OFFICIAL STATEMENT DATED MAY 17, 2012 NEW ISSUE - BOOK-ENTRY ONLY RATINGS: Standard & Poor’s: “A+” BANK QUALIFIED In the opinion of Bond Counsel, under existing law and assuming continued compliance with certain requirements of the Internal Revenue Code of 1986, as amended (the “Code”), the interest on the Bonds is: (a) excluded from gross income for federal income tax purposes; and (b) not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, but is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. The interest on the Bonds is exempt from income taxation by the State of Kansas. The Bonds are “qualified tax-exempt obligations” within the meaning of Code § 265(b)(3). See “TAX MATTERS – Opinion of Bond Counsel” herein.

CITY OF DE SOTO, KANSAS

$4,475,000

GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS SERIES 2012-A

Dated: Issue Date Due: September 1, as shown on inside cover

The General Obligation Refunding and Improvement Bonds, Series 2012-A (the “Bonds”) will be issued by the City of De Soto, Kansas (the “Issuer”), as fully registered bonds, without coupons, and, when issued, will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Bonds. Purchases of the Bonds will be made in book-entry form, in the denominations of $5,000 or any integral multiple thereof (the “Authorized Denomination”). Purchasers will not receive certificates representing their interests in Bonds purchased. So long as Cede & Co. is the registered owner of the Bonds, as nominee of DTC, references herein to the Bond owners or registered owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners (as herein defined) of the Bonds. Principal will be payable upon presentation and surrender of the Bonds by the registered owners thereof at the office of the Treasurer of the State of Kansas, Topeka, Kansas, as paying agent and bond registrar (the “Paying Agent” and “Bond Registrar”). Interest payable on each Bond shall be paid to the persons who are the registered owners of the Bonds as of the close of business on the fifteenth day (whether or not a business day) of the calendar month preceding each interest payment date by check or draft of the Paying Agent mailed to such registered owner or, in the case of an interest payment to a registered owner of $500,000 or more in aggregate principal amount of Bonds, by electronic transfer. So long as DTC or its nominee, Cede & Co., is the Owner of the Bonds, such payments will be made directly to DTC. DTC is expected, in turn, to remit such principal and interest to the DTC Participants (herein defined) for subsequent disbursement to the Beneficial Owners. Principal of the Bonds will be payable on each September 1 and semiannual interest will be payable on March 1 and September 1, beginning on September 1, 2012. The Bonds shall be general obligations of the Issuer payable as to both principal and interest from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the Issuer. The full faith, credit and resources of the Issuer are hereby irrevocably pledged for the prompt payment of the principal of and interest on the Bonds as the same become due.

MATURITY SCHEDULE LISTED ON INSIDE COVER PAGE The Bonds are subject to optional and mandatory redemption as further described herein. See “THE BONDS-Redemption Provisions.” The Bonds are offered when, as and if issued by the Issuer, subject to the approval of legality by Gilmore & Bell, P.C., Kansas City, Missouri, Bond Counsel. It is expected that the Bonds will be available for delivery through the facilities of DTC in New York, New York on or about June 6, 2012. THE COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. THE COVER PAGE IS NOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT, INCLUDING ALL APPENDICES ATTACHED HERETO TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION.

CITY OF DE SOTO, KANSAS

MATURITY SCHEDULE

$4,475,000

GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS SERIES 2012-A

SERIAL BONDS

Stated Maturity September 1

Principal Amount

Interest

Rate

Yield or

Price

CUSIP(1)

Base: 241613

2012 $35,000 2.000% 100.365% NN4 2013 115,000 2.000 101.783 NP9 2014 215,000 2.000 102.991 NQ7 2015 330,000 2.000 103.825 NR5 2016 280,000 2.000 104.561 NS3 2017 285,000 2.000 104.566 NT1 2018 325,000 2.000 104.179 NU8 2019 330,000 2.000 103.415 NV6 2020 335,000 2.000 101.691c NW4 2021 305,000 2.000 100.000 NX2 2022 315,000 2.250 101.000 c NY0 2023 300,000 2.250 100.331 c NZ7 2024 290,000 2.500 100.990 c PA0 2025 275,000 2.500 100.327 c PB8 2026 145,000 2.750 101.311 c PC6 2027 115,000 2.750 100.652 c PD4 2028 90,000 3.000 101.627 c PE2 2029 55,000 3.000 100.971 c PF9 2030 55,000 3.000 100.645 c PG7 2031 60,000 3.000 100.000 PH5

TERM BONDS

Stated Maturity September 1

Principal Amount

Interest Rate

Yield or

Price

CUSIP(1) Base:

241613 2034 $220,000 3.300% 100.000% PL6

(All plus accrued interest, if any)

(1) CUSIP numbers have been assigned to this issue by Standard & Poor’s CUSIP Service Bureau, a division of the McGraw-Hill Companies, Inc., and are included solely for the convenience of the Owners of the Bonds. Neither the Issuer nor the Underwriter shall be responsible for the selection or correctness of the CUSIP numbers set forth above.

(c) Priced to first optional call date of September 1, 2019.

_____________________________________________________________________________________________________ IN CONNECTION WITH THIS OFFERING, 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 BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE BONDS ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION. THE REGISTRATION, QUALIFICATION OR EXEMPTION OF THE BONDS IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTIONS IN WHICH THESE SECURITIES HAVE BEEN REGISTERED, QUALIFIED OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE JURISDICTIONS NOR ANY OF THEIR AGENCIES HAVE GUARANTEED OR PASSED UPON THE SAFETY OF THE BONDS AS AN INVESTMENT, UPON THE PROBABILITY OF ANY EARNINGS THEREON OR UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE.

THIS OFFICIAL STATEMENT CONTAINS STATEMENTS THAT ARE “FORWARD-LOOKING STATEMENTS” AS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. WHEN USED IN THIS OFFICIAL STATEMENT, THE WORDS “ESTIMATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED IN SUCH FORWARD-LOOKING STATEMENTS. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. _________________________________________________________________________________________________

(i)

CITY OF DE SOTO, KANSAS

32905 W. 84th Street De Soto, Kansas 66018

(913)583-1182

GOVERNING BODY

David Anderson, Mayor

Randy Johnson, Councilmember John Krudwig, Councilmember Ron McDaniel, Councilmember Lori Murdock, Councilmember Rick Walker, Councilmember

ADMINISTRATIVE OFFICERS

CITY ADMINISTRATOR & TREASURER

Patrick Guilfoyle

CLERK FINANCE OFFICER

Lana R. McPherson, MMC

Bonnie Bennett

ISSUER’S COUNSEL

Patrick Reavey, Esq.

FINANCIAL ADVISOR

BOND COUNSEL

Columbia Capital Management, LLC, Overland Park, Kansas

Gilmore & Bell, P.C., Kansas City, Missouri

CERTIFIED PUBLIC ACCOUNTANTS

Lowenthal Webb & Odermann, P.A. Lawrence, Kansas

(ii)

No dealer, broker, salesman or other person has been authorized by the Issuer or the Underwriter to give any information or to make any representations with respect to the Bonds other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein concerning the Issuer has been furnished by the Issuer and other sources which are believed to be reliable, but such information is not guaranteed as to accuracy or completeness. The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its 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. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Issuer since the date hereof. This Official Statement does not constitute a contract between the Issuer or the Underwriter and any one or more of the purchasers, Owners or Beneficial Owners of the Bonds. ________________________________________________________________________________________________

TABLE OF CONTENTS Page

INTRODUCTION ........................................................................................................................... 1 THE BONDS ................................................................................................................................... 2 THE DEPOSITORY TRUST COMPANY ...................................................................................... 6 THE PROJECTS.............................................................................................................................. 8 SOURCES AND USES OF FUNDS ............................................................................................... 9

THE REFUNDING PLAN ...............................................................................................................8 RISK FACTORS AND INVESTMENT CONSIDERATIONS..................................................... 10 BOND RATINGS .......................................................................................................................... 11 ABSENCE OF LITIGATION........................................................................................................ 11 LEGAL MATTERS ....................................................................................................................... 12 TAX MATTERS ............................................................................................................................ 12 FINANCIAL ADVISOR................................................................................................................ 13 UNDERWRITING......................................................................................................................... 13 AUTHORIZATION OF OFFICIAL STATEMENT ...................................................................... 15

APPENDIX A INFORMATION CONCERNING THE ISSUER APPENDIX B FINANCIAL STATMENTS AND REPORT OF INDEPENDENT

CERTIFIED PUBLIC ACCOUNTANTS (FOR THE FISCAL YEAR ENDED 12/31/2011)

APPENDIX C FORM OF CONTINUING DISCLOSURE INSTRUCTIONS

[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]

(THIS PAGE LEFT BLANK INTENTIONALLY)

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OFFICIAL STATEMENT

CITY OF DE SOTO, KANSAS

$4,475,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS

SERIES 2012-A

INTRODUCTION

General Matters The purpose of this Official Statement is to furnish information relating to the City of De Soto, Kansas (the “Issuer” or the “City”), and its issuance of $4,475,000 General Obligation Refunding and Improvement Bonds, Series 2012-A (the “Bonds”). The Appendices to this Official Statement are integral parts of this document, to be read in their entirety. The Issuer is a municipal corporation duly organized and existing under the laws of the State of Kansas. Additional information regarding the Issuer is contained in APPENDIX A to this Official Statement. The materials contained on the cover page, in the body and in the Appendices to this Official Statement are to be read in their entirety. All financial and other information presented herein has been compiled by the Issuer. The presentation of information herein, including tables of receipts from various taxes, is intended to show recent historic information, and is not intended to indicate future or continuing trends in the financial position or other affairs of the Issuer. No representation is made that past experience, as might be shown by such financial or other information, will necessarily continue or be repeated in the future. Bond Counsel has not assisted in the preparation nor reviewed this Official Statement, except to the extent described under the section captioned “LEGAL MATTERS” and accordingly Bond Counsel expresses no opinion as to the accuracy or sufficiency of any other information contained herein. Definitions Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Bond Resolution, a copy of which is available to any person upon request to the Issuer. Continuing Disclosure The Securities and Exchange Commission (the “SEC”) has promulgated amendments to Rule 15c2-12 (the “Rule”), requiring continuous secondary market disclosure. In the Bond Resolution, hereinafter defined, the Issuer has covenanted to provide annually certain financial information and operating data and other information necessary to comply with the Rule, and to transmit the same to the Municipal Securities Rulemaking Board. This covenant is for the benefit of and is enforceable by the Beneficial Owners of the Bonds. In the past the Issuer has failed to file its Annual Report within the time period stipulated in previous undertakings under the Rule. However, the Issuer has taken remedial action and is now in compliance with such filing requirements. The Issuer has adopted written procedures with respect on ongoing compliance with its continuing disclosure undertakings. A copy of the procedures is available from the Issuer upon request. For more information regarding the Issuer’s continuing disclosure undertaking, see “APPENDIX C – FORM OF CONTINUING DISCLOSURE INSTRUCTIONS”. Additional Information Additional information regarding the Issuer or the Bonds may be obtained from the Clerk of the Issuer at the address set forth in the preface to this Official Statement, or from the Financial Advisor, Columbia Capital Management, LLC, 6330 Lamar Ave., Suite 200, Overland Park, Kansas 66202.

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THE BONDS Authority for the Bonds The Bonds are being issued pursuant to and in full compliance with the Constitution and statutes of the State of Kansas (the ”State”), including K.S.A. 10-101 to 10-125, inclusive, K.S.A. 10-427, K.S.A. 10-620 et seq. and K.S.A. 65-163u, and Article 12, Section 5 of the Constitution of the State of Kansas, as amended and supplemented from time to time (the “Act”), an ordinance passed by the governing body of the Issuer and a resolution adopted by the governing body of the Issuer on May 17, 2012 (jointly, the “Bond Resolution”). Security for the Bonds The Bonds shall be general obligations of the Issuer payable as to both principal and interest from ad valorem taxes which may be levied without limitation as to rate or amount upon all the taxable tangible property, real and personal, within the territorial limits of the Issuer. The full faith, credit and resources of the Issuer are hereby irrevocably pledged for the prompt payment of the principal of and interest on the Bonds as the same become due. Levy and Collection of Annual Tax, Transfer to Debt Service Account The governing body of the Issuer shall annually make provision for the payment of principal of, premium, if any, and interest on the Bonds as the same become due by, to the extent necessary, levying and collecting the necessary taxes upon all of the taxable tangible property within the Issuer in the manner provided by law. Such taxes shall be extended upon the tax rolls in each of the several years, respectively, and shall be levied and collected at the same time and in the same manner as the other ad valorem taxes of the Issuer are levied and collected. The proceeds derived from said taxes shall be deposited in the Bond and Interest Fund, shall be kept separate and apart from all other funds of the Issuer, shall thereafter be transferred to the Debt Service Account and shall be used solely for the payment of the principal of and interest on the Bonds as and when the same become due, taking into account any scheduled mandatory redemptions, and the fees and expenses of the Paying Agent. Description of the Bonds The Bonds shall consist of fully registered book-entry-only bonds in the denomination of $5,000 or any integral multiples thereof (the “Authorized Denomination”) and shall be numbered in such manner as the Bond Registrar shall determine. All of the Bonds shall be dated as of the Issue Date, shall become due in the amounts, on the Stated Maturities, and subject to redemption and payment, prior to their Stated Maturities, and shall bear interest at the rates per annum set forth on the inside cover page of this Official Statement. The Bonds shall bear interest (computed on the basis of twelve 30-day months) from the later of the Dated Date or the most recent Interest Payment Date to which interest has been paid on the Interest Payment Dates in the manner hereinafter set forth. Designation of Paying Agent and Bond Registrar The Issuer will at all times maintain a paying agent and bond registrar meeting the qualifications set forth in the Bond Resolution. The Issuer reserves the right to appoint a successor paying agent or bond registrar. No resignation or removal of the paying agent or bond registrar shall become effective until a successor has been appointed and has accepted the duties of paying agent or bond registrar. Every paying agent or bond registrar appointed by the Issuer shall at all times meet the requirements of Kansas law. The Treasurer of the State of Kansas, Topeka, Kansas (the “Bond Registrar” and “Paying Agent”) has been designated by the Issuer as paying agent for the payment of principal of and interest on the Bonds and bond registrar with respect to the registration, transfer and exchange of Bonds. Method and Place of Payment of the Bonds The principal of, or Redemption Price, and interest on the Bonds shall be payable in any coin or currency which, on the respective dates of payment thereof, is legal tender for the payment of public and private debts. The principal or Redemption Price of each Bond shall be paid at Maturity to the Person in whose name such Bond is registered on the Bond Register at the Maturity thereof, upon presentation and surrender of such Bond at the principal office of the Paying Agent. The interest payable on each Bond on any Interest Payment Date shall be paid to the Owner of such Bond as shown on the Bond Register at the close of business on the Record Date for such interest (a) by check or draft mailed by the Paying Agent to the address of such Owner shown on the Bond Register or at such other address as is furnished to the Paying Agent in writing

3

by such Owner; or (b) in the case of an interest payment to Cede & Co. or any Owner of $500,000 or more in aggregate principal amount of Bonds, by electronic transfer to such Owner upon written notice given to the Bond Registrar by such Owner, not less than 15 days prior to the Record Date for such interest, containing the electronic transfer instructions including the bank, ABA routing number and account number to which such Owner wishes to have such transfer directed. Notwithstanding the foregoing, any Defaulted Interest with respect to any Bond shall cease to be payable to the Owner of such Bond on the relevant Record Date and shall be payable to the Owner in whose name such Bond is registered at the close of business on the Special Record Date for the payment of such Defaulted Interest, which Special Record Date shall be fixed as hereinafter specified. The Issuer shall notify the Paying Agent in writing of the amount of Defaulted Interest proposed to be paid on each Bond and the date of the proposed payment (which date shall be at least 30 days after receipt of such notice by the Paying Agent) and shall deposit with the Paying Agent an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest. Following receipt of such funds the Paying Agent shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 nor less than 10 days prior to the date of the proposed payment. The Paying Agent shall notify the Issuer of such Special Record Date and shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, by first class mail, postage prepaid, to each Owner of a Bond entitled to such notice not less than 10 days prior to such Special Record Date. SO LONG AS CEDE & CO., REMAINS THE REGISTERED OWNER OF THE BONDS, THE PAYING AGENT SHALL TRANSMIT PAYMENTS TO THE SECURITIES DEPOSITORY, WHICH SHALL REMIT SUCH PAYMENTS IN ACCORDANCE WITH ITS NORMAL PROCEDURES. See “THE BONDS – Book-Entry Bonds; Securities Depository.” Payments Due on Saturdays, Sundays and Holidays In any case where a Bond Payment Date is not a Business Day, then payment of principal, Redemption Price or interest need not be made on such Bond Payment Date but may be made on the next succeeding Business Day with the same force and effect as if made on such Bond Payment Date, and no interest shall accrue for the period after such Bond Payment Date. Book-Entry Bonds; Securities Depository

The Bonds shall initially be registered to Cede & Co., the nominee for the Securities Depository, and no Beneficial Owner will receive certificates representing their respective interests in the Bonds, except in the event the Bond Registrar issues Replacement Bonds. It is anticipated that during the term of the Bonds, the Securities Depository will make book-entry transfers among its Participants and receive and transmit payment of principal of, premium, if any, and interest on, the Bonds to the Participants until and unless the Bond Registrar authenticates and delivers Replacement Bonds to the Beneficial Owners as described in the following paragraphs. The Issuer may decide, subject to the requirements of the Operational Arrangements of DTC (or a successor Securities Depository), and the following provisions of this section to discontinue use of the system of book-entry transfers through DTC (or a successor Securities Depository): (a) If the Issuer determines (1) that the Securities Depository is unable to properly discharge its

responsibilities, or (2) that the Securities Depository is no longer qualified to act as a securities depository and registered clearing agency under the Securities and Exchange Act of 1934, as amended, or (3) that the continuation of a book-entry system to the exclusion of any Bonds being issued to any Owner other than Cede & Co. is no longer in the best interests of the Beneficial Owners of the Bonds; or

(b) if the Bond Registrar receives written notice from Participants having interest in not less than 50% of the Bonds Outstanding, as shown on the records of the Securities Depository (and certified to such effect by the Securities Depository), that the continuation of a book-entry system to the exclusion of any Bonds being issued to any Owner other than Cede & Co. is no longer in the best interests of the Beneficial Owners of the Bonds, then the Bond Registrar shall notify the Owners of such determination or such notice and of the availability of certificates to owners requesting the same, and the Bond Registrar shall register in the name of and authenticate and deliver Replacement Bonds to the Beneficial Owners or their nominees in principal amounts representing the interest of each, making such adjustments as it may find necessary or appropriate as to accrued interest and previous calls for redemption; provided, that in the case of a determination under (a)(1) or (a)(2) of this paragraph, the Issuer, with the consent of the Bond Registrar, may select a successor securities depository in accordance with the following paragraph to effect book-entry transfers.

