PRELIMINARY OFFICIAL STATEMENT DATED JUNE 18, 2020 … · 2020. 6. 19. · The information contained in this Preliminary Official Statement, including the cover page and Exhibits

PRELIMINARY OFFICIAL STATEMENT DATED JUNE 18, 2020

NEW ISSUE-BOOK-ENTRY ONLY RATING: Moody’s "A1" (See Rating herein)

In the opinion of Bond Counsel, the interest on the Series 2020 Bonds is, under existing law and regulations, excludable from gross income of the recipients thereof for federal income tax purposes, assuming continuing compliance by the Authority with covenants to meet the requirements of the Internal Revenue Code of 1986, as amended, and is not an item of tax preference for purposes of the federal alternative minimum tax. Additionally, in the opinion of Bond Counsel, the interest on the Series 2020 Bonds is exempt from State of Oklahoma income taxation under present law. See Tax Exemption herein.

$9,800,000* THE SALLISAW MUNICIPAL AUTHORITY

Sales Tax Revenue and Refunding Bonds Series 2020

Dated: July 1, 2020 Due: January 1 (as shown on inside cover) The Sallisaw Municipal Authority Sales Tax Revenue and Refunding Bonds, Series 2020 (the "Series 2020 Bonds") are being issued by The Sallisaw Municipal Authority (the “Authority”), a public trust created and existing under the laws of the State of Oklahoma (the “State”), particularly but not exclusively Title 60, Oklahoma Statutes 2019 Supplement, Sections 176-180.4, inclusive, by which the Authority is designated as an agency of the State and regularly constituted authority of the Beneficiary, the City of Sallisaw (the “City”), Oklahoma. The Series 2020 Bonds are being issued for the purpose of currently refunding certain outstanding indebtedness of the Authority and to fund the Project (as defined herein).

The Series 2020 Bonds are not a debt of the City, nor of the State, nor personal obligations of the Trustees of the Authority but are limited and special obligations payable solely out of revenues pledged for their payment as outlined in the paragraph entitled Security herein and as described in the Bond Indenture dated as of July 1, 2020 (the AIndenture@), by and between the Authority and BancFirst, Oklahoma City, Oklahoma (the ATrustee@ or ABank@). The Series 2020 Bonds are secured by a first lien upon proceeds of the 1¢ Sales Tax, as defined hereinafter, collected by the City and appropriated by the Authority as provided in the Sales Tax Agreement. Additionally, the Series 2020 Bonds are secured by interests in a Projects Agreement pledged to the Trustee under the Bond Indenture as security. See “Security” herein. The Authority has no taxing power.

Semi-annual interest is payable January 1 and July 1 beginning January 1, 2021. BancFirst, Oklahoma City, Oklahoma, is the Trustee Bank and the Registrar for the issue. The Series 2020 Bonds will be issued and registered in the name of Cede & Co., as nominee of the Depository Trust Company, New York, New York (“DTC”), to which all payments of principal and interest will be made. Purchasers will acquire beneficial interests in the Series 2020 Bonds, in principal amounts of $5,000 and integral multiples thereof, by book-entry only. Purchasers of the Series 2020 Bonds will not receive physical delivery of bond certificates. The Series 2020 Bonds will not be transferable or exchangeable, except for transfers to another nominee of DTC or otherwise as described herein. See “BOOK-ENTRY-ONLY-SYSTEM” herein.

The Series 2020 Bonds maturing on January 1, 20 , and thereafter shall be subject to optional redemption prior to maturity as described herein. See “REDEMPTION PROVISIONS” herein.

The Series 2020 Bonds are offered when, as and if issued and received by the original purchaser, subject to prior sale, to withdrawal or modifications of the offer without any notice, and to the approval of legality of the Series 2020 Bonds by Johanning & Byrom, PLLC, Bond Counsel. Certain legal matters will be passed upon by John Robert Montgomery, Attorney at Law, Sallisaw, Oklahoma, for the Authority. Certain legal matters will be passed upon by the Floyd Law Firm, P.C., Norman, Oklahoma, for the Underwriter. It is expected that the Series 2020 Bonds in definitive form will be available for delivery to the Underwriter in Oklahoma City, Oklahoma, on or about July 1, 2020.

*Preliminary, subject to change.

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THE SALLISAW MUNICIPAL AUTHORITY Sales Tax Revenue and Refunding Bonds

Series 2020

MATURITY SCHEDULE $9,800,000*

BASE DUE CUSIP(1) DATE AMOUNT RATE PRICE

1-1-2021 $ % % 1-1-2022 $ % % 1-1-2023 $ % % 1-1-2024 $ % % 1-1-2025 $ % % 1-1-2026 $ % % 1-1-2027 $ % % 1-1-2028 $ % % 1-1-2029 $ % % 1-1-2030 $ % % 1-1-2031 $ % % 1-1-2033 $ % % 1-1-2034 $ % % 1-1-2035 $ % % 1-1-2036 $ % % 1-1-2037 $ % % 1-1-2038 $ % % 1-1-2040 $ % %

1CUSIP numbers have been assigned to this issue by CUSIP Global Services, which is managed on behalf of the American Bankers Association by S&P Global Market Intelligence, a part of S&P Global Inc., and are included solely for the convenience of the purchasers of the Bonds. None of the Authority, the Trustee, the Financial Advisor or the Underwriter shall be responsible for the selection or correctness of the CUSIP numbers shown herein.

*Preliminary, subject to change.

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THE SALLISAW MUNICIPAL AUTHORITY

TRUSTEES

Ernie Martens Chairman Ronnie Lowe Trustee Philip Gay Trustee Julian Mendiola Trustee Shannon Vann Trustee

MAYOR AND BOARD OF CITY COMMISSIONERS OF THE

CITY OF SALLISAW

Ernie Martens Mayor Ronnie Lowe Commissioner Philip Gay Commissioner Julian Mendiola Commissioner Shannon Van Commissioner

PROFESSIONAL STAFF

Keith Skelton City Manager Dianna Davis City Clerk-Treasurer

AUTHORITY COUNSEL John Robert Montgomery, Attorney at Law

Sallisaw, Oklahoma

BOND COUNSEL

Johanning & Byrom, PLLC Oklahoma City, Oklahoma

UNDERWRITER

D.A. Davidson & Co. Tulsa, Oklahoma

UNDERWRITER’S COUNSEL

Floyd Law Firm, P.C.

FINANCIAL ADVISOR The Baker Group LP

Oklahoma City, Oklahoma

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REGARDING USE OF THE PRELIMINARY OFFICIAL STATEMENT

The Series 2020 Bonds are offered only by means of this Preliminary Official Statement. This Preliminary Official Statement does not constitute an offering of any security other than the Series 2020 Bonds specifically offered hereby. It does not constitute an offer to sell or a solicitation of an offer to buy the Series 2020 Bonds in any state or jurisdiction to any person to whom it is unlawful to make such offer, solicitation or sale, and no dealer, broker, salesman or other person has been authorized to make such unlawful offer, solicitation or sale. No dealer, broker, salesman or other person has been authorized to give any information or to make any representations other than those contained in this Preliminary Official Statement in connection with the offering of the Series 2020 Bonds and, if given or made, such other information or representations must not be relied upon.

The Series 2020 Bonds will not be registered under the Securities Act of 1933, as amended,

pursuant to an exemption under Section 3(a) thereof, and the Authority does not intend to list the Series 2020 Bonds on any stock or other securities exchange. The U.S. Securities and Exchange Commission has not passed upon the accuracy or adequacy of this Preliminary Official Statement or passed upon or endorsed the merits of this offering of the Series 2020 Bonds. With respect to the various States in which the Series 2020 Bonds may be offered, no attorney general, state official, state agency or bureau, or other state or local governmental entity has passed upon the accuracy or adequacy of this Preliminary Official Statement or passed on or endorsed the merits of this offering of Series 2020 Bonds.

All references made herein to the Series 2020 Bonds are qualified in their entirety by reference

to the Indenture. All references made herein to the Indenture are qualified in their entirety by reference to such complete documents, original counterparts of which are on file in the offices of the Authority, 115 E. Choctaw, Sallisaw, OK 74955-0525, and the corporate trust offices of BancFirst, 101 N. Broadway, Suite 900, Oklahoma City, OK 73102.

The information contained in this Preliminary Official Statement, including the cover page

and Exhibits hereto, has been obtained from the Authority and the City and other sources which are deemed to be reliable. No representation or warranty is made by the Underwriter, however, as to the accuracy or completeness of such information and nothing contained in this Preliminary Official Statement is or shall be relied upon as a promise or representation by the Underwriter. This Preliminary Official Statement is submitted in connection with the sale of securities as referred to herein and may not be reproduced or used in whole or in part for any other purpose. The delivery of this Preliminary Official Statement does not at any time imply that information herein is correct as of any time subsequent to its date. This Preliminary Official Statement is not to be construed as a contract with the purchasers of the Series 2020 Bonds.

For purposes of compliance with Rule 15c2-12(b)(1) of the U. S. Securities and Exchange

Commission, as amended, and in effect on the date hereof, this Preliminary Official Statement constitutes an official statement of the Authority that has been deemed final by the Authority as of the date hereof except for the omission of no more than the information permitted by Rule 15c2-12.

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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2020 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE SERIES 2020 BONDS TO CERTAIN DEALERS AND CERTAIN DEALER BANKS AND BANKS ACTING AS AGENTS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.

THE UNDERWRITER HAS PROVIDED THE FOLLOWING SENTENCE FOR INCLUSION IN THIS

PRELIMINARY OFFICIAL STATEMENT. THE UNDERWRITER HAS REVIEWED THE INFORMATION IN THIS PRELIMINARY OFFICIAL STATEMENT IN ACCORDANCE WITH, AND AS PART OF, THEIR RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND CIRCUMSTANCES OF THIS TRANSACTION, BUT THE UNDERWRITER DOES NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION.

THIS PRELIMINARY OFFICIAL STATEMENT CONTAINS “FORWARD-LOOKING” STATEMENTS

WITHIN THE MEANING OF SECTION 21E OF THE U.S. SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS MAY INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE AND ACHIEVEMENTS TO BE DIFFERENT FROM THE FUTURE RESULTS, PERFORMANCE AND ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED THAT THE ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS.

IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN

EXAMINATION OF THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNAUTHORIZED AND MAY CONSTITUTE A CRIMINAL OFFENSE.

All information contained in this Preliminary Official Statement, including the schedule and

exhibits attached hereto, is subject, in all respects, to the complete body of information contained in the original sources thereof and no guaranty, warranty, or other representation is made concerning the accuracy or completeness of the information herein. In particular, no opinion or representation is rendered as to whether any projection will approximate actual results, and all opinions, estimates and assumptions, whether or not expressly identified as such, should not be considered statements of fact.

None of the Authority, the Underwriter, or the Financial Advisor makes any representation or

warranty with respect to the information contained in this Preliminary Official Statement regarding DTC (defined herein) or its Book-Entry-Only System, as such information has been provided by DTC.

For additional information or copies of this prospectus, contact The Sallisaw Municipal

Authority, (918) 775-6241, 115 E. Choctaw, Sallisaw, Oklahoma 74955-0525 or The Baker Group LP, Financial Advisor, 1601 Northwest Expressway, 20th Floor, Oklahoma City, Oklahoma 73118, (405) 415-7215.

THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.

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TABLE OF CONTENTS THE AUTHORITY ...... ........................................................................................................................................... 2 TRUSTEES ............................................................................................................................................................... 2 PURPOSE OF ISSUE ............................................................................................................................................... 3 PROJECT .................................................................................................................................................................. 3 RISK FACTORS AND CERTAIN CONSIDERATIONS FOR BONDHOLDERS ................................................ 3 TAX EXEMPTION .................................................................................................................................................. 6 REQUIRED REBATE TO THE UNITED STATES ............................................................................................... 7 REDEMPTION PROVISIONS ................................................................................................................................ 7 BOOK-ENTRY ONLY SYSTEM ............................................................................................................................ 9 SOURCE AND APPLICATION OF PROCEEDS .................................................................................................. 11 OUTSTANDING INDEBTEDNESS OF THE AUTHORITY ................................................................................ 12 SECURITY ...... ............ ........................................................................................................................................... 12 Sales Tax .......... ........................................................................................................................................... 12 Projects Agreement ...................................................................................................................................... 12 SALES TAX COVERAGE ...................................................................................................................................... 13 THE DEPOSITORY ..... ........................................................................................................................................... 14 THE TRUSTEE BANK ........................................................................................................................................... 14 THE REGISTRAR ........ ........................................................................................................................................... 14 FLOW OF FUNDS ................................................................................................................................................... 14 ADDITIONAL BONDS ........................................................................................................................................... 15 BOND COVENANTS .............................................................................................................................................. 15 DEFEASANCE ....................................................................................................................................................... 17 DEFAULTS AND REMEDIES ............................................................................................................................... 18NO LITIGATION ..................................................................................................................................................... 18 RATING .......... ....................................................................................................................................................... 18 UNDERWRITING ................................................................................................................................................... 18 FINANCIAL ADVISOR .......................................................................................................................................... 19 CONTINUING DISCLOSURE ................................................................................................................................ 19 DEEMED FINAL ..................................................................................................................................................... 20 MISCELLANEOUS ................................................................................................................................................. 21 APPROVAL OF PRELIMINARY OFFICIAL STATEMENT ............................................................................... 21

Exhibits A Amortization Schedule B Economic Indices of Growth C Sales Tax Agreement D City of Sallisaw, Ok - Annual Financial Report - FYE June 30, 2019 E Projects Agreement F Form of Opinion of Bond Counsel G Continuing Disclosure Agreement

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THE AUTHORITY

The Sallisaw Municipal Authority (the "Authority"), a public trust, is a statutory

instrumentality of the City of Sallisaw, Oklahoma (the "City" or "Beneficiary"), and an agency of the State of Oklahoma (the “State”). The Authority was created under provisions of the Oklahoma Statutes by a Declaration of Trust dated March 24, 1988, as supplemented, to furnish the Beneficiary with services and facilities for the conservation and implementation of the public welfare and for the protection and promotion of public health and for other purposes proper for the City itself to furnish. The City is the sole beneficiary of the Authority and receives all net income not needed for Authority purposes. The Series 2020 Bonds will be secured by a pledge of the 1¢ Sales Tax and also secured by interests in a Projects Agreement pledged to the Trustee under the Bond Indenture as security. See “Security” herein. The Authority is empowered by the Declaration of Trust to acquire, construct, maintain and operate the aforesaid facilities for the City, and borrow money by mortgage, pledge, or other encumbrance of the Trust Estate or its revenues including the issuance of bonds or notes. All properties held by the Authority for the benefit of the City will become the property of the City when the Authority's debts are extinguished. The Authority has the same duration as the Beneficiary, or until its purposes shall have been fulfilled, or until it shall have been terminated by mutual agreement and with the consent of the owners of any outstanding indebtedness. The validity of Trusts of the nature of the Authority has been approved by the Supreme Court of the State. THE AUTHORITY HAS NO TAXING POWER.

TRUSTEES

The Trustees of the Authority are the same persons who are currently the members of the City

Council of the City and as such, they continue to hold office until their successors are elected to the governing board of the City, and qualify for office. The Mayor of the City is the Chairman of the Trustees of the Authority; and, the City Clerk is the Secretary of the Trustees. Present Trustees and employees of the Authority are:

Ernie Martens Chairman Ronnie Lowe Trustee Philip Gay Trustee Julian Mendiola Trustee Shannon Vann Trustee

Keith Skelton City Manager John Robert Montgomery City Attorney Dianna Davis City Clerk-Treasurer

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PURPOSE OF ISSUE

The Series 2020 Bonds will be issued for purposes in providing (i) funds for various

capital improvements of the Authority and the City hereinafter defined as the Project (the “Project”)(see “PROJECT” herein); (ii) funds to currently refund the Authority’s Series 2009 Revenue Bonds (the “Series 2009 Bonds”), dated December 1, 2009; and (iii) payment for all costs of issuance on the Series 2020 Bonds.

PROJECT

The Project consists of the following capital improvements:

1. Extending the Authority’s water and sewer lines to portions of the community currently

not being served by those systems.

2. Providing an automated meter reader system for the Authority’s water and electric systems.

3. Rehabilitating and improving the Authority’s wastewater treatment plant.

4. Extending a 3-phase electric line and wastewater leachate line to the Authority’s landfill.

5. Rebuilding an electrical substation for the Authority’s electric system.

RISK FACTORS AND CERTAIN CONSIDERATIONS FOR BONDHOLDERS

The following is a summary, which does not purport to be comprehensive or definitive,

of certain risk factors and considerations relating to the purchase of the Bonds. A full review, however, should be made of the entire Preliminary Official Statement in connection with any decision to purchase Bonds.

General Risks

THE PURCHASE OF THE BONDS IS SUBJECT TO CERTAIN RISKS. EACH

PROSPECTIVE INVESTOR IN THE BONDS IS ENCOURAGED TO READ THIS PRELIMINARY OFFICIAL STATEMENT IN ITS ENTIRETY, INCLUDING THE APPENDIX HERETO AND DOCUMENTS REFERENCED HEREIN THAT CAN BE PROVIDED UPON REQUEST. PARTICULAR ATTENTION SHOULD BE GIVEN TO THE FACTORS DESCRIBED BELOW WHICH, AMONG OTHERS, COULD AFFECT THE PAYMENT OF THE PRINCIPAL OF AND INTEREST ON THE BONDS, AND COULD ALSO AFFECT THE MARKET PRICE OF THE BONDS TO AN EXTENT THAT CANNOT BE DETERMINED. THE FOLLOWING LIST OF RISK FACTORS IS NOT INTENDED TO PROVIDE AN EXHAUSTIVE LIST OF THE GENERAL OR SPECIFIC

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RISKS RELATING TO THE PURCHASE OF THE BONDS. ADDITIONAL RISK FACTORS RELATING TO AN INVESTMENT IN THE BONDS ARE DESCRIBED THROUGHOUT THIS PRELIMINARY OFFICIAL STATEMENT, INCLUDING THE APPENDICES HERETO, WHETHER OR NOT SPECIFICALLY DESIGNATED AS RISK FACTORS.

Limited Security

The Bonds are special, limited obligations of the Authority payable from the 1¢ Sales

Tax and additionally, secured by a Projects Agreement of the Authority, as described in “SECURITY”.

Factors Affecting Ability to Pay Debt - Not General Obligations of the Authority or the Beneficiary

The ability of the Authority to pay debt service on the Bonds as due is subject to various

factors that are beyond the control of the Authority, including the general economic conditions of the service area. The Bonds are not general obligations of the Authority or the Beneficiary; therefore, the ability of the Authority to pay debt service on the Bonds is entirely dependent upon the collection of sufficient revenues solely from the 1¢ Sales Tax and a Projects Agreement to allow the Authority to meet the debt service requirements. The Authority is under no obligation to use revenues or funds from any other source to pay the debt service on the Bonds. THE AUTHORITY HAS NO TAXING POWER.

Secondary Market Not Established

Prices of municipal bonds traded by the Underwriter in the secondary market, if any are

subject to adjustment upward and downward in response to changes in the credit markets and changes in the performance of the issuers of such bonds. From time to time, it may be necessary for the Underwriter to suspend indefinitely secondary market trading in selected issues of municipal bonds as a result of the financial condition or market position of the Underwriter, prevailing market conditions, lack of adequate current financial information about the Issuer, whether or not the subject bonds are in default as to principal and interest payments, and other factors which, in the opinion of the Underwriter, may give rise to uncertainty concerning prudent secondary market practices. Municipal bonds are generally viewed as long-term investments, subject to material

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unforeseen changes in the investor’s circumstances and may require commitment of the investors funds for an indefinite period of time, perhaps until maturity.

Enforcement of Indenture Restricted

Enforcement of the remedies under the Indenture may be limited or restricted by laws relating

to bankruptcy and rights of creditors and by application of general principles of equity applicable to the availability of specific performance, and may be substantially delayed in the event of litigation or statutory remedy procedures.

Infectious Disease Outlook (COVID-19)

The World Health Organization has declared a pandemic following the outbreak of COVID-19,

a respiratory disease caused by a new strain of coronavirus (the “Pandemic”), which is currently affecting many parts of the world, including the United States and Oklahoma. On January 31, 2020, the Secretary of the United States Health and Human Services Department declared a public health emergency for the United States in connection with COVID-19. On March 13, 2020, the President of the United States declared the Pandemic a national emergency and the Oklahoma Governor (the “Governor”) subsequently declared COVID-19 an imminent threat of disaster for all counties in Oklahoma (collectively, the “disaster declarations”). On April 5, 2020, in response to a request from the Governor, the President issued a Major Disaster Declaration for the State of Oklahoma.

Pursuant to Oklahoma’s Catastrophic Health Emergency Act, the Governor has broad authority to respond to disasters. including suspending any regulatory statute prescribing the procedures for conducting state business or any order or rule of a state agency that would in any way prevent, hinder, or delay necessary action in coping with this disaster and issuing executive orders that have the force and effect of law. The Governor has issued a number of executive orders relating to COVID-19 preparedness and mitigation. Many of the federal, state and local actions and policies under the aforementioned disaster declarations are focused on limiting instances where the public can congregate or interact with each other, which affects economic growth within Oklahoma.

Since the disaster declarations were made, the Pandemic has negatively affected travel, commerce, and financial markets globally, and is widely expected to continue negatively affecting economic growth and financial markets worldwide and within Oklahoma. Stock values and crude oil prices in the U.S. and globally, have seen significant declines attributed to COVID-19 concerns. Oklahoma may be particularly at risk from any global slowdown, given the risk of contraction in the oil and gas industry and spillover effects into other industries, including manufacturing.

The Bonds are secured by the 1¢ Sales Tax and a Projects Agreement as defined herein, and the

continued outbreak of COVID-19 could adversely impact economic conditions within the City which could result in lower sales tax collections by the City.

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The City and the Authority continue to monitor the spread of COVID-19 and are working with

local, state, and national agencies to address the potential impact of COVID-19 upon the City. While the potential impact of COVID-19 on the City cannot be quantified at this time, the continued outbreak of COVID-19 could have an adverse effect on the City’s financial condition.

