Prelim)

This Preliminary Official Statement and information contained herein are subject to change, completion or amendment without notice. These securities may not be sold nor may offers to buy be accepted prior to the time this Preliminary Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

Draft 01/06/09

PRELIMINARY OFFICIAL STATEMENT, DATED JANUARY 14, 2009 NEW ISSUE

Rating: Moody’s ______ (See: “Ratings” herein)

In the opinion of Calfee, Halter & Griswold LLP, Bond Counsel, interest on the Taxable Notes is NOT excluded from gross income for federal income tax purposes. Interest on the Tax-Exempt Notes is excluded from gross income for federal income tax purposes and is not treated as an item of tax-preference for purposes of the alternative minimum tax imposed on individuals and corporations under the Internal Revenue Code of 1986, as amended (the “Code”). Interest on, any transfer of, and any profit made on the sale, exchange, or other disposition of, the Notes are exempt from the Ohio personal income tax, the Ohio corporation franchise tax (to the extent computed on the net income basis) and income taxes imposed by municipalities and other political subdivisions in Ohio. Interest on the Notes, as is the case with most other forms of interest on debt obligations, is not subject to the Ohio commercial activity tax imposed under Chapter 5751 of the Code. (For a more complete discussion of tax aspects, see “TAX MATTERS.”)

CITY OF SOUTH EUCLID, OHIO GENERAL OBLIGATION NOTES consisting of two issues: $__________ Taxable Real Estate Acquisition and Urban Redevelopment General Obligation (Limited Tax) Bond Anticipation Notes, Series 2009A

$__________ Real Estate Acquisition and Urban Redevelopment General Obligation (Limited Tax) Bond Anticipation Notes, Series 2009B

CUSIP: 837752 ___

CUSIP: 837752 ___

Dated: January 26, 2009

Price: 100%

Due: January 25, 2010

The City of South Euclid (the “City”), County of Cuyahoga (the “County”), State of Ohio (the “State”) is offering its Taxable Real Estate Acquisition and Urban Redevelopment General Obligation (Limited Tax) Bond Anticipation Notes, Series 2009A (the “Taxable Notes”) and the Real Estate Acquisition and Urban Redevelopment General Obligation (Limited Tax) Bond Anticipation Notes, Series 2009B (the “Tax-Exempt Notes” and, collectively with the Taxable Notes, the “Notes”). The Taxable Notes shall bear interest at the rate of _____ and _________ one-hundredths per centum (_____%) per annum and the Tax-Exempt Notes shall bear interest at the rate of _____ and _________ one-hundredths per centum (_____%) per annum, in each case payable at maturity. Interest on the Taxable Notes is NOT excludable from gross income for federal income tax purposes and interest on the Tax-Exempt Notes is excluded from gross income for federal income tax purposes. The Notes are not subject to redemption prior to maturity. The Notes will be issued initially under a book-entry system, in the name of Cede & Co., as holder and nominee for The Depository Trust Company (“DTC”). DTC will act as securities depository for the Notes. Purchase of the Notes may be made only in book-entry form through DTC Participants (as defined herein), and no physical delivery of the Notes will be made to the purchasers of book-entry interests. While the Notes are held in a book-entry system, principal and interest shall be payable to DTC or its nominee as the owners on presentation and surrender of the Notes at the corporate trust office of U.S. Bank National Association, Cleveland, Ohio. Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to owners of Book-entry Interests (as defined herein) is the responsibility of DTC Participants and Indirect Participants, as defined and more fully described herein. The Notes in certificated form as such will not be transferable or exchangeable, except for transfer to another nominee of DTC or as otherwise described in the Official Statement. The Notes are general obligations of the City payable from ad valorem taxes on all taxable real and personal property in the City, within the ten mill limitation imposed by Ohio law as more fully described herein. The Notes are offered when, as and if issued, subject to approval of legality by Calfee, Halter & Griswold LLP, Cleveland, Ohio, Bond Counsel, and certain other conditions. The Notes are expected to be available for delivery on or about January 26, 2009. January __, 2009

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This Official Statement does not constitute an offering of any security other than the original offering of the Notes of the City identified on the cover hereof. No dealer, broker, salesman or other person has been authorized by the City or others on behalf of the City to give any information or to make any representation with respect to the City or the Notes other than those contained in this Official Statement and, if given or made, such other information or representation must not be relied upon as having been authorized by any of the foregoing. The information set forth herein has been obtained from sources which are believed to be current and reliable. Estimates and opinions are included and should not be interpreted as statements of fact. Summaries of documents do not purport to be complete statements of their provisions and such summaries are qualified by references to the entire texts of the documents. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Notes by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. 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. TABLE OF CONTENTS Page INTRODUCTION................................................................................................................1 THE NOTES........................................................................................................................1 AUTHORIZATION..................................................................................................2 PURPOSE OF NOTES.............................................................................................2 ACCRUED INTEREST - PREMIUM......................................................................2 SECURITY AND SOURCES OF PAYMENT FOR THE NOTES...........................2 BOOK-ENTRY SYSTEM........................................................................................3 REVISION OR DISCONTINUANCE OF BOOK-ENTRY SYSTEM.....................6 CONTINUING DISCLOSURE UNDERTAKING...................................................6 DESCRIPTION OF THE CITY...........................................................................................8 GENERAL INFORMATION...................................................................................8 MUNICIPAL AND OTHER PUBLIC SERVICES AND FACILITIES....................9 ECONOMY AND ECONOMIC DEVELOPMENT...............................................10 GOVERNMENTAL ORGANIZATION.................................................................13 FINANCIAL ADMINISTRATION........................................................................14 CITY DEBT AND OTHER LONG TERM OBLIGATIONS..............................................15 STATUTORY DIRECT DEBT LIMITATIONS......................................................15 INDIRECT DEBT LIMITATION...........................................................................16 TEN MILL UNVOTED TAX LIMITATION..........................................................18 BOND ANTICIPATION NOTES...........................................................................19 OTHER SHORT-TERM FINANCINGS................................................................20 CURRENT AND PAST DEBT OUTSTANDING..................................................20 FUTURE FINANCINGS........................................................................................21 PENSION OBLIGATIONS....................................................................................21 OVERLAPPING AND UNDERLYING INDEBTEDNESS OF GOVERNMENTAL ENTITIES WITHIN THE CITY.......................................22 {00445198.DOC;3 }

i

DEBT RATIOS.......................................................................................................24 FINANCIAL FACTORS....................................................................................................24 BUDGET PROCESS..............................................................................................24 PROPERTY TAXES...............................................................................................26 COLLECTION OF AD VALOREM PROPERTY TAXES.....................................27 ASSESSED VALUATION AND ASSESSMENT PROCEDURE..........................28 RATES OF AD VALOREM TAXATION...............................................................32 OTHER MAJOR CITY REVENUES.....................................................................34 ACCOUNTING PROCEDURES AND EXAMINATIONS OF ACCOUNTS...................36 EMPLOYEES....................................................................................................................36 PENSION OBLIGATIONS................................................................................................38 LITIGATION......................................................................................................................38 BANKRUPTCY AND FISCAL EMERGENCY ACT........................................................38 BANKRUPTCY.....................................................................................................38 FISCAL EMERGENCY ACT................................................................................38 TAX MATTERS.................................................................................................................39 LEGAL MATTERS............................................................................................................41 RATINGS...........................................................................................................................42 UNDERWRITING.............................................................................................................42 CONCLUDING STATEMENT..........................................................................................43 Appendices

Appendix

Financial Statement for Municipality............................................................................................ A Supplemental Financial Statement................................................................................................ B Outstanding General Obligation Bond Anticipation Notes. .................................................................................................................... C Projected Debt Service - General Obligation Bonds and Notes........................................................................................................................ D General Purpose Financial Statements for 2007 (audited)............................................................ E Exhibit

Exhibit

Draft of Approving Legal Opinions of Bond Counsel.................................................................. 1

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OFFICIAL STATEMENT OF THE CITY OF SOUTH EUCLID, OHIO RELATING TO THE ISSUANCE OF $__________ Taxable Real Estate Acquisition and Urban Redevelopment General Obligation (Limited Tax) Bond Anticipation Notes, Series 2009A

$__________ Real Estate Acquisition and Urban Redevelopment General Obligation (Limited Tax) Bond Anticipation Notes, Series 2009B

INTRODUCTION This Official Statement, which includes the cover page, the Table of Contents and the Appendices and Exhibit hereto, has been prepared by the City of South Euclid (the “City”), in the County of Cuyahoga (the “County”), Ohio (the “State”), in connection with the issuance and sale by the City of its two issues of General Obligation Notes consisting of $__________ Taxable Real Estate Acquisition and Urban Redevelopment General Obligation (Limited Tax) Bond Anticipation Notes, Series 2009A (the “Taxable Notes”) and $__________ Real Estate Acquisition and Urban Redevelopment General Obligation (Limited Tax) Bond Anticipation Notes, Series 2009B (the “Tax-Exempt Notes” and collectively with the Taxable Notes, the “Notes”). All financial and other information presented herein has been provided by the City from its records, except for information expressly attributed to other sources. The presentation of information, including tables of receipts from taxes and other sources, is intended to show recent historic information, and is not intended to indicate future or continuing trends in the financial position or other affairs of the City. No representation is made that past experience, as might be shown by such financial and other information, will necessarily continue or be repeated in the future. All quotations from and summaries or explanations of provisions of the Constitution and laws of the State and acts and proceedings of the City contained herein do not purport to be complete and are qualified in their entirety by reference to the official compilations thereof, and all references to the Notes and the proceedings of the City relating thereto are qualified in their entirety by reference to the definitive forms of the Notes and such proceedings. THE NOTES The Notes will be dated and will mature, and shall bear interest at the rates per annum, all as set forth on the cover page. Principal and interest (computed on the basis of a 360-day year) will be paid at the place indicated on the cover page hereof and shall be payable in

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Federal Reserve funds of the United States of America. The Notes are not subject to optional redemption prior to maturity. The Notes will be issued originally solely in Book-entry form to DTC or its nominee, Cede & Co., to be held in DTC’s Book-entry System. So long as the Notes are held in the Book-entry System, DTC (or a successor securities depository) or its nominee will be the owner or holder of the Notes for all purposes of the Note Legislation, the Notes and this Official Statement, except for the purpose of giving certain consents. See “Book-entry System” below in this section. AUTHORIZATION The Notes are issued pursuant to (a) the authority of Sections 133.01 through 133.42, Ohio Revised Code, (b) the Charter of the City and (c) Ordinance No. ___-09, passed January 12, 2009 (the “Note Legislation”). PURPOSE OF NOTES The Notes are being issued (a) to retire and renew certain outstanding notes of the City which mature on January 27, 2009 which were originally issued for the purpose of paying the costs of the acquisition, and any necessary clearance and preparation, of real property for urban redevelopment; (b) to pay interest and the notes being retired and (c) to pay certain costs of issuance. ACCRUED INTEREST - PREMIUM Accrued interest and premium, if any, on the Notes will be deposited in the City’s Bond Retirement Fund. Under Ohio law, the City is required to establish a “Bond Retirement Fund” for the retirement of serial bonds, notes or certificates of indebtedness. Moneys appropriated from ad valorem property taxes or other sources will be paid into the City’s Bond Retirement Fund to pay the principal of and interest on all general obligation bonds and notes, including the Notes, of the City when due. SECURITY AND SOURCES OF PAYMENT FOR THE NOTES The Notes are unvoted general obligations of the City issued in anticipation of the issuance of bonds. The basic security for unvoted general obligation bonds of the City is the pledge of the City’s ability to levy, and its pledge to levy, an ad valorem tax on all the taxable property in the City in sufficient amount to pay (to the extent not paid from other sources) the principal of and interest on the outstanding unvoted general obligation bonds of the City as the same become due, which tax levy is within the ten mill limitation imposed by the Ohio Constitution and laws of the State (as described in detail under “Ten Mill Unvoted Tax Limitation” herein). Ohio law requires the levy (i.e. imposition) during the period which the Notes are outstanding of an ad valorem property tax in an amount not less than that which would have been required to be levied if the anticipated bonds had been issued without the prior issue of the Notes, although such levy need not actually be collected if other revenues are to be

