notice-of-sale--pos-final---central-ar-water

The Bonds are subject to special optional redemption on and after October 1, 2016, at the election of the Issuer, in part, from surplus collections of the Long Term Debt Surcharge Revenu

This Official Notice of Sale does not alone constitute an invitation for bids on the Bonds but is merely notice of the sale of the Bonds described herein The invitation for bids is being made by means of this Official Notice of Sale together with the Preliminary Official Statement Information contained in this Official Notice of Sale is qualified in its entirety by the detailed information contained in the Preliminary Official Statement Terms not defined in this Official Notice of Sale shall have the meanings assigned in the Preliminary Official Statement

OFFICIAL NOTICE OF SALE Dated February 2, 2016

$22,915,000*CENTRAL ARKANSAS WATER ACQUISITION AND CONSTRUCTION WATER REVENUE BONDS

(MAUMELLE WATER SYSTEM ACQUISITION PROJECT),

SERIES 2016 Bids Due: February 10, 2016 at 10:00 a.m., Central Standard Time

The Bonds are issued pursuant to and in full compliance with the constitution and laws of the State of Arkansas, including particularly Act No 982 of the Acts of Arkansas of 2001

(Ark Code Ann § 25-20-301, et seq., (the “Act”)), and pursuant to a Trust Indenture,

dated as of March 1, 2016 (the “Indenture”), duly executed and delivered by the Issuer to Regions Bank, as Trustee (the “Trustee”), and do not constitute an indebtedness of the State of Arkansas or the Cities of Little Rock or North Little Rock, Arkansas, within any constitutional or statutory limitation The Bonds are not general obligations of the Issuer, but are special obligations payable solely from Long Term Debt Surcharge Revenues (as defined below) derived from the operation of the MWM Water System (as defined below) and from funds and moneys pledged to the payment of the Bonds under the Indenture The Issuer has no taxing power

Electronic bids, via i-Deal LLC’s BiDCOMP™/Parity™ Competitive Bidding System

(“BiDCOMP/Parity”) for the purchase of all, and not less than all, of the $22,915,000* aggregate principal amount of Acquisition and Construction Water Revenue Bonds (Maumelle Water System Acquisition Project), Series 2016 (the “Bonds”), will be received by the Issuer until 10:00 a.m., Central Standard Time, on February 10, 2016, (unless changed as described herein)

THE BONDS

Description of the Bonds The Bonds will be dated March 1, 2016 Interest will be payable on October 1, 2016, and on each April 1 and October 1 thereafter until the earlier of maturity or redemption The Bonds will be issued in fully registered form without coupons, and will be in denominations of $5,000 or any integral multiple thereof Principal and interest will be paid by the Trustee

*

Amount preliminary; subject to adjustment as described herein under “Adjustment to Principal Amount.”

Principal Amortization Principal on the Bonds will be paid (subject to prior redemption) through serial maturities and/or term maturities with annual sinking fund redemptions on the following dates and in the following amounts:

Due April 1

Required Principal Payment

Mandatory Redemption The Bonds are subject to mandatory redemption on April 1, 2019, from proceeds of the Bonds not needed to accomplish the Acquisition of the MWM Water System or

to accomplish the Improvements, at par plus accrued interest to the redemption date

Optional Redemption The Bonds are subject to optional redemption on and after April 1, 2026,

at the election of the Issuer, in whole or in part on any date for which timely notice of redemption can be given under the terms of the Indenture, in inverse order of maturities unless the Trustee is otherwise directed by the Issuer, in which case, in such order of maturities as the Issuer may direct (and within each maturity as selected by the Trustee), at par plus accrued interest to the redemption date See the Preliminary Official Statement – THE BONDS for more information on the redemption provisions for the Bonds

Special Optional Redemption The Bonds are subject to special optional redemption on and after October 1, 2016, at the election of the Issuer, in part, from surplus collections of the Long Term Debt Surcharge Revenues, on any interest payment date for which timely notice of redemption can be given under the terms of the Indenture, in inverse order of maturities (and within each maturity) as directed by the Trustee, at par plus accrued interest to the redemption date provided the Issuer is not in default on the Senior Debt, the Second Lien Debt or the Bonds or any subsequently issued Parity Debt “Surplus Collections” means all collections of the Long Term Debt Surcharge deposited to the Long Term Debt Surcharge Account in the Revenue Fund established pursuant to the Indenture not needed to pay current principal and interest charges on

the Bonds See, PROJECTED SPECIAL OPTIONAL REDEMPTION in the Preliminary

Official Statement

Security The Bonds are secured by a pledge of the Long Term Debt Surcharge Revenues, as defined in the Indenture, derived from the operation of the water system to be acquired by the Issuer from the Maumelle Suburban Improvement District No 500 of Pulaski County, Arkansas, also known as “Maumelle Water Management” (the “MWM Water System”) which acquisition will be made pursuant to the provisions of that certain Water Consolidation Agreement dated as

of October 13, 2015, by and between the Issuer and MWM (the “Agreement”) “Long Term Debt Surcharge Revenues” means 100% of the collections of the Long Term Debt Surcharge levied by the Issuer pursuant to Resolution 2015-15 to be collected from customers of the Issuer within the service area for the MWM Water System The pledge of the Long Term Debt Surcharge Revenues securing these Bonds are included in the Net Revenues of the Issuer which Net Revenues are pledged first to the repayment of Senior Debt (as defined in the Indenture) of the Issuer and second to the payment of the Second Lien Debt (as defined in the Indenture) of the Issuer Thus, the pledge of the Long Term Debt Surcharge Revenues of the Issuer is a Third Lien on those Revenues No revenues of the Issuer, other than the Long Term Debt Surcharge Revenues, are pledged to the repayment of the Bonds

The Issuer and MWM have entered into the Agreement pursuant to which the Issuer has agreed

to acquire the MWM Water System and related water assets from MWM, to finance the costs of acquiring, construction and equipping extensions, betterments and improvements to the Issuer’s water system and the MWM Water System (the “Improvements”) to enhance the delivery of water and water related services to the customers of the MWM Water System, and to assume ownership, control and operational responsibilities for the MWM Water System The Issuer has covenanted in the Indenture to establish and maintain rates for the Bonds which shall yield Long

Term Debt Surcharge Revenues in each forthcoming fiscal year at least equal to the sum of (i) 120% of the aggregate debt service due on the Bonds, and any other Parity Debt during the forthcoming fiscal year, and (ii) 100% of the amounts, if any, required to be deposited in any debt service reserve fund or account securing the Bonds, or any additional Parity Debt during the forthcoming fiscal year See the caption “SECURITY FOR THE BONDS” in the Preliminary Official Statement

Purpose Proceeds of the Bonds will be used to (i) finance the costs of acquiring the MWM Water System and related water assets, (ii) finance the costs of acquiring, constructing and equipping the Improvements, (iii) establish a debt service reserve, and (iv) pay the costs of issuance of the Bonds

THE SALE

Bid Specifications No bid for other than all of the Bonds will be considered All bids must be unconditional Each proposal for the Bonds must specify the amount bid for such Bonds of not less than 99% of the par value of the aggregate principal amount of the Bonds Bidders are invited to name the rate or rates of interest that the Bonds are to bear, in multiples of 1/8 or 1/20

of one percent Any number of rates may be named, provided that (a) the difference between the highest interest rate and the lowest interest rate shall not exceed 300 basis points and (b) no interest rate may exceed 5.0% Each bidder must specify in its bid a single rate for each maturity

of the Bonds

Bonds Offered for Sale by Competitive Bidding Electronic bids (as explained below), in connection with the sale by the Issuer of $22,915,000* aggregate principal amount of the Bonds, will be received until 10:00 a.m., Central Standard Time, on February 10, 2016, or at such later time and date announced at least 48 hours in advance via BiDCOMP/Parity All bids shall be submitted on the Official Bid Form which may be obtained from the Financial Advisor or Bond Counsel or electronically via BiDCOMP/Parity No additions or alterations in the Official Bid Form shall be made except as provided therein The Official Bid Form contains a section entitled Computation which is informative only and not a part of the bid For purposes of the bidding process, the time as maintained by BiDCOMP/Parity shall constitute the official time

ELECTRONIC BIDDING AND BIDDING PROCEDURES

Registration to Bid All prospective electronic bidders must be contracted customers of BiDCOMP/Parity If you do not have a contract with BiDCOMP/Parity, call (212) 404-8102 to become a customer By submitting a bid for the Bonds a prospective bidder represents and warrants to the Issuer that such bidder’s bid for the purchase of the Bonds (if a bid is submitted

in connection with the sale) is submitted for and on behalf of such prospective bidder by an officer or agent who is duly authorized to bind the prospective bidder to a legal, valid, and enforceable contract for the purchase of the Bonds

If any provisions of this Official Notice of Sale shall conflict with earlier information provided

by BiDCOMP/Parity as approved provider of electronic bidding services, this Official Notice of

*

Amount preliminary; subject to adjustment as described herein under “Adjustment to Principal Amount.”

