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HomeMy WebLinkAbout2004-2720 - Ordinance - 04/29/2004ORDINANCE NO. 2720 PROVIDING FOR THE ISSUANCE OF $13,235,000 CITY OF COLLEGE STATION, TEXAS, GENERAL OBLIGATION IMPROVEMENT AND REFUNDING BONDS, SERIES 2004; AND ORDAINING OTHER MA'j-I'~RS RELATING TO THE SUBJECT, INCLUDING IMMEDIATE EFFECTIVENESS WHEREAS, it is deemed advisable and to the best interest of the City of College Station (the "City" or the "Issuer") that cer~n borids authorized at electrons previously held m said City be combtned tn a single ,,sue and sold at this ~me, the dates o£ elec'aon, amount oi: bonds authorized thereat, purpose, amount of'bonds prewously sold, and the amount now to be sold betn§ as follows. DATE OF AMOUNT BLECTION AUTHO~ZBD AMOUIqT AMOUNT PURPOSE PREVIOUSLY SOLD Dumt~ Impz~;e~ents $ 2,785.000 $ 855,660 S4reet [mD~w~,menta ..0- Traf6c bret? ~ystem Improvements .O- Mun~:l~l Complex ]mpmwmenu -0- WHEREAS, the bonds hereinafter authorized for such purpose are to be issued and delivered pursuant to Chapters 1251 and 1331, Texas Government Code, as amended, and the Charter of the City, and WHEREAS, the Oty Council of the City has deterrmned to refund certain of the outstandtng obhgattnns of the City described in Schedule ! to this Ordinance (the "Refunded Obhgauons'~ to achieve a debt service aswngs with respect to Refunded Oblsg~uons, and WHEREAS, the bonds hereinafter authorized for such purpose are to be issued and delivered pursuant to Chapter 1207, Texas Government Code. THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF COI-I-RGE STATION, TEXAS: 1. BONDS TO BE SOLD; SERIES DESIGNATION. That the bond or bonds of the City to be called "City of College Station, Texas General Obligation Improvement and Refunding Bonds, Series 2004" (the "Bonds" or the "Series 2004 Bonds'l, be issued under and by wrtue of the Constitution and laws of the State of Texas and the Charter of said City, tn the sggregnte pnnclpal amount of $13,235,000 for the purpose of (0 financtng permanent improvements to the City, m-vat, drainage smprovements, street Improvement~, traffic safety system tmprovements, park and recreanun anprovements, mumcspal complex improvements, and fire smUon unprovements, as provided in the preamble to this Ordinance; 00 refunding the Refunded Obl,gaaons; and 0") paying the costs of issuance of the Series 2004 Bonds. 2. MATURITY SCHEDULE. That the Series 2004 Bonds shall be dated May 1, 2004, shall be in the denomlna~on of, $5,000 each, or any integral mul~ple thereof., shall be numbered consecu- tively from R-1 upward, and shall mature on the maturity date, in each of the years, and in the amoums, respectively, as set f,orth in the following schedule' MATURITY DATE FEBRUARY 15 YEARS AMOUNTS ~) YF~ARS AMOUNTS 2005 805,000 2015 335,000 2006 925,000 2016 345,000 2007 905,000 2017 360,000 2008 885,000 2018 370,000 2009 925,000 2019 385,000 2010 1,160,000 2020 400,000 2011 1,145,000 2021 420,000 2012 1,130,000 2022 435,000 2013 865,000 2023 455,000 2014 510,000 2024 475,000 3. RIgDEMPTION PROVISIONS. (a) That the City reserves the right to redeem the Series 2004 Bonds maturing on or after February 15, 2014, in whole or in part, on February 15, 2013, or on any date thereafter, f'or the pnncipal amount thereof'plus accrued interest thereon to the date fixed f,or redempuon. The years of matunt7 of the ,.genes 2004 Bonds called for redempuon at the opuon of the City prior to stated matunty shall be seleet~l by the C,t7. The Senes 2004 Bonds or poruons thereof redeemed ~nthln a maturity shall be selected by lot or other method by the Paying Agent/Registrar (hereinafter defined);prmdet( that during any period in wh,ch ownership of.the Series 2004 Bonds is determined only by a hook entry at a securities deposttory for the Series 2004 Bonds, If fewer than all of the Senes 2004 Bonds of the same matur,ty and beanng the same interest rate are to be redeemed, the pamcular Series 2004 Bonds of such maturity and beanng such interest rate shall be selected in accordance with the arrangement~ between the City and the secunues depository. The City shall noufy the Palnng Agent/RegisWar at least forty-five (45) days prior to the scheduled redemption date that a redemption of, the Series 2004 Bonds ~s to be effected. (h) The Bonds are not sublect to mandatory sinking fund redemption pr,or to their scheduled maturates (c) At least 30 days prior to the date fixed f,or any such redemption the City shall cause a written not~ce of such redempnon to be deposited m the United States M~ul, first-class postage prepaid, addressed to each such reg~srered owner at his address shown on the Reg~straUon Books (hereinafter defined) of the Paying Agent/Reg~sWar. By the date fixed for any such redemption, due provision shall be made vnth the Paying Agent/Regmrar for the payment of the required redemption price for the Series 2004 Bonds or the portions thereofwhtch are to be so redeemed, plus accrued interest thereon to the date fixed for redemption. If such nouce of redemption is given, and if due prowslon for such payment is made, all as prowded above, the Series 2004 Bonds or the portions thereof which are to be so redeemed, thereby automatically shall be redeemed prior to their scheduled maturities, and shall not hear interest after the date fixed for their redempuon, and shall not be regarded as being outstgndlng except for the right of the registered owner to receive the redempuon price plus accrued interest to the date fixed for redemption from the Paying Agent/Registrar out of the funds provided for such payment. The Paying Agent/Registrar shall record in the Registration Books all such redemptions of pnncipal of the Series 2004 Bonds or any portion thereof. Ifa pomon of any Series 2004 Bond shall be redeemed a substitute Series 2004 Bond or Series 2004 Bonds having the same maturity date, beanng interest at the same rate, in any denomination or denominations in any integral multiple of $5,000, at the written request of the registered owner, and in an aggregate pnncipal amount equal to the unredeemed pomon thereof, vail be Issued to the registered owner upon the surrender thereof for cancellation, at the expense of the City, all as provided in this Ordinance. In ad&uon to the foregoing, the City shall cause the Paying Agent/Registrar to give notice of any such redemption in the manner set forth in Secuon 5(h) hereof. The fadure to cause such notice to be given, however, or any defect therein, shall not affect the valt&ty or effectiveness of such redempuon. 4 INTEREST. That the Series 2004 Bonds scheduled to mature during the years, respective]y, set forth below shall bear interest at the following rates per annum: matuaties 2005, % maturmes 2015, maturities 2006, % maturities 2016, __% maturities 2007, % matunUes 2017, .__% maturities 2008, % maturities 2018, % matuntles 2009, % maturities 2019, % maturities 2010, % maturities 2020, % matontles 2011, % matunues 2021, % maturities 2012, % maturities 2022, % maturmes 2013, % maturities 2023, % n~tunties 2014, % maturities 2023, % Smd interest shall be payable to the registered owner of any such Series 2004 Bond m the manner provided and on the dates stated in the FORM OF BOND. 5 ADDITIONAL CHARACTERISTICS OFTHE BONDS. (a) That the City shall keep or cause to be kept at the desgnated corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office'~ of JPMorgan Chase Bank (the "Paying Agent/Registz'ar'~, or such other bank, u'ust company, financial institution, or other agency named m accordance vath the provisions of (g) below, books or records of the registration and transfer of the genes 2004 Bonds (the "Regsu'a- non Books'~, and the City hereby appoints the Paying Ageot/Registrar as ~ts regstrar and Wansfi~r agent to keep such books or records and make such transfers and registrations under such reasonable regula- uons as the City and Paying Agent/Regislrar may prescribe; and the Paying Agent/Registrar shall make such transfers and registraUons as hereto provided It shall be the duty of the Paying Agent/Registrar to obtain from the registered owner and record in the Reg~straUon Books the address of such registered -3- owner of each bond to which payments wxth respect to the Series 2004 Bonds shall be marled, as hereto provided. The City or its designee shall have the right to inspect the Reg~strauon Books dunng regular business hours of the Pa~png Agent/Regtstrar, but othervnse the Paying Agent/Registrar shall keep the Reg~str~uon Books confidenual and, unless otherwise required by law, shall not perrmt their mspectson by any other ennty. Reg~sttauon of each Series 2004 Bond may be transferred sn the Reglstrauon Books only upon presentaUon and surrender of such bond to the Paying Agent/Reg~stxar for transfer of reg~s~afion and cancellation, together with proper written instruments of ass,gnment, in form and w~th guarantee of s,gnatures sausfactory to the Pa~nng Agent/Registrar, evidencing the assignment of such bond, or any poruon thereof m any mtegeal multiple of $5,000, to the ass,ghee or assgnees thereof, and the right of such ass,ghee or assignees to have such bond or any such poruon thereof res~stered m the name of such assignee or ass,snees Upon the assignment and transfer of any Series 2004 Bond or any poruon thereof, a new subsutute bond or bonds shall be ;ssued in exchange therefor sn the manner herein provided (b) The entity Lq whose name any Series 2004 Bond shall be registered in the flegntmnon Books at any nme shall be treated as the absolute owner thereof for all purposes of this Ordinance, whether or not such bond shall be overdue, and the &ty and the Paying Agent/Registrar shall not be affected by any not~ce to the contrary; and payment of, or on account of, the pnnopal of, premium, i£any, and interest on any such bond shall be made only to such registered owner. All such payments shall be vahd and effectual to sausfy and d,scharge the habdlty upon such bond to the extent of the sum or sums so pa~d. (c) The City hereby further appoLqls the Paying Agent/Reg~slrg to act as the paying agent for paying the pnnc~pal of and interest on the Senes 2004 Bonds, and to act as its agent to exchange or replace Series 2004 Bonds, all as prowded Lq th~s Ordinance. The Pa]nng Agent/Reg~stear shall keep proper records of all payments made by the City and the Paying Agent/Reg~strac w~th respect to the Series 2004 Bonds, and of all exchanges thereof, and all replacements thereof, as provided in th~s Ordi- nance. (d) Each Series 2004 Bond may be exchanged for fully registered bonds in the manner set forth hereto Each bond issued and delivered pursuant to this Ordinance, to the extent of the unredeemed pnnopal amount thereof, may, upon surrender theren£at the Designated Payment/Transfer Office of the Paying Agent/Registrar, together w~th a wntmn request therefor duly executed by the regntered owner or the assignee or assignees thereof, or its or their duly authorized attorneys or representanves, vath guarantee of szgnatures sattsfactoty to the Paying Agent/Reg~strac, at the opuon of the registered owner or such assignee or ass~guees, as appropriate, be exchanged for fully registered bonds, without interest coupons, m the form prescribed in the FORM OF BOND, in the denormnatton of $5,000, or any integral multiple thereof (sublect to the reqturement hereinafter stated that each subsutute bond shall have a single stated maturity date), as requested in writing by such regtstered owner or such assignee or assignees, Lq an at~,gregate pnncipal amount equal to the unredeemed principal amount of any Series 2004 Bond or Series 2004 Bonds so surrendered, and payable to the appropriate regntered owner, assignee, or assignees, as the case may be. If a porUon of any Series 2004 Bond shall be redeemed prior to its scheduled maturity as prowded herein, a substitute bond or bonds having the same maturity date, bearLqg Lqterest at the same rate, m the denommatton or denominations of any integral muluple of $5,000 at the request of the registered owner, and m an aggregate pnnc~pal amount equal to the unredeemed porUon thereof, wdl be sssued to the regmtered owner upon surrender thereof for cancellation. If any Series 2004 Bond or portion thereof ~s assigned and transferred, each bond -4- issued in exchange therefor shall hive the same prtnctpal maturity date and bear interest at the same rate as the bond For which it .s being exchanged. Each substitute bond shall bear a letter and/or number to d~stmgutsh it from each other bond The Paying Agent/Registrar shall exchange or replace Series 2004 Bonds as provided herein, and each fully registered bond or bonds delivered in exchange for or replacement of any Series 2004 Bond or pomon thereof as permitted or required by any provi- sion of this Ordinance shall constitute one of the Series 2004 Bonds for all purposes of this Ord,nance, and may agan be exchanged or replaced It is specifically provided, however, that any Series 2004 Bond dehvered in exchange for or replacement of another Series 2004 Bond prior to the first scheduled interest payment date on the Series 2004 Bonds (as stated on the face thereof') shall be dated the same date as such Series 2004 Bond, but each substitute bond so delivered on or after such first scheduled interest payment date shall be dated as of the interest payment dare preceding the date on which such subsutute bond Is delivered, unless such substtmre bond ts delivered on an interest payment date, in which case it shall be dated as of such date of dehvery;pnn~dtd, bawtt~r, that If at the nme of dehvery of any substitute bond the interest on the bond for which it is being exchanged has not been pa,d, then such subsutute bond shall be dated as of the date to which such interest has been pad m full. On each suknt~tute bond issued m exchange for or replacement of any Serzes 2004 Bond or Series 2004 Bonds issued under this Ordinance there shall be pnnted thereon a Paying Agent/Registrar's Authentlcat~on Ceraficate, in the form herennafter set forth in the FORM OF BOND (the "Authen~catmn Cemficate"). An authorized representauve of the Paying Agent/Regislxar shall, before ltae delivery of any such subsutute bond, date such subsutute bond In the manner set forth above, and manually sign and date the Authent~caUon Ceruficate, and no such subsutute bond shall be deemed to be issued or outstandmgunless the Authentacat~on Certificate is so executed The Paying Agent/Registrar promptly shall cancel all Series 2004 Bonds surrendered for exchange or replacement. No addmonal ordinances, orders, or resolutions need be passed or adopted by the City Council or any other body ot person so as to accomplash the foregoing exchange or replacement of any Series 2004 Bond or pomon hereof, and the Paying Agent/Registrar shall provide for the pnn~ng, execution, and dehvery of the substitute bonds in the manner prescribed hereto. Pursuant to Chapter 1206, Texas Government Code, the duty of exchange or replacement of any Series 2004 Bond as aforesaid Is hereby imposed upon the Paying Ag~nt/Registrsr, and, upon the execu~on of the Authentication Certaficate, be exchanged or replaced bond shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Series 2004 Bonds which originally were dehvered pursuant to th~s Ordinance, approved by the Attorney General, and registered by the Comptroller of Public Account. Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Series 2004 Bond so selected for redempt, on, in whole or in part, within 45 calendar days of the date faxed for redempUon, provided, however, such hmitanon of transfer shall not be applicable to an exchange by the registered owner of the uncalled principal of a Series 2004 Bond. (e) All Series 2004 Bonds assued in exchange or replacement of any other Series 2004 Bond or pomon thereof, 0) shall be issued in fully registered form, without interest coupons, with the principal or' and interest on such Series 2004 Bonds to be payable only to the regtstered owners thereof, (iB may be redeemed prior to their scheduled matunues, 0u} may be Ixansferred and asslgoed, 0v) may be ex- changed for other Series 2004 Bonds, (v) shall have the charactetisucs, (vi) shall be ~lgned and sealed, and (vii) the pnnc[pal of and interest on the Series 2004 Bonds shall be payable, all as provided, and in the manner required or indicated, m the FORM OF BOND. (f) The Cip/shall pay the Pa)nng Agent/Regtstrar's reasonable and customary fees and charges -5- for malung transfers of Series 2004 Bonds, but the registered owner of any Series 2004 Bond requesung such transfer shall pay any taxes or other govemmen~ charges required to be I~ud w~th respect thereto. The registered owner of any Series 2004 Bond requesnng any exchange shall pay the Pa~nng Agent/Reg~strads reasonable and standard or customfu, y fees and charges For exchangmgany such bond or pornon thereof, together with any taxes or governmental charges required to be pa~d vath respect thereto, all as a condlluon precedent to the exercise of such pnvdege of exchange, except, however, that In the case of the exchange of an assigned and transferred bond or bonds or any poruon or portions thereof in any integral mulnple of $5,000, and in the case of the exchange of. the unredeemed porUon of a Series 2004 Bond which has been redeemed m part prior to maturity, as provided in ths Ordinance, such fees and charges will be pfud by the City In addinon, the City hereby covenants vnth the registered owners of the Series 2004 Bonds that it w~ll 0) pay the reasonable and standard or customary fees and charges of the Paying Agent/Registrar for its services w~th respect to the pa~tmeot of' the principal of'and interest on the Series 2004 Bonds, when due, and 0O pay the fees and charges of the Paying Agent/Reg~trar for services with respect to the transfer or reg~stranon of Series 2004 Bonds solely to the extent above provided, and with respect to the exchange of' Series 2004 Bonds solely to the extent above provided. (g) The City covenants vath the registered owners of the Series 2004 Bonds that at all ames while the Serses 2004 Bonds are outstanding the City wdl pinwale a competent and legally qualified bank, t~ust company, or other enuty duly qualified and legally authorized to act as and pe~'orm the services ofPapng Agent/Reg~slrar for the Series 2004 Bonds under ths Ordinance, and that the Paying Agent/Registrar will be one ennty. The City reserves the right to, and may, at its opnon, change the Paying Agent/Registrar upon not less than 60 days written nonce to the Paying Agent/Registrar. In the event that the ennty at any nme acung as Pa~nng Agent/Registrar (or its successor by merger, acqulstnon, or other method) should resign or othenv~se cease to act as such, the City covenants that it will prompdy appoint a competent and les~lly qualified nauonal or state banlung msntunon which shall be a co~poration organized and doing business under the laws of the United States of America or of any state, anthonzed under such laws to exercise txust powers, subject to supervision or exammanon by fedeM or state authority, and whose qualifications substant~lly are surular to the prewous P~ymg Agent/Registrar to act as Paying Agent/Reg~strer under this Ordinance. Upon any change in the Pa]ring A~nt/Registrar, the previous Paying Agent/Regsslrar promptly shall transfer and dehver the Registranon Books (or a copy thereof), alongx~th all other pertinent books and records relating to the Series 2004 Bonds, to the new Paying Agent/Registrar designatecl and appointed by the City. Upon any change m the Paying Agent/Registrar, the City promptly wdl cause a written notice thereof to be sent by the new Paying Agent/Registrar to each registered owner of the Series 2004 Bonds, by United States Mall, tint-clans postage prep~d, which nonce also shall g~ve the address of the new Paying Agent/Registrar. By accepnng the position and performing as such, each paying Agent/Registrar shall be deemed to have agreed to the provisions of th~s Ordinance, and a cer~fied copy of this Ordinance shall be delivered to each Paying Agent/Registrar. (h) (~ in addiuon to the manner of providing nouce of redernpuon of Senes 2004 Bonds as set forth in this Ordinance, the Paying Agent/Regisu'ar shall g~ve nonce of' redempuon of Series 2004 Bonds by United States marl, first-class postage preps'nd, at least 30 days prior to a redempnon date to each NRMSIR (as defined m Section 14 hereof) and the SID (as def'u~ed in Secnon 14 hereof). In add~tson, in the event of a redemption caused by an advance refi~ndlng of the Series 2004 Bonds, the Paying Agent/Registrar shall send a second notice o£ redempuon to the persons speofied m thc Immediately preceding sentence at least 30 days but not more than 90 days prior to the actual redemption date. An)' not~ce sent to the NRM$1Rs or the $1D shall be sent so that they are received at least two days prsor to the general m~hng or pubhca~on date of such nouce. The Pisymg Agent/Reg~strer shall also send a nonce of'prepayment or redempuon to the owner of any Series 2004 -fi. Bond who has not sent the Series 2004 Bonds in for redemption 60 days after the redemption date. (i0 Each redemptton notice, whether requu'ed m the FORM OF BOND or othet~nse by thts Ordinance, shall contmn a descriplaon of' the Sene* 2004 Bonds to be redeemed, mclu&ng the complete name of the Sene* 2004 Bonds, the series, the date of issue, the interest rate, the maturity date, the CUSIP number, if any, the amounts called of each ceruficate, the pubhcanon and marling date for the notice, the date of redemption, the redernpnon price, the name of the Paying Agent/Registrar and the address at which the Sene* 2004 Bond may be redeemed, including a contact person and telephone number. 010 All redempUon payments made by the Paying Agent/Registrar to the regcstered owners of the Sene* 2004 Bonds shall include CUSIP numbers relating to each amount paid to such registered 6. FORM OF BONDS. That the form of all Series 2004 Bonds, mdudmg the form of the AuthenUcation Certificate, the form of Assgnment. and the form of the Comptroller's Registration Certificate to accompany the Sene* 2004 Bonds on the waual dehve~/thereof, shall be, respecttvely, substanaally m the form set forth m F. xhibtt A to th,s Ordinance, with such appropr,are vamtions, omissions, or ,nserttons as are permitted or required by th,. Ordinance. The pnnter of the Series 2004 Bonds is hereby authorized to pnnr on the Series 2004 Bonds 0) the form of bond counsel's op,mon relating to the Sene* 2004 Bonds, and (id an appropriate statement of insurance fumcshed by a mumclpal bond insurance company prove&rig mumopal bond insurance, ~fany, covenng all or any part of the Sene. 2004 Bonds. 7. LEVY OF TAX; INTEREST AND SINKING FUND. That a special fund or account, to be designated the "City ofColiege Statim~ Texas Sesies 2004 General Obligation Improvement and Refimding Bonds Interest and Sinking Fund" (the "Interest and Stoking Fund'~ is hereby created and shall be estabhshed and mmntmned at an officml depository of the City. The Interest and Smlang Fund shall be kept separate and apart £rom all other funds and accounts of the Cats], and shall be used only for pa)lng the int,:rest on and pnnclpal of the Senes 2004 Bonds. All ad valorem taxes Ioned and collected for and on account of the Series 2004 Bonds shall be deposited, as collected, to the cred,t of the Interest and Smlung Fund. Dunng e~ch year while any Sene* 2004 Bond is outstand- ing and unpaid, the City Councd of the City shall compute and ascertgJn the rate and amount of ad valorem tax, based on the latest approved tax rolls of the Caty, unth full allowances being made for 13x delinquencies and costs of tax co0ecl~ons, which wdl be sufficient to r'~se and produce the money reqmred to pay the interest on the Soaes 2004 Bonds as such interest comes due, and to provide a stoking fund to pay the pt~nopal (mcluchng mandatory smlung fund redemption payments, If any) of the Sene* 2004 Bonds as such pnnclpal matures, but never less than 2% of the outstanding pnnclpal amount of the Senes 2004 Bonds as a smlung fund each year. Said rate and amount of ed valorem tax cs hereby ordered to be levied and ts hereby levied against all taxable property In the City for each year while any Series 2004 Bond ts outstanding and unpaid, and said ad valorem tax shall be assessed and co0ected each such year and deposited to the credtt of the Interest and Smlung Fund. Said ad valorem tgxes necessary to pay the Interest on and pnnclpal of the Series 2004 Bonds, as such interest comes due, and such pnnclpal matures or come* due through operation o£ the mandatory smlung fund redemption, If any, as provided in the FORM OF BOND, are hereby pledged for such purpose, within the limit prescribed by law. There shall be appropriated from the General ~und of the CR7 for deposit into the Interest and Sinking Fund moneys as may be necessa~/to pay the p~nopal and interest payments on the Series 2004 Bonds scheduled to occur on or before Febmax,/15, 2005. Money m the Interest and Smkmff Fund, at the opuon of'the City, may be invested in such secunues or obhgauons as permitted under applicable law and the City's investment policy. Any secumies or obligations m which money Is so invested shall be kept and held m twst for the benefit of the owners of the Series 2004 Bonds and sh,II be sold and the proceeds of sale shall be umel¥ applied to the making of all payments required to be made from the Interest md Smhng Fund. Interest and income derived from the mveslment of money m the Interest and Smhng Fund shall be credited thereto. 