of America, the timely payment of principal of and interest on which are guaranteed by the United States of America, (C) obligations of the following government-sponsored agencies that are not backed by the full faith and credit ofthe U.S. Government: Federal Home Loan Mortgage Corp. (FHLMC) debt obligations, Farm Credit System (formerly: Federal Land Banks, Federal Intermediate Credit Banks, and Banks for Cooperatives) debt obligations, Federal Home Loan Banks (FHL Banks) debt obligations, Fannie Mae debt obligations, Financing Corp. (FICO) debt obligations, Resolution Funding Corp. (REFCORP) debt obligations, and U.S. Agency for International Development (U.S. A.I.D.) Guaranteed notes, (D) pre-refunded municipal obligations defined as follows: any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such slate which arc not callable at the option of


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the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice, or (E) instruments evidencing an ownership interest in obligations described in the preceding clauses (A), (B) and (C); or (3) a combination ofthe investments described in clauses (1) and (2) above.
"Delivery Office" shall mean the following offices of the Trustee: For Notice Purposes:
Zions Bank, a division of ZB, National Association 111 W. Washington Street, Suite//1860 Chicago, Illinois 60602
Attn: Daryl Pomykala, Vice President/Senior Account Executive
For Presentation of Bonds for payment or transfers:
Zions Bank, a division of ZB, National Association One South Main Street, Suite# 1200 Salt Lake City, Utah 84133 Attn: Corporate Trust Services

"Designated Corporate Trust Office" means the corporate trust office of the Trustee located at the address of the Trustee set forth in the definition of "Delivery Office" in the Indenture, as such address may be changed from time to time by the Trustee.
"DTC" means The Depository Trust Company, New York, New York, or its nominee, and its successors and assigns, or any other depository performing similar functions.
"Escrow Agreements" mean each Escrow Deposit Agreement dated as of January 21, 2016, between the City and the Escrow Trustee, as escrow trustee and bond registrar and paying agent for the applicable Refunded Bonds or Interest Paid Bonds.
"Escrow Trustee" means the bond registrar and paying agent for the applicable Refunded Bonds or Interest Paid Bonds, respectively, in its capacity as escrow trustee for such Refunded Bonds or Interest Paid Bonds pursuant to the applicable Escrow Agreement.
"Escrow Verification Report" means the report of Robert Thomas, CPA, LLC, dated January 12,
2016.
"Federal Obligation" means any direct obligation of, or any obligation the full and timely payment of principal of and interest on which is guaranteed by, the United States of America.
"Fitch" means Fitch Ratings Inc., a corporation organized and existing under the laws ofthe State of Delaware, its successors and assigns, and, if such corporation shall be dissolved or liquidated, or shall no longer perform the functions of a securities rating agency, "Fitch" shall be deemed to refer to any other nationally recognized securities rating agency designated by the City by notice to the Trustee.
"Indenture" means the Trust Indenture dated as of January 1, 2016, between the City and the
Trustee.



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"Interest Paid Bonds" means those certain outstanding general obligation bonds of the City as described in Appendix G ofthe Official Statement.
"Interest Payment Date" means each January 1 and July 1, commencing July 1, 2016.
"Kroll" means Kroll Bond Rating Agency, its successors and assigns, and, if Kroll shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Kroll" shall be deemed to refer to any other nationally recognized securities rating agency designated by the City by notice lo the Trustee.
"Maturity Date" means, for the Bonds of each specified maturity, the applicable maturity date set forth on the inside front cover.
"Mayor" means the Mayor ofthe City.
"Municipal Code" means the Municipal Code of Chicago, as from time to time amended.
"Opinion of Bond Counsel" means a written opinion of Bond Counsel in form and substance acceptable to the City.
"Outstanding," means, when used with reference to any Bonds, all of such obligations issued under the Indenture that are unpaid, provided that such term docs not include:
Bonds canceled at or prior to such date or delivered lo or acquired by the Trustee or Paying Agent al or prior to such dale for cancellation;
matured or redeemed Bonds which have not been presented for payment in accordance with the provisions of the Indenture and for the payment of which the City has deposited funds with the Trustee or the Paying Agent;
Bonds for which the City has provided for payment by depositing in an irrevocable trust or escrow, cash or Defeasance Obligations, in each case, the maturing principal of and interest on which will be sufficient to pay at maturity, or if called for redemption on the applicable redemption date, the principal of and interest on such Bonds;
Bonds in lieu of or in exchange or substitution for which other Bonds shall have been authenticated and delivered pursuant to the Indenture; and
Bonds owned by the Cily and tendered to the Trustee for cancellation. "Paving Agent" means the Trustee and any successor thereto.
"Permitted Investments" means any of the following obligations or securities permitted under the laws of the State and the Municipal Code:
interest-bearing general obligations of the United States of America, the State or the
City;
United Stales treasury bills and other non-interest bearing general obligations of the United States of America when offered for sale in the open market at a price below the face value of same, so as to afford the City a return on such investment in lieu of interest;


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short-term discount obligations of the United States Government or United States Government agencies;
certificates of deposit of national banks or banks located within the City which are either (i) fully collateralized at least 110 percent by marketable United States Government securities marked lo market at least monthly or (ii) secured by a corporate surety bond issued by an insurance company licensed to do business in the State and having a claims-paying rating in the lop rating category as rated by a nationally recognized statistical rating organization and maintaining such rating during the term of such investment;
(c) banker's acceptances of banks and commercial paper of banks whose senior obligations are rated in the top two short-term rating categories by at least two national rating agencies and maintaining such rating during the term of such investment;
tax-exempt securities exempt from federal arbitrage provisions applicable to investments of proceeds of the City's tax-exempt debt obligations;
domestic money market mutual funds regulated by and in good standing with the Securities and Exchange Commission, including any such fund for which the Trustee or any of its affiliates provides any service including any service for which a fee may be paid; and
any other suitable investment instrument permitted by Stale laws and the Municipal Code governing municipal investments generally, subject to the reasonable exercise of prudence in making investments of public funds.
"Principal and Interest Account" means the Series 2015C Principal and Interest Account established within the Bond Fund as described below under "—Funds and Accounts—Bond Fund"
"Principal and Interest Requirement" means an amount equal to the total principal installment and interest due on the Bonds as of each January 1 and July 1 (including any mandatory redemption of such Bonds), which amount shall be deposited in the Principal and Interest Account not later than the Business Day prior to such January 1 and July 1.
"Qualified Collateral" means:
Federal Obligations;
direct and general obligations of any state of the United States of America or any political subdivision ofthe State which are rated not less than "AA" or "Aa2" or their equivalents by any Rating Agency; and
public housing bonds issued by public housing authorities and fully secured as to the payment of both principal and interest by a pledge of annual contributions under an annual contributions contract or contracts wilh the United States of America, or project notes issued by public housing authorities, or project notes issued by local public agencies, in each case fully secured as to the payment of both principal and interest by a requisition or payment agreement with the United States of America.
"Rating Agency" means any of Fitch, S&P and Kroll, or another rating agency that has a credit rating assigned to the Bonds at the request of the City.



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"Record Date" means each June 15 and December 15 (whether or not a Business Day).
"Redemption Price" means the principal amount of Bonds payable upon redemption thereof plus interest accrued to the redemption date, pursuant to the provisions of such Bonds.
"Refunded Bonds" means those certain outstanding general obligation bonds of the City as described in Appendix G ofthe Official Statement
"Registered Owner" or "Owner" means the person or persons in whose name or names a Bond shall be registered in the Bond Register.
"Securities Depository" means DTC and any other securities depository registered as a clearing agency with the Securities and Exchange Commission pursuant to Section 17A of the Securities Exchange Act of 1934, as amended, and appointed as the securities depository for the Bonds.
"S&P" means Standard & Poor's Financial Services LLC, a division of McGraw Hill Financial, Inc., its successors and assigns, and, if S&P shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the City by notice to the Trustee.
"State" means the State of Illinois.
"Supplemental Indenture" means any indenture modifying, altering, amending, supplementing or confirming the Indenture duly entered into in accordance with the terms thereof.
"Tax Agreement" means the Tax Exemption Certificate and Agreement of the City, dated the date of issuance of the Bonds.
"Trust Estate" means the property conveyed lo the Trustee pursuant to the Granting Clauses of the Indenture.
"Trustee" means Zions Bank, a division of ZB, National Association, a national banking association with trust powers, and its successors and any entity resulting from or surviving any consolidation or merger to which it or its successors may be a party, and any successor Trustee at the time serving as successor trustee under the Indenture.
"Underwriters" means an underwriter or group of underwriters selected by the City pursuant to Ihe Bond Ordinance and set forth on the front cover ofthe Official Statement.
Source of Payment of Bonds
Pursuant to the Bond Ordinance, the Bonds constitute direct and general obligations of the City for the payment of which the City pledges its full faith and credit. See "SECURITY FOR THE BONDS."
Funds and Accounts
Bond Fund
Pursuant to the Indenture, the City has established with the Trustee a separate trust fund designated "City of Chicago General Obligation Bonds, Scries 2015C Bond Fund". At each such time as required under the Indenture, the City shall deposit into the Bond Fund, from funds of the City legally available therefor, an amount sufficient to satisfy the Principal and Interest Account Requirement. Money

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on deposit in the Bond Fund shall be applied by the Trustee to pay the principal of (whether due at maturity or by mandatory redemption) and interest on the Bonds, as applicable, as the same become due. Pending the use of moneys held in the Bond Fund, the Trustee shall invest such moneys in Permitted Investments upon the direction of an Authorized Officer or any person designated by an Authorized Officer. Income from such investments shall be credited to the Bond Fund. The Indenture also provides that an account within the Bond Fund, designated as the "Series 2015C Principal and Interest Account" (the "Principal and Interest Account") to be used in connection with the redemption of any Bonds.
Not later than the Business Day prior to each Interest Payment Date, commencing July 1, 2016 (each such date referred to herein as the "Deposit Date") there shall be on deposit in the Bond Fund an amount equal lo the Principal and Interest Account Requirement (such amount wilh respect to any Deposit Date being referred to herein as the "Deposit Requirement").
In addition to the Deposit Requirement, there shall be deposited into the Bond Fund any other moneys received by the Trustee under and pursuant to the Indenture, when accompanied by directions from the person depositing such moneys that such moneys are to be paid into the Bond Fund and to one or more accounts therein.
Upon calculation by the Trustee of each Deposit Requirement, the Trustee shall notify the City of the Deposit Requirement, along with the Deposit Dale to which it relates, and shall provide the City with such supporting documentation and calculations as the Cily may reasonably request.
Capitalized Interest Account
Pursuant lo ihc Indenture, the City has established with the Trustee a trust account within the Bond Fund, designated as the "Series 2015C Capitalized Interest Account," to hold certain proceeds of sale of the Bonds.
Moneys on deposit in the Capitalized Interest Account shall be withdrawn by the Trustee on the Business Day prior to each of Ihc Interest Payment Dates occurring on and before January 1, 2017 and deposited into the Bond Fund for application to the payment of the interest due on the Bonds on such Interest Payment Dates.
Pending the use of moneys held in the Capitalized Interest Account, the Trustee shall invest such moneys in Permitted Investments upon the direction of an Authorized Officer or any person designated by an Authorized Officer. Income from such investments shall be retained in the Capitalized Interest Account. Any amount remaining in the Capitalized Interest Account on January 2, 2017, shall be withdrawn therefrom and deposited into the Bond Fund.
Supplemental Indentures
A Supplemental Indenture may be authorized al any time by ordinance of the City Council and shall be fully effective in accordance with its terms and not subject to consent by the Owners ofthe Bonds for the following purposes: (a) to add to the covenants and agreements ofthe City in the Indenture other covenants and agreements to be observed by the City which are not contrary to or inconsistent with the Indenture as theretofore in effect; (b) to add to the limitations and restrictions in the Indenture other limitations and restrictions to be observed by the City which are not contrary lo or inconsistent with the Indenture as theretofore in effect; (c) to surrender any right, power or privilege reserved to or conferred upon the Cily by the terms ofthe Indenture, but only if the surrender of such right, power or privilege is not contrary to or inconsistent with the covenants and agreements ofthe City contained in the Indenture; (d) to confirm, as further assurance, the pledge under the Indenture, and the subjection of, additional


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properties, taxes or other collateral lo any lien, claim or pledge created or to be created by, the Indenture; (e) to cure any ambiguity, supply any omission, or cure or correct any defect or inconsistent provision in the Indenture; (f) to insert such provisions clarifying matters or questions arising under the Indenture as are necessary or desirable and arc not contrary to or inconsistent with the Indenture as theretofore in effect; or (g) to provide additional duties ofthe Trustee under the Indenture.
The Indenture shall not be modified or amended in any respect except as provided therein. Nothing in the Indenture shall affect or limit the right or obligation of the City to adopt, make, do, execute, acknowledge or deliver any ordinance, resolution, act or other instrument pursuant to the provisions of the Indenture or the right or obligation ofthe Cily lo execute and deliver to Ihe Trustee any instrument which is required to be delivered to the Trustee pursuant lo the Indenture.
Every Supplemental Indenture delivered to the Trustee for execution shall be accompanied by an opinion of counsel stating that such Supplemental Indenture has been duly and lawfully authorized by the City Council and executed by the City in accordance with the provisions of the Indenture, is authorized or permitted by the Indenture, and will, when executed and delivered by the Trustee, be valid and binding upon the Cily and enforceable in accordance with its terms.
The Trustee is authorized to enter into, execute and deliver a Supplemental Indenture and to make all further agreements and stipulations which may be therein contained, and the Trustee in taking such action shall be fully protected in relying on an opinion of counsel that such Supplemental Indenture is authorized or permitted by the provisions ofthe Indenture.
No Supplemental Indenture shall change or modify any of the rights or obligations of the Trustee without its written assent thereto.
No Supplemental Indenture supplementing the Indenture authorizing the Bonds shall take effect unless and until there has been delivered to the Trustee an Opinion of Bond Counsel to the effect that such Supplemental Indenture does not adversely affect the exclusion from gross income for federal income tax purposes to which interest on the Bonds would otherwise be entitled.
Supplemental Indentures Requiring Bondholder Consent
Al any time or from time to time, a Supplemental Indenture may be authorized by an ordinance adopted by the City Council, subject to consent by the owners of Bonds in accordance with and subject to the provisions ofthe Indenture, which Supplemental Indenture, upon the filing with the Trustee of a copy of such ordinance certified by the City Clerk, upon compliance with Ihe provisions of the Indenture, and upon execution and delivery of such Supplemental Indenture by the City and the Trustee, shall become fully effective in accordance with its terms.
Any modification or amendment of the Indenture or of the rights and obligations of the City and of the owners of Bonds, in particular, which requires the consent ofthe Bondholders, may be made by a Supplemental Indenture, wilh the written consent given as provided in the Indenture: (a) of the Owners of a majority in principal amount ofthe Bonds Outstanding at the time such consent is given; or (b) in case less than all of the then Outstanding Bonds are affected by the modification or amendment, ofthe Owners of a majority in principal amount of the then Outstanding Bonds so affected. No such modification or amendment shall permit a change in the terms of redemption or maturity of the principal of any outstanding Bonds or of any installment of interest thereon or a reduction in the principal amount or the applicable Redemption Price thereof or in the rale of interest thereon without the consent ofthe Owner of such Bonds, or shall reduce the percentages or otherwise affect the classes of Bonds the consent of the Owners of which is required to effect any such modification or amendment, or shall change or modify any


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of the rights or obligations of the Trustee without its written assent thereto. A Bond shall be deemed to be affected by a modification or amendment of the Indenture if the same adversely affects or diminishes the rights ofthe Owners of such Bond.
Default and Remedies
Each of the following events is an "Event of Default" under the Indenture:
payment of the principal or Redemption Price of any Bonds shall not be made when and as the same shall become due, whether at maturity or upon call for redemption or otherwise;
payment of any installment of interest on any Bonds shall not be made when and as the same shall become due; or
the City shall fail or refuse to comply with the provisions of the Indenture, or shall default in the performance or observance of any of the covenants, agreements or conditions on its part contained in the Indenture or in the Bonds, which materially affects the rights of the owners of the Bonds and such failure, refusal or default shall continue for a period of 45 days after written notice thereof by the Trustee or the owners of not less than 25 percent in principal amount of the Outstanding Bonds; provided, however, that in the case of any such default which can be cured by due diligence but which cannot be cured within the 45-day period, the time to cure shall be extended for such period as may be necessary to remedy the default wilh all diligence.
Upon the happening and continuance of any Event of Default specified in paragraph (a) or (b) above, the Trustee shall proceed, or upon the happening and continuance of any Event of Default (beyond the time periods specified therein) specified in paragraph (c) above, the Trustee may proceed, and upon the written request of the owners of not less than 25 percent in principal amount of the Outstanding Bonds, shall proceed, in its own name, to protect and enforce its rights and the rights ofthe owners of the Bonds by such of the following remedies as the Trustee, being advised by counsel, shall deem most effectual to protect and enforce such rights:
by mandamus or other suit, action or proceeding at law or in equity, to enforce all rights of the owners of the Bonds including the right to require the City to receive and collect taxes adequate to carry out the covenants and agreements as to such taxes and to require the City to carry out any other covenant or agreement with the owners of the Bonds and to perform its duties under the Indenture;
by bringing suit upon the Bonds;
by action or suit in equity, require the City to account as if it were the trustee of an express trust for the owners of the Bonds; and/or
by action or suit in equity, enjoin any acts or things which may be unlawful or in violation of the rights of the owners of the Bonds.
In the enforcement of any rights and remedies under the Indenture, the Trustee shall be entitled to sue for, enforce payment of and receive any and all amounts then or during any default becoming, and al any time remaining, due from the City but only out of moneys pledged as security for the Bonds for principal. Redemption Price, interest or otherwise, under any provision ofthe Indenture or ofthe Bonds, and unpaid, with interest on overdue payments al the rate or rates of interest specified in such Bonds, together with any and all costs and expenses of collection and of all proceedings hereunder and under


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such Bonds without prejudice to any other right or remedy of the Trustee or of the owners of the Bonds, and to recover and enforce a judgment or decree against the City for any portion of such amounts remaining unpaid, with interest, costs and expenses, and to collect from any moneys available under the Indenture for such purpose, in any manner provided by law, the moneys adjudged or decreed to be payable.
Under no circumstance may the Trustee declare the principal of or interest on the Bonds to be due and payable prior to the Maturity Dale following the occurrence of an Event of Default under the Indenture.
Resignation or Removal ofthe Trustee; Successors
The Trustee may at any time resign and be discharged of its duties and obligations created by the Indenture by giving not fewer than 60 days' written notice to the City and mailing notice thereof to the owners of Bonds at their addresses shown on the registration books kept by the Trustee within 20 days after the giving of such written notice. Such resignation shall take effect upon the appointment and acceptance of appointment of a successor by the City or the Owners of Bonds as provided in the Indenture.
The Trustee may be removed at any time by the Owners of a majority in principal amount of the Bonds then Outstanding, excluding any Bonds held by or for the account of the City, by an instrument or concurrent instruments in writing signed and duly acknowledged by such Owners of Bonds or by their attorneys duly authorized in writing and delivered to the City. Copies of each such instrument shall be delivered by the City to the Trustee and any successor. The City may remove the Trustee at any time, except during the existence of an Event of Default, for such cause (or upon 30 days' notice for any reason) as shall be determined in the sole discretion of the City by filing wilh the Trustee an instrument signed by an Authorized Officer and by mailing notice thereof to the Owners of Bonds at their addresses shown on the registration books kept by the Trustee. Any removal of the Trustee shall take effect upon the appointment and acceptance of appointment of a successor Trustee.
In case at any time the Trustee shall resign or shall be removed or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or if a receiver, liquidator or conservator of the Trustee or of its properly shall be appointed, or if any public officer shall take charge or control of the Trustee or of its property or affairs, a successor may be appointed by the Owners of a majority in principal amount of the Bonds then Outstanding, excluding any Bonds held by or for the account of the. City, by an instrument or concurrent instruments in writing signed by such Owners or their attorneys duly authorized in writing and delivered to such successor Trustee, notification thereof being given to the City and the predecessor Trustee. Pending such appointment, the City shall forthwith appoint a Trustee to fill such vacancy until a successor Trustee (if any) shall be appointed by the Owners of Bonds as authorized in the Indenture. The City shall mail notice to Owners of Bonds of any such appointment within 20 days after such appointment. Any successor Trustee appointed by the City shall, immediately and without further act, be superseded by a Trustee appointed by the Owners of Bonds. If in a proper case no appointment of a successor Trustee shall be made within 45 days after the Trustee shall have given to the City written notice of resignation or after the occurrence of any other event requiring or authorizing such appointment, the Trustee, any Owner of Bonds may apply to any court of competent jurisdiction to appoint a successor. Said court may thereupon, after such notice, if any, as said court may deem proper and prescribe, appoint such successor Trustee. Any Trustee appointed shall be a bank, trust company or national banking association, in any such case having corporate trust powers, doing business and having a corporate trust office in the City.



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Any successor Trustee appointed under the Indenture shall execute, acknowledge and deliver lo its predecessor Trustee, and also to the City, a written instrument of acceptance respecting such appointment, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become fully vested with all moneys, estates, properties, rights, powers, duties and obligations of such predecessor Trustee, with like effect as if originally named as Trustee; but the Trustee ceasing to act shall nevertheless, on the request of the City, or of the successor Trustee, execute, acknowledge and deliver such instruments of conveyance and further assurance and do such other things as may reasonably be required for more fully and certainly vesting and confirming in such successor Trustee all the right, title and interest ofthe predecessor Trustee in and to any property held by it under the Indenture, and shall pay over, assign and deliver lo the successor Trustee any money or other property subject to the trusts and conditions set forth in the Indenture. Should any deed, conveyance or instrument in writing from the City be required by such successor Trustee for more fully and certainly vesting in and confirming to such successor Trustee any such estates, rights, powers and duties, any and all such deeds, conveyances and instruments in writing shall, on request, and so far as may be authorized by law, be executed, acknowledged and delivered by the City.
Defeasance
The Indenture provides that if the City will pay lo the Registered Owners of the Bonds or provide for the payment of, the principal of and interest to become due on the Bonds, then Ihe Indenture and the Bond Ordinance will be fully discharged and satisfied with respect to the Bonds. Upon the satisfaction and discharge ofthe Indenture, the Trustee will, upon the request ofthe City, execute and deliver to the City all such instruments as may be desirable to evidence such discharge and satisfaction, and all fiduciaries will pay over or deliver to the City all funds, accounts and other moneys or securities held by them pursuant to the Indenture which are not required for the payment or redemption of the Bonds. If payment or provision for payment is made, to or for the Registered Owners of all or a portion of the Bonds, of the principal of and interest due and to become due on any Bond at the times and in the manner stipulated therein, and there is paid or caused to be paid to the Trustee, all sums of money due and to become due according to the provisions of the Indenture, then the estate and rights thereby granted under the Indenture and the Bond Ordinance shall cease, terminate and be void as to those Bonds or portions thereof except for purposes of registration, transfer and exchange of Bonds and any such payment from such moneys or obligations. Any Bond will be deemed to be paid when payment of the principal of any such Bond, plus interest thereon to the due date thereof (whether such due date be by reason of maturity or upon redemption as provided in the Indenture or otherwise), either (a) will have been made or caused to have been made in accordance with the terms thereof, or (b) will have been provided for by irrevocably depositing wilh the Trustee, in trust and exclusively for such payment, (1) moneys sufficient to make such payment or (2) Defeasance Obligations, or (3) a combination of the investments described in clauses (1) and (2) above, such amounts so deposited being available or maturing as to principal and interest in such amounts and at such times, without consideration of any reinvestment thereof, as will insure the availability of sufficient moneys to make such payment (all as confirmed by a nationally recognized firm of independent public accountants). If the City pays and discharges a portion of the Bonds as aforesaid, such portion shall cease to be entitled to any lien, benefit or security under the Indenture and the Bond Ordinance. The liability ofthe City wilh respect to such Bonds will continue, but the Registered Owners thereof shall thereafter be entitled to payment (to the exclusion of all other Bondholders) only out ofthe Defeasance Obligations deposited with the Trustee under the Indenture.
No deposit pursuant to the paragraph above shall be made or accepted with respect to the Bonds and no use made of any such deposit unless the Trustee shall have received an Opinion of Bond Counsel to the effect that such deposit and use would not cause any of such Bonds to be treated as "arbitrage bonds" within the meaning of Section 148 of the Code or any successor provision thereto.


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A defeasance deposit of escrow securities may be subject to a subsequent sale of such escrow securities and reinvestment of all or a portion of the proceeds of that sale in escrow securities which, together with money to remain so held in trust, shall be sufficient to provide for payment of principal of and interest on any of the defeased Bonds. Amounts held by the Trustee in excess of the amounts needed so to provide for payment ofthe defeased Bonds may be subject to withdrawal by the City.















































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I
APPENDIX B ECONOMIC AND DEMOGRAPHIC INFORMATION
[This Page Intentionally Left Blank]
ECONOMIC AND DEMOGRAPHIC INFORMATION
Set forth below is certain economic and demographic information regarding the City. Sources of information are set forth in footnotes at the end of this Appendix. With respect to non-City sources, the City considers these sources to be reliable but has made no independent verification of the information provided and does not warrant its accuracy.
Economy
The Chicago metropolitan area has a population of 9.5 million people, with over 4.5 million employees.''2 Chicago's large and diverse economy contributed to a gross regional product of more than $610 billion in 2014.3
Chicago's transportation and distribution network offers access to air, rail, and water, with two ports capable of handling ocean-going ships and barges, and an airport system that moves 1.5 million tons of freight, mail, and goods annually."'
The Chicago metropolitan area's largest industry sectors by employment include trade, transportation and utilities, professional and business services, education and health services, government, leisure and hospitality and manufacturing.5
Population
Chicago is home to over 2.7 million people that live in more than one million households.6 The City's population increased nearly 1.0 percent since the 2010 Census.7
The population ofthe United States, the State of Illinois, Cook County and the City for the census years from 1980 to 2010 and the estimate for 2014 is set forth below.
Population8 1980—2014
Year United States State of Illinois Cook County Chicago
1980 226,545,805 11,427,409 5,253,655 3,005,072
1990 248,709,873 11,430,602 5,105,067 2,783,726
2000 281,421,906 12,419,293 5,376,741 2,896,016
2010 308,745,538 12,830,632 5,194,675 2,695,598
2014 Estimate 318,857,056 12,880,580 5,246,456 2,722,389
34.2 percent of Chicago's residents (age 25 or older) have bachelor's degrees, which is higher than the national average of 28.8 percent.9











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Per Capita Income and Wages
The per capita personal income (estimated annual earnings) for the United States, the State of Illinois, Cook County and the Chicago MSA is set forth below for the years 2005 through 2014.


Year
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014


United States
$ 35,888 38,127 39,804 40,873 39,379 40,144 42,332 44,200 44,765 46,049
Per Capita Income 2005—2014
State of Illinois
$ 37,697 40,184 42,260 43,327 41,545 42,033 44,169 46,009 46,980 47,643


Cook County
$ 40,648 43,701 46,436 47,046 44,824 45,213 47,966 48,948 49,661 Unavailable


Chicago MSA
$ 40,470 43,276 45,459 46,138 43,847 44,186 46,279 48,447 49,071 Unavailable
Chicago's 2013 median household income is $47,270, compared to $56,797 in Illinois and $53,046 in the U.S., and Chicago ranks 36th among other major metropolitan areas on the cost of living index."-12
Employment
Total employment for the Stale of Illinois, the Chicago MSA, Cook County and the City for Ihc years 2005 through 2014 is set forth below.

Employment (in thousands)13 2005-2014
Year Chicago Cook County Chicago MSA State of Illinois
1,199 2,393 4,461 5,862
1,228 2,453 4,519 5,933
1,249 2,491 4,557 5,980
1,238 2,461 4,528 5,949
1,172 2,327 4,291 5,657
1,117 2,301 4,246 5,613
1,120 2,316 4,305 5,677
1,141 2,359 4,375 5,751
1,144 2,365 4,443 5,805
1,185 2,450 4,502 5,873
The percentage of total (nonfarm) employment by sector for the Chicago MSA, State of Illinois and the United Stales for November 2015 is shown in the following table.






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Percentage of Total Non-Farm Employment by Major Industry Sector
November 201514' 15
Chicago
Sector MSA Illinois United States
Trade, Transportation and Utilities 20.3% 20.0% 18.9%
Education and Health Services 15.4% 15.3% 15.6%
Government 12.2% 14.0% 15.4%
Professional and Business Services 17.8% 15.8% 14.0%
Leisure and Hospitality 9.4% 9.5% 10.7%
Manufacturing 8.8% 9.6% 8.7%
Financial Activities 6.3% 6.2% 5.7%
Construction 3.7% 3.5% 4.5%
Other Services 4.3% 4.3% 4.0%
Information 1.8% 1.7% 2.0%
Mining and Logging 0 0% 0J2% 0-6%
Tota| 100.0% 100.0% 100.0%
The City of Chicago's average annual unemployment rale decreased from 11.2 percent in 2010 to 7,7 percent in 2014, while statewide, Illinois' unemployment rate dropped from 10.4 percent in 2010 to 7.1 percent in 2014.16 In November 2015, the Chicago MSA's preliminary unemployment rate before seasonal adjustment was 5.4 percent.17
The annual unemployment rates (percent of population, not seasonally adjusted) for the United States, the State of Illinois, Cook County, the Chicago MSA and the City is set forth below for the years 2005 through year-lo-date for 2015.
Annual Unemployment Rates18 2005—2015
Cook
Year Chicago County
7.1% 6.4%
5.4 4.9
5.8 5.3
7.0 6.4
11.1 10.5
11.2 10.9
10.8 10.4
10.0 9.6
10.0 9.6
2014 7.7 7.4
2015* 5.8 5.5
Chicago State of United
MSA Illinois States
5.9% 5.7% 5.1%
4.6 4.5 4.6
4.9 5.0 4.6
6.1 6.3 5.8
10.2 10.2 9.3
10.6 10.4 9.6
9.9 9.7 8.9
9.1 9.0 8.1
9.0 9.1 7.4
7.0 7.1 6.2
5.4 5.8 4.8
' Preliminary November 2015 data.

Employers
The companies employing the greatest number of workers in the Chicago MSA as of the end of 2014 are set forth below.
Largest Employers in Chicago MSA 2014


Employer
Advocate Health Care
University of Chicago
J.P. Morgan Chase
Northwestern Memorial Healthcare
United Continental Holdings Inc.
Walgreen Co.
AT&T
Presence Health
University of Illinois at Chicago Abbott Laboratories

Number of Employees
18,556 16,025 15,015 14,550 14,000 13,797 13,000 11,279 10,100 10,000
Percentage of Total Employment
1.47%
1.27
1.19
1.15
1.11
1.09
1.03
0.89
0.80
0.79
Top Tax Payers
The top property tax payers in the City in 2013 based on 2013 EAV arc shown in the following
table


Rank|10
10|2 3 4 5 6 7 8 9 10
Top Ten Property Tax Payers 2013
($ in thousands)
Property
Willis Tower AON Center
Blue Cross Blue Shield Tower One Prudential Plaza Water Tower Place Chase Tower AT&T Corp. Center Three First National Plaza Citadel Center 300 N. LaSalle
Total

% of Total EAV
0.59%
0.40
0.32
0.31
0.31
0.31
0.29
0.29
0.28
0.26
3.36%

As shown in the table, the lop ten taxpayers account for less than 4 percent of the City's total tax
base.
Transportation
According to statistics compiled by Airports Council International in 2014, O'Hare ranked seventh worldwide and third in the United States in terms of total passengers while Midway ranked 26lh in the United States.21 According to the Chicago Department of Aviation, O'Hare and Midway had 70.1

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and 21.2 million in total passenger volume in 2014, respectively. O'Hare supports substantial international service with international passengers constituting approximately 15 percent of total enplaned passengers in 2014.22
The Chicago Transit Authority operates the second largest public transportation system in the nation, with: 1,865 buses operating over 128 routes and 1,354 route miles, making 19,000 trips per day and serving 11,104 bus stops; 1,356 rail cars operating over eight routes and 224 miles of track, making 2,250 trips each day and serving 146 stations; and 1.7 million rides on an average weekday and over 529 million rides a year (bus and train combined).23
Schools
The Chicago Public School system is the third largest school district in the nation, serving approximately 396,683 students.24 CPS is comprised of 422 elementary schools, 95 high schools, 6 combination schools (schools that serve both elementary and high school grade levels), 9 contract high schools, and 130 charter school campuses.25 The City Colleges of Chicago operate seven colleges and serve approximately 109,358 students.26
Government
The number of full-time employees of the City for the years 2006 through 2015 is included in the following table.
City Full-Time Employees
2006—2014
Budgeted Full-Time Equivalent Positions
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
40,353 40,264 40,108 37,485 36,970 36,617 33,744 33,554 34,045 34,129













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Housing Market
The monthly home sales and the median home sale prices for Chicago for the years 2009 through November, 2015 are shown below.
Chicago Monthly Home Sales21* 2009—November 2015
2009
January
February
March
April
May
June
July
August
September
October
November
December
917 866 1,212 1407 1,557 1,981 1,975 1,927 1,918 2,012 1,859 1,767
1,202 1,225 1,814 1,984 2,057 2,526 1,588 1,486 1,403 1,216 1,144 1,444
1,034 1,056 1,450 1,466 1,703 1,841 1,655 1,787 1,498 1,312 1,429 1,576
1,123 1,250 1,664 1,816 2,125 2,332 2,164 2,293 1,906 2,076 1,798 1,849
1,485 1,378 1,894 2,331 2,762 2,623 2,838 2,797 2,352 2,231 1,800 2,080
1,383 1,361 1,819 2,210 2,390 2,761 2,664 2,414 2,187 2,082 1,632 1,992
1,295 1,448 2,118 2,386 2,700 3,110 2,989 2,629 2,358 2,109 1,615

Chicago Median Home Sale Prices" 2009—November 2015

January
February
March
April
May
June
July
August
September
October
November
December
2009
$205,000 218,625 219,000 218,000 225,000 242,050 245,000 229,900 225,000 215,000 215,000 210,000
2010
$195,000 176,500 209,000 225,000 230,000 234,250 196,500 200,000 180,000 183,000 182,500 166,250
2011
$150,000 150,000 163,200 169,000 190,000 207,000 210,000 192,500 190,000 162,000 157,000 155,000
2012
$148,000 140,000 172,000 182,000 200,000 217,000 200,000 200,000 188,400 175,000 180,000 185,000
2013
SI 59,000 158,000 187,500 222,000 234,000 254,900 250,000 245,000 231,000 218,500 200,000 210,000
2014
$200,750 175,000 237,000 250,000 270,000 275,000 270,000 250,000 250,000 237,500 230,000 229,250
2015
5222,000
212,000
235,000
275,000
287,500
290,000
285,000
270,000
250,000
240,000
235,000


B-6
|10
9|U.S. Census, "Annual Estimates of the Resident Population: April 1, 2010 to July 2014," . census, gov/faces/nav/isf/pages/indcx. xhtml.|109|U.S. Bureau of Labor Statistics, "Employees on Nonfarm Payrolls by State and Metropolitan Area," httpV/www. bis, gov/news. release/metro, l03.htm.|109|U.S. Bureau of Economic Analysis, "Table 1. Current-Dollar Gross Domestic Product (GDP) by Metropolitan Area," .gov/ncwsrcleascs/rcgional/gdp metro/2015/pdf/ndp _mclro0915.pdf.|109|Chicago Department of Aviation, "Monthly Operations, Passengers, Cargo Summary By Class, December 2014," www.flvehieago.coin .|109|U.S. Bureau of Labor Statistics, "Chicago Area Economic Summary, November 3, 2015," chicago.pdf.|109|U.S. Census Bureau, "State and County QuickFacts—Chicago (cily), Illinois," (accessed December 30. 2015).|109|U.S. Census Bureau, "State and County QuickFacts—Chicago (cily), Illinois," (accessed December 30, 2015).
s U.S. Census Bureau, "State and County QuickFacts—USA," ; "State and County QuickFacts—Cook County, Illinois," ; "State and County QuickFacts—Chicago (city), Illinois." (accessed December 30, 2015).
9 U.S. Census Bureau, "State and County QuickFacts—Chicago (city), Illinois," (accessed December 30, 2015).
lu U.S. Bureau of Economic Analysis, "Interactive Data," Rcq 1 D=70&stcp= 1 #rcqid=70&stcp= 1 &isuri= 1 (accessed December 30, 2015).
" U.S. Census Bureau, "State and County QuickFacts—Chicago (city), Illinois," (accessed December 30, 2015).
12 U.S. Census Bureau, "Table 728. Cost of Living Index—Selected Urban Areas: Annual Average 2010"
lpubs/12slalab/prices.pdf?cssp=SERP (accessed December 30, 2015).
13 U.S. Bureau of Labor Statistics, "State and Metro Area Employment, Flours, & Earnings,"
(accessed December 30, 2015).
14 U.S. Bureau of Labor Statistics, (accessed December 30,
2015).
15 U.S. Bureau of Labor Statistics, "Current Employment Statistics (National),"
1 a.htm (accessed December 30, 2015).
16 U.S. Bureau of Labor Statistics, "Local Area Employment Statistics," http://www.bls.gOv/lau/#lables (accessed
December 30, 2015).
17 U.S. Bureau of Labor Statistics, "Local Area Employment Statistics,"
(accessed December 30, 2015).
18 U.S. Bureau of Labor Statistics, "Local Area Employment Statistics." (accessed
December 30, 2015).
19 Crain's Chicago Business, Crain Communications, Inc. The data represents Ihe largest employers in the six-
counly area (Cook County, Will County, Kane County, Lake County, DuPage County, and McHenry County).
20 Chicago Comprehensive Annual Financial Report for the year ended December 31, 2014,
info/comprehensive annualfinancialstatements/2014-
Financial-Statements.html
21 Airports Council International "2014 North American (AC1-NA) Top 50 Airports,"
htlp://www. aci-na.org/content/airport-traffic-reports .
22 Chicago Department of Aviation Airport Budget Statistics, "Air Traffic Data," .
23 Chicago Transit Authority, "CTA Facts at a Glance, Spring 2014,"
hllp://www.transitchicago.com/about/facts.aspx (accessed December 30, 2015).
24 Chicago Public Schools, "Stats and Facts," and facts.aspx
(accessed December 30, 2015).
25 Chicago Public Schools, "Stats and Facts,"
(accessed December 30, 2015).
26 City Colleges of Chicago, "Fiscal Year 2014 Statistical Digest,"
statistics.aspx.



B-7

37 City of Chicago Annual Financial Analysis 2015, info/2016Budgel/AFA%20-%202015%20( With%20Prcss%20Rclcasc).pdf.
28 Illinois Association of Realtors, "Illinois Market Stats Archives,"
(accessed December 30, 2015).
29 Illinois Association of Realtors, "Illinois Market Stats Archives,"
(accessed December 30, 2015).












































B-8

APPENDIX C
CITY OF CHICAGO
BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
[This Page Intentionally Left Blank]
Deloitte








City of Chicago

Basic Financial Statements for the Year Ended December 31, 2014








Rahm Emanuel, Mayor

Carole L. Brown, Chief Financial Officer Daniel Widawsky, City Comptroller

This Page Intentionally Left Blank
CITY OF CHICAGO, ILLINOIS YEAR ENDED DECEMBER 31, 2014 TABLE OF CONTENTS



INDEPENDENT AUDITORS' REPORT 1-2
MANAGEMENT'S DISCUSSION AND ANALYSIS 3-15
BASIC FINANCIAL STATEMENTS:
Government-wide Financial Statements:
Exhibit 1 Statement of Net Position 17
Exhibit 2 Statement of Activities 18-19
Fund Financial Statements:
Exhibit 3 Balance Sheet - Governmental Funds 20-21
Exhibit 4 Statement of Revenues, Expenditures and Changes in Fund Balances -
Governmental Funds 22-25
Exhibit 5 Reconciliation of the Statement of Revenues, Expenditures and Changes
in Fund Balances of Governmental Funds to the
Statement of Activities 26
Exhibit 6 Statement of Revenues and Expenditures - Budget and Actual -
General Fund (Budgetary Basis) 27
Exhibit 7 Statement of Net Position - Proprietary Funds 28-29
Exhibit 8 Statement of Revenues, Expenses and Changes in Net Position -
Proprietary Funds 30
Exhibit 9 Statement of Cash Flows - Proprietary Funds 31-32
Exhibit 10 Statement of Fiduciary Net Position - Fiduciary Funds 33
Exhibit 11 Statement of Changes in Plan Net Position, Fiduciary Funds -
Pension Trust Funds 34
NOTES TO BASIC FINANCIAL STATEMENTS 35-83
REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)
SCHEDULE OF OTHER POSTEMPLOYMENT BENEFITS FUNDING PROGRESS 84
This Page Intentionally Left Blank
Deloitte.

INDEPENDENT AUDITORS' REPORT

To the Honorable Rahm Emanuel, Mayor And Members of the City Council City of Chicago, Illinois
Report on the Financial Statements
We have audited the accompanying financial statements ofthe governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Chicago, Illinois (the "City"), as of and for the year ended December 31, 2014, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. Wc did not audit the financial statements ofthe City's Pension Plans (the "Plans") which, in aggregate, represent substantially all the assets and revenues of the fiduciary funds, included in the aggregate remaining fund information. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for the Plans, is based solely on the reports ofthe other auditors. Wc conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that wc plan and perform the audit to obtain reasonable assurance about whether the financial statements arc free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment ofthe risks of material misstatement ofthe financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe entity's internal control. Accordingly, wc express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation ofthe financial statements.




MfiiH)f-f or
DoJoiUp Touch** rohrnaiitj Itnul^l

Wc believe that the audit evidence wc have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Opinions
In our opinion, based on our audit and the reports of other auditors, 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 Chicago, Illinois, as of December 31, 2014, and the respective changes in financial position and, where applicable, cash Hows thereof and the respective budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Chicago, Illinois June 30, 2015
Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis and Schedule of Other Postemployment Benefits Funding Progress, as listed in the tabic of contents, be presented to supplement the basic financial statements. Such information, although not a part ofthe basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We and other auditors have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge wc obtained during our audit ofthe basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.















-2-

CITY OF CHICAGO, ILLINOIS MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2014
Management's Discussion and Analysis
As management of the City of Chicago, Illinois (City) we offer readers of the City's Comprehensive Annual Financial Report (CAFR) this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, 2014. We encourage the readers to consider the information presented here in conjunction with information contained within this report.
2014 Financial Highlights
Liabilities and Deferred Inflows of the City, in the government-wide financial statements, exceeded its assets and deferred outflows at the close of the most recent fiscal year by $6,536.3 million (net deficit). The net deficit is composed of $2,742.5 million in net investment in capital assets and $2,471.0 million in net position restricted for specific purposes offset by an unrestricted deficit of $11,749.8 million. The net deficit increased in 2014 by $1,165.2 million primarily as of result of increased pension costs.
The City's total assets increased by $1,347.4 million. The increase primarily relates to a $897.8 million increase in capital assets as a result of the City's capital improvement program, and an increase in cash and cash equivalents and investments of $548.0 million, primarily as a result of an increase in charges for services, improved collection of receivables, and proceeds from financing to fund capital projects.
Revenues and Other Financing Sources, in the fund financial statements, available for general governmental operations during 2014 were $6,769.4 million, an increase of $806.9 million (13.5 percent) from 2013, primarily due to the issuance of General Obligation and Motor Fuel tax-bonds.
The General Fund ended 2014 with a total Fund Balance of $141.3 million, of which $51.6 million was Unassigned. Total Fund Balance decreased from 2013 primarily because Revenues and Other Financing Sources were less than Expenditures and Other Financing Uses by $25.5 million.
The City's general obligation bonds and notes outstanding increased by $605.3 million during the current fiscal year. The proceeds from the issuance of General Obligation were used to finance the City's capital plan and certain operating expenses.
The General Fund expenditures on a budgetary basis were $28.9 million less than budgeted as a result of favorable variances in general government expenditures, offset by unfavorable variances in public safety primarily as a result of higher than expected personnel related expenses.
Overview of the Basic Financial Statements
This discussion and analysis is intended to serve as an introduction to the City's basic financial statements, which include the following components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the basic financial statements. This report also contains required supplementary information and other supplementary information in addition to the basic financial statements. These components are described below:
Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City's finances, using accounting methods similar to those used by private-sector companies. The statements provide both short-term and long-term information about the City's financial position, which assists in assessing the City's economic condition at the end of the fiscal year. These financial statements are prepared using the flow of economic resources measurement focus and the accrual basis of accounting. This basically means such statements follow methods that are similar to those used by most businesses. They take into account all revenues and expenses connected with the fiscal year even if cash involved has not been received or paid.
The government-wide financial statements include two statements:
The statement of net position presents information on all of the City's assets, deferred outflows, liabilities, and deferred inflows with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating, respectively. To assess the overall health of the City, the reader should consider additional non-financial factors such as changes in the City's property tax base and the condition of the City's roads.
|1010|
CITY OF CHICAGO, ILLINOIS MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2014
The statement of activities presents information showing how the government's net position changed during each fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future periods (for example, uncollected taxes, and earned but unused vacation). This statement also presents a comparison between direct expenses and program revenues for each function of the City.
Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, streets and sanitation, transportation, health, and cultural and recreation. The business-type activities ofthe City include water, sewer, tollway and airport services.
The government-wide financial statements present information about the City as a primary government, which includes the Chicago Public Library. The government-wide financial statements can be found immediately following this management's discussion and analysis.
Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds.
Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of a fiscal year. Such information may be useful in evaluating a government's near-term financing requirements.
Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate the comparison between governmental funds and governmental activities.
The City maintains 19 individual governmental funds. Information for the six funds that qualify as major is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances. The six major governmental funds are as follows: the General Fund, the Federal, State and Local Grants Fund, the Special Taxing Areas Fund, Service Concession and Reserve Fund, the Bond, Note Redemption and Interest Fund, and the Community Development and Improvement Projects Fund. Data from the other governmental funds are combined into a single, aggregated presentation.
The City adopts an annual appropriation budget for its general and certain special revenue funds on a non-GAAP budgetary basis. A budgetary comparison statement has been provided for the General Fund, the only major fund with an appropriation budget, to demonstrate compliance with this budget. The basic governmental fund financial statements can be found immediately following the government-wide statements.
Proprietary funds. These funds are used to show activities that operate more like those of commercial enterprises. Because these funds charge user fees for services provided to outside customers including local governments, they are known as enterprise funds. Proprietary funds, like government-wide statements, use the accrual basis of accounting and provide both long- and short-term financial information. There is no reconciliation needed between the government-wide financial statements for business-type activities and the proprietary fund financial statements. The City uses five enterprise funds to account for its water, sewer, Skyway, and two airports operations.

|1010|
CITY OF CHICAGO, ILLINOIS MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2014
Proprietary funds provide the same type of information as the government-wide financial statements, but provide more detail. The proprietary fund financial statements provide separate information for the Water Fund, Sewer Fund, Chicago Skyway Fund, Chicago-O'Hare International Airport Fund and the Chicago Midway International Airport Fund. All the proprietary funds are considered to be major funds of the City. The basic proprietary fund financial statements can be found immediately following the governmental fund financial statements.
Fiduciary funds. Fiduciary funds are used primarily to account for resources held for the benefit of parties outside the primary government. The City is the trustee, or fiduciary, for its employees' pension plans. It is also responsible for other assets that, because of a trust arrangement can be used only for the trust beneficiaries. The City also uses fiduciary funds to account for transactions for assets held by the City as agent for various entities. The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City's own programs. All of the City's fiduciary activities are reported in a separate statement of fiduciary net position and a statement of changes in fiduciary net position. The accounting used for fiduciary funds is much like that used for proprietary funds. The fiduciary fund basic financial statements can be found immediately following the proprietary fund financial statements.
Notes to the basic financial statements. The notes provide additional information that is essential for a full understanding of data provided in the government-wide and fund financial statements. The notes to the basic financial statements can be found immediately following the fiduciary fund basic financial statements.
Financial Analysis of the City as a whole
Net Position. As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of the City, liabilities and deferred inflows exceeded assets by $6,536.3 million at December 31, 2014. Of this amount, $2,742.5 million represents the City's investment in capital assets (land, buildings, roads, bridges, etc.) less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities and deferred inflows.
An additional portion of the City's net position, $2,471.0 million, represents resources that are subject to external restrictions on how they may be used.

















|1010|
CITY OF CHICAGO, ILLINOIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
YEAR ENDED DECEMBER 31, 2014
City of Chicago, Illinois Summary Statement of Net Position (in millions of dollars)
Governmental Business-type
Activities Activities
2014 2013 2014 2013
Current and other assets $ 5,254.5 $ 5,311.5 $ 4,734.1 $ 4,227.5
Capital assets 8,281.2 7,993 6 13,822.5 13,212 3
Total Assets 13,535 7 13,305.1 18,556 6 17,439.8
Deferred outflows 281.5 266.1 320.9 274.1
Total 13,817.2 13,571.2 18,877.5 17,713.9
Long-term liabilities outstanding 19,516.8 18,069.6 13,602 6 13,094.8
Other liabilities 1,767.4 1,326.6 1,122.7 904.3
Total Liabilities 21,284.2 19,396.2 14,725.3 13,999.1
Deferred Inflows 1,576.3 1,597.3 1,645.2 1,663.6
Net Position.
Net investment in capital assets. ... 28.7 (242.8) 2,713.8 2,446.2
Restricted 1,492.0 1,940.9 979.0 883.8
Unrestricted (10,564.0) (9,120.4) (1,185.8) (1,278.8)
Total net (deficit) position $ (9,043 3) $ (7,422.3) $ 2,507.0 $ 2,051 2

2013






Total
9,539.0 21,205.9
30,744.9 540.2
31,285.1
31,164.4 2,230.9
33,395.3 3,260.9
2,203.4 2,824.7 (10,399.2)
2014
9,988.6 22,103 7
32,092.3 602.4
32,694.7
33,119.4 2,890.1
36,009.5 3,221.5

2,742.5 2,471.0 (11,749.8)
$ (6,536.3) $ (5,371 1)

Governmental Activities. Net position of the City's governmental activities decreased $1,621.0 million to a deficit of $9,043.3 million, primarily as a result of increased pension costs. A significant portion of net position is either restricted as to the purpose they can be used for or they are classified as net investment in capital assets (buildings, roads, bridges, etc.). Consequently, unrestricted net position showed a $10,564.0 million deficit at the end of this year. This deficit does not mean that the City does not have the resources available to pay its bills next year. Rather, it is the result of having long-term commitments that are greater than currently available resources. Specifically, the City did not include in past annual budgets the full amounts needed to finance future liabilities arising from personnel, property, pollution and casualty claims ($900.6 million) and Municipal employees, Laborers', Policemen's and Firemen's net pension obligation and other post-employment benefits ($8,884.3 million). The City will include these amounts in future years' budgets as they come due. In addition, the remaining deferred inflow of $1,576.3 million from concession service agreements will be amortized into income over the life of such agreements.
Revenues for all governmental activities in 2014 were $5,729.1 million, an increase of $172.8 million from 2013. Over half of the City's revenues derived from taxes which increased by $98.8 million (3.2 percent). Total tax revenue includes an increase in property taxes received of $20.1 million (2.2 percent).
Expenses for governmental activities in 2014 were $7,350.1 million, an increase of $269.2 million (3.8 percent) over 2013. The amount that taxpayers paid for these governmental activities through City taxes was $3,191.6 million. Some of the cost was paid by those who directly benefited from the programs ($819.2 million), or by other governments and organizations that subsidized certain programs with grants and contributions ($720.6 million).
The City paid $997.7 million for the "public benefit" portion with other revenues such as state aid, interest and miscellaneous income.
Although total net position of business-types activities was $2,507.0 million, these resources cannot be used to make up for the deficit in net position in governmental activities. The City generally can only use this net position to finance the continuing operations of the water, sewer, Skyway, and airports activities.

|1010|CITY OF CHICAGO, ILLINOIS MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2014
City of Chicago, Illinois Changes in Net Position Years Ended December 31, (In millions of dollars)
Governmental Activities




Business-type Activities
2014
Revenues:
Program Revenues:
Licenses, Permits, Fines and
Charges for Services
Operating Grants and Contributions
Capital Grants and Contributions
General Revenues.
Property Taxes
Other Taxes
Grants and Contributions not
Restricted to Specific Programs
Other
Total Revenues .


819.2 470.7 249.9
926.8 2,264.8
740.9 256 8
5,729.1


773.4 634.4 184.4
906.7 2,186.1
754.7 1166
5,556.3

34.1


$ 2,244.1 $ 2,021 3 95.6 213.0
2,268.4
85.3
2,425.0


3,063 3 470.7 345.5
926.8 2,264.8
740.9 342.1
8,154.1


2,794 7 634.4 397.4
906.7 2,186.1
754.7 1507
7,824.7

Expenses:
General Government
Public Safety
Streets and Sanitation
Transportation
Health
Cultural and Recreational
Interest on Long-term Debt
Water
Sewer
Midway International Airport
Chicago-O'Hare International Airport.
Chicago Skyway
Total Expenses ... .
Change in Net Position
Net (Deficit) Position, Beginning of Year
Net (Deficit) Position, End of Year

442.5 216.6 241 1 920 8 106
455.4 225.6 248 2 1,029.7 10.3
1,969 2 455.8
2,051.2
7,350.1 (1,621 0)
7,080 9 (1,524.6)
(5,897.7)

2,857.7 2,913.5 275.8 475.8 125.1 121.5 580.7 455.4 225.6 248 2 1,029 7 103
1,831.6
436.8
1,614 4
9,319 3 (1,165.2)
(5,371.1)
(7,422.3)
$ (9,043.3) $ (7,422.3) $ 2,507.0 $ 2,051.2 $ (6,536 3) $ (5,371.1)






|1010|CITY OF CHICAGO, ILLINOIS MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2014
Expenses and Program Revenues - Governmental Activities (in millions of dollars)

200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 2,600 2,800 3,000 3,200

General Government Public Safety
Streets and Sanitation ^
Transportation J^ag] ' Health Q
? Expenses BProgram Revenues
Cultural and Recreational Interest on Long-term Debt


Revenues by Source - Governmental Activities

Capital Grants and Operating Grants and Contributions Contributions 4% 8%
Licenses, Permits, Fines and Charges for Services 14%
Other 5%
Grants and Contributions not restricted to specific programs 13%



Property Tax 16%



Other Taxes 40%

CITY OF CHICAGO, ILLINOIS MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2014
Business-type Activities. Total Revenues of the City's business-type activities increased by $156.6 million in 2014 mostly from an increase in the charges for services and rental income, offset by a decrease in capital grant funding.
The Water Fund's operating revenues increased by $80.9 million (13.2%) from 2013 due to a 15% increase in water rates, offset by the conversion of 20,256 accounts from nonmetered to metered. Operating expenses before depreciation and amortization for the year ended 2014 increased by $23.5 million (8.6%) from the year ended 2013 mainly due to increases in transmission and distribution expenses of $14.2 million and central services of $10.5 million; offset by a decrease in purification costs of $2.3 million.
The Sewer Fund's operating revenues increased in 2014 by $42.5 million (15.2%) primarily due to an increase in sewer rates. Operating expenses before depreciation and amortization for 2014 increased $9.9 million (9.1%) from the year ended 2013 due to an increase in repairs, general fund reimbursements, maintenance and administrative and general.
Chicago Midway International Airport's operating revenues for 2014 decreased by $4.9 million (2.8%) from 2013 primarily due to lower landing fees, and terminal area use charges. Concessions were by $1.7 million higher than last year due to an increase in auto parking. Total operating expenses before depreciation and amortization were $8.5 million (7.0%) higher than last year, due to increases in repairs and maintenance, professional and engineering fees, and salaries and wages of $4.6 million, $4.1 million, and $3.8 million, respectively. These increases are offset by a decrease of $4.0 million in other operating expenses.
Chicago O'Hare International Airport's operating revenues for 2014 increased by $126.8 million (17.7%) compared to 2013 primarily due to increased landing fees and terminal area use charges. Operating expenses before depreciation, amortization and capital asset impairment costs increased by $68.9 million (16.2%) compared to 2013 primarily due to increases in repairs and maintenance, salaries and wages, other operating expenses and professional, and engineering fees of $25.4 million, $20.8 million, and $15.7 million, and $7.0 million, respectively.
The Chicago Skyway was leased for 99 years to a private company. The agreement granted the company the right to operate the Skyway and to collect toll revenue during the term of the agreement. The City received an upfront payment of $1.83 billion of which $446.3 million was used to advance refund all of the outstanding Skyway bonds. The upfront payment is being amortized into nonoperating revenue over the period of the lease ($18.5 million annually).


















|10 10|CITY OF CHICAGO, ILLINOIS MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2014





Expenses and Program Revenues - Business-type Activities (in millions of dollars)

100 200 300 400 500 600 700 800 900 1,000 1,100 1,200
Water
Sewer

Chicago Midway International Airport

Chicago-O'Hare International Airport

? Expenses BProgram Revenues
10




Revenues by Source - Business-type Activities


CITY OF CHICAGO, ILLINOIS MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2014
Financial Analysis ofthe City's Funds
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.
Governmental funds. The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year.
At December 31, 2014, the City's governmental funds reported combined ending fund balances of $823.3 million, a decrease of $403.3 million in comparison with the prior year. Of this total amount $696.1 million was committed to specific expenditures, $65.2 million was assigned to anticipated uses, a deficit of $1,791.9 million was unassigned, $1,829.4 million was restricted in use by legislation, and $24.5 million was nonspendable.
The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the unassigned fund balance of the General Fund was $51.6 million with a total fund balance of $141.3 million. As a measure of the General Fund's liquidity, it may be helpful to compare both unassigned fund balance and total fund balance to total fund expenditures. Total General Fund balance represents 4.4 percent of total General Fund expenditures. The fund balance of the City's General Fund decreased by approximately $25.8 million during the current fiscal year mainly due to an increase in personnel expenditures in public safety. The General Fund also provided $5.0 million to the Service Concession and Reserve Fund as appropriated for in the 2014 Budget.
The Federal, State and Local Grants Fund has a total deficit fund balance of $225.0 million. The deficit is $61.4 million lower than 2013 primarily due to more timely reimbursement of expenditures.
The Special Taxing Areas Fund has a total fund balance of $1,327.0 million, which is all restricted to specific expenditures.
The Service Concession and Reserve Fund accounts for deferred inflows from nonbusiness type long-term concession and lease transactions and has $620.9 million committed to specific expenditures. The unassigned deficit of $1,576.3 million results from the deferred inflows from long-term asset leases.
The Bond, Note Redemption and Interest Fund has a total fund balance of $26.9 million. This is $223.9 million lower than 2013 due to reclassification of long-term debt to short term debt during 2014. For more information, please refer to Note 9 to the basic financial statements.
The Community Development and Improvement Projects Fund has a total fund balance of $347.7 million. This is $15.9 million lower than 2013 due to increased capital improvement efforts.
Changes in fund balance. The fund balance for the City's governmental funds decreased by $403.3 million in 2014. This includes a decrease in inventory of $0.3 million.
Proprietary funds. The City's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail.
Unrestricted net position of the Water, Sewer, Chicago Skyway, Chicago-O'Hare International Airport, and Chicago Midway International Airport Funds at the end of the year amounted to a deficit of $1,185.8 million. The unrestricted net position deficit decreased by $93.0 million due to an increase in the unrestricted assets in the Water Fund and Sewer Fund. Other factors concerning the finances of these five funds have already been addressed in the discussion of the City's business-type activities.




11

CITY OF CHICAGO, ILLINOIS MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2014
General Fund Budgetary Highlights
The City's 2014 Original General Fund Budget was $3,290.2 million. This budget reflects an increase of $131.2 million (4.2 percent) over the 2013 Budget. On November 26, 2013 the City's 2014 General Fund Budget was approved by the City Council. The General Fund revenues on a budgetary basis were $28.9 million less than the final budget as a result of lower collection of fines, state income tax, internal service, and licenses and permits revenue offset by higher than expected taxes. Expenditures were $28.9 million less than budgeted as a result of favorable variances in general government expenditures, offset by unfavorable variances in public safety primarily as a result of higher than expected personnel related expenses. Additional information on the City's budget can be found in Note 3 under Stewardship, Compliance and Accountability within this report.
Capital Asset and Debt Administration
Capital Assets. The City's capital assets for its governmental and business-type activities as of December 31, 2014 amount to $22,103.7 million (net of accumulated depreciation). These capital assets include land, buildings and system improvements, machinery and equipment, roads, highways and bridges, and property, plant and equipment.
Major capital asset events during the current fiscal year included the following:
The City continues its commitment to sustainable design in new construction projects utilizing the Leadership in Energy & Environmental Design (LEED) strategy. Completed construction in 2014 totaled $28.5 million including; Albany Park Branch Library totaling $11.9 million and Harold Washington Library totaling $7.7 million.
During 2014, $14.5 million of Architectural Plans and Landscape Drawings (Manuscripts) were donated to the City of Chicago. This was recorded as a donated capital asset addition in Works of Art and Historical Collections.
During 2014, the City completed $271.4 million in infrastructure projects including $141.0 million in street construction and resurfacing projects, $96.7 million in bridge and viaduct reconstruction projects, and $33.7 million in street lighting and transit projects. At year end, Infrastructure projects still in process had expenses totaling nearly $511.2 million.
At the end of 2014, the Water Fund had $3,482.2 million invested in utility plant, net of accumulated depreciation. During 2014, the Water Fund expended $364.8 million on capital activities. This included $16.4 million for structures and improvements, $62.0 million for distribution plant, $4.0 million for equipment, and $282.4 million for construction in progress.
During 2014, net completed projects totaling $137.6 million were transferred from construction in progress to applicable capital accounts. The major completed projects relate to installation and replacements of water mains ($109.4 million), and Jardine Water Purification plant's east building filter roof replacement and structural repair ($26.3 million).
At the end of 2014, the Sewer Fund had $2,025.2 million invested in utility plant, net of accumulated depreciation. During 2014, the Sewer Fund had capital additions being depreciated of $210.4 million, and completed projects totaling $16.3 million were transferred from construction in progress to applicable facilities and structures capital accounts. The 2014 Sewer Main Replacement Program completed 21.1 miles of sewer mains and 59.0 miles of relining of existing sewer mains at a cost of $210.4 million.
At the end of 2014, Chicago-Midway International Airport totaled $1,172.3 million, invested in net capital assets. During 2014, the Airport had additions of $48.4 million related to capital activities. This included $1.0 million for land acquisition and the balance of $47.4 million for construction projects relating to terminal improvements, runway rehabilitation and parking improvements.
At the end of 2014, Chicago-O'Hare International Airport totaled $6.9 billion, invested in net capital assets. During 2014, the Airport had additions of $346.7 million related to capital activities. This included $1.0 million for land acquisition and the balance of $345.6 million for terminal improvements, road and sidewalk
12

CITY OF CHICAGO, ILLINOIS MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2014
enhancements, runway and taxiway improvements. During 2014, completed projects totaling $438.8 million were transferred from construction in progress to applicable buildings and other facilities capital accounts. These major completed projects were related to runway and taxiway improvements, road and sidewalk enhancements and terminal improvements.
City of Chicago, Illinois Capital Assets (net of depreciation) (in millions of dollars)
Governmental Business-type
Activities Activities Total
2014 2013 2014 2013 2014 2013

Land $ 1,392.8 $ 1,392.6 $ 1,018.7 $ 1,016.6 $ 2,411.5 $ 2,409.2
Works of Art and
Historical Collections 45.2 30.8 - - 45.2 30 8
Construction in Progress 545.5 260.2 1,256.3 1,207.8 1,801.8 1,468.0
Buildings and Other Improvements 1,630.2 1,668.0 11,227.0 10,651.6 12,857.2 12,319.6
Machinery and Equipment 235.3 225.8 320.5 336.3 555.8 562.1
Infrastructure 4,432.2 4,416.2 - - 4,432.2 4,416.2
Total $ 8,281.2 $ 7,993.6 $ 13,822.5 $ 13,212.3 $ 22,103.7 $21,205.9

Information on the City's capital assets can be found in Note 7 Capital Assets in this report.
Debt. At the end of the current fiscal year, the City had $7,860.4 million in General Obligation Bonds and $475.1 million in General Obligation Certificates and Other Obligations outstanding. Other outstanding long-term debt is as follows: $189.7 million in Motor Fuel Tax Revenue Bonds; $554.1 million of Sales Tax Revenue Bonds; $74.4 million in Tax Increment Financing Bonds; and $13,071.6 million in Enterprise Fund Bonds and long-term obligations. For more detail, refer to Note 10 Long-term Obligations in the Basic Financial Statements.
City of Chicago, Illinois General Obligation and Revenue Bonds (in millions of dollars)
Governmental Business-type
Activities Activities Total
2014 2013 2014 2013 2014 2013

General Obligation $ 8,335.5 $ 7,730.2 $ - $ - $ 8,335.5 $ 7,730.2
Tax Increment 74.4 88.4 - - 74.4 88.4
Revenue Bonds 743.8 753.2 13,071.6 12,526.5 13,815.4 13,279.7
Total $ 9,153.7 $ 8,571.8 $ 13,071.6 $ 12,526.5 $ 22,225.3 $ 21,098.3







13
CITY OF CHICAGO, ILLINOIS MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2014
During 2014, the City issued the following: General Obligation Bonds:
General Obligation Bonds, Project and Refunding Series 2014A and Taxable Project and Refunding Series 2014B ($883.4 million).
Motor Fuel Tax Revenue Refunding Bonds Series 2013 ($105.9 million - issue of 2014).
Tax Increment Allocation Revenue Refunding Bonds (Pilsen Redevelopment Project) Series 2014A and 2014B Series Taxable ($33.4 million).
Enterprise Fund Revenue Bonds and Notes:
Chicago-O'Hare International Airport General Commercial Paper Notes ($51.0 million)
Chicago Midway International Airport Second Lien Revenue and Revenue Refunding Bonds, Series 2014A (AMT), Series 2014B (Non-AMT), and Series 2014C (AMT) ($896.5 million).
Second Lien Water Revenue Bonds, Series 2014 ($367.9 million).
Second Lien Wastewater Transmission Revenue Bonds, Series 2014 ($292.4 million).