In such event, all references to the Securities Depository herein shall relate to the period of time when the Securities Depository has possession of at least one Bond. Upon the issuance of Replacement Bonds, all references herein to

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obligations imposed upon or to be performed by the Securities Depository shall be deemed to be imposed upon and performed by the Bond Registrar, to the extent applicable with respect to such Replacement Bonds. If the Securities Depository resigns and the Issuer, the Bond Registrar or Owners are unable to locate a qualified successor of the Securities Depository, then the Bond Registrar shall authenticate and cause delivery of Replacement Bonds to Owners, as provided herein. The Bond Registrar may rely on information from the Securities Depository and its Participants as to the names of the Beneficial Owners of the Bonds. The cost of printing, registration, authentication, and delivery of Replacement Bonds shall be paid for by the Issuer.

In the event the Securities Depository resigns, is unable to properly discharge its responsibilities, or is no longer qualified to act as a securities depository and registered clearing agency under the Securities and Exchange Act of 1934, as amended, the Issuer may appoint a successor Securities Depository provided the Bond Registrar receives written evidence satisfactory to the Bond Registrar with respect to the ability of the successor Securities Depository to discharge its responsibilities. Any such successor Securities Depository shall be a securities depository which is a registered clearing agency under the Securities and Exchange Act of 1934, as amended, or other applicable statute or regulation that operates a securities depository upon reasonable and customary terms. The Bond Registrar upon its receipt of a Bond or Bonds for cancellation shall cause the delivery of the Bonds to the successor Securities Depository in appropriate denominations and form as provided in the Bond Resolution. Registration, Transfer and Exchange of Bonds As long as any of the Bonds remain Outstanding, each Bond when issued shall be registered in the name of the Owner thereof on the Bond Register. Bonds may be transferred and exchanged only on the Bond Register as hereinafter provided. Upon surrender of any Bond at the principal office of the Bond Registrar, the Bond Registrar shall transfer or exchange such Bond for a new Bond or Bonds in any authorized denomination of the same Stated Maturity and in the same aggregate principal amount as the Bond that was presented for transfer or exchange. Bonds presented for transfer or exchange shall be accompanied by a written instrument or instruments of transfer or authorization for exchange, in a form and with guarantee of signature satisfactory to the Bond Registrar, duly executed by the Owner thereof or by the Owner’s duly authorized agent. In all cases in which the privilege of transferring or exchanging Bonds is exercised, the Bond Registrar shall authenticate and deliver Bonds in accordance with the provisions of the Bond Resolution. The Issuer shall pay the fees and expenses of the Bond Registrar for the registration, transfer and exchange of Bonds. Any additional costs or fees that might be incurred in the secondary market, other than fees of the Bond Registrar, are the responsibility of the Owners of the Bonds. In the event any Owner fails to provide a correct taxpayer identification number to the Paying Agent, the Paying Agent may make a charge against such Owner sufficient to pay any governmental charge required to be paid as a result of such failure. The Issuer and the Bond Registrar shall not be required (a) to register the transfer or exchange of any Bond that has been called for redemption after notice of such redemption has been mailed by the Paying Agent and during the period of 15 days next preceding the date of mailing of such notice of redemption; or (b) to register the transfer or exchange of any Bond during a period beginning at the opening of business on the day after receiving written notice from the Issuer of its intent to pay Defaulted Interest and ending at the close of business on the date fixed for the payment of Defaulted Interest.

Mutilated, Lost, Stolen or Destroyed Bonds If (a) any mutilated Bond is surrendered to the Bond Registrar or the Bond Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Bond, and (b) there is delivered to the Issuer and the Bond Registrar such security or indemnity as may be required by each of them, then, in the absence of notice to the Issuer or the Bond Registrar that such Bond has been acquired by a bona fide purchaser, the Issuer shall execute and, upon the Issuer’s request, the Bond Registrar shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Bond, a new Bond of the same Stated Maturity and of like tenor and principal amount. If any such mutilated, destroyed, lost or stolen Bond has become or is about to become due and payable, the Issuer, in its discretion, may pay such Bond instead of issuing a new Bond. Upon the issuance of any new Bond, the Issuer may require the payment by the Owner of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Paying Agent) connected therewith. Nonpresentment of Bonds If any Bond is not presented for payment when the principal thereof becomes due at Maturity, if funds sufficient to pay such Bond have been made available to the Paying Agent all liability of the Issuer to the Owner thereof for the payment of such Bond shall forthwith cease, determine and be completely discharged, and thereupon it shall be the duty of the Paying Agent to hold such funds, without liability for interest thereon, for the benefit of the Owner of such Bond, who shall thereafter be restricted exclusively to such funds for any claim of whatever nature on his part under this Bond Resolution or

5

on, or with respect to, said Bond. If any Bond is not presented for payment within four (4) years following the date when such Bond becomes due at Maturity, the Paying Agent shall repay to the Issuer the funds theretofore held by it for payment of such Bond, and such Bond shall, subject to the defense of any applicable statute of limitation, thereafter be an unsecured obligation of the Issuer, and the Owner thereof shall be entitled to look only to the Issuer for payment, and then only to the extent of the amount so repaid to it by the Paying Agent, and the Issuer shall not be liable for any interest thereon and shall not be regarded as a trustee of such money.

Redemption Provisions Optional Redemption. At the option of the Issuer, the Bonds maturing on September 1, 2020 and thereafter may be called for redemption and payment prior to their Stated Maturity on September 1, 2019 and thereafter as a whole or in part (selection of maturities and the amount of Bonds of each maturity to be redeemed to be determined by the Issuer in such manner as it may determine) at any time, at the Redemption Price of 100% (expressed as a percentage of the principal amount), plus accrued interest thereon to the Redemption Date. Mandatory Redemption. The Bonds maturing on September 1, 2034 (the “Term Bond”) shall be subject to mandatory redemption and payment prior to Stated Maturity pursuant to the mandatory redemption requirements hereinafter set forth a Redemption Price equal to 100% of the principal amount thereof plus accrued interest to the Redemption Date. The Issuer shall redeem on September 1 in each year, the following principal amounts of such Term Bond:

Principal Amount

Year

$ 30,000 2032 125,000 2033

65,000 2034* _______________ *Final Maturity

Selection of Bonds to be Redeemed. Bonds shall be redeemed only in an Authorized Denomination. When less than all of the Bonds are to be redeemed and paid prior to their Stated Maturity, such Bonds shall be redeemed in such manner as the Issuer shall determine, Bonds of less than a full Stated Maturity shall be selected by the Bond Registrar in minimum Authorized Denomination in such equitable manner as the Bond Registrar may determine. In the case of a partial redemption of Bonds by lot when Bonds of denominations greater than a minimum Authorized Denomination are then Outstanding, then for all purposes in connection with such redemption each minimum Authorized Denomination of face value shall be treated as though it were a separate Bond of a minimum Authorized Denomination. If it is determined that one or more, but not all, of the minimum Authorized Denomination value represented by any Bond is selected for redemption, then upon notice of intention to redeem such minimum Authorized Denomination, the Owner or the Owner’s duly authorized agent shall forthwith present and surrender such Bond to the Bond Registrar: (1) for payment of the Redemption Price and interest to the Redemption Date of such minimum Authorized Denomination value called for redemption, and (2) for exchange, without charge to the Owner thereof, for a new Bond or Bonds of the aggregate principal amount of the unredeemed portion of the principal amount of such Bond. If the Owner of any such Bond fails to present such Bond to the Paying Agent for payment and exchange as aforesaid, such Bond shall, nevertheless, become due and payable on the redemption date to the extent of the minimum Authorized Denomination value called for redemption (and to that extent only). Notice and Effect of Call for Redemption. Unless waived by any Owner of Bonds to be redeemed, if the Issuer shall call any Bonds for redemption and payment prior to the Stated Maturity thereof, the Issuer shall give written notice of its intention to call and pay said Bonds to the State Treasurer, and the Purchaser. In addition, the Issuer shall cause the Bond Registrar to give written notice of redemption to the Owners of said Bonds. Each of said written notices shall be deposited in the United States first class mail not less than 30 days prior to the Redemption Date. All official notices of redemption shall be dated and shall contain the following information: (a) the Redemption Date; (b) the Redemption Price; (c) if less than all Outstanding Bonds are to be redeemed, the identification (and, in the case of partial redemption of any Bonds, the respective principal amounts) of the Bonds to be redeemed; (d) a statement that on the Redemption Date the Redemption Price will become due and payable upon each such Bond or portion thereof called for redemption and that interest thereon shall cease to accrue from and after the Redemption Date; and (e) the place where such Bonds are to be surrendered for payment of the Redemption Price, which shall be the principal office of the Paying Agent. The failure of any Owner to receive notice given as heretofore provided or an immaterial defect therein shall not invalidate any redemption.

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Prior to any Redemption Date, the Issuer shall deposit with the Paying Agent an amount of money sufficient to pay the Redemption Price of all the Bonds or portions of Bonds that are to be redeemed on such Redemption Date. Official notice of redemption having been given as aforesaid, the Bonds or portions of Bonds to be redeemed shall become due and payable on the Redemption Date, at the Redemption Price therein specified, and from and after the Redemption Date (unless the Issuer defaults in the payment of the Redemption Price) such Bonds or portion of Bonds shall cease to bear interest. For so long as the Securities Depository is effecting book-entry transfers of the Bonds, the Bond Registrar shall provide the notices specified to the Securities Depository. It is expected that the Securities Depository shall, in turn, notify its Participants and that the Participants, in turn, will notify or cause to be notified the Beneficial Owners. Any failure on the part of the Securities Depository or a Participant, or failure on the part of a nominee of a Beneficial Owner of a Bond (having been mailed notice from the Bond Registrar, the Securities Depository, a Participant or otherwise) to notify the Beneficial Owner of the Bond so affected, shall not affect the validity of the redemption of such Bond. In addition to the foregoing notice, the Issuer shall provide such notices of redemption as are required by the Disclosure Instructions. The Paying Agent is also directed to comply with any mandatory or voluntary standards then in effect for processing redemptions of municipal securities established by the State or the Securities and Exchange Commission. Failure to comply with such standards shall not affect or invalidate the redemption of any Bond.

THE DEPOSITORY TRUST COMPANY General. The Bonds are available in book-entry only form. Purchasers of the Bonds will not receive certificates representing their interests in the Bonds. Ownership interests in the Bonds will be available to purchasers only through a book-entry system (the “Book-Entry System”) maintained by The Depository Trust Company “DTC”), New York, New York. The following information concerning DTC and DTC’s book-entry system has been obtained from DTC. The Issuer takes no responsibility as to the accuracy or completeness thereof and neither the Indirect Participants nor the Beneficial Owners should rely on the following information with respect to such matters, but should instead confirm the same with DTC or the Direct Participants, as the case may be. There can be no assurance that DTC will abide by its procedures or that such procedures will not be changed from time to time. DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered bond certificate will be issued for each scheduled maturity of the Bonds, and will be deposited with DTC. DTC and its Participants. DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 million issues of 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 Standard & Poor’s highest rating: “AAA.” The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. Purchases of Ownership Interests. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners 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

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Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. Transfers. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Notices. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices will be sent to DTC. If less than all of the 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. Voting. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer 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 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments of Principal, Redemption Price and Interest. Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Issuer or 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 Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or 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. Discontinuation of Book-Entry System. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Issuer or Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered. The Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed, 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), and delivered to DTC (or a successor securities depository), to be held by it as securities depository for Direct Participants. If, however, the system of book-entry-only transfers has been discontinued and a Direct Participant has elected to withdraw its Bonds from DTC (or such successor securities depository), Bond certificates may be delivered to Beneficial Owners in the manner described in the Bond Resolution.

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THE PROJECTS The Bonds are being issued for the purpose of providing permanent financing for the construction of improvements to the City’s water system (the “Improvements”), more specifically described as follows:

Description Authorizing

Resolution No. Authority

Estimated Cost to be Financed with the

Bonds* Water Treatment Plant Improvements Res. No. 916 KSA 65-163u 425,000.00 TOTAL = $425,000.00

______________________ *Excludes costs of issuing the Bonds.

THE REFUNDING PLAN

Proceeds of the Bonds will be applied to retire the following general obligation bonds of the Issuer (the “Refunded Bonds”): General Obligation Bonds, Series 2004A, Dated June 1, 2004

Maturity Amount

Maturity Date

Interest Rate

Redemption Date

Redemption Price

$125,000 September 1, 2015 4.800% September 1, 2013 100% 130,000 September 1, 2016 5.000% September 1, 2013 100% 420,000 September 1, 2019 5.300% September 1, 2013 100%

1,020,000 September 1, 2025 5.550% September 1, 2013 100% General Obligation Refunding Bonds, Series 2007A, Dated August 27, 2007

Maturity Amount

Maturity Date

Interest Rate

Redemption Date

Redemption Price

$105,000 September 1, 2013 3.900% September 1, 2012 100% 190,000 September 1, 2014 3.800% September 1, 2012 100% 135,000 September 1, 2015 3.850% September 1, 2012 100% 150,000 September 1, 2017 3.900% September 1, 2012 100% 100,000 September 1, 2018 3.950% September 1, 2012 100%

95,000 September 1, 2019 4.000% September 1, 2012 100% 100,000 September 1, 2020 4.000% September 1, 2012 100%

90,000 September 1, 2021 4.050% September 1, 2012 100% 170,000 September 1, 2023 4.100% September 1, 2012 100% 115,000 September 1, 2026 4.200% September 1, 2012 100%

General Obligation Improvement Bonds, Series 2008A, Dated April 29, 2008

Maturity Amount

Maturity Date

Interest Rate

Redemption Date

Redemption Price

$140,000 September 1, 2017 3.650% September 1, 2013 100% 100,000 September 1, 2019 3.800% September 1, 2013 100% 115,000 September 1, 2021 3.900% September 1, 2013 100% 120,000 September 1, 2023 4.000% September 1, 2013 100% 135,000 September 1, 2025 4.100% September 1, 2013 100% 220,000 September 1, 2028 4.250% September 1, 2013 100%

An Escrow Fund will be established for the Refunded Bonds pursuant to the terms of the Escrow Trust Agreement dated as of the Dated Date, by and between the Issuer and Security Bank of Kansas City, Kansas City, Kansas (the “Escrow Agent”).

VERIFICATION OF ESCROW The accuracy of the mathematical computations of: (a) the adequacy of cash and certain Escrowed Securities to be held by the Escrow Agent pursuant to the Escrow Agreement, together with the interest to be earned thereon, to pay the

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principal of, premium if any, and interest due and to become due on the Refunded Bonds to and including the applicable optional redemption date or date of final maturity, and (b) certain yield calculations relating to the Bonds and the Escrowed Securities made in accordance with Code § 148, will be verified by Robert Thomas, LLC, C.P.A.. Such verification of the accuracy of such mathematical computations will be based upon information supplied by the Financial Advisor and on interpretations of the Code provided by Bond Counsel.