Sale shall control Further information about BiDCOMP/Parity, including any fee charged, may

be obtained from BiDCOMP/Parity at (212) 404-8102

Disclaimer Each prospective bidder shall be solely responsible to register to bid via BiDCOMP/Parity Each prospective bidder shall be solely responsible to make necessary arrangements to access BiDCOMP/Parity for purposes of submitting its bid in a timely manner and in compliance with the requirements of this Official Notice of Sale

Neither the Issuer nor BiDCOMP/Parity shall have any duty or obligation to undertake such registration to bid for any prospective bidder or to provide or assure such access to any prospective bidder, and neither the Issuer nor BiDCOMP/Parity shall be responsible for a bidder’s failure to register to bid or for proper operation of, or have any liability for any delays or interruptions of, or any damages caused by BiDCOMP/Parity The Issuer is using BiDCOMP/Parity as a communication mechanism, and not as the Issuer’s agent, to conduct the electronic bidding for the Bonds The Issuer is not bound by any advice and determination of BiDCOMP/Parity to the effect that any particular bid complies with the terms of this Official Notice of Sale and in particular the “Bid Specifications” set forth above All costs and expenses incurred by prospective bidders in connection with their registration and submission of bids via BiDCOMP/Parity are the sole responsibility of the bidders; and the Issuer is not responsible, directly or indirectly, for any such costs or expenses If a prospective bidder encounters any difficulty in registering to bid or submitting, modifying, or withdrawing a bid for the Bonds, it should telephone BiDCOMP/Parity and notify the Issuer’s financial advisor, Stephens Inc., by facsimile at (501) 377-3465 or electronic email

Bidding Procedures Bids submitted electronically for the purchase of the Bonds (all or none) must be by means of the Official Bid Form attached to this Official Notice of Sale via BiDCOMP/Parity by 10:00 a.m., Central Standard Time, on February 10, 2016, unless changed as described herein (see “Change of Date and Time for Receipt of Bids”) Prior to that time, a prospective bidder may input and save proposed terms of its bid in BiDCOMP/Parity Once the final bid has been saved in BiDCOMP/Parity, the bidder may select the final bid button in BiDCOMP/Parity to submit the bid to BiDCOMP/Parity Once the bids are communicated electronically via BiDCOMP/Parity to the Issuer, each bid will constitute an irrevocable offer to purchase the Bonds on the terms therein provided

No bids will be accepted in written form, by facsimile transmission, or in any other medium or

on any system other than by means of the Official Bid Form via BiDCOMP/Parity No bid will

be received after the time for receiving such bids specified above

Good Faith Deposit A Good Faith Deposit (the “Deposit”) in the amount of FOUR HUNDRED

FIFTY-EIGHT THOUSAND THREE HUNDRED DOLLARS ($458,300) is required only from the Purchaser and must be received not later than 3:00 p.m., Central Standard Time, on February

10, 2016 If the Deposit is not received in the time allotted, the Issuer may choose to reject such bid Contact the Financial Advisor at (501) 377-6315 for wiring instructions or with any questions regarding the Deposit

The Deposit will be applied to the purchase price of the Bonds In the event the Purchaser fails to honor its accepted bid, the Deposit will be retained by the Issuer as liquidated damages In the

event of the failure of the Issuer to deliver the Bonds to the Purchaser in accordance with the terms

of this Official Notice of Sale within 45 days after the date of the sale, the Deposit will be promptly returned to the Purchaser, unless otherwise directed by the Purchaser

Award of the Bonds The Issuer will award the Bonds or reject all bids after opening of bids and upon verification of the mathematical accuracy of all bids by the Financial Advisor The Issuer reserves the right to waive any irregularities or informalities in any bid, to reject any and all bids,

to take any action adjourning or postponing the sale of the Bonds, or to take any other action the Issuer may deem to be in its best interest

ADJUSTMENT TO PRINCIPAL AMOUNT

Subsequent to the date and time for receipt of bids, the principal amount of Bonds per maturity may be reduced or increased, if necessary, in order to maintain the semi-annual debt service requirements at appropriate levels To the extent that the bid of the successful bidder provides proceeds that are more than sufficient to accomplish the cost of the Projects currently identified

by the Issuer and to pay issuance costs, the principal amount of the Bonds may be reduced or increased by the Financial Advisor by adjusting the principal amount of any or all maturities In the event of a reduction or increase of a principal maturity, the Bonds of that maturity shall bear interest at the rates specified in the successful bid and any Term Bonds shall be subject to mandatory sinking fund redemption on the dates specified in the bid The Issuer and the Financial Advisor will prepare and submit to the successful bidder, not later than 1 p.m., Central Standard Time on February 10, 2016, an adjusted schedule of principal amounts The adjusted schedule shall be subject to the approval of the successful bidder which approval shall not be unreasonably withheld In the event of a reduction in total principal, the underwriter’s discount percentage based upon the original bid will be maintained

BASIS OF AWARD

ALL BIDS SHALL REMAIN FIRM UNTIL 1:00 P.M CENTRAL STANDARD TIME ON THE DATE OF THE SALE An award of the Bonds, if made, will be made by the Issuer within such three hour period of time Unless all bids are rejected, the Bonds will be awarded to the bidder whose bid results in the lowest true interest cost (“TIC”) to the Issuer The TIC shall mean the rate which, as of March 1, 2016, discounts semi-annually, all future payments on account of principal, mandatory sinking fund redemption and interest to the net purchase price bid, including underwriters’ discount, any original issue premium and any original issue discount but not including interest accrued to date of delivery, which accrued interest shall be paid by successful bidder In case of a tie, the Issuer, at its sole discretion, may select the successful bidder THE ISSUER RESERVES THE RIGHT TO WAIVE IRREGULARITIES IN ANY BID AND TO REJECT ANY OR ALL BIDS

Undertakings of the Successful Bidder The successful bidder shall make a bona fide offering of each maturity of the Bonds to the Public (as defined below) and shall, within 30 minutes after being notified of the award of the Bonds, advise the Issuer in writing (via facsimile or electronic mail transmission) of the initial public offering price of each maturity of the Bonds (the “Initial Reoffering Prices”) The successful bidder must, by facsimile or electronic mail transmission or delivery received by the Issuer within 24 hours after notification of the Final Aggregate Principal

B The identity of the other underwriters if the successful bidder is part of a group or syndicate

C Any other material information that the Issuer determines is necessary to complete the Official Statement in final form

After the award of the Bonds, the Issuer will prepare copies of the final Official Statement and will include therein such additional information concerning the reoffering of the Bonds as the successful bidder may reasonably request; provided, however, that the Issuer will not include in the final Official Statement a “NRO” (“not reoffered”) designation with respect to any maturity

of the Bonds

The successful bidder will be responsible to the Issuer in all aspects for the accuracy and completeness of information provided by such successful bidder with respect to such reoffering The Issuer expects the successful bidder to deliver copies of such Official Statement in final form (the “Final Official Statement”) to persons to whom such bidder initially sells the Bonds and the Municipal Securities Rulemaking Board (“MSRB”) via the MSRB’s Electronic Municipal Market Access System (“EMMA”)

The successful bidder will be required to acknowledge receipt of the Final Official Statement, to certify that it has made delivery of the Final Official Statement to such repositories, to acknowledge that the Issuer expects the successful bidder to deliver copies of the Final Official Statement to persons to whom such bidder initially sells the Bonds, and to certify that the Bonds will only be offered pursuant to the final Official Statement and only in states where the offer is legal

Issue Price Certificate Simultaneously with the delivery of the Bonds, the successful bidder shall furnish to the Issuer a certificate prepared by Bond Counsel (an “Issue Price Certificate”) to the effect (i) that the successful bidder has made a bona fide offering of each maturity of the Bonds to the Public at its respective Initial Reoffering Price, (ii) that, as of the date of the sale of the Bonds, the successful bidder reasonably expected to sell at least 10% of the par amount of each maturity of the Bonds to the Public at its respective Initial Reoffering Price, (iii) that, except for any specified maturities (each a “Specified Maturity”), at least 10% of the par amount of each maturity of the Bonds was actually sold to the Public at or below its respective Initial Reoffering Price, (iv) that, for the Bonds of each Specified Maturity, certain described changes in market conditions during the initial offering period prevented at least 10% of such Bonds from being sold to the Public at or below such Initial Offering Price, and (v) that the respective Initial Reoffering Price for each maturity of the Bonds was not less than the fair market value of such maturity as of the date of the sale of the Bonds The Issue Price Certificate shall state that it is made on the best knowledge, information, and belief of the successful bidder after appropriate

investigation The term “Public” means the general public of investors who are purchasing for their own account as ultimate purchasers and does not include Intermediaries “Intermediaries” include bond houses, brokers, and similar persons acting in the capacity of underwriters or wholesalers, and other intermediate purchasers with intent to sell in the short term

CHANGE OF DATE AND TIME FOR RECEIPTS OF BIDS

The Issuer expects to take bids on the Bonds on February 10, 2016 However, the Issuer reserves the right to change the date and time established for the receipt of bids, and will undertake to notify potential bidders of such changes in the date or time for the receipt of bids Prospective bidders may request notification by facsimile transmission or electronic email of any such change by so advising, and furnishing their telecopier numbers to, Stephens Inc at (501) 377-

3465 or to jtruemper@stephens.com by noon Central Standard Time, two days prior to the date fixed for the receipt of bids

A change of the bid date will be announced via TM3 not later than 8:00 a.m Central Standard Time, on any announced date for receipt of bids, and an alternative sale date and time will be announced via TM3 at least 20 hours prior to such alternative date and time for receipt of bids

On any such alternative sale date and time, the Issuer will accept bids for the purchase of the Bonds, such bids to conform in all respects to the provisions of this Official Notice of Sale, except for the changes in the date and time of sale and any other changes announced by TM3 at the time the sale date and time are announced

In addition, the Issuer reserves the right to make changes to this Official Notice of Sale Such changes will be announced on TM3