8 DAMAGED, LOST, STOI.RN OR DESTROYED BONDS. (a) That ua the event any outstanding Series 2004 Bond ts damaged, mutilated, lost, stolen, or destroyed, the Paying Agent/Registrar shall cause to be pnnted, executed, and delivered, a new bond of the same pnnopal amount, maturity, and interest rate, as the damaged, mutilated, lost, stolen, or destroyed Series 2004 Bond, in replacement for such Series 2004 Bond in the manner hereinafter provided. (b) Apphcation for replacement of dam:~ged, mualated, lost, stolen, or destroyed Series 2004 Bonds shall be made to the Paying Agent/Regtstrar. In every case of loss, theft, or dastrocaon ufa Series 2004 Bond, the appheant for a replacement bond shall furnish to the City and to the Paying Agent/Registrar such security or indemnity as may be required by them to save each of them harmless from any loss or damage w~th respect thereto. Also, ua every case of loss, theft, or destrucnon ufa Series 2004 Bond, the applicant shall furnish to the C~ty and to the Paying Agent/Regtslx-ar evidence ro their sansfact~on of the loss, theft, or deslzucuon of such Series 2004 Bond, as the case may be. In every case of damage or mutdaUon ufa Senes 2004 Bond, the applicant shall surrender to the Paying Agent/Reg'*trar for cancellation the Series 2004 Bond so damaged or muulated. (c) Notwithstanding the foregoing provisions o f thts Section, in the event any such Senes 2004 Bond shall have matured, and no default has occurred which is then conunumg in the payment of the pnncapal of, redempuon prermum, If any, or interest on the Series 2004 Bond, the City may ~uthor--e the payment of the same (w~thout surrender therenfeacept in the case ufa damaged or muulated Series 2004 Bond) instead of issuing a replacement Series 2004 Bond, pro~nded sectmty or mdemn,ty ts fur- n'*hed as above prowded m this Secuon. (d) Prior to the tssuance of any replacement bond, the Paying Agent/Regtsl~' shall charge the owner of such Series 2004 Bond with all legal, prinung, and other expenses in connection therewith. Eve~ replacement bond issued pursuant to the provisions of this Section by wrtue of the fact that any Series 2004 Bond ts lost, stolen, or destroyed shall constitute a conlractual obhgauon of the City whether or not the lost, stolen, or destroyed Series 2004 Bond shall be found at any time, or be enforeexble by anyone, and shall be enmled to all the benefits of th,* Ordinance equally and proporuonately w~th any and all other Series 2004 Bonds duly issued under th'* Ordinance. (e) In accordance with Chapter 1206, Texas Government Code, this Sec~on of th'* Ordinance shall constitute authority for the ~ssuance of any such replacement bond unthout necessity of further action by the governing body of the City or any other body or person, and the duty of the replacement of such bonds ts hereby authotmed and imposed upon the Paying Agent/Registrar, sublect to the conditions unposed by this Section 8 of th,* Ordinance, and the Paying Agent/Re~strar shall authenticate and deliver such bonds in the form and manner and vnth the effect, as provided in Section 5(d) of this Ordinance for Series 2004 Bonds tssued m exchange for other Series 2004 Bonds. 9. SUBMISSION OF PROCEEDINGS TO ATTORNEY GENERAL. That the Mayor or the designee thereof'* hereby authormed to have control of the Series 2004 Bonds and all necessary records and proceedm/s pertaining to the Series 2004 Bonds pending their dehve~ and their lnvestl~uon, exammauon and approval by the Attorney General of the State of Texas, and their re~strauon by the Comptroller of Pubhc Accounts of the State of Texas. Upon re~stratlon of the Senes 2004 Bonds, said Comptroller of Pubhc Accounts (or a deputy designated in wntln§ to act for said Comptroller) shall manually sign the Comptroller's Rel~strnUon Cemficate accompanying the Series 2004 Bonds, and the seal of said Comptroller shall be impressed, or placed ,n facsimile, on each such certttlcate. After re~strat~on by said Comptroller, delivery of the Bonds shall be made to the representauve for the underwrtters named in Section 10 below under and sublect to the general super~mon and dlrecuon of the Mayor, at~nst receipt by the City of all amounts due to the City under the terms of sole. 10. S8!-I~ OF BONDS. (a) That the sale of the Bonds to Coastal Secunnes, as representative for the underwriters named in the Bond Purchase Asreement (the "Purchase Agreement") between the City and the underwriters named therein (the "Underwnters'~, at the purchase price described in the Purchase Agreement, is hereby author,zed, muffed and confirmed. One Bond tn the pnncIpal amount maturing on each maturity date as set forth tn Section 2 hereof shall be dehvered to the Underwriters, and the Underwriters shall have the r~ht to exchange such Bonds as provided ia Secnon 5 hereof without cost (b) That the Purchase Agreement semng forth the terms of the sale of the Bonds to the Underwriters, in substanually the form attached to this Ordinance, is hereby accepted, approved and authorized to be delivered m executed form to the Underwriters (c) That the "Official Statement" prepared in connection vnth the sale of the Bonds, in substanually the form attached to th~s Ordinance, is hereby accepted, approved and authorized to be delivered tn executed form to the Underwriters The use of the "Preliminary Official Statement" prepared tn connection with the sole of the Bonds is hereby ratified. (d) That the Mayor, City Manager and the Director of Fiscal Services each is authonzed, in connecuon with effecUng the sale of the Bonds, to obtain from (the "Insurer") a municipal bond insurance policy in support of the Bonds. To that end, for so long as such pohcy is m effect, the requirements of the Insurer relaung to the muance of said policy is incorporated by reference into this Ordinance and made a part hereof for all purposes, notvathstandmg any other provision of this Ordinance to the contrary I i. FlgDERAL TAX COVlgNANTS. That the Issuer covenants to take any acnon to assure, or refrain from any action which would adversely affect, the treatment of the Series 2004 Bonds as obligations described In section 103 of the Internal Revenue Code of 1986 (the "Code'~, the interest on which ~s not Includable in the "gross income" of the holder for purposes of federal income taxation. In furtherance thereof, the Issuer covenants as £ol]ows: (a} to ts~e any acUon to assure that no more than 10 percent of the proceeds of the Series 2004 Bonds or the projects financed therewith (less amounts deposited to a reserve fund, if any) are used for any "private business use," as defined in section 141 (b) (6) of the Code or, if more than 10 percent of the proceeds are so used, that amounts, whether or not received by the Issuer, with respect to such private business use, do not, under the terms of this Ordinance or any underlying arrangement, cllrect]y or indirectly, secure or provide for the payment of more than 10 percent of the debt sennce on the Series 2004 Bonds, in contra- vention of section 141(b)(2) of the Code, -9= (b) to take any' acl~on to assure that in the event that the "private business use" descnbed in subsection (a) hereof exceeds 5 percent of the proceeds of the ,%nes 2004 Bonds or the projects financed therewith (less amounts deposited into a reserve fund, If any) then the amount m excess of 5 percent is used for a "private business use" which is "related" and not "dlsproporllonate," within the meaning o£section 141(b)(3) of the Code, to the governmental use; (c) to take any action to assure that no amount which is greater than the lesser of $5,000,000, or 5 percent of the proceeds of the Series 2004 Bonds (less amounts deposited into a reserve fired, If any) is directly or indirectly used to finance loans to persons, other than state or local govemmentai units, in contravention of section 141(c) of the Code, (d) to refrain from talung any action which would othervnse result in the Senes 2004 Bonds being Ireated as "private acR~nty bonds" w~thin the meaning of sec'non 141 Co) of the Code; (e) to refrain from taking any action that would result in the Series 2004 Bonds being "federally guaranteed" within the meaning of section 149(b) of the Code; (f) to refrain from using any pomon of the proceeds of thc Series 2004 Bonds, dtrecdy or indirectly, to acquire or to rep]ace funds which were used, dlrecdy or In&rectly, to acqinre investment property (as defined in seclion 148Co)(2) of the Code) which produces a materially h~gher yield over the teton o£the Series 2004 Bonds, other than investment property acquired w~th -- (1) proceeds of the Series 2004 Bonds invested for a reasonable mmporary penod of three years or less, or 90 days or less in the case ora current refunding, or 30 days or less in the case of an advance refunding, until such proceeds are needed for the purpose for which the bonds are issued, (2) amounts invested in a bona fide debt serwce fund, vnthin the meaning of section 1.148-1(b) of the Treasury Regulations, and (3) amounts deposited in any reasonably required reserve or replacement fund to the extent such amounts do not exceed 10 percent of the proceeds of the Series 2004 Bonds; (g) to otherwise resmct the use of the proceeds of the Series 2004 Bonds or amounts treated as proceeds of the Series 2004 Bonds, as may be necessary, so that the Series 2004 Bonds do not otherwise contravene the reqinrements ofseetion 148 of the Code (relating to arbitrage) and, to the extent apphcab[e, section 149(d) of the Code (relating to advance refundings), and (h) to pay m the United States of America at least once dunng exch five-year period (begmmng on the date ofdehvery of the Series 2004 BOnds) an amount that,, at least equal to 90 percent of the "Excess Earnings", within the maaning of section 148(f) of the Code and to pay to the Uinted States of America, not later than 60 days after the Series 2004 Bonds have been paid hq full, 100 percent of'the amount then reqmred to be paid as a result of Excess -10- F.~u'nmgs under secuon 148(0 of the Code. For purposes of the foregoing clauses (a) and (b) above, the Issuer understands that the te~n "proceeds" includes "dtsposmon proceeds" as defined m the Treasury Regnlauons and, m the case of a refunding bond, transferred proceeds 0£ any) and proceeds of the refunded bonds expended prior to the date of the issuance of the Bonds. It is the understanding of the Issuer that the covenants contained herein are intended to assure compliance x~nth the Code and any regulations or rulings promulgated by the U.S. Department of the Treasury pursuant thereto. In the event that regulauons ot rulings ate hereafter promulgated which modif7 or expand provtsions of the Code, as applicable to the Bonds, the Issuer will nor be required to complyw~th any covenant contained herein to the extent that such fadure to comply, in the opinion of nat,onally-recogtuzed bond counsel, wdl not adversely affect the exemption from federal income taxation of interest on the Bonds under secnon 103 o£the Code. In the event that regulations or rulings ~re hereafter promulgated which ~mpose additional requu'ements which are applicable to the Bonds, the Issuer ~grees to comply x~nth the addmonal requirements to the extent necessary, in the opinion o f nationally-recognized bond counsel, to preserve the exemption from federal income taxation of interest on the Bonds under section 103 of'the Code In furtherance of the foregoing, the Mayor, the City Manager, any Assistant City Manager, and the Director of Ftscal Services may execute any ceruficates or other reports required by the Code and to make such elections, on behalf of the City, which may be permitted by the Code as are consistent w~th the puzpose for the issuance of the Bonds. In order to facthtate compliance with the above clause (h), a "Rebate Fund" is hereby estabhshed by the City for the sole benefit of the United States of America, and such Rebate Fund shall not be sublect to the claun of any other person, including unthout hmit~uon the regtstered owners of the Bonds. The Rebate Fund ts estabhshed for the additional purpose of compl,ance vnth section 148 of the Code. 12 ,~I.iOCATION OF, AND LIMITATION ON, EXPENDITURES FOR THE PROJECT. That the City covenants to account for on its books and records the expenditure of proceeds from the sale of'the Bonds and any investment earnings thereon to be used for the purposes described m clause (0 of Section 1 ofthts Ordinance (such purposes referred to herein and Section 13 hereof as a "Prolect'~ in accordance wtth the requirements of the Code. The City recogmzes that m order for the proceeds to be considered used for the reimbursement of costs, the proceeds must be allocated to expenditures within 18 months of the later of the date that (a) the expenditure on a ProleCt ts made or (b) each such Prolect is completed; but in no event later than three years after the date on which the ongnaal expenditure is piud. The foregoing notwithstanding, the City recognizes that in order for proceeds to be expended under the Code, the sale proceeds or investment earnings must be expended no more than 60 days after the eat'her of (a) the fifth anniversary of the date of dehvery of the Bonds or (b) the date the Bonds are rmred The City agrees to obtain the advice ora natsonally- recognmed bond counsel if such expenditure fads to comply with the foregoing to assure that such expenditure will not adversely nffect the tax-exempt status of the Bonds For purposes of this Section, the City shall not be obligated to comply w~th this covenant if it obtmns an opinion of a nationally- recogmzed bond counsel to the effect that such failure to comply ,anll not adversely affect the excludablhty for federal income tax purposes from gross income of the Interest 13. DISPOSITION OF PROJECT. That the City covenants that the property financed or refinanced vnrh the proceeds of the Bonds will not be sold or othe~xvtse disposed m a mmsaction resulting m thc receipt by the C~ty of cash or other compensanon, unless the C~ty obt~uns an oplmon -Il- of'a nationally-recognized bond counsel substantially to the effect that such sale or other dlsposmon will not adversely affect the tax-exempt status of'the Bonds or the Refunded Obhgations. For purposes o£ this Section, the portion of' the property compns,ng personal property and disposed of' m the orchnary course of' business shall not be treated as a trans~ctlon resuhmg In the receipt o£cash or other compensation. For purposes of this Section, the City shall not be obligated to comply with this covenant flit obtmns an opinion of.a nat~onally-recognmed bond counsel to the effect that such failure to comply will not adversely affect the excludab,hty for federal income tax purposes from gross income of the interest 14 CONTINUING ONGOING DISCLOSURE. (a) Dg~at',on~. That as used m this Secnon, the following terms have the meanings ascribed to such terms below. "M3'RB" means the Mumcapal Securities Rulerealung Board. "NRM$/R" means each person whom the SEC or ~ts svaff has determined to be a nauonally recognized municipal sec'urines information repository within the meaning of the Rule from nme to nme means SEC Rule 15c2-12, as amended from nme to tame. means the United States Secunues and Exchange Commission. "$11Y' means any person designated by the Sts. te of Texas or an anthonzed deparanent, officer, or agency thereof as, and determined by the SEC or its staff to be, a state information depository vnthm the meamng of the Rule from nme to time. (b) .4#ri#a/gtpartr. (0 The City shall provide annually to each NRMSIR and any SID, within sa months after the end of each fiscal year ending in or after 2004, financud informataon and operanng data with respect to the City of the general type included in the final Offic~l Statement authorized by Section 10 of. this Ordinance, being the information described in Exhibit B hereto Any financial statements so to be pro~nded shall be (1) prepared in accordance with the accounung pnnoples descnbed in Exhibit B hereto, or such other accounlmg pnnclples as the City may be required to employ from nme to time pursuant to state l~v or regulauon, and (2) an&~ed, ffthe City comn~sslons an audit of.such statements and the ~udit is completed within the period durlng whmh they must be provided. If the audit of such financial statements is not complete within such period, then the City shall pro.de unan&~ed financial statemeots by the required time, and shall provide audited financial statemenm for the applicable fiscal year to each NRMSIR and any SID, when and If the audit report on such smtemenrs becomes av~lab]e. (a) If the City changes its fiscal year, it vail not, fy each NRMSIR and any SID of the change (and of the date of the new fiscal year end) prior to the next date by which the City othervnse would be required to provide financial information and opemUng data pursuant to this Secuon. The financial information and operanng data to be provided pursuant to this Section may be set forth in full m one or more documents or may be included by specific reference to any document (includ,ng an official statement or other offering document, if it is aw, ulable from the MSRB) that theretofore has been pro~nded to each NRMSIR and any SID or fded with the SEC. (c) MatmalEmnt Notices The City shall notary any SID and either each NRMSIR or the MSRB, in aumely manner, of any of the following events with respect to the genes 2004 Bonds, if such event ts matem] w~thm the meaning of the federal secunnes laws: 2. 4 5. 6. 7 8 9. 10. 11. Pnnclpal md interest payment delinquencies; Non-payment related defaults, Unscheduled draws on debt senqce reserves reflecting financial dlfficulnes; Unscheduled dr~ws on credit enhancements teflecnng financial cbfficulnes; Substimtton of credit or liquidity providers, or their failure to perform; Adverse tax opinions or events affecnng the vax-exempt status of the Series 2004 Bonds; Mo&ficat~ons to rights of holders of the Series 2004 Bonds; Series 2004 Bond calls; Defeasances; Release, subsntuuon, or sale of property secunng repayment of the Series 2004 Bonds; and Raung changes. The City shall nolafi/any SID and either each NRMSIR or the MSRB, m a nmely manner, of any failure by the City to provide financial mformanon or operating data in accordance w~th subsection (b) of this Section by the nme mqmred by such subsecnon. (co /~aa~tt0as, Ehsdageers, a#d,d~eadaeatr. (0 The City shall be obhg~ted to observe and perform the covenants specified in this Secnon for so long as, but only for so long as, the City remains an "obligated person" w~th respect to the Series 2004 Bonds w~thm the meaning of the Rule, except that the City in any event will ~ve no~ce of any deposit made in accordance with this Ordinance or apphcable law that causes any Series 2004 Bonds no longer to be outstandan~ 0~ The provisions ofthts Secnon are for the sole benefit of the holders and benefioal owt~ers of the Series 2004 Bonds, and nothing in this Secuon, express or ,mpl,ed, shall gwe any benefit or any legal or equitable right, remedy, or clmm hereunder to any other person. The City undertakes to pm,nde only the financial mformauon, operaung data, financial statements, and nonces which it has expt~saly agreed to provide pursuant to this Secuon and does not hereby undertake to provide any other mformauon that may be relevant or material m a complete presentauon of the City's fmanoal results, con&non, or prospects or to update any mformaUon prowded in accordance ~th thts Secnon or otherwise, except as expressly provided herein. The City does not make any representaUon or warranty concerning such informanon or tm usefulness to a decmon to revest m or sell Ser~es 2004 Bonds at any future date (q0 UNDERNO CIRCUMSTANCESSHALLTHECITYBELIABLETOTHEHOLDER OR BENEFICIAL OWNER OF ANY SERIES 2004 BOND OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN ~q~IOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS SECTION, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SH. Ar.T BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. Or) No default by thc City in observing or performing its obhganons under this Secuon shall compose a breach of or default under the Ordinance fur purposes of any other provision of this Oral,nonce. Nothing m this Section ,s intended or shall act to disclaim, wiuve, or otherwise limit the duaes of the City under fede~ and state secunaes laws. (v) The provisions of this Section may be amended by the City from amc to nme to adapt to changed circumstances that anse from a change m legal reqmrements, a change in law, or a change in the idenaty, nature, status, or type of operauons of the City, but only If (1) the provis~ons of this Section, as so amended, would have permitted an underwater to purchase or sell Series 2004 Bonds m the primary offering of the Series 2004 Bonds m comphance w~th the Rule, talung into account any amendments or interpretations of the Rule since such offenng as well as such changed circumst'ances and (2) either (a) the holders of a malonty in aggregate pnnclpal amount (or any greater amount required by any other provision of th~s Ordinance that anthonzes such an amendment) of the outstanding Series 2004 Bonds consent to such amendment or (b) a person that ,~ unaffiliated w~th the City (such as naaonally-recogmzed bond counsel) determines that such amendment will not materially impa,r the interest of the holders and benefioal owners of the Series 2004 Bonds. If the City so amends the provisions of th~s Section, It shall ~nclude w~th any amended financ,-I mfurmat~on or operating data next provided In accordance with subsection (b) of this Secaon an explanaaon, hq narmave form, of the reason for the amendment and of the impact of any change in the type of financaal lnformaaon or operating data so provided The C,ty may also amend or repeal the provisions of this conanumg chsclosure agreement if the SEC amends or repeals the applicable prov,slon of the Rule or a court of final lunsdlcaon enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwater from lawfully purchasing or selhng Series 2004 Bonds tn the primary offenng of the Series 2004 Bonds. 15. DEFEASANCE. (a) D~etafedBa#dr That any Series 2004 Bond and the mterest thereon shall be deemed to be plod, reared and no longer outstanchng (a "Defeased Bond'~ within the meaning of this Ordinance, except to the extent provided in subsecaon (d) of this Secaon, when payment of the pnnclpal of such Bond, plus interest thereon to the due date (whether such due date be by reason of maturity or otherwise) either (0 shall have been made or caused to be made m accordance vath the terms thereof', or 00 shall have been provided for on or before such due date by irrevocably deposmng with or making available to the Paying Agent/Registrar m accordance with an escrow agreement or other instrument (the "Future Escrow Agreement'~ for such payment (1) lawful money of the Umted States of' America sufficient to make such payment or (2) Defeasance Securities that mature as to principal and interest in such amounts and at such ames as will insure the availability, w~thout remvestment, of sufficient money m pm,nde for such payment, and when proper arrangements have been made by the Issuer vnth the Paying Agent/Registrar for the payment of its services unal all Defeased Bonds shall have become due and payable. At such nme as a Series 2004 Bond shall be deemed to be a Def'eased Bond hereunder, as aforesaid, such Series 2004 Bond and the interest thereon shall no longer be secured by, payable from, or Chaffed to the benefits of, the ad valorem taxes herein levied and pledged as provided in this Ordinance, and such pnncipal and interest shall be payable solely from such money or Defeasance Secunaes. Notwithstanding any other provision of this Ordinance to the contra,/, it is hereby provided that any determmaaon not to redeem Defeased Bonds that ~s made in conluncuon with the payment arrangements specified in subsecaon 15(a)(0 or (a1 shall not be Lrrevocable. provided that. (1) tn the proceedings provichng for such payment arrangements, the Issuer expressly reserves the fight to call the Defeased Bonds for redempaon. (2) the Issuer g~ves nonce of the reservation of that right to the owners of the Defeased Bonds ~rnme&ately following the malung of the payment arrangements; and (3) the Issuer du'ects that not~ce of the reservaaon be included un may redempnon nonces that ~t authorizes. -1,1- (b) Iaae~'a~at ia D~c~ Se~vna~r Any moneys so deposited wth the Pa~ng Agent/Regtstrat may at the wntmen directton of' the Issuer be ,nvested In Defeasance Secunttes, matunng in the amounts and t~mes as hereinbefore set f.orth, and all income imm such Defeasance Securities received by the Paying Agent/Registra~ that is not required for the payment of the Bonds and interest thereon, vnth respect to which such money has been so deposited, shall be turned over to the Issuer, or deposited as du'ected m wr, tmg by the Issuer. Any Future F. sctow Agreement pursuant to which the money and/or Defeasance Securities are held for the payment o£ Defeased Bonds may contort peovlsions pernutUng the investment or remvestment of' such moneys m Defeasance Secunt~es or the subst, tutmon of' other Defessance Secutitmes upon the sat~sF~cUon of the requirements specified in subsection 15(a)(~ or (l~. All income from such Defeasance Securities received by the Paying Agent/Re~sU'at which is not required for the payment of the De£eased Bonds, v,uth respect to which such money has been so deposited, shall be remitted to the Issuer ot deposited as directed m vn'iting by the Issuer. (c) D~a~r~c~ Secanae~ D~aea[ The term "Defeasance Securities" means (i) direct, noncallable obllgatmons of' the United States of' America, including obllgatmons that ate uncondltmonally guaranteed by the United States of'America., (ii) noncallable obhgat~ons of'an agency or ,nstrumentahty of. the United States o£ America, including obhgetmons that are unconditmonally guaranteed or insured by the agency or instrumentality and that, on the date of' the purchase thereof ate rated as to mvestment quality by a nat,onally recognized mvestment ratang f.irm not less than AAA or its equivalent, and (m) noncallable obl~at~ons of a state or an agency or a county, mumclpahty, or other polmcal subd,vlslon of'a state that have been refunded and that, on the date on the date the govemmg body of'the Issuer adopts or approves the proceedings authonzmg the tlnanclal arrangements ate rated as to investment quality by a nationally recognized investment rating finn not less than _A_AA or its equivalent. {cl) P~_~ ~,at/P,-~t$,0ur $~n~c~$. Unul all Defeased Bonds shall have become due and payable, the Paying Agent/Registrar shall perform the sennces of Paymg .A. gent/Regtstrar for such De£eased Bonds the same as if they had not been def'eased, and the Issuer shall n~ke proper arrangements to provide and pay for such sennces as required by th,, Ordinance. (e) ~'~c~oa ffB0#~k~r Dffe~r~c~. In the event that the Issuer elects to def.ease less than all of'the principal amount of'Bonds of' a maturity, the Paying Agent/Reg~strat shall select, or cause to be selected, such amount of'Bonds by such random method as it deems f'-,r and appropriate. 