$32,240,000 City of Manassas Park, Virginia General ...

NEW ISSUE Insured Ratings: Moody's:….............Aaa Book-Entry-Only Standard & Poor's: AAA Underlying Ratings: Moody's:………A2 Standard & Poor's: A+ (See "Ratings" herein.)

In the opinion of Bond Counsel, under existing law and subject to conditions described in “Tax Matters” in "SECTION TWO: THE SERIES 2008 BONDS," interest on the Series 2008 Bonds (1) will not be included in gross income for federal income tax purposes, (2) will not be a specific item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and (3) will be exempt from income taxation by the Commonwealth of Virginia. Such interest may be included in the calculation of a corporation's alternative minimum taxable income and will be subject to other federal income tax consequences as described in “Tax Matters” in "SECTION TWO: THE SERIES 2008 BONDS."

$32,240,000 City of Manassas Park, Virginia

General Obligation and Refunding Bonds, Series 2008

Dated: Date of Delivery Interest Payable: January 1 and July 1 Due: January 1, as shown on the inside cover First Interest Payment: January 1, 2009

The $32,240,000 General Obligation and Refunding Bonds, Series 2008 (the "Series 2008 Bonds") are general obligations of the City of Manassas Park, Virginia ("Manassas Park" or the "City"), as to which its full faith and credit and unlimited taxing power of the City are irrevocably pledged to the payment of the principal of and interest thereon. The Series 2008 Bonds are being issued to (i) finance the costs of various capital projects, including parks and recreation improvements, (ii) prepay the $1,885,500 Master Lease and Sublease Agreement, between the City and SunTrust Equipment Finance & Leasing Corp. and redeem, defease and/or refund all or a portion of the outstanding balance of the City's $4,000,000 Public Improvement Bonds, Series of 1992, $4,810,000 General Obligation Refunding Bonds, Series of 1993, $10,755,000 General Obligation and Refunding Bonds, Series 1999, $30,000,000 General Obligation School and Public Improvement Bond, Series 2005 and $26,875,000 General Obligation Bonds, Series 2007A, and (iii) pay the costs related to the issuance of the Series 2008 Bonds. The Governing Body of the City will be authorized and required, unless other funds are lawfully available and appropriated for timely payment of the Series 2008 Bonds, to levy and collect on all property located in the City subject to local taxation an annual ad valorem tax over and above all other taxes authorized or limited by law and without limitation as to rate or amount, sufficient to pay principal of and interest on the Series 2008 Bonds as the same respectively become due and payable.

The Series 2008 Bonds will be issued as fully registered bonds and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"), which will act as securities depository of the Series 2008 Bonds. So long as Cede & Co. is registered owner of the Series 2008 Bonds, as the nominee for DTC, (a) references herein to the Bondholder or registered owner shall mean Cede & Co. and (b) principal and interest shall be payable to Cede & Co., as nominee for DTC, which will, in turn, remit such principal and interest to the DTC participants for subsequent disbursements to the beneficial owners of the Series 2008 Bonds. Individual purchases of beneficial ownership interest in the Series 2008 Bonds will be made in book-entry form only, in denominations of $5,000 or multiples thereof. Bond certificates will be immobilized at DTC and not available for delivery to the public (See "Description of the Series 2008 Bonds - Book-Entry-Only System" in "SECTION TWO: THE SERIES 2008 BONDS"). The Series 2008 Bonds will bear interest from the date of delivery, payable semiannually on January 1 and July 1, commencing January 1, 2009.

The Series 2008 Bonds are subject to optional and mandatory redemption prior to their stated maturities at the option of the City as more fully set forth herein.

The scheduled payment of principal and interest on the Series 2008 Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Series 2008 Bonds by Financial Security Assurance Inc.

The Series 2008 Bonds are offered for delivery when, as and if issued, subject to the approval of validity by McGuireWoods LLP, Richmond, Virginia, Bond Counsel, as described herein. It is expected that the Series 2008 Bonds will be available for delivery through The Depository Trust Company in New York, New York, on or about May 8, 2008.

This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision.

Dated: April 17, 2008

DAVENPORT & COMPANY LLC



Dated: Date of Delivery

MATURITIES, AMOUNTS, INTEREST RATES, YIELDS AND PRICES

$21,980,000 Serial Series 2008 Bonds (Base CUSIP Number 561807)

Maturity Date

(January 1) Principal Amount

Interest Rate

Yield

Price

CUSIP Suffix

2012 $200,000 3.000% 2.750% 100.859% HF8 2013 225,000 3.250 2.900 101.509 HG6 2014 350,000 3.250 3.040 101.079 HH4 2015 720,000 3.500 3.190 101.840 HJ0 2016 745,000 3.500 3.340 101.068 HK7 2017 775,000 3.625 3.480 101.071 HL5 2018 1,345,000 4.000 3.630 102.985 HM3 2019 1,410,000 5.000 3.810 109.526* HN1 2020 1,480,000 4.750 3.940 106.443* HP6 2021 1,540,000 5.000 4.040 107.602* HQ4 2022 1,630,000 5.000 4.130 106.859* HR2 2023 1,710,000 4.750 4.260 103.838* HS0 2024 1,785,000 4.750 4.340 103.198* HT8 2025 1,870,000 5.000 4.350 105.071* HU5 2026 1,960,000 5.000 4.410 104.589* HV3 2027 2,065,000 5.000 4.460 104.190* HW1 2028 2,170,000 5.000 4.510 103.793* HX9

$10,260,000 4.500% Term Bonds due January 1, 2033, Priced at 97.807% to Yield 4.650% CUSIP Suffix JC3

* Priced to first optional redemption date, January 1, 2018.

CITY OF MANASSAS PARK, VIRGINIA

GOVERNING BODY

Frank Jones, Mayor Bryan E. Polk, Vice Mayor

Bill Treuting Cynde Gardner Fran Kassinger Michael Bunner

Keith Miller

CITY OFFICIALS

Mercury T. Payton, City Manager Gary Fields, Director of Finance

Dean H. Crowhurst, City Attorney Lana A. Conner, City Clerk

George Adamson, City Treasurer Debbie Wood, Commissioner of Revenue

John Evans, Police Chief Dr. Thomas DeBolt, Superintendent of Schools

BOND COUNSEL

McGuireWoods LLP Richmond, Virginia

INDEPENDENT AUDITOR

Robinson, Farmer, Cox Associates Charlottesville, Virginia

No dealer, broker, salesman or other person has been authorized to give any information or to make any representations other than as contained in this Official Statement in connection with the offering of the Series 2008 Bonds and, if given or made, such other information or representations must not be relied upon. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be a sale of the Series 2008 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale.

This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or owners of any of the Series 2008 Bonds. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof.

In connection with this offering, the Underwriter may overallot or effect transactions which stabilize or maintain the market price of the Series 2008 Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time.

___________________________

TABLE OF CONTENTS

-i-

SECTION ONE: INTRODUCTION ...................................................................................................................1 The Issuer...............................................................................................................................................1 The Series 2008 Bonds...........................................................................................................................1 Use of Proceeds......................................................................................................................................1 Redemption Provisions ..........................................................................................................................2 Bond Insurance ......................................................................................................................................2 Delivery..................................................................................................................................................2 Ratings ..................................................................................................................................................2 Additional Information...........................................................................................................................2

SECTION TWO: THE SERIES 2008 BONDS...................................................................................................3 Authorization and Purpose of the Series 2008 Bonds............................................................................3 Plan of Financing ...................................................................................................................................3 Description of the Series 2008 Bonds....................................................................................................4

Redemption Provisions.............................................................................................................5 Notice of Redemption...............................................................................................................5 Book-Entry-Only System .........................................................................................................5 Security for the Series 2008 Bonds ..........................................................................................8 Bond Insurance.........................................................................................................................8 Bond Insurance Policy..............................................................................................................8 Financial Security Assurance Inc .............................................................................................8 Bondholders' Remedies in the Event of Default.......................................................................9

Approval of Legal Proceedings............................................................................................................10 Tax Matters ..........................................................................................................................................10

Opinion of Bond Counsel—Federal Income Tax Status of Interest .......................................10 Reliance and Assumptions; Effect of Certain Changes..........................................................10 Certain Collateral Federal Tax Consequences........................................................................11 Original Issue Discount ..........................................................................................................12 Bond Premium........................................................................................................................12 Possible Legislative or Regulatory Action .............................................................................13 Opinion of Bond Counsel—Virginia Income Tax Consequences..........................................13

SECTION THREE: CITY OF MANASSAS PARK, VIRGINIA.....................................................................14 General Description .............................................................................................................................14

Overview ................................................................................................................................14 Form and Organization of Government..................................................................................14 Profiles of Elected Officials ...................................................................................................17 Certain Administrative Staff Members and Elected Officials ................................................17 City Employees ......................................................................................................................18

Government Services and Facilities .....................................................................................................19 Local Government Services ...................................................................................................19 Transportation ........................................................................................................................19 Public Safety...........................................................................................................................19 Judicial Administration ..........................................................................................................20 Regional Adult Detention Center ...........................................................................................20 City Attorney..........................................................................................................................20 Public Works ..........................................................................................................................20 Planning and Zoning...............................................................................................................20 Parks and Recreation ..............................................................................................................21 Education................................................................................................................................22 Public Utilities ........................................................................................................................23 Health and Welfare.................................................................................................................24

Economic and Demographic Information ............................................................................................25 Population of Manassas Park and Adjacent Areas .................................................................25 Employment ...........................................................................................................................26

TABLE OF CONTENTS (cont'd)

-ii-

Personal Income .....................................................................................................................27 Retail Sales .............................................................................................................................28 Construction Activity .............................................................................................................28 Economic Development .........................................................................................................28

SECTION FOUR: FINANCIAL INFORMATION ..........................................................................................30 Financial Reporting..............................................................................................................................30 Annual Financial Reports.....................................................................................................................30 Annual Audit........................................................................................................................................30 Fund Accounting..................................................................................................................................31

General ..................................................................................................................................31 Government –Wide Accounting & Financial Reporting ........................................................31 Governmental Fund Financial Statements..............................................................................32 General Fund ..........................................................................................................................32 General Fund Revenues and Expenditures .............................................................................33

General Fund Revenues .......................................................................................................................35 Property Taxes........................................................................................................................36 Local Sales Tax ......................................................................................................................38 Other Local Taxes ..................................................................................................................39 Licenses, Permits and Privilege Fees .....................................................................................39 Revenue from the Commonwealth .........................................................................................39 Revenue from the Federal Government..................................................................................39 Other Revenue........................................................................................................................39

General Fund Expenditures & Transfers..............................................................................................39 Expenditures for General City Government ...........................................................................39 Transfers.................................................................................................................................40

Education Function - Component Unit School Board..........................................................................40 Budgetary Procedures ..........................................................................................................................40

Operating Budget – Fiscal Year Ended June 30, 2007 Results ..............................................41 Current Fiscal Year 2008 Budget and Proposed Fiscal Year 2009 Budget............................41

Capital Improvement Program.............................................................................................................42 Debt Administration.............................................................................................................................43

Limitations on Incurrence of Debt..........................................................................................43 Overlapping or Underlying Debt............................................................................................46 Other Indebtedness and Obligations.......................................................................................47

Retirement System ...............................................................................................................................47 Investment Policies and Practices ........................................................................................................48

SECTION FIVE: MISCELLANEOUS .............................................................................................................49 Ratings ................................................................................................................................................49 Litigation..............................................................................................................................................49 Underwriting ........................................................................................................................................49 Continuing Disclosure..........................................................................................................................49 Financial Statements ............................................................................................................................50 Verification Agent................................................................................................................................50 Miscellaneous.......................................................................................................................................50 Approval of Official Statement ............................................................................................................51

Appendix A - Audited Financial Statements for Fiscal Year Ended June 30, 2007 .........................................A-1 Appendix B - Form of Continuing Disclosure Agreement ...............................................................................B-1 Appendix C - Form of Opinion of Bond Counsel.............................................................................................C-1 Appendix D - Specimen Municipal Bond Insurance Policy .............................................................................D-1

-1-

OFFICIAL STATEMENT



SECTION ONE: INTRODUCTION

The purpose of this Official Statement is to furnish information in connection with the sale by the City of Manassas Park, Virginia (the "City"), of its $32,240,000 General Obligation and Refunding Bonds, Series 2008 (the "Series 2008 Bonds"), dated their date of delivery. The Series 2008 Bonds will be general obligations of the City, for the payment of which the full faith and credit of the City are irrevocably pledged. Financial and other information contained in this Official Statement has been prepared by the City from its records (except where other sources are noted). This information speaks as of its date and is not intended to indicate future or continuing trends in the financial or economic position of the City.

The Issuer

The issuer of the Series 2008 Bonds is the City of Manassas Park, located in Northern Virginia in the northern portion of Prince William County near its border with Fairfax County, approximately 30 miles west of Washington, D.C. The City has a land area of approximately 2.5 square miles.

The City is autonomous and entirely independent of any county or any other political subdivision. It is neither coterminous with nor subject to taxation by any county and is not liable for any county indebtedness. The City had a population of 13,910 in 2007.

The Series 2008 Bonds

The Series 2008 Bonds consist of the $32,240,000 General Obligation and Refunding Bonds, Series 2008 (the "Series 2008 Bonds"). The Series 2008 Bonds are dated their date of delivery, and mature on January 1 in each of the years and in the principal amounts set forth on the inside cover page of this Official Statement. The Series 2008 Bonds will be issued in authorized denominations of $5,000 and multiples thereof and will be held by The Depository Trust Company, New York, New York ("DTC"), or by its nominee as securities depository with respect to the Series 2008 Bonds. Refer to "Description of the Series 2008 Bonds" in "SECTION TWO: THE SERIES 2008 BONDS."

Interest on the Series 2008 Bonds will be payable on January 1 and July 1 commencing January 1, 2009, until the earlier of maturity or redemption. As long as the Series 2008 Bonds are held by DTC or its nominee, interest will be paid to Cede & Co., as nominee of DTC, on each interest payment date.

Use of Proceeds

The proceeds of the Series 2008 Bonds will be used to (i) finance the costs of various capital projects, including parks and recreation improvements, (ii) prepay the $1,885,500 Master Lease and Sublease Agreement, between the City and SunTrust Equipment Finance & Leasing Corp. and redeem, defease and/or refund all or a portion of the outstanding balance of the City's $4,000,000 Public Improvement Bonds, Series of 1992, $4,810,000 General Obligation Refunding Bonds, Series of 1993, $10,755,000 General Obligation and Refunding Bonds, Series 1999, $30,000,000 General Obligation School and Public Improvement Bond, Series 2005 and $26,875,000 General Obligation Bonds, Series 2007A, and (iii) pay the costs related to the issuance of the Series 2008 Bonds. A more complete description of the use of proceeds is provided in Section Two.

-2-

Redemption Provisions

The Series 2008 Bonds maturing on or before January 1, 2018 are not subject to redemption prior to their maturities. The Series 2008 Bonds maturing on or after January 1, 2019, are subject to optional redemption in whole or in part at the direction of the City on or after January 1, 2018. Refer to "Description of the Series 2008 Bonds – Redemption Provisions – Optional Redemption" in "SECTION TWO: THE SERIES 2008 BONDS" for a more detailed description of the optional redemption features of the Series 2008 Bonds.

Bond Insurance

The scheduled payment of principal of and interest on the Series 2008 Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Series 2008 Bonds by Financial Security Assurance Inc.

Delivery

The Series 2008 Bonds are offered for delivery, when, as, and if issued, subject to the approval of validity by McGuireWoods LLP, Richmond, Virginia, Bond Counsel, and to certain other conditions referred to herein. Certain legal matters will be passed upon for the City by the City Attorney, Dean H. Crowhurst, Esquire. Certain legal matters will be passed upon for the Underwriter by its counsel, McGuireWoods LLP. It is expected that the Series 2008 Bonds will be available for delivery, at the expense of the City, in New York, New York, through the facilities of DTC, on or about May 8, 2008.

Ratings

The Series 2008 Bonds have been rated as shown on the cover page hereto by Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007 and Standard & Poor's Ratings Services, 55 Water Street, New York, New York 10041. A more complete description of the ratings is provided in Section Five.

Additional Information

Any question concerning the content of this Official Statement should be directed to Mr. Mercury T. Payton, City Manager, or Mr. Gary Fields, Director of Finance, One Park Center Court, Manassas Park, Virginia 20111-2395 (703/335-8800).

-3-

SECTION TWO: THE SERIES 2008 BONDS

Authorization and Purpose of the Series 2008 Bonds

Issuance of the Series 2008 Bonds is authorized by resolution of the Governing Body adopted on March 4, 2008 (the "Resolution") pursuant to and in conformity with Article VII of the Constitution of the Commonwealth of Virginia, and pursuant to the provisions of the Public Finance Act of 1991 (Chapter 26, Title 15.2 of the Code of Virginia of 1950, as amended).

Plan of Financing

The proceeds of the Series 2008 Bonds will be used to (i) finance the costs of various capital projects, including parks and recreation improvements, (ii) prepay the $1,885,500 Master Lease and Sublease Agreement, between the City and SunTrust Equipment Finance & Leasing Corp. (the "Note") and redeem, defease and/or refund all or a portion of the outstanding balance of the City's $4,000,000 Public Improvement Bonds, Series of 1992 (the "Series 1992 Bonds"), $4,810,000 General Obligation Refunding Bonds, Series of 1993 (the "Series 1993 Bonds"), $10,755,000 General Obligation and Refunding Bonds, Series 1999 (the "Series 1999 Bonds"), $30,000,000 General Obligation School and Public Improvement Bond, Series 2005 (the "Series 2005 Bonds") and $26,875,000 General Obligation Bonds, Series 2007A (the "Series 2007A Bonds" and together with the Series 1992 Bonds, the Series 1993 Bonds, the Series 1999 Bonds and the Series 2005 Bonds, the "Refunded Bonds"), and (iii) pay the costs related to the issuance of the Series 2008 Bonds.

A portion of the proceeds of the Series 2008 Bonds will be used on the date of closing to prepay the Note at a prepayment price of 105% of the outstanding principal amount of the Note. Upon delivery of the Series 2008 Bonds, the City will enter into an escrow agreement (the "Escrow Agreement") with U.S. Bank National Association, as escrow agent (the "Escrow Agent"). The Escrow Agreement will create an irrevocable Escrow Fund, which is to be held by the Escrow Agent and is to be applied solely to the payment of the Refunded Bonds. The City will deposit a portion of the proceeds of the sale of the Series 2008 Bonds with the Escrow Agent for deposit in the Escrow Fund in an amount which will be invested, at the direction of the City, in direct obligations of the United States of America (the "Government Securities") maturing in amounts and bearing interest at rates sufficient, without reinvestment, (i) to pay when due the principal of and the interest and redemption premium, if any, on the Series 1992 Bonds and the Series 1993 Bonds, (ii) to pay when due interest on the Series 1999 Bonds, Series 2005 Bonds and the Series 2007A Bonds through their respective maturity dates and (iii) to pay the principal of and accrued interest on the Series 1999 Bonds, the Series 2005 Bonds and the Series 2007A Bonds at maturity. The Government Securities will be purchased from the Treasury Department of the United States of America at interest rates which will cause the yield thereon, computed in accordance with the provisions of Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"), and applicable regulations thereunder, not to exceed the yield permitted by such Code. The Escrow Fund, including interest earnings on the Government Securities, is pledged solely for the benefit of the holders of the Refunded Bonds.

-4-

The Series 1992 Bonds and the Series 1993 Bonds will be irrevocably designated for redemption or prepayment in accordance with the following chart and provision will be made in the Escrow Agreement for the giving of notice of such redemption or prepayment. The Series 1999 Bonds, the Series 2005 Bonds and the Series 2007A Bonds will be paid at their respective maturities with a portion of the proceeds of the Series 2008 Bonds deposited into the Escrow Fund as shown below:

Issue Maturities being

Refunded

Principal Amount to be

Refunded Redemption

Date

Redemption Price

Public Improvement Bonds, Series of 1992

August 1, 2010 August 1, 2011 August 1, 2012

$200,000 $200,000 $200,000

June 12, 2008 June 12, 2008 June 12, 2008

101.25% 101.75% 102.00%

General Obligation Refunding Bonds, Series of 1993

July 1, 2008 $290,000 June 12, 2008 100.25%


April 1, 2009 $355,000 N/A N/A

General Obligation School and Public Improvement Bond, Series 2005

August 1, 2030 $5,135,000 N/A N/A

General Obligation Bonds, Series 2007A

April 1, 2010 through April 1, 2014 (inclusive)

$2,120,000 N/A N/A

Description of the Series 2008 Bonds

The Series 2008 Bonds will be issued in fully registered form in the denominations of $5,000 or integral multiples thereof and will be held by The Depository Trust Company ("DTC"), or its nominee, as securities depository with respect to the Series 2008 Bonds. See "Description of Series 2008 Bonds Book-Entry-Only System" below. Purchases of beneficial ownership interests in the Series 2008 Bonds will be made only in book-entry form and individual purchasers will not receive physical delivery of bond certificates. The Series 2008 Bonds will be dated their date of delivery, will bear interest at the rates per annum set forth on the inside cover page hereof, payable on January 1, 2009, and semi-annually thereafter on January 1 and July 1 of each year (an "Interest Payment Date"), and will mature in the years and in the principal amounts set forth on the inside cover page hereof.

-5-

Redemption Provisions

Optional Redemption

The Series 2008 Bonds maturing on or before January 1, 2018 are not subject to redemption prior to their respective maturity dates. The Series 2008 Bonds maturing on or after January 1, 2019 shall be subject to redemption prior to their stated maturity dates at the option of the City, on and after January 1, 2018 in whole or in part at any time at a redemption price equal to the principal amount thereof (par) together with interest accrued thereon to the redemption date.

Mandatory Redemption

The Series 2008 Bonds maturing on January 1, 2033 are required to be redeemed in part before maturity by the City on January 1, in the years and amounts set forth below, at a redemption price equal to the principal amount of the Series 2008 Bonds to be redeemed, plus accrued interest to the redemption date:

Year Amount 2029 $2,265,000 2030 2,370,000 2031 2,485,000 2032 1,535,000 2033 (maturity) 1,605,000

If less than all the Series 2008 Bonds are called for redemption, the Series 2008 Bonds to be redeemed

shall be selected by the City's Director of Finance as he or she may deem to be in the best interest of the City. If less than all of the Series 2008 Bonds of a particular maturity are called for redemption, the Series 2008 Bonds to be redeemed shall be selected by DTC or any successor securities depository, or if the book-entry-only system is discontinued, by the Series 2008 Bonds registrar and paying agent (the "Registrar") by lot in such manner as the Registrar in its discretion may determine.

Notice of Redemption

The City shall cause notice of redemption to be sent by facsimile transmission, registered or certified mail or overnight express delivery, not less than 30 nor more than 60 days prior to the redemption date, to DTC or its nominee as the registered owner of the Series 2008 Bonds. The City shall not be responsible for mailing notice of redemption to anyone other than DTC or another qualified securities depository or its nominee unless no qualified securities depository is the registered owner of the Series 2008 Bonds. If no qualified securities depository is the registered owner of the Series 2008 Bonds, notice of redemption shall be mailed to the registered owners of the Series 2008 Bonds. Each notice of redemption shall identify the Series 2008 Bonds or portions thereof to be redeemed. Interest shall cease to accrue on any Series 2008 Bonds duly called for prior redemption, after the redemption date, if payment thereof has been duly provided. The Registrar shall not be required to transfer or exchange any Series 2008 Bond or portion thereof after the notice of redemption has been duly provided. During the period that DTC or the DTC nominee is the registered holder of the Series 2008 Bonds, the Registrar will not be responsible for mailing notices of redemption to the beneficial owners of the Series 2008 Bonds. See "Description of the Series 2008 Bonds - Book-Entry-Only System" below.

Book-Entry-Only System

The description which follows of the procedures and recordkeeping with respect to beneficial ownership interests in the Series 2008 Bonds, payments of principal of and interest on the Series 2008 Bonds to DTC, its nominee, Participants, as defined below, or Beneficial Owners, confirmation and transfer of beneficial ownership interests in the Series 2008 Bonds and other bond-related transactions

-6-

by and between DTC, Participants and Beneficial Owners is based solely on information furnished by DTC.

DTC will act as securities depository for the Series 2008 Bonds. The Series 2008 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 Series 2008 Bond certificate will be issued for each maturity of the Series 2008 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world's largest depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 million issues of the 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, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation and Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, and trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on the file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

Purchases of Series 2008 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2008 Bonds on DTC's records. The ownership interest of each actual purchaser of each Series 2008 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, however, are 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 Series 2008 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 Series 2008 Bonds, except in the event that use of the book-entry system for the Series 2008 Bonds is discontinued.

To facilitate subsequent transfers, all Series 2008 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 Series 2008 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 Series 2008 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2008 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.

-7-

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 will be sent to DTC. If less than all of the Series 2008 Bonds of any maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Series 2008 Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Series 2008 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal of and interest payments on the Series 2008 Bonds will be made to Cede & Co., or such other nominee as may be requested by any 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 Registrar on each payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, its nominee, the Registrar or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal of and interest to DTC is the responsibility of the City or the Registrar, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as securities depository with respect to the Series 2008 Bonds at any time by giving reasonable notice to the City or the Registrar. Under such circumstances, in the event that a successor securities depository is not obtained, Series 2008 Bond certificates are required to be printed and delivered.

The City may decide to discontinue use of the system of book-entry transfers from DTC (or a successor securities depository). In that event, Series 2008 Bond certificates are required to be printed.

The foregoing information in this section concerning DTC and DTC's book-entry only system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof.

The City has no responsibility or obligation to Participants or the Beneficial Owners with respect to (a) the accuracy of any records maintained by DTC or any Participant; (b) the payment by any Participant of any amount due to any Beneficial Owner in respect of the principal of and interest on the Series 2008 Bonds; (c) the delivery or timeliness of delivery by any Participant of any notice to any Beneficial Owner which is required or permitted under the terms of the Resolution providing for the issuance of the Series 2008 Bonds to be given to Bondholders; or (d) any other action taken pursuant to an Omnibus Proxy.

So long as Cede & Co. is the registered owner of the Series 2008 Bonds, as nominee of DTC, references in this Official Statement to the Owners of the Series 2008 Bonds shall mean Cede & Co. and shall not mean the Beneficial Owners and Cede & Co. will be treated as the only Bondholder of the Series 2008 Bonds for all purposes under the Resolution providing for the issuance of the Series 2008 Bonds.

-8-

The City may enter into amendments to the agreement with DTC or successor agreements with a successor securities depository, relating to the book-entry system to be maintained with respect to the Series 2008 Bonds without the consent of Beneficial Owners or Bondholders.

Security for the Series 2008 Bonds

The Series 2008 Bonds constitute general obligations of the City, and the full faith and credit of the City are irrevocably pledged to the payment of principal of and interest on the Series 2008 Bonds. The proceedings authorizing the issuance of the Series 2008 Bonds provide that the Governing Body shall, in each year while any of the Series 2008 Bonds shall be outstanding, levy and collect on all property in the City subject to local taxation an annual ad valorem tax over and above all other taxes authorized or limited by law and without limitation as to rate or amount, sufficient to pay when due the principal of and the interest on the Series 2008 Bonds, unless other funds are legally available and appropriated for timely payment of the Series 2008 Bonds.

Bond Insurance

The information set forth in the following paragraphs has been provided by Financial Security Assurance Inc. ("Financial Security" or the "Insurer") for inclusion in this Official Statement. Financial Security does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding Financial Security set forth under this heading "Bond Insurance." Financial Security makes no representation regarding the Series 2008 Bonds or the advisability of investing in the Series 2008 Bonds.

Bond Insurance Policy

Concurrently with the issuance of the Series 2008 Bonds, Financial Security Assurance Inc. ("Financial Security") will issue its Municipal Bond Insurance Policy for the Series 2008 Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Series 2008 Bonds when due as set forth in the form of the Policy included as an exhibit to this Official Statement.

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

Financial Security Assurance Inc.

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

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

The consolidated financial statements of Financial Security included in, or as exhibits to, the annual and quarterly reports filed after December 31, 2007 by Holdings with the Securities and Exchange

-9-

Commission are hereby incorporated by reference into this Official Statement. All financial statements of Financial Security included in, or as exhibits to, documents filed by Holdings pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this Official Statement and before the termination of the offering of the Series 2008 Bonds shall be deemed incorporated by reference into this Official Statement. Copies of materials incorporated by reference will be provided upon request to Financial Security Assurance Inc.: 31 West 52nd Street, New York, New York 10019, Attention: Communications Department (telephone (212) 826-0100).

The Policy does not protect investors against changes in market value of the Series 2008 Bonds, which market value may be impaired as a result of changes in prevailing interest rates, changes in applicable ratings or other causes. Financial Security makes no representation regarding the Series 2008 Bonds or the advisability of investing in the Series 2008 Bonds. Financial Security makes no representation regarding the Official Statement, nor has it participated in the preparation thereof, except that Financial Security has provided to the Issuer the information presented under this caption for inclusion in the Official Statement.

Bondholders' Remedies in the Event of Default

Section 15.2-2659 of the Code of Virginia of 1950, as amended, provides that upon affidavit filed by or on behalf of any owner, or by any paying agent therefor, of a general obligation bond in default as to payment of principal, premium, if any, or interest, the Governor shall forthwith conduct a summary investigation and, if such default is established to the Governor's satisfaction, the Governor shall immediately order the State Comptroller to withhold all funds appropriated and payable by the Commonwealth of Virginia (the "Commonwealth") to the political subdivision so in default and apply the amount so withheld to payment of the defaulted principal, premium, if any, and interest. Section 15.2-2659 also provides for notice to registered owners of the Series 2008 Bonds of the default and the availability of withheld funds. The State Comptroller advises that to date no order to withhold funds pursuant to Section 15.2-2659 or its predecessor statute has ever been issued. Although neither Section 15.2-2659 nor its predecessors Section 15.1-225 has been approved by a Virginia court, the Attorney General of Virginia has ruled that appropriated funds may be withheld by the Commonwealth pursuant to that section. In the fiscal year ended June 30, 2007, the City received a total of $3,661,063 in General Fund revenues and $13,438,414 in School Operating Fund revenues from the Commonwealth.