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appropriated for the payment of debt service on the Notes. The laws of the State require that the levy for debt service on unvoted general obligations of a municipal corporation has priority over any levy for current expenses within such ten mill limitation. The Note Legislation provides further security by making a general pledge of the full faith, credit and revenues of the City for the payment of the debt service on the Notes as the same becomes due. Included in such general pledge are all funds of the City, except those which are specifically limited to another use or prohibited from use for such debt service by the Ohio Constitution, or Ohio or Federal law, or by revenue bond trust agreements. Therefore, funds from highway user charges (limited by the Constitution to highway related purposes), and other funds restricted by law to a special purpose other than debt service, tax levies voted for specific purposes, taxes levied for debt service on voted general obligation bond issues, certain trust and agency funds, and certain utility revenues are all excluded from the City’s general pledge. A similar pledge is made in each ordinance authorizing the City’s voted and unvoted general obligation bonds and notes. Only voted general obligations are payable from unlimited ad valorem property taxes. In addition, the City’s income tax revenues are pledged to the repayment of the Notes. See “Financial Factors - Other Major City Revenues - Municipal Income Tax” herein. For a discussion of the Federal Bankruptcy Act and other laws affecting creditors’ rights, and the Fiscal Emergency Act, which are generally applicable to municipal corporations in Ohio, see “Bankruptcy and Fiscal Emergency Act” herein. BOOK-ENTRY SYSTEM The Notes initially will be issued solely in Book-Entry Form to be held in the Book-Entry System maintained by DTC. So long as such Book-Entry System is used, only DTC will receive or have the right to receive physical delivery of Notes and, except as otherwise provided herein with respect to Beneficial Owners of Beneficial Ownership Interests, Beneficial Owners will not be or be considered to be, and will not have any rights as, owners or holders of the Notes. The following information about the Book-Entry System applicable to the Notes has been supplied by DTC. None of the City, Bond Counsel or the Underwriter makes any representations, warranties or guarantees with respect to its accuracy or completeness. DTC will act as securities depository for the Notes. The Notes initially will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as many be requested by an authorized representative of DTC. One fully-registered Note certificate will be issued, in the aggregate principal amount of the Notes, 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

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pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity, 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 nonU.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtc.org and www.dtcc.com. Purchases of Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the Notes on DTC’s records. The ownership interest of each actual purchaser of each Note (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Notes are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Notes, except in the event that use of the book entry system for the Notes is discontinued. To facilitate subsequent transfers, all Notes 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 Notes with DTC and their registration in the name of Cede & Co. or such other nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Notes; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Notes are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners, will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of

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Notes may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Notes, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Notes may wish to ascertain that the nominee holding the Notes for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the City or its Agent and request that copies of the notices be provided directly to them. Redemption notices will be sent to DTC. If less than all of the Notes within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in the Notes to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Notes 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 Notes are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions and dividend payments on the Notes will be made to Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the City or its Agent on the 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, the City or its Agent, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions and dividends to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or its Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. A Beneficial Owner shall give notice to elect to have its Notes purchased or tendered, through its Participant, to the City or its Agent and shall effect delivery of such Notes by causing the Direct Participant to transfer the Participant’s interest in the Notes, on DTC’s records, to the to the City or its Agent. The requirement for physical delivery of Notes in connection with an optional tender or mandatory purchase will be deemed satisfied when the ownership rights in the Notes are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Notes to the City or its Agent DTC account. DTC may discontinue providing its services as securities depository with respect to the Notes at any time by giving reasonable notice to the City or its Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Note certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Note certificates will be printed and delivered to DTC.

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The information above in this section concerning DTC and DTC’s book entry system has been obtained from sources that the City believes to be reliable, including DTC, but the City takes no responsibility for its accuracy. Direct Participants and Indirect Participants may impose service charges on book entry interest owners in certain cases. Purchasers of book entry interests should discuss that possibility with their brokers. The City and its Agent have no role in the purchases, transfers or sales of book entry interests. The rights of Beneficial Owners (i.e., book entry interest owners) to transfer or pledge their interests, and the manner of transferring or pledging those interests, may be subject to applicable state law. Beneficial Owners may want to discuss with their legal advisers the manner of transferring or pledging their book entry interests. The City and its Agent have no responsibility or liability for any aspects of the records or notices relating to, or payments made on account of, book entry interest ownership, or for maintaining, supervising or reviewing any records relating to that ownership. The City cannot and does not give any assurances that DTC, Direct Participants, Indirect Participants or others will distribute to the Beneficial Owners payments of debt charges on the Notes made to DTC as the registered owner, or any redemption or other notices, or that they will do so on a timely basis, or that DTC will serve and act in a manner described in this Official Statement. REVISION OR DISCONTINUANCE OF BOOK-ENTRY SYSTEM The City will issue and deliver Notes directly to owners other than DTC only in the event that DTC determines not to continue to act as securities depository for the Notes. Upon the occurrence of such event, the Finance Director may attempt to establish a securities depository book-entry relationship with another securities depository. If the Finance Director does not do so, or is unable to do so, and after the Finance Director has made provision for notification of the beneficial owners by the then Depository, the City will issue and deliver note certificates in bearer form in the denomination of $5,000 or any integral multiple thereof to the assignees of the Depository or to its nominee. If the event is not the result of City action or inaction, such withdrawal, authentication and delivery costs (including printing and delivery costs) will be at the expense of any persons requesting such issuance. CONTINUING DISCLOSURE UNDERTAKING In accordance with the requirements of Rule 15c2-12 (the “Rule”) promulgated by the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Exchange Act of 1934, as amended, the City has agreed to provide the following: (i)

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To each nationally recognized municipal securities information repository (“NRMSIR”) designated by the Commission in accordance with the Rule, and to

6

the appropriate state information depository (“SID”), if any, designated by the State, audited financial statements and certain annual financial information (the “Annual Information”) generally consistent with the information contained under the captions “CITY DEBT AND OTHER LONG TERM OBLIGATIONS” and “FINANCIAL FACTORS” and in Appendices A and B in this Official Statement; to be made available to the NRMSIR’s and the SID, and to each holder of the Notes who requests such information by written request to the City. (ii)

In a timely manner, to each NRMSIR or to the Municipal Securities Rulemaking Board (“MSRB”) and to the SID, notice of the occurrence of any of the following events with respect to the Notes, if such event is material: (a)

principal and interest payment delinquencies;

(b)

non-payment related defaults;

(c)

unscheduled draws on any debt service reserves reflecting financial difficulties (no debt service reserve has been established with respect to the Notes);

(d)

unscheduled draws on credit enhancements reflecting financial difficulties (no credit enhancement has been provided);

(e)

substitution of credit or liquidity providers, or their failure to perform (no credit or liquidity facility is in effect);

(f)

adverse tax opinions or events affecting the tax-exempt status of the Notes (the interest on the Notes is NOT excluded from gross income for federal tax purposes);

(g)

modifications to rights of the holders;

(h)

bond calls (the Notes are not subject to redemption prior to maturity);

(i)

defeasances;

(j)

release, substitution, or sale of property securing repayment of the Notes (no specific property is pledged to the repayment of the Notes); and

(k)

rating changes.

The City may from time to time choose to provide notice of the occurrence of certain other events, in addition to those listed above, if the City determines that such other event is material with respect to the Notes, but the City does not undertake to commit to provide any such notice of the occurrence of any material event except those events listed above.

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Any such notice may be made solely by transmitting such notice to the Texas Municipal Advisory Council (the “MAC”) as provided at http://www.disclosureusa.org unless the United States Securities and Exchange Commission has withdrawn the interpretive advice in its letter to the MAC dated September 7, 2004. (iii)

In a timely manner, to each NRMSIR or to the MSRB and to the SID, notice of its failure to provide the Annual Information with respect to itself on or before the date specified in its written continuing disclosure undertaking.

The obligations of the City described above will remain in effect for such period that the Notes are outstanding in accordance with their terms. The City acknowledges that its undertaking pursuant to the Rule described under this heading is intended to be for the benefit of the holders of the Notes (including holders of beneficial interests in the Notes). Any holder of the Notes may enforce the City's continuing disclosure undertaking; provided that, the right of the holder to enforce the provisions of the undertaking will be limited to a right to obtain specific enforcement of the City's obligations under its continuing disclosure undertaking and any failure by the City to comply with the provisions of the undertaking will not be a default or an event of default with respect to the Notes. The City has timely made all filings and given all notices required under its prior continuing disclosure agreements and the Rule. DESCRIPTION OF THE CITY There follows in this Official Statement a brief description of the City, together with certain information concerning its economy and governmental organization, its indebtedness, current major revenue sources and general and specific funds. GENERAL INFORMATION The City of South Euclid, Ohio, is located in the northeast portion of Cuyahoga County, 10 miles from downtown Cleveland, with the cities of Lyndhurst to the east, Cleveland Heights to the west, University Heights and Beachwood to the south, and Cleveland, Euclid, and Richmond Heights to the north. The City has 23,537 residents, according to the most recent data from the United States Census Bureau. The following table shows the City’s population for each tenth year since 1970 and in 2000, with the current estimate as of 2005:

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Population, 1970-2005 Year

Population

1970 1980 1990 2000 2005 (a) (a)

29,279 25,713 23,866 23,537 23,537

Latest population estimate.

Source: U. S. Bureau of Census, Census of Population

The City is in the Cleveland Primary Metropolitan Statistical Area, comprised of the four counties of Cuyahoga, Geauga, Lake and Medina, which is the 16th largest of 71 in the United States. The City is also in the Cleveland-Akron-Lorain Consolidated Metropolitan Statistical Area which is the 11th most populous of 20 in the country. MUNICIPAL AND OTHER PUBLIC SERVICES AND FACILITIES The City provides general governmental services for the territory contained within its boundaries, including police and fire protection, disposal of garbage and rubbish, sewer services, street maintenance, street construction and reconstruction, and park and recreational facilities. The South Euclid-Lyndhurst Recreation Commission organizes programs for City residents. This Commission is a governmental joint venture among the City of South Euclid, the City of Lyndhurst and the South Euclid-Lyndhurst City School District. Each entity supports the Commission through funds paid to the Commission and each has access to the year-round activities and classes. The transportation facilities available to residents of the City include bus services furnished by the Greater Cleveland Regional Transit Authority, a county-wide transit system; two State Highways and two U. S. Highways easily accessible from the City; Conrail and Amtrak railroads serving areas adjacent to the City; and Cleveland Hopkins International Airport and Burke Lakefront Airport, both located in Cleveland, and Cuyahoga County Airport, located in nearby Richmond Heights. The Board of Education of the South Euclid-Lyndhurst City School District, a separate political subdivision of the State, provides public education for children from kindergarten through the twelfth grade. The City is home to Notre Dame College, a co-ed college specializing in Masters in Education, Teaching & Nursing. Several public and private two- and four-year colleges and universities are within commuting distance of the City, including Cleveland State University, Kent State University, Case Western Reserve University, John Carroll University, Baldwin Wallace College, Ursuline College and Cuyahoga Community College.

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One daily newspaper and one weekly newspaper serve the City. The City is within the service area of six television stations and thirty-one AM and FM radio stations. The City is provided with banking and financial services by savings and loan associations located in the City and by six commercial banks headquartered in Cleveland, Ohio. Each maintains offices in the City. ECONOMY AND ECONOMIC DEVELOPMENT The City is zoned primarily for residential and commercial uses. The following table shows, on a percentage basis, the uses to which land in the City is put: USE

PERCENTAGE OF AREA

Residential Business and Office Industry and Research Institutions Open Space and Recreation Major Highway and Parking Vacant

65 15 10 5 4 0 1

Source: City Building Department.

Based on the number of full-time equivalent employees working in the City, the largest employer in the City is the South Euclid - Lyndhurst Board of Education. The following table shows, on the basis of number of full-time equivalent employees, the five largest employers located in the City as of December 31, 2008 (the latest date for which information is available):

NAME South Euclid - Lyndhurst Board of Education Riser Foods Cuyahoga County Auditor University Suburban Health Center City of South Euclid

ESTIMATED NUMBER OF EMPLOYEES 350

Government

201 199 192

Food Products Government Health Care

181

Government

Source: Regional Income Tax Agency.

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NATURE OF BUSINESS

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The following table shows the number of building permits issued by the City during the years 2004 through 2008, and the estimated cost of new construction projects, alterations and repairs authorized pursuant to such permits: SUMMARY OF BUILDING PERMITS ISSUED YEAR 2004 2005 2006 2007 2008

NUMBER OF BUILDING PERMITS 928 1084 1012 890 831

ESTIMATED COST $ 5,608,679 5,539,745 8,532,248 19,584,688 21,492,928

1 2

Source: Building Department

The comparative unemployment rates for the months of October, 2007 and October, 2008 (not seasonally adjusted) for the City, County, State and Nation are: October 2007 County State Nation

5.8% 5.3% 4.4%

October 2008 6.6% 6.8% 6.1%

Source: State of Ohio Bureau of Employment Services, Division of Research and Statistics (the “Bureau”).

Proximity to downtown Cleveland, to the University Circle cultural district, to hospitals and universities and to neighborhood shopping and dining areas, remains the major reason for moving to the City. The City has been a recipient of federal Community Development Block Grant (“CDBG”) funds for over 25 years. The City applies to the Cuyahoga County Competitive Municipal Grant Program on a yearly basis to fund critical infrastructure, capital improvements, commercial revitalization projects, housing preservation projects and remediation projects that serve low/moderate income areas of the Community. The City is primarily a residential community with a preponderance of single family homes. A major medical facility, University Suburban Health Care, provides quality health care to South Euclid residents as well as to neighboring communities. South Euclid is home to Notre Dame College, a private, four-year institute of higher learning. The following industries are vital to the City’s financial condition and contribute to the stable economic 1

A substantial portion of the increase is attributable to capital improvements at four schools in the South Euclid-Lyndhurst City School District and located within the City. 2 Increases attributable to the Notre Dame College expansion and a new Medical Center.