SOURCES AND USES OF FUNDS The following table itemizes the sources and uses of funds available for the Improvements, including the proceeds from the sale of the Bonds.

Sources of Funds: Principal Amount $4,475,000.00 Net Original Issue Premium/Discount 90,448.45 Total

$4,565,448.45

Uses of Funds:

Deposit to Improvement Fund $425,000.00 Deposit to Escrow Fund 3,980,379.70 Costs of Issuance 78,906.23 Underwriter’s Discount 81,162.52 Total

$4,565,448.45

RISK FACTORS AND INVESTMENT CONSIDERATIONS A PROSPECTIVE PURCHASER OF THE BONDS DESCRIBED HEREIN SHOULD BE AWARE THAT THERE ARE CERTAIN RISKS ASSOCIATED WITH THE BONDS WHICH MUST BE RECOGNIZED. THE FOLLOWING STATEMENTS REGARDING CERTAIN RISKS ASSOCIATED WITH THE OFFERING SHOULD NOT BE CONSIDERED AS A COMPLETE DESCRIPTION OF ALL RISKS TO BE CONSIDERED IN THE DECISION TO PURCHASE THE BONDS. PROSPECTIVE PURCHASERS OF THE BONDS SHOULD ANALYZE CAREFULLY THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT AND ADDITIONAL INFORMATION IN THE FORM OF THE COMPLETE DOCUMENTS SUMMARIZED HEREIN, COPIES OF WHICH ARE AVAILABLE AND MAY BE OBTAINED FROM THE ISSUER OR THE UNDERWRITER. Legal Matters Various state and federal laws, regulations and constitutional provisions apply to the obligations created by the Bonds. There is no assurance that there will not be any change in, interpretation of, or addition to such applicable laws, provisions and regulations which would have a material effect, either directly or indirectly, on the Issuer or the taxing authority of the Issuer. Limitations on Remedies Available to Owners of Bonds The enforceability of the rights and remedies of the owners of Bonds, and the obligations incurred by the Issuer in issuing the Bonds, are subject to the following: the federal Bankruptcy Code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors’ rights generally, now or hereafter in effect; usual equity principles which may limit the specific enforcement under state law of certain remedies; the exercise by the United States of America of the powers delegated to it by the United States Constitution; and the reasonable and necessary exercise, in certain unusual situations, of the police power inherent in the State of Kansas and its governmental subdivisions in the interest of serving a legitimate and significant public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or state government, if initiated, could subject the owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy and otherwise, and consequently may involve risks of delay, limitation or modification of their rights. Taxation of Interest on the Bonds An opinion of Bond Counsel will be obtained to the effect that interest earned on the Bonds is excludable from gross income for federal income tax purposes under current provisions of the Internal Revenue Code of 1986, as amended (the

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“Code”), and applicable rulings and regulations under the Code; however, an application for a ruling has not been made and an opinion of counsel is not binding upon the Internal Revenue Service. There can be no assurance that the present provisions of the Code, or the rules and regulations thereunder, will not be adversely amended or modified, thereby rendering the interest earned on the Bonds includable in gross income for federal income tax purposes. The Issuer has covenanted in the Bond Resolution and in other documents and certificates to be delivered in connection with the issuance of the Bonds to comply with the provisions of the Code, including those which require the Issuer to take or omit to take certain actions after the issuance of the Bonds. Because the existence and continuation of the excludability of the interest on the Bonds depends upon events occurring after the date of issuance of the Bonds, the opinion of Bond Counsel described under “TAX MATTERS” assumes the compliance by the Issuer with the provisions of the Code described above and the regulations relating thereto. No opinion is expressed by Bond Counsel with respect to the excludability of the interest on the Bonds in the event of noncompliance with such provisions. The failure of the Issuer to comply with the provisions described above may cause the interest on the Bonds to become includable in gross income as of the date of issuance. Premium on Bonds Any person who purchases a Bond in excess of its principal amount, whether during the initial offering or in a secondary market transaction, should consider that the Bonds are subject to redemption at par under the various circumstances described under “THE BONDS - Redemption of Bonds”. No Additional Interest or Mandatory Redemption upon Event of Taxability. The Bond Resolution does not provide for the payment of additional interest or penalty on the Bonds or the mandatory redemption thereof if the interest thereon becomes includable in gross income for federal income tax purposes. Likewise, the Bond Resolution does not provide for the payment of any additional interest or penalty on the Bonds if the interest thereon becomes includable in gross income for Kansas income tax purposes. Suitability of Investment The tax exempt feature of the Bonds is more valuable to high tax bracket investors than to investors who are in low tax brackets, and so the value of the interest compensation to any particular investor will vary with individual tax rates. Each prospective investor should carefully examine this Official Statement, including the Appendices hereto, and its own financial condition to make a judgment as to its ability to bear the economic risk of such an investment, and whether or not the Bonds are an appropriate investment. Market for the Bonds Bond Rating. The Bonds have been assigned the financial rating set forth in the section hereof entitled “BOND RATINGS.” There is no assurance that a particular rating will remain in effect for any given period of time or that it will not be revised, either downward or upward, or withdrawn entirely, if in the judgment of the agency originally establishing such rating, circumstances so warrant. Any downward revision or withdrawal of any rating may have an adverse affect on the market price of the Bonds. Secondary Market. There is no assurance that a secondary market will develop for the purchase and sale of the Bonds. Prices of bonds traded in the secondary market, though, are subject to adjustment upward and downward in response to changes in the credit markets. From time to time it may be necessary to suspend indefinitely secondary market trading in the Bonds as a result of financial condition or market position of broker-dealers, prevailing market conditions, lack of adequate current financial information about the Issuer, or a material adverse change in the financial condition of the Issuer, whether or not the Bonds are in default as to principal and interest payments, and other factors which may give rise to uncertainty concerning prudent secondary market practices.

BOND RATINGS Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc., has assigned a rating of “A+” to the Bonds and has affirmed the same rating for the Issuer’s outstanding general obligation bonds. Such rating reflects only the view of such rating agency, and an explanation of the significance of such rating may be obtained therefrom. No such rating constitutes a recommendation to buy, sell, or hold any bonds, including the Bonds, or as to the market price or suitability thereof for a particular investor. The Issuer furnished such rating agency with certain information

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and materials relating to the Bonds that have not been included in this Official Statement. Generally, rating agencies base their ratings on the information and materials so furnished and on investigations, studies and assumptions by the rating agencies. There is no assurance that a particular rating will remain in effect for any given period of time or that it will not be revised, either downward or upward, or withdrawn entirely, if in the judgment of the agency originally establishing such rating, circumstances so warrant. Any downward revision or withdrawal of any rating may have an adverse affect on the market price of the Bonds.

ABSENCE OF LITIGATION The Issuer, in the ordinary course of business, is a party to various legal proceedings. In the opinion of management of the Issuer, any judgment rendered against the Issuer in such proceedings would not materially adversely effect the financial position of the Issuer. The Issuer certifies that there is no controversy, suit or other proceeding of any kind pending or threatened wherein or whereby any question is raised or may be raised, questioning, disputing or affecting in any way the legal organization of the Issuer or its boundaries, or the right or title of any of its officers to their respective offices, or the legality of any official act or the constitutionality or validity of the indebtedness represented by the Bonds or the validity of said Bonds, or any of the proceedings had in relation to the authorization, issuance or sale thereof, or the levy and collection of a tax to pay the principal and interest thereof.

LEGAL MATTERS

Approval of Bonds All matters incident to the authorization and issuance of the Bonds are subject to the approval of Gilmore & Bell, P.C., Kansas City, Missouri, Bond Counsel. The factual and financial information appearing herein has been supplied or reviewed by certain officials of the Issuer and its certified public accountants, as referred to herein. Bond Counsel has participated in the preparation of the Official Statement but expresses no opinion as to the accuracy or sufficiency thereof, except for the matters appearing in the sections of this Official Statement captioned “THE BONDS,” “LEGAL MATTERS,” and “TAX MATTERS.” Payment of the legal fee of Bond Counsel is contingent upon the delivery of the Bonds.

TAX MATTERS

The following is a summary of the material federal and State income tax consequences of holding and disposing of the Bonds. This summary is based upon laws, regulations, rulings and judicial decisions now in effect, all of which are subject to change (possibly on a retroactive basis). This summary does not discuss all aspects of federal income taxation that may be relevant to investors in light of their personal investment circumstances or describe the tax consequences to certain types of holders subject to special treatment under the federal income tax laws (for example, dealers in securities or other persons who do not hold the Bonds as a capital asset, tax-exempt organizations, individual retirement accounts and other tax deferred accounts, and foreign taxpayers), and, except for the income tax laws of the State of Kansas, does not discuss the consequences to an owner under state, local or foreign tax laws. The summary does not deal with the tax treatment of persons who purchase the Bonds in the secondary market at a premium or a discount. Prospective investors are advised to consult their own tax advisors regarding federal, state, local and other tax considerations of holding and disposing of the Bonds. Opinion of Bond Counsel In the opinion of Bond Counsel, under the law existing as of the issue date of the Bonds: Federal Tax Exemption. The interest on the Bonds is excluded from gross income for federal income tax purposes. Alternative Minimum Tax. Interest on the Bonds is not an item of tax preference for purposes of computing the federal alternative minimum tax imposed on individuals and corporations, but is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. Bank Qualification. The Bonds are “qualified tax-exempt obligations” for purposes of Code § 265(b)(3), and in the case of certain financial institutions (within the meaning of Code § 265(b)(5)), a deduction is allowed for 80% of that portion of such financial institutions’ interest expense allocable to interest on the Bonds.

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Kansas Tax Exemption. The interest on the Bonds is exempt from income taxation by the State. No Other Opinions. Bond Counsel’s opinions are provided as of the date of the original issue of the Bonds, subject to the condition that the Issuer comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The Issuer has covenanted to comply with all such requirements. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. Bond Counsel is expressing no opinion regarding other federal, state or local tax consequences arising with respect to the Bonds. Other Tax Consequences Original Issue Premium. If a Bond is issued at a price that exceeds the stated redemption price at maturity of the Bond, the excess of the purchase price over the stated redemption price at maturity constitutes “premium” on that Bond. Under Code § 171, the purchaser of that Bond must amortize the premium over the term of the Bond using constant yield principles, based on the purchaser’s yield to maturity. As premium is amortized, the owner’s basis in the Bond and the amount of tax-exempt interest received will be reduced by the amount of amortizable premium properly allocable to the owner. This will result in an increase in the gain (or decrease in the loss) to be recognized for Federal income tax purposes on sale or disposition of the Bond prior to its maturity. Even though the owner’s basis is reduced, no Federal income tax deduction is allowed. Prospective investors should consult their own tax advisors concerning the calculation and accrual of bond premium. Sale, Exchange or Retirement of Bonds. Upon the sale, exchange or retirement (including redemption) of a Bond, an owner of the Bond generally will recognize gain or loss in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale, exchange or retirement of the Bond (other than in respect of accrued and unpaid interest) and such owner’s adjusted tax basis in the Bond. To the extent the Bonds are held as a capital asset, such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the Bond has been held for more than 12 months at the time of sale, exchange or retirement. Reporting Requirements. In general, information reporting requirements will apply to certain payments of principal, interest and premium paid on Bonds, and to the proceeds paid on the sale of Bonds, other than certain exempt recipients (such as corporations and foreign entities). A backup withholding tax will apply to such payments if the owner fails to provide a taxpayer identification number or certification of foreign or other exempt status or fails to report in full dividend and interest income. The amount of any backup withholding from a payment to an owner will be allowed as a credit against the owner’s federal income tax liability. Collateral Federal Income Tax Consequences. Prospective purchasers of the Bonds should be aware that ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with “excess net passive income,” foreign corporations subject to the branch profits tax, life insurance companies, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Bonds. Bond Counsel expresses no opinion regarding these tax consequences. Purchasers of Bonds should consult their tax advisors as to the applicability of these tax consequences and other federal income tax consequences of the purchase, ownership and disposition of the Bonds, including the possible application of state, local, foreign and other tax laws.

FINANCIAL ADVISOR Columbia Capital Management, LLC, Overland Park, Kansas, a registered municipal advisor, has acted as Financial Advisor to the Issuer in connection with the sale of the Bonds. The Financial Advisor has assisted the Issuer in the preparation of this Official Statement and in other matters relating to the issuance of the Bonds. The Financial Advisor has not, however, independently verified the factual information contained in the Official Statement. The Financial Advisor will not be a manager or a member of any underwriting group submitting a proposal for the purchase of the Bonds.

UNDERWRITING The Bonds have been sold at public sale by the Issuer to Robert W. Baird & Co., Red Bank, New Jersey (the “Underwriter”) on the basis of lowest true interest cost. Three (3) bids were received by the Issuer. The Underwriter has

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agreed, subject to certain conditions, to purchase the Bonds at a price equal to the principal amount of the Bonds, plus accrued interest from the Dated Date to the Issue Date, plus a premium of $90,448.45, less an underwriting discount of $81,162.52. The Bonds will be offered to the public initially at the prices determined to produce the yield to maturity set forth on the inside cover page of this Official Statement. The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing the Bonds into investment trusts) at prices other than the price stated on the inside cover page hereof and may change the initial offering price from time to time subsequent to the date hereof. In connection with the offering, the Underwriters may overallot or effect transactions which stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

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AUTHORIZATION OF OFFICIAL STATEMENT The preparation of this Official Statement and its distribution has been authorized by the governing body of the Issuer as of the date on the cover page hereof. This Official Statement is submitted in connection with the issuance of the Bonds and may not be reproduced or used as a whole or in part for any other purpose. This Official Statement does not constitute a contract between the Issuer or the Underwriter and any one or more of the purchasers, Owners or Beneficial Owners of the Bonds. CITY OF DE SOTO, KANSAS By /s/ David Anderson David Anderson, Mayor

APPENDIX A

INFORMATION CONCERNING THE ISSUER

(THIS PAGE LEFT BLANK INTENTIONALLY)

A-1

APPENDIX A

INFORMATION CONCERNING THE ISSUER

GENERAL

Size and Location The City of De Soto is located in Johnson County, Kansas, and is approximately 19 miles southwest of downtown Kansas City, Missouri. A very small portion of the City, consisting of a private golf course, is located in Leavenworth County, Kansas. The City encompasses approximately 19.2 square miles and has a current estimated population of 5,720 persons. Government and Organization of the Issuer The City was incorporated in 1857 and became a city of the second class in 2007. The City operates under the Mayor-Council form of government. The five Council members elected at large, serve four year terms. The Mayor, elected at large, for four year terms, presides over Council meetings and appoints certain City officials, subject to Council approval. The City Administrator is appointed by the Mayor and Council and is charged with the efficient and effective administration of the City. Municipal Services and Utilities The City owns and operates its own water and sewer utility systems. Atmos Energy supplies natural gas and Westar Energy supplies electricity to the City. Telephone service is provided by AT&T. Time Warner Cable operates a cable television system under franchise with the City. The City contracts out for police protection through the Johnson County Sheriff’s Department. Effective January 1, 2010, the City’s Fire Department ceased to exist as a unit of the City of De Soto. The dissolution of the City’s Fire Department was accompanied by a simultaneous dissolution of the Johnson County Rural Fire District #3, a fire district that provided fire protection to portions of the City as well as other unincorporated territory immediately beyond the City of De Soto. All of the assets and liabilities of the two fire departments were assumed by a regional fire protection district, the Northwest Consolidated Fire District (NCFD). The NCFD is a separate governmental entity, whose 5-member board of directors is composed of members whose appointments are shared by the De Soto City Council and the Johnson County Board of Commissioners. The NCFD’s property tax funding source is reviewed and approved by the Johnson County Board of Commissioners. The NCFD currently has 14 full time employees and several part time employees. Transportation and Communication Facilities The City is served by Kansas Highway 10 which connects to Interstate 435 to the east giving residents access to all major highways serving the region. Rail service is provided by BNSF. New Century Airport is located within 15 miles of the City and provides a runway capable of handling private and corporate aircraft. Regularly scheduled air service is available at Kansas City International Airport, located 40 miles from the City. Educational Institutions and Facilities Unified School District No. 232 operates five elementary schools, two middle schools, and two senior high schools in the City and surrounding area. As of September 2011, the district had a total enrollment of approximately 6,889 students. Johnson County Community College is located near the City and provides a two-year curriculum and vocational and technical courses of study. The University of Kansas is located within 20 miles of the City.

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Medical and Health Facilities The Olathe Medical Center is a private, not-for-profit, 200-bed facility located approximately 15 miles southeast of the City. Shawnee Mission Medical Center is a 383-bed acute care facility located approximately 19 miles northeast of the City. Lawrence Memorial Hospital is a 173-bed general acute care hospital located approximately 20 miles west of the City. All hospitals offer a full range of medical services including 24-hour emergency care. There is one nursing home located within the City. One medical doctor currently practices in the City. Recreational, Cultural and Religious Facilities There is recreation available in the area including parks, swimming pools, golf courses and tennis courts. Additionally, cultural opportunities such as community theater, symphony and museums are located near the City in the Kansas City metropolitan area. Five churches serve the community.