Neither the Series 2008 Bonds nor the proceedings with respect thereto specifically provide any remedies to Bondholders if the City defaults in the payment of principal of or interest thereon, nor do they contain any provision for the appointment of a trustee to enforce the interests of the Bondholders upon the occurrence of such default. Upon any default in the payment of principal or interest, a Bondholder could, among other things, seek from an appropriate court a writ of mandamus requiring the Governing Body to observe the covenants contained in the Series 2008 Bonds. The mandamus remedy, however, may be impracticable and difficult to enforce. Furthermore, the right to enforce payment of the Series 2008 Bonds may be limited by bankruptcy, insolvency, reorganization, moratorium, and similar laws and equitable principles, which may limit the specific enforcement of certain remedies.

Chapter 9 of the United States Bankruptcy Code (the "Bankruptcy Code") permits a municipality such as the City, if insolvent or otherwise unable to pay its debts as they become due, to file a voluntary petition for the adjustment of debts provided that such municipality is "specifically authorized, in its capacity as a municipality or by name, to be a debtor…" Bankruptcy Code, §109(c)(2). Current Virginia statutes do not expressly authorize the City or municipalities generally to file for bankruptcy under Chapter 9. Chapter 9 does not authorize the filing of involuntary petitions against municipalities such as the City.

Although Commonwealth law currently does not authorize such action, future legislation may enable the City to file a petition for relief under the Bankruptcy Code if it is insolvent or unable to pay its debts. Bankruptcy proceedings by the City could have adverse effects on Bondholders including (a) delay in the enforcement of their remedies, (b) subordination of their claims to claims of those supplying goods and

-10-

services to the City after the initiation of bankruptcy proceedings and to the administrative expenses of bankruptcy proceedings, or (c) imposition without their consent of a reorganization plan reducing or delaying payment of the Series 2008 Bonds. The Bankruptcy Code contains provisions intended to ensure that, in any reorganization plan not accepted by at least a majority of a class of creditors such as the holders of general obligation bonds, such creditors will have the benefit of their original claims or the "indubitable equivalent." The effect of these and other provisions of the Bankruptcy Code cannot be predicted and may be significantly affected by judicial interpretations.

The City has never defaulted in the payment of either principal or interest on any debt obligation.

Approval of Legal Proceedings

Certain legal matters relating to the authorization and validity of the Series 2008 Bonds will be subject to the approving opinion of McGuireWoods LLP, Richmond, Virginia, Bond Counsel, whose opinion with respect to the Series 2008 Bonds will be furnished at the expense of the City upon delivery of the Series 2008 Bonds. Certain legal matters will be passed upon for the Underwriters by its counsel, McGuireWoods LLP, Richmond, Virginia; and for the City by the City Attorney, Dean Crowhurst, Esquire.

The Bond Opinion will be limited to matters relating to authorization and validity of the Series 2008 Bonds and to the tax-exempt status of interest on the Series 2008 Bonds as described in "Tax Matters" herein. Bond Counsel has not been engaged to investigate the financial resources of the City or its ability to provide for payment of the Series 2008 Bonds, and the Bond Opinion will make no statement as to such matters or as to the accuracy or completeness of this Official Statement or any other information that may have been relied on by anyone in making the decision to purchase Series 2008 Bonds.

Tax Matters

Opinion of Bond Counsel—Federal Income Tax Status of Interest

Bond Counsel's opinion will state that, under current law, interest on the Series 2008 Bonds (including any accrued "original issue discount" properly allocable to the owners of the Series 2008 Bonds) is excludable from gross income for purposes of federal income taxation and that interest on the Series 2008 Bonds is not a specific item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations (a "Specific Tax Preference Item"). See "Form of Opinion of Bond Counsel" in Appendix C hereto.

Bond Counsel will express no opinion regarding other federal tax consequences arising with respect to the Series 2008 Bonds.

Bond Counsel's opinion speaks as of its date, is based on current legal authority and precedent, covers certain matters not directly addressed by such authority and precedent, and represents Bond Counsel's judgment as to the proper treatment of interest on the Series 2008 Bonds for federal income tax purposes. Bond Counsel's opinion does not contain or provide any opinion or assurance regarding the future activities of the City or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the Internal Revenue Service (the "IRS"). The City has covenanted, however, to comply with the requirements of the Code.

Reliance and Assumptions; Effect of Certain Changes

In delivering its opinion regarding the Series 2008 Bonds, Bond Counsel is relying upon (i) computations provided by the Underwriter, relating to the yield on the Series 2008 Bonds and the yield on investments in the escrow fund to be established to provide payment of the Refunded Bonds, and (ii)

-11-

certifications of representatives of the City as to facts material to the opinion, which Bond Counsel has not independently verified.

In addition, Bond Counsel is assuming continuing compliance with the Covenants (as hereinafter defined) by the City. The Code and the regulations promulgated thereunder contain a number of requirements that must be satisfied after the issuance of the Series 2008 Bonds in order for interest on the Series 2008 Bonds to be and remain excludable from gross income for purposes of federal income taxation. These requirements include, by way of example and not limitation, restrictions on the use, expenditure and investment of the proceeds of the Series 2008 Bonds and the use of the property financed or refinanced by the Series 2008 Bonds, limitations on the source of the payment of and the security for the Series 2008 Bonds, the obligation to rebate certain excess earnings on the gross proceeds of the Series 2008 Bonds to the United States Treasury. The City's non-arbitrage certificate (the "Non-Arbitrage Certificate") contains covenants (the "Covenants") under which the City has agreed to comply with such requirements. Failure by the City to comply with their respective Covenants could cause interest on the Series 2008 Bonds to become includable in gross income for federal income tax purposes retroactively to their date of issue. In the event of noncompliance with the Covenants, the available enforcement remedies may be limited by applicable provisions of law and, therefore, may not be adequate to prevent interest on the Series 2008 Bonds from becoming includible in gross income for Federal income tax purposes.

Bond Counsel has no responsibility to monitor compliance with the Covenants after the date of issue of the Series 2008 Bonds.

Certain requirements and procedures contained, incorporated or referred to in the Non-Arbitrage Certificate, including the Covenants, may be changed and certain actions may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Bond Counsel expresses no opinion concerning any effect on the excludability of interest on the Series 2008 Bonds from gross income for federal income tax purposes of any such subsequent change or action that may be made, taken or omitted upon the advice or approval of counsel other than Bond Counsel.

Certain Collateral Federal Tax Consequences

The following is a brief discussion of certain collateral federal income tax matters with respect to the Series 2008 Bonds. It does not purport to address all aspects of federal taxation that may be relevant to a particular owner thereof. Prospective purchasers of such Series 2008 Bonds, particularly those who may be subject to special rules, are advised to consult their own tax advisors regarding the federal tax consequences of owning or disposing of the Series 2008 Bonds.

Prospective purchasers of the Series 2008 Bonds should be aware that the ownership of tax-exempt obligations may result in collateral federal income tax consequences to certain taxpayers including, without limitation, financial institutions, certain insurance companies, certain corporations (including S corporations and foreign corporations), certain foreign corporations subject to the "branch profits tax," individual recipients of Social Security or Railroad Retirement benefits, taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations and taxpayers attempting to qualify for the earned income tax credit.

In addition, prospective purchasers should be aware that the interest paid on, and the proceeds of the sale of, tax-exempt obligations, including the Series 2008 Bonds, are in many cases required to be reported to the IRS in a manner similar to interest paid on taxable obligations. Additionally, backup withholding may apply to any such payments made after March 31, 2007 to any Series 2008 Bond owner who fails to provide an accurate Form W-9 Request for Taxpayer Identification Number and Certification, or a substantially identical form, or to any Series 2008 Bond owner who is notified by the IRS of a failure to report all interest and dividends required to be shown on federal income tax returns. The reporting and withholding requirements do

-12-

not in and of themselves affect the excludability of such interest from gross income for federal tax purposes or any other federal tax consequence of purchasing, holding or selling tax-exempt obligations.

Original Issue Discount

The "original issue discount" ("OID") on any Series 2008 Bond is the excess of such bond's stated redemption price at maturity (excluding certain "qualified stated interest" that is unconditionally payable at least annually at prescribed rates) over the issue price of such bond. The "issue price" of a Series 2008 Bond is the initial offering price to the public at which price a substantial amount of such bonds of the same maturity was sold. The "public" does not include bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers. The issue price for each maturity of the Series 2008 Bonds is expected to be the initial public offering price set forth on the front cover of this Official Statement, but is subject to change based on actual sales. OID on the Series 2008 Bonds with OID (the "OID Bonds") represents interest that is excludable from gross income for purposes of federal and Virginia income taxation. However, the portion of the OID that is deemed to have accrued to the owner of an OID Bond in each year may be included in determining the alternative minimum tax and the distribution requirements of certain investment companies and may result in some of the collateral federal income tax consequences mentioned in the preceding subsection. Therefore, owners of OID Bonds should be aware that the accrual of OID in each year may result in alternative minimum tax liability, additional distribution requirements or other collateral federal and Virginia income tax consequences although the owner may not have received cash in such year.

Interest in the form of OID is treated under Section 1288 of the Code as accruing under a constant yield method that takes into account compounding on a semiannual or more frequent basis. If an OID Bond is sold or otherwise disposed of between semiannual compounding dates, then the OID which would have accrued for that semiannual compounding period for federal income tax purposes is to be apportioned in equal amounts among the days in such compounding period.

In the case of an original owner of an OID Bond, the amount of OID that is treated as having accrued on such OID Bond is added to the owner's cost basis in determining, for federal income tax purposes, gain or loss upon its disposition (including its sale, redemption or payment at maturity). The amounts received upon such disposition that are attributable to accrued OID will be excluded from the gross income of the recipients for federal income tax purposes. The accrual of OID and its effect on the redemption, sale or other disposition of OID Bonds that are not purchased in the initial offering at the initial offering price may be determined according to rules that differ from those described above.

Prospective purchasers of OID Bonds should consult their own tax advisors with respect to the precise determination for federal income tax purposes of interest accrued upon sale or redemption of such OID Bonds and with respect to state and local tax consequences of owning OID Bonds.

Bond Premium

In general, if an owner acquires a bond for a purchase price (excluding accrued interest) or otherwise at a tax basis that reflects a premium over the sum of all amounts payable on the bond after the acquisition date (excluding certain "qualified stated interest" that is unconditionally payable at least annually at prescribed rates), that premium constitutes "bond premium" on that bond (a "Premium Bond"). In general, under Section 171 of the Code, an owner of a Premium Bond must amortize the bond premium over the remaining term of the Premium Bond, based on the owner's yield over the remaining term of the Premium Bond, determined based on constant yield principles. An owner of a Premium Bond must amortize the bond premium by offsetting the qualified stated interest allocable to each interest accrual period under the owner's regular method of accounting against the bond premium allocable to that period. In the case of a tax-exempt Premium Bond, if the bond premium allocable to an accrual period exceeds the qualified stated interest allocable to that accrual period, the excess is a nondeductible loss. Under certain circumstances, the owner of a Premium Bond

-13-

may realize a taxable gain upon disposition of the Premium Bond even though it is sold or redeemed for an amount less than or equal to the owner's original acquisition cost. Prospective purchasers of any Premium Bonds should consult their own tax advisors regarding the treatment of bond premium for federal income tax purposes, including various special rules relating thereto, and state and local tax consequences, in connection with the acquisition, ownership, amortization of bond premium on, sale, exchange, or other disposition of Premium Bonds.

Possible Legislative or Regulatory Action

Legislation and regulations affecting tax-exempt bonds are continually being considered by the United States Congress, the U.S. Department of the Treasury ("Treasury") and the IRS. In addition, the IRS has established an expanded audit and enforcement program for tax-exempt bonds. There can be no assurance that legislation enacted or proposed after the date of issue of the Series 2008 Bonds or an audit initiated or other enforcement or regulatory action taken by the Treasury or the IRS involving either the Series 2008 Bonds or other tax-exempt bonds will not have an adverse effect on the tax status or the market price of the Series 2008 Bonds or on the economic value of the tax-exempt status of the interest thereon.

Opinion of Bond Counsel—Virginia Income Tax Consequences

Bond Counsel's opinion also will state that, under current law, the Series 2008 Bonds and the income from them, including any profit made on their sale, are exempt from taxation by the Commonwealth and any of its political subdivisions. Bond Counsel will express no opinion regarding (i) other Virginia tax consequences arising with respect to the Series 2008 Bonds or (ii) any consequences arising with respect to the Series 2008 Bonds under the tax laws of any state or local jurisdiction other than Virginia. Prospective purchasers of the Series 2008 Bonds should consult their own tax advisors regarding the tax status of interest on the Series 2008 Bonds in a particular state or local jurisdiction other than Virginia.

-14-

SECTION THREE: CITY OF MANASSAS PARK, VIRGINIA

General Description

Overview

The City is located within the northern portion of Prince William County near its border with Fairfax County. A part of the City's western border is contiguous with the eastern border of the City of Manassas. The City comprises an area of approximately 2.5 square miles.

The City became an independent city on June 1, 1975. The City is autonomous and entirely independent of any county or any other political subdivision. It is neither coterminous with, nor subject to taxation by, any county and is not liable for any county indebtedness. Prior to becoming a city, the City of Manassas Park was an incorporated town within Prince William County and received certain of its municipal services through Prince William County.

Form and Organization of Government

The City's government is organized according to the Council-Manager form of government. The Mayor and the City Council constitute the Governing Body of the City, which formulates policy for the administration of the City. The six members of the City Council are elected on an at-large basis to serve four-year terms of office. The Mayor is also elected at large, for a four-year term, and presides at Governing Body meetings and is authorized to vote as a member of the Governing Body

The Governing Body appoints the City Manager to serve as the City's chief administrative officer. The City Manager is responsible for implementing the policies of the Governing Body, directing business and administrative procedures and appointing departmental officials and certain other City employees. At the present time, the City Manager is assisted by eight staff departments including Building, Planning, Zoning and Code Enforcement; Finance; Fire & Rescue; Management Services; Parks & Recreation; Police; Public Works; and Social Services.

The operation of the public school system in the City is the responsibility of the City School Board. The Governing Body appoints the five members of the School Board to serve three-year staggered terms of office. The Superintendent of Schools is appointed by the School Board. The local share of funds for operating public schools in the City is provided by an appropriation from the City's General Fund to the School Board. The School Board, however, is an autonomous policy-making body in matters governing education and is independent of the Governing Body.

The City Treasurer and the Commissioner of the Revenue are local constitutional officers of the Commonwealth elected by the residents of the City. The City Treasurer is responsible for the collection, investment and management of all monies payable to the City and its School Board. The Commissioner of the Revenue prepares the assessment and the tax levy of real and personal property and processes the Commonwealth of Virginia income tax returns of City residents.

-15-

CITY OF MANASSAS PARK ORGANIZATIONAL CHART

-16-

Principal Executive Officers Officials

Manner of Selection

Length of Service with City

Term

Expiration

Governing Body Members Frank Jones, Mayor

Elected by voters 4 years 4 years December 1, 2008

Bryan E. Polk, Vice Mayor


William J. Treuting, Jr.


Cynthia Gardner


Dr. Frances Kassinger


Michael R. Bunner


Keith Miller

Elected by voters 2 year 4 years December 1, 2008

Other Elected Officials

Debra D. Wood, Commissioner of the Revenue


George Adamson, City Treasurer


Certain Administrative Staff

Mercury T. Payton, City Manager

Appointed by Governing Body

5 years Serves at the pleasure of the Governing Body

Gary Fields, Director of Finance

Appointed by City Manager

2.5 years Serves at the pleasure of the City Manager

Dr. Thomas De Bolt, Superintendent of Schools

Appointed by the School Board

13 years Serves at the pleasure of the School Board

Dean H. Crowhurst, City Attorney

Appointed by Governing Body

6 years Serves at the pleasure of Governing Body

Colonel John Evans, Chief of Police

Appointed by City Manager

22 years Serves at the pleasure of the City Manager

Lana A. Conner, City Clerk Appointed by Governing Body

39 years Serves at the pleasure of Governing Body

-17-

Profiles of Elected Officials

Frank Jones was elected to his first term as Mayor in 2004. Prior to his election to the Governing Body, Mr. Jones served for 13 years on the Manassas Park School Board and as Chairman of the School Board for 11 of those years. A retired United States Navy officer, he is currently employed with the federal government.

Bryan E. Polk was elected to his first term on the Governing Body in 2004 and was appointed Vice Mayor in 2006. Mr. Polk has served the City in various capacities for over 13 years, including serving as a member of the Governing Body School Board Liaison Committee and serving as Vice Chairman of the Manassas Park School Board. He received a Bachelor of Science degree in Computer Science from Virginia Tech and is currently employed as an Information Technology Manager.

William J. Treuting, Jr. was first appointed to the Governing Body in 1997 to finish out the term of a member that relocated out of the City. In 1998, he was elected to the Governing Body for a four-year term and in 2000 he was elected Mayor. In 2006, Mr. Treuting was appointed again to Governing Body to finish out the remainder of the term of a member that relocated out of the City. Currently a Senior Principal Engineer, he also served 20 years as a commissioned officer in the United States Air Force. Mr. Treuting received a Bachelor of Science degree from Nicholls State University and a Master of Arts degree from Webster University.

Cynthia Gardner was elected to her first term on the Governing Body in 2004. She grew up in Cherry Tree, Pennsylvania. Currently, a stay at home mom, she received an Associate degree in Accounting from Altoona School of Commerce.

Dr. Frances Kassinger was appointed to her first term on the Governing Body in 2000 to fulfill Mr. Treuting's term as member to the Governing Body after Mr. Treuting was elected Mayor. In 2006 she was elected to the Governing Body for a four-year term. She is currently with the Department of Treasury as Training Manager for the HR Connect Program Office. Dr. Kassinger is a former active duty United States Air Force officer, resigning her commission in 1992. She earned a Bachelors degree and Masters degree in Education from the University of Georgia and received her Doctorate in Human Resources from Virginia Tech.

Michael R. Bunner was first elected to serve on the Governing Body in 2002 and was elected for a second term in 2006. While maintaining an active role in the community, particularly the Department of Parks & Recreation, Mr. Bunner is a Lieutenant in the Washington, D.C. Metropolitan Police Department where he has served for the past 17 years.

Keith Miller was appointed to his first term on the Governing Body in 2006 to finish out the term of a member that resigned. He is current co-owner of a full service catering company based in the City of Manassas Park. Mr. Miller has a Bachelor of Science degree in Criminology from Indiana University of Pennsylvania.

Certain Administrative Staff Members and Elected Officials

Mercury T. Payton was appointed City Manager in March 2005. Prior to his appointment, he served as Deputy City Manager for two years. From November 2000 to February 2003, Mr. Payton was Assistant City Manager of Emporia, Virginia. He earned a Bachelor of Arts degree in Political Science from Hampton University and a Master of Public Administration degree from the University of Delaware. Mr. Payton is an active member of the Virginia Local Government Management Association (VLGMA) and the International City/County Management Association (ICMA).

-18-

Gary Fields was appointed Director of Finance in November 2005. Mr. Fields has served as Finance Director for the City of Bay City, Michigan and the City of Growth Point, Michigan. He has over 25 years of accounting and financial experience, with 21 years specific to local government. Mr. Fields spent over 16 years in various public accounting firms, where he served as senior manager in the auditing of various local government bodies. He received a Bachelors degree in Business Administration from Abilene Christian University in Abilene, Texas.

George Adamson was first appointed City Treasurer in November 2004 and was elected to the office for a four-year term in November 2005. Mr. Adamson served as an auditor for the City of Manassas Park from 2000 to 2004. Prior to coming to the City of Manassas Park, Mr. Adamson spent two years teaching economics at McMurray College in Abilene, Texas and 25 years at the Department of Defense where he held various positions, including Appropriation Manager, Controller and Budget Officer. He received his Bachelor of Science degree in Economics from the University of Utah and has completed all requirements except his dissertation for a PhD in Economics at Texas A&M University.

Debra D. Wood has been Commissioner of the Revenue since June 1999. She has been employed by the City of Manassas Park since August 1991. From 1991 to 1999, Ms. Wood served as Deputy Commissioner and Chief Deputy Commissioner. She was appointed as interim Commissioner in June 1999 and was elected to office in November 1999. She became a Certified Commissioner of the Revenue in November 2000 from the University of Virginia.

Dr. Thomas DeBolt was appointed Superintendent of Schools on August 1, 1995. Prior to his appointment as Superintendent of Schools, Dr. DeBolt was a high school principal for 23 years. He received a Bachelor of Arts degree from Eureka College, and a Master of Arts Degree, an EdS Degree and a PhD Degree from George Peabody College for Teachers of Vanderbilt University.

Lana A. Conner was appointed City Clerk in January 1976. Prior to that, she served as Clerical Secretary, Deputy Town Clerk, and Clerk of Court for the Manassas Park Court. She has been employed by the City since 1969. In 1987 she was designated as Certified Municipal Clerk and is a member of the Virginia Municipal Clerks Association and the International Institute of Municipal Clerks.

Dean Crowhurst was appointed by the Governing Body as City Attorney in May 2002. Mr. Crowhurst is a solo practitioner and opened his solo practice in 2005. Prior to 2005, he was an associate at the Tysons Corner office of McGuireWoods LLP. Mr. Crowhurst received his Bachelors degree from the University of California (Davis) and received his Juris Doctorate from George Mason University School of Law. Prior to his career in law, Mr. Crowhurst was a Naval Flight Officer in the United States Navy for 12 years. He currently serves in the Naval Reserves.

City Employees

The number of persons employed by the City is set forth in the table below.

General Number of Employees Full-time

220

School Instructional Personnel 223 Other 157

Total 380

_____________________ Source: City of Manassas Park, Virginia Department of Finance and the School Department of Finance.

-19-

Government Services and Facilities

Local Government Services

In Virginia, cities and counties are not overlapping units of government. Each city or county is a distinct political entity providing services for the population within its respective jurisdiction. There are no combined city county governmental services unless provided by contractual agreement. The City is therefore responsible for providing all local governmental services to its residents.

Transportation

The City is served to the east by Interstate 95 and U.S. Highway 1, both connecting the City with Washington, D.C. to the north and Richmond, Virginia to the south. Interstate 66 connects the western portion of the City with Washington D.C. to the east and Interstate 81 to the west. Interstate 81 connects the City with southwestern Virginia and eastern Tennessee to the south, and Pennsylvania and New York to the north. Railroad service is provided by the Norfolk Southern Railway and the Richmond, Fredericksburg and Potomac Railway. An Amtrack passenger station is located in the City of Quantico and City of Manassas. Air transportation service is provided by Dulles International Airport, Ronald Reagan Washington National Airport, and by Manassas Municipal Airport, which is located in the City of Manassas. Virginia Railway Express (VRE) also serves Manassas Park. This commuter railway began operating in July 1992 transporting commuters to Union Station in Washington, D.C. A VRE Commuter rail station is located in the heart of the City of Manassas Park, across from the site of the new Park Center town center development near City Hall.

The Potomac and Rappahannock Transportation District Commission (the "Transportation District") was created on August 1, 1986 following the passage of enabling legislation by the General Assembly of Virginia Section 15.2-4500, Code of Virginia (1950), as amended. The Transportation District is currently comprised of the Counties of Prince William and Stafford and the Cities of Manassas, Manassas Park and Fredericksburg. The Transportation District receives revenues from a 2% sales tax on motor fuels sold within the member jurisdictions that is collected by the Commonwealth. During fiscal year ended June 30, 2007, the City received $261,456 in tax revenues which was used for transportation projects identified by the City.

The Transportation District is governed by a commission comprised of fifteen members (the "Commission"), including a representative of the Virginia Department of Transportation and three members of the General Assembly. The Commission has prepared a long-term transportation plan for the Transportation District to facilitate the planning and development of an improved transportation system composed of transit facilities, public highway and other modes of transportation in order to promote orderly transportation into, within and from the various contiguous counties and cities composing the district. VRE stations are located at Broad Run, Manassas and Manassas Park, and at Quantico, Rippon and Woodbridge in the east. The Transportation District also owns and operates the VRE station in the City.

Public Safety

The City of Manassas Park Public Safety Department consists of police, fire and rescue, and animal control services. The police department, consisting of 32 sworn officers, is responsible for community patrols and criminal investigations. The department also conducts many crime prevention programs such as Operation I.D., the Neighborhood Watch Program, drug abuse prevention programs and youth services. The department also coordinates the school safety patrol program and is an accredited agency through the Virginia Law Enforcement Professional Standards Commission. City fire prevention, fire suppression, fire investigation and emergency medical services are provided by a career organization of firefighters and emergency medical technicians. Emergency medical care is provided with an Advanced Life Support Ambulance and a Basic Life Support Ambulance. In a reciprocal agreement, both Prince William County and the City of Manassas provide back up service to the City. The City also utilizes an Enhanced 911 communications system.

-20-

Judicial Administration

The City contracts with Prince William County to administer judiciary affairs through the Offices of the Clerk of the Court, the Circuit Court, the Commonwealth's Attorney, the General District Court, the Juvenile and Domestic Relations Court and the Sheriff. Funding for the operations of the Clerk of the Court, the Commonwealth's Attorney and the Sheriff are largely provided by the Commonwealth.

The duties of the Clerk include filing and recording public records including criminal and civil court records, processing and retaining court files, orders, and judgments, and directly supporting the 31st Circuit Court and its judges. In fiscal year ended June 30, 1990, the General Assembly authorized a fifth judgeship for the Circuit court to assist in deciding increased case loads.

The Commonwealth Attorney's primary duties are the prosecution of all criminal and traffic cases involving violations of State Code and County Ordinances within the City. The Office is also responsible for the Victim/Witness assistance program which provides guidance and assistance to victims and witnesses.

The General District Court processes criminal, civil, and traffic cases heard by the District Court Judges and holds preliminary hearings for felonies. The Juvenile and Domestic Relations Court has jurisdiction over all cases involving juveniles and domestic relations.

Regional Adult Detention Center

The City contracts with Prince William County on a per diem basis for the use of the Regional Adult Detention Center (ADC) to provide secure, safe, and cost effective housing of prisoners admitted. The Center is governed by a Regional Jail Board consisting of ten members appointed by the Board of County Supervisors and the Manassas City Council.

City Attorney

The City Attorney provides legal assistance, advice, and litigation services to the Governing Body, officials, and employees of the City in matters concerning the government. He handles matters involving land use and zoning, leases and contract negotiations, deed preparation and review, voting rights act, and personnel matters, including fair labor standards law and workers' compensation. He represents the Governing Body and City employees in litigation and administrative proceedings.

Public Works

The City of Manassas Park Public Works Department consists of street maintenance, building and grounds, sanitation, vehicle maintenance and water and sewer divisions. The City is responsible for the maintenance of all City streets, roads and other public infrastructure. In addition, the City maintains all public buildings, property, and utility lines. The City contracts refuse collection to American Disposal Services, Inc.

Planning and Zoning

The Department of Building Planning and Zoning is responsible for administering the City zoning ordinance, subdivision ordinance, and Comprehensive Plan; as well as, reviewing and providing case management services for commercial and residential plans, including preliminary plans, final plan, plan revisions, administrative, and simple subdivision plans. The department reviews and issues land development permits; and ensures the posting of bonds and escrows.

The department also reviews and provides case management services for rezoning, and conditional use permit applications from the initial application acceptance to preparing recommendations to the Planning Commission and final action by the Governing Body. The department processes Comprehensive Plan

-21-

amendment requests to the Governing Body and processes administrative reviews; reviews and prepares zoning text amendments, and special projects related to economic development, beautification, and other planning/program projects as identified by the Governing Body. The department responds to requests for land development documents and records associated with land development activities.

The department provides assistance to citizens and developers by answering inquiries concerning permitted uses of land and related City codes.

Parks and Recreation

The City of Manassas Park places a heavy emphasis on offering residents quality recreation and leisure services. These services fall into five distinct categories: Aquatics, Recreation Center Programming, Parks, Historic Preservation, and Special Events.

The Aquatics component is a seasonal program that operates from the City owned 110,000 gallon swimming pool located in Costello Park and from the facilities that comprise Signal Bay Water Park. Costello Park pool features a wading pool, diving area, shower facilities, restrooms, and lounging and picnic facilities. Signal Bay Water Park features a zero-depth-entry leisure pool, a three-foot-deep lazy river, shower facilities, restrooms, lodging and picnic area and a sand volleyball court. A variety of aquatic activities and programs are offered to appeal to all age groups.

The Recreation Center is a City-owned facility comprised of a large gymnasium, game room and classrooms. A variety of recreational and cultural programs are offered year round for children and adults.

The City has developed a system of parks, historic sites and playgrounds which geographically span the entire City. Included in the park system are (i) three neighborhood block parks; (ii) Costello Park, a 25 acre active recreation park; (iii) Signal Hill Park, a 106 acre actively developed regional park; (iv) the Conner House; (v) Camp Carondelet; (vi) the Georgia Cemetery and (vii) Signal Hill Monument. Prince William County opened an 18 hole public golf course in May 1996, located in Manassas Park.

The City sponsors a variety of special events throughout the year appealing to all age groups and interests at many different locations. The City's July Fourth Festival held in at Signal Hill Park, attracts over 15,000 visitors regionally. Other special events include a seasonal concert series, outdoor movie festivals, the Latino Festival and the Light Parade, all of which attract visitors regionally.

The City is in the development stages of a new Parks & Recreation Community Center (the "Community Center") to replace the aging building. The Community Center will be located at the same location of the old community center and will be a 76,000 square foot facility. The Community Center will include a full sized gym, multi-use classrooms, a preschool area, a teen lounge, a large activity room, indoor swimming pool and various other recreational facilities. A portion of the proceeds of the Series 2008 Bonds will be used to finance the construction of the Community Center, along with approximately $3,500,000 of proceeds from the City's $30,000,000 General Obligation School and Public Improvement Bond, Series 2005.

-22-

Education

Before Manassas Park became a City, Manassas Park students attended schools operated by Prince William County. Upon becoming a City in June 1975, the Governing Body appointed a School Board to function independently of Prince William County, and to acquire from Prince William County all school facilities within the City. The School Board, in setting up an independent City school system, contracted with Prince William County to continue operation of the school system through June 30, 1976. Since July 1, 1976, the School Board has operated the school system on an independent basis. The Governing Body appoints members to the School Board and provides significant funding for the operation of the school system.