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condition of the City: Aero Controlex, Division of Transdigm, Inc., is a Fortune 500 company which manufactures custom components for the aerospace industry; Glastic Corporation manufactures thermoset polymers used in appliances; and Gent Machine Company manufactures automotive and aircraft components. Several retail shopping centers, which are among the major tax contributors within the City, are available for the City’s residents, including a 14,000 square foot shopping center at the intersection of Mayfield and Green Roads, anchored by CVS/Pharmacy, and the Mayfield Road-Green Road shopping center, housing over fifty-eight retail stores including Marc’s discount store and Blockbuster Video. Another small shopping center is located in the northern section of the City known as Glengate Shopping Center and houses thirteen retail stores. A smaller strip of stores is located on Cedar and Green Roads. The redevelopment of the Cedar Center shopping area is progressing with the acquisition of the property with the proceeds of the Notes. The City has successfully negotiated a Developer’s Agreement with The Coral Company to redevelop the north side of Cedar Center into a mixed use development consisting of retail, office and residential uses. Early site plans show 120,000 square feet of retail uses, 18,000 square feet of office uses and 74 residential units. In addition, there are plans for an interior civic space of 9,000 square feet and exterior green space plazas for events. The Coral Company has already developed the south side of Cedar Center, located in University Heights, which is anchored by Whole Foods and CVS. The City’s development will be complimentary to the University Heights side and will again unify the Cedar Center area into a shopping and life style center. In addition to major retail district revitalization efforts, the City has been aggressive in attracting new businesses and redevelopment of parcels on Mayfield and Green Roads. New projects include: 

Dr. Sender’s Pediatric Health Center: This $4.2 million project located on South Green Road near Notre Dame College and University Suburban Health Center opened for business in February 2007.



Dunkin Donuts: A combination Dunkin Donuts/Baskin Robbins is now opened for business. The existing dilapidated building which housed an auto repair shop was demolished and a new structure was built on Mayfield Road.



Fifth Third Bank: Fifth Third Bank demolished its old building and has built a new structure in the same location.



A new medical office building opened at a cost of $275,000, housing the offices of three podiatrists.

With the overwhelming success of the Monticello Place planned unit residential development in 2003, consisting of thirty-eight single family detached units, the City has spurred interest from several other parties wanting to develop new housing projects to attract new home buyers and keep residents looking for new housing in South Euclid. This has resulted in the construction and/or approved plans for the following new housing developments:

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

Novicky Court with 14 new units is completely sold.



Crestview Court with 11 new housing units only has two units remaining unsold.



Cutter’s Creek with 48 units. The first 15 units have been constructed.



Francis Court with 16 units. The project has been approved by City Council and is currently under construction. One unit has been completed.

Notre Dame College recently completed a project in order to meet the College’s growing enrollment. Ongoing improvements include increased parking facilities, exterior walkways and the addition of new dormitory rooms, two new dormitories, and a wrestling room. Infrastructure projects included the replacing of the Telhurst Road bridge and sewer and road replacement for Suffolk, Waverly and Brookline Roads. The Bluestone area infrastructure project is still in progress as well as the start of the East Antisdale/Grosvenor infrastructure project. The Warrensville Center Road sewer and street replacement project was completed. A water splash park constructed by the City at the Quarry North Park opened in 2008. A $150,000 community-built “Playground of Possibilities” was constructed in Fall of 2008. GOVERNMENTAL ORGANIZATION The City operates under and is governed by its Charter which voters first adopted in 1953 and which has been amended from time to time. The last amendment was made in 2005, effective 2006. The City is also subject to certain general laws applicable to all Ohio cities. Under the Ohio Constitution, the City may exercise all local self-government and police powers to the extent that none are in conflict with applicable general laws. The Charter also establishes certain administrative departments. The Charter provides for a mayor-council form of government. Legislative authority is vested in a seven-member Council. The Council consists of three council members elected at-large and four elected by wards. Council members are elected for a four year term. Each member has a right to vote. The Council fixes compensation of City officials and employees and enacts ordinances and resolutions relating to the City services, tax levies, appropriations and indebtedness, licensing of regulated businesses and trades and other municipal purposes. The presiding officer is the President who is elected by Council for a twoyear term. The City’s chief executive and administrative officer is the Mayor who is elected by the voters specifically to that office for a four-year term. The other elected official is the Municipal Court Judge, elected to a six-year term.

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The Mayor appoints all of the directors of the City departments, including the Directors of Finance, Law, Service, Economic Development, Community Relations and Community Center, the Building Commissioner, the Zoning Administrator and the City Engineer. The Mayor also appoints the Chiefs of Police and Fire as well as police and fire personnel after competitive civil service examinations. The Mayor appoints members to a number of boards and commissions, and in accordance with civil service requirements, may remove all appointed officials and employees, except Council officers and employees. The Mayor may veto any legislation passed by Council, but Council may override a veto by a vote of five Council members. The Mayor’s duties and responsibilities include those of Safety Director. FINANCIAL ADMINISTRATION Responsibility for the major financial functions of the City is divided among the Council, the Mayor and the Finance Director. Under the Charter, the Finance Director is the principal fiscal officer of the City and has charge of the administration of the financial affairs of the City, including the maintenance and supervision of all accounts showing the City’s financial transactions; the custody of all public money of the City; the institution and collection of special assessments; the issuance of licenses and collection of license fees; and the control, funding and payment of the public debt of the City. The City’s Codified Ordinances require the City’s accounting procedures to be adequate for recording all cash receipts and disbursements and all revenues accrued and liabilities incurred and for making reports of the City’s financial condition and transactions periodically to the Council and the public. The City’s fiscal year is January 1st through December 31st. Under Ohio law, the Finance Director is not permitted to allow expenditures to exceed the amount of appropriations, or to expend moneys for purposes other than those for which they were appropriated without subsequent reappropriation by the City’s Council. Under the Charter, no contract, agreement or other obligation involving the expenditure of money may be entered into unless the Finance Director has first certified that the money required for the contract, agreement, obligation or expenditure is in the City’s treasury, or in the process of collection, to the credit of the fund from which it is to be paid, and that such funds have not been appropriated for any other purpose. The Finance Director also assists the Mayor in the preparation of the City’s annual operating and tax budget which forms the basis for City Council’s annual appropriation measure. The Council must approve the City’s tax budget on or before July 15th for the next succeeding fiscal year. Pursuant to Ohio law, the Auditor of State, as chief inspector and supervisor of public offices, through state examiners appointed by the Auditor of State examines the City’s accounts on a periodic basis, unless a firm of qualified independent public accountants is engaged to conduct such an audit. The Charter permits the Council to engage a firm of independent public accountants to audit the accounts of the City. The Cuyahoga County Auditor (elected from the County at large) assesses real property for tax purposes within the City and County subject to supervision by the Ohio Tax

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Commissioner. The Ohio Tax Commissioner is responsible for assessing tangible personal property. For a more detailed discussion of the City’s accounting procedures and the examination of the City’s accounts, see “ACCOUNTING PROCEDURES AND EXAMINATION OF ACCOUNTS” herein. For a more detailed discussion of the assessment of real and tangible personal property, see “FINANCIAL FACTORS - ASSESSED VALUATION AND ASSESSMENT PROCEDURE” herein. CITY DEBT AND OTHER LONG TERM OBLIGATIONS The following describes the statutory debt limitations (the “direct debt limitations”), the constitutional debt limitation (the “indirect debt limitation”) and ad valorem property tax limitations applicable to the City and to the presently outstanding and future bond and note indebtedness of the City. As further discussed and described below, the Notes are subject to the direct debt limitations as well as the indirect debt limitation, as well as the related property tax limitation. STATUTORY DIRECT DEBT LIMITATIONS Ohio law provides that the net principal amount of both voted (i.e., voter approved) and unvoted (i.e., approved only by action of Council) debt of the City that is not “exempt debt” (discussed below) may not exceed 10-1/2% of the total value of all property in the City as listed and assessed for taxation, and that the net principal amount of its unvoted nonexempt debt may not exceed 5-l/2% of such value. These two limitations are referred to as the “direct debt limitations.” The City’s ability to incur unvoted debt (whether or not exempt from the direct debt limitations) is also restricted by the indirect debt limitation (discussed under the caption “INDIRECT DEBT LIMITATION”). The Ohio Revised Code provides that various types of debt that an Ohio municipality may issue are exempt from the direct debt limitations (the “exempt debt”). Exempt debt includes, among others, general obligation debt issued for a municipal utility (water, sewerage disposal, sewage, electric), on-street/off-street parking, hospital, recreation, and solid waste, hazardous waste, recovery or recycling facilities, to the extent that such debt is “selfsupporting” (that is, revenues from the facility are estimated by the fiscal officer to be sufficient to pay the operating and maintenance expenses and all debt service on indebtedness incurred for such facility); bonds issued in anticipation of the collection of special assessments; revenue bonds; notes issued in anticipation of the collection of current revenues (which under Ohio law ordinarily have a maximum maturity of six months) or in anticipation of the proceeds of a specific tax levy; notes issued for certain emergency purposes; bonds issued to pay final judgments; securities that are not general obligations; and unvoted general obligation securities, if the principal and interest payable thereon will be met from lawfully available municipal income taxes to be applied thereto, and if such obligations are issued pursuant to ordinances containing covenants of the municipality to appropriate annually, from such municipal income

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taxes, amounts necessary to meet the annual debt service thereon. To the extent that securities which may be issued would be exempt debt, securities issued in anticipation of such securities also would be exempt. In calculating the debt subject to the direct debt limitations, the amount of money in the City’s Bond Retirement Fund allocated to the principal amount of nonexempt debt is deducted from gross nonexempt debt. Appendix A to this Official Statement is a Financial Statement for the City, certified by the City’s Finance Director, showing the amount of the outstanding securities of the City (after issuance of the Notes) which are subject to the voted and unvoted direct debt limitation (10-1/2% limit) and the unvoted direct debt limitation (5-1/2% limit). Appendix A to this Official Statement shows that the maximum aggregate principal amount of voted and unvoted general obligation debt which the City may issue without exceeding the 10-1/2% limitation is $48,310,518. The total principal amount of the City’s outstanding debt (after issuance of the Notes) which is subject to the 10-1/2% limitation is $7,299,994 of which $559,994 represents voted debt. The difference between the two amounts is $41,010,524 which represents the total principal amount of additional voted and unvoted nonexempt debt which the City may issue without exceeding the 10-1/2% limitation. Appendix A to this Official Statement shows that the maximum aggregate principal amount of unvoted general obligation debt which the City may issue without exceeding the 5-1/2% limitation is $25,305,509. The total principal amount of the City’s outstanding debt which is subject to the 5-1/2% limitation is $6,740,000. The difference between the two amounts is $18,565,509 which represents the total principal amount of additional unvoted nonexempt debt which the City may issue without exceeding the 5-1/2% limitation. The indirect debt limitation also restricts the City’s ability to issue unvoted general obligation debt, and any issuance of such debt must satisfy both the direct and indirect limitations. INDIRECT DEBT LIMITATION Although the Ohio Constitution does not directly limit the amount of debt which a municipality may incur, the combined effect of two provisions of the Ohio Constitution indirectly imposes a limitation on the amount of unvoted general obligation securities which a municipality may issue. Article XII, Section 2 of the Ohio Constitution and the statutes of the State impose a ten mill (i.e., $.01 per $1.00 of assessed value) limitation on the amount of ad valorem property taxes which may be levied on each $1.00 of assessed value of taxable property without a vote of the electors. Article XII, Section 11 requires that, in connection with all bonded indebtedness incurred by a municipality, provision must be made for the levy of taxes in an amount sufficient to pay annual debt charges on such indebtedness. The combined effect of these two provisions is known as the indirect debt limitation. To determine whether a municipality may issue unvoted general obligation securities without exceeding the indirect debt limitation, one must take into account the outstanding unvoted general obligation indebtedness not only of the municipality, but also of the State, if any, and other political subdivisions which overlap the municipality.