Since the Oklahoma Constitution allows only for a pledge of the funds derived from the

collection of a sales tax on a year to year basis, the 1¢ Sales Tax is to be committed to the Authority on a year to year basis, subject to the annual appropriation of such monies by the City. If the City should decide not to appropriate such monies or should the City take action to eliminate the pledge or should the voters rescind the right of the City to levy and collect the 1¢ Sales Tax, the Authority may be unable to pay the debt service requirements of the Series 2020 Bonds. The right of the City to levy and collect sales tax is provided in the statutes of the State of Oklahoma. The legislature has the ability to rescind the right of the City to levy and collect sales tax. Additionally, pursuant to the laws of the State of Oklahoma the governing body of the City and the citizens of the City have the ability to repeal the ordinance providing for the levy of sales tax. If the Authority should not receive any sales tax or if such collections should decline due to economic conditions, it could inhibit the ability of the Authority to pay the debt service requirements of the Series 2020 Bonds.

TAX EXEMPTION

In the opinion of Bond Counsel, assuming continued compliance by the Authority with the

terms of the Federal Tax and Arbitrage Certificate of the Authority, under existing statutes, regulations, rulings and judicial decisions, the interest on the Series 2020 Bonds is excludable from gross income of the recipients thereof for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”) and is not an item of tax preference for purposes of the federal alternative minimum tax that may be imposed under the Code.

The Code imposes certain requirements which must be met subsequent to the issuance of the

Series 2020 Bonds in order for the interest thereon to be and remain exempt from federal income taxation. Non-compliance with such requirements could cause the interest on the Series 2020 Bonds to become includable in gross income for federal income tax purposes retroactive to the date of issue of the Series 2020 Bonds regardless of the date on which noncompliance is ascertained. These requirements include, but are not limited to, limitations on the use of Bond proceeds, restrictions on the yield which may be earned on the investment of Bond proceeds and other amounts, and the obligation to rebate certain investment earnings to the United States Treasury. In the Indenture, the Authority has covenanted to comply with the provisions of the Code relating to the exemption from federal income taxation of the interest on the Series 2020 Bonds.

Prospective purchasers of the Series 2020 Bonds should be aware that the ownership of tax-

exempt obligations may result in collateral federal income tax consequences to financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations. Certain foreign corporations doing business in the United States may be subject to a “branch profits tax” on their effectively-connected earnings and profits including tax-exempt interest such as interest on the Series 2020 Bonds. Furthermore, in the case of

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a Subchapter S Corporation, interest on the Series 2020 Bonds is treated as passive investment income which is subject to the tax imposed by Section 1375 of the Code. These categories of bondowners should consult their own tax advisors as to the applicability of these consequences.

Additionally, in the opinion of Bond Counsel interest paid by the Authority on the Series 2020

Bonds is exempt from State of Oklahoma income taxation under present laws.

REQUIRED REBATE TO THE UNITED STATES

The Authority in the Bond Indenture has covenanted to comply and the Trustee is empowered to take any and all actions necessary to comply with all of the provisions of the Code, relating to the exemption from federal income taxes of the interest paid upon the bonds authorized by the Bond Indenture, including the Series 2020 Bonds, to the end that interest thereon shall remain exempt from federal income taxation.

The Code, as amended, provides that bonds which are part of an issue, including the Series 2020 Bonds, will be treated as arbitrage bonds if certain hereinafter described requirements are not met with respect to such issue.

Under the Code, an issuer, including the Authority, is required to make certain payments or

rebates to the United States in an amount equal to the sum of the excess of the amount of money earned on all non-purpose investments, over the amount of money which would have been earned if such non-purpose investments were invested at a rate of interest equal to the yield on the issue, including the Series 2020 Bonds, plus any income derived from the aforesaid excess itself. The aforesaid payments or rebates are to be paid in installments which are required to be made at least once every five years and each such installment is required to be in an amount which ensures that 90 percent of the excess amount (referred to above) with respect to the issue, at the time payment of such installment is required, will have been paid to the United States. The final installment is required to be paid no later than 60 days after the final maturity of the Series 2020 Bonds, and shall be in an amount sufficient to pay the remaining balance of the excess amount (referred to above) with respect to such issue.

The Authority will abide by its covenants to comply with the Code, including the covenant to

timely pay or rebate any and all excess earnings in the manner provided in the Code.

REDEMPTION PROVISIONS

The Series 2020 Bonds are subject to redemption prior to maturity only as described in this section of the Preliminary Official Statement.

A. Optional Redemption - The Series 2020 Bonds maturing on January 1, 20 , and

thereafter shall be subject to redemption prior to maturity at the option of the Authority, on at least thirty (30) days’ notice (to be provided in the manner hereafter stated), in whole or in part, in inverse order of maturity and by lot within a maturity on any date, on and after January 1, 20 , at the redemption prices of par and accrued interest.

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B. Mandatory Sinking Fund Redemption - The Series 2020 Bonds are subject to mandatory sinking fund redemption and payment prior to maturity on January 1, 20 , and on each January 1, thereafter through January 1, 20 , at a redemption price equal to the principal amount thereof plus accrued interest thereon to the redemption date, as follows:

Mandatory

Redemption Dates Principal

January 1, 20 $ January 1, 20 * $

*Final Maturity

The Series 2020 Bonds are subject to mandatory sinking fund redemption and payment prior to maturity on January 1, 20 , and on each January 1, thereafter through January 1, 20 , at a redemption price equal to the principal amount thereof plus accrued interest thereon to the redemption date, as follows:

Mandatory

Redemption Dates Principal

January 1, 20 $ January 1, 20 $ January 1, 20 $ January 1, 20 $ January 1, 20 $ January 1, 20 $ January 1, 20 $ January 1, 20 $ January 1, 20 $ January 1, 20 * $

*Final Maturity

C. Notice and Effect of Redemption - Notice of any call for redemption will be given

by the Trustee Bank, identifying the Series 2020 Bonds to be redeemed, not less than thirty (30) days prior to the redemption date by notice sent by first class mail to the holder or holders of the bond or bonds to be redeemed, directed to the address shown on the registration books. No further interest will accrue on the principal of any Series 2020 Bonds called for redemption from and after the date fixed for redemption if payment of the redemption price thereof has been duly provided for.

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BOOK-ENTRY ONLY SYSTEM

The information in this section concerning The Depository Trust Company (“DTC”) and DTC’s book-entry-only system has been obtained from DTC, and the Authority and the Underwriters take no responsibility for the accuracy thereof.

DTC will act as securities depository for the Series 2020 Bonds. The Series 2020 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Series 2020 Bond certificate will be issued for each series and maturity of the Series 2020 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC at the office of the Trustee on behalf of DTC utilizing the DTC FAST system of registration.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of: AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchases of Series 2020 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2020 Bonds on DTC’s records. The ownership interest of each actual purchaser of each Series 2020 Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners 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 Series 2020 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Series 2020 Bonds, except in the event that use of the book-entry system for the Series 2020 Bonds is discontinued.

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To facilitate subsequent transfers, all Series 2020 Bonds deposited by Direct Participants with DTC (or the Trustee on behalf of DTC utilizing the DTC FAST system of registration) are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2020 Bonds with DTC (or the Trustee on behalf of DTC utilizing the DTC FAST system of registration) and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2020 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2020 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Redemption notices shall be sent to DTC. If less than all the Series 2020 Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Series 2020 Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Series 2020 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

DTC may discontinue providing its services as securities depository with respect to the Series 2020 Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Series 2020 Bond certificates are required to be printed and delivered.

Redemption proceeds, distributions and dividend payments on the Series 2020 Bonds will be made to Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Authority or the Paying 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 (nor its nominee), the Paying Agent or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions and dividend payments on the Series 2020 Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Paying 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.

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The Authority may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Series 2020 Bond certificates will be printed and delivered to DTC.

The Authority, Bond Counsel, the Trustee and the Underwriters cannot and do not give any assurances that the DTC Participants will distribute to the Beneficial Owners of the Series 2020 Bonds: (i) payments of principal of or interest on the Series 2020 Bonds; (ii) certificates representing an ownership interest or other confirmation of Beneficial Ownership interests in the Series 2020 Bonds; or (iii) redemption or other notices sent to DTC or its nominee, as the Registered Owners of the Series 2020 Bonds; or that they will do so on a timely basis or that DTC or its participants will serve and act in the manner described in this Official Statement. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC.

None of the Authority, Bond Counsel, the Trustee or the Underwriters will have any responsibility or obligation to such DTC Participants (Direct or Indirect) or the persons for whom they act as nominees with respect to: (i) the Series 2020 Bonds; (ii) the accuracy of any records maintained by DTC or any DTC Participant; (iii) the payment by any DTC Participant of any amount due to any Beneficial Owner in respect of the principal amount of or interest on the Series 2020 Bonds; (iv) the delivery by any DTC Participant of any notice to any Beneficial Owner which is required or permitted under the terms of the Indenture to be given to Registered Owners; (v) the selection of the Beneficial Owners to receive payment in the event of any partial redemption of the Series 2020 Bonds; or (vi) any consent given or other action taken by DTC as Registered Owner.

SOURCE AND APPLICATION OF PROCEEDS

Series 2020 Bonds $ Series 2009 Prior Bond Fund Reoffering Premium Accrued Interest

Total $

Refund 2009 Bonds $ Construction/Project Fund Deposit to Debt Service Fund Underwriter's Discount Costs of Issuance (1)

Total $

(1) Cost of Issuance includes legal fees, trustee fees, rating agency fee, financial advisory fee, printing costs and other miscellaneous costs of issuance for the Series 2020 Bonds.

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OUTSTANDING INDEBTEDNESS OF THE AUTHORITY

The Authority has previously issued its Refunding Revenue Bonds Tax-Exempt Series 2012A and Taxable Series 2012B dated June 1, 2012, in the original principal amount of $22,350,000 of which only the Series 2012A Bonds are outstanding in the remaining principal amount of $17,320,000 (the “Series 2012A Bonds”). The Authority has also issued its Refunding Revenue Bonds, Tax-Exempt Series 2012C and Taxable Series 2013D dated August 1, 2012, in the original principal amount of $525,000 of which only the Series 2012C Bonds are outstanding in the remaining principal amount of $315,000 (the “Series 2012C Bonds”).

The Authority has also previously issued its Sales Tax Revenue Bonds Series 2013, dated August

1, 2013, in the original principal amount of $5,325,000 of which $2,255,000 remains outstanding (the “Series 2013 Bonds”) and are secured solely by the proceeds of a one-half cent (1/2¢) sales tax collected by the City and appropriated to the Authority.

The Authority has also previously issued its Promissory Note payable to the Oklahoma Water

Resources Board, dated March 2, 2010, in the original principal amount of $5,360,000 of which $3,113,383 remains outstanding (the “Series 2010 Note”).

The Authority has previously issued its Series 2009 Revenue Bonds, dated December 1, 2009,

in the original principal amount of $8,475,000 of which $4,480,000 currently remains outstanding (the “Series 2009 Bonds”). The Series 2009 Bonds (the “Refunded Bonds”) will be retired with a portion of the proceeds of the Series 2020 Bonds.

SECURITY

Sales Tax

On May 9, 1988, the citizens of Sallisaw, Oklahoma, approved by a majority vote, Ordinance no. 88-7, which provided for a levy of an additional one cent sales tax. Ordinance No. 88-7 provided for the levy of a one cent sales tax which was voted and approved for the purpose of providing capital improvements to properties of the City and for payment of the principal of and interest on indebtedness incurred on behalf of the City by the Authority thereof for said purposes. The Series 2020 Bonds are secured by a first lien upon proceeds of this 1 cent sales tax collected by the City and appropriated by the Authority (the “1¢ Sales Tax”).

The City and the Authority have entered into a Sales Tax Agreement effective July 1, 2020,

(the “Sales Tax Agreement”) wherein the City has agreed (subject to annual appropriation as further described hereafter) to appropriate the proceeds of a two cent (2¢) sales tax levy to the Authority. Pursuant to the Sales Tax Agreement, an amount equal to a one-half cent (1/2¢) of sales tax collections shall be dedicated solely for debt service on the Authority’s Series 2013 Bonds; one-half cent (1/2¢) sales tax collections shall be available for debt service on the Series 2012A Bonds; and the remaining one cent (1¢), the 1¢ Sales Tax, for debt service on the Series 2020 Bonds and any indebtedness secured equally therewith. Average annual debt service charges are defined as all charges for payment of principal of and interest on Bonds, due and payable from their date of issue, up to and including payment of the final maturity of that issue, divided by the number of years elapsed during that period.

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Since the Oklahoma Constitution allows only for a pledge of the funds derived from the

collection of a sales tax on a year to year basis, the 1¢ Sales Tax are to be committed to the Authority on a year to year basis, subject to the annual appropriation of such monies by the City. If the City should decide not to appropriate such monies or should the City take action to eliminate the pledge or should the voters rescind the right of the City to levy and collect the 1¢ Sales Tax, the Authority may be unable to pay the debt service requirements of the Series 2020 Bonds. The right of the City to levy and collect any sales tax is provided in the statutes of the State of Oklahoma. The legislature has the ability to rescind the right of the City to levy and collect any sales tax. Additionally, pursuant to the laws of the State of Oklahoma the governing body of the City and the citizens of the City have the ability to repeal the ordinance providing for the levy of sales tax. If the Authority should not receive any or if such collections should decline due to economic conditions, it could inhibit the ability of the Authority to pay the debt service requirements of the Series 2020 Bonds.

The amount of sales tax collected depends upon the sale of covered goods and services within

the jurisdiction of the City and is therefore dependent upon the general economy of the City. The Oklahoma Legislature has the ability to modify the definition of covered goods and services. For example, the Oklahoma Legislature has considered removing food from the definition of covered goods, but no action was taken. Such reductions would have a negative impact on debt service coverage. There can be no assurance that the 1¢ Sales Tax levied and collected in any period will be sufficient to fund debt service on the Series 2020 Bonds.

Projects Agreement

The City and the Authority have entered into a Projects Agreement (the “Projects Agreement”)

effective as of July 1, 2020, whereby the Authority has agreed to issue the Series 2020 Bonds and the City has covenanted and agreed to and duly appropriate on an annual basis, subject to availability and appropriation of funds, to provide additional monies to the Authority to pay principal of, and interest on the Series 2020 Bonds when due.

SALES TAX COVERAGE

2019 2018 2017

1¢ Sales Tax (appropriated to Series 2020 Bonds) 1,437,714$ 1,353,744$ 1,351,218$

Debt Service - Series 2020 Bonds (Projected) 671,000$ 671,000$ 671,000$

Coverage 2.14 2.02 2.01

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THE DEPOSITORY

The Authority is from time to time to designate a bank or banks, preferably in Sallisaw, Oklahoma, which shall act as Depository for The Sallisaw Municipal Authority Gross Revenue Account and Bond Account, and from which withdrawals are to be made as stipulated in the section "Flow of Funds" which follows.

THE TRUSTEE BANK

BancFirst, Oklahoma City, Oklahoma (the “Trustee Bank”), will act as Trustee for the holders

of the Series 2020 Bonds, and is to hold the Bond Indenture securing the Series 2020 Bonds, and perform such other duties as have or may be agreed upon and as are outlined briefly in the paragraphs that follow and fully in the Bond Indenture.

THE REGISTRAR

BancFirst, Oklahoma City, Oklahoma, will act as Registrar for this issue and will register

ownership and transfer of the Series 2020 Bonds on books kept for that purpose and act as paying agent on behalf of the Authority. Interest shall be paid by check or draft mailed by the Registrar to bondholders of record on the Record Date, which is the 15th day of the month, next preceding each interest payment date whether or not such date is a business day.

FLOW OF FUNDS

I. BOND PROCEEDS: The proceeds of the Series 2020 Bonds will be deposited in the Trustee Bank in The Sallisaw Municipal Authority Series 2020 Construction Fund, except that accrued interest will be deposited directly into The Sallisaw Municipal Authority Sinking Fund, described in paragraph III. All fees and expenses for services in connection with the issuance of the Series 2020 Bonds shall be paid to the persons entitled thereto, the cost of establishing the escrow to defease all of the outstanding Refunded Bonds of the Authority shall be paid.

A. All payments of properties and equipment purchased, for professional services, labor

and materials furnished, and for all construction performed and for deposit to the Sinking Fund during construction; and

B. Any remainder shall be retained in the Construction Fund to be used later for the same

purpose for which the proceeds of the Bonds are to be used, or transferred to the Sinking Fund and used to diminish payments otherwise required to be made into it.

II. AUTHORITY REVENUES: The Depository Bank shall receive daily all money received from the Sales Tax and the Project Agreement into an account known as The Sallisaw Municipal Authority Gross Revenue Account and hereafter called the "Gross Revenue Account". The Authority has the sole authority to withdraw money from the Gross Revenue Account. From the Gross Revenue Account there is to be paid in the following order:

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A. Payment of principal and interest payable upon the Series 2020 Bonds.

B. The remainder is to be used for any proper purpose of the Authority, including, but not limited to, purchase of any Series 2020 Bonds or any other equally secured indebtedness on the open market, redemption of bonds of this or equally secured debt prior to maturity, or payments to or for the Beneficiary.

All deposits made by the Authority must be in banks the accounts of which are insured by the

Federal Deposit Insurance Corporation (the "F.D.I.C.") and any deposit in excess of that amount insured by the F.D.I.C. must be secured as are the deposits of uninvested sinking funds of political subdivisions of the State of Oklahoma, or in the case of deposits in the Bank, in the manner prescribed by federal law for securing trust funds.

III. DEBT SERVICE: From the Bond Account the Bank shall, not later than each interest and

principal payment date so long as these Series 2020 Bonds remain outstanding, withdraw therefrom the accumulated sum and deposit it in the "Sinking Fund" which it holds. The Sinking Fund is to be used by the Bank for payment of principal of and interest on the Series 2020 Bonds as they mature. The withdrawals are to be made in that amount which will permit payment of principal of and interest on Series 2020 Bonds as they become due.

IV. INVESTMENT OF FUNDS:

A. All funds not specifically mentioned in "Flow of Funds" section are to be kept continuously invested in conformance with its use and applicable law to yield the highest annual return for the benefit of the Authority subject to the security provisions as provided in subsection II herein entitled "Authority Revenues".

ADDITIONAL BONDS

The Authority shall have no right to incur additional indebtedness secured by the 1¢ Sales Tax (as defined in the Bond Indenture); provided however, nothing in the Bond Indenture shall be construed to prevent the Authority from incurring any indebtedness secured by such 1¢ Sales Tax so long as such indebtedness is not secured by any lien or charge on any part of such 1¢ Sales Tax equal or superior to the lien of the Bond Indenture.

BOND COVENANTS

Pursuant to the Indenture, the Authority has made certain covenants, which include the

following:

1. The Authority has good right and lawful authority to execute and deliver the conveyance set forth in the Indenture, and all of said property is free and clear of all liens, claims, demands, encumbrances and governmental charges which could or in any manner might adversely affect or prejudice the rights, interests, privileges, powers and liens provided in the Indenture, and the Authority, so

often as requested so to do by the Bank or any holder of any Series 2020 Bond

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promptly will execute and deliver all such other and further instruments and do, or cause to be done, all such other and further things, as reasonably shall be required to vest in the Bank all of the rights, powers and benefits intended to be conveyed, assigned and conferred by the Indenture.

2. The Authority will not suffer or permit any lien or encumbrance upon any of the

property or revenues conveyed as security under the terms of the Indenture, or any part of said property or revenues, to be or become superior or in preference to the lien created by the Indenture, neither will the Authority do or suffer to be done any act or thing whereby the security provided in the Indenture shall be diminished or impaired.

3. The Authority forever will defend the unimpaired and unencumbered right, title

and interest in and to each and every part of the property and revenues mentioned in the Indenture against all claims and demands asserted by any person or entity whatsoever to be prior or preferential to the lien created by the Indenture, and the Authority, upon request by the Bank or by the holder of any Series 2020 Bond, promptly will take such action as reasonably shall be required to extinguish any defect or cloud upon the rights, title and interests described as aforesaid whether presently existing or hereafter coming into existence; and the Authority will save harmless the Trustee and each holder of any Series 2020 Bond from all loss, cost, expense and damage with respect to any of the foregoing.

4. The proceeds of these bonds will be used solely for the purposes for which they

were issued, as briefly outlined in a preceding paragraph entitled "Purpose of Issue" and as described in complete detail in the Bond Indenture itself under which they are issued and for refunding interim or temporary debt incurred by the Authority for the same purposes.

5. All monies collected by the Authority will be applied in the manner provided in

the preceding section entitled "Flow of Funds".

6. The Authority will keep proper books, records and accounts in accord with good accounting practices which shall at all reasonable times be made available to bondholders or their representatives. That, within 180 days following the close of its fiscal year, it will supply to the Bank, the Beneficiary, The Baker Group LP, Oklahoma City, Oklahoma, and to any bondholder who so requests, an annual audit of its operations during the preceding fiscal year, prepared by a Certified Public Accountant. If so requested by the Bank or the holders of at least 51% of the outstanding debt, such Certified Public Accountant shall be named by the Bank or the bondholders.

7. Any provision in the Bond Indenture may be amended by the agreement of the

Authority and the Bank with the consent given in writing to the Bank by the holders of not less than 75% of all the equally secured bonds then outstanding except, however:

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a. The aforesaid percentage of seventy-five percent (75%) shall not be

reduced without the consent of the holders of all of the outstanding indebtedness;

b. Any reduction made in the rate of interest must apply equally to all bonds

unless otherwise consented to in writing by the holder of the excepted bonds;

c. That in the event that there shall be an extension of maturities serially, the

same relative position in the extended schedule shall be retained for each bond as in the maturity schedule of the bonds as originally issued, unless otherwise consented to in writing by the holder of the excepted bonds. However, if the extension of maturities is made into a single maturity, the extension shall apply to all bondholders; and

d. That no bond be given preference in security over any other;

8. It is also provided that in the event monies in an amount which shall be sufficient or direct obligations of the United States or of agencies of the United States fully guaranteed by the United States are placed in a special escrow account for the sole purpose and in sufficient amount that the principal and interest earned when due shall provide funds to pay promptly and fully as they mature, both interest on and principal of the Series 2020 Bonds or in the alternative, on such earlier date any of said outstanding bonds, respectively, are callable for redemption prior to maturity, in the latter event, together with any premium payable upon such redemption, at which time the lien securing them by the Trust Estate shall be released.