DELIVERY OF BONDS

Delivery of Bonds The Bonds are expected to be delivered on or about March 1, 2016 (UNLESS A NOTICE OF A CHANGE IN THE DELIVERY DATE IS ANNOUNCED ON TM3 NOT LATER THAN 3:00 P.M CENTRAL STANDARD TIME ON THE LAST BUSINESS DAY PRIOR TO ANY ANNOUNCED DATE FOR RECEIPT OF BIDS) through the facilities of The Depository Trust Company (“DTC”), New York, New York, against payment

of the purchase price therefor (less the amount of the Deposit) in Federal Reserve Funds The usual closing documents, including a certificate that no litigation is pending affecting the issuance

of the Bonds, will be delivered at the time of delivery of the Bonds If the Bonds are not tendered for delivery by 12:00 noon, Central Standard Time, on March 1, 2016, or the first business day thereafter, the Purchaser may, on that day or any time thereafter until delivery of the Bonds, withdraw its proposal by serving notice of cancellation, in writing, to the Chief Financial Officer of the Issuer, in which event the Issuer shall promptly return the Deposit Payment for the Bonds, except for the Deposit if credited thereon, shall be made in Federal Reserve Funds

CUSIP Numbers It is anticipated that CUSIP identification numbers will be printed on the Bonds; however, neither the failure to print such numbers on any Bond nor any error with respect thereto shall constitute a cause for a failure or refusal by the Purchaser to accept delivery

of or pay for the Bonds The CUSIP Service Bureau charge for the assignment of CUSIP

Legal Opinion Bids and delivery of the Bonds shall be conditioned upon the unqualified approving opinion of Wright, Lindsey & Jennings LLP, Little Rock, Arkansas, Bond Counsel, which opinion will be provided at the expense of the Issuer and delivered contemporaneously with the delivery of the Bonds

Tax Exemption In the opinion of Bond Counsel, under existing law, interest on the Bonds will be excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it should be noted, however, that, for the purpose of computing the alternative minimum tax imposed on certain corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted current earnings In Bond Counsel’s further opinion, the interest on the Bonds is exempt from State of Arkansas income taxes, and the Bonds are not subject to property taxation in the State of Arkansas See the Preliminary Official Statement, “TAX EXEMPTION.”

Trustee Regions Bank has been selected to authenticate the Bonds and serve as Trustee for the Bonds The Issuer will pay the fees of the Trustee

Preliminary Official Statement The Issuer has prepared a Preliminary Official Statement dated February 2, 2016, copies of which may be obtained from the Financial Advisor or Bond Counsel at the addresses on the last page of this Notice The Preliminary Official Statement has been deemed final by the Issuer except for the addition of information which will become available following the sale of the Bonds Upon the sale of the Bonds, the Issuer will adopt the final Official Statement

Statement, as revised, amended, or supplemented, will not, in light of the circumstances when such Official Statement is delivered to a prospective purchaser, be misleading The Issuer will furnish the Purchaser with up to 25 copies thereof without cost on or before February 19, 2016 Additional copies may be ordered by the Purchaser at its expense An electronic copy of the final Official Statement will also be delivered to the Purchaser

Continuing Disclosure The Issuer, as Dissemination Agent, and the Trustee will enter into a Continuing Disclosure Agreement which is being executed and delivered for the benefit of the Owners of the Bonds and to assist the Purchaser in complying with Section (b)(5)(i) of Securities and Exchange Commission Rule 15c2-12 under the Securities Exchange Act of 1934 See the Preliminary Official Statement, “APPENDIX B—FORM OF CONTINUING DISCLOSURE AGREEMENT.”

During the past five years, there was one year in which the Issuer’s annual report was not filed in a timely fashion For fiscal year 2010, as reported by the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access (“EMMA”), the Comprehensive Annual Financial Report (“CAFR”) was filed timely on June 28, 2011, and the annual report was filed on July 14, 2011 (15 days late); the Issuer’s records document that the annual report was provided timely to the former dissemination agent on June 13, 2011

In order to eliminate filing delays by the dissemination agent, the Issuer has been acting in the capacity of dissemination agent since 2012 The Issuer has adopted written procedures for preparation and filing of CAFRs, annual reports, and event notifications Other than as set forth in detail in the preceding paragraph, the Issuer has complied, in all material respects, with all previous undertakings in the past five years with respect to the outstanding bonds of the Issuer

On May 1, 2010, Moody’s Investors Service, Inc (“Moody’s”) changed the rating on the Issuer’s outstanding Water Revenue Bonds, Series 2007, dated July 15, 2007 (the “Senior Debt”) from “Aa3” to “Aa2” due to Moody’s move to the Global Rating Scale The Issuer filed a Notice of Material Event for the rating change on July 16, 2014

Registration The Bonds have not been registered under the Securities Act of 1933, as amended, nor has the Indenture been qualified under the Trust Indenture Act of 1939, as amended, in reliance upon certain exemptions from such registration and qualification contained in such laws The Issuer assumes no responsibility for registration or qualification of the Bonds under securities laws

of any jurisdiction in which the Bonds may be sold, assigned, pledged, hypothecated, or otherwise transferred By submission of its bid, the Purchaser represents that the sale of the Bonds will be made pursuant to exceptions from registration or qualification, or where necessary, the Purchaser will register the Bonds at the Purchaser’s expense in accordance with the securities laws of the state in which the Bonds are offered or sold

Costs and Expenses The Issuer will pay from proceeds of the Bonds or other revenues of the Water System the following costs and expenses in connection with the sale and delivery of the Bonds: fees and expenses of the Financial Advisor, Bond Counsel, Accountants, the Trustee, CUSIP, and Moody’s Investors Service, Inc and up to 25 printed copies of the Official Statement The Purchaser shall pay all fees or charges with respect to DTC or any registration or qualification

Wright, Lindsey & Jennings LLP

200 West Capitol, Suite 2300 Little Rock, Arkansas 72201 Attention: John William Spivey III

Email: jspivey@wlj.com

Dated: February 2, 2016

CENTRAL ARKANSAS WATER

By: /s/ Jeff Mascagni, CFO

Official Bid Form Page 1

OFFICIAL BID FORM

Ladies and Gentlemen:

Section 1 Subject to the provisions and in accordance with the terms of your Official

Notice of Sale dated February 2, 2016, which is made a part hereof, we hereby offer to purchase all

of the $22,915,000* Central Arkansas Water Acquisition and Construction Water Revenue Bonds, Series 2016 (the “Bonds”), dated the date of their original issuance and delivery, as described in the Official Notice of Sale, and to pay therefor the price of $ for Bonds bearing the rates of interest per annum and maturing or payable through sinking fund redemptions on April 1

in each of the years and aggregate principal amounts shown on the Official Bid Form, Page 2

Section 2

TERM BONDS

(complete only if applicable)

$ _ Term Bonds maturing on _ 1, _ at _% per annum yield

$ _ Term Bonds maturing on _ 1, _ at _% per annum yield

$ _ Term Bonds maturing on _ 1, _ at _% per annum yield [Any bidder desiring to propose more than three Term Bonds may do so on a separate sheet to be attached hereto.]

Section 3 We acknowledge that, in the event we are the Purchaser, a wire transfer in the

amount of $458,300 must be transmitted in accordance with the terms and conditions set forth in the Official Notice of Sale We have noted that the payment of the balance of the purchase price shall be paid in Federal Reserve Funds

Section 4 If the Purchaser is a group or syndicate, the names of all members are listed on

a separate sheet attached hereto The undersigned also acknowledges receipt of the Preliminary Official Statement described in the Official Notice of Sale

Very truly yours, By:

Amount preliminary; subject to adjustment before award of the Bonds as described in the Official Notice of Sale at the caption

“Adjustment to Principal Amount.”

Official Bid Form Page 2

SERIAL BONDS AND MANDATORY SINKING FUND REDEMPTIONS

Due

April 1

Required Principal Payment

Serial Maturity or Mandatory Sinking Fund Redemption1 Interest Rate2

Bonds may be designated as term bonds, serial bonds, or a combination of serial and term bonds, but not both in a single maturity

2 Complete only for years in which Bonds mature; see “Term Bonds” on page 1 of this Official Bid Form

Official Bid Form Page 3

COMPUTATION

We have computed, in the manner set forth in the Official Notice of Sale in the section titled “The Sale—Bonds Offered for Sale by Competitive Bidding,” the true interest cost of the Bonds to the Issuer under the foregoing proposal For your information only, and not as a part of the foregoing proposal, we advise you that such rate, so calculated, to the dated date, is:

Par Amount of Bonds $ _*

Less Discount/Plus Premium $ _

Net Purchase Price $ _

TIC (to four decimals) _%

ACCEPTANCE

The foregoing bid is hereby accepted this _, 2016

CENTRAL ARKANSAS WATER

By:

Jeff Mascagni, CFO

*

Amount preliminary; subject to adjustment before award of the Bonds as described in the Official Notice of Sale at the caption

“Adjustment to Principal Amount.”

PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY 2, 2016

In the opinion of Bond Counsel, interest on the Bonds will be excludable from gross income for federal income tax purposes under statutes, regulations, published rulings, and court decisions existing on the date thereof, subject to the matters described under the caption “TAX EXEMPTION” herein, including the alternative minimum tax on corporations Bond Counsel is also of the opinion that the Bonds and interest thereon are exempt from all state, county, and municipal taxation in the State of Arkansas under existing law See the caption “TAX EXEMPTION” herein

$22,915,000 † CENTRAL ARKANSAS WATER ACQUISITION AND CONSTRUCTION WATER REVENUE BONDS (MAUMELLE WATER SYSTEM ACQUISITION PROJECT),

SERIES 2016

The Bonds are issuable only as fully registered bonds and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York, to which principal, premium, if any, and interest payments on the Bonds will be made so long as Cede & Co is the registered owner of the Bonds Individual purchases of the Bonds will be made only in book-entry form, in denominations of $5,000 or integral multiples thereof Individual purchasers (“Beneficial Owners”) of Bonds will not receive physical delivery of bond certificates See the caption “BOOK-ENTRY ONLY SYSTEM’ herein

The Bonds shall bear interest from March 1, 2016, payable on October 1 and April 1 of each year, commencing October 1, 2016 All such interest payments shall be payable to the persons in whose name such Bonds are registered on the bond registration books maintained by Regions Bank, Little Rock, Arkansas, as trustee (the “Trustee”), as of the fifteenth day preceding the applicable interest payment date Principal

of and premium, if any, on the Bonds shall be payable at the principal corporate trust office of the Trustee So long as DTC or its nominee is the registered owner of the Bonds, disbursement of such payments to DTC Participants is the responsibility of DTC, and the disbursement of such payments to Beneficial Owners is the responsibility of DTC Participants or Indirect Participants, as more fully described herein

Pursuant to the terms and provisions of a Trust Indenture dated as of March 1, 2016 (the “Indenture”), between Central Arkansas Water, a public body corporate and politic of the State of Arkansas (the “Issuer”), and the Trustee, payment of the principal of and premium, if any, and interest on the Bonds is secured by a pledge of the Long Term Debt Surcharge Revenues (as defined herein) collected in the Maumelle Water Management Water Service Area (the “MWM Water System”) See APPENDIX H herein Such pledge is made on a junior and subordinate basis to a prior pledge of Net Revenues of the Issuer’s water system (the “Issuer’s Water System”) securing payments with respect to the Issuer’s Water Revenue Bonds, Series 2007 (the “Senior Debt”), and the pledge of Stabilized Net Revenues securing the Issuer’s Refunding Water Revenue Bonds, Series 2010A; Refunding Revenue Bonds, Series 2010C; Water Revenues Bonds, Series 2011A (Wye Mountain Extension Project); Refunding Water Revenue Bonds, Series 2011B; Capital Improvement Water Revenue Bonds, Series 2012A; Refunding Water Revenue Bonds, Series 2014; Refunding Water Revenue Bonds, Series 2015 and any subsequently issued parity debt (together, the “Second Lien Debt”), and subject to any subsequently issued Parity Debt (as defined herein)

The MWM Water System will be acquired by the Issuer with proceeds of the Bonds, subject to the provisions of that certain Water Consolidation Agreement dated as of October 13, 2015, by and between the Issuer and MWM (the “Water Consolidation Agreement”) pursuant to which the Issuer has agreed to purchase the MWM Water System and related assets and to assume ownership, operation, management and control of the MWM Water System In addition, the Issuer will undertake the acquisition, construction and equipping of betterments, improvements and extensions, which upon completion will facilitate the Issuer’s ability to supply water from the Issuer’s water resources to the customers of the MWM Water System and to provide enhancements to the MWM Water System

The Issuer has covenanted in the Indenture to establish and maintain the Long Term Debt Surcharge Revenues which shall yield revenues in each forthcoming fiscal year at least equal to the sum of (i) 120% of the aggregate debt service due on the Bonds and any other Parity Debt during the forthcoming fiscal year, and (ii) 100% of the amounts, if any, required to be deposited in any debt service reserve fund or account securing the Bonds, or any additional Parity Debt during the forthcoming fiscal year See the caption “SECURITY FOR THE BONDS” herein The Bonds are subject to optional redemption prior to maturity as more fully described under the caption “THE BONDS—Redemption” herein

The Bonds are special obligations of the Issuer secured by and payable solely from the Long Term Debt Surcharge and other amounts available under the Indenture No part of the Revenues, Net Revenues or Stabilized Net Revenues of the Issuer’s Water System are pledged to secure payment of the Bonds other than the Long Term Debt Surcharge Revenues The Bonds do not constitute an indebtedness of the Issuer, the City of Little Rock, the City of North Little Rock, or the State of Arkansas within the meaning of any constitutional or statutory debt limitation or restriction The issuance of the Bonds shall not directly, indirectly, or contingently obligate the City of Little Rock, the City of North Little Rock, or the State of Arkansas to levy or pledge any taxes whatsoever or to make any appropriation for the payment of the Bonds The Issuer has no power of taxation

See inside front cover for maturity schedule

The Bonds will be offered for sale on February 10, 2016, pursuant to the Official Notice of Sale of the Issuer dated February 2, 2016, subject

to review by Stephens Inc., Financial Advisor, and to the final approving opinion of Wright, Lindsey & Jennings LLP, Little Rock, Arkansas, Bond Counsel, and to certain other conditions referenced to in the Official Notice of Sale It is expected that the Bonds will be available for delivery in New York, New York, on or about March 1, 2016

* For an explanation of the rating, see the caption “RATING” herein

† Preliminary; subject to change

* Preliminary; subject to change

** CUSIP is a registered trademark of the American Bankers Association CUSIP data herein is provided by CUSIP Global Services, managed by Standard & Poor’s Financial Services LLC on behalf of the American Bankers Association CUSIP numbers have been assigned to this issue by the CUSIP Service Bureau and are included solely for the convenience of the owners of the Bonds This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP services None of the District, the Financial Advisor, or the Underwriter shall be responsible for the selection or correctness of the CUSIP numbers set forth herein

ii

USE OF INFORMATION IN OFFICIAL STATEMENT

No dealer, broker, salesman, or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the Issuer, the Financial Advisor, or the Underwriter

Certain information set forth herein has been obtained from the Issuer and other sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness, and it is not to be construed as a representation by the Financial Advisor or the Underwriter

This Official Statement is not to be used in connection with an offer to sell or the solicitation of an offer to buy in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so

or to any person to whom it is unlawful to make such offer or solicitation

Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of the 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 or other matters described herein since the date hereof See “APPENDIX B—Form of Continuing Disclosure Agreement” herein for a description of the undertakings of the Issuer to provide certain information on a continuing basis

THE BONDS ARE EXEMPT FROM REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE BONDS IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTIONS IN WHICH THE BONDS HAVE BEEN REGISTERED, QUALIFIED, OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE 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

OVER-None of the Issuer, the Financial Advisor, or the Underwriter make any representation or warranty with respect to the information contained in this Official Statement regarding DTC or its book-entry-only system described in “APPENDIX E—Book-Entry Only System” as such information has been provided by DTC

The Underwriter has provided the following sentence for inclusion in this Official Statement The Underwriter has reviewed the information in this Official Statement pursuant to its responsibilities to investors under federal securities laws, but the Underwriter does not guarantee the accuracy or completeness of such information

The agreements of the Issuer and others related to the Bonds are contained solely in the contracts described herein Neither this Official Statement nor any other statement

iii

made in connection with the offer or sale of the Bonds is to be construed as constituting an agreement with the purchaser of the Bonds INVESTORS SHOULD READ THE ENTIRE OFFICIAL STATEMENT, INCLUDING ALL APPENDICES ATTACHED HERETO, TO OBTAIN INFORMATION ESSENTIAL TO MAKING AN INFORMED INVESTMENT DECISION

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

[The balance of this page left blank intentionally.]

i

TABLE OF CONTENTS

PAGE

THE BONDS 3

Description 4

Optional Redemption 4

Special Optional Redemption 4

Mandatory Redemption 4

Mandatory Sinking Fund Redemption 4

Partial Redemption of Bonds 5

Notice of Redemption 6

Parity Debt 6

Subordinated Indebtedness 7

Short-Term Indebtedness 7

Special Purpose Bonds 7

Transfer or Exchange 7

SECURITY FOR THE BONDS 7

General 7

Rate Covenant 8

Debt Service Reserve Fund 9

Plans for Additional Parity Debt 9

ACQUISITION OF MWM WATER SYSTEM 9

THE IMPROVEMENTS 9

SOURCES AND USES OF FUNDS 10

SENIOR DEBT AND SECOND LIEN DEBT; DEBT SERVICE REQUIREMENT 11

SENIOR DEBT AND SECOND LIEN DEBT; DEBT SERVICE COVERAGE 12

ESTIMATED DEBT SERVICE REQUIREMENTS 13

ESTIMATED DEBT SERVICE COVERAGE FOR THE BONDS 14

Projected Special Optional Redemption 15

THE ISSUER 15

THE ISSUER’S WATER SYSTEM 19

Customers 20

Usage 20

Water Sources; Treatment, Storage, and Distribution of Water 20

Watershed Protection Issues 23

Water Rates 23

Rate Comparison 34

Billing Procedures, Penalties, Delinquency, and Uncollectible Accounts 34

Projected Capital Expenditures 35

Financial Information 35

THE CITIES 36

General 36

Demographics 37

DESCRIPTION OF THE CITY OF MAUMELLE 37

Generally 37

Transportation 37

ii

Government 38

Education 38

Economy 39

Economic Data 39

Employment 39

Residential Construction 40

Higher Education 41

Medical Facilities 41

City Employees 42

Port of Little Rock 42

Bill and Hillary Clinton National Airport 42

ACQUISITION OF THE MWM WATER SYSTEM 42

WATER RATES WITHIN THE MWM WATER SYSTEM SERVICE AREA 45

SUMMARY OF THE INDENTURE 48

FINANCIAL ADVISOR 57

UNDERWRITING 58

TAX EXEMPTION 58

RATING 60

LEGAL MATTERS 61

FINANCIAL STATEMENTS 61

FORWARD-LOOKING STATEMENTS 61

MISCELLANEOUS 62

ACCURACY AND COMPLETENESS OF OFFICIAL STATEMENT 62 APPENDIX A – Definitions of Certain Terms