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The City may issue voted general obligation securities and securities issued in anticipation thereof pursuant to a majority vote of the electors of the City. The levy of ad valorem taxes, without limitation as to amount or rate, to pay debt service on such voted securities is authorized by the electors at the same time the issuance of the securities is authorized. Voted obligations may also be issued by certain overlapping subdivisions. Voted general obligation securities are not subject to the indirect debt limitation. Since the indirect debt limitation is derived from the Ohio Constitution’s limitation on the imposition of unvoted ad valorem property taxes, it applies only to indebtedness payable from such taxes, including indebtedness which may be payable from such taxes only in the event of the insufficiency of other revenues pledged to the payment thereof. The indirect debt limitation thus does not apply to voted debt obligations and debt obligations which do not have unvoted ad valorem taxes and the full faith and credit of the municipality pledged to their payment; consequently, the limitation does not apply to revenue bonds or mortgage revenue bonds or other obligations payable solely from non-tax revenues such as the income of municipally-owned utilities. In contrast to the direct debt limitations, which relate to the principal amount of the outstanding indebtedness, the indirect debt limitation relates to the amount of principal and interest annually payable on outstanding indebtedness. In order for a municipality to determine whether it may issue additional unvoted general obligation securities without exceeding the indirect debt limitation, the municipality must calculate the number of mills which would need to be levied in order to yield the dollar amount necessary to pay the principal and interest due on all outstanding unvoted general obligation debt of the municipality and all overlapping subdivisions in the year in which the aggregate amount of such principal and interest is highest. In making that calculation, the municipality must include the principal and interest payable on all such debt which may be paid from ad valorem property tax revenues, irrespective of whether such revenues will in fact be applied to the payment thereof. By subtracting from ten mills the number of mills resulting from that calculation, the municipality determines the remaining millage available for additional issuances of unvoted general obligation debt consistent with the indirect debt limitation. With respect to any proposed issuance of unvoted general obligation debt, the municipality must determine the number of mills necessary to pay the principal and interest due on such debt in the year in which the total principal and interest payable would be highest. If that number of mills is less than the remaining millage available for additional issuances of such debt, then the municipality may issue the proposed debt without exceeding the indirect debt limitation. The South Euclid-Lyndhurst City School District, the Cleveland Heights School District, the Greater Cleveland Regional Transit Authority and Cuyahoga County, which overlap the City, are separate political subdivisions with operating and debt service funding separate from that of the City. In applying the indirect debt limitation to the City, one must take into account the outstanding unvoted general obligation debt of the State, if any, and these overlapping subdivisions.

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Appendix B to this Official Statement is a Supplemental Financial Statement, certified by the Cuyahoga County Auditor, which shows the required tax rate, in mills, required to pay debt service for unvoted general obligation debt of the City and its overlapping political subdivisions for the fiscal year in which the debt service is the highest. Such Statement indicates that all unvoted general obligation debt, other than the Notes, of the City and its overlapping subdivisions requires 3.5561 mills to be levied, if the debt is not paid from other revenues, and that the Notes require 4.1802 mills to be levied, if they are not paid from other revenues. The total millage required for all unvoted general obligation debt of the City and its overlapping subdivisions, including the Notes, is 7.7363 mills, as of the date of the Supplemental Financial Statements, leaving 2.2637 mills, as of the date of the Supplemental Financial Statement, of unused debt capacity under the indirect debt limitation to the City and its overlapping political subdivisions for the issuance of additional unvoted general obligation debt in the future. TEN MILL UNVOTED TAX LIMITATION Article XII, Section 2 of the Ohio Constitution and Section 5705.02 of the Ohio Revised Code limit the maximum aggregate millage that may be levied for all purposes on any single parcel of property by all overlapping taxing subdivisions without a vote of the electors, to ten mills of assessed valuation. A statutory formula determines the allocation of that ten mills among overlapping subdivisions. The City and its overlapping subdivisions levy 9.85 of the available ten mills as follows: the City -- 3.90 mills; Cuyahoga County -- 1.45 mills; Cleveland Metropolitan Park District -- 0.05 mills; and Cleveland Heights - University Heights City School District -- 4.45 mills. (Source: Cuyahoga County Auditor). The ten mills that may be levied as ad valorem taxes upon real property without a vote of the electors are referred to as the “inside millage.” Ohio law presently requires that the inside millage allocated to each overlapping taxing subdivision be used first for the payment of debt service on unvoted general obligation debt of the subdivision, unless provisions have been made for its payment from other sources. The remaining balance of inside millage (in the case of municipal corporations, after allocating 0.6 mills to police and fire pension purposes) must be used for general fund purposes. To the extent that the inside millage required for annual debt service by a subdivision or taxing unit exceeds the portion allocated to debt service for that subdivision or taxing unit, the amount that would otherwise be available to that subdivision or its overlapping subdivisions for general fund purposes is reduced. The allocation of inside millage to a municipal corporation may not, however, be increased through such a reduction in the allocation to the overlapping political subdivisions unless moneys available to pay the municipality’s debt service on its unvoted general obligations are still insufficient after applying the following: (a)

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the municipality’s formula share of the inside millage, without preserving any operating levy to the municipality within the inside millage;

18

(b)

after application of paragraph (a) above, receipts of any municipal income tax levied by the municipality lawfully available for payment of debt service;

(c)

after application of paragraphs (a) and (b) above, receipts of ad valorem property taxes in excess of the ten mill tax limitation for current operating expenses of the municipality that are lawfully available for the payment of debt service. (Ohio Revised Code Sections 5705.31 and 5705.312).

If, after application of the moneys described in clauses (a), (b) and (c) above, the moneys available from the entire inside millage allocated to a municipality to pay debt service on a municipality’s unvoted general obligations are still insufficient, then the municipality’s share of the inside millage will be increased to provide an amount sufficient to pay debt service on such unvoted general obligations, and the overlapping subdivisions’ or taxing units’ share of the inside millage for general fund purposes will be reduced commensurately. BOND ANTICIPATION NOTES With the issuance of the Notes, the City will have outstanding bond anticipation notes in the aggregate principal amount of $21,800,0001 as shown on Appendix C to this Official Statement. The City may retire such bond anticipation notes at maturity from one or a combination of the following sources: available funds of the City, the proceeds of the sale of the bonds anticipated by such notes, the proceeds of the sale of renewal notes, or, under appropriate circumstances, the proceeds of revenue or mortgage revenue bonds. Under Ohio law, municipalities may issue notes, including renewal notes, in anticipation of the issuance of general obligation bonds. Such notes and subsequent renewal of notes may remain outstanding for a maximum period of twenty years from the date of issuance of the original notes but may in no event remain outstanding later than the maximum maturity of the bonds anticipated plus five years (except for notes issued in anticipation of special assessments, for which the maximum maturity is generally the last day of December of the fifth year following the year in which such notes are initially issued). If such notes and renewal of notes remain outstanding later than the last day of December of the fifth year following the year in which such notes are originally issued, then any such period in excess of five years must be deducted from the permitted maximum maturity of the bonds anticipated, and portions of the principal amount of such notes must be retired in the amounts and at the times that would have been required for the payment of principal maturities on the bonds anticipated if the bonds had been issued at the expiration of the initial five-year period. The ability of the City to retire its outstanding bond anticipation notes from the proceeds of the sale of either renewal notes or bonds will depend upon the marketability of such renewal notes or bonds under market conditions prevailing at the time of the proposed sale thereof. Under Ohio law, general obligation bonds and notes of a municipality may be issued bearing interest at a rate not to exceed the maximum or maximum average annual interest rate determined by the municipality’s legislative authority. 1

Preliminary, subject to change.

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OTHER SHORT-TERM FINANCINGS Other than bond anticipation notes which are issued to finance capital improvements, the City has not issued and does not foresee any need to issue short-term obligations such as tax anticipation notes or revenue anticipation notes to finance its operations. The timing of the collection of the City revenues provides sufficient cash-flow to meet expenses as they are incurred. CURRENT AND PAST DEBT OUTSTANDING Appendix A shows the principal amounts of voted and unvoted debt of the City, including the Notes, and the principal amount of such debt that is exempt from the statutory direct debt limitation, grouped by category. Appendix C lists all general obligation bond anticipation notes that are or will be outstanding upon issuance of the Notes. Appendix D shows the projected annual debt service requirements on the City’s general obligation bonds and bond anticipation notes, including the Notes. The following table lists the principal amount of the City’s notes and bonds (other than conduit issues, if any) outstanding on December 31 of the five most recent fiscal years: Year

Notes

Bonds

2004 2005 2006 2007 2008

-0-0$ 1,800,000 18,800,000 19,810,000

$11,579,994 10,614,994 9,619,994 8,609,994 7,569,994

Total Notes and Bonds $11,579,994 10,614,994 11,419,994 27,409,994 27,379,994

The City has no outstanding revenue or mortgage revenue bonds that are payable solely from the revenues of specific facilities and which do not have taxes or the full faith and credit of the City pledged for their payment. The City has no long term financial debt obligations, other than the bonds and notes described above or referred to in the various Appendices mentioned above, pension obligations hereinafter described and an outstanding loan from the Ohio Public Works Commission in the principal amount of $1,637,478 as of December 31, 2008. For a discussion of the City’s required annual payments for allocated accrued liability under the statewide pension fund for police and fire personnel and the statewide public employees retirement system for other City employees, see “PENSION OBLIGATIONS” herein. For a discussion of the City’s obligations for unpaid accumulated sick leave, anticipated workers

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compensation and unemployment compensation payments or premiums, vacation and overtime, see “EMPLOYEES” herein. FUTURE FINANCINGS After the Notes are issued, the City will have outstanding general obligation bond anticipation notes aggregating $21,800,000∗ in principal amount and maturing in 2009. The City currently plans to retire the balance of its outstanding notes (i) through the issuance of renewal notes and annual appropriations for such purpose during the period that such notes may be renewed, or (ii) the issuance of bonds. The City has no plans to issue debt to finance ongoing and routine capital improvements. PENSION OBLIGATIONS Employees, present and retired, of the City are covered under two statewide public pension and retirement systems. The Ohio Police and Fire Pension Fund (“OP&F”) applies to most members of the police department and all members of the fire department. Most other City employees are covered by the Ohio Public Employees Retirement System (“OPERS”). (See the City’s financial statements in Appendix E for additional information about the City’s pension obligations.) OPERS estimated in its Comprehensive Annual Financial Report for the year ending December 31, 2006 (the “OPERS CAFR”) that there were 381,464 active contributing OPERS members statewide for the year 2006. As of December 31, 2008, OPERS provides coverage for 127 present full-time and part-time employees of the City, including some members of the police department. Currently, non-law enforcement employees contribute at a rate of 10% of earnable salary or compensation, 8% of which is the statutory minimum and 2% of which has been set by the OPERS Board. The City currently contributes at a rate of 14% of the same base, which is the rate actuarially established for OPERS. The OPERS Board has the authority to increase the employee contribution rate up to 10% and the employer rate up to 14%, except as to County Sheriffs and their deputies. State law determines the benefits for members of OPERS.



The City’s annual contribution to OPERS is treated as a current expense and is included in its operating expenditures. OPERS reported that, based on actuarial data as of the year ending December 31, 2005, actuarial accrued liabilities exceeded actuarial value of assets, creating an unfunded actuarial liability of $6.70 billion as of December 31, 2005, the date of the latest actuarial valuation (the most recent information available). (Source: OPERS CAFR).

Preliminary, subject to change.

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As of December 31, 2008, OP&F provides coverage for 40 full-time employees of the City’s police department and 37 full-time employees of the City’s fire department, who currently contribute at a statutory rate of 10% of gross earnings. The City currently contributes at the statutory rates of 19.5% applicable to police personnel and 24.00% applicable to fire personnel. These rates are fixed by the Ohio General Assembly on the basis of actuarial evaluations and recommendations required by law to be made each year. OP&F and OPERS are not presently subject to the funding and vesting requirements of the federal Employee Retirement Income Security Act of 1974; however, such pension funds are complying with certain reporting requirements under that Act. The United States Congress currently has under review legislation which would regulate pension funds for public bodies and governments. (Source: OPERS and OP&F). Both OP&F and OPERS are created pursuant to statutes of the State. The Ohio General Assembly could determine to amend the benefits to be paid or the format of either retirement system or to revise contributions to be made by municipalities into the retirement systems. Federal law requires City employees hired after March 31, 1986 to participate in the federal Medicare program, which requires matching employer and employee contributions, each being 1.45% of the wage base. Otherwise, City employees covered by a State retirement system are not currently covered under the federal Social Security Act. Congress has had under consideration legislation that would require such coverage. (Source: OPERS and OP&F). OVERLAPPING AND UNDERLYING INDEBTEDNESS OF GOVERNMENTAL ENTITIES WITHIN THE CITY In addition to the City, the following overlapping governmental entities have the power to issue bonds and to levy taxes or cause taxes to be levied on taxable property in the City without a vote. The estimated gross outstanding general obligation indebtedness of such governmental entities, based on information obtained from the County Auditor, is as follows: [remainder of page intentionally left blank]

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ESTIMATED OVERLAPPING AND UNDERLYING INDEBTEDNESS As of December 31, 2008 Gross Indebtedness (Bonds & Bond Anticipation Notes)

Units Cuyahoga County

Percentage Applicable To City(a)

Estimated Debt Applicable To City

$194,593,691

1.44%

$2,808,396

147,385,000

1.44%

2,127,075

South EuclidLyndhurst City School District

19,344,995

43.72%

8,457,127

Cleveland Heights School District

12,009,871

3.03%

364,279

Greater Cleveland Regional Transit Authority

Gross Estimated Overlapping and Underlying Debt Applicable to City: (a)

$13,756,878

The percentage of gross indebtedness of the City’s overlapping political subdivisions was determined by dividing the overlapping subdivision’s assessed valuation within the City by its total assessed valuation.

