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RISK FACUR$ <br />Following is a description of possible risks to holders of these Bonds without <br />weighing as to probability. This description of risks is not intended to be <br />all-inclusive and there may be other risks not now perceived or listed here. <br />Taxes: The Bonds of this offering are general obligations of the City of Orono, <br />the ultimate payment of which rests in the City's ability to levy and collect <br />sufficient taxes to pay debt service should other revenue (water and sewer revenues <br />and special assessments) be insufficient. <br />Rat inQ$�__intere_st_Rates: Li the future, the City's credit rating may be reduced or <br />withdrawn, or interest rates for this type of obligation may rise generally, both <br />possibilities resulting in a reduction in the valu? of the obligations for resale <br />prior to maturity. <br />Tit EXeMpti,Qn: If the federal government or the State of Minnesota taxes the <br />interest on municipal obligations directly or indirectly, the value of the Bonds <br />may fall for purposes of resale. Noncompliance following the issuance of the Bonds <br />with certain requirements of the Code and covenants of the bond resolution may <br />rPSult in the inclusion of interest on the Bonds in gross income of the recipient <br />for United States or in taxable net income of individuals, esLdLes vi LLUbts .,. <br />State of Minnesota income tax purposes. No provision has been made fer redemption <br />of the Bonds, or for an , -ease in the interest rate on the Bonds, in the event <br />that interest on the Bonds ecomes subject to United States or State of Minnesota <br />income taxation, retroacti%e to the date of issuance. <br />State Economy;_LQc-Ajl_GQv_C_rrrment. A:_d$: State cash flow problems could affect local <br />governments and possibly increase property taxes. <br />Econpmy: The economy of the City of Orono consists of light industry and commerce, <br />and agriculturally related businesses. A combination of economic-, climatic, <br />political or civil disruptions reuld affect the local economy and result in reduced <br />tax ccllections and/Or increased demands upon local government. <br />6 <br />`- I <br />