APPENDIX B – Form of Continuing Disclosure Agreement

APPENDIX C – Audited Financial Statements for year ended December 31, 2013 and

December 31, 2014 prepared by Thomas & Thomas LLP APPENDIX D – Unaudited Financial Statements for the fiscal year ended December 31,

2015 APPENDIX E – Book Entry Only System

APPENDIX F - Form of Opinion of Bond Counsel

APPENDIX G – Water Consolidation Agreement

APPENDIX H – Map of Maumelle Water Management Water Service Area

The cover page hereof, the section entitled “Selected Data from the Official Statement,” this Table

of Contents, and the Appendices attached hereto are part of this Official Statement

COMMISSION

ADMINISTRATION

C TAD BOHANNON Chief Executive Officer

THAD LUTHER, P.E., B.C.E.E

Chief Operating Officer

JEFF MASCAGNI, CPA, CGFM

Chief Financial Officer

BECKY LINKER Chief Administrative Officer

ACCOUNTANTS

THOMAS & THOMAS LLP

210 East Markham Street, Suite 500 Little Rock, Arkansas 72201

BOND COUNSEL

WRIGHT, LINDSEY & JENNINGS LLP

200 West Capitol Avenue, Suite 2300 Little Rock, Arkansas 72201

FINANCIAL ADVISOR

STEPHENS INC

111 Center Street, 23rd Floor Little Rock, Arkansas 72201

iv

SELECTED DATA FROM THE OFFICIAL STATEMENT

The selected data is subject in all respects to the more complete information and definitions contained or incorporated in this Official Statement The offering of the Bonds

to potential investors is made only by means of this entire Official Statement No person is authorized to detach this page from this Official Statement or to otherwise use it without the entire Official Statement

The Issuer Central Arkansas Water (the “Issuer”) is a public body corporate and

politic organized and existing under the laws of the State of Arkansas The Issuer owns and operates the consolidated water system (the

“Water System”) of the Cities of Little Rock and North Little Rock, Arkansas The Issuer is governed by a seven-member Board of Commissioners For more information regarding the Issuer, see the caption “THE ISSUER” herein

Authority for

Issuance

The Issuer’s Acquisition and Construction Water Revenue Bonds, Series 2016 (the “Bonds”), are being issued pursuant to Amendment

65 to the Arkansas Constitution and the Consolidated Waterworks

Authorization Act of 2001, Ark Code Ann §§ 25-20-301 et seq and

Resolution 2016- of the Board of Commissioners of the Issuer, adopted February 11, 2016 See the caption “INTRODUCTION” herein

The Bonds The Bonds shall mature on the dates and in the amounts set forth on

page 2 of this Official Statement See the caption “THE BONDS” herein

Payment of

Interest

Interest on the Bonds will accrue from March 1, 2016, and is payable

on October 1, 2016, and semiannually thereafter on each succeeding April 1 and October 1 of each year until stated maturity or prior redemption See the caption “THE BONDS” herein

v

Security The Bonds are special obligations of the Issuer secured by and payable

solely from the Long Term Debt Surcharge Revenues approved by the Issuer pursuant to Resolution 2015-15 approved October 8, 2015 to be collected within the water service area of the Maumelle Suburban Improvement District No 500 of Pulaski County, Arkansas (also known as “Maumelle Water Management” or “MWM”) SEE MAP OF MAUMELLE WATER SYSTEM SERVICE AREA IN APPENDIX H HEREIN “Long Term Debt Surcharge Revenues” means, for any period, an amount equal to all of the revenues received during such period from collection of the Long Term Debt Surcharge within the

Maumelle Water System Service Area No part of the Revenues,

Net Revenues or the Stabilized Net Revenues of the Issuer’s Water System or the MWM Water System except for Long Term Debt Surcharge Revenues shall be used to pay Accrued Debt Service on the Bonds See the caption “SECURITY FOR THE

BONDS” herein

Use of Proceeds Proceeds from the sale of the Bonds will be used to (i) acquire the

MWM Water System and related assets, (ii) accomplish the Improvements, (iii) establish a debt service reserve, and (iv) pay the costs of issuing the Bonds See the captions “SOURCES AND USES

OF FUNDS,” “ACQUISITION OF THE MWM SYSTEM” and the

“IMPROVEMENTS” herein

Redemption

Provisions

The Bonds are subject to (i) optional redemption on and after April 1,

2026, at the election of the Issuer, (ii) special optional redemption on any interest payment date on or after October 1, 2016, providing there

is no default on the Senior Debt, the Second Lien Debt, the Bonds and any Parity Debt, from surplus collections of the Long Term Debt Surcharge, (iii) mandatory redemption for proceeds of the Bonds not needed to accomplish the acquisition of the MWM Water System and the completion of the Improvements on April 1, 2019, and (iv) Term Bonds, if any, will be designated by the successful bidder The Term Bonds, if any, will be subject to mandatory sinking fund redemptions

in part by lot on any April 1 on or after April 1 in the years designated

by the successful bidder, at the principal amount thereof, plus accrued and unpaid interest to the date of redemption, from installments which are required to be made in amounts sufficient to redeem on April 1 of each year the principal amount of the Bonds specified for each of the years designated by the successful bidder See the captions “THE BONDS—Redemption” and “THE BONDS—Mandatory Sinking Fund Redemption herein.”

vi

Tax Exemption In the opinion of Bond Counsel, interest on the Bonds will be

excludable from gross income for federal income tax purposes under statutes, regulations, published rulings, and court decisions existing

on the date thereof, subject to the matters described under “TAX MATTERS” herein, including the alternative minimum tax on corporations

Rating Moody’s Investors Service, Inc (“Moody’s”) has given the Bonds the

rating of “A1.” See the caption “RATING” herein

Book-Entry-Only System

The definitive Bonds will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company (“DTC”) pursuant to the Book-Entry-Only System described herein Beneficial ownership of the Bonds may be acquired in denominations of $5,000,

or integral multiples thereof No physical delivery of the Bonds will

be made to the beneficial owners thereof The principal of and interest on the Bonds at maturity or on a prior redemption date will

be payable by the Trustee to Cede & Co., which will make distribution

of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds See

“APPENDIX E—BOOK-ENTRY-ONLY SYSTEM” attached hereto

Trustee The initial Trustee for the Bonds is Regions Bank, Little Rock,

Arkansas (see the caption “THE BONDS—Registration and Exchange” herein)

Payment

Record

The Issuer has never defaulted on the payment of its bonded indebtedness

Legality Delivery of the Bonds is subject to the rendering of an opinion as to

legality by Wright, Lindsey & Jennings LLP, Bond Counsel

vii

For additional information regarding the Issuer, please contact:

Thad Luther, Chief Operating Officer

221 East Capitol Avenue Little Rock, AR 72201 Phone: (501) 377-1256 Email: Thad.Luther@carkw.com

[THIS PAGE INTENTIONALLY LEFT BLANK]

The following introductory statement is subject in all respects to the more complete information set forth in this Official Statement All descriptions and summaries of documents hereinafter set forth are qualified in their entirety by reference to each such document Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in APPENDIX A, “DEFINITIONS OF CERTAIN TERMS.”

This Official Statement, including the cover page and the Appendices hereto, is furnished in connection with the offering of $22,915,000* Acquisition and Construction Water Revenue Bonds (Maumelle Water System Acquisition Project), Series 2016 (the

“Bonds”), by Central Arkansas Water (the “Issuer”)

The Issuer is a public body corporate and politic organized and existing under the laws of the State of Arkansas, including, particularly, the Consolidated Waterworks

Authorization Act of 2001, Ark Code Ann §§ 25-20-301 et seq (the “Act”) Pursuant to the

provisions of the Act, the Issuer owns and operates the consolidated water system (the

“Water System”) of the Cities of Little Rock and North Little Rock, Arkansas The Issuer is authorized under Amendment 65 to the Constitution of the State (“Amendment 65”) and the Act to issue and sell its revenue bonds for the purpose of financing the cost of acquiring, constructing and equipping improvements, betterments, and extensions to the Water System

The Bonds are to be issued and secured by the Issuer pursuant to a resolution of its Board of Commissioners (the “Commission”) adopted on February 11, 2016 (the

“Authorizing Resolution”), and pursuant to a Trust Indenture dated as of March 1, 2016 (the “Indenture”), between the Issuer and Regions Bank, Little Rock, Arkansas, as trustee (the “Trustee”), for the purposes of (i) acquiring the MWM Water System and related assets, (ii) accomplishing the Improvements, (iii) establishing a debt service reserve, and (iv) paying the costs of issuing the Bonds See the captions “SOURCES AND USES OF FUNDS” “ACQUISITION OF MWM WATER SYSTEM,” and the “IMPROVEMENTS” herein

The Bonds are special obligations of the Issuer, payable solely from the Long Term Debt Surcharge Revenues collected by the Issuer within the Water Service Area of the Maumelle Suburban Improvement District No 500 of Pulaski County, Arkansas (also known as Maumelle Water Management) and other amounts available under the Indenture No part of the Revenues, Net Revenues

or Stabilized Net Revenues of the Issuer’s Water System except for Long Term Debt Surcharge Revenues are pledged to secure payment of the Bonds The Bonds do not constitute an indebtedness of the City of Little Rock, the City of North Little Rock, or the State of Arkansas within the meaning of any constitutional or statutory debt limitation or restriction The issuance of the