At December 31, 2014 the City had credit ratings with each of the three major rating agencies as follows:

Standard &
Poors Fitch
General Obligation: City
Revenue Bonds:
O'Hare Airport: Senior Lien General Airport Revenue Bonds Senior Lien Passenger Facility Charge (PFC) Customer Facility Charge (CFC)
Midway Airport: First Lien Second Lien
Water: First Lien Second Lien
Wastewater: First Lien Second Lien
Sales Tax
Motor Fuel Tax

Baal



A2 A2 Baal

A2 A3

A2 A3

A2 A3
Baal
Baal

A+



A-A-BBB

A A-

AA AA-

AA AA-
AAA
AA+





A-A NR

A A-

AA+ AA

NR AA
A-
BBB+

NR



NR NR NR

NR NR

NR AA

NR AA-
NR
NR

See Subsequent Events in the footnotes for ratings changes in 2015.

14

CITY OF CHICAGO, ILLINOIS MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2014
Economic Factors and Next Year's Budgets and Rates
Local, national, and global economies play a major role in the City's finances and economic growth. In 2014, local and national economies experienced moderate growth and recovery from the economic downturn. Although rising home prices and shrinking inventory slowed the housing market in 2014 and home sales were down 7 percent compared to 2013, median home prices were up 14 percent over 2013. In 2014, nationwide, retail sales grew 4 percent over 2013, with consumer confidence showing consistent improvement. The average national unemployment rate decreased from 7.3 percent in 2013 to 6.2 percent in 2014, and Chicago's unemployment rate was down consistently throughout 2014. Tourism, business, and convention travel to Chicago remained strong in 2014, with amusement tax collections up about 17 percent and hotel tax revenues up about 12 percent from 2013. Additionally, in July 2014, Chicago had over one million occupied hotel rooms; this was the first time this benchmark has ever been reached in a single month.
The City's 2015 General Fund budget, totaling $3,534 million, was approved by a 46 to 4 vote of City Council on November 19, 2014. The 2015 budget balanced a preliminary budget shortfall of $297 million by reforming and cutting spending, and improving revenue growth. The 2015 budget balances the City's finances without raising property, sales or gas taxes. At the same time, it makes significant investments in youth, infrastructure, and businesses, as well as in City services, and it continues to build the City's reserves in order to enhance long-term financial stability The 2015 budget also commits an additional $5 million to the City's long-term reserves, following provisions of $20 million in 2012, $15 million in 2013 and $5 million in 2014.
Requests for Information
This financial report is designed to provide a general overview of the City's finances for all of those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of Chicago Department of Finance

























15

This Page Intentionally Left Blank
Exhibit 1
CITY OF CHICAGO, ILLINOIS STATEMENT OF NET POSITION December 31, 2014
(Amounts are in Thousands of Dollars)
Governmental Activities
ASSETS AND DEFERRED OUTFLOWS
Cash and Cash Equivalents $ 537,665
Investments 1,563,515
Cash and Investments with Escrow Agent 411,085
Receivables (Net of Allowances):
Property Tax 1,150,682
Accounts 977,873
Internal Balances (50,892)
Inventories 24,498
Restricted Assets:
Cash and Cash Equivalents 28,689
Investments 593,643
Other Assets 17,778
Capital Assets:
Land, Art, and Construction in Progress 1,983,594
Other Capital Assets, Net of Accumulated Depreciation 6,297,580
Total Capital Assets 8.281.174
Total Assets 13,535,710
Deferred Outflows 281,487
Total Assets and Deferred Outflows $ 13,817,197
LIABILITIES AND DEFERRED INFLOWS
Voucher Warrants Payable $ 579,901
Short-term Debt 297,981
Accrued Interest 225,459
Accrued and Other Liabilities 401,318
Unearned Revenue 113,862
Derivative Instrument Liability 148,923
Long-term Liabilities:
Due Within One Year 314,682
Due in More Than One Year 19,202,103
Total Liabilities 21,284,229
Deferred Inflows 1,576,293
Total Liabilities and Deferred Inflows 22,860,522
NET POSITION
Net Investment in Capital Assets 28 744
Restricted for:
Capital Projects
Debt Service 164,937
Special Taxing Areas 1,327,058
Passenger Facility Charges
Contractual Use Agreement
Airport Development Fund
Customer Facility Charges
Other Purposes
Unrestricted (Deficit) (10,564,064)
Total Net Position $ (9,043.325)
Primary Government
Total
643,087 1,835,373 411,085
1,150,682 1,318,709
46,306
1,149,852 3,324,414 109,132
4,258,559 17,845,101 22.103.660 32,092,300 602,426
Business-type Activities
105,422 271,858


340,836 50,892 21,808
1,121,163 2,730,771 91,354
2,274,965 11,547,521 13.822.486 18,556,590 320,939
920,711 297,981 498,746 565,635 258,089 349,018
622,495 32,496,889
$ 18,877,529 $ 32,694,726

340,810 $
273,287 164,317 144,227 200,095
36,009,564
307,813 13,294,786
3,221,445
14,725,335
39,231,009
1,645,152
2,742,569
193,782 200,235 1,327,058 142,765 158,165 300,101 113,661 35,200 (11,749,819)
16,370,487

2,713,825
193,782 35,298
142,765 158,165 300,101 113,661 35,200 (1,185,755)
$ 2.507.042 $ (6.536.283)
See notes to basic financial statements.

Exhibit 2
CITY OF CHICAGO, ILLINOIS STATEMENT OF ACTIVITIES Year Ended December 31, 2014 (Amounts are in Thousands of Dollars)


Licenses, Permits, Fines and Charges for Services
Primary Government Governmental Activities:
General Government $ 2,857,789
Public Safety 2,913,469
Streets and Sanitation 275,814
Transportation 475,751
Health 125,068
Cultural and Recreational 121,548
Interest on Long-term Debt 580,701
Total Governmental Activities 7,350,140

505,275 208,206 44,552 44,278 2,281 14,643
819,235

Business-type Activities:
Water 455,433 692,634
Sewer 225,600 322,228
Chicago Midway International Airport 248,231 216,662
Chicago-O'Hare International Airport 1,029,559 1,012,529
Chicago Skyway 10,314 -
Total Business-type Activities 1,969,137 2,244,053
Total Primary Government $ 9,319,277 $ 3,063,288

















See notes to basic financial statements.




18

Program Revenues Net (Expense) Revenue and Changes in Net Assets
Primary Government
Operating Capital
Grants and Grants and Governmental Business-type
Contributions Contributions Activities Activities Total


$ 294,052 $ - $ (2,058,462) .$ - $ (2,058,462)
57,633 - (2,647,630) - (2,647,630)
(231,262) - (231,262)
249,860 (181,613) - (181,613)
104,447 - (18,340) - (18,340)
14,527 ' - (92,378) - (92,378)
-_ -_ (580,701) -_ (580,701)
470,659 249,860 (5,810,386) -_ (5,810,386)


1,766 - 238,967 238,967
96,628 96,628
4,826 - (26,743) (26,743)
89,032 - 72,002 72,002
-_ -_ (10,314) (10,314)
-_ 95,624 -_ 370,540 370,540
$ 470,659 $ 345,484 (5,810,386) 370,540 (5,439,846)
General Revenues , Taxes:
Property Tax 926,839 - 926,839
Utility Tax 570,469 - 570,469
Sales Tax 324,273 - 324,273
Transportation Tax 406,624 - 406,624
Transaction Tax 379,256 - 379,256
Special Area Tax 260,256 - 260,256
Recreation Tax 193,680 - 193,680
Other Taxes 130,266 - 130,266
Grants and Contributions not Restricted to
Specific Programs 740,911 - 740,911
Unrestricted Investment Earnings 62,400 35,849 98,249
Miscellaneous 194,415 49,430 243,845
Total General Revenues 4,189,389 85,279 4,274,668
Change in Net Assets (1,620,997) 455,819 (1,165,178)
Net Position - Beginning (7,422,328) 2,051,223 (5,371,105)
Net Position - Ending $ (9,043,325) $ 2,507,042 $ (6,536,283)




19
Exhibit 3
CITY OF CHICAGO, ILLINOIS BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2014
(Amounts are in Thousands of Dollars)


ASSETS
Cash and Cash Equivalents $
Investments
Cash and Investments with Escrow Agent
Receivables (Net of Allowances):
Property Tax
Accounts
Due From Other Funds
Due From Other Governments
Inventories
Restricted Cash and Cash Equivalents
Restricted Investments
Other Assets
Total Assets $

General
1,102 102,400


209,386 109,514 241,878 24,498 389

689,167

Special Taxing Areas
403,019 588,005
Federal, State and Local Grants
288,302 4,429 423,933
$ 22,980 71,036


3,778 10,059 452,721
3,220
4,075
$ 567,869 $ 1,707,689
LIABILITIES, DEFERRED INFLOWS AND FUND BALANCE Liabilities:
Voucher Warrants Payable $ 185,783
Bonds, Notes and Other Obligations Payable - Current
Accrued Interest
Due To Other Funds 276,805
Accrued and Other Liabilities 69,811
Line of Credit and Commercial Paper
Claims Payable 13,326
Unearned Revenue 2,164
Total Liabilities 547,889~
Deferred Inflows

11,682 2,920


$ 157,929 $ 117,027

296,159 9,861
131,629

69,825 533,774
259,140
249,002
Fund Balance:
Nonspendable
Restricted
Committed
Assigned
Unassigned
Total Fund Balance
Total Liabilities, Deferred Inflows and Fund Balance $

24,498

65,223 51,557
141,278
689,167

15,230


1,327,058
1,327,058

(240,275) (225,045)
$ 567,869 $ 1,707,689





See notes to basic financial statements.

Service Community
Concession Bond, Note Development Other Total
and Redemption and Improvement Governmental Governmental
Reserve and Interest Projects Funds Funds
$ 99 $ 17,119 $ 77,793 $ 15,553 $ 537,665
172,490 439,137 190,447 1,563,515
338,533 - 72,552 411,085
491,473 - 370,907 1,150,682
2,435 2,971 2,626 16,608 242,233
5,000 - 97,053 79,210 724,769
2,578 - 38,463 735,640
24,498
24,868 - 211 - 28,689
593,643 - - - 593,643
- - -_ -__ 4,075
$ 626,045 $ 1,025,164 $ 616,820 $ 783,740 $ 6,016,494


$ 14 $ - $ 38,999 $ 64,877 $ 564,629
82,331 - 4,400 86,731
223,995 - 1,464 225,459
5,140 85,700 56,996 94,698 827,180
95,373 67,648 245,613
198,086 77,800 21,423 297,309
13,326
- 41,873 - - 113,862
5,154 631,985 269,168 254,510 2,374,109
1,576,293 420,051 - 314,563 2,819,049

24,498
347,652 139,491 1,829,431
620,891 - - 75,176 696,067
65,223
(1,576,293) (26,872) - -_ (1,791,883)
(955,402) (26,872) 347,652 214,667 823,336
$ 626,045 $ 1,025,164 $ 616,820 $ 783,740 $ 6,016,494

Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources
and therefore are not reported in the funds 8,281,174
Other long-term assets are not available to pay for current-period
expenditures and therefore are recorded as deferred inflows in the funds 1,242,756
Certain liabilities, including bonds payable, are not due and payable in the current
period and therefore are not reported in the funds (19,390,591)
Net position of governmental activities $ (9,043,325)

21

Exhibit 4
CITY OF CHICAGO, ILLINOIS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Year Ended December 31, 2014
(Amounts are in Thousands of Dollars)

Federal,
State and Special
Local Taxing
General Grants Areas
Revenues:
Property Tax $ - $ - $
Utility Tax 473,496
Sales Tax (Local) 285,773
Transportation Tax 185,076
State Income Tax 278,031
State Sales Tax 334,526
Transaction Tax 316,201
Special Area Tax - - 331,380
Recreation Tax 193,680
Other Taxes 109,004
Federal/State Grants 2,335 809,840
Internal Service 305,716
Licenses and Permits 119,940
Fines 338,329
Investment Income 1,573 - 4,822
Charges for Services 141,850 - 5
Miscellaneous 90,620 - 2,149
Total Revenues 3,176,150 809,840 338,356
Expenditures: Current:
General Government
Health
Public Safety
Streets and Sanitation
Transportation
Cultural and Recreational
Employee Pensions
Other
Capital Outlay
Debt Service:
Principal Retirement
Interest and Other Fiscal Charges
Total Expenditures
Revenues (Under) Over Expenditures

929,918 25,902 2,020,072
195,390 47,309

2,298

7,830 2,539
3,231,258
(55,108)

360,892 102,350 40,122
237,961 12,272
2,197 9,863



765,657
44,183

446,652 15
419 139,933 15





587,034 (248,678)



Continued on following pages.


Service Concession and Reserve













39,607 21,033


Bond, Note Redemption and Interest
481,698 22,332 38,500 12,552




17

2,203 17,963 15,303
Community Development
and Improvement Projects













5,579 27,538


Nonmajor Governmental Funds
448,143 74,641
208,996 126,019
63,055

21,245
30,046
15,188 106 31,073 23,296


Total Governmental Funds
929,841 570,469 324,273 406,624 404,050 334,526 379,256 331,380 193,680 130,266 812,175 335,762 122,143 353,517 69,650 172,928 179,939
6,050,479


14 - - 306,081 2,043,557
502 128,769
6,785 2,066,979
73,584 269,393
93,298 518,501
81,238 93,525
483,493 483,493
915 5,410
317,499 67,854 395,216
518,078 - 73,487 599,395
533,897 - 31,720 568,156
14 1,051,975 317,499 1,218,957 7,172,394
60,626 (461,407) (284,382) (177,149) (1,121,915)








23

Exhibit 4 - Concluded
CITY OF CHICAGO, ILLINOIS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Year Ended December 31, 2014
(Amounts are in Thousands of Dollars)
Federal, State and Local
General Grants
Special Taxing Areas
Other Financing Sources (Uses):
Issuance of Debt $ - $ 17,168 $
Premium
Payment to Refunded Bond Escrow Agent
Transfers In 39,700 - 97,513
Transfers Out (10,081) -_ (44,463)
Total Other Financing Sources (Uses) 29,619 17,168 53,050
Net Changes in Fund Balance
Fund Balance, Beginning of Year
Change in Inventory _
Fund Balance, End of Year $
(25,489) 61,351 (195,628)
167,057 (286,396) 1,522,686
(290) - -
141,278 $ (225,045) $ 1,327,058


See notes to basic financial statements.
Service Concession Agreements and Reserve

Bond, Note Redemption and Interest
Community Development
and Improvement Projects

Nonmajor Governmental Funds

Total Governmental Funds



5,000 (13,900)
328,471 9,995 (302,862)
366,198 (164,268)
535,240 5,208
7,004 (279,009)
123,468 2,262
137,171 (140,865)
1,004,347 17,465 (302,862) 652,586 (652,586)
718,950
51,726 (1,007,128)
(223,873) 197,001
(15,939) 363,591
(55,113) 269,780
(402,965) 1,226,591 (290)
$ (955,402) $ (26,872) $ 347,652 $ 214,667 $_





























25

Exhibit 5
CITY OF CHICAGO, ILLINOIS
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Year Ended December 31, 2014 (Amounts are in Thousands of Dollars)

Amounts reported for governmental activities in the statement of activities are different from amounts reported for governmental funds in the statement of revenues, expenditures and changes in fund balances because:
Net change in fund balances - total governmental funds $ (402,965)
Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current
period 303,167
Revenues in the statement of activities that do not provide current financial
resources are not reported as revenues in the funds (155,112)
Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net
assets. This is the amount by which proceeds exceeded repayments (115,625)
Certain expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as
expenditures in governmental funds (1,250,462)

Change in the net position of governmental activities $ (1,620,997)









See notes to basic financial statements.














26

Exhibit 6
CITY OF CHICAGO, ILLINOIS
STATEMENT OF REVENUES AND EXPENDITURES ¦ BUDGET AND ACTUAL GENERAL FUND (BUDGETARY BASIS) Year Ended December 31, 2014 (Amounts are in Thousands of Dollars)
Original Budget
Revenues1
Utility Tax $ 450,274
Sales Tax 274,505
Transportation Tax 183,732
Transaction Tax 284,627
Recreation Tax 182,565
Business Tax 102,470
State Income Tax 293,700
State Sales Tax 322,272
State Auto Rental 4,100
Federal/State Grants 1,500
Internal Service 318,212
Licenses and Permits 131,668
Fines 414,680
Investment Income 4,725
Charges for Services 124,476
Municipal Utilities 6,656
Leases, Rentals and Sales 22,118
Miscellaneous 55,920
Budgeted Prior Years' Surplus
and Reappropriations 53,417
Transfers In/Out 58,608
Total Revenues 3,290,225
Expenditures: Current:
General Government 1,051,842
Health 28,127
Public Safety 1,960,557
Streets and Sanitation 196,446
Transportation 50,873
Debt Service:
Principal Retirement 1,830
Interest and Other Fiscal Charges 550
Total Expenditures 3,290,225
Revenues Over (Under) Expenditures ... $ -
Final Budget
450,274 274,505 183,732 284,627 182,565 102,470 293,700 322,272 4,100 1,500 318,212 131,668 414,680 4,725 124,476 6,656 22,118 55,920
53,417 58,608
3,290,225


1,051,842 28,127
1,960,557 196,446 50,873

1,830 550
3,290,225
Actual Amounts
473,496 285,773 185,076 316,201 193,680 104,829 278,031 334,526 4,175 2,335 305,716 119,940 338,329 1,573 134,593 7,257 24,127 66,493
45,472 39,700
3,261,322


958,216 26,229 2,037,661
189,909 46,927

1,830 550
3,261,322

Variance
23,222 11,268 1,344 31,574 11,115 2,359 (15,669) 12,254 75 835 (12,496) (11,728) (76,351) (3,152) 10,117 601 2,009 10,573
(7,945) (18,908)
(28,903)


93,626 1,898
(77,104) 6,537 3,946



28,903


See notes to basic financial statements.
Exhibit 7
CITY OF CHICAGO, ILLINOIS STATEMENT OF NET POSITION PROPRIETARY FUNDS December 31, 2014
(Amounts are in Thousands of Dollars)
Business-type Activities - Enterprise Funds
Major Funds
Chicago- Chicago-
Midway O'Hare
International International Chicago
Airport Airport Skyway
ASSETS AND DEFERRED OUTFLOWS CURRENT ASSETS:
Cash and Cash Equivalents $ 23,551
Investments 101,359
Accounts Receivable (Net of
Allowances) 159,613
Interest Receivable 163
Due from Other Funds 91,224
Inventories 21,192
Cash and Cash Equivalents - Restricted 12,596
Investments - Restricted 132,451
Interest Receivable - Restricted 599
Other Assets - Restricted
TOTAL CURRENT ASSETS 542,748
NONCURRENTASSETS:
Cash and Cash Equivalents - Restricted
Investments - Restricted 386,090
Interest Receivable - Restricted
Other Assets - Restricted
Due from Other Governments - Restricted
Other Assets 4,898
Property, Plant, and Equipment:
Land 5,083
Structures, Equipment and -
Improvements 3,986,305
Accumulated Depreciation (966,834)
Construction Work in Progress 457,645
Total Property, Plant and Equipment 3,482,199
TOTAL NONCURRENT ASSETS: 3,873,187
TOTAL ASSETS 4,415,935
DEFERRED OUTFLOWS 129,229
TOTAL ASSETS and DEFERRED OUTFLOWS $ 4,545,164
676 481
5,632 94,002
76,760 212 33,751
494,735
6,358 34,042
11,518
527
72,514
105,422 271,858
339,232 375 154,918 21,808 601,092 235,924 1,140 2,860


69,205 $ 41,974

91,339
29,416
616 21,247 103,473
2,860
1,159
1,734,629
520,071 2,489,761 3,946 34,774 1,229 53,720
707,952
464,329 1,503,728 3,684 31,729 1,229 33,987
885,669
8,208,757 (2,973,903) 752,331
541
357,811
124,959
289,041
9,964
12,609
490,818 (233,547)
3,970
560
2,494,910 (495,953) 25,703

55,742 310,902 262 3,045
1,018,701
16,737,309 (5,189,788) 1,256,264
13,822,486
901

114,780
1,556,519
(519,551)
20,585
2,025,220 1,172,333
2,318,231 2,676,042 89,905
6,872,854 269,880
18,660,616 320,939
1,668,144 51,633
1,543,185 8,911,540 279,844 16,925,987
9,619,492 281,003
50,172
$ 2,765,947 $ 1,719,777 $ 9,669,664 $ 281,003 $ 18,981,555

See notes to basic financial statements.

Business-type Activities - Enterprise Funds
Major Funds
Chicago- Chicago-
Midway O'Hare
International International Chicago
Water Sewer Airport Airport Skyway Total
LIABILITIES CURRENT LIABILITIES:
Voucher Warrants Payable $ 26,168 S 4,242 $ 18,732 $ 61,106 $ 140 $ 110,388
Due to Other Funds 20,130 71,228 9,134 3,519 15 104,026
Accrued and Other Liabilities 92,312 31,047 2,165 7,409 - 132,933
Unearned Revenue 22,411 18,076 558 103,182 • - 144,227
Current Liabilities Payable From
Restricted Assets 144,321 124,720 72,514 494,735 - 836,290
TOTAL CURRENT LIABILITIES 305,342 249,313 103,103 669,951 155 1,327,864
NONCURRENT LIABILITIES: Revenue Bonds and
Commercial Paper Payable 2,456,933 1,710,019 1,590,934 7,536,900 - 13,294,786
Derivative Instrument Liability 98,106 71,861 30,128 - - 200,095
Other 1,577 - 2,310 2,729 - 6,616
TOTAL NONCURRENT LIABILITIES ... 2,556,616 1,781,880 1,623,372 7,539,629 - 13,501,497
TOTAL LIABILITIES 2,861,958 2,031,193 1,726,475 8,209,580 155 14,829,361
DEFERRED INFLOWS - - - - 1,645,152 1,645,152
NET POSITION: Net Investement
in Capital Assets 1,393,968 520,627 (115,080) 644,430 269,880 2,713,825
Restricted Net Position:
Debt Service - - 12,109 23,189 - 35,298
Capital Projects 599 111,333 10,160 71,690 - . 193,782
Passenger Facility Charges - - 4,658 138,107 - 142,765
Contractual Use Agreement - - 28,282 129,883 - 158,165
Air Development Fund - - - 300,101 - 300,101
Customer Facility Charge - - 23,651 90,010 - 113,661
Other - - 7,666 27,534 - 35,200
Unrestricted Net Position 288,639 102,794 21,856 35,140 (1,634,184) (1,185,755)
TOTAL NET POSITION $ 1,683,206 $ 734,754 $ (6,698) $ 1,460,084 5(1,364,304) $ 2,507,042


See notes to basic financial statements.




29

Exhibit 8
CITY OF CHICAGO, ILLINOIS
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
PROPRIETARY FUNDS
Year Ended December 31, 2014
(Amounts are in Thousands of Dollars)
Business-type Activities - Enterprise Funds
Major Funds
Chicago- Chicago-
Midway O'Hare
International International Chicago ,
Water Sewer Airport Airport Skyway Total
Operating Revenues:
Charges for Services - Net $ 670,559 $ 321,100 $ 83,455 $ 552,431 $ - $ 1,627,545
Rent - - 86,804 292,093 - 378,897
Other 22,075 1J28 - - - 23,203
Total Operating Revenues 692,634 322,228 170,259 844,524 - 2,029,645
Operating Expenses:
Personnel Services 120,607 14,394 47,836 182,984 - 365,821
Contractual Services 55,664 3,336 23,255 88,143 - 170,398
Repairs and Maintenance 1,886 64,809 44,160 ' 110,928 - 221,783
Commodities and Materials 22,089 .. 22,089
Depreciation and Amortization 57,949 36,701 46,163 218,211 10,314 369,338
General Fund Reimbursements 77,371 36,740 - - - 114,111
Other 21,105 - 14,345 112,952 - 148,402
Total Operating Expenses 356,671 155,980 175,759 713,218 10,314 1,411,942
Operating Income (Loss) 335,963 166,248 (5,500) 131,306 (10,314) 617,703
Nonoperating Revenues (Expenses):
Investment Income (Loss) (515) 2,984 3,540 29,838|99|35,849
Interest Expense (98,762) (69,620) (64,111) (300,295) - (532,788)
Passenger Facility Charges - - 39,889 131,721 - 171,610
Customer Facility Charges - - 6,514 36,284 - 42,798
Noise Mitigation Costs - - (3,103) (15,892) - (18,995)
Cost of Issuance - - (5,258) (154) - (5,412)
Other (2,223) 829 1,522 30,845 18,457 49,430
Total Nonoperating Revenues
(Expenses) (101,500) (65,807) (21,007) (87,653) 18,459 (257,508)
Capital Grants 1,766 - 4,826 89,032 - 95,624
Net Income (Loss) 236,229 100,441 (21,681) 132,685 8,145 455,819

Net Position (Deficit)-Beginning of Year 1,446,977 634,313 14,983 1,327,399 (1,372,449) 2,051,223
Net Position (Deficit)-End of Year $ 1,683,206 $ 734,754 $ (6,698) $ 1,460,084 $ (1,364,304) $ 2,507,042

See notes to basic financial statements.




30

Exhibit 9
CITY OF CHICAGO, ILLINOIS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS Year Ended December 31, 2014 (Amounts are in Thousands of Dollars)
Business-type Activities - Enterprise Funds Major Funds
Chicago- Chicago-
Midway O'Hare
International International Chicago
Water Sewer Airport Airport Skyway Total
Cash Flows from Operating Activities:
Received from Customers
Payments to Vendors
Payments to Employees
Transactions with Other City Funds
Cash Flows Provided By
Operating Activities
Cash Flows from Capital and Related Financing Activities: Proceeds from Issuance of Bonds/
Commercial Paper
Acquisition and Construction of
Capital Assets
Capital Grant Receipts
Bond Issuance Costs
Payment to Refund Bonds
Principal Paid on Debt
Interest Paid
Passenger and Customer Facility Charges
Concessionaire Funds
Cash Flows (Used in) Provided By Capital
and Related Financing Activities
Cash Flows from Non Capital Financing Activities:
Noise Mitigation Program
Proceeds from Settlement Agreement
Cash Flows Used in Non Capital
Financing Activities
Cash Flows from Investing Activities:
Sale (Purchases) of Investments, Net
Investment Income (Loss)
Cash Flows Provided By (Used in)
Investing Activities
Net Increase (Decrease) in Cash and
Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
$ 670,519 $ 310,970 $ 164,849 $ 842,353 $ - $ 1,988,691
(80,663) (35,780) (83,377) (272,612) - (472,432)
(120,607) (43,617) (39,295) (167,248) - (370,767)
(143,903) (40,218) (6,440) (61,543) - (252,104)

325,346 191,355 35,737 340,950 - 893,388



462,500 338,026 972,038 43,380 - 1,815,944
(334,191) (167,115) (41,443) (289,835) - (832,584)
4,894 88,942 - 93,836
(3,146) - (5,258) (154) - (8,558)
(797,008) - - (797,008)
(43,633) (37,929) (82,378) (168,895) - (332,835)
(109,432) (69,860) (59,237) ' (368,370) - (606,899)
46,539 169,837 - 216,376
14 14

(27,902) 63,122 38,147 (525,095) 14 (451,714)

(2,609) (15,892) - (18,501)
1,029 1^999 - 3,028

(1,580) (13,893) - (15,473)

(306,037) (213,388) (111,577) 162,528 (106) (468,580)
8,209 4,657 2,953 17,991 2 33,812

(297,828) (208,731) (108,624) 180,519 (104) (434,768)

(384) 45,746 (36,320) (17,519) (90) (8,567)
36,531 44,706 170,934 982,215 766 1,235,152
$ 964,696 $ 676 $ 1,226,585

See notes to basic financial statements.
Exhibit 9 - Concluded
CITY OF CHICAGO, ILLINOIS
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
Year Ended December 31, 2014
(Amounts are in Thousands of Dollars)
Business-type Activities - Enterprise Funds
Major Funds
Chicago- Chicago-
Midway O'Hare
International International
Airport Airport


Chicago Skyway
Reconciliation of Operating Income to Cash Flows from Operating Activities:
Operating Income (Loss) $ 335,963 $ 166,248 $ (5,500) $ 131,306 $ (10,314) $ 617,703
369,340 38,765
(81,554) (73,208)
1,728
19,120
1,494
Adjustments to Reconcile:
Depreciation and Amortization 57,949 36,701 46,164 218,212 10,314
Provision for Uncollectible Accounts 22,537 16,557 (329)
Change in Assets and Liabilities:
(Increase) Decrease in Receivables (45,813) (29,162) 3,739 (10,318)
(Increase) Decrease in Due From Other Funds (71,789) (2,489) 3,612 (2,542)
Increase (Decrease) in Voucher Warrants
Payable and Due to Other Funds 10,775 (1,541) (3,463) (4,043)
Increase (Decrease) in Unearned Revenue
and Other Liabilities 15,077 4,389 (8,492) 8,146
(Increase) Decrease in Inventories and
Other Assets 647 652|99|_189 -

Cash Flows from
Operating Activities $ 325,346 $ 191,355 $ 35,737 $ 340,950 $ - $ 893,388



Supplemental Disclosure of Noncash Items:
Capital asset additions in 2014 have outstanding accounts payable
and accrued and other liabilities $ 64,553 $ 54,611 $ 18,615 $ 89,773 $ $ 227,552


See notes to basic financial statements.












32

Exhibit 10
CITY OF CHICAGO, ILLINOIS STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS December 31, 2014
(Amounts are in Thousands of Dollars)
Pension Trust Agency
ASSETS
Cash and Cash Equivalents $ 234,273 $ 53,202
Investments - 109,447
Investments, at Fair Value Bonds and U.S. Government
Obligations 2,426,669
Stocks 5,139,698
Mortgages and Real Estate 668,384
Other 1,862,939
Cash and Investments with
Escrow Agent - 6,437
Property Tax Receivable - 91,619
Accounts Receivable, Net 623,874 114,155
Due From City 51,519
Property, Plant, Equipment and other 570
Invested Securities Lending Collateral 906,189 -
Total Assets $ 11,914,115 $ 374,860


LIABILITIES
Voucher Warrants Payable $ 341,537 $ 37,534
Accrued and Other Liabilities - 259,623
Securities Lending Collateral 906,189 -
Total Liabilities 1,247,726 $ 297,157
Deferred Inflows $ 787 $ 77,703
Total Liabilities and Deferred Inflows $ 1,248,513 $ 374,860
NET POSITION
Restricted for Pension Benefits 10,665,602
Total Net Position $ 10,665,602




See notes to basic financial statements.





33

Exhibit 11
CITY OF CHICAGO, ILLINOIS
STATEMENT OF CHANGES IN PLAN NET POSITION FIDUCIARY FUNDS - PENSION TRUST FUNDS
Year Ended December 31, 2014 (Amounts are in Thousands of Dollars)
Total
ADDITIONS Contributions:
Employees $ 290,063
City 470,199
Total Contributions 760,262
Investment Income: Net Appreciation in
Fair Value of Investments 365,194
Interest, Dividends and Other 232,118
Investment Expense (50,906)
Net Investment Income 546,406
Securities Lending Transactions:
Securities Lending Income 2,711
Securities Lending Expense 1,075
Net Securities Lending Transactions 3,786
Total Additions 1,310,454
DEDUCTIONS
Benefits and Refunds of Deductions 1,888,392
Administrative and General 17,713
Total Deductions 1,906,105
Net Increase in Net Position (595,651)
Net Position:
Beginning of Year 11,261,253
End of Year $ 10,665,602





See notes to basic financial statements.







34

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
1) Summary of Significant Accounting Policies
The City of Chicago (City), incorporated in 1837, is a "home rule" unit under State of Illinois (State) law. The City has a mayor-council form of government. The Mayor is the Chief Executive Officer of the City and is elected by general election. The City Council is the legislative body and consists of 50 members, each representing one of the City's 50 wards. The members of the City Council are elected through popular vote by ward for four-year terms.
The accounting policies of the City are based upon accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board (GASB). Effective January 1, 2014, the City adopted the following GASB Statements:
GASB Statement No. 67, Financial Reporting for Pension Plans, an amendment of GASB No. 25 ("GASB 67"), was established to provide improved financial reporting by state and local government pension plans. The Pension Plans (as defined below in subsection a) adopted GASB No. 67 during the year ended December 31, 2014.
GASB Statement No. 69, Government Combinations and Disposals of Government Operations ("GASB 69"), establishes accounting and financial reporting standards related to government combinations and disposals of government operations. The City adopted GASB 69 for the year ended December 31, 2014. GASB 69 requires disclosures to be made about government combinations and disposals of government operations to enable financial statement users to evaluate the nature and financial effects of those transactions. There was no impact on the City's Financial Statements as a result of the implementation of GASB 69.
GASB Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees ("GASB 70"), establishes accounting and financial reporting standards for financial guarantees that are nonexchange transactions (nonexchange financial guarantees) extended or received by a state or local government. The City adopted GASB 70 during the year ended December 31, 2014. GASB 70 requires a government that has issued an obligation guaranteed in a nonexchange transaction to report the obligation until legally released as an obligor. This Statement also requires a government that is required to repay a guarantor for making a payment on a guaranteed obligation or legally assuming the guaranteed obligation to continue to recognize a liability until legally released as an obligor. When a government is released as an obligor, the government should recognize revenue as a result of being relieved of the obligation. This Statement also provides additional guidance for intra-entity nonexchange financial guarantees involving blended component units and requires disclosures to be made about government combinations and disposals of government operations to enable financial statement users to evaluate the nature and financial effects of those transactions. There was no impact on the City's Financial Statements as a result of the implementation of GASB 70.
Other accounting standards that the City is currently reviewing for applicability and potential impact on the financial statements include:
GASB Statement No. 68, Accounting and Financial Reporting for Pensions ("GASB 68"), establishes new financial reporting requirements for most governments that provide their employees with pension benefits through these types of plans. GASB 68 will be effective for the City beginning with its year ending December 31, 2015. GASB 68 replaces the requirements of GASB Statement No. 27, Accounting for Pensions by State and Local Governmental Employers and GASB Statement No. 50, Pension Disclosures, as they relate to governments that provide pensions through pension plans administered as trusts or similar arrangements that meet certain criteria. GASB 68 requires governments providing defined benefit pensions to recognize their long-term obligation for pension benefits as a liability for the first time, and to more comprehensively and comparably measure the annual costs of pension benefits. The Statement also enhances accountability and transparency through revised and new note disclosures and required supplementary information (RSI). As of December 31, 2014, the City reported a net pension obligation of $8.6 billion on the statement of net position and disclosed within Note 11a combined unfunded actuarial accrued liability for all of the pension plans of $19.7 billion in accordance with GASB Statement No. 27. During 2014, the Pension Plans (as defined below
35

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
in subsection a) implemented GASB Statement No. 67, Financial Reporting for Pension Plans - an amendment of GASB Statement No. 25, and disclosed a combined net pension liability of $20.1 billion. The City has not yet determined the impact, if any, GASB 68 will have on the enterprise fund financial statements.
GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date -an amendment of GASB Statement No. 68 ("GASB 71"), relates to amounts associated with contributions, if any, made by a state or local government employer or nonemployer contributing entity to a defined benefit pension plan after the measurement date of the government's beginning net pension liability. GASB 71 will be effective for the City beginning with its year ending December 31, 2015. This Statement amends paragraph 137 of Statement 68 to require that, at transition, a government recognize a beginning deferred outflow of resources for its pension contributions, if any, made subsequent to the measurement date of the beginning net pension liability and requires that beginning balances for other deferred outflows of resources and deferred inflows of resources related to pensions be reported at transition only if it is practical to determine all such amounts.
GASB Statement No. 72 Fair Value Measurement and Application ("GASB 72"), addresses accounting and financial reporting issues related to fair value measurements. GASB 72 will be effective for the City beginning with its year ending December 31, 2016. This Statement provides guidance for determining a fair value measurement for financial reporting purposes and the related disclosures. This Statement requires a government to use valuation techniques that are appropriate under the circumstances and for which sufficient data are available to measure fair value. This Statement establishes a hierarchy of inputs to valuation techniques used to measure fair value. This Statement also requires disclosures to be made about fair value measurements, the level of fair value hierarchy, and valuation techniques.
Reporting Entity - The City includes the Chicago Public Library. The financial statements for the City have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), applicable to governmental units, as required by the Municipal Code of Chicago (Code).
The City's financial statements include the following legal entities as fiduciary trust funds:
The Municipal Employees' Annuity and Benefit Fund of Chicago is governed by a five-member board: three members are elected by plan participants and two are members ex-officio
The Laborers' and Retirement Board Employees' Annuity and Benefit Fund of Chicago is governed by an eight-member board: two members are elected by plan participants, two are members ex-officio, two members are appointed by the City Department of Human Resources, one member is elected by retired plan participants and one member is elected by the local labor union.
The Policemen's Annuity and Benefit Fund of Chicago is governed by an eight-member board: four members are elected by plan participants and four are appointed by the Mayor.
The Firemen's Annuity and Benefit Fund of Chicago is governed by an eight-member board: four members are elected by plan participants and four are members ex-officio.
Financial statements for each of these four pension plans (collectively,"Pension Plans") may be obtained at the respective fund's office.
Related Organizations - City officials are responsible for appointing a voting majority of the members of the boards of other organizations, but the City's accountability for these organizations does not extend beyond making appointments and no financial accountability or fiscal dependency exists between the City and these organizations. Therefore, the Chicago Park District, Chicago Public Building Commission, Chicago Public Schools, Community College District No. 508, Chicago Housing Authority and the Chicago Transit Authority are deemed to be related organizations.
Government-wide and fund financial statements - The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities
36

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
of the government. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on user fees and charges for services.
The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identified with a specific function or segment. Program revenues include: 1) charges to customers or applicants who purchase, use or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate fund financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the fiduciary funds are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.
c) Measurement focus, basis of accounting, and financial statement presentation - The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 90 days of the end of the current fiscal period with the exception of property tax revenue, which is recorded as deferred inflows unless taxes are received within 60 days subsequent to year-end. Licenses and permits, charges for services and miscellaneous revenues are not considered to be susceptible to accrual and are recorded as revenues when received in cash. All other revenue items are considered to be measurable and available only when cash is received by the City. Expenditures generally are recorded when a liability is incurred, as under accrual basis of accounting, except for interest and principal on long-term debt, the long-term portion of compensated absences, claims and judgments and pension obligations.
The City reports the following major governmental funds:
The General Fund is the City's primary operating fund. It accounts for and reports all financial resources not accounted for and reported in another fund.
Federal, State and Local Grants Fund accounts for the expenditures for programs, which include general government, health, public safety, transportation, aviation, cultural and recreational, and capital outlays. The majority of revenues are provided by several agencies of the Federal government, departments of the Illinois State government and City resources.
Special Taxing Areas Fund accounts for expenditures for special area operations and maintenance and for redevelopment project costs as provided by tax levies on special areas.
Service Concession and Reserve Fund accounts for monies committed for mid and long term uses. The Mid-term portion is subject to appropriation for neighborhood human infrastructure programs, health, and other initiatives, whereas the Long-term portion is committed for future budgetary and credit rating stabilization. These reserves were created as a result of the Skyway Lease and Parking Meter System transactions. The deferred inflows result from long-term concession and lease transactions whose proceeds are recognized as revenue over the term of the agreements.
37

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
Bond, Note Redemption and Interest Fund accounts for the expenditures for principal and interest as provided by property tax, utility tax, sales tax, transportation tax, and investment income.
Community Development and Improvement Projects Funds account for proceeds of debt used to acquire property, finance construction, and finance authorized expenditures and supporting services for various activities.
Within the governmental fund types, fund balances are reported in one of the following classifications:
Nonspendable - includes amounts that cannot be spent because they are either: a) not in a spendable form; or b) legally or contractually required to be maintained intact.
Restricted - includes amounts that are restricted to specific purposes, that is, when constraints placed on the use of resources are either: a) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments; or b) imposed by law through constitutional provisions or enabling legislation.
Committed - includes amounts constrained to specific purposes by a government itself, using its highest level of decision-making authority (i.e, City Council); to be reported as committed, amounts cannot be used for any other purpose unless the government takes the same highest-level action to remove or change the constraint. The City's highest level of decision-making authority is held by the City Council. The City Council passes Ordinances to commit their fund balances.
Assigned - includes amounts that are constrained by the City's intent to be used for specific purposes, but that are neither restricted nor committed. Intent is expressed by: a) the City Council itself; or b) a body or official to which the City Council has delegated the authority to assign amounts to be used for specific purposes. The Budget Director or Comptroller have authority to assign amounts related to certain legal obligations outside of the appropriation process within the General Fund. Within the other governmental fund types (special revenue, debt service, and capital projects) resources are assigned in accordance with the established fund purpose and approved appropriation. Residual fund balances in these fund types that are not restricted or committed are reported as assigned.
Unassigned - includes the residual fund balance that has not been restricted, committed, or assigned within the General Fund and deficit fund balances of other governmental funds.
The City reports the following major proprietary funds as business-type activities:
Water Fund accounts for the operations of the Chicago Water System (Water). The Water system purifies and provides Lake Michigan water for the City and 125 suburbs. The Water Fund operates two water treatment facilities and 12 pumping stations with a combined pumping capacity of 3,661 million gallons per day.
Sewer Fund accounts for the operations of the Wastewater Transmission System (Sewer). The Sewer system transports wastewater to the Metropolitan Water Reclamation District of Greater Chicago for processing and disposal. This service is provided for the residents and businesses of the City and certain suburban customers.
Chicago Midway International Airport Fund records operations of Chicago Midway International Airport (Midway) that provides regional travelers with access to airlines that generally specialize in low-cost, point-to-point, origin and destination passenger services. Midway Airport is conveniently located 10 miles from downtown Chicago.

Chicago-O'Hare International Airport Fund records operations of Chicago-O'Hare International Airport (O'Hare), the primary commercial airport for the City. The airlines servicing the airport operate out of four terminal buildings. Three domestic terminal buildings, having a total of 169 gates, serve domestic flights
38

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
and certain international departures. The International Terminal, having a total of 20 gates and five remote aircraft parking positions, serves the remaining international departures and all international arrivals requiring customs clearance.
Chicago Skyway Fund records operations of the Chicago Skyway (Skyway) which provides vehicle passage across the Calumet River, between the State of Indiana and the State of Illinois (State) through the operation of a tollway which consists of a 7.8-mile span connecting the Dan Ryan Expressway to the Indiana Toll Road. Facilities include a single toll plaza consisting of a central office, maintenance garage and toll collection area. In January 2005, the City entered into a long-term Concession and Lease Agreement of the Skyway, granting a private company the ability to operate and to collect toll revenue during the 99-year term of the agreement. The City received a one-time upfront payment of $1.83 billion.
Additionally, the City reports the following fiduciary funds:
Pension Trust Funds report expenditures for employee pensions as provided by employee and employer contributions and investment earnings.
Agency Funds account for transactions for assets held by the City as agent for certain activities or for various entities. Payroll deductions and special deposits are the primary transactions accounted for in these funds.
As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payment-in-lieu of taxes and other charges between the City's water, sewer, airports and skyway funds. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned.
Amounts reported as program revenues include: 1) charges to customers or applicants for goods and services, or privileges provided, or fines, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes.
Certain indirect costs have been included as part of the program expenses reported for the various functional activities.
In the fund financial statements, proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the water and sewer funds are charges to customers for sales and services. The airport funds' principal operating revenues are derived from landing fees and terminal use charges as well as rents and concessions. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.
When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources, as they are needed.
The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.







39

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
d) Assets, liabilities, deferred inflows, deferred outflows, and net position or equity
Cash, Cash Equivalents and Investments generally are held with the City Treasurer as required by the Code. Interest earned on pooled investments is allocated to participating funds based upon their average combined cash and investment balances. Due to contractual agreements or legal restrictions, the cash and investments of certain funds are segregated and earn and receive interest directly. The City uses separate escrow accounts in which certain tax revenues are deposited and held for payment of debt. The Code permits deposits only to City Council-approved depositories, which must be regularly organized state or national banks and federal and state savings and loan associations, located within the City, whose deposits are federally insured.
Investments authorized by the Code include interest-bearing general obligations of the City, State and U.S. Government; U.S. Treasury bills and other noninterest-bearing general obligations of the U.S. Government purchased in the open market below face value; domestic money market funds regulated and in good standing with the Securities and Exchange Commission and tax anticipation warrants issued by the City. The City is prohibited by ordinance from investing in derivatives, as defined, without City Council approval. The City values its investments at fair value or amortized cost. U.S. Government securities purchased at a price other than par with a maturity of less than one year are reported at amortized cost.
The City's four retirement plans are authorized to invest in bonds, notes, and other obligations of the U.S. Government; corporate debentures and obligations; insured mortgage notes and loans; common and preferred stocks; stock options; real estate; and other investment vehicles as set forth in the Illinois Compiled Statutes. These investments are reported at fair value.
Repurchase agreements can be purchased only from banks and certain other institutions authorized to do business in the State. The City Treasurer requires that securities that are pledged to secure these agreements have a fair value equal to the cost of the repurchase agreements plus accrued interest.
Investments generally may not have a maturity date in excess of ten years from the date of purchase. Certain other investments are held in accordance with the specific provisions of applicable ordinances.
Cash equivalents include certificates of deposit and other investments with maturities of three months or less when purchased.
Deficit cash balances result in interfund borrowings from the aggregate of funds other than escrowed funds. Interest income and expense are generally not recognized on these interfund borrowings.
State statutes and the City's Pension Plans' policies permit lending Pension Plan securities to broker-dealers and other entities with a simultaneous agreement to return the collateral for the same securities in the future. Securities lent at year-end for cash collateral are presented as not categorized in the schedule of custodial credit risk; securities lent for securities collateral are classified according to the category for the collateral.
Receivables and Payables activity between funds are representative of services rendered, outstanding at the end of the fiscal year, and are referred to as either "due to/from other funds" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the noncurrent portion of interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances."
All trade and property tax receivables are shown net of an allowance for uncollectibles. The allowance is based on historical trends. The estimated value of services provided but unbilled at year-end has been included in receivables.


40

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
Inventory includes government-wide inventories, which are stated at cost determined principally, using the average cost method. For proprietary funds, the costs of inventories are recorded as expenses when used (consumption method). Governmental fund inventories are accounted for using the purchases method and represent nonspendable resources because they do not represent expendable available financial resources.
Assets Held for Resale includes land and buildings of $4.1 million, recorded at lower of cost or market in the Federal, State and Local Grant Funds. These assets are purchased through the use of federal grants and City resources and are intended to be resold.
Restricted Assets include certain proceeds of the City's enterprise fund revenue bonds, as well as certain resources set aside for their repayment. These assets are classified as restricted or committed in the basic financial statements because they are maintained in separate bank accounts and their use is limited by applicable bond covenants or specific City Council action.
The Water and Sewer funds maintain Rate Stabilization Accounts where any net revenues remaining after providing sufficient funds for all required deposits in the bond accounts may be transferred upon the direction of the City to be used for any lawful purpose of the specific fund.
The O'Hare and Midway funds maintain Passenger Facility Charge accounts as restricted as they are subject to Federal Aviation Administration regulation and approval, to finance specific eligible capital and debt related activities.
Capital Assets, which include property, plant, equipment, and infrastructure assets (e.g. roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets, or a network of assets, with an initial cost of more than $5,000 (not rounded) and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation.
The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets' lives are not capitalized.
Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalization value of the assets constructed. The total interest expense (Governmental and Business Activities) incurred by the City during the current fiscal year was $1,184.7 million, of which $83.8 million was capitalized as part of the capital assets under construction projects in proprietary funds.
Property, plant, and equipment of the City are depreciated using the straight-line method, in the year subsequent to acquisition or when placed into service, over the following estimated useful lives:
Utility plant
Utility structures and improvements
Buildings and improvements
Airport runways, aprons, tunnels, taxiways, and paved roads
Bridge infrastructure
Lighting infrastructure
Street infrastructure
Transit infrastructure
Equipment (vehicle, office, and computer)
25 - 100 years 50- 100 years 15 - 40 years 5 - 30 years 10 - 40 years
25 years 10- 25 years 40 years 5 - 20 years

41

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
The City has a collection of artwork and historical treasures presented for public exhibition and education that are being preserved for future generations. The proceeds from sales of any pieces of the collection are used to purchase other acquisitions. A portion of this collection is not capitalized or depreciated as part of capital assets.
Deferred Outflows represent the fair value of derivative instruments that are deemed to be effective hedges and unamortized loss on bond refundings.
Employee Benefits are granted for vacation and sick leave, workers' compensation and health care. Unused vacation leave is accrued and may be partially carried over for one year. Sick leave is accumulated at the rate of one day for each month worked, up to a maximum of 200 days. Severance of employment terminates all rights to receive compensation for any unused sick leave. Sick leave pay is not accrued. Employee benefit claims outstanding, including claims incurred but not reported, are estimated and recorded in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements.
Employees are eligible to defer a portion of their salaries until future years under the City's deferred compensation plan created in accordance with Internal Revenue Code Section 457 The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. Third-party administrators who maintain the investment portfolio administer the Plan. The plan's assets have been placed in trust accounts with the plan administrators for the exclusive benefit of participants and their beneficiaries and are not considered assets of the City.
The City is subject to the State of Illinois Unemployment Compensation Act and has elected the reimbursing employer option for providing unemployment insurance benefits for eligible former employees. Under this option, the City reimburses the State for claims paid by the State. Expenditures for workers' compensation are recorded when paid in the governmental funds. A liability for these amounts is recorded in the government-wide and proprietary fund financial statements.
Judgments and claims are included in the government-wide financial statements and proprietary fund types. Uninsured claim expenditures and liabilities are reported when it is probable that a loss has occurred and the amount of that loss can be reasonably estimated. These losses include an estimate of claims that have been incurred but not reported. In the fund financial statements, expenditures for judgments and claims are recorded on the basis of settlements reached or judgments entered within the current fiscal year. Amounts that related to deferred compensatory time and reserves for questioned costs are treated the same way.
Long-term obligations are included in the government-wide financial statements and proprietary fund types in the fund financial statements. Long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the related debt, except in the case of refunding debt transactions where the amortization period is over the term of the refunding or refunded debt, whichever is shorter.
The City enters into interest rate swap agreements to modify interest rates and/or cash flows on outstanding debt. For existing swaps, the net interest expenditures resulting from these arrangements are recorded as interest expense. The fair value of derivative instruments that are deemed to be effective is accounted for as deferred outflows. Derivative instruments that are deemed not effective are adjusted to fair value with the change in fair value recorded to investment earnings. Under certain bond ordinances adopted by the City Council, interest rate swaps and swaptions are authorized to be entered into by designated City officials in connection with certain bonds issued by the City. For swaps related to O'Hare Bonds, airline approval is also required before entering into a swap agreement.

42

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
In the fund financial statements, governmental funds recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received and discounts given on debt issued are reported as other financing sources or uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as expenditures.
Certain debt obligations are to be paid from sales tax, motor fuel or special area taxes. Pension
The City's contributions to the four Pension Plans primarily serving City employees are set by State law. In recent years, the total contributions have been lower than the actuarially required amounts for the Plans, which has served to increase the Plans' unfunded actuarial accrued liabilities. Recurring cash inflows from all sources to the Plans (including City contributions, employee contributions, and investment earnings) have been lower than the cash outlays of the Plans in some recent years. As a result, the Plans have liquidated investments and used assets of the Plans to satisfy their respective current payment obligations in those years. The use of assets by the Plans for these purposes reduces the amount of assets on hand to pay benefits or earn investment returns in the future.
Current State law for the Policemen's and Firemen's Plans, known as Public Act 96-1495 (P.A. 96-1495), requires the City to significantly increase contributions to those Plans beginning in 2016. In each year, the City must contribute the amount needed for each Plan to achieve a 90% Funded Ratio by the end of 2040. Under the enacted State legislation for the Municipal Employees' and Laborers' Plans, known as Public Act 98-641 (P.A. 98-641), the City is required to significantly increase contributions to those two Plans beginning in 2016. During the period 2016 through 2020, the City's contributions to the Municipal Employees' and Laborers' Plans increase by statutorily determined amounts which are not based on actuarial calculations. Beginning in 2021, P.A. 98-641 requires the City to contribute in each year to the Municipal Employees' and Laborers' Plans the amount needed for each Plan to achieve a 90% Funded Ratio by the end of 2055. P.A. 98-641 also makes certain modifications to the automatic annual increases paid to retirees and requires increases in employee contributions toward the cost of their retirement benefits. P.A. 98-641 is currently subject to challenge in a lawsuit alleging its unconstitutionality.
Senate Bill 777 ("SB 777"), an amendment to P.A. 96-1495, passed both houses of the Illinois General Assembly as of May 31, 2015. SB 777 institutes a Phase-in Period until 2020 and a Revised Amortization Period to 2055. A Revised Amortization Period would reduce the annual funding obligation required to reach a 90% Funded Ratio, but extend the number of years over which such payments would need to be made. Enactment of a Phase-in Period would reduce the City's required payment in the initial years to allow for a more gradual phase-in of the requirements of P.A. 96-1495. Although SB 777 has passed both chambers of the Illinois General Assembly, a motion to reconsider the vote on SB 777 has been filed in the Illinois Senate, and accordingly, SB 777 has not been sent to the Governor for consideration. The City makes no representation as to whether SB 777 will be enacted.
Liquidity
The City's general obligation bonds, sales tax revenue bonds and motor fuel tax revenue bonds were downgraded by Moody's, Standard & Poor's and Fitch Ratings in May 2015. Moody's cited in its rating action the Illinois Supreme Court's decision on May 8, 2015, which found the State Pension Reform Act unconstitutional, as limiting the City's options for addressing its unfunded pension liabilities. Moody's downgraded the City's general obligation, sales tax revenue and motor fuel tax revenue credits to Ba1. Moody's indicated that further downgrades could follow upon the occurrence of any of the following: (a) a determination by a court of law that P.A. 98-641 is unconstitutional; (b) continued growth in the debt and/or unfunded pension liabilities of the City and overlapping governments; and (c) narrowing of the City's fund balances and liquidity. At the same time, Moody's downgraded the City's Water senior lien revenue bonds from A2 to Baal, the Water second lien revenue bonds from A3 to Baa2 and the City's Wastewater senior lien bonds from A3 to Baa2 and the Wastewater second lien revenue bonds from Baal to Baa3, each with a negative outlook.
43

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
In May 2015, Standard and Poor's downgraded the rating of the City's general obligation bonds to A-from A+, Water senior lien and Wastewater senior lien revenue bonds to A from AA, and Water second lien revenue bonds and Wastewater second lien revenue bonds to A- from AA-.
In May 2015, Fitch Ratings downgraded the rating of the City's general obligation bonds and sales tax revenue bonds to BBB+ from A-.

The rating actions by Standard & Poor's and Fitch, in part, cited the Moody's rating action and the resulting uncertainty regarding the City's liquidity position.
Due to the Moody's downgrade of the City's general obligation credit to Ba1 (below investment grade) from Baa2, an event of default was triggered under credit agreements the City had entered into with certain banks to provide letters of credit supporting the City's general obligation debt (including the general obligation variable rate demand bonds) and to provide letters of credit or revolving lines of credit for the City's general obligation commercial paper notes and line of credit facilities, which consisted of general obligation revolving lines of credit from four banks and two series of general obligation commercial paper notes (one series backed by a letter of credit from Wells Fargo Bank and the other series backed by a letter of credit from Bank of Montreal). Upon the event of default, the banks providing letters of credit for the general obligation debt as well as the banks supporting the commercial paper/line of credit program had the right to demand immediate repayment of amounts owed under their credit agreements. The Moody's downgrade also resulted in a termination event under the City's existing interest rate swaps on its general obligation variable rate bonds; pursuant to those swap agreements, the swap counterparties had the right to set an early termination date for the swaps and demand a termination payment from the City.
Shortly after the Moody's downgrades and resulting event of default/termination event, the City terminated the letter of credit from Wells Fargo Bank; there were no commercial paper notes outstanding secured by that letter of credit. With respect to the other banks supporting the commercial paper/line of credit program, the banks providing letters of credit for the City's general obligation debt, and the counterparties on the interest rate swaps for its general obligation variable rate bonds, the City entered into forbearance agreements pursuant to which the affected banks agreed to temporarily forbear from exercising their respective rights resulting from the event of default/termination event. In May and June 2015, the City converted ($674 million) and/or redeemed ($132 million) all of its general obligation variable rate bonds and converted sales tax variable rate revenue bonds ($112 million) to long-term fixed rate bonds and terminated the associated letters of credit and interest rate swaps (termination payment of $221 million) for those bonds. For the agreements with the banks supporting the commercial paper/line of credit program, the forbearance agreements ($849 million) extend to September 30, 2015, but can terminate earlier if: (i) there are any other events of default by the City under the related credit agreements, (ii) there are further downgrades of the rating on the City's general obligation bonds, or (iii) the forbearance period in one of the other forbearance agreements terminates prior to its scheduled end date. The City plans to issue long-term general obligation fixed rate bonds in mid-2015 to repay most of the outstanding amounts under the commercial paper/line of credit program.
With respect to the City's Series 2000 and Series 2004 Water Second Lien Revenue Bonds, the downgrades triggered defaults under certain credit and/or liquidity facilities, and for the Series 2008C Wastewater Second Lien Revenue Bonds, certain continuing covenant agreements with those bondholders. The Moody's downgrades also triggered termination events under interest rate swap agreements relating to these bonds. In response to the triggering of these defaults and termination events, the City entered into forbearance agreements with the holders of its Series 2008C Wastewater Second Lien Revenue Bonds ($332 million) to June 30, 2016; and amended and/or transferred the interest rate swap agreements for its Water Second Lien Revenue Bonds (estimated termination value of $125 million) and its Wastewater Second Lien Revenue Bonds (estimated termination value of $75 million) to remove such termination event from the swap agreements prior to any demand being made for a termination payment by the counterparties; and obtained a waiver of the event of default from the provider of a letter of credit relating to the Series 2000 Water Second Lien Revenue Bonds. With respect
44

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
to the forbearance agreements with the holders of the Series 2008C Wastewater Second Lien Revenue Bonds, the forbearance period under each of those forbearance agreements extends to June 30, 2016, but can terminate earlier if: (i) there are any other events of default by the City under the related continuing covenant agreements, (ii) there are further downgrades of the rating on the Wastewater Second Lien Bonds, or (iii) the forbearance period in one of the other forbearance agreements for the Wastewater Second Lien Bonds terminates prior to its scheduled end date. With respect to the Series 2008C Water and Wastewater swap agreements, a ratings downgrade below Baa3 on the Second Lien Revenue Bonds for each of the respective credits would trigger a termination event with respect to the related swap agreement. With respect to the Water credit and/or liquidity facilities, a ratings downgrade below Baa3 on the Water Second Lien Revenue Bonds would trigger an event of default.
The City believes its expected revenues along with current assets are sufficient to fund its operations on a continuing basis, through 2015 and beyond, notwithstanding the City's plans to issue additional bonds in 2015.
Deferred inflows represent amounts to be recognized as revenue on a straight line basis over the life of the related long-term lease and concession agreements. In the fund financials, grants that meet all of the eligibility criteria except for time availability and property taxes levied for a future period are also included in deferred inflows.
Fund equity in the government-wide statements is classified as net position and displayed in three components:

Net investement in capital assets - Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes or any other borrowings that are attributable to the acquisition, construction, or improvement of those assets.
Restricted net position - Consists of net position with constraints placed on the use either by external groups such as creditors, grantors, contributors, or laws or regulations of other governments, or are legally restricted through constitutional provisions or enabling legislation.
Restricted net position for business activities are provided in Exhibit 7, Statement of Net Position, Proprietary Funds.
Unrestricted - All other net positions that do not meet the definition of "restricted" or "net investement in capital assets."
2) Reconciliation of Government-wide and Fund Financial Statements
a) Explanation of certain differences between the governmental funds balance sheet and the government-wide statement of net position.
i) The governmental funds balance sheet includes a reconciliation between fund balance - total governmental funds and net position - governmental activities as reported in the government-wide statement of net position. One element of that reconciliation explains that "Other long-term assets are not available to pay for current-period expenditures and therefore are deferred in the funds." The details of this $1,242.8 million are as follows (dollars in thousands):






45

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
Deferred inflows - property tax $ 983,616
Deferred inflows - grants 259,140
Net adjustment to increase fund balance - total governmental funds - to arrive at net position -
governmental activities $ 1,242,756

ii) Another element of that reconciliation explains that "Certain liabilities and deferred outflows, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds." The details of this $19,390.5 million are as follows (dollars in thousands):
Long-term liabilities:
Total bonds, notes and certificates payable $ 9,606,475
Pension and other postemployment benefits 8,884,304
Lease obligation 116,858
Pollution remediation 8,532
Claims and judgments 900,616
Total Long-term liabilities 19,516,785
Accounts payable - infrastructure retainage 15,272
Bonds, notes and other obligations payable current (86,059)
Other assets - issuance costs (bond insurance) (16,033)
Deferred outflows-unamortized loss on refunding (158,102)
Accrued interest 2,330
Derivative instrument liability 25,538
Accrued and other liabilities - compensated absences 90,860
Net adjustment to reduce fund balance - total governmental funds - to arrive at net position -
governmental activities $ 19,390,591


b) Explanation of certain differences between the governmental funds' statement of revenues, expenditures, and changes in fund balances and the government-wide statement of activities.
i) The governmental funds statement of revenues, expenditures, and changes in fund balances includes a reconciliation between net changes in fund balances - total governmental funds and changes in net position - governmental activities as reported in the government-wide statement of activities. One element of that reconciliation explains that "Governmental funds report capital outlays as expenditures. However, in the statements of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense." The details of this $303.2 million are as follows (dollars in thousands):
Capitalized asset expenditures $ 656,672
Donated assets 14,476
Depreciation expense (367,845)
Loss - disposal of equipment (136)
Net adjustment to increase net changes in fund balances - total governmental funds - to arrive at
changes in net position - governmental activities _$ 303,167
46

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
ii) Another element of that reconciliation states that "Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net position." The details of this decrease of $115.6 million are as follows (dollars in thousands):
Proceeds of debt $ (1,004,347)
Premium (17,465)
Payment of refunded bond escrow agent 302,862
Principal retirement 599,395
Interest expense 3,643
Cost of Issuance 287
Net adjustment to reduce net changes in fund balances - total governmental funds - to arrive at
changes in net position - governmental activities $ (115,625)
iii) Another element of that reconciliation states that "Certain expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds." The details of this decrease of $1,250.4 million are as follows (dollars in thousands):
Claims and judgments $ (20,849)
Pension and other post employment benefit liabilities (1,209,339)
Pollution remediation 66
Vacation (1,532)
Lease obligations (18,518)
Inventory (290)
Net adjustment to reduce net changes in fund balances - total governmental funds - to arrive at
changes in net position - governmental activities $ (1,250,462)

3) Stewardship, Compliance and Accountability
a) Annual Appropriation Budgets are established for the General Fund and the Vehicle Tax, Pension, Chicago Public Library and certain Miscellaneous, Special Events, Tourism and Festivals nonmajor Special Revenue Funds, on a non-GAAP budgetary basis:
Prior to November 15, the Mayor submits to the City Council a proposed budget of expenditures and the means of financing them for the next year.
The budget document is available for public inspection for at least ten days prior to passage of the annual appropriation ordinance by the City Council, which is also required to hold at least one public hearing.
Prior to January 1, the budget is legally enacted through passage of the appropriation ordinance.
Subsequent to the enactment of the appropriation ordinance, the City Council has the authority to make necessary adjustments to the budget, which results in a change in total or individual appropriations. The legal level of budgetary control is designated in the budget by object grouped by purpose except for the Motor Fuel Tax Fund, which is subsequently re-appropriated by project. A separate Motor Fuel Tax Fund Report demonstrates compliance with annual and project-length budgets required by the State. The

47

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
separately issued Supplement to the Comprehensive Annual Financial Report provides budgetary information for all other budgeted funds. Copies of this report are available upon request, v) All annual appropriations unused and unencumbered lapse at year-end. Encumbered appropriations are carried forward to the following year. Project-length financial plans are adopted for Capital Project Funds. Appropriations for Debt Service Funds are established by bond ordinance.
b) Reconciliation of GAAP Basis to Budgetary Basis - The City's budgetary basis of accounting used for budget vs. actual reporting differs from GAAP. For budgetary purposes, encumbrances are recorded as expenditures but are included in "Unassigned" fund balance for GAAP purposes. For budgetary purposes, proceeds of long-term debt and transfers in are classified as revenues. For budgetary purposes prior years' resources used to cover current year budgetary expenditures are recorded as revenues. For GAAP purposes, proceeds of long-term debt and transfers out are treated as other financing sources. Provision for doubtful account expenditures are not budgeted. A reconciliation of the different basis of revenue and expenditure recognition for the year ended December 31, 2014 is as follows (dollars in thousands):

General
Fund
Revenues, GAAP Basis $ 3,176,150
Add:
Transfers In 39,700
Prior Year's Surplus Utilized 45,472
Revenues, Budgetary Basis $ 3,261,322
Expenditures, GAAP Basis $ 3,231,258
Add:
Transfers Out 10,081
Encumbered in 2014 29,223
Deduct:
Payments on Prior Years' Encumbrances (6,943)
Provision for Doubtful Accounts and Other (2,297)
Expenditures, Budgetary Basis $ 3,261,322

c) Individual Fund Deficits include the Chicago Skyway Fund, an Enterprise Fund, which has a fund deficit of $1,364.3 million which management anticipates will be funded through recognition of deferred inflows. Midway International Airport Fund has a fund deficit of $6.7 million which will be funded through future revenues. Federal State and Local Grants, a governmental fund, has a deficit of $225.0 million and will be funded by the recognition of deferred grant inflows and unearned revenue. The Service Concession and Reserve Fund, a Special Revenue Fund, has a deficit fund balance of $955.4 million which will be funded through the recognition of deferred inflows. Also, the Bond, Note Redemption and Interest Fund has a deficit of $26.9 which will be funded through the issuance of General Obligation Bonds.