The Manassas Park public school system consists of two elementary schools, one middle school and one high school. The City has invested significant resources in the last decade toward replacing its school facilities. The City issued its Series 2007A Bonds to provide funds for the completion of a 10-year school capital improvement plan resulting in 100% school building replacement.

Manassas Park High School opened in 1999 and serves 9th through 12th grade students. The high school shares its campus with the recently completed Manassas Park Middle School. This new facility was constructed on the footprint of the old Manassas Park Middle/High School and the main building became occupied by staff and students in October 2006. The final phases of this project include a recently opened theater style auditorium that seats over 600 people and serves all schools in the City for performances of all types as well as community and civic events. The High School/Middle School campus has also been greatly enhanced in the last two years with the expansion and renovation of the stadium facility, including new stadium restroom facilities, new storage and press boxes, several new athletic fields, and landscaping.

Cougar Elementary School opened in 2001 and serves the kindergarten through third grade. The current Manassas Park Elementary School is located in the older part of the City. This school was built in the 1950s (prior to the City's incorporation) and hosts the fourth and fifth grade as well as pre-kindergarten programs. The City's Series 2007A Bonds financed the replacement of this school and the construction of a new preschool facility, both of which will be located in the same location as the Cougar Elementary School. Upon opening of the New Cougar Upper Elementary and Preschool facilities, the property where the old Manassas Park Elementary School is located will be turned over to the City for development as part of the Costello Park improvements as described in "Parks and Recreation" above.

The public schools in the City of Manassas Park have embraced the federal "No Child Left Behind" legislation and all schools as well as the school division achieved AYP (adequate yearly progress) last year. The Manassas Park school division is one of only 24 school divisions in the Commonwealth to successfully achieve this federal benchmark, Manassas Park City Schools student pass rates on state standardized tests are well above the state averages.

Academic Year Number Enrolled 1998 1,674 1999 1,789 2000 1,855 2001 2,041 2002 2,124 2003 2,273 2004 2,412 2005 2,358 2006 2,321 2007 2,473

_________________ Source: School Board, City of Manassas Park, Virginia.

-23-

Public Utilities

Water Service

The City of Manassas Park Water System serves approximately 14,000 people within its service area through a system of wells supplemented by water purchased from the City of Manassas. The City utilizes and maintains three active wells with depths ranging from 875 to 1,000 feet yielding 965 gallons per minute (gpm). No treatment is currently provided for the well supplies. The City supplements its well supplies through an agreement with the City of Manassas effective January 1, 1988. The City purchases up to one million gallons per day of chlorinated water from the City of Manassas to provide operating, fire and emergency storage capacity for the water system. The largest standpipe is 81 feet high and 48.5 diameter and has a total capacity of 1,000,000 gallons with an overflow elevation of 410 feet. The next standpipe is 63 feet high and 50 feet in diameter and has a total capacity of 925,300 gallons. The smallest of the three standpipes is 70 feet high and 24 feet in diameter and has a total capacity of 250,000 gallons. Both of these standpipes have an overflow elevation of 374 feet.

The water distribution system consists of a network of 32.82 miles of cast or ductile iron water mains. Standard fire hydrants are connected to mains in strategic positions. Currently, there are about 4,000 water connects.

The City is currently negotiating with certain regional wholesale water providers to purchase additional water capacity to support growth. The City intends to finance this purchase of water capacity through the sale of utility revenue bonds later this calendar year.

Sewer Service

The City of Manassas Park operates and maintains a sanitary sewage collection system for use by its residents. This sewage system consists of approximately 31.00 miles of sewer mains ranging in size from 6 to 12 inches in diameter. Total flows from this sewage collection network are metered as it enters the Upper Occoquan Sewage Authority's (UOSA) trunk sewers. From there the flows are transported to the UOSA regional advanced wastewater treatment plant where they are processed.

UOSA was formed on March 3, 1971, by concurrent resolution of the governing bodies of Fairfax and Prince William Counties and the Cities of Manassas and Manassas Park. UOSA's effluent discharge flows via Bull Run to the Occoquan Reservoir. The Occoquan Reservoir is a major water supply source for approximately one million people located in Fairfax County, the City of Alexandria and eastern Prince William County. Studies in 1969-70 concluded that inadequately treated sewage discharge by the existing eleven secondary treatment plants in the Occoquan Watershed were largely responsible for the serious water quality problems in the Reservoir. To remedy the problems, the Virginia Water Control Board in 1971 adopted a comprehensive policy for the Occoquan Watershed (Occoquan Policy). A principal requirement of the Occoquan Policy was the construction of a regional water reclamation facility to replace the eleven existing treatment plants. UOSA was created to address this mandate.

UOSA is a public politic, corporate, and an instrumentality of the Commonwealth of Virginia. The governing body of UOSA is an eight-person Board of Directors consisting of two members appointed for four year terms by the governing body of each member political subdivision. The Executive Director is responsible to the Board of Directors for the day to day operations of UOSA. The staff is composed of three Divisions: Operations and Maintenance, Treatment Process, and Administration. The Laboratory and Construction/Engineering Sections are staff functions reporting directly to the Executive Director.

The City is obligated under an agreement with the UOSA for sewage treatment and disposal service.

-24-

UOSA has issued various revenue bonds to fund construction costs of the system. The City's share of construction costs and debt service is determined based on their portion of capacity rights of the facilities. The City funds its obligations to UOSA through payments from the Enterprise Fund. Operation and maintenance charges are paid to UOSA monthly and debt service payments quarterly.

Health and Welfare

The City of Manassas Park Department of Social Services administers human services to the citizens under the support of the Commonwealth of Virginia State Department of Social Services. Funding for service delivery to clients is covered through state and federal funds reimbursed monthly to the City of Manassas Park. Approximately 80% of the associated operational costs for the administration of mandated programs are reimbursed to the locality from state and federal funding.

The following Financial Assistance or Benefits programs are available to eligible citizens:

• Temporary Assistant to Needy Families-TANF • General Relief • Food Stamps • Medicaid eligibility • Energy Assistance • Subsidized Child Care funding for eligible families that need child care to work

The department also administers child protective and adult protective services on a 24-hour basis to

the citizens of the City of Manassas Park. These services are available if children or incapacitated adults over 60 are determined to be experiencing abuse, neglect or exploitation. Foster Care and adoption services are also available if determined to be in the best interest of the child. Services needed for the children in foster care are covered through Federal IV-E funding, Comprehensive Services funding or local funds.

Adult Services, such as companion, home health care is also purchased when necessary. Payments to vendors for associated services are made and overseen by the department. Citizens of Manassas Park may also access additional services for the elder population through the Area Agency on Aging (the "Agency") in Prince William County. The Agency helps elder citizens maintain independence and quality of life. The Agency also advocates, educates and implements programs and services for adults. The Agency is funded largely through state funds with some local funding.

Similarly, mental health services are available through Prince William County's Community Services department. Community Services is a public agency that provides a variety of mental health, mental retardation, substance abuse and early intervention as well as emergency services for the citizens of Prince William County, the City of Manassas and the City of Manassas Park. Community Services operates two centers in Prince William County providing evaluation and treatment services relating to drug and alcohol abuse; and a 24-hour emergency services program. The Mental Retardation Services division provides counseling and case management to families of mentally retarded citizens and citizens with autism. Mental Health Services division operates two service centers providing psychotherapy and counseling services, hospitalization for seriously emotionally distressed persons, and operates joint residential detoxification/emergency stabilization program. The Prevention Services division of Community Services provides public information and education in mental health promotion, substance abuse prevention, and youth and adult suicide prevention programs.

Prince William County's Office of Criminal Justice Services also provides services that are available to the citizens of the City of Manassas Park. These services are in place to develop, establish and maintain community based corrections programs that provide sanctions and alternatives to incarceration and to provide leadership and coordination throughout the entire criminal justice system. These alternatives are used to alleviate overcrowding in jails and involve nonviolent felons and misdemeanants referred by the Circuit Court.

-25-

Prince Williams County's Court Service Unit, which is associated with the County's Juvenile and Domestic Relations District which provides services to the citizens of the City of Manassas Park. The functions of the Court Service Unit include

• Intake, for child custody, support, paternity, visitation, family abuse, protective orders, delinquent and CHINS (Child in Need of Service) petitions.

• Probation: provides community supervision for juveniles under the jurisdiction of the court. Youth on probation receive community based supervision including services that may be obtained from other agencies or purchased thorough private vendors as appropriate.

• Parole: provides community supervision for youth returning to the community from correctional centers. The unit has a goal to reduce recidivism for offenders.

The Prince William County Department of Public Health, funded primarily through the Commonwealth, is responsible for assuring that vital statistics, health information and preventive and environmental health services are available. The department's functions include maintaining birth and death records, inspection of food and public establishments, providing service regarding disposal of solid waste, inspecting, testing and permitting water supplies and sewage disposal facilities, and reviewing new projects for environmental impact. Public health services provided to the City by the department include maternal child care services, family planning services and general medical services for treatment of communicable diseases.

Economic and Demographic Information

Manassas Park, with a current estimated population of 13,910 persons, is part of the Northern Virginia portion of the Washington, D.C., Metropolitan Statistical Area (MSA). Located in the northern section of Prince William County, adjacent to Fairfax County, the City's economy is linked closely to the continued growth and economic development of the surrounding area. While the City is primarily residential in character, its commercial area is undergoing significant growth and development with the addition of new businesses.

Population of Manassas Park and Adjacent Areas

1970 1980 1990 1998 2000 2007 City of Manassas Park 6,844 6,542 6,734 8,500 10,290 13,910 City of Manassas 9,086 15,438 28,039 34,300 35,135 36,576 Prince William County 118,103 144,703 223,341 258,700 280,813 369,216 Commonwealth of Virginia 4,648,494 5,346,818 6,127,680 6,791,300 7,079,030 7,642,884 Source: United States Census; Data for year 2007, Weldon Cooper Center for Public Service.

-26-

Employment

The labor force of the City has been primarily employed by federal government agencies and the U.S. military. Many commute into Washington, D.C., and surrounding areas to the Pentagon, military bases, FBI and other government installations. Business establishments located within the City are summarized below by industry.

2007 Annual Quarterly Census of Employment

Industry Number of Establishments

Average Employment

Construction 82 1,524 Administrative and Waste Services 24 312 Wholesale Trade 20 251 Retail Trade 23 246 Manufacturing 11 206 Professional and Technical Services 18 180 Other Services, Ex. Public Admin 33 129 Accommodation and Food Services 10 79 Health Care and Social Assistance 8 59 Finance and Insurance 4 18 Real Estate and Rental and Leasing 4 15 Totals 237 3,019 ______________________ Source: Virginia Employment Commission, Third Quarter Report, 2007.

The largest employer within the City limits is the City itself, including the School division, as noted below. The following table shows the principal employers in the City.

Major Employers in the City Fiscal Year Ended June 30, 2007

Employer

Business Type

Employees

% of Total City

Employment Manassas Park Schools Government 380 5.82% Manassas Park City Government 220 3.26 Atlas Plumbing LLC Plumbing 130 3.60 QMT Associates Inc. Home/Garden 125 1.84 Owens and Dove Contractor 114 1.72 Finley Asphalt Asphalt 110 1.69 Strittmatter Equipment Trucking 103 1.58 ConCor of Virginia Concrete 100 1.53 Burton & Robinson, Inc. Concrete Contractor 70 1.38 Abuelita Mexican Food Products Food Services 62 1.36 Totals ____1,414____ ___23.79%__

______________________ Source: City of Manassas Park, Virginia, Comprehensive Annual Financial Report fiscal year ended June 30, 2007.

-27-

Annual Unemployment Rates

Unemployment Rate(1)

Year City of

Manassas Park

Virginia

United States 1998 1.7% 2.8% 4.5% 1999 1.2 2.7 4.2 2000 1.4 2.3 4.0 2001 1.8 3.2 4.7 2002 2.7 4.2 5.8 2003 2.6 4.1 6.0 2004 2.6 3.7 5.0 2005 2.4 3.5 5.1 2006 2.3 3.0 4.6 2007 2.5 3.1 4.6

________________________ Source: Virginia Employment Commission. (1) Percentages combine the unemployment rates for the City of Manassas Park and Prince William County.

Personal Income

Per Capita Income

2003 2004 2005 2006 2007 Manassas Park $26,154 $27,069 $28,016 $29,037 $30,140

Virginia 34,014 36,160 37,503 N/A N/A

_____________________ Source: Weldon Cooper Center for Public Service and the U.S. Department of Commerce, Bureau of Economic Analysis.

-28-

Retail Sales

Taxable Retail Sales and Taxable Retail Sales Per Capita

Last Ten Fiscal Years

Fiscal Year Population

Taxable Retail Sales

Taxable Retail Sales Per Capita

1998 8,500 $93,264,842 $10,972 1999 9,300 110,257,117 11,856 2000 10,290 138,896,916 13,498 2001 11,200 132,262,750 11,809 2002 11,900 134,462,007 11,299 2003 12,300 140,062,194 11,387 2004 12,700 171,524,276 13,506 2005(1) 12,900 174,436,372 13,522 2006(1) 13,100 165,227,698 12,613 2007 13,910 165,821,013 11,924

_____________________ Source: Virginia Department of Taxation and Weldon Cooper Center for Public Service. (1) As a result of the implementation of a new accounting system at the Virginia Department of Taxation (the "Department") and subsequent database modifications, the business classification categories will be converted to reflect North American Industry Classification System codes, effective with the third quarter of 2005. However, historical taxable sales will not be converted and will not be directly comparable to the figures for 2005 and forward. In addition, due to the controlled production environment utilized by the Department, the third and fourth quarters of 2005 are underreported and the first quarter of 2006 is overstated. Construction Activity

The following data is presented to illustrate construction activity in the City:

Real Property Value and Construction Activity Last Ten Fiscal Years

Building Permits Issued Fiscal Year

Real Property Value Number Value

1998 386,423,000 418 25,435,436 1999 402,686,000 516 20,452,577 2000 443,822,000 574 17,696,047 2001 515,503,000 409 25,117,043 2002 617,359,000 273 6,170,517 2003 737,216,000 360 32,619,596 2004 887,204,000 300 6,749,061 2005 1,103,796,000 308 29,163,149 2006 1,472,023,000 357 25,139,461 2007 1,767,459,000 177 2,696,283

__________________ Sources: City of Manassas Park, Virginia, Comprehensive Annual Financial Report, fiscal year ended June 30, 2007.

Economic Development

The Interstate 66 and Interstate 95 corridors are major growth areas in Northern Virginia. These corridors have attracted major electronic, computer, commercial, telecommunications, engineering and technology corporations. Northern Virginia's favorable business climate contributes to its high concentration

-29-

of technology firms in the region. The City of Manassas Park's close proximity and ease of access to these corporations as well as the region's dynamic service economy make the City an ideal location for businesses.

The Conner Center Industrial and Business Park is a 200 acre development that was built in the 1980's and currently holds over 300 small and medium sized businesses. Blooms Crossing is a City developed residential community of 460 acres that was developed over the past ten years. Blooms Crossing now has over 900 single-family and townhouse units. This residential development also includes commercial enterprises, including a private Christian school K-8th grade, a convenience store and a small retail center with ten businesses.

Recent private development includes the development an 81 acre privately owned piece of property located in the City's east side. Centrum-Manassas Park LLC developed a 150 unit age-restricted development and Fairfield at Manassas Park Apartments developed a gated 350 unit apartment development on the property in 2002 and 2003. Also construction of Digital Drive through the property was completed in the spring of 2002, which has allowed the remainder of the 81 acres to be opened up for development. A 44,000 square foot office-warehouse project was completed in 2003. Centex Homes has recently finished the development of Park Station at the end of Digital Drive, consisting of 65 townhomes, 105 "two-over-two" condos and 8 condo flats, consisting of 52 units.

In April 2007, Park Center LLC, managed by Clark Realty Capital, L.L.C., began construction on phase one of the Park Center Project, a multi-phased mixed-use 'town center' development which will consist of over 100,000 square feet of retail space, including two restaurants, in-line shops, and a shopping center. The plan for the Park Center Project also includes the construction of 414 residential units, a majority of which will be located above the retail space. The Park Center Project is located on 18 acres of vacant property across from City Hall and adjacent to the City's VRE Station. In January 2007, the City sold to Park Center LLC approximately 12.5 acres land needed to build phase one of the project. The City continues to own the remaining acreage and anticipates selling the property in 2008 or 2009. The first buildings of the Park Center Project are currently under construction and are expected to be completed and occupied by September 2008.

See the discussion of the Park Center Community Development Authority in "Debt Administration - Overlapping or Underlying Debt" in "SECTION FOUR: FINANCIAL INFORMATION."

-30-

SECTION FOUR: FINANCIAL INFORMATION

Financial Reporting

The City's financial statements include the following sections:

• Management's discussion and analysis (MD&A). - The MD&A introduces the basic financial statements and provide an analytical

overview of the government's financial activities.

• Basic financial statements. The basic financial statements include: - Government-wide financial statements, consisting of a statement of net assets and a

statement of activities. - Fund financial statements consisting of a series of statements that focus on

information about the government's major governmental and enterprise funds, including its discretely presented component unit School Board.

- Notes to the financial statements provide information that is essential to a user's understanding of the basic financial statements and the reporting entity.

• Required supplementary information (RSI). In addition to MD&A, budgetary comparison schedules are presented as RSI along with other types of data as required by GASB pronouncements.

Financial summaries provided in this offering statement are largely compiled from the audited

comprehensive annual financial reports of the City. These summaries should be read in conjunction with the related financial statements and notes. See Appendix A. Certain restatements have been made in order to maintain consistency with current reporting formats.

Annual Financial Reports

The City prepares a comprehensive annual financial report as of June 30, which is its fiscal year end. The Government Finance Officers Association has awarded the City a Certificate of Achievement for its comprehensive annual financial report since June 30, 1984. This certificate is awarded only to those governmental units whose comprehensive annual financial reports are judged to conform substantially to high standards of public financial reporting.

Annual Audit

An independent certified public accounting firm is engaged annually to audit the City's financial records. The firm of Robinson, Farmer, Cox and Associates has conducted the annual audit for fiscal year ended June 30, 2007. The auditor's report on the City's 2007 financial statements is included in Appendix A

The City's audited Comprehensive Annual Financial Report for the fiscal year ended June 30, 2007, has been published and the basic financial statements have been reproduced therefrom and are included in Appendix A to this Official Statement. Prior audited financial reports are available for inspection at the office of the Finance Department, One Park Center Court, Manassas Park, Virginia 20111-2395. Copies of the comprehensive annual financial reports may be obtained on-line at http://www.cityofmanassaspark.us/Public_Documents/ManassasParkVA_Finance/CAFR/S008A449F and, subject to availability, from the office of the Finance Department.

-31-

Fund Accounting

General

The accounts of the City are organized on the basis of funds, each of which constitutes a separate entity for accounting purposes. The City reports three types of funds in its financial statements.

Governmental Funds

Governmental Funds account for resources and uses for general government administration, courts, public safety, public works, health and human services, parks and recreation, community and economic development, debt service and local support to public education. Governmental Funds include the general fund and debt service funds for the City and the Manassas Park Public Schools. The School Operating Fund is a special revenue (governmental) fund. The School Operating Fund is reported under the Component Unit School Board in accordance with generally accepted governmental accounting standards.

Proprietary Fund

The City uses a Proprietary Fund to account for financial activity of the City's water and sewer operations. For proprietary funds, financial information is reported on the full accrual basis, similar to business entities, in both the government-wide and the fund financial statements.

Fiduciary Funds

Fiduciary Funds reported in the City of Manassas Park's financial statements reflect a small amount of funds held on behalf of certain social services clients.

Government –Wide Accounting & Financial Reporting

The government-wide financial statements are prepared 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, net of an allowance for uncollectible accounts. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

Below is a summary of net assets for the City and its Component Unit School Board for the fiscal year ended June 30, 2006 and fiscal year ended June 30, 2007.

-32-

Summary of Net Assets

2007 2006 2007 2006 2007 2006 2007 2006

Current & other assets $ 49,725 $ 30,179 $ 7,824 $ 9,197 $ 57,549 $ 39,376 $ 3,621 $ 2,821 Capital assets 78,058 69,013 10,226 10,273 88,284 79,286 21,749 17,550 Total assets $ 127,783 $ 99,192 $ 18,050 $ 19,470 $ 145,833 $ 118,662 $ 25,370 $ 20,371

Long-term debtoutstanding $ 100,271 $ 65,714 $ 1,085 $ 1,139 $ 101,356 $ 66,853 $ 1,014 $ 492

Other liabilities 3,088 5,054 89 215 3,177 5,269 2,847 2,530 Total liabilities $ 103,359 $ 70,768 $ 1,174 $ 1,354 $ 104,533 $ 72,122 $ 3,861 $ 3,022

Net assets:Invested in capital assets,

net of related debt $ 17,966 $ 22,768 $ 9,192 $ 9,161 $ 27,158 $ 31,929 $ 21,129 $ 17,379Restricted (transporation) - 1,495 - - - 1,495 - - Restricted (retiree health benefits) - - - - - - 114 114 Unrestricted (deficit) 6,458 4,161 7,684 8,955 14,142 13,116 266 (144) Total net assets $ 24,424 $ 28,424 $ 16,876 $ 18,116 $ 41,300 $ 46,540 $ 21,509 $ 17,349

Component Unit Governmental Business-type Total Primary

The City's combined net assets decreased from $46.54 million at June 30, 2006 to $41.3 million at June 30, 2007, primarily due to an increase in current assets (cash) offset by an increase in long-term debt outstanding in governmental activities. The majority (74%) of the City's net assets of governmental activities are invested in capital assets (streets, drainage, construction in progress, buildings, equipment, etc.). The capital assets are net of the outstanding principal of the debt associated with their acquisition. These assets are not available for future expenditures since they will not be sold. The City has a sound financial position with 32% of total (governmental and business-type) net assets unrestricted and available for providing services to the citizens of the City.

The Component Unit School Board net assets increased by $4.2 million primarily as a result of an increase in capital assets.

Governmental Fund Financial Statements

Governmental Fund financial statements are prepared using the current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when they become both measurable and available. In general, revenues are considered to be available when collected within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the financial reporting period. Expenditures are recorded when the liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded in the period payment is due.

General Fund

The General Fund is the primary operating fund of the City and receives most of the revenue generated by the City from local sources, including general real estate and personal property taxes, other local taxes, licenses, permits and privilege fees. Other sources of revenue to the General Fund include monies from the Commonwealth representing the City's share of Commonwealth-derived non-school revenue and reimbursement of City expenses shared by the Commonwealth. In addition, revenue is received by the General Fund from the federal government to pay a portion of the costs of City programs.

-33-

Major General Fund expenditures include the costs of general City government services (including administration, police, fire, planning, economic development, parks, recreation, social services, public works, and contracted services for courts, adult and juvenile detention, libraries, sheriff, health and certain other human / social services provided through regional service delivery agreements with Prince William County) and transfers to other funds, including amounts for City and Public School related debt service payments and the City's allocation of local support to the School Operating Fund.

General Fund Revenues and Expenditures

The financial data shown below provides a summary of revenues and expenditures of the City's General Fund for the last five fiscal years ended June 30.

Summaries for fiscal years ended June 30, 2003 to 2007 are compiled from the Comprehensive Annual Financial Reports of the City that have been audited by the independent auditor for the City. These summaries should be read in conjunction with their related financial statements and notes. See Appendix A. Certain restatements have been made in order to conform to current departmental functions.

-34-

Five-Year Summary of General Fund Revenues and Expenditures

2003 2004 2005 2006 2007 Revenues: General property taxes $12,444,746 $14,661,144 $17,667,471 $20,122,307 $23,343,036 Other local taxes 4,160,394 4,833,743 5,800,210 6,003,726 5,676,137 Permits, privilege fees, and regulatory licenses 281,542 91,520 175,910 269,389 105,881 Fines and forfeitures 104,682 189,338 178,035 178,624 173,357 Revenues from the use of money and property 266,240 103,367 172,425 210,096 345,602 Charges for services 588,575 497,655 636,159 574,765 606,197 Miscellaneous 115,297 727,135 382,260 637,948 374,283 Recovered costs 0 42,409 92,138 34,375 42,284 Intergovernmental revenues: Commonwealth 3,073,434 2,793,361 3,547,811 4,057,308 3,661,063 Federal 793,218 844,867 846,558 1,187,329 1,168,539 TOTAL REVENUES $21,828,128 $24,784,539 $29,498,977 $33,275,867 $35,496,379 Expenditures: Current: General government administration $1,850,371 $2,198,396 $2,461,195 $3,395,372 $3,554,307 Judicial administration 282,373 257,239 375,191 269,123 288,350 Public safety 3,642,256 4,453,967 4,717,014 5,649,817 6,311,384 Public works 2,350,021 2,321,422 1,911,181 2,404,325 2,363,545 Health and welfare 2,451,299 2,606,275 3,627,395 3,515,217 3,714,284 Education 7,641,638 10,862,752 11,911,772 13,419,763 13,983,290 Parks, recreation, and cultural 1,236,025 1,418,027 1,446,302 1,808,710 2,059,722 Community development 194,240 178,560 122,511 35,345 0 Debt Service: Principal retirement 0 9,037 0 115,063 155,055 Interest and other fiscal charges 0 953 0 2,703 11,793 Capital leases 0 0 0 0 0 TOTAL EXPENDITURES $19,648,223 $24,306,628 $26,572,561 $30,615,438 32,441,730 Excess (deficiency) of revenues over (under) expenditures

$2,179,905 $477,911 $2,926,416 $2,660,429 $3,054,649

Other Financing Sources (Uses): Transfers in 66,325 327,000 3,300 0 846,800 Transfers out (3,263,585) (1,462,603) (3,343,548) (2,994,417) (5,226,697) Proceeds of capital leases 0 48,593 216,940 0 0 Sale of capital assets 90,823 0 1,068,850 0 0 Issuance of bank note 0 0 0 65,007 0 TOTAL OTHER FINANCING SOURCES (USES)

$(3,106,437) $(1,087,010) $(2,054,458) $(2,929,410) $(4,379,897)

Net change in fund balance: (926,532) (609,099) 871,958 (268,981) (1,325,248) Fund balance – beginning 7,464,918 6,538,386 5,929,287 6,801,245 6,532,264 Fund balance – ending $6,538,386 $5,929,287 $6,801,245 $6,532,264 $5,207,016

_____________________ Source: City of Manassas Park, Virginia, Comprehensive Annual Financial Reports, fiscal years ended 2003 through

2007.

During the last several fiscal years, the City has allocated the use of the General Fund balance for operating and/or capital needs. Due to increases in the City's real property value and tax revenues, the City planned the use of the General Fund balance in order to reduce real property tax rates while still managing to maintain a stable fund balance level. For the fiscal year ended June 30, 2008, the City's balanced budget has not appropriated any fund balance for operating purposes. The following table shows the City's General Fund balance for the last five fiscal years ending June 30.

-35-

General Fund Balance Fiscal Years 2003 – 2007

Ended June 30

_____________________ Source: City of Manassas Park, Virginia, Comprehensive Annual Financial Reports, fiscal years ended June 30, 2003-2007. (1) Amounts have been restated for FY 2003 to separate Reserved for Transportation from the Undesignated Fund Balance.

General Fund Revenues

The City's revenue has more than doubled in the last decade. The primary source of revenue is taxes. The following table shows the City's principal tax revenues by source for each of the last ten fiscal years. Growth in total tax revenues has averaged 12.6% per year during the period.

Total Tax Revenues by Source Last Ten Fiscal Years

_________________________ Source: City of Manassas Park Comprehensive Annual Financial Report, fiscal year ended June 30, 2007.

2003(1) 2004 2005 2006 2007 General Fund Balance: Reserved for Emergencies $1,148,008 $1,148,008 $986,224 $986,224 $1,095,863

Reserved for Transportation (PRTC Equity)

491,576 922,664 1,124,998 1,494,759 1,755,162

Designated for Local Education - 120,396 39,961 - - Undesignated Fund Balance 4,898,802 3,738,219 4,650,062 4,051,281 2,355,991 Total General Fund Balance $6,538,386 $5,929,287 $6,801,245 $6,532,264 $5,207,016

General Fund Balance as Percent of General Fund Expenditures and Other Financing Uses

28.54%

23.01%

22.73%

19.44%

13.82%

Fiscal Year Property Taxes Local Sales Taxes Utility Taxes Other Taxes Total Taxes 1998 $7,699,212 $ 890,030 $ 667,113 $ 657,877 $ 9,914,232 1999 8,354,337 1,106,010 663,214 878,180 11,001,741 2000 8,755,349 1,382,260 712,335 1,051,214 11,901,158 2001 9,870,450 1,553,085 808,447 1,256,095 13,488,077 2002 11,190,516 1,415,216 809,612 1,241,347 14,656,691 2003 12,444,746 1,447,427 1,079,328 1,459,075 16,430,576 2004 14,661,144 1,712,194 1,095,639 1,773,746 19,242,723 2005 17,667,471 2,032,705 1,244,478 2,313,947 23,258,601 2006 20,122,307 2,041,465 1,273,467 2,392,935 25,830,174 2007 23,343,036 1,814,552 1,400,147 2,307,247 28,864,982

-36-

Property Taxes

An annual ad valorem tax is levied by the Governing Body on the assessed value of real and personal property located within the City as of the January 1 in the calendar year in which such tax is due. The ratio of the assessed value of property to its estimated market value is 100%. Real property taxes are payable in two installments on June 5 and December 5 of the calendar year in which they are levied. Personal property taxes are due on December 5. The penalty for late payment is 10% of the amount of taxes due. Interest on delinquent taxes and penalties accrues at a rate of 10% per annum. For the fiscal year ended June 30, 2007, property taxes (including penalties for late payment of prior year's taxes) represented 64.2% of total General Fund receipts.

The following data is presented to illustrate the trends and characteristics of the value of taxable property, property tax rates, tax collection experience and the largest taxpayers.