16. BOOK-EN'I'ItY ONLY $YS-I-~M. That the Series 2004 Bonds m,ually shall be issued and debvered in such manner that no physical dlsmbution of' the Series 2004 Bonds will be made to thc public, and The Depository Tnast Company ("DTC"), New York, l~ew York, Imt~ly,anll act as depository for the Series 2004 Bonds. DTC has represented that it is a limited purpose trust company mcorporated under the laws of: the State of' New York, a member of' the Federal Reserve System, a "cleanng corporauon" within the meaning of' the New York Uniform Commercial Code, and a "cleanng agency" registered under Secuon 17~ of' the $ccutitmcs Exchange Act of' 1934, as amended, and the C,ty accepts, but in no way venBes, such representations. The Series 2004 Bonds mltaally authoneed by this Ordinance ~ntended to be held by DTC shall be del,vered to and registered an the name of'CF. DE & CC)., the nominee of'DTC. It is expected that DTC wall hold the Series 2004 Bonds on behalf of the Undetwmers (as defined in Secuon 10) and their pamcipants. So long ~s each Series 2004 Bonds Is registered In the name of CEDE & CO., the Palqng Agent/Registrar shall treat and deal with DTC the same m all respects as if it were the actual and beneficial owner thereof. It is expect~x] that DTC will maintmn a book-entry system which will identify ownership of the Series 2004 Bonds m integral amounts of $5,000, with transfers of ownership being effected on the records of DTC and its parUclpants pursuant to rules and regulations established by them, and that the Scnes 2004 Bonds mmally deposited with DTC shall be lmmobdlzed and not be further exchanged for subsftute ~nes 2004 Bonds except as hereinafter provided. The City is not responsible or l,~ble for any funcuons of DTC, will not be responsible for palnng any fees or charges with respect to its services, will not be responsible or liable for maint',umng, supervising, or reviewing the records of DTC or its p~r'acipants, or protecUng any interests or rights of the beneficial owners of the Series 2004 Bonds h shall be the duty of the DTC Pamclpants, as defined in the Official Statement here,n approved, to make all arrangements with DTC to establish this book-entry system, the beneficial ownership of the Series 2004 Bonds, and the method of paying the fees and charges of DTC. The City does not represent, nor does it m an)' way covenant that the initial book-entry system established with DTC will be maintained in the future. Notwithstanding the mmal establishment of' the foregoing book-entry system with DTC, if for any reason any of the onginally delivered Series 2004 Bonds is duly filed with the Paying Agent/Reg~slrar with proper request for transfer and subsntution, as prowded for in this Ordinance, subs,tute Series 2004 Bonds will be duly dehvered as provided in this Ordinance, and there will be no assurance or representauon that any book-enwy system will be mainlmned for such Series 2004 Bonds in connecnon with the initial establishment of the foregoing book-entry system with DTC, the City heretofore has executed a "Blanket Letter of Representations" prepared by DTC in order to implement the book-entry system described above. 17. REASONS FOR REFUNDING. That the Cay is refunding the Refunded Oblgations to produce a net present value savings of $ and a gross savings of $ 18. ESCROWAGREEMENT. That concun-enfly with the dehveW of the Bonds the Caty shall cause to be deposited with the "Escrow Agent" named m the hereinafter descnbed Escrow Agreement, from the proceeds from the sale of the Bonds and other avialable moneys of the City, all as described in the letter of instmctlons referred to in Section 20 hereof, an amount sufficient to prowde for the refunding of the Refunded Obligations m accordance v~th Chapter 1207, Texas Goveromenr Code. The City Manager and City Sccreim'y are hereby authorized, for and on behalf of the City, to execute an "Escrow Agreement" with the aforesaid E~crow Agent to accomphsh such purposes, in substantially the form and substance attached to this Ordinance. 19 REDEMPTION OF REFUNDING OBLIGATIONS. That the City hereby determines that, sublect to the delivery of the Bonds, the Refunded Obhgations shall be called for redemption on the dates, and at the applicable redemption price to the date fixed for redemption, as provided in Schedule I attached to this Ordinance, all in accordance with the applicable provisions of the ordinances authonaing the issuance of the senes of the Refunded Obbgations The City Manager or the designee thereof' shall take such actions as are necessary to cause the required notice of redemption to be given in accordance with the terms of the ordinance anthonzmg the Issuance of the Refunded Obligations called for redemption 20. USE OF BOND PROCEEDS. That the proceeds from the sale of the Bonds shall be used in thc manner described m a letter of mstrucuons prepared by the City or on behalf of' ga¢ CLty -16- by the City's financ,,I advisor. The foregoing notwithstanding, proceeds representing accrued interest on the Bonds shall be deposited to the crecht of the Interest and Sinking Fund, and proceeds representing premmm on the Bonds shall be used in a manner consistent w~th the provisions of Section 1201.029, Texas Government Code Any amounts remmnmg after complenon o1: the ,mprovements described in clause (~ ofSectlon I hereof shall be transferred FIRST to the Rebate Fund, to the extent required by Section I1 hereof, and THEREAI~-I'ER to the Interest and Sinking Fund. 21. OFFICI~I-~ AUTHORIZED TO ACT ON BEHALF OF THE CITY. That the Mayor, the C. lty Secretary, the City Manager, any Asslstimt City Manager or the Director of Fiscal Scrvaces of the City, and all other officers, employees, and agents of the City, and each of them, shall be and they are hereby expressly authonzed, empowered, and directed from t~me to time and at any time to do and perform all such acts and things and to execute, acknowledge, and deliver in the name and under the seal and on behalf' of the City all such instruments, whether or not herein mentioned, as tiny be necessary or desirable in order to carry out the terms and provisions of this Ordinance, the Bonds, the offering documents prepared in connecnon with the sale of the Bonds, or the Payln§ Agent/Registrar Agreement. In case any officer whose signature appears on any Bond shall cease to be such officer before the delivery of such Bond, such signature shall nevertheless be valid and sufficient for all purposes the same as if he or she had rems,ned in office until such delivery. 22. PRRAMBI.~. That the preamble to this Ordinance is incorporated by reference and made a part hereof for all purposes 23. MISC£I.IANEOUS PROVISIONS. (a) Titles Not Restrictive. That the tides assigned to the various sections ofth~s Ordinance are for convenience only and shall not be considered resmcl~ve of the sublect matter of any sec~on or of any part of this Ordinance. (b) Rules of Construction. The words "herein", "hereof" and "hereunder" and other words of similar import refer to this Ordinance as a whole and not to any pamcular Section or other subdivision. Except where the context othetvflse requires, terms defined in this Ordinance to Imp~rt the singular number shall be considered to include the plural number and vice versa. References to any named person means that party and its successors and assigns References to any constltu~onal, statutory or regulatory provision means such provision ~s It exists on the date this Ordinance is adopted by the City and any future amendments thereto or successor proxqslons thereof Any reference to the payment of pnnclpal in this Ordinance shall be deemed to include the payment of any mandatory sinking fund redemption payments as may be descnbed harem. References to the FORM OF BOND in this Ordinance refer to the FORM OF BOND set forth in Exhibit A to this Ordlnauce. (c) Inconsistent Provisions. All orders and resolu~ons, or parts thereof, which are In confhct or mcousLstent with any provision of this Ordinance are hereby repealed and declared to be mapphcable, and the proxqsions of this Ordinance shall be and remain controlling as to the matters prescnbed herein. id) Severability If any word, phrase, clause, paragraph, sentence, part, pomon, or provision of this Orchnance or the apphcataon thereof to any person or circumstance shall be held to be invalid, the remmnder of this Ordinance shall nevertheless be valid and the City hereby declares that this Ordinance would have been enacted without such invalid word, phrase, clause, paragraph, sentence, part, pot'non, or pro~nslons. (e) Governing Law. This Ord,nance shall be construed and enforced in accordance vnth the laws of the State of Texas (f) Open Meeting. The City officially finds and determines that the meeting at which this Ordinance ,s adopted was open to the public, and that public notice of the nme, place, and purpose of such meeting was g~ven, all as required by Chapter 551, Texas Government Code. (g) Immediate Effect. In accordance with the pro.nslons of Secuon 1201.028, Texas Government Code, this Ordinance shall be effeeuve immediately upon its adopnon by the City Council PASSED AND APPROVED this April 29, 2004 City SecretatT, City of College Station, Texas (CITY SEAL) APPROVED: McCall, Parkhurst & Horton L L P. Bond Counsel SCHEDULE ! DESCRIPTION OF REFUNDED OBLIGATIONS The following obhsauom are the "Refunded Obhgal~ons", as defined m the Ordinance: CITY OF COLLEGE STATION, TEXAS GENERAL OBLIGATION AND REFUNDING BONDS, SERIES 1991, all obligations matunng on Februa~ 15 m each of the years 2010 through 2012, reclusive, aggregating $750,000 m pnnctpal amount; REDEMPTION DATE,. July I, 2004; R~'-DEMPTION PRICE: par plus accrued interest. CITY OF COfJ-FGE STATION, TEXAS PUBLIC IMPROVEMENT AND REFUNDING GENERAL OBLIGATION BONDS, SERIES 1994, ali obl~attons matunng on February 15 tn each of the years 2005 through 2014, reclusive, aggrega~ang $2,750,000 in pnnclpal amount;, REDEMPTI ON DATE: July 1,2004; RR~EaMTtrION PRICE. par plus accrued interest. CITY OF COLLEGE STATION, TEXAS GENERAL OBLIGATION BONDS, SERIES 1995, all obhgauons matunng on February 15 in each of the years 2006 through 2013, inclusive, aggregaung $2,650,000 in prmcapal amount; REDEMPTION DATE. February 15, 2005; REDEMPTION PRICE. par plus accrued interest. EXHIBIT A NO. UNITED STATES OF AMERICA STATE OF TEXAS C1TY OF' COLLEGE STATION, TEXAS GENERAL OBLIGATION IMPROVEMENT AND REFUNDING BONDS, SERIES 2004 ORIGINAL ISSUE DATE CUSIP May I, 2004 ON THE MATURITY DATE SPECIF.IED ABOVE, THE CITY OF COLLEGE STATION, TEXAS (the "Issuer"), a home-rule mumopahty located Brazos County, Texas, hereby promme$ to pay to or to the registered assignee hereof (either being hereinafter called the "regmered owner") the pnnc,pal amount of: DOr.~ 4RS and to pay interest thereon, from the Otaginal Issue Date specified above, to the maturity date specified above, or the date of its redempuon prior to scheduled maturity, at the rate of interest per annum specified above, with said mtexest being payable on February 15, 2005, and semiannually on each August 15 and February i 5 thereafter;, except that if the PaymgAgent/Regtstraffs Authentieauon Ceru£- icate appearing on the face of th,s Bond ,s dated later than February 15, 2005, such ,nterest ,s payable sermannu.lly on each August 15 and February 15 following such date. THE PRINCIPAL OF AND INTEREST ON this Bond are payable in lawful money of the United States of America, without exchange or collection charges. The principal of this Bond shall be paid to the registered owner hereof upon presentation and surrender of thts Bond at matonty or redemption prior to maturity at the designated corporate trust office in Dallas, Texas (the "Designated Payment/Transfer Office'S, of JPMorgan Chase Bank, which is the "Paying Agent/Registrar" for this Bond The payment of interest on this Bond shall be made by the Paying Agent/Registrar to the registered owner hereofas shown by the Registration Books kept by the Paying Agent/Registrar at the close of business on the last business day of the month next preceding such interest payment date by check, dated as of such interest payment date, drawn by the Paying Agent/Registrar on, and payable solely from, funds of the Issuer required to be on deposit w~th the Paying Agent/Registrar for such puqaose as hereinafter provided; and such check shall be sent by the Paying Agent/Registrar by United States mail, fit'st-class postage prepaid, on each such interest payment date, to the registered owner hereof at its address as it appears on the Registration Books kept by the Paying Agent/Registrar, as hereinafter described Any accruad interest duc at maturity ot upon redemption of th~ Bond prior to maturity as prodded hereto shall be pad to the registered owner upon presentation and surrender of this Bond for redempnon and payment at the Designated Payment/Transfer Office of the Paying Agent/Reg~su-ar. The Issuer covenants with the registered owner of thcs Bond that no later than each pnnclpal payment and/or interest payment date for th~s Bond it vail make av~ulable to the Paying Agent/Regtstrar from the Interest and Sinking Fund as defined by the ordinance authorizing the Bonds (the "Ordinance") the amounts required to provide for the payment, zn immediately available funds, of all pnnopal of and interest on the Bonds, when due IN THE EVENT OF A NON-PAYMENT of interest on a scheduled payment date, and for 30 days there'after, a new record date for such interest payment (a "Special Record Date") vail be estahhshed by the Paying Agent/Registrar, if and when fonds for the payment of such interest have been received from the Issuer Nonce of the Special Record Date and of the scheduled payment date of the past due interest ("Special Payment Date", which shall be ! 5 days after the Special Record Date) shall be sent at least five business days prior to the Spec~ Record Date by Umted States mall, first class postage prepaid, to the address of each registered owner ora Bond eppeanng on the reg~stranon books of the Paying Agent/Regcstrar at the close of business on the last business day next preceding the date of mailing of such nonce. IF'rI-IE DATE for the payment of the pnnclpal of or interest on thcs Bond shall be a Saturday, Sunday, a legal hohday, or a day on wh,ch banlang msntunons in the city where the Designated Payment/Transfer Office of the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal hohday, or day on which banking restitutions are authorized to dose; and payment on such date shall have the same force and effect as if made on the ongmal date payment was due. Notwithstanding the foregoing, durmg any period in which ownership of the Bonds is determined only by a book entry at a securines depository for the Bonds, any payment to the secunnes depository, or its nominee or registered ass,gas, shall be made in accordance w~th existing arrangements between the Issuer and the secunties depository THIS BOND ~s one ora Series of Bonds ofhke tenor and effect except as to number, principal amount, interest rate, maturity and option of redemption, authorized in accordance w,th the Constitu- tion and laws of the State of Texas in the pnncapal amount of $13,325,000, for the follovnng purposes, to-mt' to construct street improvements, traffic safety system ~,nprovements, parks and recreanon ~mprovements, municipal complex improvements and fire stauon anprovements, to refund the C,ty's "Refunded Obhganons" (as such term cs defined in the Ordinance); and to pay the costs recurred m connecuon with the issuance of the Bonds. ON FEBRUARY 15, 2013, or on any date thereafter, the Bonds of this Sertes matunng on February 15, 2014 and thereafter may be redeemed prior to their scheduled matunues, at the opuon of the Issuer, in whole, or in part, at par and accrued interest to the date fixed for redempnon The years of maturity of the Bonds called for redempnon at the option of the Oty prior to stated maturity shall be selected by thc City. The Bonds or porUons thereof redeemed within a maturity shall be selected by lot or other method by the Paying Age n t/Regcstrar;,~r~t~&d, that dunng any period in which Ownersfup of'the Bonds is determined only by a book entry at a secunUes depository for the Bonds, if fewer than all of the Bonds of the same matumy and beanng the same interest rate are to be redeemed, the parucular Bonds of such maturity and bearing such interest rate shall be selected in accordance w~th the arrangements between the Issuer and the secunues deposztory. AT I.I~-/kST ~0 days pnor to the date fixed for any such redemption a written nonce of such redemption shall be g~ven to the registered owner of each Bond or a pomon thereof being called for redemption by depnsllmg such not, ce in the Umted S~ates ma~l, first-class postage prepiud, addressed to each such registered owner at hss address shown on the Re~straUon Books of the Paying Agent/Registrar By the date fixed for any such redemption due provision shall be made by the Issuer with the Pa~nng Agent/Registrar for the payment of the required redempuon pr,ce for this Bond or the pomon hereof which ~s to be so redeemed, plus accrued interest thereon to the date fixed for redempuon. I£ such not,ce of redempuon ,s g~ven, and ,f due provision for such payment is made, ,11 as provided above, this Bond, or the pomon hereofwluch is to be so redeemed, thereby automatically shall be redeemed prior to its scheduled maturity, and shall not bear interest after the date fixed for ,ts redempnon, and shall not be regarded as being outstanding except for the right of the registered owner to receive the redempuon price plus accrued interest to the date fixed for redemption from the Paying Agent/Registrar out of the funds prowded for such payment. The Pa~nng Agent/Reg~s~ar shall record m the Registration Books all such redemptaons of pnncIpal of thls Bond or any poi'son hereof. Ifa portion of any Bond shall be redeemed a subsmute Bond or Bonds having the s~une marunty date, bearing interest at the same rate. in any denormnation or denominations in any integral multiple of $5,000, at the written request of the registered owner, and in a~geegate pnnopal amount equ~l to the unredeemed poruon thereof, will be issued to the registered owner upon the surrender thereof for cancellanon, at the expense of the Issuer, all as prov,ded m the Ordinance ALL BONDS OF THIS SERIES are Issuable solely aa fully registered bonds, vathout mtexest coupons, m the denominauon of any integral multiple of $5,000. As pro,nded in the Ordinance, this Bond, or any unredeemed portson hereof, may, at the request of the reg~tered owner or the assignee or assignees hereof, be ass,gned, transferred, and exchanged for a hke ~ggregate pnnc~pal amount of fully registered bonds, vathout ,nterest coupons, payable to the appropriate registered owner, assignee, or assignees, as the case may be, having the same maturity date, and beanng interest at the same rate, in any denomuaauon or denomuaauons ua any uategral muluple of $5,000 as requested in writing by the appropriate registered owner, ass,gnee, or assignees, as the case may be, upon surrender of this Bond to the Payuag Agnnt/Regtstrar at its Designated Payment/Transfer Office for c'ancellat~on, all m accordance w,th the form and procedures set forth m the Ordinance. Among other requ~ements for such assignment and transfer, th,s Bond must be presented and surrendered to the Payuag Agnnt/Reg- tslrar, together with proper instruments of assignment, in form and xwth guarantee of signatures sausfactory to the Paying Agent/Registrar, evidencing assignment of this Bond or any pomon or pomons hereof,n any integral multiple of $5,000 to the assignee or assignees ,n whose name or names th~s Bond or any such poruon or poruons hereof is or are to be transferred and registered. The form of Ass,gnment pnnted or endorsed on this Bond ma), be executed by the registered owner to evidence the assgnment hereof, but such method ,s nor exclusive, and other mstzuments of assignment saus~ctory to the Paying Agent/Reg~strac may be used to evidence the assignment of'th~s Bond or any pomon or pomons hereof from time to nme by the registered owner. The one requesUng such exchange shall pay the Paying Agent/Reg~strar's reasonable standard or customary fees and chasges for exchanging any Bond or poHaon thereof. The foregoing notwithstanduag* in the case of the exchange ora pomon ora Bond which has been redeemed prior to maturity, as provided hereto, and in the case of the exchange of an ass,gned and transferred Bond or Bonds or any pomon or pomons thereof, such fees and charges of the Paying Agent/Registrar wgl be prod by the issuer. In any circumstance, neither the Issuer nor the Paying Agent/Registrar shall be required (1) to make any transfer or exchange dunng a period beginning at the opening of business 30 days before the da)' of the first reading ora nonce of redempuon of Bonds and ending at thc close of business on the day of such reading* or (2) to transfer or exchange any Bonds so selected for redempuon when such redempUon is scheduled to occur wlthua 30 calendar days. WHENEVER the benefloal ownership of th~s Bond is determined by a book entry at a securmes depository for the Bonds, the foregoing requirements of holding, delivering or transfemng Bond shall be modified to require the appropriate person or enmy to meet the requirements of the secunues depository as to reg~stenng or transfemng the book entry to produce the same effect IN THE EVENT any Paying Agent/Reg~stras for the Bonds is changed by the Issuer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in the Ordinance that It promptly wll appoint a competent and legally qualified substitute therefor, and promptly w~ll cause written nouce thereof to be totaled to the rel~stered owners of the Bonds. IT IS HEREBY CERTIFIED AND RECITED that thc zssuance of this Bond, and the series ofwhmh it is a part, is duly authorized by law, that all acts, con&t~ons and things required to be done precedent to and in the ,ssuance of this series of bonds, and of th,s Bond, have been properly done and performed and have happened m regular and due t~me, form and manner as requared by law; that sufficient and proper previa,on for the levy and collection of'ad valorem taxe~ has been made, which, when collected, shall be appropriated exclusively to the payment of this Bond and the series of which it ,s a part;, and that the total indebtedness of the City of College Station, Texas, including the entire series o£ bonds of which this is one, does not exceed any constRuuonal or statutory hmitaaon. BY BECOMING the registered owner of this Bond, the registered owner thereby acknowledges all of the terms and provisions of the Or&nance, agrees to be bound by such terms and provtslons, acknowledges that the Ordinance ,~ duly recorded and avmlable for mspecaon m the official minutes and records of the governing body of the Issuer, and agrees that the terms and provisions of this Bond and the Ordinance consutute a compact between each regtstered owner hereof and the Issuer. IN WITNESS WHEREOF, the City has caused this Bond to be signed by the manual or facsmallc signature of the Mayor of the City and countersigned by the manual or facsimile signature of the City Secretary of the City, has earned the officaal seal of the City to be duly impressed, or placed in facsanlle, on this Bond. City Secretary City of College Station, Texas City of College Statton, Texas (SE~) FORM OF PAYING AGENT/PEG ISTRAR'S AUTHENTICATION CERTIFICATE: PAYING AGENT/REGIS'rRAR'S AUT[IIgNTICATION CERTIFICATE It is hereby cemfied that this Bond has been issued under the pro~ns,ons of the proceedings adopted by the Issuer as described m the text of this Bond; and that this Bond has been issued ,n conversion of and exchange for or replacement of a bond, bonds, or a poruon of a bond or bonds of an issue which originally was approved by the Attorney General of the State o£Texas and registered by the Comptroller of Pubhc Accounts of the State of Texas Dated: J'PMORGAN CHASE BANK, Pa~nng Agent/Reg~sWar Authorized Representauve FORM OF coMrq'ROIJ2,R'S CERTIFICATE (ATTACHED TO THE BONDS UPON INITIAL DELIVERY THEREOF): OFFICE OF COMPTROLLER STATE OF TEXAS REGISTER NO. i hereby cerufy that there is on file and of record m my office a ceruficate of the Attorney General of the State of Texas to the effect that this Bond has been examined by him as required by law, and that he finds that it has been ,ssued ,n conformity with the Consumuon and laws of the State of'Texas, and that ,t ~s a vahd and b,n&ng obhganon ofthe C,ty of College Station, Texas, payable m the manner pro,haled by and m the ordinance authorizing same, and said Bond has th~s day been registered by me. WITNESS MY HAND and seal of office at Ausun, Texas Comps'oiler of Pubhc Accounls of the State of Texas FOR VALUE RECEIVED, FORM OF ASSIGNMENT. ASSIGNMENT the underssgned hereby sells, ass~ns and uansfers unto Please insert Social Security or Taxpayer Idenuficauon Number of Transferee / / (Please pnnt or rypewnte name and address, including zip code of Transferee) the within Bond and all rights thereunder, and hereby irrevocably consUtutes and appoints attorney to rel~ster the transfer of the vathin Bond on the books kept for reg~strauon thereof, with full power of subsmuuon ,n the premises. Dared' Signature Guaranteed: NOTICE: Signature(s) must be guaranteed by a member firm of the New York Stock Exchange or a commerc,al bank or u'mt company. NOTICE: The signature above must correspond vath the name of the Registered Owner as it appears upon the front of this Bond in every particular, without alterauon or enlargement or any change whatsoever. The pnnter of the Series 2004 Bonds is hereby authorized to print on the Series 2004 Bonds 0) the form of bond counsel's opinion relaung to the ,genes 2004 Bonds, and 00 an appropriate statement of insurance furnished by a municipal bond insurance company prov~chng municipal bond insurance, if any, covenng all or any part of the Series 2004 Bonds DESCRIPTION OF ANNUAL FINANCI.