ECONOMIC INFORMATION Originally developed as a suburban community to Kansas City, Missouri, Johnson County has experienced tremendous growth in population, wealth and industry over the past 30 years. From a 1960 population of 143,792 to the 2010 U.S. Census Bureau estimate of 544,179, few counties in the country have experienced such a rapid rate of growth. Major Employers Listed below are the major employers located in City and the number employed by each:

Major Employers

Product/Service

Number of Full-& Part-time Employees

Unified School District #232 Public Education 912 Huhtamaki Consumer Packaging Manufacturer of paper containers 350 Engineered Air HVAC Manufacturing 250 Intervet Inc. Animal Pharmaceutical 163 Rehrig Pacific Co. Plastic Injection Molding 116 Mr. Goodcents Franchise Research & Development Headquarters 62 Custom Foods, Inc. Food Preparation 32

Source: City of De Soto, Kansas Labor Force The following table sets forth labor force figures for Johnson County and the State of Kansas:

JOHNSON COUNTY

Average For Year

Total Labor Force

Employed

Unemployed

Unemployed Rate

2006 292,778 280,831 11,947 4.1% 2007 297,132 285,601 11,531 3.9% 2008 302,301 289,116 13,185 4.4% 2009 297,731 277,703 20,028 6.7% 2010 299,658 280,275 19,383 6.5% 2011 301,113 283,223 17,890 5.9%

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STATE OF KANSAS

Average For Year

Total Labor Force

Employed

Unemployed

Unemployed Rate

2006 1,470,819 1,407,071 63,748 4.3% 2007 1,478,781 1,418,666 60,115 4.1% 2008 1,506,200 1,433,386 72,814 4.8% 2009 1,507,644 1,399,356 108,288 7.2% 2010 1,504,883 1,397,208 107,675 7.2% 2011 1,505,043 1,404,339 100,704 6.7%

Source: U.S. Department of Labor, Bureau of Labor Statistics Retail Sales Tax Collections The following table lists State of Kansas sales tax collections for the years indicated for sales occurring in Johnson County, Kansas:

Year Sales Tax Collections Per Capita Sales Tax 2006 $471,825,678 $918.57 2007 485,638,096 918.60 2008 503,453,890 954.26 2009 464,292,589 901.80 2010 513,604,956 852.78

Source: Kansas Statistical Abstract Local Option Sales Tax In 2001 County voters approved a sales tax on retail sales within the County limits. The County shares a portion of its sales and use tax collections with the City pursuant to a statutory formula. The City uses its portion of sales tax receipts to provide operating funds for general operations, transportation and utility projects. In 2011, the De Soto voters approved the renewal of a De Soto-only special sales tax set to expire in 2012. The 2011 vote approves the extension from 2012 to 2022. The City uses the special sales tax receipts as a revenue source for its debt service. The following table provides the amount of local sales tax collected and received by the City during the years indicated:

Year

County Receipts

De Soto-Based Receipts

2007 $665,868 $338,316 2008 656,285 343,393 2009 599,807 311,504 2010 553,469 325,605 2011 676,627 355,119

Source: City Clerk Financial and Banking Institutions There are currently three banks located in the City of De Soto, Kansas.

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The following table provides information regarding the banks in Johnson County during the years indicated:

Year

Institutions

Offices

Total Bank Deposits*

2006 61 227 $12,676 2007 62 236 14,105 2008 64 244 14,547 2009 67 252 14,978 2010 68 252 14,591

* Bank deposits are in millions of dollars Source: Kansas Statistical Abstract Building Permits The following table indicates the number of building permits and total valuation of these permits issued within the City of De Soto, Kansas for the years indicated.

Year

Single-Family Home Permits

Total Number of Building Permits

Total Valuation

2007 11 124 12,097,500 2008 7 59 4,975,134 2009 6 50 3,060,292 2010 6 53 5,129,520 2011 17 52 12,731,117

Source: City of De Soto, Kansas Population Trends The following table shows the approximate population of City and Johnson County in the years indicated:

Year

City Population

Johnson County Population

1960 1,271 143,792 1970 1,839 217,662 1980 2,061 270,269 1990 2,291 355,054 2000 4,561 451,086 2010 5,720 544,179

The median age of persons in Johnson County and the State of Kansas is 36.4 and 36.0 years, respectively, according to the 2010 Census. Source: 1960, 1970, 1980, 1990, 2000 and 2010 - U.S. Census Data Personal Income Trends Johnson County personal and per capita income and the State of Kansas per capita income are listed for the years indicated, in the following table:

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Year

Johnson County Personal Income*

Johnson County Per Capita

Personal Income

State of Kansas Per Capita

Personal Income 2005 $24,358,292 $48,123 $32,866 2006 26,227,975 50,781 34,799 2007 28,062,079 53,472 36,525 2008 29,489,076 56,042 38,886 2009 28,956,705 53,353 37,916

*Thousands of dollars Source: Kansas Statistical Abstract

FINANCIAL INFORMATION Accounting, Budgeting and Auditing Procedures The City follows a modified accrual basis of accounting for all tax supported funds of the City, including the General Fund. The City follows a cash receipts and disbursement basis of accounting which is adjusted for the issuing of statements, to the accrual or modified accrual basis, as appropriate. An annual budget of estimated receipts and disbursements for the coming calendar year is required by statute to be prepared for all funds (unless specifically exempted). The budget is prepared utilizing the modified accrual basis which is further modified by the encumbrance method of accounting. For example, commitments such as purchase orders and contracts, in addition to disbursements and accounts payable, are recorded as expenditures. The budget lists estimated receipts by funds and sources and estimated disbursements by funds and purposes. The proposed budget is presented to the governing body of the City prior to August 1, with a public hearing required to be held prior to August 15, with the final budget to be adopted prior to August 25 of each year. Budgets may be amended upon action of the governing body after notice and public hearing, provided that no additional tax revenues may be raised after the original budget is adopted. Kansas law prohibits governmental units from creating indebtedness unless there are funds on hand in the proper accounts and unencumbered by previous action with which to pay such indebtedness. An exception to this cash-basis operation is made where provision has been made for payment of obligations by bonds or other specific debt obligations authorized by law. The financial records of the City are audited annually by a firm of independent certified public accountants in accordance with generally accepted auditing standards. In recent years, the annual audit has been performed by Lowenthal Webb & Odermann P.A. Copies of the audit reports for the past five (5) years are on file in the Clerk’s office and are available for review. The audit for the Fiscal Year ended December 31, 2010 is attached hereto as Appendix B. The financial information contained in the Appendices to this Official Statement are an integral part of this document and are intended to be read in conjunction herewith. Sources of Revenue The City finances its general operations through the local property tax levy, a variety of license and permit fees and other miscellaneous sources as indicated below for the most recently audited Fiscal Year:

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Source 2011 Ad Valorem/Vehicle Tax $ 503,482 Sales/Liquor 1,163,427 Licenses and permits 42,312 Franchise fee 198,336 Charges for services 75,580 Use of money and property 87,619 Fines and fees 293,354 Miscellaneous 11,074

TOTAL= $2,675,184 The City also has the following special revenue funds which had cash receipts for the most recently audited Fiscal Year as indicated below:

Source 2011 Law Enforcement Fund $441,775 Special Highway Fund 146,248 Special Parks and Recreation Fund 22,283 Transient Guest Tax Fund 19,611 Sponsorship Fund 4,469 Water Development Fee Fund 8,400 Sewer Development Fee Fund 39,000 Electric Utility Investment Fund 85,670

TOTAL= $767,456 Source: City of De Soto’s 2011 Audited Financial Statements Property Valuations The determination of assessed valuation and the collection of property taxes for all political subdivisions in the state of Kansas is the responsibility of the various counties under the direction of state statutes. The Johnson County Appraiser’s office determines the assessed valuation that is to be used as a basis for the mill levy on property located in the City. All property in the state of Kansas was reevaluated as a result of a bill passed by the 1985 session of the Kansas Legislature requiring county appraisers to reassess property for tax purposes, with an effective date of January 1, 1989. In conjunction with the November 1986 general election, Kansas voters approved a proposition to modify the state constitution with respect to classification of property for ad valorem taxation. For taxable years 1989 through 1992, real and personal property was divided into classes and assessed at different percentages of fair market value. Land devoted to agricultural use was valued on the basis of its agricultural income or productivity and assessed at 30% of the value so obtained; commercial and industrial machinery and equipment was assessed at 20% of its fair market value; residential property and vacant lots were assessed at 12% of fair market value; and all other property was assessed at 30% of fair market value. Farm machinery and equipment, merchants’ and manufacturers’ inventories, and livestock were exempt from property taxation. In conjunction with the November, 1992 general election, Kansas voters approved a proposition to further modify the state constitution with respect to classification of property for ad valorem taxation. The modified classification provisions shall be effective for assessment and taxation of property on and after January 1, 1993 and each year thereafter. Property is divided into two classes, real property and personal property. Real property is divided into seven subclasses; there are six subclasses of personal property. The real property (Class 1) subclasses are: (i) real property used for residential purposes including multi-family mobile or manufactured homes and the real property on which such homes are located, assessed at 11.5%, (ii) agricultural land, valued on the basis of agricultural income or productivity, assessed at 30%, (iii) vacant lots, assessed at 12%, (iv) real property, owned and operated by a not-for-profit organization not subject to federal income taxation, pursuant to Section 501 of the Internal Revenue Code, assessed at 12%, (v) public utility real property, except railroad real property, assessed at the average rate that all other commercial and industrial property is assessed, assessed at 33%, (vi) real property used

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for commercial and industrial purposes and buildings and other improvements located on land devoted to agricultural use, assessed at 25%, and (vii) all other urban and real property not otherwise specifically classified, assessed at 30%. Tangible personal property (Class 2) subclasses are: (i) mobile homes used for residential purposes, assessed at 11.5%, (ii) mineral leasehold interests, except oil leasehold interests, the average daily production from which is 5 barrels or less, and natural gas leasehold interests, the average daily production from which is 100 mcf or less, which shall be assessed at 25%, assessed at 30%, (iii) public utility tangible personal property, including inventories thereof, except railroad personal property, including inventories thereof, which shall be assessed at the average rate all other commercial and industrial property is assessed, assessed at 33%, (iv) all categories of motor vehicles not defined and specifically valued and taxed pursuant to law enacted prior to January 1, 1985, assessed at 20%, (v) commercial and industrial machinery and equipment which if its economic life is 7 years or more, shall be valued at its retail cost, when new, less seven-year straight-line depreciation, or which, if its economic life is less than 7 years, shall be valued at its retail cost when new, less straight-line depreciation over its economic life, except that, the value so obtained for such property, notwithstanding its economic life and as long as such property is being used, shall not be less than 20% of the retail cost when new of such property, assessed at 25%, and (vi) all other tangible personal property not otherwise specifically classified, assessed at 30%. All property used exclusively for state, county, municipal, literary, educational, scientific, religious, benevolent and charitable purposes, farm machinery and equipment, merchants’ and manufacturers’ inventories, other than public utility inventories included in subclass (3) of class 2, livestock, and all household goods and personal effects not used for the production of income, shall be exempted from property taxation. The 2006 Kansas Legislature exempted from all property or ad valorem property taxes levied under the laws of the State all commercial, industrial, telecommunications and railroad machinery and equipment acquired by qualified purchase or lease after June 30, 2006 or transported into the State after June 30, 2006 for the purpose of expanding an existing business or creating a new business. Assessed Valuation The following table shows the assessed valuation of the taxable tangible property within the City for the following years:

Year

Real Property

Personal Property

Utilities

Motor Vehicles

Total Valuation

2002 $34,656,132 $7,740,394 $2,616,910 $4,638,774 $49,652,210 2003 33,041,713* 7,869,480 3,161,858 5,024,604 49,097,655 2004 35,563,178 7,370,490 3,592,872 5,878,511 52,405,051 2005 42,683,663 7,651,945 3,797,692 6,549,230 60,682,530 2006 45,298,576 7,288,392 3,571,311 6,613,286 62,771,565 2007 48,607,395 7,096,952 3,612,146 6,737,242 66,053,735 2008 49,180,326 5,820,228** 3,250,102 6,834,839 65,085,495 2009 47,947,030 4,716,555 2,174,282 6,363,552 61,201,419 2010 45,345,809 4,682,899 2,786,548 6,450,309 59,265,565 2011 45,150,575 4,174,997 2,931,289 6,107,613 58,364,474

* Decrease in taxable assessed value in 2003 was due to a decrease in valuation for several large taxpayers. **Decrease in taxable assessed value in 2008 was due to scheduled exemption of machinery and equipment from taxation. Source: Johnson County Property Tax Levies and Collections Tax Collections: Tax statements are mailed November 1 each year and may be paid in full or one-half on or before December 20 with the remaining one-half due on or before June 20 of the following year. The 2003 Legislature authorized the Governor to advance the required June 20 payment to be made on or before May 10. The Governor has now exercised such authority and published notice of such advancement. Taxes that are unpaid on the due dates are considered delinquent and accrue interest at a per annum rate established by State law until paid or until the property is sold for

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taxes. Real estate bearing unpaid taxes is advertised for sale on or before August 1 of each year and is sold by the County for taxes and all legal charges on the first Tuesday in September. Properties that are sold and not redeemed within two years after the tax sale are subject to foreclosure sale, except homestead properties which are subject to foreclosure sale after three years. Personal taxes are due and may be paid in the same manner as real estate taxes, with the same interest applying to delinquencies. If personal taxes are not paid when due, and after written notice, warrants are issued and placed in the hands of the Sheriff for collection. If not paid on or before October 1, legal judgment is entered and the delinquent tax becomes a lien on the property. Unless renewed, a non-enforced lien expires five years after it is entered. Motor vehicle taxes are collected periodically throughout the year concurrently with the renewal of motor vehicle tags based upon the value of such vehicles. Such tax receipts are distributed to all taxing subdivisions, including the State of Kansas, in proportion to the number of mills levied within each taxpayer’s tax levy unit. Tax Rates: The City may levy taxes in accordance with the requirements of its adopted budget. Property tax levies are based on the adopted budget of the City and the assessed valuations provided by the County appraiser. The following table shows the City’s mill levies by fund (per $1000 of assessed valuation) for each of the years indicated:

Year

General Fund

Law Enforce/Fire Protect*

G.O. Bonds

Total Levy

2006/07 5.776 16.058 4.448 26.282 2007/08 6.024 16.549 4.290 26.863 2008/09 5.987 16.873 4.475 27.335 2009/10 10.009 7.008 2.253 19.270 2010/11 8.200 7.300 4.600 20.100 2011/12 6.782 6.782 6.483 20.047

* The City no longer has Fire Protection as of 2009/10 Source: Johnson County Aggregate Tax Levies: The aggregate tax levies (per $1000 assessed valuation) of the City and overlapping jurisdictions for the years indicated are included in the following table:

Year

City

Johnson County

School District

State

Johnson County

Community College

Other

Total Levy

2004/05 24.785 16.041 72.806 1.500 9.438 5.619 130.189 2005/06 24.836 17.922 69.115 1.500 8.960 5.529 127.862 2006/07 26.282 17.949 69.693 1.500 8.872 5.533 129.829 2007/08 26.863 17.985 71.463 1.500 8.749 5.539 132.099 2008/09 27.335 17.767 74.170 1.500 8.768 5.736 135.276 2009/10 19.270 17.716 74.186 1.500 8.784 15.291 136.747 2010/11 20.100 17.748 84.051 1.500 8.799 18.199 150.397 2011/12 20.047 17.700 82.558 1.500 8.776 19.165 149.746

Source: City Clerk

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Tax Collection Record: The following table sets forth tax collection information for the City for the years indicated:

Current Taxes

Collected

Delinquent Taxes

Collected Current and Delinquent Levy Year/ Budget Year Total Levy

Total Taxes Levied Amount Percent Amount Amount Percent

2002/03 131.323 $875,503 $850,784 97.18% $27,605 $878,389 100.33% 2003/04 132.744 1,013,179 991,405 97.85% 15,897 1,007,301 99.42% 2004/05 130.189 950,891 933,693 98.19% 13,962 947,655 99.66% 2005/06 127.862 1,145,592 1,127,371 98.41% 19,021 1,146,391 100.07% 2006/07 129.829 1,204,769 1,199,211 99.54% 25,444 1,224,655 101.65% 2007/08 132.099 1,033,637 1,048,181 101.41% 15,212 1,063,393 102.88% 2008/09 135.276 1,012,066 1,381,413 136.49% 22,087 1,403,500 138.68% 2009/10 136.520 1,114,963 1,085,961 97.40% 18,744 1,104,705 99.08% 2010/11 150.053 1,112,427 1,087,361 97.75% 37,003 1,124,364 101.07% 2011/12* 149.429 1,047,593 626,709 59.82% 29,718 656,427 62.66% * Collections as of February 29, 2012. Source: Johnson County Treasurer The following table sets forth special assessment information for the City for the years indicated:

Levy Year/ Total Taxes Current Taxes

Collected

Delinquent Taxes

Collected Current and Delinquent Budget Year Levied Amount Percent Amount Amount Percent 2002/03 316,515 312,174 98.63% 10,068 322,243 101.81% 2003/04 258,251 229,565 88.89% 946 230,512 89.26% 2004/05 255,715 244,674 95.68% 1,818 246,492 96.39% 2005/06 133,973 130,212 97.19% 24,971 155,183 115.83% 2006/07 85,644 82,370 96.18% 13,938 96,307 112.45% 2007/08 87,504 115,055 131.48% 2,798 117,853 134.68% 2008/09 75,929 70,303 46.06% 1,549 71,852 47.08% 2009/10 35,132 17,891 50.92% 2,435 20,326 57.86% 2010/11 105,660 69,972 66.22% 5,761 75,733 71.68% 2011/12* 106,419 21,411 20.12% 242 21,653 20.35%

* Collections as of February 29, 2012. Source: Johnson County Treasurer

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Major Taxpayers: The following table sets forth the ten largest taxpayers in the City for taxes levied in the most recent tax collection period:

Taxpayer

Assessed Valuation

Taxes Paid

1. Huhtamaki, Inc. $3,215,724 $478,577 2. Intervet Inc. 545,971 81,711 3. Clearview Village, Inc. 526,855 78,655 4. Great Southern Bank 500,864 74,541 5. Hillside Village, LLC 382,305 56,850 6. K-10 Investment Group LLC 300,548 45,006 7. Custom Foods, Inc. 294,500 43,829 8. First Community Bank 260,217 38,727 9. De Soto Investments L.L.C. 254,453 37,869 10. MCNB Asset Corporation, Inc. 235,751 35,085

Source: City of De Soto, Kansas Risk Management The City is insured against the risks arising from general liability and employee medical coverage by commercial insurance. The Kansas Tort Claims Act limits the City’s liability from tort claims to $500,000. History of Employment The following table indicates the history of the Issuer’s employment for the years indicated.