[remainder of page intentionally left blank]

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DEBT RATIOS The following table lists as of December 31, 2008 certain debt ratios of the City based on its own debt and underlying and overlapping debt applicable to the City. Per Capita (c)

Percentage of Assessed Value (d)

$27,379,994

$1,163.27

5.95%

2.08%

Estimated Underlying and Overlapping Debt Applicable to City (b)

13,756,878

584.48

2.99%

1.05%

Total Direct City and Estimated Overlapping and Underlying Debt Applicable to City

41,136,872

1,747.75

8.94%

3.13%

Amount Gross City Debt (a)

Percentage of Estimated Full Value (e)

(a)

As of December 31, 2008. Does not include the Notes, since the Notes were not outstanding on December 31, 2008, but would include, in addition to other debt, the principal amount of all notes outstanding on December 31, 2008, including the notes that will be retired with the proceeds of the Notes.

(b)

Includes the City’s applicable share of all general obligation debt of the County, Greater Cleveland Regional Transit, the South Euclid-Lyndhurst City School District, and Cleveland HeightsUniversity Heights City School District, as of December 31, 2008.

(c)

Current City population is estimated to be 23,537.

(d)

City assessed valuation for tax year 2008 (collection year 2009) is $460,100,170.

(e)

Full valuation estimated by applying equalization factor of 35% to assessed valuation.

FINANCIAL FACTORS BUDGET PROCESS The City’s budgeting process is governed by Ohio law and the City’s Charter, and the responsibility for budgeting is divided among the Mayor (who prepares the tax budget with the assistance of the Finance Director), Council, the County Auditor and the Cuyahoga County Budget Commission (the “County Budget Commission”) consisting of the County Auditor, County Treasurer and County Prosecutor. The major features of the budgeting process are discussed below. The City’s fiscal year runs from January 1st through December 31st. On or before the fifteenth day of July of each year, the Council must adopt a tax budget for the next {00445198.DOC;3 }

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succeeding fiscal year. The tax budget is prepared on a cash or non-GAAP basis. Based upon its review of the tax budget, the County Budget Commission certifies tax levies that may be levied within and in excess of the ten mill tax limitation. The County Budget Commission also issues an “official certificate of estimated resources,” stating by fund the City’s estimated resources. The City must then revise its tax budget so that the total contemplated appropriations and expenditures, by fund, will not exceed the City’s estimated resources, by fund, as determined by the County Budget Commission’s certificate. On or about the first of each fiscal year, the Finance Director of the City certifies the total amount of all sources (taxes and revenues) available for expenditure from each fund, together with balances existing at the end of the preceding year. Year-end balances are to be unencumbered balances; that is, the balances shall be reduced by any unliquidated and outstanding obligations at the end of the year. The County Budget Commission then issues an amended official certificate of estimated resources. On or before the fifteenth day of November of each year, the Mayor must submit to the Council an estimate of the expenditures and revenues of the City departments for the ensuing fiscal year, which estimate then forms the basis of the appropriation ordinance for that year. The total appropriations made during the fiscal year from any fund may not exceed the amount set forth as available for expenditure from such fund in the official certificate of estimated resources, or any amendment thereto, certified prior to the appropriations. Based on the Mayor’s estimate and the official certificate of estimated resources, or amendments thereto, the City’s Council will pass the annual appropriation measure and any supplemental appropriations. The Council may pass a temporary appropriation measure and delay the passage of the annual appropriation measure to a date not later than April 1st, if the City has not received the amended official certificate of estimated resources showing the actual prior year’s fund balances. Such temporary appropriations are chargeable to the appropriations in the annual appropriation measure for the fiscal year when passed. Appropriation measures are not effective until the County Auditor files with the Council a certificate (the “Appropriation Certificate”) that the total appropriations from each fund, taken together with all other outstanding appropriations, do not exceed the amounts shown in the official or amended official certificate of estimated resources. When the County Auditor may properly issue such Appropriation Certificate, he must do so forthwith upon his receipt from the Council of a certified copy of the appropriation measure. The temporary, annual and supplemental appropriation measures establish the maximum amount that may be encumbered or expended from each fund during the fiscal year. In addition, the City’s Charter contains certain provisions relating to the annual appropriation measure and appropriations.

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PROPERTY TAXES The City derives a substantial portion of its General Fund revenues from taxes levied on real property and also from tangible personal property used in business. (See the discussion below under “ASSESSMENT VALUATION AND ASSESSMENT PROCEDURE” for information concerning recent legislation to reduce and ultimately eliminate taxation of most personal property used in business in Ohio.) Further, Bond Retirement Fund revenues used to pay general obligation bonds and notes of the City are provided by such taxes, to the extent such bonds and notes are not paid from other sources. The following tables provide data for the most recent five fiscal years as to the amounts of real and personal property taxes billed and collected and the amounts of current and accumulated delinquencies: Ad Valorem Real Property Taxes Collection Year 2004 2005 2006 2007 2008

Billed

(1)

$5,524,957 5,555,418 5,532,307 5,931,183 5,916,975

Collected

(2)

% Collected

$5,322,225 5,325,613 5,308,039 5,873,659 5,909,079

96.33% 95.86% 95.95% 99.03% 99.87%

Delinquent Current Accumulated $200,237 214,612 235,645 276,957 268,022

$360,768 305,248 309,311 361,123 360,452

Ad Valorem Personal Property Taxes Collection Year

Billed (1)

Collected (2)(3)

% Collected

2004 2005 2006 2007 2008

$198,838 213,866 132,461 123,571 53,189

$192,889 211,128 131,886 121,161 51,409

97.01% 98.72% 99.57% 98.05% 96.65%

Delinquent Current Accumulated(1) $5,996 2,738 590 9,108 512

$39,566 33,454 52,871 19,877 16,769

Special Assessments Collection Year

Billed (1)

Collected (2)

% Collected

2004 2005 2006 2007 2008

2,825,349 2,737,702 2,850,845 2,845,285 2,897,314

2,674,959 2,076,327 2,657,723 2,833,004 2,873,479

94.68% 97.76% 93.23% 99.57% 99.18%

Delinquent Current Accumulated 174,982 204,794 209,251 201,322 219,111

337,813 342,140 356,878 382,291 386,819

Source: Cuyahoga County Auditor (1) (2) (3)

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“Billed” amounts include the current charges, plus current additions, less current abatements. “Collected” amounts include “billed” amounts collected. See “COLLECTION OF AD VALOREM PROPERTY TAXES” below.

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For a discussion of certain real property tax relief payments made by the State from State revenues, amounts of which are included in the amounts of ad valorem property taxes shown as “billed” and “collected” in the foregoing table, see “RATES OF AD VALOREM TAXATION” below. COLLECTION OF AD VALOREM PROPERTY TAXES Under Ohio law, the current and delinquent ad valorem property taxes and special assessments are billed and collected by County officials for the City and the other taxing subdivisions in the County. The County Auditor certifies and delivers to the County Treasurer on October 1 in each year a list of the taxable value of real and public utility property in the County. The County Treasurer thereafter prepares and distributes tax bills, which contain a notice that if taxes are not paid within one year from the date they are due, the property is subject to foreclosure. Tax bills are payable in full on or before December 31, or in installments with one-half payable on December 31 and the balance on or before June 20. Ohio law permits the extension of these dates in the case of certain emergencies and certain other limited circumstances. If one-half of the real estate taxes, assessments and other charges in regard to the current year’s tax list are not paid on or before the later of December 31 of the previous calendar year, or any extension of such date, a 10% penalty is added thereto, and if the balance is not paid on or before the later of the following June 20, or any extension of such date, the same penalty is charged on the unpaid balance. On July 1 (or August 1 if the due date for the payment of taxes has been extended) the unpaid balance of any taxes which were due on or before December 31 of the previous calendar year, and on the following December 1 the balance unpaid in any calendar year, is each subject to interest at the rate calculated by the State Tax Commissioner in accordance with Ohio law on October 15 of the preceding calendar year (the “Interest Rate for Delinquencies”). As to taxable tangible personal property used in business, taxpayers file an annual return by April 30, listing such property owned, its valuation, and the applicable taxing districts. (Please see the discussion below under “ASSESSED VALUATION AND ASSESSMENT PROCEDURE” for a discussion of recent changes to the law affecting the levy and collection of taxable personal property tax in Ohio). At the time of the filing, the taxpayer must pay one-half of the applicable taxes. The County Auditor sends tax bills for the taxes remaining unpaid, which then become due on or before the next succeeding September 20. If the amount due is not paid by that date, a penalty of 10% is imposed. In addition, such amount unpaid in any calendar year when it is due is subject to interest at the Interest Rate for Delinquencies. Overpayments of taxes are returned to the taxpayer. Typically (for example, if any taxing authority in the County places a tax levy on the ballot at the general election in November), the time for the delivery of the list of real and public utility property by the County Auditor to the County Treasurer is extended by law to the first Monday in December and the times for payment of the tax bills is extended to January 31 and July 20. Under certain limited circumstances, the State Tax Commissioner can further extend these deadlines. Under certain circumstances, the County Treasurer is required to waive

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the collection of, and the County Auditor is required to remit, one-half of the penalty for late payment of taxes. On the first Monday of February and August of each year, the County Treasurer must pay over to the City all moneys received from taxes and assessments levied. At other times throughout the year, upon request by the City, the County Auditor will pay over such moneys as that official has in the City’s account. If real estate taxes and special assessments are not paid within 41 days after the second installment is due, they are certified by the County Auditor’s office as delinquent. A list of delinquent properties is then published in a newspaper of general circulation in the County. If the delinquent taxes and special assessments are not paid within one year after such certification, the properties are then also certified as delinquent to the County Prosecutor, who then institutes a proceeding to foreclose the lien of the State for the delinquent amount. The County Auditor’s office employs a notification procedure and the County Treasurer, in addition to any other remedy provided by law, is required to initiate proceedings in common pleas court to collect delinquent tangible personal property taxes. Proceeds from foreclosure sales of delinquent real property become part of the current collection and are distributed as current collections to the taxing subdivisions in the County, or, if applicable to special assessments, are remitted to the subdivisions that levied such assessments. The foregoing is a general and capsulized summary of the Ohio statutory procedures and requirements for the collection of ad valorem property taxes. The actual practices employed may vary from county to county and from time to time as to certain discretionary matters. Although the City has not maintained a reserve for uncollected taxes, it budgets its property tax revenues on the assumption, based on historical data, that a certain percentage of current and delinquent taxes will be uncollected. Specifically, the City budgets such revenues based on the assumption that an amount equal to 98% of the total tax levy, including delinquencies, will be collected from current payments by taxpayers. The City has historically collected the amount of property tax revenues that it has budgeted. ASSESSED VALUATION AND ASSESSMENT PROCEDURE The assessment of the value of property within the City pursuant to Ohio statutory procedures provides the basis for determining the amount of property taxes which the City may levy. The following table sets forth, for each of the most recent five years, the assessed valuation of property within the City subject to ad valorem taxes levied by the City.

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Tax Collection Year 2004 2005 2006 2007 2008

Real Property $403,488,950 405,928,590 406,048,630 448,084,590 450,568,300

(1)

Public Utility Tangible Personal Property (2) $9,450,900 9,335,390 8,488,680 8,219,840 6,012,100

Tangible Personal Property (Other than Public Utility (3)(4))

Total Assessed Valuation (6)

$12,016,718 12,756,472 13,659,190 8,747,215 3,519,770 (7)

$424,956,568 428,020,452 428,196,500 465,051,645 (5) 460,100,170

Source: Cuyahoga County Auditor (1)

Real property taxes collected in a calendar year are levied in the preceding calendar year on assessed values as of January l of that preceding year.

(2)

Public utility real and tangible personal property taxes collected in a calendar year are levied in the next preceding calendar year on assessed values determined as of December 31 of the second year preceding the tax collection year.

(3)

Tangible personal property taxes collected in a calendar year are levied on the assessed value of the personal property listed generally as of the close of business of the taxpayer’s fiscal year-end for purposes of federal income taxation in the preceding calendar year, except in certain cases involving new taxpayers and taxpayers applying for, and receiving the State Tax Commissioner’s approval to use, another fiscal year-end.

(4)

The estimated value of tangible personal property includes the first $10,000 of value for each taxpayer, which since collection year 1984 has been exempted from personal property tax. However, Ohio law also currently provides 100% revenue reimbursement to the City from State revenues for this exemption.

(5)

The increase in the 2007 assessed valuation is due primarily to the County’s 2006 sexennial reappraisal of real property valuations in Cuyahoga County.

(6)

Values do not include assessed valuation that is currently exempt from taxation due to tax abatement or certain City projects funded with tax increment financing revenues.

(7)

Estimated 2009 from actual 2008.