Assessed and Estimated Actual Value of all Taxable Property Last Ten Fiscal Years

Fiscal Year(2)

Real Estate(1)

Personal Property(1)

Machinery and Tools(1)

Public Utility(3)

Total

1998 $386,423,000 $56,017,000 $758,000 $9,870,000 $453,068,000 1999 402,686,000 61,439,000 1,196,000 11,536,000 476,857,000 2000 443,822,000 68,449,000 965,000 13,098,000 526,334,000 2001 515,503,000 81,930,000 942,000 16,370,000 614,745,000 2002 617,359,000 90,398,000 868,000 16,643,000 725,268,000 2003 737,216,000 97,925,000 1,158,000 17,561,000 853,860,000 2004 887,204,000 106,601,000 1,156,000 18,057,000 1,013,018,000 2005 1,103,796,000 106,877,000 929,000 20,987,000 1,232,589,000 2006 1,472,023,000 124,133,000 936,000 24,420,000 1,621,512,000 2007 1,767,459,000 127,797,000 1,111,000 24,175,000 1,920,542,000

_________________________ Source: City of Manassas Park, Virginia, Comprehensive Annual Financial Report, fiscal year ended June 30, 2007. (1) Property assessed at 100% of fair market value. (2) The values shown are averages of the prior and current year's January 1 assessed values, since the fiscal year spans both

assessment periods (i.e. fiscal year ended June 30, 2007 values are an average of the January 1, 2006 and 2007 assessed valuations).

(3) Assessed values are established by the State Corporation Commission.

-37-

The table below summarizes the tax rates established by the City applicable to the last ten fiscal years.

Property Tax Rates Per $100 Assessed Value Last Ten Fiscal Years

Fiscal Year

Real Estate 1st Half 2nd Half

Personal Property

Mobile Homes

Machinery and Tools

1999 $1.44 $1.44 $3.50 $3.50 $3.50 2000 1.44 1.44 3.50 3.50 3.50 2001 1.44 1.42 3.50 3.50 3.50 2002 1.42 1.37 3.50 3.50 3.50 2003 1.37 1.33 3.50 3.50 3.50 2004 1.33 1.33 3.50 3.50 3.50 2005 1.33 1.29 3.50 3.50 3.50 2006 1.25 1.14 3.50 3.50 3.50 2007 1.14 1.14 3.50 3.50 3.50 2008 1.14 1.24 3.50 3.50 3.50

_________________________ Source: City of Manassas Park, Virginia, Comprehensive Annual Financial Report, fiscal year ended June 30, 2007.

The following table summarizes information concerning the City's real estate and personal property tax collection experience for fiscal years ended June 30, 1998 through 2007.

Property Tax Levies and Collections Last Ten Fiscal Years

Fiscal Year

Total Tax Levy(1)

Current Tax

Collections(1)

Percent of Levy

Collected

Delinquent Tax

Collections(1)

Total Tax

Collections

Percent of Total Tax

Collections to

Tax Levy

Outstanding Delinquent

Taxes

Percent of Delinquent

Taxes to Tax Levy

1998 $7,696,460 $7,223,002 93.85% $347,766 $7,570,768 98.37% $896,328 11.65% 1999 8,084,489 7,947,562 98.31 280,248 8,227,810 101.77 858,921 10.62 2000 8,927,997 8,456,785 94.72 468,934 8,925,719 99.97 1,244,082 13.93 2001 10,190,875 9,982,710 97.96 394,554 10,377,264 101.83 1,270,419 12.47 2002 11,949,074 11,563,919 96.78 581,888 12,145,807 101.65 1,300,442 10.88 2003 13,557,770 13,316,071 98.22 597,903 13,913,974 102.63 1,242,286 9.16 2004 14,579,543 13,939,691 95.61 551,394 14,491,075 99.39 1,393,090 9.56 2005 17,073,274 16,891,966 98.94 402,794 17,294,760 101.30 1,763,337 10.33 2006 20,004,837 19,653,859 98.25 833,869 20,487,728 102.41 1,407,870 7.04 2007 24,246,347 23,238,365 95.84 ---- 23,238,365 95.84 1,007,982 4.16

_____________________ Source: City of Manassas Park, Virginia, Comprehensive Annual Financial Report, fiscal year ended June 30, 2007. (1) Exclusive of penalties and interest. Below is a summary of the City's largest real property owners / taxpayers in the City.

-38-

Ten Largest Real Estate Taxpayers as of June 30, 2007

Taxpayer 2007 Assessed Valuation Percentage of Total Assessed Valuation

Stellar Haverhill LLC ...................................................... $53,467,800 2.8% Centrum-Manassas Park .................................................. 13,704,000 0.7 Centex Homes.................................................................. 16,410,000 0.9 Centex Homes.................................................................. 7,086,000 0.4 Digital Park LLC. ............................................................ 3,854,200 0.2 Lewis Guy H III Trustee.................................................. 5,255,200 0.3 Jerax Enterprises.............................................................. 5,467,800 0.3 22 SAC Self Storage Corp............................................... 4,391,800 0.2 PFS Properties LLC......................................................... 3,235,400 0.2 The Sills Family LTD Partners........................................ 3,857,600 0.2 Storage America Man Park.............................................. 3,211,700 0.2 Flourance Robert & Sandra ............................................. 3,199,000 0.2 Leopold Charles & Jacqueline......................................... 3,398,500 0.2 JMAKHLP....................................................................... 3,086,000 0.2 RPC of Manassas Park LLC ............................................ 5,699,700 0.3 Total $135,325,100 7.0% _________________________ Source: City of Manassas Park, Virginia, Comprehensive Annual Financial Report, fiscal year ended June 30, 2007. Local Sales Tax

A 1% City retail sales tax is added to the 4% Commonwealth sales tax. The City sales tax is collected with the Commonwealth sales tax and remitted to the State Department of Taxation. The local portion of the tax monies are remitted to the City by the Commonwealth during the month following receipt. These receipts totaled $1,814,552 or 5.1% of the General Fund revenues for the fiscal year ended June 30, 2007. The table below shows revenue from the local sales tax for the past five fiscal years.

Local Sales Tax Revenues Fiscal Years 2003 through 2007

Fiscal Year Revenues Percent Change

2003 1,447,427 2.3% 2004 1,712,194 18.3 2005 2,032,705 18.7 2006 2,041,465 0.4 2007 1,814,552 (11.12)

_________________________ Source: City of Manassas Park Comprehensive Annual Financial Report, fiscal year ended June 30, 2007.

-39-

Other Local Taxes

The City receives revenue from various other local taxes including recordation taxes and a variety of consumer utility taxes. In 2006, the General Assembly established a new communications tax to replace several taxes previously collected by the City. Beginning January 1, 2007, the Commonwealth imposed a communications tax (at 5% of customers' bills) which replaced the locality taxes previously charged to consumers and remitted to the City for 911 services, cable franchise fee, cell phone, and regular and long distance telephone taxes. The Commonwealth remits back to the locality its proportionate share of such tax collections based on the previous years statewide tax collections for these revenue sources. At this point, the City does not expect this change to have a material effect on the net amount collected for these taxes.

Other local taxes (including sales tax) represented approximately 16.0% of the total General Fund revenues for the year ended June 30, 2007.

Licenses, Permits and Privilege Fees

The City requires business, professional and occupational licenses, permits for the operation of motor vehicles and performance of certain activities in the City. In addition, various fees must be paid for services provided by certain City departments. These receipts represented approximately 0.3% of total General Fund revenues for the year ended June 30, 2007.

Revenue from the Commonwealth

The City is reimbursed by the Commonwealth for a portion of certain shared office and employee expenses involving the Treasurer, Commissioner of the Revenue, Law Enforcement Aid and various social services programs. In addition, the Commonwealth provides the City with revenue from the collection of sales and gasoline taxes to be used for the maintenance of secondary roads in the City and a share of net profits of the Alcoholic Beverage Control Board derived from liquor sales. Revenue is also received from the Commonwealth under the Personal Property Tax Relief Act. Revenue received from the Commonwealth for the fiscal year ended June 30, 2007, represented 10.3% of total General Fund revenue.

Revenue from the Federal Government

During fiscal year ended June 30, 2007, the City received $1,168,539 in non-education related funding from the federal government in the form of grants and/or reimbursement for the administration of public assistance and welfare programs. Federal categorical aid for welfare administration and assistance totaled $1,034,881 in fiscal year ended June 30, 2007.

Other Revenue

Other sources of revenue of the General Fund represent approximately 4.3% of total General Fund revenue reported for the fiscal year ended June 30, 2007.

General Fund Expenditures & Transfers

Expenditures for General City Government

Payments for the costs of the operation of the City government are made from the General Fund. Such costs include expenditures for public safety, public works, general administration, parks and recreation, public welfare, courts and judicial administration, and planning and economic development. Debt service for capital lease payments is also reported as an expenditure in the General Fund. These expenditures represented 49.0% of the total reported expenditures and transfers out for the period ended June 30, 2007.

-40-

The City also reports education expenditures in the General Fund. This expenditure represented 37.1% of total expenditures and transfers out reported for the General Fund in the fiscal year ended June 30, 2007, and 49.0% of total revenue reported for the School Operating Fund for the same period.

Transfers

The City transfers monies from the General Fund to the City and Public Schools debt service funds to pay debt service payments for debt incurred by the City to fund certain facilities, infrastructure, and equipment. Transfers for the payment of debt service totaled almost $5.2 million in fiscal year ended June 30, 2007, approximately 13.9% of total General Fund expenditures and transfers out for fiscal year ended June 30, 2007.

Education Function - Component Unit School Board

Due to its fiscal reliance on the City, the Component Unit School Board financial information is included in the financial reporting of the City. Appendix A includes detailed information and schedules in regard to the financial operations of the City's Public Schools.

The School Funding Agreement, adopted by the City's Governing Body and the School Board in 2004, devotes 57% of the City's uncommitted (general tax) revenue to support education and school facility debt service costs. This Agreement has allowed City and school leaders to work together in a non-adversarial manner to improve the educational services provided to youth of the City ensuring fiscal responsibility on the part of the School Board. To this end, the School Board has accumulated a reserve for school debt service, held by the City in the School Debt Service Fund of $1,881,854, as of June 30, 2007.

The School Board also receives revenues from the Commonwealth of Virginia for the operation of the Manassas Park Public Schools. Those revenues, along with the local support to education, are accounted for in a separate, special revenue fund, the School Operating Fund. State revenue for education provided 47% of total revenue to the School Operating Fund in the fiscal year ended June 30, 2007.

Federal grant revenue received for specific programs under school operations and school food nutrition services totaled $1,303,432 in fiscal year ended June 30, 2007. Federal revenue sources represented about 4.4% of total school operations and school food nutrition services revenue in fiscal year ended June 30, 2007.

Budgetary Procedures

The Governing Body requires the City Manager to submit a proposed budget of revenues and expenditures to the Governing Body by April 30 each year for the ensuing fiscal year to begin on July 1. The proposed budget, which may be modified by the Governing Body, is required to be adopted by the Governing Body prior to the beginning of the fiscal year. On the basis of the adopted budget, tax rates are established and revenues are appropriated.

The annual budget process of a fiscal year begins with the submission by department heads of budget estimates to the City Manager. Budget estimates are reviewed by the City Manager and meetings between the City Manager and department heads are held to discuss budget requests. The proposed budget of the School Board is submitted to the City Manager who includes it, without alteration, in his budget for submission to the Governing Body. The Governing Body may alter the School Board's request in its annual appropriation of revenues to the School Board. The Governing Body is prohibited under State law, however, from exercising any control regarding the School Board's expenditure of such revenues.

-41-

The following procedures are used by the City in establishing the budgetary data reflected in their financial statements:

1. Prior to May 1, the City Manager submits to the Governing Body a proposed operating and capital budget for the fiscal year commencing the following July 1. The operating and capital budget includes proposed expenditures and the means of financing them.

2. Public hearings are conducted to obtain citizen comments.

3. Prior to July 1, the budget is legally enacted through passage of an ordinance.

4. All revisions to the budget, including transfers, additions or deletions, must be approved by the Governing Body.

5. Formal budgetary integration is employed as a management control device during the year for the General, Special Revenue, Debt Service and General Projects Funds.

6. Budgets for all governmental funds are adopted on a basis consistent with generally accepted accounting principles (GAAP).

7. Quarterly appropriations are made by the Governing Body to the function or department level. The appropriation for each department or category can be revised only by Governing Body. Occasionally, supplemental appropriations are made by Governing Body. All appropriations lapse at year end.

8. All budget data presented in the accompanying Financial Statements is the legally amended or revised budget for the year ended June 30, 2007.

During the fiscal year, detailed reviews of both expenditures and revenues are conducted by the City and schools finance departments. Adjustments in appropriations or expenditure rates, if necessary, are implemented at these times so that total General Fund expenditures and revenues and School Board revenues and expenditures will remain in balance throughout the fiscal year. Budgetary amounts are incorporated into the accounting records and budgetary compliance is monitored at the legal level of control, generally the fund total and/or state reporting category level.

Operating Budget – Fiscal Year Ended June 30, 2007 Results

The City's fiscal year ended June 30, 2007 General Fund operating revenues versus expenditures reflected a deficit of ($1,325,248). The original budget assumed a $699,575 use of accumulated surplus fund balance as a revenue item in the operating budget. The higher than anticipated operating deficit was due to a revenue shortfall of ($1,101,064), with revenue variances confined primarily to unrealized grant revenues and economically sensitive revenue sources such as, among other things, local sales taxes and recordation taxes. The City underspent its General Fund budget by $475,391, largely as a result of management's imposition of midyear spending controls to mitigate the aforementioned revenue shortfalls. Consequently, the City experienced a General Fund operating budget deficit of ($625,673), which, when combined with the planned use of fund balance in the originally adopted budget, generated the aggregate operating deficit of ($1,325,248) referenced above.

Current Fiscal Year 2008 Budget and Proposed Fiscal Year 2009 Budget

The adopted fiscal year ended June 30, 2008 budget for the General Fund totals $39,750,346. The budget is balanced without an appropriation of fund balance as revenue. Despite the overall decrease in assessed value of the City at 8.77% at January 1, 2008, current projections still estimate that the budget will

-42-

remain balanced as a result of spending cuts and a $0.10 real estate tax rate increase for June 2008 taxes. The City Manager's recommended fiscal year ended June 30, 2009 budget totals $38,822,161, reflecting a continued decline in assessed property values. Accordingly, the Governing Body has enacted the $0.10 real estate tax rate increase to provide sufficient revenue to fund the proposed budget. The City Manager's recommended budget includes modest wage increases for City employees, while freezing hiring in many departments and cutting non-essential spending. The proposed budget incorporates the use of $400,000 of General Fund balance to balance the fiscal year ended June 30, 2009 budget.

Capital Improvement Program

The City annually develops a Capital Improvement Program (CIP) for the next five fiscal years. The City's Planning Commission presents a five-year CIP Summary to the Governing Body recommending proposed capital outlays for general City, water and sewer and school improvements. The CIP is reviewed by the Governing Body but does not represent a legislative commitment to expend capital funds for the projects indicated. It is a plan for future spending and establishes priorities for the orderly development of the City. The CIP is subject to continuing examination and revision.

The CIP is funded by transfers of surplus revenue from various funds and by revenues generated from the sale of real property owned by the City. Only the first year of the CIP is appropriated, and in the Budget for fiscal year ended June 30, 2008, $13,724,593 has been appropriated to pay for various projects proposed by the CIP. The remaining projects proposed by the CIP will be completed, if at all, in future years. The following is a summary of the current CIP.

Proposed Expenditures For the Next Five Fiscal Years

2009 2010 2011 2012 2013 TOTAL

Public Works $12,965,000 $4,992,000 $11,198,000 $8,698,000 $19,398,000 $57,251,000 Parks & Recreation 1,037,960 170,000 610,000 0 68,000 1,885,960

Fire & Rescue 150,000 0 150,000 0 600,000 400,000 TOTAL $14,152,960 $5,162,000 $11,958,000 $8,698,000 $20,066,000 $60,036,960 ____________________ Source: City of Manassas Park, Virginia, Director of Finance.

-43-

Debt Administration

Limitations on Incurrence of Debt

Pursuant to the Constitution of Virginia and the Public Finance Act, a city in Virginia is authorized to issue general obligation bonds secured by a pledge of its full faith and credit. For the payment of such bonds the governing body of the City is required to levy, if necessary, an ad valorem tax on all property in the City subject to local taxation. The issuance by cities in Virginia of bonds or other interest bearing obligations is subject to a limitation of 10% of the assessed value of real property in the City subject to taxation as shown by the last preceding assessment for taxes. In determining the limitation, certain classes of indebtedness may be excluded, including revenue anticipation notes maturing in one year or less, referendum-approved general obligation bonds payable from a specific revenue producing undertaking and revenue bonds.

The City’s legal debt margin is computed as follows:

Computation of Legal Debt Margin

As of June 30, 2008

Total assessed value of taxed real property(1) $1,612,191,100

Debt limit – 10% of total assessed value $161,219,110

Total Amount of debt applicable to debt limit(2)(3) $118,915,583

Legal debt margin $42,303,527

____________________ Source: City of Manassas Park, Virginia, Director of Finance. (1) Assessed value as of January 1, 2008 (2) Includes Series 2008 Bonds (3) Net of Refunded Bonds

Statement of General Obligation Long-Term Debt

Purpose Amount Outstanding General Government $17,348,410 Schools 78,478,083 Water & Sewer(1) 1,000,000 Total Long-Term Debt as of June 30, 2008 $96,826,493 Series 2008 Bonds 32,240,000 Less: Refunded Bonds to be refunded (10,150,910) Total Long-Term Debt Upon Issuance of the Series 2008 Bonds $118,915,583 __________________ Source: City of Manassas Park Comprehensive Annual Financial Report For fiscal year ended June 30, 2007. (1) Water and sewer bonds have historically been self supporting.

-44-

Debt Service Requirements on Currently Outstanding General Obligation Debt

As of June 30, 2008(1)

GENERAL LONG-TERM SCHOOLS ENTERPRISE FUND TOTAL DEBT SERVICE

Fiscal Year Principal Interest Total Principal Interest Total Principal Interest Total Principal Interest Total

2009 $1,121,114 $731,712 $1,852,826 $1,908,491 $2,716,114 $4,624,605 90,000 51,742 141,742 $3,119,605 $3,499,568 $6,619,173 2010 855,486 681,990 1,537,476 1,944,881 3,257,015 5,201,896 95,000 46,840 141,840 2,895,367 3,985,845 6,881,212 2011 882,719 651,458 1,534,176 2,555,861 3,019,961 5,575,822 95,000 41,781 136,781 3,533,580 3,713,200 7,246,779 2012 907,825 615,251 1,523,076 2,774,523 3,083,740 5,858,263 105,000 36,379 141,379 3,787,348 3,735,370 7,522,718 2013 792,805 580,446 1,373,252 3,020,152 2,926,379 5,946,531 110,000 30,520 140,520 3,922,957 3,537,345 7,460,302 2014 615,749 547,553 1,163,302 3,130,213 2,804,545 5,934,758 115,000 24,389 139,389 3,860,962 3,376,487 7,237,449 2015 596,691 523,466 1,120,157 3,248,633 2,682,688 5,931,321 125,000 17,849 142,849 3,970,324 3,224,003 7,194,327 2016 620,850 499,307 1,120,157 3,372,964 2,555,154 5,928,118 130,000 10,900 140,900 4,123,814 3,065,362 7,189,175 2017 645,171 474,186 1,119,357 3,507,521 2,416,902 5,924,423 135,000 3,679 138,679 4,287,692 2,894,767 7,182,459 2018 550,000 449,839 999,839 3,722,317 2,268,110 5,990,427 0 0 0 4,272,317 2,717,949 6,990,266 2019 575,000 426,277 1,001,277 3,797,364 2,114,566 5,911,930 0 0 0 4,372,364 2,540,842 6,913,206 2020 597,500 401,361 998,861 3,670,175 1,960,046 5,630,221 0 0 0 4,267,675 2,361,408 6,629,083 2021 622,500 375,281 997,781 3,790,764 1,802,177 5,592,941 0 0 0 4,413,264 2,177,457 6,590,721 2022 650,000 347,678 997,678 3,914,145 1,650,669 5,564,814 0 0 0 4,564,145 1,998,347 6,562,492 2023 677,500 318,639 996,139 2,972,835 1,492,525 4,465,360 0 0 0 3,650,335 1,811,164 5,461,499 2024 707,500 288,342 995,842 3,083,486 1,366,431 4,449,917 0 0 0 3,790,986 1,654,774 5,445,760 2025 740,000 256,216 996,216 3,201,495 1,225,201 4,426,696 0 0 0 3,941,495 1,481,417 5,422,912 2026 772,500 222,184 994,684 3,319,763 1,078,359 4,398,122 0 0 0 4,092,263 1,300,543 5,392,806 2027 807,500 186,634 994,134 3,097,500 934,244 4,031,744 0 0 0 3,905,000 1,120,879 5,025,879 2028 842,500 149,509 992,009 3,232,500 791,689 4,024,189 0 0 0 4,075,000 941,199 5,016,199 2029 882,500 110,697 993,197 3,367,500 642,682 4,010,182 0 0 0 4,250,000 753,379 5,003,379 2030 922,500 70,084 992,584 3,512,500 487,109 3,999,609 0 0 0 4,435,000 557,194 4,992,194 2031 962,500 24,664 987,164 2,972,500 345,064 3,317,564 0 0 0 3,935,000 369,728 4,304,728 2032 0 0 0 1,710,000 241,200 1,951,200 0 0 0 1,710,000 241,200 1,951,200 2033 0 0 0 1,785,000 164,250 1,949,250 0 0 0 1,785,000 164,250 1,949,250 2034 0 0 0 1,865,000 83,925 1,948,925 0 0 0 1,865,000 83,925 1,948,925

TOTALS $17,348,410 $8,932,776 $26,281,186 $78,478,083 $44,110,746 $122,588,828 $1,000,000 $264,079 $1,264,079 $96,826,493 $53,307,601 $150,134,093

____________________ Source: City of Manassas Park, Virginia, Comprehensive Annual Financial Report, fiscal year ended June 30, 2007. (1) Excludes the Series 2008 Bonds and includes the Refunded Bonds.

-45-

General Obligation Debt Service Requirements As of June 30, 2008

CURRENTLY OUTSTANDING DEBT SERVICE PLUS SERIES 2008 BONDS LESS REFUNDED BONDS TOTAL DEBT SERVICE

Fiscal Year Principal Interest Total Principal

Net Interest(1) Total Principal Interest Total Principal Interest Total

2009 $3,119,605 $3,499,568 $6,619,173 $ 0 $327,656 $327,656 $1,663,614 $393,446 $2,057,060 $1,455,991 $3,433,778 $4,889,769 2010 2,895,367 3,985,845 6,881,212 0 506,250 506,250 1,147,986 329,057 1,477,043 1,747,381 4,163,038 5,910,419 2011 3,533,580 3,713,200 7,246,779 0 506,250 506,250 1,857,719 278,324 2,136,043 1,675,861 3,941,125 5,616,986 2012 3,787,348 3,735,370 7,522,718 200,000 1,488,119 1,688,119 1,687,825 200,043 1,887,868 2,299,523 5,023,446 7,322,969 2013 3,922,957 3,537,345 7,460,302 225,000 1,482,119 1,707,119 1,780,305 131,963 1,912,269 2,367,652 4,887,500 7,255,152 2014 3,860,962 3,376,487 7,237,449 350,000 1,474,806 1,824,806 1,680,749 58,370 1,739,119 2,530,213 4,792,924 7,323,137 2015 3,970,324 3,224,003 7,194,327 720,000 1,463,431 2,183,431 106,691 10,883 117,574 4,583,633 4,676,551 9,260,184 2016 4,123,814 3,065,362 7,189,175 745,000 1,438,231 2,183,231 110,850 6,724 117,574 4,757,964 4,496,869 9,254,833 2017 4,287,692 2,894,767 7,182,459 775,000 1,412,156 2,187,156 115,171 2,403 117,574 4,947,521 4,304,520 9,252,041 2018 4,272,317 2,717,949 6,990,266 1,345,000 1,384,063 2,729,063 0 0 0 5,617,317 4,102,012 9,719,329 2019 4,372,364 2,540,842 6,913,206 1,410,000 1,330,263 2,740,263 0 0 0 5,782,364 3,871,105 9,653,469 2020 4,267,675 2,361,408 6,629,083 1,480,000 1,259,763 2,739,763 0 0 0 5,747,675 3,621,170 9,368,845 2021 4,413,264 2,177,457 6,590,721 1,540,000 1,189,463 2,729,463 0 0 0 5,953,264 3,366,920 9,320,184 2022 4,564,145 1,998,347 6,562,492 1,630,000 1,112,463 2,742,463 0 0 0 6,194,145 3,110,810 9,304,955 2023 3,650,335 1,811,164 5,461,499 1,710,000 1,030,963 2,740,963 0 0 0 5,360,335 2,842,126 8,202,461 2024 3,790,986 1,654,774 5,445,760 1,785,000 949,738 2,734,738 0 0 0 5,575,986 2,604,511 8,180,497 2025 3,941,495 1,481,417 5,422,912 1,870,000 864,950 2,734,950 0 0 0 5,811,495 2,346,367 8,157,862 2026 4,092,263 1,300,543 5,392,806 1,960,000 771,450 2,731,450 0 0 0 6,052,263 2,071,993 8,124,256 2027 3,905,000 1,120,879 5,025,879 2,065,000 673,450 2,738,450 0 0 0 5,970,000 1,794,329 7,764,329 2028 4,075,000 941,199 5,016,199 2,170,000 570,200 2,740,200 0 0 0 6,245,000 1,511,399 7,756,399 2029 4,250,000 753,379 5,003,379 2,265,000 461,700 2,726,700 0 0 0 6,515,000 1,215,079 7,730,079 2030 4,435,000 557,194 4,992,194 2,370,000 359,775 2,729,775 0 0 0 6,805,000 916,969 7,721,969 2031 3,935,000 369,728 4,304,728 2,485,000 253,125 2,738,125 0 0 0 6,420,000 622,853 7,042,853 2032 1,710,000 241,200 1,951,200 1,535,000 141,300 1,676,300 0 0 0 3,245,000 382,500 3,627,500 2033 1,785,000 164,250 1,949,250 1,605,000 72,225 1,677,225 0 0 0 3,390,000 236,475 3,626,475 2034 1,865,000 83,925 1,948,925 0 0 0 0 0 0 1,865,000 83,925 1,948,925

TOTAL $96,826,493 $53,307,601 $150,134,093 $32,240,000 $22,523,906 $54,763,906 $10,150,910 $1,411,214 $11,562,124 $118,915,583 $74,420,293 $193,335,876

_____________________ Source: City of Manassas Park, Virginia, Director of Finance. (1) Includes capitalized interest through January 1, 2011.

-46-

The following table summarizes the outstanding debt of the City and relevant debt ratio information

for the last ten years.

Debt Ratios

Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt per Capita

Last Ten Fiscal Years

Fiscal Year Population

Assessed Value(1)

Gross Bonded Debt(2)

Less Debt Payable From

Enterprise Revenues

Net Bonded

Debt

Ratio of Net

General Obligation

Debt to Assessed

Value

Net Bonded Debt per Capita

1998 8,500 $453,068,000 $26,248,343 $1,695,000 $24,553,343 5.42% $2,889 1999 9,300 476,857,000 23,438,734 1,640,000 21,798,734 4.57 2,344 2000 10,290 526,334,000 32,082,021 1,585,000 30,497,021 5.79 2,964 2001 11,200 614,745,000 30,715,137 1,525,000 29,190,137 4.75 2,606 2002 11,900 725,268,000 27,390,000 1,460,000 25,930,000 3.58 2,179 2003 12,300 853,860,000 32,825,000 1,395,000 31,430,000 3.68 2,555 2004 12,700 1,013,018,000 31,831,287 1,325,000 30,506,287 3.01 2,402 2005 12,900 1,232,589,000 39,482,219 1,250,000 38,232,219 3.10 2,964 2006 13,100 1,621,512,000 65,463,808 1,170,000 64,293,808 3.97 4,908 2007 13,910 1,920,542,000 97,798,362 1,085,000 96,713,362 5.04 6,953 ______________________ Source: City of Manassas Park, Virginia, Comprehensive Annual Financial Report, fiscal year ended June 30, 2007. (1) 100% of fair market value. (2) Excludes capital leases, bank loans and compensated absences. Overlapping or Underlying Debt

The City is autonomous and entirely independent of any county or other political subdivision. It is not subject to taxation by any county or school district, nor is it liable for any county or school district indebtedness. There is no overlapping debt except as described below.

The Park Center Community Development Authority (the "Park Center CDA") was created by an ordinance adopted by the Governing Body on January 9, 2007 to finance certain infrastructure improvements, including public road and intersection improvements, traffic controls, public signage, public utilities, parking facilities, wetlands mitigation, landscaping, pedestrian walkways and bridges and storm water management (the "Improvements"), related to the construction of a mixed-use 'town center' development. To fund the Improvements, the Park Center CDA has issued Special Assessment Revenue Bonds in the principal amount of $12,350,000 (the "CDA Bonds"), which will mature in 2047. The CDA Bonds are secured by and payable from special assessments (the "Special Assessments") to be levied by the City on the taxable parcels within the Park Center CDA District (the "District"). The CDA Bonds are also secured by funds held pursuant to an Indenture of Trust between the Park Center CDA and Regions Bank, as bond trustee. Pursuant to a memorandum of understanding, the City is obligated, subject to appropriation, to pay over to the Park Center CDA those Special Assessments collected by the City; however such obligations do not constitute a general obligation of the City or a pledge of the City's full faith and credit. The City is not responsible for paying the debt service on the CDA Bonds.

-47-

Other Indebtedness and Obligations

The City leases various types of equipment under capital leases. As of June 30, 2007, the City had $2,115,984 in outstanding leases requiring yearly payments of approximately $238,519.

Retirement System

Manassas Park participates in a multiple employer defined benefit pension plan under the Virginia Retirement System (VRS). All eligible full time employees of the City are enrolled in VRS, which provides group term life insurance, retirement pension, disability and death benefits to vested members. The City pays both the employer and employee share of costs to fund these benefits.

The VRS maintains separate accounts for each participating locality based on contributions made by the locality and the benefits being paid to former employees. The City's contributions are actuarially determined for VRS every two years. Detailed information on the benefits offered and funding policy is included in Note 11 of the financial statements for the year ended June 30, 2006.