Year

Total Full- Time Employees

Total Part- Time Employees

Total

2006 31 13 44 2007 31 13 44 2008 31 7 38 2009 30 7 37 2010 30 7 36 2011 29 7 35

Source: City of De Soto, Kansas Pension and Employee Retirement Plans The City participates in the Kansas Public Employees Retirement System (KPERS) which was established in 1962, as an instrumentality of the State pursuant to K.S.A. 74-4901 et seq., to provide retirement and related benefits to public employees in Kansas. KPERS is governed by a board of trustees consisting of nine members, including four members appointed by the Governor subject to confirmation by the State Senate, one appointed by the President of the Senate, one appointed by the Speaker of the House of Representatives, two elected by members and retirants of the retirement system, which must be members of such system, and the State Treasurer. Members of the board of trustees serve four-year terms and elect a chairperson annually. The board of trustees appoints an Executive Director to serve as the managing officer of KPERS and employs a staff of approximately 95 people. As of June 30, 2011, KPERS serves about 279,000 members and 1,500 participating employers, including the State, school districts, counties, cities, public libraries, hospitals and other governmental units. KPERS administers the following three statewide, defined benefit retirement plans for public employees:

(a) Kansas Public Employees Retirement System;

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(b) Kansas Police and Firemen’s Retirement System; and (c) Kansas Retirement System for Judges.

These three plans are separate and distinct with different membership groups, actuarial assumptions, experience, contribution rates and benefit options. The Kansas Public Employees Retirement System is the largest of the three plans, accounting for more than 95% of the members. The Kansas Public Employees Retirement System is further divided into two separate groups, as follows:

(a) State/School Group - includes members employed by the State, school districts, community colleges, vocational-technical schools and educational cooperatives. The State of Kansas makes all employer contributions for this group, 85% of which comes from the State General Fund. State legislation enacted in 2003 made certain pre-1962 Board employees (which are part of a small group of pre-1962 Board and University of Kansas Hospital Authority employees known as the “TIAA Group”), special members of the State/School Group.

(b) Local Group - all participating cities, counties, library boards, water districts and political subdivisions are included in this group. Local employers contribute at a different rate than the State/School Group rate. State legislation enacted in 2003 made certain pre-1962 employees of the University of Kansas Hospital Authority (which are a part of a small group of pre-1962 Board and University of Kansas Hospital Authority employees known as the “TIAA Group”), special members of the Local Group.

KPERS is a qualified, governmental, Section 401(a) defined benefit pension plan, and has received IRS determination letters attesting to the plan’s qualified status dated October 14, 1999 and March 5, 2001. KPERS is also a “contributory” defined benefit plan, meaning that employees make contributions to the plan. This contrasts it from noncontributory pension plans (more common in the private sector), which are funded solely by employer contributions. The City’s employees annually contribute: (a) 4% of their gross salary to the plan if such employees are KPERS Tier 1 members (covered employment prior to July 1, 2009), or (b) 6% of their gross salary to the plan if such employees are KPERS Tier 2 members (covered employment on or after July 1, 2009). The City’s contribution varies from year to year based upon the annual actuarial valuation and appraisal made by KPERS, subject to legislative caps on percentage increases. As of January 1, 2012 the City’s contribution is 8.34% of each participating employee’s gross salary for calendar year 2012. According to the Valuation Report as of December 31, 2010 (the “Valuation Report”) the KPERS Local Group, of which the Issuer is a member, carried an unfunded accrued actuarial liability (“UAAL”) of $1.395 billion at the end of 2010. KPERS’ actuaries identified that an employer contribution rate of 9.43% of covered payroll would be necessary, in addition to statutory contributions by covered employees, to eliminate the UAAL by 2033, the end of the actuarial period. Because the annual growth in employer contribution rates is limited by State law, the actual contribution rate permitted at the time of calculation was only 7.94%. As a result, members of the Local Group are underfunding their projected actuarial liabilities and the UAAL can be expected to grow over time. KPERS’ actuaries project the required employer contribution rate to increase by the maximum, 0.60%, each year until such time as the permitted rate equals the actuarial rate. The authors of the Valuation Report expect this to occur in approximately 2017 based upon the actuarial assumptions made by the authors. The 2011 Kansas legislature approved a number of changes to KPERS, including: (a) Establishing a 13-member KPERS Study Commission to evaluate alternative plan designs during 2011 and recommend a plan for the long-term sustainability of KPERS. The Commission's report was delivered to the Kansas Legislature in accordance with the January 6, 2012 deadline. A summary of the Commission's recommendations can be found at: www.kpers.org/studycommissionresults.html. Pursuant to the 2011 legislation, the 2012 Kansas Legislature must vote on the report’s recommendations in order for the other parts of the bill, described below, to become effective. (b) Increasing the statutory maximum employer contribution annual increase from 0.6% per year (status quo) to 0.9% per year in 2014 and to 1.2% per year by 2017.

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(c) For future service for existing KPERS members enrolled before July 1, 2009, increasing employee contribution rates and/or reducing retirement benefits, starting in 2014. (d) For existing KPERS members enrolled on or after July 1, 2009, reducing benefits or eliminating annual cost of living increases on benefits paid during retirement, starting in 2014.

DEBT STRUCTURE Debt Summary The following table summarizes certain key statistics with respect to the Issuer’s general obligation debt, including the Bonds:

Debt Summary (As of June 6, 2012)

City Debt

Estimated Actual Fair Market Value of Tangible Property1 ............................................................. $347,693,350 Equalized Assessed Valuation of Tangible Valuation for Computation of Bonded Debt Limitations................................................................................ $58,364,474 Legal limitation of Bonded Debt2...................................................................................................... $17,509,342

Outstanding General Obligation Debt3.............................................................................................. $18,785,000

Statutory Exempt Debt ...................................................................................................................... $11,690,230

Net Debt against Debt Limit Capacity............................................................................................... $7,094,770

Additional Debt Capacity .................................................................................................................. $10,414,572

Less Self Supporting Debt 4............................................................................................................... $100,000

Non Self Supporting Debt ................................................................................................................. $18,685,000

Statutory Direct Debt as a Percentage of Assessed Valuation........................................................... 12.16%

Direct Debt Per Capita (Population = 5,720)..................................................................................... $3,284.09

Direct Debt as a Percentage of Assessed Valuation .......................................................................... 32.19%

Overlapping Indebtedness 5 ............................................................................................................... $27,849,267

Direct and Overlapping Debt Per Capita ........................................................................................... $8,152.84

Direct and Overlapping Debt as a Percentage of Assessed Valuation............................................... 79.90%

Direct Debt as a Percentage of Actual Fair Market Value................................................................. 5.40%

Direct and Overlapping Debt as a Percentage of Actual Fair Market Value..................................................................................................................................

13.41%

1 For 2011. 2 K.S.A. 10-301 et seq. 3 Includes the Bonds. 4 Series 2007-B Bonds. 5 See “Overlapping Indebtedness” below. Current Indebtedness of the Issuer The following table sets forth as of the date of issuance of the Bonds all of the outstanding obligations of the Issuer including the Bonds:

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GENERAL OBLIGATION BONDS

Category of

Indebtedness

Date of

Indebtedness

Final

Maturity

Original Principal Amount

Amount Outstanding at June 6, 20121

Exempt From

Debt Limit1 Storm Sewer Projects (Series 2002-A) 3/15/02 9/1/2012 $240,000 $30,000 $30,000Refunding and Improvements (Series 2003-A) 4/1/03 9/1/2017 1,180,000 295,000 277,300Municipal Swimming Pool (Series 2004-A) 6/1/04 9/1/2025 2,650,000 345,000 0Waste Water Treatment Plant (Series 2005-A) 10/15/05 9/1/2032 9,000,000 8,965,000 8,965,000Refunding (Series 2007-A) 08/22/07 9/1/2026 1,250,000 0 0Refunding (Series 2007-B) 08/22/07 9/1/2013 140,000 100,000 100,000General Improvements (Series 2008-A) 4/29/08 9/1/2028 1,080,000 130,000 4,784Refunding and Improvements (Series 2009-A) 4/14/09 9/1/2039 1,320,000 1,320,000 136,885General Improvements (Series 2010-A) 4/28/10 9/1/2030 1,285,000 1,250,000 160,153Taxable General Improvements (Series 2010-B)2 4/28/10 9/1/2035 710,000 710,000 0Taxable General Improvements (Series 2010-C)3 12/7/10 9/1/2040 1,080,000 1,080,000 1,080,000General Improvements (Series 2010-D) 12/7/10 9/1/2027 85,000 85,000 85,000Refunding and Improvement (Series 2012) 6/06/12 9/1/2034 4,475,000 4,475,000 851,109 Total $18,785,000 $11,690,230

1 Excludes the Refunded Bonds. 2 Build America Bonds – Federal Subsidy. 3 Recovery Zone Economic Development Bonds – Federal Subsidy.

TEMPORARY NOTES

None. History of General Obligation Indebtedness The following table sets forth general obligation debt information pertaining to the Issuer as of the end of each of the years indicated:

Year

Total Debt

2007 $17,040,000 2008 17,460,000 2009 16,840,000 2010 18,430,000 2011 18,075,000

Source: City of De Soto, Kansas The City has never in its history defaulted on the payment of any of its debt obligations.

A-14

General Obligation Debt Service Requirements The following debt service schedule shows the yearly principal and interest requirements for all outstanding general obligation bonded indebtedness of the Issuer.

Debt Service Schedule

Outstanding Bonds Series 2012-A Year Annual Debt Service 1 Bonds Total 2012 $991,780.02 $58,911.57 $1,050,691.59 2013 1,117,137.52 215,572.50 1,332,710.02 2014 1,021,865.02 313,272.50 1,335,137.52 2015 909,010.02 423,972.50 1,332,982.52 2016 965,347.52 367,372.50 1,332,720.02 2017 963,895.02 366,772.50 1,330,667.52 2018 926,682.52 401,072.50 1,327,755.02 2019 925,215.02 399,572.50 1,324,787.52 2020 922,915.02 397,972.50 1,320,887.52 2021 959,762.52 361,272.50 1,321,035.02 2022 949,115.02 365,172.50 1,314,287.52 2023 947,537.52 343,085.00 1,290,622.52 2024 939,770.02 326,335.00 1,266,105.02 2025 941,095.02 304,085.00 1,245,180.02 2026 1,051,330.02 167,210.00 1,218,540.02 2027 1,040,240.02 133,222.50 1,173,462.52 2028 1,038,348.78 105,060.00 1,143,408.78 2029 1,025,160.02 67,360.00 1,092,520.02 2030 1,015,912.52 65,710.00 1,081,622.52 2031 985,552.52 69,060.00 1,054,612.52 2032 979,737.52 37,260.00 1,016,997.52 2033 367,592.50 131,270.00 498,862.50 2034 375,382.50 67,145.00 442,527.50 2035 387,332.50 0.00 387,332.50 2036 213,140.00 0.00 213,140.00 2037 215,187.50 0.00 215,187.50 2038 211,735.00 0.00 211,735.00 2039 213,020.00 0.00 213,020.00 2040 103,850.00 0.00 103,850.00

Total = $22,704,649.18 $5,487,739.07 $28,192,388.25 1 Net of expected federal subsidy on Series 2010-B and Series 2010-C Bonds. Excludes the Refunded Bonds. Source: City of De Soto, Kansas Lease Obligations The City does not currently have any outstanding lease obligations. Industrial Revenue Bonds On December 31, 2011, the City had a total of three (3) separate series of industrial revenue bonds outstanding, aggregating $26,050,000 in principal amount. The City has no obligation to make principal or interest payments on any of these industrial revenue bonds.

A-15

Overlapping Indebtedness The following table sets forth overlapping indebtedness as of December 31, 2011 (unless otherwise noted), and the percent attributable (on the basis of assessed valuation) to the City:

Taxing Jurisdiction

Assessed

Valuation1

Outstanding General Obligation

Indebtedness2

Percent Applicable to Issuer

Amount Applicable to Issuer

Johnson County $8,319,238,811 $240,750,000 0.70% $1,685,250 Johnson County Park 8,319,238,811 3,625,000 0.70% 25,375 Johnson County Community College 8,319,238,811 0 0.70% 0 U.S.D. No. 232 418,070,034 186,215,000 13.96% 25,995,614 Northwest Consolidated Fire District 90,419,346 0 64.55% 0 Johnson County Rural Fire #3 (Bond “B”) 3 94,981,168 360,000 39.73% 143,028 Total $27,849,267

_________________________ 1 As of January 1, 2011. 2 Johnson County debt as of December 31, 2011, all other debt as of June 30, 2011. 3 Johnson County Rural Fire #3 (Bond “B”) refers to the debt incurred by Johnson County Rural Fire #3 and attributable to the Issuer before the Northwest Consolidated Fire District was formed. Future Indebtedness The City has prepared a capital improvement plan which it plans to revisit annually. The latest plan anticipates approximately no further issuances of general obligation bonds through 2016.

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APPENDIX B

FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

(FOR THE FISCAL YEAR ENDED 12/31/11)

(THIS PAGE LEFT BLANK INTENTIONALLY)

CITY OF DE SOTO, KANSAS

FINANCIAL STATEMENTS

Year ended December 31, 2011

This page intentionally left blank.

i

CITY OF DE SOTO, KANSAS

Financial Statements Year ended December 31, 2011

TABLE OF CONTENTS Page Number INTRODUCTORY SECTION Table of Contents i FINANCIAL SECTION Independent Auditor's Report on the Financial Statements 1 - 2 STATEMENT 1 Summary of Cash Receipts, Expenditures and Unencumbered Cash 3 STATEMENT 2 Summary of Expenditures - Actual and Budget 4 STATEMENT 3 Statement of Cash Receipts and Expenditures - Actual and Budget or Actual General Fund 5 Law Enforcement Fund 6 Special Highway Fund 7 Special Parks and Recreation Fund 8 Transient Guest Tax Fund 9 Sponsorship Fund 10 Water Development Fee Fund 11 Sewer Development Fee Fund 12 Electric Utility Investment Fund 13 Enhancement Community Fountain Fund 14 Riverfest Park Improvement Fund 15 Debt Service Fund 16 Capital Projects Fund 17 Capital Improvements Fund 18 Shughart Trust Fund 19 Water System Fund 20 Sewer System Fund 21 Refuse System Fund 22 Shop Fund 23 STATEMENT 4 Statement of Cash, Cash Receipts and Disbursements - Agency Funds 24 Notes to the Financial Statements 25 - 32

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1

INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS Mayor and City Council City of De Soto, Kansas We have audited the accompanying financial statements of the City of De Soto, Kansas, (the City) as of and for the year ended December 31, 2011, as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year partial comparative information has been derived from the City’s financial statements for the year ended December 31, 2010. In our report dated April 4, 2011, on these financial statements, we expressed an adverse opinion as to presentation on the basis of generally accepted accounting principles and an unqualified opinion as to presentation on the Kansas prescribed basis of accounting. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the “Kansas Municipal Audit Guide.” Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As described in Note 1, the City of De Soto, Kansas prepares its financial statements on a basis of accounting prescribed by the State of Kansas which demonstrates compliance with the cash basis and budget laws of the State of Kansas which practices differ from accounting principles generally accepted in the United States of America. The effect on the financial statements of those differences is also described in Note 1. In our opinion, because of the City’s policy to prepare its financial statements on the basis of accounting discussed in the preceding paragraph, the financial statements referred to above do not present fairly, in conformity with accounting principles generally accepted in the United States of America, the financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of De Soto, Kansas, as of December 31, 2011, or the respective changes in financial position for the year then ended. Also, in our opinion, the financial statements referred to above present fairly, in all material respects, the cash and unencumbered cash balances of the City of De Soto, Kansas, as of December 31, 2011, and its cash receipts and expenditures by fund, and fund budget to actual comparisons, for the year then ended, taken as a whole, on the prescribed basis of accounting described in Note 1.