* Preliminary, subject to change

2

Bonds shall not directly, indirectly, or contingently obligate the City of Little Rock, the City of North Little Rock, or the State of Arkansas to levy or pledge any taxes whatsoever or to make any appropriation for the payment of the Bonds The Issuer has no power of taxation

The pledge of Long Term Debt Surcharge Revenues securing the Bonds is made on a junior and subordinated basis to a prior pledge of Net Revenues of the Issuer’s Water System securing payments with respect to the Issuer’s Water Revenue Bonds, Series 2007 (the “Senior Debt”); and to the pledge of the Stabilized Net Revenues securing the Issuer’s Revenue Bonds, Series 2010A (the “Series 2010A Bonds”); Refunding Revenue Bonds, Series 2010C (Watershed Protection Project) (the “Series 2010C Bonds”); Water Revenue Bonds, Series 2011A (Wye Mountain Extension Project) (the “Series 2011A Bonds”); Refunding Water Revenue Bonds, Series 2011B (the “Series 2011B Bonds”); Capital Improvement Water Revenue Bonds, Series 2012A (the “Series 2012A Bonds”); Refunding Water Revenue Bonds, Series 2014 (the “Series 2014 Bonds”); Refunding Water Revenue Bonds, Series 2015 (the “Series 2015 Bonds”), and any subsequently issued parity debt (together, the “Second Lien Debt”) Other than the pledge of Net Revenues of the Water System securing the Senior Debt and the pledge of Stabilized Net Revenues securing the Second Lien Debt, as of the Closing Date, there is no other debt of the Issuer, the City of Little Rock, or the City of North Little Rock secured by a pledge of the Long Term Debt Surcharge Revenues of the MWM Water System on a prior or parity basis with the pledge

of Long Term Debt Surcharge Revenues securing the payment of debt service on the Bonds

or any subsequently issued Parity Bonds In the Indenture, the Issuer has covenanted to establish and maintain rates for MWM Water System services which shall yield Long Term Debt Surcharge Revenues in each forthcoming Fiscal Year at least equal to the sum of (i) 120% of the aggregate debt service due on the Bonds, and any other Parity Debt during the forthcoming Fiscal Year, and (ii) 100% of the amounts, if any, required to be deposited in any debt service reserve fund or account securing the Bonds, or any additional Parity Debt during the forthcoming Fiscal Year See the caption “SECURITY FOR THE BONDS” herein

The Issuer may issue additional indebtedness secured on a senior basis to the Bonds

as to the Revenues, Net Revenues, Stabilized Net Revenues and Long Term Debt Surcharge Revenues of the Issuer’s Water System and the MWM Water System Parity Debt may be issued and secured on a parity basis with the Bonds and Subordinated Indebtedness may

be issued and secured on a junior basis to the Bonds under certain circumstances set forth

in the Indenture See the captions “THE BONDS—Parity Debt” and “THE BONDS—Subordinated Indebtedness” herein For information regarding the Issuer’s future plans for additional indebtedness, see the captions “SECURITY FOR THE BONDS—Plans for Additional Parity Debt” and “THE MWM WATER SYSTEM—Projected Capital Expenditures” herein

The Bonds are subject to optional, special optional, mandatory and mandatory sinking fund redemption from sinking fund payments prior to maturity as more fully described herein under the caption “THE BONDS—Redemption.”

Pursuant to the provisions of a Continuing Disclosure Agreement, dated as of March

1, 2016 (the “Continuing Disclosure Agreement”), the Issuer has undertaken certain obligations with respect to providing ongoing disclosure of certain financial and operating data concerning the MWM Water System, the Issuer and the Issuer’s Water System and of the occurrence of certain material events A copy of the Continuing Disclosure Agreement

is contained in APPENDIX B

3

During the past five years, there was one year in which the Issuer’s annual report was not filed in a timely fashion For fiscal year 2010, as reported by the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access (“EMMA”), the Comprehensive Annual Financial Report (“CAFR”) was filed timely on June 28, 2011, and the annual report was filed on July 14, 2011 (15 days late); the Issuer’s records document that the annual report was provided timely to the former dissemination agent on June 13,

2011

In order to eliminate filing delays by the dissemination agent, the Issuer has been acting in the capacity of dissemination agent since 2012 The Issuer has adopted written procedures for preparation and filing of CAFRs, annual reports, and event notifications Other than as set forth in detail in the preceding paragraph, the Issuer has complied, in all material respects, with all previous undertakings in the past five years with respect to the

outstanding bonds of the Issuer

On May 1, 2010, Moody’s Investors Service, Inc (“Moody’s”) changed the rating on the Issuer’s outstanding Water Revenue Bonds, Series 2007, dated July 15, 2007 (the

“Senior Debt”) from “Aa3” to “Aa2” due to Moody’s move to the Global Rating Scale The Issuer filed a Notice of Material Event for the rating change on July 16, 2014

When issued, the Senior Debt was insured by MBIA Insurance Corporation (the

“Insurer”) and utilized the Insurer’s rating from Moody’s Reinsurance and assignment agreements, which became effective as of January 1, 2009, between MBIA Insurance Corporation and National Public Finance Guarantee Corporation (“National”), formerly known as MBIA Insurance Corporation of Illinois, enable covered policyholders to make claims for payment directly to National in accordance with the terms of the applicable agreements Moody’s made several changes to the rating of National, as follows: On December 19, 2011, Moody’s downgraded National’s rating from “Baa1” to “Baa2”; on May 21, 2013, Moody’s upgraded National’s rating from “Baa2” to “Baa1”; and on May 21,

2014, Moody’s upgraded National’s rating from “Baa1” to “A3.” The Issuer filed a Notice of Material Event for these rating changes of National on July 16, 2014

Initially, the Bonds will be registered and delivered only to Cede & Co., the nominee

of The Depository Trust Company (“DTC”) pursuant to the Book-Entry-Only System described herein No physical delivery of the Bonds will be made to the beneficial owners The principal of and interest on the Bonds at maturity or upon prior redemption will be payable by the Trustee to Cede & Co., which will distribute the amounts paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds See “APPENDIX E—BOOK-ENTRY-ONLY SYSTEM” attached hereto

Descriptions of the Issuer, the Issuer’s Water System, the MWM Water System, the Bonds, and the Indenture are included in this Official Statement A copy of the Continuing Disclosure Agreement is contained in APPENDIX B Copies of the Indenture are available from the Issuer All references herein to the Bonds are qualified in their entirety by reference to the definitive form thereof and the information with respect thereto included in the Indenture Certain financial and statistical data contained herein has been provided by the Issuer from its audited and unaudited records All other information contained herein has been obtained from other sources which are believed to be reliable, but the adequacy, accuracy, or completeness of such information is not guaranteed by, and it is not to be construed as a representation by, the Issuer, Bond Counsel, the Financial Advisor, or the Underwriter

4

THE BONDS Description The Bonds will be dated March 1, 2016, and will bear interest

payable semiannually on October 1 and April 1 of each year, commencing October 1, 2016,

at the rates set forth on the inside cover page hereof The Bonds will mature on April 1 in the years and in the principal amounts set forth on the inside cover page hereof

The Bonds are issuable only in the form of fully registered bonds and, when issued, will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York, to which principal, premium, if any, and interest payments on the Bonds will be made so long as Cede & Co is the registered owner of the Bonds Individual purchases of the Bonds will be made only in book-entry form, in denominations of $5,000 or integral multiples thereof Individual purchasers (“Beneficial Owners”) of Bonds will not receive physical delivery of bond certificates See APPENDIX E,

“BOOK-ENTRY ONLY SYSTEM.”

All interest payments on the Bonds shall be payable to the persons in whose name such Bonds are registered on the bond registration books maintained by the Trustee as of the fifteenth day next preceding the applicable interest payment date (the “Record Date”) Principal of and premium, if any, on the Bonds shall be payable at the principal corporate trust office of the Trustee All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bonds to the extent of the sum or sums so paid So long as DTC or its nominee is the registered owner of the Bonds, disbursement of such payments to DTC Participants is the responsibility of DTC, and the disbursement of such payments to Beneficial Owners is the responsibility of DTC Participants or Indirect Participants, as more fully described herein

Optional Redemption The Bonds are subject to optional redemption on and after

April 1, 2026, at the election of the Issuer, in whole or in part on any date for which timely notice of redemption can be given under the terms of the Indenture, in inverse order of maturities unless the Trustee is otherwise directed by the Issuer, in which case, in such order of maturities as the Issuer may direct (and within each maturity as selected by the Trustee), at par plus accrued interest to the redemption date

Special Optional Redemption The Bonds are subject to special optional

redemption on and after October 1, 2016, at the election of the Issuer, in part, from surplus collections of the Long Term Debt Surcharge Revenues, on any interest payment date for which timely notice of redemption can be given under the terms of the Indenture, in inverse order of maturities (and within each maturity) as directed by the Trustee, at par plus accrued interest to the redemption date, provided the Issuer is not in default on the Senior Debt, the Second Lien Debt, the Bonds or any Parity Debt “Surplus Collections” means all collections of the Long Term Debt Surcharge deposited to the Long Term Debt Surcharge Account in the Revenue Fund established pursuant to the Indenture not needed to pay current principal and interest charges on the Bonds

Mandatory Redemption The Bonds are subject to mandatory redemption on

April 1, 2019, from proceeds of the Bonds not needed to accomplish the Acquisition of the MWM Water System or to accomplish the Improvements, at par plus accrued interest to the redemption date

Mandatory Sinking Fund Redemption Term Bonds, if any, will be designated

by the successful bidder The Term Bonds, if any, will be subject to mandatory sinking fund redemptions in part by lot on any April 1 on or after April 1 in the years designated by the