The liability of the City to its employees under the VRS at June 30, 2007 the latest actuarial valuation, is as follows:

Funded Liability $15,335,728 Unfunded Liability 1,046,638 Total Liability $16,382,366

__________________ Source: Virginia Retirement System.

In June 2004, the Government Accounting Standards Board (GASB) issued Statement Number 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. The City is required to comply with this in respect to its financial statements starting in fiscal year ended June 30, 2008. GASB 45 establishes new standards which require the City to account for and to report the costs of its Other Post Employment Benefits (OPEB) – health insurance, life insurance, and other non-pension benefits provided to its retirees. GASB 45 requires that the cost of OPEB commitments be accounted for and reported in the same manner as pensions. Annual OPEB costs will be determined actuarially.

The City is a member of the Virginia Local Choice Plan, a state sponsored, multi-employer, self-

insured group and has five or less retirees under 65 participating and receiving blended rates, which is not considered a material liability. All retirees over 65 in the Virginia Local Choice health insurance plan are offered a Medicare supplement plan that reflects a statewide, experience rated premium for this group. There is no "hidden subsidy" for retirees over 65 in this plan. Group premiums for non-Medicare eligible retirees are blended for both the City and the City's public schools (the "School Division"). The City does not pay any part of the premiums charged for such coverage. Consequently, the City, in consultation with its auditor, believes its OPEB liability to be immaterial.

In fiscal year ended June 30, 2006, the School Board commissioned Bolton Partners, Inc. to conduct a

feasibility study for post-retirement health care benefits in compliance with GASB 45 based on plan provisions and actuarial assumptions to estimate the cost of offering continued health benefits to retirees. Prior to fiscal year ended June 30, 2006, the School Division did not offer post retirement health benefits to employees. The School Division also offers medical benefits through the Virginia Local Choice Plan. The estimated GASB 45 liability was $117,000 with an annual expense of a "funded" plan for 2007 of $6,000. For an unfunded plan, the annual expense was estimated at $22,000. In adding the 2006 retiree medical subsidy benefit, the School Division established a reserve of fund balance in the amount of $100,000 in anticipation of GASB 45 implementation. The reserve is currently held in the School Operating Fund, but will be transferred to the

-48-

School Medical Reserve Fund and placed in an irrevocable trust to offset the OPEB liability when GASB 45 becomes applicable to the City. As of June 30, 2007, the reserve balance was $113,700.

Investment Policies and Practices

The elected City Treasurer is responsible for the investment of the City's and School Division's operating and bond funds. The Treasurer invests operating funds in a local government investment pool. Bonds funds are held in the state non-arbitrage investment pool (SNAP).

All of the City's cash is maintained in accounts collateralized in accordance with the Virginia Security for Public Deposits Act (Section 2.2-4400 et seq of the Code of Virginia) or covered by federal depository insurance. Under this Act, banks holding public deposits in excess of the amounts insured by FDIC must pledge collateral in the amount of 50% of excess deposits to a collateral pool in the name of the State Treasury Board. Savings and Loan institutions are required to collateralize 100% of deposits in excess of FDIC limits. Deposits covered by the Act are considered insured since the Treasury Board is authorized to make additional assessments.

-49-

SECTION FIVE: MISCELLANEOUS

Ratings

Moody's Investors Service, Inc. ("Moody's") has assigned a rating of "Aaa" and Standard & Poor's Ratings Group ("S&P"), has assigned a rating of "AAA" to the Series 2008 Bonds as set forth on the cover page of this Official Statement, based on the issuance of a bond insurance policy by Financial Security Assurance Inc. See "Bond Insurance" and Appendix D – Specimen Municipal Bond Insurance Policy. Moody's and S&P have also assigned underlying ratings on the Series 2008 Bonds, without taking into account the bond insurance policy, of "A2" and "A+," respectively. The City requested that the Series 2008 Bonds be rated and provided information to Moody's and S&P, including certain information that may not be included in this Official Statement.

Such ratings reflect only the respective views of such organizations. An explanation of the significance of such ratings may only be obtained from the rating agency furnishing the same. There is no assurance that such ratings will be continued for any given period of time or that they will not be revised or withdrawn entirely by any or all of such rating agencies, if in their judgment the circumstances so warrant. A downward revision or withdrawal of such ratings, or any of them, may have an adverse effect on the market price of the Series 2008 Bonds.

Litigation

During the normal course of business, the City or its officers or employees are or may be named as defendants in litigation involving personal injury, property damage, or other matters, which are defended by the City Attorney. The City's potential liability is protected partially by insurance. It is the opinion of the City Attorney that any possible losses in connection with any such pending or threatened litigation will not materially affect the City's financial condition or operations. There is no litigation pending against the City which would in any way affect the validity of the Series 2008 Bonds or the ability of the City to levy or collect ad valorem taxes, without limitation as to rate or amount, for the payment of the Series 2008 Bonds or the interest thereon.

Underwriting

The Bonds are being purchased by Davenport & Company LLC (the "Underwriter"). The purchase contract for the Series 2008 Bonds (the "Bond Purchase Agreement") sets forth the obligation of the Underwriter to purchase the Series 2008 Bonds at a price equal to $32,706,004.35 (which reflects the par amount of the Series 2008 Bonds plus net original issue premium of $788,404.35 and less an underwriting discount of $322,400.00 (1.000%)) and is subject to certain terms and conditions, including the approval of certain legal matters by counsel. The Bond Purchase Agreement provides that the Underwriter will purchase all of the Series 2008 Bonds if any are purchased. The Underwriter may offer and sell the Series 2008 Bonds to certain dealers (including dealers depositing the Series 2008 Bonds into investment trusts) and others at prices different from the public offering prices stated on the cover page of this Official Statement. The public offering prices may be changed from time to time at the discretion of the Underwriter.

Continuing Disclosure

The City has undertaken in the Resolution to comply with provisions of the Rule 15c2-12 of the Securities and Exchange Commission (the "Rule"), by providing certain annual financial and material event notices required by the Rule. As described in Appendix B, such undertaking requires the City to provide only limited information at specified times.

The City has failed to file certain annual financial information with regard to the Rule for fiscal years ended June 30, 2005 and 2006 and failed to file certain annual financial information with regard to the Rule for

-50-

fiscal years ended June 30, 2003 and 2004 in a timely manner. As of the date hereof, the City has provided all of the required financial information for its fiscal years ended June 30, 2003, 2004, 2005, 2006 and 2007 to each NRMSIR and has instituted procedures to ensure that the required information is filed in a timely manner in future years.

As of the date of this Official Statement, (i) the SEC has recognized the entities listed at the end of Appendix B as nationally recognized municipal securities information repositories ("NRMSIR"); and (ii) no state information depository ("SID") has been created for the Commonwealth. If, however, a SID is hereafter created for the Commonwealth, the City is obligated to make filings and provide notices to the SID as required by the Rule. Investors and other interested parties may contact any NRMSIR for additional information concerning its services. The City makes no representation about the scope of the services provided to the secondary market or as to the costs of the provision of such services by any NRMSIR.

Financial Statements

The City's financial statements for the fiscal year ended June 30, 2007 have been audited by independent public accountants for each fiscal year through the fiscal year ended June 30, 2007. The City's general purpose financial statements and notes thereto lifted from the City's audited financial report for the fiscal year ended June 30, 2007, are included herein as Appendix A. These general purpose financial statements, along with the related notes to financial statements, are intended to provide a broad overview of the financial position and operating results of the City's various funds and account groups.

The Comprehensive Annual Financial Report of the City for the fiscal year ended June 30, 2007 is available for inspection in the Finance Department, One Park Center Court, Manassas Park, Virginia 20111-2395 or on the City's website at www.cityofmanassaspark.us.

Verification Agent

The Arbitrage Group, Inc. (the "Verification Agent"), located in Tuscaloosa, Alabama, has verified from the information provided to them by the Underwriter, the mathematical accuracy as of the date of closing on the Series 2008 Bonds of (1) the computation contained in the provided schedules to determine that the anticipated receipts from the Government Securities and cash deposits listed in the schedule, to be held in escrow or to be applied at closing, will be sufficient to pay, when due, the principal, interest and call premium payment requirements of the Refunded Bonds, and (2) the computations of the yield to both the Government Securities and the Series 2008 Bonds contained in the provided schedules used by Bond Counsel in its determination that the interest on the Series 2008 Bonds is exempt from gross income for federal income tax purposes. The Verification Agent expresses no opinion on the reasonableness of the assumptions provided to them, the likelihood that the principal and interest on the Refunded Bonds, or the Series 2008 Bonds will be paid as described in the accompanying schedules, or as to the exemption from taxation for federal income tax purposes of the interest on the Series 2008 Bonds.

Miscellaneous

So far as any statements made in this Official Statement involve matters of opinion or of estimates, whether or not expressly stated, they are set forth as such and not as representations of fact. No representation is made that any of the statements will be realized. Neither this Official Statement nor any statement which may have been made verbally or in writing is to be construed as a contract with the holder of the Series 2008 Bonds.

The purpose of this Official Statement is to supply information to prospective buyers of the Series 2008 Bonds. All quotations from and summaries and explanations of laws contained in this Official Statement do not purport to be complete and reference is made to such laws for full and complete statements of their provisions.

-51-

Approval of Official Statement

The distribution of this Official Statement has been duly authorized by the Governing Body.


By: /s/ Mercury T. Payton City Manager

#######################

7KLV#SDJH#LQWHQWLRQDOO\#OHIW#EODQN1#

APPENDIX A

Audited Financial Statements of the City of Manassas Park, Virginia

#######################


ROBINSON, FARMER, COX ASSOCIATES

CERTIFIED PUBLIC ACCOUNTANTS A PROFESSIONAL LIMITED LIABILITY COMPANY

Independent Auditors’ Report THE HONORABLE GOVERNING BODY CITY OF MANASSAS PARK, VIRGINIA We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Manassas Park, Virginia, as of and for the year ended June 30, 2007, which collectively comprise the City’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Manassas Park, Virginia’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Specifications for Audits of Counties, Cities, and Towns issued by the Auditor of Public Accounts of the Commonwealth of Virginia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Manassas Park, Virginia, as of June 30, 2007, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated November 30, 2007, on our consideration of the City of Manassas Park, Virginia’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and important for assessing the results of our audit. The Management’s Discussion and Analysis, budgetary comparison information and Schedule of Pension Funding Progress as listed in the table of contents, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

A-1

Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the City of Manassas Park, Virginia's, basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, and statistical tables are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the basic financial statements of the City of Manassas Park, Virginia. The combining and individual fund financial statements and schedules, supporting schedules and the schedule of expenditures of federal awards have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section and statistical tables have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them.

Charlottesville, Virginia November 30, 2007

A-2

CITY OF MANASSAS PARK

Management’s Discussion and Analysis

The Management Discussion and Analysis (MD&A) offers readers of the City of Manassas Park’s financial statements a narrative overview and analysis of the financial activities of the City for the fiscal year that ended June 30, 2007. The information presented here should be considered in conjunction with additional information provided in the letter of transmittal. FINANCIAL HIGHLIGHTS • The assets of the City exceeded its liabilities at June 30, 2007 by $41.3 million (net assets). Of this amount,

$14.1 million is unrestricted and may be used to meet the City’s future obligations. The School Board’s net assets were $21.5 million of which is $21.1 million is reported as invested in capital assets and $113,700 is restricted for retiree health insurance benefits and the remaining $265,848 is unrestricted. (See Exhibit 1)

• The Government’s net assets decreased by $5.2 million and the School Board’s net assets increased by $4.16 million. (See Exhibit 2)

• The unreserved, undesignated fund balance for the General Fund of $2.35 million represents 7.0 percent of total General Fund revenues of $35.5 million compared to the Council-adopted target of 15.0 percent.

• In comparison with the prior fiscal year, the City’s total net assets decreased $5.2 million from $46.5

million. Net assets of governmental activities decreased $4.0 million from $28.4 million and net assets of business-type activities decreased $1.2 million from $18.1 million.

• During FY 2007, gross bonded debt increased by $32.4 million from $64.29 million to $96.7 million. New

debt in the amount of $43.17 million was issued while $8.84 million was retired. OVERVIEW OF THE FINANCIAL STATEMENTS The Management Discussion and Analysis serves as an introduction to the City’s basic financial statements, which are composed of the government-wide financial statements, fund financial statements, and notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. GOVERNMENT-WIDE FINANCIAL STATEMENTS The government-wide financial statements, similar to those used by private-sector companies, report information about the City as a whole. One of the most important questions asked about the City’s finances is; “Is the City as a whole better off or worse off as a result of the year’s activities?” The Statement of Net Assets and the Statement of Activities, which are the government-wide statements, report information about City finances as a whole and about its activities in a way that helps answer this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year’s revenues and expenses are taken into account regardless of when cash is received or paid. These statements combine and consolidate short-term, spendable resources with capital assets and long-term obligations. The Statement of Net Assets and the Statement of Activities report the City’s net assets and changes in assets. One can think of the City’s net assets – the difference between assets and liabilities – as one way to measure the City’s financial health, or financial position. Over time, increases or decreases in net assets help determine whether the City’s financial position is improving or deteriorating.

A-3

GOVERNMENT-WIDE FINANCIAL STATEMENTS: (Continued) In the Statement of Net Assets and the Statement of Activities, the City is divided into the following: Governmental activities – Most of the City’s basic services are reported here: general government, police, fire, public works, health and human services, parks and recreation, community development. These activities are primarily funded with property taxes, other taxes and intergovernmental revenue. Business-type activities - The financial activity of the water and sewer enterprise is reported here. The City charges a fee to customers to help cover all or most of the cost of services provided by this activity. Component unit – The City also includes a separate legal entity -- the School Board, in its report. While legally separate, the School Board’s financial relationship with the City makes the City financially accountable. The Government-Wide financial statements can be found on pages 17-19 of this report. FUND FINANCIAL STATEMENTS Traditional readers of government financial statements will find the fund financial statement presentation more familiar. The focus is on the City’s most significant funds. 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 uses fund accounting to demonstrate and ensure fiscal accountability. The City uses governmental, proprietary, and fiduciary fund financial statements to provide more detailed information about the City’s most significant funds. The City has three kinds of 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 statements provide a near or short-term view of the City’s finances that helps the reader determine whether there are more or less financial resources that can be spent in the near future to finance City programs. The basic Governmental Funds financial statements can be found on pages 23-26 of this report. Proprietary Funds Proprietary funds are used to report the same functions presented as business-type activities in the government-wide financial statements. Proprietary funds are classified as either enterprise or internal service funds. An enterprise fund may be used to report any activity for which a fee is charged to external users for goods or services. Internal service funds are used to account for goods and services provided on a cost reimbursement basis from activities within the government. The City maintains a single proprietary fund to account for its water and sewer operations. Currently, no internal service funds are maintained. The basic Proprietary Funds financial statements can be found on pages 27-29 of this report. Fiduciary Funds Fiduciary funds are used to account for assets held by the City in a trustee capacity or as an agent for others. Activities from fiduciary funds are not included in the government-wide financial statements because the City cannot use these assets for its operations. The accounting for fiduciary funds is much like that used in proprietary funds in that the City cannot use these assets for its operations. The basic Fiduciary Fund financial statement can be found on page 30 of this report.

A-4

FUND FINANCIAL STATEMENTS: (Continued) Notes to the financial statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 31-66 of this report. Other information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information. Required supplementary information can be found on pages 67-70 of this report. Other supplementary information can be found on pages 71-88 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS Statement of Net Assets - The following table reflects condensed information on the City’s net assets:

2007 2006 2007 2006 2007 2006 2007 2006

Current & other assets $ 49,725 $ 30,179 $ 7,824 $ 9,197 $ 57,549 $ 39,376 $ 3,621 $ 2,821 Capital assets 78,058 69,013 10,226 10,273 88,284 79,286 21,749 17,550 Total assets $ 127,783 $ 99,192 $ 18,050 $ 19,470 $ 145,833 $ 118,662 $ 25,370 $ 20,371

Long-term debtoutstanding $ 100,271 $ 65,714 $ 1,085 $ 1,139 $ 101,356 $ 66,853 $ 1,014 $ 492

Other liabilities 3,088 5,054 89 215 3,177 5,269 2,847 2,530 Total liabilities $ 103,359 $ 70,768 $ 1,174 $ 1,354 $ 104,533 $ 72,122 $ 3,861 $ 3,022

Net assets:Invested in capital assets,

net of related debt $ 17,966 $ 22,768 $ 9,192 $ 9,161 $ 27,158 $ 31,929 $ 21,129 $ 17,379Restriced (transporation) - 1,495 - - - 1,495 - - Restriced (retiree health benefits) - - - - - - 114 114 Unrestricted (deficit) 6,458 4,161 7,684 8,955 14,142 13,116 266 (144) Total net assets $ 24,424 $ 28,424 $ 16,876 $ 18,116 $ 41,300 $ 46,540 $ 21,509 $ 17,349

Summary of Net Assets (000s omitted)

Component Unit Governmental Business-type Total Primary

The City’s combined net assets decreased from $46.54 million at June 30, 2006 to $41.3 million at June 30, 2007 primarily due to an increase in current assets (cash) offset by an increase in long-term debt outstanding in governmental activities. The majority (74 percent) of the City’s net assets of governmental activities are invested in capital assets (streets, drainage, construction in progress, buildings, equipment, etc.). The capital assets are net of the outstanding principal of the debt associated with their acquisition. These assets are not available for future expenditures since they will not be sold. The City has a sound financial position with 32 percent of total (governmental and business-type) net assets unrestricted and available for providing services to the citizens of the City. The component Unit School Board net assets increased by $ 4.2 million primarily as a result of an increase in capital assets.

A-5

GOVERNMENT-WIDE FINANCIAL ANALYSIS: (Continued) The net assets of the City’s business-type activities are $16.9 million, a decrease of $1.2 million. The decrease is due primarily to the decrease of tap fees (capital contributions) received and the transfer out to the general fund. As with the governmental activities, a significant amount (54 percent) of the net assets is invested in capital assets. The City uses these assets to provide services to its citizens. The unrestricted net assets of the business-type activities were $7.7 million on June 30, 2007. Statement of Activities The City’s total revenues and expenses for governmental, business-type and School Board activities are reflected in the following chart:

Governmental Activities

2007 2006 2007 2006 2007 2006 2007 2006Revenues: Program revenues: Charges for services $ 885 $ 1,025 $ 3,609 $ 3,570 $ 4,494 $ 4,595 $ 531 $ 540 Operating grants and contributions 3,271 3,384 - - 3,271 3,384 14,761 12,891 Capital grants and contributions 30 701 344 1,742 373 2,443 - - General revenues: Property taxes 23,315 20,093 - - 23,315 20,093 - - Other taxes 5,676 6,004 - - 5,676 6,004 - - Payment from City of

Manassas Park - - - - - - 19,300 15,031 Grants and contributions not - restricted to specific programs 2,050 4,392 - - 2,050 4,392 - - Other 2,575 1,336 204 200 2,779 1,536 170 140

Total Revenues $ 37,802 $ 36,935 $ 4,156 $ 5,512 $ 41,958 $ 42,447 $ 34,762 $ 28,602

Expenses:General government $ 3,640 $ 3,092 $ - $ - $ 3,640 $ 3,092 $ - $ - Judicial administration 288 269 - - 288 269 - - Public safety 6,705 5,838 - - 6,705 5,838 - - Public works 3,376 3,479 - - 3,376 3,479 - - Health and welfare 3,655 3,516 - - 3,655 3,516 - - Education 19,637 15,033 - - 19,637 15,033 - - Parks recreation and cultural 2,158 1,913 - - 2,158 1,913 - - Community development - 166 - - - 166 - - Interest on long-term debt 2,843 2,206 - - 2,843 2,206 - - Water and Sewer - - 4,896 4,894 4,896 4,894 - - School Board - - - - - - 30,602 27,289

Total Expenses $ 42,302 $ 35,512 $ 4,896 $ 4,894 $ 47,198 $ 40,406 $ 30,602 $ 27,289

Increase in net assets before transfers $ (4,500) $ 1,423 $ (740) $ 618 $ (5,240) $ 2,041 $ 4,160 $ 1,313Transfers 500 - (500) - - - - - Increase In net assets $ (4,000) $ 1,423 $ (1,240) $ 618 $ (5,240) $ 2,041 $ 4,160 $ 1,313Net Assets - beginning 28,424 27,001 18,116 17,498 46,540 44,499 17,349 16,036Net Assets - ending $ 24,424 $ 28,424 $ 16,876 $ 18,116 $ 41,300 $ 46,540 $ 21,509 $ 17,349

School BoardGovernment Activities

Statement of ActivitiesChanges in Net Assets (000s omitted)

For Fiscal Years Ending June 30, 2007 and 2006

Component UnitTotal PrimaryBusiness-type

A-6

GOVERNMENT-WIDE FINANCIAL ANALYSIS: (Continued) Governmental Activities Revenues For FY 2007, revenues from governmental activities totaled $37.8 million. General Revenues, specifically Property Taxes and Other Local Taxes, are the largest components of revenues (77 percent). General Property Tax revenues were $23.3 million. Real Property Tax, the City’s largest single source of revenue, was $19.3 million, which represents 51% of total revenues. The City received a total of $4.84 million from Personal Property Taxes, which is comprised of taxes on individual automobiles, business personal property, and machinery and tools, the second largest revenue source. Of the $4.84 million, the City received reimbursement from the Commonwealth of Virginia of $1.4 million for taxes on individual automobiles. Other Local Taxes includes revenue from local sales, consumer utilities, business licenses, and meals taxes. Local sales tax revenues was $1.84 million for FY 2007 a decrease of $226,913 from FY 2006. Consumers’ utility tax revenue and taxes on recordation and wills decreased 25 and 26 percent, respectively. The combination of these revenue sources resulted in an overall decrease in revenue from other local taxes for FY 2007 from $6.0 million in 2006 to $5.7 million in 2007.

Revenue by Source-Governmental Activities

5.42%

61.68%

6.81%

2.34%

0.08%

8.65%

15.02%

Charges for services

Other revenue

Property taxes

Other taxes

Operating grants and contributions

Capital grants

Grants & contributions. not restrictedto specific programs

Expenses For FY 2007, expenses for governmental activities totaled $42.3 million, which included budgeted increases for all functions. As a result of the GASB 34 financial reporting requirements, depreciation expense replaces retirement of principal on long-term debt and is allocated to governmental activities. The City’s five largest funded programs are local support for education, public safety, public works, health and human services, and parks and recreation. Education continues to be one of the City’s highest priorities and commitments. The City’s education expense totaled $19.6 million. Expenses for governmental activities, the Statement of Activities (Exhibit 2) on page 18, shows that $885,186 was financed by those receiving services; $3.27 million from operating grants and contributions, $29,526 from capital grants and contributions, with the City’s general revenues financing $34.12 million of the remaining program expenses.

A-7

GOVERNMENT-WIDE FINANCIAL ANALYSIS: (Continued) Governmental Activities: (Continued)

Expenses: (Continued) The graph that follows shows the program expenses and program revenues generated by governmental activities.

Program Expenses and Revenues

0

5

10

15

20

25

Genera

l gov

ernmen

t

Judic

ial ad

ministr

ation

Public

safet

y

Public

works

Health

and w

elfare

Educa

tion

Parks r

ecrea

tion a

nd cu

ltural

Intere

st on

long

-term

debt

In M

illio

ns

ExpensesRevenues

Business-type Activities The City’s business-type activity is composed of an enterprise fund for water and sewer operations. Net assets of business-type activity decreased $1.2 million. The decrease in overall net assets is directly attributed to the decrease of revenue received from tap fees, depreciation expense and the transfer of funds to the general fund. At June 30, 2007, total net assets for business-type activities were $16.9 million, of which $9.2 million is invested in capital assets. The balance of $7.7 million is unrestricted and available to provide funding for future operations. Revenues Total revenues both operating and non-operating exceeded $4.16 million: charges for service totaled $3.6 million; capital grants and contributions tap fees provided $0.3 million, interest contributed $177,567 and miscellaneous of $26,116. The following chart illustrates the revenues by source.

Revenues by Source0.63%

86.83%

8.27%

4.27% Charges for services

Unrestricted revenues fromuse of money and property

Capital contributions

Other revenues

A-8

GOVERNMENT-WIDE FINANCIAL ANALYSIS: (Continued) Expenses Expenses totaled $4.89 million.

Expenses & Program RevenuesBusiness-Type Activity

344 178

4896

3609

260

1000

2000

3000

4000

5000

6000

Water and Sewer Enterprise

Dol

lars

(000

's o

mitt

ed) Expenses

Charges for Service

Capital Grants andContributionsMiscellaneous

Unrestricted revenues from theuse of money and property

The City’s Proprietary Fund financial statements provide the same type of information found in the government-wide financial statements for business-type activities but in more detail. Please refer to pages 27-29 for more details. Component Unit - School Board The net assets of the School Board increased $4.2 million. This increase was primarily attributable to the replacement, improvement, and/or addition of capital assets purchased during FY 2007 from school operating funds. The carrying value of assets added during the year (net of depreciation) totaled $4.2 million. Changes in the allocation of debt-financed fixed assets between the City and the School Board also contributed to the increase in School Board net assets. FUND FINANCIAL ANALYSIS Governmental Funds Governmental Funds comprise the General Fund and Other Governmental Funds, which includes the Debt Service Fund, School Debt Service, Capital Projects Fund and School Building Fund. 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, the unreserved 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 the end of FY 2007, the City’s governmental funds reported a combined fund balance of $46.37 million. The significant increase in fund balance is attributable to unspent bond proceeds. These unspent proceeds of $40.5 were reported as restricted assets in the City Capital Projects Fund ($6,275,410), School Debt Service Fund ($1,881,854), and the School Building Fund ($32,368,933). • Of the combined fund balance, $4.05 million constitutes unreserved fund balance, $2.36 million for the

General Fund, $0.8 million for the School Debt Service Fund and $0.9 million for the City Capital Projects Fund and School Building Fund combined.

• Of the combined fund balance, $1,881,854 belongs to the School Debt Service Fund and is restricted for future debt service payments. The fund balance increased by $974,000 in fiscal year 2007.

• The School Building Fund Balances increased significantly, $24.6 million, due to the $33 million bond issuance for construction of new elementary school.

A-9

FUND FINANCIAL ANALYSIS: (Continued) General Fund The General Fund is the chief operating fund of the City. At the end of FY 2007, the undesignated fund balance was $2.36 million. The undesignated fund balance represents 7.0 percent of total General Fund revenues, slightly below the Council’s adopted financial policy target of 15.0 percent. The following graph presents General Fund summary financial information for the past five years.

Five Year General Fund Financial Summary

05,000

10,00015,00020,00025,00030,00035,00040,000

2003 2004 2005 2006 2007

Fiscal Year

Dol

lars

(000

's

omitt

ed)

RevenueExpensesUndesignated Fund Balance

Original Amended AmendedBudget Budget Actual vs Actual

Revenues, & Other Sources:

Taxes $ 29,968 $ 29,162 $ 29,019 $ (143) Intergovernmental 5,557 5,708 4,830 (878) Other 1,418 1,478 1,648 170 Issuance of debt - - - -

Total $ 36,944 $ 36,347 $ 35,496 $ (851)

Expenditures,Transfers & Other Uses:

Expenditures $ 33,257 $ 32,912 $ 32,442 $ 470 Transfers 4,135 4,135 4,380 (245)

Total $ 37,392 $ 37,047 $ 36,822 $ 225

Change in Fund Balance $ (448) $ (699) $ (1,325) $ (626)

FY 2007 General Fund Budgetary Highlights(000s omitted)

Actual revenues and other financing sources were less than the amended budget revenues by $851,064. The largest portion of this negative variance is attributable to less revenue from the Commonwealth of Virginia. More specifically revenue from welfare administration & assistance and several grant programs that were less than the amended budget. Expenditures, transfers and other uses of funds were $470,066 less than the FY 2007 amended budget. These expenditure savings were attributable primarily to appropriations for: • Public safety which expended less than the amended budget by $249,642, with the majority of the positive

variance in the police department expenditures. • Expenditures for public works were less than the amended budget by $274,188. • Expenditures appropriated for parks, recreation and culture were $188,580 less than the amended budget.

A-10

FUND FINANCIAL ANALYSIS: (Continued) General Fund: (Continued) During FY 2007, City Council approved budget amendments of resulting in a net decrease of $596,629 to the original budget were reported in the general fund. The significant of this amendment are outlined below. • Reduction in the appropriation to Schools by $459,779 due to Real Estate tax revenue reduction of

$1,439,629. • Appropriated an additional $783,000 in anticipation of increased revenue from Personal Property taxes,

Business Licenses, and the Virginia Railway Express (VRE) reimbursement to the City. • Decrease in appropriations for management reserves in the amount of $206,850.

Proprietary Fund The City of Manassas Park’s proprietary fund statement provides the same type of information found in the government-wide financial statements, but in more detail. The City maintains a single proprietary fund for the Water and Sewer Enterprise. Water and Sewer Fund The Water and Sewer Fund ended FY 2007 with unrestricted assets of $16.9 million. Decrease in net assets is directly attributed to the significant reduction in the collection of tap fees, from $1.74 million in FY 2006 to $0.3 million in FY 2007. Other factors concerning the finances of this fund have already been addressed in the discussion of the City’s business-type activities. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets The primary government investment in capital assets as of June 30, 2007 for its governmental and business-type activities was $88.3 million, net of depreciation, as reflected in the schedule below.

Govern- Business- Componentmental Type Total Unit

Land $ 5,234 $ - $ 5,234 $ 1,964 Buildings and system 49,463 - 49,463 18,120 Machinery and equipment 2,020 - 2,020 1,665 Infrastructure 11,024 - 11,024 - Construction in progress 10,317 - 10,317 - Utility Plant and Equipment - 10,226 10,226 -

Total $ 78,059 $ 10,226 $ 88,285 $ 21,749

Capital Assets (000s omitted)

as of June 30, 2007(net of depreciation)

Investments in Capital Assets in FY 2007 include continuation of the street and sidewalk enhancements program, construction of the middle school and completed construction of the Police Station building. Detailed information on the City’s Capital Assets can be found in Note 8 of this report.