2

The financial statements include partial prior-year comparative information. Such information does not include all of the information required for a presentation in conformity with the Kansas prescribed basis of accounting. Accordingly, such information should be read in conjunction with the City’s financial statements for the year ended December 31, 2010, from which such partial information was derived.

April 24, 2012

Add:Outstanding

Beginning Prior Ending Encumbrances EndingUnencumbered Period Cash Unencumbered and Accounts Cash

Funds Cash Balance Adjustment Receipts Expenditures Cash Balance Payable Balance

General Fund 767,809$ -$ 2,746,153$ 2,621,429$ 892,533$ 29,540$ 922,073$Special Revenue Funds:Law Enforcement Fund 67,161 - 441,775 460,990 47,946 113,637 161,583Special Highway Fund 5,949 - 146,248 149,890 2,307 - 2,307Special Parks and Recreation Fund 20,407 - 22,283 30,000 12,690 - 12,690Transient Guest Tax Fund 28,247 - 19,611 26,607 21,251 - 21,251Sponsorship Fund 13,020 - 4,469 2,370 15,119 - 15,119Water Development Fee Fund 7,568 - 8,400 14,000 1,968 - 1,968Sewer Development Fee Fund 5,000 - 39,000 14,000 30,000 - 30,000Electric Utility Investment Fund 1,934,839 - 85,670 373,039 1,647,470 - 1,647,470Enhancement Community Fountain Fund 1,141 - - 101 1,040 - 1,040Riverfest Park Improvement Fund 1,157 - - - 1,157 - 1,157

Debt Service Fund 1,112,112 - 962,417 1,139,922 934,607 - 934,607Capital Project Funds:Capital Projects Fund 44,086 - 16,380 35,000 25,466 - 25,466Capital Improvements Fund 982,471 - 736,833 1,437,196 282,108 207,336 489,444

Permanent Fund:Shughart Trust Fund 22,910 - 100 - 23,010 - 23,010

Enterprise Funds:Water System Fund 142,184 - 1,361,554 1,276,415 227,323 7,448 234,771Sewer System Fund 122,248 - 466,678 463,486 125,440 17,264 142,704Refuse System Fund 54,443 - 350,141 355,696 48,888 50 48,938

Internal Service Fund:Shop Fund [5,756] - 119,900 118,658 [4,514] 4,516 2

Total City 5,326,996$ -$ 7,527,612$ 8,518,799$ 4,335,809$ 379,791$ 4,715,600$

Composition of Cash:

Great American BankChecking 447,788$Certificates of Deposit 3,828,955Deposit in Transit 12,785Outstanding Checks [130,189]

FCB BankChecking 280,797Outstanding Checks [200,000]

Great Southern BankMoney Market 176,854Checking 49,798Deposit in Transit 2,626Outstanding Checks [894]

Kansas Municipal Investment Pool 284,389

Total Cash 4,752,909

Agency Funds per Statement 4 [37,309]

Total 4,715,600$

STATEMENT 1

CITY OF DE SOTO, KANSASSummary of Cash Receipts, Expenditures and Unencumbered Cash

For the Year Ended December 31, 2011

The notes to the financial statements are an integral part of this statement.3

STATEMENT 2

Summary of Expenditures - Actual and Budget

Adjustment for Total Expenditures VarianceCertified Qualifying Budget for Chargeable to Positive

Funds Budget Budget Credits Comparison Current Year [Negative]

General Fund 2,867,075$ -$ 2,867,075$ 2,621,429$ 245,646$Special Revenue Funds:Law Enforcement Fund 466,318 - 466,318 460,990 5,328Special Highway Fund 166,268 - 166,268 149,890 16,378Special Parks and Recreation Fund 30,000 - 30,000 30,000 -Transient Guest Tax Fund 30,000 - 30,000 26,607 3,393Sponsorship Fund 3,350 - 3,350 2,370 980Water Development Fee Fund 28,000 - 28,000 14,000 14,000Sewer Development Fee Fund 14,000 - 14,000 14,000 -

Debt Service Fund 2,098,964 - 2,098,964 1,139,922 959,042Enterprise Funds:Water System Fund 1,295,809 - 1,295,809 1,276,415 19,394Sewer System Fund 483,915 - 483,915 463,486 20,429Refuse System Fund 360,000 - 360,000 355,696 4,304

CITY OF DE SOTO, KANSAS

For the Year Ended December 31, 2011

The notes to the financial statements are an integral part of this statement.4

STATEMENT 3 - 1

Statement of Cash Receipts and Expenditures - Actual and BudgetFor the Year Ended December 31, 2011

Prior VarianceYear PositiveActual Actual Budget [Negative]

Cash ReceiptsTaxes 601,239$ 503,482$ 487,069$ 16,413$Intergovernmental 1,004,317 1,163,427 1,037,480 125,947Licenses and permits 31,323 42,312 25,550 16,762Franchise fee 483,983 498,336 491,000 7,336Charges for services 72,069 75,580 - 75,580Use of money and property 119,315 87,619 106,800 [19,181]Fines and fees 246,313 293,354 334,900 [41,546]Miscellaneous 9,956 11,074 1,000 10,074Transfers in 72,724 70,969 125,000 [54,031]

Total Cash Receipts 2,641,239 2,746,153 2,608,799$ 137,354$

Expenditures and Transfers Subject to BudgetPersonal services 1,375,238 1,347,480 1,617,400$ 269,920$Contractual services 809,051 832,260 848,761 16,501Commodities 388,678 365,305 333,800 [31,505]Capital outlay 89,943 76,384 67,114 [9,270]

Total Expenditures and Transfers Subject to Budget 2,662,910 2,621,429 2,867,075$ 245,646$

Receipts Over [Under] Expenditures [21,671] 124,724

Unencumbered Cash, Beginning 794,301 767,809

Prior period adjustment [4,821] -

Unencumbered Cash, Ending 767,809$ 892,533$

CITY OF DE SOTO, KANSASGeneral Fund

(With Comparative Actual Amounts For the Year Ended December 31, 2010)

Current Year

The notes to the financial statements are an integral part of this statement.5

STATEMENT 3 - 2

Prior VarianceYear PositiveActual Actual Budget [Negative]

Cash ReceiptsTaxes 435,886$ 441,775$ 425,236$ 16,539$

Total Cash Receipts 435,886 441,775 425,236$ 16,539$

Expenditures and Transfers Subject to BudgetContractual services 435,262 460,990 466,318$ 5,328$

Total Expenditures and Transfers Subject to Budget 435,262 460,990 466,318$ 5,328$

Receipts Over [Under] Expenditures 624 [19,215]

Unencumbered Cash, Beginning 66,537 67,161

Unencumbered Cash, Ending 67,161$ 47,946$

Current Year

(With Comparative Actual Amounts For the Year Ended December 31, 2010)

CITY OF DE SOTO, KANSASLaw Enforcement Fund

Statement of Cash Receipts and Expenditures - Actual and BudgetFor the Year Ended December 31, 2011

The notes to the financial statements are an integral part of this statement.6

STATEMENT 3 - 3

Statement of Cash Receipts and Expenditures - Actual and BudgetFor the Year Ended December 31, 2011

Current YearPrior VarianceYear PositiveActual Actual Budget [Negative]

Cash ReceiptsIntergovernmental 146,495$ 146,248$ 148,090$ [1,842]$

Total Cash Receipts 146,495 146,248 148,090$ [1,842]$

Expenditures and Transfers Subject to BudgetCapital outlay 56,001 65,000 65,000$ -$Transfers out 93,712 84,890 101,268 16,378

Total Expenditures and Transfers Subject to Budget 149,713 149,890 166,268$ 16,378$

Receipts Over [Under] Expenditures [3,218] [3,642]

Unencumbered Cash, Beginning 9,167 5,949

Unencumbered Cash, Ending 5,949$ 2,307$

CITY OF DE SOTO, KANSASSpecial Highway Fund

(With Comparative Actual Amounts For the Year Ended December 31, 2010)

The notes to the financial statements are an integral part of this statement.7

STATEMENT 3 - 4

Current YearPrior VarianceYear PositiveActual Actual Budget [Negative]

Cash ReceiptsIntergovernmental 11,693$ 10,202$ 11,648$ [1,446]$Charges for services 11,670 12,081 12,480 [399]

Total Cash Receipts 23,363 22,283 24,128$ [1,845]$

Expenditures and Transfers Subject to BudgetTransfer out 10,000 30,000 30,000$ -$

Total Expenditures and Transfers Subject to Budget 10,000 30,000 30,000$ -$

Receipts Over [Under] Expenditures 13,363 [7,717]

Unencumbered Cash, Beginning 7,044 20,407

Unencumbered Cash, Ending 20,407$ 12,690$

CITY OF DE SOTO, KANSASSpecial Parks and Recreation Fund

Statement of Cash Receipts and Expenditures - Actual and BudgetFor the Year Ended December 31, 2011

(With Comparative Actual Amounts For the Year Ended December 31, 2010)

The notes to the financial statements are an integral part of this statement.8

STATEMENT 3 - 5

Current YearPrior VarianceYear PositiveActual Actual Budget [Negative]

Cash ReceiptsIntergovernmental 17,782$ 19,611$ 19,000$ 611$

Total Cash Receipts 17,782 19,611 19,000$ 611$

Expenditures and Transfers Subject to BudgetContractual services 23,635 16,607 20,000$ 3,393$Transfers out - 10,000 10,000 -

Total Expenditures and Transfers Subject to Budget 23,635 26,607 30,000$ 3,393$

Receipts Over [Under] Expenditures [5,853] [6,996]

Unencumbered Cash, Beginning 34,100 28,247

Unencumbered Cash, Ending 28,247$ 21,251$

(With Comparative Actual Amounts For the Year Ended December 31, 2010)

CITY OF DE SOTO, KANSASTransient Guest Tax Fund

Statement of Cash Receipts and Expenditures - Actual and BudgetFor the Year Ended December 31, 2011

The notes to the financial statements are an integral part of this statement.9

STATEMENT 3 - 6

Current YearPrior VarianceYear PositiveActual Actual Budget [Negative]

Cash ReceiptsCharges for services 5,109$ 4,469$ 2,250$ 2,219$

Total Cash Receipts 5,109 4,469 2,250$ 2,219$

Expenditures and Transfers Subject to BudgetCapital outlay 1,910 2,370 3,350$ 980$

Total Expenditures and Transfers Subject to Budget 1,910 2,370 3,350$ 980$

Receipts Over [Under] Expenditures 3,199 2,099

Unencumbered Cash, Beginning 9,821 13,020

Unencumbered Cash, Ending 13,020$ 15,119$

CITY OF DE SOTO, KANSASSponsorship Fund

For the Year End December 31, 2011Statement of Cash Receipts and Expenditures - Actual and Budget

(With Comparative Actual Amounts For the Year Ended December 31, 2010)

The notes to the financial statements are an integral part of this statement.10

STATEMENT 3 - 7

Current YearPrior VarianceYear PositiveActual Actual Budget [Negative]

Cash ReceiptsCharges for services 15,600$ 8,400$ 18,200$ [9,800]$

Total Cash Receipts 15,600 8,400 18,200$ [9,800]$

Expenditures and Transfers Subject to BudgetTransfer out 10,000 14,000 28,000$ 14,000$

Total Expenditures and Transfers Subject to Budget 10,000 14,000 28,000$ 14,000$

Receipts Over [Under] Expenditures 5,600 [5,600]

Unencumbered Cash, Beginning 1,968 7,568

Unencumbered Cash, Ending 7,568$ 1,968$

(With Comparative Actual Amounts For the Year Ended December 31, 2010)

CITY OF DE SOTO, KANSASWater Development Fee Fund

Statement of Cash Receipts and Expenditures - Actual and BudgetFor the Year Ended December 31, 2011

The notes to the financial statements are an integral part of this statement.11

STATEMENT 3 - 8

Current YearPrior VarianceYear PositiveActual Actual Budget [Negative]

Cash ReceiptsCharges for services 18,000$ 39,000$ 9,000$ 30,000$

Total Cash Receipts 18,000 39,000 9,000$ 30,000$

Expenditures and Transfers Subject to BudgetTransfer out 14,730 14,000 14,000$ -$

Total Expenditures and Transfers Subject to Budget 14,730 14,000 14,000$ -$

Receipts Over [Under] Expenditures 3,270 25,000

Unencumbered Cash, Beginning 1,730 5,000

Unencumbered Cash, Ending 5,000$ 30,000$

(With Comparative Actual Amounts For the Year Ended December 31, 2010)

CITY OF DE SOTO, KANSASSewer Development Fee Fund

Statement of Cash Receipts and Expenditures - Actual and BudgetFor the Year Ended December 31, 2011

The notes to the financial statements are an integral part of this statement.12

STATEMENT 3 - 9

Electric Utility Investment Fund*

2011 2010Cash ReceiptsInterest income 25,969$ 27,448$Loan repayment 53,451 41,560Grants 6,250 -

Total Cash Receipts 85,670 69,008

Expenditures and Transfers Subject to BudgetCapital outlay 347,070 256,076Transfer out 25,969 27,448

Total Expenditures and Transfers Subject to Budget 373,039 283,524

Receipts Over [Under] Expenditures [287,369] [214,516]

Unencumbered Cash, Beginning 1,934,839 2,149,355

Unencumbered Cash, Ending 1,647,470$ 1,934,839$

* - This fund is not required to be budgeted.

Statement of Cash Receipts and Expenditures - Actual

CITY OF DE SOTO, KANSAS

For the Year Ended December 31, 2011 and 2010

The notes to the financial statements are an integral part of this statement.13

STATEMENT 3 - 10

2011 2010Cash ReceiptsDonations -$ -$

Total Cash Receipts - -

Expenditures and Transfers Subject to BudgetMiscellaneous 101 539

Total Expenditures and Transfers Subject to Budget 101 539

Receipts Over [Under] Expenditures [101] [539]

Unencumbered Cash, Beginning 1,141 1,680

Unencumbered Cash, Ending 1,040$ 1,141$

* - This fund is not required to be budgeted.

For the Year Ended December 31, 2011 and 2010Statement of Cash Receipts and Expenditures - Actual

Enhancement Community Fountain Fund*CITY OF DE SOTO, KANSAS

The notes to financial statements are an integral part of this statement.14

STATEMENT 3 - 11

2011 2010Cash ReceiptsCharges for services -$ -$

Total Cash Receipts - -

Expenditures and Transfers Subject to BudgetMiscellaneous - -

Total Expenditures and Transfers Subject to Budget - -

Receipts Over [Under] Expenditures - -

Unencumbered Cash, Beginning 1,157 1,157

Unencumbered Cash, Ending 1,157$ 1,157$

* - This fund is not required to be budgeted.

CITY OF DE SOTO, KANSASRiverfest Park Improvement Fund*

Statement of Cash Receipts and Expenditures - ActualFor the Year Ended December 31, 2011 and 2010

The notes to financial statements are an integral part of this statement.15

STATEMENT 3 - 12

Current YearPrior VarianceYear PositiveActual Actual Budget [Negative]

Cash ReceiptsTaxes 484,124$ 628,436$ 597,619$ 30,817$Special assessments 31,291 70,079 107,963 [37,884]Transfers in 225,997 224,380 222,000 2,380Interest income 263 291 25,000 [24,709]Miscellaneous 5,094 39,231 14,910 24,321

Total Cash Receipts 746,769 962,417 967,492$ [5,075]$

Expenditures and Transfers Subject to BudgetBond principal 275,000 345,000 1,067,848$ 722,848$Interest expense 690,556 794,922 67,334 [727,588]Cash basis reserve - - 963,782 963,782

Total Expenditures and Transfers Subject to Budget 965,556 1,139,922 2,098,964$ 959,042$

Receipts Over [Under] Expenditures [218,787] [177,505]

Unencumbered Cash, Beginning 1,330,899 1,112,112

Unencumbered Cash, Ending 1,112,112$ 934,607$

CITY OF DE SOTO, KANSASDebt Service Fund

Statement of Cash Receipts and Expenditures - Actual and BudgetFor the Year Ended December 31, 2011

(With Comparative Actual Amounts For the Year Ended December 31, 2010)

The notes to the financial statements are an integral part of this statement.16

STATEMENT 3 - 13

Capital Projects Fund*

2011 2010Cash ReceiptsIntergovernmental 16,380$ 8,794$

Total Cash Receipts 16,380 8,794

Expenditures and Transfers Subject to BudgetTransfers out 35,000 60,000

Total Expenditures and Transfers Subject to Budget 35,000 60,000

Receipts Over [Under] Expenditures [18,620] [51,206]

Unencumbered Cash, Beginning 44,086 95,292

Unencumbered Cash, Ending 25,466$ 44,086$

* - This fund is not required to be budgeted.