9. The Authority will timely prepare and file, or cause to be prepared and filed, any

and all reports or returns required under the Internal Revenue Code of 1986, as amended, in order to preserve the federal tax-exempt status of the interest payable on the Series 2020 Bonds and the Authority will timely meet the rebate requirements of the Internal Revenue Code of 1986, as amended, including but not limited to, payment of any required rebates to the United States, relating to income derived from investment of the proceeds of the Series 2020 Bonds.

DEFEASANCE

The Indenture shall be defeased if, among other things, there are sufficient monies, the

principal of and interest on which when due will provide monies, which together with the monies, if any, deposited with the Bank at the same time are sufficient to pay when due the principal or redemption price of and interest due, and to become due, on the Series 2020 Bonds, on and prior to the redemption date or maturity date thereof, as the case may be.

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DEFAULTS AND REMEDIES

The Bond Indenture makes the happening or existence of any fact incompatible with its provisions a default including, but not limited to, the failure to pay the principal of and interest on the Series 2020 Bonds when due.

All of the customary remedies, including acceleration of maturities, receivership, etc., are

made available to the Bank and to all bondholders. An additional remedy is also provided which permits the appointment of temporary Trustees in sufficient number to constitute a majority of the Trustees. This device permits continued operation of the properties under control of the bondholders without endangering the tax-free status of the property or its operation as a governmental agency. It is simple to apply, is inexpensive and continues in effect until the default is cured. All remedies expressly are made concurrent and elective.

NO LITIGATION

There is not now pending any litigation restraining or enjoining the issuance or delivery of the Series 2020 Bonds or questioning or affecting the validity of the Series 2020 Bonds or the proceedings and authority under which they are to be issued. Neither the creation, organization or existence of the Authority, nor the title of the present trustees or officers of the Authority to their respective offices, is being contested.

RATING

Moody’s will assign a rating and will be shown on the cover of the Official Statement for the

Series 2020 Bonds. The rating reflects only the view of such organization and an interpretation of the rating may be obtained only from the rating agency furnishing the same. There is no assurance that the rating will continue for any given period of time or that they will not be revised down or withdrawn entirely by such rating agencies, if circumstances so warrant. Any revision or withdrawal of the rating may have an adverse effect on the market price of the Series 2020 Bonds.

UNDERWRITING

The Series 2020 Bonds are to be purchased by D.A. Davidson & Co. (the “Underwriter”),

pursuant to a Contract of Purchase with the Authority (the “Contract of Purchase”). The Underwriter has agreed to purchase the Series 2020 Bonds at a price of $ (which represents the $ principal amount of Series 2020 Bonds, plus reoffering premium of $_____, less Underwriter's Discount of $______, and plus accrued interest, if any). The Contract of Purchase provides that the Underwriter will not be obligated to purchase any Series 2020 Bonds if all Series 2020 Bonds are not available for purchase, and requires the Authority to indemnify the Underwriter against losses, claims, damages and liabilities arising out of any incorrect or incomplete statements or information contained in this Preliminary Official Statement pertaining to the Projects and other matters. The initial public offering price set forth on the inside cover page hereof may be changed by the Underwriter.

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In connection with the offering of the Bonds, the Underwriter may overallot or effect transactions which stabilize or maintain the market prices of the Bonds at levels above those which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time.

The Underwriter has provided the following sentence for inclusion in this Preliminary Official

Statement. The Underwriter has reviewed the information in this Preliminary Official Statement in accordance with, and as a part of, its responsibilities under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information and this Preliminary Official Statement is not to be construed as the promise or guarantee of the Underwriter.

FINANCIAL ADVISOR

The Authority's financial advisor is The Baker Group LP, Oklahoma City, Oklahoma. The Baker Group LP has prepared certain information for this Preliminary Official Statement in connection with its services to the Authority and has provided financial advice to the Authority in connection with the Series 2020 Bonds.

CONTINUING DISCLOSURE

The Authority will execute and deliver its Continuing Disclosure Agreement (the "Continuing

Disclosure Agreement") for the benefit of the holders and beneficial owners of the Series 2020 Bonds. The Authority is required to observe the Continuing Disclosure Agreement for so long as it remains obligated to pay the Series 2020 Bonds. Pursuant to the Continuing Disclosure Agreement, the Authority will be obligated to provide certain updated financial information and timely notice of certain specified events, to the Municipal Securities Rulemaking Board (the "MSRB") through its Electronic Municipal Market Access ("EMMA") system at www.emma.msrb.org. See Exhibit G - Continuing Disclosure Agreement.

Annual Reports The Authority will provide certain updated financial information annually. The information to be updated includes the Authority’s annual audited financial statements (the “Annual Report”). The Authority will update and provide this information within 180 days after the end of each fiscal year. The Authority’s fiscal year end is June 30th. The Authority will provide updated information to the Trustee who will provide it to the MSRB. The Authority may provide updated information in full text or may incorporate by reference other publicly available documents, as permitted by United States Securities and Exchange Commission Rule 15c2-12 (the “Rule”). The updated information will include audited financial statements if the Authority commissions an audit and the audit is completed by the required time. If audited financial statements are not available by the required time, the Authority will provide such financials statements on an unaudited basis within the required time and audited financial statements when they become available. Any such financial statements will be prepared in accordance with generally accepted (“GAAP”) accounting principles or such other accounting principles as the

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Authority may be required to employ from time to time pursuant to State law or regulation.

The Continuing Disclosure Agreement executed in connection with the issuance of these Series 2020 Bonds will provide for the disclosure of the Annual Report as provided for in the Indenture and no later than 180 days after the close of the Authority=s fiscal year.

Material Event Notices

The Authority will file with the MSRB notice of any of the Material Events listed in the

Continuing Disclosure Agreement with respect to the Bonds in a timely manner (and not more than 10 business days after occurrence of the event). In addition, the Authority will provide timely notice of any failure by the Authority to provide information, data, or financial statements described above under Annual Reports in accordance with the Continuing Disclosure Agreement. The Authority will provide each notice described in the Continuing Disclosure Agreement to the MSRB.

Compliance with Prior Undertakings

The Authority has entered into prior continuing disclosure undertakings pursuant to the Rule

with respect to the Authority’s currently outstanding Series 2009 Bonds, Series 2012A Bonds, Series 2012C Bonds and Series 2013 Bonds and the Authority’s no longer outstanding Series 2012B Bonds (the APrior Undertaking@).

During the last five years, the Authority did not timely file audited financial statements for

its fiscal year ended 2015 and 2017 through 2019 in connection with its Series 2009 Bonds, and did not file or timely file notice of its failure to provide the aforementioned information on or before the date of December 1st of each year as specified in the Series 2009 prior continuing disclosure undertaking.

The Authority has covenanted to provide the final Official Statement to the purchaser within

seven business days after final agreement to purchase, offer, or sell the Bonds in an offering and in sufficient time to accompany any confirmation that request payment from any customer.

DEEMED FINAL

THE AUTHORITY HAS CERTIFIED THAT THIS PRELIMINARY OFFICIAL STATEMENT WAS DEEMED FINAL AS OF ITS DATE FOR PURPOSES OF RULE 15c2-12(b), EXCEPT FOR THE INFORMATION NOT REQUIRED TO BE INCLUDED THEREIN UNDER RULE 15c2-12(b).

Concurrently with the delivery of the Series 2020 Bonds, the Authority will furnish a

certificate executed on behalf of the Authority to the effect that the final Official Statement, as of the date of the final Official Statement and as of the date of delivery of the Bonds, does not contain any untrue statement of a material fact or omit to state any material fact necessary to make to the statements herein, in light of the circumstances under which they were made, not misleading.

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MISCELLANEOUS

Information concerning the Authority, the Project, the Financial Statements and the Series 2020 Bonds contained in this Preliminary Official Statement has been furnished by the Authority.

The foregoing summaries or descriptions of provisions in the Indenture and the Project

Agreement and all references to other materials not purporting to be quoted in full, are only brief outlines of certain provisions thereof and do not constitute complete statements of such provisions and do not summarize all the pertinent provisions of such provisions. For further information, reference should be made to the complete documents, copies of which are on file at the corporate trust offices of the Trustee for examination and will be furnished by the Authority upon request.

All projections and other statements in this Preliminary Official Statement involving matters

of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Preliminary Official Statement is not to be construed as a contract or agreement between the Authority and the purchasers or holders of any of the Series 2020 Bonds.

APPROVAL OF PRELIMINARY OFFICIAL STATEMENT

This Preliminary Official Statement has been approved by the Authority for distribution to

prospective purchasers of the Series 2020 Bonds.


By: /s/ Ernie Martens Chairman of Trustees


EXHIBIT A

AMORTIZATION SCHEDULE

Dated: July 1, 2020 Due: January 1, as shown on inside cover

Maturity Principal Interest Total P&I 1/01/2021 1/01/2022 1/01/2023 1/01/2024 1/01/2025 1/01/2026 1/01/2027 1/01/2028 1/01/2029 1/01/2030 1/01/2031 1/01/2032 1/01/2033 1/01/2034 1/01/2035 1/01/2036 1/01/2037 1/01/2038 1/01/2039 1/01/2040


EXHIBIT B

CITY OF SALLISAW, OKLAHOMA Economic Indices of Growth

THE CITY

The following information is intended only as general information about the City. The City is in no way obligated to repay any portion of the Series 2020 Bonds.

GENERAL

Sallisaw has 19 fire personnel and 18 full-time police officers. The City’s fire insurance has a

4 classification while the adjacent area has an 8 classification. Electricity is provided by the Sallisaw Municipal Authority, natural gas is provided by Arkansas-Oklahoma Gas Corporation and telephone service is provided by the Sallisaw Municipal Authority and AT&T.

TRANSPORTATION

Air Transportation. The nearest commercial airport is 26 miles from Sallisaw at Ft. Smith,

Arkansas. This airport is a full service field with several airlines in operation.

Water Transportation. The nearest water transportation is at the Kerr Lock & Dam. It is 9 miles from Sallisaw and has a channel depth of 9 feet. It is connected via the Arkansas River to the Mississippi River and the Gulf of Mexico.

Road System. Sallisaw is located on I-40 and intersected by US 59 and US 64.

Rail Availability. There is service from two main rail carriers: Kansas City Southern and

Union Pacific, which operate at least 4 local trains daily. Piggyback (container) service is operated by Kansas City Southern in Sallisaw.

MAJOR EMPLOYERS

The major employers located in the City, the type of business engaged in, and the

approximate number of employees are shown below: Approximate Number of

Company Name Product Employees Cherokee Casino Gaming Casino 605 People Incorporated Human Resources 326 Sallisaw Public Schools Educational Services 246 Walmart Super Center Retail Sales 281 SLPT Automotive Air & Oil 250 Aviagen Chicken Production 233 Peter’s Agency Care Home Health Care 140 City of Sallisaw City Services 143 Cellofoam North America Foam Insulation 83 United Parcel Service Delivery Service 50 Sequoyah Memorial Hospital Health Services 179

*OK Dept of Veterans Affairs Veterans Care Facility 280

*Note: Opening expected early 2022

Source: City of Sallisaw EDUCATION

Sallisaw Public School District has 10 primary and secondary schools with approximately

12,558 students and approximately 910 certified staff.

Type Grades Facilities Enrollment Teachers Public K-5 2 889 74 Public 6-8 1 423 34 Public 9-12 1 665 38 Total 4 1,977 146

POPULATION

The 2020 estimated population of the City is presently 8,450 people. The historical population of the City is as follows:

Year Population 2010 8,880 2000 7,989 1990 7,122 1980 6,403 1970 4,888

Source: U.S. Census

BUILDING PERMITS

Shown below are the number of building permits for the last six calendar years.

Calendar

Year

Number of Building Permits

Value 2018 20 $3,331,304 2017 13 $2,252,900 2016 11 $1,861,200 2015 7 $1,099,000 2014 13 $2,393,300 2013 9 $1,292,400

Source: City of Sallisaw

Sales Tax Collections (1)

FY

Total Collections

1 Cent Collections

Average 1 Cent

Collections Monthly

% Change

2019/20 $5,025,088 $1,256,272 $ 125,627 4.86% 2018/19 $5,750,858 $1,437,714 $ 119,810 6.20% 2017/18 $5,414,977 $1,353,744 $ 112,812 0.19% 2016/17 $5,404,870 $1,351,218 $ 112,601 -0.94% 2015/16 $5,456,249 $1,364,062 $ 113,672 -0.43% 2014/15 $5,479,705 $1,369,926 $ 114,161 N/A 2019/20

Collections for 10 months only at 4 cents.

2018/19 Collections for 12 months at 4 cents. 2017/18 Collections for 12 months at 4 cents. 2016/17 Collections for 12 months at 4 cents. 2015/16 Collections for 12 months at 4 cents. 2014/15 Collections for 12 months at 4 cents.

Bank Deposits (2) Net Valuation Trends (3) 2014 $516,494,000 2019/20 $45,090,972 3.32% 2015 414,134,000 2018/19 43,641,386 2.64% 2016 451,799,000 2017/18 42,517,415 8.94% 2017 487,432,000 2016/17 39,028,585 1.04% 2018 482,247,000 2015/16 38,628,629 1.94% 2019 515,196,000 2014/15 37,894,792 n/a Utility Connections (4)

Year Water Meters

Sewer Connect

2019 3,489 3,002 2018 3,472 2,983 2017 3,459 2,971 2016 3,453 2,966 2015 3,436 2,945

Sanitation Connect

Electric Connect

Telecom Connect

4,100 4,215 2,818 4,067 4,174 2,693 4,046 4,156 2,549 4,056 4,166 2,304 4,042 4,140 2,002

(1) Source: Oklahoma Tax Commission (2) Source: Oklahoma Bankers Association (3) Source: Official Estimate of Needs (4) Source: City Officials


EXHIBIT C

SALES TAX AGREEMENT


Sales Tax Agreement 1

SALES TAX AGREEMENT THIS SALES TAX AGREEMENT, dated as of the 8th day of June, 2020 and to be effective as of June 1, 2020, by and between The Sallisaw Municipal Authority (the "Authority") and the City of Sallisaw, Oklahoma (the "City"), W I T N E S S E T H : WHEREAS, the Authority has been created by a Declaration of Trust dated as of March 24, 1988, as supplemented, for the use and benefit of the City under authority of and pursuant to the provisions of Title 60, Oklahoma Statutes 2019 Supplement, Sections 176 to 180.3, inclusive, as amended and supplemented, the Oklahoma Trust Act and other applicable Statutes of the State of Oklahoma; and WHEREAS, the City currently levies a two percent (2%) sales tax pursuant to City ordinance consisting of a one cent (1¢) sales tax levied pursuant to Ordinance No. 88-7, a one-half cent (½¢) sales tax levied pursuant to Ordinance No. 04-9 and a one-half cent (½¢) sales tax levied pursuant to Ordinance No. 2013-05 (collectively, the “Sales Tax Ordinances”); and WHEREAS, the two percent (2%) excise tax (sales tax) generated pursuant to the Sales Tax Ordinances shall be referred to herein as the “Sales Tax Revenues”; and WHEREAS, the purpose of the Sales Tax Ordinances is to provide revenues to be used for certain capital improvements to be financed and refinanced by the Authority; and WHEREAS, the Authority has determined to issue its Sales Tax Revenue and Refunding Bonds Series 2020, dated July 1, 2020 (the “Series 2020 Bonds”), for the purpose of refunding certain outstanding indebtedness of the Authority and to provide capital improvements serving the City (the "Project"); and


WHEREAS, in order to secure the payment of the Series 2020 Bonds and define how the Sales Tax Revenues levied and collected pursuant to the Sales Tax Ordinances are to be received by the City and paid over to the Authority, it is necessary that this Sales Tax Agreement be entered into; and WHEREAS, all things to be done to make this Sales Tax Agreement a valid and binding agreement by and between the Authority and the City have been done, happened and performed; NOW, THEREFORE, IN CONSIDERATION of the mutual covenants expressed herein and the issuance of the Series 2020 Bonds by the Authority by and on behalf of the City and other good and valuable consideration, receipt of which is hereby acknowledged by and between the parties hereto, the Authority and the City agree as follows: SECTION 1. The Authority shall issue its Series 2020 Bonds and use the net proceeds thereof for the purposes set out above. SECTION 2. The sales tax monies received from the Oklahoma Tax Commission by the City each month shall be deposited in a special account established in the General Fund of the City. The City agrees to appropriate each year that amount of money representing the Sales Tax Revenues, said amount to be paid over as received for immediate deposit in a bank or banks designated by the Authority, in an account to be established entitled The Sallisaw Municipal Authority Sales Tax Account (the "Sales Tax Account"). The parties to this Sales Tax Agreement further hereby acknowledge and the Authority does hereby pledge, the referenced Sales Tax Revenues, for the purpose of paying debt service on the Authority’s outstanding debt service and in accordance with the provisions set forth herein. The Sales Tax Revenues are to be utilized in the manner and for the purposes set out herein, which purposes it is hereby acknowledged are consistent with the authorized uses of said Sales Tax Revenues as set out in the Sales Tax Ordinances. The Sales Tax Account shall be chargeable with the following payments in the following order of priority:


First: To provide an amount equal to one-half cent (½¢) of sales tax collections levied pursuant to Ordinance No. 2013-05 for the debt service on the Authority’s outstanding Sales Tax Revenue Bonds Series 2013, dated August 1, 2013 which shall cease to be levied and transferred by the City upon retirement of the Series 2013 Bonds on or before August 1, 2023; and

Second: To provide an amount equal to one-half cent (½¢) of sales tax collections levied pursuant to Ordinance No. 04-9 for the Authority’s outstanding Refunding Revenue Bonds, dated June 1, 2012; and

Third: The balance of the remaining one-cent (1¢) levied pursuant to Ordinance No. 88-7 Sales Tax Revenues shall be available to provide for debt service on the Authority’s outstanding Series 2020 Bonds and all other indebtedness equally secured therewith; and

Fourth: In the event the Authority is current on its debt service payments on the Series 2013 Bonds, the Series 2012A Bonds, and the Series 2020 Bonds and any other indebtedness issued on a parity therewith, then any remaining Sales Tax Revenues in the Sales Tax Account shall be available for any lawful purpose of the Authority as provided in the respective Sales Tax Ordinances.

SECTION 3. In consideration of the issuance of the Series 2020 Bonds by the Authority on behalf of the City, and to further secure said Series 2020 Bonds, the Authority has pledged the Sales Tax Revenues to BancFirst, Oklahoma City, Oklahoma, as trustee, pursuant to the bond indenture securing the Series 2020 Bonds (the “Trustee”), and does hereby create a security interest in said revenues in favor of the Trustee. SECTION 4. The Authority and the City agree to continually ensure that the Sales Tax Revenues is utilized for one or more of the authorized purposes as set out in the Sales Tax Ordinances and in the manner set out in Section 2 hereof.


SECTION 5. This Sales Tax Agreement shall remain in full force and effect until the Series 2020 Bonds and other indebtedness on a parity therewith is no longer outstanding. It is hereby acknowledged that under Oklahoma Law, the City may not become obligated beyond its fiscal year (July 1 through June 30) and therefore, the covenants made herein by the City shall be on a year-to-year basis automatically renewed for additional one-year periods on July 1 of each year until such time as the principal of and interest on the Series 2020 Bonds and other indebtedness on a parity therewith has been paid; provided that the payment of the sales tax monies as set out herein is subject to annual appropriation by the City, and provided further that since the levy, collection and use of the Sales Tax Revenues was approved by a majority of the voters voting at elections held for such purpose, the voters have the power to revoke the same. Additionally, the City shall not be obligated to transfer funds in an amount equal to any sales tax levy which shall expire pursuant to the terms of the ordinance providing for such levy. The Series 2020 Bonds are issued by the Authority shall in no way be or become an obligation of the City. SECTION 6. It is understood and agreed that this Sales Tax Agreement is a third-party beneficiary contract for the benefit of the holders of the Series 2020 Bonds and other indebtedness on a parity therewith and may be pledged and assigned by the Authority as security for the Series 2020 Bonds and other indebtedness on a parity therewith. [Remainder of Page Intentionally Left Blank.]


IN WITNESS WHEREOF, The Sallisaw Municipal Authority has caused this Sales Tax Agreement to be signed by its Chairman, attested by its Secretary, and has caused the seal of the Authority to be impressed hereon and the City of Sallisaw, Oklahoma, acting by and through its Board of Commissioners, has caused this Sales Tax Agreement to be signed by its Chairman, attested by its City Clerk, and has caused the seal of the City to be impressed hereon, all as of the date above set out.