*Table to be completed after sale of Bonds

The Trustee shall, in each year in which Term Bonds are to be redeemed, make timely selection of such Term Bonds or portions thereof to be so redeemed (by lot in $5,000 units of principal amount in such equitable manner as it may determine) and shall give notice thereof without further instructions from the Issuer The Trustee may, upon instructions from the Issuer, use moneys on hand in the Bond Fund at any time to purchase Term Bonds in the open market at a price not in excess of their principal amount, and each Term Bond so purchased shall be credited at 100 percent of the principal amount thereof on the obligation of the Issuer to redeem Term Bonds on the next mandatory sinking fund redemption date applicable to Term Bonds and the principal amount of Term Bonds to be redeemed shall be reduced accordingly At its option, to be exercised on or before the 45th day next preceding April 1 in the years 20 through 20 , inclusive, the Issuer may: (1) deliver to the Trustee for cancellation Term Bonds in the aggregate principal amount desired; or (2) furnish to the Trustee funds, together with appropriate instructions, for the purpose of purchasing any of said Term Bonds from any Owner thereof on the open market whereupon the Trustee shall expend such funds for such purposes to such extent as may be practical; or (3) receive a credit in respect to its mandatory sinking fund redemption obligation (a) for any Term Bonds which prior to such date have been redeemed (other than through the operation of the mandatory sinking fund requirements) and canceled by the Trustee and not theretofore applied as a credit against any mandatory sinking fund redemption obligation Each Term Bond so delivered or previously purchased or redeemed shall be credited at 100 percent of the principal amount thereof on the obligation of the Issuer to redeem Term Bonds on such redemption date, and any excess of such amount shall be credited on future mandatory sinking fund redemption obligations for Term Bonds

in chronological order or such other order as the Issuer may designate and the principal amount of Term Bonds to be redeemed by operation of the mandatory sinking fund requirements shall be accordingly reduced If the Issuer intends to exercise the option granted by the provisions of clauses (1), (2), or (3) above, the Issuer will, on or before the 45th day next preceding the applicable April 1, furnish the Trustee a certificate signed by

an Authorized Official of the Issuer indicating to what extent the provisions of said clauses (1), (2), and (3) are to be complied with in respect to such mandatory sinking fund redemption payment

Partial Redemption of Bonds If less than all of the Bonds maturing on any

single date are called for redemption, the Trustee shall select the particular Bonds to be redeemed from the Outstanding Bonds maturing on that date and not previously called for redemption in such manner as in the Trustee’s sole discretion it shall deem appropriate and fair; provided, however, that the portion of any Bond to be redeemed shall be in a Principal amount equal to a denomination in which the Bonds are authorized to be issued So long as

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DTC or its nominee is the sole Registered Owner of the Bonds, the particular Bonds or portions thereof to be redeemed within a maturity shall be selected in such manner as DTC shall determine In the case any Outstanding Bond is in a denomination greater than

$5,000, each $5,000 of face value of such Bond shall be treated as a separate Bond in the denomination of $5,000

Notice of Redemption (a) When Bonds (or portions thereof) are to be redeemed,

the Issuer shall give or cause to be given notice of the redemption of the Bonds to the Trustee no later than 65 days prior to the redemption date or such shorter time as may be acceptable to the Trustee In the case of an optional redemption, the notice may state (i) that it is conditioned upon the deposit of moneys, in an amount equal to the amount necessary to effect the redemption, with the Trustee no later than the redemption date or (ii) that the Issuer retains the right to rescind such notice on or prior to the scheduled redemption date (in either case, a “Conditional Redemption”), and such notice and optional redemption shall be of no effect if such moneys are not so deposited or if the notice is rescinded as described in (c) below The Trustee, at the expense of the Issuer, shall send notice of any redemption, identifying the Bonds to be redeemed, the redemption date, and the method and place of payment by first class mail to each holder of a Bond called for redemption to the holder’s address listed on the Bond Register Such notice shall be sent by the Trustee by first class mail between 30 and 60 days prior to the scheduled redemption date If notice is given as stated, failure of any Bondholder to receive such notice, or any defect in the notice, shall not affect the redemption or the validity of the proceedings for the redemption of the Bonds

(b) On or before the date fixed for redemption moneys shall be deposited with the Trustee to pay the principal of and interest accrued to the redemption date on the Bonds called for redemption Provided such moneys are deposited, the Bonds shall cease to bear interest on the redemption date and shall no longer be entitled to the benefits of the Indenture (other than for payment and transfer and exchange) and shall no longer be considered Outstanding

(c) Any Conditional Redemption may be rescinded in whole or in part at any time prior to the redemption date if the Issuer instructs the Trustee to rescind the redemption notice The Trustee shall give prompt notice of such rescission to the affected Bondholders Any Bonds subject to Conditional Redemption where redemption has been rescinded shall remain Outstanding, and the rescission shall not constitute an Event of Default Further, in the case of a Conditional Redemption, the failure of the Issuer to make funds available in part or in whole on or before the redemption date shall not constitute an Event of Default, and the Trustee shall give immediate notice to the affected Bondholders that the redemption did not occur and that the Bonds called for redemption and not so paid remain Outstanding

Parity Debt The Issuer may issue indebtedness (“Parity Debt”) from time to time

secured by the Long Term Debt Surcharge on a parity basis with the Bonds, provided that (a) there is no Event of Default existing with respect to the Bonds or any outstanding Parity Debt and no event of default under the instruments securing the Senior Debt or any outstanding Second Lien Debt, (b) the average annual collections of the Long Term Debt Surcharge for the immediately two preceding calendar years exceed an amount equal to not less than the sum of (i) 125% of the average annual Debt Service on the Bonds and any outstanding Parity Debt, and (ii) the maximum annual Debt Service on the proposed Parity Debt Until such time as the Issuer has insured indebtedness secured by the Watershed Protection Fee, the Issuer may include the revenues granted by the Watershed Protection Fee when computing Stabilized Net Revenues for purposes of the preceding sentence

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Notwithstanding the test required by the preceding paragraph, the Issuer may issue Parity Debt for the purpose of refunding any outstanding Senior Debt, Second Lien Debt, the Bonds, or Parity Debt if the refunded Senior Debt, Second Lien Debt, Bonds, or Parity Debt, as the case may be, are defeased on the date of delivery of the refunding Parity Debt and if the annual Debt Service of the refunding Parity Debt does not exceed the annual Debt Service of the refunded Senior Debt, Second Lien Debt, Bonds, or Parity Debt in any Fiscal Year by more than $5,000

Subordinated Indebtedness The Issuer may incur Subordinated Indebtedness

without limit as to amount

Short-Term Indebtedness The Issuer may incur Short-Term Indebtedness,

secured by and payable from Net Revenues on a parity basis with the Bonds and any Parity Debt, if immediately after the incurrence of such Short-Term Indebtedness the outstanding principal amount of all Short-Term Indebtedness does not exceed 10% of budgeted Net Revenues (Revenues less Operation and Maintenance Costs) as shown on the Issuer’s annual budget for the current Fiscal Year

Special Purpose Bonds The Issuer may issue Special Purpose Bonds, notes, or

obligations from time to time for the purpose of financing Special Purpose Facilities or those matters that may be funded by the Watershed Protection Fee Said Special Purpose Bonds, notes, or obligations shall be payable solely from (i) the rentals or other charges derived by the Issuer from the Special Purpose Facilities, or (ii) the Watershed Protection Fee See the caption “SUMMARY OF THE INDENTURE—Special Purpose Bonds” herein

Transfer or Exchange The Bonds may be transferred on the books of registration

kept by the Trustee by the registered owner in person or by the registered owner’s duly authorized attorney, upon surrender thereof, together with a written instrument of transfer duly executed by the registered owner or the registered owner’s duly authorized attorney Upon surrender for transfer of any Bond at the principal corporate office of the Trustee, the Issuer shall execute and the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Bond or Bonds of the same series and in the same aggregate principal amount and of any authorized denomination or denominations

Transfers of registration or exchanges of Bonds shall be without charge to the holders of such Bonds, but any taxes or other governmental charges required to be paid with respect to the same shall be paid by the holder of the Bond requesting such transfer or exchange as a condition precedent to the exercise of such privilege

The Issuer and the Trustee shall not be required to transfer or exchange any Bond

or portion thereof that has been selected for redemption and also shall not be required to transfer or exchange any Bond or portion thereof during the period in which the Trustee is selecting Bonds for redemption or during the 15 days preceding and principal payment or redemption date

So long as DTC or its nominee is the sole registered owner of the Bonds, transfers of beneficial interests in the Bonds shall be in accordance with the rules and procedures of DTC and its direct and indirect participants See APPENDIX E, “BOOK-ENTRY ONLY SYSTEM.”

of Little Rock, the City of North Little Rock, or the State of Arkansas within the meaning of any constitutional or statutory debt limitation The issuance of the Bonds shall not directly, indirectly, or contingently obligate the City of Little Rock, the City of North Little Rock, or the State of Arkansas to levy or pledge any taxes whatsoever or to make any appropriation for the payment of the Bonds The Issuer has no power of taxation