~L INFORMATION The following informanon is referred to in Secuon 14 of this Orchnance. Annual Financial Statements and Operating Data Exhibit B to Oraln~nce The financial information and operating data with respect to the City to be provided annually in accordance with such Section are as specified be]ow (and included in the Appendix or under the headings of the Official Statement referred to): 1. The "Audit Report" for the most recently concluded fiscal year. 2. The in£ormatlon included in the Official Statement under the following captions, but for the most recently concluded fiscal year: Tables 1 through 6 and Tables 8 through 13 and Appendix B Accounting Prineiple~ The ~ccounting pnnoples referred to in such Section are the accounting pnnciples descnbed in the notes to the financial statements referred to in paragraph 1 described above, as such pnnciples may be changed from tune to time to comply vath state law or regulation. I'R£1olMI,'%AR't OF[ ICI 4 L STA1 I' rslE~ I Dated April 22, 2004 Ratings: Mondy'l: "Applied for" S&p: "Applied foP' See ("OTHER INFORMATION. NEW ISSUE - Book-Entry-Only I~TrNGS' herein) In the opmron of Bond Coufl~el. interest on the Obl~gunom will be excludoble from gros~ taco;ne for /ederal I~come tar purpnxe~ urn/er exurrag Iww: subject to the marters descrrbed under ' T/iX MJ~f£~$" Aerem. mc&drag the alrcmanve ;rnnmram ~wc on TIIE BONDS WILL NOT BE DESIONATED AS "OUALIFIED TAX-EXEMPT BONDS" FOR FINANCIAL INSTITUTIONS CITY OF COLLEGE STATION, TEXAS (a Home-Rule City located In Brizsu County, Texas) $13,~1S,000' GENERAL OBLIGATION IMPROVEMENT AND REFUNDING BONDS SERIES 2004 $9,31 S,000 CERTIFICATES OF OBLIGATION SERIES 2004 OutedDnte: May 1,2004 Due: Februiry IS, ax abown below The S13.235,000' City of College Statton, Texas, General Obhgetton ImpmvamanL and Refunding Bonds, Sencs 2004 Ithe "Bonds") and the S9,315,000 Ctty of College Stntton, Texas, Cemficatee of Obhgatton (the "Cernficab:s") are bemg tssund by the Ctty of College Station, Texas (the "Ctty"~ pursuant to the terms of two sepurate ordinances adopted by the gevertnng body of the City The Bonds and the Cefltfictnee arc ~e~m'nd to beton cnlleeuvely es ~ "Obhgettnns" The Obhgettons are tssuable only tn fully repstercd form tn the deonmmanon of' $5,000 pnuc~pul amount or mtegnd raultiplcs thereo~ onttnlly regtsternd solely rn thc name of Cede & Co. as rcgmercd owner and nemtnee for The Dapucttory Trust Company ("DTC"L New York, New York, ucttng es seeunttee deposttory for the Obhgettons, onttl DTC ~stgns or ts thsehetged. The Obhgettons rmtmlly Mil be evadable to purchasers in bonk-oney-form only So long as Cede & Co ~s the regtstcrnd owner of the Agent/Regtse'ar") will pay the Imuc~pal of and interest on the Obhgetmuc to Cede .5 Co, which will, In tam, reont such amounts to DTC perttc~pams for subsequent d~sburaeraant to the benefictul owne~ of the Obhgettons August I$ and Febmm'y l$ thereafter u.ntt] maturity or early redemptton Interest on tho Obhgabons will he calculated on the hesm ofn 360 day year ¢onmstmg of twelve 30-day months The City reserves the nghL et its opnon, to redeem Obhget~ons having stated raatunttes on and after Fabraa~ 15. 2014. m whole or m -- m pnnctpal amounts of S$.000 or any rategral muh,ple thee'oaf, on Febra,ty l$. 20]3. or nay, therent~er. ,t the par value thereof plus need'ned tnterest to the date of rndemptton (see "TILE OBLIOATIONS - OPllONAL REDEMPTION") SEE MATURITY SCHEDULE, INTEREST RATES, AND YIELDS ON INSIDE COVER The Obhgattons are payable from ed valorem t~xes levsed ~tnst nil taxable property in the City. Mthtn the legal hmtts presenbnd by lew The Cert~fieetes are ndthnonally payuble I'mm a ~bordtnate hen on nnd pledge of $1,000 of the sorpluc rcvenuas of the City's combtnnd utzhty system (see "THE OBLIOATIONS - SEcue. rrY AJ~O SOURCE OF PAYMENT." and "TAX P~.TE LIMITATIONS"} The Obhgenons are offered fur dehvery, when issued, and ~ce~vnd by the Undenvnters thereof and subJeCt to the op~mon of the Attorney General of the State of Texas and the oponon of McCall. Parldrarst & Honon L L P. Dallas. Tunas. Bond Counsel for the C~ty (see "APPENDIX C = FORM OF OPINIONS OF BOND COUNSEL"} Cat,.ara legal mtn~ers will be passed upon for the Underwntem by Vrnson .5 Elktns L L P. Houston. Texas, counsel for the Undenvntees It ~s expected that the Obhgettons will be evadable t'or dehvery through the servscas o1' DTC on or about May 20. 2004 Coastal Securities A.G. Edwards & Sons, Inc. RBC Dain Rauseher Southwest Securities * Prehonntny. subJeCt to change MATURITY SCHEDULIrS~ INTEREST RATg5 AND YIELDS SI3.235,000' General Obligation lmpFovement and Refunding Bonds, Series 2004 Yteld % S9~31S,000 CeFtiflcat~s of Obligation, Series 2004 Yteld CUSIP Nm have been ass~ned to tha Obhgnt:o~ by ~he CUSIP Sa~ice Bureau ~nd sr~ ]nclud~d solely for the convemmce of * Prehrmnar~, subJeCt to chnnge For parlmSg~ of cernpltonce with Rule I $c2-12 of II~ &,cuntte~ trad ~ Comm~ton. ar arnmah~ and In e.~ect on the dale dacument comt, tuau a Ptellmtr~ O~'w~ Su~meot of the C'I~ wtth reneer to the Bonds that Am been deemed "final" by the Cm' date e:tcept ~or the ommton of no more than the mforrnatton pt. nmttod by Rule I$c2-12 17fu O~tal Sttttetneto, whtclJ mclttdez the cover page and the ,'ll~ndlcet hereto, tfoet not cottTtttuto an o,~er to aell or the ~ollcttotton of an offer to buy tn any jurtsa~ctInn to ~v I, Wrgon to wl~om tt At unlawful to make tuch o~er. $oltcltotton or tale No dealer, broker. sale~person or other perzon Im~ been aotbun:ed to gme Infornmtton or to maim any repte~entaBon other titan tIaa~ contatned tn tht~ O,O~ctal Statement. an~. tf glve'n or made ~uch other reformation or reprm~totmn~ ma~t not he rehfvl upon ~ tnformatton setfortlf hetem Aar be~n obtotMIfrom tile Ctiv and other sources hehev~;l to he tellable, but such mformatton t~ not guaranteed as to accuracy or cornpletme~t ana~ t~ not to he con~trued a~ the promise or guarantee of the Ftnanctal Advisor OJ~ctal Statorncnt contamt, tn part. e~ttmates and rnatter~ of opinton wAtclf are not intended ~,~ ttotomentt off act. and no repre. Motatton t~ made a~ to the correctoe~ of ~uch e~ttrnat~ and opmtor.~ or thot thqy will he reahzed CUSIP humbert Itave been oJ$~ned to t~ue by tbu CUSIP Servtce Bureau. and ant mcbuJed solely for the convetoence of tiM ovo~erz of the Obllgotlon~ IVetther tire Ctty tim Fmanctal 4dv~or nor the Underwrttort almll be re~l~Ol~tble for the telectton or cotrectn~ts of the CUSIP numbers $l~o~ on tim tnFtde cover gage ~ mforrnotton and e~prg~tota~ of opmton contained h~rem ate ~ubject to cbung~ wttItoot nottce. ~ nettber the dehvery of O,~¢lal Statement nor an)' sale made hereunder wtll. under an). clrcum.~tances, create an). tmIdtcotlon tltat there Ires been no changu tn Ihe affatn of the Cttv or other rnattors d~$crtbed In ,onn~ctton wltA tht~ oJfermg the Under~rttor$ may over-allot or e,~ct trdtudctton~ winch ~tobtl~e the market prtce of tAe ~tsue at a level above tbut wl~tch mtght otherwrse pr~atl tn the opon mm,het SucA stabtlt~mg. If comrnenc~ mm be dt~contmued at an) ttrde TABLE OF CONTENT~ CITY OFFICIALS, STAFF AND CONNULTANTS...vi ELECTED OESIC~ALS VII SELECTED ADMINISTRATIVE ~I'AFF VII CONSULTANTS AND ADVISORS VII INTRODUCTION ...................................................... PLAN OF FINANCING ............................................ SOURCES AND USES OF PROCEEDS 2 THE OBLIGATIOI~S ................................................... 2 TAX II~ FORMATION ................................................... 6 TABLE I - VALUATION. EXEMPTIONS AND GENERAL OBUGATION DEBT 9 TABLE ~ - TAXABLE ASSESSED VALUATIONS BY CA~aO~¥ 10 TABLE 3 - VALUATION &ND (.~IINL~AL OBLKi~TION ~EBT ]~STORY . I ] TABLE 4 - TAX R~., LEV~ ~r~ COLL~ON ' HISTORY .1 I TABLE 5 - TEN LABGEST TA.'~AV~E$ I I TABLE 6 = TAX ADEQUACY 12 TABLE 7 - ESTIMAYED OVERLAPPING DEBT DEBT INFORMATION ............................................. 13 TABLE 8 - ]~o-FORMA AD VALOREM TAX SERVICE RI~QtBI~.MEN~J I TABLE 9 - hV~KEST AND SINKING FUNI~'BUD~Er PRO~C'ilON I TABLE 10 - AU~rIORI~EDIN. r['UNISEOEDTAXBONDS 14 FINANCIAL INFORMATIOI~, ................................... TABLE I I - (3ENEEALFUNDREVENUESAND EX~D~rUEE H~STOB¥. I TABLE 12 - MUmC~pAt SALES TAX H~sruR¥ 16 INVESTMENTS .......................................................... I? TABLE 13 - CURRENT INVESIMENI~ I TAX MATTRRS ...................................................... 19 OprmoN 19 FEDERAL INL"OME TAX AL"COU~TING TREATMENT OF COL L~IT~a~L FEDKBAL INCOME TA.X CONESQ UENCE$ 20 STA~,~ LOCAL AND FURE~ON TA~S 20 CONTINUING DI~2'LO~URE OF II~FOI~IATION OTHER INFORMATION .................................... 22 RATmC~ 22 R~,sn~noN ~ QU~LanCAnoN O~ LE6At INV~S~m~rE ~ EL~am~Lrrv TO SBCURE PUBLIC FUNDS IN T~.AS .. 22 LEC~L OPtmON$ 22 InFOnMA~ON . 23 FINANCIAL ADVISOR . 23 UNDEBWRrrEES 23 SCHEDULE OF REFUNDED BONDS ....................... APPENDICES The cowr pag~ hereof, th,s pa~, ~h~ aPl~nd~ccs mclud~ hereto and any addenda, Eupplem~nt or amendm~m h~-to, OFFICIM. STATEMENT SUMMARY This anm~ Is subject tn ali respects to the more complete mformahon and deFmtttons contatoed or maxpomtad ra tbs effete] Star. neat The off. ms of the Obhganons to potanttal mvcstore rs mede only by means of this enure Offczal Stoteraant No person ts euthortzed to detach thzs summeO, from tins Officrsl Statement or to other, vise use tt wlthralt the entire Offcrsl Statement THE CIT~ THE BOm)S TAX EY, r..Sn~ON Usg OF CERTIFICATE PROCEEDS The Ctty of College Stetton, Texas (the "Cfly") ts a pohttca] sulxlt..'lStOn and a home-nde ctty oftbe State. located tn Branos County. Texas Thc Ctty covers approxtmntely 41 square miles (see "INTRODUCTION - DsscalP'not~ OF CITy") The Bonds are mued as $13,235.000' Ctty of College Stanon. Texas General Obhgatton Improvement and Refvndmg Bonds, Senex 2004 The Bonds nrc tssued as semi bonds meturmg Febnmry 15. 2005 through February 15. 2024* {see "THE OBLIGATIONS - G£NERAt. DSSC~mON") The Certtficates are tssued as S9,315,000 Cfly of College Statton, Texas Cemficates of Obhgetton. Series 2004 The Ceraficates are t,~ued as aerial obhgnttous matonng Febranry 15, 2005 through FebmMy 15. 2024* (see "THE OBLIGATIONS - G~q~.AI. DnSClOWnON") Interest on the Obhgettons aeemas from May I, 2004. end ts payable Fchrum'y 15. 2005, and each August 15 and February 15 thereafter unttl maturity or prior redemptton (see "THE OBLIGATIONS -GaNERAL DESCR~rlON") The Bonds are rssued pursuant to the general laws of the State, paFttculasly Chapto- 1207 and Ch~pt~ 1331, Texas Government Code. end an ordmence passed by the Ctty Courted of the City The Cefltficatas me rssuod pursuant to the general laws of the State, pamculasly Subchapter C of Chapter 27L Texas Local Goveroment Code, as amended. Chapter I.'q02, as amended, Texas Government Code and an ordtnance passed by the City Council of the Ctty (see "THE OBLIGATIONS - Au'moal~, FOR ISSUAnCe") The Bonds onasttmte du~ct obhsattons of the Ctty, payable from the levy and onlleetton ora dm~'t and contmum~ ed valorem tax, wtthm the lunjts pfesonbed by law, on all taxable property located mthtn the City (see ''THE OBLIGATIONS - S£cuarr~ AM~ SOUltC~ OF PAYMENT") The Cemflcatas cousMute direct obhgattons of the Ctty. payable from a combmanon of(O the levy and onlleonon ofa duect and c~tmranS nd valorem tax, mdun the Imuts pr-~cnbed by law, on all taxable pfopony located mthm the CNty, and (ti) a suboldmate hen on and pledge of $1,000 of the smplus revenues derived from the Ctty's combined utthty system. (see 'THE OBLIGATIONS - SEc'up. try Alfa SOUP. CE OF PAYMnNT"} The Ctty reserves the right, at ~ts optfon, to redeem Obhgetlons bovmS stated rantunuex on and after Felm2my 15.2014, tn whole or m part m Imnctpal amounts of $5,000 or any tntesra] multsple thereof, on Febmmy 15, 2013. or any date thereafter, at the pm' value thereof plus accrued interest to the date of redemptton Isee "THE OBLIGATIONS - OPTiONAl. RnDEMPTIO~") In the optmon of Bond Counsel, the ane~st on th~ ObhF;mons mil be excludable fzmn groas raceme for fodend raceme mx pmpeees under existing law md the Obhsattous are not prtvate eet]vfly bonds See ''TAX MATfERS" for a thscumon of the opuuon of Bond Counsel, tncludmg a dcscnpuon of the altamelwe mmmmm tax eousequencus for cmpomnons. Proceeds from the sale of foe Bonds Mil be used to pay for the cost of {I ) drmonge mtprovements for grecnways. (2) constroct~on and ncqutsmon of and tmprovements to Cfly streets, traffic control systems, parks, end pubhc thctht~es, {3) refund eerlmn obhgattoDs oftbe Cfly dasorthed tn Schedule I to thts Offcml Statement (the 'Refunded Bonds"), and (4) to pay the costs tncun'ed tn connection wsth the tssuanee of thc Bonds (see "PLAN OF FINANCING - USE OF PROC~DS'} Proceeds from the sale of the Cemficates Mil be used to pay for the oust of(I) eonsUuetton of streets, dmmege tmprovements, street hght]ng, and wat~ and sew~ anprovements, (2) electric and wastewater uhhty projects, and (3) to pay the costs mcorred tn coouecaon wtth the tssuance oftbe Cemficates (see 'PLAN OF FINANCING - USa aP PROCEEDS") * Prehraum~, subJect to clmnge RATINGS SYSTEM, 'l'he presently outstanding tax supported debt of the Ctty is rated "Aa3" by Moody's Inveqtors Service, [nc ("Moody's") and 'AA-" by Stsndard & Poor's Rnt, n~s Services, a Dzvmon of The McOraw-Htll Companies, Inc ("S&P") The City also has other roues outstanding whsch are rated "Ann" by Moody's and "AAA" by SiP through Insurance by vinous comme~ml msurnnce companzes Apphent~ons ~'or ratmgs on the Bonds have been made to Moody's and S&P (see "OTI-IER INFORMATION - RA?mGS") The definzttve Obhgnt~ons Mil be mmally registered and deltvev~d only to Cede & Co, the nominee of DTC pursuant to the Book-Ent~-Only System described hereto Beneficial ownershzp of the Obliger,ohs may be acquzred m denommar]orts of $5,000 or :ntegml multiples thetL"of No phys,cal delivery of'the Obhgatzons will be rnnde to the beneficial owners thereof Pnncfpal of'and mterest on the Obhgatzons wzll be pey~lble by the Paying Agent/Registrar to C~le & Co, whtch will make dismbu,on of the nmoum~ so pard to the i~rticzpatmg members of DTC for subsequent payment to the benefieal owner~ of the Obltgattons (see "THE OBLIGATIONS - BG~K-ENTRY-ONL~r SYSTEM") The C~t~ hns never de faul~'d zn payment of tis general obhgntton mx debt v SELECTED F~N&NCIAL INFORMATION Per Cspzm Per Debt to Fzscn] Esun'~ted Tnxnble Taxable Capita T~txnble Percent Year Ended City Assessed Assessed Ad Valorem Ad Valorem Assessed Total 9/30 Populntmnm YaluaDon~2~ Vnltmt~on Tax Deb~J~ Tax Debt ValuaDon Collec~on 1999 66,200 $ 1.928,970,462 $ 29,139 '~ 39,$05,000 $ 597 205%. 99 1'7% 2000 68.038 2,194.620,399 32,256 56,655.000 833 258%. 9831%. 200l 70,075 2,315~362,362 33,041 $9,970.000 856 2 5900 100 10% 2002 70,308 2,489,$60.083 35,409 74,945,000 1,066 3 01%, 100 03%. 2003 72,500 2.723,565,453 37,566 75,695,000 1,044 2 7Sero 98 63°,0 2004 75,763 3,028,907,414 39,979 86,415,00014~ 1,141 14J 2 850,% f4~ i'o (I) Smm:e TheCsty (4! Projl~,ted, ~ncludes Ihe Oblsgatmm and excludes lite Refunded Bonds The CemficateJ are expeclnd to be Imzd f~om ut]hty fund revenues (5) In process ot'colJeebon GENERAL FUND CONaOLIDATen ~FATIU~e, NT 8UI~kRY Fro' Ftscal Year Ended Sept~,k-r 30 ~t, Unaudited 2003 2002 2001 2000 1999 Begmmn.~Enlnnce $10,111,225 S 9,432,700 $ 8,428,183 $ 7,809.532 $ 7,259,196 Total Revenue 28,157,582 26,269,679 24.355,204 22.732,090 20,733.466 Totnl Enpendltures 33,676,271 .11,675,353 28,806.157 26,977,25 ! 24.849,104 Other Ftnancmg Sources fUses) 6.657,799 6t084.199 5,455,470 4,863,812 4r665.973 EndmgEnlanee 211,250,335 m210'111'225 $ 9,432.700 $ 8,428fl83 $ 7,809.531 (I) ~ Czty's fu~n~m~ pohcxe! are f~- n General Fund balance of 15°4 of bnd~eted appropnaeons al year end To I~e os. tent ebat lite General 2003 Electnc $ 45,480,173 Water and Westewatet 16,552,584 Interest 1,076,079 O~her 2,013t489 Total Revenues $ 65,122,325 Total Expenses Net Avedable for Debt Servtce S 47ff785,550 S 17,336,775 For Ftscal Year Ended Se~t~mh,,, 30 2002 2001 2000 1999 $ 44.238,340 $ 42,290.635 $ 35,295,718 $ 32,561,234 16,024,595 15,118,463 15,696,095 14,276,533 1,858,545 2,787,779 2,467,905 1.$68,912 1~974r507 1.734~798 Ir940ff771 2,263,337 S 64,095,987 'S 61,931.675 S $5,400,489 $ 50.670,016 $ 46,274r555 $ 45.465,778 $ 37tl49,229 .$ 30,080,145 $ 17,821,432 $ 16.465,897 $ 18.251,260 $ 20~589,871 CITY OFFICI~ ! -q~ STAFF AND CONSULTANTS Lcnath of City Council Position Semce Term Expires ROU SiIvm Mayor 6 Years fl) 5/04 Anne Hnz~n Mayor Pro-Tern 6 Ynars 5/04 John Happ Councflmember 2 Year 5/04 Dennis Malouey Councllmember 5 Years S/OS James Massey Counedmemhnr 5 Years 5/05 Scott Mears Councllmember 2 Year 5/04 Robert Wanng Councflmember I Years 5/05 (I) Elected Mayor [] May 2002 Occu~tmn Retired Retired R N Ao~ort D~rector Pamun$ Contractor Director of Facility Coordlnatlou Du~ctor of Suppart Servzecs Vice Prealden!, Inves~nenls Thomas E Brymer Glen Brown John C Woody Charles Cryax Jeff Kerstefl Connie L Hooks City Manager As~lsmm C~ty Maouger Dir~ctor of Public Utdmas Dlreclor of Fiscal Servzces Budget D~reClor City Secretary Lou~b of Service To City 16 Ynar~" 4 Years I 7 Years 13 Yem,s 12 Years 18 Years Auditors Bond Coouscl Financial Advisor , For addtttou&l tn fonontlon regarding thc City, please contact Charles Cryan Director of Fiscal Services City of College Ste~ou [ 101 Texas Avenue College Station, Texas 77840 (979} 764-3552 Phone (979) 764-3899 Fax Ingrain, Wnlhs & Company Bryan, Texas McCall, Park. hum & Hortou L L P Dallas, Texas First Southwest Cou~pnny Houslou, Texas Firs~ Southwest Compnny or 1021 Mare Sucet, Suite 2200 Hoirstm~ Texas 77002 ( 713) 651 =9850 Phone (713) 6S4-8658 Fax vii PRELIMINARY OFFICIAL STATEMIrNT RELATING TO CITY OF COLLEGE STATION. TEXAS (u Rome-Rule City located In Bm Couaty., Texas) SI3,235,000' GENERAL OBLIGATION IMPROVEMENT AND REFUNDING BONDS SERIES 2004 S9,315,000 CERTIFICATES OF OBLIGATION SERIES 2004 INTRODUCTION This Official Statement, which includes the cover pages and Appendtces hereto, provides cormtn mformauon regarding the issunece of the $13,23S,000' City of College Station, Texas, General Obligation Improvement and Refunding Bonds, Series 2004 (the '"Bonds") and the $9,315,000 Ctt~./of College Stetion, Texas, Cefllficates of Obhgetton (the ,,Certzficates,,) The Bonds sud the Certificates are referred to berem collechvely as the "Obhgetions" Capitalized terros used tn this Of~cnd Statement, except as otherwise tndlcated herein, have the same mannings assigned to such terms tn the ordlnencas authorizing the issuance of the Bonds (thc "Bond Ordinance") and the Certificates (the "Cefltficate Ordinance"), respecttvely, to be adopted on the date of asia of'the Obhgntlons. The Bond OTdmance and the Certificate Ordtonnce are collectively referred to harem as the "Ordtonoces" There follows tn this Of~clal Statement de~oript~ons of the Obhgettons ond ceflam ntthrmatlon regarding the City ond tis finances All de~npttons of documents contained he~.ra are only sunmlanes and nra qunllfind tn their entirety by reference to eseh such document Copies olr such documents may be obnttnnd from the City's FJnnncfal Advtsur, Fil~t Southwest Company, Houston, Texas Dr~scRII,I'ION OF TIn~ CFr', The City ts n pohucal subdivision and municipal corlx)ratlon of the State, duly orgentzed end existing under the Inwa of the State, including the Ctty's Home Rule Charter The City wis mcolporatnd tn October 1938, ond first ndoplnd its Home Rule Chaffer tn Ontober 1938, whtch was last amended in May 1992 The Cit~ operates under n Councd/Clty Manager form of government with a City Conoctl comprtsed of the Mayor and stx Councllmemhers. Some of the serv]ecs that the Ctty provides are public safety (pohce and fire protectton), highways and streets, elecmc, water and santmTy sewer utfllttes, health and social ~'Yices, cu[tore-recreutton, pubhc translMrmtton, pubhe Improvements, plzonrag and zoning, and gonernl ndrmntsrmtlve survtcas The 1990 Census Ix~pulatton for the City was 52,456 lind the 2000 Census popalntton was 67,890 The Ct~/covera approxtmetely 41 square miles PLAN OF FINANCING PURPOSE. Pt'ocends from the sale of the Bonds will he used to pay for the cost of (I} drainage Improvements for 8reenways, consu'uehon ned acqulsttlon of ned neprovements to City streets, tmt~c control systems, paflcs, lind public thcthties, (3) refond portions of the outstandln8 nd valorem tax supported obhgettons of the City (the =Refundnd Bonds"), and (4) to pay the costs recurred tn connection with the tssunece of the Bonds (see "Soumes nad Uses of' Proceeds"} See Schedule I for a detailed hsuns of the Refunded Bonds end shear raspec~ve call dates and redempl~on prtces Proceeds from the ~ale of the Cefllficates wdl be used to pay for the cost of { 1) eonst~ction of streets, drainage improvements, street hghtln8, and water and sewer unprovements, (2) electric and wnstewater utility projects, and (3) to pay the coste tncurrnd tn onrmectton with the isfunnce of thc Certificates (sen "SOURCES AM) USES OF PROCEEDS") REFUNDED BONDS The pnnelpal of and Intereet due on the Refonded Bonds nra to he paid on the scheduled intorest payment dates, maturity dates and the respective redernptlon dates of such Refonded Bonds, from funds to be deposited ~rsonnt to a certain Escrow Agreement (the "Escrow Agreement''} between the City and JPMorgen Chase Bank, Dallas, Texas (the ~ Agent') The lk)nd Ordinance provldas that from the proceeds of the sule of the Bonds ~cet red from the UndorM'zter8, the Ctty Mil deposit with the Escrow Agent, the amount necessery to occomphsh the diseha~e and f'mal payment of the Refunded Bonds on their respective mntuflty dstes and redon~ptton dates Such fonds wdl he held by the Escrow Agent m n special escrow neon~nt {the "Eserow Fund') Zod used Purehasudtr¢ct°bhsatt°as°ffoeUnltedSt&tes°fAmorlcn(the"FnderalSecuntlas'') Under the Escrow Agrecrnont, theEserowFnedls ;rrevocab[y pledged to the payment of the pnoclpal of and interest on the Refunded Bonds * Prehmma~y. subject to chonge Grant Thornton LLP. a nationally tacogub~"d accounting firm. wdl verify at die time of dehvmy of tbs Bonds to the Underwriters thereof thc mathemt~col accuracy of the schedules that demous~ate the Federal Seounttes will mamra and pay interest in such mounts which, tngether with uninvested funds, If any, m ~ Escrow Fund, will be sut~clent to pay, when due, the principal of and interest off the Refunded Bonds Such matonng principal of and interest on the Federal Securities v, dl not be avadable to pay the Bonds See "Other Informnl~on - Yenficouon of Mathematical Computations" By the deposit of thc Federal Seermttes and cash, if neeesmuy, v. ith the Escrow Agent pursuant to the Escrow Ag~ement, the City wdl have effected thc defeasance of all ut' the Refunded Bonds in aecordsuee with the law. As a result of such defcosnnce, thc Refunded Bonds will be outstanding only for the puq~ose of raceivmg payments f-n~n the Federal Securities nnd any cash held for such purpose by the Escrow Agent and such Refunded Bonds will out be deemed as being outstanding obhgutions of the City The sources and uses of the Bonds wdl be epphed approxmmtely ns follows Sources offends Par Amount of Bouds Net Preouum ou the Bonds Debl Service Fund Transfer by the City Total Sources of Funds $ $ Uses of Funds Deposit to Es:row Fund Deposit to ProJect Fund Issuance Expenses and Undarwmers Discount Total Uses of Fouds The sources and uses of lbs Certificates will be applied approxmmtely as follows, Soueees of Funds Par Amount of Certnfieates Net Prenuum on the Certificates Total Sources of Funds Uses of Funds Deposit to ProJeCt Fund Issuance F.,xpenses and Undenvntera Discount ~[ Total Uses of Funds ( I ) Includes mumcspal ix*nd ~nrmmnce p~numn THE OBLIGATIONS GENERAL DKS~ItlPTION 'me Obhgattons are dated May I, 2004, and stature on Febtmuy 15 m each of the yearn and m the amounts shown on the reside cover page hereof Interest will be computed on the betas of n 360-day year of tv,,elve 30-day months, and will be payable ou Febnan7 15, 2005 and ou each August 15 and February I$ thereafter outtl matrmty or prior rcdemp~on. The defimtlve Obhgut]ons wall be issued only tn fully regmterod form tn any integral nmltLole of $5,000 for any one matonty and will be mltlally reglstored and delivered null' to Cede & Co, the nominee of 'f'ne Depusttmy Trust Company, New York. New York ("DTC",} pummun to the Bouk-EntsT-Only System dsscnbed herein No physical dehvery of the Obhga~ons will be made to the owners thereof Principal of and interest ou the Obhgat~ous will be payable by the Paying Agent/Re,sitar to Cede & Co, which will make dlstrihatlou of the amounts su paid to the pmlte~putlng members of DTC for subsequent payment to the benei~cinl owners of the Obhgenous (see "Book- EnUT-Oni~ System"} AUTHORITV FOR ISSUANCE OF THE BONDS 't'he Bonds are being issued pursuant to the Constitotion and ganemJ laws of the State of Texas, pamculofly Chapter 1331. Texas Government Code, es smendsd, eleetiatu hem November 3, 1998 and November 4, 2003, ~ passed by a majority of the pm13eipatmg voters. Mth respect to the t~fondmg of the Refimded Bonds, Chapter 120';, Texas Government Code. and the Bond Ordinance the State of Texas, pamculady Subehapter C of'Chapter 271, Texas Local Govemmanl Code (the Certificate ot'Obhgation Act of' 1971). as amended, and the Certificate Ordinance SECURITY AND SOURCE OF PAYMENT All taxable property within the City Is subject to a contmmng direct annual ad valorem lox levied by the City sufficient to provide for the payment of principal of and mterest on all obhgations (such ns the Obhgatians) payable zn whole or tn part from ad valorem maes, which tax must be Icvled wltlun limits prescnbed by law The City intends to pay the ObhgatlonS flora ed valorem ma proceeds, however, the Certificates ate also payable from and secured by a hmtted pledge of SI,000 of the surplus revenues derived fiom the City's combined utility system revenues, as prowded in thc Ordinances, in order to meet the legal requirements for the sale thereof for cash TAX RATE LII~TATION All mashie property within the City is subject to the assessment, levy and collection by the City of a contlnmng, direct nonual ed valorem tax suf~crent to provtda for the payment of' principal of and interest on all ed valorem tax debt within the lionlo prescrthnd by law Article XI. Section $, of the Texas Constfmtmn ts apphcable to the City, and hm]ts rte maximum ed valorem tax rote to S2 50 per $100 Taxable Assessed Valuation for all City purposes The Home Rule Chaser of the City adopts the constitutionally anthortzed maximum tan rote of $2 50 pet SI(X) Taxable Assessed Va[annas Adonnistratively, the Attorney Genera[ of the Slate ot'Texse will permit allocation orS1 50 of tbs $2 50 mexunum tax rate for all debt sermee ~ obligations payable from ed OPTIONAL RiDEMPTION The City reserves the right, at ilo option, to redvem Obhgatlons of either series having stated maturities on and after February 15, 2014, tn whole or in part in pnnclpa[ amounts of $5,000 or any integral multiple thereof', on Febnmty I 5, 201.t, or any date thereafter, st the par value thereof' plus seemed interest to the date of' redemption If less thnn ail of' the Bonds are to be redeemed, the City shall determine the Obligations. or puritans tbe~of, vfltlun such maturity to be redvemed. If' an Obhgatton (or any purtton of the pnnctpal sum thereat) shall have been called for redemptmn and notice of' such redemption shall have been given, such Obligation (or the prmc~pa[ amount thereof to he redeemed} shall become due and payable on such redemption date and mterest thereon shall cease to accrue from mid sRer the redemption date. provided Rinds for the payment of thc redemption pflce and accrued interest thereon are held by the Paying Agant/Registrer on the redemption date NOTIC& OF REDEMPTION Not less than 30 days prior to a redemption date for Ihs Obligations. thc City shall cause a onttce of redemption to be sent by United States mall, first class, postage prepaid, to the registered owners of the Obligations to he redeemed, zn whole or m part, at the address of the registered owner appearing on the regutTaston books of the Paying Agent/Registrar ANY NOTICE SO MAILED SHALL Ss- CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE NOTICE HAVING BEEN SO GIVEN, THE OBLIGATIONS CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY OBLIGATION OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH OBLIGATION OR PORTION THEREO]~ SHALL CFASE TO ACCRUE BOOK ENTRY ONLY SYSTEM TAL~ section desen~.