A-11

CAPITAL ASSETS AND DEBT ADMINISTRATION Long-term Debt At the end of FY 2007, the City’s total outstanding debt was $100.7 million, with $1.1 million of business-type activity debt supported by the enterprise fund, resulting in net bonded debt of governmental activities of $99.6 million. Accrued compensated absences, bank loans and capital leases are not included in the bonded debt amounts. During FY 2007, the City retired $8.84 million of outstanding principal and issued $43.17 of new long-term debt. The new debt consists of a $26.875 million general obligation bond for school construction. Additionally, the City issued $6.695 million of general obligation refunding bonds to refund the 1999 general obligation bonds and a $7.5 million bond anticipation note for school related capital projects. The City of Manassas Park maintains an “A” rating from Standard & Poor’s, and an “A3” from Moody’s for General Obligation debt. Detailed information on the City’s long-term debt can be found in Note 9 to this report. ECONOMIC FACTORS

• The City’s unemployment rate for June 2007 was 2.4 percent. This compares favorably to the State’s unemployment rate of 3.2 percent and the national average rate of 4.7 percent for June 2007.

• The recent downturn in housing prices in the region has significantly impacted the City’s real estate tax revenue. An overall decline of 10% or more is expected for the January 1, 2008 assessments.

• Despite signs of growth slowing down, the projections for the city’s economic growth show that it is expected to grow faster than the economies of nearby counties partly because its base is small (resulting in higher percent change) and, as a result, the economy is likely to change more as it grows yielding higher growth rates.

• The City owns several business properties that will be marketed for development or redevelopment. The largest project involves the development of “Park Center”, a mixed-use town center project on eighteen acres of vacant property across from City Hall. The project includes up to 400,000 square feet of residential, office and retail space, in the Center for the City. Construction of this project broke ground in spring 2007. Occupancy is expected to begin in September 2008.

All of these factors were considered in preparing the City’s budget for 2008 fiscal year. Requests for Information This financial report is designed to provide a general overview of the City’s finances for all those with an interest in the City’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Director of Finance, City of Manassas Park, City Hall, One Park Center, Manassas Park, VA 20111 or [email protected].

A-12

BASIC FINANCIAL STATEMENTS

A-13

This page intentionally left blank

A-14

Government-wide Financial Statements

A-15


A-16

CITY OF MANASSAS PARK, VIRGINIA Exhibit 1

Statement of Net Assets

ComponentGovernmental Business-type Unit

Activities Activities Total School Board

ASSETSCash and cash equivalents $ 4,075,459 $ 7,240,580 $ 11,316,039 $ 2,533,831Receivables (net of allowance for uncollectibles):

Taxes receivable 1,201,511 - 1,201,511 - Accounts receivable 696,143 260,146 956,289 333,547Notes receivable - 291,917 291,917 -

Due from other governmental units 734,773 - 734,773 551,077Inventories - - - 53,611Prepaid expenses 125,388 265 125,653 8,977Restricted assets:

Temporarily restricted:Cash and cash equivalents 40,526,197 - 40,526,197 139,664

Other assets:Investment in joint venture 1,755,162 - 1,755,162 - Unamortized bond issue costs 609,055 30,940 639,995 -

Capital assets (net of accumulated depreciation):Land 5,234,156 - 5,234,156 1,964,118 Buildings and improvement 49,463,261 - 49,463,261 18,119,820 Machinery and equipment 2,020,065 - 2,020,065 1,665,132 Infrastructure 11,024,030 - 11,024,030 - Utility plant and equipment - 10,226,271 10,226,271 - Construction in progress 10,317,382 - 10,317,382 -

Total assets $ 127,782,582 $ 18,050,119 $ 145,832,701 $ 25,369,777

LIABILITIESAccounts payable $ 468,263 $ 55,939 $ 524,202 $ 844,854Accounts payable, payable from restricted assets 417,739 - 417,739 - Accrued liabilities 56,344 4,946 61,290 1,992,912Retainage payable, payable from restricted assets 634,908 - 634,908 - Accrued interest payable 1,115,554 9,758 1,125,312 - Deferred revenue 46,697 - 46,697 9,406Deposits payable 347,919 18,962 366,881 - Long-term liabilities:

Due within one year 2,909,490 83,550 2,993,040 204,557Due in more than one year 97,361,742 1,001,104 98,362,846 809,195

Total liabilities $ 103,358,656 $ 1,174,259 $ 104,532,915 $ 3,860,924

NET ASSETSInvested in capital assets, net of related debt $ 17,965,771 $ 9,191,736 $ 27,157,507 $ 21,129,305Restricted for:

Retiree health benefit - - - 113,700 Unrestricted (deficit) 6,458,155 7,684,124 14,142,279 265,848

Total net assets $ 24,423,926 $ 16,875,860 $ 41,299,786 $ 21,508,853

The notes to the financial statements are an integral part of this statement.

Primary Government

June 30, 2007

A-17


Statement of ActivitiesFor the Year Ended June 30, 2007

Operating CapitalCharges for Grants and Grants and

Expenses Services Contributions Contributions

PRIMARY GOVERNMENT:Governmental activities:

General government administration $ 3,639,495 $ 30,046 $ 220,099 $ 1,180 Judicial administration 288,349 3,425 - - Public safety 6,705,352 336,106 716,938 28,346Public works 3,376,327 61,321 564,184 - Health and welfare 3,654,486 227,519 1,769,363 - Education 19,637,339 - - - Parks, recreation, and cultural 2,157,786 226,769 - - Interest on long-term debt 2,842,832 - - -

Total governmental activities $ 42,301,966 $ 885,186 $ 3,270,584 $ 29,526

Business-type activities:Water and sewer $ 4,895,554 $ 3,608,526 $ - $ 343,613

Total business-type activities $ 4,895,554 $ 3,608,526 $ - $ 343,613 Total primary government $ 47,197,520 $ 4,493,712 $ 3,270,584 $ 373,139

COMPONENT UNITS:School Board $ 30,602,208 $ 540,307 $ 14,761,188 $ - Total component units $ 30,602,208 $ 540,307 $ 14,761,188 $ -

General revenues: General property taxes Other local taxes: Local sales and use taxes Consumer utility taxes Business license taxes E-911 / communication taxes Taxes on recordation and wills Other local taxes Payment from City of Manassas Park Unrestricted revenues from use of money and property Miscellaneous Grants and contributions not restricted to specific programsGain on sale of assetsTransfers Total general revenues and transfersChange in net assetsNet assets - beginning Net assets - ending


Functions/Programs

Program Revenues

A-18

Exhibit 2

Component UnitGovernmental Business-type

Activities Activities Total School Board

$ (3,388,170) $ - $ (3,388,170) $ - (284,924) - (284,924) -

(5,623,962) - (5,623,962) - (2,750,822) - (2,750,822) - (1,657,604) - (1,657,604) -

(19,637,339) - (19,637,339) - (1,931,017) - (1,931,017) - (2,842,832) - (2,842,832) -

$ (38,116,670) $ - $ (38,116,670) $ -

$ - $ (943,415) $ (943,415) $ - $ - $ (943,415) $ (943,415) $ - $ (38,116,670) $ (943,415) $ (39,060,085) $ -

$ - $ - $ - $ (15,300,713) $ - $ - $ - $ (15,300,713)

$ 23,315,372 $ - $ 23,315,372 $ -

1,814,552 - 1,814,552 - 950,344 - 950,344 - 908,429 - 908,429 - 449,803 - 449,803 - 414,066 - 414,066 -

1,138,943 - 1,138,943 - - - - 19,300,480

1,184,060 177,567 1,361,627 13,747564,327 26,116 590,443 146,146

2,050,160 - 2,050,160 - 826,829 - 826,829 - 500,000 (500,000) - -

$ 34,116,885 $ (296,317) $ 33,820,568 $ 19,460,373 $ (3,999,785) $ (1,239,732) $ (5,239,517) $ 4,159,660

28,423,711 18,115,592 46,539,303 17,349,193$ 24,423,926 $ 16,875,860 $ 41,299,786 $ 21,508,853

Net (Expense) Revenue andChanges in Net Assets

Primary Government

A-19


A-20

Fund Financial Statements

A-21


A-22


Balance SheetGovernmental Funds

SchoolCity Debt SchoolDebt Service Capital Building

General Service Fund Projects Fund Total

ASSETSCash and cash equivalents $ 2,523,986 $ - $ 806,318 $ 725,874 $ 41,381 $ 4,097,559Receivables (net of allowance

for uncollectibles):Taxes receivable 1,201,511 - - - - 1,201,511Accounts receivable 435,739 - - 260,404 - 696,143

Due from other funds 140,266 - - - - 140,266Due from other governmental units 734,773 - - - - 734,773Prepaid items 101,188 24,200 - - - 125,388Investment in joint venture 1,755,162 - - - - 1,755,162Restricted assets:

Temporarily restricted:Cash and cash equivalents - - 1,881,854 6,275,410 32,368,933 40,526,197Total assets $ 6,892,625 $ 24,200 $ 2,688,172 $ 7,261,688 $ 32,410,314 $ 49,276,999

LIABILITIES AND FUND BALANCESLiabilities:

Reconciled overdraft $ - $ 22,100 $ - $ - $ - $ 22,100Accounts payable 468,266 - - - - 468,266Accounts payable, payable from restricted assets - - - 260,602 157,137 417,739Accrued liabilities 54,247 2,100 - - - 56,347Retainage payable, payable from restricted assets - - - 231,607 403,301 634,908Due to other funds - - - 140,266 - 140,266Deferred revenue 815,177 - - - - 815,177Deposits payable 347,919 - - - - 347,919

Total liabilities $ 1,685,609 $ 24,200 $ - $ 632,475 $ 560,438 $ 2,902,722

Fund balances:Reserved for:

Emergencies $ 1,095,863 $ - $ - $ - $ - $ 1,095,863Construction - - - 5,783,201 31,808,495 37,591,696Transportation 1,755,162 - - - - 1,755,162School debt service - - 1,881,854 - - 1,881,854

Unreserved: Reported in:

General fund 2,355,991 - - - - 2,355,991Debt service funds - - 806,318 - - 806,318Capital projects funds - - - 846,012 41,381 887,393Total fund balances $ 5,207,016 $ - $ 2,688,172 $ 6,629,213 $ 31,849,876 $ 46,374,277Total liabilities and fund balances $ 6,892,625 $ 24,200 $ 2,688,172 $ 7,261,688 $ 32,410,314 $ 49,276,999


June 30, 2007

A-23


Reconciliation of the Balance Sheet of Governmental FundsTo the Statement of Net Assets

Amounts reported for governmental activities in the statement of net assets aredifferent because:

Total fund balances per Exhibit 3 - Balance Sheet - Governmental Funds $ 46,374,277

Capital assets used in governmental activities are not financial resources and,therefore, are not reported in the funds. 78,058,894

Other long-term assets are not available to pay for current-period expendituresand, therefore, are deferred in the funds. 261,987

Long-term liabilities, including bonds payable, are not due and payable in thecurrent period and, therefore, are not reported in the funds. (100,271,232)

Net assets of governmental activities $ 24,423,926


June 30, 2007

A-24


Statement of Revenues, Expenditures, and Changes in Fund BalancesGovernmental FundsFor the Year Ended June 30, 2007

SchoolCity Debt City SchoolDebt Service Capital Building

General Service Fund Projects Fund TotalREVENUESGeneral property taxes $ 23,343,036 $ - $ - $ - $ - $ 23,343,036 Other local taxes 5,676,137 - - - - 5,676,137 Permits, privilege fees, and regulatory

licenses 105,881 - - - - 105,881 Fines and forfeitures 173,357 - - - - 173,357 Revenue from the use ofmoney and property 345,602 - 294,432 384,369 159,659 1,184,062

Charges for services 606,197 - - - - 606,197 Miscellaneous 374,283 - - 9,852 - 384,135 Recovered costs 42,284 - - - - 42,284 Intergovernmental revenues:Commonwealth 3,661,063 - - 714,385 - 4,375,448 Federal 1,168,539 - - 56,206 - 1,224,745 Total revenues $ 35,496,379 $ - $ 294,432 $ 1,164,812 $ 159,659 $ 37,115,282

EXPENDITURESCurrent:General government administration $ 3,554,307 $ - $ - $ - $ - $ 3,554,307 Judicial administration 288,350 - - - - 288,350 Public safety 6,311,384 - - - - 6,311,384 Public works 2,363,545 - - - - 2,363,545 Health and welfare 3,714,284 - - - - 3,714,284 Education 13,983,290 - - - - 13,983,290 Parks, recreation, and cultural 2,059,722 - - - - 2,059,722

Capital projects - - - 9,301,406 8,566,113 17,867,519 Debt service:Principal retirement 155,055 756,762 1,485,444 - - 2,397,261 Interest and other fiscal charges 11,793 800,430 2,401,599 - - 3,213,822 Total expenditures $ 32,441,730 $ 1,557,192 $ 3,887,043 $ 9,301,406 $ 8,566,113 $ 55,753,484

Excess (deficiency) of revenues over(under) expenditures $ 3,054,649 $ (1,557,192) $ (3,592,611) $ (8,136,594) $ (8,406,454) $ (18,638,202)

OTHER FINANCING SOURCES (USES)Transfers in $ 846,800 $ 1,557,192 $ 3,669,505 $ 150,000 $ - $ 6,223,497 Transfers out (5,226,697) - - (496,800) - (5,723,497) Issuance of bond anticipation note - - - - 7,500,000 7,500,000 Issuance of capital leases - - - 2,102,183 - 2,102,183 Advance refunding bonds issued - - 6,695,000 - - 6,695,000 Issuance of general obligation bonds - - 1,375,000 - 25,500,000 26,875,000 Premium on general obligation bonds - - 261,342 - - 261,342 Payment to refunding bond escrow agent - - (6,627,847) - - (6,627,847) Sale of capital assets - - - 2,500,000 - 2,500,000

Total other financing sources (uses) $ (4,379,897) $ 1,557,192 $ 5,373,000 $ 4,255,383 $ 33,000,000 $ 39,805,678

Net change in fund balances $ (1,325,248) $ - $ 1,780,389 $ (3,881,211) $ 24,593,546 $ 21,167,476 Fund balances - beginning 6,532,264 - 907,783 10,510,424 7,256,330 25,206,801 Fund balances - ending $ 5,207,016 $ - $ 2,688,172 $ 6,629,213 $ 31,849,876 $ 46,374,277


A-25


Reconciliation of Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental FundsTo the Statement of ActivitiesFor the Year Ended June 30, 2007

Amounts reported for governmental activities in the statement of activities are different because:

Net change in fund balances - total governmental funds $ 21,167,476

Governmental funds report capital outlays as expenditures. However, in the statement of activitiesthe cost of those assets is allocated over their estimated useful lives and reported as depreciationexpense. This is the amount by which the capital outlays exceeded depreciation in the currentperiod. 10,808,716

The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins,and donations) is to increase net assets. (1,763,171)

Revenues in the statement of activities that do not provide current financial resources are notreported as revenues in the funds. (27,664)

The issuance of long-term debt (e.g. bonds, leases) provides current financial resources togovernmental funds, while the repayment of the principal of long-term debt consumes the currentfinancial resources of governmental funds. Neither transaction, however, has any effect on netassets. Also, governmental funds report the effect of issuance costs, premiums, discounts, andsimilar items when debt is first issued, whereas these amounts are deferred and amortized in thestatement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. (34,293,034)

Some expenses reported in the statement of activities do not require the use of current financialresources and, therefore are not reported as expenditures in governmental funds. 107,892

Change in net assets of governmental activities $ (3,999,785)


A-26


Statement of Net AssetsProprietary Funds

EnterpriseFund

Water andSewer Fund

ASSETSCurrent assets:

Cash and cash equivalents $ 7,240,580Accounts receivables, net of allowances for uncollectibles 260,146Due from other funds 291,917Prepaid expenses 265

Total current assets $ 7,792,908 Noncurrent assets:

Other assets:Unamortized bond issue costs $ 30,940

Capital assets:Utility plant and equipment $ 14,566,195Less accumulated depreciation (4,339,924) Total capital assets $ 10,226,271 Total noncurrent assets $ 10,257,211 Total assets $ 18,050,119

LIABILITIESCurrent liabilities:

Accounts payable $ 55,939Accrued liabilities 4,946Accrued interest payable 9,758Deposits payable 18,962Bonds payable - current portion 78,538Compensated absences - current portion 5,012

Total current liabilities $ 173,155 Noncurrent liabilities:

Bonds payable - net of current portion $ 955,997Compensated absences - net of current portion 45,107

Total noncurrent liabilities $ 1,001,104 Total liabilities $ 1,174,259

NET ASSETSInvested in capital assets, net of related debt $ 9,191,736 Unrestricted 7,684,124

Total net assets $ 16,875,860


June 30, 2007

A-27


Statement of Revenues, Expenses, and Changes in Fund Net AssetsProprietary FundsFor the Year Ended June 30, 2007

EnterpriseFund

Water andSewer Fund

OPERATING REVENUESCharges for services:

Water and sewer revenues $ 3,468,343Other revenues 140,183

Total operating revenues $ 3,608,526

OPERATING EXPENSESWater and sewer operations $ 1,711,731Inflow and infiltration 1,419,537Operation and maintenance of U.O.S.A. plant 1,341,562Depreciation 352,060

Total operating expenses $ 4,824,890

Operating income (loss) $ (1,216,364)

NONOPERATING REVENUES (EXPENSES)Investment earnings $ 177,567 Antenna lease charges - watertower 26,116 Bond issuance cost amortization (3,148) Interest expense (67,516)

Total nonoperating revenues (expenses) $ 133,019 Income before contributions and transfers $ (1,083,345)

Capital contributions $ 343,613Transfers out (500,000)

Change in net assets $ (1,239,732)

Total net assets - beginning 18,115,592 Total net assets - ending $ 16,875,860


A-28


Statement of Cash FlowsProprietary FundsFor the Year Ended June 30, 2007

EnterpriseFund

Water andSewer Fund

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers and users $ 3,541,215 Payments to suppliers (3,851,490) Payments to employees and on behalf of employees (859,815)

Net cash provided (used) by operating activities $ (1,170,090)

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES

Transfers to other funds $ (500,000) Net cash provided (used) by noncapital financing activities $ (500,000)

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES

Additions to utility plant $ (305,134) Principal payments on bonds (85,000) Tap fees 343,613 Interest payments (60,716)

Net cash provided (used) by capital and related financing activities $ (107,237)

CASH FLOWS FROM INVESTING ACTIVITIES

Interest and dividends received $ 177,567

Net increase (decrease) in cash and cash equivalents $ (1,599,760)

Cash and cash equivalents - beginning 8,840,340 Cash and cash equivalents - ending $ 7,240,580

Reconciliation of operating income (loss) to net cash provided (used) by operating activities:Operating income (loss) $ (1,216,364) Adjustments to reconcile operating income (loss) to net cash

provided (used) by operating activities:Depreciation expense $ 352,060 Antenna lease fees 26,116 (Increase) decrease in accounts receivable 61,047 (Increase) decrease in due from other funds (291,917) Increase (decrease) in deposits payable 2,900 (Increase) decrease in prepaid expenses (15) Increase (decrease) in accounts payable and compensated absences (90,162) Increase (decrease) in accrued liabilities (13,755) Total adjustments $ 46,274

Net cash provided (used) by operating activities $ (1,170,090)


A-29


Statement of Fiduciary Net AssetsFiduciary Funds

AgencyFunds

ASSETSCash and cash equivalents $ 13,154

Total assets $ 13,154

LIABILITIESAmounts held for social services clients $ 13,154

Total liabilities $ 13,154


June 30, 2007

A-30


Notes to Financial Statements As of June 30, 2007

Note 1—Summary Of Significant Accounting Policies: The financial statements of the City conform to generally accepted accounting principles (GAAP) applicable to government units promulgated by the Governmental Accounting Standards Board (GASB). The following is a summary of the more significant policies: A. Reporting Entity:

The City of Manassas Park, Virginia, (government) is a municipal corporation governed by an elected mayor and six-member City Council. The accompanying financial statements present the government and its component units, entities for which the government is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the government’s operations. Each discretely presented component unit is reported in a separate column in the government-wide financial statements (see note below for description) to emphasize that it is legally separate from the government.

Blended Component Units - The City has no blended component units for the fiscal year ended June 30, 2007.

Discretely Presented Component Unit - The component unit column in the combined financial statements include the financial data of the City's discretely presented component unit. The component unit is reported in a separate column to emphasize that it is legally separate from the City.

The Manassas Park City School Board operates the elementary and secondary public schools in the City. School Board members are appointed by the Governing Body. The School Board is fiscally dependent upon the City because the City approves all debt issuances of the School Board and provides significant funding to operate the public schools since the School Board does not have separate taxing powers. A separate financial report for the Manassas Park City School Board is not prepared.

Related Organizations - A related organization is an organization for which a primary government is not financially accountable because it does not impose will or have a financial benefit or burden relationship even though the primary government appoints a voting majority of the organization's governing board. The Industrial Development Authority of Manassas Park is a related organization of the City.

The City has organized the Industrial Development Authority of Manassas Park to promote and develop commercial and industrial enterprise within the City. The Authority issues bonds to enterprises who locate within the City as a means of attracting business. Although the Authority's members are appointed by City Council, the Authority is not a part of the City's reporting entity because the City has no accountability for fiscal matters. The bonds are not obligations of the City or the Commonwealth of Virginia, but are secured solely by revenues received from the businesses on whose behalf they are issued. The Authority had no revenue bonds outstanding at June 30, 2007.

Joint Ventures - A joint venture is a legal entity or other organization that results from a contractual arrangement and that is owned, operated, or governed by two or more participants as a separate and specific activity subject to joint control, in which the participants retain (a) an ongoing financial interest or (b) an ongoing financial responsibility. The Potomac and Rappahannock Transportation District Commission is a joint venture of the City and is included in the combined financial statements of the City as an investment in the general fund.

A-31

CITY OF MANASSAS PARK, VIRGINIA Notes to Financial Statements As of June 30, 2007 (Continued)

Note 1—Summary Of Significant Accounting Policies: (Continued) A. Reporting Entity: (continued)

The Potomac and Rappahannock Transportation Commission (PRTC), was created in fiscal year 1987 to levy a two percent fuel tax authorized by the Commonwealth of Virginia. The PRTC is a joint venture with the contiguous jurisdictions of Prince William and Stafford Counties and the Cities of Manassas, Manassas Park, and Fredericksburg and was established to improve transportation systems, comprised of transit facilities, public highways and other modes of transport.

The governing body of each member jurisdiction appoints, from among its members, its representatives to act as Commissioners. The Commission has fourteen members and one ex-officio representative from the Virginia Department of Rail and Public Transportation. The composition of the Commission is as follows:

Percentage of Percentage ofMembers Membership Jurisdiction Jurisdictions

Prince William County 6 40.00% 1 14.29%Stafford County 2 13.33% 1 14.29%Manassas 1 6.67% 1 14.29%Manassas Park 1 6.67% 1 14.29%Fredericksburg 1 6.67% 1 14.28%House 2 13.33% 1 14.28%Senate 1 6.67% 1 14.28%Virginia Department of Rail

and Public Transportation 1 6.66% - -15 100.00% 7 100.00%

PRTC’s financial position as of June 30, 2006 (most recent data available), and operating results for the year then ended, along with comparable information for the City of Manassas Park’s share for the year ended June 30, 2007, follows:

June 30, 2007June 30, 2006 City'sTotal (000's) Share

Total assets $ 84,632 $ 1,755,162 Total liabilities 11,835 -

Net Equity $ 72,797 $ 1,755,162

Total revenues $ 42,200 $ 944,179 Total expenditures (35,648) (565,510)

Net income (loss) $ 6,552 $ 378,669

A-32



Each Commission member, including the Virginia Department of Rail and Public Transportation representative, is entitled to one vote in all matters requiring action by the Commission. A majority vote of the Commission members present and voting and a majority of the jurisdictions represented is required to act. For purposes of determining the number of jurisdictions present, Virginia Department of Transportation is not counted as a separate jurisdiction. The Commissioners adopt an annual operating budget based on projected motor vehicle fuel sales. The City has an equity interest in this joint venture equal to its share of the gas tax proceeds less expenditures authorized by the Governing Body. The gas tax proceeds are authorized by the Commonwealth of Virginia and are restricted for transportation. The direct financial interest is restricted and is reported as an investment in joint venture. Complete financial statements of the Potomac and Rappahannock Transportation District Commission can be obtained from their administrative offices in Woodbridge, Virginia. Jointly Governed Organizations - A jointly governed organization is a multi-governmental arrangement that is governed by representatives from each of the governments that create the organization, but that is not a joint venture because the participants do not retain an ongoing financial interest or responsibility. The Upper Occoquan Sewage Authority (UOSA) was created under the provisions of the Virginia Water and Sewer Authorities Act to be the single regional entity to construct, finance and operate the regional sewage treatment facility. UOSA is a jointly governed organization formed on March 3, 1971 by a concurrent resolution of the governing bodies of the Counties of Fairfax and Prince William and the Cities of Manassas and Manassas Park. The governing body of UOSA is an eight-person Board of Directors consisting of two members appointed to four-year terms by the governing body of each participating jurisdiction. In turn, the UOSA Board adopts an annual operating budget based on projected sewage flows. Each jurisdiction’s percentage share of UOSA’s capacity as of June 30, 2006 (latest available information) is as follows:

Percentage of TotalAllocated Capacity

Fairfax County 41.22%Prince William County 31.24%City of Manassas 21.46%City of Manassas Park 6.08%

100.00%

A-33



UOSA's financial condition as of June 30, 2006 (latest available financial information) and operating results for the year then ended is summarized as follows:

Total assets $ 484,987,527 Total liabilities 360,521,208

Net equity $ 124,466,319

Total revenues $ 44,658,938 Total expenses 40,571,343

Net (loss) $ 4,087,595

The City is obligated under a cost sharing agreement with UOSA to fund the City's current allocated share of UOSA's annual operating costs and debt service. Accordingly, the City made payments to UOSA in fiscal year 2006 as follows:

Operating and reserve maintenance costs $ 761,566 Debt service 1,419,273

Total $ 2,180,839

UOSA currently has six sewage system revenue bonds outstanding. Terms of the issuances are as follows:

OriginalIssue Amount Maturity Interest

Serial - 1995 A $ 28,885,000 July 1, 2010 4.30 to 6.00%Term - 1995 A 259,715,000 July 1, 2015-July 1, 2029 4.75 to 5.00%Serial - 1995 B 42,260,000 July 1, 2010 3.95 to 5.00%Serial - 2003 58,150,000 July 1, 2021 2.00 to 5.00%Serial - 2004 49,395,000 July 1, 2015 3.00 to 5.00%Serial - 2005 82,465,000 July 1, 2025 3.85 to 4.01%

The City's share of construction costs was determined based on their portion of estimated capacity rights of the facilities. The City funds its obligations to UOSA through payments from the Enterprise Fund. Operation and maintenance charges are paid to UOSA monthly and debt service is paid quarterly. The City has entered into a supplemental agreement with Fairfax City for 600,000 gallons per day of the City's capacity. The City's share of operating and maintenance costs are billed directly from the Authority, but debt service payments are made through the City.

A-34


Note 1—Summary Of Significant Accounting Policies: (Continued)

A. Reporting Entity: (continued)

The City has also entered into a supplemental agreement with the City of Manassas dated August 13, 1981 for 600,000 gallons per day of the City's capacity. The City received a total of $3,375,000 in connection with this sale. The City has entered into a second supplemental agreement with City of Fairfax dated October 30, 1986 for the sale of 600,000 gallons per day of the City's capacity. The City has paid the City of Fairfax $2,942,148 for the purchase of this capacity.

B. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. 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 fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable 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 financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter 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 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 government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due.

A-35


Note 1—Summary Of Significant Accounting Policies: (Continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation: (Continued)

Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Accordingly, real and personal property taxes are recorded as revenues and receivables when billed, net of allowances for uncollectible amounts. Property taxes not collected within 60 days after year-end are reflected as deferred revenues. Sales and utility taxes, which are collected by the state or utilities and subsequently remitted to the City, are recognized as revenues and receivables upon collection by the state or utility, which is generally in the month preceding receipt by the City. Licenses, permits, fines and rents are recorded as revenues when received. Intergovernmental revenues, consisting primarily of federal, state and other grants for the purpose of funding specific expenditures, are recognized when earned or at the time of the specific expenditure. Revenues from general purpose grants are recognized in the period to which the grant applies. All other revenue items are considered to be measurable and available only when cash is received by the government. The government reports the following major governmental funds:

The general fund is the government’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The general fund includes the activities of the fire revolving loan, drug enforcement, and industrial development funds.

The City Debt Service and School Debt Service Funds account for the resources accumulated and payments made for principal and interest on long-term general obligation debt of governmental funds, including public improvement bonds and obligations issued through the Virginia Public School Authority. Debt service funds consist of the City Debt Service Fund and the School debt service fund.

The City Capital Projects and School Building Funds account for financial resources to be used for the acquisition or construction of major capital facilities, other than those financed by proprietary funds. The City’s two capital project funds consist of the City Capital Projects Fund and the School Building Fund.

The government reports the following major proprietary funds:

The water and sewer fund accounts for the activities and operations of the sewage treatment plants, sewage pumping stations and collection systems, and the water distribution system.

Fiduciary funds account for assets held by the government in a trustee capacity or as agent or custodian for individuals, private organizations, other governmental units, or other funds. The City’s sole agency fund includes the Special Welfare fund.

Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The government has elected not to follow subsequent private-sector guidance.

A-36


Note 1—Summary Of Significant Accounting Policies: (Continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation: (Continued)

As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are other charges between the government’s water and sewer function and various other functions of the government. 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, services, or privileges provided, 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. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the water and sewer enterprise fund are charges to customers for sales and services. The water and sewer fund also recognizes as operating revenue the portion of tap fees intended to recover the cost of connecting new customers to the system. Operating expenses for enterprise funds include the cost of sales and services, administrative expense, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the government’s policy to use restricted resources first, then unrestricted resources as they are needed.

D. Assets, Liabilities, and Net Assets or Equity 1. Deposits and investments

The government’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition.

Investments for the government, as well as for its component unit, are reported at fair value. The State Treasurer’s Local Government Investment Pool operates in accordance with appropriate state laws and regulations. The reported value of the pool is the same as the fair value of the pool shares.

2. Receivables and payables

Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year 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 non-current portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds.” Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources.

A-37



D. Assets, Liabilities, and Net Assets or Equity: (Continued) 3. Inventory

Purchases of materials and supplies are recorded as an expenditure at the time purchased except for school commodities which are valued at cost using the first-in/first-out method.