Statement of Cash Receipts and Expenditures - Actual

CITY OF DE SOTO, KANSAS

For the Year Ended December 31, 2011 and 2010

The notes to the financial statements are an integral part of this statement.17

STATEMENT 3 - 14

2011 2010Cash ReceiptsBond proceeds -$ 3,160,000$Intergovernmental 485,165 -Miscellaneous 150,400 93,503Transfers in 101,268 77,445

Total Cash Receipts 736,833 3,330,948

Expenditures and Transfers Subject to BudgetCapital outlay 1,403,723 565,671Bond refunding - 1,640,000Bond issuance costs 715 206,377Transfer out 32,758 -

Total Expenditures and Transfers Subject to Budget 1,437,196 2,412,048

Receipts Over [Under] Expenditures [700,363] 918,900

Unencumbered Cash, Beginning 982,471 63,571

Unencumbered Cash, Ending 282,108$ 982,471$

* - This fund is not required to be budgeted.

CITY OF DE SOTO, KANSASCapital Improvements Fund*

Statement of Cash Receipts and Expenditures - ActualFor the Year Ended December 31, 2011 and 2010

The notes to the financial statements are an integral part of this statement.18

STATEMENT 3 - 15

Shughart Trust Fund*

2011 2010Cash ReceiptsInterest income 100$ 248$

Total Cash Receipts 100 248

Expenditures and Transfers Subject to BudgetContractual - -

Total Expenditures and Transfers Subject to Budget - -

Receipts Over [Under] Expenditures 100 248

Unencumbered Cash, Beginning 22,910 22,662

Unencumbered Cash, Ending 23,010$ 22,910$

* - This fund is not required to be budgeted.

Statement of Cash Receipts and Expenditures - Actual

CITY OF DE SOTO, KANSAS

For the Year Ended December 31, 2011 and 2010

The notes to the financial statements are an integral part of this statement.19

STATEMENT 3 - 16

Current YearPrior VarianceYear PositiveActual Actual Budget [Negative]

Cash ReceiptsSales to consumers 1,224,478$ 1,361,554$ 1,254,427$ 107,127$Miscellaneous 8,029 - 25,000 [25,000]

Total Cash Receipts 1,232,507 1,361,554 1,279,427$ 82,127$

Expenditures and Transfers Subject to BudgetPersonal services 498,575 500,281 489,050$ [11,231]$Contractual services 395,692 417,660 434,500 16,840Commodities 260,347 303,474 301,950 [1,524]Capital outlay - - 15,309 15,309Transfer out 55,000 55,000 55,000 -

Total Expenditures and Transfers Subject to Budget 1,209,614 1,276,415 1,295,809$ 19,394$

Receipts Over [Under] Expenditures 22,893 85,139

Unencumbered Cash, Beginning 120,664 142,184

Prior period adjustment [1,373] -

Unencumbered Cash, Ending 142,184$ 227,323$

CITY OF DE SOTO, KANSASWater System Fund

Statement of Cash Receipts and Expenditures - Actual and BudgetFor the Year Ended December 31, 2011

(With Comparative Actual Amounts For the Year Ended December 31, 2010)

The notes to the financial statements are an integral part of this statement.20

STATEMENT 3 - 17

Current YearPrior VarianceYear PositiveActual Actual Budget [Negative]

Cash ReceiptsCharges for services 431,513$ 466,678$ 446,871$ 19,807$

Total Cash Receipts 431,513 466,678 446,871$ 19,807$

Expenditures and Transfers Subject to BudgetPersonal services 167,520 152,113 154,115$ 2,002$Contractual 126,098 161,470 152,050 [9,420]Capital outlay 580 480 - [480]Commodities 56,189 54,423 82,750 28,327Transfer out 95,000 95,000 95,000 -

Total Expenditures and Transfers Subject to Budget 445,387 463,486 483,915$ 20,429$

Receipts Over [Under] Expenditures [13,874] 3,192

Unencumbered Cash, Beginning 136,122 122,248

Unencumbered Cash, Ending 122,248$ 125,440$

CITY OF DE SOTO, KANSASSewer System Fund

Statement of Cash Receipts and Expenditures - Actual and BudgetFor the Year Ended December 31, 2011

(With Comparative Actual Amounts For the Year Ended December 31, 2010)

The notes to the financial statements are an integral part of this statement.21

STATEMENT 3 - 18

Current YearPrior VarianceYear PositiveActual Actual Budget [Negative]

Cash ReceiptsSales to consumers 324,666$ 350,141$ 324,720$ 25,421$

Total Cash Receipts 324,666 350,141 324,720$ 25,421$

Expenditures and Transfers Subject to BudgetContractual 331,173 355,696 360,000$ 4,304$

Total Expenditures and Transfers Subject to Budget 331,173 355,696 360,000$ 4,304$

Receipts Over [Under] Expenditures [6,507] [5,555]

Unencumbered Cash, Beginning 60,950 54,443

Unencumbered Cash, Ending 54,443$ 48,888$

(With Comparative Actual Amounts For the Year Ended December 31, 2010)

CITY OF DE SOTO, KANSASRefuse System Fund

Statement of Cash Receipts and Expenditures - Actual and BudgetFor the Year Ended December 31, 2011

The notes to the financial statements are an integral part of this statement.22

STATEMENT 3 - 19

2011 2010Cash ReceiptsCharges for services 119,900$ 110,060$

Total Cash Receipts 119,900 110,060

Expenditures and Transfers Subject to BudgetCommodities 112,143 106,354Contractual 6,515 7,945

Total Expenditures and Transfers Subject to Budget 118,658 114,299

Receipts Over [Under] Expenditures 1,242 [4,239]

Unencumbered Cash, Beginning [5,756] [1,432]

Prior period adjustment - [85]

Unencumbered Cash, Ending [4,514]$ [5,756]$

* - This fund is not required to be budgeted.

CITY OF DE SOTO, KANSASShop Fund*

Statement of Cash Receipts and Expenditures - ActualFor the Year Ended December 31, 2011 and 2010

The notes to the financial statements are an integral part of this statement.23

STATEMENT 4

Beginning EndingCash Cash Cash CashBalance Receipts Disbursements Balance

FUNDS

Payroll Sec. 125 Fund 16,468$ 30,198$ 24,027$ 22,639$IRB Fund 3,058 - - 3,058Municipal Court Fund 18,817 24,804 32,009 11,612

Total Agency Funds 38,343$ 55,002$ 56,036$ 37,309$

For the Year Ended December 31, 2011

CITY OF DE SOTO, KANSASStatement of Cash, Cash Receipts and Disbursements

Agency Funds

The notes to the financial statements are an integral part of this statement.24

25

CITY OF DE SOTO, KANSAS

Notes to the Financial Statements December 31, 2011

NOTE 1 - Summary of Significant Accounting Policies Financial Reporting Entity

The City of De Soto (City) is a municipal corporation governed by a mayor and five-member council. These financial statements present the City and any component units—entities for which the City is considered to be financially accountable. The City has no component units.

Basis of Accounting These financial statements are presented on a basis of accounting, which demonstrates compliance with the cash basis and budget laws of Kansas. Cash receipts are recognized when the cash balance of a fund is increased. For an interfund transaction, a cash receipt is recorded in the fund receiving cash from another fund. Cash disbursements are recognized when the cash balance of a fund is decreased. For an interfund transaction, a cash disbursement is recorded in the fund from which the cash is transferred. Expenditures include disbursements, accounts payable, and encumbrances. Encumbrances are commitments related to unperformed (executory) contracts for goods and services, and are usually evidenced by a purchase order or written contract. Departure from Accounting Principles Generally Accepted in the United States of America The basis of accounting described above results in a financial statement presentation, which shows cash receipts, cash disbursements, cash and unencumbered cash balances, and expenditures compared to budget. Balance sheets that would have shown noncash assets such as receivables, inventories, and prepaid expense, liabilities such as deferred revenue and matured principal and interest payable, and reservations of the fund balance are not presented. Under accounting principles generally accepted in the United States of America, encumbrances are only recognized as a reservation of fund balance. Encumbrances outstanding at year-end do not constitute expenditures or liabilities. Consequently, the expenditures as reported do not present the cost of goods and services received during the fiscal year in accordance with accounting principles generally accepted in the United States of America. Capital assets that account for the land, buildings, and equipment owned by the City are not presented in the financial statements. Also, long-term debt such as general obligation bonds, temporary notes, and compensated absences are not presented in the financial statements. The City has a waiver from accounting principles generally accepted in the United States of America, which allows the City to use the prescribed basis of accounting.

Fund Descriptions In governmental accounting, a fund is defined as an independent fiscal and accounting entity with a self-balancing set of accounts, recording cash balances and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations. Governmental funds are those through which most governmental functions of the City are financed. The City's governmental fund types are:

General Fund - to account for all unrestricted cash except that required to be accounted for in another fund. This is the principal operating fund of the City.

Special Revenue Funds - are used to account for revenues derived from specific taxes, governmental grants or other revenue sources which are restricted to finance particular functions or activities of the City.

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CITY OF DE SOTO, KANSAS

Notes to the Financial Statements December 31, 2011

NOTE 1 - Summary of Significant Accounting Policies (Continued) Governmental Fund Types

The Debt Service Fund is used to account for the accumulation of cash for, and the payment of, principal, interest and other related costs of the City’s general obligation bonds. The Capital Project Funds are used to account for the construction of major capital projects.

The Permanent Fund is used to account for resources that are legally restricted to the extent that only earnings, not principal, may be used for government programs.

Proprietary Fund Types The proprietary funds are used to account for the City’s ongoing organizations and activities, which are similar to those often found in the private sector. The City’s proprietary fund types are:

Enterprise Funds - to account for operations that are financed and operated in a manner similar to private business enterprise - where the intent of the governing body is that the costs of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges. Internal Service Fund – to account for operations that provide services to other departments.

Fiduciary Funds

Agency Funds - to account for assets held by the City in a trustee capacity or as an agent for individuals, other governmental units, private organizations, and/or other funds. Agency funds are custodial in nature and do not involve measurement of operations.

Budgetary Information Kansas statutes require that an annual operating budget be legally adopted for the general fund, special revenue funds (unless specifically exempted by statute), debt service funds, and enterprise funds. The statutes provide for the following sequence and timetable in the adoption of the legal annual operating budget: 1. Preparation of the budget for the succeeding calendar year on or before August 1st. 2. Publication in local newspaper of the proposed budget and notice of public hearing on the budget on or before

August 5th. 3. Public hearing on or before August 15th, but at least ten days after publication of notice of hearing. 4. Adoption of the final budget on or before August 25th. The statutes allow for the city council to increase the originally adopted budget for previously unbudgeted increases in revenue other than ad valorem property taxes. To do this, a notice of public hearing to amend the budget must be published in the local newspaper. At least ten days after publication, the hearing may be held and the governing body may amend the budget at that time. The 2011 budget was amended for the Law Enforcement, Water System and Refuse System Funds.

The statutes permit transferring budgeted amounts between accounts within an individual fund. However, such statutes prohibit expenditures in excess of the total amount of the adopted budget of expenditures of individual funds. Budget comparison statements are presented for each fund showing actual receipts and expenditures compared to legally budgeted receipts and expenditures.

27

CITY OF DE SOTO, KANSAS

Notes to the Financial Statements December 31, 2011

NOTE 1 - Summary of Significant Accounting Policies (Continued) Budgetary Information (Continued) All legal annual operating budgets are prepared using the statutory basis of accounting, in which revenues are recognized when cash is received and expenditures include disbursements, accounts payable, and encumbrances. Encumbrances are commitments by the City for future payments and are supported by a document evidencing the commitment, such as a purchase order or contract. All unencumbered appropriations (legal budget expenditure authority) lapse at year-end. A legal operating budget is not required for certain special revenue, capital project, permanent and the internal service funds. Spending in funds which are not subject to the legal annual operating budget requirement is controlled by federal regulations, other statutes, or by the use of internal spending limits established by the city council. NOTE 2 - Deposits The City’s cash is considered to be active funds by management and is invested according to K.S.A. 9-1401. The statute requires that banks eligible to hold active funds have a main or branch bank in the county in which the City is located or in a county adjacent to the City and the banks provide an acceptable rate for active funds. Various City investments are considered to be idle funds by management and are invested according to K.S.A. 12-1675. The statute requires that at the City invest its idle funds in only temporary notes of the City, bank certificates of deposit, repurchase agreements, and if eligible banks do not offer an acceptable rate for the funds: U.S. Treasury bills or notes, the Municipal Investment Pool (KMIP) and certain other investments if the municipality has extended investment authority. Maturities of the above investments may not exceed two years by statute. Some of the City’s investments are of bond proceeds invested pursuant to K.S.A. 10-131. This statute allows additional investment authority beyond that of K.S.A. 12-1675. Investments of bond proceeds may follow K.S.A. 12-1675 or include other investments such as the KMIP, direct obligations of the US government or any agency thereof, investment agreements with a financial institution the obligations of which at the time of investment are rated in either of the three highest rating categories by Moody’s investors service or Standard and Poor’s corporation, and various other investments as specified in K.S.A. 10-131. At December 31, 2011, the City has the following investments:

Investment Type Fair Value RatingKansas Municipal Investment Pool 284,389$ S&P AAAf/S1+

Total fair value 284,389$ The municipal investment pool is under the oversight of the Pooled Money Investment Board. The board is comprised of the State Treasurer and four additional members appointed by the State Governor. The board reports annually to the Kansas legislature. State pooled monies may be invested in direct obligations of, or obligations that are insured as to principal and interest by the U.S. government or any agency thereof, with maturities up to four years. No more than 10 percent of those funds may be invested in mortgage-backed securities. In addition, the State pool may invest in repurchase agreements with Kansas banks or with primary government securities dealers. The City does not have any formal investment policies that would further limit concentration of credit risk, interest rate, or custodial credit risks beyond state statutes.

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CITY OF DE SOTO, KANSAS

Notes to the Financial Statements December 31, 2011

NOTE 2 – Deposits (Continued) Custodial credit risk is the risk that in the event of a bank failure, the City’s deposits may not be returned to it. The City’s deposit policy for custodial credit risk require that the depository banks will maintain 100% security in the form of FDIC coverage and pledged collateral according to K.S.A. 9-1402. The City does not have any formal investment policies that would further limit concentration of credit risk, interest rate, or custodial credit risks beyond state statutes. NOTE 3 - Retirement Plan Plan Description - The City participates in the Kansas Public Employees Retirement System (“System”), a cost-sharing multiple-employer defined benefit pension plan as provided by K.S.A. 74-4901, et seq. KPERS provides retirement benefits, life insurance, disability income benefits, and death benefits. Kansas law establishes and amends benefit provisions. KPERS issues a publicly available financial report that includes financial statements required supplementary information. That report may be obtained by writing to KPERS (611 South Kansas Avenue; Topeka, Kansas 66603) or by calling 1-888-275-5737. Funding Policy - K.S.A. 74-4919 establishes the KPERS member-employee contribution rate up to 6% of covered salary. The employer collects and remits member-employee contributions according to the provisions of Section 414(h) of the Internal Revenue Code. State law provides that the employer contribution rate be determined annually based on the results of an annual actuarial valuation. KPERS is funded by an actuarial reserve bases. State law sets a limitation on annual increases in the contribution rates for KPERS employers. The employer rate was 6.74% from January 1 to December 31, 2011. The employer contributions to KPERS for years ending December 31, 2011, 2010 and 2009 were $123,005, $111,793, and $91,418, respectively, equal to the required contributions for each year. NOTE 4 - Long-Term Debt General Obligation (G.O.) Bonds. The City issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. General obligation bonds have been issued for general government activities.