Ohio law requires that the County Auditor make a sexennial reappraisal of real property, and further requires that the County Auditor reassess real property at any time he finds that the true or taxable value thereof has changed and in the third calendar year following the year in which a sexennial reappraisal is completed (the “triennial reappraisal”) if ordered by the State Tax Commissioner (referred to in this Official Statement as the “Commissioner” or “Tax Commissioner”). The County Auditor made such a triennial reappraisal of the real property within the City for the calendar year 2006 and, as a result, adjusted the true value of taxable real property to reflect then current fair market values. These adjustments were reflected in the 2006 tax duplicate for collection year 2007 and in the ad valorem taxes distributed to the City in 2007. Under Ohio law the taxable value of real property is a percent of true value in money or, in the case of agricultural land, the current agricultural use value established by rule of {00445198.DOC;3 }

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the Commissioner, not to exceed thirty-five percent (35%). Under existing rules of the Commissioner, real property is assessed at not more than 35% of true value, or 35% of current agricultural use value as determined by the County Auditor pursuant to rules of the Commissioner. If declared by the property owner and deemed to qualify as “forest land” under Section 5713.22 of the Ohio Revised Code, certain real property is taxed at fifty percent (50%) of the local tax rate. The following table shows the ten largest ad valorem property taxpayers in the City, based on a review of the two hundred taxpayers having the largest real property assessed valuation in the City and the twenty-five taxpayers having the largest personal property assessed valuation in the City for the 2008 collection year: Assessed Valuation

Name of Taxpayer University Suburban Real Estate Cleveland Electric Illuminating Co. City of South Euclid Albrecht, Incorporated Ohio Bell Telephone Company Glastic Corporation Gannett Co. Inc. B.W.S. Properties SS South Euclid LLC East Ohio Gas Company

$6,570,770 4,399,240 4,239,950 2,513,670 1,777,490 1,568,380 1,416,390 1,121,590 1,116,750 989,020

Source: Cuyahoga County Auditor

Tangible personal property used in business (except for the public utility business) has been assessed at 25% of true value (in general, true value is net book value). The assessment level of public utility tangible personal property, except that of a railroad and a rural electric company whose tangible personal property is assessed at 25% and 50% respectively, is either 88% or 100% of true value depending on the nature of the public utility. Initially effective for collection year 2006, the assessed valuation of new and existing personal property used in business (except for new machinery and equipment) for most Ohio businesses (not including public utilities) decreased in 2007 to 12.50% of true value and will be decreased further over the subsequent two years to 0%, effective in 2009. New machinery and equipment were entirely exempt from personal property taxation beginning with collection year 2006. The City is of the opinion that this legislation has not had any significant impact on the financial condition of the City. Tangible personal property owned or used by public utilities is not affected by the phase-out and exemption provisions of the biennial appropriations bill. That property will

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continue to be assessed at the rate of 25% to 88% of its true value, depending upon the type of property at issue. In 2007, the City received $77,126 in revenues from a newly instituted state commercial activity tax to offset a portion of the decreased personal property tax revenues. Those offsetting revenues are scheduled, pursuant to the biennial appropriations bill, to be distributed to local governments such as the City through October of 2017. Ohio law provides certain tax incentives by way of abatement to certain business enterprises to encourage them to locate or expand in areas of chronic unemployment and to hire previously unemployed individuals, individuals previously on welfare and handicapped individuals. The zone(s) in which such incentives may be granted must be approved by the State’s Director of Development. Municipalities or counties (with the consent of affected municipalities or townships, as the case may be) that grant abatements must enter into agreements with qualified business enterprises pursuant to which the enterprise commits to certain employment targets in consideration for the tax abatements granted. In the case of agreements with certain municipalities, and with counties if the designated zone is located in a municipal corporation, the following tax abatements are authorized: (1) Exemption for a specified number of years, not to exceed ten, of a specified portion, up to seventy-five percent, of tangible personal property first used in business at the project site as a result of the agreement; and (2) Exemption for a specified number of years, not to exceed ten, of a specified portion, up to seventy-five percent, of the increase in the assessed value of the real property constituting the project site. In the case of the exemptions described in the immediately preceding items (1) and (2), the portion of the assessed value exempted from taxation may exceed seventy-five percent in any one year for which that portion is exempted if the average percentage exempted for all years for which the agreement is in effect does not exceed sixty percent. Officially, the entire City is designated as an Enterprise Zone, however there are no current Enterprise Zone incentives currently operating within the City. A ten-year Enterprise Zone abatement for Aerocontrolex Corporation was retired in 2004. Higher exemption rates may be negotiated with the approval of affected school districts. Under Ohio law, municipal corporations, such as the City, and counties are permitted to create “community reinvestment areas” (CRA) in which real property tax abatement can be granted for specified types of increased property valuation that results from improvements to real property in the form of new construction or the remodeling of existing structures by the property owner. In such areas, residential, commercial or industrial facilities may be eligible for such real property tax incentives, as authorized by the City or County that establishes the CRA. This program is designed to be controlled at the local level by the local legislative body. Such control includes control over the types of eligible projects, level of abatement as well as the number of years of tax abatement within certain statutory maximums. State law also provides {00445198.DOC;3 }

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for performance agreements between the benefiting enterprises and conferring governmental authorities in the case of CRA abatements. The City has established CRA districts, but no existing incentive programs are currently in place. The Ohio General Assembly has exercised from time to time its power to revise the Ohio statutes and to propose amendments to the Ohio Constitution regarding the determination of assessed valuation of property subject to ad valorem taxation, the rates at which ad valorem taxes may be levied, and the amount of tax proceeds which may be produced by ad valorem taxation of such property. The Ohio General Assembly may continue to make further revisions and proposals for revisions in these areas. RATES OF AD VALOREM TAXATION The amount of tax revenues derived from the levy of an ad valorem property tax by an Ohio taxing subdivision is determined by multiplying the rate at which the tax is levied, in mills ($1.00 per $1,000 of assessed valuation), by the assessed valuation of the property subject to the tax, determined in accordance with the rules and procedures for such assessment discussed above under “Assessed Valuation and Assessment Procedure.” The effective rate at which such a tax is levied and the revenues actually realized from the levy of the tax may, however, be affected by Ohio statutory requirements and procedures for tax limitation and reduction discussed previously and below. The following table shows the rates, in mills ($1.00 per $1,000 of assessed valuation), at which the City and its overlapping taxing subdivisions are collecting or have collected ad valorem property taxes for each of the most recent five fiscal years: TAX TABLE A Collection Year 2005 2006 2007 2008 2009

(1)

City

County

14.90 14.90 14.70 14.70 14.90

13.52 13.52 13.42 13.43 13.32

South Euclid Lyndhurst City School District 89.80 96.50 96.30 96.20 101.50

Special Taxing Districts(2)

Total

6.78 6.78 6.78 6.78 7.28

125.00 131.70 131.20 131.10 137.00

(1) Includes Police and Fire Pension Special Revenue Funds (2) Cleveland MetroParks, Cleveland-Cuyahoga County Port Authority, County Library, Cuyahoga Community College Source: Cuyahoga County Auditor

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The following Tax Table B shows the rates, in mills ($1.00 per $1,000 of assessed valuation), at which the City collected and will collect voted and unvoted ad valorem property taxes for each of the most recent five fiscal years: TAX TABLE B Voted and Unvoted City Tax Rates Collection Year 2005 2006 2007 2008 2009

Total Voted

(1)

Total Unvoted

11.25 11.25 11.05 11.05 11.90

3.65 3.65 3.65 3.65 3.00

(2)

Total Voted and Unvoted 14.90 14.90 14.70 14.70 14.90

(1) The voted tax levies for the retirement of debt obligations authorized by vote of the electors continue for the life of such debt obligations in annual amounts sufficient to pay debt service on such debt obligations as it becomes due and payable. (2) For a discussion of the ten mill limitation on the issuance of unvoted debt obligations and the priority of the claim by the holders of such obligations on taxes levied within the ten mill limitation, see “TEN MILL UNVOTED TAX LIMITATION” herein.

Ohio law limits the amount which may be realized by a taxing subdivision from certain voted taxes on real property to the amount realized from such taxes in the initial year in which such taxes were levied, plus certain allowed additional amounts. This effectively reduces the rate at which such taxes are levied in succeeding years. The purpose and effect of this limitation is to offset increases in taxes which would otherwise result from increases in the true value of real property. Exempted from reduction under this limitation are real property taxes of the following types: (i) taxes levied at whatever rate is necessary to produce a specified amount of tax money or an amount to pay debt charges, (ii) taxes levied within the ten mill limitation, and (iii) taxes provided for by the charter of a municipal corporation. As applied to the City, all of the ad valorem taxes levied by the City are exempt and thus not subject to reduction under this limitation. After the County Auditor has complied with the statutory procedure to implement the above-discussed limitation on the amounts to be levied by certain real property taxes, Ohio law requires that the County Auditor then further reduce the sum to be levied against each parcel of residential real property by an additional ten percent (the “ten percent rollback”). Ohio law allows for additional reductions in the real property taxes on homesteads (the “homestead exemption”). The State reimburses each taxing subdivision for the full amount of the reductions in that subdivision’s real property taxes resulting from the ten percent rollback and the homestead exemption. The ten percent rollback and the homestead exemption do not affect the determination of the principal amount of bonds or notes that may be issued by a subdivision under the direct or indirect debt limitations, and in the event the funds for payment of debt charges on bonds or notes payable from taxes reduced by those reductions are insufficient for

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such payment, the reduction of taxes thereby must be adjusted to the extent necessary to provide sufficient funds from real property taxes. As applied to the City’s collection of real property taxes in 2008, the ten percent rollback and the homestead exemption resulted in the State’s reimbursing the City in the amounts of $512,907 and $181,130 respectively. Only residential and agricultural property are eligible for the rollback. OTHER MAJOR CITY REVENUES This section describes major sources of revenue to the City’s general fund in addition to ad valorem property taxes. Municipal Income Tax Ohio law authorizes the levy of a municipal income tax at a rate not to exceed 1% by Council action without a vote of the electors. Municipal income taxes at a rate in excess of 1% must be for a specified purpose and must first be approved by a vote of the electors. The City, pursuant to Council action, currently levies a municipal income tax at the rate of 1%, and pursuant to votes of the electors approving additional levies of 1/2% effective August 1, 1983 and August 1, 2005, respectively, levies an additional 1%. The total municipal income tax rate (voted and unvoted) is currently 2%. The City’s income tax is levied upon the net income of corporations and other business entities doing business in the City and on the wages, salaries and compensation of individuals who work or reside in the City. The income tax is collected and administered by the Regional Income Tax Agency. Pursuant to the City’s income tax ordinances, the municipal income tax is in effect for a continuing period of time until reduced or terminated by action of Council or at an election which can be initiated by petition containing signatures numbering at least 10% of the electors of the City (based on the number of registered voters at the last general election for municipal officers), pursuant to initiative procedures under the City’s Charter. The reduction or termination of the tax at any such initiative election must be approved by a majority vote of the electors of the City voting on the issue. Council could reimpose a 1% tax without further authorization by the electors. In the Note Legislation, the City has covenanted to appropriate annually from the lawfully available municipal income tax, and to continue to levy and collect the municipal income tax in amounts necessary to pay the debt service charges on the Notes.

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The City’s annual collections of the income tax for the five-year period 2004 to 2008, as well as the Tax Rate and Resident Credit are as follows: Year 2004 2005 2006 2007 2008

Amount

Tax Rate (%)

Resident Credit (%)(a)

$5,283,128 5,673,842 6,644,770 8,436,791 8,372,096

1.5 1.5 2.0 2.0 2.0

.75 .75 .75 .75 .75

(a) City residents are granted, as credit against their tax liability to the City, the stated percentage of income tax they paid to other Ohio municipal corporations up to a maximum credit of 75% of the first 1%.