~ how m+~ersh~ of the Obhgano~ ~s to he ;A~ferred a~d haw the pnnc~MI of and Interest on the ObllgatloA~ are to be ~Mld to and credited by the ~)~O~Jtor~, TiLer Co~my ("DT~") ~klle the Ohl~gatlo~ registered m its nominee name lite information m this section concerning D~C and the Book-Entry-Only System has beth provided b)' DTCforsuetndt.~cloatredocumentcsuchasthtsC~cialStntement TheCto. beheve.~thesourceofsuchlnformationtoherehable, but talte~ no re~pon.~ibth.tv for the accoracv or completon~ thereof The Cay cannot and does not ghee an)' assurance that t I) DTC will dutrtbute payments of debt service on the Obltgatlong or redemption or other noticm, to DTC Participant& (2) DTC Porttctpa~$ or others will dutribute debt service lno,~nt~ paid to DTC or its nomin~ (a.~ the r~gnttered owner of the Obltgdtlon. O. or redemption or other nnt~ces, to the Beneficial Ownor& or that they wdl do so on a timely basis, or O) DTC will serve and act In ~e manner dosertbed tn tats O~cral Statement ~ current rule~ applicable to DTC ~e on file with the &,curines and F~change Cc,remission. and the current pracedut~s of DTC to be followed in dealing v,,tth DTC Participants are on]lie ~lth D~C DTC will act as sec'unties deposttoty for the Obhgations The Obhganons Mil ha issued as fully.-rng~stered secunties tn the name of Cede & Co (DTC's partnemlup nominee) or sash other name as may be tequested by an authorized representative of DTC One fully- registered certificate for each maturity will be issued for the Obhgatmns, in the aggregate pnnetpal amount of such issue, and will be depostted with DTC DTC, the world's largest dep~im~y, is n Ituuted-parpose m~ company or~tueed und~ &c New Yarc Ben]tiltg Law, a "banking organizaUun" within the meaning of the New York Benk~ng Law. a raembeF of the Federal Reserve System. a "clenrmg coq~omtzun" within the meaning of the New York Umfo~n Commercial Code. and fi "clendng agency" regtstesed putsuent to the pmvtsioos of Section 17A of.the Securities Exchange Act OF 1934 DTC holds and pmvrdes asset servicing for over 2 mdhon issues OFU S and non U S equity issues, co~porate and mumcipal debt issues, and money market insuuments f~ over 55 counmos that DTC's psfllcipants ("Direct Parttelpents'') deposit with DTC DTC also facilitates the po~-trade set~lerncot among Direct Purttetpaots of sales and other seconttes transactiuns tn deposited securities, throngh electronic computenzad book-enu~ transfers and pledges between Direet Purtlcipants' accounts This elunmates the need for physical movement ot'Obhgatioos Direct Pufl]etpunts include both U S and non- U $ securities brokn~ and dealers, banks, in,st companies, clearing cct~oratiuns, and certain other organizations DTC ts a wholly- owned substthnq; OF The Depositor~ Tsust & Cleunng Corpm'atiun ("DTCC"') DTCC. m turn. is owned by a number of' Direct Participants OF DTC and Members of the National SeeUnltes Cleunng Corporation, Government Secorrtrea Clearing Coq)oration. MBS Clennng Coq~omtlun. and Eme~qng Markets Clennng Cmporatlco. (NSCC. GSCC. )vlBSCC. and EMCC. nlsu subsidmfles of DTCC). as well as by the New York Stock Exehnnge. [nc. the American Stock Exchange LLC. and the National Assucrst~un of Scenarios Deale~. lac Access to the DTC system is also available to othe~ such as both U S and non-U S sucunties brokers and dealers, banks. trust companies, and clearing corporations that clear through or maintain a custodial relationship widi a Direct Partlc*patu. ellher d*recl[y or indirectly ("Indirect Participants") DTC has Standard & Poor's highest rating AAA The DTC Rules appheeable to tis Partictpsnis am un file with the Securities and Exchange Countusstun More reformation about DTC can be ~ound at www.diec.com Purchases of Obhgotiuns under the DTC system must be made by or through Direct PafllcJpents. which will receive a credit for SUCH perchMses on DTC's records The ownership interest of each netoal pumhaser of eneh Obhgatron (-Benefictal Owner..) is m tom to be recorded on the Direct and Indirect Pa~cipents' records Beneficial Owners will not receive wnttco confirmattun From DTC of their ptuchase l~oneficnd Owners are. however, expected to receive wrflton cunfirmattoes pmvrdtng details of' the uunsuctton as well as panodtc statements at' their holdings, fi'om the Dl~ct or Inthrect Pumclpant through which the Beneficial Owner entered mia the tmnascttun Transfers of ownership Interests m the Obhgotiuns are to be accomphsbed by enmos made un the books of D~rec~ and Indirect Purttctpants acting un behalf of Beneficnd Owners Beneficrsl Owners will not t'eeeive ceflificotes representing their owacrshlp interests m the ob[igettoos, exeepl in the event that use of.the beok-entr~ system desenbed herein ts diseuntmucd To facilitate subsequent ~aosf.ers. all Obhgotluns deposited by Direct Purtictpents with DTC are registered tn the name of DTC's partneuhlp nominee. Cede & Co. or such other name as amy be requested by an anthoflzad representative of DTC The deposit of Obhgattons with DTC and their regtstmtiun in the nnme of Cede & Co or such other DTC nominee do not clTeet any change in beneficnd ownership DTC has no knowledge of the actual Beneficml Owners of' the Obhgettoos. DTC's records reflect only the identity of' the Direct Purttclpants to whose accounts such Obligations nm credited, v. hich amy or nmy not be the l~eneflclal Owners The Direct and lnthrect Participants wdl tomato responsible for keeping account oFtheir holdings un behalfof.tbetr eestomers Cunveymb.-e of nonces and other conunumenttuns by DTC to Direct Purtlcipents. by Direct Pafltctpants to Indirect Par~ctpents, end by Direct Purtlclpents and Inthract Participants to Beneficral Owners will be governed by un'engements among them. subject to any stattuory or mgelnto~"/requirements as may be tu eft'eot fsum time to tune Beneflers[ Ownen~ OF Obhgettons mey wish to take certain steps to augment the Uaosmtssion to them of' notices of sigmficaot events with respect to the Obhgnttoos. such as redempt~uns, teede~ defunlts, and proposed amendments to the Obhget]un dneuments For example, neneficad Owners OF Obhgettons may wish to ascertain that the nominee holding the Obhgettuns For their benefit has ngreed to obtain and tsansnut notices to Beneficial Owners In the alternative. BeneficrsJ Owners may wish to provide their anmes and addresses to the regrsrrar and request that copses of notices be provided directly to them Neitlier DTC nor Cede & Co (nor any other DTC nominee) will consent or vote with respect to Obhgettuns unless anthortzed by a Direct Purticlpent in aconrdanee with DTC's Prneedums Under its usual procedures. DTC mails an Omatbos Proxy to the City as soon as possible after the record date The Omnibus Proxy asstgos Cede & Co's consenting or voting rights to those Dt~ct Parttctpents to whose accounts Obhgattons are credited on the record date ('rdenttfied tn a hstlng attached to the Omnibus Proxy) Payments on the Obh~ltiuns will be nmde to Cede & Co. or such other nounnee ns may be requested by an authorized representauve o1' DTC. DTC's practice ts to cratht Direct Parttctpunts' aeeonnts upon DTC's ~celpt of funds and correr, ponding detad infommtton from the aP/ and the Paying Aennt/Rngrstror. on payable date tn accordance with their respective holdmge shown un DTC's records Payments by Paflletpsnts to Bcoeflcrsl Owners will be governed by standing inetmcltone and eostomney practices, as ts the case with senunties held for thc nccunnts of costomct3 m bearer form or registered m "street nemn,*' und will be the responsdidity of such PurtlCtpstu and not OFDTC nor its nominee, the Paying Agent/Rngisttur. or the City. subJeCt to any statutory or t~gehto~/requonments Ms may be m efT~ct from tune to time Payment of redemptiun proceeds, dtstobutiuns, end dividend payments to Cede & Co (or such other nommee as may be requested by an enthonzed representauve of' DTC} is the responsthdity of the City and the Paying Agent/Reaistmr Drsbm3ement of such payments to Direct Partlclpents will be the rasponsdithty of DTC. and reimbursement of such payments to the Beneficml Owners will be the responstbdi~ OF Direct ned lndsraer Purttctpents DTC may thscoonnue provlthnS its ser~'tces as depcottor~' with respect to ~ Obligations at any time by giving reasonable untzee to the Sty and the Paying Ageot/Rnglstmr. requund to be prtuted and delivered Under such circumsUmens, in die event that a sueeassor depos~tu~, ts not obtained. Obhgunons mc The C~ty may dec~de to d;sountmue usc of the system of beok-entry ttensfers tlrmngh DTC {or n suceessur secuntles del~sltmy) In thai event, Obl~al~ons will be pnnted and delivered The information m thts se~on coucermns DTC and DTC's bank-enUy system has been obtained from sources that the City beheves to be rebable, but the City takes no responsfolhty for the accuracy thereof U~o/C¢~mnTern~mOtb~r.~tJon~oftb~s~c~alStaren~nt In tending t].s Officml Statement it should be understood that wlolc the Oblsgotlons are m the Book-Entry-Only System, references in other sect~ous of thus Official Statement to re~ste~d owners should be ~ad to include the person for which the Participant acquires an interest In the Obhget,ans, but (0 nil rights ot'ownersh;p must be exercised through DTC and the Book-Entry-Only System. and (~0 except as descnbnd above, notices that are to be gwen to registered owners under the Ordinances will be given only to DTC Information concerning DTC and the Book-E~tty System Ires been obtemnd from DTC and is not goaranteed as to accuracy or completeness by. and is not to be ¢oustmed as a representation by the City or the Underwnteri P,~YINC A, GI~NT/Ri~GlSl'It~R The mttml Paying Agent/Reg~strnr is JPMor~an Chase Bank, Dallas, Texas In the Ordinances, the City relams the nltht to replece tbe Paytog Agem/Rnglsttar The City covenams to mmnenn and pro'adc a Paying Agent/Requirer al nil times until the Oblsannous are duly paid and any snceessur Paym~ Agent/R~sstrar mast be a banlG ~ust company, financial restitution, or other entity duly qnahfied and legally anthonzed to serve as and perform the dut~ns and services of Paying Alzent/Rngls~ar for the Obhgattons Up°n say cltanp, e m the PaYing Agent/Registrar for the Obhgahous. the C~ty wdl promptly cause a written notice thereof to be sent to each reglstmed owner or' the Obhgouous by United States maul, first-class, postege prepaid, which nonce will also include the address of the new Paying Agont/Re;strer '/~sP~P., EXC~'qG; ,~Nt) R~6;ta'ntXT~ON In the event the Bouk-Entsy-Only System should be dlscontmand, the Obl~getlous may be transferred and exchanged on the rngsstralson books of the Paying AgenVRe~strar only upon presentation and sun~nder thereof to the Paying Agent/Registrar and such ~ransfer or exebange will be without expense or serwce ehmgu to the registered owner, except for any tax or other governmental chmges required to be pa~d with respect lo such re;strut,on, exchange and transfer Obhgotmns may be assigned by the execution of an nss;goment form on the req~ect~ve Obl~gotiona or by other Inatnsmeot or' transfer and asssgoment acceptable to the Paying Agont/Re~;sstrar New Obbgetsous will be debvered by the Paying Agent/Rnglstrar, m heu of ihe Obhgat,ans being transferred or encbanncd, at the coq~rate ~ual office of the Paying Agont/Rnglstrar, or sent by United States mini, fi~t class. postage prepaid, to the new regrsteted owner or his deslgoen To the exteot possible, new Obligations sssund in an exchange or tmnst'er of Obligations will be delivered to the registered oyster or assigner of the registered owner in not mo~ than Ilane business days alter the receipt o£tbe Obhgotlons to be canceled, and the wntren mstmmcot of transfer or request for exchange duly executed by the reg~sten.--d ownm or his duly aotbonzed agent, in form sutlsfaetory to the Paymg Agent/R. egsstrar New Bonds or Certsficatos teF~stered und delivered m an exchange or transfer will be sn any integral mulople of $5,000 for any one nmtunty and t'or a like nggrngate prtacipel amount as the Obhganous snn'ende;~-d for exchange or transfer Sec "Banit-Eot~-Only System" hereto for a desunpt]an of the system to be otslo~ed Imnally In regotd to owncrshlp and transfe~abdlty of the Oblq,,atlons Neither the City nor the Paying Agent/Reipstrar will be reqmred to transfer or exebenge any Obhptlou called for redemption, ~n whole or in pan, within .t0 days ot' the date fixed for redemption, provided, however, such llmstoilon of trensfer will not be applicable to an exchange by the registered owner of the uncalled balance ora Obhgotson RtconD D~,Tt ~o;t [NTtnSs'r P&YM~'r The record date ("Record Date") for determmm~ the peteon to whom the intewet is payable on the Obhgouons on any interest payment date means the close o~'bnsme= on the Init business day of the preceding month In the uvent of a ann-payment of interest on a scheduled payment dale, and for .10 days therealter, a new record date for inch mlerest payment (a "Spncml Record Date"} will be established by the Psymg Agent/Re~stxer. ;fncd when funds for the payment of such interest have been received from the City Notice of the Special Record Date and of the subeduled payment date of the past due interest (.a "Special Payment Dale,- which will be 15 days utter the Specml Record Dale} will be sent at Insst five days poor to the Specml Record Date by United States mall, tim-class postave prepaid, to the address of nsch Holder ofa Obl~al~on nppeanng on the reg~stratton books of the Paying Agent/Registrar al the close o~'bnsmeas on the day next precethng the date of malbng of'such ant]ce I)zpz.~s,o~cz The Ordinances provide for the defeasance of the Obhgot~ous when the payment of the pnno~pal of and premium, if any, on the Obl~at~ous, plus Intereit thereon to the due date therent'(whether inch due date be by reason of matonty, redemption, or otherwrse), is pro.aded by irmvncably depnsltmg with a paying agency, in ~,nst (I) money sufficient to make such payment or f2) Defeasance Secunt~ns, cenlfled by an independent pobbc accounting firm of national re~totson to mature ns to prmclpal and interest m such nrouunts and at such tunes to insure the avadebd;ty, without remvestrnent, of sufficient money to make such payment, and al! naeassazy and proper fees, compensation and expenses of the paying ngent for the OblqIalious The Ordinances provides that "Defeasance Secuntlns" means (a) d~-ect, anncallchle chlsgotlons of the Umted States of Amenca, including obhgot~ons that are unennd;tlonally guaranteed by the i.lnlted States of AJnerlca, (b) nounallable obl~atlona of an agency or instntnsentallty of the United States of America. mc[uthng obhgnt~ons that nrc uneontht~onally guaranteed or ;nsored by the agency or instrumentality and that are rated as to mves~nent qnahty by a naltoan[[y recognized mves~nent rating firm not [ess than AAA or sis eqmvalent, and (c) nonna[lab[e obligations of a state or an agency or n county, nmmcspahty, or other pohheal subds.aslon ofn slate that have been refonded and that rated as to mvealment quality by a anltonal[y recogolzed mvealtocot talmg firm not less than AAA. or its eqmvelent The City has ndthtloually reserved the right, subject to sunsfymg the reqmremem of(l ) and (2) above, to substlotto other De fnasunce Secuntres for the Defeasance Sncuntles originally deposited, to remvestment the oumvested moneys on deposit for such defeasance and to withdrew for the benefit of the City moneys in excess of the amount required for such defeasance REMEDIES OF HOLDEILS OF OBLIGATIO~TS.. The Ordinances do not astabhsh specific events of default with respect te the Obhgattons, nd th~c ts no nahr ~o the uccelcra~,on of matumy of the Obhgutlons upon the failure oftbe City m ohee~,e eny covenant under the Orthnances Although a rcgtstared owner of the Obhsrauons could peesumably oblate a judgment naainst the City if a default occurm:lm the paymeot of'lmnetpal of' or interest on eny such Obl~attons, such judgment could not be sattsfiud by execution against any proper~ of the City Such registered owner's only practical remedy, ifa default occu~ zsa mendnmus proceedreg to compel the Czt~ m levy, nsseas and collect an anona[ ad valorem tax sufficient to pay pnnctpa[ o~ end interest on the Obh~.uons as it becomes due The enforcereent of any such rereedy may be difficult and time consutmn~ and a registered owner could be requl~:l to enforce such rcmedy on a penothc basis The Ordinances do not prevlde For the appointment ofa m]stee to rcprcsent the retercsts of the bendhoMere upon any fadurc of the C~t*Y lo perform m ascordence Mth the tenY~.s of the On:lreanees. or upon uny other condmon Furthermore, the City ts ehg~ble to seek. relief' fi'om tis creditors under Chapter 9 of the U S Benknq)tcy Code ("Chapter 9") Although Chapter 9 provides for the recogretmn of' a secuflty relents! represented by a specifically pledged source of speerel revenues, the pledse of taxes nmi other general revenue In support of a general obhgntton of a bankrupt entity is not specifically recognized as a security interest under Chapter 9 CJrepter 9 also rencludes an nutoreahc stay pro'-qslon that would prolubtt, wtthont Benkroptey Coati approval, the proasCUllon of. uny otber legal ecuon bY creditors or bondhnldere of su enttt)' which has sought proteetren onder Chapter 9 'fhereforc. should the Cxty eyed i~elf of Chapter 9 protect,on rrore creditors, the ability to enforce would be subject to the approval of the Bankroptey Coati (which enuld requtrc that the ucllon be heard tn Bankruptcy Court restead of'other federal or state court), nnd the Benkroptcy Code provides for broud dlscrettonnP/powe~ of a Bankroptcy Coati re adreremterreg uny procexdmg broul~ht heforc st The opreion of Bond Connsel will note that all opmrens re[atwe to the enforcenbtht~ of the Ordreences and the Obhgntmns are qanltfiad with respect to the customary rights of'debtre3 relative to their crm:htors TAX I~FORMA~ON A~) VALORF. M TAX ~W ~e ~onnl o~ ~ wt~m the Ct~ ts ~e ~zbtlz~ o~ ~e B~ Co~ Ap~z~l Dismct (~ 'A~ml~l ~smct") Excl~ng a~culmml ~ ~n-s~e la~, w~ch ~y ~ mx~ on the hsts of ~ucn~ ca~t~, ~e A~al Dtsm~ ts ~qul~ und~ Title I, T~s T~ C~e (~ M h~n ~ ~e "P~ Tax C~e'~ m ~t~ all ~ wt~re ~e A~nsnl Dt~ct on ~ buis ~ I~ of tU ~et val~ ~ IS pmhbt~ ~m applpn8 my ~n~nt ~s~ ~e vnl~ pl~ u~n ~ Mthre ~e A~x~ Dssmct ts ~bj~ to ~vt~ ~ n Apponnl R~t~ B~, ~tstm8 ~ ~ ~m~ ~re~ ~ ~ B~ of Dt~to~ o~the App~snl Dts~ct ~e Ap~tml ~s~ u ~u~ to ~t~ ~ value ofp~ wtt~n ~ A~ Dxs~ct at le~t ~ ~e ~ ~ CtW ~ ~u~ a~nl ~w~ ~ t~ ~n ~. ~ xs ~ttled ~ chlle~ ~e ~t~non of n~mu~ value ofp~ within the C~ ~ ~tttren fil~ wt~ t~ Apponnl Re~ B~ ~fe~e ~ m~e to ~e Pm~ T~ C~e, ~ td~ttficahon of ~ ~bj~t to ~h~, p~ exem~ or which may ~ ~em~ ~ ~uon, t~ clm~, ~ ~p~tnl of pm~ [or ~ v~m taxnuon ~es, ~d t~ p~s nd long.tons apphcnble to the [e~ nd coll~hon of~ valo~m ~es Amcle VIII of the State C~sttmtton ("A~1cle VIII") ~ Sm~ law p~t~ ~ c~tn euc~tto~ from p~ mxu, ~e ~l~tmn of a~cnlmnl a~ ~n~e 1~ at pm~etw~W ~luc, end ~e ~ ofc~re ~nl ~ ~m ~ vnl~ ~tt~ U~er ~mn 1~, A~cle VIII, nd SM~ law. ~e go~ ~ ~ a ~lm~l ~WlSl~, at tis ~t~, ~y ~nt fl ) ~ ~ph~ ofn~ le~ ~an $3,0~ of the manet value of~e ~lde~ h~d of~as 65 ~ of~e or o1~ (2) An ~e~tton to ~ thnbl~ ~m nil ad vnlo~m ~es ~a~er levl~ by ~e ~lmeal n~s,~, ~ (3) ~ exe~tren ~up m 2~ of the m~ket value of ~sld~ ~est~ ~e minimum exem~mn under this ~venon ts S5,~ In ~e ~ of ~td~ce hom~ ~l~S ~ ~ S~ I-b, A~cle VIII, ~ v~m mx~ may ~nt~e m ~ levt~ ~tp~t ~ val~ ~h~e~s ex~ w~ ~ vnlo~ ~s h~ p~sly ~ pl~ f~ ~e ~t of~bt tf c~ntt~ of the le~ ~ld t~tr ~ obllptt~ of~e c~t by whrch the de~ ~s c~t~ Su~ hw ~ S~tren 2, An~le VUI. ~ n ~monnl p~ ~ ~on ~ thnbl~ ~s ~ ~e ~tw~ s~ or chdd~n of a ~ M~an who died while ~ ~t~ ~ sn t~ ~ f~es, the cxe~t~ n~hu to etth~ ~1 ~ ~o~1 p~ wt~ t~ ~t ofn~d vnlu~on ~e~ ~t~ ~m S5,~ ~ a m~tmum of Sl2,~ Afllcle ~[[I provides ~t el~ble own~ of b~h ~mud Iud (~hon I~) nd ~-s~e I~ fS~ren 1~-I), mcl~reg ~n~e Iud ~v~ ~ ~ or ~h ~oses or o~n~ce Iud ~v~ to ~r p~u~t~, ~y el~ ~ have s~h ~ ~t~d for pm~ mxatren ~ the ~ts o~t~ p~Uve cn~ctW ~ saree laud may not ~ qu~fi~ und~ ~ ~xon I~ ~ I~-I Nonlmsreess personal property, such as autoreob]les or haht trocks, are exempt from ad valorem taxation unless the govemreg body ora polmcal nlxJtvtston elects to tax Ibis property Boats owned as nonbusreess property am exempt from nd valorem taxation Amcle VIII. Sec41on l-j, provides for "f~epo~. properly*' to be exempted frore ad valorem taxation Freeport propafly ts defined as goods detained tn Texas for 175 days or less for the puqMse o£assf:mbly, storage, nmnufactunng, processing or fabncntton Decisions to continue to mx reay be revecsed in the future, declStOas to excmpt freeport propatty nrc not subject to reversal The Ctty and the other taxing bodtes within ils temtoty may asree to jomtly create tax merement financtos zimns within the Oty, under which the tax values on property m the zone are 'fiozen" at the value of the property at the ume of crentzon of the zone The Ctty also may enter into rex abatement apenments to eneomzge economtc development Under the agreements, a penperty owner a~es to constflzet certain improvements on its properly The City m taro aSrees not to levy a tax on all or part of the mernssed value atmbutchle totheimProvementsimlzltheexptratlenoftheasreemcut The abatement aSreemeor enuld last foruponodofupto 10yeats RECENT CONSTITUTIONAL A.MENDI~NT , In a statewide election held on September 13, 2003, voter~ approved an amendment to Seetton I-b, Arttcle VIII of the Texan Censtttotton, thet would authorize a county, ctty. town or jimtor collene dtsmct ~o establish an ad valorem lax freeze on residence homesteads of the dtrabled and ofthe elderly and thetr spouses The City IS now authorized to freeze ad valorem taxes on restdeuee homesteads of per-sons who are disabled or stxty-five years ofngu or older Ifthe Ctty Councd does flor toke action to esutbhsh the tax himtaltim, voters wldun the City may subrmt n petttton sigued by five percent of the renlstered voters of the City requiting the Ctty Cenned to cull an e[eettim to determine by maJority vote whether to estabhsh the tax [tm~totiim If the tax Iimltetton ts esmbhchnd, the