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CITY OF DE SOTO, KANSAS

Notes to the Financial Statements December 31, 2011

NOTE 4 - Long-Term Debt (Continued) General obligation bonds are direct obligations and pledge the full faith and credit of the City. These bonds generally are issued with equal amounts of principal maturing each year. General obligation bonds currently outstanding are as follows:

OriginalInterest Amount Balance Due At

Description Rates Maturity Issued December 31, 2011G.O. bonds issued:

03/15/02 4.00-4.35 2012 237,369$ 30,000$ 04/15/03 2.00-4.00 2017 1,180,000 295,000 06/09/04 4.00-5.55 2025 2,650,000 2,040,000 10/15/05 3.75-4.375 2032 9,000,000 8,965,000 08/02/07 3.80-4.20 2026 1,250,000 1,250,000 08/02/07 3.90 2013 140,000 100,000 04/29/08 2.70-4.25 2028 1,080,000 960,000 03/25/09 4.10-5.25 2039 1,320,000 1,320,000 04/19/10 1.00-4.30 2030 1,285,000 1,250,000 04/19/10 6.00 2035 710,000 710,000 11/23/10 6.50-7.00 2040 1,080,000 1,080,000 11/23/10 4.60 2027 85,000 85,000

18,085,000$ Annual debt service requirements to maturity for the general obligation bonds are as follows:

Year EndingDecember 31,

2012 1,213,863$ 2013 1,444,220 2014 1,429,853 2015 1,424,778 2016 1,413,275

2017-2021 6,959,100 2022-2026 6,591,060 2027-2031 5,489,503 2032-2036 2,452,429 2037-2041 773,875

Total Principal and Interest 29,191,954 Less: Interest 11,106,954 Total Principal 18,085,000$

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CITY OF DE SOTO, KANSAS

Notes to the Financial Statements December 31, 2011

NOTE 4 - Long-Term Debt (Continued) Changes in General Long-term Liabilities. During the year ended December 31, 2011, the following changes occurred in long-term debt:

Balance BalanceJanuary 1, December 31,

2011 Additions Retirements 2011

General obligation debt 18,430,000$ -$ 345,000$ 18,085,000$

Totals 18,430,000$ -$ 345,000$ 18,085,000$

Conduit Debt Obligations. From time to time, the City has issued Industrial Revenue Bonds to provide financial assistance to private-sector entities for the acquisition and construction of industrial and commercial facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private-sector entity served by the bond issuance. Neither the City, the State of Kansas, nor any political subdivision thereof is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of December 31, 2011, there was three series of Industrial Revenue bonds outstanding, with an aggregate original principal amount payable of $26,050,000. NOTE 5 - Risk Management The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City carries commercial insurance for risks of loss. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years.

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CITY OF DE SOTO, KANSAS

Notes to the Financial Statements December 31, 2011

NOTE 6 - Interfund Transfers A reconciliation of transfers by fund type for 2011 follows:

Transfer TransferFund In Out

General Fund 70,969$ -$ Special Highway Fund - 84,890 Special Parks and Recreation Fund - 30,000 Transient Guest Tax Fund - 10,000 Water Development Fee Fund - 14,000 Sewer Development Fee Fund - 14,000 Electric Utility Investment Fund - 25,969 Debt Service Fund 224,380 - Capital Improvement Fund 101,268 32,758 Capital Projects Fund - 35,000 Water System Fund - 55,000 Sewer System Fund - 95,000

396,617$ 396,617$ NOTE 7 - Developer Deposits Developer deposits payable, in the amount of $9,000, are outstanding as of December 31, 2011. The deposits are payable to the developer upon completion of the specific project. NOTE 8 - Compensated Absences Full-time employees accrue vacation each year at the following rate: One to four years of service - ten days Five to nine years of service - fifteen days Ten to fourteen years of service - twenty days Fifteen to nineteen years of service - twenty-five days After twenty years of service - thirty days Employees cannot carry over more than one half of the annual entitlement for the year in which it was earned of accrued vacation from one payroll year to the next. Upon termination or resignation, an employee on regular status shall be compensated for all authorized accumulated, unused vacation leave, but the compensation is limited to the maximum number of hours the departing employee could accumulate in one year. Total accrued vacation leave was $66,998 at December 31, 2011.

32

CITY OF DE SOTO, KANSAS

Notes to the Financial Statements December 31, 2011

NOTE 9 - Lease Agreement The City of De Soto continues to operate the water treatment plant at the former Sunflower Army Ammunition Plant, now owned by private developer Sunflower Redevelopment LLC. The City’s use is pursuant to a perpetual lease agreement dated July 29, 2005. Pursuant to a Real Estate Transfer Agreement dated July 29, 2005 between City of De Soto and Sunflower Redevelopment, LLC, the City will receive fee title interest to the treatment plant as soon as the land receives a CERCLA Covenant pursuant to 42 U.S.C. § 9620(h)(3)(A)(ii). The City completed improvements to the water treatment plant site initiated in 2010; the improvements included a back-up electrical generator, the installation of new electrical service to the plant, and a new water main leading from the plant to the City’s distribution system. Construction was completed in 2011. The City, in conjunction with the City of Baldwin, City of Wellsville, and Douglas Country Rural Water District #4, completed a broader water facilities study in 2011; study evaluated the concept and costs of creating a regional wholesale water supply district. The study and the decision to proceed with the creation of a regional wholesale water supply district is now in the respective hands of the study group’s policy-making boards to determine whether each entity will commit to proceeding with the regional district or not. NOTE 10 - Due To—Due From The Electric Utility Investment Fund has advanced money to the Water System Fund. The advance was made in 2001. The City plans to pay back the $150,000 loan, with interest, when bonds are issued for additional major capital improvements needed for the City’s water system. The Electric Utility Investment Fund has advanced money to the General and Water Fund for the purchase of vehicles in the amount of $301,081. The General and Water Fund paid the Electric Utility Investment Fund $53,451 in 2011 for repayment of the vehicle advance. The balance of the advance remaining at December 31, 2011 was $188,529.

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APPENDIX C

FORM OF CONTINUING DISCLOSURE INSTRUCTIONS

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FORM OF CONTINUING DISCLOSURE INSTRUCTIONS

CITY OF DE SOTO, KANSAS

$4,475,000

GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS SERIES 2012-A

DATED JUNE 6, 2012

THESE CONTINUING DISCLOSURE INSTRUCTIONS (the “Disclosure Instructions”) are executed and delivered by the Issuer in connection with the issuance of the above-described bonds (the “Bonds”) which are being issued simultaneously herewith as of June 6, 2012, pursuant to the Bond Resolution, in which the Issuer covenants to enter into this undertaking to provide certain financial and other information with respect to the Bonds in order to assist the Participating Underwriters in complying with the provisions of the SEC Rule. The Issuer is the only “obligated person” with responsibility for continuing disclosure with respect to the Bonds. Section 1. Definitions. In addition to the definitions set forth in the Bond Resolution, which apply to any capitalized term used in these Disclosure Instructions, unless otherwise defined herein, the following capitalized terms shall have the following meanings: “Annual Report” means any Annual Report filed by the Issuer pursuant to, and as described in, Section 2 of these Disclosure Instructions. “Audit” means the Issuer’s annual audited financial statements. “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. “Bond Resolution” means jointly the ordinance and the resolution of the governing body of the Issuer authorizing the issuance of the Bonds. “Designated Agent” means Gilmore & Bell, P.C. or one or more other entities designated in writing by the Issuer to serve as a designated agent of the Issuer for purposes of these Disclosure Instructions. “Dissemination Agent” means any entity designated in writing by the Issuer to serve as dissemination agent pursuant to these Disclosure Instructions and which has filed with the Issuer a written acceptance of such designation substantially in the form attached hereto as Exhibit B. “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. “Financial Information” means the financial information of the Issuer described in Section 2(a)(1) hereof. “Fiscal Year” means the one year period ending December 31, or such other date or dates as may be adopted by the Issuer for its general accounting purposes. “GAAP” means generally accepted accounting principles, as applied to governmental units, as in effect at the time of the preparation of the Financial Information. “Issuer” means the city and any successors or assigns. “Material Events” means any of the events listed in Section 3(a) hereof.

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“MSRB” means the Municipal Securities Rulemaking Board. “Official Statement” means the Issuer’s Official Statement for the Bonds. “Operating Data” means the operating data of the Issuer described in Section 2(a)(2) hereof. “Participating Underwriters” means any of the original underwriters of the Bonds required to comply with the SEC Rule in connection with offering of the Bonds. “Repository” means the MSRB via EMMA. “SEC” means the Securities and Exchange Commission of the United States. “SEC Rule” means Rule 15c2-12(b)(5) adopted by the SEC 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 Issuer shall, or shall cause the Dissemination Agent to, not later than 180 days after the end of the Issuer’s Fiscal Year, commencing with the Fiscal Year ended in 2011, file with the MSRB, through EMMA, the Issuer’s Audit and Operating Data (jointly, the “Annual Report”), as follows: (1) Financial Information. The financial statements of the Issuer for such prior Fiscal Year,

accompanied by an audit report resulting from an audit conducted by an Independent Accountant in conformity with generally accepted auditing standards. Such financial statements will be prepared on a modified accrual basis of accounting other than GAAP which demonstrates compliance with the State’s “cash-basis” and “budget” laws. A more detailed explanation of the accounting basis is contained in Appendix A to the Official Statement. If such audit report is 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 audit report and accompanying financial statements shall be filed in the same manner as the Annual Report promptly after they become available. The method of preparation and basis of accounting of the Financial Information may not be changed to a basis less comprehensive than contained in the Official Statement, unless the Issuer files notice of such change in the same manner as for a Material Event under Section 3(b) hereof.

(2) Operating Data. Updates as of the end of the Fiscal Year of substantially all of the information and

data contained in those sections of Appendix A to the Official Statement entitled “Debt Structure.”

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 Issuer is an “obligated person” (as defined by the SEC Rule), which have been filed with the MSRB or the SEC. If the document included by reference is a final official statement, it must be available from the MSRB on EMMA. The Issuer shall clearly identify each such other document so included by reference. In each case, 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; provided that the audit report and accompanying financial statements may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the Issuer’s Fiscal Year changes, it shall give notice of such change in the same manner as for a Material Event under Section 3(b).

(b) If no Dissemination Agent has been appointed, the Issuer shall file the Annual Report as specified by Section 2(a) hereof; or if the Annual Report is not filed within the time period specified in Section 2(a) hereof, the Issuer shall file a notice with the MSRB via EMMA in substantially the form attached as Exhibit A.

Section 3. Reporting of Material Events.

(a) Within 10 business days after the occurrence of any of the following events, the Issuer shall give, or cause the Dissemination Agent, if any, to give, notice of the occurrence of any of the following events with respect to the Bonds: (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;

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(6) adverse tax opinions; the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 570-TEB) or other material notices or determinations with respect to the tax status of the Bond, or other material events affecting the tax status of the security;

(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 Institution; (13) the consummation of a merger, consolidation, or acquisition involving the Institution or the sale of

all or substantially all of the assets of the Institution, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and

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

(b) Such notice shall be given by promptly filing a notice of such occurrence with the Repository.

Notwithstanding the foregoing, notice of Material Events described in subsections (a)(8) or (9) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to the Owners of affected Bonds pursuant to the Bond Resolution.

Section 4. Dissemination Agent. (a) General. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying

out its obligations under these Disclosure Instructions, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.

(b) Annual Reports. If a Dissemination Agent is appointed, not later than 15 Business Days prior to the date

specified in Section 2(a) for providing the Annual Report to the Repository, the Issuer shall provide the Annual Report to the Dissemination Agent or the Repository. The Dissemination Agent shall file a report with the Issuer certifying that the Annual Report has been provided pursuant to these Disclosure Instructions, stating the date it was provided, or that the Issuer has certified to the Dissemination Agent that the Issuer has provided the Annual Report to the Repository. If the Dissemination Agent has not received an Annual Report or has not received a written notice from the Issuer that it has provided an Annual Report to the Repository, by the date required in Section 2(a), the Dissemination Agent shall send a notice to the Repository in substantially the form attached as Exhibit A.

(c) Material Event Notices. (1) 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 chief financial officer of the Issuer or his or her designee, or such other person as the Issuer shall designate in writing to the Dissemination Agent from time to time, inform such person of the event, and request that the Issuer promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to Section 4(c)(3).

(2) The Issuer will promptly respond in writing to any such request. Whenever the Issuer obtains knowledge

of the occurrence of a Material Event, because of a notice from the Dissemination Agent pursuant to this subsection (c) or otherwise, the Issuer shall promptly determine if such event would be material under applicable federal securities law. If the Issuer has determined that knowledge of the occurrence of a Material Event would be material under applicable federal securities law, the Issuer shall promptly so notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to Section 4(c)(3). If the Issuer has determined that knowledge of a Material Event would not be material under federal securities law, the Issuer shall promptly so notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent not to report the occurrence pursuant to Section 4(c)(3).

(3) If the Dissemination Agent has been given written instructions by the Issuer to report the occurrence of a

Material Event, the Dissemination Agent shall promptly file a notice of such occurrence with the Repository, with copies to the Issuer. Notwithstanding the foregoing, notice of Material Events described in Sections 3(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 Owners of affected Bonds pursuant to the Bond Resolution.

(d) Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such

duties as are specifically set forth in these Disclosure Instructions, and the Issuer agrees to indemnify and save the Dissemination

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Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The obligations of the Issuer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Issuer pursuant to these Disclosure Instructions.

(e) Other Designated Agents. The Issuer may, from time to time, appoint or designate a Designated Agent to submit Annual Reports, Material Event notices, and other notices or reports pursuant to these Disclosure Instructions. The Issuer hereby appoints the Dissemination Agent and the Designated Agent(s) solely for the purpose of submitting Issuer-approved Annual Reports, Material Event notices, and other notices or reports pursuant to these Disclosure Instructions. The Issuer may revoke this designation at any time upon written notice to the Designated Agent.

Section 5. Termination of Reporting Obligation. The Issuer’s obligations under these Disclosure Instructions shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If the Issuer’s obligations hereunder are assumed in full by some other entity as permitted in the Bond Resolution, such person shall be responsible for compliance with under these Disclosure Instructions in the same manner as if it were the Issuer, and the Issuer shall have no further responsibility hereunder. If such termination or substitution occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such termination or substitution in the same manner as for a Material Event under Section 3(b). Section 6. Amendment; Waiver. Notwithstanding any other provision of these Disclosure Instructions, the Issuer and the Dissemination Agent, if any, may amend of these Disclosure Instructions (and the Dissemination Agent shall not unreasonably refuse to execute any amendment so requested by the Issuer) and any provision of these Disclosure Instructions may be waived, provided that: (a) Bond Counsel or other counsel experienced in federal securities law matters provides the Issuer and the Dissemination Agent, if any, with its opinion that the undertaking of the Issuer contained herein, as so amended or after giving effect to such waiver, is in compliance with the SEC Rule and all current amendments thereto and interpretations thereof that are applicable to these Disclosure Instructions; (b) if the amendment or waiver relates to Sections 2(a) or 3(a), it may only be made in connection with a change in circumstances that arises from a change in law or legal requirements, or change in the identity, nature or status of an obligated person with respect to the Bonds, or the type of business conducted; and (c) the amendment or waiver is either (1) approved by the Owners of the Bonds in the same manner as provided in the Bond Resolution with consent of the Owners, or (2) does not in the opinion of Bond Counsel materially impair the interests of the Owners or Beneficial Owners of the Bonds. If there is an amendment or waiver of a provision of these Disclosure Instructions, the Issuer shall describe such amendment 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 Issuer. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements: (a) notice of such change shall be given in the same manner as for a Material Event under Section 3(b), and (b) 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 these Disclosure Instructions shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in these Disclosure Instructions 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 these Disclosure Instructions. If the Issuer 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 these Disclosure Instructions, the Issuer shall have no obligation under these Disclosure Instructions to update such information or include it in any future Annual Report or notice of occurrence of a Material Event. Section 8. Noncompliance. In the event of a failure of the Issuer or the Dissemination Agent, if any, to comply with any provision of these Disclosure Instructions, the 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 Issuer or the Dissemination Agent, if any, as the case may be, to comply with its obligations under these Disclosure Instructions. Noncompliance with the provisions of these Disclosure Instructions shall not be deemed an Event of Default under the Bond Resolution, and the sole remedy under these Disclosure Instructions in the event of any failure of the Issuer or the Dissemination Agent, if any, to comply with these Disclosure Instructions shall be an action to compel performance. Section 9. Notices. Any notices or communications to or among any of the parties referenced in these Disclosure Instructions may be given as follows: (a) To the Issuer at:

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32905 W. 84th Street De Soto, Kansas 66018 Fax: (913)208-0467 Attention: Clerk (b) To the Participating Underwriter at the addresses listed in the Bond Resolution; or such other address as is furnished in writing to the other parties referenced herein. (c) To the Dissemination Agent at the address set forth on Exhibit B attached hereto. 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 10. Electronic Transactions. Actions taken hereunder and the arrangement described herein may be conducted and related documents may be stored by electronic means. Section 11. Beneficiaries. These Disclosure Instructions shall inure solely to the benefit of the Issuer, the Dissemination Agent, if any, 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 these Disclosure Instructions, the Bond Resolution or the Bonds relating hereto, 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. Governing Law. These Disclosure Instructions shall be governed by and construed in accordance with the laws of the State of Kansas.

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