No single employer (via tax on business net profits and taxes withheld from employees) contributed more than 5% of the total of 2007 income tax collections received by the City. Local Government Funds Distributions from the local government fund of the State are another significant City general fund revenue source. Under Ohio law, such fund is governed by statute and is comprised of designated State revenues which are distributed to each county and then allocated by the County Budget Commission among the county and cities, villages, townships and other eligible units of local government located therein on the basis of a statutory calculation or locally determined formulas. In Cuyahoga County a local formula approved by the required number of participating units of local government is in effect. Such local formula may be revised from time to time or rescinded pursuant to Ohio law. If the local formula is rescinded, distributions to participating units of government will be made pursuant to the statutory calculation. In addition to the local government fund, the Ohio General Assembly in 1989 created the local government revenue assistance fund, and the City began receiving monies from such fund in September, 1989. The sources of State revenues paid into the local government fund, the methods of distributions from the fund, and the continuance of the fund are subject to statutory control by the Ohio General Assembly. The following table lists the total amount received by the City from both funds in recent years and allocated for the year 2008: Local Government Funds Receipts 2004 2005 2006 2007 2008

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$1,184,592 1,182,119 1,183,420 1,185,583 1,238,402

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ACCOUNTING PROCEDURES AND EXAMINATIONS OF ACCOUNTS The financial statements of the city are prepared in conformity with generally accepted accounting principles as contained in pronouncements of the Governmental Accounting Standards Board (“GASB”). The City has produced Comprehensive Annual Financial Reports (“CAFRs”) for each fiscal year beginning with the fiscal year ending December 31, 1983 and has submitted them to the Government Finance Officers Association (“GFOA”) in the Certificate of Achievement for Excellence in Financial Reporting Program. The City was awarded the GFOA Certificate of Achievement for Excellence in Financial Reporting (the “GFOA Certificate”) for its CAFRs for fiscal years ending December 31, 1984 through 2007. Under the pronouncements of GASB, the basis of accounting utilized in these reports is the modified accrual basis for the City’s governmental fund type funds and the full accrual basis for its proprietary fund type funds. The audited General Purpose Financial Statements for fiscal year ending December 31, 2007 are attached as Appendix E. The General Purpose Financial Statements of the City for each fiscal year are audited in accordance with generally accepted auditing standards. The City’s most recent General Purpose Financial Statements for the fiscal year ending December 31, 2007 have been audited by the Auditor of the State and received an unqualified opinion. EMPLOYEES As of December 31, 2008, 110 of the City’s 145 full-time employees were represented by the following collective bargaining agencies, with labor agreements expiring as indicated. Number of Employees

Bargaining Unit

Contract Expiration Date

Fire Fighters Association Local 1065

37

12/31/09

Fraternal Order of Police Lodge #80

40

12/31/09

9

12/31/09

24

12/31/09

Ohio Patrolmen’s Benevolent Association (FullTime Dispatchers) Local 2319 & Ohio Council 8 of The American Federation of State, County and Municipal Employees Union (AFSCME)

The remaining full-time City employees either are not authorized to join a bargaining unit or have not elected to do so.

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The State Collective Bargaining Law establishes procedures for and regulates public employer-employee collective bargaining and labor relations for state and local governmental units in the State, including the City. The Collective Bargaining Law creates a three-member State Employment Relations Board (the “SERB”). The SERB administers and enforces the Collective Bargaining Law. Among other things, the Collective Bargaining Law: (i) creates rights and obligations of public employers, public employees and employee organizations with respect to labor relations; (ii) defines which employees are covered by the Collective Bargaining Law; (iii) establishes methods for (a) the recognition of employee organizations as exclusive representatives for collective bargaining and (b) the determination of bargaining units; (iv) establishes matters for which collective bargaining is (a) required, (b) prohibited and (c) optional with the public employer; (v) establishes procedures for bargaining and the resolution of disputes, including negotiations, mediation and fact finding; and (vi) permits all employees covered under the Collective Bargaining Law to strike, except certain enumerated classes of employees including police and fire personnel. Disputes with employees who are not permitted to strike (including police and fire personnel) are to be resolved by binding arbitration on a best offer, issue by issue basis. If a strike by employees who are permitted to strike presents a clear and present danger to the public health or safety, the Court of Common Pleas in the County having jurisdiction over the parties may issue a temporary restraining order against the strike for not to exceed 72 hours, and in such a case the employer may request authorization from the SERB to enjoin the strike beyond the period of the temporary restraining order. The SERB determines if a clear and present danger to the public health or safety exists, and if it so determines, the Court of Common Pleas issuing the temporary restraining order has jurisdiction to further enjoin the strike for a period of 60 days after the end of the temporary restraining order or when agreement is reached, whichever occurs first. Thereafter, no court has jurisdiction to issue injunctive or other orders and a strike may be resumed at the end of such 60 day period. The Collective Bargaining Law establishes certain employer and employee and employee-organization unfair labor practices and remedies for such unfair labor practices. The Collective Bargaining Law applies to the City. The nonunion employees of the City are compensated for employment based upon Council action in the form of an annual salary ordinance normally passed in April of each year. The City has not yet determined the total accrued liability for compensated absences (sick and vacation time) for City employees for 2008. However, through December 31, 2007, such amount equaled $1,280,454. The total accrued liability to the State’s workers’ compensation fund through December 31, 2008 is estimated to be $200,000, which represents estimates of amounts to be paid for reported claims and incurred but not reported claims, and that amount has been funded by the City. The City reimburses the State, on a current basis, for unemployment benefits paid to former City employees.

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PENSION OBLIGATIONS For a discussion of the City’s obligations to the two statewide pension systems under Ohio law, see “CITY DEBT AND OTHER LONG TERM OBLIGATIONS - PENSION OBLIGATIONS” herein. LITIGATION As are other cities and political subdivisions in the State, the City is party to a number of lawsuits in the ordinary course of its operations. To the knowledge of the appropriate officials of the City, no litigation or administrative action or proceeding is pending or threatened, restraining or enjoining, or seeking to restrain or enjoin, the issuance and delivery of the Notes, the collection of ad valorem property taxes to pay the debt service on the Notes, or contesting or questioning the proceedings and authority under which the Notes have been authorized and are to be issued, sold, executed or delivered, or the validity of the Notes. In the opinion of the Director of Law of the City, there are no lawsuits or claims, whether civil rights, equal employment, tort or other suit, including actions or claims by any state or Federal governmental agency, pending or threatened against the City, the resolution of which will have a materially adverse impact upon the financial condition or operations of the City, the Notes or the security for the Notes. BANKRUPTCY AND FISCAL EMERGENCY ACT BANKRUPTCY The enforceability of and security for debt obligations, including, without limitation, the Notes, of Ohio municipalities, including the City, are subject to the provisions of Chapter 9 of Title 11 (the “Bankruptcy Code”) of the United States Code and other laws affecting creditors’ rights generally. Pub. L. No. 95-598, as amended by Pub. L. No. 98-353, by Pub. L. No. 99-554 and otherwise, enacted a revised Chapter 9 of the Bankruptcy Code which relates to the adjustment of debts of a state’s political subdivisions, public agencies and instrumentalities (“eligible entities”), such as the City. Under Chapter 9 of the Bankruptcy Code and in certain circumstances described therein, an eligible entity may be authorized to initiate a case under Chapter 9 without prior notice or consent of its creditors, which proceedings may result in material and adverse modification or alteration of the rights of its secured and unsecured creditors, including holders of its bonds and notes. FISCAL EMERGENCY ACT In 1979, the Ohio General Assembly enacted Chapter 118 of the Revised Code of Ohio (the “Fiscal Emergency Act” or the “Act”) providing methods for dealing with fiscal emergencies of municipal corporations in Ohio. The Act applies only to those municipal corporations whose financial condition is determined to constitute a fiscal emergency condition.

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A few municipal corporations in the State have been determined to be in a state of fiscal emergency, and accordingly are subject to the Act. Such conditions, generally, include (i) default on any debt obligation for more than thirty days, (ii) failure, for lack of funds, to meet payrolls for a period of thirty days or beyond permitted extensions, (iii) a reallocation of millage within the ten mill limit to the municipality from its overlapping political subdivisions, (iv) excessive past due accounts payable from (a) the general fund and (b) all funds, (v) excessive deficits, and (vi) insufficient cash and investments to support fund balances. If a fiscal emergency condition is determined to exist, the municipality is subject to State oversight through a Financial Planning and Supervision Commission (the “Commission”) which is assisted by certified public accountants engaged by the Commission, and must develop and submit a detailed financial plan for approval or rejection by the Commission showing the actions to be taken by the municipality to eliminate existing fiscal emergency conditions, avoid future fiscal emergency conditions, and restore the municipality’s ability to market long-term debt obligations under generally applicable State laws. The Commission must approve the amount and purpose of any issue of debt obligations by a municipality subject to the Act, must require the municipality to establish monthly levels of expenditures and encumbrances consistent with the financial plan and a balanced budget, must monitor such monthly levels and require justification to substantiate any departure from an approved level, must disapprove an issuance of debt obligations by a covered issuer if: (i) the issuance would impede the purposes of the financial plan or be inconsistent with the financial plan or the Fiscal Emergency Act; (ii) debt limits would be exceeded; (iii) the ability of overlapping subdivisions to issue unvoted general obligation debt would be impaired; or (iv) their issuance would be likely to lead to the reallocation of minimum levies of other political subdivisions. Expenditures may not be made contrary to an approved financial plan. The Fiscal Emergency Act provides, among other requirements and provisions, that a municipality subject to such Act: must develop an effective financial accounting and reporting system; must have budgets, appropriations and expenditures consistent with the purposes of the financial plan; may issue local government funds notes, payable solely from the municipality’s share of the local government fund pursuant to restrictions imposed by the Act; may include certain extraordinary covenants in its debt obligations, including a state pledge not to repeal the Act or to impair the municipality’s power to fulfill its obligations to the holders of its debt; and may issue current revenue notes and advanced tax payment notes pursuant to the authorization and subject to the restrictions of the Act. The City’s Finance Director has reviewed the applicable portions of the Act and has records pertaining to the City’s circumstances with respect to the Act. The Finance Director, based upon his understanding of the Act, is of the opinion that, with respect to the City, no circumstances or conditions currently exist or that with the issuance of the Notes will exist that would cause a fiscal emergency condition to be determined to exist under the Act. TAX MATTERS In the opinion of Calfee, Halter & Griswold LLP, Bond Counsel, under existing law and assuming compliance with certain covenants, (i) interest on the Tax-Exempt Notes is

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excludable from gross income for federal income tax purposes under Section 103(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and is not treated as an item of tax preference under Section 57 of the Code for purposes of the alternative minimum tax imposed on individuals and corporations and (ii) interest on the Notes, any transfer thereof, and any profit on their sale, exchange, transfer or other disposition is exempt from the Ohio personal income tax, the Ohio commercial activity tax, the net income base of the Ohio corporate franchise tax, and income taxes imposed by municipalities and other political subdivisions in Ohio. The interest on the Taxable Notes is not excluded from gross income for federal income tax purposes. An opinion to those effects will be included in the approving legal opinion. Bond Counsel will express no opinion regarding other federal income tax consequences resulting from the receipt of accrual of interest on the Notes. The opinion on tax matters will be based on and will assume the accuracy of certain representations and certifications, and continuing compliance with certain covenants of the City to be contained in the transcript of proceedings and which are intended to evidence and assure the foregoing, including that the Tax-Exempt Notes are and will remain obligations the interest on which is excludable from gross income for federal income tax purposes. Bond Counsel will not independently verify the accuracy of the certifications and representations made by the City. The Code prescribes a number of qualifications and conditions for the interest on state and local government obligations to be and remain excludable from gross income for federal income tax purposes, some of which, including provisions for potential payments by the City to the federal government, require future or continued compliance after issuance of the obligations in order for the interest to be and continue to be so excludable from the date of issuance. Noncompliance with these requirements could cause the interest on the Tax-Exempt Notes to be included in gross income for federal income tax purposes, in some cases retroactively to the date of their issuance. The City has covenanted in the Note Legislation to take such actions which may be required for the interest on the Tax-Exempt Notes to be and remain excludable from gross income for federal income tax purposes, and not to take any actions which would adversely affect that exclusion. Under Code provisions applicable to corporations (as defined for federal income tax purposes), a portion of the excess of adjusted current earnings (which includes interest on all tax-exempt bonds, including the Tax-Exempt Notes) over other alternative minimum taxable income, is included in alternative minimum taxable income which may be subject to a corporate alternative minimum tax. In addition, that interest may be subject to the branch profits tax imposed under Section 884 of the Code on certain foreign corporations doing business in the United States and to the tax imposed under Section 1375 of the Code on excess net passive income of certain S corporations. Under the Code, the exclusion of interest from gross income for federal income tax purposes can have certain adverse federal income tax consequences on items of income, deductions or credit for certain taxpayers, including financial institutions, certain insurance companies, recipients of Social Security and Railroad Retirement benefits, those that are deemed to incur or continue indebtedness to acquire or carry tax-exempt obligations, and individuals otherwise eligible for the earned income credit. The applicability and extent of these or other tax

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consequences will depend upon the particular tax status or other items of the owner of the TaxExempt Notes. Bond Counsel will express no opinion regarding such consequences. From time to time, legislative proposals are pending in Congress or the Ohio legislature that would, if enacted, alter or amend one or more of the federal or state tax matters discussed herein in certain respects or that would adversely affect the market value of the Notes. In addition, federal or state judicial decisions may be rendered, or administrative actions taken by taxing authorities, which could also impact the federal or state tax matters discussed herein or that would adversely affect the market value of the Notes. Neither the form nor enactment of any of such proposals can be predicted, and there can be no assurance that any such proposals, or any judicial decisions or administrative actions, will not apply, either retroactively or prospectively, to the Notes. Prospective purchasers of the Notes should consult their own tax advisers regarding pending and proposed federal and state tax legislation and other court proceedings, and prospective purchasers of the Notes at other than their original issuance at the respective prices on the inside cover page of this Official Statement should also consult their own tax advisers regarding other tax considerations such as the consequences of market discount, as to all of which Bond Counsel expresses no opinion. The discussion of tax matters in this Official Statement applies on in the case of purchasers of Notes at their original issuance. It does not address any other tax consequences, such as, among others, the consequence of the existence of any market discount to subsequent purchasers of the Tax-Exempt Notes. The foregoing is not intended as a detailed or comprehensive description of all possible tax consequences of purchasing or holding the Tax-Exempt Notes. Persons considering the purchase of the Tax-Exempt Notes should consult with their tax advisors as to the consequences of buying or holding the Tax-Exempt Notes in their particular circumstances.