By______________________________ Chairman of Trustees

ATTEST: (Seal) _______________________________ Secretary of Trustees

CITY OF SALLISAW, OKLAHOMA

By______________________________ Chairman, Board of Commissioners

ATTEST: (Seal) _______________________________ City Clerk


EXHIBIT D

CITY OF SALLISAW, OKLAHOMA ANNUAL FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED JUNE 30, 2019


CITY OF SALLISAW, OKLAHOMASALLISAW, OKLAHOMA

ANNUAL FINANCIAL STATEMENTSAND ACCOMPANYING

INDEPENDENT AUDITOR'S REPORT

FOR THE YEAR ENDEDJUNE 30, 2019

PagesList of Principal Officials 1

Independent Auditor's Report 2-3

Management's Discussion and Analysis 4-11

Basic Financial Statements

Government - Wide Financial StatementsStatement of Net Position 12Statement of Activities 13

Fund Financial StatementsGovernmental Funds -

Balance Sheet 14Statement of Revenues, Expenditures, and Changes in Fund Balances 15Reconciliation of Governmental Funds and Government-Wide

Financial Statements 16

Proprietary Funds - Statement of Net Position 17Statement of Revenues, Expenses, and Changes in Net Position 18Statement of Cash Flows 19

Notes to Financial Statements 20-45

Required Supplementary Information

Statement of Revenues, Expenditures, and Changes in Fund Balance Budget and 46Actual (Non-GAAP Budgetary Basis) – General Fund

Statement of Revenues, Expenditures, and Changes in Fund Balance Budget and 47Actual (Non-GAAP Budgetary Basis) – OK StateProject Fund

Schedule of the City's Proportionate Share of the Net Pension Liability and Related RatiosOklahoma Municipal Retirement Fund (OkMRF) 48

Schedule of the City's Proportionate Share of the Net Pension Liability and Related RatiosOklahoma Police Pension & Retirement System (OPPRS) 49

Schedule of the City's Proportionate Share of the Net Pension Liability and Related RatiosOklahoma Firefighters Pension & Retirement System (OFPRS) 50

Supplementary Information

Combining Financial Statements

Nonmajor Governmental FundsBalance Sheet 51-53Statement of Revenues, Expenditures, and Changes in Fund Balances 53-56

Internal Control and Compliance Information

Independent Auditor's report on Internal Control and Compliance Over Financial Reportingin Accordance with Government Auditing Standards 57-58

Schedule of Findings and Responses 59-60

City of Sallisaw, OklahomaAnnual Finanical Statements

June 30, 2019

Table of Contents

MayorErnie Martens

Commissioner Ward 1Ronnie Lowe

Commissioner Ward 2Philip Gay

Commissioner Ward 3Julian Mendiola

Commissioner Ward 4Shannon Vann

City of Sallisaw, OklahomaYear Ended June 30, 2019

List of Principal Officials

INDEPENDENT AUDITOR’S REPORT

To the Honorable Mayor and City Commissioners City of Sallisaw, Oklahoma

Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Sallisaw, Oklahoma, as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Sallisaw, Oklahoma, as of June 30, 2019, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and budgetary comparison information on pages 4-11 and 46-40 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Sallisaw, Oklahoma’s basic financial statements. The introductory section, combining nonmajor fund financial statements, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The combining nonmajor fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated November 19, 2019, on consideration of the City of Sallisaw, Oklahoma’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Sallisaw, Oklahoma’s internal control over financial reporting and compliance.

FSW&P CPAs-PLLC

Stillwater, Oklahoma

November 19, 2019

MANAGEMENT DISCUSSION & ANALYSIS CITY OF SALLISAW, OKLAHOMA JUNE 30, 2019

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The following discussion and analysis of the City of Sallisaw’s (the City) financial performance provides an overview of the City’s financial activities for the fiscal year ended June 30, 2019. Please read it in conjunction with the City’s basic financial statements. Financial Highlights

• The assets and deferred outflows of resources of the City of Sallisaw exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $20,752,846 (net position), compared to $16,944,700 in prior year. Of this amount, $3,662,421 (unrestricted net position) may be used to meet the government’s ongoing obligations to citizens and creditors.

• During the year, the government’s total net position increased by $3,808,146 compared to $2,470,907 in prior year.

• At of the close of the fiscal year, the City of Sallisaw’s governmental funds reported combined ending fund balances of $5,505,716, an increase of $1,215,534 in comparison with the prior year of $4,290,182. Approximately $1,360,000 is available for spending at the government’s discretion (assigned and unassigned fund balance).

• The City of Sallisaw’s long-term debt decreased $1,931,595 or 5.2% during the fiscal year due to scheduled payments made as well as a decline in the net pension obligations of the City.

Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City of Sallisaw’s basic financial statements. The City of Sallisaw’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide Financial Statements. The government-wide financial statements are designed to provide readers with a broad view of the City of Sallisaw’s finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the City of Sallisaw’s assets, deferred outflows and inflows, and liabilities, with the balance reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City of Sallisaw is improving or deteriorating. The statement of activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in the future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City of Sallisaw that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of Sallisaw include general government, public safety, public works, culture and recreation, and economic development. The business-type activities of the City of Sallisaw include the Sallisaw Municipal Authority which includes the city’s electric, water, wastewater, landfill, and sanitation utility operations, as well as telecommunication services. Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Sallisaw, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City of Sallisaw can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds.


5

Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains twenty (20) individual government funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund and capital improvements fund which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund date for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for all of its funds. A budgetary comparison statement has been provided for all major funds to demonstrate compliance with this budget. Proprietary funds. There are two types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses an enterprise fund to account for its Municipal Authority operation. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide information for the Sallisaw Municipal Authority. The Sallisaw Water Projects fund is part of the Sallisaw Municipal Authority but is used to account for the account balances (asset and debt) as well as the activities of its water system projects. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City does not have any internal service funds. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the City’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The City does not report any fiduciary funds. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. Other Information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City’s actual revenues and expenditures on a budgetary basis compared with the original and final budgets for the general fund, and a schedule of funding progress for the pension plan.


6

Government-Wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the City, assets plus deferred outflows of resources exceeded liabilities and deferred inflows of resources by $20,752,846 at the close of the most recent fiscal year. One portion of the City’s net position ($13,199,121 or 63%) reflects its investment in capital assets (e.g., land, buildings, improvements, vehicles, and equipment); less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending.

Another portion of the City’s net position ($3,891,304 or 19%) represents resources that are subject to external restrictions on how they may be used, for example, capital improvements and debt service. The remaining balance of unrestricted net position $3,662,421 (18%) may be used to meet the government’s ongoing obligations to citizens and creditors.


7

The City’s net position increased as a whole $3,808,146 during the fiscal year. When compared to prior year, the City noted only a 3% increase in revenues. Expenses noted a decrease of only 2% which shows a reallocation of resources of the City.

Financial Analysis of the Government’s Funds As noted earlier, the city uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirement’s net requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year.


8

Graphic presentation of the City’s governmental funds revenue sources and uses follow to assist in analysis of the City’s activities.

Sales tax provided for the largest portion of revenues of the City’s governmental funds at $2,884,682 compared to $2,728,695 in prior year. The next largest source of revenue for the City’s was Intergovernmental funds at $1,023,628 or 21%. This is a decrease from prior year due to the inclusion of funding from the Oklahoma Department of Transportation for improvements in fiscal year 2018.

Sales tax45%

Other taxes

9%

Charges for

services6%

Intergov't21%

Fines & forfeiture

10%

Misc9%

Revenue SourcesFiscal Year 2019

Sales tax49%

Other taxes

6%

Charges for

services4%

Intergov't37%

Fines & forfeiture

.7%

Misc7%

Revenue SourcesFiscal Year 2018

General gov't26%

Public safety35%

Public works10%

Culture & rec

9%

Econ Dev5%

Debt service:

3% Capital outlay12%

Use of FundsFiscal Year 2019

General gov't27%

Public safety33%

Public works13%

Culture & rec10%

Econ Dev6%

Debt service:

2%Capital outlay

7%

Use of FundsFiscal Year 2018


9

Public safety was the largest use of funds for the City during fiscal year 2019, totaling over $3.3 million or 35% of the City’s expenditures. This is consistent with prior year allocation of expenses. General government was the next largest use at $2.4 million or 26% of the use of funds, which, again, is consistent with prior year at 27%. These costs, as well as all other governmental activity expenses, were primarily funded by tax revenues. It should be noted that governmental expenses are adjusted from the fund statements to the government-wide statements for the purchase and construction of capital assets. Government-wide statement is full accrual; capital outlay expenses are eliminated and capital assets are reported. Business-type activities. The City’s business-type activities account for operating activities that are primarily financed by revenues generated by the activities themselves.

Business-type activities are shown comparing costs to revenues generated by the related services. Telecommunications, Sanitation, Landfill, Wastewater, Water, and Electric activities are intended to be self-supporting with user charges and other revenues designed to recover costs. Other activities provide services with minimal user charges. Budgetary Highlights of Major Governmental Funds The original adopted General Fund budget for fiscal year 2019 was $12,671,610 which is an increase of $611,493 over prior year’s budget of $12,060,117. Budget amendments were made during the fiscal year which changed the allocation of resources but did not increase the budget of the City. The General Fund budget complied in all material respects with financial policies approved by the City and the Oklahoma Municipal Budget Act. Capital Asset and Debt Administration Capital assets. The City’s investment in capital assets for its governmental and business-type activities as of June 30, 2019 is $43,715,260 (net of accumulated depreciation). This investment in capital assets includes land, buildings and improvements, vehicles and equipment, and infrastructure.

- 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000

Administration

Electric

Water

Wastewater

Landfill

Sanitation

Telecommunications

Business-type ActivitiesRevenue vs Expense Fiscal Year 2019

Revenues Expenses


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Long-term liabilities. For the year ended June 30, 2019, the City had total long-term liabilities of $35,202,945.

Long-term liabilities decreased over prior year by over $1.9 million due to payments made on outstanding bond obligations and a decline in the net pension liability of the City offset by capital lease arrangements made in governmental funds. Economic Factors and Next Year’s Budgets and Rates According to the William S. Spears School of Business, Center for Applied Economic Research, noted in July 2019 “The rebound in oil and natural gas prices from their lows in early 2016 spurred growth in the energy sector and the Oklahoma economy more broadly…The rebound in energy sector employment helped turn the overall Oklahoma economy around from the employment declines during 2015-2016. For the first time in several years Oklahoma’s total nonfarm employment grew as fast or faster than that of the nation at times during 2017-2018.” The economic environment of the state sheds light on the local economy of the City.


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Mission Statement

“The mission of the City of Sallisaw is to provide superior municipal services to all residents of the City in the most efficient, cost-effective manner possible, and to promote growth and development of the community to enhance the quality of life for all citizens.” Requests for information This financial report is designed to provide our citizens, taxpayers, customers, and investors with a general overview of the City’s finances and to show the City’s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Office of the City Manager at the City of Sallisaw, Post Office Box 525, Sallisaw, Oklahoma 74955-0525. You may also visit our website at www.sallisawok.org for more budgetary and contact information.

http://www.sallisawok.org/

Governmental Activities

Business-type Activities Total

AssetsCash and cash equivalents 3,724,045$ 1,818,725$ 5,542,770$ Investments 393,803 1,244,031 1,637,834 Receivables (net of allowance for uncollectible) 1,132,611 1,633,330 2,765,941 Inventory 10,843 - 10,843 Other assets 192,088 - 192,088 Restricted assets:

Cash and cash equivalents 7,239 2,509,428 2,516,667 Investments 768,019 495,063 1,263,082 Pension asset 131,143 - 131,143

Capital assets (net of accumulated depreciation) 7,003,060 36,712,200 43,715,260 Total assets 13,362,851 44,412,777 57,775,628

Deferred outflows of resourcesLoss on refunding of debt - 1,781,491 1,781,491 Deferred amounts related to pensions 1,610,076 300,528 1,910,604

Total deferred outflows of resources 1,610,076 2,082,019 3,692,095

LiabilitiesCurrent liabilities

Accounts payable 220,316 713,382 933,698 Payroll liabilities - - -

Due to other funds 314,703 (314,703) - Salary payable 44,848 26,185 71,033 Capital leases, current 326,383 - 326,383 Notes payable, current - 274,941 274,941 Bonds payable, current - 1,790,000 1,790,000

Payable from restricted assetsAccrued interest payable - 309,277 309,277 Customer deposits - 668,218 668,218

Long-term liabilitiesCompensated absences 387,780 137,595 525,375 Capital lease obligation 719,819 - 719,819 Notes payable - 3,034,996 3,034,996 Bonds payable - 24,370,000 24,370,000 Landfill closure - 2,247,503 2,247,503 Pension liability 3,267,508 806,615 4,074,123

Total liabilities 5,281,357 34,064,009 39,345,366 Deferred inflows of resourcesDeferred amounts related to pensions 1,134,781 234,730 1,369,511

Total deferred inflows of resources 1,134,781 234,730 1,369,511

Net positionNet investment in capital assets 5,956,858 7,242,263 13,199,121 Restricted 2,799,273 1,092,031 3,891,304 Unrestricted (199,342) 3,861,763 3,662,421

Total net position 8,556,789$ 12,196,057$ 20,752,846$

City of Sallisaw, OklahomaStatement of Net Position

June 30, 2019

See accompanying notes to financial statements. 12

Expenses Charges for

Services Operating Grants and Contributions

Capital Grants and Contributions

Governmental Activities

Business-type Activities Total

Governmental activities:General government 2,580,754$ 104,665$ -$ -$ (2,476,089)$ -$ (2,476,089)$ Public safety 3,522,642 473,633 348,039 - (2,700,970) - (2,700,970) Public works 1,148,176 105,567 174,692 444,971 (422,946) - (422,946) Culture and recreation 913,432 54,707 2,600 107,747 (748,378) - (748,378) Economic development 742,203 - - - (742,203) - (742,203)

Total governmental activities 8,907,207 738,572 525,331 552,718 (7,090,586) - (7,090,586)

Business-type activities:Administration 1,499,342 464,594 - - - (1,034,748) (1,034,748) Electric 7,965,221 10,319,588 - - - 2,354,367 2,354,367 Water 1,098,212 1,948,887 - - - 850,675 850,675 Wastewater 1,354,452 820,409 - - - (534,043) (534,043) Landfill 1,181,785 1,557,103 - - - 375,318 375,318 Sanitation 583,109 1,213,481 - - - 630,372 630,372 Telecommunications 2,660,511 3,092,843 - - - 432,332 432,332

Total business-type activities 16,342,632 19,416,905 - - - 3,074,273 3,074,273 Total primary government 25,249,839$ 20,155,477$ 525,331$ 552,718$ (7,090,586)$ 3,074,273$ (4,016,313)$

General revenues:Sales tax 2,884,683 2,884,682 5,769,365 Other taxes 404,990 442,145 847,135 Interest income 31,309 57,294 88,603 Miscellaneous 250,029 838,913 1,088,942 Change in pension obligation 751,585 - 751,585 Transfers - internal activity 5,192,015 (5,192,015) - Transfers - other governments (721,171) - (721,171)

Total general revenues and transfers 8,793,440 (968,981) 7,824,459 Change in net position 1,702,854 2,105,292 3,808,146

Net position, beginning 6,853,935 10,090,765 16,944,700

Net position, ending 8,556,789$ 12,196,057$ 20,752,846$

City of Sallisaw, OklahomaStatement of Activities

Year Ended June 30, 2019

Program Revenues Net (Expense) Revenue and Changes in Net Position


General

Oklahoma State Project

Fund

Other Governmental

Funds

Total Governmental

Funds AssetsCash and cash equivalents 509,919$ -$ 3,214,126$ 3,724,045$ Investments 103,288 - 290,515 393,803 Restricted cash 7,239 - - 7,239 Restricted investments 768,019 - - 768,019 Receivables:

Taxes 581,591 - 8,589 590,180 Grant - 309,664 36,307 345,971 Municipal court fines 184,390 - - 184,390 Accrued interest 705 - 223 928 Other, net of allowance 11,142 - - 11,142

Due from other funds 165,278 - 76,168 241,446 Inventory 10,843 - - 10,843 Other assets 192,088 - - 192,088

Total assets 2,534,502$ 309,664$ 3,625,928$ 6,470,094$

LiabilitiesAccounts payable 208,938$ -$ 10,261$ 219,199$ Salary payable 44,848 - - 44,848 Capital lease, current obligation - - 143,065 143,065 Due to other funds 550,383 - 5,766 556,149 Court bonds payable 1,117 - - 1,117

Total liabilities 805,286 - 159,092 964,378

Fund balanceNonspendable 10,843 - - 10,843 Restricted 775,258 - 2,024,015 2,799,273 Committed - - 1,335,671 1,335,671 Assigned - - 107,150 107,150 Unassigned 943,115 309,664 - 1,252,779

Total fund balances 1,729,216 309,664 3,466,836 5,505,716 Total liabilities and fund balances 2,534,502$ 309,664$ 3,625,928$ 6,470,094$

Amounts reported for governmental activities in the Statement of Net Position are different because:

Land and capital assets, net of accumulated depreciation, are not financial resources and, in the funds, and therefore, are not reported

Land and construction in process 1,849,636 Capital assets 15,406,510 Less: Accumulated depreciation (10,253,086) 7,003,060

Long-term portion of liabilities are not due and payable in the current period and are not reportedCapital lease obligations (903,137) Compensated absences (387,780) Net deferred outflows(inflows) on pension obligations 475,295 Net pension (obligation)/asset (3,136,365) (3,951,987)

Net position of governmental activities 8,556,789$

City of Sallisaw, OklahomaBalance Sheet

Governmental FundsJune 30, 2019


General

Oklahoma State Project

Fund

Other Governmental

Funds

Total Governmental

Funds RevenuesSales tax 2,163,512$ -$ 721,171$ 2,884,683$ Other taxes 314,501 - 90,489 404,990 Licenses and permits 66,625 - - 66,625 Intergovernmental 2,500 434,971 586,157 1,023,628 Fines and forfeitures 449,789 - 16,549 466,338 Charges for services 181,869 - 21,700 203,569 Rental 11,010 - 9,640 20,650 Donations - - 35,811 35,811 Other 272,316 11,238 75,243 358,797 Interest 21,142 - 10,167 31,309

Total revenues 3,483,264 446,209 1,566,927 5,496,400

ExpendituresGeneral government 2,483,633 - - 2,483,633 Public safety 3,075,930 - 304,169 3,380,099 Public works 860,918 - 69,375 930,293 Culture and recreation 846,226 - 38,547 884,773 Economic development 532,197 - - 532,197 Debt service:

Principal - - 283,625 283,625 Interest - - 24,865 24,865

Capital outlay 80,666 91,053 978,619 1,150,338 Total expenditures 7,879,570 91,053 1,699,200 9,669,823

Excess of revenues over (under) expenditures (4,396,306) 355,156 (132,273) (4,173,423)

Other financing sources (uses)Proceeds from capital lease obligations - - 918,113 918,113 Transfers in 9,757,145 - 603,000 10,360,145 Transfers out (4,243,438) - (924,692) (5,168,130) Transfers out to other governments (721,171) - - (721,171)

Total other financing sources (uses) 4,792,536 - 596,421 5,388,957

Net change in fund balances 396,230 355,156 464,148 1,215,534

Fund balances, beginning 1,332,986 (45,492) 3,002,688 4,290,182

Fund balances, ending 1,729,216$ 309,664$ 3,466,836$ 5,505,716$

City of Sallisaw, OklahomaStatement of Revenues, Expenditures, and Changes in Fund Balances -

Governmental FundsYear Ended June 30, 2019


Net change in fund balances - total governmental funds 1,215,534$

Governmental funds report capital outlays as expenditures; whereas, in the statement ofactivities, the cost of those assets are allocated over their estimated useful lives as a depreciation expense.

Capital outlay expenditures capitalized 1,150,338 Depreciation expense (698,094)

In the statement of activities, the cost of pension benefits earned net of employeecontributions is reported as an element of pension expense. The fund financial statementsreport pension contributions as expenditures. 751,585

The proceeds of debt issuance provides current financial resources to governmental funds,but issuing debt increases long-term liabilities in the statement of net position. Repaymentof debt principal is an expenditure in the governmental funds, but the repayment reduceslong-term liabilities in the statement of net position.