Under the Indenture, “Long Term Debt Surcharge Revenues” means 100% of the collections of the Long Term Debt Surcharge collected by the Issuer within the MWM Water System Service Area “Net Revenues” means, for any period, an amount equal to all

of the Revenues received during such period less amounts paid or transferred pursuant to the Master Indenture or the Second Lien Indentures “Revenues” are defined as all revenues, fees, income, rents, and receipts derived by the Issuer from the Issuer’s Water System and the MWM Water System, including, without limitation, any proceeds from the sale of any property of the Issuer’s Water System and the MWM Water System permitted under the Master Indenture, the Second Lien Indentures, and the Indenture including the proceeds of any insurance covering business interruption loss Revenues also includes all interest, profits, or other income derived from the investment of any moneys held pursuant

to the Master Indenture, the Second Lien Indentures, and the Indenture and any indenture securing the Parity Debt or Subordinated Indebtedness and required to be paid into the Revenue Fund and the proceeds of any interest subsidy with respect to the Bonds, the Senior Debt, the Second Lien Debt, Parity Debt, or Subordinated Indebtedness paid to or for the account of the Issuer by any governmental body or agency Revenues shall not include: (a) Grant Aid; (b) proceeds received on insurance resulting from casualty damage

to assets of the Issuer’s Water System or the MWM Water System; (c) rentals or other charges derived by the Issuer under and pursuant to a lease or leases relating to Special Purpose Facilities; (d) the proceeds of the sale of Bonds, Parity Debt, Subordinated Indebtedness or other obligations issued for Issuer’s Water System or MWM Water System purposes; (e) the proceeds of the Watershed Protection Fee; or (f) franchise fees No part of the Long Term Debt Surcharge Revenues shall be used to pay Operation and Maintenance Costs of the MWM Water System “Operation and Maintenance Costs” means all actual operation and maintenance costs related to the Water System incurred by the Issuer in any particular Fiscal Year or period to which said term is applicable or charges made therefor during such Fiscal Year or period, including amounts reasonably required to be set aside in reserves for items of Operation and Maintenance Costs the payment of which is not then immediately required

Rate Covenant In order to assure maintenance of the Long Term Debt Surcharge

at a level sufficient to cause prompt payment of principal of and interest on the Bonds, with

a margin for contingencies and temporary unanticipated reduction in the Long Term Debt Surcharge Revenues, the Issuer covenants and agrees in the Indenture to establish, fix, prescribe, continue, and collect (directly or through leases, use agreements, or other agreements, licenses, or ordinances) rates and charges which, together with other income, are reasonably expected for purposes of the Bonds to yield available revenues at least equal

to the Rate Covenant Requirement for the forthcoming Fiscal Year The term “Rate

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Covenant Requirement” for purposes of the Bonds means: Long Term Debt Surcharge Revenues at least equal to the sum of (i) 120% of the aggregate Debt Service for the forthcoming Fiscal Year for the Bonds and any Parity Debt, and (ii) 100% of the amounts, if any, required by the Indenture to be deposited into the Debt Service Reserve Fund and into applicable debt service reserve funds for such Parity Debt For so long as any of the Senior Debt and the Second Lien Debt remains outstanding, the Issuer will also be subject to compliance with the rate covenants contained in the Master Indenture and the Second Lien Indentures

For a description of the water rates, including the Long Term Debt Surcharge, currently in effect with respect to the Water System, see the caption “THE MWM WATER SYSTEM—Water Rates” herein Resolution 2015-15 which levied the rates for water service within the Maumelle Water System Service Area enacted on October 8, 2015 to be effective March 1, 2016 There is no planned rate increase for 2016

Debt Service Reserve Fund From the proceeds of the sale of the Bonds, there

shall be deposited into the Debt Service Reserve Fund an amount equal the Debt Service Reserve Requirement Under the Indenture, “Debt Service Reserve Requirement” is defined as an amount equal to fifty percent (50%) of Maximum Annual Debt Service

In the event the Trustee draws funds from the Debt Service Reserve Fund to pay principal of or interest on the Bonds, the Issuer shall restore the funds therein in 12 consecutive monthly payments If a surplus shall exist in the Debt Service Reserve Fund over and above the Debt Service Reserve Requirement, such surplus shall be deposited into the Bond Fund

The moneys on deposit in the Debt Service Reserve Fund shall be used to the extent necessary to prevent a default in the payment of Accrued Debt Service on the Bonds Whenever the amount on deposit in the Debt Service Reserve Fund, together with the amount on deposit in the Bond Fund, is sufficient to pay in full all Outstanding Bonds, the funds on deposit in the Debt Service Reserve Fund shall be transferred to the Bond Fund and such amounts may be used, together with other available funds, to provide for the payment at maturity or to redeem prior to maturity all, but not less than all, of the Outstanding Bonds

Plans for Additional Parity Debt See the caption “THE WATER SYSTEM—

Project Capital Expenditures” for a discussion of the Issuer’s plans for additional Parity Debt The unforeseen lack of availability of resources or the unexpected need for capital expenditures beyond those currently anticipated could result in the necessity of issuing additional Parity Debt or Subordinated Indebtedness to provide adequate funding sources See the caption “THE BONDS—Parity Debt.”

ACQUISITION OF MWM WATER SYSTEM

Pursuant to this provisions of the Water Consolidation Agreement, the Issuer has agreed to purchase the MWM Water System and related assets for a purchase price equal

to the outstanding principal and interest on MWM’s outstanding debt obligations in the approximate aggregate principal amount of $8,767,000.00 All of MWM’s Water Assets (as defined in the Water Consolidation Agreement, with the exception of a Reserve Cash Fund), will be acquired by the Issuer on an “as is-where is” basis, with all faults The Issuer will assume full ownership, operation, management and control of the MWM Water System and

related Water Assets on the Closing Date The Water Consolidation Agreement may be

found in Appendix G

THE IMPROVEMENTS

The Issuer will apply a portion of the proceeds of the Bonds to finance improvements

that will include (1) the acquisition, construction, installation or replacement of water

distribution and transmission mains, fire hydrants and water storage facilities; (2) facilities

upgrades; (3) the acquisition and installation or improvement to various water pumping,

processing and/or production equipment; and (4) the costs of related engineering and other

services The total costs of the improvements are not to exceed $13,600,000 in estimated

cost These improvements will connect the Issuer’s Water System with the MWM Water

System which upon completion will enhance and improve water service to the customers

within the MWM Water System Service Area

SOURCES AND USES OF FUNDS 1

The proceeds of the Bonds (exclusive of accrued interest) are expected to be used as

follows:

Transfers from Prior Issue DSR Funds 312,763.59

Transfers from Prior Issue Debt Service Funds 143,622.94

Uses of Funds

Deposit to Project Construction Fund $ 13,600,000.00

Costs of Acquisition of Maumelle Water Management Water System 8,767,336.16

Deposit to Debt Service Reserve Fund (DSRF) 617,780.63

Costs of Issuance ( including Underwriter’s Discount) 382,694.75

1 Preliminary, subject to change

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SENIOR DEBT AND SECOND LIEN DEBT DEBT SERVICE REQUIREMENTS

As of the Closing Date the Senior Debt and the Second Lien Debt will constitute the

only debt obligations secured by Revenues, Net Revenues, and Stabilized Net Revenues of

the Water System The following table details amounts required to pay scheduled principal

of and interest on the Senior Debt and the Second Lien Debt, and the Bonds during each

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SENIOR DEBT AND SECOND LIEN DEBT

DEBT SERVICE COVERAGE

The following table shows Net Revenues and Stabilized Net Revenues available to

pay Debt Service on the Senior Debt and the Second Lien Debt for the twelve months ended

December 31, 2014, calculated on the basis of the audited financial statements of the Issuer

(attached hereto as APPENDIX C) prepared by Thomas & Thomas LLP, independent

certified public accounts, Little Rock, Arkansas The table further shows the extent to

which Maximum Annual Debt Service on the Senior Debt and the Second Lien Debt is

covered by such amount:

Net Revenues Available for Debt Service* $14,509,642

Maximum Annual Debt Service on Prior Debt (1,399,512)

Transfer to Rate Stabilization Account -0-

Maximum Annual Debt Service Requirements** 6,203,180

Coverage 2.27X THE NET REVENUES AND THE STABILIZED NET REVENUES AVAILABLE

FOR DEBT SERVICE ON THE SENIOR DEBT AND THE SECOND LIEN DEBT SET

FORTH ABOVE ARE BASED ON THE HISTORICAL RESULTS OF OPERATION OF

THE WATER SYSTEM FUTURE NET REVENUES AND STABILIZED NET

REVENUES AVAILABLE FOR DEBT SERVICE ON THE SENIOR DEBT AND THE

SECOND LIEN DEBT WILL DEPEND ON NUMEROUS FACTORS, AND THERE CAN

BE NO ASSURANCE THAT FUTURE NET REVENUES AND STABILIZED NET

REVENUES AVAILABLE FOR DEBT SERVICE ON THE SENIOR DEBT AND THE

SECOND LIEN DEBT WILL APPROXIMATE HISTORICAL RESULTS

[Remainder of page intentionally left blank.]

* Net Revenues Available for Debt Service means Revenues of the Water System less Operation and Maintenance Costs

(excluding depreciation, interest, and amortization expenses), as calculated in accordance with generally accepted accounting

principles applicable to municipal water systems

** Collection of the Watershed Protection Fee commenced May 1, 2009, and may be included in rate coverage calculations

unless pledged to Special Purpose Bonds Watershed Protection Fees are included in the operating revenues ancillary charges

in the 2014 CAFR See APPENDIX C.

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ESTIMATED DEBT SERVICE REQUIREMENTS

FOR THE BONDS

As of the Closing Date, the Bonds will constitute the only debt obligations secured by Long Term Debt Surcharge Revenue, of the MWM Water System The following table details estimated amounts required to pay scheduled principal of and interest on the Bonds during each calendar year:

Year

Service Principal Interest

* Preliminary, subject to change; and assuming for purposes of this Preliminary Official Statement a net interest cost of 3.4750136% per annum