48

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
4) Restricted and Unrestricted Cash, Cash Equivalents and Investments
a) Investments As of December 31, 2014, the City had the following Investments (dollars in thousands):
Investment Type Investment Maturities (in Years)
More Than
Less Than 1 t^j City Funds
U.S. Agencies* $ 892,426 $ 3,025,098 $ 172,590 $ 112,073 $ 4,202,187
Commercial Paper 556,993 - - - 556,993
Corporate Bonds 73,420 182,564 120,707 73,998 450,689
Corporate Equities 910 - - - 910
Municipal Bonds 72,144 300,170 69,591 11,209 453,114
Certificates of Deposit and
Other Short-term 1,593,657 - - - 1,593,657
Total City Funds $ 3,189,550 $ 3,507,832 $ 362,888 $ 197,280 $ 7,257,550
*U.S. Agencies include investments in government-sponsored enterprises such as Federal National Mortgage Association, Federal Home Loan Banks, and Federal Home Loan Mortgage Corporation
Pension Trust Funds
U.S. and Foreign
Government Agencies $ 293,168 $ 369,223 $ 155,772 $ 467,811 $ 1,285,974
Corporate Bonds 861,112 465,027 394,251 321,362 2,041,752
Corporate Equities 5,629,900 - - - 5,629,900
Pooled Funds 66,143 22,339 - - 88,482
Real Estate 634,015 - - -' 634,015
Securities Received from
Securities Lending 906,189 - - - 906,189
Venture Capital 435,340 - - - 435,340
Certificates of Deposit and
Other Short-term 178,686 - - - 178,686
Derivatives 787 - - - 787
Other 36,539 ; : : 36,539
Total Pension Trust Funds $ 9,041,879 $ 856,589 $ 550,023 $ 789,173 $ 11,237,664

Total $ 12,231,429 $ 4,364,421 $ 912,911 $ 986,453 $ 18,495,214
Interest Rate Risk - As a means of limiting its exposure to fair value losses arising from rising interest rates, the City's investment policy limits all securities so purchased, except tax anticipation warrants, municipal bonds, notes, commercial paper or other instruments representing a debt obligation of the City, and shall show on their face that they are fully payable as to principal and interest, where applicable, if any, within ten years from the date of purchase.
Credit Risk - The Code limits investments in commercial paper to banks whose senior obligations are rated in the top two rating categories by at least two national rating agencies and who are required to maintain such rating during the term of such investment. The Code also limits investments to domestic money market mutual funds regulated by, and in good standing with, the Securities and Exchange Commission. Certificates of Deposit are also limited by the Code to national banks which provide collateral of at least 105 percent by marketable U.S. government securities marked to market at least monthly; or secured by a corporate surety bond issued by an insurance company licensed to do business
49

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
in Illinois and having a claims-paying rating in the top rating category, as rated by a nationally recognized statistical rating organization maintaining such rating during the term of such investment. The following schedule summarizes the City's and Pension Trust Funds exposure to credit risk (in thousands):
Quality Rating City
Aaa/AAA $ 176,616
Aa/AA 4,150,011
A/A 252,722
Baa/BBB
Ba/BB
B/B
Caa/CCC
Ca
C/CC
D/D
P1/A1 888,599
Not Rated* 1,789,602
Total Funds $ 7,257,550
116,827 136,607 252,464 352,443 162,158 150,649 36,095 828 350 528 357,957 932,256
Quality Rating Pension Trust Funds
Aaa/AAA $
Aa/AA
A/A
Baa/BBB
Ba/BB
B/B
Caa/CCC
Ca
C/CC
D/D
Not Rated
2,499,162
Other
$

* Not rated is primarily composed of money market mutual funds.
Custodial Credit Risk - Cash and Certificates of Deposit: This is the risk that in the event of a bank failure, the City's deposits may not be returned. The City's Investment Policy states that in order to protect the City's deposits, depository institutions are to maintain collateral pledges on City deposits during the term of the deposit of at least 102 percent of marketable U.S. government, or approved securities or surety bonds, issued by top-rated insurers. Collateral is required as security whenever deposits exceed the insured limits of the FDIC. The bank balance of cash and certificates of deposit with the City's various municipal depositories was $318.2 million. 97.7 percent of the bank balance was either insured or collateralized with securities held by City agents in the City's name. $7.4 million was uncollateralized at December 31, 2014, and thus was subject to custodial credit risk.
Custodial Credit Risk - Investments: For an investment, this 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 investments or collateral securities that are in possession of an outside party. The City has no custodial credit risk exposure because investment securities are insured, registered and held by the City.















50

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
v) Foreign Currency Risk - In the case of the Pension Trust Funds, is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The risk of loss is managed by limiting its exposure to fair value loss by requiring their international securities managers to maintain diversified portfolios. The following schedule summarizes the Pension Trust Funds' exposure to foreign currency risk (in
thousands):
Foreign Currency Risk
Australian dollar $ 62,870
Brazilian real 43,414
British pound 303,227
Canadian dollar 79,768
Chilean peso 2,666
Chinese yuan (1,493)
Columbian peso 1,941
Czech Republic koruna 2,661
Danish krone 21,222
Egyptian pound 434
European euro 394,560
Hong Kong dollar 185,487
Hungarian forint 832
Indian rupee 47,536
Indonesian rupiah 19,691
Japanese yen 317,654
Malaysian ringgit 7,704
Mexican peso 29,391
New Israeli shekel 9,136
New Romanian leu 377
New Taiwan dollar 30,860
New Zealand dollar 1,835
Nigeria Naira (34)
Norwegian krone 19,080
Pakistan rupee 302
Peruvian Nuevo Sol |910|Philippines peso 3,252
Polish zloty 3,122
Qatari riyal 610
Russian ruble 337
Singapore dollar 18,145
South African rand 40,395
South Korean won 58,148
Swedish krona 57,088
Swiss franc 101,272
Taiwan dollar 5,175
Thailand baht 14,232
Turkish lira 19,608
United Arab Emirates dirham... 4,333
Urguayan peso Uruguayo 466
Total Pension Trust Funds $ 1,907,307

51

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
vi) The following schedule summarizes the cash and investments reported in the basic financial statements (dollars in thousands):
Per Note 4:
Investments - City $ 7,257,550
Investments - Pension Trust Funds 11,237,664
$ 18,495,214
Per Financial Statements:
Restricted Investments $ 3,324,414
Unrestricted Investments 1,835,373
Investments with Fiduciary Funds 10,207,137
Investments with Escrow Agent 417,522
Invested Securities Lending Collateral 906,189
Investments Included as Cash and Cash
Equivalents on the Statement of Net Position 1,804,579
$ 18,495,214
5) Property Tax
The City's property tax becomes lien on real property on January 1 of the year it is levied. The Cook County Assessor (Assessor) is responsible for the assessment of all taxable real property within Cook County (County), except for certain railroad property assessed directly by the State. The County Board has established a triennial cycle of reassessment in which one-third of the County will be reassessed each year on a repeating schedule established by the Assessor.
Property in the County is separated into fifteen classifications for assessment purposes. After the Assessor establishes the fair market value of a parcel of land, that value is multiplied by one of the classification percentages to arrive at the assessed valuation (Assessed Valuation) for that parcel. These percentages range from 10.0 percent for certain residential, commercial, and industrial property to 25.0 percent for other commercial and industrial property.
The Illinois Department of Revenue has the statutory responsibility of ensuring uniformity of real property assessments throughout the State. Each year, the Department of Revenue furnishes the county clerks with an adjustment factor to equalize the level of assessment among counties. This factor (Equalization Factor) is then applied to the Assessed Valuation to compute the valuation of property to which a tax rate will be'applied (Equalized Assessed Valuation). The County Clerk adds the Equalized Assessed Valuation of all real property in the County to the valuation of property assessed directly by the State and subtracts total amounts of EAV in Tax Increment Financing Districts to arrive at the base amount (Tax Base) used in calculating the annual tax rates.
The County Clerk computes the annual tax rate by dividing the levy by the Tax Base and then computes the rate for each parcel of real property by aggregating the tax rates of all governmental units having jurisdiction over that particular parcel. The County Treasurer then issues the tax bills. Property taxes are deposited with the County Treasurer, who remits to the City its respective share of the collections. Taxes levied in one year become due and payable in two installments during the following year on March 1 and August 1 or 30 days from mailing of tax bills if later than July 1. The first installment is 55.0 percent of the prior year's tax bill. The second installment tax bill equals the total tax liability for the year minus the first installment tax bill amount.
The City Council has adopted an ordinance beginning in 1994, limiting the City's aggregate property tax levy to an amount equal to the prior year's aggregate property tax levy plus the lesser of (a) five percent or (b) the percentage increase in the annualized Consumer Price Index, based on the ordinance. The ordinance provides an exception for that portion of any property tax debt service levy equal to the aggregate interest and principal payments on the City's general obligation bonds and notes during the 12-month period ended January 1, 1994, subject to annual increase in the manner described above for the aggregate levy, all as provided by the ordinance. Most general obligation bond levies approved after 2001 have also been excluded from this limit.
52

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
6) Interfund Balances and Transfers
a) The following balances at December 31, 2014 represent due from/to balances among all funds (dollars in thousands):
Fund Type/Fund Due From Due To
Governmental Funds:
General $ 109,514 $ 276,805
Federal, State and Local Grants 10,059 296,159
Special Taxing Areas 423,933 11,682
Service Concession and Reserve 5,000 5,140
Bond, Note Redemption and Interest - 85,700
Community Development and Improvement Projects.. 97,053 56,996
Nonmajor Governmental Funds 79,210 94,698
Total Governmental Funds 724,769 827,180
Enterprise Funds:
Water 91,224 20,130
Sewer 29,416 71,228
Chicago Midway International Airport 527 9,134
Chicago-O'Hare International Airport 33,751 3,519
Chicago Skyway - 15
Total Enterprise Funds 154,918 104,026
Fiduciary activities:
Pension Trust 51,519 -
Total Fiduciary activities 51,519 -
Total $ 931,206 $ 931,206

The balances resulted from the time lag between the dates that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system and (3) payments between funds are made.
b) The following balances at December 31, 2014 represent interfund transfers among all funds (dollars in
thousands):
Fund Type/Fund Transfer In Transfer Out
Governmental Funds:
General $ 39,700 $ 10,081
Special Taxing Areas 97,513 44,463
Service Concession and Reserve 5,000 13,900
Bond, Note Redemption and Interest 366,198 164,268
Community Development and Improvement Projects.. 7,004 279,009
Nonmajor Governmental Funds 137,171 140,865
Total Governmental Funds $ 652,586 $ 652,586
Transfers are used to move revenues from the fund that the statute or budget requires to collect them to the fund that statute or budget requires to expend them and to move receipts restricted to debt service from the funds collecting the receipts to the debt service fund as debt service payments become due.

53
CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
7) Capital Assets
a) Capital Assets activity for the year ended December 31,
Balance January 1, 2014
Governmental activities:
Capital assets, not being depreciated:
Land $ 1,392,613
Works of Art and Historical Collections 30,749
Construction in Progress 260,192
Total capital assets, not being depreciated 1,683,554
Capital assets, being depreciated:
Buildings and Other Improvements 2,545,699
Machinery and Equipment 1,381,545
Infrastructure 8,151,833
Total capital assets, being depreciated 12,079,077
Less accumulated depreciation for:
Buildings and Other Improvements 877,695
Machinery and Equipment 1,155,690
Infrastructure 3,735,664
Total accumulated depreciation 5,769,049
Total capital assets, being depreciated, net 6,310,028
Total governmental activities $ 7,993,582
Business-type activities:
Capital assets, not being depreciated:
Land $ 1,016,635
Construction in Progress 1,207,828
Total capital assets, not being depreciated 2,224,463
Capital assets, being depreciated:
Buildings and Other Improvements 15,138,127
Machinery and Equipment 682,588
Total capital assets, being depreciated 15,820,715
Less accumulated depreciation for:
Buildings and Other Improvements 4,486,528
Machinery and Equipment 346,314
Total accumulated depreciation 4,832,842
Total capital assets, being depreciated, net 10,987,873
Total business-type activities $ 13,212,336
Total Capital Assets $ 21,205,918




2014 was as follows (dollars in thousands): Additions Disposals Balance
and and December 31,
220 14,483 576,209
Transfers Transfers 2014


$ 1,392,833 45,232
(290,872)
590,912
(290,872) 545,529
28,451 68,123 258,959
1,983,594
(10,374)
355,533

2,574,150 1,439,294 8,410,792
(10,374) 12,424,236
66,389 58,534 242,922
(10,238)
367,845
(10,238)
(136)

944,084 1,203,986 3,978,586 6,126,656
6,297,580
(12,312)
2,066 $ 701,092
$ 578,600 $ (291,008) $ 8,281,174
703,158
(652,656)


$ 1,018,701 (652,656) 1,256,264
2,274,965
840,309 5,411
73,240 (2,366)
845,720
70,874

16,051,676 685,633 16,737,309
339,691 21,336
(1,605) (2,476)
361,027
(4,081)
74,955

4,824,614 365,174 5,189,788
11,547,521
484,693
$ 1,187,851 $ (577,701) $ 13,822,486 $ 1,766,451 $ (868,709) $ 22,103,660


54

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
b) Depreciation expense was charged to functions/programs of the City as follows (dollars in thousands):
Governmental activities:
General Government $ 44,735
Public Safety 27,464
Streets and Sanitation 14,936
Transportation 251,702
Health 955
Cultural and Recreational 28,053

Total Depreciation Expense - Governmental Activities $ 367,845

Business-type Activities:
Water $ 54,802
Sewer 34,061
Chicago Midway International Airport 46,044
Chicago-O'Hare International Airport 215,918
Chicago Skyway 10,202

Total Depreciation Expense - Business-type Activities $ 361,027

8) Leases
a) Operating Leases
The City leases building and office facilities under noncancelable operating leases. Total costs for such leases were approximately $13.6 million for the year ended December 31, 2014.
The future minimum lease payments for these leases are as follows (dollars in thousands):
$ 8,986
4,096
2,813
2,457
2,183
2020- 2024 7,196
2025 - 2029 336
2030 - 2034 254
2035- 2039 216
2040 - 2042 66
Total Future Rental Expense $ 28,603
b) Capital Leases
During 2003, the City entered into lease and lease back agreements with third parties pertaining to 911 Center Qualified Technological Equipment (QTE), with a book value of $143.3 million at December 31, 2003. Under the QTE lease agreement, which provided certain cash and tax benefits to the third party, the City entered into a long-term lease for applicable assets back to the City under a sublease. Under the sublease, the City was required to make future minimum lease payments.


55

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
In June 2014, the City terminated the two lease/leaseback transactions relating to its 911 and 311 systems (QTE-1 and QTE-2). Under the termination agreements, the leases were terminated and the City regained unrestricted title to its 911 and 311 systems. Under the termination agreement relating to QTE-1, the City paid a gross amount of $1.0 million to Bank of America N.A. To terminate the QTE-2 transaction, the City made a net payment of $1.3 million to SMBC Leasing Investment LLC.
During 2005, the City entered into a sale and leaseback agreement with third parties pertaining to the City owned portion of a rapid transit line with a book value of $430.8 million at December 31, 2005. Under the lease agreement, which provides certain cash and tax benefits to the third party, the City entered into a long-term lease for applicable assets back to the City under a lease. Under the lease, the City is required to make future minimum lease payments.
The future minimum payments for this lease are as follows (dollars in thousands):

Year Ending Total
December 31,
$
9,000
9,000
18,977
3,003
2020- 2024 15,016
2025 - 2029 2,000
2030 - 2032 165,164
Total Minimum Future Lease Payments 222,160
Less Interest 105,302
Present Value of Minimum
Future Lease Payments _$ 116,858
c) Lease Receivables
Most of the O'Hare land, buildings and terminal space are leased under operating lease agreements to airlines and other tenants. The following is a schedule of the minimum future rental income on noncancelable operating leases as of December 31, 2014 (dollars in thousands):
2015 $ 93,228
2016 93,222
94,218
93,283
91,967
2020-2024 8,144
2025 - 2029 9,432
Total Minimum Future Rental Income $ 483,494

Contingent rentals that may be received under certain leases based on the tenants' revenues or fuel flow are not included in minimum future rental income. Rental income for O'Hare, consisting of all rental and concession revenues except ramp rentals and automobile parking, amounted to $418.5 million, including contingent rentals of $89.0 million.



56

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
Most of the Midway land and terminal space is leased under operating lease agreements to airlines and other tenants. The following is a schedule of the minimum future rental income on noncancelable operating leases as of December 31, 2014 (dollars in thousands):
$ 48,634
48,171
26,763
26,609
26,609
2020-2024 133,045
2025 - 2029 133,045
Total Minimum Future Rental Income $ 442,876

Contingent rentals that may be received under certain leases based on tenants' revenues are not included in minimum future rental income. Rental income for Midway, consisting of all rental and concession revenues except aircraft parking fees and certain departure fees (turns) and automobile parking, amounted to $92.9 million, including contingent rentals of $39.6 million.

9) Short-term Debt
Matured bonds represent principal due on coupon bonds in which the coupons have not been presented for payment. As of December 31, 2014, the outstanding balance was at $0.7 million.
Line of Credit and Commercial Paper Notes The City issues commercial paper notes and maintains revolving lines of credit for working capital in anticipation of receipt of other revenue and to fund capital projects, debt refinancing or restructuring; the latter are typically repaid from proceeds of later issuances of general obligation bonds. Historically, the commercial paper notes have been supported by underlying letters of credit that extend beyond one year from the date of the financial statements and the lines of credit have also extended beyond one year from the date of the financial statements. Thus, the outstanding amounts at December 31 have been historically recorded as long-term debt.
Due to the Moody's downgrade of the City's general obligation credit in May 2015, see Note 17, an event of default was triggered under each of the revolving credit agreements and the letter of credit reimbursement agreements for the commercial paper notes. Subsequent to December 31, 2014 the City terminated the letter of credit from Wells Fargo Bank; no commercial paper notes secured by that letter of credit were then outstanding. For the remaining banks, the City entered into forbearance agreements pursuant to which the affected banks agreed to forbear from exercising their respective rights resulting from the event of default. The forbearance period under each of the forbearance agreements extends to September 30, 2015, but can terminate earlier if: (i) there are any other events of default by the City under the related credit agreements, (ii) there are further downgrades of the rating on the City's general obligation bonds, or (iii) the forbearance period in one of the other forbearance agreements terminates prior to its scheduled end date. As the forbearance period with respect to the credit agreements and the underlying letter of credit associated with the outstanding commercial paper notes is less than one year from the date of the financial statements, the outstanding general obligation commercial paper notes and lines of credit at December 31, 2014 have been recorded as fund liabilities in the fund financials, as follows (dollars in thousands):
Outstanding
Type Fund at 12/31/14
Line of Credit Community Development and Improvement Projects $75,000
Commercial Paper Community Development and Improvement Projects 2,800 Commercial Paper Bond, Note Redemption and Interest 198,086 Commercial Paper Other Governmental Funds 21,423 Total $297,309
57
CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
10) Long-term Obligations
a) Long-term Debt activity for the year ended December 31,2014 was as follows (in thousands):
Additions
Reductions

Balance January 1, 2014*
883,420 33,410 123,063 1,039,893
17,465 32,595 1,089,953
$ 278,092 47,412 132,430 457,934
22,712 28,372 509,018
Governmental activities: Bonds and notes payable:
General obligation debt $ 7,730,178
Tax increment 88,397
Revenue 753,162
160,014 293,789
8,571,737
Add unamortized premium
9,025,540
Add accretion of capital appreciation bonds . Total bonds, notes and certificates payable .
Other liabilities:
7,589,929 171,674 8,598 679,768
8,649,969
1,340,753 20,805
170,356 1,531,914
46,378 75,621 66
149,508 271,573
Pension and other postemployment
benefits obligations
Lease obligations
Pollution Remediation
Claims and judgments
Total other liabilities


Amounts Due within One Year


$ 100,094 9,035 18,400 127,529

22,213 149,742





164,940 164,940
Total governmental activities $ 17,675,509 $ 2,621,867 $ 780,591 $ 19,516,785 $ 314,682
Business-type activities'
Revenue bonds and notes payable:
Water
Sewer
Chicago-O'Hare International Airport . Chicago Midway International Airport.

Add unamortized premium
Add accretion of capital appreciation bonds .


$ 1,996,858 1,369,459 7,665,205 1,495,008 12,526,530
330,022 89,158


428,889 307,405 31,026 896,520 1,663,840
149,885 8,720
$ 1,822,445 $ 1,165,556 $ 4,444,312 $ 1,946,147


2,381,771 1,638,935 7,527,336 1,523,590
13,071,632
9,571
442,259 88,708
$ 13,602,599 $ 307,813

33,119,384 $ 622,495
* Commercial Paper and Line of Credit are no longer included due to reclassification as short term debt.
The Pension obligation liability will be liquidated through a Special Revenue Fund (Pension Fund) as provided by tax levy and State Personal Property Replacement Tax revenues.


58

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
b) Issuance of New Debt
General Obligation Bonds
General Obligation Bonds, Project and Refunding Series 2014A ($432.6 million), and Taxable Project and Refunding Series 2014B ($450.8 million) were sold at a premium in March 2014. The bonds have interest rates ranging from 4.0 percent to 6.314 percent and maturity dates from January 1, 2018 to January 1, 2044. Net proceeds of $881.6 million will be used to finance infrastructure improvements; transportation improvements; grants or loans to assist not-for-profit organizations or educational or cultural institutions; or to assist other municipal corporations or units of local government, or school districts; cash flow needs ofthe City; acquisition of personal property; acquisition, demolition, remediation or improvement of real property for industrial, commercial or residential purposes; constructing, equipping, altering and repairing various municipal facilities including fire stations, police stations, libraries, senior and health centers and other municipal facilities; enhancement of economic development within the City by making grants or deposits to secure obligations of not-for-profit or for-profit organizations doing or seeking to do business in the City; litigation judgments or settlements agreements involving the City, including escrow accounts or other reserves needed for such purposes; payments of certain pension contributions; repayment of Commercial Paper Notes and Lines of Credit; providing for facilities, services and equipment to protect and enhance public safety, and other uses permitted by the Ordinance ($628.0 million), to refund certain maturities of bonds outstanding ($185.2 million), and to fund capitalized interest ($68.3 million). The current refunding of the bonds increased the City's total debt service payments by $217.8 million, resulted in a net economic loss of approximately $13.5 million and a book loss of approximately $7.9 million.
Motor Fuel Tax Revenue Bonds
Motor Fuel Tax Revenue Refunding Bonds, Series 2013 ($105.9 million) were sold at a premium in June 2014. The bonds have interest rates ranging from 2.0 percent to 5.0 percent and maturity dates from January 1, 2015 to January 1, 2033. Net proceeds of $114.7 million and prior bonds reserves of $2.9 million were used to advance refund all maturities of the outstanding Motor Fuel Tax Revenue Bonds, Series 2003 ($114.7 million) and fund the debt service reserve account ($2.9 million). The advance refunding of the bonds decreased the City's total debt service payments by $13.6 million and resulted in an economic gain of $9.9 million and a book loss of approximately $2.4 million.
Tax Increment Allocation Bonds
Tax Increment Allocation Revenue Refunding Bonds (Pilsen Redevelopment Project), Series 2014A ($17.3 million) and 2014B Taxable ($16.1 million) were sold at a premium in November 2014. The bonds have interest rates ranging from 0.95 percent to 5.0 percent and maturity dates from June 1, 2015 to June 1, 2022. Net proceeds of $35.0 million and prior bonds reserves of $5.1 million were used to refund all maturities of principal and interest outstanding on the Series 2004B Pilsen Bonds ($25.9 million), the Series 2004G Bonds for the Pilsen Redevelopment Project ($10.7 million) and fund the debt service reserve account ($3.5 million). The current refunding of the bonds decreased the City's total debt service payments by $7.9 million, resulted in a net economic gain of approximately $5.4 million and a book loss of approximately $1.1 million.
Revenue Loans
In June 2013, the City entered into a loan agreement with the United States Department of Transportation under the Transportation Infrastructure Finance and Innovation Act (TIFIA) program to complete the Wacker Drive Reconstruction Project. The loan amount of $98.66 million will fund the Chicago Riverwalk along the main branch of the Chicago River. The interest rate is 3.33 percent and the final maturity of the loan is January 1, 2048. There have been loan disbursements made to the City in the total of $17.2 million as of December 31, 2014.

59

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
v) Enterprise Fund Revenue Bonds and Notes
In August 2013, the City entered into a loan agreement with the United States Department of Transportation under the Transportation Infrastructure Finance and Innovation Act (TIFIA) program to fund a portion of Consolidated Rental Car Facility at O'Hare, additions, extensions and improvements to the airport transit system (ATS) including the purchase of new ATS vehicles and certain public parking facilities. The loan amount of $288.1 million is subordinate to the O'Hare Customer Facility Charge Senior Lien Revenue Bonds, Series 2013. The interest rate is 3.86 percent and the final maturity of the loans is January 1, 2052. There were no loan disbursements made to the City as of December 31, 2014.
Chicago Midway International Airport Second Lien Revenue Bonds, Series 2014 A&B ($771.8 million) were sold at premium in June 2014. The bonds have interest rates ranging from 4.0 percent to 5.0 percent and maturity dates from January 1, 2019 to January 1, 2041. Net proceeds of $842.2 and other monies ($20.6 million) were used to finance the costs of certain Airport projects ($114.9 million), to refund certain maturities of bonds outstanding ($673.7 million), fund capitalized and debt service reserve ($16.5 million) and to repay the Commercial Paper notes ($57.7 million). The current refunding decreased the City's total debt service payments by $135.7 million, resulted in a net economic gain of approximately $69.2 million and a book loss of approximately $15.9 million.
Chicago Midway International Airport Second Lien Refunding Revenue Bonds, Series 2014C ($124.7) were sold in June 2014. The bonds were issued at a daily rate of 0.08 percent. The bonds have maturities of January 1, 2041 to January 1, 2044. Net proceeds of $124.4 million were used to refund certain maturities of bonds outstanding ($124.1 million). The current refunding resulted in a book loss of approximately of $0.6 million.
Second Lien Water Revenue Bonds, Series 2014 ($367.9 million) were sold at a premium in September 2014. The bonds have interest rates ranging from 3.0 percent to 5.0 percent and maturity dates from November 1, 2015 to November 1, 2044. Net proceeds of $400.0 million will be used to finance certain costs of improvements and extensions to the water system.
On May 27, 2014, a loan agreement was signed with the Illinois Environment Protection Agency to install water meters at residences throughout the City that are currently unmetered. In 2014 the Water Fund drew $6.5 million from this loan agreement. The loan has an interest rate of 2.295% with maturity dates from September 21, 2014 to March 21, 2034.
On August 5, 2013, a loan agreement was signed with the Illinois Environment Protection Agency to replace approximately 10 miles of damaged, undersized and leaking watermains located throughout the City with new 8-inch diameters watermain. In 2014 the Water Fund drew $39.4 million from this loan agreement. The loan has an interest rate of 1.93% with maturity dates from January 16, 2015 to July 16, 2034.
On September 19, 2013, a loan agreement was signed with the Illinois Environment Protection Agency to install water meters at residents throughout the City that are currently unmetered. Installations will be performed by a private contractor. Meters will be equipped with an AMR (Automatic Meter Reading) capabilities. In 2014 the Water Fund drew $15.0 million from this loan agreement. The loan has an interest rate of 1.93% with maturity dates from April 16, 2015 to October 16, 2034.
Second Lien Wastewater Transmission Revenue Bonds, Series 2014 ($292.4 million) were sold at a premium in September 2014. The bonds have interest rates ranging from 3.0 percent to 5.0 percent and maturity dates from January 1, 2016 to January 1, 2044. Net proceeds of $320.0 million will be used to finance certain costs of improvements and extensions to the wastewater system.
In 2014, the Sewer Fund drew $15.0 million from the Illinois Environment Protection Agency loan agreement line to replace existing sewer pipes throughout the city. The loan has an interest rate of 2.295 percent with maturity dates from March 4, 2015 to September 4, 2034.

60

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
In 2014, $31.0 million of Chicago O'Hare International Airport Commercial Paper Notes Series 2013 were issued. Outstanding O'Hare Commercial Paper Notes at December 31, 2014 were $51.0 million. The proceeds were used to finance portions of the cost of authorized airport projects.
In 2014, $30.0 million of Chicago Midway International Airport Commercial Notes Series 2013 were issued. The proceeds were used to finance portions of the costs of authorized airport projects.
c) Annual requirements listed below for each year include amounts payable January 1 of the following year. Bonds maturing and interest payable January 1, 2015 have been excluded because funds for their payment have been provided for. Annual requirements to amortize debt outstanding as of December 31, 2014 are as follows (dollars in thousands):
General Obligation Tax Increment
Year Ending Principal Interest Principal Interest
December 31,
$ 235,676 $ 438,328 $ 9,335 $ 3,272
251,072 428,190 10,640 2,795
274,537 417,278 11,795 2,306
287,152 405,157 16,010 1,757
296,244 392,075 6,020 960
2020-2024 1,554,715 1,780,488 16,195 1,392
2025-2029 1,532,769 1,452,485
2030-2034 1,790,238 1,025,642
2035-2039 1,277,419 554,626
2040-2043 772,425 94,623 : -
$8,272,247 $6,988,892 $ 69,995 $ 12,482

Revenue Business-type Activities
Year Ending Principal Interest Principal Interest
December 31,
2015 $ 18,170 $ 34,316 $ 314,322 $ 640,650
17,880 33,397 392,640 624,517
18,250 32,487 445,178 606,773
19,150 31,590 457,732 586,321
20,335 30,649 441,142 567,407
2020-2024 119,187 137,871 2,194,324 2,519,632
2025-2029 141,116 120,681 2,614,614 1,963,663
2030-2034 132,133 126,900 3,083,740 1,208,250
2035-2039 200,730 39,362 2,134,220 517,087
2040-2043 38,445 1,922 699,065 62,832
$ 725,396 $ 589,175 $12,776,977 $ 9,297,132
For the debt requirements calculated above, interest rates for fixed rate bonds debt range from 1.92 percent to 7.78 percent and interest on variable rate debt was calculated at the rate in effect or the effective rate of a related swap agreement, if applicable, as of December 31, 2014. Standby bond purchase agreements or letters of credit were issued by third party financial institutions that are expected to be financially capable of honoring their agreements.
The City's variable rate bonds may bear interest from time to time at a flexible rate, a daily rate, a weekly rate, an adjustable long rate, or the fixed rate as determined by the remarketing agent, in consultation with the City. An irrevocable letter of credit provides for the timely payment of principal and interest. In the event the bonds are put
61
CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
back to the bank and not successfully remarketed, or if the letter of credit agreements expire without an extension or substitution, the bank bonds will convert to a term loan. There is no principal due on the potential term loans within the next fiscal year.
d) Derivatives
i) Interest Rate Swaps
(1) Objective of the swaps. In order to protect against the potential of rising interest rates and/or changes in cash flows, the City has entered into various separate interest rate swaps at a cost less •than what the City would have paid to issue fixed-rate debt. The notional amounts related to bonds maturing on January 1, 2015 have been excluded in the following table because funds for their payment have been provided for.
Changes in Fair Value Classification Amount
Fair Value at December 31, 2014
Classification
Notional Amount
Governmental Activities
Hedges:
Deferred Outflow of
Interest Rate Swaps Resources $ (15,850)
Investment Derivative Instruments:
Investment
Interest Rate Swaps Income (4,821)
Business-type Activities
Hedges:
Deferred Outflow of
Interest Rate Swaps Resources (50,998)
Total


Deferred Outflow of Resources

Investment Revenue


Deferred Outflow of Resources

363,700




$(158,328) $1,192,175


(32,467)
924,280




(200,095) $ (390,890)

(2) Terms, fair values, and credit risk. The objective and terms, including the fair values and credit ratings, of the City's hedging derivative instruments outstanding as of December 31, 2014, are as follows. The notional amounts of the swaps match the principal amounts of the associated debt. The City's swap agreements contain scheduled reductions to outstanding notional amounts that are expected to approximately follow scheduled or anticipated reductions in the associated "bonds payable" category. The notional amounts related to bonds maturing on January 1, 2015 have been excluded below because funds for their payment have been provided for. Under the swaps on a net basis for each related series of bonds, the City pays the counterparty a fixed payment and receives a variable payment computed according to the London Interbank Offered Rate (LIBOR) and/or The Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Index. The terms as of December 31, 2014, are as follows (dollars in thousands):






62
CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014

Associated Bond Issue
Hedging Instruments Governmental Activities:

Notional Effective Amounts Date
Counter-Termi- party Fair nation Credit Values Date Rating
150,000 11/8/2007 Pay 3.9982%; receive SIFMA 50,000 11/8/2007 Pay 3.9982%; receive SIFMA 200,000 1/1/2014 Pay SIFMA; receive 72.5% of 1 Mo. LIBOR *
$ (43,370) 1/1/2042 A3/A (5,443) 8/1/2018 Baa2/A-(17,373) 1/1/2042 Aa3/AA-
155,953 66,837
100,000 61,395 61,395
GO VRDB (Series 2005D) 207,880
Sales Tax Revenue Refunding Bonds
(VRDB Series 2002) 111,715
Tax Increment Allocation Bonds
(Near North TIF, Series 1999A) 27,000
Business-type Activities:
Chicago Midway International Airport 84,405
Revenue Bonds (Series 2004C&D) 56,270
8/17/2005 Pay 4.104%; receive SIFMA 8/17/2005 Pay 4.104%; receive SIFMA
Pay SIFMA+.045%; 1/1/2014 receive 72.5% of 1 Mo. LIBOR * 1/1/2014 Pay SIFMA; receive 72.5% of 1 Mo. LIBOR' 1/1/2014 Pay SIFMA; receive 72.5% of 1 Mo. LIBOR'
Pay SIFMA + .05%; 1/1/2031 receive 72.5% of 1 Mo. LIBOR *

6/27/2002 Pay 4.23%; receive 75.25% of 3 Mo. LIBOR

9/1/1999 Pay 5.084%; receive 67% of 1 Mo. LIBOR

12/14/2004 Pay 4.174%; receive SIFMA Plus .05% 4/21/2011 Pay 4.247%; receive SIFMA Plus .05%

(23,181) (20,287)
7/1/2020 Baa1/A 1/1/2040 Aa3/A+
(6,096) 1/1/2031 Aa2/AA-
(3,343) 1/1/2031 A3/A
(3,343) 1/1/2031 A3/A
(6,028) 1/1/2040 A2/A

(26,657) 1/1/2034 Aa3/A+

(3,207) 1/1/2019 A2/A

(17,678) 1/1/2035 Baa1/A (12,450) 1/1/2035 Aa3/AA-



Wastewater Transmission Variable Rate Revenue Bonds (Series 2008C)
Pay 3.886%; receive 95% of 3 Mo. LIBOR
(if LIBOR is < 3%) or 232,560 1/3/2011 67% of 3 Mo. LIBOR (if LIBOR is > 3%)
Pay 3.886%; receive SIFMA 49,835 7/29/2004 (if LIBOR is < 3%) 49,835 7/29/2004 or 67% of 1 Mo. LIBOR (if LIBOR is > 3%)

(11,472) (11,362)

(49,027) 1/1/2039 A3/A
1/1/2039 A2/A 1/1/2039 Aa3/A+

182,230
Water Variable Rats Revenue Refunding Bonds (Series 2004)
Second Lien Water Revenue
Refunding Bonds (Series 2000) 100,000
8/5/2004 Pay 3.8694%; receive 67% of 1 Mo. Libor (30,996) 11/1/2031 A2/A
(29,460) 11/1/2030 A2/A
8/5/2004 Pay 3.8669%; receive 67% of 1 Mo. Libor (37,650) 11/1/2031 Aa3/AA-
4/16/2008 Pay 3.8694%; receive 67% of 1 Mo. Libor
Investment Instruments
Governmental Activities:
Pay 4.052%;
8/7/2003 receive 66.91% of 10 Yr USD ISDA Swap Rate (20,434) 1/1/2034 Aa3/AA-Pay 4.052%;
8/7/2003 receive66.91%of10YrUSDISDASwapRate (6,755) 1/1/2034 Aa3/A+
Pay 66.91 % of 10 Yr USD ISDA Swap Rate +
3/1/2014 .05%; receive 75% of 1 Mo. LIBOR * (1,361) 1/1/2019 A2/A
Pay 66.91%of 10 YrUSD ISDA Swap Rate
11/1/2014 receive 75% of 1 Mo. LIBOR * (3,917) 1/1/2019 Aa2/AA-
Tolal $ (390,890)
See Table 31 in Statistical Section for Counterparty Entities and additional details for credit ratings. See Footnote 18 - Subsequent Events for swap terminations and amendments to agreements effective in 2015. Type and objective for all the Swaps is the same, as mentioned earlier. * Reflects Swap Overlay agreement. VRDB means variable rate demand bonds.
63

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
Fair Value. As of December 31, 2014, the swaps had a negative fair value of $390.9 million. As per industry convention, the fair values of the City's outstanding swaps were estimated using the zero-coupon method. This method calculates the future net settlement payments required by the swap, assuming that the forward rates implied by the yield curve correctly anticipate future spot rates. These payments are then discounted using the spot rates implied by the current yield curve for hypothetical zero-coupon bonds due on the date of each future net settlement on the swap. Because interest rates are below the Fixed Rate Paid, the City's swaps had negative values. Note that the combination of the negative fair value of $390.9 million less the unamortized interest rate swap premium balance of $6.9 million related to investment derivative instruments and $34.9 million related to governmental cash flow hedges represent the total fair value of the derivative liability in the statement of net position. During 2014, the City terminated the swap associated with Series 2002B General Obligation Variable Rate Demand Bond (Neighborhoods Alive 21 Program); the termination payment amounted to $36.3 million.
Credit Risk. The City is exposed to credit risk (counterparty risk) through the counterparties with which it enters into agreements. If minimum credit rating requirements are not maintained, the counterparty is required to post collateral to a third party. This protects the City by mitigating the credit risk, and therefore the ability to pay a termination payment, inherent in a swap. Collateral on all swaps is to be in the form of cash or Eligible Collateral held by a third-party custodian. Upon credit events, the swaps also allow transfers, credit support, and termination if the counterparty is unable to meet the said credit requirements.
Basis Risk. Basis risk refers to the mismatch between the variable rate payments received on a swap contract and the interest payment actually owed on the bonds. The two significant components driving this risk are credit and SIFMA/LIBOR ratios. Credit may create basis risk because the City's bonds may trade differently than the swap index as a result of a credit change in the City. SIFMA/LIBOR ratios (or spreads) may create basis risk. With percentage of LIBOR swaps, if the City's bonds trade at a higher percentage of LIBOR over the index received on the swap, basis risk is created. This can occur due to many factors including, without limitation, changes in marginal tax rates, tax-exempt status of bonds, and supply and demand for variable rate bonds. The City is exposed to basis risk on all swaps except those that are based on Cost of Funds, which provide cash flows that mirror those of the underlying bonds. For all other swaps, if the rate paid on the bonds is higher than the rate received, the City is liable for the difference. The difference would need to be available on the debt service payment date and it would add additional underlying cost to the transaction.

Tax Risk. The swap exposes the City to tax risk or a permanent mismatch (shortfall) between the floating rate received on the swap and the variable rate paid on the underlying variable-rate bonds due to tax law changes such that the federal or state tax exemption of municipal debt is eliminated or its value reduced. There have been no tax law changes since the execution of the City's swap transactions.
Termination Risk. The risk that the swap could be terminated as a result of certain events including a ratings downgrade for the issuer or swap counterparty, covenant violation, bankruptcy, payment default or other defined events of default. Termination of a swap may result in a payment made by the issuer or to the issuer depending upon the market at the time of termination.
Rollover Risk. The risk that the City may be exposed to rising variable interest rates if (i) the swap expires or terminates prior to the maturity of the bonds and (ii) the City is unable to renew or replace the swap.
Swap payments and associated debt. Bonds maturing and interest payable January 1, 2015 have been excluded because funds for their payment have been provided for. As of December 31, 2014, debt service requirements of the City's outstanding variable-rate debt and net swap payments, assuming current interest rates remain the same, for their term are as follows (dollars in thousands):
64

I
CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014

Interest
Variable-Rate Bonds Rate
Year Ending Principal Interest Swaps, Net Total
December 31,
$ 31,965 $ 4,201 $ 62,676 $ 98,842
51,365 4,215 61,330 116,910
53,750 4,017 59,429 117,196
59,865 3,810 57,437 121,112
58,410 3,593 55,167 117,170
2020- 2024 413,660 14,894 236,467 665,021
2025-2029 300,625 9,418 168,159 478,202
2030-2034 418,560 5,744 100,499 524,803
2035-2039 235,900 1,504 35,232 272,636
2040 - 2042 43,535 20 2,608 46,163
$ 1,667,635 $ 51,416 $ 839,004 $ 2,558,055
e) Debt Covenants
Water Fund - The ordinances authorizing the issuance of outstanding Water Revenue Bonds provide for the creation of separate accounts into which net revenues, as defined, or proceeds are to be credited, as appropriate. The ordinances require that net revenues available for bonds, as adjusted, equal 120 percent of the current annual debt service on the outstanding senior lien bonds and that City management maintains all covenant reserve account balances at specified amounts. The above requirements were met at December 31, 2014. The Water Rate Stabilization account had a balance in restricted assets of $88.4 million at December 31, 2014.
The ordinances authorizing the issuance of outstanding Second Lien Water Revenue Bonds provide for the creation of separate accounts into which monies will be deposited, as appropriate. The ordinances require that net revenues are equal to the sum of the aggregate annual debt service requirements for the fiscal year of the outstanding senior lien bonds and 110 percent of the aggregate annual debt service requirements ofthe outstanding second lien bonds. This requirement was met at December 31, 2014
Sewer Fund - The ordinances authorizing the issuance of outstanding Wastewater Transmission Revenue Bonds provide for the creation of separate accounts into which net revenues, as defined, or proceeds are to be credited, as appropriate. The ordinances require that net revenues available for bonds equal 115 percent of the current annual debt service requirements on the outstanding senior lien bonds. This requirement was met at December 31, 2014. The Sewer Rate Stabilization account had a balance in restricted assets of $32.6 million at December 31, 2014.
The ordinances authorizing the issuance of outstanding Second Lien Wastewater Transmission Revenue Bonds provide for the creation of separate accounts into which monies will be deposited, as appropriate. The ordinances require that net revenues equal 100 percent of the sum of the current maximum annual debt service requirements of the outstanding senior lien bonds and the maximum annual debt service requirements of the second lien bonds. This requirement was met at December 31, 2014.
Chicago Midway International Airport Fund - The Master Indenture of Trust securing Chicago Midway Airport Revenue Bonds requires in each year the City set rates and charges for the use and operation of Midway and for services rendered by the City in the operation of Midway so that revenues, together with any other available monies and the cash balance held in the Revenue Fund on the first day of such fiscal year not then required to be deposited in any fund or account, will be at least sufficient (a) to provide for the Operation and Maintenance Expenses for the fiscal year and (b) to provide for the greater of (i) the
65

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
amounts needed to be deposited into the First and Junior Lien Debt Service Funds, the Operations & Maintenance Reserve Account, the Working Capital Account, the First Lien Debt Service Reserve Fund, the Repair and Replacement Fund, and the Special Project Fund and (ii) an amount not less than 125 percent of the Aggregate First Lien Debt Service for such Fiscal Year reduced by an amount equal to the sum of any amount held in any Capitalized Interest Account for disbursement during such Fiscal Year to pay interest on First Lien Bonds. These requirements were met at December 31, 2014.
The Master Indenture of Trust Securing Chicago Midway Airport Second Lien Obligations requires that the City set rentals, rates and other charges for the use and operation of Midway and for certain services rendered by the City in the operation of Midway in order that in each Fiscal Year, Revenues, together with Other Available Moneys deposited with the First Lien Trustee or the Second Lien Trustee with respect to such Fiscal Year and any cash balance held in the First Lien Revenue Fund or the Second Lien Revenue Fund on the first day of such Fiscal Year not then required to be deposited in any Fund or Account under the First Lien Indenture for the Second Lien Indenture, will be at least sufficient (1) to provide for the payment of Operation and Maintenance Expenses for the Fiscal Year and (2) to provide for the greater of (A) or (B) as follows: (A) the greater of the amounts needed to make the deposits required under the First Lien Indenture described in the immediately preceding paragraph above; or (B) the greater of the amounts needed to make the deposits required under the First Lien Indenture described in the immediately preceding paragraph above or an amount not less than 110 percent of the Aggregate First Lien Debt Service and Aggregate Second Lien Debt Service for the Bond Year commencing during such Fiscal Year, reduced by (X) any amount held in any Capitalized Interest Account for disbursement during such Bond Year to pay interest on First Lien Bonds, and (Y) any amount held in any capitalized interest account established pursuant to a Supplemental Indenture under the Second Lien Indenture for disbursement during such Bond Year to pay interest on Second Lien Obligations. These requirements were met at December 31, 2014.
iv) Chicago-O'Hare International Airport Fund - The Master Indenture of Trust securing Chicago O'Hare International Airport General Airport Senior Lien Obligations requires that Revenues in each Fiscal Year, together with Other Available Moneys deposited with the Trustee with respect to that Fiscal Year and any cash balance held in the Revenue Fund on the first day of that Fiscal Year not then required to be deposited in any Fund or Account, will be at least sufficient: (i) to provide for the payment of Operation and Maintenance Expenses for the Fiscal Year; and (ii) to provide for the greater of (a) the sum of the amounts needed to make the deposits required to be made pursuant to all resolutions, ordinances, indentures and trust agreements pursuant to which all outstanding Senior Lien Bonds Obligations or other outstanding Airport Obligations are issued and secured, and (b) one and ten-hundreths times Aggregate Debt Service for the Bond Year commencing during that Fiscal Year, reduced by any proceeds of Airport Obligations held by the Trustee for disbursement during that Bond Year to pay principal of and interest on Senior Lien Obligations. This requirement was met at December 31, 2014.
The Master Trust Indenture securing Chicago O'Hare International Airport Passenger Facility Charge (PFC) Obligations requires PFC Revenues, as defined, to be deposited into the PFC Revenue Fund. The City covenants to pay from the PFC Revenue Fund not later than the twentieth day of each calendar month the following amounts in the following order of priority: (1) to the Trustee for deposit in the Bond Fund, the sum required to make all of the Sub-Fund Deposits and Other Required Deposits to be disbursed from the Bond Fund [to meet debt service and debt service reserve requirements] in the calendar month pursuant to the Master Indenture; (2) to make any payments required for the calendar month with respect to Subordinated PFC Obligations; and (3) all moneys and securities remaining in the PFC Revenue Fund shall be transferred by the City (or the Trustee if it then holds the PFC Revenue Fund pursuant to the Master Indenture) to the PFC Capital Fund.
The Indenture of Trust Securing Chicago O'Hare International Airport Customer Facility Charge Senior Lien Revenue Bonds requires that, as long as any Bonds remain Outstanding, in each Fiscal Year, the City shall set the amount of the CFC (when multiplied by the total number of projected Contract Days) plus projected Facility Rent at an annual level sufficient to provide sufficient funds (1) to pay principal of and interest on the Bonds due in such Fiscal Year, (2) to reimburse the Rolling Coverage Fund, the
66

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
Supplemental Reserve Fund, the Debt Service Reserve Fund and any Subordinate Reserve Fund for any drawings upon such Funds over a period not to exceed twelve months, as determined by the City, (3) to provide funds necessary to pay any "yield reduction payments" or rebate amounts due to the United States under the Indenture for which funds in the Rebate Fund or the CFC Stabilization Fund are not otherwise available, (4) to maintain the balance of the CFC Stabilization Fund in an amount of no less than the CFC Stabilization Fund Minimum Requirement and to reimburse any drawings below the CFC Stabilization Fund Minimum Requirement over a period not to exceed twelve months, as determined by the City, and (5) to maintain the balance of the Operation and Maintenance Fund in an amount of no less than the Operation and Maintenance Fund Requirement and to reimburse any drawings below the Operation and Maintenance Fund Minimum Requirement over a period of not to exceed twelve months, as determined by the City.
No-Commitment Debt and Public Interest Loans include various special assessment, private activity bonds and loans. These types of financings are used to provide private entities with low-cost capital financing for construction and rehabilitation of facilities deemed to be in the public interest. Bonds payable on no-commitment debt are not included in the accompanying financial statements because the City has no obligation to provide for their repayment, which is the responsibility of the borrowing entities. In addition, federal programs/grants, including Community Development Block Grants and Community Service Block Grants, provide original funding for public interest loans. Loans receivable are not included as assets because payments received on loans are used to fund new loans or other program activities in the current year and are not available for general City operating purposes. Loans provided to third parties are recorded as current and prior year programs/grants expenditures. Funding for future loans will be from a combination of the repayment of existing loans and additional funds committed from future programs/grants expenditures.
Defeased Bonds have been removed from the Statement of Net Position because related assets have been placed in irrevocable trusts that, together with interest earned thereon, will provide amounts sufficient for payment of all principal and interest. Defeased bonds at December 31, 2014, not including principal payments due January 1, 2015, are as follows (dollars in thousands):
Amount
Defeased Outstanding
General Obligation Emergency Telephone System-Series 1993 $ 213,730 $ 103,570
General Obligation Bonds - Series 2001A 406,571' 64,805
General Obligation Project Bonds - Series 2004A 323,040 3,405
General Obligation Project and Refunding Bonds - Series 2005B 11,435 1,750
General Obligation Direct Access Bonds - Series 2005E 22,186 5,555
General Obligation Project and Refunding Bonds - Series 2006A 28,695 7,440
General Obligation Project and Refunding Bonds - Series 2007A 10,505 4,350
Lakefront Millennium Project Parking Facilities Bonds - Series 1998 149,880 43,880
Special Transportation Revenue Bonds - Series 2001 118,715 90,395
Total $ 1,284,757 $ 325,150










67

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
11) Pension Funds
a) Retirement Benefit-Eligible City employees participate in one of four single-employer defined benefit pension plans (Plans). These Plans are: the Municipal Employees'; the Laborers' and Retirement Board Employees'; the Policemen's; and the Firemen's Annuity and Benefit Funds of Chicago. Plans are administered by individual retirement boards of trustees comprised of City officials or their designees and of trustees elected by plan members. Certain employees of the Chicago Board of Education participate in the Municipal Employees' Fund or the Laborers' and Retirement Board Employees' Annuity and Benefit Fund. Each Plan issues a publicly available financial report that includes financial statements and required supplementary information.
The financial statements of the Plans are prepared using the accrual basis of accounting. Employer and employee contributions are recognized in the period in which employee services are performed. Benefits and refunds are recognized when payable.
Plan investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on national or international exchanges are valued at the last reported sales price at current exchange rates. Fixed income securities are valued principally using quoted market prices provided by independent pricing services. For collective investments, the net asset value is determined and certified by the investment managers as of the reporting date. Real estate investments are generally valued by appraisals or other approved methods. Investments that do not have an established market are reported at estimated fair value.
The Plans have a securities lending program. At year-end, the Plans have no credit risk exposure to borrowers because the amounts the Plans owe the borrowers exceed the amounts the borrowers owe the Plans. The contract with the Plans' master custodian requires it to indemnify the Plans if the borrowers fail to return the securities (and if the collateral is inadequate to replace the securities lent) or fail to pay the fund for income distributions by the securities' issuers while the securities are on loan. All securities loans can be terminated on demand by either the Plans or the borrower, although the average term of the loans has not exceeded 154 days. The Plans' custodian lends securities for collateral in the form of cash, irrevocable letters of credit and/or U.S. government obligations equal to at least 102 percent of the fair value of securities or international securities for collateral of 105 percent. Cash collateral is invested in the lending agents' short-term investment pool, which at year-end has a weighted average maturity that did not exceed 39 days. The Plans cannot pledge to sell collateral securities received unless the borrower defaults. Loans outstanding as of December 31, 2014 are as follows: market value of securities loaned $883.6 million, market value of cash collateral from borrowers $906.2 million and market value of non-cash collateral from borrowers $1.5 million.
The Plans provide retirement, disability, and death benefits as established by State law. Benefits generally vest after 20 years of credited service. Employees who retire at or after age 55 (50 for policemen and firemen) with 20 years of credited service qualify to receive a money purchase annuity and those with more than 20 years of credited service qualify to receive a minimum formula annuity. The annuity is computed by multiplying the final average salary by a percentage ranging from 2.0 percent to 2.5 percent per year of credited service. The final average salary is the employee's highest average annual salary for any four consecutive years within the last 10 years of credited service.
Historically, State law required City contributions at statutorily, not actuarially, determined rates. The City's contribution was calculated based on the total amount of contributions by employees to the Plan made in the calendar year two years prior, multiplied by (in recent years) 1.25 for the Municipal Employees', 1.00 for the Laborers', 2.00 for the Policemen's, and 2.26 for the Firemen's. State law also requires covered employees to contribute a percentage of their salaries.
Beginning in 2016, current State law requires significantly increased contributions by the City to the Policemen's and Firemen's Plans. This is projected to require an increase in the City's contributions to the Policemen's and Firemen's Plans by more than $548.6 million starting in 2016 and increasing by
68
CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
approximately three percent each year thereafter. A bill was recently passed by the Illinois General Assembly which would, among other things, institute an extension to 2055 of the period by which the unfunded liabilities of the Policemen's and Firemen's Plans are amortized to a 90 percent Funded Ratio. This would also phase-in over the next five years the increases in the City's contributions to the Policemen's and Firemen's Plans. A motion to reconsider this vote has been filed in the Illinois Senate and is under consideration.
Also beginning in 2016, State law requires significantly increased contributions by the City to the Municipal Employees' and Laborers' Plans. The multiplier determining the City contribution, based on the total amount of contributions by employees to the respective Plans made in the calendar year two years prior, will increase as follows: for the City contribution to be made in 2016, 1.60 (Laborers') and 1.85 (Municipal Employees'); for the contribution made in 2017, 1.90 (Laborers') and 2.15 (Municipal Employees'); for the contribution made in 2018, 2.20 (Laborers') and 2.45 (Municipal Employees'); for the contribution made in 2019, 2.50 (Laborers') and 2.75 (Municipal Employees'); and for the contribution made in 2020, 2.80 (Laborers') and 3.05 (Municipal Employees'). Beginning in 2021, the City's payment contributions for Laborers' and Municipal Employees' will equal the Normal Cost (based on actuarial calculations) for such year plus the amount, determined on a level percentage of payroll basis, that is sufficient to achieve a Funded Ratio of 90 percent in Laborers' and Municipal Employees' by the end of contribution year 2055. This will require an increase in the City's contributions to the Municipal Employees' and Laborers' Plans of more than $89.1 million starting in 2016 and increasing by approximately three percent each year thereafter
The City's annual pension cost for the current year and related information for each Plan is as follows (dollars in thousands):

Contribution rates:
City (a)
Plan members..
Annual required contribution
Interest on net pension obligation .
Adjustment to annual required
contribution
Annual pension cost Contributions made
Increase in net pension obligation Net pension obligation,
beginning of year
Net pension obligation,
end of year
Municipal Employees'
(a) 8.5%
$ 839,038 200,461
(210,521)
828,978 149,747
679,231 2,672,812
$ 3,352,043 $
Policemen's
(a) 9.0%
i 491,651 209,449
(147,857)
553,243 178,158
375,085 2,702,573

Total
n/a rVa
1,740,972 562,972
(515,792)
1,788,152 447,399
1,340,753 7,290,607
Firemen's
(a)
9.125%
304,265 150,726
(154,961)
300,030 107,334
192,696 1,884,074
$ 2,076,770 $ 8,631,360













69

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014

Municipal
Employees' Laborers' Policemen's Firemen's
Actuarial valuation date 12/31/2014 12/31/2014 12/31/2014 12/31/2014
Actuarial cost method Entry age normal Entry age normal Entry age normal Entry age normal
Amortization method Level dollar, open Level dollar, open Level percent, open Level dollar, open
Remaining amortization period 30 years 30 years 30 years 30 years
Asset valuation method 5-yr. Smoothed 5-yr. Smoothed 5-yr. Smoothed 5-yr. Smoothed
Market Market Market Market
Actuarial assumptions:
Investment rate of return (a) 7.5% 7.5% 7.5% 8.0%
Projected salary increases (a):
Inflation 3.0 3.0 3.0 3.0
Seniority/Merit (b) (c) (d) (e)
Postretirement benefit increases (f) (f) (g) (g)
(a) Proceeds from a tax levy not more than the amount equal to the total amount of contributions by the employees to the Fund made in the
calendar year, two years prior to the year for which the annual applicable tax is levied multiplied by 1 25 for Municipal, 1.00 for Laborers', 2 00 Policemen's and 2.26 for Firemen's.
(D) Service-based increases equivalent to a level annual rate increase of 1 4 percent over a full career.
Service-based increases equivalent to a level annual rate increase of 1 9 percent over a full career.
Service-based increases equivalent to a level annual rate increase of 1 8 percent over a full career.
Service-based increases equivalent to a level annual rate increase of 1.8 percent over a full career.
The lesser of 3.0 percent or 1/2 of CPI (simple) per year, applied to the annuity in effect as of December 31, 2014, with a minimum of 1.0 percent per year for total annuities less than $22,000 00 Beginning at the earlier of

the later of the first of January of the year after retirement and age 61;
the later of the first of January of the year after the fourth anniversary of retirement and age 54.
Uses 3.0 percent per year for annuitants age 55 or over, bom before 1955 with at least 20 years of service and 1 5 percent per year for 20 years for annuitants age 60 or over, born in 1955 or later.
For particpants that first became members on or after January 1, 2011, increases are equal to the lesser of 3 0 percent and 50 percent of CPt-U of the original benefit, commencing at age 60
The following tables of information assist users in assessing each fund's progress in accumulating sufficient assets to pay benefits when due. The three-year historical information for each Plan is as follows (dollars in thousands):
Annual % of Annual Net Pension
Pension Pension Cost (Asset) /
Year Cost Contributed Obligation
Municipal Employees':
2012 $ 687,519 21.65% $ 2,008,546
812,463 18.24 2,672,812
828,978 18.06 3,352,043
Laborers':
2012 77,857 15.22 (63,707)
106,439 10.88 31,148
105,901 11.48 124,889
Policemen's:
483,359 40.94 2,350,739
531,355 33.79 2,702,573
553,243 32.20 3,077,658
Firemen's:
268,112 30.41 1,696,679
291,064 35.62 1,884,074
300,030 35.77 2,076,770
70
CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014





Actuarial
Valuation
Year Date
Municipal Employees':
12/31/12
12/31/13
12/31/14
Laborers':
12/31/12
12/31/13
12/31/14
Policemen's:
12/31/12
12/31/13
12/31/14
Firemen's:
12/31/12
12/31/13
12/31/14
SCHEDULE OF FUNDING PROGRESS
(dollars in thousands)
Unfunded AAL
Actuarial Accrued Liability (AAL) Entry Age
M
5,073,320 $ 13,475,377 $ 8,402,057 5,114,208 13,828,920 8,714,712 5,039,297 12,307,094 7,267,797
2,336,189 2,383,499 2,107,110
10,051,827 10,282,339 11,334,799
4,020,138 4,128,735 4,338,593





Funded Ratio


38%
37
41
56 57 64
31 30 26
25 24 23





Covered Payroll
(c)
1,590,794 1,580,289 1,602,978
198,790 200,352 202,673
1,015,171 1,015,426 1,074,333
418,965 416,492 460,190

Unfunded (Surplus) AAL as a Percentage of Covered Payroll ((b-a)/c)

528 %
551
453
513 514 370
680 712 780
722 753 728
The unfunded liability to the Plans poses significant financial challenges. The unfunded liability has consistently increased in recent years, but is expected to decrease in the future. Such a decrease is expected to result from significantly increased City contributions to the Plans, beginning in 2016, as required by State law (see Note 1). These increased contributions to the Plans are expected to pose a substantial burden on the City's financial condition.
b) Other Post Employment Benefits (OPEB) - The Pension Funds also contribute a portion of the City's contribution as subsidy toward the cost for each of their annuitants to participate in the City's health benefits plans, which include basic benefits for eligible annuitants and their dependents and supplemental benefits for Medicare eligible annuitants and their dependents. The amounts below represent the accrued liability of the City's pension plans related to their own annuitants and the subsidy paid to the City (see Note 12). The plan is financed on a pay as you go basis (dollars in thousands).













71
CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
Annual OPEB Cost and Contributions Made For Fiscal Year Ended December 31, 2014
Municipal
Employees' Laborers' Policemen's Firemen's
A portion ofthe City's employer contribution to the Pension Funds is used to finance the health insurance supplement benefit payments.
Annual Required Contribution Interest on Net OPEB Obligation Adjustment to Annual -Required Contribution
Annual OPEB Cost (Gain) Contributions Made
9,826 $ 3,404
(26,330)
(13,100) 9,051
2,520 $ 290
(2.243)
567 2,360
9,723 547
(4.079)
6,191 9,657
2,739 $ 24,808 536 4,777
(4.143)
(868) 2,471
(36,795)
(7,210) 23,539
Decrease in
Net OPEB Obligation
Net OPEB Obligation, Beginning of Year
Net OPEB Obligation, End of Year

Actuarial Method and Assumptions - For the Pension Funds' subsidies, the actuarial valuation for the fiscal year ended December 31, 2014 was determined using the Entry Age Normal actuarial cost method. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan understood by the employer and plan members) and included the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial method and assumptions used include techniques that are designed to reduce the effects of short term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long term perspective of the calculations.


