Proceeds from capital lease obligations (918,113) Capital lease principal payments 283,625

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

Accrued compensated absences, net change (82,021)

Change in net position of governmental activities 1,702,854$

City of Sallisaw, OklahomaReconciliation of Governmental Funds and Government-Wide

Financial StatementsYear Ended June 30, 2019


Sallisaw Municipal Authority

Sallisaw Economic Authority Total

AssetsCash and cash equivalents 1,781,187$ 37,538$ 1,818,725$ Investments 1,244,031 - 1,244,031 Receivables:

Accounts (net of allowance for uncollectible) 1,631,834 - 1,631,834 Accrued interest 1,496 1,496

Due from other funds 553,777 - 553,777 Restricted assets:

Cash and cash equivalents 2,509,428 - 2,509,428 Investments 495,063 - 495,063

Capital assets (net of accumulated depreciation) 35,930,868 781,332 36,712,200 Total assets 44,147,684 818,870 44,966,554

Deferred outflows of resourcesLoss on refunding of debt 1,781,491 - 1,781,491 Deferred amounts related to pensions 300,528 - 300,528

Total deferred outflows of resources 2,082,019 - 2,082,019

LiabilitiesAccounts payable 713,382 - 713,382 Salary payable 26,185 - 26,185 Notes payable, current 274,941 - 274,941 Bonds payable, current 1,790,000 - 1,790,000 Payable from restricted assets:

Accrued interest payable 309,277 - 309,277 Customer deposits 668,218 - 668,218

Due to other funds 239,074 - 239,074 Noncurrent liabilities:

Compensated absences 137,595 - 137,595 Notes payable 3,034,996 - 3,034,996 Bonds payable 24,370,000 - 24,370,000 Landfill closure 2,247,503 - 2,247,503 Pension obligation 806,615 - 806,615

Total liabilities 34,617,786 - 34,617,786 Deferred inflows of resourcesDeferred amounts related to pensions 234,730 - 234,730

Net positionNet investment in capital assets 6,460,931 781,332 7,242,263 Restricted:

Debt service 1,092,031 - 1,092,031 Unrestricted 3,824,225 37,538 3,861,763

Total net position 11,377,187$ 818,870$ 12,196,057$

City of Sallisaw, OklahomaStatement of Net Position

Proprietary FundsJune 30, 2019

Enterprise Funds



Sallisaw Economic Authority Totals

Operating revenuesCharges for services:

Electric 10,319,588$ -$ 10,319,588$ Water 1,948,887 - 1,948,887 Wastewater 820,409 - 820,409 Landfill 1,557,103 - 1,557,103 Sanitation 1,213,481 - 1,213,481 Telecommunications 3,092,843 - 3,092,843 Other 464,594 - 464,594

Total operating revenues 19,416,905 - 19,416,905

Operating expensesAdministration 90,325 12 90,337 Electric 7,688,053 - 7,688,053 Water 681,101 - 681,101 Wastewater 671,363 - 671,363 Landfill 831,741 - 831,741 Sanitation 478,206 - 478,206 Telecommunications 2,358,833 - 2,358,833 Depreciation and amortization 2,350,300 - 2,350,300 Bad debt expense 58,337 - 58,337

Total operating expenses 15,208,259 12 15,208,271

Total operating income (loss) 4,208,646 (12) 4,208,634

Nonoperating revenues (expenses)Sales tax 2,884,682 - 2,884,682 Other taxes 442,145 - 442,145 Miscellaneous revenues 228,913 610,000 838,913 Interest income 57,294 - 57,294 Gain (loss) on disposal of assets - - - Interest expense and fiscal charges (1,134,361) - (1,134,361) Payments to hospital - - -

Total nonoperating revenues (expenses) 2,478,673 610,000 3,088,673

Operating transfersTransfers in 4,963,964 201,166 5,165,130 Transfers (out) (10,357,145) - (10,357,145)

Total operating transfers (5,393,181) 201,166 (5,192,015)

Net income (loss) 1,294,138 811,154 2,105,292

Net position, beginning 10,083,049 7,716 10,090,765

Net position, ending 11,377,187$ 818,870$ 12,196,057$

City of Sallisaw, OklahomaStatement of Revenues, Expenses, and Changes in Net Position -

Proprietary FundsYear Ended June 30, 2019

Enterprise funds



Sallisaw Economic Authority Total

Cash flows from operating activities: Receipts from customers 19,585,378$ -$ 19,585,378$ Payments to suppliers (10,556,261) (12) (10,556,273) Payments to employees (2,577,030) - (2,577,030)

Net cash provided (used) by operating activities 6,452,087 (12) 6,452,075

Cash flows from non-capital financing activities: Transfers from other funds 4,963,964 201,166 5,165,130 Transfers to other funds (10,357,145) - (10,357,145) Intergovernmental revenues 3,326,827 610,000 3,936,827

Net cash provided (used) by non-capital financing activities (2,066,354) 811,166 (1,255,188)

Cash flows from capital and related financing activities: Purchase of capital assets (2,047,429) (781,332) (2,828,761) Capital grants and contributions 552,597 - 552,597 Principal paid on capital debt (2,004,634) - (2,004,634) Interest paid on capital debt (1,130,509) - (1,130,509)

Net cash provided (used) by capital andrelated financing activities (4,629,975) (781,332) (5,411,307)

Cash flows from investing activities: Purchase of investments 273,760 - 273,760 Investment income 57,294 - 57,294

Net cash provided (used) by investing activities 331,054 - 331,054

Net increase (decrease) in cash and cash equivalents 86,812 29,822 116,634

Cash & cash equivalents, June 30, 2018 2,938,406 7,716 2,946,122

Cash & cash equivalents, June 30, 2019 3,025,218$ 37,538$ 3,062,756$

Cash, including time deposits 1,781,187$ 37,538$ 1,818,725$ Restricted cash, including time deposits 1,244,031 - 1,244,031

Total cash and cash equivalents, end of year 3,025,218$ 37,538$ 3,062,756$

Reconciliation of operating income (loss) to net cash provided (used) by operating activities

Operating income (loss) 4,208,646$ (12)$ 4,208,634$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities:

Depreciation 2,350,300 - 2,350,300 Bad debt 58,337 58,337 Changes in assets and liabilities:(Increase) decrease in receivables 168,473 - 168,473 Increase (decrease) in accounts payable (189,337) - (189,337) Increase (decrease) in payroll liabilities (88,703) - (88,703) Increase (decrease) in other liabilities (55,629) - (55,629) Total adjustments 2,243,441 - 2,243,441

Net cash provided (used) by operating activities 6,452,087$ (12)$ 6,452,075$

Enterprise Funds

City of Sallisaw, OklahomaStatement of Cash Flows

Proprietary FundsYear Ended June 30, 2019


CITY OF SALLISAW, OKLAHOMA Notes to the Financial Statements

June 30, 2019

20

I. Organization

The City of Sallisaw, Oklahoma, (the City) operates under a Council-Manager form of government under Title 11 of the Oklahoma Statutes. The City provides the following services to its citizens: public safety (police and fire), streets and highways, sanitation and solid waste services, culture and recreation, public improvements, electric and water utilities, cable television, internet, telephone, planning and zoning, and general administrative services.

II. Summary of significant accounting policies

A. Reporting entity

The accompanying financial statements present the City and its component units, entities for which the City is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the City’s operations. The City’s financial statements do not include any discreetly presented component units which would be reported in a separate column in the government-wide financial statements to emphasize that it is legally separate from the City. Component Units: Sallisaw Municipal Authority (“SMA”) was created as a public trust pursuant to Title 60 of the Oklahoma Statues to finances, develop, and operate the electric, water, wastewater, solid waste, and telecommunications activities of the City. SMA is governed by a board comprised of the City’s elected commissioners. The rates for user charges and bond issuance authorizations are approved by the city commission. SMA is reported as a blended component unit. Sallisaw Economic Authority (“SEA”) was created as public trusts pursuant to Title 60 of the Oklahoma Statues to finance and pursue economic development activities within the City of Sallisaw. The City Commissioners serve as the governing body. SEA is reported as blended component unit. In fiscal year 2015, all assets of the SEA were sold. Sallisaw Library Trust Authority was organized as a public trust to help promote the library services and facilities in the City. The Library Trust Authority is reported as a special revenue fund in the combining governmental statements of the City.

B. Basis of Presentation

Government-wide financial statements

The primary government and component units are presented separately within the financial statements with the focus on the primary government. Individual funds are not displayed but the statements distinguish governmental activities, generally supported by taxes and general revenues, from business-type activities, generally financed with fees charged to external customers. The statement of activities reports the expenses of a given function offset by program revenues directly connected with the functional program. A function is an assembly of similar activities and may include portions of a fund or summarize more than one fund to capture the expenses and program revenues associated with a distinct functional activity. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) operational grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or


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segment (3) capital grants and contributions which fund the acquisition, construction, or rehabilitation of capital assets. Taxes and other revenue sources not properly included among program revenues are reported as general revenues.

Fund financial statements

Fund financial statements are provided for governmental funds and proprietary funds. Major individual governmental and enterprise funds are reported as separate columns in the fund financial statements with composite columns for non-major funds. The City reports the following major governmental funds: General Fund – The general fund is the City’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. State Grant Fund - The State Grant fund accounts for grant proceeds received from state agencies.

The City reports the following major proprietary funds:

Sallisaw Municipal Authority – SMA accounts for the revenues generated by the City’s utility systems and the expenditures related to the operations and financing of such utilities. This includes the electric, water, wastewater, landfill, sanitation, and telecommunication services.

The City reports no fiduciary activities.

C. Measurement focus, basis of accounting, and financial statement presentation

Generally Accepted Accounting Principles (U.S. GAAP)

The financial statements of the City are prepared in accordance with U.S. GAAP. The City applies all relevant GASB pronouncements.

Measurement focus, basis of accounting, and financial statement presentation The government-wide financial statements include the statement of net position and the statement of activities and are reported on the accrual basis of accounting and economic resource focus. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. In proprietary funds, operating revenues and expenses are distinguished from non-operating items. Operating revenues and expenses generally result from providing services in connection with the principle ongoing operations of the fund. All revenues and expenses not meeting this definition are reported as non-operating items. Governmental fund financial statements are reported using the current financial resources measurement focus and modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absence, claims, and judgements are recorded in the year payment is due.


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Major revenue sources susceptible to accrual include sales and use taxes, franchise taxes, intergovernmental revenues, and investment income. In general, other revenues are recognized when cash is received. Operating income reported in proprietary fund financial statements includes revenues and expenses related to the primary, continuing operations of the fund. Principal operating revenues for proprietary funds are charges to customers for sales or services. Principal operating expenses are the costs of providing goods or services and include administrative expenses and depreciation of capital assets. Other revenues and expenses are classified as non-operating in the financial statements. For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Oklahoma Police Pension and Retirement System (OPPRS) and the Oklahoma Firefighter’ Pension and Retirement System (OFPRS) and additions to / deductions from OPPRS and OFPRS fiduciary net position have been determined on the same basis as they are reported by OPPRS and OFPRS. For this purpose, benefit payments (including refunds of employee contributions) re recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Use of estimates The preparation of financial statements in conformity with U.S. GAPP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure; accordingly, actual results could differ from those estimates.

D. Budget policy and practice

Annual budgets are adopted for governmental funds and the Sallisaw Municipal Authority. All unencumbered annual appropriations will lapse at fiscal year-end. Actual expenditures within a fund may not exceed 90% of the budget until actual revenues equal to the estimated amount have been received. No expenditure can exceed the actual amount on hand. Prior to June of each year, all department heads of the City submit requests for appropriations to the city manager so that a budget may be prepared. The city manager meets with each of the department heads to review their needs, estimates, and requests. The Commissioners hold a public hearing prior to June 15 and a final budget must be prepared and adopted no later than June 23. The appropriated budget is prepared by fund, function, and department. Transfers of appropriations within a department or between departments may be approved by the city manager. Once the budget is established, the Commission must authorize any amendments that change the total legal appropriations of the fund previously approved in the budget. The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is the department level. Encumbrance accounting is employed in governmental funds. Encumbrances (e.g., purchase orders, contracts) outstanding at year-end are reported as reservations of fund balances and do not constitute expenditures or liabilities as the commitments will be re-appropriated and honored during the subsequent year.


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E. Policies Related to Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Fund Equity

Deposits and investments The City’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. City policy is that deposits can only be made in financial institutions insured by the Federal Deposit Insurance Corporation. The City invests its funds in an effort to ensure preservation of capital, remain sufficiently liquid and attain a reasonable market rate of return, while remaining within the guidelines provided by the City’s investment policy. Investments for the City, as well as for its component units, are reported at fair value. Cash deposits are reported at carrying amount which reasonably estimates fair value. Receivables and payables Receivables in governmental funds and governmental activities include tax accruals and intergovernmental revenues such as grant requests, as they are both measurable and available. These receivables are due within one year. Proprietary fund and business-type activities receivables include revenues earned at year end but not yet received. Utility accounts receivable, both billed and unbilled, comprise the majority of the receivables. All trade receivables are shown net of an allowance for uncollectible. Trade accounts receivable in excess of 90 days comprise the trade accounts receivable allowance for uncollectible. Inventories Inventories are similarly reported in government-wide and fund financial statements. Inventories in governmental funds consist of airport fuel held for future sale. The fuel is reported at cost and recorded as an expense at the time the fuel is sold. Restricted assets Restricted assets include assets legally restricted for capital projects funded through long-term debt, debt service reserves, facility charges, and Federal, State, and private grants. Restricted assets and liabilities current in nature are reported with current assets and current liabilities in the financial statements. Assets restricted for acquisition or construction of non-current assets or assets restricted for liquidation of long-term debt are reported with non-current assets. It is the City's policy when purchasing goods or services, or servicing debt for which resources have been restricted, to use restricted resources first and then unrestricted resources as needed. Restricted assets and liabilities payable from restricted assets current in natures are reported with the current assets and current liabilities in the financial statements. Capital assets

The City's property, plant, equipment, and infrastructure with useful lives of more than one year are stated at historical cost and reported in the government-wide financial statements. Proprietary


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and component unit capital assets are also reported in their respective fund and combining component units’ financial statements. Donated assets are stated at fair value on the date donated. Capital assets are defined by the City as assets with an initial, individual cost of more than the following amounts, along with an estimated useful life in excess of one year.

Assets Cost

Threshold Buildings and improvements $ 25,000 Equipment and vehicles 5,000 Telecommunications, computer, and other personal property 10,000 Infrastructure 50,000

The costs of normal maintenance and repairs that do not add to the asset value or materially extend useful lives are not capitalized. Capital assets, including those of component units, are depreciated using the straight-line method. When capital assets are disposed, the cost and applicable accumulated depreciation are removed from the respective accounts, and the resulting gain or loss is recorded in operations.

Assets Years Buildings 30-50 Improvements other than buildings 15-30 Infrastructure 30-40 Equipment and vehicles 3-12

Major outlays for capital assets and improvements are recorded as construction in progress and are not depreciated until placed in service. Interfund balances Generally, outstanding balances between funds reported as due to/due from other funds include outstanding charges by one fund to another for goods or services outstanding at year end, or other miscellaneous receivables/payable between funds. All activity between governmental and business-type activities are eliminated and any residual balances outstanding between the activities are reported in the government-wide financial statements as internal balances. Deferred outflows of resources and deferred inflows of resources In addition to assets and liabilities, the statement of financial position and the governmental fund balance sheet may report separate sections of deferred outflows of resources and deferred inflows of resources. Deferred outflows of resources represent a consumption of net position that applies to a future period which will not be recognized as an outflow of resources until that time. Deferred inflows of resources represent an acquisition of net position that applies to a future period which will not be recognized as an inflow of resources until that time. Compensated absences

All full-time City employees earn vacation at varying rates depending upon years of eligible service. All vacation pay is accrued when incurred in the government-wide and proprietary fund financial statements. Vacation leave which is unused and vested to the employee in good standing, is payable upon termination. Except as described below, employees are not compensated for unused sick leave upon their termination of employment. In governmental funds, amounts accrued are expected to be liquidated with available financial resources and are reported as an expenditure. For governmental activities, compensated absences are generally liquidated by the general fund.


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Full-time employees with at least one year of service earn vacation of five (5) to twenty (20) days per year depending on years of service completed. Employees may carry over up to 480 hours of unused vacation. Full-time employees are granted sick leave at a rate of 4.615 hours per pay period, with no limitation on the amount that can be accrued or carried over. Upon retirement, employees will be compensated for hours accrued in excess of 1,000 hours, up to a maximum of 2,500 hours, at a rate of $2,500 for the first 1,000 hours, and $5.00/hour for the next 1,500 hours. Fund equity Fund balance Nonspendable Fund Balance Fund balances reported as non-spendable includes amounts that cannot be spent because they are either not in spendable form or not expected to be converted to cash including inventories and non-current receivables. Restricted Fund Balance Restricted fund balance includes amounts that are constrained for a specific purpose which are externally imposed by providers, such as creditors, or amounts constrained due to constitutional provisions or enabling legislation including City ordinances approved by a vote of the citizens. Committed Fund Balance Committed fund balance includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the city’s highest level of decision-making authority. The City’s highest level of decision-making authority is made by ordinance. Assigned Fund Balance Assigned fund balance includes amounts that are intended to be used for specific purposes but are neither restricted nor committed. Assignments of fund balance may be made by city council action or management decision when the city council had designated that authority. Unassigned Fund Balance Unassigned fund balance includes balances that has not been assigned to other funds and had not been restricted, committed, or assigned to specific purposes within the general fund. It is the City’s policy to first use restricted fund balance prior to the use of unrestricted fund balance when an expense is incurred for purposes for which both restricted and unrestricted fund balance are available. The City’s policy for the use of unrestricted fund balance amounts require that committed amounts would be reduced first, followed by assigned amounts, and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of those unrestricted fund balance classifications could be used. Net Position Net investment in capital assets and legally restricted amounts are separated from unrestricted net position. Net investment in capital assets The amount reported is calculated as total capital assets less accumulated depreciation and outstanding debt used to purchase the assets net of unspent portions. Unspent portions of debt, along with any amounts used to fund debts reserves, are included with restricted net position.

Restricted Amounts reported as restricted net position include constraints placed on the use either by 1) external groups such as creditors, grantors, contributors, or laws and regulations of other governments, or 2) law through constitutional provisions or enabling legislation.


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F. Policies Related to Revenues and Expenses

Program Revenues Charges for Services Program revenues reported with governmental activities include charges for services like permits and fees, parks charges, and fines and forfeitures. Business-type activity charges for services include all operating income of proprietary funds. Grants and Contributions Governmental grants and contributions primarily consist of grants from Federal and state agencies. The nature of the grant determines if it is reported as operating or capital program revenues. Business-type activities’ grants and contributions include restricted investment income, donations from others, as well as grants from Federal and state agencies. General Revenues General revenues reported with governmental activities include tax revenues. Both governmental and business-type activities report unrestricted investment income as general revenues. Sales Tax The City received 4% tax on sales within the City. The tax is restricted as follows: • 1.00% in the General Fund to find City operations. • 1.00% to the Sallisaw Municipal Authority for operations. • 0.50% to the Sallisaw Municipal Authority for debt service water projects. • 0.50% to the Sallisaw Municipal Authority for debt service on the sports complex. • 0.50% to the Capital improvements fund for capital outlay and debt service. • 0.50% to the Sallisaw hospital.

III. Detail Notes on Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Fund Equity

A. Deposits and investments Deposits

Custodial credit risk for deposits is the risk that in the event of a bank failure, the City’s deposits may not be returned, or the City will not be able to recover collateral securities in the possession of an outside party. The City’s deposits are secured by collateral values at market or par, whichever is lower, less the amount covered by the Federal Deposit Insurance Corporation (FDIC). Deposited funds may be invested in certificates of deposit in institutions with an established record of fiscal health and service. At June 30, 2019, the City was fully collaterialized. Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Investments held for longer periods are subject to increased risk of adverse interest rate changes.


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Investments The City invests primarily in certificates of deposit. Investment securities are exposed to various risks such as interest rate risk and credit risk. The following is a summary of the investments of primary government.

B. Receivables Receivables as of June 30, 2019, for the City’s major funds and nonmajor funds in the aggregate, including the applicable allowances for uncollectible accounts are as follows:


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C. Restricted cash and investments

The following details the restricted cash and investments held by the City as of June 30, 2019:

D. Capital assets Capital asset balances and activities for the year ended June 30, 2019 were as follows:


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


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E. Long-term liabilities Governmental activities

Capital Leases The City has entered into several lease agreements as lessee for financing the acquisition of buildings, land, and equipment. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of their future minimum lease payments as of the inception date. The governmental activities capital lease obligations are as follows:


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Business-type activities


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The following is a summary of changes in long-term debt for the year ended June 30, 2019:

Annual debt service requirements to maturity for long-term debt are as follows:

F. Defeased debt

On June 1, 2012, the Sallisaw Municipal Authority issued the Series 2012 Sallisaw Municipal Authority Revenue Refunding Bonds of $22,875,000 with interest rates ranging from 0.96% to 4.00% to advance refund the Series 2005 Revenue Bonds with interest rates from 3.80% to 5.00%. The Series 2005 bonds mature annually through 2035. The Series 2012 bonds were issued at a discount of $269,501, and after paying issuance costs of $894,875, the net proceeds were $21,741,066, including accrued interest. The net proceeds, along with available cash funds from the old debt, were used to purchase U.S. Government-backed securities in the amount of $23,416,761, which were deposited into an irrevocable trust with an escrow agent to provide debt service payments when due over the remaining term of the Series 2005 bonds. The advance


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refunding met the requirements of an in-substance debt defeasance and the Series 2005 bonds were removed from the City of Sallisaw’s financial statements. As a result of the advance refunding, the Sallisaw Municipal Authority reduced its total debt service requirements by $3,588,112.

G. Interfund receivables, payables, and transfers

The composition of interfund balances as of June 30, 2019, is as follows:

The City records a transfer to other governments in the amount of $721,171 to reflect the restricted sales tax for the Hospital as discussed in Note II.F.


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H. Landfill closure and post-closure liability

Federal and State regulations require the City to place a final cover on its landfill site when it stops accepting water, and to perform certain maintenance and monitoring functions at the site for eighteen years after closure. Although closure and post-closure care costs will be paid only near or after the date the landfill stops accepting waster, the City reports a portion of those costs as an operating expense of the Sallisaw Municipal Authority each fiscal year. The amount of the current period expense is based upon the amount of landfill capacity used as of each fiscal year. The $2,247,503 reported as a long-term liability for the accrued landfill closure cost liability as of June 30, 2019, represents the cumulative amount of such cost reported to date based on the use of approximately 68.5% of the estimated capacity of the landfill. The Sallisaw Municipal Authority will recognize the remaining estimated costs of closure and post-closure care in the amount of $1,033,523 as the remaining estimated capacity is filled. These amounts are based on what it would cost to perform all closure and post-closure care in 2019. Based on current life of the site, the City expects the current site to remain open until fiscal year 2028. Actual costs may be more or less at that time than are currently estimated. The estimated closure and post-closure costs and the accrued liability as of June 30, 2019, are as follows:

The City has qualified under the State of Oklahoma Department of Environmental Quality (DEQ) financial assurance test relating to these future closure and post-closure costs, whereby the City’s overall financial condition and other submitted information serves as evidence of the City’s ability to pay for the closure and post-closure care costs when the landfill is closed. As such, the City is not required to fund an escrow trust account for the costs.

IV. Other information

A. Risk management

The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The City has insurance for the major risks such as property, general liability, workers’ compensation, and unemployment. Commercial insurance is used to cover general liability claims and the risk of loss to City buildings and mobile equipment. Judgements against the City may be paid by a property tax assessment over a three-year period.