LEGAL MATTERS Legal matters incident to the issuance of the Notes are subject to the approving legal opinion of Calfee, Halter & Griswold LLP, Cleveland, Ohio, Bond Counsel. A signed copy of such opinion, dated and speaking as of the date of original delivery of the Notes to the original purchasers, will be delivered to the original purchasers at the time of such original delivery. The anticipated form of such opinion is included as Exhibit 1 hereto. Bond Counsel has performed certain functions to assist the City in the preparation of this Official Statement. The engagement of the firm is limited generally to the preparation of certain of the documents contained in the transcript of proceedings, an examination of such transcript of proceedings and the law incident to rendering the approving legal opinion referred to above, and the rendering of such approving legal opinion. Except as described under this caption, Bond Counsel has not been engaged to confirm or verify, and assumes no responsibility for and expresses and will express no opinion as to, the accuracy, completeness or fairness of any

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of the statements in this Official Statement, including the Appendices hereto (other than Exhibit 1, which sets forth a draft of said firm’s approving legal opinion), or in any reports, financial information, offering or disclosure documents or other information relating to the City or the Notes that may be prepared or made available by the City or others to the purchasers or holders of the Notes or to the investing community at large. In its capacity as Bond Counsel, however, the firm has reviewed the information in this Official Statement under this caption and the description of the Notes and the security therefor and of the direct and indirect debt and tax limitations contained on the cover page and under the following captions: “The Notes,” “Authorization,” “Purpose of Notes,” “Accrued Interest - Premium,” “Security and Sources of Payment For the Notes,” “City Debt and Other Long Term Obligations,” “Statutory Direct Debt Limitations,” “Indirect Debt Limitation,” “Ten Mill Unvoted Tax Limitation,” “Bond Anticipation Notes,” “Current and Past Debt Outstanding” and “Bankruptcy and Fiscal Emergency Act.” Bond Counsel has also reviewed the information in this Official Statement under the following captions, but only with respect to the discussion of the Ohio Constitution, laws of the State and the Charter of the City: “Governmental Organization,” “Financial Administration,” “Pension Obligations,” and “Financial Factors.” RATINGS Moody’s Investors Service, Inc. (“Moody’s”) has assigned a rating of _____ to the Notes. Moody’s has assigned a rating of _____ to the City’s general obligation bonds. These ratings reflect only the views of the rating service at the time such rating was issued and any explanation concerning the significance of such a rating must be obtained from the rating agency. Certain information and materials concerning the City and overlapping agencies and entities were furnished to such agency by the City and others. If in its judgment circumstances so warrant, the rating agency may raise, lower or withdraw its rating. Should a downward change or withdrawal of the rating occur, it could have an adverse effect on the resale price of the Notes. UNDERWRITING KeyBanc Capital Markets Inc. (the “Underwriter”), has agreed to purchase the Notes from the City at a price of 100% of their face amount, plus accrued interest, if any, from the date of the Notes. The Underwriter is purchasing the Notes for purposes of resale. Based upon the Underwriter’s sale of all the Notes at the public offering price set forth on the cover page hereof, the gross spread (including certain costs of issuance to be paid by the Underwriter) to the Underwriter is $_________. The public offering price of the Notes may be changed from time to time by the Underwriter, and the Underwriter may allow a concession from the public offering price to certain dealers. None of the Notes purchased by the Underwriter will be delivered by the City to the Underwriter unless all of the Notes are so delivered.

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CONCLUDING STATEMENT Any quotations from and summaries and explanations of the Ohio Constitution and laws of the State do not purport to be complete, and reference is made to the pertinent provisions of the Ohio Constitution and the Ohio Revised Code for their complete provisions. To the extent that any statements made in this Official Statement involve matters of opinion or estimates, whether or not expressly stated to be such, such statements are made as such and not as representations of fact or certainty, and no representation is made that any of such statements will be realized. Information herein has been derived by the City from official and other sources and is believed by the City to be reliable, but such information other than that obtained from official records of the City has not been independently confirmed or verified by the City and its accuracy is not guaranteed. Neither this Official Statement nor any statement which may have been made orally or in writing is to be construed as or as part of a contract with the original purchasers or holders of the Notes. The execution and delivery of this Official Statement have been authorized by an Ordinance of the City’s Council passed on January 12, 2009. This Official Statement has been duly prepared and delivered by the City and executed for and on behalf of the City by its Finance Director. CITY OF SOUTH EUCLID, OHIO Dated: January ___, 2009

By: Finance Director

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APPENDIX A FINANCIAL STATEMENT FOR MUNICIPALITY The undersigned, being the officer of the municipality of South Euclid, Ohio, having charge of its accounts, hereby certifies that the following statements concerning the finances of the municipality are true and correct: 1.

2.

3.

Tax valuation of all the property subject to ad valorem taxation in the municipality as shown by the tax duplicate for the collection year 2009, which is the latest tax duplicate at the date hereof. (a) Aggregate permitted net indebtedness incurred with and without a vote of the electors (10 1/2% of tax valuation) (b) Aggregate permitted net indebtedness incurred without a vote of the electors (5 1/2% of tax valuation) Total par value of all outstanding securities, including the amount of securities apportioned to another municipality as a result of the acquisition of territory, but excluding the amount of securities apportioned to another municipality as a result of the loss of territory and the payment or reimbursement obligations of the subdivision under credit enhancement facilities in relation to outstanding securities, plus the present issue of $20,000,000**

48,310,518 25,305,509

29,369,994 (21,800,000) **

Exempt securities included in item 2. (a) Special assessments (b) Securities issued with covenant to appropriate municipal income tax to pay debt charges (c)

$460,100,170

270,000 20,000,000 * (20,000,000) *

Special Obligation debt

1,800,000 (1,800,000) 21,070,000 (21,800,000) *

4.

5.

Total voted and unvoted securities subject to 10-1/2% overall debt limitation [2 minus 3]

7,299,994

Available amount of total voted and unvoted net indebtedness [1(a) minus 4]

6.

Unvoted securities included in Item 4

7.

Available amount of unvoted net indebtedness [1(b) minus 6]

41,010,524 6,740,000 18,565,509

Dated: January 26, 2009 /s/ Joseph G. Filippo Finance Director * Amounts in parentheses represent the aggregate amount of anticipatory securities included in the totals. **Preliminary, subject to change.

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APPENDIX C OUTSTANDING GENERAL OBLIGATION BOND ANTICIPATION NOTES $1,800,000 Housing Development Special Obligation Note, Series 2008



$20,000,000∗ consisting of Taxable Real Estate Acquisition and Urban Redevelopment General Obligation Bond Anticipation Notes, Series 2009A and $_________ Real Estate Acquisition and Urban Redevelopment General Obligation Bond Anticipation Notes, Series 2009B

Preliminary, subject to change.

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APPENDIX D PROJECTED DEBT SERVICE - GENERAL OBLIGATION BONDS AND NOTES General Obligation Notes Due Date

Principal

December 17, 2009 January 25, 2010

Interest

$ 1,800,000 20,000,0001

Total

$59,400 ________

$1,859,400 _________

General Obligation Bonds

1

Year

Principal Due December 1

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

$1,105,000 663,586 681,408 675,000 705,000 730,000 705,000 740,000 765,000 800,000

Interest Due June 1 $132,197.00 382,089.00 372,988.00 90,382.00 78,794.50 66,312.00 53,417.00 41,519.50 28,570.00 14,800.00

Preliminary, subject to change.

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Interest Due December 1 $132,197.00 382,089.00 372,988.00 90,382.00 78,794.50 66,312.00 53,417.00 41,519.50 28,570.00 14,800.00

Total $1,369,394 1,427,764 1,427,384 855,764 862,589 862,624 811,834 823,039 822,140 829,600

APPENDIX E

GENERAL PURPOSE FINANCIAL STATEMENTS FOR 2007 (AUDITED)

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EXHIBIT 1-A

DRAFT OF APPROVING LEGAL OPINION OF BOND COUNSEL January 26, 2009 KeyBanc Capital Markets Inc. Cleveland, Ohio We have acted as bond counsel to the City of South Euclid, Ohio (the “City”) and in such capacity have examined the transcript of proceedings relating to the issuance and sale of $_________ Taxable Real Estate Acquisition and Urban Redevelopment Bond Anticipation Notes, Series 2009A of the City dated January 26, 2009 (the “Taxable Notes”). In addition, we have examined the law under authority of which the Notes are issued and such other materials as we have deemed necessary to render this opinion. Regarding questions of fact material to our opinion, we have relied on the certified proceedings and other certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation. On the basis of these examinations, we are of the opinion that, under existing law, the Taxable Notes constitute valid and binding general obligations of the City, except that the rights of the owners of the Taxable Notes and the enforceability of the Taxable Notes may be limited by the application of bankruptcy, insolvency, reorganization, moratorium and other similar laws with respect to creditors’ rights generally, and by the application of general principles of equity. We are also of the opinion that the principal of and interest on the Taxable Notes, unless paid from other sources, are to be paid from the proceeds of the levy of ad valorem taxes by the City on all taxable property in the City, within the limitations prescribed by law. We are further of the opinion that under existing law the interest on the Taxable Notes is not excluded from gross income for federal income tax purposes under Section 103(a) of the Internal Revenue Code of 1986, as amended (the “Code”). Interest on, any transfer of, and any profit made on the sale, exchange or other disposition of, the Taxable Notes are exempt from the Ohio corporation franchise tax (to the extent computed on the net income basis), the Ohio personal income tax, and income taxes imposed by municipalities and other political subdivisions in Ohio. Interest on the Taxable Notes, as is the case with most other forms of interest on debt obligations, is not subject to the Ohio commercial activity tax imposed under Section 5751 of the Ohio Revised Code. We express no opinion regarding other tax consequences caused by the receipt or accrual of interest on the Taxable Notes.

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EXH. 1-1-A

KeyBanc Capital Markets Inc. January 26, 2009 Page 2 This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur. Respectfully submitted, CALFEE, HALTER & GRISWOLD LLP

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EXHIBIT 1-B

DRAFT OF APPROVING LEGAL OPINION OF BOND COUNSEL January 26, 2009 KeyBanc Capital Markets Inc. Cleveland, Ohio We have acted as bond counsel to the City of South Euclid, Ohio (the “City”) and in such capacity have examined the transcript of proceedings relating to the issuance and sale of $_________ Real Estate Acquisition and Urban Redevelopment Bond Anticipation Notes, Series 2009B of the City dated January 26, 2009 (the “Tax-Exempt Notes”). In addition, we have examined the law under authority of which the Notes are issued and such other materials as we have deemed necessary to render this opinion. Regarding questions of fact material to our opinion, we have relied on the certified proceedings and other certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation. On the basis of these examinations, we are of the opinion that, under existing law, the Tax-Exempt Notes constitute valid and binding general obligations of the City, except that the rights of the owners of the Notes and the enforceability of the Tax-Exempt Notes may be limited by the application of bankruptcy, insolvency, reorganization, moratorium and other similar laws with respect to creditors’ rights generally, and by the application of general principles of equity. We are also of the opinion that the principal of and interest on the TaxExempt Notes, unless paid from other sources, are to be paid from the proceeds of the levy of ad valorem taxes by the City on all taxable property in the City, within the limitations prescribed by law. We are further of the opinion that under existing law the interest on the TaxExempt Notes is excluded from gross income for federal income tax purposes under Section 103(a) of the Internal Revenue Code of 1986, as amended (the “Code”) and is not treated as an item of tax preference under Section 57 of the Code for purposes of the alternative minimum tax imposed on individuals and corporations. Interest on, any transfer of, and any profit made on the sale, exchange or other disposition of, the Tax-Exempt Notes are exempt from the Ohio personal income tax, the Ohio corporation franchise tax (to the extent computed on the net income basis), and from income taxes imposed by municipalities and other political subdivisions in Ohio. (Interest on the Tax-Exempt Notes, as is the case with most other forms of interest on debt

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EXH. 1-1-B

KeyBanc Capital Markets Inc. January 26, 2009 Page 2 obligations, is not subject to the Ohio commercial activity tax imposed under Section 5751 of the Ohio Revised Code). We express no opinion regarding other tax consequences caused by the receipt or accrual of interest on the Tax-Exempt Notes. Portions of the interest on the Tax-Exempt Notes earned by corporations (as defined for federal income tax purposes) may be subject to a corporate alternative minimum tax that is imposed under the Code on a portion of the excess of the corporation’s adjusted current earnings over its other alternative minimum taxable income. In addition, that interest may be subject to the branch profits tax imposed under Section 884 of the Code on certain foreign corporations doing business in the United States and to the tax imposed on the excess net passive income of certain S corporations by Section 1375 of the Code. This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur. Respectfully submitted, CALFEE, HALTER & GRISWOLD LLP

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