total amount of nd valorem taxes imposnd by the Ctty on a homestead that recetves the exemptton may not be merezsed whde it remains the residence homestead al'that person or tbet person's spouse who ts dtsablnd or sixty-five years of age or older, except to the extent the value of the homestead is tnorensed by improvements other than reparrs Ifa disabled or elderly person thes tn n year m whtch the person reeetved a restdence homestead exeml~tton, the total amount of ad valemm taxes tmpnsed on the homestead by the texmg imtt may not be Increased wbtle st ~mams the restdence homestead of that person's sof3qvm$ spouse tf the spouse ts fifty-five years of age or older nt the time oftbe person's death In nddnton, the Texas Legislature by general Inv.' may provtde for the uunsfer of all or u propor~lonnte amount of the tu himtat;im npphcub[e to n person's homestead to he transfer~ to the new homestead of ~.zch person if the person moves to u different rcstdence wttinn the taxmS unit Once estabhshed, the governing body of the tav, mg imtt may nnt repeal or rescind the tan hmttstton The Ctty Cmmctl has not determmed al this ttme what aetten, if any, it Mil take regarding this constttottoiml amandmant The City cnn make no representonims or predict;ires concemmg the impact such a tax hnumuim would have on the taarng rotes of the Ctty or its abthty to tonke debt service payments srz~ZrEc'rJ';E T,q.X RArE A]~rD ROLL~ACK T,qX RAT! By the later of September 30'b or 60 days after the cemfied appraisal roll ts dehvercd to the City, the Ctty Cairned adopts a tax rote per Sl00 texchle value for the ctovent year The tax rate consists of two components (I) a rate for thndtng of mamtenence and operat;im expenditures, and (2) n rate for debt servtez Under the Property Tax Code. the Ctty must annually celeulate and pobhctze tLs "effeettve tax rote' and "rollback tax rate" The Ctty Caused may not adopt a tax rate that provtdns marc revenue than the prevtous year's tax rate imul st has held a pobhc hcenng on the proposed mcreaan folinwtng notice to the taxpayers nnd orberwls~ comphed wtth tbs Properly Tex Cnde If the adopted tsx rote excends the rollbsok tax rote the qualified voters of the Ctty by pettttim may requtre that an eleetton be held to determine whether or not to reduce the tan rate adopted for the eurf~nt year to the rollback tax rate "Rollback tax rate" means the rate that wdl produce last year's mamteennce and operatton tax levy (adJusted) from this year's values (ndjnstnd) multtphnd by I 08 plus a rate that wzll produce this year's debt service fzom this year's values (unadJusted) thvtdnd by the antlCtpatnd tax collection rate The Propofly Tax C'nde provzdes that cerntm cities and counties zn the State may submit a pmpnstoim to the voters to authoflze an addtooenl tree-belt cent anlns mx on retszl ales of taxable ttema If the nddntimal ntx ts levred, the cff-eonve tax rate and the rollbeck rex rate calculations are requtred to be off-set by the revenue that Mil be generated by the sales tax in the current year Reference ts made to the Property Tax Code for defimtive requimmeots for the levy and enllanttim of' ad valorem taxes and the celculanim of'the vartous defined tax rates PROPER'I'VA~NTANDTAXI~AYMENT PropertymthlntheCttyzsgenemllyessessednsofJannsv/I ofesohyear Business inventot¥ may, at the option of the taxpayer, he assessed es of Septembar Od and ~s z~,erves are nsses~ on the besm ora valimt~on process which uses an avenge of the dmly pace of'od and gas for the prtor year T0~es become due October I of the same year, and become dehnqueot on Febromy 15 of the following year Taxpayers 65 year& old or older nra pantottod by State law to pay ts.xes on homesteads tn four installments w:th the first due before Fchromy 15 of each year and the final msntllment due before August I$ PgNALTIES AND ]*~T Charges for penalizes and interest on the unpaid balance of dehnquent taxes are made ns follows Cumulative Cumobttlve Month Penalty IntevTst Total Februm'y 6% I% 'Ac March 7 2 9 April 8 3 I I May 9 4 13 June 10 $ 15 July 12 6 IR ARer July, penalty remmns m 12%, end interest increases ut the rate of' I% each month In addition, iran account is delinquent in July, nn amount up to 20% attorney's collestton fee ss added to the total ax penalty end mterest charge Under certain circumstances, axes which become delinquent on the homestead of u taxpayer 65 yoM3 old or older mcor n penalty of 8% per annum wnh no ndthrfonnl penalties or mterest assessed In gcoeml, property subJeCt to the City's hen nm~ be sold, m whole or in parcels, pursuant to court order to collect the amounts due Federal law does not allow for the collection ofpoualty end interest agemst en estate in benln~ptcy Federal benl~tcy law provides that en automatic say of action by crethtors end other entrees, mcludmg governmental units, goes into effect with the films of eny petfl~on m benltfl~ptey Tbe entomattc stoy Prevents governmental units from foreclosing on property and prevents liens for past-potation taxes from atmchmg to property end obtammg secured creditor status unlen, tn either ecsc, en order hfong thc stay ts obtained from thc ban]rmptcy court In many c~cs post-pennon taxes m*e pad as en admmls~ettve expense et' the estsie tn bankruptcy or by order of the benJm]ptey court CFFY APPliCATION OF PROPERTY TAX CODE . The City g~nts en exemption to the market value of the residence homestesd of Per3ous 65 Ye&=s of age or older of S30,000 The City has not grented en adthttoual exempttofl of'~..0% of d~e nurket Value of reSldunce homesteads Ad valorem taxes are not levied by the City al~mest the exempt ','81un of ~sldence homesteads for the payment of debt Tho City does not tax noubusmess pe~onal property The City docs net permit split payments, end discounts nrc not allowed The City does collect the additional one-half cent soles t0x for FedUChOn Of nd Valorc~n taxes The City has adopted a mx abatement puhcy (see =TAX INFORA4ATION - TAX ^nA'r~'r POt.iCY") BFazos County collects the axes for the City TAX AB&TEMENT POLICY The City bas established a ax obntement progmre to encourage economic development. In order to be coustderad for tax abatement, a proJect must meet severn] cmcm peflammg to job crusl~on mu] prope~ value enhencement The value of proper~ subject to abatement is shown tn Table 1 on next pege Ail apphcatious must meet the following general c~term before bemg considered for ax abatement The project expands the local mx base 2. The project creates permanent full time employment The proJect would not othenvue be developed 4. The pgojcct melees u coumbotlon to enbanclng further acouomtc development. The PsoJem must remain m goud sandmg to all uesthenc end envtroumenml coeneme 6 The project has net been started end no construction has commenced at the time the opphceuon is opproved 7 The project must not have any ortho followots~ objenftous there would be sobstaotml adveue effect on the proYtStou of'govonunent service or tax base, the applicant has msufllctem financial capacsty. II] plenned or putenttal use elr the prope~y would constitute n hazard to public sefety, IV. planned or potential use of'the prop~ would pve adverse impacts to adjacent propemcs, or eny violation et'laws of the United States or State of Texse or ordmnnces of the City of College Station would result If the project in the apphcntlon meets the general cntona, ts a thclltty of a targeted enteqmse, and has a capital cost that exceeds $250,000, then nhatement of eny or all of the mmeased valen MIl be eousxdet~d In no case would tea abatement excecd the maxonum allowed by State [aw, presently 100% for ten years Fectors to consnder in determmtng the pomon of the mcmesed value m be abated end the duration of the abatement agreement include, but are not hatted to Total amount of'the mcressed value, Total number of jehu created, Type of jobs created, Dollar value of payroll erected, end Other munl¢tpe[ cus~ nad revenues assoclcted with the cpphentlon 2~/~ Merk~ Val~t~on ~mbhs~ ~ B~s ~oun~ Ap~ Ov~ 65 Ho~med $ ~,553,4~ Dt~l~ V~e~n 1.896,000 Ho~t~ Cap ~just~nt 5,549.748 H~se Ball 366tt) 99,~49 ~lmml ~nd Us~sm~r P~u~svt~ ~ 45~33,970 A~t~nts 41,572,761 P~tton 570.958 F~poa 7t289,~ 2~3~ T~ble Ass~ Vnluntmn $ 3.~8,907,414 ~t Pebble ~m Ad Vnlo~ T~ (ns of 3~l~) ~ml Obhptmn Bonds, Sen~ 1~5 300.~0 Genial Obh~tt~ ~ Re~ndz~ Bonds, ~nes 1996 4,295,000 Co~x~tton T~ ~ ~ue CeEtfi~s of Obh~tmn, ~nes 1~8 4~30,~ G~ Obl~ton l~m ~ Sen~ 1998 Genii Obh~zon l~nt Bon~, Series 19~ 5,060,~ Combs~tmn T~ and Revenue Ce~tficn~ ofObh~on, ~n~ 2~0 2,765,~ ~eml Obh~tt~ Im~me~ Bonds. Series 2~ 6,605.~ Combs~tton T~ ~ ~en~ Centrists o[Obh~tmn, Sines 2~A 6,205,~0 ~tfi~tes of Obh~t~on, Series 2~1 2.275.000 ~ne~l Obh~tmn Imp~nt B~d~ Sen~ 2~1 2~45.~ Ce~sficntes of Obh~tson. Series 2~2 12,455.~ ~10bh~uon Imp~me~ Bonds, S~er 2~2 5,555,~ C~flcnt~ o~Obh~hon, S~ 2003 C~flcat~ o~Obh~tton. Sen~ 2003A 780,~0 ~r~ Oblation Bonds, Sen~ 2~3 4,790,000 ~e Bonds 13,235,~ ~e Cemficn~s ~ 9,315.~ 86.415.0~ ~s. ~ n~ Stag Fund ns o~3-3 I~ 3.~2.501 N~ Debt P~ble ~m Ad V~ T~ $ 83.352,499 ~tm of Ad Vnlo~m T~ ~bt m T~ble Ass~ Val~non 2 75% $ 3,175,674,004 2004 Estimated Populntton - Per CaMtn Tnxnble Assessed Valuation - S39.979 Per C~Mtn Funded Debt - $1,100 (I) H9 366 was pnssed by the 74' Leg~slnlu~ and exempts pastural property and minerals thru have m ~ ~]~ of ~ ~ $~ ~) Excludes the Refunded Bonds TABL~ 2 - TAXABL~ ASSE~ED VALUAT~ON~ BY CA~OltY Cate~or~ Amount Real. Res~demml. Smgle-Faouly S 1,497,903,267 Real, ResMentml. Multi-Fnnuly 582,197,86.5 Real, Vacant Lots/Tracts 64,305,345 Real, Acreage (Land Only) 73,572,440 Real, Farm and Ranch Improvements 9,957,510 Real, Commcrelal/Induemal 636,939,757 Real, Oil, Gas &: Other Mineral Reserves 3,417,620 Real nnd Tangible PersunaL Uttht~es 44,083,230 Tung~ble Petsounl, Business 239.851,270 Tunnsbln Personal, Other 3,328,650 Real Pmperry Inventory 14,117,150 Specml Inventory 5,999,900 Total Apl~alsed Value Before Exemptmue S 3,175,674,004 Less Total Exemphons/ReductlouS 146,766,590 Taxable Assessed Value $ 3,020,907,414 Taxable Ap~nused Value, Fiscal Year Ending September 30 2004 2003 2002 %of %of Total Amoral Total Amount % of Total 4717% $ 1,305,123,758 4603% S 1,165,793,808 4485% 18 33% 543,671,950 19 18% 498.169,190 19 16% 2 02% 61,488,980 2 17% 57,943,080 2 23% 2 32% 58,043,010 2 05% 54,600,810 2 10% 0 3 I% 5,627,110 0 20% 5,276,590 0 2~ 20.06% 567,471,371 2002% 532,716,948 20 4~'~ 0 1 I% 2,889,430 0 10% 3,973,620 0 15% I 39% 44,621.630 I 57% 52,024,755 2 00% 7 55% 229,678,206 8 I~ 218,475,628 8 40% 0 10% 3,589,940 0 13% 3.637,130 0 14% 0 44% 7,051,743 0 25% 1.627,310 0 06% 0 19% 5,906,780 021% 5,349,810 021% 10000% $ 2,835,163,908 1000~ $ 2,599,588.679 1000~, I I 1,598A55 110r028~596 $ 2,723.565,453 S 2,489,560,083 Real, Residential, Smgle-Famdy $ 1,054,789,945 Real, Residential, Multi-Family 456,684,815 Real, Vacnnt Lots/Tracts 62,976,900 Real, Acreage iLond Only) 50,447,630 Real, Foun and Ranch Improvements 4,900,990 Real, Comn~-c~al/lndustnal 507,145,636 Real, Otl, Gas x. Other Mineral Reecn, es 2,793,790 Real und Tungsble Personal, Utilmes 53,962,443 Tangsble Personal, Bunmess 220,180,97 I Tangible Personal, Mobile Home 3,378,370 Tangible Personal, Other 1,149,470 Real Property Inventory 5r328.370 Total Apprn~sed Value Before Exemptions $ 2,423,819,330 Less Total Exemptions/Reductions 108.456.968 Taxable Assessed Value S 2,315.362.362 Taxable Appraised Value, Fiscal Year Ending September 30 2001 2000 %of %of Amount Total Amount Total 43 52% $ 981,497,987 43 I1% 18 84% 405,119,446 I 7 79% 2 60% 42,899,010 I 88% 2 08% 87,$89,705 3 85% 0 21% 4,930,640 0 22% 20 92% 483,242.890 21 22% 0 12% 2,234,980 0 10% 2 23% 55,736,000 2 45% 9 08% 208,786,573 9 17% 0 14% 3,007,1 I0 0 13% 0 05% 1,848,780 0 08% 0 22% 0 00% 10000% $ 2,276.893,121 10000% 82.2721722 $ 2,194,6201399 NOTE Valuations shown are ee~tfied taxable assessed values reported by the Bn~os County Appmml Dismct to the State Compuoller of Public Accounts Cemfied values are subJeCt to change throughout the year a~ contested values are resolved nmi the Appoueal Dis'inet updates records 10 TAnLt $ - VALUATION AND GL~'LqAL OBUGATION Ol~gf HISTORY O O Rabo of Fiscal Taxable Tax Deb~ O O Tax Debt Year Taxable Assessed Ouuteudmg to Taxable G O Ended EsUmatnd Assessed Vnluntmn at E~d Assessed T~ Debt 9/30 Populationm Valeutleu~z~ Per Capita of Year Valuation Per Cap~la 1999 66,200 $ 1,920,970,462 29,13q $ 39,505,000 2 05% 597 2000 68,038 2.194.620,399 32,256 56,655,000 2 5890 833 2001 70,075 2,315,362,362 33.041 59,970,000 2 59% 856 2002 '/0,308 2.48c~.560,083 35.409 74,945,000 3 01% 1.066 2003 72,500 2,723.565,453 37,566 75,695,000 2 78% 1.044 2004 75,763 3.028.907,414 39,9'/9 86.415,000 m 2 85% ~31 1,141 (1! Source TheOty (2} As mpmtod by the Bonos Cmmty Appmsal Distant, subject to I'.t)ProJected, includes the Oblsga~zon and excludes the Refunded Bonds The Cemfi~aes are expecled to be from utd~ty fund revenues Ftscal Year General Interest nnd % Current % Total Ended 9/30 Tax Rate Feud 5mleu~ Fund Tax Lov~ Collecoons Collections 1999 $ 04293 $ 01618 S 0267,5 $ 8,292,212 9846% 9917% 2000 0 4293 0 1631 0 2662 9,068,352 97 78% 98 3 I% 2001 04293 0 1662 02631 9.939,951 99.00~ 100 10% 2002 0 4777 0 1846 0 2931 I 1.892,629 99 36% 100 03% 2003 0 4777 0 1946 0 2831 13.010,472 96.18% 98 63% 2004 04653 0 1921 02732 14.093,306 m ~) (I) In pfoeeas of eolleclmn TAm. ES - TEN LARGEsTTAXI'A%'ERS 2003/04 % of Tmal Taxable Taxable Assessed Assessed Name of Taxpa~er Nature of Propert~ Valuation Valuation CBL & Associates Retad Mall $ 49,331,205 1 63% Venzeu Communlcatmns. loc Telephone Utility 34,347,890 I 13% Alkosser, David Housm~ 33,751,295 I 1 I% College 8ration Hospital L P Medical 25,681,960 0 85% Wal-Mart Stores East Inn Retail 23,769,510 0 78% Melrase Apamnmts Houstng 19,400,080 0 64% Fairfield College Station L P Housing 18,340,000 0 61% 301 Church Avenue L P Housing 17,936,445 0 39% I-lEg Pamry Foods Orocer~ Slore 17,615,105 0 58% University Commons Housing 17r279t200 0 57% $ 257,452,690 8 50% the City's Home Rule Charter (see '"THE OBLIGATIONS - TAX R~TE Ll~rrATION") II TAm. g 6 - TAX AgSX)~AC'V Maximum Pnuctpal and lnte~st RecluL~ments (2005} $0 364~il Tax Rate at 9~0 Colleetson Produces .. Average Pnnetpal and Interest Requtrements (2004-2024) $0 21818 Tax Rate at 97% Colleetton Produces $ 9.629.731 59 9.620.758 01 S 5.764.10490 m 5.764.131 32 TabLE 7 - F. S11MXTED OV~U.A~I~G DEBT Expenthmres of the vnnous taxm~ entlttes within the temtoty of thc City are paid out of nd valorem taxes levted by such entlttes on propemes within the City Such entrees ere independent of the City and may incur borrowmes to finance their expenditures Th~s statement of direct and esttmatnd overlapping nd valorem tax debt {"Tax Debt"} was developed by tho City from mfomtetton obtained f~om the Br~os County Appraisal Dmtnet Except for the amounts relating to the Ctty. the Cxty has not independently vmfind the acc~cy or completeness of such mformatton, and no per~ou should rely upon such mfommuon es bums accurate or complete Fuflhermore. ceflem of the entrees hated ma). have issued nddtt~onal debt since the date hereoF, and such entitles may have pro,rams requlnng the tssuam:e of substantnd amounts of nddtttonal debt. the amount of wbteb ennnot be determined The followm$ tsble reflects the estunntnd shere ot'over[appms Tax Debt of'the City Ctt~s Authonzed Total Estimated Overlapping But Untssued 2003/04 Taxable 2003/04 Tax % Tax Debt as Tax Debt as Asseesed Value~ Tax Rate Debt Apphedole of 3-01-04 of 3-01-O4 C]tyofCollegeStatlon $ 3.028.907.414 $ 04653 q; 8t~.41'c.0~0'~l 10000% $ 86.415.000 $ 33.500.000 Bmzos County 6.190.969.725 04350 35.925.000 4692% 16.856.010 10.510.0GO Brynn lSD 2.872.624.772 I 6800 63.265.000 5 17% 3,270.801 0 Collego Smnon lSD .1.328.529.238 I 7700 55.879.611 83 48°.0 46.648.299 14.000.000 Total D~reet and Overlapping Funded Tax Debt Ratio of Dsrcet and Ovm'lappmg Funded Tax Debt to Taxable Aeses~d Valuation Per Caplte Overlapping Funded Tax Debt Source Mumcq~d Advtsmy Com~:d of Texas (1) Taxable.A~emed ValunUon for F~scn] Year 2003 (2) Projected. sneludes the Obh~auons. excludes the Refunded Bonds S153.190.110 06% 2.022 12 DEBT INI~ORMATION TABLE 8 - PRO-FORMA AD VA/.OREM TAX DEBT SERVIC~ REQOIREmNTS $ 98,886,265 $ 81229,438 SI3,235,000 S 3,856,444 S 17.091,444 S 9,315.000 S 3,982,931 $ 13,297,931 S ]21,04b,203 (1) Interest has been esurnated ~ pu~ ofdluenntma Prm~pal amounts are pre]murine, sub~ecl to change (2) ~ Cen*flca~s are expected to be paid i'rom utdtty ~und revenues TABI,~ 9 - INTERLST AND SINKING FUND BUDGET L~U3JECnON Ad Valorem Tax Debt Service Reqmrements, Fssenl Year Endzng September 30. 2004 Interest nnd SInkmB Fund, September 30, 2003 $ 1,636,307 Intercst and Stoking Fund Tax Lev~ ~ 98% Collectzon 8,403,340 Bud~ed Investment Earnings Budgeted Transfers !,423,624 Estmmted Balance, September 30, 2004 $ 8,706,165 I I,$18,271 $ 2,812,106 13 TAm~ 10 - AtrfIIORIZED BUT UNISSUED TAX BOSUS Date of Amount Issued Aufuonzalzon Put,use Authorized To Date 1/24/1984 Fire Substation Building (:) $ 700.000 $ 0 112411984 Street Improvemonts ,t) 6.325.000 $.825.000 1 I/3/1998 Street Improvements 8.$39.000 8.$39.000 1 I/3/1998 Traffic Management 2.980.000 2.980.000 1 I/3/1998 Fire Station Improvements 2.47'7.000 2.477.000 1 I/3/1998 City Fncihties 1.835.000 1.8:3:5.000 1 I/3/1998 Park Improvements 4.769.000 4.769.000 1 I/3/1998 Drainage Improvements 3.640.000 2.785.1000 11/4/'2003 Street Improvements 17.980.000 0 1 I/4/2003 Traffic Management 3.000.000 0 1 I/4/2003 Park Improvemems 8.105,000 0 1 I/4/2003 Municipal Complex Improvements ?.610.000 0 1 I/4/2003 Fire Stauon Improvements I.`710,000 0 The Bonds Unissued S 0 $ 700,000 0 500,000 0 0 0 0 0 0 0 0 855.000 0 1.050.000 16.930.000 550.1000 2.450.000 I $0.000 7.955.000 3.955.000 3.655.000 400,000 1,310.000 S 69.670.000 S 29.210.000 $ 6.960.000 $ 33.500.000 OTt~e OBUGATIOPm AS of September 30. 2003. the City has no outstand:nS capital leases or loans PENSION FUND The City provides pension benefits for nil of tis full-tune employees through the Texas Mumclpal Retirement System ("TMI~q"), a Stete-w~de administered pension plan The City makes annual conm'ontmas to the plan equal to the amounts accrued for pensmn expense (For mine detailed mfurrnat~on concerning the retirement plua. see 'APPENDIX B - E.XCT=aPYS ~ROM TI~ CITY Gl: COLLEOE STA'nO~. T~XAS .A~qUAL Fm.qNC~.AL REPORT" - Note IV } 14 FINANCIAL INFORMATION TAIL[ I I - G[,'(ERAL ]~Jt~D RE'VINII~ ~ ~(II:NDITUI~ HISTORY £o~ F,sca] Year Ended September 30 $ 3,813,167 S 3,420,720 S 3,139,301 1,796,203 1,393,505 1,208,499 779,150 680,776 643,968 1,892,964 1,681,877 1.463,432 1,398.007 1,217.806 1,091,924 $ 24,355,204 S 22,732.090 $ 20,733,466 3,279,715 S 2,909.436 $ 1,775,494 S 1,735,592 2.153,217 1,889,611 1.967,135 1,783,602 8.914,893 8~73.652 7.567,620 6.903.858 6-405,874 5,702,804 5,179.104 4,841.832 t22,074 41,623 773,703 594,417 6-045,622 5,185,737 5,168~31 4,592,990 2,293,734 2,229.600 1,760,191 1,498,655 5,211.720 4,585,796 4.353.073 3,923.00~ 734,083 581,768 600,776 571.742 (5,823,852) (5,287,9281 (4,645,701 J (4,034,54 ] ) 208.485 290,644 519,712 334,932 96,564 316. I ] 3 24,458 ] 0.403 150,000 376.328 397,312 659.86 I 31,675.353 $ 28,806,]$7 $ 26.977,251 $ 24.849,104 $ 0 S 0 $ 0 S 0 30,106 2~,329 5~.403 22.082 6-534,900 6.198,141 5.923.785 5.400,175 (480,8071 (767,0001 ( I, I 15,376j (756-2841 $ 5.455,470 $ 4,86.1,812 $ 4,605.075 678,525 S 1,004,517 $ 618,651 $ 550,335 9.432,700 8,428,183 7,809,532 7,259,196 tO.I 11,225 S 9,432,700 S 8,428,183 $ 7,809,532 15 Tsm,g 12 - MUNZC~),L SALES TSX HISTOin* The Oty has edopted the Municipal Sales and Use Tax Aet, VATCS, Tax Code. Chapter 321, which grants the City the power to impose and levy a I% Local Sales and Use Tax mthm the City, the proceeds are credited to the Geneml Fund and sm not pledged to the payment of the Obhgetsom. Coflectmns md enforcements em effected du'cugh the offfces of the Comptroller of Pubhe Accounts, Smt~ of Texax. who retails the proceeds of the tax, after dsduct]un cfa ~/o service fee, to the City monthly In May 19~0, the voters of the City approved the unpusttten ofen nddmunal sales and use tax of one-half of ouc percent (%% of I%) Fiscal Year % of F. quwalent of Ended Total Ad Valorem Ad Valorem Per 9-30 Collected Tax Lev~ Tax Rate Capita'u 1999 $ I 1,662,546 140 64% 0 60 176 2000 12,759,591 140 70% 0 60 188 2001 13,031.079 131 10% 0 56 186 2002 13,648,835 114 77% 0 55 194 2003 14,027,488 107 82% 0 52 193 ~.I) Bnaed on populsuon esumnt~s I~-ovsded by tho Ct]y G,,ISB 34 The City Is a Phase II C~ty which required GASB 34 implementation for the fiscal year ended September 30, 2003 B~z= of,4ccounnm, The Kc'mints of' the City are orget]lZed and operated un the bums of fonds and uceunnt groups A fond is an independcut fiscal and uccuuntmS enuty ruth a self-balancing set of anenunts Fund accountorg segregates fonds a¢cordmg to their intended purpose and is used to aid management in demonstrating ¢omphence with finance-relntod legal and cunmietunl ptovsuons The nunlmum number of funds are matmmned curtslstent ruth legel and maungeml rcqmremems, Account groups are s reporting device to account for en~nln axsets and Imbdmes of the governmental funds not ~eordsd du~-etly m those funds Government fonds are used to account for the City's general government uct~vst]es Governmental fond 13~pes use the flow of cucrent finencnd resoorces meaxuremem focus and the modified nenmal hams of uceounrtng C-e~ernl Fund The General Fund is the City's prmm~ operating fund It is used to uccutmt for all acUvit]es typically conadered governmental funetlmu of the City These include Public Sal'ety. Public Woflcs, Parks and Recreation, Economic and Development qervtces, the support funchons for these areas, and the edmunstmttve functions for the City The General Fund for the 2003-04 fiscal year is influenced by current policies and any t]pproved policy changes The policies include later-fond equity, mmntnmmg n balance between revenues and expenditures, and nmmtalmng thc level o£scrvien cur~-ntly provided as the City expeneuces resldenlml and commercnd growth The City's financial pohcses are for a Geneml Fund balance of Z5% of budgeted appropnaesous et year end To the extent that the General Fund bulauce exceeds this amount, thss suq~lus ss to be expended sn fotom yam for one time expendcures such ns capitol stems end short term I~ojects ~ The Debt Service Fund accounts for the set'vicing of general long-term debt not being financed by propnetaW or nonexpendable mist f~mds It is the City's puhcy to mamtom at least 15% of annual appropriated expundztures for debt scrv:ce and any assocmted £ees es the l)ebt Service Fund balance at fiscal year end The fond is m compbunen with that pohcy BuE~em~, Prdcedur~s Pnor to September I, the City Manager submits to the City Council a proposed open~mS budget for the fiscal year cummenclng the following October I The operating budget mclndes pmposud expenditures and the means offinencmg them. All budget r~ests are compiled by the Finance Department and presented with compsmtlve and supporting data to the MJtyor and City Couucd for review Pubhc beormge are properly edvertlscd and conducted at Czty Hall For taxpayer commcuts Pnor to September 27, the budget ts legally enacted through passage of an ordmanor The City Council must approve nil trunsfe~ of budgeted amounts between depnrm~ents within any ~und end any ~viston that altem the total expenditure of uny fund An emunnt is also budgeted each year for cunttngenctes which may arise 16 INVESTMENTS The City invests tu mvemblc funds in mvestmenui authorized by Texas hw tn accordance with mvestmenr pohcies npl~oved by thc City Cotmcd Both stere law and the Cit~,'s investment pohcies are subject to ehenge LEGAL ~ Under Texas btw, the City ts enthonzed to invest tn (1) obhgntlons, tncludmg lettm3 of credit, of the Untied Stmes or its agencies and mstnnnenuihttes, (2) direct obligations of the Suite of Texas or its agencies and mstrumentehttes, colleteralu~ed mortgage obligations directly issued by a federal agency or mst~menuihty of the United States, the underlying sncunty for which ts guaranteed by an agency or mstmmentalfly of the Untied Suites, (4) other obhgattous, the pnnctpal of and mterest on which are uncondtttunally guaranteed or msured by, or backed by the full froth and credtt of, the State of' Texas or the United States or their respective agencies and Instrumcntehtics. (5} obhgettuns of atates, ngancins, counties, cities, and other pohtical sub4:hvtslunS ofeny state rated ns to mvnstment quality by a nanunally reenguized Investment ratrag finn not less than A or its equivalent, (6) eettlficntes ot' deposit or share ecmficetes issued by a state or national bank, a savings bank or a state or federal eredti union domiciled tn the State of Texas that are (.a) gnunmteed or insux~l by the Federal Deposit Insurance Corporation or the Ntmonal Credit Union Share Insurance Fund, or (b) are secured ns to pnnclpal by obligations described tn the clauses (1} through (51 und clause (12). which are mtended to include all direct federal agency or mstrumentehty issues that have n market value of not less than the pnncipal amount of the certificates ns In any other manner and amount provided by law for City d~nstts, (7) folly col]ateraltecd repnschase ngmaments that have a defined tenmnatton date, are ~ully secured by obhgetitms de~:flhad in clause (I), and are placed through a pnmaln/guvenutmnt securities dealer or a finuncial mstltotton doxng boSlncss in the State of Texas, (8) bankers' neceptences with the remalmng tens of 270 days or less, at' the short-term obhgutions of' the nceeptmg bank or its ps.rent are rated al [east A-I or P-I or the equivalent by at least one nationally recognized credit truing agency, (9) commercnd paper that Is rated at least A-I or P-I or the equivalent by either (n) two natmtndly recognized credit