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B. Employee retirement systems and pension plans

The City participates in four employee pension systems as follows:

Name of Plan/System Type of Plan Oklahoma Police Pension and Retirement Fund Cost Sharing Multiple Employer – Defined Benefit Plan Oklahoma Firefighters Pension and Retirement

Fund Cost Sharing Multiple Employer – Defined Benefit Plan

Oklahoma Municipal Retirement Fund Agent Multiple Employer – Defined Benefit Plan ICMA Section 457 Deferred Compensation Plan Single Employer Deferred Compensation Plan

Oklahoma Police Pension and Retirement System (OPPRS) Plan Description – The City of Sallisaw, as the employer, participates in the Oklahoma Police Pension and Retirement plan, a cost-sharing, multiple-employer defined benefit pension plan administered by the Oklahoma Police Pension and Retirement System (OPPRS). Title 11 of the Oklahoma State Statues, through the Oklahoma Legislature, grants the authority to establish and amend the benefit terms to the OPPRS. OPPRS issues a publicly available financial report that can be obtained at www.ok.gov/OPPRS Benefits Provided – The OPPRS provides retirement, death, and disability benefits to plan members and beneficiaries. The normal retirement date under the Plan is the date upon which the participant completes 20 years of credited service, regardless of age. Participants become vested upon completing 10 years if credited service. Participants’ contributions are refundable, without interest, upon termination prior to normal retirement. Participants who have completed 10 years of credited service may elect a vested benefit in Lieu of having their accumulated contributions refunded. If the vested balance is elected, the participant is entitled to a monthly retirement benefit commencing on the date the participant reaches 50 years if age or the date the participant would have had 20 years of credited service had employments continued uninterrupted, whichever is first. Monthly retirement benefits are calculated at 2.5% of the final average salary (defined as the average base salary of the officer over the highest 30 consecutive months of the last 60 months of credited service) multiplied by the years of credited service considered. Monthly benefits for participants due to permanent disability incurred in the line of duty are 2.5% of the participants’ final average salary multiplied by 20 years. This disability benefit is reduced by stated percentages for partial disability based on the percentage of impairment. After 10 years of credited service, participants who retire due to disability incurred from any cause are eligible for a monthly benefit based on 2.5% of their final average salary multiplied by the years of service, this disability based on the percentage of impairment. Effective July 1, 1998, once a disability benefit is granted to a participant, that participant is no longer allowed to apply for an increase in the dollar amount of the benefit at a subsequent date. Survivor’s benefits are payable in full to the participant’s beneficiary upon the death of a retired participant. The beneficiary of any active participant killed in the line of duty is entitles to a pension benefit. Contributions – The contribution requirements of plan are at an established rate determined by Oklahoma Statute and are not based in actuarial calculations. Plan members are required to contribute 8.0% of their annual covered salary and the City of Sallisaw contributes 13.0% of annual covered payroll. Contributions to the OPPRS for the year ended June 30, 2019, for the employees and employer were $79,164 and $128,641, respectively, on covered payroll of $989,550.

http://www.ok.gov/OPPRS


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Pension liabilities, pension expense, and deferred outflows and inflows of resources related to pensions – As of June 30, 2019, the City reported an asset of $131,143 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2018, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of July 1, 2018.The City’ proportion of the net pension liability was based on the City’s contributions received by the pension plan relative to the total contributions received by pension plan for all participating employers as of June 30, 2018. Based upon this information, the City’s proportionate share was 0.2753%. For the year ended June 30, 2019, the City recognized $92,928 in pension expense. At June 30, 2019, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Amortization of Pension Deferrals - $132,100 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as an increase of the net pension asset in the year ended June 30, 2019. Amounts reported as deferred inflows of resources will be recognized in pension expense as follows:

Actuarial assumptions: - The total pension liability was determined by an actuarial valuation as of July 1, 2018 actuarial valuation using the following actuarial assumptions, applied to all periods included in the measurement.

Inflation: 3%

Salary increases: 4.5% to 17% average, including inflations

Investment rate of return: 7.5% net of pension plan investment expense

Mortality rates: Active employees (pre-retirement): RP-2000 Combined Blue Collar Healthy Employees with (fully generational using scale AA) with age set back four years.

Active employees (post retirement) and nondisabled pensioners: RP-2000 Blue Collar Healthy Employees with fully generational projection.


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Disabled pensioners: RP-2000 Blue Collar Healthy Combined with age set back four years.

The actuarial assumptions used in the July 1, 2019, valuation were based on the results of an actuarial experience study for the period July 1, 2007 to June 30, 2012. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense, and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of June 30, 2018, are summarized in the following table:

Asset Class

Long-Term Expected Real Rate of Return

Fixed income 5.53% Domestic equity 7.42% International equity 9.74% Real estate 7.23% Private equity 10.58% Commodities 4.68%

The current allocation policy is that approximately 60% of assets are in equity investments, including public equity, long-short hedge, venture capital, and private equity strategies; approximately 25% of assets are in fixed income, to include investment grade bonds, high-yield and non-dollar denominated bonds, convertible bonds, and low volatility hedge fund strategies; and 15% of assets are in real assets, to include real estate, commodities, and other strategies. Discount rate – The discount rate used to measure the total pension liability was 7.5%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current contribution rate and that contributions from the City will be made at contractually required rates, determined by Oklahoma Statutes. Projected cash flows also assume the State of Oklahoma will continue contributing 14% of the insurance premium, as established by statute. Based on these assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the net pension liability to changes in the discount rate – The following presents the net pension liability of the City, calculated using the discount rate of 7.5%, as well as what the plan’s net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.5%) or 1-percentage point higher (8.5%) than the current rate:

Payables to the Pension Plan – There are no payables to the pension plan for the year ended June 30, 2019.


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Pension plan fiduciary net position – Detailed information about the pension plan’s fiduciary net

position is available in the separately issued financial report of the OPPRS; which can be located at www.ok.gov/OPPRS. Oklahoma State Firefighters’ Pension and Retirement System (OFPRS)

Plan Description – The City of Sallisaw, as the employer, participates in the Firefighters Pension and Retirement System, a cost-sharing, multiple-employer defined benefit pension plan administered by the Oklahoma Firefighters Pension and Retirement System (OFPRS). Title 11 of the Oklahoma State Statues, through the Oklahoma Legislature, grants the authority to establish and amend the benefit terms to the OFPRS. OFPRS issues a publicly available financial report that can be obtained at www.ok.gov/FPRS. Benefits Provided – The OPPRS provides retirement, death and disability benefits to plan members. Benefits for members hired prior to November 1, 2013 are determined as 2.5% of the employee’s final average compensation time the employee’s years of service and have reached the age of 50 or have completed 20 years of service, whichever is later. For volunteer firefighters, the monthly pension benefit for normal retirement is $150.60 per month. Benefits vest with 10 years or more of service.

Benefits for members hired after November 1, 2013 are determined as 2.5% of the employee’s final average compensation times the employee’s years of service and have reached the age of 50 or have completed 22 years of service, whichever is later. For volunteer firefighters, the monthly pension benefit for normal retirement is $165.66 per month. Benefits vest with 11 years or more of service. All firefighters are eligible for immediate disability benefits. For paid firefighters, the disability in-the-line-of-duty benefit for firefighters with less than 20 years of service is equal to 50% of final average monthly compensation, based on the most recent 30 months of service. For firefighters with over 20 years of service, a disability in-the-line-of-duty is calculated based on 2.5% of final average monthly compensations, based on the most recent 30 months, per year of service, with a maximum of 30 years of service. For disabilities not-in-the-line-of-duty, the benefit is limited to only those with less than 20 years of service and is 50% of final average monthly compensation, based on the most recent 60-month salary as opposed to 30 months. For volunteer firefighters, the not-in-the-line-of-duty disability is also limited to only those with less than 20 years of service and is $7.53 per year of service, with a maximum of 30 years.

A $5,000 lump sum death benefit is payable to the qualified spouse or designated recipient upon the participant’s death. The $ 5,000 death benefit does not apply to members electing the vested benefit.

Contributions – The contribution requirements of plan are at an established rate determined by Oklahoma Statute and are not based on actuarial calculations. Plan members are required to contribute 9.0% of their annual covered salary and the City of Sallisaw contributes 14.0% of annual covered payroll. Contributions to the OFPRS for the year ended June 30, 2019, for employees and employer were $23,770 and $36,976, respectively, on covered payroll of $264,111.

Pension liabilities, pension expense, and deferred outflows and inflows of resources related to pensions – As of June 30, 2019, the City reported a net pension liability of $897,555 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2018, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of July 1, 2018. The City’s proportion of the net pension liability was based

on the City’s contributions received by the pension plan relative to the total contributions received by pension plan for all participating employers as of June 30, 2018. Based upon this information, the City’s proportionate share was 0.079737 percent.

http://www.ok.gov/OPPRS

http://www.ok.gov/FPRS.


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For the year ended June 30, 2019, the City recognized $977 in pension expense. At June 30, 2019, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Amortization of Pension Deferrals – $149,871 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2019. Amounts reported as deferred outflows of resources and deferred inflows of resources will be recognized in pension expense as follows:

Actuarial assumptions – The total pension liability was determined by an actuarial valuation as of July 1, 2018 actuarial valuation using the following actuarial assumptions, applied to all periods included in the measurement:

Inflation: 3% Salary increases: 3.5% to 9% average, including inflations Investment rate of return: 7.5% net of pension plan investment expense Mortality rates: Based on RP-2000 combined healthy with blue collared adjustment as

appropriate, with adjustments for generational mortality improvement using scale AA for healthy lives and no mortality improvement for disabled lives.

The actuarial assumptions used in the July 1, 2018, valuation were based on the results of an actuarial experience study for the period July1, 2007 to June 30, 2012.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense, and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class


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included in the pension plan’s target asset allocation as of June 30, 2018, are summarized in the following table:

Asset Class Long-Term Expected Real Rate of Return

Fixed income 5.18% Domestic equity 8.70% International equity 10.87% Real estate 7.23% Other assets 6.24%

Discount rate – The discount rate used to measure the total pension liability was 7.5%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current contribution rate and that contributions from the City will be made at contractually required rates, determined by Oklahoma Statutes. Projected cash flows also assume the State of Oklahoma will continue contributing 36% of the insurance premium, as established by statute. Based on these assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the net pension liability to changes in the discount rate – The following presents the net pension liability of the City, calculated using the discount rate of 7.5%, as well as what the plan’s

net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.5%) or 1-percentage point higher (8.5%) than the current rate:

Payables to the Pension Plan – There are no payables to the pension plan for the year ended June 30, 2019.

Pension plan fiduciary net position – Detailed information about the pension plan’s fiduciary net

position is available in the separately issued financial report of the OFPRS; which can be located at www.ok.gov/FPRS .

Agent Multiple Employer – Defined Benefit Plan

Oklahoma Municipal Retirement Fund Employee Retirement System of Sallisaw, Oklahoma

Plan Description – The Oklahoma Municipal Retirement Fund Employee Retirement System of Sallisaw, Oklahoma (the Plan) is a defined benefit retirement plan covering City employees not covered by other plans. The City contributes to the OMRF for all eligible employees except for those covered by the Police and Firefighter Pension Systems. The OMRF plan issues a separate financial report and can be obtained from OMRF or from their website: www.okmrf.org/reports.html. Benefits are established or amended by the City Council in accordance with O.S. Title 11, Section 48-101-102.

Summary of Significant Accounting Policies – For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the City’s plan and additions to/deductions

from the City’s fiduciary net position have been determined on the same basis as they are reported

by OMRF. For this purpose, benefit payments are recognized when due and payable in accordance

http://www.ok.gov/FPRS

http://www.okmrf.org/reports.html


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with the benefit terms. Investments are reported at fair value based on published market prices. Detailed information about the OMRP plans’ fiduciary net position is available in the separately issued OMRF financial report.

Eligibility Factors and Benefit Provisions

Provision July 1, 2018 through June 30, 2019

Eligibility All regular, full-time employees except police, firefighters, and other employees who are covered under an approved system.

Contributions 7% of pay

Service: Credited service The last period of continuous employment with the City

Vesting Credited service plus transferred service from other OMRF employers.

Benefit eligibility 10 or more years of service

Final average compensation Average of 5 highest consecutive years of salaries out of the last 10 years of service

Accrued benefit Plan AAA 3% of final average compensation multiplied by the number of years of credited service.

Normal retirement age The earlier of: Age 65 with 10 or more years of vesting service Age 55 with 80 points and 10 or more years of vesting service (Points are equal to age plus completed years of service)

Normal retirement Eligibility

Termination after age 55 with 10 or more years of vesting service.

Benefit The accrued benefit payable starting at normal retirement age, or the accrues benefit reduced 5% per year for commencement prior to normal retirement age

Disability retirement Eligibility

Total and permanent disability after 10 or more years of service.

Benefit The accrued benefit is payable upon disablement without reduction for early payment.

Termination before retirement age Before vesting Return of employee contributions, if any, with interest

After vesting The accrued benefit payable starting at normal retirement age, or a reduced benefit payable at an early retirement age.

In-service death Before vesting Return of employee contributions, if any, with interest.

After vesting (married participants only)

50% of the accrued benefit is payable to the spouse until death or remarriage.

After vesting (other participants) 50% of the accrued benefit is payable for 5 years certain.

Payment options Normal form Monthly lifetime annuity with 5 years certain Optional forms Disability retirement benefits paid under normal form.

Actuarially equivalent optional forms: Joint & 50% survivor annuity Joint & 66 2/3rds% last survivor annuity


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Joint & 100% survivor annuity

Cost of living This plan has not elected the automatic post-retirement cost-of-living adjustments.

Employees covered by benefit terms:

Contribution Requirements

The City Council has the authority to set and amend contribution rates by ordinance for the OMRF defined benefit plan in accordance with O.S. Title 11, Section 48-102. The contribution rates for the current fiscal year have been made in accordance with an actuarially determined rate. The actuarially determined rate is 14.18% of covered payroll as of July 1, 2018 through June 30, 2019. For the year ended June 30, 2019, the City recognized $ 581,452 of employer contributions to the plan which equals the actuarially determined amount based on covered payroll of $ 4,193,915.

Actuarial assumptions

Date of last actuarial valuation July 1, 2019 a. Actuarial cost method Entry age level b. Rate of return on investments & discount

rate 7.75%

c. Projected salary increase based on age 4% - 7.42% d. Post retirement cost-of-living increase None e. Inflation rate 3% f. Mortality table UP 1994, with projected mortality improvement g. Percent of married employees 100% h. Spouse age difference 3 years (female spouses younger)

i. Turnover Select & ultimate rates Ultimate rates are age-related as shown)

Additional rates per thousand are added during the first 5 years:

Year 1: 215 Year 2: 140 Year 3: 95 Year 4: 65 Year 5: 40

j. Date of last experience study September 2013=2 for fiscal years 2007 through 2011

Discount rate – The discount rate used to value benefits was the long-term expected rate of return on plan investments, 7.75% since the plan’s net fiduciary position is projected to be sufficient to

make projected benefit payments.

The City has adopted a funding method that is designed to fund all benefits payable to participants over the course of their working careers. Any differences between actual and expected experience are funded over a fixed period to ensure all funds necessary to pay benefits have been contributed to the trust before those benefits are payable. Thus, the sufficiency of pension plan assets was made without a separate projection of cash flows.


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The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation (3.0%).

Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of July 1, 2018 are summarized in the following table:

Changes in Net Pension Liability – The total pension liability was determined based on an actuarial valuation performed as of July 1, 2018 which is also the measurement date. There were no changes in assumptions or changes in benefit terms that affected measurement of the total pension liability. There were also no changes between the measurement date of July 1, 2018 and the City’s report

ending date of June 30, 2018, that would have had a significant impact on the net pension liability.

Target allocation

Real return

Weighted return

Large cap stocks 25% 5.40% 1.35%

S&P 500

Small/mid cap stocks 10% 7.50% 0.75%

Russel 2500

Long/short equity 10% 6.10% 0.61%

MSCI ACWI

International stocks 20% 5.10% 1.02%

MSCI EAFE

Fixed income bonds 30% 2.60% 0.78%

Barclay’s Capital Aggregate

Real estate 5% 4.80% 0.24%

NCREIF

Cash equivalents 0% 0.00% 0.00%

3-month Treasury

Total 100%

Average Real Return 4.75%

Inflation 3.0%

Long-term expected return 7.75%


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The following table reports the components of changes in pension liability:

Sensitivity of the net pension liability to changes in the discount rate. The following presents the net pension liability of the City, calculated using the discount rate of 7.50 percent, as well as what the City’s net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower (6.50 percent) or 1-percentage point higher (8.50 percent) than the current rate:

The City reported $ 209,915 in pension expense for the year ended June 30, 2019.


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At June 30, 2019 the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

$ 259,121 will be reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2019. Amounts reported as deferred inflows of resources related to pensions will be recognized in pension expense as follows:

C. Commitments and contingencies

Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this time, although the City expects such amounts, if any, to be immaterial.

The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of the City’s counsel the resolution of these matters will not have a

material adverse effect on the financial condition of the City.

As described in Note II.E., full-time employees are granted sick leave of 4.615 hours per pay period and upon retirement, will be compensated for unused hours accrued in excess of 1,000 hours, up to a maximum of 2,500 hours. The payment is $2,500 for the first 1,000 hours and $5.00/hour for the next 1,500 hours. No accrual has been made in the accompanying financial statements for any such payments since the number of hours or time of retirement for any employee is not yet certain.


Variance -Revised Favorable

Budget Revisions Budget Actual (Unfavorable)REVENUES

Sales tax 5,413,000$ -$ 5,413,000$ 5,769,364$ 356,364$ Other taxes 652,074 - 652,074 756,647 104,573 Licenses and permits 24,250 - 24,250 66,625 42,375 Intergovernmental - - - 2,500 2,500 Fines and forfeitures 359,100 - 359,100 449,789 90,689 Charges for services 122,000 - 122,000 181,869 59,869 Rental 6,000 - 6,000 11,010 5,010 Other 319,250 - 319,250 272,316 (46,934) Interest 1,500 - 1,500 21,142 19,642

Total revenues 6,897,174 - 6,897,174 7,531,262 634,088

EXPENDITURESGeneral government:

Administration 1,420,083 (106,655) 1,313,428 1,154,043 159,385 Customer Service 479,013 (430) 478,583 465,728 12,855 Fleet Maintenance 218,425 26,447 244,872 244,870 2 Information services 132,631 (77) 132,554 108,686 23,868 Finance 619,944 1,482 621,426 499,369 122,057 General sundry 22,000 16,368 38,368 69,064 (30,696)

Public safety:Police 1,973,400 (46,685) 1,926,715 1,857,035 69,680 Police Auxillary 518,563 19,078 537,641 491,607 46,034 Animal Welfare 169,137 29,538 198,675 141,853 56,822 Municipal Court 63,678 2,950 66,628 66,628 - Fire 474,354 136 474,490 442,696 31,794

Public works:Streets 710,251 1,226 711,477 687,737 23,740 Sanitation 494,965 1,452 496,417 464,466 31,951 Landfill 755,947 67,845 823,792 823,591 201 Electric 868,292 (247) 868,045 777,648 90,397 Telecommunications 677,329 11,982 689,311 608,874 80,437 Water production 527,477 (337) 527,140 440,257 86,883 Water distribution 281,788 (653) 281,135 253,774 27,361 Wastewater collection 265,887 329 266,216 241,753 24,463 Wastewater treatment 443,535 (555) 442,980 440,348 2,632

Culture and recreation:Airport 164,700 (11,254) 153,446 117,029 36,417 Parks 715,857 3,284 719,141 676,051 43,090 Swimming Pool 76,591 (9,837) 66,754 51,309 15,445 Cemetery 14,766 (60) 14,706 7,428 7,278

Economic Development:Building development 582,997 (5,327) 577,670 533,936 43,734

Total expenditures 12,671,610 - 12,671,610 11,665,780 1,005,830 Revenue over (under) expenditures (5,774,436) - (5,774,436) (4,134,518) (371,742)

OTHER FINANCING SOURCES (USES) Operating transfers in/(out) 5,355,153 - 5,355,153 4,071,366 (1,283,787)

Balance forward 419,283 - 419,283 - (419,283) Net other financing sources (uses) 5,774,436 - 5,774,436 4,071,366 (1,703,070)

Revenues and other financing sources over (under) expenditures and other uses - - - (63,152) (2,074,812)

Fund balance at beginning of year (Non-GAAP budgetary basis) 1,575,969 Fund balance at end of year (Non-GAAP budgetary basis) 1,512,817$

ADJUSTMENTS TO GENERALLY ACCEPTED ACCOUNTING PRINCIPLES Revenue and transfer accruals 216,399

Fund balance at end of year (GAAP basis) 1,729,216$


General Fund - Budget and Actual (Non-GAAP Budgetary Basis)

See accompanying notes to the financial statements 46


Variance -Revised Favorable

Budget Revisions Budget Actual (Unfavorable)REVENUES

Intergovernmental -$ -$ -$ 434,971$ 434,971$ Other - - - 11,238 11,238

Total revenues - - - 446,209 446,209

EXPENDITURESCapital outlay - - - 91,053 (91,053)

Total expenditures - - - 91,053 (91,053) Revenue over (under) expenditures - - - 355,156 537,262

OTHER FINANCING SOURCES (USES) Operating transfers in/(out) - - - - -

Net other financing sources (uses) - - - - -

Revenues and other financing sources over (under) expenditures and other uses - - - 355,156 537,262

Fund balance at beginning of year (Non-GAAP budgetary basis) (45,492) Fund balance at end of year (Non-GAAP budgetary basis) 309,664$

ADJUSTMENTS TO GENERALLY ACCEPTED ACCOUNTING PRINCIPLES Revenue and transfer accruals -

Fund balance at end of year (GAAP basis) 309,664$


OK State Projects Fund - Budget and Actual (Non-GAAP Budgetary Basis)

See accompanying notes to the financial statements 47

City of Sallisaw, OklahomaSchedules of Required Supplementary Information

SCHEDULE OF CHANGES IN THE CITY'S NET PENSION LIABLITY AND RELATED RATIOS

Oklahoma Municipal Retirement FundSINCE INITIAL APPLICATION

2015* 2016* 2017* 2018* 2019*

Total pension liabilityService cost 366,952$ 408,732$ 425,998$ 412,468$ 404,894$ Interest 1,223,894 1,250,385 1,291,059 1,304,887 1,318,346 Changes in benefit terms - - - - - Differences between expected and actual experience - (227,314) (559,807) (174,613) (160,360) Changes in assumptions - - - 210,427 - Benefit payments, including refunds of employee contributions (904,499) (858,806) (956,975) (1,001,518) (1,023,236)

Net change in total pension liability 686,347 572,997 200,275 751,651 539,644 Total pension liability - beginning 15,869,042 16,555,389 17,128,386 17,328,661 18,080,312 Total pension liability - ending (a) 16,555,389$ 17,128,386$ 17,328,661$ 18,080,312$ 18,619,956$