72

I
CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014

Actuarial Valuation Date Actuarial Cost Method

Amortization Method
Remaining Amortization Method
Asset Valuation Method

Actuarial assumptions: OPEB Investment Rate of Return (a)
Projected Salary Increases (a) Inflation
Municipal Employees'
12/31/2014
Entry Age Normal
Level Dollar, Open
2 years Closed
No Assets (Pay-as-you-go)

4.5% 3 0%

Laborers'
12/31/2014
Entry Age Normal
Level Dollar, Open
2 years Closed
No Assets (Pay-as-you-go)
Policemen's
12/31/2014
Entry Age Normal
Level Percent, Open
2 years Closed
4.5% 3.0%
(d) 0.0%
No Assets (Pay-as-you-go)

4.5% 3 0%
(c) 0 0%
rate of increase of 1.4 percent over a full career rate of increase of 1.9 percent over a full career rate of increase of 1 8 percent over a full career

OPEB COST SUMMARY
(dollars in thousands)
Annual OPEB Cost
% of Annual OPEB Obligation
Net OPEB Obligation

2013 2014
2012 2013 2014
2012 2013 2014
2012 2013 2014
Municipal Employees' 2012 $ 13,703
13,389 (13,100)
Laborers'
2,994 3,009 567
Policemen's
10,573 10,536 6,191
Firemen's
4,154 4,071 (868)
69.49 % $ 71,756
75,637 53,486
5,951 6,442 4,649
11,461 12,150 8,684
10,382 11,902 8,563
* The negative cost is primarily due to the insurance subsidy ending in 2016.
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revisions as the results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presents, as required,
73

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
supplementary information following the notes to the financial statements (dollars in thousands, unaudited).
Unfunded
Actuarial (Surplus)
Accrued AAL as a
Actuarial Liability Unfunded Percentage
Actuarial Value of (AAL) (Surplus) Funded Covered of Covered
Valuation Assets Entry Age UAAL Ratio Payroll Payroll
Date (_aj (bj ( b-a ) ( a/b ) . (c) (( b-a ) / c )
Municipal
Employees' 12/31/2014 $ - $ 17,495 $ 17,495 - $ 1,602,978 1.09
Laborers' 12/31/2014 - 4,593 4,593 - 202,673 2.27
Policemen's 12/31/2014 - 18,762 18,762 - 1,074,333 1.75
Firemen's 12/31/2014 - 4,995 4,995 - 460,190 1.09

12) Other Post Employment Benefits - City Obligation
Up to June 30, 2013, the annuitants who retired prior to July 1, 2005 received a 55 percent subsidy from the City and the annuitants who retired on or after July 1, 2005 received a 50, 45, 40 and zero percent subsidy from the City based on the annuitant's length of actual employment with the City for the gross cost of retiree health care under a court approved settlement agreement, known as the "Settlement Plan." The pension funds contributed their subsidies of $65 per month for each Medicare eligible annuitant and $95 per month for each Non-Medicare eligible annuitant to their gross cost. The annuitants contributed a total of $84.8 million in 2014 to the gross cost of their retiree health care pursuant to premium amounts set forth in the below-referenced settlement agreement.
The City of Chicago subsidized a portion of the cost (based upon service) for hospital and medical coverage for eligible retired employees and their dependents based upon a settlement agreement entered in 2003 and which expired on June 30, 2013.
On May 15, 2013, the City announced plans to, among other things: (i) provide a lifetime healthcare plan to former employees who retired before August 23, 1989 with a contribution from the City of up to 55% of the cost of that plan; and (ii) beginning July 1, 2013, provide employees who retired on or after August 23, 1989 with healthcare benefits in a new Retiree Health Plan (Health Plan), but with significant changes to the terms including increases in premiums and deductibles, reduced benefits and the phase-out of the Health Plan for such employees by December 31, 2016.
The cost of health benefits is recognized as an expenditure in the accompanying financial statements as claims are reported and are funded on a pay-as-you-go basis. In 2014, the net expense to the City for providing these benefits to approximately 24,381 annuitants plus their dependents was approximately $79.3 million.
Plan Description Summary - The City of Chicago was party to a written legal settlement agreement outlining the provisions of the Settlement Plans, which ended June 30, 2013. The Health Plan provides for annual modifications to the City's level of subsidy. It is set to phase out over three years, at which the Health Plan, along with any further City subsidy, will expire by December 31, 2016, for all but the group of former employees (the Korshak class of members) who retired before August 23, 1989, who shall have lifetime benefits. Duty Disabled retirees who have statutory pre-63/65 coverage will continue to have fully subsidized coverage under the active health plan until age 65.
The provisions of the Health Plan provide in general, that the City pay a percentage of the cost (based upon an employee's service) for hospital and medical coverage to eligible retired employees and their dependents for the specified period, ending December 31, 2016. The percentage subsidies were revised to reduce by approximately 25 percent of 2013 subsidy levels in 2014 and 50 percent of 2013 subsidy levels in 2015. Additional step downs in subsidy levels for 2016 have not yet been finalized.
74

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
In addition, State law authorizes the four respective Pension Funds (Policemen's, Firemen's, Municipal Employees', and Laborers') to provide a fixed monthly dollar subsidy to each annuitant who has elected coverage under any City health plan through December 31, 2016. After that date, no Pension Fund subsidies are authorized. The liabilities for the monthly dollar Pension Fund subsidies contributed on behalf of annuitants enrolled in the medical plan by their respective Pension Funds are included in the NPO actuarial valuation reports of the respective four Pension Funds under GASB 43 (see Note 11).
Special Benefits under the Collective Bargaining Agreements (CBA) - Under the terms of the collective bargaining agreements for the Fraternal Order of Police (FOP) and the International Association of Fire Fighters (IAFF), certain employees who retire after attaining age 55 with the required years of service are permitted to enroll themselves and their dependents in the healthcare benefit program offered to actively employed members. They may keep this coverage until they reach the age of Medicare eligibility. These retirees do not contribute towards the cost of coverage, but the Policemen's Fund contributes $95 per month towards coverage for police officers; the Firemen's Fund does not contribute.
Both of these agreements which provide pre-65 coverage originally expired at June 30, 2012. These benefits have been renegotiated to continue through 2016 or June 30, 2017, depending on bargaining unit agreements. This valuation assumes that the CBA special benefits, except for those who will have already retired as of December 31, 2016, will cease on December 31, 2016 or June 30, 2017, depending on bargaining unit agreements. The renegotiated agreements also provided that retirees will contribute 2% of their pension toward the cost of their health care coverage.
Funding Policy - No assets are accumulated or dedicated to funding the retiree health plan benefits.
Annual OPEB Cost and Net OPEB Obligation - The City's annual other post-employment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC). The ARC (Annual Required Contribution) represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and to amortize any unfunded actuarial liabilities over a period of ten years.
The following table shows the components of the City's annual OPEB costs for the year for the Health Plan and CBA Special Benefits, the amount actually contributed to the plan and changes in the City's net OPEB obligation. The Net OPEB Obligation is the amount entered upon the City's Statement of Net Position as of year end as the net liability for the other post-employment benefits - the Health Plan. The amount of the annual cost that is recorded in the Statement of Changes in Net Position for 2014 is the Annual OPEB Cost (expense).


















75
CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
Annual OPEB Cost and Contributions Made
(dollars in thousands)


Contribution Rates: City
Plan Members
Annual Required Contribution Interest on Net OPEB Obligation Adjustment to Annual Required Contribution
Annual OPEB Cost Contributions Made Decrease in Net OPEB Obligation
Net OPEB Obligation, Beginning of Year
Net OPEB Obligation, End of Year
Retiree Settlement Health Plan
Total
N/A
128,625 5,795 (21,988)
N/A
60,912 3,989 (15,135)
Pay As You Go Pay As You Go Pay As You Go
N/A
62,666 93,962
49,766 34,099
67,713 1,806 (6,853)
15,667
(31,296)
112,432 128,061
60,210
193,191
(15,629)
132,981
28,914 $ 148,648 $ 177,562

The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for fiscal year 2014 are as follows (dollars in thousands):
Schedule of Contributions,
OPEB Costs and Net Obligations
62,666 149.9% $ 28,914
75,444 148.4 60,210
37,444 260.5 96,760
49,766 68.5% $ 148,648
41,722 65.5 132,981
39,533 46.6 118,601
112,432 113.9% $ 177,562
117,166 118.9 193,191
76,977 150.6 215,361
Fiscal Year Annual Percentage of Annual Net OPEB
Ended OPEB Cost OPEB Cost Contributed Obligation
Settlement Plan
12/31/2014 S 12/31/2013 12/31/2012
CBA Special Benefits
12/31/2014 $ 12/31/2013 12/31/2012
Total
12/31/2014 $ 12/31/2013 12/31/2012
Funded Status and Funding Progress - As of January 1, 2014, the most recent actuarial valuation date, the actuarial accrued liability for benefits was $964.6 million all of which was unfunded. The covered payroll (annual payroll of active employees covered by the plan) was approximately $2,425.0 million and the ratio of the unfunded actuarial accrued liability to the covered payroll was 39.8 percent.
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revisions as the results are compared with past
76

i








I
I


CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
expectations and new estimates are made about the future. The schedule of funding progress, presents, as required, supplementary information following the notes to the financial statements (dollars in thousands, unaudited).
Unfunded UAAL
Actuarial Actuarial Actuarial Actuarial as a
Valuation Value of Accrued Accrued Liability Funded Covered Percentage of
Date Assets Liability (AAL) (UAAL) Ratio Payroll Covered Payroll
Settlement Plan
12/31/2013 $ - $ 498,205 $ 498,205 0% $ 2,425,000 20.5%
CBA Special Benefits
12/31/2013 $ - $ 466,421 $ 466,421 0% $ 1,400,269 33.3%
Total
12/31/2013 $ - $ 964,626 $ 964,626 0% $2,425,000 39.8 %

Actuarial Method and Assumptions - Projections of benefits for financial reporting purposes are based on the substantive plan (the plan understood by the employer and plan members) and included the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial method and assumptions used include techniques that are designed to reduce the effects of short term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long term perspective of the calculations.
For the Health Plan benefits (not provided by the Pension Funds), the entry age normal actuarial cost method was used. The actuarial assumptions included an annual healthcare cost trend rate of 8.0% initially, reduced by decrements to an ultimate rate of 5.0% in 2026. The range of rates included a 3.0% inflation assumption. Rates included a 2.5% inflation assumption. The plan has not accumulated assets and does not hold assets in a segregated trust. However, the funds expected to be used to pay benefits are assumed to be invested for durations which will yield an annual return rate of 3.0%. The remaining Unfunded Accrued Actuarial Liability is being amortized as a level dollar amount over ten years. The benefits include the provisions under the new Health Plan, which will be completely phased-out by December 31, 2016, except for the Korshak category, which is entitled to lifetime benefits. Also included in the Non-CBA benefits are the duty disability benefits under the active health plan payable to age 63/65.
For the Special Benefits under the CBA for Police and Fire, the renewed contracts' expiration dates of June 30, 2016 (for Police Captains, Sergeants and Lieutenants) and June 30, 2017 for all other Police and Fire are reflected, such that liabilities are included only for payments beyond the end of the calendar year of contract expiration on behalf of early retirees already retired and in pay status as of December 31 of the expiration year of the contract. The entry age normal method was selected. The actuarial assumptions included an annual healthcare cost trend rate of 8.0% in 2014, reduced by decrements to an ultimate rate of 5.0% in 2026. Rates included a 2.5% inflation assumption. The plan has not accumulated assets and does not hold assets in a segregated trust. The funds expected to be used to pay benefits are assumed to be invested for durations which will yield an annual return rate of 3.0%. The remaining Unfunded Accrued Actuarial Liability is being amortized as a level dollar amount over ten years.











77

I
CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014

Summary of Assumptions and Methods
Settlement CBA
Health Plan Special Benefits
Actuarial Valuation Date
Actuarial Cost Method
Amortization Method
Remaining Amortization Period
Asset Valuation Method
Actuanal Assumptions: Investment Rate of Return Projected Salary Increases Healthcare Inflation Rate
December 31,2013 Entry Age Normal Level Dollar, open 10 years Market Value

3.0% 2.5%
8.0% initial to 5.0% in 2026
December 31, 2013 Entry Age Normal Level Dollar, open 10 years Market Value

3.0% 2.5%
8 0% initial to 5.0% in 2026
13) Risk Management
The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; certain benefits for and injuries to employees and natural disasters. The City provides worker's compensation benefits and employee health benefits under self-insurance programs except for insurance policies maintained for certain Enterprise Fund activities. The City uses various risk management techniques to finance these risks by retaining, transferring and controlling risks depending on the risk exposure.
Risks for O'Hare, Midway, and certain other major properties, along with various special events, losses from certain criminal acts committed by employees and public official bonds are transferred to commercial insurers. Claims have not exceeded the purchased insurance coverage in the past three years, accordingly, no liability is reported for these claims. All other risks are retained by the City and are self-insured. The City pays claim settlements and judgments from the self-insured programs. Uninsured claim expenditures and liabilities are reported when it is probable that a loss has occurred and the amount of that loss can be reasonably estimated. These losses include an estimate of claims that have been incurred but not reported. The General Fund is primarily used to record all non-Enterprise Fund claims. The estimated portion of non-Enterprise Fund claims not yet settled has been recorded in the Governmental Activities in the Statement of Net Position as claims payable along with amounts related to deferred compensatory time and estimated liabilities for questioned costs. As of December 31, 2014, the total amount of non-Enterprise Fund claims was $483.2 million and Enterprise Fund was $57.1 million. This liability is the City's best estimate based on available information. Changes in the reported liability for all funds are as follows (dollars in thousands):
2014 2013
Balance, January 1 $ 547,674 $608,485
Claims incurred and
change in estimates 627,488 699,582
Claims paid on current and
prior year events (634,890) (760,393)
Balance, December 31 $ 540,272 $547,674

14) Expenditure of Funds and Appropriation of Fund Balances
The City expends funds by classification as they become available, and "Restricted" funds are expended first. If/when City Council formally sets aside or designates funds for a specific purpose, they are considered "Committed." The Mayor (or his/her designee) may in this capacity, also set aside,or designate funds for specific purposes and all of these funds will be considered "Assigned." Any remaining funds, which are not specifically allocated in one or more of the previous three categories, are considered "Unassigned' until such allocation is completed.
78

I
CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
In addition to the categories above, any amounts which will be used to balance a subsequent year's budget will be considered "Assigned" as Budgetary Stabilization funds. The amounts may vary from fiscal year to fiscal year or depending on the City's budgetary condition, or may not be designated at all. The funds may be assigned by the Mayor or his designee, up to the amount of available "Unassigned" fund balance at the end of the previous fiscal year.
a) Fund Balance Classifications
On the fund financial statements, the Fund Balance consists of the following (dollars in thousands):
Community
Service Bond, Note Development Other
Special Concession Redemption Improvement Governmental
Taxing Areas and Reserve and Interest Projects Funds

Federal, State and Local Grants
General
Nonspendable Purpose.
Inventory $ 24,498
Restricted Purpose:
TIF and Special Service Area Programs and
1,327,058
139,491
347,652
Redevelopment
Capital Projects
Grants - 15,230
Debt Service
General Government
75,176
Committed Purpose:
620,891
Debt Service
Budget and Credit Rating Stabilization . .
Repair, Maintenance and City Services .. Assigned Purpose:
Future obligations
Special Projects 65,223
Unassigned 51,557 (240,275)
(1,576,293) (26,872)
Total Government Fund Balance $ 141,278 $ (225,045) $ 1,327,058 S (955,402) S (26,872) $ 347,652 $ 214,667

At the end of the fiscal year, total encumbrances for the General Operating Fund amounted to $29.2 million, $47.3 million for the Special Taxing Areas Fund, $75.5 million for the Capital Projects Fund and $7.3 million for the Non Major Special Revenue Fund.
15) Commitments and Contingencies
The City is a defendant in various pending and threatened individual and class action litigation relating principally to claims arising from contracts, personal injury, property damage, police conduct, alleged discrimination, civil rights actions and other matters. City management believes that the ultimate resolution of these matters will not have a material adverse effect on the financial position of the City.
The City participates in a number of federal-and state-assisted grant programs. These grants are subject to audits by or on behalf of the grantors to assure compliance with grant provisions. Based upon past experience and management's judgment, the City has made provisions in the General Fund for questioned costs and other amounts estimated to be disallowed. City management expects such provision to be adequate to cover actual amounts disallowed, if any.
As of December 31, 2014, the Enterprise Funds have entered into contracts for approximately $518.1 million for construction projects.
The City's pollution remediation obligation of $8.5 million is primarily related to Brownfield redevelopment projects.

79

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
These projects include removal of underground storage tanks, cleanup of contaminated soil, and removal of other environmental pollution identified at the individual sites. The estimated liability is calculated using the expected cash flow technique. The pollution remediation obligation is an estimate and subject to changes resulting from price increases or reductions, technology, or changes in applicable laws or regulations.
Concession Agreements
The major fund entitled Service Concession and Reserve Fund is used for the purpose of accounting for the deferred inflows associated with governmental fund long-term lease and concession transactions. Deferred inflows are amortized over the life of the related lease and concession agreements. Proceeds from these transactions may be transferred from this fund in accordance with ordinances approved by the City Council that define the use of proceeds.
In February 2009, the City completed a $1.15 billion concession agreement to allow a private operator to manage and collect revenues from the City's metered parking system for 75 years. The City received an upfront payment of $1.15 billion which was recognized as a deferred inflow that will be amortized and recognized as revenue over the term of the agreement. The City recognizes $15.3 million of revenue for each year through 2083.
In December 2006, the City completed a long-term concession and lease of the City's downtown underground public parking system. The concession granted Chicago Loop Parking, LLC (CLP) the right to operate the garages and collect parking and related revenues for the 99-year term of the agreement. The City received an upfront payment of $563.0 million of which $347.8 million was simultaneously used to purchase three of the underground garages from the Chicago Park District. The City recognized a deferred inflow that will be amortized and recognized as revenue over the term of the lease. The City recognizes $5.7 million of revenue for each year through 2105. In January 2014, CLP assigned all of its interests in the concession and lease agreement to LMG2, LLC, the designee of its lenders, in lieu of foreclosure by the lenders on their leasehold mortgage on the underground garages.
In January 2005, the City completed a long-term concession and lease of the Skyway. The concession granted a private company the right to operate the Skyway and to collect toll revenue from the Skyway for the 99-year term of the agreement. The City received an upfront payment of $1.83 billion; a portion of the payment ($446.3 million) advance refunded all of the outstanding Skyway bonds. The City recognized a deferred inflow of $1.83 billion that will be amortized and recognized as revenue over the 99-year term of the agreement. The City recognizes $18.5 million of revenue related to this transaction for each year through 2103. Skyway land, bridges, other facilities and equipment continue to be reported on the Statement of Net Position and will be depreciated, as applicable, over their useful lives. The deferred inflow of the Skyway is reported in the Proprietary Funds Statement of Net Position.
Subsequent Events Ratings
In February 2015, Moody's Investors Service (Moody's) downgraded the ratings of the City's General Obligation bonds, Sales Tax revenue bonds and Motor Fuel Tax revenue bonds from Baal to Baa2, the City's Wastewater senior lien revenue bonds from A2 to A3, and the Wastewater second lien revenue bonds from A3 to Baal, each with a negative outlook.
In March 2015, Kroll Bond Rating Agency (Kroll) rated the City's General Obligation bonds A- with a stable outlook.
In May 2015 Moody's downgraded the City's General Obligation bonds, Sales Tax revenue bonds and Motor Fuel Tax revenue bonds from Baa2 to Ba1, with a negative outlook. At the same time, Moody's downgraded the City's Water senior lien revenue bonds from A2 to Baal, the Water second lien revenue bonds from A3 to Baa2 and the City's Wastewater senior lien bonds from A3 to Baa2 and the Wastewater second lien revenue bonds from Baal to Baa3, each with a negative outlook. The Moody's May 2015 downgrades triggered (with respect to the City's General Obligation debt, Sales Tax revenue bonds, Water second lien revenue bonds and Wastewater second lien revenue bonds) defaults under certain credit and/or liquidity facilities, certain general obligation revolving credit agreements and, for the Series 2008C Wastewater second lien revenue bonds, certain continuing covenant agreements with those bondholders. The Moody's May 2015 downgrades also triggered termination events under interest rate swap
80

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
agreements to which the City is a party. The City does not have any such facilities or agreements relating to its Motor Fuel Tax revenue bonds. In response to the triggering of these defaults and termination events, the City took several actions: (i) it terminated the Wells Fargo letter of credit securing two series of its General Obligation commercial paper notes (no such notes were outstanding at the time of termination) and terminated the associated reimbursement agreement; (ii) it entered into forbearance agreements with (A) the providers of credit and/or liquidity facilities for its General Obligation bonds, General Obligation commercial paper notes and Sales Tax revenue bonds, (B) the lenders on its General Obligation revolving credit agreements, (C) the counterparties on its General Obligation and Sales Tax Revenue interest rate swap agreements, and (D) the holders of its Series 2008C Wastewater second lien revenue bonds; (iii) it amended and/or transferred the interest rate swap agreements for its Water second lien revenue bonds and its Wastewater second lien revenue bonds to remove such termination event from the swap agreements prior to any demand being made for a termination payment by the counterparties; and (iv) it obtained a waiver of the event of default from the provider of a letter of credit relating to its Water second lien revenue bonds.
In May 2015, subsequent to the Moody's downgrades, Standard and Poor's (S&P) downgraded the City's General Obligation bonds from A+ to A- with a negative watch. S&P also downgraded the City's Water senior lien revenue bonds from AA to A, the Water second lien revenue bonds from AA- to A- the City's Wastewater senior lien bonds from AA to A and the Wastewater second lien revenue bonds from AA- to A-, each with a negative watch.
In May 2015, subsequent to the Moody's downgrades, Fitch Ratings (Fitch) downgraded the City's General Obligation bonds and Sales Tax revenue bonds from A- to BBB+, with a negative watch.
In June 2015, Kroll rated the Sales Tax revenue bonds AA+ with a stable outlook.
Bonds
In May 2015, the City converted its General Obligation Bonds (Neighborhoods Alive 21 Program), Series 2002B ($176.2 million) from variable rate to fixed rate. The bonds were converted at interest rates ranging from 5.0 percent to 5.5 percent and mandatory sinking fund or maturity dates from January 1, 2016 to January 1, 2037. Proceeds were used to pay a portion of the purchase price of the bonds mandatorily tendered on the conversion date and the costs of conversion. The remaining portion of $24.8 million was redeemed by the City.
In May 2015, the City converted its General Obligation Bonds, Project and Refunding Series 2003B ($170.1 million) from variable rate to fixed rate. The bonds were converted at interest rates ranging from 5.0 percent to 5.5 percent and maturity dates from January 1, 2016 to January 1, 2034. Proceeds were used to pay a portion of the purchase price of the bonds mandatorily tendered on the conversion date and the costs of conversion. The remaining portion of $11.8 million was redeemed by the City.
In June 2015, the City converted its General Obligation Bonds, Project and Refunding Series 2005D ($174.0 million) from variable rate to fixed rate. The bonds were converted at an interest rate of 5.5 percent and mandatory sinking fund or maturity dates from January 1, 2033 to January 1, 2040. Proceeds were used to pay a portion of the purchase price of the bonds mandatorily tendered on the conversion date and the costs of conversion. The remaining portion of $48.8 million was redeemed by the City.
In June 2015, the City converted its General Obligation Bonds, Refunding Series 2007E, F and G ($153.7 million) from variable rate to fixed rate. The bonds were converted at an interest rate of 5.5 percent and mandatory sinking fund or maturity dates from January 1, 2034 to January 1, 2042. Proceeds were used to pay a portion of the purchase price of the bonds mandatorily tendered on the conversion date and the costs of conversion. The remaining portion of $46.3 million was redeemed by the City.
In June 2015, the City converted its Sales Tax Revenue Refunding Bonds, Series 2002 ($111.7 million) from variable rate to fixed rate. The bonds were converted at interest rates ranging from 2.0 percent to 5.0 percent. Proceeds were used to pay the purchase price of the bonds mandatorily tendered on the conversion date and the costs of conversion.



81

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
Swaps
In May and June 2015, the City terminated all of its General Obligation and Sales Tax revenue swaps and transferred and modified certain thresholds with respect to Additional Termination Events for its Water second lien revenue swaps and Wastewater second lien revenue swaps.
The City terminated the swaps relating to its (1) General Obligation Bonds, Project and Refunding Series 2003B for total termination payments of $31.0 million, (2) General Obligation Bonds, Project and Refunding Series 2005D for total termination payments of $62.8 million, (3) General Obligation Bonds, Refunding Series 2007 E, F and G for total termination payments of $62.0 million and 4) Sales Tax Revenue Refunding Bonds, Series 2002 for a termination payment of $29.0 million.
The City transferred the swaps with UBS related to its Water Second Lien Revenue Bonds, Series 2000 ($100.0 million notional amount) and Series 2004 ($173.3 million notional amount) to Barclays. At the same time, the ATE rating threshold was reduced from below Baal by Moody's or BBB+ by S&P to below Baa3 or BBB- by Moody's and S&P respectively. In addition, the swap with Royal Bank of Canada relating to the City's Water Second Lien Revenue Bonds, Series 2004 ($182.2 million notional amount) was modified to reduce the ATE rating threshold from below Baal by Moody's or BBB+ by S&P to below BBB+ by S&P or Fitch.
The City modified the ATE rating thresholds related to its Second Lien Wastewater Transmission Revenue Bonds, Series 2008C swaps with JPMorgan ($49.8 million notional amount) and Bank of America ($49.8 million notional amount) from below Baal by Moody's or BBB+ by S&P to below Baa3 or BBB- by Moody's or S&P, respectively.
Commercial Paper, Letters of Credit, Lines of Credit and Continuing Covenant Agreements
As of December 31, 2014, the outstanding balance for the City's General Obligation Commercial Paper Notes and General Obligation Lines of Credit (G.O. CP) was $297.4 million. Since January 2015, the City has paid down $54.2 million of G.O. CP and has issued $591.8 million to refund certain outstanding bonds, facilitate the conversion of variable rate bonds to fixed rate, fund swap termination payments and pay certain settlements and judgments. The current G.O. CP outstanding is approximately $835.0 million.
In February 2015, the City's Midway Commercial Paper program was reduced from $150 million to $85 million. As such, the PNC letter of credit was not extended.
In April 2015, the City issued $30.5 million aggregate principal amount of its Chicago O'Hare International Airport Commercial Paper Notes (O'Hare CP Notes). The proceeds of these O'Hare CP Notes were used to finance a portion of the cost of authorized airport projects.
In May and June 2015, the City converted its General Obligation bonds and Sales Tax revenue bonds from variable rate to fixed rate, as discussed above. The related letters of credit and liquidity facilities were terminated at the time of the conversion.
Due to the May 2015 downgrades by Moody's, the City entered into forbearance agreements with its General Obligation commercial paper credit providers (except Wells Fargo), the lenders on its General Obligation revolving credit agreements and the Orange Line letter of credit provider. The forbearance agreements extend to September 30, 2015, unless another event of default is triggered, including another rating downgrade by Moody's or a downgrade below investment grade by S&P or Fitch. The Wells Fargo letter of credit was terminated; there were no such General Obligation commercial paper notes outstanding secured by that letter of credit. The City also entered into forbearance agreements with the holders of its Series 2008C Wastewater second lien revenue bonds. Each of those holders has a continuing covenant agreement with the City with respect to its bonds. An event of default was triggered under each continuing covenant agreement due to the May 2015 downgrades by Moody's. The forbearance agreements extend to June 30, 2016 (provided that the City has taken certain steps prior to June 30, 2016 to convert the Series 2008C Wastewater second lien revenue bonds to fixed rates of interest), unless another event of default is triggered, including another rating downgrade by Moody's or a downgrade below investment grade by S&P or Fitch.
In May 2015, the City entered into a Line of Credit Agreement with DNT Asset Trust, which allows the City to draw on the line of credit in an aggregate amount not to exceed $200.0 million to facilitate the conversions of the City's
82

CITY OF CHICAGO, ILLINOIS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2014
General Obligation variable rate bonds to fixed rate, by funding a portion of the purchase price of tendered bonds as well as paying for the redemption of bonds which were not converted to fixed rate. The line of credit was subsequently reduced to $151.6 million, to reflect the amount of the draws related to the conversions. The City's repayment obligation under the line of credit is a general obligation of the City. The line of credit expires September 30, 2015. In June 2015, the City amended its Revolving Credit Agreement with Bank of America, which increases the line of credit amount to $348.4 million. The City's repayment obligation under the line of credit is a general obligation of the City. The line of credit remains in effect through the forbearance period ending on September 30, 2015, although any draws on the line of credit during and after the forbearance period are subject to approval by the bank in its sole discretion.








































83

REQUIRED SUPPLEMENTARY INFORMATION CITY OF CHICAGO, ILLINOIS
SCHEDULE OF OTHER POSTEMPLOYMENT BENEFITS FUNDING PROGRESS Last Three Years (dollars are in thousands)


Actuarial Valuation Date


Actuarial
Value of Assets (a)

Actuarial Accrued Liability (AAL) Entry Age
LD
Unfunded Actuarial Accrued Liability (UAAL) (b-a)



Funded Ratio (a/b)



Covered Payroll (c)
Unfunded (Surplus) AAL as a Percentage of Covered
Payroll (( b-a)/c)
Municipal Employees'
12/31/2012
12/31/2013
12/31/2014


162,083 27,573 17,495


162,083 27,573 17,495


$ 1,590,794 1,580,289 1,602,978


10.19 1.74 1.09

Laborers'
12/31/2012
12/31/2013
12/31/2014
Policemen's
12/31/2012
12/31/2013
12/31/2014
Firemen's
12/31/2012
12/31/2013
12/31/2014
City of Chicago
12/31/2011
12/31/2012
12/31/2013
38,654 7,074 4,593

168,811 28,376 18,762

46,206 7,692 4,995

470,952 997,281 964,626
38,654 7,074 4,593

168,811 28,376 18,762

46,206 7,692 4,995

470,952 997,281 964,626
198,790 200,352 202,673

1,015,171 1,015,426 1,074,333

418,965 416,492 460,190

2,518,735 2,385,198 2,425,000
19.44 % 3.53 2.27

16.63 % 2.79 1.75

11.03 % 1.85 1.09

18.70 %
41.81
39.78
















84

APPENDIX D PROPERTY TAXES
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PROPERTY TAXES
Real Property Assessment, Tax Levy and Collection Procedures
General
Information under this caption provides a general summary of the current procedures for real property assessment, tax levy and tax collection in Cook County (the "County"). The following is not an exhaustive discussion, nor can there be any assurance that the procedures described under this caption will not be changed either retroactively or prospectively. The Illinois laws relating to real property taxation arc contained in the Illinois Property Tax Code (the "Property Tax Code").
Substantially all (approximately 99.99 percent) of the "Equalized Assessed Valuation" (described below) of taxable properly in the City is located in the County. The remainder is located in DuPage County. Accordingly, unless otherwise indicated, the information set forth under this caption and elsewhere in this Official Statement with respect to taxable property in the City does not reflect the portion situated in DuPage County.
Assessment
The Cook County Assessor (the "Assessor") is responsible for the assessment of all taxable real property within the County, except for certain railroad property and pollution control equipment assessed directly by the State. One-third of the real property in the County is reassessed each year on a repeating triennial schedule established by the Assessor. The suburbs in the northern and northwestern portions of the County were reassessed in 2013. The suburbs in the western and southern portions ofthe County were reassessed in 2014. The Cily was reassessed in 2015.
Real property in the County is separated into various classifications for assessment purposes. After the Assessor establishes the fair cash value of a parcel of land, lhat value is multiplied by one ofthe classification percentages to arrive at the assessed valuation (the "Assessed Valuation") for the parcel. Beginning with the 2009 tax year, the classification percentages range from 10 to 25 percent depending on the type of property (e.g., residential, industrial, commercial) and whether it qualifies for certain incentives for reduced rates. For prior years, the classification percentages ranged from 16 to 38 percent.
The Cook County Board of Commissioners has adopted various amendments to the County's Real Property Assessment Classification Ordinance (the "Classification Ordinance"), pursuant to which the Assessed Valuation of real property is established. Among other things, these amendments have reduced certain properly classification percentages, lengthened certain renewal periods of classifications and created new properly classifications.
The Assessor has established procedures enabling taxpayers to contest the Assessor's tentative Assessed Valuations. Once the Assessor certifies final Assessed Valuations, a taxpayer can seek review of its assessment by the Cook County Board of Review (the "Board of Review"). The Board of Review has powers lo review and adjust Assessed Valuations set by the Assessor. Owners ofproperty are able to appeal decisions ofthe Board of Review to the Illinois Property Tax Appeal Board (the "PTAB"), a state­wide administrative body, or to the Circuit Court of Cook County (the "Circuit Court"). The PTAB has the power to determine the Assessed Valuation of real property based on equity and the weight of the evidence. Based on the amount of the proposed change in assessed valuation, taxpayers may appeal decisions of the PTAB to either the Circuit Court or the Illinois Appellate Court under the Illinois Administrative Review Law.




D-1

In a scries of PTAB decisions, the PTAB reduced the assessed valuations of certain commercial and industrial property in the County based upon the application of median levels of assessment derived from Illinois Department of Revenue sales-ratio studies instead of utilizing the assessment percentages provided in the Classification Ordinance. On appeal, the Illinois Appellate Court determined that it was improper for the PTAB, on its own initiative, to use the sales-ratio studies when such studies were not even raised as an issue by the taxpayer before the Board of Review or in its appeal to the PTAB.
The Appellate Court decisions do not preclude a taxpayer in a properly presented case from introducing into evidence sales-ratio studies for the purpose of obtaining an assessment below that which would result from application of the Classification Ordinance. No prediction can be made whether any currently pending or future case would be successful. The City believes that the impact of any such case on the City would be minimal, as the City's ability to levy or collect real property taxes would be unaffected.
As an alternative to seeking review of Assessed Valuations by the PTAB, taxpayers who have first exhausted their remedies before the Board of Review may file an objection in the Circuit Court. The City filed a petition to intervene in certain of these proceedings for the first time in 2003, but the Circuit Court denied the City's petition in early 2004. The Cily appealed the Circuit Court decision. On appeal, the Circuit Court decision was reversed and the matter was remanded to the Circuit Court wilh instructions to allow the City to proceed with its petitions to intervene. In addition, in cases where the Assessor agrees that an assessment error has been made after tax bills have been issued, the Assessor can correct the Assessed Valuation, and thus reduce the amount of taxes due, by issuing a Certificate of Error.
Equalization
After the Assessed Valuation for each parcel of real estate in a county has been determined for a given year including any revisions made by the Board of Review, the Illinois Department of Revenue reviews the assessments and determines an equalization factor (the "Equalization Factor"), commonly called the "multiplier," for each county. The purpose of equalization is to bring the aggregate assessed value of all real properly, except farmland, wind turbines with a nameplate capacity of al lcasl 0.5 megawatts and undeveloped coal, in each county to the statutory requirement of 33-1/3 percent of estimated fair cash value. Adjustments in Assessed Valuation made by the PTAB or the courts are not reflected in the Equalization Factor. The Assessed Valuation of each parcel of real estate in the County is multiplied by the County's Equalization Factor to determine the parcel's equalized assessed valuation (the "Equalized Assessed Valuation").
The Equalized Assessed Valuation for each parcel is the final property valuation used for determination of tax liability. The aggregate Equalized Assessed Valuation for all parcels in any taxing body's jurisdiction, after reduction for all applicable exemptions, plus the valuation of property assessed directly by the Stale, constitutes the total real estate tax base for the taxing body and is the figure used to calculate tax rates (the "Assessment Base"). The Equalization Factor for a given year is used in computing the taxes extended for collection in the following year. The Equalization Factors for each of the last 10 tax levy years, from 2005 through 2014 (the most recent years available), are listed in this Official Statement under "FINANCIAL DISCUSSION AND ANALYSIS—Property Taxes" (sec the table captioned "Assessed, Equalized Assessed and Estimated Value of All Taxable Property 2005-2014").
In 1991, legislation was enacted by the State which provided that for 1992 and for subsequent years' tax levies, the Equalized Assessed Valuation used to determine any applicable tax limits is the one for the immediately preceding year and not the current year. This legislation impacts taxing districts wilh



D-2

rate limits only and currently does not apply to the City. See "—Property Tax Limit Considerations" below.
Exemptions
The Illinois Constitution allows homestead exemptions for residential property. Pursuant to the Illinois Property Tax Code, property must be occupied by the owner as a principal residence on January 1 of the tax year for which the exemption will be claimed.
The annual general homestead exemption provides for the reduction of the Equalized Assessed Valuation ("EAV") of certain property owned and used exclusively for residential purposes by the amount of the increase over the 1977 EAV, currently up to a maximum reduction of $7,000 in Cook County and $6,000 in all other counties. There is an additional homestead exemption for senior citizens (individuals at least 65 years of age), for whom the Assessor is authorized to reduce the EAV by $5,000. There is also an exemption available for homes owned and exclusively used for residential purposes by disabled veterans or their spouses, for whom the Assessor is authorized lo annually exempt up to $70,000 of the Assessed Valuation. An additional exemption is available for disabled persons, for whom the Assessor is authorized to reduce the EAV by $2,000. An exemption is available for homestead improvements by an owner of a single family residence of up to $75,000 of the increase in the fair cash value of a home due to certain home improvements to an existing structure for at least four years from the date the improvement is completed and occupied. Senior citizens whose household income is $55,000 or less, and who are either the owner of record or have a legal or equitable interest in the property, qualify to have the EAV of their property frozen in the year in which they first qualify for the so-called "freeze" and each year thereafter in which the qualifying criteria are maintained. Each year applicants for the Senior Citizens Assessment Freeze Homestead Exemption must file the appropriate application and affidavit with the chief county assessment office.
Aside from homestead exemptions, upon application, review and approval by the Board of Review, or upon an appeal to the Illinois Department of Revenue, there arc exemptions generally available for properties of religious, charitable (including qualifying not-for-profit hospitals), and educational organizations, as well as units of federal, state and local governments.
Additionally, counties have been authorized to create special property tax exemptions in long-established residential areas or in areas of deteriorated, vacant or abandoned homes and properties. Under such an exemption, long-lime, residential owner-occupants in eligible areas would be entitled to a deferral or exemption from that portion of property taxes resulting from an increase in market value because of refurbishment or renovation of other residences or construction of new residences in the area. On June 5, 2001, the County enacted the Longtime Homeowner Exemption Ordinance, which provides property tax relief from dramatic rises in property taxes directly or indirectly attributable to gentrification in the form of an exemption. This is generally applicable to homeowners: (i) who have resided in their homes for 10 consecutive years (or five consecutive years for homeowners who have received assistance in the acquisition of the property as part of a government or nonprofit housing program), (ii) whose annual household income for the year of the homeowner's triennial assessment docs not exceed 115 percent of the Chicago Primary Metropolitan Statistical Area median income as defined by the United States Department of Housing and Urban Development, (iii) whose property has increased in assessed value lo a level exceeding 150 percent of the current average assessed value for properties in the assessment district where the property is located, (iv) whose property has a market value for assessment purposes of $300,000 or less in the current reassessment year, and (v) who, for any triennial assessment cycle, did not cause a substantial improvement which resulted in an increase in the property's fair cash value in excess of the $45,000 allowance set forth in the Property Tax Code.



D-3

Tax Levy
There are over 800 units of local government (the "Units") located in whole or in part in the County lhal have taxing power. The major Units having taxing power over property within the City are the City, the Chicago Park District, the Board of Education of the City of Chicago, the School Finance Authority, Community College District No. 508, the Metropolitan Water Reclamation District of Greater Chicago, the County and the Forest Preserve District of Cook County.
As part of the annual budgetary process of the Units, each year in which the determination is made to levy real estate taxes, proceedings are adopted by the governing body for each Unit. The tax levy proceedings impose the Units' respective real estate taxes in terms of a dollar amount. Each Unit certifies its real estate tax levy, as established by the proceedings, to the County Clerk's Office. The remaining administration and collection of the real estate taxes is statutorily assigned to the County Clerk and the County Treasurer, who is also the County Collector (the "County Collector").
After the Units file their annual tax levies, the County Clerk computes the annual tax rate for each Unit by dividing the levy of each Unit by the Assessment Base of the respective Unit. If any tax rate thus calculated or any component of such a tax rate (such as a levy for a particular fund) exceeds any applicable statutory rate limit, the County Clerk disregards the excessive rate and applies the maximum rate permitted by law.
The County Clerk then computes the total tax rate applicable to each parcel of real property by aggregating the lax rates of all the Units having jurisdiction over Ihc particular parcel. The County Clerk enters in the books prepared for the County Collector (the "Warrant Books") the tax (determined by multiplying that total tax rate by the Equalized Assessed Valuation of that parcel), along with the tax rates, the Assessed Valuation and the Equalized Assessed Valuation. The Warrant Books are the County Collector's authority for the collection of taxes and are used by the County Collector as the basis for issuing tax bills to all properly owners.
The Illinois Truth in Taxation Law (the "Truth in Taxation Law") contained within the Property Tax Code imposes procedural limitations on a Unit's real estate taxing powers and requires that a notice in a prescribed form must be published if the aggregate annual levy is estimated to exceed 105 percent of the levy of the preceding year, exclusive of levies for debt service, levies made for the purpose of paying amounts due under public building commission leases and election costs. A public hearing must also be held, which may not be in conjunction with the budget hearing of the Unit on the adoption of the annual levy. No amount in excess of 105 percent of the preceding year's levy may be used as the basis for issuing tax bills to property owners unless the levy is accompanied by certification of compliance with the foregoing procedures. The Truth in Taxation Law does not impose any limitations on the rale or amount of the levy to pay principal of and interest on the general obligations bonds and notes ofthe City.
Collection
Property taxes are collected by the County Collector, who remits to each Unit its share of the collections. Taxes levied in one year become payable during the following year in two installments, the first due on March 1 and the second on the later of August 1 or 30 days after the mailing of the tax bills. The first installment is an estimated bill calculated at 55 percent of the prior year's tax bill. The second installment is for the balance of the current year's tax bill, and is based on the current levy, assessed value and Equalization Factor and applicable tax rates, and reflects any changes from the prior year in those factors. Taxes on railroad real property used for transportation purposes are payable in one lump sum on the same date as the second installment.



D-4

The following table sets forth the second installment penalty date for the tax years 2005 to 2014; the first installment penalty date has been March 2 or March 3 for all years.
Second Installment
Penalty Date
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
August 3, 2015 August 1,2014 August 1,2013
November 1, 2012 November 1, 2011 December 13, 2010 December 1,2009 November 3, 2008 December 3, 2007 September 1, 2006
The County may provide for tax bills to be payable in four installments instead of two. The County has not determined to require payment of tax bills in four installments. During the periods of peak collections, tax receipts are forwarded to each Unit not less than weekly.
At the end of each collection year, the County Collector presents the Warrant Books to the Circuit Court and applies for a judgment for all unpaid taxes. The court order resulting from the application for judgment provides for an annual sale of all unpaid taxes shown on the year's Warrant Books (the "Annual Tax Sale"). The Annual Tax Sale is a public sale, al which lime successful tax buyers pay the unpaid laxes plus penalties. Unpaid taxes accrue interest al the rate of 1.5 percent per month from their due date until the date of sale. Taxpayers can redeem their properly by paying the amount paid at the sale, plus an additional penalty fee calculated from the penalty bid at sale times a certain multiplier based on each six-month period after the sale. If no redemption is made within the applicable redemption period (ranging from six months to two and one-half years depending on the type and occupancy of the property) and the tax buyer files a petition in Circuit Court, notifying the necessary parties in accordance with applicable law, the tax buyer receives a deed to the property. In addition, there are miscellaneous statutory provisions for foreclosure of tax liens.
If there is no sale of the tax lien on a parcel of property at the Annual Tax Sale, the taxes are forfeited and eligible lo be purchased at any time thereafter at an amount equal to all delinquent taxes, interest and certain other costs to the date of purchase. Redemption periods and procedures are the same as applicable to the Annual Tax Sale, except lhat a different penalty rale may apply depending on the length ofthe redemption period.
A scavenger sale (the "Scavenger Sale"), like the Annual Tax Sale, is a sale of unpaid taxes. A Scavenger Sale must be held, al a minimum, every two years on all properly in which taxes are delinquent for two or more years. The sale price of the unpaid taxes is the amount bid at the Scavenger Sale, which may be less than the amount of the delinquent taxes. Redemption periods vary from six months to two and one-half years depending upon the type and occupancy of the property.
The annual appropriation ordinance of the City has a provision for an allowance for uncollectible taxes. The City reviews this provision annually to determine whether adjustments are appropriate. For tax year 2015, collectible in 2016, the allowance for uncollectible taxes is about four percent of the estimated gross tax levy. For financial reporting purposes, uncollected taxes are written off by the City after four years, but arc fully reserved after one year.




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Property Tax Limit Considerations
State of Illinois. The Property Tax Code limits (a) the amount of property taxes that can be extended for non-home rule units of local government located in the County and five adjacent counties and (b) the ability of those entities to issue general obligation bonds without voter approval (collectively, the "State Tax Cap"). Generally, the extension of property taxes for a unit of local government subject to the State Tax Cap may increase in any year by five percent or the percent increase in the Consumer Price Index for the preceding year, whichever is less, or the amount approved by referendum. The Stale Tax Cap does not apply to "limited bonds" payable from a unit's "debt service extension base" or to "double-barreled alternate bonds" issued pursuant to Section 15 ofthe Local Government Debt Reform Act.
As a home rule unit of government, the City is not subject lo the State Tax Cap. Under the Illinois Constitution of 1970, the enactment of legislation applying the State Tax Cap to the City and other home rule municipalities would require a law approved by the vote of three-fifths ofthe members of each house of the Illinois General Assembly and the concurrence of the Governor of the State of Illinois. It is not possible to predict whether, or in what form, any properly tax limitations applicable to the City would be enacted by the Illinois General Assembly. The adoption of any such limits on the extension of real properly taxes by the Illinois General Assembly may, in future years, adversely affect the City's ability to levy property taxes to finance operations at current levels and the City's power to issue additional general obligation debt without the prior approval of voters.
As a home rule unit of government, the City is not limited as to the amount of debt il may issue payable from ad valorem properly taxes. The General Assembly may limit by law the amount and require referendum approval of such debt, but only to the extent such debt, in the aggregate, exceeds three percent of the assessed value of all taxable property in the City.
State law imposes certain notice and public hearing requirements on non-home rule units of local government that propose to issue general obligation debt. These requirements do not apply to the City.
The City. In 1993, the City Council of the City adopted an ordinance (the "Chicago Property Tax Limitation Ordinance") limiting, beginning in 1994, the City's aggregate property tax levy lo an amount equal to the prior year's aggregate property tax levy (subject to certain adjustments) plus the lesser of (a) five percent or (b) the percentage increase in the annualized Consumer Price Index for all urban consumers for all items, as published by the United States Department of Labor, during the 12-month period most recently announced prior to the filing of the preliminary budget estimate report. The Chicago Property Tax Limitation Ordinance also provides that such limitation shall not reduce lhat portion of each levy attributable to the greater of: (i) for any levy year, interest and principal on general obligation notes and bonds of the City outstanding on January 1, 1994, to be paid from collections ofthe levy made for such levy year, or (ii) the amount of the aggregate interest and principal payments on the City's general obligation bonds and notes during the 12-month period ended January 1, 1994, subject to annual increase in the manner described above for the aggregate levy (the "Safe Harbor"). Additional safe harbors are provided for portions of any levy attributable to payments under installment contracts or public building commission leases or attributable to payments due as a result of the refunding of general obligation bonds or notes or of such installment contracts or leases.
Pursuant to the Bond Ordinance, the taxes levied by the City for the payment of principal and interest on the Bonds are not subject to the limitations contained in the City Property Tax Limitation Ordinance.





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APPENDIX E RETIREMENT FUNDS
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RETIREMENT FUNDS
TABLE OF CONTENTS
Page

RETIREMENT FUNDS E-l
General E-l
Source Information E-2
Background Information Regarding the Retirement Funds E-3
Determination of Employee Contributions E-7
Determination of City's Contributions E-8
The Actuarial Valuation E-l 1
Actuarial Methods E-l4
Actuarial Assumptions E-16
Funded Status of the Retirement Funds E-l 7
Net Pension Liability and Discount Rate E-25
Projection of Funded Status E-26
Legislative Changes E-3.2
Diversion of Grant Money to the Retirement Funds Under P.A. 96-1495 and P.A. 98-641 E-35
Effect on MEABF and LABF If P.A. 98-641 Found Unconstitutional E-35
Future Legislation E-39
Report and Recommendations of the Commission to Strengthen Chicago's Pension Funds E-40
Special Revenue and Enterprise Fund Allocation of Retirement Fund Costs E-40
Impact of Retirement Funds' Unfunded Liability on the City's Bond Ratings E-40
PAYMENT FOR OTHER POST-EMPLOYMENT BENEFITS E-42
General E-42
The Settlement E-43
City Financing ofthe Health Plan : E-43
Actuarial Considerations E-43
Funded Status E-44
Retiree Health Benefits Commission E-45
Status of Healthcare Benefits After the Settlement Period E-45



















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RETIREMENT FUNDS
General
Pursuant lo the Illinois Pension Code, as revised from lime to time (the "Pension Code"), the City contributes to four retirement funds (collectively, the "Retirement Funds"), which provide benefits upon retirement, death or disability to members of the Retirement Funds and their beneficiaries. The Retirement Funds are, in order from largest to smallest membership: (i) the Municipal Employees' Annuity and Benefit Fund of Chicago ("MEABF"); (ii) the Policemen's Annuity and Benefit Fund of Chicago ("PABF"); (iii) the Firemen's Annuity and Benefit Fund of Chicago ("FABF"); and (iv) the Laborers' and Retirement Board Employees' Annuity and Benefit Fund of Chicago ("LABF"). The Retirement Funds' membership consists primarily of current and former employees of the City and their beneficiaries.
The Retirement Funds are established, administered and financed under the Pension Code, as separate bodies politic and corporate and for the benefit of the members of the Retirement Funds and their beneficiaries. The City's contributions to the Retirement Funds, and benefits for members of the Retirement Funds and their beneficiaries, arc governed by the provisions of the Pension Code. See "— Determination of City's Contributions" below. This Appendix describes, among other things, the current provisions of the Pension Code applicable to the City's funding of the Retirement Funds. No assurance can be made that the Pension Code will not be amended in the future.
The Retirement Funds' funding sources are the City's contributions, the employees' contributions and investment income on the Retirement Funds' assets. The City's and employees' contribution levels are determined pursuant to the Pension Code.
The Retirement Funds have been actuarially determined lo be significantly underfunded. See "— Funded Status of the Retirement Funds" and "— Projection of Funded Status" below. The funded status of the Retirement Funds has adversely impacted, and may further adversely impact, the City and its taxpayers in several ways, certain of which are described in this paragraph and throughout this Appendix. First, the City's bond ratings have declined based, according to the reports of the rating agencies issued with respect to such downgrades, in part on the size of the Retirement Funds' unfunded liabilities and the projected impact of future City contributions to the Retirement Funds on the City. See "Impact of Retirement Funds' Unfunded Liabilities on the City's Bond Ratings" below. In addition, as described in ihe following paragraphs, the magnitude ofthe Retirement Funds' underfunding has prompted the Illinois General Assembly to pass legislation which increases the City's contributions to the Retirement Funds. As a result, the City increased its property tax levy in October 2015 to generate the revenues necessary lo make certain additional contributions to the Retirement Funds under such legislation, and the City may be required to further increase its revenues, to reduce its expenditures, or both, to provide the funds necessary to pay increased contributions in the future. Further, the governmental units with which Ihe lax base of the City overlaps, which include, but are not limited to, the Chicago Board of Education of the City of Chicago (the "Board of Education"), the Chicago Park District ("CPD"), the County of Cook (the "County") and the State of Illinois (the "State") (collectively, all such other units are referred lo herein as the "Governmental Units"), described herein, also have significantly underfunded pension liabilities which, in combination with the current financial position ofthe Retirement Funds, may place a substantial burden on the City's taxpayers if such Governmental Units are required to make increased contributions to their respective retirement funds in the future as a result of such underfunding. See "—Background Information Regarding the Retirement Funds—Overlapping Tax Bodies" below.
As noted above, in an effort lo improve the funded status of the Retirement Funds, the Illinois General Assembly passed two statutes designed to improve the funding levels of the Retirement Funds:


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P.A. 98-641 (which is defined and described herein), which modifies provisions of the Pension Code related to MEABF and LABF, and P.A. 96-1495 (which is defined and described herein), which modifies provisions ofthe Pension Code with respect to PABF and FABF.
P.A. 98-641 would make significant changes to the City's contributions to MEABF and LABF and would make other adjustments lhat would cause the unfunded liabilities of MEABF and LABF lo decrease on ils effective date and would cause such unfunded liabilities to decrease further over time. See "—Determination of City's Contributions"—City's Required Contributions to LABF and MEABF Pursuant to P.A. 98-641" below. Information regarding projected future Cily contributions lo LABF and MEABF pursuant lo P.A. 98-641 is set forth in TABLE 13—"Projection of Future Funding Status— MEABF," TABLE 14—"Projection of Future Funding Status—LABF" and TABLE 18—"Projected Contributions: MEABF and LABF" below. P.A. 98-641 was determined to be unconstitutional by the Circuit Court of Cook County, Illinois (the "Circuit Court"). The City appealed this decision to the Illinois Supreme Court. See "—Legislative Changes—P.A. 98-64J" below.
P.A. 96-1495 is expected to reduce the unfunded liabilities of PABF and FABF because it significantly increases future City contributions lo be made by the Cily to PABF and FABF. See "— Determination of City's Contributions—City's Required Contributions to PABF and FABF Beginning in 2016" below. Unless modified by SB 777 (as defined and described herein) or similar legislation, P.A. 96-1495 has been projected to require an increase in the City's contributions to'PABF and FABF from approximately $290 million in 2015 to approximately $839 million in 2016, with an increase of approximately three percent each year thereafter. Sec TABLE 15—"PROJECTION OF FUTURE FUNDING STATUS—FABF" and TABLE 16—"PROJECTION OF FUTURE FUNDING STATUS— PABF" below. In addition, as a result of certain changes to PABF's actuarial assumptions beginning with the 2014 Actuarial Valuation (as defined and described herein), the City's contributions lo PABF arc expected to increase by approximately $62 million for the 2017 Contribution. Increases in the City's contributions lo PABF and FABF mandated by P.A. 96-1495 caused the City to significantly increase its property tax levy beginning in levy year 2015 (to be collected in 2016). Should the City's required contributions increase in the future, through the implementation of P.A. 96-1495 without modification by SB 777 or similar legislation, or otherwise, the Cily may be required lo further raise its revenues, to reduce its expenditures, or some combination thereof, to provide for such contributions.
Certain statements made in this Appendix arc based on projections, are forward-looking in nature and arc developed using assumptions and information currently available. Such statements are subject to certain risks and uncertainties. The projections set forth in this Appendix rely on information produced by the Retirement Funds' independent actuaries (except where specifically noted otherwise) and were not prepared wilh a view toward complying with the guidelines established by the American Institute of Certified Public Accountants wilh respect lo prospective financial information. This information is not fact and should not be relied upon as being necessarily indicative of future results. Readers of this Appendix are cautioned not to place undue reliance on the prospective financial information. Neither Ihe City, the City's independent auditors, nor any other independent accountants have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or ils achievabilily, and assume no responsibility for, and disclaim any association with, the prospective financial information.
Source Information
The information contained in this Appendix relies in part on information produced by ihc Retirement Funds, their independent accountants and their independent actuaries (the "Source Information"). Neither the City nor the City's independent auditors have independently verified the



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Source Information and make no representations nor express any opinion as to the accuracy of the Source Information.
Furthermore, where the tables in this Appendix present aggregate information regarding the Retirement Funds, such combined information results solely from the application of arithmetic to the data presented in the Source Information and may not conform to the requirements for the presentation of such information by the Governmental Accounting Standards Board ("GASB") or the Pension Code.
Certain of the comprehensive annual financial reports of the Retirement Funds (each a "CAFR" and together the "CAFRs"), and certain of the actuarial valuations of the Retirement Funds (each, an "Actuarial Valuation" and together, the "Actuarial Valuations"), may be obtained by contacting the Retirement Funds. Certain of these reports may also be available on the Retirement Funds' websites (www.meabf.org ; www.chipabf.org ; www.labfchicago.org ; and www.fabf.org ); provided, however, that the contents of these reports and of the Retirement Funds' websites are not incorporated herein by such reference.
The Retirement Funds typically release their Actuarial Valuations in the April or May following the close of their respective fiscal years on December 31. All ofthe Retirement Systems have released their 2014 Actuarial Valuations.
Background Information Regarding the Retirement Funds
General
Each of the Retirement Funds is a single-employer, defined-benefit public employee retirement system. "Single-employer" refers to the fact that there is a single plan sponsor, in this case, the City. "Defined-benefit" refers to the fact that the Retirement Funds pay a periodic benefit to employees upon retirement and survivors in a fixed amount determined at the time of retirement. The amount of the periodic benefit is generally determined on the basis of service credits and salary. Eligible employees receive the defined benefit on a periodic basis for life, along with certain benefits to spouses and children that survive the death of the employee.
To fund the benefits to be paid by a defined-benefit pension plan, both employees and employers make contributions to the plan. Generally in a defined-benefit pension plan, employees contribute a fixed percentage of their annual salary and employers contribute the additional amounts required (which amounts may be determined pursuant to statute, as in the case of the City), when combined wilh the investment earnings on plan assets, to pay Ihe benefits under the pension plan. See "Table 1 -Membership," "—Determination of Employee Contributions" and "—Determination of City's Contributions" below.
The benefits available under the Retirement Funds accrue throughout the lime an employee is employed by the City. Although the benefits accrue during employment, certain age and service requirements must be achieved by an employee to generate a retirement or survivor's periodic defined benefit payment upon retirement or termination from the City. The Retirement Funds also provide certain disability benefits and, until the later of the date on which the City no longer provides a health care plan for the annuitants or December 31, 2016, retiree healthcare benefits to eligible members.
Section 5 of Article XIII ofthe Illinois Constitution (the "Pension Clause") provides as follows:





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"Membership in any pension retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired."
References in this Appendix to "member" are references to the active, inactive and retired employees of the City and their beneficiaries, the active, inactive and retired employees of the Retirement Funds participating in the Retirement Funds and their beneficiaries, and wilh regard to MEABF, certain employees of the Board of Education who are members of MEABF as described below, and their beneficiaries.
The Retirement Funds
Municipal Employees' Annuity and Benefit Fund of Chicago. MEABF is established by and administered under Article 8 of the Pension Code. MEABF provides age and service retirement benefits, survivor benefits and disability benefits to all eligible members. MEABF is administered under the direction of a five-member board of trustees (the "MEABF Board"), whose members are responsible for managing and administering MEABF for the benefit of its members. In addition to City and Retirement Fund employees, former employees and survivors, MEABF's membership includes non-instructional employees of the Board of Education ("CBOE Employees"). With respect to MEABF, the terms "employee" and "member" include the CBOE Employees. The CBOE Employees account for almost half of MEABF's membership. The Mayor of the City, the City Clerk, the City Treasurer, and members ofthe Cily Council may participate in MEABF if such persons file, while in office, written application to the MEABF Board.
Policemen's Annuity and Benefit Fund of Chicago. PABF is established by and administered under Article 5 of the Pension Code. PABF provides retirement and disability benefits to the police officers ofthe City, their surviving spouses and their children. PABF is administered by an eight-member board of trustees (the "PABF Board"). Members of the PABF Board are charged with administering the PABF under the Pension Code for the benefit of ils members.
Firemen's Annuity and Benefit Fund of Chicago. FABF is established by and administered under Article 6 ofthe Pension Code. FABF provides retirement and disability benefits to fire service employees and their survivors. FABF is governed by an eight-member board of trustees (the "FABF Board"). Members of the FABF Board arc statutorily mandated to discharge their duties solely in the interest of FABF's members.
Laborers' and Retirement Board Employees' Annuity and Benefit Fund of Chicago. LABF is established by and administered under Article 11 of the Pension Code. LABF provides retirement and disability benefits for employees of the City and the Board of Education who are employed in a title recognized by the City as labor service and for the survivors of such employees. LABF is governed by an eight-member board of trustees (the "LABF Board" and, together with the MEABF Board, the PABF Board and the FABF Board, the "Retirement Fund Boards"). Members of the LABF Board are statutorily mandated to discharge their duties solely in the interest of LABF's members.
The membership ofthe Retirement Funds as of December 31, 2014, was as follows:








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TABLE 1 - MEMBERSHIP

Retirement Fund

Active Members
Inactive/ Entitled to Benefits
Retirees and Beneficiaries
MEABF
PABF
FABF
LABF
Total
30,160 12,020 4,809 2,837
49,826
15,495 630 65 1,449
17,639
24,855 13,230 4,703 3,902
46,690
70,510 25,880 9,577 8,188
114,155
Source: Actuarial Valuations of the Retirement Systems as of December 31, 2014.
Overlapping Taxing Bodies
The City's tax base overlaps with the Governmental Units, which includes, but is not limited to, the Board of Education, the CPD, the County and the State. Certain of the Governmental Units maintain their own defined benefit pension plans (collectively, all such other plans arc referred to herein as the "Other Retirement Funds"), many of which are also significantly underfunded. The unfunded liabilities of the Other Retirement Funds may impose an additional burden on the City's taxpayers if the Governmental Units need additional revenue to fund contributions to the Other Retirement Funds.
State Pension Reform Act and Litigation. On May 8, 2015, the Illinois Supreme Court affirmed the decision of the Sangamon County Circuit Court that Public Act 98-0599 (the "State Pension Reform Act") is unconstitutional. The State Pension Reform Act would have provided for certain cost-saving and other reforms lo the State's four largest pension plans, including, but not limited lo, changes to the employee and employer contribution formula, cost of living adjustmcnls, rcliremenl ages and employee contributions. The State Pension Reform Act was challenged on behalf of various classes of annuitants, current and former workers, and labor organizations, alleging, among other things, that the legislation violates the Pension Clause.
Chicago Park District Pension Reform. On January 7, 2014, then Governor Pat Quinn signed Public Act 98-0622 into law (the "CPD Pension Reform Act"). The CPD Pension Reform Act provides for certain cost-saving and other reforms to CPD's pension plan, including, but not limited to, changes to the employee and employer contribution formula, cost of living adjustments, retirement ages and employee contributions. Such changes became effective on June 1, 2014. On October 8, 2015, participants in CPD's pension plan filed a lawsuit challenging the legality of the CPD Pension Reform Act by alleging, among other things, that the legislation violates the Illinois Pension Clause.
For more information on these Other Retirement Funds, please refer lo the State's Commission on Government Forecasting and Accountability ("COGFA") website at ; provided, however, that the contents of the COGFA website are not incorporated herein by such reference.









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Certain Duties
Each Retirement Fund Board is a fiduciary of its respective Retirement Fund and is authorized lo perform all functions necessary for operation of such Retirement Fund. The Pension Code authorizes each Retirement Fund Board to make certain decisions, including decisions regarding the investment of funds, the management of assets, the disbursement of benefits, and the hiring of staff, financial advisors and asset managers.
Each Retirement Fund Board is authorized to promulgate rules and procedures regarding the administration of benefits and other matters in accordance with the Illinois Administrative Procedure Act, and decisions awarding, limiting, or denying benefits are subject to the Illinois Administrative Procedure Act. Certain aspects of the Retirement Funds, however, including the defined benefits and the employer and employee contribution levels, are established in the Pension Code and may be amended only by an amendment to the Pension Code.
The Pension Code provides that the expenses incurred in connection with the administration of the Retirement Funds are not construed to be debt imposed upon the City. Such expenses are the obligation of the Retirement Funds exclusively, as separate bodies politic and corporate.
The Illinois Attorney General and annuitants may bring a civil action to obtain relief for violations of a fiduciary duty to the Retirement Funds or any act or practice which violates any provision of the Pension Code.
Investments
Each Retirement Fund Board manages the investments of its respective Retirement Fund. State law regulates the types of investments in which the Retirement Funds' assets may be invested. Furthermore, the Retirement Fund Boards invest the Retirement Funds' assets in accordance with the prudent person rule, which requires members of the Retirement Fund Boards, who are fiduciaries of the Retirement Funds, lo discharge their duties with the care, prudence and diligence that a prudent person acting in a like capacity and familiar with such matters would use in a similar situation.
In carrying out their investment duty, the Retirement Fund Boards may appoint and review investment managers as fiduciaries lo manage the investment assets of the Retirement Funds. Such investment managers are granted discretionary authority to manage the Retirement Funds' assets. Additional information regarding the Retirement Funds' investments and investment management may be found on the Retirement Funds' websites; provided, however, that the contents of such websites arc not incorporated into this Appendix by such reference.
Table 2 provides information on the investment returns experienced by each of the Retirement
Funds.