rattan agencies or (b) one unttounlb/~cngnlecd credit rtmun agency tf the papor ts fully secured by mi mcvocable letter of credit lamed by n U S or state hank, (10,) no-loud money market nmmal funds regtstm'ed with and regulated by the Seoanttes nnd Exchange Cmnnnsslou that have a dollar weighted nveraga por~foho matunt~ of 90 days or less and mclnde tn their mvestment objechves the nmlnteunnce of a stoble net asset value of S I for each share, ( I I) no-lond mutual funds regteterad with the Securities and Exchange Conununton that have un average weighted maturity of less than two years, mvests exclusively tn obhgutmns descnhed tn the preceding clauses, and are contttmously rated as to investment qoahty by at [ensl one oatunm[ly recogutzed investment feting finn of not less than AAA or its equivalent, (12} bonds, notes or other obligations, Issued by the Stein of Israel, and (13) pobhe funds mveatment pools thet have an ndvmory board which mcludes parttcipunts in thc pool and are cuntmuonsly rated as to mvestment qoahty by at les~ one noutmally recognized mvestmeot rahng firm of not less than AAA ns its eqmvalenl or no [owci' then ravestment grade with a weighted average nmtonty of. no greater then 90 days In nddmon, the City may invest bond proceeds tn accordance with the terms of'n gnm'nntend investment contract, coumatenl with the provtsJous of. Chapter 2256, Texas Government Code (the "PFIA"I Effective September I, 200.t, a pohttcal subdtvistun such as the Czty may enter into secuntms lendmg programs If'0) the secunttes ]aened under the program are 100% col]aterallzed, n loan made under the program allows for tennmattou at uny tune and s ]ann made under the prngrnm ss ezther secured by (a) obhgetions that are desenhed in clauses (I) through (5) and clause (12) above, {'o) trrevncable letters of cretht msued by a sate or natzonal hank that ts cunttunously rated by a nntzonally recognized mvestment mhng firm at not less than A or its equivalent or (c) cash mvested tn obhgnttous deecnbed in clauses (I) through (.5) above, c]ansns ('9) through ( 12} above, or an nutbonzed ravestment pool, (it} secuflties held as esl]steal under a loan are pledged to the City, held tn the City's name and deposited at the time the investment ts made with the City or a third party designated by the City. (tit) a loan made under the program ts placed through either a pnma~ govemmant securities denier or a f'muncnd inst]uitlon dang busmess in the Stere of Texas. and {iv) the agreement to lend securities has a term of one year or less The Ctty may revest in such obligations dtractly or through gnvernment investment pools that invest solely tn such obhgetious provided that the pools are rated tm lower then AAA or AAAm or un equivalent by at least one nationally recognized rating service The Oty is specifically prohihited t'mm investrag in (I) obligations whose payment represents the coupon payments on the outstendmg principal halence of the underly:ng mortgage-hacked secunty collateral and pays no pnncipal, (2) obltgetmns whose payment represenui the pnncipal r, renm of. cash flow fi'mn the underlyrag morlguge-becked seennty and bears no mtereat, (3) collatendized mortgaga obhgattons that have n stated final nmmnty of.greater than 10 yeas, and (4) eollaterahzed mortgage obhgnttons the interest rate of.which is determined by an adex that adjusts opposite to the changes in a market adex INVESTMENT POUCIES Under Texas ]aw, the City ts retlmred to invest its funds under Wlltten Investment policies that primarily emphasize safety of. pnncipal and liquidity, that nd(h'ess investment dlvef$1fic,t~tlou, yield, maturity, and the quality and capability of' mvestment manngement, and that raclndcs n hat Or' nothonzed investments for City funds, moAImum allowable stmcd matmlty of any individual investment and the maximum average dellar-welghted maturity allowed for pooled fond 8runps All City funds must he invested consistent with a ~TMIly ~ "fuveatm~m Strategy Statement" that spacifical]~ addrenes each f~da' mvesttncitt Each Investmem Strategy Suitsntent will desenhe its objec~ves concermng ( I ) suttshil]ty of mt type, ('2) prearrveAun end safety of prmctpal, ('31 hqutthty, (4) mathetsbthty of.esch mvestment. (5) thver~ficat~un of'the ponfoho, and (6) yield 17 Under Texas law, Oty invagunents must be made "vath jud~nent and oare, under pt~.-vathng cucumstnoeus, that a pe~on of pmdeuce, dlscreaun, and mte[hgence would exercise in the management of the person's own alfa[n, not fu~ speculation, but for mvegunent, cousldenng the pmheble safety of capital nnd the pmheble income to be derived" At least quarterly the mvsatment oi~ce~ ofthe vail submit an snvastment report detnthng. (l) the investment position of the Cs[y, (2) that all [nvesotssnt officers jmntly prepared and signed the report. O) the beginning market value, any nddmons and changes to market value and the end[nS value of each Fooled fund group, (4) the book value and nmrket value of each separately hated asset at the begnnnmg and end of the reporting pennd, (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund g~oup for which each mdwtdunl mves~a-nent wes acqmred, end (7) the compbance of the ~nvestment ponfobu as tt relates to (a) adopted mvsatment stmtagy statements end (b) state law No person may revest City funds va[bout exprem wmten enthonty from the City Council /momot~. l~.ovimons Under Texas law the City ts sddmonally r~qun~d to (I) ~mlly mv~ (2} ~ut~ ny m~s~t o~' vath ~[ ~t~ss mla~nosh~ps or ~ht~vu va~ ~s ~mg to ~[[ ~cufltt~ ~ the ~t~ te thsclose the ndatt~tp nd file a sMtement wub ~ Te~ Ethics C~zssmn nd the Ct~ C~nctl, {3} ~ut~ ~e ~gtste~ pn~t~ of fi~s ~kmg ~ sell ~ues ~ ~e Ct~ ~ (a) ~elve and ~ ~e Ct~'s tn~st~t ~h~. ~) uc~owl~ge ~t ~o~ble ~ls ~d ~s ~ ~n ~pl~ted m ~l~e tmp~ent m~s~t ~e~ ~d (c) ~h~r a ~n sm~m~t n~es~ to th~ ~m~moats. (4) ~ff~ an ~ual a~tt of tbe ~ment c~ls ~ m~s~ents nd ndhe~ m t~ Ct~'s mv~tmeot ~hcy, (5) ~Me sp~fie m~ent trmnl~ for ~e T~a~mr, ~tef Fiend O~r ~m~se ~menu to n~ mo~ ~ ~ ~s a~ ~ t~ m~t of mv~ ~h~ n~ent ~s to no ~nter ~n ~e ~ of~e ~ ~uff~se ~ffement: (7) ~ct ~e tn~ent Jn ~n-~n~ ~et mural ~s o~any ~ton ofbo~ ~s. ~se~es ~d ~ held fur debt ~fft~ ~ m ~ ~ ~d ~se~s nd ~r ~ held fm ~ s~tce, ~ (8) ~t~ I~nl ~v~ent t~lment p~ls ~ cunf~ ~ ~e new dt~l~uff. mtt~, net ~ wlue. y~eld calcalatt~, n~ ~ Under Texas law, the City may contract with en investment management firm registered under the Inveganent Adv[sem Act of 1940 (15 U S C Sceuon 80b-I et seq ) or wub the State Sceunt[sa Board m pmwdc for the mves~nent and management of its public funds or other funds under its comml for a term up to two years, but the City re[ams uthmate respunSllnhty sa fiduem~/of'Its assets In order to ~new or extend such a eon[mci, the City must do so by order, ordinance or resolunon The City has not contac:ted with. and hes no present mrennon ofeontmctm8 va[h. nny such mve~tmenl mnnagement firm or the State Secuntlus Board to provide such sennces CITY'S I~W..SI'Mg.nT POUCV The Du-cetor of F[susl Services Mil promptly tnvust all Oty funds vath the Beak Dt~oattory ~n accordance vath tho provmons of the current Bank DeltaS[to~ Agreement or in any negotiable instrument that the City Couned has anthormed under the provisions of the PFIA. ns amended, and In accordence vath the City Councd approved Investment Pohe[es At the end of each fiscal year. a t~.'port on mvestmant performance wdl he provided to the City Council In conJunCtion vath the mocthly fmancnd report, the Du~cmr of F~scal Services vail prepa~ and provide a written rceapimlatton of the City's mvestment portfolm Io the Couned, detsthng each Oty investment mstmment with sis rate or' r~x~rn end mctunty date T.~L~ 13 = CIJitl~rf INv~'l~[fts As of September 30. 2003, the City's [nvesteble funds were Invested in the follovang catego~es Bank Demand Accounts U S Treasary Sceunues Texas Lueal Govemment Inves~uent Pool U S Government Agencies Money Market Mutual Fund Fleyable Repurchase Agreement Book Value Market Value 1,339,852 $ 1,339,852 2.012,188 2,016,250 33,383,889 33.383,889 77,578,524 78,043,000 12,679.516 12,679,516 6r318,907 6.718,907 133,712,876 $ 133.783,414 18 On the date of initial dehve~7 of each ~enes of the Obhgat~ons. McCall, Psfldmr~t & H~on L L P, Dal~. Texas, B~d Coun~l, wdl ~r I~ ~mson ~at, m a~o~ with smm~ w~latl~, pubh~ mhngs ~d ~n d~s~s ~lmng on ~ dale ~e~of f'Ex~stmg Law"), (I) Inte~st ~ ~e Oblxpts~ ~r f~eml mc~e mx ~s wd[ ~ excl~le ~ t~ 'g~ mc~' of~e holden th~r~d (2) ~e Obl~tm~ ~fi not ~ ~a~ ~ 'n~l~ ~vn~ K~v]~ ~n~", the m~st on which ~uld as nn al~mnt~ve msmmum mx ~e s~m ~er se~ion 57(a~5) of the In~ Re~nue C~e oF 1986 (~e "C~e") Exc~ ns stated nbo~, B~ Co~sel wdl ~ss no ~mzon ns ~ ~y o~ ~ml, ~ate ~ I~nl mx ~u~ of~e ~K~e, o~e~ip or dis~zt~ of the ObhgntJom See App~dJx C - Fo~ ~ BO~ COt~SEL'S Op~ In ~enng ~ ~mson, Bo~ C~sel mil rely u~n (a) ce~n mf~atl~ n~ ~w~atm~ of~e C~, ~l~]ng ~nmt~ons e~tem~ In the Cs~s ~eml mx a~fiea~. ~d {b) co~mnls of~e C~ conmm~ m ~ d~en~ auth~zmg e~h ~nes of ~e Oblations ~lat~ m ~m ma~, z~ludzng a~t~ ~d ~e use of the p~s ~ ~e ~h~s and the ~e~ finnnc~ ~ ~financ~ the~sth Fadu~ of ~ CaW m co~ly ws~ ~se ~s~mtmns or c~nan~ c~ld ~u~ the rate.st on the ~h~tto~ m ~ mcl~ble ~n ~ss sncome ~tsvely ~ the ~ of ~ance of~e ~e C~e ~ the ~la~s ~mul~ ~n~r c~m a n~ of ~u~n~ ~t m~ ~ ~l~sfled ~nt m ~e ~ce of ~e Obls~s m o~r for mte~ on the Obh~l~ons m ~. ~d m ~m, exe~dable ~m gm~ m~e ~r pu~s Fadu~ m c~ply ~ such ~me~ ~ eau~ mt~l on ~e Obh~t~s to ~ ~ncl~ m to tho ~ of xss~nce of the Obh~t~s ~e ~nmn of ~nd C~el ~s ~nd~ m ~lmnea u~n ~e ~mph~ by ~e CaW w~ ~ch ~ut~nts, and Bo~ C~n~l ~s not ~n ~mmed m m~tor ~ph~e wt~ ~ ~u~menm su~nt to the a~ce of I~ Oblsgau~s ~e Ex~s~ ~w ~s s~Jecl to eh~ by ~e Co~s a~ ~ ~q~nt J~aCml ~d ~mm~s~t~ m~mtion ~ent ~e T~W ~e~ c~ ~ no as~e ~at ~h ~ ~ ~ ~e mte~mt~ ~fwdl ~t ~ c~ ~n a ~nner whtch ~ld ~ve~ly ~ff~t ~e mx ~a~ent of ~c p~. ~e~p ~ dss~l~on ~e Obh~s ~nd Coun~l's opinion is not a g~ of a ~h. ~t ~nm s~ le~l ju~ent ~ u~ s~ ~vaew ~senmnons ~ ~ve~n~ of ~e CaW de~n~ a~ No mlmg ~s ~ s~t from ~ ~1Reven~ ~ce {~e 'S~a~.) ~ ~ ~ ~e ma~s ~d~ m the ~mton of Bo~ ~1, ~ no n~ ~n ~ ~n ~t ~e S~ w~ld a~ wxth ~e ~nson of B~d Co~el, ~f ~e ~x~xem~ sm~ of t~ m~st on es~er sen~ ~e ~h~s we~ ~e subj~ of ~ a~st Iran ~dtt ~s eo~nc~, under cu~nt p~u~ the Se~ce ss hkely ~ ~t the CnW ~ ~ "~y~, and &e o~m of the ~h~l~s ~ld ~ve no n~t to pn~ac~ m ~ a~t ~ In ~a~ m ~ ~ an a~t oft~ ~xem~ sm~ ~e mte~ on · e Obhg~m~, the CaW ~y ha~ d~nt or confllclmg tn~ts ~ ~e ~e~ of the ~h~t~ons ~e mttm] ~bhc offenng pace m ~ ~d for ~e or m~ ~ttes of~e Obh~ta~ (1~ '~1 I~ ~o~t B~") ~y less t~ ~e pnnct~l am~t ~e~f or ~e or ~ ~ ~ ~e ~y~t of m~l on ~e ~h~tt~ may n~ ~c~l ~od or ~ m execs ofone y~r In ~h ~nl, the thff~nce ~en (~) ~e "sm~d ~t~ ~ at ~W" of~h O~mal Isle D~t Obh~tson, ~d (.} ~e ~n~hal o~g ~ce ~ the pubhc of s~h Ong~l Isle Daunt ~l~ts~ w~ld co~Umte ~s~ ~ d~L ~e "stated ~d~ts~ ~ce at mamnW" ~ ~ ~m of all ~y~n~ to ~ ~e ~ ~e Obh~ons [ess ~ ~ of afl ~n~c mte~ ~en~ ~c m~t ~ls am ~ymen~ ~ch ~ ~ d~ ~ua[ ~al pen~s (or d~ any ~unl ~n~ sf~t ~s ~e m~tml or fi~ ~n~) ~d whsch a~ ~ dun~ ac~al ~n~ which ~ ~t U~r Exts~ Law. ~y o~er w~ ~s pu~h~ s~h On~l Isle Ds~ Obh~n~ m ~e mmal ~l~c o~n~ ~cl~ ~m ~ss t~e (~ defined m ~tson 61 of the C~e) an am~nt of m~ ws~ ~ m s~h On~n~ Is~ D~t Obh~t~on ~ual m ~1 ~ of ~e a~nt of ~ch on~l ss~ d~s~nt afl.able to ~e ~1 pen~ F~ a th~sss~ ofce~n colln~ra[ ~enl ~x ~ns~u~ ~ th~ss~ s~ ~ bel~ In ~ e~t of ~e ~mpl~on, ~le or ~hcr ~able d~s~tt~ of s~h ~ l~e D~ Obl~uon ~m m ~t~ ma~, h~. ~e ~nt ~al~ ~ s~h ~er m e~ of the ~m of~h ~gmal Isle Ds~t ~h~ m (~J~ u~a~ ~ ~e ~mon of the on.al sss~ d~nt all--hie m ~e pm~ ~ which ~h On~ I~ ~ Obh~tt~ ~ held ~ ~ mstml ~er) ~s mclu~blc m ~ ~ome U~ Exas~ Law, ~e original m~e ds~nt on ~h Ongs~ I~ue Da~nt Obh~on as ~ the~f {~n am~n~ cal~la~ ~ descn~ ~1~ ~r each stx-mon~ ~n~ enth~ on ~e ~ ~ ~e ~1 ~ ~t~ of~e ~te of~e Obl~t~s a~ m~bly wa~n ~h s~h s~-mon~ ~} ~ ~e accm~ nm~nt ~s a~ed ~ ~ m~hal ~e~s bnsss ~r s~h Orts~ I~e Dtsc~nt Obh~ for pu~es of det~ the ~nt of~m ~ 1~ ~ ~tmn. sale or ~er ths~s~tmn th~f T~ ~t ~ ~ ~ ~ bnsss ~ each ~1 ~n~ m ~ce nnd ~e am~nt of ~gmal msue dsscount ~d m ~ ~s mul~ph~ ~ ~e y~eld ~ sm~ ~nW (~sn~ ~ ~e ~s of c~th~ at ~ cl~ of~h ~1 ~n~ ~d p~y adj~ for t~ I~h of~e ~1 ~n~} I~s ~) ~e ~nts ~ynble ~ ~nt ~nte~st ~ such a~l ~n~ ~ s~h On~ I~ D~t Obh~ts~ 19 Thc Fed:lend mcomL, nix consequences of' d~L. pun:base, owne~lup, redempuou, aslL. or ntber dtsposttttm of' Original Issue Drscount Obhgnuous which arc not purchased m thL. outml offering at thL. out, al of.~rlng pncu may be dntermnted ancordms to roles which th fr~' f'mm those deseflbed abovL. AIl owners of. Ortgin's Issue Dtscuunt ObhgL.ttous should cunsult their OWn mx advisors Mth rcspent to thc d~.*rtmnL.uon for fedend, state and local tucome tax purposes of' the treL.tmcnt of intreat uccmed upon redempuou, selL. or other duposmou ut' such OnSlanl Issou Discount Obhgnttous and Mth respect to thL. fhdcraL state, local and foreign tax consequcnecs of the purchase, ownL.rshtp, redL.mptlon, selL' or other drspostttou of' such Original lssu~ Drscoout Obhgnttous COLLATERAL FEDERAL [NCOI~ TAX CONSEQILILWi~r.r.S The followmB thscusstou ts a summa~ of. ccFtam collstcrnl ~dend tncomL, m.x cntxsequcnecs resulting fi'om thc purchase, ownership or dtsposJttou u f. tbe Obhgnttous This d~scuselou ts bnsod ou Extstntg Law, which ts subjL.ct to cbanse or modtficutton, rcn.ouctlvcly The f'ollowtng dtseusstou ts apphcnblc to in'rasters, othL.r than thosL, who are subject to spocrsl provcuous of'the Codc, such as fianuct's restitutions, property Bud cusu'sty msemuce companmes, hfc msucanee compumes, owners of' interests m a FASIT, mthvtducl rectptL.nts of'Sucrsl Security or Railroad Retiremeot beauties, mdwldu'ss allowed an emmL.d moumL, credit, certain S corporattous with Subebapter C curump end profit~ and taxpayers who tm~y be deerucd to have meuued or contumed indebtedness to porcbasc lax~p! ubhgL.tmns THE DISCUSSION CONTAINED HEREIN MAY NOT BE EXHAUSTIVE INVESTORS. INCLUDING THOSE WHO ARE SUBJECT TO SPECIAL FROVISIONS OF THE CODE. SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX TREATMENT WHICH MAY BE ANTICIPATED TO RESULT FROM THE PURCHASE, OWN'ERSHIP AND DISPOSmON OF TAX-EXEMPT OBLIGATIONS BEFORE DETF_,RMINfiqO WHETHER TO PURCHASE ~ OBLIGATIONS Interest on the Obhg, auous wall be tucludable as an adjus~mcut for "adjusted cucreflt eamtngs" to cL.Icuh, te the L.Itematt,;c ntmzmum tax tmposed on coqxmlltons by sentzou 55 of the Code Sentton 55 ofthL. Code u~Ix~cs s tea equel tO 20 ps,cent for corporettons, or 26 percent for noucorporste taxpayers (28 percent t'or taxable mcome exceodntg $175,000), of'the taxpayer's 'altemettve ountmum taxable Jucome.' it' the eemount of ~]ch alternettve minimum tax ts greater than the taxpayer's regular raceme mx for the taxable year Interest on the Obhgnttoax amy be subJeCt lo the 'branch profits lax" ~rnposed by sectmn 884 of. the Code on the efi'ucltvely-connected ·enmmgs and profits of.L. foreign corpocauou doing business tn the Umted States Under suctmn 6012 of the Code, holders of'tax-exempt obltgnttous, such ns the Obhgntloax, rnny be reqmred to dtsclcue interest recesved or L.cerued dunng each taxable year on thetr returns of' federal income taxation Seetton 1276 of'the Code provtdes for orthnary raceme mx treatment of gem recognized upon the disposmon of. n mx-exempt obhgatton, such se the Obhgnttons, st'such obhsnttou was nequtred at a 'market dtsccunt' and if'the fixed matonty of such obhgntton ts equal to, or exceeds, one )'em' from the date oflnsue Such tzealment apphes to "market discount bonds" to the extent such gem does not exceed the ucc'mad market dtseount of such bonds, although for thts purpose, a de mouous amount of' nmrket discount ts ignored A "nmthet discount bond" ts one which ~s anqmred by the holder L.t L. purchase pnee wluch ts less than the sated redempuon pncu at mL.torlty or. tn the case of'L. bond rssued at an enamel issue drscount, the "re,fiscal tssue pace" (I e, the issue pace plus accrued ongnml issue dtseount} The "uccmed market dtseount" is the amount whtch beats the nme ratto to the market dtscuunt as the number of days dunng which the holder holds the obligation bears to the number of'days between the acqmsmou date and the fin's maturity date STAT~ LOCAL AND FOREIGN Investors should coaxult thetr own tax advisors coucermng the tax tmphcuttmu of' the porebsee, ownershtp or dlsposltton of the Obhgntlous under apphcuble state or IocL.l laws Foreign investors should 'ese consult thetr own tan ad,fleers regnrdtng the tax CONTINUING DISCLOSURE OF INFORMATION In the Ordtnances, the Cfly has nrsdc the following ngrcemcut for the benefit of the holders and beneficrsl owne~ of tbs Obhgnttons The Ctty ts required to observe the agrean~nt t'or so Ioun as it remains obligated to ndvmv.~ funds to pay the Obhgnttons Under the agreement, the Ctty Mil be obligated to provide certain updated financrsl tnformat~ou and operating dam annually, and ttmely nottee of speetfied match's events, to certem mf'ormatton vendors Thts mfornmttou Mil be evadable to securtttes broken and others who subscribe to recetve the mthrmatton from the vcndors A~i~*UAL REPORTS . The City will provide cemm updated financial inFommtton and operating data to certain inFormation vendors annually The mfonnstton to be updated mcludas all qanntttottve finnacud informatinn and operating datu with respect to the City Of the ~qinml type included tn thts Official Statement under Tables numbered I throngh 6 and 8 thz'onsh 13 and tn Appendix n The City will update and provide thts mfofinauofl within six months 8i~er the and of each fiseal year The City Mil provide the updated mFormat]on to each nationally recognized mutoczpal sncuflties information repository ("NRMSIR") and to any state infofnmuon depusttow¥ (°'SID") that zs desl~meted by the State of Texas and approved by the State of Texas and approved by the staff of the tJmted States Securities and Exchange Commtssinn (the "SEC"} The City may provide updated mfommtzon tn full text or may mcorpurate by reference cezxain other publicly available documents, as paiTintted by SEC Rule 15c2-12 (the "Rule") The updated inFolT~ttlon Mil include audited financial statements, if the City commissions an audit and it ts completed by the required ttme I f suthted fiusncud statements are not aveilnble by the reqinred tiine, the City will provide audited f'manctal statements when and if the audit repurt becomes available Any such finaneml statements will be prepared m accordance with the accounting imncJples descrthed In Appeudix B or such other areonnt]ng prmetples as the City rosy be required to employ fsure time to time pu~anflt to state law or regulatren The City's current fiscal year end Is September 30 Accordingly, tt must provide updated mfncmat]on by March 31 In each year, unless thc City changes tis fiscal year If the City changes ItS fiscal year, It will not]fy each NRAfSIR and the SID Of the change MA'IZRIAL EVENT NOTICES The City will also provide timely notices of certain events to nczTain inFororstton venders The City will provide notice of any of thc following events with respect to the Obhgetions, if'such event IS material to ii declSIOII to ptn~ or sell Obhget]ous ( 1 ) Pttnctpal and interest Paymcrtt dehnqncnctes, (2) non-payment related defauhs, (3) onacheduled draws on dein set.vice reserves refleettog financml difficulties, (4) uuscheduled draws on eredzt enhancerosnts reflecting financml dtffienines, ('5) suhstitotion of eredtt or hqtodtty prowdros, or their fuziofe to perform, (6) adverse tan opznanls or events atT~ the tux-enempt rotes of the Obllgettous, (7) mndtfient]ous to rights Of Imldars of either certes of the Obhgntionc, (8) OShgetInn calls, (9) defz:asonees, (10) release, suhstltot]ofl, of sale of property sneering repayInant of the Obhgetions, end (I I) rating changes (Neither the Obllgatlrsts nor the Ordinances make any provision for redemption, debt service reserves of liquidity enhancement ) In adthtInn, the City will provide tunely notice Of any fminre by the City to provide inforllmuon, deta, or financlnl statements in accordance with its ogrecrostu deacrthed above under "ANNUAL REPORTS" The Cdy will provide each not]ce described in thts paragraph to the SID end to echer each NRMSIR or the A4tmlClpel Sacin'luer RuleInakm8 Board AYAILABn. ITY OF INPORMATIOI~ FROM NRMSIRs AND sin The City has agreed to provide the foregoing information only to NRMSIP, s and the SID The mFormatzon will be evadable to holders ofObhgetion$ ordy tribe holdem comply with thc procedures and pay the chat'Beg estabhshed by such mFormstton vendors of obtain the mfofmatron through sncoftues brokers who do so The Municipal Advisory Council of Texes has been deaignnted b)* the State of Texac and approved by the SEC stuff es a quslified S[D The address of the Mtmtcipul Advisuty Comtod ts 600 West 8th Sl~Tet, P O Box 2177, Austin, Texas 787t]8-2177, and tis telephone number ts 512/476-6947 LIP4WrATIO~IS AND ~NDMF. NTS T~e City described above The CItY has not ngrend to provide other mformahon that may be relevant or rostorud to a enmplcte presentation Of its fmancm[ results Of operations, condition, of prospects or agreed to update ney information that ts provided, except ns descrthnd above The C"tty makes no representation or warranty concermng such information or concerning its usefulness to e dnctainn to Invest In or sell Obbgettons at any future date The City dtscharos any contractual of tort Imbthty fur darosges resulting tn whole or in part fxoin any breach of Ita continumg disclosure a~reeinetu or from any stuten~tu made pulsuaot to tis a~Fcement, although holders of Obhgntions may seek a wet of rosedaflms to compel the City to comply with its agreement The City rosy amend its contminng thsclosure agreement froIn time to time to adapt to changed ctreurostances that aclse from n change m legal reqInrements, a change in law, or a change in the zdentoy, nature, status, or type Ofopemtiorts emended, wofdd have permitted an underwriter to purchase or sell Obligations In the offering descrthnd herein m compliance with the Rule, ~ mtn nccoont any emendments oz' tntezpretauous of thc Rule tu the date of such amendment, as well as such changed ctreumstances, and (it) either (n) the holders of a rosjonty In n~gete principal amount of the outstanthng Obb~lt]ons co~seot to the amendment of (b) any person unaf~hsted with the City (such as anttoon]ly recogezzed bond cmm~l) determines that the amendment will not rostertulfy Impelr tbe interests of the holders and beneficial owners of the Obhgettons if the City so airtenda the ngreemant, it has agreed to include with the next fInancial information and opemtmg data provided tn accordance with Its agreement described above under "ANNUAL REFORTS" an anplanotzon, In anrmttve funn, of the reasons for the amendment and of the im~ of any change in the type Of fiusncml reformation and pperating data so provided COMPLIANCE WI3~l PRIOR UNDERTAKINGS The City became obligated m 1996 to make ~ disclosure of enrtam flnancml information with the SII) and each NRMgl R AIl anneal repurts were trmely filed, encept that the 1998 audit was inndvertendy filed iste with the SID end NRlvfSIRs The audit has since been filed, as well ns a notice of late filing In addition, tho City and Its financml adviser have implemented procedures to ensure lonely filing of nil future m furmstren The C'tty thd not receive an invoice for debt servine reqturements due to the bondholders on August 15, 2003 for the Certificates of Obl~atlon, Sertes 2002, and thus did not make its payment timely Upon notification Of the error, the City wired the ~*quired funds to the paying agent on Aulust 22, 2003 A notice of materiel event has smee been filed The City has tol~tt reInedlal stops to ensure that the reasons for the delay would not occur in the filtore 21 O'I'H~R INFORMATION The presendy outstanding tax supported debt of the City is rated "A83' by Moody's and "AA--" by S&P The Oty also has ssvend issues outstandm8 which arc rated "Aaa" by Moody's and "AAA" by S~P through insurance by venous commercial msumnce compunlos Appltcotions fur roungs un thc Obhgattoos have heen made to Moody's and S&P Thc rotmgs reflect only the respective v,ews of such orgamzatlouS and the C,ty makes no repmsenmttou as to the appropnnteness of the ratings There ts no sssumnce that such ratings will continue for any given period of time or that they Mil not be ~vlsed downward or withdrawn ant. rely by either or both of such rating composes, sf in the judgment of either or beth companies, clrcumsmuces so warrant Any such downward revision or withdrawal of such stings, or either of them, may have an adverse silL-ct on the madtct pace of.the Obhgatloos It u the opouon of the Cie/Attorney and City Smffthat there is no penthn8 htsgauon against the City that would have a matenal adverse Iinancad impact upon thc City or tis operabons. Thc sale of the Obligations has not been registered under the fedeml Seountlos Act of 1933, ns amended, in rehucce upon the exemption pmvrded thereunder by Section 3(aX2), and the Obhgatluns have not been quahfind under the Securities Act of Texas in rehauce upon vanuns exempttuns contmned therein, nor have the Obligations been qualified under the seennttes acts of any junsthetlou The City assumes no responsibility for quahficahun of thc Obl~stlons under the eeounttes laws of any junsthcttun m wluch the Obhgstlons may be sold. assigned, pledged, hypothecated or othenvtse transferred This thKlauner of responstbthty for qualtfientlun for sale or other disposition of the Obhgauous must not be enn. st~ued ss uc mterpt~nt~un of any kind wstb regard to the avallobthty of any exempuun Section 1201 041 of the Public Secunty Procedures Act (Cbept~ 1201, Texas Government Code) provides that the Obhgattoos are nagntmble toss,meats governed by Clmptcr 8. Texas Business and Commerce Code. and are legal and authorized investments for msucance comlmmes, fiducJmes, and totstucs, and for the sotkmS funds of municlpohtxes or other pohttcal subdtvzsmns or pobhc agencies of the State of Texas With respec~ to invesunent tn thc Obhgatlons by munlClpohues or other pohttcal sobdtvlstons OF pubhc agencies or'the State of Texss. the Pubhc Funds investment Act, Cbepter 22S6. 