Plan fiduciary net positionContributions - employer 593,615 623,077 640,405 604,182 607,837 Contributions - employee 228,564 248,235 251,139 259,627 265,928 Net investment income 1,805,094 356,175 116,710 1,610,821 1,070,688 Benefit payments, including refunds of employee contributions (904,499) (858,806) (956,975) (1,001,518) (1,023,236) Administrative expense (26,721) (26,404) (25,775) (28,185) (30,045) Other - - - - -

Net change in plan fiduciary net position 1,696,053 342,277 25,504 1,444,927 891,172

Plan fiduciary net position - beginning 11,043,455 12,739,508 13,081,785 13,107,289 14,552,216 Plan fiduciary net position - ending (b) 12,739,508$ 13,081,785$ 13,107,289$ 14,552,216$ 15,443,388$

City's net pension liability - ending (a) - (b) 3,815,881$ 4,046,601$ 4,221,372$ 3,528,096$ 3,176,568$

Plan fiduciary net position as a percentage of the total pension liability 76.95% 76.37% 75.64% 80.49% 82.94%Covered-employee payroll 3,329,223$ 3,503,183$ 3,564,633$ 3,511,459$ 3,752,847$

City's net pension liability as a percentage of covered-employee payroll 114.62% 115.51% 118.42% 100.47% 84.64%

* The amount presented for each fiscal year were determined as of the fiscal year-end that occurred previous

SCHEDULE OF CITY CONTRIBUTIONSOklahoma Municipal Retirement Plan

2015* 2016* 2017* 2018* 2019*

Actuarially determined contribution 593,615$ 623,077$ 640,405$ 604,182$ 607,837$

Contributions in relation to the actuarially determined contribution (593,615) (639,165) (696,228) (636,690) (581,452)

Contribution deficiency (excess) -$ (16,088)$ (55,823)$ (32,508)$ 26,385$

City's covered-employee payroll 3,329,223$ 3,503,183$ 3,564,633$ 3,511,459$ 3,752,847$

Contributions as a percentage of covered-employee payroll 17.83% 17.79% 17.97% 17.21% 16.20%


Schedules of Required Supplementary Information

SCHEDULE OF THE CITY'S PROPORTIONATE SHARE OF THE NET PENSION LIABLITYOklahoma Police Pension Retirement Plan


2015* 2016* 2017* 2018* 2019*

City's portion of the net pension liability (asset) 0.2792% 0.2768% 0.2427% 0.2603% 0.2753%

City's proportionate share of the net pension liability (asset) (94,003)$ 11,288$ 371,631$ 20,051$ (131,143)$

City's covered-employee payroll 753,098$ 759,023$ 753,272$ 838,373$ 989,550$

City's proportionate share of the net pension liability (asset) as a percentage of its covered-employee payroll -12.48% 1.49% 49.34% 2.39% -13.25%

Plan fiduciary net position as a percentage of the total pension liability 139.12% 100.00% 99.76% 100.00% 100.01%


SCHEDULE OF CITY CONTRIBUTIONSOklahoma Police Pension Retirement Plan

2015* 2016* 2017* 2018* 2019*

Contractually required contribution 97,903$ 98,673$ 93,034$ 108,988$ 128,641$

Contributions in relation to the contractually required contribution (97,903) (98,673) (93,034) (108,988) (128,641)

Contribution deficiency (excess) -$ -$ -$ -$ -$



** Only the current fiscal year is presented because 10-year data is not yet available

City of Sallisaw, Oklahoma


2015* 2016* 2017* 2018* 2019*

City's portion of the net pension liability (asset) 0.0874% 0.089412% 0.089085% 0.087642% 0.079737%

City's proportionate share of the net pension liability (asset) 899,045$ 949,024$ 1,088,360$ 1,102,295$ 897,555$


City's proportionate share of the net pension liability (asset) as a percentage of its covered-employee payroll 389% 385% 455% 483% 340%

Plan fiduciary net position as a percentage of the total pension liability 99.30% 100.00% 99.91% 99.97% 99.98%


SCHEDULE OF CITY CONTRIBUTIONSOklahoma Fire Pension Retirement Plan

2015* 2016* 2017* 2018* 2019*

Contractually required contribution 32,354$ 34,466$ 34,886$ 31,925$ 36,976$

Contributions in relation to the contractually required contribution (32,354) (34,466) (34,886) (31,925) (36,976)

Contribution deficiency (excess) -$ -$ -$ -$ -$



** Only the current fiscal year is presented because 10-year data is not yet available

SCHEDULE OF THE CITY'S PROPORTIONATE SHARE OF THE NET PENSION LIABLITYOklahoma Fire Pension Retirement Plan


City of Sallisaw, OklahomaSchedules of Required Supplementary Information


City of Sallisaw, OklahomaCombining Balance Sheet

Nonmajor Governmental FundsJune 30, 2019

Street and Alley Fund

Library Fund

Library Trust

Authority

Youth & Recreation

Fund

Fire Department

Fund AssetsCash and cash equivalents 260,424$ 2,150$ 45$ 317,229$ 78,797$ Investments - - 87,789 - - Receivables:

Taxes 5,985 - - - 2,604 Grants - - - - - Accrued interest - - 67 - -

Due from other funds - - - 11,415 - Total assets 266,409$ 2,150$ 87,901$ 328,644$ 81,401$

LiabilitiesAccounts payable - - - - - Current portion of capital leases - - - - - Due to other funds - - - - -

Total liabilities - - - - -

Fund balance:Nonspendable - - - - - Restricted 266,409 - 87,901 - - Committed - - - 328,644 - Assigned - 2,150 - - 81,401 Unassigned - - - - -

Total fund balance 266,409 2,150 87,901 328,644 81,401 Total liabilities and fund balance 266,409$ 2,150$ 87,901$ 328,644$ 81,401$

See accompanying notes to the financial statements.51



AssetsCash and cash equivalentsInvestmentsReceivables:

TaxesGrantsAccrued interest

Due from other fundsTotal assets

LiabilitiesAccounts payableCurrent portion of capital leasesDue to other funds

Total liabilities

Fund balance:NonspendableRestrictedCommittedAssignedUnassigned

Total fund balanceTotal liabilities and fund balance

Police Department

Fund

SallisawNOW PFS

Grant Police

Drug Fund Sallisaw

NOW

Department of Justice

Grants

Sallisaw NOW DFC

Grant

Capital Improvements

Fund

29,365$ 5,779$ 137,293$ (10,674)$ (16,591)$ 3,353$ 1,311,880$ - - - - - - -

- - - - - - - - 7,957 - - 11,150 11,890 - - - - - - - - - - - - - - 64,753

29,365$ 13,736$ 137,293$ (10,674)$ (5,441)$ 15,243$ 1,376,633$

- 55 - - - 68 4,900 - - - - - - 143,065

5,766 - - - - - - 5,766 55 - - - 68 147,965

- - - - - - - - 13,681 - (10,674) (5,441) 15,175 1,228,668 - - 137,293 - - - -

23,599 - - - - - - - - - - - - -

23,599 13,681 137,293 (10,674) (5,441) 15,175 1,228,668 29,365$ 13,736$ 137,293$ (10,674)$ (5,441)$ 15,243$ 1,376,633$




AssetsCash and cash equivalentsInvestmentsReceivables:

TaxesGrantsAccrued interest

Due from other fundsTotal assets

LiabilitiesAccounts payableCurrent portion of capital leasesDue to other funds

Total liabilities

Fund balance:NonspendableRestrictedCommittedAssignedUnassigned

Total fund balanceTotal liabilities and fund balance

Cemetery Fund

Infrastructure Improvements

Fund FAA Grant CDBG Fund

PoliceTechnology

Fund COPSGrant

TotalGovernmental

Funds

149,354$ 869,734$ 35,171$ 21,000$ 25,127$ (5,310)$ 3,214,126$ 202,726 - - - - - 290,515

- - - - - - 8,589 - - - - - 5,310 36,307 156 - - - - - 223 - - - - - - 76,168

352,236$ 869,734$ 35,171$ 21,000$ 25,127$ -$ 3,625,928$

- - 5,238 - - - 10,261 - - - - - - 143,065 - - - - - - 5,766 - - 5,238 - - - 159,092

- - - - - - - 352,236 - 29,933 21,000 25,127 - 2,024,015

- 869,734 - - - - 1,335,671 - - - - - - 107,150 - - - - - - -

352,236 869,734 29,933 21,000 25,127 - 3,466,836 352,236$ 869,734$ 35,171$ 21,000$ 25,127$ -$ 3,625,928$


City of Sallisaw, Oklahoma Combining Statement of Revenues, Expenditures, and Changes in Fund Balances

Nonmajor Governmental Funds Year ended June 30, 2019

Street and Alley Fund

Library Fund

Library Trust

Authority

Youth & Recreation

Fund

Fire Department

Fund

Police Department

Fund

SallisawNOW PFS

Grant Police

Drug Fund Sallisaw

NOW RevenuesIntergovernmental 75,472$ -$ -$ -$ 41,448$ 6,500$ 71,402$ 99,220$ -$ Sales Tax - - - - - - - - - Hotel tax - - - 90,489 - - - - - Fines and forfeitures - - - - - - - - - Charges for services - - - - - - - - - Rental income - - - - - - - - - Donations - - - 35,711 - - - - - Interest - - 1,709 - - - - - - Miscellaneous income - - - - - - - - - Proceeds from debt issuance - - - - - - - - -

Total Revenues 75,472$ -$ 1,709$ 126,200$ 41,448$ 6,500$ 71,402$ 99,220$ -$

ExpendituresPublic safety - - - - - - 62,184 810 14,674 Public works - - - 8,332 - - - - - Culture and recreation - 6,282 - - - - - - -

Debt service:Principal - - - - - - - - - Interest - - - - - - - - -

Capital outlay 61,000 - - 35,711 - - - - - Total expenditures 61,000 6,282 - 44,043 - - 62,184 810 14,674

Excess of revenues over (under) expenditures 14,472 (6,282) 1,709 82,157 41,448 6,500 9,218 98,410 (14,674)

Other financing sources (uses)Proceeds from debt issuance - - - - - - - - - Transfers in - 3,000 - - - - - - - Transfers (out) - - - - - - - - -

Total other financing sources (uses) - 3,000 - - - - - - -

Net change in fund balances 14,472 (3,282) 1,709 82,157 41,448 6,500 9,218 98,410 (14,674)

Fund balances, beginning 251,937 5,432 86,192 246,487 39,953 17,099 4,463 38,883 4,000

Fund balances, ending 266,409$ 2,150$ 87,901$ 328,644$ 81,401$ 23,599$ 13,681$ 137,293$ (10,674)$




RevenuesIntergovernmentalSales TaxHotel taxFines and forfeituresCharges for servicesRental incomeDonationsInterestMiscellaneous incomeProceeds from debt issuance

Total Revenues

ExpendituresPublic safetyPublic worksCulture and recreation

Debt service:PrincipalInterest

Capital outlayTotal expenditures

Excess of revenues over (under) expenditures

Other financing sources (uses)Proceeds from debt issuanceTransfers inTransfers (out)

Total other financing sources (uses)

Net change in fund balances

Fund balances, beginning

Fund balances, ending

Department of Justice

Grants

Sallisaw NOW DFC

Grant

Capital Improvements

Fund Cemetery

Fund

Infrastructure Improvements

Fund FAA Grant CDBG Fund

11,150$ 128,562$ -$ -$ -$ 53,425$ 10,000$ - - 721,171 - - - - - - - - - - - - - - - - - - - - - 21,700 - - - - - - 9,640 - - - - - - 100 - - - - - 1,270 3,948 3,240 - - - - 71,943 - - 3,300 - - - 918,113 - - - -

11,150$ 128,562$ 1,712,497$ 35,388$ 3,240$ 56,725$ 10,000$

9,970 116,163 1,262 - - - - - - 12,826 2,111 36,106 - 10,000 - - 32,265 - - - -

- - 283,625 - - - - - - 24,865 - - - - - - 795,245 - 36,926 49,737 -

9,970 116,163 1,150,088 2,111 73,032 49,737 10,000

1,180 12,399 562,409 33,277 (69,792) 6,988 -

- - - - - - - - - 500,000 - 100,000 - - - - (924,692) - - - - - - (424,692) - 100,000 - -

1,180 12,399 137,717 33,277 30,208 6,988 -

(6,621) 2,776 1,090,951 318,959 839,526 22,945 21,000

(5,441)$ 15,175$ 1,228,668$ 352,236$ 869,734$ 29,933$ 21,000$




RevenuesIntergovernmentalSales TaxHotel taxFines and forfeituresCharges for servicesRental incomeDonationsInterestMiscellaneous incomeProceeds from debt issuance

Total Revenues

ExpendituresPublic safetyPublic worksCulture and recreation

Debt service:PrincipalInterest

Capital outlayTotal expenditures

Excess of revenues over (under) expenditures

Other financing sources (uses)Proceeds from debt issuanceTransfers inTransfers (out)

Total other financing sources (uses)

Net change in fund balances

Fund balances, beginning

Fund balances, ending

PoliceTechnology

Fund COPSGrant

TotalGovernmental

Funds

-$ 88,978$ 586,157$ - - 721,171 - - 90,489

16,549 - 16,549 - - 21,700 - - 9,640 - - 35,811 - - 10,167 - - 75,243 - - 918,113

16,549$ 88,978$ 2,485,040$

10,128 88,978 304,169 - - 69,375 - - 38,547

- - 283,625 - - 24,865 - - 978,619

10,128 88,978 1,699,200

6,421 - 785,840

- - - - - 603,000 - - (924,692) - - (321,692)

6,421 - 464,148

18,706 - 3,002,688

25,127$ -$ 3,466,836$


INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN

ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

To the Honorable Mayor and City Commissioners City of Sallisaw, Oklahoma

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Sallisaw, Oklahoma, as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the City of Sallisaw, Oklahoma’s basic financial statements, and have issued our report thereon dated November 19, 2019.

Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the City of Sallisaw, Oklahoma’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Sallisaw, Oklahoma’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City of Sallisaw, Oklahoma’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Sallisaw, Oklahoma’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

FSW&B CPAs-PLLC

Stillwater, Oklahoma November 19, 2019

CITY OF SALLISAW, OKLAHOMA Schedule of Findings and Responses June 30, 2019

Financial Statement Findings

None to report.

CITY OF SALLISAW, OKLAHOMA Schedule of Findings and Responses June 30, 2018

Financial Statement Findings

Finding 2017-002 Approval of Purchas Card Transactions

Criteria-The City’s purchasing policy references a P-Card Receipt Log which accompanies the receipts supporting purchases made with the P-Card. The Receipt Log required the cardholder to sign and date the form, as well as an approval signature and date the form, as well as an approval signature and date.

Condition-In the testing of 45 transactions during the fiscal year 2017, there were 12 transactions (27%) where the purchasing policy was not followed. In testing during fiscal year 2018, 2 of 31 transactions did not follow the approved purchasing policy.

Cause-Lack of proper oversight of P-Card transactions.

Effect-City funds could be spent inappropriately.

Recommendation-The Purchasing policy should be followed in all instances. Any exceptions to the policy should be documented as they occur and discussed with the appropriate supervisor.

Responsible Official’s Comments and Plan of Action-City management is aware of the issue. All employees will be reminded of the purchasing policy of the City ad require compliance thereto. The purchasing agent of the City will be diligent in ensuring compliance with policy for all purchases made by the City.

Status-This finding was cleared in fiscal year 2019.

Finding 2018-001 Creation of Fund Balance Deficit

Criteria-Oklahoma State Statutes prohibit the creation of a negative fund balance.

Condition-A deficit fund balance was reported in two special revenue funds of the City.

Cause-Oversight of transactions in the governmental funds.

Effect-The City did not comply with Oklahoma State law.

Recommendation-All transactions of each fund should be reviewed and approved on a timely basis. Expenses should be compared against budget to ensure compliance. Monthly (or quarterly) financial reporting should be prepared and reviewed in the Finance office to ensure timely identification of potential fund balance deficits.

Responsible Official’s Comments and Plan of Action-City management is aware of the issue. The City’s finance department will review the balance sheet and income statement of all funds of the City on a quarterly basis.

Status-This finding was cleared in fiscal year 2019.

EXHIBIT E

PROJECTS AGREEMENT


PROJECTS AGREEMENT THIS PROJECTS AGREEMENT, dated as of the 1st day of July, 2020, by and between The Sallisaw Municipal Authority (the "Authority") and the City of Sallisaw, Oklahoma (the "City") is hereby the “Agreement”.

W I T N E S S E T H : WHEREAS, The Authority has been created by a Declaration of Trust, dated as of March 24, 1988, for the use and benefit of the City under authority of and pursuant to the provisions of Title 60, Oklahoma Statutes 2019, Sections 176 to 180.3, inclusive, as amended and supplemented, the Oklahoma Trust Act and other applicable statutes of the State of Oklahoma; and WHEREAS, the City currently levies a two percent (2%) sales tax, pursuant to City ordinances consisting of a one cent (1¢) sales tax levied pursuant to Ordinance No. 88-7, a one half cent (1/2¢) sales tax levied pursuant to ordinance No. 04-9, and a one-half cent (1/2¢) sales tax levied pursuant to Ordinance No. 10213-05 (collectively, the “Sales Tax Ordinances”). The one cent sales tax levied pursuant to Ordinance No. 88-7 is to be used for the purpose of erecting, furnishing, equipping, renovating, operating and maintaining the City’s or the Authority’s buildings and facilities and acquiring sites therefore and/or to be applied or pledged toward the payment of principal and interest on the Series 2020 (hereinafter referred to as the “1¢ Sales Tax"); and WHEREAS, the Authority has determined upon a refunding project consisting of refunding and refinancing the outstanding portion of the $8,475,000 Utility System Refunding Revenue Series 2009 (the “Prior Bonds”) and a capital improvements project (together, the “Project”); and WHEREAS, in order to pay the costs of the Project, the Authority intends to issue its $9,870,000 Sales Tax Revenue Refunding Bonds, Series 2020 (the "Series 2020 Bonds"); and WHEREAS, in order to better secure the payment of the Series 2020 Bonds it is necessary that this Projects Agreement be entered into; and WHEREAS, all things required to have been done to make this Projects Agreement a valid and binding agreement by and between the City and the Authority have been done, happened and been performed. NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS EXPRESSED HEREIN AND THE ISSUANCE OF THE SERIES 2020 BONDS BY THE AUTHORITY AND OTHER GOOD AND VALUABLE CONSIDERATION, RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED BY THE PARTIES HERETO, THE CITY AND THE AUTHORITY AGREE AS FOLLOWS:

1

SECTION 1. The Authority shall issue the Series 2020 Bonds for the Project, as more fully set out in the Bond Indenture, dated as of July 1, 2020 (the "Indenture"), by and between the Authority and BancFirst, Oklahoma City, Oklahoma, as Trustee (the "Trustee"). SECTION 2. In consideration of the issuance of the Series 2020 Bonds, the City shall deposit in its special sales tax fund each month as received, proceeds derived from the 1¢ Sales Tax pursuant to the Sales Tax Agreement by and between the City and the Authority dated as of July 1, 2020 (the “Sales Tax Agreement”) as received from the Oklahoma Tax Commission, and the City agrees, subject to availability and appropriation of funds, to transfer, as received, all proceeds of the 1¢ Sales Tax to the Trustee on behalf of the Authority for immediate deposit in the Authority’s Gross Revenue Account created under the Indenture. The 1¢ Sales Tax proceeds shall be used by the Trustee on behalf of the Authority pursuant to the terms and provisions of the Indenture, including specifically for the payment of principal and interest on the Series 2020 Bonds when due (whether upon the scheduled due date, upon purchase, or acceleration, or otherwise), which purpose is hereby acknowledged to be consistent with the authorized and proper use of the 1¢ Sales Tax proceeds. SECTION 3. If payment in excess of the 1¢ Sales Tax is required, the City agrees, subject to availability and appropriation of funds, to make payments from available funds of the City in excess of the 1¢ Sales Tax in an amount sufficient to pay the principal of the Series 2020 Bonds when due, whether upon the scheduled due date, upon redemption, purchase or acceleration or otherwise) and all accrued interest thereon. The 1¢ Sales Tax transferred pursuant to Sections 2 hereof and any additional payments made by the City pursuant to this Section 3 shall hereinafter be referred to collectively as the “Project Payments”. All such Project Payments shall not be subject to set-off or counterclaim by the City and shall be used as set forth in the Indenture and shall be in such amounts as are necessary for the payment when due (whether upon the scheduled due date, upon redemption, purchase, or acceleration, or otherwise) of (a) principal of and interest on the Series 2020 Bonds coming due at such time and (b) all other amounts due under the Indenture. In any case where the date fixed for any payment from the City to the Trustee on behalf of the Authority shall not be a Business Day (as defined in the Indenture), then such payment may be made on the next succeeding Business Day. In the event that Project Payments are not deposited in the Authority’s Revenue Fund when due, the Trustee on behalf of the Authority shall give written notice of such failure to deposit to the Authority and to the City, and the City will have five calendar days to deposit such funds. Failure to deposit such funds within such five calendar day period shall constitute an event of default hereunder. SECTION 4. The Authority agrees that all proceeds of the Project Payments received by it shall be utilized exclusively for the purposes set out in the resolutions and ordinances of the City related to the Series 2020 Bonds and this Agreement and for no other purposes. SECTION 5. It is hereby acknowledged that under applicable Oklahoma law, the City may not become obligated beyond its fiscal year (July 1 through June 30) and therefore, the covenants made herein by the City shall be on a year-to-year basis. Payment of the Project Payments as set out herein is subject to the availability of funds and annual appropriations

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thereof by the City. The Series 2020 Bonds issued by the Authority shall in no way be or become an obligation of the City. SECTION 6. This Projects Agreement shall be for a term commencing on the date hereof and ending on June 30, 2021. This Projects Agreement may be renewed for successive annual periods commencing July 1, 2021, at the option of the City, upon written notice of the exercise of each such option from the City to the Authority given prior to the expiration of the then current term and the taking by the City of such official action as shall be required by applicable laws to effect such renewal and annual appropriations described in Sections 2, 3 and 4 hereof. Notice of such renewal shall be provided to the Trustee, not later than July 31 of each year. SECTION 7. It is understood and agreed that this Projects Agreement is a third party beneficiary contract for the benefit of the holders of the Series 2020 Bonds and may be pledged and assigned by the Authority as security for the Series 2020 Bonds. SECTION 8. The City is not in default in the performance, observance or fulfillment of any material obligation, covenant or condition contained in any material agreement or instrument to which the City is a party or by which the City or any of its property is bound or in any of the obligations, covenants or conditions contained in this Projects Agreement. The financial statements of the City as and for the period ended June 30, 2019, supplied to the Authority fairly present the financial status and operating results of the City as of such date and for the period covered thereby, there has not been any material adverse change in the financial condition of the City since such date and do not contain any untrue statement of a material fact and does not omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading. The City hereby agrees to supply to the Authority, and any holder of the Series 2020 Bonds who requests the same, the comprehensive annual financial report and other financial statements prepared by the City no later than December 31 annually, and such other financial information of the City as the Authority may from time to time reasonably request. SECTION 9. Any notice or other communication required or permitted hereunder shall be sufficiently given if delivered personally, electronically, or sent by registered or certified mail, postage prepaid, return receipt requested, and addressed as listed below, or to such other address as the party concerned may substitute by written notice to the other: If to the Authority: The Sallisaw Municipal Authority 115 E. Choctaw Sallisaw, Oklahoma 74955 If to the City of Sallisaw, OK: The City of Sallisaw, Oklahoma 115 E. Choctaw Sallisaw, Oklahoma 74955

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SECTION 10. It is the intention of the parties that the laws of the State of Oklahoma shall govern the validity of this Agreement, the construction of its terms and interpretation of the rights and duties of the parties. SECTION 11. No amendment or modification hereof shall be deemed valid unless first reduced to writing and signed and dated by both parties hereto and unless written consent of the Bondholders has been obtained as more fully set forth in the Indenture. Fully executed copies of this Projects Agreement shall be deemed for all purposes as duplicate originals. SECTION 12. Should any section, clause or provision of this Projects Agreement be invalid or void for any reason, such invalid or void section, clause or provision shall not affect the whole of this instrument, but the balance of the provisions hereof shall remain in full force and effect. SECTION 13. The headings of the several sections of this Projects Agreement have been prepared for convenience of reference only and shall not control, affect the meaning of, or be taken as an interpretation of any provision of this Projects Agreement. SECTION 14. This Projects Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective successors and assigns. The City hereby acknowledges that this Projects Agreement will be pledged to the Trustee for the holders of the Series 2020 Bonds, and the City consents to such pledge.