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TABLE 2 - INVESTMENT RATES OF RETURN, 2005-2014
Fiscal
Year MEABF FABF LABF PABF
6.6% 9.5% 7.8% 7.3%
12.7 14.0 11.2 12.1
7.3 11.0 8.0 8.8
(28.7) (33.8) (29.2) (27.8)
19.6 23.7 21.5 21.5
14.2 17.7 15.5 12.7
0.1 (2.0) (0.3) 0.8
12.8 16.2 14.6 12.4
16.1 19.5 15.8 13.7
4.7 2.9 3.8 5.9
Assumed Rate0 > 7.5 8.0 7.5 7.5

Source: For FABF, the audited financial statements of FABF for fiscal years 2005-2012 and the Actuarial Valuations of FABF for fiscal years 2013 and 2014. For MEABF, the Actuarial Valuation of MEABF as of December 31, 2014. For LABF and PABF, the respective CAFRs of such Retirement Funds for the fiscal years 2005-2012 and the respective Actuarial Valuations of such Retirement Funds for fiscal years 2013 and 2014.
(I) Reflects the assumed rate of return in the respective Actuarial Valuations of the Retirement Funds measured as of December 31, 2014, as discussed in further detail under "Actuarial Assumptions—Assumed Investment Rate of Return" below.
Determination of Employee Contributions
Employees are required to contribute to their respective Retirement Fund as set forth in the Pension Code.
Prior to the implementation of P.A. 98-641 on January 1, 2015, and since the date of the Circuit Court Ruling (as hereinafter defined), MEABF employees contributed 8.5 percent of their salary to MEABF (consisting of a 6.5 percent contribution for employee benefits, a 1.5 percent contribution for spouse benefits, and a 0.5 percent contribution for an annuity increase benefit). For a summary of the increases in employee contributions that take effect under P.A. 98-641, see "—Legislative Changes — P.A. 98-641."
PABF employees contribute 9.0 percent of their salary to PABF (consisting of a 7.0 percent contribution for employee benefits, a 1.5 percent contribution for spouse benefits and a 0.5 percent contribution for an annuity increase benefit).
FABF employees contribute 9.125 percent of their salary to FABF (consisting of a 7.125 percent contribution for employee benefits, a 1.5 percent contribution for spouse benefits, a 0.375 percent contribution for an annuity increase benefit and a 0.125% contribution for disability benefits).
Prior to the implementation of P.A. 98-641 on January 1, 2015, and since the date ofthe Circuit Court Ruling, LABF employees contributed 8.5 percent of their salary lo LABF (consisting of a 6.5 percent contribution for employee benefits, a 1.5 percent contribulion for spouse benefits, and a 0.5 percent contribution for an annuity increase benefit). For a summary of the increases in employee contributions that took effect under P.A. 98-641, sec "—Legislative Changes —P.A. 98-641."


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For each Retirement Fund, if an employee leaves without qualifying for an annuity, accumulated employee contributions are refunded.
Determination of City's Contributions
Under the Pension Code, the City's contributions to the Retirement Funds are determined pursuant to a statutory formula on an annual basis. The City's contributions prior to the 2016 Contribution equaled the Multiplier Funding (as defined below) and certain other amounts as required by the Pension Code. "Multiplier Funding" is equal lo the product of a multiplier established by the Pension Code for each Retirement Fund (each, a "Multiplier") and the amount contributed by the City's employees two years prior to the year in which the tax is levied. With respect to the City's 2015 contribution, the Multiplier for each Retirement Fund was as follows: 1.25 for MEABF; 2.00 for PABF; 2.26 for FABF; and 1.00 for LABF. The City's contributions pursuant to the Multiplier were governed by the Pension Code and were not based on the Actuarially Required Contribution (as hereinafter defined). See "—The Actuarial Valuation—City's Contributions Not Related to GASB Standards" below. Beginning in 2016, the City's contributions to PABF and FABF are determined pursuant to the P.A. 96-1495 Funding Plan (as hereinafter defined) rather than the Multiplier Funding system. See "— City's Contributions to PABF and FABF Beginning in 2016" below. P.A. 98-641 would change the manner of contributing to MEABF and LABF if the Illinois Supreme Court determines the law to be constitutional upon appeal. Under P.A. 98-641, beginning in 2021, the City's contributions to MEABF and LABF would be determined pursuant lo the P.A. 98-641 Funding Plan (as hereinafter defined) rather than the Multiplier Funding system. See "—City's Required Contributions lo LABF and MEABF Pursuant to P.A. 98-641" below.
The Pension Code provides that each Retirement Fund Board must annually certify to the City Council a determination of the required City contribution to such Retirement Fund. In making its request for the City's annual contribution, each Retirement Fund, acting through its Retirement Fund Board, annually approves and then submits a resolution to the City Council requesting that the City Council levy for a particular contribution amount. The City has generally paid the amounts so requested.*
The City's contributions to the Retirement Funds have historically been made primarily from the proceeds of an annual levy ofproperty taxes for each of the Retirement Funds (collectively, the "Pension Levy") by the City solely for such purpose, as provided by the Pension Code. However, the Pension Code allows the City to use any other legally available funds (collectively, the "Other Available Funds," as described below) in lieu of the Pension Levy to make its contributions to the Retirement Funds. The amount ofthe Pension Levy, like any City property tax levy, must be approved by the City Council. The Pension Levy is exclusive of and in addition to the amount of property taxes which the City levies for other purposes.
If Other Available Funds are being utilized to pay a portion of the City's contributions, such funds are to be deposited with the City Treasurer to be used for the same purpose as the Pension Levy. The City's practice has been to use a portion of the City's Personal Property Replacement Tax revenue ("PPRT") to pay a portion ofthe City's contributions. PPRT revenue is paid by the State of Illinois (the "State") to the City from the Personal Property Replacement Tax Fund of the State pursuant to Section 12 of the Revenue Sharing Act of the State. Since 2003, the amount of PPRT contributed by the City to the Retirement Funds in the aggregate has averaged approximately $78,387,000 annually. In 2012, 2013 and

With respect to the contribution to be made in 2015, FABF requested a contribution from the City which the City determined exceeded the amount required by the Pension Code by $18,147,000. The FABF Board has made similar requests for amounts in excess ofthe amount the City has determined to be the statutory requirement in each of the last several years. In each such year, including the current year, the City has indicated that it will not contribute amounts in excess of the amount the City has determined to be the statutory contribution requirement for the City to FABF.


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I I
2014, the amounts of PPRT contributed to the Retirement Funds in the aggregate were approximately $101,875,000, $126,639,000 and $127,239,000 respectively. For those same years, the City's total distributive share of PPRT was $139,461,000, $159,559,000 and $158,547,000, respectively.
The City's contributions lo the Retirement Funds in accordance with the Pension Code have not been sufficient, when combined wilh employee contributions and investment returns, to offset increases in the Retirement Funds' liabilities, which has contributed to the significant underfunding of the Retirement Funds. Moreover, the contributions to the Retirement Funds in accordance wilh the Pension Code have had the effect of deferring the funding of the Retirement Funds' liabilities, which increases the costs of such liabilities and the associated financial risks, including Ihc risk lhal each Retirement Fund will not be able to pay its obligations as they become due. Furthermore, increases in the City's contributions to the Retirement Funds (such as those scheduled to occur under P.A. 96-1495 and P.A. 98-641 if the latter is determined to be constitutional) may require the City lo increase its revenues, reduce its expenditures, or some combination thereof, which may impact the services provided by the City or limil the City's ability to generate additional revenues in the future. The City's contributions to FABF and PABF are projected to increase in fiscal year 2016, when compared to fiscal year 2015, by approximately $134 million and $404 million, respectively, pursuant to the provisions of P.A. 96-1495. In addition, the City's contributions to MEABF and LABF would increase in fiscal year 2016, when compared to the City's contributions in fiscal year 2015, by approximately $80 million and $9 million, respectively pursuant to the provisions of P.A. 98-641, if such act is determined to be constitutional.
City's Required Contributions to PABF and FABF Beginning in 2016
Public Act 096-1495 ("P.A. 96-1495") was signed into law on December 30, 2010. Among other things, P.A. 96-1495 created a new method of determining the contributions lo be made by the City to PABF and FABF. P.A. 96-1495 requires that, beginning in 2016, the City's contributions each year for PABF and FABF (the "P.A. 96-1495 Contribution") will be equal to the amount necessary to achieve a Funded Ratio (as hereafter defined) of 90 percent in PABF and FABF by the end of fiscal year 2040 (the "P.A. 96-1495 Funding Plan").
Pursuant to the P.A. 96-1495 Funding Plan, the P.A. 96-1495 Contribution for PABF and FABF will be calculated as the level percentage of payroll necessary to reach the 90 percent Funded Ratio target by 2040. In Cook and DuPage Counties (in which the City is located), property taxes levied in one year become payable during the following year in two installments. As described in further detail under "City's 2016 Contributions to the Retirement Funds for Fiscal Years 2015 and 2016" herein, the City increased its property tax levy for the purpose of making increased pension payments during calendar year 2015, with the collection of such increased levy to occur during calendar year 2016.
Unless amended by the Illinois General Assembly, the P.A. 96-1495 Funding Plan will significantly increase the City's required contributions to PABF and FABF beginning in 2016. See "— City's 2016 Contributions lo the Rcliremcnl Funds for Fiscal Years 2015 and 2016" herein. Senate Bill 777 ("SB 777") passed both houses ofthe Illinois General Assembly as of May 31, 2015. SB 777 would extend the period by which the unfunded liabilities of PABF and FABF are amortized to a 90 percent Funded Ratio from 2040 to 2055 (the "Revised Amortization Period") and institute a phase-in period during 2016-2020 to reduce the City's required payment in the initial years to allow for a more gradual phase-in ofthe requirements of P.A. 96-1495 (the "Phase-in Period"). The Revised Amortization Period would reduce the annual funding obligation required lo reach a 90 percent Funded Ratio, but extend the number of years over which such payments would need to be made. A motion lo reconsider the vote on SB 777 was filed in the Illinois Senate on May 31, 2015, and, as such, SB 777 has not yet been scnl to the Governor for consideration. In addition to, or in lieu of, a Revised Amortization Period or a Phase-in Period, the Illinois General Assembly may consider other legislation that could affect the City payment


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obligations for PABF and FABF and/or funding sources for those obligations, including a City-owned casino. The City makes no representation as to whether or when SB 777 or any such other legislation would be enacted into law.
Any change to the P.A. 96-1495 Funding Plan which would reduce the contributions required of the City, such as a Revised Amortization Period or a Phase-in Period, would have the effect of increasing the unfunded liabilities and decreasing the Funded Ratios of PABF and FABF when compared to the projected unfunded liabilities and Funded Ratios of such Retirement Funds set forth in Tables 15 and 16 below.
City's Required Contributions to LABF and MEABF Pursuant to P.A. 98-641
P.A. 98-641, which was determined to be unconstitutional by the Circuit Court, would modify the manner in which the City's contributions to LABF and MEABF arc calculated. If P.A. 98-641 became effective, the Multiplier Funding system would be retained lo calculate the City's contributions to LABF and MEABF for payment years 2016 through 2020 (unless the amount determined pursuant to the Multiplier Funding system for any year is more than the Normal Cost (as hereinafter defined) for such year plus the amount, determined on a level percentage of payroll basis, that is sufficient to achieve a Funded Ratio of 90 percent by the end of contribution year 2055). During this period, P.A. 98-641 would increase the Multiplier as follows: for the contribution made in 2016, 1.60 (LABF) and 1.85 (MEABF); for the contribution made in 2017, 1.90 (LABF) and 2.15 (MEABF); for the contribution made in 2018, 2.20 (LABF) and 2.45 (MEABF); for the contribution made in 2019, 2.50 (LABF) and 2.75 (MEABF); and for the contribution made in 2020, 2.80 (LABF) and 3.05 (MEABF). Beginning in 2021, the City's contributions for LABF and MEABF would equal the Normal Cost for such year plus the amount, determined on a level percentage of payroll basis, that is sufficient to achieve a Funded Ratio of 90 percent in LABF and MEABF by the end of contribution year 2055 (the "P.A. 98-641 Funding Plan").
The Circuit Court determined P.A. 98-641 to be unconstitutional on July 24, 2015 (the "Circuit Court Ruling"). The City has appealed the Circuit Court's decision to the Illinois Supreme Court. See "Legislative Changes—P.A. 98-641" below. A decision by the Illinois Supreme Court to uphold the Circuit Court's decision regarding the constitutionality of P.A. 98-641 would have the effect of increasing the UAAL (as hereinafter defined) and decreasing the Funded Ratio of MEABF and LABF when compared to the law as modified by P.A. 98-641. See "—Effect on MEABF and LABF if P.A. 98-641 Found Unconstitutional" below for additional information regarding the effect of P.A. 98-641 being overturned on the funded status of MEABF and LABF.
City's 2016 Contributions to the Retirement Funds for Fiscal Years 2015 and 2016
On October 28, 2015, the City Council approved its supplemental fiscal year 2015 budget (the "Supplemental Budget") and its fiscal year 2016 budget (the "FY 2016 Budget"). The Supplemental Budget increased the budgeted fiscal year 2015 contribution (payable to the Retirement Funds in 2016) to PABF and FABF by $328 million (the "Additional 2015 Contribution") which increased the total contribution to the Retirement Funds to $886 million for such fiscal year (the "2015 Contribution"). The FY 2016 Budget includes an additional increase in the contribution to PABF and FABF which results in a total contribution for fiscal year 2016 (payable to the Retirement Funds in 2017) of $978 million (the "2016 Contribution"). The 2015 Contribution and the 2016 Contribution each assume the effectiveness of P.A. 98-641 and the enactment of SB 777.
The City's budget for fiscal year 2015, as amended by the Supplemental Budget (together the "Amended FY 2015 Budget"), provides that the increase in contributions to PABF and FABF be primarily generated through an increase in the City's property tax levy. Such property tax increase has


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been adopted by the City Council. However, the 2015 Contribution and the 2016 Contribution assume the enactment of SB 777, which would reduce the contribution currently required by the Pension Code under P.A. 96-1495. Specifically, with respect to fiscal year 2015, SB 777 would reduce the City's contribution to PABF and FABF from $839 million to $619 million. Because the Amended FY 2015 Budget assumes the enactment of SB 777, the FY 2015 Contribution included in the Amended FY 2015 Budget would be insufficient to fund the contribution required by the Pension Code should SB 777 not be enacted.
The City can give no assurance as to whether SB 777 or similar legislation will be adopted by the General Assembly. If SB 777 or similar legislation is not enacted and the City must contribute lo PABF and FABF pursuant lo the current provisions of the Pension Code, the Cily expects that it would fund such additional contributions through an increase in revenues, a decrease in expenditures or a combination thereof.
The Actuarial Valuation
General
The Pension Code requires that the Retirement Funds annually submit to the City Council a report containing a detailed statement of the affairs of such Retirement Fund, its income and expenditures, and assets and liabilities, which consists of the Actuarial Valuation. With respect to the Retirement Funds, the Actuarial Valuation measures the financial position of a Retirement Fund, determines the amount lo be contributed by the City to such Retirement Fund pursuant lo the statutory requirements described above, and produces certain information mandated by the financial reporting standards issued by the Governmental Accounting Standards Board, as described below.
In producing the Actuarial Valuations, Ihe Retirement Funds' actuaries use demographic data (including employee age, salary and service credits), economic assumptions (including estimated future salary and interest rates), and decrement assumptions (including employee turnover, mortality and retirement rates) to produce the information required by the Prior GASB Standards or the New GASB Standards, each as hereinafter defined. The Retirement Funds' Actuarial Valuations arc publicly available and may be obtained from the Retirement Funds. See "—Source Information" above. A description of the statistics generated by the Retirement Funds' actuaries in the Actuarial Valuations follows in the next few paragraphs. This information was derived from the Source Information.
GASB, which is part of a private non-profit corporation known as the Financial Accounting Foundation, promulgates standards regarding accounting and financial reporting for governmental entities. These principles have no legal effect and do not impose any legal liability on the City. The references to GASB principles in this Appendix do not suggest and should not be construed to suggest otherwise.
Prior GASB Standards
For the fiscal years discussed in this Appendix prior to and including December 31, 2013, the applicable GASB financial reporting standards were GASB Statement No. 25 ("GASB 25") and GASB Statement No. 27 ("GASB 27" and, together with GASB 25, the Prior GASB Standards"). The Prior GASB Standards required the determination of the Actuarially Required Contribution and the calculation of pension funding statistics such as the UAAL and the Funded Ratio in the Actuarial Valuation. In addition, the Prior GASB Standards allowed pension plans to prepare financial reports pursuant to a variety of approved actuarial methods, certain of which are described in "—Actuarial Methods" below.



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GASB 25 required disclosure of an "Actuarially Required Contribution," which was such pronouncement's method for calculating the annual amounts needed to fully fund the Retirement Funds, though the Actuarially Required Contribution was a financial reporting requirement and not a funding requirement. The Prior GASB Standards referred to the Actuarially Required Contribution as the "Annual Required Contribution"; however, this Appendix refers to the concept as the Actuarially Required Contribution to denote the fact that the Actuarially Required Contribution is the amount an actuary would calculate pursuant to the Prior GASB Standards to be contributed in a given year, to differentiate it from the amount the City will be required to contribute under the Pension Code.
The Actuarially Required Contribution as defined in GASB 25, consisted of two components: (1) that portion of the present value of pension plan benefits which is allocated to the valuation year by the actuarial cost method (as described in "—Actuarial Methods—Actuarial Accrued Liability" below), termed the "Normal Cost"; and (2) an amortized portion of any UAAL.
The Actuarial Accrued Liability was an estimate of the present value of the benefits each Retirement Fund must pay to members as a result of past employment with the City and participation in such Retirement Fund. The Actuarial Accrued Liability was calculated by use of a variety of demographic and other data (such as employee age, salary and service credits) and various assumptions (such as estimated salary increases, interest rates, employee turnover, retirement date and age and mortality and disability rates). The Actuarial Value of Assets reflected the value ofthe investments and other assets held by each Retirement Fund. Various methods existed under the Prior GASB Standards for calculating the Actuarial Value of Assets and the Actuarial Accrued Liability. For a discussion of the methods and assumptions used to calculate the Retirement Funds' Actuarial Accrued Liability and Actuarial Value of Assets under GASB 25, see "—Actuarial Methods" and "—Actuarial Assumptions" below.
Any shortfall between the Actuarial Value of Assets and the Actuarial Accrued Liability was referred to as the "Unfunded Actuarial Accrued Liability" or "UAAL." The UAAL represented the present value of benefits attributed to past service that arc in excess of plan assets. In addition, the actuary computed the "Funded Ratio," which was the Actuarial Value of Assets divided by the Actuarial Accrued Liability, expressed as a percentage. The Funded Ratio and the UAAL provide one way of measuring the financial health of a pension plan.
New GASB Standards
Beginning with the fiscal year ended December 31, 2014, GASB 25 was replaced with GASB Statement No. 67 ("GASB 67"), and GASB 27 will be replaced with GASB Statement No. 68 beginning with the fiscal year ending December 31, 2015 ("GASB 68" and, together with GASB 67, the "New GASB Standards"). Unlike the Prior GASB Standards, the New GASB Standards do not establish approaches to funding pension plans. Instead, the New GASB Standards provide standards solely for financial reporting and accounting related to pension plans. The New GASB Standards require calculation and disclosure of a "Net Pension Liability," which is the difference between the actuarial present value of projected benefit payments that is attributed to past periods of employee service calculated pursuant to the methods and assumptions set forth in the New GASB Standards (referred to in such statements as the "Total Pension Liability") and the fair market value of the pension plan's assets (referred to as the "Fiduciary Net Position"). This concept is similar to the UAAL, which was calculated under the Prior GASB Standards, but most likely will differ from the UAAL on any calculation date because the Fiduciary Net Position is calculated at fair market value and because of the differences in the manner of calculating the Total Pension Liability as compared to the Actuarial Accrued Liability under the Prior GASB Standards.



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Furthermore, the New GASB Standards employ a rate, referred to in such statements as the "Discount Rate," which is used to discount projected benefit payments to their actuarial present values. The Discount Rate may be a blended rate comprised of (1) a long-term expected rate of return on a Retirement Fund's investments (to the extent that such assets are projected to be sufficient to pay benefits), and (2) a tax-exempt municipal bond rate meeting certain specifications set forth in the New GASB Standards. Therefore, in certain cases in which the assets of a Retirement Fund arc not expected to be sufficient to pay the projected benefits of such Retirement Fund, the Discount Rate calculated pursuant to the New GASB Standards may differ from the assumed investment rate of return used in reporting pursuant to the Prior GASB Standards.
Finally, the New GASB Standards require that the Net Pension Liability be disclosed in the notes to the financial statements of the pension system and that a proportionate share of the Net Pension Liability be recognized on the balance sheets of the employer. In addition, the New GASB Standards require an expense (the "Pension Expense") to be recognized on the income statement of the City. The recognition of the Net Pension Liability and the Pension Expense do not measure the manner in which a Retirement Fund is funded and therefore do not conflict with the various manners of funding the Retirement Funds described in this Appendix.
As stated above, GASB 67 was first applied with respect to the Actuarial Valuation for the fiscal year ended December 31, 2014. The City expects lhat the New GASB Standards may significantly alter the financial statements produced by the City. For example, the Retirement Funds disclosed a combined Net Pension Liability of $20.1 billion as of December 31, 2014, which will impact the City's balance sheet in future years. However, because the City contributes to the Retirement Funds pursuant to the methods established in the Pension Code, the New GASB Statements will not materially impact the contributions made by the City without legislative action.
City's Contributions Not Related to GASB Standards
The City's contributions to the Retirement Funds are not based on the contribution calculations promulgated by GASB for reporting purposes. Instead, the City's contributions arc calculated pursuant to the formulas established in the Pension Code. Sec "— Determination of City's Contributions" above.
The methods for contributing to the Retirement Funds set forth in the Pension Code do not conform to the manner of funding established by the Prior GASB Standards which funding was based on the Actuarially Required Contribution. The difference between the City's actual contributions and the Actuarially Required Contribution (as calculated by the Retirement Funds' actuaries) for fiscal years 2005-2014 is shown in TABLE 4—"Information Regarding City's Contributions—Aggregated" below. Each Retirement Fund's Actuarially Required Contribution is equal to its Normal Cost plus an amortization of the Retirement Funds' UAAL over a 30-year period. MEABF, LABF and FABF amortize the UAAL on a level dollar basis, whereas PABF amortizes the UAAL on a level percent of payroll basis. P.A. 98-641 would require amortization for LABF and MEABF on a level percent of payroll basis. Both methods of calculating the Actuarially Required Contribution were acceptable under the Prior GASB Standards.
Furthermore, beginning in 2016 with respect to PABF and FABF under the P.A. 96-1495 Funding Plan and, if P.A. 98-641 is determined to be constitutional, not later than 2021 with respect to MEABF and LABF under the P.A. 98-641 Funding Plan, the City will contribute an actuarially determined amount, as opposed to the current, non-actuarial, multiplier-based approach, as set forth in the Pension Code. The P.A. 96-1495 Funding Plan and the P.A. 98-641 Funding Plan differ from the manner of calculation required by the Prior GASB Standards for financial reporting purposes, primarily because the goal of such funding plans is to reach a Funded Ratio in the respective Retirement Funds of 90 percent


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whereas the Prior GASB Standards required the Retirement Funds to amortize the UAAL towards attainment of a 100 percent Funded Ratio.
The New GASB Standards do not require calculation of an Actuarially Required Contribution.
Actuarial Methods
The Retirement Funds' actuaries employ a variety of actuarial methods to arrive at the pension statistics required by the Prior GASB Standards and the New GASB Standards. Certain of these methods arc discussed in the following sections.
Actuarial Value of Assets
Under the Prior GASB Standards, the Retirement Funds calculate their respective Actuarial Value of Assets by smoothing investment gains and losses over a period of five years, a method of valuation referred to as the "Asset Smoothing Method." Under the Asset Smoothing Method, the Retirement Funds recognize in the current year 20 percent of the investment gain or loss realized in that year and each of the previous four years. The Asset Smoothing Method was an allowable method of calculating the Actuarial Value of Assets under the Prior GASB Standards.
The Asset Smoothing Method lessens the immediate impact of market fluctuations on the Actuarial Value of Assets, which is used to calculate the UAAL and the Funded Ratio, lhat may otherwise occur as a result of market volatility. However, asset smoothing delays recognition of gains and losses, thereby providing an Actuarial Value of Assets that differs from the market value of pension plan assets at the lime of measurement. As a result, presenting the Actuarial Value of Assets as determined under the Asset Smoothing Method might provide a more or less favorable presentation of the current financial position of a pension plan than would a method that recognizes investment gains and losses annually.
As described above, under the New GASB Standards, the Fiduciary Net Position is equal to the fair market value of a pension plan's assets as of the date of determination. As such, the Asset Smoothing Method docs not apply to the determination of the Fiduciary Net Position under the New GASB Standards.
Table 3 provides a comparison of the assets of the Retirement Funds (as aggregated) on a fair value basis and after application of the Asset Smoothing Method.


















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TABLE 3 - ACTUARIAL VALUE OF ASSETS VS. FAIR VALUE OF NET ASSETS
AGGREGATED'"
Fiscal Year
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Actuarial Value
of Assets<2>
$13,086,060 13,435,692 14,254,816 13,797,344 13,051,349 12,449,863 11,521,138 10,531,447 10,513,564 10,339,208

Fair Value of Net Assets
$13,245,445 14,164,347 14,595,514 9,844,339 10,876,846 11,408,555 10,536,135 10,799,603 11,261,254 10,665,597
Actuarial Value as a Percentage of Fair Value
98.80%
94.86
97.67 140.16 119.99 109.13 109.35
97.52
93.36
96.94

Source:

(1) (2)
2005 through 2010 data is from the Actuarial Valuations ofthe Retirement Funds as of December 31, 2010, and from the Retirement Fund CAFRs for the fiscal year ended December 31, 2010. Data from 2011 through 2014 is from the Actuarial Valuations of the Retirement Funds for the fiscal years 2011 through 2014. In thousands of dollars. Data is presented in the aggregate for the Retirement Funds. The Actuarial Value of Assets is calculated through use ofthe Asset Smoothing Method.
Actuarial Accrued Liability
As the final step in the calculation of actuarial liabilities, the actuary applies a cost method to allocate the total value of benefits to past, present and future periods of employee service. This allocation is accomplished by the development of the Actuarial Accrued Liability and the Normal Cost under the Prior GASB Standards and the Pension Code and the Total Pension Liability under the New GASB Standards. Currently, all of the Retirement Funds use the entry age normal actuarial cost method (the "EAN Method") with costs allocated on the basis of earnings. The EAN Method was an approved actuarial cost method under the Prior GASB Standards and is the only allowable actuarial cost method under the New GASB Standards.
Under the EAN Method, the present value of each employee's projected pension is assumed to be funded by annual installments equal to a level percentage of the employee's earnings for each year between entry age and assumed exit age. Each employee's Normal Cost, as calculated pursuant to the Prior GASB Standards, for the current year is equal to the portion of the value so determined, assigned lo the current year. Therefore, the Normal Cost for the plan for the year is the sum of the Normal Costs of all employees.
P.A. 96-1495 requires lhat, beginning in 2016, PABF and FABF calculate the Actuarial Accrued Liability pursuant to Ihe projected unit credit actuarial cost method (the "PUC Method"). Under the PUC Method, Normal Cost represents the actuarial present value of that portion of an employee's projected benefit that is attributable to service in the current year, based on future compensation projected to retirement. Under this method, the Actuarial Accrued Liability equals the actuarial present value of that portion of a member's projected benefit that is attributable to service to date, again, on the basis of future compensation projected to retirement. 1





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Under cither cost method, the Actuarial Accrued Liability is the portion of the present value of benefits assigned by the cost method to years of service up to the valuation date, i.e., for past service. This value changes as the employee's salary changes and years of service increase, and as some employees leave and new employees are hired. Future Normal Cost is the portion of the present value of benefits assigned to future years of service and is assumed to be funded annually.
As compared to the EAN Method, the PUC Method will produce a more back-loaded growth in liabilities because the PUC Method allocates a higher portion of retirement costs closer to the time of retirement. Therefore, the PUC Method results in a slower accumulation of assets, which in turn requires smaller initial, and larger future, contributions (assuming funding is actuarially based, as under the P.A. 96-1495 Funding Plan and under P.A. 98-641). Deferring contributions in this manner increases the cost ofthe liabilities and the associated financial risks for PABF and FABF.
Actuarial Assumptions
The Actuarial Valuations of the Retirement Funds use a variety of assumptions in order to calculate the statistics required by the Prior GASB Standards and the New GASB Standards. Although several of the assumptions arc the same across all of the Retirement Funds, each Retirement Fund determines, within actuarial standards, the assumptions to be used in its Actuarial Valuation unless a specific assumption is fixed by the Pension Code. No assurance can be given that any of the assumptions underlying the Actuarial Valuations will reflect the actual results experienced by the Retirement Funds. Variances between the assumptions and actual results may cause increases or decreases in the statistics calculated pursuant to the Prior GASB Standards or the New GASB Standards. Additional information on each Retirement Fund's actuarial assumptions is available in the respective 2014 Actuarial Valuations of the Retirement Funds. See "—Source Information" above.
The actuarial assumptions used by the Retirement Funds are determined by the individual Retirement Fund Boards upon the advice of the actuary for each Retirement Fund Board. The Retirement Funds periodically perform experience studies to evaluate the actuarial assumptions in use. The purpose of an experience study is to validate that the actuarial assumptions used in the Actuarial Valuation continue to reasonably estimate the actual experience of the pension plan or, if necessary, to develop recommendations for modifications to the actuarial assumptions to ensure their continuing appropriateness.
Assumed Investment Rate of Return
The Actuarial Valuations assume an investment rate of return on the assets in each Retirement Fund. The average long-term investment rales of return currently assumed by the Retirement Funds are described in Table 2 above. Due to the volatility of the marketplace, however, the actual rate of return earned by the Retirement Funds on their assets in any year may be higher or lower than the assumed rate. Changes in the Retirement Funds' assets as a result of market performance will lead to an increase or decrease in the UAAL and the Funded Ratio. As a result of the Retirement Funds' use of the Asset Smoothing Method, however, only a portion of these increases or decreases will be recognized in the current year, with the remaining gain or loss spread over the remaining four years. See "—Actuarial Methods—Actuarial Value of Assets" above.
The assumed investment rate of return is used by each Retirement Fund's actuary as the discount rate to determine the present value of future payments lo such Retirement Fund's members. Such a determination is part ofthe actuary's process to develop the Actuarial Accrued Liability under the Prior GASB Standards. Reducing the assumed investment rate of return will, taken independently of other changes, produce a larger Actuarial Accrued Liability for each Retirement Fund. Furthermore, as discussed above, an increase in the Actuarial Accrued Liability will, taken independently, increase the UAAL, decrease the Funded Ratio and increase the Actuarially Required Contribution.


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Under the New GASB Standards, each Retirement Fund's actuary will calculate the Discount Rate, as described under "—Actuarial Valuation" above, a reduction in which will, taken independently of other factors, produce a larger Total Pension Liability for each Retirement Fund. Information regarding the Discount Rate and the sensitivity of the Total Pension Liability to changes in the Discount Rate is provided below in Table 12.
Beginning with calendar year 2012, the Retirement Fund Boards of MEABF, LABF and PABF reduced the assumed investment rate of return lo be used by their respective actuaries in preparing future actuarial valuations. For MEABF and LABF, the assumed investment rate of return has been decreased to 7.50 percent beginning with calendar year 2012. For PABF, the assumed investment rate of return was decreased to 7.75 percent for calendar year 2012 and to 7.50 percent for calendar year 2014. FABF continues to assume an investment rate of return of 8.0 percent. For a discussion of the rate to be used by Moody's Investors Service ("Moody's") in analyzing public pension plans, see "—Impact of Retirement Funds' Unfunded Liability on the City's Bond Ratings" below.
These changes to the assumed investment rate of return will not impact contributions by the City to Retirement Funds when such contributions are determined pursuant to the Multiplier Funding System. However, beginning in 2016 with respect to PABF and FABF, when P.A. 96-1495 becomes effective, and, if P.A. 98-641 is determined to be constitutional, no later than 2021 with respect to MEABF and LABF, which require the City to contribute lo the Retirement Funds on an actuarial basis, such changes in the assumed investment rate of return will, taken independently of other facts, increase the City's contributions to such Retirement Funds because the respective UAALs of PABF, LABF and MEABF will increase as described above and the P.A. 96-1495 Funding Plan and the P.A. 98-641 Funding Plan require an amortization of the UAAL to reach a 90 percent funding target by 2040 and 2054, respectively.
Funded Status of the Retirement Funds
In recent years, the City has contributed to the Retirement Funds the full amount of Multiplier Funding and certain other amounts determined by the City to be required by the Pension Code through a
combination of property tax revenues (through the Pension Levy) and PPRT funds. However, these amounts have not been sufficient, when combined with employee contributions and investment returns, to offset increases in the liabilities of the Retirement Funds. Moreover, expenses related to the Health Plan (as defined below) arc paid from the City's contributions, which has the effect of reducing the Actuarial Value of Assets and decreasing the Funded Ratio.
Furthermore, the income from all sources (including employee contributions, City contributions and investment earnings) to the Retirement Funds has been lower than the cash outlays of the Retirement Funds in some recent years. As a result, the Retirement Funds have liquidated investments and used assets of the Retirement Funds lo satisfy these cash outlays. The use of investment earnings or assets of the Retirement Funds for these purposes reduces the amount of assets on hand to pay benefits in the future and prevents the Retirement Funds from recognizing the full benefits of compounding investment returns.
Table 4 provides information on the Actuarially Required Contribution, the City's actual contributions in accordance with the Pension Code and the percentage of the Actuarially Required Contribution made in each year.

As discussed under "— Determination of City's Contributions" above, the City and FABF have disagreed over whether certain amounts arc required under the Pension Code. In addition, pursuant to the Pension Code, the City did not make any contributions to LABF in fiscal years 2001 through 2006 because LABF had funds on hand in excess of its liabilities. The Pension Code provides that the City will cease to make contributions to LABF in such a situation. The City continued to make contributions to the other Retirement Funds during those years.


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TABLE 4 - INFORMATION REGARDING CITY'S CONTRIBUTIONS''} - AGGREGATED
Percentage of Actuarially
Actuarially Required
Fiscal Required Actual Employer Contribution
Year Contribution Contribution(2) Contributed'3'
2005 $ 698,185 $423,515 60.7%
2006(4> 785,111 394,899 50.3
2007'4) 865,776 395,483 45.7
2008'4> 886,215 416,130 47.0
2009(4) 990,381 423,929 42.8
2010'4) 1,112,626 425,552 38.2
2011'4> 1,321,823 416,693 31.5
2012'4) 1,470,905 440,120 29.9
2013(4) 1,695,278 442,970 26.1
2014<4) 1,740,973 447,400 25.7
Sources: Actuarial Valuations ofthe Retirement Funds as of December 31, 2010, December 31, 2011, December 31, 2012, December 31, 2013, and December 31, 2014, the Fund CAFRs for the fiscal year ended December 31, 2010, and the City CAFRs for the fiscal years ended December 31, 2011, December 31, 2012 and December 31, 2013.
In thousands of dollars. Data is presented in the aggregate for the Retirement Funds and uses assumptions and methods employed by each of the Retirement Funds. For the data presented as of December 31, 2005 and December 31, 2006, contribution information includes amounts related to other post-employment benefits. Beginning in 2007, as a result of a change in GASB standards, contribution information is presented exclusive of amounts related to other post-employment benefits.
Includes the portion ofthe PPRT contributed to the Retirement Funds in each year.
The estimated multipliers that would have been necessary for FABF, LABF and PABF to make the full Actuarially Required Contribution in 2014 were as follows: 7.98 for FABF; 4.87 for LABF; and 7.94 for PABF. The estimated multiplier that would have been necessary for MEABF to make the full Actuarially Required Contribution in 2014 has not been publicly disclosed, however the necessary contribution multiple for 2013 was 4.52. Beginning in 2016. the City's contributions to PABF and FABF will not be calculated in accordance with the Multiplier Funding system. If P.A. 98-641 is determined to be constitutional, the City's contributions to LABF and MEABF will not be calculated in accordance with the Multiplier Funding system beginning in 2021. See "—Determination of City's Contributions" above.
Beginning in 2006, as a result of a change in GASB standards, the information in this Table 4 does not include other post-employment benefits, which the City's Comprehensive Annual Financial Report presents separately.
PABF changed certain actuarial assumptions beginning with the fiscal year ended December 31, 2014. Specifically, PABF reduced its assumed investment rate of return from 7.75 percent to 7.50 percent and changed the mortality table used by its actuary to RP-2014, which projects longer lives for PABF members. Considered independently of other factors, these changes increased the GASB 25 Actuarial Accrued Liability, and, as a result, increased PABF's UAAL and Actuarially Required Contribution. With respect to the City's 2017 contribution to PABF, these changes are expected to result in an additional contribution of $62 million.
The continued decline in the percentage of the Actuarially Required Contribution contributed by the City, as shown in Table 4 above, results, in part, from the fact that the actuarial liability continues to grow due to the delayed recognition of gains and losses resulting from the Retirement Funds' use ofthe Asset Smoothing Method for financial reporting purposes under the Prior GASB Standards. See "— Actuarial Methods—Actuarial Value of Assets" above.
The following tables summarize the financial condition and the funding trends of the Retirement
Funds.



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A variety of factors impact the Retirement Funds' UAAL and Funded Ratio. A lower return on investment than that assumed by the Retirement Funds, and insufficient contributions when compared lo the Normal Cost plus interest will all cause an increase in the UAAL and a decrease in the Funded Ratio. Conversely, higher returns on investment than assumed, and contributions in excess of Normal Cost plus interest will decrease the UAAL and increase the Funded Ratio. In addition, legislative amendments, changes in actuarial assumptions and certain other factors (including, but not limited to, higher or lower incidences of retirement, disability, in-service mortality, retiree mortality or terminations than assumed) will have an impact on the UAAL and the Funded Ratio.
Net Pension Liability and Discount Rate
As described in "— The Actuarial Valuation—New GASB Standards" above, the New GASB Standards require the calculation of the Net Pension Liability, which is the difference between the Total Pension Liability and the Fiduciary Net Position. Furthermore, the Discount Rate is the blended rate at which the actuaries of the Retirement Funds discount projected benefit payments to their actuarial present values. The following tables present information on the Net Pension Liability and the components thereof and the Discount Rate and the sensitivity of the Net Pension Liability to changes in the Discount Rate. As described in this Appendix, the fiscal year ended December 31, 2014 is the first fiscal year for which GASB 67 is effective and, as such, comparative historical information is not yet available with respect to the information provided in these tables.

Plan Net Position
TABLE 11- NET PENSION LIABILITY ($ IN THOUSANDS)

Total Pension Liability

Plan Net Position as a Percentage of Total Pension Liability
MEABF LABF PABF FABF Total
$12,307,094 2,162,906 11,773,431 4,512,760
$30,756,191
$5,179,486 1,388,093 3,062,014 1,036,008
$10,665,601
$7,127,608 774,813 8,711,417 3,476,752
$20,090,590
42.09% 64.18 26.01 22.96
34.68%
Source: The Actuarial Valuations of the Retirement Funds for the fiscal year ended December 31, 2014.





















E-25

TABLE 12- SENSITIVITY OF NET PENSION LIABILITY TO CHANGES IN THE DISCOUNT
RATE(I)
MEABF Discount Rate Net Pension Liability
LABF Discount Rale Net Pension Liability
PABF
Discount Rate
Net Pension Liability FABF
Discount Rate
Net Pension Liability
1 % Decrease

6.50% $8,511,386

6.24% $1,013,951

6.15% $10,123,094

6.60% $3,963,803
Current

7.50% $7,127,608

7.24% $774,813

7.15% $8,711,417

7.60% $3,476,752
1% Increase

8.50% $5,955,121

8.24% $572,792

8.15% $7,524,224

8.60% $3,060,757
Source: The Actuarial Valuations ofthe Retirement Funds for the fiscal year ended December 31, 2014. (1) In thousands.
Projection of Funded Status
The Retirement Funds' funding level has decreased in recent years due to a combination of factors, including: adverse market conditions and investment returns as a result of the financial downturns experienced in 2001 and in 2008 and beyond; and contributions that are lower than the Actuarially Required Contribution. With respect to MEABF and LABF, the funding level increased for fiscal year 2014 as a result of the implementation of P.A. 98-641. The manner of funding MEABF and LABF reverted to the law in effect prior to the implementation of P.A. 98-641 after the Circuit Court determined P.A. 98-641 to be unconstitutional.
The following projections (collectively, the "Projections") arc based upon numerous variables lhat arc subject to change. The Projections arc forward-looking statements regarding future events based on the Retirement Funds' actuarial assumptions and assumptions made regarding such future events, including that there are no changes to the current legislative structure and that all projected contributions to the Retirement Funds are made as required. No assurance can be given lhat these assumptions will be realized or that actual events will not cause material changes to the data presented in this subsection.
The Projections are based on data as of December 31, 2014, and are provided to indicate expected trends in the funded status of the Retirement Funds under the applicable law. The Projections provided in this section with respect to MEABF combine pension and other post-employment benefit ("OPEB") liabilities together in a single projection, whereas the Projections included with respect to the other Retirement Funds exclude OPEB liabilities. Therefore, with respect to MEABF, such projections overstate the Actuarial Accrued Liability with respect lo pension benefits by the amount of such OPEB liability. In addition, the City believes that the liability related to OPEB may be reduced based upon the outcome of the Lawsuit (as hereinafter defined). See "—Payment for Other Post-Employment Benefits— Status of Healthcare Benefits after the Settlement Period" herein. The Projections reflect the implementation of both P.A. 96-1495 and P.A. 98-641. However, P.A. 98-641 has been determined to be unconstitutional by the Circuit Court. For projections regarding MEABF and LABF under the law in effect prior to the enactment of P.A. 98-641, see "—Effect on MEABF and LABF If P.A. 98-641 Found




E-26

Unconstitutional" herein. In addition, the Projections do not consider the potential impact of SB 777 or any similar legislation impacting the P.A. 96-1495 Funding Plan.



TABLE 13 - PROJECTION OF FUTURE FUNDING STATUS - MEABF
Market
Actuarial Unfunded Accrued Market
Accrued Market Actuarial Liabilities Funded
Liability Assets (UAAL) Ratio Employer
Fiscal ($) ($) ($) (%) Contribution12'
Year (a) (b) (a-b) (b/a) ($)
$12,623,220 $5,099,126 $7,524,094 40.4% $158,798
12,944,628 5,040,865 7,903,763 38.9 242,700
13,288,088 5,093,774 8,194,314 38.3 275,248
13,634,558 5,222,804 8,411,754 38.3 381,424
13,991,237 5,435,586 8,555,651 38.8 464,616
14,346,358 5,649,839 8,696,519 39.4 542,585
14,697,099 5,862,858 8,834,241 39.9 554,376
15,040,872 6,071,971 8,968,901 40.4 565,732
15,377,568 6,277,293 9,100,275 40.8 576,324
15,704,963 6,476,772 9,228,191 41.2 586,751
16,032,289 6,679,887 9,352,402 41.7 596,887
16,345,527 6,872,954 9,472,573 42.0 606,555
16,643,231 7,055,253 9,587,978 42.4 615,840
16,926,173 7,228,381 9,697,792 42.7 625,322
17,194,166 7,393,218 9,800,948 43.0 635,022
17,446,425 7,550,013 9,896,412 43.3 645,219
17,682,375 7,699,294 9,983,081 43.5 655,655
17,903,431 7,843,902 10,059,529 43.8 666,177
18,111,649 7,987,600 10,124,049 44.1 677,231
18,309,447 8,134,674 10,174,773 44.4 689,120
18,510,692 8,300,829 10,209,863 44.8 701,813
18,708,637 8,481,310 10,227,327 45.3 715,218
18,906,845 8,681,906 10,224,939 45.9 729,451
19,109,525 8,908,258 10,201,267 46.6 744,700
19,320,602 9,170,030 10,150,572 47.5 760,983
19,529,562 9,456,586 10,072,976 48.4 778,333

Source: Actuarial Valuation of MEABF as of December 31, 2014.
Note: Reflects the implementation of P.A. 98-641, which was found unconstitutional by the Circuit Court. Such decision is being appealed to the Illinois Supreme Court. In addition, this Table includes OPEB liabilities. Therefore, such projections overstate the Actuarial Accrued Liability with respect to pension benefits by the amount of such OPEB liability. In addition, the City believes that the liability related to OPEB may be reduced based upon the outcome of the Lawsuit See "—Payment for Other Post-Employment Benefits—Status of Healthcare Benefits after the Settlement Period" herein.
In thousands of dollars. Projections calculated on a cash basis.
Represents contributions expected to be made by the City during the fiscal year.






E-27
TABLE 14


Actuarial Accrued Liability
($)
(a)
PROJECTION OF FUTURE FUNDING STATUS - LABF'
Market Unfunded Accrued
Actuarial Market
Market Liabilities Funded
Assets (UAAL) Ratio
($) ($) (%)
(b) (a-b) (b/a)

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
$2,145,052 2,175,622 2,208,991 2,231,152 2,273,671 2,304,497 2,333,490 2,360,554 2,385,406 2,407,534 2,429,710 2,449,606 2,466,633 2,480,723 2,491,848 2,500,071 2,505,962 2,510,086 2,513,040 2,515,720 2,518,676 2,522,349 2,527,430 2,534,183 2,542,950 2,554,422
$1,363,097 1,342,036 1,325,498 1,314,693 1,311,023 1,313,146 1,324,203 1,333,970 1,342,241 1,348,670 1,356,183 1,362,569 1,367,354 1,370,612 1,372,411 1,372,908 1,372,824 1,372,877 1,373,840 1,376,709 1,381,940 1,390,066 1,401,875 1,417,752 1,438,244 1,464,246
$ 781,955 833,586 883,493 916,459 962,648 991,351 1,009,287 1,026,584 1,043,165 1,058,864 1,073,527 1,087,037 1,099,279 1,110,111 1,119,437 1,127,163 1,133,138 1,137,209 1,139,200 1,139,011 1,136,736 1,132,283 1,125,555 1,116,431 1,104,706 1,090,176
63.5%
61.7
60.0
58.9
57.7
57.0
56.7
56.5
56.3
56.0
55.8
55.6
55.4
55.3
55.1
54.9
54.8
54.7
54.7
54.7
54.9
55.1
55.5
55.9
56.6
57.3
$ 14,472 24,019 28,536 37,768 46,280 56,096 68,520 70,398 72,308 74,296 76,371 78,462 80,560 82,695 84,830 86,915 89,060 91,245 93,475 95,647 97,562 99,442 101,274 103,084 104,922 106,793

Source: Actuarial Valuation of LABF as of December 31, 2014.
Note: Reflects the implementation of P.A. 98-641, which was found unconstitutional by the Circuit Court. Such decision is being appealed lo the Illinois Supreme Court.
In thousands of dollars. Projections calculated on a cash basis.
Represents contributions expected to be made by (he City during the fiscal year.













E-28

TABLE 15 — PROJECTION OF FUTURE FUNDING STATUS - FABF'



Fiscal Year
Market
Actuarial Unfunded Accrued Market
Accrued Market Actuarial Liabilities Funded
Liability Assets (UAAL) Ratio
($) ($) ($) (%)
(a) (b) (a-b) (b/a)


Employer Contribution'2' ($)

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
$4,434,859 4,577,294 4,722,294 4,866,705 5,009,665 5,150,374 5,288,603 5,423,461 5,555,176 5,682,352 5,804,282 5,920,962 6,033,745 6,144,159 6,253,408 6,362,319 6,469,132 6,573,937 6,676,785 6,777,422 6,877,220 6,976,596 7,077,715 7,181,432 7,288,756 7,401,532
$1,109,401 1,217,224 1,331,697 1,45.1,676 1,577,203 1,708,420 1,845,600 1,989,064 2,141,193 2,301,929 2,471,585 2,650,813 2,840,666 3,043,394 3,259,857 3,491,000 3,734,518 3,990,843 4,261,086 4,545,008 4,844,498 5,160,943 5,497,989 5,858,397 6,244,911 6,661,361
$3,325,458 3,360,070 3,390,597 3,415,029 3,432,462 3,441,954 3,443,003 3,434,397 3.413,983 3,380,423 3,332,697 3,270,149 3,193,079 3,100,765 2,993,551 2,871,319
, 2,734,614 2,583,094 2,415,699 2,232,414 2,032,722 1,815,653 1,579,726 1,323,035 1,043,845 740,171
25.0%
26.6
28.2
29.8
31.5
33.2
34.9
36.7
38.5
40.5
42.6
44.8
47.1
49.5
52.1
54.9
57.7
60.7
63.8
67.1
70.4
74.0
77.7
81.6
85.7
90.0
$109,813(3) 246,132 284,086 292,439 301,752 311,205 320,955 330,536 340,547 351,861 363,224 374,623 385,647 395,621 405,505 414,140 421,833 427,568 432,905 438,176 442,417 446,354 450,005 454,185 458,737 463,527

Source: The Actuarial Valuation of FABF as of December 31, 2014.
In thousands of dollars. Projections are calculated by GRS on an accrual basis. However, with respect to Employer Contribution column, the City has presented the data based on the year the employer contribution actually made, rather than the preceding budget year.
Represents contributions expected lo be made by Ihe City during the fiscal year.
The City's budgeted contribution for 2015 is $96,300 (rounded lo thousands of dollars).












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TABLE 16 - PROJECTION OF FUTURE FUNDING STATUS - PABF



Fiscal Year
Market
Actuarial Unfunded Accrued Market
Accrued Market Actuarial Liabilities Funded
Liability Assets (UAAL) Ratio
($) ($) ($) (%)
(a) (b) (a-b) (b/a)


Employer Contribution'"
($)

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
$11,411,836 11,781,145 12,163,551 12,548,773 12,933,725 13,316,644 13,696,272 14,071,381 14,439,986 14,799,878 15,148,088 15,481,802 15,799,359 16,100,434 16,385,906 16,656,508 16,913,448 17,157,541 17,389,628 17,611,490 17,826,154 18,036,195 18,244,281 18,452,509 18,662,552 18,875,443
$3,278,525 3,572,979 3,889,364 4,219,011 4,560,317 4,914,566 5,281,951 5,663,586 6,059,763 6,470,260 6,895,984 7,337,188 7,795,756 8,273,986 8,777,064 9,311,291 9,882,460 10,492,841 11,140,748 11,825,203 12,551,460 13,323,888 14,148,326 15,030,205 15,974,830 16,987,488
$8,133,311 8,208,166 8,274,187 8,329,762 8,373,408 8,402,078 8,414,321 8,407,795 8,380,223 8,329,618 8,252,104 8,144,614 8,003,603 7,826,448 7,608,842 7,345,217 7,030,988 6,664,700 6,248,880 5,786,287 5,274,694 4,712,307 4,095,955 3,422,304 2,687,722 1,887,955
28.7%
30.3
32.0
33.6
35.3
36.9
38.6
40.2
42.0
43.7
45.5
47.4
49.3
51.4
53.6
55.9
58.4
61.2
64.1
67.1
70.4
73.9
77.5
81.5
85.6
90.0
$187,815(3) 592,863 675,826 695,124 713,810 732,200 752,090 772,004 792,595 813,531 834,435 856,465 878,925 902,286 925,836 951,072 978,674 1,007,732 1,034,971 1,056,933 1,073,628 1,089,551 1,104,206 1,118,732 1,132,916 1,146,889

Source: The Actuarial Valuation of PABF as of December 31, 2014.
In thousands of dollars. Projections arc calculated by GRS on an accrual basis. However, with respect to the Employer Contribution column, the Cily has presented the data based on the year the employer contribution is actually made, rather than the preceding budget year.
Represents contributions expected to be made by the City during the fiscal year.
The City's budgeted contribution for 2015 is SI 94,122 (rounded to thousands of dollars).













E-30

TABLE 17 - PROJECTION OF FUTURE FUNDING STATUS - AGGREGATE0
Market Unfunded Accrued
Actuarial Actuarial Market
Accrued Market Liabilities Funded
Liability Assets (UAAL) Ratio Employer
Fiscal ($) ($) ($) (%) Contribution1
Year (a) (b) (a-b) (b/a) ($)
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
$30,614,967 31,478,689 32,382,924 33,281,188 34,208,298 35,117,873 36,015,464 36,896,268 37,758,136 38,594,727 39,414,369 40,197,897 40,942,968 41,651,489 42,325,328 42,965.323 43,570,917 44,144,995 44,691,102 45,214,079 45,732,742 46,243,777 46,756,271 47,277,649 47,814,860 48,360,959
$10,850,149 11,173,104 11,640,333 12,208,184 12,884,129 13,585,971 14,314,612 15,058,591 15,820,490 16,597,631 17,403,639 18,223,524 19,059,029 19,916,373 20,802,550 21,725,212 22,689,096 23,700,463 24,763,274 25,881,594 27,078,727 28,356,207 29,730,096 31,214,612 32,828,015 34,569,681
$19,764,818 20,305,585 20,742,591 21,073,004 21,324,169 21,531,902 21,700,852 21,837,677 21,937,646 21,997,096 22,010,730 21,974,373 21,883,939 21,735,116 21,522,778 21,240,111 20,881,821 20,444,532 19,927,828 19,332,485 18,654,015 17,887,570 17,026,175 16,063,037 14,986,845 13,791,278
35.4%
35.5
35.9
36.7
37.7
38.7
39.7
40.8
41.9
43.0
44.2
45.3
46.6
47.8
49.1
50.6
52.1
53.7
55.4
57.2
59.2
61.3
63.6
66.0
68.7
71.5
$470,898 1,105,714 1,163,696 1,406,755 1.526,458 1,642,086 1,695,941 1,738,670 1,781,774 1,826,439 1,870,917 1,916,105 1,960,972 2,005,924 2,051,193 2,097,346 2,145,222 2,192,722 2,238,582 2,279,876 2,315,420 2,350,565 2,384,936 2,420,701 2,457,558 2,495,542
Source: The aggregated information presented in this table is derived from the projections presented in Tables 13-
16. Please refer to Tables 13-16 for source information. Note: Reflects the implementation of P.A. 98-641, which was found unconstitutional by the Circuit Court. Such
decision is being appealed to the Illinois Supreme Court. Includes OPEB liabilities with respect to
MEABF. See Note to Table 13 for additional information.
In thousands of dollars. Projections for MEABF and LABF arc calculated on a cash basis. Projections for PABF and FABF are calculated on an accrual basis, however, with respect to the Employer Contribution column, the City has presented the data based on the year the employer contribution is actually made, rather than the preceding budget year.
Aggregate data presented in this table includes data for all four Retirement Funds.
Represents contributions expected to be made by the City during the fiscal year.
The projections in Tables 15 and 16 show that the assets of both FABF and PABF will, under current law, begin to increase in 2016. This increase assumes the implementation ofthe P.A. 96-1495 Funding Plan. This projection docs not consider the impact of any bill delaying the impact of P.A. 96-1495, such as SB777. See "—Determination of City's Contributions—City's Required Contributions to



E-31

PABF and FABF Beginning in 2016" herein. The City projects that, should such a delay bill be enacted, the purpose of such bill would be extend the period over which the City implements such increases in the contributions currently projected to occur pursuant to P.A. 96-1495, which would most likely have the effect of delaying the increases in the Funded Ratio with respect to such Retirement Funds during the period in which the contributions established pursuant to such delay bill are lower than those under P.A. 96-1495. See "—Determination of City's Contributions—City's Required Contributions to PABF and FABF Beginning in 2016" herein.
Legislative Changes
P.A. 96-0889
On April 14, 2010, then Governor Quinn signed Public Act 96-0889 (the "Pension Reform Act") into law. The Pension Reform Act establishes a "two-tier" benefit system wilh less generous benefits for employees who become members of MEABF and LABF on or after January 1, 2011 ("Tier II Members") as compared to those provided to employees prior to such date ("Tier I Members"). The Pension Reform Act does not impact persons who first became employees prior to its effective date of January 1, 2011.
Among other changes, the Pension Reform Act: (i) increases the minimum age at which an employee may retire with unreduced benefits to age 67 from age 60 or younger based on a formula combining the age ofthe employee and the number of years of service; (ii) increases the minimum age at which an active employee may retire with reduced benefits to age 62 from age 50; (iii) provides thai final average salary is based on 96 consecutive months within the last 120 months of employment (instead of 48 months of the last 120 months); (iv) reduces the annual cost of living adjustment to the lower of 3 percent or 50 percent of the change in the consumer price index for all urban consumers, whichever is lower, and eliminates compounding for employees hired after January 1, 2011, compared with a cost of living adjustment of 3 percent, compounded, under prior law; and (v) caps the salary on which a pension may be calculated at $106,800 (subject to certain adjustments for inflation).
The Pension Reform Act as described in this subsection, taken independently of any other legislative or market effects, is expected to reduce benefits afforded new hires and therefore reduce over time the growth in the Actuarial Accrued Liability, the UAAL and the Actuarially Required Contribution for MEABF and LABF. In calculating the Actuarial Accrued Liability, the actuaries make assumptions about future benefit levels. As the value of future benefits decreases over time, and as a greater percentage of the City's workforce is covered by the Pension Reform Act, the Actuarial Accrued Liability is expected to decrease compared to what it would have been under previous law. Consequently, the UAAL is expected to grow more slowly and the Funded Ratio to increase. As the growth in the UAAL slows, the Actuarially Required Contribution is expected to be reduced as the amount of UAAL to be amortized decreases. However, no assurance can be given that these expectations will be the actual experience going forward.
PA. 96-1495
P.A. 96-1495 makes changes to the Pension Code wilh respect to PABF and FABF. Sec "— Determination of City's Contributions—City's Required Contributions to PABF and FABF Beginning in 2016" for additional information regarding the impact ofthe changes imposed by P.A. 96-1495. The P.A. 96-1495 Funding Plan will significantly increase the City's contributions to PABF and FABF because, among other things, such contributions will no longer be determined pursuant to the Multiplier Funding system and because the P.A. 96-1495 Funding Plan is designed to require larger contributions by the City.





E-32

In addition, P.A. 96-1495 makes changes to benefits for police officers and firefighters first participating in PABF and FABF on or after January 1, 2011. Among other changes, P.A. 96-1495: (i) increases the minimum eligibility age for unreduced retirement benefits from 50 (with ten years of service) to 55 (with ten years of service); (ii) provides for retirement al age 50 (with ten years of service) with the annuity reduced by 0.5 percent per month; (iii) provides that final average salary is based on 96 consecutive months within Ihe last 120 months of employment (instead of 48 months of the last 120 months); (iv) reduces the cost of living adjustment to the lower of 3 percent or 50 percent of the change in the consumer price index for all urban consumers ("CPI-u"), whichever is lower, commencing at age 60;
provides that widow benefits are 66 2/3 percent of the employee's annuity at the date of death; and
caps the salary on which a pension may be calculated at $106,800 (subject to certain adjustments for inflation).
Sec —"Projection of Funded Status" herein for a projection of future contributions, the UAAL and the Funded Ratio of PABF and FABF following the implementation of P.A. 96-1495.
P.A. 98-641
If determined by the Illinois Supreme Court to be constitutional, P.A. 98-641 would make significant changes to LABF and MEABF. Certain provisions relating to the City's contributions to LABF and MEABF under P.A. 98-641 are discussed above in "—Determination of City's Contributions—City's Required Contributions to LABF and MEABF Pursuant to P.A. 98-641." The P.A. 98-641 Funding Plan would have the effect of significantly increasing the City's contributions to LABF and MEABF.
In addition, with respect to LABF and MEABF, P.A. 98-641:
Skips automatic annual increases ("AAI") in 2017, 2019 and 2025 for retired members that would otherwise be entitled to receive them and who have an annuity greater than $22,000;
Provides that members who retire after the effective date of P.A. 98-641 are not eligible to receive an AAI until one full year after they otherwise would have;
Reduces the AAI rate for Tier I Members to the lesser of 3.0 percent or 50 percent of the CPI-u, except that retirees with an annual annuity of less than $22,000 will receive at least a 1 percent AAI in each year, including in the AAI skip years described above;
Reduces for Tier II Members the minimum eligibility age for unreduced retirement benefits to 65 wilh 10 years of service and, for reduced retirement benefits, to age 60 with 10 years of service;
Increases employee contribution rates for both Tier I Members and Tier II Members to 9.0 percent in calendar year 2015, 9.5 percent in calendar year 2016, 10.0 percent in calendar year 2017, 10.5 percent in calendar year 2018 and 11.0 percent for calendar year 2019 and after until the respective Retirement Fund reaches a 90 percent Funded Ratio, at which point the employee contribution rate is reduced to 9.75 percent and
Institutes the Recapture Provisions with respect to MEABF and LABF.
Gabriel Roeder Smith & Company ("GRS") has prepared projections of City contributions and the funded status of LABF and MEABF based on the enactment of P.A. 98-641. Such projections are based on the data, assumptions and methods used in the actuarial valuations for LABF and MEABF as of December 1, 2013. Tables 18 and 19 provide such projections as compared to projected results under current Pension Code provisions.


E-33

TABLE 18 - PROJECTED CONTRIBUTIONS: MEABF AND LABF
MEABF


Contribution Year
Contributions to LABF Before P.A. 98-641
Contributions to LABF Under P.A. 98-641
Increase in Contributions to LABF Under P.A. 98-641
Contributions to MEABF Before P.A. 98-641
Contributions to MEABF Under P.A. 98-641
Increase in Contributions to MEABF Under P.A. 98-641

2015 2016 2017 2018 2019 2020 2021 2022 2030 2040 2050 2055
; 14.5 14.4 15.4 15.7 16.2 16.7 17.2 17.8 232.6 244.8 217.1 218.1
14.5 24.0 30.5 38.2 47.1 57.3 67.7 69.6 86.2 105.5 124.3 135.3
S 0.0 9.6 15.1 22.5 30.9 40.6 50.5 51.8 (146.4) (139.3) (92.8) (82.8)
$ 156.1 157.4 161.9 167.1 172.6 178.2 184.0 189.9 1,325.3 1,598.9 1,530.1 1,519.9
$ 156.1 242.7 290.1 361.2 442.1 533.0 585.6 600.3 724.7 917.4 1,184.5 1,332.2
0.0 85.3 128.2 194.1 269.5 354.8 401.6 410.4 (600.6) (681.5) (345.6) (187.7)

Source: GRS. Projection derived from actuarial data as of December 31, 2013. (1) In millions of dollars. Projections are calculated on a cash basis.
TABLE 19 - PROJECTED FUNDED RATIOS: MEABF AND LABF1'
LABF MEABF
Contribution Year
Funded Ratio Before P.A. 98-641
Funded Ratio Under P.A. 98-641
Funded Ratio Before P.A. 98-641
Funded Ratio Under P.A. 98-641

2015 2016 2017 2018 2019 2020 2021 2022 2030 2040 2050 2055
53.9%
52.8
50.9
48.0
44.9
41.6
38.1
34.3
0.0
0.0
0.0
0.0
62.5%
62.3
61.7
60.5
59.5
59.0
58.7
58.5
57.2
60.2
76.5
90.0
33.1%
31.3
29.1
26.3
23.3
20.1
16.6
12.9 '
0.0
0.0
0.0
0.0
38.5%
37.6
36.8
35.8
35.4
35.6
35.9
36.2
38.8
45.0
68.7
90.0

Source: GRS. Projection derived from actuarial data as of December 31, 2013. (1) In millions of dollars. Projections are calculated on a cash basis.
P.A. 98-641 would also provide that the Retirement Board of LABF or MEABF may bring a mandamus action to compel the City to make the contributions required by the Pension Code, in addition to other remedies that may be available by .law. P.A. 98-641 would further provide that the court may order a reasonable payment schedule to enable the City to make payments without imperiling the City's public health, safety, or welfare.



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Under P.A. 98-641, such payments are expressly subordinated to the payment of the principal, interest, premium, if any, and other payments on or related lo any bonded debt obligation of the City, either currently outstanding or to be issued, for which ihe source of repayment or security thereon is derived directly or indirectly from any funds collected or received by the City or collected or received on behalf ofthe City. Per P.A. 98-641, such payments on bonded debt obligations include any statutory fund transfers or other prefunding mechanisms or formulas set forth, now or hereafter, in State law, City ordinance, or bond indentures, into debt service funds or accounts of the City related to such bonded debt obligations, consistent with the payment schedules associated with such obligations.
In December 2014, shortly before P.A. 98-641 was to take effect, two lawsuits were filed in the Circuit Court challenging Ihc constitutionality of P.A. 98-641. Plaintiffs argue lhat P.A. 98-641 violates the Pension Clause and seek a preliminary and permanent injunction prohibiting its enforcement. The City was allowed to intervene in both lawsuits to defend the constitutionality of P.A. 98-641. On July 24, 2015, the Circuit Court entered a decision in these lawsuits determining that P.A. 98-641 is unconstitutional and void in its entirety. The City has appealed the Circuit Court's decision to the Illinois Supreme Court, and oral arguments regarding such appeal were heard on November 17, 2015. The City has been defending and will continue to defend this matter vigorously. The City can give no assurance as to the ultimate outcome of the lawsuit.
Should the Illinois Supreme Court affirm the Circuit Court's decision finding P.A. 98-641 unconstitutional, MEABF and LABF arc projected to become insolvent beginning in 2026 and 2029, respectively. Sec "—Effect on MEABF and LABF If P.A. 98-641 Found Unconstitutional" below for additional information. Should the Circuit Court's decision regarding P.A. 98-641 be affirmed, it is not clear whether or how the unfunded status or insolvency of MEABF and LABF might be resolved or what, if any, impact such a resolution may have on the City.
Diversion of Grant Money to the Retirement Funds Under P.A. 96-1495 and P.A. 98-641
P.A. 96-1495 and, if determined to be constitutional, P.A. 98-641 allow the State Comptroller to divert State grant money intended for the City to the Retirement Funds lo satisfy contribution shortfalls by the City (the "Recapture Provisions"). If the City fails to contribute to the Retirement Funds as required by the Pension Code, the Cily will be subject to a reallocation of grants of State funds to the City if (i) the City fails to make the required payment in a timely manner as set forth in the respective statute, (ii) the subject Retirement Fund gives notice of the failure lo the City, and (iii) such Retirement Fund certifies to the State Comptroller thai such payment has not been made. Upon the occurrence of these events, the State Comptroller will withhold grants of State funds from the City in an amount not in excess ofthe delinquent payment amount in the following proportions: (i) in fiscal year 2016, one-third of the City's State grant money, (ii) in fiscal year 2017, two-thirds of the City's State grant money, and (iii) in fiscal year 2018 and in each fiscal year thereafter, 100 percent of the City's State grant money. Should the Recapture Provisions in cither of P.A. 96-1495 or, if determined to be constitutional, P.A. 98-641, be invoked as a result of the City's failure to contribute all or a portion of its required contribution, a reduction in Stale grant money may have a significant adverse impact on the City's finances.
Effect on MEABF and LABF If P.A. 98-641 Found Unconstitutional
As described in "—Legislative Changes—P.A. 98-641" above, P.A. 98-641 has been determined to be unconstitutional by the Circuit Court. If the Circuit Court's decision regarding the constitutionality of P.A. 98-641 is not overturned and the law in effect at the time of the enactment of P.A. 98-641 is effective, the City's consulting actuaries project that MEABF and LABF will not have assets on hand to make payments to beneficiaries beginning in 2026 and 2029, respectively. Tables 20 and 21 provide current projections of Ihe Actuarial Accrued Liability, Market Value of Assets, UAAL, Funded Ratio and



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i I
i
i
I
i
i
Employer Contribution with respect to MEABF and LABF in the absence of P.A. 98-641. Table 22 combines the projections in Tables 20 and 21 with the projections in Tables 15 and 16 for FABF and PABF, respectively, to provide an aggregate projection of Actuarial Accrued Liability, Market Value of Assets UAAL, Funded Ratio and Employer Contribution for the four Retirement Funds in the absence of P.A. 98-641.