4. Property Taxes

Property is assessed at its value on January 1. Property taxes attach as an enforceable lien on property as of January 1. Real estate taxes are payable in two installments on June 5th and December 5th. Personal property taxes are due and collectible annually on November 5th. The City bills and collects its own property taxes.

5. Allowance for Uncollectible Accounts

The City calculates its allowance for uncollectible accounts using historical collection data and, in certain cases, specific account analysis. The allowance amounted to approximately $772,332 at June 30, 2007 and is comprised of property taxes, $546,202, and water and sewer billings, $226,130.

6. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

7. Restricted assets

Unspent proceeds of the City’s general obligation bond anticipation notes are classified as restricted assets on the balance sheet because they are maintained in separate bank accounts and their use is limited by applicable bond covenants.

8. Capital assets 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 government as assets with an initial, individual cost of more than $5,000 (amount 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 cost 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 capitalized value of the assets constructed. No interest was capitalized during the current year.

A-38



D. Assets, Liabilities, and Net Assets or Equity: (Continued)

8. Capital assets: (Continued) Property, plant, and equipment of the primary government, as well as the component unit, are depreciated using the straight line method over the following estimated useful lives:

Assets Years

Buildings 50Buildings improvements 50Structures, lines, and accessories 40Infrastructure 30Machinery and equipment 5-10

9. Compensated Absences

Vested or accumulated vacation and sick leave that is expected to be liquidated with expendable available financial resources is reported as an expenditure and a fund liability of the governmental fund that will pay it. Amounts of vested or accumulated vacation and sick leave that are not expected to be liquidated with expendable available financial resources are reported as liabilities in the Statement of Net Assets. In accordance with the provisions of Government Accounting Standards No. 16, Accounting for Compensated Absences, no liability is recorded for nonvesting accumulating rights to receive sick pay benefits. However, a liability is recognized for that portion of accumulating sick leave benefits that it is estimated will be taken as "terminal leave" prior to retirement. The City accrues salary-related payments associated with the payment of compensated absences. 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.

10. Long-term obligations 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 assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types 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 on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

A-39



E. Assets, Liabilities, and Net Assets or Equity: (Continued)

11. Fund equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change.

12. Net Assets Net assets are the difference between assets and liabilities. Net assets invested in capital assets represent capital assets, less accumulated depreciation less any outstanding debt related to the acquisition, construction or improvement of those assets.

Note 2—Reconciliation of Government-Wide and Fund Financial Statements: A. Explanation of certain differences between the governmental fund balance sheet and the

government-wide statement of net assets

The governmental fund balance sheet includes a reconciliation between fund balance—total governmental funds and net assets—governmental activities as reported in the government-wide statements of net assets. One element of that reconciliation explains that “long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds.” The details of these differences for the primary government and discretely presented component unit, respectively, are as follows:

Component

Primary Unit - SchoolGovernment Board

Bonds and notes payable $ (97,450,695) $ - Capital leases (2,115,984) (645,729) Compensated absences (704,553) (368,023)

Net adjustment to increase (decrease) fund balances-totalgovernmental funds to arrive at net assets-governmentalactivities $ (100,271,232) $ (1,013,752)

A-40


Note 2—Reconciliation of Government-Wide and Fund Financial Statements: (Continued)

A. Explanation of certain differences between the governmental fund balance sheet and the government-wide statement of net assets: (Continued) Another element of the reconciliation explains that "long-term" assets including capital assets and unamortized bond issue costs are not available to meet the obligations of the government in the current period. The details of these are as follows:

ComponentPrimary Unit - School

Government Board

Capital assets $ 90,795,361 $ 29,397,840 Accumulated depreciation (12,736,467) (7,648,770)

Net adjustment to increase fund balances-totalgovernmental funds to arrive at net assets-governmentalactivities $ 78,058,894 $ 21,749,070

A final element of the reconciliation includes other long-term assets that are not available to pay for current-period expenditures and, therefore are not reported in the funds. The details of these differences are as follows:


Government Board

Unamortized bond issue costs $ 609,055 $ - Deferred revenue 768,486 - Accrued interest payable (1,115,554)

Net adjustment to increase fund balances-totalgovernmental funds to arrive at net assets-governmentalactivities $ 261,987 $ -

A-41


Note 2—Reconciliation of Government-Wide and Fund Financial Statements: (Continued)

B. Explanation of certain differences between the governmental fund statement of revenues, expenditures, and changes in fund balances and the government-wide statement of activities

The governmental fund 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 assets of 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 statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense.” The details of these differences for the primary government and discretely presented component unit, respectively, are as follows:


Government Board

Capital outlay $ 17,365,266 $ 456,226 Depreciation expense (1,984,542) (829,006) Allocation of debt financed school asssets based on current year repayments (4,572,008) 4,572,008

Net adjustment to increase (decrease) net changes in fundbalances-total governmental funds to arrive at changes innet assets of governmental activities $ 10,808,716 $ 4,199,228

Another element of the reconciliation explains that proceeds from sale of assets are recorded as other financing sources in the governmental funds. However in the statement of activities, a gain or loss is computed.


Government Board

Gain on disposal of assets $ (1,763,171) $ -

Net adjustment to increase (decrease) net changes in fundbalances-total governmental funds to arrive at changes innet assets of governmental activities $ (1,763,171) $ -

A-42


Note 2—Reconciliation of Government-Wide and Fund Financial Statements: (Continued) B. Explanation of certain differences between the governmental fund statement of revenues,

expenditures, and changes in fund balances and the government-wide statement of activities (Continued) A final element of the reconciliation explains that certain revenues do not provide current financial resources and are not reported as revenues in the fund.

Component

Primary Unit - SchoolGovernment Board

Deferred revenue $ (27,664) $ -

Net adjustment to increase (decrease) net changes in fundbalances-total governmental funds to arrive at changes innet assets of governmental activities $ (27,664) $ -

Another element of that reconciliation states that “the issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities.” The details of these differences for the primary government and discretely presented component unit, respectively, are as follows:


Government BoardDebt issued or incurred:

Issuance of general obligation bonds, net of premium discounts and issued costs $ (34,588,112) $ - Capital lease (2,102,183) (600,000)

Principal repayments:General obligation debt and capital leases 2,397,261 124,361

Net adjustment to increase (decrease) net changes in fundbalances-total governmental funds to arrive at changes innet assets of governmental activities $ (34,293,034) $ (475,639)

A-43


Note 2—Reconciliation of Government-Wide and Fund Financial Statements: (Continued) B. Explanation of certain differences between the governmental fund statement of revenues,

expenditures, and changes in fund balances and the government-wide statement of activities (Continued) Another element of that reconciliation states that “Some 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 these differences for the primary government and discretely presented component unit, respectively, are as follows:


Government Board

Compensated absences $ (147,721) $ (46,515) Accrued interest 255,613 -

Net adjustment to increase (decrease) net changes in fundbalances-total governmental funds to arrive at changes innet assets of governmental activities $ 107,892 $ (46,515)

Note 3—Stewardship, Compliance, and Accountability: A. Budgetary Information

The following procedures are used by the City in establishing the budgetary data reflected in the financial statements:

1. Prior to May 1, the City Manager submits to the Governing Body a proposed operating and capital

budget for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures and the means of financing them.

2. Public hearings are conducted to obtain taxpayer comments. 3. Prior to July 1, the budget is legally enacted through passage of an ordinance. 4. All revisions to the budget at the fund level must be approved by the Governing Body. Management

may transfer budgeted amounts between functions without approval by the Governing Body. 5. Formal budgetary integration is employed as a management control device during the year for the

General, Debt Service, Capital Projects and Water and Sewer Funds. 6. Budgets for all funds are legally adopted on a basis consistent with generally accepted accounting

principles (GAAP) except for the school building fund which does not budget for the receipt or expenditure of capital lease proceeds. Capital lease payments are budgeted in the period payments are due.

A-44


Note 3—Stewardship, Compliance, and Accountability: A. Budgetary Information (Continued)

7. Quarterly appropriations are made by the Governing Body to the fund level. Appropriations can be

revised only by the Governing Body. Several supplemental appropriations were necessary during this fiscal year. All appropriations lapse at year-end except for capital projects funds where appropriations carry forward the duration of the project.

8. All budget data presented in the accompanying financial statements is the legally amended or

revised budget for the year ended June 30, 2007. 9. The following funds have legally adopted budgets: General Fund, City Debt Service Fund, School Debt

Service Fund, City Capital Projects Fund, Water and Sewer Fund, School Operating Fund, School Cafeteria Fund, School Capital Projects Fund, School Debt Service Fund. The legal level of control, the level on which expenditures may not legally exceed appropriations, is the fund level.

B. Excess of Expenditures Over Appropriations

For the year ended June 30, 2007, no funds exceeded appropriations. Note 4—Deposits and Investments: Deposits All cash of the primary government and its discretely presented component unit is maintained in accounts collateralized in accordance with the Virginia Security for Public Deposits Act (a multiple financial institution collateral pool), Section 2.2-4400 et. seq. of the Code of Virginia or covered by federal depository insurance. Under the Act, banks holding public deposits in excess of the amounts insured by FDIC must pledge collateral in the amount of 50% of excess deposits to a collateral pool in the name of the State Treasury Board. Savings and Loan institutions are required to collateralize 100% of deposits in excess of FDIC limits. Deposits covered by the Act are considered insured since the Treasury Board is authorized to make additional assessments. Investments Statutes authorize the City to invest in obligations of the United States or agencies thereof, obligations of the Commonwealth of Virginia or political subdivisions thereof, obligations of the International Bank for Reconstruction and Development (World Bank), the Asian Development Bank, the African Development Bank, “prime quality” commercial paper and certain corporate notes, banker’s acceptances, repurchase agreements, State Treasurer’s Local Government Investment Pool (LGIP) and the State Non-Arbitrage Pool (SNAP). The City does not have a formal investment policy addressing the risks related to investments.

A-45


Note 4—Deposits and Investments: (Continued) Credit Risk of Debt Securities The City’s rated debt investments as of June 30, 2007 were rated by Standard and Poor's and the ratings are presented below using Standard and Poor’s rating scale.

Rated Debt Investments

AAA AA A A1 Unrated

U.S. Agency Securities $ 5,576,222 $ - $ - $ - $ - U.S. Treasury Money Market 1,885,500 - - - - Corporate Debt 88,354 - - - - Money Market Mutual Fund 421,645 - - - - Local Government Investment Pool 862,900 - - - - State Non-Arbitrage Pool 38,640,696 - - - -

Total $ 47,475,317 $ - $ - $ - $ -

Locality's Rated Debt Investments' Values

Fair Quality Ratings

Concentration of Credit Risk The City had investments at June 30, 2007, with more than 5 percent of the total in securities of Federal Home Loan Bank. These investments represented 7 percent of total investments. Interest Rate Risk

Less Than Greater ThanInvestment Type Fair Value 1 Year 1-5 Years 6-10 Years 10 Years

U.S. Agencies Securities $ 5,576,222 $ 499,690 $ 5,076,532 $ - $ - Corporate Debt 88,354 - - - 88,354

Total $ 5,664,576 $ 499,690 $ 5,076,532 $ - $ 88,354

Investment Maturities (in years)

External Investment Pools The State Non-Arbitrage Pool (SNAP) is an open-end management investment company registered with the Securities and Exchange Commission (SEC). The fair value of the positions in the Local Government Investment Pool (LGIP) are the same as the value of the pool shares. As this pool is not SEC registered, regulatory oversight of the pool rests with the Virginia State Treasury. LGIP maintains a policy to operate in a manner consistent with SEC Rule 2a-7.

A-46


Note 5—Due To/From Other Governmental Units: Amounts due from other governmental units are as follows at June 30, 2007:

DiscretelyPresented

ComponentUnit

TotalPrimary School Reporting

Government Board EntityFederal Government:

Categorical aid-welfare $ 93,756 $ - $ 93,756 Categorical aid-education - 150,114 150,114 Categorical aid-School Food - 80,898 80,898

Commonwealth of Virginia:Local sales tax 358,039 - 358,039 State sales tax - 320,065 320,065 Categorical aid-Comprehensive Services Act 193,314 - 193,314 Categorical aid-welfare 40,031 - 40,031 Noncategorical aid: ABC Profits tax 6,033 - 6,033 Wine tax 6,323 - 6,323 Auto Rental tax 19,919 - 19,919 Rolling stock tax 3,150 - 3,150 Shared Expenses-Treasurer 6,760 - 6,760 Shared Expenses-Commissioner of Revenue 7,448 - 7,448

Totals $ 734,773 $ 551,077 $ 1,285,850

A-47


Note 6—Interfund Obligations: Interfund obligations for the year ended June 30, 2007 consisted of the following:

Interfund InterfundFund Receivable Payable

Primary Government:General Fund $ 140,266 $ - Capital Projects Fund - 140,266

Total $ 140,266 $ 140,266

The above interfund obligations represent temporary advances between funds or amounts allocable to one fund and not yet transferred between the funds. Note 7—Interfund Transfers: Interfund transfers for the year ended June 30, 2007 consisted of the following:

Fund Transfers In Transfers Out

Primary Government:General Fund $ 846,800 $ 5,226,697 City Debt Service Fund 1,557,192 -School Debt Service Fund 3,669,505 - City Capital Projects Fund 150,000 496,800 Enterprise Fund - 500,000

Total $ 6,223,497 $ 6,223,497

Transfers are used to (1) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them and (2) use unrestricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with budgeting authorization.

A-48


Note 8—Capital Assets: Capital asset activity for the year ended June 30, 2007 was as follows: Primary Government:

Beginning EndingBalance Increases Decreases Balance

Governmental activities:Capital assets not being depreciated:

Land $ 6,997,327 $ - $ (1,763,171) $ 5,234,156 Construction in progress 21,412,679 15,019,491 (26,114,788) 10,317,382

Total capital assets not being depreciated $ 28,410,006 $ 15,019,491 $ (27,877,959) $ 15,551,538

Capital assets being depreciated:Buildings and improvements $ 32,691,546 $ 26,166,941 $ (4,572,008) $ 54,286,479 Machinery and equipment 3,772,956 763,044 - 4,536,000 Infrastructure 14,890,766 1,530,578 - 16,421,344 Total capital assets being

depreciated $ 51,355,268 $ 28,460,563 $ (4,572,008) $ 75,243,823 Less accumulated depreciation for:

Buildings and improvements $ (3,856,328) $ (1,100,298) $ 133,408 $ (4,823,218) Machinery and equipment (2,091,055) (424,880) - (2,515,935) Infrastructure (4,804,542) (592,772) - (5,397,314)

Total accumulated depreciation $ (10,751,925) $ (2,117,950) $ 133,408 $ (12,736,467) Total capital assets being

depreciated, net $ 40,603,343 $ 26,342,613 $ (4,438,600) $ 62,507,356

Governmental activities capital assets, net $ 69,013,349 $ 41,362,104 $ (32,316,559) $ 78,058,894

A-49


Note 8—Capital Assets: (Continued) Primary Government: (Continued)

Beginning EndingBalance Increases Decreases Balance

Business-type activities:Capital assets being depreciated:

Utility plant and equipment $ 14,261,061 $ 305,134 $ - $ 14,566,195 Less accumulated depreciation (3,987,864) (352,060) - (4,339,924)

Total capital assets not being depreciated, net $ 10,273,197 $ (46,926) $ - $ 10,226,271

Business-type activities capital assets, net $ 10,273,197 $ (46,926) $ - $ 10,226,271

Depreciation expenses was charged to functions/programs of the primary government as follows:

Governmental activities:General government $ 103,138 Public safety 346,891 Public works 669,661 Health and Welfare 1,738 Parks, recreation, and cultural 104,372

Total depreciation expense-governmental activities $ 1,225,800

Depreciation on joint tenancy assets-transferred to School Board 892,150

Total $ 2,117,950

Business-type activities:Water and sewer fund $ 352,060

Total depreciation expense-business-type activities $ 352,060

A-50


Note 8—Capital Assets: (Continued) Discretely Presented Component Unit: Capital asset activity for the School Board for the year ended June 30, 2007 was as follows:

Beginning EndingBalance Increases Decreases Balance (1)

Capital assets not being depreciated:Land $ 1,964,118 $ - $ - $ 1,964,118 Total capital assets not being

depreciated $ 1,964,118 $ - $ - $ 1,964,118

Capital assets being depreciated:Buildings and improvements $ 20,005,761 $ 4,572,008 $ - $ 24,577,769 Machinery and equipment 2,399,727 605,709 (149,483) 3,154,919

Total capital assets being depreciated $ 22,405,488 $ 5,177,717 $ (149,483) $ 27,732,688

Less accumulated depreciation for:Buildings and improvements $ (5,783,241) $ (1,566,858) $ 892,150 $ (8,242,249) Machinery and equipment (1,036,523) (303,781) 149,483 (1,489,787)

Total accumulated depreciation $ (6,819,764) $ (1,870,639) $ 1,041,633 $ (9,732,036) Total capital assets being

depreciated, net $ 15,585,724 $ 3,307,078 $ 892,150 $ 18,000,652

School Board capital assets, net $ 17,549,842 $ 3,307,078 $ 892,150 $ 21,749,070

Capital asset activity for the School Board for the year ended June 30, 2007 was as follows:

Depreciation expense $ 1,737,231 Depreciation on joint tenancy assets-transferred to

School Board 133,408

Net increases in accumulated depreciation $ 1,870,639

(1) Legislation enacted during the year ended June 30, 2002, Section 15.2-1800.1 of the Code of Virginia, 1950, as amended, has changed the reporting of local school capital assets and related debt for financial statement purposes. Historically, debt incurred by local governments “on-behalf” of school boards was reported in the school board’s discrete column along with the related capital assets. Under the new law, local governments have a “tenancy in common” with the school board whenever the locality incurs any financial obligation for any school property which is payable over more than one fiscal year. For financial reporting purposes, the legislation permits the locality to report the portion of school property related to any outstanding financial obligation eliminating any potential deficit from capitalizing assets financed with debt. The effect on the City of Manassas Park, Virginia for the year ended June 30, 2007, is that school financed assets in the amount of $44,607,490 are reported in the Primary Government for financial reporting purposes.

A-51


Note 9—Long-Term Debt: Primary Government—Governmental Activity Indebtedness: Annual requirements to amortize long-term debt and the related interest are as follows:

Year General Obligation Bonds &Ending Capital Leases Bank Loans

June 30, Principal Interest Principal Interest Principal Interest Principal Interest

2008 $ 1,912,901 $ 3,896,670 $ 625,000 $ 258,750 $ 238,520 $ 49,246 $ 62,615 $ 2,8572009 2,160,870 4,078,480 625,000 240,000 291,535 69,631 42,002 5652010 1,922,380 3,987,330 625,000 221,250 303,932 57,233 - - 2011 10,050,861 3,519,939 625,000 202,500 257,806 44,287 - - 2012 2,409,523 3,215,848 625,000 183,750 267,724 34,369 - - 2013 2,672,652 3,107,987 625,000 165,000 207,185 24,621 - - 2014 2,600,213 2,993,203 625,000 146,250 143,001 18,518 - - 2015 2,738,633 2,882,146 625,000 127,500 126,403 13,143 - - 2016 2,882,964 2,764,613 625,000 108,750 108,751 8,823 - - 2017 3,037,521 2,635,560 625,000 90,000 112,990 4,584 - - 2018 3,272,317 2,494,824 625,000 71,250 58,137 650 - - 2019 3,372,364 2,347,717 625,000 52,500 - - - - 2020 3,517,675 2,198,283 375,000 33,750 - - - - 2021 3,663,264 2,036,832 375,000 22,500 - - - - 2022 3,814,145 1,880,222 375,000 11,250 - - - - 2023 3,275,335 1,715,539 - - - - - - 2024 3,415,986 1,570,399 - - - - - - 2025 3,566,495 1,408,292 - - - - - - 2026 3,717,263 1,238,668 - - - - - - 2027 3,530,000 1,070,254 - - - - - - 2028 3,700,000 901,824 - - - - - - 2029 3,875,000 725,254 - - - - - - 2030 4,060,000 540,319 - - - - - - 2031 3,560,000 364,103 - - - - - - 2032 1,710,000 241,200 - - - - - - 2033 1,785,000 164,250 - - - - - - 2034 1,865,000 83,925 - - - - - -

Totals $ 88,088,362 $ 54,063,679 $ 8,625,000 $ 1,935,000 $ 2,115,984 $ 325,105 $ 104,617 $ 3,422

General Long-term DebtLiterary Fund LoansBond Anticipation Note

A-52


Note 9—Long-Term Debt: Primary Government—Governmental Activity Indebtedness: (Continued) The following is a summary of long-term debt transactions of the City for the year ended June 30, 2007.

Balance BalanceJuly 1, June 30,2006 Issuances Retirements 2007

Compensated absences:General $ 556,831 $ 221,583 $ 73,861 $ 704,553

General Obligation Debt:Bonds/Notes - General 55,043,808 33,570,000 8,025,446 80,588,362 Bank Loans 168,967 - 64,350 104,617 Bond Anticipation Notes - 7,500,000 - 7,500,000 Capital Leases 141,267 2,102,183 127,466 2,115,984 Literary Fund Loans - General 9,250,000 - 625,000 8,625,000

Totals $ 65,160,873 $ 43,393,766 $ 8,916,123 $ 99,638,516

Deferred Amount on Advance Refunding - (182,151) - (182,151)

Premium on Bonds Issued 553,525 261,342 - 814,867

Total Debt for financial statementpresentation $ 65,714,398 $ 43,472,957 $ 8,916,123 $ 100,271,232

Note: Section 15.2-1800.1, Code of Virginia, 1950, as amended, was enacted during the year ended June30, 2002, which affected the reporting of local school capital assets and related debt for financialstatement purposes. All debt historically reported by the Discretely Presented Component Unit -School Board, has been assumed by the Primary Government as a result of this legislation.

A-53


Note 9—Long-Term Debt: (Continued) Primary Government—Governmental Activity Indebtedness: (Continued) Details of Long-term Indebtedness: (Continued)

Total AmountAmount Due Within

Outstanding One YearGeneral obligation bonds/notes:$4,000,000 Public Improvement Bonds, dated August 1, 1992 maturingannually with interest payable semiannually (interest only payable 2004-2009 at 4.50%), through August 1, 2012 $ 600,000 $ -

$300,000 note, dated February 3, 2004 payable in monthly installmentsof $5,300, including interest at 2.32%, through February 2, 2009 98,765 61,970

$9,145,000 General Obligation Bonds, dated November 10, 2004maturing annually with interest at 4.10% to 5.60% payable semi-annuallythrough July 15, 2029 9,145,000 -

$6,314,536 VPSA General Obligation Bonds, dated November 10, 2005including a premium of $330,045 maturing annually with interest from4.60% to 5.10% payable semi-annually through July 2026 5,729,597 265,931

$26,875,000 General Obligation Bonds, dated June 6, 2007, principalmaturing annually with interest from 4.00% to 4.75% payable semi-annually through April 2034 26,875,000 -

$30,000,000 public improvement bonds dated December 1, 2005maturing annually with interest from 4.0% to 5.125% payable semi-annually through August 2030 29,560,000 745,000

Refunding Bonds:$4,810,000 General Obligation Refunding Bonds, dated July 15, 1993maturing annually with interest at 5.15% to 5.50% payable semiannuallythrough July 1, 2008 585,000 295,000

A-54


Note 9—Long-Term Debt: (Continued) Primary Government—Governmental Activity Indebtedness: (Continued) Details of Long-term Indebtedness: (Continued)


Outstanding One YearGeneral obligation bonds/notes: (Continued)Refunding Bonds: (Continued)

$6,695,000 General Obligation Advance Refunding Bonds, dated June 6,2007, principal maturing annually with interest between 4.00% and5.50% payable semi-annually through April 2022. The bond was issued toadvance refund the 1999 general obligation refunding bonds.$6,445,000 was placed in an irrevocable trust with an escrow agent tocall the bonds in April 2010. The City's total debt service paymentswere reduced by $284,892 to obtain an economic gain of $257,109 6,695,000 -

$10,755,000 General Obligation Refunding Bonds, dated April 1, 1999due in annual installments from $385,000 to $655,000, including interestat 3.80% to 5.10% payable semiannually through April 1, 2022 1,300,000 545,000

Total general obligation bonds/notes $ 80,588,362 $ 1,912,901

Bond Anticipation Note:

$7,500,000 bond anticipation note payable, dated December 12, 2006 due in quarterly installments of $63,554, including interest at 3.38%through March 2011 $ 7,500,000 $ -

State Literary Fund Loans:$5,000,000, issued May 15, 1999, due in annual installments of $250,000through May 15, 2019, interest payable annually at 3% $ 3,000,000 $ 250,000

$7,500,000, issued August 15, 2001, due in annual installments of$375,000 through August 15, 2022, interest payable annually at 3% 5,625,000 375,000

Total State Literary Fund Loans $ 8,625,000 $ 625,000

A-55


Note 9—Long-Term Debt: (Continued) Primary Government—Governmental Activity Indebtedness: (Continued)

Details of Long-term Indebtedness: (Continued)


Outstanding One YearBank Loans:

$200,000 bank loan dated June 30, 2004, due in monthly installments of$3,547, including interest at 2.475%, through June 30, 2009 $ 82,978 $ 40,976

$65,007 bank loan dated November 1, 2005 payable in annualinstallments of $22,993, including interest at 5.72%, through November2008 21,639 21,639

Total Bank Loans $ 104,617 $ 62,615

Capital Lease:

$216,683 capital lease dated August 17, 2006 payable in annualinstallments of $59,073, including interest at 6.10%, through August2010 $

157,611 49,458

$1,885,000 capital lease dated June 8, 2007 payable in monthlyinstallments ranging between $6,031 and $18,395, including interest atrates between 3.75% and 3.83% through June 2017

1,885,500 116,188

$216,940 capital lease enterd on May 25, 2005 payable in annualinstallments of $77,646, including interest at 6.545% through July 15,2007 $ 72,873 $ 72,873

Total Capital Leases $ 2,115,984 $ 238,519

Compensated absences (payable from General Fund) $ 704,553 $ 70,455

Total $ 99,638,516 $ 2,909,490

The assets acquired through capital leases are as follows:

Asset:Vehicles $ 407,035 Equipment 26,588 Less: Accumulated depreciation (198,949)

Total $ 234,674

As of June 30, 2007 capital lease proceeds in the amount of $1,885,500 remain unspent. A-56


Note 9—Long-Term Debt: (Continued) Primary Government—Enterprise Activity Indebtedness: Annual requirements to amortize long-term debt and related interest are as follows:

YearEnding

June 30, Principal Interest

2008 $ 85,000 $ 56,337 2009 90,000 51,742 2010 95,000 46,840 2011 95,000 41,781 2012 105,000 36,379 2013 110,000 30,520 2014 115,000 24,389 2015 125,000 17,849 2016 130,000 10,900 2017 135,000 3,679

Totals $ 1,085,000 $ 320,416

General Obligation Bonds

The following is a summary of long-term debt transactions of the City for the year ended June 30, 2007:

Balance BalanceJune 30, 2006 Issuances Retirements June 30, 2007

Enterprise FundCompensated absences $ 26,538 $ 39,807 $ 16,226 $ 50,119 General obligation bonds 1,170,000 - 85,000 1,085,000

Totals $ 1,196,538 $ 39,807 $ 101,226 $ 1,135,119

Less: deferred amounton refunding (57,266) - (6,801) (50,465)

Total debt for financialstatement presentation $ 1,139,272 $ 39,807 $ 94,425 $ 1,084,654

A-57


Note 9—Long-Term Debt: (Continued) Primary Government—Enterprise Activity Indebtedness: (Continued) Details of long-term indebtedness:


Outstanding One Year

General obligation bonds:

$1,805,000 General Obligation Water and Sewer Refunding Bonds,issued December 1, 1995. Interest payable monthly at fixed ratesranging from 3.75% to 5.45% principal maturing annually throughNovember 1,2016 $ 1,085,000 $ 85,000

Less deferral on advance refunding (50,465) (6,462)

Sub-total general obligation water and sewer refunding bonds $ 1,034,535 $ 78,538

Accrued compensated absences (payable from Water and Sewer Fund)$ 50,119 $ 5,012

Total $ 1,084,654 $ 83,550

Discretely Presented Component Unit—School Board Indebtedness: Annual requirements to amortize long-term debt and related interest are as follows:

YearEnding Capital Lease

June 30, Principal Interest

2008 $ 154,520 $ 22,400 2009 100,638 17,205 2010 84,345 13,806 2011 87,711 10,439 2012 91,212 6,939 2013 94,852 3,298 2014 32,451 266

Totals $ 645,729 $ 74,353

General Long-term Debt

A-58


Note 9—Long-Term Debt: (Continued) Discretely Presented Component Unit—School Board Indebtedness: (Continued) The following is a summary of long-term debt transactions of the Discretely Presented Component Unit-School Board for the year ended June 30, 2007:

Balance BalanceJune 30, 2006 Issuances Retirements June 30, 2007

Capital lease $ 170,090 $ 600,000 $ 124,361 $ 645,729 Compensated absences 321,508 325,120 278,605 368,023

Totals $ 491,598 $ 925,120 $ 402,966 $ 1,013,752

Details of Long-term Indebtedness:


Outstanding One Year

$361,497 capital lease entered on October 2, 2003, due in quarterlyinstallments of $19,692, including interest at 3.32%, through October2, 2008 $ 96,055 $ 76,525

$600,000 capital lease entered on October 6, 2006, due in monthlyinstallments of $8,179, including interest at 3.92%, through October13, 2013 549,674 77,995

Accrued compensated absences (payable from School Fund) 368,023 50,037

Total $ 1,013,752 $ 204,557

The assets acquired through capital leases are as follows:

Asset:Machinery and equipment $ 942,806 Less: Accumulated depreciation (243,384)

Total $ 699,422

A-59


Note 10—Commitments: Water Treatment Capacity Purchase Agreement: By agreement dated February 12, 2001, the City of Manassas Park purchased 1 mgd of water treatment capacity from the City of Manassas at the Lake Manassas Water Treatment Plant. The purchase price of this capacity is $3,750,000, payable from April 23, 2001 through April 23, 2006. On April 23, 2001, the City made an initial payment of $2,400,000. While the City has no ownership rights in the treatment plant, it will obtain future benefits from its ownership in the facility. Accordingly, the $3,750,000 has been established as an asset to be amortized using the straight-line method over 40 years. Wholesale Water Rate Agreement The Cities also entered into a wholesale water rate agreement whereas Manassas Park agrees to purchase from Manassas 182.4 million gallons per year of treated water whether Manassas Park uses the water or not. The agreed upon minimum increases to 212.4 million gallons per year on the fifth anniversary of the water rate agreement. The rate is determined based upon a “Cost of Service Model” developed by Manassas and agreed to by both parties. Note 11—Defined Pension Benefit Obligation: Primary Government and Discretely Presented Component Unit - School Board A. Plan Description

Name of Plan: Virginia Retirement System (VRS) Identification of Plan: Agent and Cost-Sharing Multiple-Employer Defined Benefit Pension Plan Administering Entity: Virginia Retirement System (System) The City contributes to the Virginia Retirement System (VRS), a mixed agent and cost-sharing multiple-employer defined benefit pension plan administered by the Virginia Retirement System. All full-time, salaried permanent employees of participating employers must participate in the VRS. Benefits vest after five years of service.