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IN WITNESS WHEREOF, the Authority has caused this Projects Agreement to be signed by its Chairman of Trustees, attested by its Secretary of Trustees and has caused the seal of the Authority to be impressed hereon, and the City has caused this Projects Agreement to be signed by the Mayor and attested by the City Clerk and has caused the seal of the City to be impressed hereon all as of the date first above written.

ATTEST: By: ____________________________________ Chairman of Trustees _______________________________ Secretary of Trustees (SEAL) CITY OF SALLISAW, OKLAHOMA ATTEST: By:____________________________________ ____________________________________ Mayor _______________________________ City Clerk (SEAL)

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EXHIBIT F

FORM OF OPINION OF BOND COUNSEL


July 1, 2020

We have examined a certified copy of the Transcript of Proceedings of the Trusteesof The Sallisaw Municipal Authority (the "Authority") preliminary to, and in theissuance of Sales Tax Revenue and Refunding Bonds Series 2020 of the Authority,dated July 1, 2020 (the "Bonds"), in the principal amount of $9,800,000.00 and aspecimen Bond of the issue, and based upon such examination, it is our opinionthat said issue is lawfully authorized by said proceedings under present law. TheBonds are issuable only in registered form in denominations of $5,000 and, withrespect to principal maturing on the same date, integral multiples thereof areexchangeable for other Bonds of the same maturity, bear interest payable onJanuary 1 and July 1 of each year commencing January 1, 2021, until the principalis paid, and mature on January 1 in the years, in the principal amounts and bearinterest at the rates all as set forth on the face thereof and in the Indenturehereinafter mentioned.

The items examined included the Declaration of Trust of the Authority dated March24, 1988, a Supplement thereto dated June 13, 1988, a Second Supplementthereto dated November 9, 1992, a Third Supplement thereto dated December 10,2001, a Lease dated June 28, 1988, by which the City of Sallisaw, Oklahoma (the"City"), leased to the Authority all then existing and thereafter acquired water,sanitary sewer, electric, telecommunications and garbage collection systems (the”Systems”) for a term extending to June 27, 2038, and so long thereafter as anyindebtedness of the Authority secured by the Systems or their revenues shallremain unpaid, The Sallisaw Municipal Authority Series 2020 Revenue BondIndenture dated July 1, 2020 (the “Indenture”), between the Authority and BancFirst,Oklahoma City, Oklahoma, as trustee, the proceedings authorizing execution anddelivery of all of the foregoing and the relevant provisions of the Constitution andStatutes of the State of Oklahoma.

From such examination, it is our opinion that the Authority is a validly existing publictrust of which the City is the beneficiary and, as such, an agency of the State ofOklahoma and regularly constituted authority of the City, that the Bonds and theaforesaid Indenture are valid and binding obligations of the Authority according totheir terms, the Bonds being secured by the Gross Revenues, as defined in theIndenture, and a Project Agreement entered into by and between the City and theAuthority, effective July 1, 2020. The Bonds are exempted securities within themeaning of Section 3(a)(2) of the Securities Act of 1933 and Section 3(a)(12) of the

Securities Exchange Act of 1934 and the approval of no agency of the State ofOklahoma other than the Authority is required for their issuance. No qualificationof the Indenture is required under the Trust Indenture Act of 1939.

It is our further opinion that interest paid by the Authority on the Bonds is and,assuming continuing compliance by the Authority with its hereinafter describedcovenants to comply with all of the requirements of the Internal Revenue Code of1986, as amended, contained in the aforesaid Indenture, said interest will continueto be excluded from the gross income of the payees thereof in the computation offederal income taxes under present law and interpretation thereof and is not an itemof tax preference for purposes of the federal alternative minimum tax. In ouropinion, the covenants contained in the aforesaid Indenture by which the Authorityhas agreed to comply with the Internal Revenue Code of 1986, as amended, to theend that interest on the Bonds shall remain exempt from federal income taxes arevalid and binding obligations of the Authority and compliance therewith is notprohibited by or violative of any provision of law applicable to the Authority. Thefailure of the Authority to comply with its aforesaid covenants could cause theinterest on the Bonds to be so included in gross income retroactive to the date ofissuance of the Bonds.

It is our further opinion that interest paid by the Authority on the Bonds is excludedfrom the gross income of the payees hereof in the computation of State ofOklahoma income taxes.

JOHANNING & BYROM, PLLC

ByChris Byrom

CB:pe

EXHIBIT G

CONTINUING DISCLOSURE AGREEMENT


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CONTINUING DISCLOSURE AGREEMENT

This CONTINUING DISCLOSURE AGREEMENT dated as of July 1, 2020 (the “Continuing Disclosure Agreement”), is executed and delivered by The Sallisaw Municipal Authority (the “Authority”) and BancFirst, Oklahoma City, Oklahoma, as dissemination agent (the “Dissemination Agent”).

RECITALS

1. This Continuing Disclosure Agreement is executed and delivered in connection with the

issuance by The Sallisaw Municipal Authority (the “Authority”) of $13,500,000.00 Utility System Revenue and Refunding Bonds, Series 2020 (the “Bonds”), pursuant to a Bond Indenture dated as of July 1, 2020 between the Authority and BancFirst, Oklahoma City, Oklahoma, as trustee (the “Indenture”).

2. The Authority and the Dissemination Agent are entering into this Continuing Disclosure

Agreement for the benefit of the Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with Rule 15c2-12 of the Securities and Exchange Commission. The Authority is an “obligated person” with responsibility for continuing disclosure hereunder.

In consideration of the mutual covenants and agreements herein, the Authority and the

Dissemination Agent covenant and agree as follows:

Section 1. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Continuing Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“Annual Report” means any Annual Report filed by the Authority pursuant to, and as described

in, Section 2 of this Continuing Disclosure Agreement.

“Beneficial Owner” means any registered owner of any Bonds and any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes.

“Dissemination Agent” means BancFirst, Oklahoma City, Oklahoma, acting in its capacity as

dissemination agent hereunder, or any successor Dissemination Agent designated in writing by the Authority.

“EMMA” means the Electronic Municipal Market Access system for municipal securities

disclosures established and maintained by the MSRB, which can be accessed at www.emma.msrb.org or such other location as may be designated in the future by the MSRB pursuant to the Rule.

“Financial Obligation” shall mean (i) debt obligation; (ii) derivative instrument entered into in

connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term “Financial Obligation” shall not include municipal securities (as defined in the Securities Exchange Act of 1934, as amended) as to which a final official statement (as defined in the Rule) has been provided to the MSRB consistent with the Rule.

http://www.emma.msrb.org/

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“Fiscal Year” means the 12-month period beginning on July 1 and ending on June 30 or any other 12-month period selected by the Authority as the Fiscal Year of the Authority for financial reporting purposes.

“Material Events” means any of the events listed in Section 3(a) of this Continuing Disclosure

Agreement.

“MSRB” means the Municipal Securities Rulemaking Board, or any successor repository designated as such by the Securities and Exchange Commission in accordance with the Rule.

“Participating Underwriter” means any of the original underwriter(s) of the Bonds required to

comply with the Rule in connection with offering of the Bonds.

“Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

Section 2. Provision of Annual Reports.

(a) The Authority shall, or shall cause the Dissemination Agent to, not later than 180 days

after the end of the Authority’s Fiscal Year, commencing with the year ending June 30, 2020, file with the MSRB, through EMMA, the following financial information and operating data and certification (the “Annual Report”):

(1) Audited Financials: The financial statements of the Authority for the prior Fiscal

Year, prepared in accordance with accounting principles generally accepted in the United States of America. If audited financial statements are to be prepared but are not available by the time the Annual Report is required to be filed pursuant to this Section, the Annual Report shall contain unaudited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report promptly after they become available.

(2) Updated Financial Data: Each Annual Report shall add the immediately

preceding Fiscal Year’s information concerning the Authority’s revenue, expenditures, debt service requirements, and coverage ratio as provided in the table entitled “Comparative Revenue and Expenses” provided in the Official Statement for the Bonds.

Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues with respect to which the Authority is an “obligated person” (as defined by the Rule), which have been filed with the MSRB and are available through EMMA or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB on EMMA. The Authority shall clearly identify each such other document so included by reference.

The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in this Section. If the Authority’s Fiscal Year changes, it shall give notice of such change in the same manner as for a Material Event under Section 3 of this Continuing Disclosure Agreement.

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(b) Not later than three (3) Business Days prior to the date specified in subsection (a) for providing the Annual Report to the MSRB, the Authority shall either (1) provide the Annual Report to the Dissemination Agent, with written instructions to file the Annual Report as specified in subsection (a), or (2) provide written notice to the Dissemination Agent that the Authority has filed the Annual Report with the MSRB or will do so prior to the deadline specified in subsection (a). The Dissemination Agent may rely conclusively on the certification of the Authority provided pursuant to subsection (a)(4) above that such Annual Report constitutes the Annual Report required to be furnished by the Authority hereunder and shall have no independent duty to review such Annual Report.

(c) If the Dissemination Agent has not received either an Annual Report with filing

instructions or a written notice from the Authority that it has filed an Annual Report with the MSRB by the date required in subsection (a), the Dissemination Agent shall send a notice to the MSRB in substantially the form attached as Exhibit A.

(d) The Dissemination Agent shall, unless the Authority has filed the Annual Report with the

MSRB, promptly following receipt of the Annual Report and instructions required in subsection (b) above, file the Annual Report with the MSRB and file a report with the Authority certifying that the Annual Report has been filed pursuant to this Continuing Disclosure Agreement, stating the date it was filed with the MSRB. Such confirmation may be in the form of any confirming email or submission confirmation obtained from EMMA.

(e) In addition to the foregoing requirements of this Section, the Authority agrees to provide

copies of the most recent Annual Report to any requesting bondowner or prospective bondowner, but only after the same have been delivered to the MSRB.

Section 3. Reporting of Material Events.

(a) No later than ten (10) Business Days after the occurrence of any of the following events,

the Authority shall give, or cause to be given to the MSRB by the Dissemination Agent, through EMMA, notice of the occurrence of any of the following events with respect to the Bonds (“Material Events”):

(1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions; the issuance by the Internal Revenue Service of proposed

or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701- TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds;

(7) modifications to rights of bondholders, if material; (8) bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution or sale of property securing repayment of the Bonds, if

material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the Authority or the City

of Sallisaw, Oklahoma (the “City”);

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(13) the consummation of a merger, consolidation, or acquisition involving the Authority or the City or the sale of all or substantially all of the assets of the Authority or the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material;

(14) appointment of a successor or additional trustee or the change of name of the trustee, if material;

(15) incurrence of a Financial Obligation of the Authority or the City, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the Authority or the City, any of which affect bondholders, if material; and

(16) default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the Authority or the City, any of which reflect financial difficulties.

(b) The Dissemination Agent shall, promptly after obtaining actual knowledge of the

occurrence of any event that it believes may constitute a Material Event, contact the Chairman of the Authority or his or her designee, or such other person as the Authority shall designate in writing to the Dissemination Agent from time to time, inform such person of the event, and request that the Authority promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection (d). If in response to a request under this subsection (b), the Authority determines that the event does not constitute a Material Event, the Authority shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent whether or not to report the occurrence pursuant to subsection (d).

(c) Whenever the Authority obtains knowledge of the occurrence of a Material Event,

because of a notice from the Dissemination Agent pursuant to subsection (b) or otherwise, the Authority shall promptly notify and instruct the Dissemination Agent in writing to report the occurrence pursuant to subsection (d).

(d) If the Dissemination Agent receives written instructions from the Authority to report the

occurrence of a Material Event, the Dissemination Agent shall promptly file a notice of such occurrence to the MSRB, with a copy to the Authority. Notwithstanding the foregoing, notice of Material Events described in subsections (a)(8) and (9) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to the registered owners of affected Bonds pursuant to the Indenture.

Section 4. Termination of Reporting Obligation. The Authority’s obligations under this

Continuing Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If the obligations of the Authority under this Continuing Disclosure Agreement are assumed in full by some other entity, such person shall be responsible for compliance with this Continuing Disclosure Agreement in the same manner as if it were the Authority, and the Authority shall have no further responsibility hereunder. If such termination or substitution occurs prior to legal defeasance, prior redemption or payment in full of all of the Bonds, the Authority shall give notice of such termination or substitution in the same manner as for a Material Event under Section 3 of this Continuing Disclosure Agreement.

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Section 5. Dissemination Agents. The Authority may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Continuing Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign as dissemination agent hereunder at any time upon 30 days prior written notice to the Authority. Except as otherwise provided herein, the Dissemination Agent shall not be responsible in any manner for the content of any notice or report (including without limitation the Annual Report) prepared by the Authority pursuant to this Continuing Disclosure Agreement. The initial Dissemination Agent is BancFirst, Oklahoma City, Oklahoma.

Section 6. Amendment; Waiver. Notwithstanding any other provision of this Continuing

Disclosure Agreement, the Authority and the Dissemination Agent may amend this Continuing Disclosure Agreement and any provision of this Continuing Disclosure Agreement may be waived, provided that Bond Counsel or other counsel experienced in federal securities law matters provides the Authority and the Dissemination Agent with its written opinion that the undertaking of the Authority contained herein, as so amended or after giving effect to such waiver, is in compliance with the Rule and all current amendments thereto and interpretations thereof that are applicable to this Continuing Disclosure Agreement.

In the event of any amendment or waiver of a provision of this Continuing Disclosure Agreement,

the Authority shall describe such amendment or waiver in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Authority. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (1) notice of such change shall be given in the same manner as for a Material Event under Section 3 of this Continuing Disclosure Agreement, and the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

Section 7. Additional Information. Nothing in this Continuing Disclosure Agreement shall be

deemed to prevent the Authority from disseminating any other information, using the means of dissemination set forth in this Continuing Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Material Event, in addition to that which is required by this Continuing Disclosure Agreement. If the Authority chooses to include any information in any Annual Report or notice of occurrence of a Material Event, in addition to that which is specifically required by this Continuing Disclosure Agreement, the Authority shall not have any obligation under this Continuing Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Material Event.

Section 8. Default. If the Authority or the Dissemination Agent fails to comply with any

provision of this Continuing Disclosure Agreement, any Participating Underwriter or any Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Authority or the Dissemination Agent, as the case may be, to comply with its obligations under this Continuing Disclosure Agreement. A default under this Continuing Disclosure Agreement shall not be deemed an event of default under the Indenture or the Bonds, and the sole remedy under this Continuing Disclosure Agreement in the event of any failure of the Authority or the Dissemination Agent to comply with this Continuing Disclosure Agreement shall be an action to compel performance.

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Section 9. Duties and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Continuing Disclosure Agreement The fees, charges and expenses of the Dissemination Agent in connection with its administration of this Continuing Disclosure Agreement shall be paid as provided in the Indenture.

The Dissemination Agent shall not be responsible for the content of any notice or information

provided by the Authority to the Dissemination Agent for filing or the Authority’s failure to submit a complete Annual Report. The Dissemination Agent shall not be responsible for ensuring the compliance with any rule or regulation of the Authority or Participating Underwriter in connection with the filings of information herein, but is merely responsible for the filing of any such information provided to the Dissemination Agent by the Authority.

Section 10. Notices. Any notices or communications to or among any of the parties to this

Continuing Disclosure Agreement may be given by registered or certified mail, return receipt requested, or by confirmed facsimile, or delivered in person or by overnight courier, and will be deemed given on the second day following the date on which the notice or communication is so mailed, as follows:

To the Authority: The Sallisaw Municipal Authority

115 E. Choctaw Sallisaw, Oklahoma 74955-0525 ATTN: Chairman of Trustees

To the Dissemination Agent: BancFirst

101 N. Broadway, Suite 800 Oklahoma City, Oklahoma 73102 ATTN: Corporate Trust Department

Any person may, by written notice to the other persons listed above, designate a different address

or telephone number(s) to which subsequent notices or communications should be sent.

Section 11. Beneficiaries. Subject to the limitation on remedies contained in Section 9 of this Continuing Disclosure Agreement, this Continuing Disclosure Agreement shall inure solely to the benefit of the Authority, the Dissemination Agent, the Participating Underwriter, and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.

Section 12. Severability. If any provision in this Continuing Disclosure Agreement, the

Indenture or the Bonds shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 13. Counterparts. This Continuing Disclosure Agreement may be executed in several

counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 14. Electronic Transactions. The arrangement described herein may be conducted and

related documents may be stored by electronic means. Copies, telecopies, facsimiles, electronic files and other reproductions of original documents shall be deemed to be authentic and valid counterparts of such original documents for all purposes, including the filing of any claim, action or suit in the appropriate court of law.

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Section 15. No Pecuniary Liability; General Limitation on Authority Obligations.

(a) Notwithstanding the language or implication of any provision, representation, covenant or agreement to the contrary, no provision, representation, covenant or agreement contained in this Continuing Disclosure Agreement or any obligation herein imposed upon the Authority, or the breach thereof, shall constitute or give rise to or impose upon the Authority a pecuniary liability. No provision hereof shall be construed to impose a charge against the general credit of the Authority or any personal or pecuniary liability upon any official, director, officer, agent, or employee of the Authority.

(b) ANY OTHER TERM OR PROVISION OF THIS CONTINUING DISCLOSURE

AGREEMENT OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION WITH THE TRANSACTION WHICH IS THE SUBJECT HEREOF TO THE CONTRARY NOTWITHSTANDING, THE AUTHORITY SHALL NOT BE REQUIRED TO TAKE OR OMIT TO TAKE, OR REQUIRE ANY OTHER PERSON OR ENTITY TO TAKE OR OMIT TO TAKE, ANY ACTION WHICH WOULD CAUSE IT OR ANY PERSON OR ENTITY TO BE, OR RESULT IN IT OR ANY PERSON OR ENTITY BEING, IN VIOLATION OF ANY LAW OF THE STATE OF OKLAHOMA.

Section 16. Governing Law. This Continuing Disclosure Agreement shall be governed by

and construed in accordance with the laws of the State of Oklahoma.

[Remainder of Page Intentionally Left Blank.]


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IN WITNESS WHEREOF, the Authority and the Dissemination Agent have caused this Continuing Disclosure Agreement to be executed as of the day and year first above written.


By: Title: Chairman of Trustees

Continuing Disclosure Agreement

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BancFirst, Oklahoma City, Oklahoma, as Dissemination Agent

By: Title: Authorized Officer

Continuing Disclosure Agreement

EXHIBIT A

NOTICE OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: The Sallisaw Municipal Authority (the “Authority”)

Name of Bond Issue: $13,500,000.00 Utility System Revenue and Refunding Bonds,

Series 2020

Name of Obligated Person: The Sallisaw Municipal Authority

Date of Issuance: July 1, 2020

NOTICE IS HEREBY GIVEN that the Authority has not filed an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Agreement dated as of July 1, 2020, between the Authority and BancFirst, Oklahoma City, Oklahoma, as Dissemination Agent. The Authority has informed the Dissemination Agent that the Authority anticipates that the Annual Report will be filed by _____________________.

Dated: _____________, _____.

BancFirst, Oklahoma City, Oklahoma, as Dissemination Agent on behalf of The Sallisaw Municipal Authority

cc: The Sallisaw Municipal Authority

A–1


Documents

PRELIMINARY OFFICIAL STATEMENT DATED JUNE 18, 2020 … · 2020. 6. 19. · The information contained in this Preliminary Official Statement, including the cover page and Exhibits