TABLE 20 - PROJECTION OF FUTURE FUNDING STATUS - MEABF
Market
Actuarial Unfunded Accrued Market
Employer Contribution'21 ($)
Accrued Market Actuarial Liabilities Funded
Fiscal Year
Liability Assets (UAAL) Ratio
($) ($) ($) (%)
(a) (b) (a-b) . (b/a)
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
S 14,788,983 15,257,262 15,736,491 16,213,945 16,686,091 17,149,388 17,600,400 18,038,164 18,459,401 18,874,417 19,269,819 19,644,224 19,996,084 20,324,749 20,628,151 20,904,445 21,153,680 21,376,674 21,574,935 21,750,671 21,906,148 22,043,770 22,166,160 22,275,941 22,376,201 22,470,299
$ 5,088,720 4,855,643 4,585,770 4,264,599 3,885,513 3,441,412 2,925,154 2,331,452 1,652,472 893,662 36,495
$ 9,700,263 10,401,619 11,150,721 11,949,346 12,800,578 13,707,976 14,675,246 15,706,712 16,806,929 17,980,755 19,233,324 19,644,224 19,996,084 20,324,749 20,628,151 20,904,445 21,153,680 21,376,674 21,574,935 21,750,671 21,906,148 22,043,770 22,166,160 22,275,941 22,376,201 22,470,299
33.1%
31.3
29.1
26.3
23.3
20.1
16.6
12.9
9.0
4.7
0.2
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
$ 156,091 157,427 161,916 167,069 172,600 178,248 184.018 189,873 195,848 201,863 208,088 214,489 220,984 227,654 234,442 241,387 248,481 255,727 263,007 270,436 278,088 285,948 293,986 302,297 310,857 319,656

Source: GRS. Projections derived from actuarial data as of December 31, 2013. Such projections assume that the City will continue to contribute to MEABF pursuant to the Multiplier Funding system upon the insolvency of MEABF.
Note: Does not include OPEB liabilities.
In thousands of dollars. Projections calculated on a cash basis.
Represents contributions expected to be made by the City during the fiscal year.










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TABLE 21 - PROJECTION OF FUTURE FUNDING STATUS - LABF'
Market
Actuarial Unfunded Accrued Market
Employer Contribution'2' ($)
$ 14,472 14,411 15,387 15,722 16,168 16,675 17,228 17,813 18,431 19,075 19,752 20,462 21,185 21,941 22,725 23,521 24,337 25,179 26,018 26,845 27,688 28,540 29,395 30,184 30,909 31,610
Accrued Market Actuarial Liabilities Funded
Liability Assets (UAAL) Ratio
Fiscal ($) ($) ($) (%)
Year (a) (b) (a-b) (b/a)
2015 $ 2,504,477 S 1,408,178 $1,096,299 53.9%
2,558,009 1,371,220 1,186,789 52.8
2,612,627 1,329,444 1,283,183 50.9
2,665,643 1,279,237 1,386,406 48.0
2,716,750 1,219,905 1,496,845 44.9
2,765,274 1,150,320 1,614,954 41.6
2,811,041 1,069,824 1,741,217 38.1
2,853,770 977,541 1,876,229 34.3
2,892,919 872,303 2,020,616 30.2
2,929,006 753,999 2,175,007 25.7
2,961,105 620,990 2,340,115 21.0
2,988,935 472,234 2,516,701 15.8
3,012,165 306,567 2,705,598 10.2
3,030,629 122,928 2,907,701 4.1
3,044,169 - 3,044,169 0.0
3,052,779 - 3,052,779 0.0
3,056,992 - 3,056,992 0.0
3,057,367 - 3,057,367 0.0
3,054,510 - 3,054,510 0.0
3,049,319 - 3,049,319 0.0
3,042,417 - 3,042,417 0.0
3,034,418 - 3,034,418 0.0
3,026,025 - 3,026,025 0.0
3,017,590 - 3,017,590 0.0
3,009,528 - 3,009,528 0.0
3,002,648 - 3,002,648 0.0

Source: GRS. Projections derived from actuarial data as of December 31, 2013. Such projections assume that the City will continue to contribute to LABF pursuant to the Multiplier Funding system upon the insolvency of LABF.
Note: Does not include OPEB liabilities.
In thousands of dollars. Projections calculated on a cash basis.
Represents contributions expected to be made by the City during the fiscal year.














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TABLE 22 - PROJECTION OF FUTURE FUNDING STATUS




Fiscal Year
Market Unfunded Accrued
Actuarial Actuarial Market
Accrued Market Liabilities Funded
Liability Assets (UAAL) Ratio
($) ($) ($) (%)
(a) (b) (a-b) (b/a)



Employer Contribution13'
($)

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
$33,140,155 34,173,710 35,234,963 36,295,066 37,346,231 38,381,680 39,396,316 40,386,776 41,347,483 42,285,654 43,183,294 44,035,923 44,841,352 45,599,971 46,311,634 46,976,052 47,593,251 48,165,519 48,695,858 49,188,902 49,651,939 50,090,978 50,514,180 50,927,472 51,337,037 51,749,922
SI 0,884,824 11,017,066 11,136,275 11,214,523 11,242,938 11,214,718 11,122,529 10,961,643 10,725,731 10,419,850 10,025,054 10,460,235 10,942,989 11,440,308 12,036,921 12,802,291 13,616,978 14,483,684 15,401,834 16,370,211 17,395,958 18,484,831 19,646,315 20,888,602 22,219,741 23,648,849
$22,255,331 23,156,644 24,098,688 25,080,543 26,103,293 27,166,962 28,273,787 29,425,133 30,621,752 31,865,804 33,158,240 33,575,688 33,898,363 34,159,663 34,274,713 34,173,761 33,976,273 33,681,835 33,294,024 32,818,691 32,255,98:1 31,606,147 30,867,865 30,038,870 29,117,296 28,101,073
32.8%
32.2
31.6
30.9
30.1
29.2
28.2
27.1
25.9
24.6
23.2
23.8
24.4
25.1
26.0
27.3
28.6
30.1
31.6
33.3
35.0
36.9
38.9
41.0
43.3
45.7
S 468,191 1,010,833 1,037,215 1,170,354 1,204,330 1,238,328 1,274,291 1,310,226 1,347,421 1,386,330 1,425,499 1,466,039 1,506,741 1,547,502 1,588,508 1,630,120 1,673,325 1,716,206 1,756,901 1,792,390 1,821,821 1,850,393 1,877,592 1,905,398 1,933,419 1,961,682
Source: The aggregated information presented in this table is derived from the projections presented in Tables 15, 16, 20 and 21. Please refer to Tables 13-16 for source information. Tables 15 and 16 were based on actuarial data as of December 31, 2014 and Tables 20 and 21 were based on actuarial data as of December 31, 2013 (the most recent data available).
Note: Does not include OPEB liabilities.
In thousands of dollars. Projections for MEABF and LABF are calculated on a cash .basis. Projections for PABF and FABF are calculated on an accrual basis, however, with respect lo the Employer Contribution column, the City has presented the data based on the year the employer contribution is actually made, rather than the preceding budget year.
Aggregate data presented in this table includes data for all four Retirement Funds.
Represents contributions expected to be made by the City during the fiscal year.
The City cannot predict the impact that the insolvency of MEABF or LABF would have on its contributions to these Retirement Funds. Under the current provisions of the Pension Code, the City would revert lo contributing the Multiplier Funding amount lo MEABF and LABF. The contributions calculated pursuant to Multiplier Funding most likely would be insufficient lo make all necessary payments to beneficiaries. One possibility upon insolvency of MEABF or LABF would be changes in Ihe Pension Code to provide for pay-as-you-go funding. Under pay-as-you-go funding, the employer



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contribution equals the amount necessary, when added to other income, specifically employee contributions, to fund the current year benefits to be paid by the retirement fund. GRS projects that, should the City be required to adopt pay-as-you-go funding to ensure that payments to beneficiaries are made to MEABF and LABF beneficiaries following the insolvency of such Retirement Funds, the City's contributions to such Retirement Funds would increase substantially. With respect to MEABF, GRS projects that pay-as-you-go funding would increase the City's contribution from approximately $208 million in 2025 to $1,107 billion in 2026, $1,607 billion in 2042 and $1,581 billion in 2060. With respect to LABF, GRS projects that pay-as-you-go funding would increase the City's contribution from approximately $21.9 million in 2028 to $99.6 million in 2029, $248 million in 2036 and $231 million in 2060. Such large increases in the City's contributions would likely have a material adverse impact on the City's financial condition.
Additionally, the City cannot predict if or when changes to the Pension Code or judicial decisions relevant to its contributions will be enacted or decided, respectively, and the impact any such legislation or judicial decisions would have on the manner in which il contributes to the Retirement Funds. Contributing pursuant to Multiplier Funding or pay-as-you-go funding, as discussed in this subsection, represent two possible outcomes; however, the City can make no representation that some other method of determining contributions, including payments that are possibly even larger than pay-as-you-go funding, would not be required.
Future Legislation
The City continues to believe that additional legislative changes may be necessary to properly fund the Retirement Funds. With respect to PABF and FABF, the City believes that legislation, such SB 777, is necessary to allow the City and its taxpayers to absorb the impact of substantially increased pension payments over a longer period of lime, such impact consisting of increases in the City's revenues, a reduction in the City's expenditures or some combination thereof. Furthermore, should the Illinois Supreme Court determine that P.A. 98-641 is unconstitutional, additional legislation may be necessary to prevent MEABF and LABF from becoming insolvent, as described in "Effect on MEABF and LABF If P.A. 98-641 Found Unconstitutional" herein. Such legislation may include provisions for increased contributions by the Cily in future years, which may require the City to increase revenues, reduce expenditures or some combination thereof. The City gives no assurance as to whether any of such legislation with respect to any of the Retirement Funds will be enacted, and no assurance can be given that such legislation, if adopted, will be upheld upon a legal challenge.




















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Report and Recommendations ofthe Commission to Strengthen Chicago's Pension Funds
On January 11, 2008, then Mayor Richard M. Daley announced the formation of the Commission to Strengthen Chicago's Pension Funds (the "CSCP"), which was composed of a broad cross-section of City officials, union leaders, pension fund executives, and business and civic professionals. The CSCP was charged wilh examining the Retirement Funds and recommending ways to improve the Funded Ratio of each Retirement Fund. The CSCP met several limes in 2008 through 2010, and at the CSCP's final meeting on March 24, 2010, the CSCP endorsed its final report, with three commissioners dissenting. The CSCP's final report, which included letters from the dissenting commissioners, was submitted to Mayor Daley on April 30, 2010 (the "Final Report"). The Final Report is available at _Vol.l_4.30.2010.pdf; however, the content ofthe Final Report and such website are not incorporated herein by such reference. The City makes no representation nor expresses any opinion as to the accuracy of the Final Report, the statements made or the information therein, some of which may be conflicting. Furthermore, information about the Final Report is being provided for historical purposes only.
The CSCP's approval of the Final Report occurred before the enactment of the Pension Reform Act, P.A. 96-0889, P.A. 96-1495 and P.A. 98-641; the Final Report, accordingly, does not consider the impact of these acts on the Retirement Funds. See "—Determination of City's Contributions" above and "—Legislative Changes" above for additional information on these acts. Certain ofthe CSCP's findings and recommendations as contained in the Final Report are addressed by these acts.
Special Revenue and Enterprise Fund Allocation of Retirement Fund Costs
The City allocates to its special revenue and enterprise funds their share of the City's annual contribution to the Retirement Funds based upon the amount of services provided by Cily employees to the functions or enterprises related to or paid out of those funds. The special revenue and enterprise funds account for their allocable share of the City's contributions to the Retirement Funds as operating and maintenance expenses. For budget year 2015, the City has budgeted for the special revenue and enterprise funds to reimburse the City approximately $74 million for their allocable share of the City's pension contribution.
The allocations described in this subsection are not required by statute but represent the City's current method of allocating its pension costs. The City may alter the manner in which it allocates its pension costs to these funds at any lime.
Impact of Retirement Funds' Unfunded Liability on the City's Bond Ratings
The financial health of the Retirement Funds and the projected impact of the Retirement Funds' underfunding on future contributions lo be made by the City have impacted the rating agencies' determination of the City's creditworthiness. On April 17, 2013, Moody's issued a release (the "Release") announcing a new approach to analyzing state and local government pensions. The method of evaluating public pension plans established in the Release is intended to be a method of standardizing information among public pension plans and docs not impact the City's required contributions, the value of the Retirement Funds' assets, or the liabilities owed by the Retirement Funds. The City does not endorse the method of analysis adopted by Moody's in the Release.
Moody's new pension analysis appears to include, among other things, adjusting pension plan Actuarial Accrued Liabilities by using certain common assumptions, such as the discount rate and amortization period. Certain other actuarial assumptions, such as mortality and salary growth rates, were not standardized across governmental plans. To accomplish its review, Moody's stated that it will use a



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I









I
discount rate based on Citibank's Pension Liability Index discount rate as of a pension plan's valuation date. Such a discount rate will be lower than the discount rate currently used by the Retirement Funds and is closer to the discount rate for a typical pension plan in the private sector. The City estimates that Moody's new method of analysis would result in the following Funded Ratios of the Retirement Funds (based on projected December 31, 2014 assets and liabilities provided in the actuarial valuations ofthe Retirement Funds as of December 31, 2013): 27.4 percent for MEABF, 43.5 percent for LABF, 18.8 percent for PABF, and 15.5 percent for FABF. See Tables 5 through 8 above for information on the Retirement Funds' historical Funded Ratios. For information regarding the Retirement Funds' discount rate, see "—Actuarial Assumptions—Assumed Investment Rate of Return" above. The Release can be obtained from Moody's; provided, however, that the Release is not incorporated herein by such reference.
On May 12, 2015, Moody's issued a ratings action report (the "Rating Report") downgrading the ratings of the City's general obligation bonds and sales tax revenue bonds from "Baa2" to "Bal," the City's water senior lien revenue bonds from "A2" to "Baal," the City's wastewater senior lien revenue bonds from "A3" to "Baa2," the City's water second lien revenue bonds from "A3" to "Baa2," the City's wastewater second lien revenue bonds from "Baal" to "Baa3," and placed all such ratings on negative outlook. This follows previous downgrades of the City's ratings by Moody's on February 27, 2015, March 4, 2014, and July 17, 2013. Moody's indicated in the Rating Report that the May 12, 2015 downgrades reflected the expected continued growth in the unfunded liabilities of the Retirement Funds and the narrowing of the City's options for curbing such growth as a result of the Illinois Supreme Court's decision finding the State Pension Reform Act unconstitutional. Moody's indicated that further downgrades could follow if, among other things, (i) P.A. 98-641 was found to be unconstitutional, or (ii) the Retirement Funds' UAAL continues to grow. The Cily makes no prediction as to whether the Moody's rating action described above will result in additional downgrades, or the impact that the financial condition ofthe Retirement Funds will have on Moody's or any other rating agency's judgment ofthe City's creditworthiness or on the City's future financing costs. The Rating Report can be obtained from Moody's; provided, however, that the report is not incorporated herein by such reference.
On May 15, 2015, Fitch Ratings, Inc. ("Fitch") downgraded the City's general obligation bond and sales tax bond ratings from "A-" to "BBB+" and placed each rating on negative watch. In announcing these ratings downgrades, Fitch cited, among other things, increased fiscal pressures as a result of the Illinois Supreme Court decision finding the State Pension Reform Act unconstitutional. Fitch further indicated that a determination that P.A. 98-641 is unconstitutional would likely lead to additional downgrades. On July 3, 2015, Filch removed the negative watch from the City's general obligation bond and sales tax bond ratings and placed such ratings on negative outlook
On July 8, 2015, Standard & Poor's Ratings Group ("S&P") downgraded the City's general obligation bond rating from "A-" to "BBB+" wilh a negative outlook and removed the rating from negative watch. In downgrading the City's general obligation bond rating, S&P cited, among other things, the City's pension liabilities, the impact on the City's budget of scheduled future increases in pension contributions, and "the City's lack of progress in unveiling a sustainable funding mechanism" for PABF and FABF.
On July 7, 2015, Kroll Bond Rating Agency ("Kroll") affirmed its long term rating of "A-" with a stable outlook on the City's general obligation bonds. In its report affirming the City's rating, Kroll indicated lhat the budgetary pressure exerted by the funding of the Rclircmcnt Funds and the future increase in contributions to PABF and FABF under P.A. 96-1495 constitute key concerns with respect to its rating of the City's general obligation bonds.






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On January 11, 2016, Fitch and S&P reaffirmed their existing ratings and outlooks on the City's outstanding general obligation bonds. On the same date, Kroll affirmed its long-term rating on the City's outstanding general obligation bonds, but changed its outlook from stable to negative.
In addition, other rating agencies may have established, or may establish in the future, methods for evaluating the financial health of the Retirement Funds and their impact on the City's creditworthiness that are different from the information provided in this Appendix. Further downgrades of the City's bond ratings may have a material adverse impact on the City's finances. See "INVESTMENT CONSIDERATIONS—Credit Rating Downgrades" for additional information.


PAYMENT FOR OTHER POST-EMPLOYMENT BENEFITS
Genera)
The City and the Retirement Funds share the cost of post-employment healthcare benefits available to City employees participating in the Retirement Funds through a single-employer, defined benefit healthcare plan (the "Health Plan"), which is administered by the City. Prior to June 30, 2013, the costs of the Health Plan were shared pursuant to a settlement agreement (as amended, the "Settlement") entered into between the City and the Retirement Funds regarding the responsibility for payment of these health benefits as described below under "—The Settlement."
MEABF and LABF participants older than 55 with at least 20 years of service and PABF and FABF participants older than 50 wilh al least 10 years of service may become eligible for the Health Plan if they eventually become an annuitant.2 The Health Plan provides basic health benefits to non-Medicare eligible annuitants and provides supplemental health benefits to Medicare-eligible annuitants.
The City contributes a percentage toward the cosl of the Health Plan for each eligible annuitant. The annuitants are responsible for contributing the difference between the cost of their health benefits and the sum of the subsidies provided by the City and the related Retirement Fund. Until June 30, 2013, annuitants who retired prior to July 1, 2005 received a 55 percent subsidy from the City, whereas annuitants retiring on or after such date received a subsidy equal to 50 percent, 45 percent, 40 percent or zero percent based on the annuitant's length of actual employment with the City pursuant to the Settlement. The Retirement Funds contributed a fixed dollar amount monthly ($65 for each Medicare-eligible annuitant and $95 for each non-Medicare eligible annuitant) for each of their annuitants. For a description of benefits after the expiration of the Settlement, see "—Status of Healthcare Benefits After the Settlement Period" herein. .
The Retirement Funds' subsidies are paid from the City contribution, as provided in the Pension Code and described in "Retirement Funds—Determination of City's Contributions" above. These payments therefore reduce the amounts available in the Retirement Funds to make payments on pension liabilities. See Tables 5-9 in "Retirement Funds—Funded Status of Retirement Funds" above for Retirement Funds' statement of net assets, which incorporates the expense related to the Health Plan as part ofthe "Administration" line item.


Under their respective collective bargaining agreements, which were renegotiated in 2012, certain retired PABF and FABF participants are eligible to enroll themselves and their dependents in the City's healthcare plan for active members until they reach the age of Medicare eligibility ("Special CBA Benefit"). These members do not contribute towards the cost of coverage for this plan. PABF contributes $95 per month for these members; FABF does not contribute for these members. The Special CBA Benefit expires in 2016, at which time the City expects it will be phased out permanently.



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The Settlement
In 1987, the City sued the Retirement Funds asserting, among other things, that the City was not obligated to provide healthcare benefits to certain retired City employees. Certain retired employees intervened as a class in the litigation, and the Retirement Funds countersued the City. To avoid the risk and expense of protracted litigation, the City and the other parties entered into the Settlement, the terms of which have been renegotiated over time. The City contributed to the Health Plan as a result of the obligation established by the Settlement during the term of the Settlement (the "Settlement Period"). The Settlement expired on June 30, 2013. For the status of the Health Plan after the Settlement Period, see "—Status of Healthcare Benefits After the Settlement Period" below.
City Financing ofthe Health Plan
The City funds its share of the Health Plan's costs on a pay-as-you-go basis. Pay-as-you-go funding refers to the fact that assets are not accumulated or dedicated to funding the Health Plan. Instead, the City contributes the amount necessary lo fund its share of the current year costs of the Health Plan. See Table 24 below for a schedule of historical contributions made by the City to the Health Plan.
Actuarial Considerations
City Obligation
The City has an Actuarial Valuation completed for its contributions to the Health Plan annually. The purpose and process behind an Actuarial Valuation is described above in "Retirement Funds—The Actuarial Valuation." In addition, the Retirement Funds produce an Actuarial Valuation for the liability of such Retirement Fund to its retirees for the benefits provided under the Health Plan.
Although these Actuarial Valuations all refer to the liability owed for the same benefits, the results of the Retirement Funds' Actuarial Valuations differ significantly from the City's Actuarial Valuation for two reasons. First, the City's Actuarial Valuation only reflects the portion of liabilities the City owes under the Settlement. Second, the Actuarial Valuations of the City and the Retirement Funds differ because the actuarial methods and assumptions used for each purpose vary.
This Appendix addresses the funded status of the City's obligation to make payments for the Health Plan. For additional information on the amounts owed to members of the Retirement Funds for retiree healthcare benefits, see the Actuarial Valuations of the Retirement Funds, which arc available as described in "Retirement Funds — Source Information" above, and Note 12 to the City's Basic Audited Financial Statements, which are available on the City's website at ; provided, however, that the contents of the City's website are not incorporated herein by such reference.
Actuarial Methods and Assumptions
The Actuarial Valuation for the City's obligation to the Health Plan utilizes various actuarial methods and assumptions similar to those described in "Retirement Funds" above with respect to the Retirement Funds. The City does not use an Actuarial Method lo calculate the Actuarial Value of Assets ofthe Health Plan because no assets arc accumulated therein for payment of future benefits. As such, the Actuarial Value of Assets for the Health Plan is always zero.
The City's 2012 Actuarial Valuation ("2012 Actuarial Valuation") amortizes the City's retiree healthcare UAAL over a closed 1 -year period, in order to reflect the remainder of the Settlement Period



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I
and the Special CBA Benefit that was set to expire in 2012 under collective bargaining agreements that were in place at that time. The use of a closed, 1-year period has the effect of increasing the Actuarially Required Contribution as compared to the typical 30-year open amortization period because (i) the period of time over which the UAAL will be amortized is shorter, and (ii) the amortization period is one year as opposed to repeating 30-year periods. The 2012 Actuarial Valuation employed the PUC Method to allocate the City's retiree healthcare obligations. For more information on the PUC Method, see "Retirement Funds—Actuarial Methods" above.
The City's 2013 Actuarial Valuation ("2013 Actuarial Valuation") and 2014 Actuarial Valuation (the "2014 Actuarial Valuation") amortizes the City's retiree healthcare UAAL over a closed 10-year period, in order lo reflect (i) the City's extension of healthcare coverage for members that had participated in the Settlement (wilh such coverage varying based on retiremcnl date), and (ii) the provision of the Special CBA Benefit. For details on the Health Plan after the Settlement Period, see "— Status of Healthcare Benefits After the Settlement Period" below. The use of a closed, 10-year period rather than a closed, 1-year period has the effect of decreasing the Actuarially Required Contribution because the period of time over which the UAAL will be amortized is longer. In addition, the 2013 Actuarial Valuation and the 2014 Actuarial Valuation employed the EAN Method, rather than the PUC Method, lo allocate the City's retiree healthcare obligations. For more information on the EAN Method and the PUC Method, see "Retirement Funds—Actuarial Methods" above.
Funded Status
The following tables provide information on the financial health of the Health Plan. The Health Plan is funded on a pay-as-you-go basis, which means no assets are accumulated to pay for the liabilities ofthe Health Plan. As such, the Funded Ratio with respect to the Health Plan is perpetually zero.
Table 23 summarizes the current financial condition and the funding progress ofthe Health Plan. TABLE 23- SCHEDULE OF FUNDING PROGRESS*l)(2)


Actuarial Unfunded
Valuation Actuarial Actuarial Actuarial UAAL as a
Date Value of Accrued Accrued Funded Covered Percentage of
(Dec. 31) Assets Liability Liability Ratio Payroll Payroll
$0 51,062,864 $1,062,864 0% $2,562,007 41.5%|109|787,395 787,395|99|2,475.107 31.8|109|533,387 533,387|99|2,546,961 20.9|109|390,611 390,611|99|2,475,000 15.8|109|470,952 470,952|99|2,518,735 18.7|109|997,281 997,281|99|2,385,198 41.8|109|964,626 964,626|99|2,425,000 39.8

Sources: Comprehensive Annual Financial Report ofthe City for the fiscal years ending December 31, 2010-2014. (l) In thousands of dollars.
(2> The City, as required, adopted GASB Statement No. 45 in fiscal year 2007. The information provided in this table was produced in 2007 or later.







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Table 24 shows the net expense to the City for providing benefits under the Health Plan. TABLE 24 - HISTORY OF CITY'S CONTRIBUTIONS10

Actual City Contribution
2008 2009 2010 2011 2012 2013 2014
$ 98,065 98,000 107,431 99,091 97,531 97,500 79,300

Sources: Comprehensive Annual Financial Report ofthe City for the fiscal years ending 2008-2014. In thousands of dollars. 2013 and 2014 contribution amounts are approximate.
Retiree Health Benefits Commission
The Settlement provided for the creation of the Retiree Health Benefits Commission (the "RHBC"), which was tasked with, among other things, making recommendations concerning retiree health benefits after June 30, 2013. The RHBC's members were appointed by the Mayor for terms that do not expire. The Settlement required that the RHBC be composed of experts who will be objective and fair-minded as to the interest of both retirees and taxpayers, and include a representative ofthe City and a representative ofthe Retirement Funds.
On January 11, 2013, the RHBC released its "Report to the Mayor's Office on the State of Retiree Healthcare" (the "RHBC Report"). The RHBC Report can be found on the City's website at commissionreporltothemayor.html; provided, however, that the contents of the RHBC Report and of the City's website are not incorporated herein by such reference.
The RHBC Report concluded that maintaining the funding arrangement then in place for the Health Plan was untenable, would prevent the City from continuing to provide the current level of benefits to retirees in the future, and could result in other financial consequences, such as changes to the City's bond rating and its creditworthiness. The RHBC Report presented several options for the Mayor to consider which would reduce the level of spending with respect to the Health Plan from approximately $108 million annually to between $90 million and $12.5 million annually depending on the option.
Status of Healthcare Benefits After the Settlement Period
On May 15, 2013, the City announced plans to, among other things: (i) provide a lifetime healthcare plan to employees who retired before August 23, 1989 with a contribution from the City of up to 55 percent of the cost of that plan; and (ii) beginning January 1, 2014, provide employees who retired on or after August 23, 1989 with healthcare benefits but with significant changes to the terms provided by the Health Plan, including increases in premiums and deductibles, reduced benefits and the phase-out of the entire Health Plan for such employees by the beginning of 2017. If the City prevails in the Lawsuit (defined below), it expects a reduction in expenses of approximately $90 to $95 million annually beginning in 2017 as a result ofthe phase-out of the Health Plan.





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On May 30, 2013, the General Assembly passed Senate Bill 1584, which was signed into law by the Governor on June 28, 2013. Senate Bill 1584 extends the Retirement Funds' subsidies for retiree healthcare costs until such time as the City no longer provides a health care plan for annuitants or December 31, 2016, whichever comes first.
After the June 30, 2013 expiration ofthe Settlement, on July 5, 2013, certain participants in the Health Plan filed a motion to "re-activate" the 1987 litigation covered by the Settlement. On July 17, 2013, the Circuit Court denied that motion. On July 23, 2013, certain of the participants filed a new lawsuit, Underwood v. Chicago (the "Lawsuit"), in the Circuit Court against the Cily and the Trustees of each of the four Retirement Fund Boards, seeking to bring a class action on behalf of former and current City employees who previously contributed or now contribute to one ofthe four Retirement-Funds.
The complaint advanced State law claims, including alleged violation of the Pension Clause, and federal law claims. The City removed the case to federal court based on the federal law claims. The federal district court dismissed the case in its entirely. As to plaintiffs' claim that the planned changes violate the Pension Clause, the district court predicted that the Illinois Supreme Court would rule in a separate case, Kanerva v. Weems ("Kanerva"), then pending before the Illinois Supreme Court that healthcare benefits are not protected by the Pension Clause. However, on July 3, 2014, the Supreme Court of Illinois issued an opinion in Kanerva determining lhal rcliree healthcare benefits provided to State retirees are protected under the Pension Clause. The City argued on appeal to the federal appellate court that it should affirm the district court dismissal, including the State law claims, on an alternative ground. On February 25, 2015, the federal appellate court affirmed the dismissal of the federal law claims and declined to rule on the State law claims on the ground that the State law claims involved a question of State law, which it ordered returned to the Slate court for decision. On June 22, 2015, the City and certain of the defendants each filed a motion to dismiss the remaining State law claims in the Circuit Court of Cook County. On December 13, 2015, the Circuit Court issued its ruling dismissing certain of the State law claims but gave the plaintiffs leave to amend the complaint with respect to such claims. With respect to the remaining State law claim, which sought a declaration that a reduction in the benefits provided by the Health Plan would violate the Pension Clause, the Circuit Court determined that such a declaration could be made only with respect to those employees hired prior to August 23, 1989. The City has been defending and will continue to defend this matter vigorously. The City can give no assurance as to the ultimate outcome of the Lawsuit.






















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APPENDIX F OPINIONS OF CO-BOND COUNSEL
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Proposed Form of Opinions of Co-Bond Counsel [Letterhead of Co-Bond Counsel] [to be dated closing date]

Cily of Chicago Citigroup Global Markets Inc.,
Chicago, Illinois as representative of the underwriters named in
Zions Bank, a division of ZB, National the Bond Purchase Agreement dated December
Association, as trustee January 12, 2016
Chicago, Illinois
Re: City of Chicago
General Obligation Refunding Bonds, Series 2015C
We have acted as bond counsel in connection with the issuance by the City of its fully registered General Obligation Refunding Bonds, Series 2015C, in the aggregate principal amount of $500,000,000 (the "Bonds"), dated the date hereof, due on January 1 of the years and in the amounts and bearing interest as follows:

YEAR PRINCIPAL INTEREST YEAR PRINCIPAL INTEREST
(JANUARY 1) AMOUNT RATE (JANUARY 1) AMOUNT RATE
$ 6,635,000 5.00% 2027 $11,415,000 5.00%
7,695,000 5.00% 2028 4,555,000 5.00%
79,930,000 5.00% 2029 4,895,000 5.00%
78,965,000 5.00% 2030 1,505,000 5.00%
78,530,000 5.00% 2031 3,595,000 5.00%
63,285,000 5.00% 2035 14,425,000 5.00%
54,340,000 5.00% 2038 90,230,000 5.00%
The Bonds are authorized and issued pursuant to the provisions of Section 6 of Article VII of the Illinois Constitution of 1970 and by virtue of an ordinance adopted by the City Council of the City on the 24lh day of September, 2015 (the "Bond Ordinance"), as supplemented by a Notification of Sale dated January 21, 2016 (the "Notification of Sale"), and a Trust Indenture dated as of January 1, 2016 (the "Indenture") between the City and Zions Bank, a division of ZB, National Association, as trustee (the "Trustee"). Capitalized terms used herein without definition shall have the meanings assigned to such terms in the Indenture. '
The Bonds are subject to mandatory and optional redemption prior to maturity as provided in the Indenture.
In our capacity as bond counsel, we have examined the following:
(a) a certified copy of the proceedings of the City Council adopting the Bond Ordinance and authorizing, among other things, the execution and delivery of the Indenture and the issuance of the Bonds;


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a certified copy of the Bond Ordinance, an executed copy of the Notification of Sale and an executed counterpart ofthe Indenture; and
such other certifications, documents, showings and related matters of law as we have deemed necessary in order to render this opinion.
Based upon the foregoing we are ofthe opinion lhat:
The City has full power and authority and has taken all necessary corporate action to authorize the issuance of the Bonds and the execution and delivery of the Indenture.
The Indenture has been duly and lawfully executed and delivered by the City and, assuming the due authorization, execution and delivery by, and the binding effect on, the Trustee, the Indenture is a legal, valid and binding obligation of Ihe City and, except as provided below, enforceable against the City in accordance with its terms.
The Bonds have been duly and validly authorized and issued in accordance with law and the Bonds, to the amount named, arc valid and legally binding upon the City and, except as provided below, enforceable in accordance with their terms and the terms of the Indenture.
The Bonds are payable from any funds of the City legally available for such purpose, and all taxable property in the Cily is subject to the levy of taxes by the City to pay the same without limitation as to rate or amount. The Bonds are secured by the other moneys, securities and funds pledged under the Indenture.
Subject to the City's compliance with certain covenants, under present law, interest on the Bonds is excludable from gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the alternative minimum tax for individuals and corporations under the Internal Revenue Code of 1986, but is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. Failure to comply with certain of such City covenants could cause interest on the Bonds to be includible in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. Ownership of the Bonds may result in other federal tax consequences to certain taxpayers, and we express no opinion regarding any such collateral consequences arising with respect to the Bonds.
Interest on the Bonds is not exempt from present State of Illinois income taxes. Ownership of the Bonds may result in other state and local tax consequences to certain taxpayers, and we express no opinion regarding any such collateral consequences arising with respect to the Bonds.
In rendering the foregoing opinion, we advise you that the enforceability (but not the validity or binding effect) of the Bonds and the Indenture (i) may be limited by any applicable bankruptcy, insolvency or other laws affecting the rights or remedies of creditors generally now or hereafter in effect and (ii) is subject to principles of equity in the event that equitable remedies are sought, either in an action at law or in equity.
In rendering this opinion, wc have relied upon certifications of the City with respect to certain material facts within the City's knowledge. Wilh respect lo the exclusion, from gross income for Federal income tax purposes, of interest on ihe Bonds, we have relied on the verification report of Robert Thomas, CPA LLC, certified public accountants, regarding the computation of the arbitrage yield on the Bonds and of certain investments made wilh the proceeds ofthe Bonds.



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This opinion is based upon laws, regulations, rulings and decisions in effect on the date hereof. We assume no responsibility for updating this opinion to take into account any event, action, interpretation or change of law occurring subsequent to the date hereof that may affect the validity of any of the opinions expressed herein. We express no opinion herein as to the accuracy, adequacy or completeness of any information furnished to any person in connection with any offer or sale of the Bonds.














































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APPENDIX G REFUNDED AND INTEREST PAID BONDS

























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REFUNDED BONDS
General Obligation Bonds, Project and Refunding Series 1998
Maturity Date (January 1) 2017
Par Amount^ $7,255,000
Interest Rate 5.500%

Maturity Date (January 1) 2017
General Obligation Bonds, Project and Refunding Series 2001A
Par Amount
$5,830,000

Interest Rate 5.380%

Genera] Obligation Bonds (Neighborhoods Alive21 Program) Series 2002B
Maturity Date (January 1) 2017
Par Amount $2,055,000
Interest Rate 5.000%

Maturity Date (January 1) 2017
General Obligation Bonds, Project and Refunding Series 2003A
Par Amount
$510,000

Interest Rate 5.250%

General Obligation Bonds, Project and Refunding Series 2003B
Maturity Date (January 1) 2017
Par Amount $4,955,000
Interest Rate 5.000%
General Obligation Bonds, Project and Refunding Series 2004A
Maturity Date (January 1) 2017
Par Amount $285,000
Interest Rate 5.250%

General Obligation Bonds, Project and Refunding Series 2005A
Maturity Date (January 1) 2017 2022 2023 2024 2025 2026
Par Amount $44,920,000 12,470,000 5,940,000 6,995,000 4,570,000 3,905,000
Interest Rale 5.000% 5.000% 5.000% 5.000% 5.000% 5.000%









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Maturity Date ( January 1) 2017 2022 2023 2024 2025 2026
General Obligation Bonds, Project and Refunding Series 2005B
Par Amount
$ 6,035,000 15,390,000 19,245,000 18,930,000 16,375,000 11,980,000

Interest Rate 5.000% 5.000% 5.000% 5.000% 5.000% 5.000%

Maturity Date (January 1") 2017 2017 2022 2023 2024 2025 2026
General Obligation Bonds, Project and Refunding Series 2006A
Par Amount
S 640,000 . 8,575,000 43,965,000 45,320,000 43,715,000 27,715,000 . 27,890,000

Interest Rate 4.100% 5.000% 5.000% 5.000% 5.000% 5.000% 5.000%

Maturity Date (January 1) 2017 2017
General Obligation Bonds, Project and Refunding Series 2007A
Par Amount
$3,600,000 2,015,000

Interest Rate 4.000% 5.000%






















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INTEREST PAID BONDS
The City has funded interest through and including the January 1, 2017 interest payment on the following maturities. For the Scries 2009C, Series 2009D, and Series 2010B, only a portion of the interest through January 1, 2017 has been funded. None of the principal amounts shown below have been refunded.
General Obligation Bonds (Neighborhoods Alive21 Program) Series 2002B
Maturity Date (January 1) Par Amount Interest Rate
$2,185,000 5.000%
2,270,000 5.000%
2,405,000 5.000%
2,540,000 5.000%
2,630,000 5.250%
2,775,000 5.250%
2,920,000 5.000%
3,105,000 5.000%
3,250,000 5.000%
3,395,000 5.125%
3,590,000 5.250%
3,795,000 5.250%
4,000,000 5.500%
4,220,000 5.500%
4,450,000 5.500%
4,680,000 5.500%
4,965,000 5.500%
5,210,000 5.500%
5,505,000 5.500%
5,810,000 5.500%


General Obligation Bonds, Project and Refunding Series 2003B
Maturity Date (January 1) Par Amount Interest Rate
$5,220,000 5.000%
5,500,000 5.000%
5,800,000 5.000%
6,110,000 5.000%
6,440,000 5.000%
6,785,000 5.000%
7,150,000 5.000%
1,860,000 5.000%
1,960,000 5.000%
2,065,000 5.125%
2,180,000 5.250%
2,300,000 5.250%
2,430,000 5.500%
2,575,000 5.500%
2,725,000 5.500%
2,885,000 5.500%
3,055,000 5.500%

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General Obligation Bonds, Project and Refunding Series 2005D
Maturity Date (January 1) Par Amount Interest Rate
$6,040,000 5.500%
8,605,000 5.500%
6,695,000 5.500%
11,490,000 5.500%
7,295,000 5.500%
13,870,000 5.500%
14,635,000 5.500%
8,555,000 5.500%


General Obligation Bonds, Project and Refunding Series 2007A
Maturity Date ("January 1) Par Amount Interest Rate
2018 $1,070,000 4.000%
2018 895,000 4.250%
4,700,000 5.000%
410,000 4.000%

6,705,000 5.000%
580,000 4.000%

10,800,000 5.000%
290,000 4.000%

6,640,000 5.000%
7,275,000 5.000%
11,715,000 5.000%
12,640,000 5.000%
30,450,000 5.000%
4,005,000 4.250%

20,770,000 5.000%
24,580,000 5.000%

6,035,000 5.000%
15,000 5.000%
10,325,000 5.000%
1,615,000 4.500%
2033 8,560,000 5.000%

(Term 2029) 18,820,000 5.000%
(Term 2029) 16,855,000 5.000%

(Term 2032) 9,090,000 5.000%
(Term 2032) 8,170,000 5.000%
(Term 2032) 10,030,000 5.000%
(Term 2032) 10,530,000 5.000%
(Term 2032) 11,055,000 5.000%
(Term 2037) 11,610,000 5.000%
(Term 2037) 12,190,000 5.000%
(Term 2037) 12,800,000 5.000%
(Term 2037) 13,440,000 5.000%
(Term 2037) 14,110,000 5.000%



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General Obligation Bonds, Refunding Series 2007E
Maturity Date ("January 1) Par Amount Interest Rate
$8,615,000 5.500%
4,470,000 5.500%
1,965,000 5.500%
2,070,000 5.500%
2,180,000 5.500%
905,000 5.500%
4,390,000 5.500%
4,625,000 5.500%
4,865,000 5.500%


General Obligation Bonds, Refunding Series 2007F
Maturity Date ("January 1) Par Amount Interest Rate
$6,895,000 5.500%
3,575,000 5.500%
1,575,000 5.500%
1,655,000 5.500%
1,740,000 5.500%
720,000 5.500%
3,515,000 5.500%
3,700,000 5.500%
3,890,000 5.500%



General Obligation Bonds, Refunding Series 2007G
Maturity Date (January 1) Par Amount Interest Rate
$1,720,000 5.500%
890,000 5.500%
390,000 5.500%
410,000 5.500%
430,000 5.500%
175,000 5.500%
875,000 5.500%
925,000 5.500%
970,000 5.500%











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General Obligation Bonds, Refunding Scries 2008A
Maturity Date (January 1) 2018 2019 2020 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2033 2034 2035 2036 2037
Par Amount $ 8,320,000 12,930,000 9,780,000 3,295,000 12,025,000 12,560,000 12,445,000 12,130,000 13,630,000 6,465,000 6,805,000 7,160,000 2,105,000 2,740,000 6,150,000 6,475,000 6,815,000 7,175,000
Interest Rate 5.000% 5.000% 5.000% 4.000% 5.250% 5.250% 5.250% 5.250% 5.250% 5.250% 5.250% 5.250% 5.250% 4.625% 5.250% 5.250% 5.250% 5.250%

General Obligation Bonds, Project and Refunding Series 2008C
Maturity Date (January 1) 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
Par Amount $ 7,660,000 15,025,000 10,470,000 11,440,000 12,395,000 8,835,000 14,820,000 20,915,000 19,925,000 22,450,000 26,165,000 5,390,000 14,965,000 17,350,000 4,985,000 13,200,000 12,890,000 22,045,000
Interest Rate 5.000% 5.000% 4.600% 5.000% 5.000% 5.000% 5.000% 5.000% 5.000% 5.000% 5.000% 5.000% 5.000% 5.000% 5.000% 5.000% 5.000% 5.000%









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General Obligation Bonds, Taxable Project Series 2009C (Build America Bonds -Direct Payment) (Interest paid in part)
Maturity Date (January 1) Par Amount Interest Rate
$ 1,345,000 6.207%
23,070,000 6.207%
24,505,000 6.207%
26,025,000 6.207%
23,375,000 6.207%

General Obligation Bonds, Taxable Project Series 2009D (Recovery Zone Economic Development Bonds - Direct Payment) (Interest paid in part)
Maturity Date (January 1) Par Amount Interest Rate
$ 4,265,000 6.257%
29,355,000 6.257%
31,195,000 6.257%
33,145,000 6.257%
35,220,000 6.257%

General Obligation Bonds, Taxable Project Series 2010B (Build America Bonds - Direct Payment) (Interest paid in part)
Maturity Date (January 1) Par Amount Interest Rate
$38,735,000 7.517%
40,630,000 7.517%
42,615,000 7.517%
¦ 2039 44,695,000 \ 7.517%
2040 46,880,000 7.517%


General Obligation Bonds, Project Series 2011A
Maturity Date (January 1) Par Amount Interest Rate
$19,070,000 4.625%
19,950,000 5.250%
20,995,000 5.250%
22,100,000 5.250%
23,260,000 5.000%
24,425,000 5.000%
25,645,000 5.000%
26,925,000 5.000%
28,270,000 5.000%









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General Obligation Bonds, Project Series 2012A
Maturity Date (January 1) Par Amount Interest Rate
2030 $ 2,450,000 5.000%
26,570,000 5.000%
44,605,000 5.000%
36,840,000 5.000%


General Obligation Bonds, Project Series 2012C
Maturity Date (January 1) Par Amount Interest Rate
2020 $ 4,985,000 5.000%
2,455,000 4.000%
7,700,000 5.000%

2,210,000 4.000%
9,065,000 5.000%

1,350,000 4.000%
10,725,000 5.000%

410,000 4.000%
11,410,000 5.000%

305,000 4.000%
6,785,000 5.000%
5,335,000 5.000%

935,000 4.000%
975,000 4.000%
1,010,000 4.000%

























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General Obligation Bonds, Project and Refunding Series 2014A
Maturity Date (January 1) Par Amount Interest Rate
$ 2,445,000 4.000%
2,550,000 4.000%
3,310,000 4.000%
4,430,000 5.000%
4,540,000 5.000%
4,400,000 5.000%
555,000 4.000%

4,025,000 5.000%
4,475,000 5.000%
3,580,000 5.000%
9,550,000 5.000%
20,630,000 5.250%
27,090,000 5.250%
3,320,000 5.000%

33,070,000 5.250%
13,805,000 5.250%
38,140,000 5.250%
40,160,000 5.250%
44,480,000 5.000%
61,755,000 5.000%
60,860,000 5.000%




























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Exhibit 3

Indenture with respect to the Bonds
City of Chicago


to


Zions Bank, a division of ZB, National Association,
as Trustee


Trust Indenture


Securing

City of Chicago General Obligation Refunding Bonds, Series 2015C



Dated January 1, 2016
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Table of Contents

(This Table of Contents is not a part of the Indenture and is only for convenience of reference)

Section Heading Page

Article I. Definitions|910|Section 1.01. Definitions|910|
Article II The Bonds 10
Section 2.01. Authority for and Issuance of Bonds 10
Section 2.02. General Terms of Bonds 11
Section 2.03. Execution 11
Section 2.04. Authentication 11
Section 2.05. Forms of Bonds; Temporary Bonds 12
Section 2.06. Delivery of Bonds 12
Section 2.07. Mutilated, Lost, Stolen or Destroyed Bonds 13
Section 2.08. Transfer and Exchange of Bonds; Persons Treated as Owners 13
Section 2.09. Required Information in Bond Form 14
Section 2.10. Cancellation 14
Section 2.11. Book Entry Provisions 14

Article III Redemption of Bonds 16
Section 3.01. Redemption Terms, Dates and Prices 16
Section 3.02. Notice of Redemption 18
Section 3.03. Selection of Bonds for Redemption 20
Section 3.04. Deposit of Funds 20

Article IV Application of Bond Proceeds; Creation of Funds and
Security for Bonds 21
Section 4.01. Source of Payment of Bonds 21
Section 4.02. Application of Bond Proceeds 21
Section 4.03. Creation of Bond Fund and Accounts Therein 21
Section 4.04. Other Accounts 22
Section 4.05. Deposits into Bond Fund and Accounts Therein 22
Section 4.06. Tax Covenants 23
Section 4.07. Non-presentment of Bonds 23
Section 4.08. Moneys Held in Trust 23
Section 4.09. Refunded Bonds and Interest Paid Bonds Account 23


Article V Investment of Moneys 24


CA350512.12 CA350512.20

Section 5.01. Investment of Moneys 24
Section 5.02. Investment Income 24

Article VI Discharge of Lien 24
Section 6.01. Defeasance 24

Article VII Default Provisions; Remedies 25
Section 7.01. Defaults 25
Section 7.02. Remedies 26

Article VIII Trustee and Paying Agent 27
Section 8.01. Acceptance of Trusts 27
Section 8.02. Dealing in Bonds 27
Section 8.03. Compensation of Trustee 27
Section 8.04. Paying Agent 27
Section 8.05. Notice to Rating Agencies 28
Section 8.06. Qualification of Trustee 29
Section 8.07. Responsibilities of Trustee 29
Section 8.08. Funds Held in Trust and Security Therefor 30
Section 8.09. Evidence on which Trustee May Act 30
Section 8.10. Permitted Acts and Functions 31
Section 8.11. Resignation 31
Section 8.12. Removal 31
Section 8.13. Appointment of Successor 31
Section 8.14. Transfer of Rights and Property to Successor 32
Section 8.15. Merger or Consolidation 32
Section 8.16. Adoption of Authentication 32
Section 8.17. Evidence of Signatures of Owners and Ownership of Bonds 33
Section 8.18. Preservation and Inspection of Documents 33

Article IX Supplemental Indenture 33
Section 9.01. Supplemental Indenture Effective Upon Execution by the
Trustee 33
Section 9.02. Supplemental Indentures Effective With Consent of Owners
of Bonds 34
Section 9.03. General Provisions 35
Section 9.04. Additional Matters 35
Section 9.05. Mailing of Notice of Amendment 36
Section 9.06. Powers of Amendment 36
Section 9.07. Consent of Owners of Bonds 36
Section 9.08. Modifications by Unanimous Consent 37
Section 9.09. Exclusion of Bonds 37
Section 9.10. Notation on Bonds : 38


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I
I
Article X. Miscellaneous 38
Section 10.01. Severability 38
Section 10.02. Payments Due on Saturdays, Sundays and Holidays 38
Section 10.03. Counterparts 38
Section 10.04. Rules of Interpretation 38
Section 10.05. Captions 38

Exhibit A — Refunded Bonds and Interest Paid Bonds A-1
Exhibit B — Form of Bond B-1
Exhibit C — Closing Memorandum C-l










































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Trust Indenture

This Trust Indenture, made and entered into January 1, 2016 (this "Indenture"), from the City of Chicago (the "Cily"), a body politic and corporate under the laws of the State of Illinois and a home rule unit under Article VII of the Illinois Constitution of 1970, to Zions Bank., a division of ZB, National Association (the "Trustee"), a national bank with trust powers, having a corporate trust office located in the City of Chicago, Illinois, duly organized, validly existing and authorized to accept and execute trusts of the character herein set out under and by virtue ofthe laws of the United States of America,

WITNESSETH:

Whereas, the City has heretofore authorized the issuance of general obligation bonds and notes which are currently outstanding (the "Authorized General Obligation Bonds and Notes") and which mature and are subject to optional and mandatory redemption as provided in the proceedings authorizing such Authorized General Obligation Bonds and Notes; and

Whereas, it is in the best interests of the inhabitants of the City and necessary for the welfare of the government and affairs of the City that the City refund certain of its Authorized General Obligation Bonds and Notes, as further detailed in Exhibit A attached hereto (collectively, the "Refunded Bonds") in order to achieve savings for the City or restructure debt relating to the Refunded Bonds; and

Whereas, it is in the best interests of the inhabitants of the City and necessary for the welfare ofthe government and affairs of the City that the City pay all or a portion of certain of its Authorized General Obligation Bonds and Notes, as also further detailed in Exhibit A attached hereto (collectively, the "Interest Paid Bonds") in order to restructure debt by providing for the payment of interest on the Interest Paid Bonds; and

Whereas, pursuant to an ordinance duly adopted by the City Council of the City (the "City Council") on September 24, 2015 (the "Bond Ordinance"), the City duly authorized the issuance and sale of its General Obligation Refunding Bonds, Series 2015C (the "Bonds") in order to provide the funds, together with other available funds, including proceeds of other general obligation bonds, for the purpose of (i) providing funds to pay the Refunded Bonds, (ii) providing funds to pay interest on the Interest Paid Bonds, (iii) capitalizing or funding interest on the Bonds, and (iv) paying the expenses relating to the issuance ofthe Bonds; and

Whereas, by virtue of Article VII ofthe Illinois Constitution of 1970 and pursuant to the Bond Ordinance, the City is authorized to issue the Bonds, enter into this Indenture and to do or cause to be done all the acts and things herein provided or required to be done; and

Whereas, the execution and delivery of the Bonds and of this Indenture have in all respects been duly authorized and all things necessary to make such Bonds, when executed by the City and authenticated by the Trustee, the legal, valid and binding obligations ofthe City and to make this Indenture a legal, valid and binding agreement, have been done; and

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Whereas, the Bonds, and the Trustee's Certificate of Authentication to be endorsed on such Bonds, shall be substantially in the form attached hereto as Exhibit B, with necessary and appropriate variations, omissions and insertions as permitted or required by this Indenture and the Bond Ordinance;
Now, Therefore, This Indenture Witnesseth: Granting Clauses
That the City, in consideration of the premises and the acceptance by the Trustee of the trusts hereby created, and of the purchase and acceptance of the Bonds by the Registered Owners thereof, and ofthe sum of one dollar, lawful money of the United States of America, to it duly paid by the Trustee at or before the execution and delivery of these presents, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, to secure the payment of the principal of, premium, if any, and interest on the Bonds according to their tenor and effect, and to secure the performance and observance by the City of all the covenants expressed or implied herein and in the Bonds, does hereby assign and grant a security interest in and to the following to the Trustee, and its successors in trust and assigns forever, for the securing of the performance of the obligations of the City hereinafter set forth (the "Trust Estate"):

Granting Clause First

Any moneys, revenues, receipts, income, assets or funds of the City legally available for such purposes, including, but not limited to, the proceeds of a direct annual tax allocable to the Bonds levied by the City in the Bond Ordinance upon all taxable property in the City, all to the extent provided in this Indenture;

Granting Clause Second

All moneys and securities from time to time held by the Trustee under the terms of this Indenture, except for moneys deposited with or paid to the Trustee and held in trust hereunder for the redemption of Bonds, notice of the redemption of which has been duly given; and

Granting Clause Third

Any and all other property, rights and interests of every kind and nature from time to time hereafter by delivery or by writing of any kind granted, bargained, sold, alienated, demised, released, conveyed, assigned, transferred, mortgaged, pledged, hypothecated or otherwise subjected hereto, as and for additional security hereunder by the City or by any other person on its behalf or with its written consent to the Trustee, and the Trustee is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof;



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To Have and To Hold all and singular the Trust Estate, whether now owned or hereafter acquired, unto the Trustee and its successors in said trust and assigns forever;

In Trust, Nevertheless, upon the terms and trusts herein set forth for the equal and proportionate benefit, security and protection of all present and future Registered Owners of the Bonds, without privilege, priority or distinction as to the lien or otherwise of any of the foregoing over any other of the foregoing, except to the extent herein otherwise specifically provided;

Provided, However, that if the City, its successors or assigns shall well and truly pay, or cause to be paid, the principal of, premium, if any, and interest on the Bonds, at the times and in the manner set forth therein according to the true intent and meaning thereof, and shall cause the payments to be made on the Bonds as required herein, or shall provide, as permitted hereby, for the payment thereof, and shall well and truly cause to be kept, performed and observed all of its covenants and conditions pursuant to the terms of this Indenture, and shall pay or cause to be paid to the Trustee all sums of money due or to become due to them in accordance with the terms and provisions hereof, then upon the final payment thereof this Indenture and the rights hereby granted shall cease, determine and be void; otherwise this Indenture shall remain in full force and effect.

This Indenture Further Witnesseth, and it is expressly declared, that all Bonds reissued and secured hereunder are to be reissued, authenticated and delivered, and all said property, rights and interests and any other amounts hereby assigned and pledged are to be dealt with and disposed of, under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes as herein expressed, and the City has agreed and covenanted, and does hereby agree and covenant, with the Trustee and the respective owners of the Bonds as follows:
Article I. Definitions
Section 1.01. Definitions. All capitalized terms used herein unless otherwise defined shall have the meanings given in the recitals above and the following meanings for purposes of this Indenture:

"AuthorizedDenomination" means $5,000 and any integral multiple thereof.

"Authorized General Obligation Bonds and Notes" has the meaning given to such term in the recitals hereto.

"Authorized Officer" means (a) the Mayor, the Chief Financial Officer, the City Comptroller or any other official of the City so designated by a Certificate signed by the Mayor or Chief Financial Officer and filed with the Trustee for so long as such designation shall be in effect, (b) the City Clerk with respect to the certification of any ordinance or resolution of the City Council or any other document filed in his or her office, and (c) the City Treasurer with respect to the investment of any moneys held pursuant to this Indenture.
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"Beneficial Owner" means the owner of a beneficial interest in the Bonds registered in the name of Cede & Co., as nominee of DTC (or a successor securities depository or nominee for either of them).

"Bond Counsel" means the firm of Ice Miller LLP, Chicago, Illinois, and the firm of Cotillas and Associates, Chicago, Illinois, or any other firm or firms of nationally recognized bond counsel designated by the Corporation Counsel of the City.

"Bond Fund" means the "City of Chicago General Obligation Refunding Bonds, Series 2015C Bond Fund" established and described in Section 4.03 hereof.

"Bondholder," "holder," or "owner of the Bonds" means the Registered Owner or Beneficial Owner of any Bond, as the case may be.

"Bond Ordinance " has the meaning given to such term in the recitals hereto.

"Bond Register " means the registration books of the City kept by the Trustee to evidence the registration and transfer of Bonds.

"Bond Year" means a 12-month period commencing on January 2 of each calendar year and ending on January 1 of the next succeeding calendar year.

"Bonds" means the General Obligation Refunding Bonds, Series 2015C issued pursuant to Section 2.01 hereof.

"Business Day" means any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions located in the city where the Designated Corporate Trust Office is located are authorized or required by law or executive order to close, and (iii) a day on which The New York Stock Exchange, Inc., is closed.

"Capitalized Interest Account" means the Series 2015C Capitalized Interest Account established within the Bond Fund and described in Section 4.03(c) hereof relating to the Bonds.

"Certificate" means an instrument of the City in writing signed by an Authorized Officer. Any such instrument in writing and supporting opinions or representations, if any, may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed so as to form a single instrument. Any such instrument may be based, insofar as it relates to legal, accounting or engineering matters, upon the opinion or representation of counsel, accountants, or engineers, respectively, unless the officer signing such instrument knows that the opinion or representation with respect to the matters upon which such instrument may be based, as aforesaid, is erroneous. The same Authorized Officer, or the same counsel or accountant or other persons, as the case may be, need not certify to all ofthe matters required to be certified under any provision of this Indenture or any Supplemental Indenture, but different officers, counsel, accountants or other persons may certify to different facts, respectively.


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"Chief Financial Officer" means the Chief Financial Officer appointed by the Mayor, or the City Comptroller ofthe City at any time a vacancy exists in the office ofthe Chief Financial Officer.

"City" means the City of Chicago, a municipal corporation and home rule unit of local government, organized and existing under the Constitution and laws of the State.

"City Clerk" means the duly qualified and acting City Clerk ofthe City or any Deputy City Clerk or other person that may lawfully take a specific action or perform a specific duty prescribed for the City Clerk pursuant to the Bond Ordinance.

"City Comptroller" meant the City Comptroller of the City.

"Closing Date " means January 21, 2016.

"Closing Memorandum" means the memorandum prepared by the Underwriters in connection with the issuance ancl delivery of the Bonds, attached hereto is Exhibit C.

"Code" means the United States Internal Revenue Code of 1986, as amended. References to the Code and to Sections of the Code shall include relevant final, temporary or proposed regulations thereunder as in effect from time to time and as applicable to obligations issued on the Date of Issuance.

"Contract of Purchase" means the bond purchase agreement(s) with respect to the sale ofthe Bonds to, or at the direction of, the Underwriters.

"Costs of Issuance Account" means the Series 2015C Costs of Issuance Account established and described in Section 4.04 hereof relating to the Bonds.

"Date of Issuance" means January 21, 2016, the date of issuance and delivery ofthe Bonds to the initial purchasers thereof.

"Defeasance Obligations" means: (1) money; or (2)(A) direct obligations of the United States of America, (B) obligations of agencies of the United States of America, the timely payment of principal of and interest on which are guaranteed by the United States of America, (C) obligations of the following government-sponsored agencies that are not backed by the full faith and credit of the U.S. Government: Federal Home Loan Mortgage Corp. (FHLMC) debt obligations, Farm Credit System (formerly: Federal Land Banks, Federal Intermediate Credit Banks, and Banks for Cooperatives) debt obligations, Federal Home Loan Banks (FHL Banks) debt obligations, Fannie Mae debt obligations, Financing Corp. (FICO) debt obligations, Resolution Funding Corp. (REFCORP) debt obligations, and U.S. Agency for International Development (U.S. A.I.D.) Guaranteed notes, (D) pre-refunded municipal obligations defined as follows: any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice, or (E) instruments evidencing an ownership

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interest in obligations described in the preceding clauses (A), (B) and (C); or (3) a combination ofthe investments described in clauses (1) and (2) above.
"Delivery Office " shall mean the following offices of the Trustee: For Notice Purposes:
Zions Bank, a division of ZB, National Association 111 W. Washington Street, Suite#1860 Chicago, Illinois 60602
Attn: Daryl Pomykala, Vice President/Senior Account Executive

For Presentation of Bonds for payment or transfers:

Zions Bank, a division of ZB, National Association One South Main Street, Suite# 1200 Salt Lake City, Utah 84133 Attn: Corporate Trust Services

"Designated Corporate Trust Office" means the corporate trust office of the Trustee located at the address of the Trustee set forth in the definition of "Delivery Office" herein, as such address may be changed from time to time by the Trustee.

"DTC" means The Depository Trust Company, New York, New York, or its nominee, and its successors and assigns, or any other depository performing similar functions.

"Escrow Agreements" mean each Escrow Deposit Agreement dated as of January 21, 2016, among the City and the Escrow Trustee, as escrow trustee and bond registrar and paying agent for the applicable Refunded Bonds or Interest Paid Bonds.

"Escrow Trustee " means the bond registrar and paying agent for the applicable Refunded Bonds or Interest Paid Bonds, respectively, in its capacity as escrow trustee for such Refunded Bonds or Interest Paid Bonds pursuant to the applicable Escrow Agreement.

"Escrow Verification Report" means the report of Robert Thomas, CPA, LLC, dated January 21, 2016.

"Federal Obligation" means any direct obligation of, or any obligation the full and timely payment of principal of and interest on which is guaranteed by, the United States of America.

"Fitch " means Fitch Ratings Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and assigns, and, if such corporation shall be dissolved or liquidated, or shall no longer perform the functions of a securities rating agency, "Fitch" shall be deemed to refer to any other nationally recognized securities rating agency designated by the City by notice to the Trustee.

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"Indenture" means this Indenture, as amended and supplemented from time to time in accordance with Article IX hereof.

"Interest Payment Date " means each January 1 and July 1. The initial Interest Payment Date shall be July 1,2016.

"Interest Paid Bonds" has the meaning given to such term in the recitals hereto, as further described in Exhibit A.

"Kroll" means Kroll Bond Rating Agency, its successors and assigns, and, if Kroll shall be dissolved or liquidated or shall no longer perform the functions of a security rating agency, "Kroll" shall be deemed to refer to any other nationally recognized securities rating agency designated by the City by notice to the Trustee.

"Maturity Date " means, for the Bonds of each series and each specified maturity, the applicable maturity date set forth in Section 2.02.

"Municipal Code " means the Municipal Code of Chicago, as from time to time amended.

"Opinion of Bond Counsel" means a written opinion of Bond Counsel in form and substance acceptable to the City.

"Outstanding," means, when used with reference to any Bonds of a series, all of such obligations issued under this Indenture of that particular series that are unpaid, provided that such term does not include:
Bonds canceled at or prior to such date or delivered to or acquired by the Trustee or Paying Agent at or prior to such date for cancellation;
matured or redeemed Bonds which have not been presented for payment in accordance with the provisions of this Indenture and for the payment of which the City has deposited funds with the Trustee or Paying Agent;
Bonds for which the City has provided for payment by depositing in an irrevocable trust or escrow, cash or Defeasance Obligations, in each case, the maturing principal of and interest on which will be sufficient to pay at maturity, or if called for redemption on the applicable redemption date, the principal of, redemption premium, if any, and interest on such Bonds;
Bonds in lieu of or in exchange or substitution for which other Bonds shall have been authenticated and delivered pursuant to this Indenture; and
Bonds owned by the City and tendered to the Trustee for cancellation.

