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CITY OF SOUTH BEND, INDIANA <br />South Bend, Indiana <br />DISCUSSION OF RISK FACTORS <br />Readers of this Report should be aware and take into account the risk factors related to <br />estimates and other events which are beyond the control of the City. These risk factors include <br />but are not limited to the following matters concerning this Report: <br />1. The Bonds are secured by the CEDIT Revenues and if such CEDIT Revenues are <br />insufficient, the City is not obligated to pay the principal of or the interest on the Bonds from <br />any other revenues, funds or taxes. <br />2. There can be no assurance that CEDIT Revenues will continue to be collected at the levels <br />indicated in this Report. <br />3. The rate at which the CEDIT is imposed cannot be modified unless the St. Joseph County <br />Income Tax Council (the "County Income Tax Council') takes the necessary action. The <br />County Income Tax Council is prohibited by statute from taking any action that would result <br />in a civil taxing unit having a smaller distributive share than the share to which it was entitled <br />when it pledged the CEDIT revenues. <br />4. The Indiana Legislature or an administrative agency with jurisdiction in the matter could <br />modify or enact new laws or regulations or a court of competent jurisdiction could interpret <br />the laws or regulations governing all matters associated with CEDIT Revenues in a manner <br />that may negatively affect the owners of the Bonds. <br />5. Adverse economic conditions in the County, the State or the United States could result in a <br />reduction in the adjusted gross income of qualifying taxpayers in the County and, therefore, <br />a reduction in CEDIT revenues. Such adverse economic conditions could include a general <br />economic downturn, strikes, lay -offs or plant closings in the County, a reduction in the <br />number of taxpayers in the County or a reduction in the aggregate adjusted gross income of <br />the County taxpayers. <br />6. Local area or statewide delinquencies in State income tax collections could result in reduced <br />CEDIT receipts. <br />SUMMARY OF SIGNIFICANT ASSUMPTIONS <br />1. No increase in CEDIT distributions has been assumed for purposes of estimating CEDIT <br />revenues during the forecast period. (Exhibit C). <br />2. It has been assumed that there will not be any changes in the general demographics of the <br />County, nor in the City, in terms of populations, work force, or personal income of a material <br />nature. <br />3. The debt service reserve will be fully funded from the proceeds of the Bonds. <br />C -7 <br />