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Indian River County, Florida Notes To Financial Statements Year Ended September 30, 2012 NOTE 13 - LONG-TERM LIABILITIES - Continued B. Primary Govermnent - Continued Recreational (Golf Course) Revenue Refunding Bonds, Series 2003 - Continued Pledge of Revenues - The revenue bonds are secured by liens, for the remaining term of the bonds, in the following order: (1) the net revenues derived from the operations of the golf course, (2) one hundred percent of racetrack and Jai Alai Fronton funds, and (3) seven percent of the half -cent sales tax accruing annually to the County. Refer to Schedule 26 of the statistical section for historical data on the pledged revenues. The financial strength of our municipal bond insurer, AMBAC, was downgraded to Baal in November 2008. This downgrade required the County to fully cash fund the debt service reserve. The County elected to pledge the Racetrack and Jai Alai Fronton funds to meet this bond covenant. The total annual amount of the required debt service reserve, $417,500, was cash funded. The current principal and interest payments of $637,964 represent sixty-one percent of net revenues of $1,039,595 of the golf course. The total principal and interest remaining to be paid on the bonds is $2,321,287. All three pledged revenue sources totaled $2,004,997 for the current fiscal year. The County did not utilize the second and third revenue sources toward the current year principal and interest payments. Rate Covenant — Net revenues shall be sufficient to pay 100% of reserve and current year principal and interest requirements. Bonds Issued - At September 30, 2012, the revenue bonds consisted of the following: Description 2003 Recreational Revenue Refunding Bonds Outstanding at Interest Rates September 30, and Date Maturity Issue 2012 2.00 — 4.125% 9/1/16 $ 6,455,000 $ 2,120,000 3/1 and 9/1 Optional Redemption - The revenue bonds, maturing on or after September 1, 2014, are subject to redemption prior to maturity, at the option of the County on and after September 1, 2013, in whole or in part, at any time thereafter at the redemption price of par, plus interest accrued to the date of redemption. Water and Sewer Revenue Refunding Bonds, Series 2005 Purpose - The Series 2005 bonds were issued to defease $31,680,000 of the County's outstanding Water and Sewer Revenue Bonds, Series 1996. These bonds were issued by the County to provide funds, together with $5,000,000, to retire 95 percent of the 1996 Series and to pay for all bond issuance costs. The September 1, 2005 and 2006 principal installments were not subject to early call and consequently paid at their respective maturity dates. The 1996 bonds were issued to acquire an existing water and sewer facility, as well as for capital improvements to the existing system. 81