"Participant," when used with respect to any Securities Depository, means any participant of such Securities Depository.
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"Paying Agent" means the Trustee and any additional Paying Agent designated by the Trustee pursuant to Section 8.04 hereof, and any successor thereto.

"Permitted Investments" means any of the following obligations or securities permitted under the laws of the State and the Municipal Code:
interest-bearing general obligations of the United States of America, the State or the City;
United States treasury bills and other non-interest bearing general obligations of the United States of America when offered for sale in the open market at a price below the face value of same, so as to afford the City a return on such investment in lieu of interest;
short-term discount obligations of the United States Government or United States Government agencies;
certificates of deposit of national banks or banks located within the City which are either (i) fully collateralized at least 110 percent by marketable United States Government securities marked to market at least monthly or (ii) secured by a corporate surety bond issued by an insurance company licensed to do business in the State and having a claims-paying rating in the top rating category as rated by a nationally recognized statistical rating organization and maintaining such rating during the term of such investment;
banker's acceptances of banks and commercial paper of banks whose senior obligations are rated in the top two short-term rating categories by at least two national rating agencies and maintaining such rating during the term of such investment;
tax-exempt securities exempt from federal arbitrage provisions applicable to investments of proceeds ofthe City's tax-exempt debt obligations;
domestic money market mutual funds regulated by and in good standing with the Securities and Exchange Commission, including any such fund for which the Trustee or any of its affiliates provides any service including any service for which a fee may be paid; and
any other suitable investment instrument permitted by State laws and the Municipal Code governing municipal investments generally, subject to the reasonable exercise of prudence in making investments of public funds.

"Principal and Interest Account" means the Series 2015C Principal and Interest Account established within the Bond Fund and described in Section 4.03(b) hereof relating to the Bonds.

"Principal and Interest Requirement" means an amount equal to the total principal installment and interest due on the Bonds as of each January 1 and July 1 (including any

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mandatory redemption of Bonds as required by Section 3.01(c) hereof), which amount shall be deposited in the Principal and Interest Account not later than the Business Day prior to such January 1 and July 1.

"Qualified Collateral" means:
Federal Obligations;
direct and general obligations of any state of the United States of America or any political subdivision of the State which are rated not less than "AA" or "Aa2" or their equivalents by any Rating Agency; and
public housing bonds issued by public housing authorities and fully secured as to the payment of both principal and interest by a pledge of annual contributions under an annual contributions contract or contracts with the United States of America, or project notes issued by public housing authorities, or project notes issued by local public agencies, in each case fully secured as to the payment of both principal and interest by a requisition or payment agreement with the United States of America.

"Rating Agency" means any of Fitch, S&P and Kroll, or another rating agency that has a credit rating assigned to the Bonds at the request of the City.

"Record Dale " means each June 15 and December 15 (whether or not a Business Day).

"Redemption Price " means the principal amount plus accrued interest to the date fixed for redemption, payable upon redemption.

"Refunded Bonds" has the meaning given to such term in the recitals hereto, as further described in Exhibit A.

"Refunded Bonds and Interest Paid Bonds Account" means the account by that name established and described in Section 4.09 hereof.

"Registered Owner" or "Owner" means the person or persons in whose name or names a Bond shall be registered in the Bond Register.

"Securities Depository" means DTC and any other securities depository registered as a clearing agency with the Securities and Exchange Commission pursuant to Section 17A of the Securities Exchange Act of 1934, as amended, and appointed as the securities depository for the Bonds.

"S&P" means Standard & Poor's Financial Services LLC, a division of McGraw Mill Financial, Inc., its successors and assigns, and, if S&P shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the City by notice to the Trustee.
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"State " means the State of Illinois.

"Supplemental Indenture" means any indenture modifying, altering, amending, supplementing or confirming this Indenture duly entered into in accordance with the terms hereof.

"Tax Agreement" means the Tax Exemption Certificate and Agreement of the City, dated the date of issuance ofthe Bonds.

"Trust Estate" means the property conveyed to the Trustee pursuant to the Granting Clauses hereof.

"Trustee" means Zions Bank, a division of ZB, National Association, a national bank with trust powers, and its successors and any entity resulting from or surviving any consolidation or merger to which it or its successors may be a party, and any successor Trustee at the time serving as successor trustee hereunder.

"Underwriters" means an underwriter or group of underwriters selected by the City pursuant to Section 12 of the Bond Ordinance.
Article II The Bonds
Section 2.01. Authority for and Issuance of Bonds, (a) No Bonds may be issued under the provisions of this Indenture except in accordance with this Article. Except as provided in Section 2.07 hereof, the aggregate principal amount of Bonds that may be issued hereunder is expressly limited to the sum of not to exceed $500,000,000 plus an amount equal to the amount of any net original issue discount used in the marketing of the Bonds (not to exceed 15 percent of the principal amount of each series of Bonds).

The Bonds shall be issued in a series to be designated: "City of Chicago General Obligation Refunding Bonds, Series 2015C" and shall be issued as fully registered bonds, without coupons, in Authorized Denominations substantially in the form attached as Exhibit B. Unless the City shall otherwise direct, the Bonds shall be lettered and numbered from R-l and upwards. Each Bond shall be dated the Date of Issuance and shall mature, subject to prior redemption as provided in Article III hereof, on its Maturity Date.

(b) The Bonds shall bear interest from the later of the Date of Issuance or the most recent Interest Payment Date to which interest has been paid or duly provided for, until the principal amount of such Bond is paid, such interest being payable on January 1 and July 1 of each year, commencing on July 1, 2016. Interest on each Bond shall be paid to the person in whose name such Bond is registered at the close of business on the Record Date next preceding the applicable Interest Payment Date, by check or draft of the Trustee, or, at the option of any registered owner of $1,000,000 or more in aggregate principal amount of Bonds of a series, by

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wire transfer of immediately available funds to such bank in the continental United States of America as the registered owner of such Bonds shall request in writing to the Trustee.

(c) The principal of the Bonds and any redemption premium shall be payable in lawful money of the United States of America which, at the respective dates of payment thereof, is legal tender for the payment of public and private debts, upon presentation and surrender thereof at the Designated Corporate Trust Office of the Trustee.

Section 2.02. General Terms of Bonds. The Bonds shall mature on January 1 in each year shown in the following table in the respective principal amount set forth opposite each such year. The Bonds shall bear interest from and including the Date of Issuance as shown in the table below until payment of the principal or Redemption Price thereof shall have been made or provided for in accordance with the provisions hereof, whether at the applicable Maturity Date, upon redemption or acceleration, or otherwise. Interest accrued on the Bonds shall be paid in arrears on each Interest Payment Date. Interest on the Bonds shall be computed upon the basis of a 360-day year consisting of twelve 30-day months.

Year Principal Interest Year Principal Interest
(January 1) Amount ¦ Rate (January 1) Amount Rate
$ 6,635,000 5.000% 2027 $11,415,000 5.000%
7,695,000 5.000% 2028 4,555,000 5.000%
79,930,000 5.000% 2029 4,895,000 5.000%
78,965,000 5.000% 2030 1,505,000 5.000%
78,530,000 5.000% 2031 3,595,000 5.000%
63,285,000 5.000% 2035 14,425,000 5.000%
54,340,000 5.000% 2038 90,230,000 5.000%


Section 2.03. Execution. The seal of the City or a facsimile thereof shall be affixed to or
printed on each of the Bonds, and the Bonds shall be executed by the manual or facsimile signature ofthe Mayor and attested by the manual or facsimile signature ofthe City Clerk, and in case any officer whose signature shall appear on any Bond shall cease to be such officer before the delivery of such Bond, such signature shall nevertheless be valid and sufficient for all proposes, the same as if such officer had remained in office until delivery.

Section 2.04. Authentication. All Bonds shall have thereon a certificate of authentication substantially in the form attached hereto as part of Exhibit B, duly executed by the Trustee as authenticating agent of the City and showing the date of authentication. No Bond shall be valid or obligatory for any purpose or be entitled to any security or benefit under this Indenture unless and until such certificate of authentication shall have been duly executed by the Trustee by manual signature, and such certificate of authentication upon any such Bond shall be conclusive evidence that such Bond has been authenticated and delivered under the Bond Ordinance and this Indenture. The certificate of authentication on any Bond shall be deemed to have been executed by the Trustee if signed by an authorized officer of such Trustee, but it shall not be necessary that the same officer sign the certificate of authentication on all ofthe Bonds issued hereunder.

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Section 2.05. Forms of Bonds; Temporary Bonds. The Bonds issued under this Indenture shall be substantially in the form attached hereto as Exhibit B with such appropriate variations, omissions and insertions as are permitted or required by the Bond Ordinance and this Indenture.

Pending preparation of definitive Bonds, or by agreement with the purchasers of the Bonds, the City may issue and, upon its request, the Trustee shall authenticate, in lieu of definitive Bonds, one or more temporary printed or typewritten Bonds in Authorized Denominations of substantially the tenor recited above. Upon request of the City, the Trustee shall authenticate definitive Bonds in exchange for and upon surrender of an equal principal amount of temporary Bonds. Until so exchanged, temporary Bonds shall have the same rights, remedies and security hereunder as definitive Bonds.

Section 2.06. Delivery of Bonds. Upon the execution and delivery of this Indenture, the City shall execute and deliver to the Trustee, and the Trustee shall authenticate, the Bonds and deliver them to the purchasers as may be directed by the City as hereinafter in this Section provided.

Prior to the delivery by the Trustee of any of the Bonds there shall be filed with the Trustee:
copies, duly certified by the City Clerk of the City, of the Bond Ordinance;
original executed counterparts of this Indenture;
a notification of sale of the City, executed by an Authorized Officer, as required under Section 12 of the Bond Ordinance;
a Certificate executed by an Authorized Officer stating that upon the issuance of the Bonds, no event of default under the Indenture on the part of the City, nor an event which with notice or lapse of time or both would become an event of default under the Indenture has occurred and is continuing;
an opinion or opinions of Corporation Counsel to the City in form and substance satisfactory to Bond Counsel;

(6) . an executed counterpart of any Contract of Purchase and continuing
disclosure undertaking relating to the Bonds;
an executed counterpart ofthe Escrow Agreements;
a signed copy ofthe Escrow Verification Report;
an Opinion of Bond Counsel to the effect that this Indenture (i) has been duly and lawfully authorized by the City Council ofthe City and executed by the City in accordance with the provisions of the Bond Ordinance and (ii) will, when executed and
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delivered by the Trustee, be valid and binding upon the City and enforceable in accordance with its terms;
a Certificate executed by an Authorized Officer stating that all conditions precedent with respect to the execution of all documents by the City relating to the Bonds have been satisfied; and
such further documents, certificates and opinions as may be required by the provisions of the Bond Ordinance, this Indenture, any Contract of Purchase or proceedings taken pursuant thereto.

Section 2.07. Mutilated, Lost, Stolen or Destroyed Bonds. If any Bond, whether in temporary or definitive form, is lost (whether by reason of theft or otherwise), destroyed (whether by mutilation, damage, in whole or in part, or otherwise) or improperly cancelled, the Trustee may authenticate a new Bond of like date, maturity date, interest rate, denomination and principal amount and bearing a number not contemporaneously outstanding; provided that (i) in the case of any mutilated Bond, such mutilated Bond shall first be surrendered to the Trustee, and (ii) in the case of any lost Bond or Bond destroyed in whole, there shall be first furnished to the Trustee evidence of such loss, theft, or destruction satisfactory to the City and the Trustee, together with indemnification of the City and the Trustee, satisfactory to the Trustee. If any lost, destroyed or improperly cancelled Bond shall have matured or is about to mature, or has been called for redemption, instead of issuing a duplicate Bond, the Trustee shall pay the same without surrender thereof if there shall be first furnished to the Trustee evidence of such loss, destruction or cancellation, together with indemnity, satisfactory to it. Upon the issuance of any substitute Bond, the Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto.

All Bonds shall be owned upon the express condition that the foregoing provisions, to the extent permitted by law, are exclusive with respect to the replacement or payment of mutilated, destroyed, lost, stolen or purchased Bonds, and shall preclude any and all other rights or remedies.

Section 2.08. Transfer and Exchange of Bonds; Persons Treated as Owners, (a) Subject to the limitations contained in subsection (c) of this Section, upon surrender for registration of transfer of any Bond at the Designated Corporate Trust Office of the Trustee, duly endorsed by, or accompanied by a written instrument or instruments of transfer in form satisfactory to the Trustee and duly executed by the Bondholder or such Bondholder's attorney duly authorized in writing in such form and with guarantee of signature as shall be satisfactory to the Trustee, the City shall execute, and the Trustee shall authenticate and deliver, in the name ofthe transferee or transferees, one or more fully registered Bonds of the same interest rate and Maturity Date of Authorized Denominations, for a like principal amount bearing numbers not contemporaneously outstanding. Subject to the limitations contained in subsection (c) of this Section, Bonds may be exchanged at the Designated Corporate Trust Office of the Trustee for a like aggregate principal amount of Bonds ofthe same interest rate and Maturity Date of other Authorized Denominations bearing numbers not contemporaneously outstanding.


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No service charge shall be made for any transfer or exchange of Bonds, but the City or the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Bonds, except that no such payment may be required in the case of the issuance of a Bond or Bonds for the unredeemed portion of a Bond surrendered for redemption.
The Trustee shall not be required to transfer or exchange any Bond during the period commencing on the Record Date next preceding any Interest Payment Date of such Bond and ending on such Interest Payment Date, or to transfer or exchange such Bond after the mailing of notice calling such Bond for redemption has been made as herein provided or during the period of 15 days next preceding the giving of notice of redemption of Bonds of the same Maturity Date.
Bonds delivered upon any registration of transfer or exchange as provided herein or as provided in Section 2.07 hereof shall be valid general obligations of the City, evidencing the same debt as the Bonds surrendered, shall be secured by this Indenture and shall be entitled to all of the security and benefits hereof and of the Bond Ordinance to the same extent as the Bond surrendered. The City, the Trustee and any Paying Agent may treat the Registered Owner of any Bond as the absolute owner thereof for all purposes, whether or not such Bond shall be overdue, and shall not be bound by any notice to the contrary. All payments of or on account of the principal of, premium, if any, and interest on any such Bond as herein provided shall be made only to or upon the written order of the Registered Owner thereof or such Registered Owner's legal representative, but such registration may be changed as herein provided. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid.

Section 2.09. Required Information in Bond Form. On each date on which the Trustee authenticates and delivers a Bond, it shall complete the information required to be inserted by the applicable Bond form and shall keep a record of such information.

Section 2.10. Cancellation. Any Bond surrendered for the purpose of payment or retirement, or for exchange, transfer or replacement, shall be canceled upon surrender thereof to the Trustee or any Paying Agent. If the City shall acquire any of the Bonds, the City shall deliver such Bonds to the Trustee for cancellation and the Trustee shall cancel the same. Any such Bonds canceled by any Paying Agent other than the Trustee shall be promptly transmitted by such Paying Agent to the Trustee. Certification of Bonds canceled by the Trustee and Bonds canceled by a Paying Agent other than the Trustee which are transmitted to the Trustee shall be made to the City. Canceled Bonds may be destroyed by the Trustee unless instructions to the contrary are received from the City.

Section 2.1 J. Book Entry Provisions. The provisions of this Section shall apply as long as the Bonds are maintained in book entry form with DTC or another Securities Depository, any provisions of this Indenture or the Bond Ordinance to the contrary notwithstanding. Notwithstanding anything else to the contrary herein, so long as DTC is the Securities Depository, the Bonds shall be subject to the operational arrangements of DTC in effect from time to time.
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The Bonds shall be payable to the Securities Depository, or its nominee, as the Registered Owner of the Bonds, in same day funds on each date on which the principal of, premium, if any, and interest on the Bonds is due as set forth in this Indenture and the Bonds. Such payments shall be made to the offices of the Securities Depository specified by the Securities Depository to the City and the Trustee in writing. Without notice to or the consent of the Beneficial Owners of the Bonds, the City and the Securities Depository may agree in writing to make payments of principal and interest in a manner different from that set forth herein. If such different manner of payment is agreed upon, the City shall give the Trustee notice thereof, and the Trustee shall make payments with respect to such Bonds in the manner specified in such notice. Neither the City nor the Trustee shall have any obligation with respect to the transfer or crediting of the principal of, premium, if any, and interest on the Bonds to Participants or the Beneficial Owners of the Bonds or their nominees.
If (i) the City determines, or (ii) the City receives notice that the Securities Depository has received notice from its Participants having interests in at least 50 percent in principal amount of the Bonds, that the Securities Depository or its successor is incapable of discharging its responsibilities as a securities depository, or that it is in the best interests of the Beneficial Owners that they obtain certificated Bonds, the City may (or, in the case of clause (ii) above, the City shall) cause the Trustee to authenticate and deliver such Bond certificates. The City shall have no obligation to make any investigation to determine the occurrence of any events that would permit the City to make any determination described in this paragraph.
If, following a determination or event specified in paragraph (b) above, the City discontinues the maintenance of the Bonds, in book entry form with the then current Securities Depository, the City will issue replacement Bonds, to the replacement Securities Depository, if any, or, if no replacement Securities Depository is selected for such Bonds, directly to the Participants as shown on the records of the former Securities Depository or, to the extent requested by any Participant, to the Beneficial Owners of the Bonds shown on the records of such Participant. Any such Bonds so issued in replacement shall be in fully registered form and in Authorized Denominations, be payable as to interest on the Interest Payment Dates of such Bonds by check mailed to each Registered Owner at the address of such Registered Owner as it appears on the Bond Register or, at the option of any Registered Owner of not less than $1,000,000 principal amount of Bonds, by wire transfer to any address in the United States of America on such Interest Payment Date to such Registered Owner as of such Record Date, if such Registered Owner provides the Trustee with written notice of such wire transfer address not later than the Record Date (which notice may provide that it will remain in effect with respect to subsequent Interest Payment Dates unless and until changed or revoked by subsequent notice). Principal and premium, if any, on any replacement Bonds are payable only upon presentation and surrender of such replacement Bond or Bonds at the Designated Corporate Trust Office of the Trustee.
The Securities Depository and its Participants, and the Beneficial Owners of the Bonds, by their acceptance of such Bonds, agree that the City and the Trustee shall

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not have liability for the failure of such Securities Depository to perform its obligations to the Participants and the Beneficial Owners of the Bonds, nor shall the City or the Trustee be liable for the failure of any Participant or other nominee of the Beneficial Owners to perform any obligation ofthe Participant to a Beneficial Owner of the Bonds.
As long as Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the Registered Owner of the Bonds, as nominee of DTC, references herein to the Registered Owners of such Bonds shall mean Cede & Co. and shall not mean the Beneficial Owners of such Bonds.
As long as Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the Registered Owner of the Bonds:

if less than all of the Bonds of a maturity are to be redeemed prior to maturity, the particular Bonds or portions of such Bonds will be selected by lot by DTC or such successor securities depository in such manner as DTC or such successor securities depository may determine;
selection of Bonds to be redeemed upon partial redemption or presentation of Bonds to the Trustee upon partial redemption, shall be deemed made when the right to exercise ownership rights in such Bonds through DTC or DTC's Participants is transferred by DTC on its books;
any notices of the interest rate on the Bonds, to be provided by the Trustee shall be provided to anyone identifying itself to the Trustee as a person entitled to exercise ownership rights with respect to such Bonds through DTC or its Participants; and
DTC may present notices, approvals, waivers or other communications required or permitted to be made by Registered Owners under this Indenture on a fractionalized basis on behalf of some or all of those persons entitled to exercise ownership rights in the Bonds, through DTC or its Participants.

Article III

Redemption of Bonds

Section 3.01. Redemption Terms, Dates and Prices. The Bonds shall be subject to redemption prior to their respective Maturity Dates in the amounts, at the times and in the manner provided in this Section.

(a) Optional Redemption. The Bonds maturing on and after January 1, 2027, are subject to redemption at the option of the City, in whole or in part, on any date occurring on or after January 1, 2026, and if less than all of the outstanding Bonds of a single maturity are to be redeemed, such Bonds shall be called by lot, in such principal amounts and from such maturities
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as the City shall detemiine, at a Redemption Price equal to 100 percent of the principal amount thereof plus accrued interest, if any, to the date fixed for redemption.

The City is authorized to sell or waive any right the City may have to call any of the Bonds for optional redemption, in whole or in part; provided, that, with respect to any Bonds, such sale or waiver will not adversely affect the excludability of interest on such Bonds from gross income for federal income tax purposes.
General Provisions Regarding Redemptions.

No redemption of less than all of the Bonds Outstanding shall be made pursuant to Section 3.01(a) hereof unless the aggregate principal amount of Bonds to be redeemed is equal to $5,000 multiples. Any redemption of less than all of the Bonds Outstanding shall be made in such a manner that all Bonds Outstanding after such redemption are in Authorized Denominations. If fewer than all Bonds Outstanding are to be optionally redeemed, the Bonds to be called shall be called from such maturities and interest rates as may be determined by an Authorized Officer.
Bonds may be called for redemption by the Trustee pursuant to Section 3.01(a) hereof upon receipt by the Trustee at least 45 days prior to the redemption date (unless a shorter time period shall be satisfactory to the Trustee) of a written request of the City requesting such redemption; in the case of a redemption pursuant to Section 3.01(c) hereof, Bonds shall be called for redemption by the Trustee in accordance with the applicable mandatory schedule provided herein, without further action by the City.
In lieu of redeeming Bonds pursuant to Section 3.01(a) hereof, the Trustee may, at the request of the City, use such funds available hereunder for redemption of Bonds to purchase Bonds in the open market at a price not exceeding the Redemption Price then applicable hereunder. Any Bond so purchased in lieu of redemption shall be delivered to the Trustee for cancellation and shall be canceled, all as provided in Section 2.10 hereof.
Mandatory Redemption of Bonds.

The Bonds maturing on January 1, 2035 are subject to mandatory redemption prior to maturity on January 1 of the years and in the amounts set forth below, at a Redemption Price equal to 100 percent of the principal amount thereof plus accrued interest, if any, to the date fixed for redemption:

Principal Amount
2033 2034 2035
$4,595,000 4,830,000 5,000,000*
*Final Maturity



C\350512.20

i

I
The Bonds maturing on January 1, 2038 are subject to mandatory redemption prior to maturity on January 1 of the years and in the amounts set forth below, at a Redemption Price equal to 100 percent of the principal amount thereof plus accrued interest, if any, to the date fixed for redemption:

Principal Amount
2036 2037 2038
$35,490,000 37,265,000 17,475,000*
*Final Maturity

The principal amount of the Bonds to be mandatorily redeemed in each year may be reduced through the earlier optional redemption thereof. Any partial optional redemption of Bonds will be credited against future mandatory redemption requirements for that maturity in such order of the mandatory redemption dates as the City may determine. In addition, on or prior to the sixtieth (60th) day preceding any mandatory redemption date, the Trustee if directed by the City, shall purchase Bonds required to be retired on such mandatory redemption date at such prices as the City shall determine. Any Bond so purchased shall be canceled and the principal amount thereof shall be credited against the payment required on such next mandatory redemption date.

Section 3.02. Notice of Redemption, (a) Unless waived by any owner of Bonds of a Series to be redeemed, notice of the call for any such redemption shall be given by the Trustee on behalf of the City by mailing the redemption notice by first class mail at least 30 days and not more than 60 days prior to the date fixed for redemption to the Registered Owner of the Bond or Bonds to be redeemed at the address shown on the Bond Register or at such other address as is furnished in writing by such Registered Owner to the Trustee, but the failure to mail any such notice or any defect therein as to any Bond shall not affect the validity of the proceedings for the redemption of any other Bond. Any notice of redemption mailed as provided in this Section 3.02 hereof shall be conclusively presumed to have been given whether or not actually received by the addressee.
All notices of redemption shall state:
the Series designation of the Bonds to be redeemed,
the redemption date,
the Redemption Price,
if less than all outstanding Bonds are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts and interest rates) of the Bonds to be redeemed,



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that on the redemption date the Redemption Price will become due and payable upon each such Bond or portion thereof called for redemption, and that interest thereon shall cease to accrue or compound from and after said date,
the place where such Bonds are to be surrendered for payment of the Redemption Price, and
such other information as shall be deemed necessary by the Trustee at the time such notice is given to comply with law, regulation or industry standard.

With respect to an optional redemption of Bonds, such notice may state that said redemption is conditioned upon the receipt by the Trustee on or prior to the date fixed for redemption of moneys sufficient to pay the applicable Redemption Price of the Bonds. If such moneys are not so received, such redemption notice shall be of no force and effect, the City shall not redeem such Bonds and such failure to deposit such funds shall not constitute an Event of Default under this Indenture. The Trustee shall give notice, in the same manner in which the notice of redemption was given, that such moneys were not so received and that such Bonds will not be redeemed. Unless the notice of redemption shall be made conditional as provided above, on or prior to any redemption date for the Bonds, the City shall deposit with the Trustee an amount of money sufficient to pay the applicable Redemption Price of all the Bonds or portions thereof which are to be redeemed on that date.
Notice of redemption having been given as aforesaid, the Bonds, or portions thereof, so to be redeemed shall, on the redemption date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the City shall default in the payment of the Redemption Price or unless, in the event of a conditional notice as described above, the necessary moneys were not deposited) such Bonds, or portions thereof, shall cease to bear interest. Upon surrender of such Bonds for redemption in accordance with said notice, such Bonds shall be paid by the Trustee at the Redemption Price. Installments of interest due on or prior to the redemption date shall be payable as herein provided for payment of interest. Upon surrender for any partial redemption of any Bond, there shall be prepared for the Registered Owner a new Bond or Bonds of the same interest rate and maturity in the amount of the unpaid principal.
If any Bond, or portion thereof, called for redemption shall not be so paid upon surrender thereof for redemption, the principal shall, until paid, bear interest from the redemption date at the rate borne by such Bond, or portion thereof, so called for redemption. All Bonds which have been redeemed shall be cancelled and destroyed by the Trustee and shall not be reissued.
Failure to give notice in the manner prescribed hereunder with respect to any Bond, or any defect in such notice, shall not affect the validity of the proceedings for redemption for any Bond with respect to which notice was properly given. Upon the happening of the above conditions and if sufficient moneys are on deposit with the Trustee on the applicable redemption date to redeem the Bonds to be redeemed and to pay interest due thereon and premium, if any, the Bonds thus called shall not, after the applicable redemption date, bear interest, be protected

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by this Indenture or the Bond Ordinance or be deemed to be Outstanding under the provisions of this Indenture.
If any Bond is transferred or exchanged on the Bond Register after notice has been given calling such Bond for redemption, the Trustee will attach a copy of such notice to the Bond issued in connection with such transfer or exchange.
If any Bond is not presented for payment when the principal amount thereof becomes due, either at maturity or at a date fixed for redemption thereof or otherwise, and if moneys sufficient to pay such Bond are held by the Trustee for the benefit of the Registered Owner of such Bond, the Trustee shall hold such moneys for the benefit of the Registered Owner of such Bond without liability to the Registered Owner for interest. The Registered Owner of such Bond thereafter shall be restricted exclusively to such funds for satisfaction of any claims relating to such Bond.

Section 3.03. Selection of Bonds for Redemption. If less than all the Bonds shall be called for redemption under any provision of this Indenture permitting such partial redemption, (i) such redemption shall be by lot in such manner as the Trustee may determine among such Bonds, and (ii) subject to other applicable provisions of this Indenture, the portion of any Bond to be redeemed shall be in a principal amount equal to an Authorized Denomination. In selecting Bonds for redemption, the Trustee shall assign to each Bond of like Maturity Date, a distinctive number for each minimum Authorized Denomination of such Bond and shall select by lot from the numbers so assigned as many numbers as, at such minimum Authorized Denomination for each number, shall equal the principal amount of such Bonds to be redeemed. In such case, the Bonds to be redeemed shall be those to which were assigned numbers so selected; provided that only so much of the principal amount of each Bond shall be redeemed as shall equal such minimum authorized denomination for each number assigned to it and so selected. If it is determined that one or more, but not all, of the integral multiples of the Authorized Denomination of principal amount represented by any Bond is to be called for redemption, then, upon notice of intention to redeem such integral multiple of an Authorized Denomination, the Registered Owner of such Bond shall forthwith surrender such Bond to the Trustee for (a) payment to such Registered Owner of the Redemption Price of the integral multiple of the Authorized Denomination of principal amount called for redemption, and (b) delivery to such Registered Owner of a new Bond or Bonds in the aggregate principal amount ofthe unredeemed balance of the principal amount of such Bond. New Bonds representing the unredeemed balance of the principal amount of such Bond shall be issued to the Registered Owner thereof without charge therefor.

The Trustee shall promptly notify the City in writing of the Bonds, or portions thereof, selected for redemption and, in the case of any Bond selected for partial redemption, the principal amount thereof, and the interest rate thereof to be redeemed.

Section 3.04. Deposit of Funds. For the redemption of any of the Bonds, the City shall cause to be deposited in the Principal and Interest Account moneys sufficient to pay when ,due the principal of, and premium, if any, and interest on, such Bonds to be redeemed on the redemption date to be applied in accordance with the provisions hereof.

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Article IV

Application of Bond Proceeds; Creation of Funds and Security for Bonds

Section 4.01. Source of Payment of Bonds. Pursuant to the Bond Ordinance, the Bonds constitute direct and general obligations of the City for the payment of which the City pledges its full faith and credit.

Section 4.02. Application of Bond Proceeds, (a) The proceeds of the sale of the Bonds, consisting of the principal amount of the Bonds plus original premium of $23,892,352 used in the marketing of the Bonds and less an Underwriters' discount of $2,968,401.95, shall be applied simultaneously with their delivery as follows:
$502,472,814.14 shall be deposited into the Refunded Bonds and Interest Paid Bonds Account and applied by the Trustee in accordance with Section 4.09 hereof.
Intentionally deleted.
$17,499,200.55 representing capitalized interest, if any, on the Bonds, shall be deposited into the Capitalized Interest Account, to be applied to the payment of certain interests to accrue on the Bonds, as provided in Section 4.03(c).
$951,935.36 shall be deposited into the Cost of Issuance Account and shall applied by the Trustee in accordance with Section 4.04 hereof.

Section 4.03. Creation of Bond Fund and Accounts Therein, (a) There are established with the Trustee a separate trust fund designated "City of Chicago General Obligation Refunding Bonds, Series 2015C Bond Fund" (the "Bond Fund").
At each such time as is required under this Indenture, the City shall deposit into the Bond Fund, from funds ofthe City legally available therefor, an amount sufficient to satisfy the Principal and Interest Requirement.
Money on deposit in the Bond Fund shall be applied by the Trustee to pay the principal of (whether due at maturity or by mandatory redemption) and interest on the Bonds, as the same become due.
Pending the use of moneys held in the Bond Fund, the Trustee shall invest such moneys in Permitted Investments upon the direction of an Authorized Officer or any person designated by an Authorized Officer. Income from such investments shall be credited to the Bond Fund.



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Creation of Principal and Interest Account. There is established with the Trustee an account within the Bond Fund, designated as the "Series 2015C Principal and Interest Account" (the "Principal and Interest Account"), to be used in connection with the redemption of any Bonds.
Creation of Capitalized Interest Account. There is established with the Trustee an account within the Bond Fund, designated as the "Series 2015C Capitalized Interest Account" (the "Capitalized Interest Account"), to hold certain proceeds of sale of the Bonds described in Section 4.02(a)(iii) hereof for application as authorized herein.

Moneys on deposit in the Capitalized Interest Account shall be withdrawn by the Trustee on the Business Day prior to each of the following Interest Payment Dates and deposited into the Bond Fund for application to the payment of the interest due on Bonds on each of such Interest Payment Dates in the amounts as follows:

Amount of Interest
Interest Payment Date to be Paid

July 1,2016 $8,234,917.91 January 1, 2017 9,264,282.64

Pending the use of moneys held in the Capitalized Interest Account, the Trustee shall invest such moneys in Permitted Investments upon the direction of an Authorized Officer or any person designated by an Authorized Officer. Income from such investments shall be retained in the Capitalized Interest Account. Any amount remaining in the Capitalized Interest Account on January 2, 2017, shall be withdrawn therefrom and deposited into the Bond Fund and applied to the payment of the next interest to become due on the Bonds.

Section 4.04. Costs of Issuance Account. There are established with the Trustee a trust account designated "Series 2015C Costs of Issuance Account" (the "Costs of Issuance Account"). The Trustee shall deposit into the Costs of Issuance Account, the amount described in Sections 4.02(a)(iv) of this Indenture in order to pay costs of issuance of the Bonds. The Trustee shall release funds, from time to time, from such account in accordance with written directions from an Authorized Officer in a Certificate. Such funds shall be held by the Trustee uninvested in cash, without liability for interest. Upon the disbursement of all amounts from the Costs of Issuance Account, the Trustee shall close such account without further direction.

Section 4.05. Deposits into Bond Fund and Accounts Therein. Not later than the Business Day prior to the Interest Payment Date commencing July 1, 2016 (each such date referred to herein as the "Deposit Date") there shall be on deposit in the Bond Fund an amount equal to the Principal and Interest Requirement (such amount with respect to any Deposit Date being referred to herein as the "Deposit Requirement").

In addition to the Deposit Requirement, there shall be deposited into the Bond Fund any other moneys received by the Trustee under and pursuant to this Indenture, when accompanied by directions from the person depositing such moneys that such moneys are to be paid into such

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Bond Fund and to one or more accounts therein, including any amounts received from an Escrow Trustee pursuant to its respective Escrow Agreement upon termination thereof, which amounts shall be applied to the payment ofthe next interest to become due on the Bonds.

Upon calculation by the Trustee of each Deposit Requirement under this Section, the Trustee shall notify the City of the Deposit Requirement, along with the Deposit Date to which it relates, and shall provide the City with such supporting documentation and calculations as the City may reasonably request.

Section 4.06. Tax Covenants, (a) The City covenants that it will take no action in the investment of the proceeds of the Bonds which would result in making the interest payable on any of such Bonds subject to federal income taxes by reason of such Bonds being classified as "arbitrage bonds" within the meaning of Section 148 of the Code.

(b) The City further covenants that it will act with respect to the proceeds of the Bonds, the earnings on the proceeds of such Bonds and any other moneys on deposit in any fund or account maintained in respect of such Bonds, including, if necessary, a rebate of such earnings to the United States of America, in a manner which would cause the interest on such Bonds to continue to be exempt from federal income taxation under Section 103(a) of the Code.

Section 4.07. Non-presentment of Bonds. In the event any Bond shall not be presented for payment when the principal thereof becomes due, whether at maturity, at the date fixed for redemption or otherwise, if moneys sufficient to pay such Bond shall have been made available to the Trustee for the benefit of the Registered Owner thereof, subject to the provisions of the immediately following paragraph, all liability of the City to the Registered Owner thereof for the payment of such Bond shall forthwith cease, determine and be completely discharged, and thereupon it shall be the duty of the Trustee to hold such moneys, without liability for interest thereon, for the benefit of the Registered Owner of such Bond who shall thereafter be restricted exclusively to such moneys, for any claim of whatever nature on his or her part under this' Indenture or on, or with respect to, such Bond.

Any moneys so deposited with and held by the Trustee not so applied to the payment of Bonds within two years after the date on which the same shall have become due shall be repaid by the Trustee to the City, and thereafter the Registered Owners of such Bonds shall be entitled to look only to the City for payment, and then only to the extent of the amount so repaid, and all liability of the Trustee with respect to such moneys shall thereupon cease, and the City shall not be liable for any interest thereon and shall not be regarded as a trustee of such moneys. The obligation of the Trustee under this Section to pay any such funds to the City shall be subject, however, to any provisions of law applicable to the Trustee or to such funds providing other requirements for disposition of unclaimed property.

Section 4.08. Moneys Held in Trust. All moneys required to be deposited with or paid to the Trustee for the account of any fund or account referred to in any provision of this Indenture shall be held by the Trustee in trust as provided in Section 8.08 of this Indenture, and shall, while held by the Trustee, constitute part of the Trust Estate and be subject to the lien or security interest created hereby.

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Section 4.09. Refunded Bonds and Interest Paid Bonds Account. There are established with the Trustee a trust account designated "Refunded Bonds and Interest Paid Bonds Account." The Trustee shall deposit into the Refunded Bonds and Interest Paid Bonds Account the amount described in Sections 4.02(a)(i) and shall disburse such amount by making wire transfers to the applicable Escrow Trustees on the Closing Date in accordance with the Closing Memorandum. Upon the disbursement of all amounts from the Refunded Bonds and Interest Paid Bonds Account, the Trustee shall close such account without further direction.

Article V

Investment of Moneys

Section 5.01. Investment of Moneys. Moneys held in the funds, accounts and subaccounts established hereunder shall be invested and reinvested in accordance with the provisions governing investments contained in this Indenture. All such investments shall be held by or under the control of the Trustee and shall be deemed at all times a part of the fund, account or subaccount for which they were made.

Section 5.02. Investment Income. The interest earned on any investment of moneys held hereunder, any profit realized from such investment and any loss resulting from such investment shall be credited or charged to the fund, account or subaccount for which such investment was made.
Article VI Discharge of Lien
Section 6.01. Defeasance, (a) If the City shall pay to the Registered Owners ofthe Bonds, or provide for the payment of, the principal, premium, if any, and interest to become due on the Bonds, then this Indenture and the Bond Ordinance shall be fully discharged and satisfied with respect to such Bonds. Upon the satisfaction and discharge of this Indenture with respect to the Bonds, the Trustee shall, upon the request ofthe City, execute and deliver to the City all such instruments as may be desirable to evidence such discharge and satisfaction, and all fiduciaries shall pay over or deliver to the City all funds, accounts and other moneys or securities held by them pursuant to this Indenture which are not required for the payment or redemption of such Bonds. If payment or provision for payment is made, to or for the Registered Owners of all or a portion of the Bonds, of the principal of and interest due and to become due on any Bond at the times and in the manner stipulated therein, and there is paid or caused to be paid to the Trustee all sums of money due and to become due according to the provisions of this Indenture, then these presents and the estate and rights hereby and by the Bond Ordinance granted shall cease, terminate and be void as to those Bonds or portions thereof except for purposes of registration, transfer and exchange of Bonds and any such payment from such moneys or obligations. Any Bond shall be deemed to be paid within the meaning of this Section when payment of the principal of any such Bond, plus interest thereon to the due date thereof (whether such due date be by reason of maturity or upon redemption as provided in this Indenture or otherwise), either

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shall have been made or caused to have been made in accordance with the terms thereof, or
shall have been provided for by irrevocably depositing with the Trustee, in trust and exclusively for such payment, (1) moneys sufficient to make such payment or (2) Defeasance Obligations, or (3) a combination ofthe investments described in clauses (1) and (2) above, such amounts so deposited being available or maturing as to principal and interest in such amounts and at such times, without consideration of any reinvestment thereof, as will ensure the availability of sufficient moneys to make such payment (all as confirmed by a nationally recognized firm of independent public accountants). If the City shall pay and discharge a portion ofthe Bonds as aforesaid, such portion shall cease to be entitled to any lien, benefit or security under this Indenture and the Bond Ordinance. The liability of the City with respect to such Bonds shall continue, but the Registered Owners thereof shall thereafter be entitled to payment (to the exclusion of all other Bondholders) only out of the Defeasance Obligations deposited with the Trustee under this Article VI.

Nothing in this Indenture shall prohibit a defeasance deposit of escrow securities as provided in this section from being subject to a subsequent sale of such escrow securities and reinvestment of all or a portion of the proceeds of that sale in escrow securities which, once deposited together with money to remain so held in trust, shall be sufficient to provide for payment of principal, redemption premium, if any, and interest on any of the defeased Bonds. Amounts held by the Trustee in excess of the amounts needed so to provide for payment of the defeased Bonds may be subject to withdrawal by the City.
No such deposit under Sections 6.01(a) or (b) shall be made or accepted hereunder and no use made of any such deposit unless the Trustee shall have received an Opinion of Bond Counsel to the effect that such deposit and use would not cause any of such Bonds to be treated as "arbitrage bonds" within the meaning of Section 148 of the Code or any successor provision thereto.

Article VII

Default Provisions; Remedies

Section 7.01. Defaults. Each ofthe following events is hereby declared to be an "Event of Default":
payment of the principal or Redemption Price, if any, of any Bonds shall not be made when and as the same shall become due, whether at maturity or upon call for redemption or otherwise;
payment of any installment of interest on any Bonds shall not be made when and as the same shall become due; or
the City shall fail or refuse to comply with the provisions of this Indenture, or shall default in the performance or observance of any of the covenants, agreements or conditions on its part contained herein or in the Bonds, which materially affects the rights of the owners of the Bonds and such failure, refusal or default shall continue for a period
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of 45 days after written notice thereof by the Trustee or the owners of not less than 25 percent in principal amount of the Outstanding Bonds; provided, however, that in the case of any such default which can be cured by due diligence but which cannot be cured within the 45-day period, the time to cure shall be extended for such period as may be necessary to remedy the default with all diligence.

Section 7.02. Remedies, (a) Upon the happening and continuance of any Event of Default specified in paragraph (a) or (b) of Section 7.01 hereof, the Trustee shall proceed, or upon the happening and continuance of any Event of Default (beyond the time periods specified therein) specified in paragraph (c) of Section 7.01 hereof, the Trustee may proceed, and upon the written request of the owners of not less than 25 percent in principal amount of the Outstanding Bonds, shall proceed, in its own name, subject to the provisions of this Section, to protect and enforce its rights and the rights of the owners ofthe Bonds by such of the following remedies as the Trustee, being advised by counsel, shall deem most effectual to protect and enforce such rights:
by mandamus or other suit, action or proceeding at law or in equity, to enforce all rights of the owners of the Bonds including the right to require the City to receive and collect taxes adequate to carry out the covenants and agreements as to such taxes and to require the City to carry out any other covenant or agreement with the owners of the Bonds and to perform its duties under this Indenture;
by bringing suit upon the Bonds;
by action or suit in equity, require the City to account as if it were the trustee of an express trust for the owners of the Bonds; and/or
by action or suit in equity, enjoin any acts or things which may be unlawful or in violation ofthe rights of the owners of the Bonds.

In the enforcement of any rights and remedies under this Indenture, the Trustee shall be entitled to sue for, enforce payment of and receive any and all amounts then or during any default becoming, and at any time remaining, due from the City but only out of moneys pledged as security for the Bonds for principal, Redemption Price, interest or otherwise, under any provision of this Indenture or of the Bonds, and unpaid, with interest on overdue payments at the rate or rates of interest specified in such Bonds, together with any and all costs and expenses of collection and of all proceedings hereunder and under such Bonds without prejudice to any other right or remedy of the Trustee or of the owners of the Bonds, and to recover and enforce a judgment or decree against the City for any portion of such amounts remaining unpaid, with interest, costs and expenses, and to collect from any moneys available under this Indenture for such purpose, in any manner provided by law, the moneys adjudged or decreed to be payable.
Under no circumstance may the Trustee declare the principal of or interest on any Bond to be due and payable prior to its Maturity Date following the occurrence of an Event of Default under this Indenture.



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Article VIII

Trustee and Paying Agent

Section 8.01. Acceptance of Trusts. The Trustee hereby accepts the trusts imposed upon it by this Indenture, and agrees to perform said trusts, but only upon and subject to the express terms and conditions set forth herein. Except as otherwise expressly set forth in this Indenture, the Trustee assumes no duties, responsibilities or liabilities by reason of its execution of this Indenture other than as set forth in this Indenture, and this Indenture is executed and accepted by the Trustee subject to all the terms and conditions of its acceptance of the trust under this Indenture. The Trustee shall make payments to Bondholders and effect optional and mandatory redemptions when required, whether or not its fees and expenses have been fully paid.

Section 8.02. Dealing in Bonds. The Trustee, in its individual capacity, may buy, sell, own, hold and deal in any of the Bonds, and may join in any action which the Registered Owner of any Bond may be entitled to take with like effect as if it did not act in any capacity hereunder. The Trustee, in its individual capacity, either as principal or agent, may also engage in or be interested in any financial or other function with the City, and may act as depositary, trustee or agent for any committee or body of the Registered Owners of Bonds secured hereby or other obligations of the City as freely as if it did not act in any capacity hereunder.

Section 8.03. Compensation of Trustee. The City shall pay to the Trustee from time to time reasonable compensation for all services rendered under this Indenture and also all reasonable expenses, charges, counsel fees and other disbursements, including those of their attorneys, agents and employees incurred in and about the performance of their powers and duties under this Indenture and, except as provided in Section 8.01 hereof the Trustee shall have a lien therefor on any and all moneys at any time held by it under this Indenture. The City further agrees to indemnify and save the Trustee harmless against any liabilities which it may incur in the exercise and performance of its powers and duties hereunder, which are not due to its negligence or default.

Section 8.04. Paying Agent. The Trustee may appoint a Paying Agent with power to act on its behalf and subject to its direction (i) in the authentication, registration and delivery of Bonds in connection with transfers and exchanges hereunder, as fully to all intents and purposes as though such Paying Agent had been expressly authorized by this Indenture to authenticate, register and deliver Bonds, and (ii) for effecting purchases and sales of Bonds pursuant hereto and accepting deliveries of Bonds, making deliveries of Bonds and holding Bonds pursuant hereto. The foregoing notwithstanding, the Trustee need not appoint a Paying Agent hereunder as long as the Bonds are held in book-entry form pursuant to Section 2.11 hereof; at any time the Bonds are not held in book-entry form pursuant to Section 2.11 hereof, the Trustee shall either maintain an office in New York, New York capable of handling the duties of Paying Agent hereunder, or shall appoint a Paying Agent with an office in New York, New York hereunder. Any Paying Agent appointed pursuant to this Section shall evidence its acceptance by a certificate filed with the Trustee, the Bank and the City. For all purposes of this Indenture, the authentication, registration and delivery of Bonds by or to any Paying Agent pursuant to this Section 8.04 shall be deemed to be the authentication, registration and delivery of Bonds "by or

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to the Trustee." Such Paying Agent shall at all times be a commercial bank or trust company having an office in New York, New York, and shall at all times be a corporation organized and doing business under the laws of the United States of America or of any state with combined capital and surplus of at least $50,000,000 and in each case authorized under such laws to exercise corporate trust powers and subject to supervision or examination by Federal or state authority. If such corporation publishes reports of condition at least annually pursuant to law or the requirements of such authority, then for the purposes of this Section the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

Any corporation into which such Paying Agent may be merged or converted, or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which such Paying Agent shall be a party, or any corporation succeeding to the corporate trust business of such Paying Agent, shall be a successor of such Paying Agent hereunder, if such successor corporation is otherwise eligible under this Section, without the execution or filing or any further act on the part of the parties hereto or such Paying Agent or such successor corporation.

Any Paying Agent may at any time resign by giving written notice of resignation to the Trustee and the City, and such resignation shall take effect at the appointment by the Trustee of a successor Paying Agent pursuant to the succeeding provisions of this Section and the acceptance by the successor Paying Agent of such appointment. The Trustee may at any time terminate the agency of any Paying Agent by giving written notice of termination to such Paying Agent and the City, which termination shall not take effect until the acceptance by the successor Paying Agent of such appointment. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Paying Agent shall cease to be eligible under this Section, the Trustee shall promptly appoint a successor Paying Agent, shall give written notice of such appointment to the City and shall mail notice of such appointment to all Registered Owners of Bonds.

Notwithstanding anything herein to the contrary, any Paying Agent shall be entitled to rely on information furnished to it orally or in writing by the Trustee and shall be protected hereunder in relying thereon. The Trustee agrees to pay to any Paying Agent from time to time its fees and expenses for its services, and the Trustee shall be entitled to be reimbursed for such payments pursuant to Section 8.03 hereof.

Section 8.05. Notice to Rating Agencies. The Trustee hereby agrees that if at any time (a) the City redeems any portion of the Bonds Outstanding hereunder prior to their Maturity Date, (b) the City provides for the payment of any portion ofthe Bonds pursuant to Section 6.01, (c) a successor Trustee is appointed, (d) any supplement to this Indenture shall become effective, or any party thereto shall waive any provision of this Indenture, or (e) any other information that a Rating Agency may reasonably request in order to maintain the ratings on the Bonds, then, in each case, the Trustee shall give notice thereof to each Rating Agency then maintaining a rating on the Bonds.



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Any notice given to a Rating Agency hereunder shall be mailed by first class mail as follows:

Fitch Ratings Inc. 33 Whitehall Street New York, NY 10004

Kroll Bond Rating Agency, Inc.
845 Third Avenue, 4* Floor
New York, NY 10022
Attention: Public Finance Surveillance
Email: hzachem@kbra.com

Standard & Poor's Rating Services
Public Finance Department
55 Water Street
New York, NY 10041-0003

Section 8.06. Qualification of Trustee. The Trustee hereunder shall be a bank, trust company or national banking association having the powers of a trust company doing business and having a corporate trust office in the City of Chicago, Illinois.

Section 8.07. Responsibilities of Trustee, (a) The recitals of fact herein and in the Bonds shall be taken as the statements of the City and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the validity or sufficiency of this Indenture or any Supplemental Indenture or of any Bonds issued hereunder or thereunder or in respect of the security afforded by this Indenture or any Supplemental Indenture and the Trustee shall not incur any responsibility in respect thereof. The Trustee shall, however, be responsible for its representation contained in its certificate of authentication on the Bonds. The Trustee shall not be under any responsibility or duty with respect to the issuance ofthe Bonds for value or the application of the proceeds thereof except to the extent such proceeds are paid to the Trustee in its capacity as Trustee, or the application of any moneys paid to the City or others in accordance with this Indenture or any Supplemental Indenture. The Trustee shall not be under any obligation or duty to perform any act that would involve it in expense or liability or to institute or defend any action or suit in respect hereof, or to advance any of its own moneys, unless properly indemnified. Subject to the provisions of paragraph (b) of this Section, the Trustee shall not be liable in connection with the performance of its duties hereunder except for its own negligence or willful misconduct or that of its agents.

(b) The Trustee, prior to the occurrence of an Event of Default and after the remedy of all Events of Default that may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and each Supplemental Indenture. In case an Event of Default has occurred and has not been remedied, the Trustee shall exercise such of the rights and powers vested in it by law, this Indenture and each Supplemental Indenture and shall use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. Any provision of this Indenture

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and any Supplemental Indenture and any Supplemental Indenture relating to action taken or so to be taken by the Trustee or to evidence upon which the Trustee may rely shall be subject to the provisions of this Section.

Section 8.08. Funds Held in Trust and Security Therefor. Any moneys held by the Trustee, as such, at any time pursuant to the terms of this Indenture or any Supplemental Indenture shall be and hereby are assigned, transferred and set over unto the Trustee in trust for the purposes and upon the terms and conditions of this Indenture or any Supplemental Indenture. Subject to the terms of this Indenture concerning Permitted Investments, all moneys (not including securities) held by the Trustee, as such, may be deposited by the Trustee in its banking department, or with such other banks, trust companies, or national banking associations, each having a place of business in the City of Chicago, Illinois, as may be designated by the City and approved by the Trustee. No such funds shall be deposited with any bank, trust company or national banking association, other than the Trustee, in an amount exceeding 25 percent of the amount which an officer of such bank, trust company or national banking association shall certify to the Trustee and the City as the combined capital, surplus and undivided profits of such bank, trust company or national banking association. No such funds shall be deposited or remain on deposit with any bank, trust company or national banking association in excess of the amount insured by the Federal Deposit Insurance Corporation, unless (a) such bank, trust company or national banking association shall have deposited in trust with the trust department of the Trustee or with a Federal Reserve Bank or branch or, with the written approval of the Trustee and the City, pledged to some other bank, trust company or national banking association, for the benefit of the City and the appropriate fund or account, as collateral security for the moneys deposited, Qualified Collateral having a current market value (exclusive of accrued interest) at least equal to 110 percent of the amount of such moneys, or (b) in lieu of such collateral security as to all or any part of such moneys, there shall have been deposited in trust with the trust department of the Trustee, for the benefit of the City and the appropriate fund or account, and remain in full force and effect as security for such moneys or part thereof, the indemnifying bond or bonds of a surety company or companies qualified as surety for deposits of funds of the United States of America and qualified to transact business in the State in a sum at least equal to the amount of such moneys or part thereof. The Trustee shall allow and credit interest on any such moneys held by it at such rate as it customarily allows upon similar moneys of similar size and under similar conditions or as required by law. Interest in respect of moneys or on securities in any fund or account shall be credited in each case to the fund or account in which such moneys or securities are held.

Section 8.09. Evidence on which Trustee May Act. The Trustee shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, opinion, bond or other paper or document believed by it to be genuine, and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who may or may not be counsel to the City, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. Whenever the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, including payment of moneys out of any fund or account, such matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a

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Certificate, and such Certificate shall be full warrant for any action taken or suffered in good faith under the provisions of this Indenture upon the faith thereof, but in its discretion the Trustee may in lieu thereof accept other evidence of such fact or matter or may require such further or additional evidence as to it may seem reasonable. Except as otherwise expressly provided herein or therein, any request, order, notice or other direction required or permitted to be furnished pursuant to any provision hereof or thereof by the City to the Trustee shall be sufficiently executed if executed in the name ofthe City by an Authorized Officer.

Section 8.10. Permitted Acts and Functions. The Trustee may become the Owner of any Bonds, with the same rights it would have if it were not the Trustee. To the extent permitted by law, the Trustee may act as depositary for, and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of the Owners of Bonds or to effect or aid in any reorganization growing out of the enforcement of the Bonds or this Indenture, whether or not any such committee shall represent the Owners of a majority in principal amount of the Bonds then Outstanding.

Section 8.11. Resignation. The Trustee may at any time resign and be discharged of its duties and obligations created by this Indenture by giving not fewer than 60 days' written notice to the City and mailing notice thereof, to the owners of Bonds at their addresses shown on the registration books kept by the Trustee within 20 days after the giving of such written notice. Such resignation shall take effect upon the appointment and acceptance of appointment of a successor by the City or the Owners of Bonds as herein provided.

Section 8.12. Removal. The Trustee may be removed at any time by the Owners of a majority in principal amount of the Bonds then Outstanding, excluding any Bonds held by or for the account of the City, by an instrument or concurrent instruments in writing signed and duly acknowledged by such Owners of Bonds or by their attorneys duly authorized in writing and delivered to the City. Copies of each such instrument shall be delivered by the City to the Trustee and any successor. The City may remove the Trustee at any time, except during the existence of an Event of Default, for such cause (or upon 30 days' notice for any reason) as shall be determined in the sole discretion of the City by filing with the Trustee an instrument signed by an Authorized Officer and by mailing notice thereof to the Owners of Bonds at their addresses shown on the registration books kept by the Trustee. Any removal of the Trustee shall take effect upon the appointment and acceptance of appointment of a successor Trustee.

Section 8.13. Appointment of Successor. In case at any time the Trustee shall resign or shall be removed or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or if a receiver, liquidator or conservator of the Trustee or of its property shall be appointed, or if any public officer shall take charge or control ofthe Trustee or of its property or affairs, a successor may be appointed by the Owners of a majority in principal amount of the Bonds then Outstanding, excluding any Bonds held by or for the account of the City, by an instrument or concurrent instruments in writing signed by such Owners or their attorneys duly authorized in writing and delivered to such successor Trustee, notification thereof being given to the City and the predecessor Trustee. Pending such appointment, the City shall forthwith appoint a Trustee to fill such vacancy until a successor Trustee (if any) shall be appointed by the Owners of Bonds as herein authorized. The City shall mail notice to Owners of Bonds of any such
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appointment within 20 days after such appointment. Any successor Trustee appointed by the City shall, immediately and without further act, be superseded by a Trustee appointed by the Owners of Bonds. If in a proper case no appointment of a successor Trustee shall be made pursuant to the foregoing provisions of this Section within 45 days after the Trustee shall have given to the City written notice of resignation as provided in Section 8.11 hereof or after the occurrence of any other event requiring or authorizing such appointment, the Trustee, any Owner of Bonds may apply to any court of competent jurisdiction to appoint a successor. Said court may thereupon, after such notice, if any, as said court may deem proper and prescribe, appoint such successor Trustee. Any Trustee appointed under the provisions of this Section shall be a bank, trust company or national banking association, in any such case having corporate trust powers, doing business and having a corporate trust office in the City.

Section 8.14. Transfer of Rights and Property to Successor. Any successor Trustee appointed under this Indenture shall execute, acknowledge and deliver to its predecessor Trustee, and also to the City, a written instrument of acceptance respecting such appointment, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become fully vested with all moneys, estates, properties, rights, powers, duties and obligations of such predecessor Trustee, with like effect as if originally named as Trustee; but the Trustee ceasing to act shall nevertheless, on the request of the City, or of the successor Trustee, execute, acknowledge and deliver such instruments of conveyance and further assurance and do such other things as may reasonably be required for more fully and certainly vesting and confirming in such successor Trustee all the right, title and interest of the predecessor Trustee in and to any property held by it under this Indenture, and shall pay over, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set forth. Should any deed, conveyance or instrument in writing from the City be required by such successor Trustee for more fully and certainly vesting in and confirming to such successor Trustee any such estates, rights, powers and duties, any and all such deeds, conveyances and instruments in writing shall, on request, and so far as may be authorized by law, be executed, acknowledged and delivered by the City.

Section 8.15. Merger or Consolidation. Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such company shall be a bank, trust company or national banking association which is qualified to be a successor to the Trustee under Section 8.13 hereof and shall be authorized by law to perform all the duties imposed upon it by this Indenture, shall be the successor to the Trustee without the execution or filing of any paper or the performance of any further act.

Section 8.16. Adoption of A uthentication. In case any of the Bonds contemplated to be issued under this Indenture shall have been authenticated but not delivered, any successor Trustee may adopt the certificate of authentication of any predecessor Trustee so authenticating such Bonds and deliver such Bonds so authenticated, and in case any of the said Bonds shall not have been authenticated, any successor Trustee may authenticate such Bonds in the name ofthe predecessor Trustee, or in the name of the successor Trustee, and in all such cases such


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certificate shall have the full force which it is anywhere in the Bonds or in this Indenture provided that the certificate ofthe Trustee shall have.

Section 8.17. Evidence of Signatures of Owners and Ownership of Bonds, (a) Any request, consent or other instrument which this Indenture may require or permit to be signed and executed by the Owners of Bonds may be in one or more instruments of similar tenor, and shall be signed or executed by such Owners in person or by their attorneys appointed in writing. Proof of (i) the execution of any such instrument, or of an instrument appointing any such attorney, or (ii) the ownership by any person of the Bonds, shall be sufficient for any purpose of this Indenture (except as otherwise herein expressly provided) if made in the following manner, but the Trustee may nevertheless in its discretion require further or other proof in cases where it deems the same desirable:
The fact and date of the execution by any Owner or his attorney of such instrument may be proved by the certificate, which need not be acknowledged or verified, of an officer of a bank or trust company satisfactory to the Trustee or of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the jurisdiction in which he purports to act, that the person signing such request or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such notary public or other officer.
The authority of the person or persons executing any such instrument on behalf of a corporate Owner of Bonds may be established without further proof if such instrument is signed by a person purporting to be the president or vice president of such corporation with a corporate seal affixed and attested by a person purporting to be its secretary or an assistant secretary.

(b) The ownership of Bonds and the amount, numbers and other identification, and date of ownership of the same shall be proved by the Bond Register. Any request, consent or vote of the Owner of any Bond shall bind all future Owners of such Bond in respect of anything done or suffered to be done by the City or the Trustee in accordance therewith.

Section 8.18. Preservation and Inspection of Documents. All documents received by the Trustee under the provisions of this Indenture shall be retained in its possession and shall be subject at all reasonable times to the inspection of the City and any Owner of Bonds and their agents and their representatives, any of whom may make copies thereof.

Article IX

Supplemental Indenture

Section 9.01. Supplemental Indenture Effective Upon Execution by the Trustee. For any one or more of the following purposes and the purposes enumerated in Section 9.04 hereof, and at any time or from time to time, a Supplemental Indenture may be authorized by an ordinance adopted by the City Council ofthe City, which, upon the filing with the Trustee of a copy of such ordinance certified by the City Clerk and the execution and delivery of such Supplemental
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Indenture by the City and the Trustee, shall be fully effective in accordance with its terms and not subject to consent by the Registered Owners of the Bonds:
to add to the covenants and agreements of the City in this Indenture other covenants and agreements to be observed by the City which are not contrary to or inconsistent with this Indenture as theretofore in effect;
to add to the limitations and restrictions in this Indenture other limitations and restrictions to be observed by the City which are not contrary to or inconsistent with this Indenture as theretofore in effect;
to surrender any right, power or privilege reserved to or conferred upon the City by the terms of this Indenture, but only if the surrender of such right, power or privilege is not contrary to or inconsistent with the covenants and agreements of the City contained in this Indenture;
to confirm, as further assurance, the pledge herein, and the subjection of, additional properties, taxes or other collateral to any lien, claim or pledge created or to be created by, this Indenture;
to cure any ambiguity, supply any omission, or cure or correct any defect or inconsistent provision in this Indenture;
to insert such provisions clarifying matters or questions arising under this Indenture as are necessary or desirable and are not contrary to or inconsistent with this Indenture as theretofore in effect; or
to provide additional duties of the Trustee under this Indenture.

Section 9.02. Supplemental Indentures Effective With Consent of Owners of Bonds. At any time or from time to time, a Supplemental Indenture may be authorized by an ordinance adopted by the City Council of the City, subject to consent by the Owners of Bonds in accordance with and subject to the provisions of this Article, which Supplemental Indenture, upon the filing with the Trustee of a copy of such ordinance certified by the City Clerk, upon compliance with the provisions of this Article, and upon execution and delivery of such Supplemental Indenture by the City and the Trustee, shall become fully effective in accordance with its terms.











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Section 9.03. General Provisions, (a) This Indenture shall not be modified or amended in any respect except as provided in and in accordance with and subject to the provisions of this Article. Nothing in this Article shall affect or limit the right or obligation of the City to adopt, make, do, execute, acknowledge or deliver any ordinance, resolution, act or other instrument pursuant to the provisions of this Article or the right or obligation of the City to execute and deliver to the Trustee any instrument which elsewhere in this Indenture it is provided shall be delivered to the Trustee.
Any ordinance authorizing a Supplemental Indenture referred to and permitted or authorized by Section 9.01 or 9.04 hereof may be adopted by the City Council of the City without the consent of any of the Owners of Bonds, but such Supplemental Indenture shall be executed and delivered by the City and the Trustee and shall become effective only on the conditions, to the extent and at the time provided in this Article. Every Supplemental Indenture delivered to the Trustee for execution shall be accompanied by an opinion of counsel stating that such Supplemental Indenture has been duly and lawfully authorized by the City Council of the City and executed by the City in accordance with the provisions of this Indenture, is authorized or permitted by this Indenture, and will, when executed and delivered by the Trustee, be valid and binding upon the City and enforceable in accordance with its terms.
The Trustee is hereby authorized to enter into, execute and deliver any Supplemental Indenture referred to and permitted or authorized by this Article and to make all further agreements and stipulations which may be therein contained, and the Trustee, in taking such action, shall be fully protected in relying on an opinion of counsel that such Supplemental Indenture is authorized or permitted by the provisions of this Indenture.
No Supplemental Indenture shall change or modify any of the rights or obligations of the Trustee without its written assent thereto.
No Supplemental Indenture shall take effect unless and until there has been delivered to the Trustee an Opinion of Bond Counsel to the effect that such Supplemental Indenture does not adversely affect the exclusion from gross income for federal income tax purposes to which interest on the Bonds would otherwise be entitled.

Section 9.04. Additional Matters. Additionally, this Indenture may, without the consent of, or notice to, any of the Bondholders, be supplemented and amended, in such manner as shall not be inconsistent with the terms and provisions hereof, for any one or more of the following purposes:
to provide for certificated Bonds; and
to secure or maintain ratings from any Rating Agency in the. highest long term debt rating category, of such Rating Agency which are available for the Bonds, which changes will not restrict, limit or reduce the obligation of the City to pay the principal of, premium, if any, and interest on the Bonds as provided in this Indenture or otherwise adversely affect the Registered Owners of the Bonds under this Indenture.


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Section 9.05. Mailing of Notice of Amendment. Any provision in this Article for the mailing of a notice or other paper to owners of Bonds shall be fully complied with if it is mailed postage prepaid only (i) to each Registered Owner of then Outstanding Bonds at his address, if any, appearing upon the registration books maintained by the City at the Designated Corporate Trust Office of the Trustee, and (ii) to the Trustee.