Employees are eligible for an unreduced retirement benefit at age 65 with 5 years of service (age 60 with 5 years of service for participating law enforcement officers and firefighters) and at age 50 with 30 years of service for participating employers (age 50 with 25 years of service for participating law enforcement officers and firefighters) payable monthly for life in an amount equal to 1.7 percent of their average final compensation (AFC) for each year of credited service. Benefits are actuarially reduced for retirees who retire prior to becoming eligible for full retirement benefits. In addition, retirees qualify for annual cost-of-living adjustment (COLA) in their second year of retirement. The COLA is limited to 5% per year. AFC is defined as the highest consecutive 36 months of reported compensation. Participating law enforcement officers and firefighters may receive a monthly benefit supplement if they retire prior to age 65. The VRS also provides death and disability benefits. Title 51.1 of the Code of Virginia (1950) as amended, assigns the authority to establish and amend benefit provisions to the General Assembly of Virginia.

A-60


Note 11—Defined Pension Benefit Obligation: (Continued) Primary Government and Discretely Presented Component Unit - School Board: (Continued) A. Plan Description: (Continued)

The System issues a publicly available comprehensive annual financial report that includes financial statements and required supplementary information for VRS. A copy of that report may be obtained by writing to the System at P. O. Box 2500, Richmond, Virginia 23218-2500.

B. Funding Policy Primary Government: Plan members are required by Title 51.1 of the Code of Virginia (1950), as amended, to contribute 5% of their annual reported compensation to the VRS. The employer has assumed this 5% member contribution. In addition, the City is required to contribute the remaining amounts necessary to fund its participation in the VRS using the actuarial basis specified by the statute and approved by the VRS Board of Trustees. The City’s contribution rate for the fiscal year ended June 30, 2007 was 7.43% of the annual covered payroll. Discretely Presented Component Unit - School Board:

Plan members are required by Title 51.1 of the Code of Virginia (1950), as amended, to contribute 5% of their annual reported compensation to the VRS. The employer has assumed this 5% member contribution. In addition, the School Board is required to contribute the remaining amounts necessary to fund its participation in the VRS using the actuarial basis specified by the statute and approved by the VRS Board of Trustees. The School Board’s contribution rate for the fiscal year ended June 30, 2007 was 7.06% of the annual covered payroll.

A-61


Note 11—Defined Pension Benefit Obligation: (Continued)

Primary Government and Discretely Presented Component Unit - School Board: (Continued)

B. Funding Policy: (Continued)

Primary Discretely PresentedGovernment Component Unit

School BoardCity Non-Professional

Retirement Plan Retirement PlanContribution rates for the year ended

Employer 7.43% 7.06%Plan members1 5.00% 5.00%

Annual pension cost $ 574,646 $ 104,440Contributions made $ 574,646 $ 104,440Actuarial valuation date 06/30/06 06/30/06Actuarial cost method Entry age normal Entry age normalAmortization method Level percentage, open Level percentage, openPayroll growth rate 2.50% 2.50%Remaining amortization period 20 years 20 yearsAsset valuation method Modified market Modified marketActuarial assumptions:

Investment rate of return2 7.50% 7.50%Projected salary increases2

Non LEO Employees 3.75 to 5.60% 3.75 to 5.60%LEO Employees 3.50 to 4.75% 3.50 to 4.75%

Cost-of-Living adjustments 2.50% 2.50%

1This member contribution has been assumed by the employer.2Includes inflation at 2.5%.

June 30, 2007:

Primary Government: For 2007, The City’s annual pension cost of $574,646 was equal to the City’s actual contributions of $574,646 (does not include the employee portion of $386,707 which has been assumed by the City). The required contribution was determined as part of the June 30, 2005 actuarial valuation using the entry age normal actuarial cost method.

Discretely Presented Component Unit - School Board: For 2007, the School Board’s annual pension cost of $104,440 was equal to the School Board’s actual contribution of $104,440 (does not include the employee portion of $73,966 which has been assumed by the School Board). The required contribution was determined as part of the June 30, 2005 actuarial valuation using the entry age normal actuarial cost method.

A-62


Note 11—Defined Pension Benefit Obligation: (Continued) Primary Government and Discretely Presented Component Unit - School Board: (Continued)

B. Funding Policy: (Continued)

Fiscal Annual Percentage NetYear Pension of APC Pension

Ending Cost (APC)1 Contributed ObligationPrimary Government:

City 6/30/05 $ 341,281 100% $ -6/30/06 403,655 100% -6/30/07 574,646 100% -

Discretely PresentedComponent Unit:School Board Non Professional 6/30/05 $ 82,793 100% $ -

6/30/06 93,840 100% -6/30/07 104,440 100% -

1Employer portion only

Three-Year Trend Information

Discretely Presented Component Unit School Board PROFESSIONAL EMPLOYEES: A. Plan Description

The Manassas Park City School Board contributes to the Virginia Retirement System (VRS), a cost-sharing multiple-employer defined benefit pension plan administered by the Virginia Retirement System. VRS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Title 51.1 of the Code of Virginia (1950), as amended, assigns the authority to establish and amend benefit provisions to the State legislature. The System issues a publicly available comprehensive annual financial report that includes financial statements and required supplementary information for VRS. That report may be obtained by writing to the System at P. O. Box 2500, Richmond, Virginia 23218-2500.

B. Funding Policy

Plan members are required to contribute 5.0% of their annual covered salary and Manassas Park City School Board is required to contribute at an actuarially determined rate. The employer has assumed this 5% member contribution. The current rate is 9.20% of annual covered payroll. The contribution requirements of plan members and the Manassas Park City School Board are established and may be amended by the VRS Board of Trustees. The School Board’s contributions to VRS for the years ending June 30, 2007, 2006, and 2005 were $1,425,633, $873,403, and $743,871 respectively, equal to the required contributions for each year.

A-63


Note 12—Deferred Revenue: Deferred revenue represents amounts for which asset recognition criteria have been met, but for which revenue recognition criteria have not been met. Under the modified accrual basis of accounting, such amounts are measurable, but not available. Deferred revenue totaling $815,177 is comprised of the following: Primary Government-Deferred Property Taxes – Deferred revenue representing deferred property tax revenues totaled $768,480. Prepaid property taxes totaled $46,697. Note 13—Leases: Operating Lease The City leases E-911 equipment under a noncancelable operating lease. Total expenditures under the lease were $48,815 for the year ended June 30, 2007. The future minimum lease payments are as follows:

Year Ending June 30, Amount

2008 $ 4,068

Total $ 4,068

Note 14—Cost Sharing Agreements: The City is obligated under a contract for services with Prince William City. Services provided by the City include those of a Sheriff, Commonwealth's Attorney, courts, library and certain social programs. These cost sharing agreements do not meet the criteria discussed in Note 1 for inclusion within the financial reporting entity of the City, as the City is not responsible for the fiscal matters of these programs. Note 15—Contingent Liabilities: Federal programs in which the City and its component unit participate were audited in accordance with the provisions of U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments and Non-Profit Organizations of this circular. All major programs and certain other programs were tested for compliance with applicable grant requirements. While no matters of noncompliance were disclosed by audit, the Federal Government may subject grant programs to additional compliance tests which may result in disallowed expenditures. In the opinion of management, future disallowances of current grant program expenditures, if any, would be immaterial.

A-64


Note 16—Deferred Compensation Plan: The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all City employees, permits them to defer a portion of their salary until future years. Participation in the plan is optional. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. In compliance with revisions to Section 457 of the Internal Revenue Code effective August 20, 1996, the assets are held for the exclusive benefit of City employees. Accordingly, assets and the resulting liabilities of the Deferred Compensation Plan are no longer recorded in the City’s financial statements. Note 17—Surety Bonds:

AmountFidelity and Deposit Company of Maryland - Surety

George Adamson, Treasurer $ 200,000 Debra D. Wood, Commissioner of the Revenue 3,000 Above constitutional officers' employees 50,000 Director of Social Services 100,000

Virginia Municipal League:School Board Employees Blanket Bond 1,000,000

Note 18—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; injuries to employees; and natural disasters. The City joined together with other local governments in Virginia to form the Virginia Municipal Group Self Insurance Association, a public entity risk pool currently operating as a common risk management and insurance program for participating local governments. The City pays an annual premium to the association for its workers compensation insurance. In the event of a loss deficit and depletion of all available excess insurance, the Association may assess all members in the proportion which the premium of each bears to the total premiums of all members in the year in which such deficit occurs. The City continues to carry commercial insurance for all other risks of loss, including general liability and employee health and accident insurance. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years.

A-65


Note 19—Designated and Reserved Fund Balances: Primary Government: Portions of the General fund balance are designated and/or reserved as follows:

Fund balance in the amount of $1,095,863 is reserved for emergencies. Expenditures from this reserved balance require a two-thirds majority vote of approval of the Governing Body. Fund balance in the amount of $1,755,162 is reserved for transportation. This amount is the expendable balance of funds held by the Potomac and Rappahannock Transportation Commission.

Portions of the Capital Projects Fund and School Building Fund are reserved as follows: Fund balance in the amounts of $31,808,495 and 5,783,201 are reserved for construction in the school building and capital projects funds, respectively. These amounts are the net of restricted construction funds held and related liabilities due.

Portions of the School Debt Service Fund Balance are reserved as follows:

Fund balance in the amount of $1,881,854 is reserved for School debt service.

Discretely Presented Component Unit - School Board:

Portions of the School Cafeteria Fund Balance are designated as follows:

Funds balance in the amount of $189,515 is designated for school food services. Portions of the School Operating Fund Balance are reserved as follows:

Fund balance in the amount of $113,700 is reserved to establish a retiree medical trust fund for future retiree health insurance benefits.

Note 20—Construction Commitments: At June 30, 2007 the City (primary government) had outstanding construction commitments totaling approximately $5.8 million for the construction of a new police station. At June 30, 2007 the school board (component unit) had outstanding construction commitments totaling approximately $6.5 million for the renovation and construction of the Cougar Upper Elementary School.

A-66

REQUIRED SUPPLEMENTARY INFORMATION

Note to Required Supplementary Information: Presented budgets were prepared in accordance with accounting principles generally accepted in the United States of America.

A-67


A-68


General FundSchedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and ActualFor the Year Ended June 30, 2007

Variance withFinal Budget -

Actual PositiveOriginal Final Amounts (Negative)

REVENUESGeneral property taxes $ 24,155,634 $ 23,216,005 $ 23,343,036 $ 127,031 Other local taxes 5,812,780 5,945,780 5,676,137 (269,643) Permits, privilege fees, and regulatory licenses 265,674 265,674 105,881 (159,793) Fines and forfeitures 146,938 146,938 173,357 26,419 Revenue from the use of money and property 88,641 88,641 345,602 256,961 Charges for services 588,434 648,434 606,197 (42,237) Miscellaneous 244,013 244,013 374,283 130,270 Recovered costs 84,730 84,730 42,284 (42,446) Intergovernmental revenues:

Commonwealth 4,624,758 4,774,758 3,661,063 (1,113,695) Federal 932,470 932,470 1,168,539 236,069

Total revenues $ 36,944,072 $ 36,347,443 $ 35,496,379 $ (851,064)

EXPENDITURESCurrent:

General government administration $ 3,338,131 $ 3,408,131 $ 3,554,307 $ (146,176) Judicial administration 287,145 287,145 288,350 (1,205) Public safety 6,556,771 6,561,026 6,311,384 249,642 Public works 2,597,733 2,637,733 2,363,545 274,188 Health and welfare 3,626,977 3,626,977 3,714,284 (87,307) Education 14,435,413 13,975,634 13,983,290 (7,656) Parks, recreation, and cultural 2,248,302 2,248,302 2,059,722 188,580

Debt service:Principal retirement 155,055 155,055 155,055 - Interest and other fiscal charges 11,793 11,793 11,793 -

Total expenditures $ 33,257,320 $ 32,911,796 $ 32,441,730 $ 470,066

Excess (deficiency) of revenues over (under)expenditures $ 3,686,752 $ 3,435,647 $ 3,054,649 $ (380,998)

OTHER FINANCING SOURCES (USES)Transfers in $ 1,096,800 $ 1,096,800 $ 846,800 $ (250,000) Transfers out (5,232,022) (5,232,022) (5,226,697) 5,325

Total other financing sources and uses $ (4,135,222) $ (4,135,222) $ (4,379,897) $ (244,675)

Net change in fund balances $ (448,470) $ (699,575) $ (1,325,248) $ (625,673) Fund balances - beginning 448,470 699,575 6,532,264 5,832,689 Fund balances - ending $ - $ - $ 5,207,016 $ 5,207,016

Budgeted Amounts

A-69


Schedule of Pension Funding ProgressLast Three Fiscal Years

Primary Government:

City Retirement Plan

UnfundedActuarial Actuarial Actuarial UAAL

Actuarial Value of Accrued Accrued as % ofValuation Assets Liability Liability Funded Coverage Covered

Date (AVA) (AAL) (UAAL) Ratio Payroll Payroll(a) (b) (b-a) (a/b) (c) ((b-a)/c)

6/30/04 $ 11,016,264 $ 12,134,149 $ 1,117,885 90.79% $ 5,463,100 (20.46%)6/30/05 11,770,729 13,202,797 1,432,068 89.15% 5,885,254 (24.33%)6/30/06 13,044,206 13,805,921 761,715 94.48% 7,269,298 (10.48%)

Discretely Presented Component Unit:

School Board Non-Professional Retirement Plan

UnfundedActuarial Actuarial Actuarial UAAL

Actuarial Value of Accrued Accrued as % ofValuation Assets Liability Liability Funded Coverage Covered

Date (AVA) (AAL) (UAAL) Ratio Payroll Payroll(a) (b) (b-a) (a/b) (c) ((b-a)/c)

6/30/04 $ 1,029,953 $ 1,277,607 $ 247,654 80.62% $ 942,317 26.28%6/30/05 1,185,618 1,453,720 268,102 81.56% 1,215,976 22.05%6/30/06 1,394,155 1,591,715 197,560 87.59% 1,320,735 14.96%

A-70

APPENDIX B

Form of Continuing Disclosure Agreement

#######################


B-1

Appendix B

CONTINUING DISCLOSURE AGREEMENT

This CONTINUING DISCLOSURE AGREEMENT dated May 8, 2008 (the "Disclosure Agreement"), is executed and delivered by the City of Manassas Park, Virginia (the "Issuer"), in connection with the issuance by the Issuer of its $32,240,000 General Obligation and Refunding Bonds, Series 2008 (the "Bonds"). The Issuer hereby covenants and agrees as follows:

Section 1. Purpose. This Disclosure Agreement is being executed and delivered by the Issuer for the benefit of the holders of the Bonds and in order to assist the purchasers of the Bonds in complying with the provisions of Section (b)(5)(i) of Rule 15c2-12 (the "Rule") promulgated by the Securities and Exchange Commission by providing certain annual financial information and material event notices required by the Rule (collectively, "Continuing Disclosure").

Section 2. Annual Disclosure. (a) The Issuer shall annually provide financial information and operating data in accordance with the provisions of Section (b)(5)(i) of the Rule as follows:

(i) audited financial statements of the Issuer, prepared in accordance with generally accepted accounting principles in effect from time to time; and

(ii) the City's Comprehensive Annual Financial Report, which includes the operating data with respect to the Issuer of the type described in the sections of the Issuer's Official Statement dated April 10, 2008, entitled "SECTION FOUR: FINANCIAL INFORMATION – Fund Accounting" (including the tables "Summary of Net Assets," "Five-Year Summary of General Fund Revenues and Expenditures," and "General Fund Balance"), "-General Fund Revenues" (including the tables "Total Tax Revenues by Source," "Assessed and Estimated Actual Value of all Taxable Property Last Ten Fiscal Years," "Property Tax Rates Per $100 Assessed Value Last Ten Fiscal Years," "Property Tax Levies and Collections Last Ten Fiscal Years," "Ten Largest Real Estate Taxpayers," and "Local Sales Tax Revenues"); "-Budgetary Procedures"; "- Capital Improvement Program" (including the table "Proposed Expenditures For the Next Five Years"); and "- Debt Administration" (including the tables "Computation of Legal Debt Margin," "Statement of General Obligation Long-Term Debt," "Debt Service Requirements on Currently Outstanding General Obligation Debt," "General Obligation Debt Service Requirements," and "Debt Ratios Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt per Capita Last Ten Fiscal Years").

If the financial statements filed pursuant to Section 2(a)(i) are not audited, the Issuer shall file such statements as audited when available.

B-2

(b) The Issuer shall provide annually the financial information and operating data described in subsection (a) above (collectively, the "Annual Disclosure") within 270 days after the end of the Issuer's fiscal year, commencing with the Issuer's fiscal year ending June 30, 2008, to each nationally recognized municipal securities information repository ("NRMSIR") and to the appropriate state information depository, if any, then exists ("SID").

(c) Any Annual Disclosure may be included by specific reference to other documents previously provided to each NRMSIR and to any SID or filed with the SEC; provided, however, that any final official statement incorporated by reference must be available from the Municipal Securities Rulemaking Board (the "MSRB").

(d) The Issuer shall provide in a timely manner to each NRMSIR or the MSRB and to any SID notice specifying any failure of the Issuer to provide the Annual Disclosure by the date specified.

Section 3. Event Disclosure. The Issuer shall provide in a timely manner to each NRMSIR or the MSRB and to any SID notice of the occurrence of any of the following events with respect to the Bonds, if material:

(a) principal and interest payment delinquencies;

(b) non-payment related defaults;

(c) unscheduled draws on debt service reserves reflecting financial difficulties;

(d) unscheduled draws on any credit enhancement reflecting financial difficulties;

(e) substitution of credit or liquidity providers, or their failure to perform;

(f) adverse tax opinions or events affecting the tax-exempt status of the Bonds;

(g) modifications to rights of Bondholders;

(h) bond calls;

(i) defeasance of all or any portion of the Bonds;

(j) release, substitution, or sale of property securing repayment of the Bonds; and

(k) rating changes.

Section 4. NRMSIRs/MSRB. As of the date of this Disclosure Agreement, the following are the addresses of the NRMSIRs and the MSRB:

B-3

Bloomberg Municipal Repository 100 Business Park Drive Skillman, New Jersey 08558 Phone: (609) 279-3225 Fax: (609) 279-5962 http://www.bloomberg.com/markets/rates/municontacts.html Email: [email protected]

DPC Data Inc. One Executive Drive Fort Lee, NJ 07024 Phone: (201) 346-0701 Fax: (201) 947-0107 http://www.dpcdata.com Email: [email protected]

Interactive Data Pricing and Reference Data, Inc. Attn: NRMSIR 100 William Street, 15th Floor New York, New York 10038 Telephone: (212) 771-6999; (800) 689-8466 Facsimile: (212) 771-7390 http://www.interactivedata-prd.com E-mail: [email protected]

Standard & Poor's Securities Evaluations, Inc. 55 Water Street, 45th Floor New York, NY 10041 Phone: (212) 438-4595 Fax: (212) 438-3975 http://www.disclosuredirectory.standardandpoors.com Email: [email protected]

Municipal Securities Rulemaking Board 1900 Duke Street, Suite 600 Alexandria, Virginia 22314 Phone: (703) 797-6600 Fax: (703) 797-6704

Section 5. CUSIP Numbers. The Issuer shall refer to the CUSIP numbers for the Bonds in any notice provided to the NRMSIRs, the MSRB and any SID.

Section 6. Termination. The obligations of the Issuer will terminate upon the redemption, defeasance (within the meaning of the Rule) or payment in full of all the Bonds.

Section 7. Amendment. The Issuer may modify its obligations hereunder without the consent of Bondholders, provided that this Disclosure Agreement as so modified complies

B-4

with the Rule as it exists at the time of modification. The Issuer shall within a reasonable time thereafter send to each NRMSIR and any SID a description of such modification(s).

Section 8. Defaults. (a) If the Issuer fails to comply with any covenant or obligation regarding Continuing Disclosure specified in this Disclosure Agreement, any holder (within the meaning of the Rule) of Bonds then outstanding may, by notice to the Issuer, proceed to protect and enforce its rights and the rights of the holder by an action for specific performance of the Issuer's covenant to provide the Continuing Disclosure.

(b) Notwithstanding anything herein to the contrary, any failure of the Issuer to comply with any obligation regarding Continuing Disclosure specified in this Disclosure Agreement (i) shall not be deemed to constitute an event of default under the Bonds or the resolution providing for the issuance of the Bonds and (ii) shall not give rise to any right or remedy other than that described in Section 8(a) above.

Section 9. Central Post Office. Any filing under this Disclosure Agreement may be made solely by transmitting such filing to the Texas Municipal Advisory Council (the "MAC") as provided at http://www.disclosureusa.org unless the SEC has withdrawn the interpretive advice in its letter to the MAC dated September 7, 2004.

Section 10. Additional Disclosure. The Issuer may from time to time disclose certain information and data in addition to the Continuing Disclosure. Notwithstanding anything herein to the contrary, the Issuer shall not incur any obligation to continue to provide, or to update, such additional information or data.

Section 11. Governing Law. This Disclosure Agreement shall be construed and enforced in accordance with the laws of the Commonwealth of Virginia.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

B-5

Dated: May ___, 2008


By:_________________________________ Its: City Manager

[Continuing Disclosure Agreement, Signature Page]

#######################


APPENDIX C

Form of Opinion of Bond Counsel

#######################


C-1

May __, 2008 Governing Body of the City of Manassas Park, Virginia Manassas Park, Virginia



Ladies and Gentlemen:

We have served as Bond Counsel to the City of Manassas Park, Virginia (the "City"), in connection with the issuance and sale of its $32,240,000 General Obligation and Refunding Bonds, Series 2008 (the "Bonds"), dated the date of their delivery.

We have examined the Constitution of Virginia and the applicable laws of the Commonwealth of Virginia and the United States and such certified proceedings and other documents of the City as we deem necessary to render this opinion. As to questions of fact material to this opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify them by independent investigation. In addition, without undertaking to verify the same by independent investigation, we have relied on computations provided to The Arbitrage Group, Inc., the mathematical accuracy of which was verified by them, relating to the yield on investments in the escrow funds established with a portion of the Bonds and the yield on the Bonds.

Based on the foregoing, in our opinion, under current law:

1. The Bonds have been authorized and issued in accordance with the Constitution and laws of the Commonwealth of Virginia and constitute valid and binding general obligations of the City.

2. The City Council has the power and is authorized and required by law to levy and collect annually, at the same time and in the same manner as other taxes of the City are assessed, levied and collected, a tax upon all taxable property within the City, over and above all other taxes authorized or limited by law, and without limitation as to rate or amount, sufficient to pay when due the principal of and premium, if any, and interest on the Bonds to the extent other funds of the City are not lawfully available and appropriated for such purpose.

C-2

3. Interest on the Bonds, including any accrued "original issue discount" properly allocable to the owners of the Bonds, is excludable from gross income for purposes of federal income taxation under Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"), and is not a specific item of tax preference for purposes of the federal alternative minimum income tax imposed on individuals and corporations. We observe, however, that for purposes of the alternative minimum tax imposed on corporations (as defined for federal income tax purposes) under Section 56 of the Code, interest on the Bonds must be included in computing adjusted current earnings. The "original issue discount" on any Bond is the excess of its stated redemption price at maturity over the initial offering price to the public at which price a substantial amount of the Bonds of the same maturity was sold. The "public" does not include bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers. We express no opinion regarding other federal tax consequences arising with respect to the Bonds.

In providing the opinions set forth in this paragraph, we are assuming continuing compliance with the Covenants (as hereinafter defined) by the City. The Code and the regulations promulgated thereunder contain a number of requirements that must be satisfied after the issuance of the Bonds in order for interest on the Bonds to be and remain excludable from gross income for purposes of federal income taxation. These requirements include, by way of example and not limitation, restrictions on the use, expenditure and investment of the proceeds of the Bonds and the use of the property financed or refinanced by the Bonds, limitations on the source of the payment of and the security for the Bonds, and the obligation to rebate certain excess earnings on the gross proceeds of the Bonds to the United States Treasury. The City's non-arbitrage certificate and tax compliance agreement dated the date hereof contains covenants (the "Covenants") under which the City has agreed to comply with such requirements. Failure by the City to comply with the Covenants could cause interest on the Bonds to become includable in gross income for federal income tax purposes retroactively to their date of issue. In the event of noncompliance with the Covenants, the available enforcement remedies may be limited by applicable provisions of law and, therefore, may not be adequate to prevent interest on the Bonds from becoming includible in gross income for federal income tax purposes.

We have no responsibility to monitor compliance with the Covenants after the date of issue of the Bonds.

4. Interest on the Bonds is excludable from gross income for purposes of income taxation by the Commonwealth of Virginia. We express no opinion regarding (i) other Virginia tax consequences arising with respect to the Bonds or (ii) any consequences arising with respect to the Bonds under the tax laws of any state or local jurisdiction other than the Commonwealth of Virginia.

The rights of the owners of the Bonds and the enforceability of those rights are subject to bankruptcy, insolvency, reorganization, moratorium and similar laws now or hereafter in effect affecting creditors' rights. The enforceability of those rights is also subject to the exercise of judicial discretion in accordance with general principles of equity.

C-3

Our services as Bond Counsel have been limited to rendering the foregoing opinion based on our review of such legal proceedings as we deem necessary to approve the validity of the Bonds and the tax-exempt status of the interest on the Bonds. The foregoing opinion is in no respect an opinion as to the business or financial resources of the City or the City's ability to provide for the payment of the Bonds or the accuracy or completeness of any information that anyone may have relied upon in making the decision to purchase the Bonds.

Very truly yours,

#######################


APPENDIX D

Specimen Municipal Bond Insurance Policy

#######################


FINANCIAL SECURITY ASSURANCE®

MUNICIPAL BOND INSURANCE POLICY

ISSUER: BONDS:

Policy No.: -N

Effective Date:

Premium: $

FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or paying agent (the "Paying Agent") (as set forth in the documentation providing for the issuance of and securing the Bonds) for the Bonds, for the benefit of the Owners or, at the election of Financial Security, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer. On the later of the day on which such principal and interest becomes Due for Payment or the Business Day next following the Business Day on which Financial Security shall have received Notice of Nonpayment, Financial Security will disburse to or for the benefit of each Owner of a Bond the face amount of principal of and interest on the Bond that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by Financial Security, in a form reasonably satisfactory to it, of (a) evidence of the Owner's right to receive payment of the principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner's rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in Financial Security. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by Financial Security is incomplete, it shall be deemed not to have been received by Financial Security for purposes of the preceding sentence and Financial Security shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, who may submit an amended Notice of Nonpayment. Upon disbursement in respect of a Bond, Financial Security shall become the owner of the Bond, any appurtenant coupon to the Bond or right to receipt of payment of principal of or interest on the Bond and shall be fully subrogated to the rights of the Owner, including the Owner's right to receive payments under the Bond, to the extent of any payment by Financial Security hereunder. Payment by Financial Security to the Trustee or Paying Agent for the benefit of the Owners shall, to the extent thereof, discharge the obligation of Financial Security under this Policy. Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. "Business Day" means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer's Fiscal Agent are authorized or required by law or executive order to remain closed. "Due for Payment" means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity unless Financial Security shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond, any payment of principal or interest that is Due for Payment

D - 1

Page 2 of 2 Policy No. -N

made to an Owner by or on behalf of the Issuer which has been recovered from such Owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order of a court having competent jurisdiction. "Notice" means telephonic or telecopied notice, subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an Owner, the Trustee or the Paying Agent to Financial Security which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount and (d) the date such claimed amount became Due for Payment. "Owner" means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that "Owner" shall not include the Issuer or any person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds. Financial Security may appoint a fiscal agent (the "Insurer's Fiscal Agent") for purposes of this Policy by giving written notice to the Trustee and the Paying Agent specifying the name and notice address of the Insurer's Fiscal Agent. From and after the date of receipt of such notice by the Trustee and the Paying Agent, (a) copies of all notices required to be delivered to Financial Security pursuant to this Policy shall be simultaneously delivered to the Insurer's Fiscal Agent and to Financial Security and shall not be deemed received until received by both and (b) all payments required to be made by Financial Security under this Policy may be made directly by Financial Security or by the Insurer's Fiscal Agent on behalf of Financial Security. The Insurer's Fiscal Agent is the agent of Financial Security only and the Insurer's Fiscal Agent shall in no event be liable to any Owner for any act of the Insurer's Fiscal Agent or any failure of Financial Security to deposit or cause to be deposited sufficient funds to make payments due under this Policy. To the fullest extent permitted by applicable law, Financial Security agrees not to assert, and hereby waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to Financial Security to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy. This Policy sets forth in full the undertaking of Financial Security, and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto. Except to the extent expressly modified by an endorsement hereto, (a) any premium paid in respect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Bonds prior to maturity and (b) this Policy may not be canceled or revoked. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this Policy to be executed on its behalf by its Authorized Officer. [Countersignature] By

FINANCIAL SECURITY ASSURANCE INC. By

Authorized Officer A subsidiary of Financial Security Assurance Holdings Ltd. 31 West 52nd Street, New York, N.Y. 10019 Form 500NY (5/90)

(212) 826-0100

D - 2