Section 9.06. Powers of Amendment. Any modification or amendment of this Indenture or of the rights and obligations of the City and of the Owners of the Bonds, in particular, which requires the consent of the Bondholders, may be made by a Supplemental Indenture, with the written consent given as provided in Section 9.07, (a) of the Owners of a majority in principal amount of the Bonds Outstanding at the time such consent is given, or (b) in case less than all of the then Outstanding Bonds are affected by the modification or amendment, of the Owners of a majority in principal amount of the then Outstanding Bonds so affected. No such modification or amendment shall permit a change in the terms of redemption or maturity of the principal of any Outstanding Bonds or of any installment of interest thereon or a reduction in the principal amount or the applicable Redemption Price thereof or in the rate of interest thereon, or in terms of purchase or the purchase price thereof, without the consent of the owner of such Bonds, or shall reduce the percentages or otherwise affect the classes of Bonds the consent of the owners of which is required to effect any such modification or amendment, or shall change or modify any of the rights or obligations of the Trustee without its written assent thereto. For the purposes of this Section, a Bond shall be deemed to be affected by a modification or amendment of this Indenture if the same adversely affects or diminishes the rights of the owners of such Bond.

Section 9.07. Consent of Owners of Bonds, (a) The City may at any time authorize a Supplemental Indenture making a modification or amendment permitted by the provisions of Section 9.06, to take effect when and as provided in this Section. A copy of such Supplemental Indenture (or brief summary thereof or reference thereto in form approved by the Trustee), together with a request to the Owners of the Bonds for their consent thereto in form satisfactory to the Trustee, shall be mailed by the City to the Owners of the Bonds (but failure to mail such copy and request shall not affect the validity of the Supplemental Indenture when consented to as in this Section provided). Such Supplemental Indenture shall not be effective unless and until, and shall take effect in accordance with its terms when, (i) there shall have been filed with the Trustee (1) the written consents of Owners ofthe percentages of Outstanding Bonds specified in Section 9.06 and (2) an opinion of counsel stating that such Supplemental Indenture has been duly and lawfully executed and delivered by the City and the Trustee in accordance with the provisions of this Indenture, is authorized or permitted hereby and is valid and binding upon the City and enforceable in accordance with its terms upon its becoming effective as in this Section provided, and (ii) a notice shall have been mailed as hereinafter in this Section provided.

(b) The consent of an Owner of Bonds to any modification or amendment shall be effective only if accompanied by proof of the Ownership, at the date of such consent, of the Bonds with respect to which such consent is given, which proof shall be such as is pennitted by Section 8.17. A certificate or certificates signed by the Trustee that it has examined such proof and that such proof is sufficient in accordance with Section 8.17 shall be conclusive that the consents have been given by the Owners of the Bonds described in such certificate or certificates. Any such consent shall be binding upon the Owner of the Bonds giving such
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consent and upon any subsequent Owner of such Bonds and of any Bonds issued in exchange therefor (whether or not such subsequent Owner thereof has notice thereof) unless such consent is revoked in writing by the Owner of such Bonds giving such consent or a subsequent Owner thereof by filing such revocation with the Trustee, prior to the time when the written statement of the Trustee hereinafter provided for in this Section is filed. The fact that a consent has not been revoked may likewise be proved by a certificate of the Trustee to the effect that no revocation thereof is on file with the Trustee.

(c) At any time after the Owners of the required percentages of Bonds shall have filed their consents to the Supplemental Indenture, the Trustee shall make and file with the City a written statement that the Owners of such required percentages of Bonds have filed such consents. Such written statement shall be conclusive that such consents have been so filed. At any time thereafter notice, stating in substance that the Supplemental Indenture (which may be referred to as a Supplemental Indenture entered into by the City and the Trustee as of a stated date, a copy of which is on file with the Trustee) has been consented to by the Owners of the required percentages of Bonds and will be effective as provided in this Section, shall be given to Owners by the Trustee by mailing such notice to the Owners of the Bonds (but failure to mail such notice shall not prevent such Supplemental Indenture from becoming effective and binding as provided in this Section). The Trustee shall file with the City proof of the mailing of such notice. A record, consisting of the papers required or permitted by this Section to be filed with the Trustee, shall be proof of the matters therein stated. Such Supplemental Indenture making such amendment or modification shall be deemed conclusively binding upon the Trustee and the Owners of all Bonds at the expiration of 40 days after the filing with the Trustee of proof of the mailing of such last mentioned notice, except in the event of a final decree of a court of competent jurisdiction setting aside such Supplemental Indenture in a legal action or equitable proceeding for such purpose commenced within such 40-day period; except that the Trustee and the City, during such 40-day period and any such further period during which any such action or proceeding may be pending, shall be entitled in their absolute discretion to take such action, or to refrain from taking such action, with respect to such Supplemental Indenture as they may deem expedient.

Section 9.08. Modifications by Unanimous Consent. The terms and provisions of this Indenture and the rights and obligations of the City and of the Owners of the Bonds hereunder may be modified or amended in any respect upon the consent of the Owners of all the then Outstanding Bonds, to the execution and delivery of such Supplemental Indenture, such consent to be given as provided in Section 9.07 except that no notice to the Owners of such Bonds shall be required; but no such modification or amendment shall change or modify any ofthe rights or obligations ofthe Trustee without its written assent thereto.

Section 9.09. Exclusion of Bonds. Bonds owned by or for the account of the City shall not be deemed Outstanding for the purpose of consent or other action or any calculation of Outstanding Bonds provided for in this Article, and the City shall not be entitled with respect to such Bonds to give any consent or take any other action provided for in this Article. At the time of any consent or other action taken under this Article, the City shall furnish the Trustee with a Certificate upon which the Trustee may rely, describing all Bonds so to be excluded.


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Section 9.10. Notation on Bonds. Bonds authenticated and delivered after the effective date of any action taken as in this Article provided may, and, if the Trustee so determines, shall, bear a notation by endorsement or otherwise in form approved by the City and the Trustee as to such action, and in that case upon demand of the Owner of any Bond Outstanding at such effective date and presentation of his Bond for that purpose at the Designated Corporate Trust Office ofthe Trustee or upon any exchange or registration of transfer of any Bond Outstanding at such effective date, suitable notation shall be made on such Bond or upon any Bond issued upon any such exchange or registration of transfer by the Trustee as to any such action. If the City or the Trustee shall so determine, new Bonds so modified as in the opinion of the Trustee and the City to conform to such action shall be prepared, authenticated and delivered, and upon demand of the Owner of any Bond then Outstanding shall be exchanged, without cost to such Owner, for Bonds of the same maturity upon surrender of such Bond.

Article X

Miscellaneous

Section 10.01. Severability. If any provision of this Indenture shall be held or deemed to be, or shall in fact be, illegal, inoperative or unenforceable, the same shall not affect any other provision or provisions herein contained or render the same invalid, inoperative or unenforceable to any extent whatever.

Section 10.02. Payments Due on Saturdays, Sundays and Holidays. If the date for making any payment, or the last date for the performance of any act or the exercise of any right, as provided in this Indenture, shall not be a Business Day, such payment may be made, act performed or right exercised on the next Business Day with the same force and effect as if done on the nominal date provided in this Indenture, and no interest shall accrue for the period after such nominal date.

Section 10.03. Counterparts. This Indenture may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 10.04. Rides of Interpretation. Unless expressly indicated otherwise, references to Sections or Articles are to be construed as references to Sections or Articles of this instrument as originally executed. Use of the words "herein," "hereby," "hereunder," "hereof, "hereinbefore," "hereinafter" and other equivalent words refer to this Indenture and not solely to the particular portion in which any such word is used. In the event of any conflict between the provisions of this Indenture and the Bond Ordinance (including in the forms of Bond attached hereto as Exhibit B), the terms of this Indenture shall be deemed to control.

Section 10.05. Captions. The captions and headings in this Indenture are for convenience only and in no way define, limit or describe the scope or intent of any provisions or Sections of this Indenture.


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Section 10.06. Notices. Any notice, demand, direction, request or other instruments authorized or required by this Indenture to be given to, delivered to or filed with the City or the Trustee shall be deemed to have been sufficiently given, delivered or filed for all purposes of the Indenture if and when sent by registered mail, postage prepaid, return-receipt requested:

To the City, if addressed to: City of Chicago
Office ofthe Chief Financial Officer 121 North LaSalle Street, 7th Floor Chicago, Illinois 60602 Attention: Chief Financial Officer Telephone: (312)744-2204

or at such other address as may be designated in writing by the City to the Trustee; and

To the Trustee, if addressed to: Zions Bank, a division of ZB, National Association
111 West Washington Street, Suite 1860 Chicago, Illinois 60602 Attention: Daryl Pomykala Telephone: (312) 763-4256 Email: Daryl.Pomykala@zionsbank.com

or at such other address as may be designated in writing by the Trustee to the City.




[Signatures Appear on Following Page]























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In Witness Whereof, the City has caused these presents to be executed in its name and with its official seal hereunto affixed and attested by its duly authorized officials; and to evidence its acceptance of the trusts hereby created, the Trustee has caused these presents to be executed in its corporate name and with its corporate seal hereunto affixed and attested by its duly authorized officers, on the date first above written.

City of Chicago

Carole L. Brown Chief Financial Officer

[Seal]

Attest:

By:
Susana A. Mendoza
City Clerk


Zions Bank, a division of ZB, National Association, as Trustee


By:
Name:
Authorized Signatory


















Signature Page to Trust Indenture

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In Witness Whereof, the City has caused these presents to be executed in its name and with its official seal hereunto affixed and attested by its duly authorized officials; and to evidence its acceptance of the trusts hereby created, the Trustee has caused these presents to be executed in its corporate name and with its corporate seal hereunto affixed and attested by its duly authorized officers, on the date first above written.

City of Chicago


By:
Carole L. Brown Chief Financial Officer
[Seal] Attest:


By:
Signature Page to Trust Indenture
0350512.18
Susana A. Mendoza City Clerk

t
Exhibit A
Refunded Bonds and Interest Paid Bonds
REFUNDED BONDS

General Obligation Bonds, Project and Refunding Series 1998
Maturity Date (January 1) Par Amount Interest Rate
2017 $7,255,000 5.500%


General Obligation Bonds, Project and Refunding Series 2001A
Maturity Date (January 1) Par Amount Interest Rate
2017 $5,830,000 5.380%


General Obligation Bonds (Neighborhoods Alive21 Program) Series 2002B
Maturity Date (January 1) Par Amount Interest Rate
2017 $2,055,000 5.000%


General Obligation Bonds, Project and Refunding Series 2003A
Maturity Date (January 1) Par Amount Interest Rate
2017 $510,000 5.250%


General Obligation Bonds, Project and Refunding Series 2003B
Maturity Date (January 1) Par Amount Interest Rate
2017 $4,955,000 5.000%


General Obligation Bonds, Project and Refunding Scries 2004A
Maturity Date (January 1) Par Amount Interest Rate
2017 $285,000 5.250%


General Obligation Bonds, Project and Refunding Scries 2005A
Maturity Date (January 1) Par Amount Interest Rate
2017 $44,920,000 5.000%
12,470,000 5.000%
5,940,000 5.000%
6,995,000 5.000%
2025 • 4,570,000 5.000%
2026 3,905,000 5.000%



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General Obligation Bonds, Project and Refunding Series 2005B
Maturity Date (January 1) Par Amount Interest Rate
2017 $ 6,035,000 5.000%
15,390,000 5.000%
19,245,000 5.000%
2024 ' 18,930,000 5.000%
16,375,000 5.000%
11,980,000 5.000%


General Obligation Bonds, Project and Refunding Series 2006A
Maturity Date (January 1) Par Amount Interest Rate
2017 $ 640,000 4.100%
2017 8,575,000 5.000%
43,965,000 5.000%
45,320,000 5.000%
43,715,000 5.000%
27,715,000 5.000%
27,890,000 5.000%


General Obligation Bonds, Project and Refunding Series 2007A
Maturity Date (January 1) Par Amount Interest Rate
2017 $3,600,000 4.000%
2017 2,015,000 5.000%
























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CY3505I2.20
INTEREST PAID BONDS

The City has funded interest through and including the January 1, 2017 interest payment on the following maturities. For the Series 2009C, Series 2009D, and Series 201 OB, only a portion of the interest through January 1, 2017 has been funded. None of the principal amounts shown below have been refunded.

General Obligation Bonds (Neighborhoods Alive21 Program) Series 2002B
Maturity Date (January 1) Par Amount Interest Rate
$2,185,000 5.000%
2,270,000 5.000%
2,405,000 5.000%
2,540,000 5.000%
2,630,000 5.250%
2,775,000 5.250%
2,920,000 5.000%
3,105,000 5.000%
3,250,000 5.000%
3,395,000 5.125%
3,590,000 5.250%
3,795,000 5.250%
4,000,000 5.500%
4,220,000 5.500%
4,450,000 5.500%
4,680,000 5.500%
4,965,000 5.500%
5,210,000 5.500%
5,505,000 5.500%
5,810,000 5.500%




















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0350512.20

General Obligation Bonds, Project and Refunding Series 2003B
Maturity Date (January 1) Par Amount Interest Rate
2018 $5,220,000 5.000%
5,500,000 5.000%
5,800,000 5.000%
6,110,000 5.000%
6,440,000 5.000%
6,785,000 5.000%
7,150,000 5.000%
1,860,000 5.000%
1,960,000 5.000%
2,065,000 5.125%
2,180,000 5.250%
2,300,000 5.250%
2,430,000 5.500%
2,575,000 5.500%
2,725,000 5.500%
2,885,000 5.500%
3,055,000 5.500%


General Obligation Bonds, Project and Refunding Series 2005D
Maturity Date (January 1) Par Amount Interest Rate
$6,040,000 5.500%
8,605,000 5.500%
6,695,000 5.500%
11,490,000 5.500%
7,295,000 5.500%
13,870,000 5.500%
14,635,000 5.500%
8,555,000 5.500%


















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CY350512.20

General Obligation Bonds, Project and Refunding Series 2007A
Maturity Date (January 1) Par Amount Interest Rate
2018 $1,070,000 4.000%
2018 895,000 4.250%
4,700,000 5.000%
410,000 4.000%

6,705,000 5.000%
580,000 4.000%

10,800,000 5.000%
290,000 4.000%

6,640,000 5.000%
7,275,000 5.000%
11,715,000 5.000%
12,640,000 5.000%
30,450,000 5.000%
4,005,000 4.250%

20,770,000 5.000%
24,580,000 5.000%

6,035,000 5.000%
15,000 5.000%
10,325,000 5.000%
1,615,000 4.500%
2033 8,560,000 5.000%

(Term 2029) 18,820,000 5.000%
(Term 2029) 16,855,000 5.000%

(Term 2032) 9,090,000 5.000%
(Term 2032) 8,170,000 5.000%
(Term 2032) 10,030,000 5.000%
(Term 2032) 10,530,000 5.000%
(Term 2032) 11,055,000 5.000%
(Term 2037) 11,610,000 5.000%
(Term 2037) 12,190,000 5.000%
(Term 2037) 12,800,000 5.000%
(Term 2037) 13,440,000 5.000%
(Term 2037) 14,110,000 5.000%













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C\350512.20

General Obligation Bonds, Refunding Scries 2007E
Maturity Date (January 1) Par Amount Interest Rate
$8,615,000 5.500%
4,470,000 5.500%
1,965,000 5.500%
2,070,000 5.500%
2,180,000 5.500%
905,000 5.500%
4,390,000 5.500%
4,625,000 5.500%
4,865,000 5.500%


General Obligation Bonds, Refunding Series 2007F
Maturity Date (January 1) Par Amount Interest Rate
$6,895,000 5.500%
3,575,000 5.500%
1,575,000 5.500%
1,655,000 5.500%
1,740,000 5.500%
720,000 5.500%
3,515,000 5.500%
3,700,000 5.500%
3,890,000 5.500%


General Obligation Bonds, Refunding Series 2007G
Maturity Date (January 1) Par Amount Interest Rate
$1,720,000 5.500%
890,000 5.500%
390,000 5.500%
410,000 5.500%
430,000 5.500%
175,000 5.500%
875,000 5.500%
925,000 5.500%
970,000 5.500%











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0350512.20

General Obligation Bonds, Refunding Scries 2008A
Maturity Date (January 1) Par Amount Interest Rate
$ 8,320,000 5.000%
12,930,000 5.000%
9,780,000 5.000%

3,295,000 4.000%
12,025,000 5.250%
12,560,000 5.250%
12,445,000 5.250%
12,130,000 5.250%
13,630,000 5.250%
6,465,000 5.250%
6,805,000 5.250%
7,160,000 5.250%
2,105,000 5.250%

2,740,000 4.625%
6,150,000 5.250%
6,475,000 5.250%
6,815,000 5.250%
7,175,000 5.250%


General Obligation Bonds, Project and Refunding Series 2008C
Maturity Date (January 1) Par Amount Interest Rate
$ 7,660,000 5.000%
15,025,000 5.000%
10,470,000 4.600%
11,440,000 5.000%
12,395,000 5.000%
8,835,000 5.000%
14,820,000 5.000%
20,915,000 5.000%
19,925,000 5.000%
22,450,000 5.000%
26,165,000 5.000%

5,390,000 5.000%
14,965,000 5.000%
17,350,000 5.000%
4,985,000 5.000%
13,200,000 5.000%
12,890,000 5.000%
22,045,000 5.000%





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General Obligation Bonds, Taxable Project Series 2009C (Build America Bonds - Direct Payment) (Interest paid in part)
Maturity Date (January 1) Par Amount Interest Rate
$ 1,345,000 6.207%
23,070,000 6.207%
24,505,000 6.207%
26,025,000 6.207%
23,375,000 6.207%


General Obligation Bonds, Taxable Project Series 2009D (Recovery Zone Economic Development Bonds - Direct Payment) (Interest paid in part)
Maturity Date (January 1) Par Amount Interest Rate
$ 4,265,000 6.257%
29,355,000 6.257%
31,195,000 6.257%
33,145,000 6.257%
35,220,000 6.257%


General Obligation Bonds, Taxable Project Series 2010B (Build America Bonds - Direct Payment) (Interest paid in part)
Maturity Date (January 1) Par Amount Interest Rate
$38,735,000 7.517%
40,630,000 7.517%
42,615,000 7.517%
44,695,000 7.517%
46,880,000 7.517%


General Obligation Bonds, Project Scries 2011A
Maturity Date (January 1) Par Amount Interest Rate
$19,070,000 4.625%
19,950,000 5.250%
20,995,000 5.250%
22,100,000 5.250%
23,260,000 5.000%
24,425,000 5.000%
25,645,000 5.000%
26,925,000 5.000%
28,270,000 5.000%






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C\350512.20

General Obligation Bonds, Project Series 2012A
Maturity Date (January 1) Par Amount Interest Rate
2030 $ 2,450,000 5.000%
26,570,000 5.000%
44,605,000 5.000%
36,840,000 5.000%


General Obligation Bonds, Project Series 2012C
Maturity Date (January 1) Par Amount Interest Rate
2020 $ 4,985,000 5.000%
2,455,000 4.000%
7,700,000 5.000%

2,210,000 4.000%
9,065,000 5.000%

1,350,000 4.000%
10,725,000 5.000%

410,000 4.000%
11,410,000 5.000%

305,000 4.000%
6,785,000 5.000%
5,335,000 5.000%

935,000 4.000%
975,000 4.000%
1,010,000 4.000%

























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C\350512.20

General Obligation Bonds, Project and Refunding Series 2014A
Maturity Date (January 1) Par Amount Interest Rate
$ 2,445,000 4.000%
2,550,000 4.000%
3,310,000 4.000%
4,430,000 5.000%
4,540,000 5.000%
4,400,000 5.000%
555,000 4.000%

4,025,000 5.000%
4,475,000 5.000%
3,580,000 5.000%
9,550,000 5.000%
20,630,000 5.250%
27,090,000 5.250%
3,320,000 5.000%

33,070,000 5.250%
13,805,000 5.250%
38,140,000 5.250%
40,160,000 5.250%
44,480,000 5.000%
61,755,000 5.000%
60,860,000 5.000%



























A-10
C\350512.20
Exhibit B Form of Bond
Registered No.

United States of America

State of Illinois

City of Chicago

General Obligation Refunding Bond Series 2015C
See Reverse Side for Additional Provisions
Interest Rate:
Maturity Date:
January 1, 20
Dated Date:
January
CUSIP: 167486
Registered Owner: Principal Amount:
The City of Chicago (the "City") hereby acknowledges itself to owe and for value received promises to pay to the Registered Owner identified above, or registered assigns as hereinafter provided, on the Maturity Date identified above, the Principal Amount identified above and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on such Principal Amount from the later ofthe date of this Bond or the most recent interest payment date to which interest has been paid at the Interest Rate per annum set forth above on January 1 and July 1 of each year commencing July 1, 2016, until said Principal Amount is paid. Principal of this Bond and redemption premium, if any, shall be payable in lawful money of the United States of America upon presentation and surrender at the designated corporate trust office of Zions Bank, a division of ZB, National Association, Salt Lake City, Utah, as trustee, bond registrar and paying agent (the "Trustee"). Payment of the installments of interest shall be made to the Registered Owner hereof as shown on the registration books of the City maintained by the Trustee at the close of business on the 15th day of the month next preceding each interest payment date and shall be paid by check or draft of the Trustee mailed to the address of such Registered Owner as it appears on such registration books or at such other address furnished in writing by such Registered Owner to the Trustee or, at the option of any Registered Owner of $1,000,000 or more in aggregate principal amount of the Bonds, by wire transfer of immediately available funds to such bank in the continental United States of America as the Registered Owner hereof shall request in writing to the Trustee.


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C\350512.20

Reference is hereby made to the further provisions of this Bond set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as if set forth at this place.

It is hereby certified and recited that all conditions, acts and things required by law to exist or to be done precedent to and in the issuance of this Bond did exist, have happened, been done and performed in regular and due form and time as required by law; that the indebtedness of the City, including the issue of Bonds of which this is one, does not exceed any limitation imposed by law; and that provision has been made for the collection of a direct annual tax sufficient to pay the interest hereon as it falls due and also to pay and discharge the principal hereof at maturity.

This Bond shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Trustee.






































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C\350512.20

In Witness Whereof, the City of Chicago by the City Council has caused its corporate seal to be imprinted by facsimile hereon and this Series 2015C Bond to be signed by the duly authorized facsimile signature of the Mayor and attested by the facsimile signature of the City Clerk, all as of the Dated Date identified above.


(Facsimile Signature)
Mayor City of Chicago

Attest:

(Facsimile Signature)
City Clerk City of Chicago

[Seal]


































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CY3505I2.20

Date of Authentication: January , 2016


Certificate of Authentication

This Bond is one of the Bonds described in the within-mentioned Bond Ordinance and Indenture and is one ofthe General Obligation Refunding Bonds, Series 2015C, of the City of Chicago.

By: (Manual Signature)
Authorized Officer








































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[Fonn of Bond — Reverse Side]

City of Chicago General Obligation Refunding Bond Series 2015C

For the prompt payment of this Bond, both principal and interest, as aforesaid, as the same become due, and for the levy of taxes sufficient for that purpose, the full faith, credit and resources ofthe City are hereby irrevocably pledged.

This Bond is one of a series of Bonds aggregating the principal amount of $500,000,000 issued pursuant to issued pursuant to, under authority of and in full compliance with the Constitution and laws of the State of Illinois, particularly Article VII, Section 6(a) of the 1970 Constitution of the State of Illinois and an Ordinance adopted by the City Council of the City on September 24, 2015 (the "Bond Ordinance"), and executed under a Trust Indenture securing the City of Chicago General Obligation Refunding Bonds, Series 2015C, dated January 1, 2016 (the "Indenture'") from the City to the Trustee, for the purposes of (i) providing funds to pay the Refunded Bonds, (ii) providing funds to pay interest on the Interest Paid Bonds, (iii) capitalizing or funding interest on the Bonds, and (iv) paying the expenses relating to the issuance of the Bonds.

The Bonds maturing on and after January 1, 2027, are subject to redemption prior to maturity at the option of the City, in whole or in part, on any date on or after January 1, 2026, and if less than all of the outstanding Bonds of a single maturity and interest rate are to be redeemed, such Bonds shall be called by lot, in such principal amounts and from such maturities and interest rates as the City shall determine, at a redemption price equal to the principal amount of the Bonds being redeemed plus accrued interest to the date fixed for redemption.

The Bonds maturing on January 1, 2035, are subject to mandatory redemption prior to maturity on January 1 of the years 2033 to 2034, inclusive, and the Bonds maturing on January 1, 2038, are subject to mandatory redemption prior to maturity on January 1 of the years 2036 to 2037, inclusive, in each case at par and accrued interest to the date fixed for redemption and in such principal amount for each such year, as provided in the Indenture.

In the event of the redemption of less than all the Bonds of like maturity, the aggregate principal amount thereof to be redeemed shall be $5,000 or an integral multiple thereof, and the Trustee shall assign to each Bond of such maturity a distinctive number for each $5,000 principal amount of such Bond and shall select by lot from the numbers so assigned as many numbers as, at $5,000 for each number, shall equal the principal amount of such Bonds to be redeemed. The Bonds to be redeemed shall be the Bonds to which were assigned numbers so selected; provided that only so much of the principal amount of each Bond shall be redeemed as shall equal $5,000 for each number assigned to it and so selected.

Notice of any such redemption shall be sent by first class mail not less than 30 days nor more than 60 days prior to the date fixed for redemption to the Registered Owner of each Bond to be redeemed at the address shown on the registration books of the City maintained by the

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Trustee or at such other address as is furnished in writing by such Registered Owner to the Trustee; provided that the failure to mail any such notice or any defect therein as to any Bond shall not affect the validity of the proceedings for the redemption of any other Bond. When so called for redemption, this Bond shall cease to bear interest on the specified redemption date, provided that funds for redemption are on deposit at the place of payment at that time, and shall not be deemed to be outstanding.

This Bond is transferable by the Registered Owner hereof in person or by its attorney duly authorized in writing at the designated corporate trust office of the Trustee in Salt Lake City, Utah, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, and upon surrender and cancellation of this Bond. Upon such transfer a new Bond or Bonds of authorized denominations, of the same interest rate, series and maturity and for the same aggregate principal amount will be issued to the transferee in exchange therefor. The Trustee shall not be required to transfer or exchange this Bond during the period commencing on the Record Date next preceding any Interest Payment Date for this Bond and ending on such Interest Payment Date, or to transfer or exchange such Bond (A) after notice calling this Bond for redemption has been mailed, or (B) during a period of 15 days next preceding mailing of a notice of redemption of this Bond.

The Bonds are issued in fully registered form in the denomination of $5,000 each or authorized integral multiples thereof. This Bond may be exchanged at the designated corporate trust office of the Trustee for a like aggregate principal amount of Bonds of the same maturity and interest rate of other authorized denominations, upon the terms set forth in the Indenture.

The City and the Trustee may deem and treat the Registered Owner hereof as the absolute owner hereof for the purpose of receiving payment of or on account of principal hereof and interest due hereon and redemption premium, if any, and for all other purposes and neither the City nor the Trustee shall be affected by any notice to the contrary.






















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(Assignment)

For Value Received, the undersigned sells, assigns and transfers unto

(Name and Address of Assignee)

the within Bond and does hereby irrevocably constitute and appoint

attorney to transfer the said Bond on the books kept for registration thereof with full power of substitution in the premises.

Dated:

Signature guaranteed:

Notice: The signature to this assignment must correspond with the name of the Registered Owner as it appears upon the face of the within Bond in every particular, without alteration or enlargement or any change whatever.
































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Exhibit C Closing Memorandum


















































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Schedule I Terms and Authorization
Aggregate Principal Amount. $500,000,000
Dated: January 21,2016
Interest Payment Dates: January 1 and July 1 of each year, commencing July 1, 2016.
Maturities, Principal Amounts, Interest Rates, Prices and CUSIP Numbers:
Maturity (January 1)
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2035 2038
Principal Amount
$ 6,635,000 7,695,000 79,930,000 78,965,000 78,530,000 63,285,000 54,340,000 11,415,000 4,555,000 4,895,000 1,505,000 3,595,000 14,425,000 90,230,000
Interest Rate
5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%

Price
105.366 106.147 106.165 106.008 105.873 105.758 105.530 104.870 104.051 103.483 103.080 102.598 101.405 100.972

CUSIP
167486WS4
167486WT2
167486WU9
167486WV7
167486WW5
167486WX3
167486WY1
167486WZ8
167486XA2
167486XB0
167486XC8
167486XD6
167486XE4
167486XF1


5. Redemption.
The Bonds are subject to both optional and mandatory redemption prior to maturity, as described below. The Bonds shall be redeemed only in principal amounts of $5,000 and integral multiples thereof.

Optional Redemption. The Bonds maturing on and after January 1, 2027, are subject to redemption prior to maturity at the option of the City, in whole or in part, on any date on or after January 1, 2026, and if less than all of the outstanding Bonds of a single maturity and interest rate are to be redeemed, the Bonds called shall be called by lot in such principal amounts and from such maturities and interest rates as the City shall determine, at a redemption price equal to

the principal amount of the Bonds being redeemed plus accrued interest to the date fixed for redemption.

The City is authorized to sell or waive any right the City may have to call any of the Bonds for optional redemption, in whole or in part; provided, that such sale or waiver will not adversely affect the excludability of interest on the Bonds from gross income for federal income tax purposes.

Mandatory Redemption of the Bonds. The Bonds due January 1 in the years 2035 and 2038, are subject to mandatory redemption prior to maturity, at par and accrued interest to the date fixed for redemption, on January 1 of the following years and in the following principal amounts:
Term Bond Due January 1,2035
Principal Year Amount
$4,595,000
4,830,000
5,000,000*
Term Bond Due January 1,2038
Principal Year Amount
$35,490,000
37,265,000
17,475,000*

* Final Maturity


Selection of Series 2015C Bonds for Redemption. While the Series 2015C Bonds are registered in the book-entry system and so long as DTC or a successor securities depository is the sole registered owner of the Series 2015C Bonds, if less than all of the Series 2015C Bonds of such maturity are to be redeemed prior to maturity, the particular Series 2015C Bonds or portions of such Bonds will be selected by lot by The Depository Trust Company ("DTC") or such successor securities depository in such manner as DTC or such successor securities depository may determine.
If the Series 2015C Bonds are not registered in the book-entry system, the following procedures for the selection of such Bonds shall apply.

If less than all the Series 2015C Bonds shall be called for redemption under any provision of the Indenture pursuant to which the Series 2015C Bonds are issued permitting such partial redemption, (i) such redemption shall be by lot in such manner as the Trustee may determine among such Bonds, and (ii) subject to other applicable provisions of such Indenture, the portion of any Series 2015C Bond to be redeemed shall be in a principal amount equal to an Authorized Denomination. In selecting Series 2015C Bonds for redemption, the Trustee shall assign to each Series 2015C Bond of like Maturity Date, a distinctive number for each minimum Authorized Denomination of such Bond and shall select by lot from the numbers so assigned as many numbers as, at such minimum Authorized Denomination for each number, shall equal the

principal amount of such Bonds to be redeemed. In such case, the Series 2015C Bonds to be redeemed shall be those to which were assigned numbers so selected; provided that only so much of the principal amount of each Series 2015C Bond shall be redeemed as shall equal such minimum Authorized Denomination for each number assigned to it and so selected. If it is determined that one or more, but not all, of the integral multiples of the Authorized Denomination of principal amount represented by any Series 2015C Bond is to be called for redemption, then, upon notice of intention to redeem such integral multiple of an Authorized Denomination, the Registered Owner of such Bond shall forthwith surrender such Bond to the Trustee for (a) payment to such Registered Owner of the Redemption Price of the integral multiple of the Authorized Denomination of principal amount called for redemption, and (b) delivery to such Registered Owner of a new Series 2015C Bond or Bonds in the aggregate principal amount of the unredeemed balance of the principal amount of such Bond. New Series 2015C Bonds representing the unredeemed balance of the principal amount of such Bond shall be issued to the Registered Owner thereof without charge therefor.
SCHEDULE II SERIES 2015C DEBT MANAGEMENT PROJECT


Total Amount of Deposit per Escrow Trustee:

Wells Fargo Bank, N.A. $121,422,216.36

Seaway National Bank of Chicago $513,568.40

New York Mellon Trust Company, N.A. $100,380,092.80

Amalgamated Bank of Chicago $63,584,361.50
U.S. Bank National Association $216,572,575.08

Total for all Escrow Trustees: $502,472,814.14

SCHEDULE II SERIES 2015C DEBT MANAGEMENT PROJECT


REFUNDED BONDS

Bond * Maturity Date Interest Rate Par $ Amount Call Date Call Price
General Obligation Bonds, Project and Refunding Series 1998 Escrow Trustee: The Bank of New York Mellon Trust Company Total Deposit of Bond Proceeds: $7,610,943.98
01/01/2017 5.500% 7,255,00.00
General Obligation Bonds, Project and Refunding Series 2001A (Convertible Bonds) Escrow Trustee: Amalgamated Bank of Chicago Total Deposit of Bond Proceeds: $5,930,072.25
CONVCAB1 01/01/2017 5.380% 5,830,000.00 02/20/2016 101.000
General Obligation Bonds (Neighborhoods Alive 21 Program) Series 2002B (Fixed Rate Conversion) Escrow Trustee: U.S. Bank National Association Total Deposit of Bond Proceeds: $2,145,586.36
01/01/2017 5.000% 2,055,000.00
General Obligation Bonds, Project and Refunding Series 2003A Escrow Trustee: Seaway National Bank of Chicago Total Deposit of Bond Proceeds: $513,568.40
01/01/2017 5.250% 510,000.00 02/20/2016 100.000
General Obligation Bonds Project and Refunding Series 2003B (Fixed Rate Conversion) Escrow Trustee: Amalgamated Bank of Chicago Total Deposit of Bond Proceeds: $5,173,418.28
01/01/2017 5.000% 4,955,000.00
General Obligation Bonds, Project and Refunding Series 2004A Escrow Trustee: Wells Fargo Bank, N.A. Total Deposit of Bond Proceeds: $286,995.86
01/01/2017 5.250%) 285,000.00 02/20/2016 100.000
General Obligation Bonds, Refunding Series 2005A Escrow Trustee: Wells Fargo Bank, N.A. Total Deposit of Bond Proceeds: $79,323,928.06
01/01/2017 5.000% 44,920,000.00 02/20/2016 100.000
01/01/2022 5.000%o 12,470,000.00 02/20/2016 100.000
01/01/2023 5.000% 5,940,000.00 02/20/2016 100.000
01/01/2024 5.000%o 6,995,000.00 02/20/2016 100.000
01/01/2025 5.000%) 4,570,000.00 02/20/2016 100.000
01/01/2026 5.000% 3,905,000.00 02/20/2016 100.000
78,800,000.00

SCHEDULE II SERIES 2015C DEBT MANAGEMENT PROJECT

Bond * Maturity Date Interest Rate Par $ Amount Call Date Call Price
General Obligation Bonds, Project and Refunding Series 2005B Escrow Trustee: The Bank of New York Mellon Trust Company Total Deposit of Bond Proceeds: $88,539,797.65
01/01/2017 5.000% 6,035,000.00 02/20/2016 100.000
01/01/2022 5.000%. 15,390,000.00 02/20/2016 100.000
01/01/2023 5.000% 19,245,000.00 02/20/2016 100.000
01/01/2024 5.000%. 18,930,000.00 02/20/2016 100.000
01/01/2025 5.000%. 16,375,000.00 02/20/2016 100.000
01/01/2026 5.000% 11,980,000.00 02/20/2016 100.000
87,955,000.00
General Obligation Bonds, Project and Refunding Series 2006A Escrow Trustee: U.S. Bank National Association Total Deposit of Bond Proceeds: $199,134,482.26
01/01/2017 4.100%. 640,000.00 02/20/2016 100.000
01/01/2017 5.000% 8,575,000.00 02/20/2016 100.000
01/01/2022 5.000%. 43,965,000.00 02/20/2016 100.000
01/01/2023 5.000%, 45,320,000.00 02/20/2016 100.000
01/01/2024 5.000%. 43,715,000.00 02/20/2016 100.000
01/01/2025 5.000%. 27,715,000.00 02/20/2016 100.000
01/01/2026 5.000% 27,890,000.00 02/20/2016 100.000
197,820,000.00
General Obligation Bonds, Project and Refunding Series 2007A Escrow Trustee: Wells Fargo Bank, N.A. Total Deposit of Bond Proceeds: $5,826,645.29
01/01/2017 4.000%. 3,600,000.00
01/01/2017 5.000% 2,015,000.00
5,615,000.00

TOTAL PAR AMOUNT REFUNDED BONDS 391,080,000.00

*Maturity Date means Maturity Date or Sinking Fund Payment Date.

SCHEDULE II SERIES 2015C DEBT MANAGEMENT PROJECT

INTEREST-ONLY REFUNDED BONDS

Bond * Maturity Date Interest Rate Principal $ Amount from which Interest is being Refunded Payment Date Payment Date
General Obligation Bonds (Neighborhoods Alive 21 Program) Series 2002B (Fixed Rate Conversion) Escrow Trustee: U.S. Bank National Association Total Deposit of Bond Proceeds: $3,900,822.41 Total amount of Refunded Interest per Payment Date: $1,957,709.38 Total amount of Refunded Interest: $3,915,418.76
01/01/2018 5.000% 2,185,000.00 07/01/2016 01/01/2017
01/01/20J 9 5.000?/o 2,270,000.00 07/01/2016 01/01/20] 7
01/01/2020 5.000%. 2,405,000.00 07/01/2016 01/01/2017
01/01/2021 5.000% 2,540,000.00 07/01/2016 01/01/2017
01/01/2022 5.250%. 2,630,000.00 07/01/2016 01/01/2017
01/01/2023 5.250% 2,775,000.00 07/01/2016 01/01/2017
01/01/2024 5.000%. 2,920,000.00 07/01/2016 01/01/2017
01/01/2025 5.000% 3,105,000.00 07/01/2016 01/01/2017
01/01/2026 5.000%. 3,250,000.00 07/01/2016 01/01/2017
01/01/2027 5.125%. 3,395,000.00 07/01/2016 01/01/2017
01/01/2028 5.250% 3,590,000.00 07/01/2016 01/01/2017
01/01/2029 5.250%. 3,795,000.00 07/01/2016 01/01/2017
01/01/2030 5.500%. 4,000,000.00 07/01/2016 01/01/2017
01/01/2031 5.500%. 4,220,000.00 07/01/2016 01/01/2017
01/01/2032 5.500% 4,450,000.00 07/01/2016 01/01/2017
01/01/2033 5.500%. 4,680,000.00 07/01/2016 01/01/2017
01/01/2034 5.500% 4,965,000.00 07/01/2016 01/01/2017
01/01/2035 5.500%. 5,210,000.00 07/01/2016 01/01/2017
01/01/2036 5.500% 5,505,000.00 07/01/2016 01/01/2017
01/01/2037 5.500%. 5,810,000.00 07/01/2016 01/01/2017
73,700,000.00
General Obligation Bonds Project and Refunding Series 2003B (Fixed Rate Conversion) Escrow Trustee: Amalgamated Bank of Chicago Total Deposit of Bond Proceeds: $3,421,329.35 Total amount of Refunded Interest per Payment Date: $1,717,065.63 Total amount of Refunded Interest: $3,434,131.26
01/01/2018 5.000%o 5,220,000.00 07/01/2016 01/01/2017
01/01/2019 5.000%. 5,500,000.00 07/01/2016 01/01/2017
01/01/2020 5.000% 5,800,000.00 07/01/2016 01/01/2017
01/01/2021 5.000% 6.110,000.00 07/01/2016 01/01/2017
01/01/2022 5.000% 6,440,000.00 07/01/2016 01/01/2017
01/01/2023 5.000% 6,785,000.00 07/01/2016 01/01/2017
01/01/2024 5.000%. 7,150,000.00 07/01/2016 01/01/2017

I


I I
i
I
SCHEDULE II SERIES 2015C DEBT MANAGEMENT PROJECT

Bond * Maturity Date Interest Rate Principal $ Amount from which Interest is being Refunded Payment Date Payment Date
General Obligation Bonds Project and Refunding Series 2003B (Fixed Rate Conversion) (cont'd)
01/01/2025 5.000% 1,860,000.00 07/01/2016 01/01/2017
01/01/2026 5.000%, 1,960,000.00 07/01/2016 01/01/2017
01/01/2027 5.125% 2,065,000.00 07/01/2016 01/01/2017
01/01/2028 5.250%, 2,180,000.00 07/01/2016 01/01/2017
01/01/2029 5.250%, 2,300,000.00 07/01/2016 01/01/2017
01/01/2030 5.500%, 2,430,000.00 07/01/2016 01/01/2017
01/01/2031 5.500%, 2,575,000.00 07/01/2016 01/01/2017
01/01/2032 5.500%, 2,725,000.00 07/01/2016 01/01/2017
01/01/2033 5.500%, 2,885,000.00 07/01/2016 01/01/2017
01/01/2034 5.500% 3,055,000.00 07/01/2016 01/01/2017
67,040,000.00
General Obligation Project and Refunding Series 2005D (Fixed Rate Conversion) Escrow Trustee: The Bank of New York Mellon Trust Company Total Deposit of Bond Proceeds: $4,229,351.17 Total amount of Refunded Interest per Payment Date: $2,122,587.50 Total amount of Refunded Interest: $4,245,175.00
01/01/2033 5.500%, 6,040,000.00 07/01/2016 01/01/2017
01/01/2034 5.500% 8,605,000.00 07/01/2016 01/01/2017
01/01/2035 5.500%, 6,695,000.00 07/01/2016 01/01/2017
01/01/2036 5.500%, 11,490,000.00 07/01/2016 01/01/2017
01/01/2037 5.500%, 7,295,000.00 07/01/2016 01/01/2017
01/01/2038 5.500%, 13,870,000.00 07/01/2016 01/01/2017
01/01/2039 5.500%, 14,635,000.00 07/01/2016 01/01/2017
01/01/2040 5.500% 8,555,000.00 07/01/2016 01/01/2017
77,185,000.00
General Obligation Bonds, Project and Refunding Series 2007A Escrow Trustee: Wells Fargo Bank, N.A. Total Deposit of Bond Proceeds: $15,811,255.25 Total amount of Refunded Interest per Payment Date: $7,935,212.50 Total amount of Refunded Interest: $15,870,425.00
01/01/2018 4.250% 895,000.00 07/01/2016 01/01/2017
01/01/2018 5.000% 4,700,000.00 07/01/2016 01/01/2017
01/01/2018 4.000%, 1,070,000.00 07/01/2016 01/01/2017
01/01/2019 4.000%, 410,000.00 07/01/2016 01/01/2017
01/01/2019 5.000% 6,705,000.00 07/01/2016 01/01/2017
01/01/2020 4.000%, 580,000.00 07/01/2016 01/01/2017
01/01/2020 5.000%, 10,800,000.00 07/01/2016 01/01/2017
01/01/2021 4.000%, 290,000.00 07/01/2016 01/01/2017
01/01/2021 5.000%, 6,640,000.00 07/01/2016 01/01/2017

SCHEDULE II SERIES 2015C DEBT MANAGEMENT PROJECT

Bond *Maturity Date Interest Rate Principal $ Amount from which Interest is being Refunded Payment Date Payment Date
General Obligation Bonds, Project and Refunding Series 2007A (cont'd)
01/01/2022 5.000% 7,275,000.00 07/01/2016 01/01/2017
01/01/2023 5.000%> 11,715,000.00 07/01/2016 01/01/2017
01/01/2024 5.000%. 12,640,000.00 07/01/2016 01/01/2017
01/01/2025 5.000%, 30,450,000.00 07/01/2016 01/01/2017
01/01/2026 4.250%. 4,005,000.00 07/01/2016 01/01/2017
01/01/2026 5.000% 20,770,000.00 07/01/2016 01/01/2017
01/01/2027 5.000% 24,580,000.00 07/01/2016 01/01/2017
01/01/2030 5.000%, 6,035,000.00 07/01/2016 01/01/2017
01/01/2031 5.000%, 15,000.00 07/01/2016 01/01/2017
01/01/2032 5.000%, 10,325,000.00 07/01/2016 01/01/2017
01/01/2033 4.500%, 1,615,000.00 07/01/2016 01/01/2017
01/01/2033 5.000%, 8,560,000.00 07/01/2016 01/01/2017
TERM 2029 01/01/2028 5.000%, 18,820,000.00 07/01/2016 01/01/2017
TERM 2029 01/01/2029 5.000%, 16,855,000.00 07/01/2016 01/01/2017
TERM 2032 01/01/2028 5.000% 9,090,000.00 07/01/2016 01/01/2017
TERM 2032 01/01/2029 5.000%, 8,170,000.00 07/01/2016 01/01/2017
TERM 2032 01/01/2030 5.000% 10,030,000.00 07/01/2016 01/01/2017
TERM 2032 01/01/2031 5.000%, 10,530,000.00 07/01/2016 01/01/2017
TERM 2032 01/01/2032 5.000%, 11,055,000.00 07/01/2016 01/01/2017
TERM 2037 01/01/2033 5.000%, 11,610,000.00 07/01/2016 01/01/2017
TERM 2037 01/01/2034 5.000%, 12,190,000.00 07/01/2016 01/01/2017
TERM 2037 01/01/2035 5.000%, 12,800,000.00 07/01/2016 01/01/2017
TERM 2037 01/01/2036 5.000%, 13,440,000.00 07/01/2016 01/01/2017
TERM 2037 01/01/2037 5.000% 14,110,000.00 07/01/2016 01/01/2017
318,775,000.00
General Obligation Bonds Refunding Series 2007E (Fixed Rate Conversion) Escrow Trustee: U.S. Bank National Association Total Deposit of Bond Proceeds: $1,867,689.41 Total amount of Refunded Interest per Payment Date: $937,337.50 Total amount of Refunded Interest: $1,874,675.00
01/01/2034 5.500% 8,615,000.00 07/01/2016 01/01/2017
01/01/2035 5.500%, 4,470,000.00 07/01/2016 01/01/2017
01/01/2036 5.500%, 1,965,000.00 07/01/2016 01/01/2017
01/01/2037 5.500%, 2,070,000.00 07/01/2016 01/01/2017
01/01/2038 5.500%, 2,180,000.00 07/01/2016 01/01/2017
01/01/2039 5.500%, 905,000.00 07/01/2016 01/01/2017
01/01/2040 5.500%, 4,390,000.00 07/01/2016 01/01/2017
01/01/2041 5.500%, 4,625,000.00 07/01/2016 01/01/2017
01/01/2042 5.500% 4,865,000.00 07/01/2016 01/01/2017
34,085,000.00

SCHEDULE II SERIES 2015C DEBT MANAGEMENT PROJECT

Bond * Maturity Date Interest Rate Principal $ Amount from which Interest is being Refunded Payment Date Payment Date
General Obligation Bonds Refunding Series 2007F (Fixed Rate Conversion) Escrow Trustee: U.S. Bank National Association Total Deposit of Bond Proceeds: $1,493,987.95 Total amount of Refunded Interest per Payment Date: $749,787.50 Total amount of Refunded Interest: $1,499,575.00
01/01/2034 5.500% 6,895,000.00 07/01/2016 01/01/2017
01/01/2035 5.500% 3,575,000.00 07/01/2016 01/01/2017
01/01/2036 5.500% 1,575,000.00 07/01/2016 01/01/2017
01/01/2037 5.500%, 1,655,000.00 07/01/2016 01/01/2017
01/01/2038 5.500%, 1,740,000.00 07/01/2016 01/01/2017
01/01/2039 5.500%, 720,000.00 07/01/2016 01/01/2017
01/01/2040 5.500%, 3,515,000.00 07/01/2016 01/01/2017
01/01/2041 5.500% 3,700,000.00 07/01/2016 01/01/2017
01/01/2042 5.500% 3,890,000.00 07/01/2016 01/01/2017
27,265,000.00
General Obligation Bonds Refunding Series, 2007G (Fixed Rate Conversion) 2007 Escrow Trustee: U.S. Bank National Association Total Deposit of Bond Proceeds: $371,787.65 Total amount of Refunded Interest per Payment Date: $186,587,50 Total amount of Refunded Interest: $373,175.00
01/01/2034 5.500%, 1,720,000.00 07/01/2016 01/01/2017
01/01/2035 5.500% 890,000.00 07/01/2016 01/01/2017
01/01/2036 5.500%, 390,000.00 07/01/2016 01/01/2017
01/01/2037 5.500% 410,000.00 07/01/2016 01/01/2017
01/01/2038 5.500%, 430,000.00 07/01/2016 01/01/2017
01/01/2039 5.500% 175,000.00 07/01/2016 01/01/2017
01/01/2040 5.500% 875,000.00 07/01/2016 01/01/2017
01/01/2041 5.500%, 925,000.00 07/01/2016 01/01/2017
01/01/2042 5.500% 970,000.00 07/01/2016 01/01/2017
6,785,000.00
General Obligation Bonds, Refunding Series 2008A Escrow Trustee: U.S. Bank National Association Total Deposit of Bond Proceeds: $7,658,219.04 Total amount of Refunded Interest per Payment Date: $3,843,437.50 Total amount of Refunded Interest: $7,686,875.00
01/01/2018 5.000% 8,320,000.00 07/01/2016 01/01/2017
01/01/2019 5.000%, 12,930,000.00 07/01/2016 01/01/2017
01/01/2020 5.000%, 9,780,000.00 07/01/2016 01/01/2017
01/01/2020 4.000%, 3,295,000.00 07/01/2016 01/01/2017
01/01/2021 5.250% 12,025,000.00 07/01/2016 01/01/2017
01/01/2022 5.250%, 12,560,000.00 07/01/2016 01/01/2017

SCHEDULE II SERIES 2015C DEBT MANAGEMEN T PROJECT

Bond * Maturity Date Interest Rate Principal $ Amount from which Interest is being Refunded Payment Date Payment Date
General Obligation Bonds, Refunding Series 2008A (cont'd)
01/01/2023 5.250% 12,445,000.00 07/01/2016 01/01/2017
01/01/2024 5.250%. 12,130,000.00 07/01/2016 01/01/2017
01/01/2025 5.250% 13,630,000.00 07/01/2016 01/01/2017
01/01/2026 5.250%. 6,465,000.00 07/01/2016 01/01/2017
01/01/2027 5.250% 6,805,000.00 07/01/2016 01/01/2017
01/01/2028 5.250%. 7,160,000.00 07/01/2016 01/01/2017
01/01/2029 5.250% 2,105,000.00 07/01/2016 01/01/2017
01/01/2033 4.625%. 2,740,000.00 07/01/2016 01/01/2017
01/01/2034 5.250% 6,150,000.00 07/01/2016 01/01/2017
01/01/2035 5.250% 6,475,000.00 07/01/2016 01/01/2017
01/01/2036 5.250%. 6,815,000.00 07/01/2016 01/01/2017
01/01/2037 5.250%. 7,175,000.00 07/01/2016 01/01/2017
149,005,000.00
General Obligation Bonds, Project and Refunding Series 2008C (CM) Escrow Trustee: Amalgamated Bank of Chicago Total Deposit of Bond Proceeds: $12,955,888.13 Total amount of Refunded Interest per Payment Date: $6,502,185.00 Total amount of Refunded Interest: $13,004,370.00
01/01/2023 5.000% 7,660,000.00 07/01/2016 01/01/2017
01/01/2024 5.000%. 15,025,000.00 07/01/2016 01/01/2017
01/01/2025 4.600% 10,470,000.00 07/01/2016 01/01/2017
01/01/2026 5.000%. 11,440,000.00 07/01/2016 01/01/2017
01/01/2027 5.000% 12,395,000.00 07/01/2016 01/01/2017
01/01/2028 5.000%. 8,835,000.00 07/01/2016 01/01/2017
01/01/2029 5.000%. 14,820,000.00 07/01/2016 01/01/2017
01/01/2030 5.000%. 20,915,000.00 07/01/2016 01/01/2017
01/01/2031 5.000%. 19,925,000.00 07/01/2016 01/01/2017
01/01/2032 5.000%. 22,450,000.00 07/01/2016 01/01/2017
01/01/2033 5.000%. 26,165,000.00 07/01/2016 01/01/2017
01/01/2034 5.000%. 5,390,000.00 07/01/2016 01/01/2017
01/01/2035 5.000% 14,965,000.00 07/01/2016 01/01/2017
01/01/2036 5.000%. 17,350,000.00 07/01/2016 01/01/2017
01/01/2037 5.000%. 4,985,000.00 07/01/2016 01/01/2017
01/01/2038 5.000% 13,200,000.00 07/01/2016 01/01/2017
01/01/2039 5.000%. 12,890,000.00 07/01/2016 01/01/2017
01/01/2040 5.000% 22,045,000.00 07/01/2016 01/01/2017
260,925,000.00

SCHEDULE II SERIES 2015C DEBT MANAGEMENT PROJECT

Bond *Maturity Date Interest Rate Principal $ Amount from which Interest is being Refunded Payment Date Payment Date
General Obligation Bonds, Taxable Project Series 2009C (BABS) Escrow Trustee: Amalgamated Bank of Chicago Total Deposit of Bond Proceeds: $3,647,522.44 Total amount of Refunded Interest per Payment Date: $1,830,599.48 Total amount of Refunded Interest: $3,661,198.96
01/01/2032 6.207% 1,345,000.00 07/01/2016 01/01/2017
01/01/2033 6.207%. 23,070,000.00 07/01/2016 01/01/2017
01/01/2034 6.207% 24,505,000.00 07/01/2016 01/01/2017
01/01/2035 6.207%. 26,025,000.00 07/01/2016 01/01/2017
01/01/2036 6.207%, 23,375,000.00 07/01/2016 01/01/2017
98,320,000.00
General Obligation Bonds, Taxable Project Series 2009D (Recovery Zone Economic Development Bonds) Escrow Trustee: Amalgamated Bank of Chicago Total Deposit of Bond Proceeds: $4,150,382.30 Total amount of Refunded Interest per Payment Date: $2,082,955.30 Total amount of Refunded Interest: $4,165,910.60
01/01/2036 6.257%. 4,265,000.00 07/01/2016 01/01/2017
01/01/2037 6.257%. 29,355,000.00 07/01/2016 01/01/2017
01/01/2038 6.257%. 31,195,000.00 07/01/2016 01/01/2017
01/01/2039 6.257%. 33,145,000.00 07/01/2016 01/01/2017
01/01/2040 6.257%. 35,220,000.00 07/01/2016 01/01/2017
133,180,000.00
General Obligation Bonds, Taxable Project Series 2010B (BABS) Escrow Trustee: Wells Fargo Bank, N.A. Total Deposit of Bond Proceeds: $9,594,876.73 Total amount of Refunded Interest per Payment Date: $4,815,390.20 Total amount of Refunded Interest: $9,630,780.40
01/01/2036 7.517% 38,735,000.00 07/01/2016 01/01/2017
01/01/2037 7.517% 40,630,000.00 07/01/2016 01/01/2017
01/01/2038 7.517% 42,615,000.00 07/01/2016 01/01/2017
01/01/2039 7.517%. 44,695,000.00 07/01/2016 01/01/2017
01/01/2040 7.517% 46,880,000.00 07/01/2016 01/01/2017
213,555,000.00
General Obligation Bonds, Project Series 2011A Escrow Trustee: Wells Fargo Bank, N.A. Total Deposit of Bond Proceeds: $10,578,515.17 Total amount of Refunded Interest per Payment Date: $5,309,050.00 Total amount of Refunded Interest: $ 10,618,100.00
01/01/2032 4.625% 19,070,000.00 07/01/2016 01/01/2017
01/01/2033 5.250%. 19,950,000.00 07/01/2016 01/01/2017

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SCHEDULE II SERIES 20I5C DEBT MANAGEMENT PROJECT

Bond ?Maturity Date Interest Rate Principal $ Amount from which Interest is being Refunded Payment Date Payment Date
General Obligation Bonds, Project Series 2011A (cont'd)
01/01/2034 5.250% 20,995,000.00 07/01/2016 01/01/2017
01/01/2035 5.250% 22,100,000.00 07/01/2016 01/01/2017
01/01/2036 5.000% 23,260,000.00 07/01/2016 01/01/2017
01/01/2037 5.000% 24,425,000.00 07/01/2016 01/01/2017
01/01/2038 5.000%, 25,645,000.00 07/01/2016 01/01/2017
01/01/2039 5.000% 26,925,000.00 07/01/2016 01/01/2017
01/01/2040 5.000%, 28,270,000.00 07/01/2016 01/01/2017
210,640,000.00
General Obligation Bonds, Project Series 2012A Escrow Trustee: Amalgamated Bank of Chicago Total Deposit of Bond Proceeds: $5,502,660.96 Total amount of Refunded Interest per Payment Date: $2,761,625.00 Total amount of Refunded Interest: $5,523,250.00
01/01/2030 5.000%, 2,450,000.00 07/01/2016 01/01/2017
01/01/2032 5.000%, 26,570,000.00 07/01/2016 01/01/2017
01/01/2033 5.000%, 44,605,000.00 07/01/2016 01/01/2017
01/01/2034 5.000%, 36,840,000.00 07/01/2016 01/01/2017
110,465,000.00
General Obligation Bonds, Refunding Series 2012C Escrow Trustee: Amalgamated Bank of Chicago Total Deposit of Bond Proceeds: $3,174,374.30 Total amount of Refunded Interest per Payment Date: $1,593,125.00 Total amount of Refunded Interest: $3,186,250.00
01/01/2020 5.000% 4,985,000.00 07/01/2016 01/01/2017
01/01/2020 4.000% 2,455,000.00 07/01/2016 01/01/2017
01/01/2021 5.000%, 7,700,000.00 07/01/2016 01/01/2017
01/01/2021 4.000% 2,210,000.00 07/01/2016 01/01/2017
01/01/2022 5.000%, 9,065,000.00 07/01/2016 01/01/2017
01/01/2022 4.000% 1,350,000.00 07/01/2016 01/01/2017
01/01/2023 5.000%, 10,725,000.00 07/01/2016 01/01/2017
01/01/2023 4.000% 410,000.00 07/01/2016 01/01/2017
01/01/2024 5.000%, 11,410,000.00 07/01/2016 01/01/2017
01/01/2024 4.000% 305,000.00 07/01/2016 01/01/2017
01/01/2025 5.000%, 6,785,000.00 07/01/2016 01/01/2017
01/01/2026 5.000%, 5,335,000.00 07/01/2016 01/01/2017
01/01/2030 4.000% 935,000.00 07/01/2016 01/01/2017
01/01/2031 4.000%, 975,000.00 07/01/2016 01/01/2017
01/01/2032 4.000%, 1,010,000.00 07/01/2016 01/01/2017
65,655,000.00

SCHEDULE II SERIES 2015C DEBT MANAGEMENT PROJECT

Bond ?Maturity Date Interest Rate Principal $ Amount from which Interest is being Refunded Payment Date Payment Date
General Obligation Bonds, Project and Refunding Series 2014A Escrow Trustee: Amalgamated Bank of Chicago Total Deposit of Bond Proceeds: $19,628,683.49 Total amount of Refunded Interest per Payment Date: $9,851,068.75 Total amount of Refunded Interest: $19,702,137.50
01/01/2018 4.000% 2,445,000.00 07/01/2016 01/01/2017
01/01/2019 4.000% 2,550,000.00 07/01/2016 01/01/2017
01/01/2020 4.000%, 3,310,000.00 07/01/2016 01/01/2017
01/01/2021 5.000%, 4,430,000.00 07/01/2016 01/01/2017
01/01/2022 5.000%, 4,540,000.00 07/01/2016 01/01/2017
01/01/2023 5.000%, 4,400,000.00 07/01/2016 01/01/2017
01/01/2024 4.000%, 555,000.00 07/01/2016 01/01/2017
01/01/2024 5.000% 4,025,000.00 07/01/2016 01/01/2017
01/01/2025 5.000% 4,475,000.00 07/01/2016 01/01/2017
01/01/2026 5.000% 3,580,000.00 07/01/2016 01/01/2017
01/01/2027 5.000%, 9,550,000.00 07/01/2016 01/01/2017
01/01/2028 5.250%, 20,630,000.00 07/01/2016 01/01/2017
01/01/2029 5.250%, 27,090,000.00 07/01/2016 01/01/2017
01/01/2030 5.000%, 3,320,000.00 07/01/2016 01/01/2017
01/01/2030 5.250% 33,070,000.00 07/01/2016 01/01/2017
01/01/2031 5.250%, 13,805,000.00 07/01/2016 01/01/2017
01/01/2032 5.250%, 38,140,000.00 07/01/2016 01/01/2017
01/01/2033 5.250%, 40,160,000.00 07/01/2016 01/01/2017
01/01/2034 5.000%, 44,480,000.00 07/01/2016 01/01/2017
01/01/2035 5.000% 61,755,000.00 07/01/2016 01/01/2017
01/01/2036 5.000% 60,860,000.00 07/01/2016 01/01/2017
387,170,000.00



TOTAL INTEREST REFUNDED: $108,391,447.48


The City has funded interest through and including the January 1, 2017 interest payment on the previously shown maturities of Interest Only Refunded Bonds. For the Series 2009C, Series 2009D, and Series 201 OB, only a portion of the interest through January 1, 2017 has been funded. None of the principal amounts of Interest Only Refunded Bonds shown above have been refunded.
?Maturity Date means Maturity Date or Sinking Fund Payment Date.





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Schedule HI Notification of Tax Abatement








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STATE OF ILLINOIS COUNTY OF COOK

)
)SS
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NOTIFICATION OF TAX ABATEMENT $500,000,000
GENERAL OBLIGATION REFUNDING BONDS, SERIES 2015C
OF THE CITY OF CHICAGO
To: The City Council of the City of Chicago and the County Clerks of The Counties of Cook and DuPage, Illinois
Please be advised that responsive to authority contained in an Ordinance (the "Ordinance") adopted by the City Council (the "City Council") of the City of Chicago (the "City") on September 24, 2015, authorizing the issuance of up to $500,000,000 aggregate principal amount of general obligation bonds of the City, plus original issue discount, on January 21, 2016 the City issued its $500,000,000 General Obligation Refunding Bonds, Series 2015C (the "Bonds"), having the terms described in that certain Bond Purchase Agreement, dated January 12, 2016 (the "Bond Purchase Agreement"), between the City and Citigroup Global Markets Inc., acting on behalf of itself and as representative of certain underwriters named therein (the "Underwriters").
Capitalized terms used herein without definition have the meanings assigned to such terms in the Ordinance.
Notification of the sale of the Bonds to the City Council and of the determinations made by the Chief Financial Officer of the City with respect to the sale of the Bonds, the filing of the Bond Purchase Agreement, and the Official Statement for the Bonds, all as provided for or required by the Ordinance was made by the filing with the City Clerk of a Notification of Sale executed and delivered by the Chief Financial Officer on the date of issuance of the Bonds.
Please be further advised that Section 7 of the Ordinance provides for a direct annual tax in and for each of the years 2015 to 2055, inclusive, to pay the interest on the Bonds promptly when and as the same falls due and to pay and discharge the principal thereof at maturity. Pursuant to Section 12 ofthe Ordinance, please be further advised that the amount of the annual tax levy requirements for the payment of the principal of and interest on the Bonds resulting from the sale of the Bonds is less than the levy of taxes authorized in Section 7 of the Ordinance. I have determined that a reduction in the amount of the tax levy in the years 2015 to 2036, inclusive, is deemed desirable in connection with the sale of the Bonds. The amount of the taxes levied in the Ordinance to pay debt service on the Bonds, the amount of the taxes to be abated resulting from the sale of the Bonds, and the remainder of the taxes levied which is to be extended for collection are as follows:








CV459961.4

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AMOUNT LEVIED
LEVY IN THE
YEAR ORDINANCE
2015 $ 275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000
275,000,000


EXCESS LEVY TO BE ABATED
$ 268,888,089 250,000,000 250,000,000 243,365,000 242,636,750 170,786,500 175,748,000 180,131,250 199,302,750 211,412,000 257,054,000 264,484,750 264,372,500 268,007,250 265,992,500 269,767,250 265,172,250 265,167,000 265,238,500 234,998,500 234,998,000 256,651,250 275,000,000 275,000,000 275,000,000 275,000,000 275,000,000 275,000,000 275,000,000 275,000,000 275,000,000 275,000,000 275,000,000 275,000,000 275,000,000 275,000,000 275,000,000 275,000,000 275,000,000 275,000,000 275,000,000
TAX TO BE EXTENDED FOR PAYMENT OFTHE BONDS
$ 6,111,911 25,000,000 25,000,000 31,635,000 32,363,250 104,213,500 99,252,000 94,868,750 75,697,250 63,588,000 17,946,000 10,515,250 10,627,500 6,992,750 9,007,500 5,232,750 9,827,750 9,833,000 9,761,500 40,001,500 40,002,000 18,348,750

CV459961.4
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IN WITNESS WHEREOF, I hereunto fix my official signature at Chicago, Illinois, the Zls^~ day of January, 2016.


CITY OF CHICAGO

Carole L. Brown Chief Financial Officer









































Signature Page to Direction for Abatement of Certain Taxes

Acknowledgment of Filing Notification of Sale

The foregoing Notification of Sale of $500,000,000 aggregate principal amount of General Obligation Refunding Bonds, Series 2015C, ofthe City of Chicago (the "City") has been filed in my office as City Clerk of the City and is part of the official files and records of my office.
In Witness Whereof, I have hereunto affixed my signature and caused to be affixed hereto the corporate seal of the City this day of January, 2016.


Susana A. Mendoza \ City Clerk













































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