'rc~, Ooveroment Cads. ~ul,,s that the Obhgattoos he assigned a retina of "A" or lU ~usvalent as to mvesunent quality by n national rnttoS ageucy See '*OTHER INFORMATION - RA'rmos" heres in addition, venous promtoos of' thc Texas Fmunce Code provide tbeL subjuct to n prudent mveetor stondm'd, the Obhgattuns are legal mvestments for state banks, eevmgs banks, trust compamee Mth -.* coplnd of' one mdhun dulln~ or more. and savmss nd loan associations The Obhgattons arc ehgthle to secure deposits of' any public fonds of the State. its ageuctes, and Its pohtlcal subdwlstoos, and are legal sucunty for those deposits to the extent of.their mmket value No review by the City has beuc made of the lows tn other states to determme whether the Obhgattuns are lagal investments for vartuns luctttutlons tn those states The City will fomfsh a complete tmflscnpt of pruceedmSs had mctdent to the authortxatton and z~sunuce of the Obhgntt ess, mclndmS the unqualified approving legal opunon of.the Attorney Oeucml of Texas npprmung the ObhgaUous and m the effect that thc Obhgat,ons are valid and legally bmdm8 obligations of the City, and based upon exaunnatton of such transcript of pruceedmgs, the legal opmiou of. Bond Counsel, to like effeet and to thc effect that the mmeet un the ObhgaUons will he excludable f~m gross meuse for fademl tacoma tax pmposee under suctmon 103(a) of the Code, subJeCt to the realtors doscnbed under "TAX MAI-IE:R~" herein, tucluthng the alterxatzve mzmmum tex un corporations Bond Cunosel has reviewed the mfornmntlen relntmg to the Oblm~nuuns and the Ordotanees to dc~q.i,ne that such information ennfornm to the Ordinances The legal fac to be pard to Bond Counsel fur services renderer zn enuneetzun Mth the issuance of the Obhgauons ts eontmgent un the sale and duhvety of the Obhgstzuns The legal opinion Mil accompany the Obhgattons depostted with DTC uc Mil he punted on the Obligations in the event of the thscontmuucee of the Book- Entry-Only System In eonneouou Mth the transKtzons descnhed tn the Off]end Statement. Bond Counsel represents only the Oty The vanuns legal op~nzuns to be delivered concurrently wxth the dehvety of the Obligations express the pmt'essmucl judgment of the anomeys rendenns the opmluns as to the legal muss explicitly add~essnd therein In rendenng a legal opmtun, the attorney does not become an maurer or gaamntor of that expression of professional judgement, of the transscuun opmed upon, or of the future performance of the parses to the U'anssctlun Nor does the rendennS of an opunon guarantee the outcome of. any Iogal dispute that may ease out of. thc IranMctlon 22 Thc fiannctei dam and othe~ mfonnatmn conmmed heron have been obtained from City records, audited financial mtemants and other souses which nrc believed to be reliable There is no ganrantce that any of' the asmmlpttons or asr]mates contained herein will be realized Ali of the somnmrias of' the mtotes, documents and resoluttoas contained In this O~etal State.ant are made subject to all of' thc provisions of such mtutas, documents and resolutions These summmas do not pt~ to be complete statements of'such p~ovtsions end rel'eceacc is made to such donuments tm' further tlL~)ortetlon Reference Is made to orl~tanl dacumants tn ail rcspucts The accuracy of the mathenmtleal computations of (i) the adequacy of thc nmtonng pnnclpal of' and mterest earned on the Escrow Securities together with other available funds held m the Hsc~ow £ond, to provido for the p~ant of the Refunded l~mds, and (11) the "ylelot* on the Escrow Securities and on the Refunding Bonds. prepured by the Flonacmi Advisor will be verified by Grant Thornton LLP. a firm of mdepandenl certified pubhc ecconntsms Theso computations wdl be based upun mformatlon and assumptions supphed by the Fmancml Advisor on bebe]f of the Dlstrtc! Gmat Thornton LLP has restricted its pmeedm~es to rccalcolal]ng the computations provided by the Financial Advisor and has not evaluated or e~nmmed the assumptions or mfommtlon used in the eomputatMas First Southwest Company ts employed as Financial Advisor to the City m connection with the tsmmace of the Obhgattorm The Fmanetal Advlsot*s fee for settees mndesnd with respect to the sale of the Obh~etioas IS contmgaot upon the issuance and doltve~ of the Obitgetions Ft~t Southwest Company. In t~s capacity as Financial Advisor. has rebed on the opinion of Bond Coumel and has not verified and does not assume any respuas~thty for the mfommtlon, covenants and representations contamnd m any of the legal documents with respect to the t"ederal income te~ stems of thc Obligations. or the puas~ble impact of any ps,.sent, pending or future asrtop..s taken by nny legsslntlve or jndlclal bethes The Financial Advisor has ~tewed the infornmtmn in this Ot'fietal Statement m accordance with. and as part of, its responstbtht~es to the City and, as applicable, to mvesto~ under the federal securities laws as applied to tile thcts end ctommstlmces of dos lesnse~ttofl, but the Financial Advisor does not guarantee the accuracy or completeness of such ml'omlatton Coastel Securtues. acting ns the ;~;~scntatlve of the underwriters (the "Unda:,#riters"} set forth on the cover page of this Official Statement. has ng~nd, subJeCt to certam terms and conditions, to purchase the Bonds from the City The purchase price for the Bonds IS $ (represontmg the par amount of the Bonds. plus n net premmm of $.__ and leu an undep~nters* discount of $ ) The Under~nters will be obligated to pureheso ail ofthe Bonds Ifan~ Bon~ nrc purchased. The Bonds to be o~red to the public amy he offetnd and sol0 to ce~aln dealers (laclodiog the Under#ritm$ ired ~ duelers dopustllo~ Betlds into mvestotefll trusts) at prices lower than the public offering paces of such Bonds. and such public offering paces may be changed, fz~m time to time, by the Underwriters Coastal Securities, acting as the representative of the underwnters Ithe "Undet'~mers") set forth on the cover page of this Official Statement, has ngrend, subJect to ce~aln terms and conditions, to purchase the Certificates Imm the City The purchase pries t'or the Certificates is $ (represantm~ the por anmuot of the Certifinates, plus a net premlHm of' $ __ and Ices an undet~v~ts~J* discount ors .) The Undeswnte~ will be obhguted to purchase all of the Cemficates If any Cemficatce are purchased The Certificates to he offered to the pabhc may be offered and sold to ccrtem dealers (tacindlng the Underwriters and othe~ dealers dcposllln~ Cestlficetes rata investment tl~tsts) at prices luwcr than thc public offering prices of each Certlfinates, and such public offering paces may be changed, fTom time to time, by the Undor~qlte~s The Underwriters have provided the following sentence for inclusion In this Official Statement Thc Underwriters have rewewed the infurmatioo in this Official Stateritent in accordance with, end as pall of. theft respuasl"bliltleS to the City stld, as applicable, to investors under the federal securities lows as applied to the facts and cu~.'umstances of this tomsectlon, but the Undetwntem do not gP. aesntee the aceumcy or complcteness of such iofommtlon 23 At the tune of payment for and dehvery of the Obltgauons. the City will furnish fi cemficata, execmed by prOpaF officers, acting tn their official capacity, to the effect that to the hast of their Imowtedae and hahef' (a) the descriptions and statements of or peflamm8 to the C'tty cnotamed in its Offlctal Statement, and any addenda, suppleorent or atnondmcnt thereto, on thc data of such Officml SmtamenL on the date of mia of astd Obligations and the aeceptsncc of the hast bid therefor, and oo the data of the dehve~y, were and are uae and correct m all nurcrtal raspc~ts, (b) manfat as the C'tty and its affairs, mcludmg its financial affatre, arc concerned, such Official Statement did not and does not contain an umrue statement of'a matanal fact or onot to state a metartai tact required to ha stated tharem or necesasr~, to make the statements thereto, tn thc hght of'the circumstances under which they were made. not mlsle~dmL (c) insular as the descriptions and statamcnts, mclndmg financial da~ of or pertalmnS to enmities, other than the City. and their actzvmcs contained in such Official Statement are concerned, such stataments and dam have been obtained from sources which thc City hahevas to ha reliable and the C~ty has no reason to behave that they me notme tn any material respect, and (d) there has been no metanal adver~ change m the fiflaucml condttzon of thc City smec the date of iht last andtted financial stataments of the City The Ordinances anthonzlng the muance of the Obhgattnos Mil also approve the form and contant of this Of'flctal Statament, and any addenda or amendment thereto, and authorize its forthar use m the reofferms of the Obhgatzons by the Underwntars City of College Station, Texas SCHEDULE I SCHEDULE OF REFUNDED BONDS Ortj~znal Dated Dale ] 1/15/1991 General Obhgut~on and Refundtng Bonds, Series 1991 Orl~nel Issue Ortgtnal line, est Amount Matunt~ {,~151 I~tes Amount S 4,625,000 2010 6 00% 250,000 2011 5 500/o 250,000 2012 5 50% 250t000 $ 750,000 Redempuon Date and Pace of Call 7/1/2004 ~, 100% 7/I/2004 ~ 100% 711/2004 @ 100% On,mai Dated Date 8/15/1994 Pubhc Improvement and Refunding Bonds, Series 1994 Ongmal Issue Original Interest Amount Matunt~ (,2/15,) Rates Amount S 6,250,000 2005 5 50% 2006 5 50% 2007 5 50% 2008 5 50% 2009 5 50% 2010 5 5~ 2011 5 50% 2012 5 50% 2013 5 50% 2014 5 50% Redempuon Date and Pace of Call 275,000 7/1/2004 ~ 100% 275,000 711/2004 ~ 100% 275,000 7/I/2004 ~ 100% 275,000 7/1/2004 ~ 100% 275,000 7/1/2004 ~ 100% 275,000 7/1/2004 @ 100% 275.000 7/1/2004 ~ 100% 275.000 7/1/2004 ~, 100% 275,000 7/I/2004 @ 100% 275,000 7/I/2004 ~ 100% $ 2,750,000 OnFnnl Dated Date 8/15/1995 Ooueml Obhgatton Bonds, Senes 1995 Original Issue Amount $ 4,700,00O O~smal )4mun~¢2/15~ 2oo6 2007 2008 2oo9 2010 2011 2012 2013 Interest Redemption D~te Rates Amount and Pace of Call 5 25% 300,000 2/15/2005 ~ 100% 5 25% 300,000 2/15/2005 ~ 100% 5 25% 300,000 2/15/2005 ~ 100% 5 25% 350,000 2/15/2005 ~ 100% 5 25% 350,000 2/15/2005 ~ 100% 5 25% 350.000 2/15/2005 ~ 100% 5 25% 350,000 2/15/2005 ~ 100% 5 25% 350,000 2115/2005 ~ 100% $ 2,650,000 25 ~6 THE CITY The City, located in Brazos County, is situated in the mtddle of a mangle bounded by Dallusfft Worth, Houston, and San Antonio and Austto Alyproxtmatoly 80°4 of the Texas populnttou is located wtthm a 200 mile radius of'the City The City zs principally a restdentml commumty for facolty, students and other personnel of Texas A&M Untvemity The City penofucally aceesses technical information and assistance made available by Texas A&M Umverstty The City was incorporated tn 1938 and has a Couned-Csty Mannger form of government with City employees totshng 805 correndy The City adopted and enfumes compreheustvc zoning and building resmntlnns amted at assuring orderly growth and development. The City's ordmnnees require all subthvlders, at therr own eoq~nsu and without provmton for refund, to install streets and water and wastewateF lines tn any planned subdivision These facthttes are constrocled under the City's speelficatious and inspection and whnn completed are deeded to the City free and clear All areas within the City are now Ci3~F OWNItD FAclLmES The City has constricted a major part of its present thcthttss out of current revenues Approxtnmtely 711 lane miles of' streets (99 8%} within the City are hard surface The City has a complete water dtstrthutloo, wustewater collection and trontment system with 470 miles of' wastewnter and water lines The City owns the electrical thsmbutinn system with 256 miles of' disu'thutlon Imee, and pumbusus tis electricity from Amencan Eleemc Power Thc City has a fully equipped pohce depanmant with 98 full tune police officers and 44 5 support per:~onuel and fire department with 100 full-t~me equivalents The City has 18 police petrol cars and one buldlng facility Mth a capacity of 20 The College Ststtnn Independent School District ts a fully accrethted system offering educational facilities for kmdergmen through high school The School District has a student enrollment m excess of 5,200 and employs over 600 people The School Dtsmci's fusthtles are also used by Bhnn College, offermS two years of college level courses Texas A&M Unlverssty provides higher educational facdmes, offenng both four year college programs and graduate degree prngnnns The Bmzus Valley Medical Center is located on 25 acres wtfutn the City The 100,000 sqnnm fou~ facthty is a full care hospital contmmng 100 beds and employing 340 people Other ama health care providem include Care Plus Medical Center, College Ststton Medical Center, St Joseph Reg~ounl Health Care Center, and Scott & White Chmc U S Highway 190/State Highway 21 hnks the City to Interstate 45 which is located approximateJy 35 miles to the east stere Highway 21 vm U S Highway 290 also links the City to Austin, located approxmmtely 110 miles to the west State Highway 6 hnks the City to Wano (100 oules) and Interstate 35 to the north, end Houston (90 oules} to the south Also, State Highway 30 links the City to Hnntsvtlle (45 miles) and Interstme 45 to the east Aidtnes Railroads Coounereial, corporate and private mtport faclht~as are provided by Eastenvoud Auport. which is located on the City's west side and is owned and operated by Texas A&M University Amencnn Eagle Airlines provtdus dady flights to and from Dallas-Fort Worth AuJx)rt out of Eusterwood Coulter Field ts located north of the City of Bryan and pro,fidus a recently completed 4,000 foot hghted n]nwey Coulter Field offers all types of services for the private mmusft Two bus lines serve the City Mth dndy service connecting the City Mth Houston and Dallas Rtol fi'etght survtce ts provided by the Union Pm:trio Railroad Union Pacific Railroad operates ammn freight line from Houston du'ough Bryan-College Stettou to Dallus-Fort Worth and beyond RKCREATION The College Station park system presently includes 42 perks encompassing 1,134 scses, mcludu~ a 515 acm wilderness perk Collectively, these parks contain 24 plnypounds, 28 scceer fields, 17 basketball courts, 19 softbulVoomhell diamonds, 3 sw]outong pools, a ~nnnstum, and a number of ptentc shelters, The Parks Depmlmnnt sponsors a variety oforgemzed athletic nnd nqnnnc prngmms as well as many specml =vents thronghout the year A-I ~OIq.q,ATION OtficmlUS Census 1940 1950 1960 1970 ]950 1990 2000 City of College Station 2,184 7,925 I 1,396 17,676 37,272 52,456 67,890 Brozos Coouty 26,977 78,390 44,895 57,978 93,588 121,862 152,415 ECONOMIC BACKGROUND Texas A&M Umversttv and S/stem Of major importance to the City Is Texas A&M University which has a 5,200 ante campus located with[] the City The City is pnnclpally a resldennal community fat fanulty, srodents and other personnel of the Uroverslty Texas A&M Uroverslty and sts System are the largest eroployer in Brazes County and a roaJor conmbutor to the local anonomy Texas A&M has a mgrot~esm economic iropact on the City, coumbuttng an estimated $766 :~ rollhon annually to the local econoroy Texas AAM has consistently tanked [] the top ten nationally aroong public rostlmtlons of hasher edueMmn [] both enrollroant and rasenreh grants Resexreh dollars totaled approxsmately $402 rodhon fat 2001 The U[]vemty bas approximately 25.700 penonncot sod pan- t~roe employees with a pay•Il of approximately $679 outhon and has a phymcal plant valued [] excess of$1 5 bdhon Texas A&M had nn enrollment of 44.701 students, the 3rd largest in the nation, dunng the fall semester of 2003 There are cunently over 700 National Meat Sclmle's enrolled at Texas A&M Urove[]lty, ranking in the nation's top 10 onwe[]mas for National Meat Scholar enrollment Student Rec Center The Student Ran Center is a 286,000 square foot building located on thc Texas A&M Umvemlty caropus The Center includes muitl-purpuse g~,.ma w~th had•rotan, basketball and volleyball courts, indoor soccer courts with dasher bonrds, 14 rocquetball/lmndball courts, and two squash courts ruth glass bankwnlls The Ccotet is horoe to a 14,000-squere foot area •th machine weights, free we~hts, card. zo-va.~'alar equipment, and a casdm-theater, five anttwty rooms for aetob[]s, dance and martial aris, and a quaffer-mdc four-lane walkms/jngg~ng torck It features a 42-foot []door rock ohrobro~ fa[]hty with mterehangesble hand and foothold, nn ontdonr a[]wtty arce with a slx-lane lap, and a free-form pool with a cool water spa The botldmS also houses n nntetormro that seats 2,$00 wtth a S0-roeter, eight-lane Olyrop[]-[]ze pool. a five-lane msttuet[]nal pool. a divots weft with one and three meter spnnglmaed~ and competztwe platt'ac•s, and hot tubs Goatee Bush Premdent~al Library and Museum The City m the site of the George Bush Preside•mi Ltbroly sod Mt~eum, located au the campus of Texas A&M Urove[]lty Texas A&M provides programs and fa[]ht[]s •ich as research and ms~auet~oanl prosroma reiatnd to the hlmuy and roesoum, a conference center, communications center, educauonal museonVhbroty center, and ~•lly-or[]flted thoth~tes ~lch as a surrounding the presidential Ilbroty and muscoro Dumig 2000, the premdeotml hbro~ and related fanshtses attracted roam than I$0,000 visitors to thc coma•tory As a result, the room occupancy rote for 2002 was m cxcass of 62% The •crease in tounsro has spurred the con~tmctron of sevend ncw hotels In addition, the City is currontly under contrant for a pubhc/pnvate venture to construct n 300-rooro full service hotel to be associated with a City owned 45,000 square foot conference center This project ts scheduled 1o be completed in the 2~ quarter of 2005 Reed Arena is a speend events center located on the Texas A&M Urovermty campus The Arena anats up to 12,500 pcople and is the largest such fandlty in the Brozes Valley asea The canter atU'ants athletic events, concerts and exhibits. A-2 Number of Firm Name Product Employees Tosas A&M Untvemty and System Educatton/Rasos~h 19.97 I BrTan lSD Education 1.868 St. Joseph's Regmnel Hospital Hospi*~l I. 170 Reliant Building Products Aluminum Windows 1,100 Sanderson Falms- lac Ponltiy Processing 1.100 City of Bryan Municipal 859 Cl~y of College Station Municipal 805 Collage Station ISD Education 800 Brazos County Oovemmen! 796 Wal=Mart Supereenter - B~yan Rctad 600 UCS~ntsys Computer Hardware and Soft'ware 550 Hamilton State School Education 500 Young Contractors, Inc Consm~ctlon 500 Scett & White Clinic Clinic 375 College Station Medical Center Medical 327 First American Bank SSB Bank 300 Bhnn College College 293 Britt Rice Electric Elcetrica[ Conttaetor 200 Kent Moore Cabinets Cabinet Manufuclurer 200 In addition m the Umvemity, emp[oyment la prowdnd by more than 85 manufnctunng mdusmos located in, or adjacent to, the City v/tach produce such products as aluminum windows, foroitnre, chemicals, deity products, feeds and fe~illzets, modular homes- bronze castings, and gonphyslcal survey sensors A growing resosxch pa~ ts located within die Tc~qs A&M campus Major tenants include the Off3hore Teclmolng~ Research Center and the Food Sa~-ty Inspection School National Training Center Automated Manngament systems provides a major automated accounting service for independent property and casualty msursuce agents The City has also developed the College Station Business Center, a 200-ucro business path Tenants within the park include United Computer Systenm ("UCS"), wbtch employs approxtonttely 800 people, Cabletime, e graphics IKIvertising business- Prodigene, a blotcelmo[o~, research business, and Stem (~)11)orntion. e software resenmh business Businesses either under construction or m place account for approximately 300,000 square feet of braidings end employ npproxmmtely 1,000 people LA~OR STA1 Il[fiCa College Station Labor Total Year Fore EmpIo|ment Unemplo~nncet Rate 1999 30,059 29,506 553 I 8% 2000 30,538 30,051 487 I 6% 200l 30,881 30.349 532 I 7% 2002 32,065 31,439 626 2 0% 200.t .t3,546 32,769 777 2 3% Brtzce County Labor Total Yess Force Empire/moat UnempIo~'ment Rate 1999 75,486 74.166 1,320 I 7% 2000 76,699 75.537 1,162 I 5% 2001 77,554 76,285 1,269 I 6% 2002 80,518 79.025 IA93 I 9% 200.1 84.223 82.368 1,854 2 2% A-3 SALTS AND EFF~CTWE BUYING INCOME College Station Medmn Household Total Household Calendar Estimated TOMI Effective Effective Year Popuhtton Retml Sales Bu~nng Income Bu~nni Income 1997 60,300 713.118.000 18.919 715.456.000 1990 66.000 792,531,000 19.481 820,064.000 1999 65,400 626.034.000 21.456 873,068,000 2000 67,200 987,041.000 23.260 976,163,000 2001 70,400 974,869.000 25.661 1.007,953.000 2002 72.700 1,016,089,000 21.918 1,010.820.000 Brazos County Median Household Total Household Calender Est:mated Total Effective Effective Year Population Retad Sales Buying Income Buying Income 1997 132,600 1,356.737.000 26,271 1,843,$01.000 1998 142,400 1,487. 107,000 26,651 2.084,009,000 1999 145,000 2.066.179.000 27.925 2.230.843,000 2000 154.700 2.307.670.000 29.418 2,441,456,000 2001 158,600 2,225,738,000 30,992 2,534,254.000 2002 161,900 2,327.506.000 28.472 2.377.460,000 College Station has grown rapidly over thc past 26 years as evidenced by an mcreasc tn population from 17,676 tn 1970 to 68,038 In 2000 The following table sets forth the number and value of COl~t~lctlolt p~t~ltts t,~ued by thc City over the Imst Number Number Number Year of Penmts Value of Parouls Value of Pernuts Value 1999 1.020 $ 87,917,466 138 $ 26,665,024 1.158 S114,$82,490 2000 639 85.278,855 162 46,094230 801 131.373,085 2001 782 79,340.756 191 40,194,722 973 119.535.478 2002 1,180 94.300.400 138 43.483,100 1,318 137,783,500 2003 1,230 144,925.000 138 37.863.100 1,368 182,788.100 Brazos County was created tn 1841 ~rarn Robertson and Wasinng~n Counties The econon~ ts dzveoufied pnmanly by a~nbueluess, computer mnnufactunng, research and development, and education The Texas Almanac designates cattle, hop. sorghuma, corn, cotton, wheat, outs and pecans as tile pnuetpal sources of'n0ncultural income The County had a 2000 populattou of 152,415, an increase of 25 07% since 1990 MmeFals produced m the County mcinde sand and grovel, hgmte, gas nnd mi A-4 APPgNDIX 8 EXCERPTS FROM TH~ CITY OF COLLEGE STATION, TEXAS ANNUAL FINANCIAL REPORT For the Year Ended September 30. 2002 The mfommtmn contained m this Appendsx conststs of excerpts from the C~ty of College Station. Texas Annual Financial Report for the Year Ended September 30, 2002, and is not intended to be a complete mteraent of the Ctty's fmanctal cnndmnn Reference ts made to the complete Report for further mfommtion James 13 Ingrain, Ill 'ret.emo~ ~A Wnltm (979) ?76-Z600 James D I~m, IV R~ L Webb (9~) 774-775~ ~enn~h W ~al J~fer A St,ll~ z~O~m~alln~ ~m Mehn~e ~ B~m Meier Meier ~ld B ~m~ _I~'DEPENDF.,NT AUDITORS' RETORT Mayor Ron Silvia, Members of thc City Council and City lvl~nager of the City of College Station, Texss We have audited the accompanying general purpose financial statements of the City of College Stauon, Texas (the "Cnty"), as of and for thc year en(~:l September 30, 2002, as listed in the table of contents. These general purpose financtel statements are the responsibility of the City's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with auditing sts~dards ~rally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Sta~,,~,,,-ds, issued by the Complroller General of the Umted St,t,,~. Those sumdurds mluire that we plan and perform the audit to obtain reasonable assorence about whethor the general purpose financial statements arc free of material misstatement. An audit includes examining, on a test basis, evidence supporting thc amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting pnnciples used and significant estimates made by menagement, as well as evaluating the overall geanral putlx}se financial statement presentst~on, We believe that our aucht provides a reasonable basis for our opinion. In our opimon, the genoral purpose financial statements refen~d to above present fa;fly, m all material respects, the financial position of the City, as of September 30, 2002, and the results of its operations and the cash flows .of its proprietary fund types and nonexpendable trust funds for the year then ended m cenfomuty with accounting principles generally accepted in the Umted States of America. In accordance wtth Government Auditing Stamlards, we have also issued our tep~ a.t,~cl January 10, 2003, on our coflmderation of the City's internal con~'ol over financial t'-c, porong and on our tests of its comphance with certain provisions of laws, r~gulat~ons, contracts and grants. That report is an integral purt of an audit performed in accordance wxth Goverarnent Audigng Standard~ and should be read in conjunction with this report m consxdering the results of our md:t, 23 Our audit was performed for the purpose of forming an opimon on the general purpose financial statements of the City, taken as a whole. The combining and inthwdual fund and account group financial statements and schedules hsted in the table of contents are presented for purposes of additional analys~s and are not a required pa~t of thc general purpose financial statements of the Civ. Such ~nformation has be~n subjected to the audmng procedures applied in the audit of the genoral purpose financial statoments and, m our opinion, ~s fmrly stated, m all material respects, in relation to the general purpose financial statements taken as a whole. The statistical section, listed in the table of contents, was not audited by us and. accordingly, we express no opinion thereon. Bryan, Texas January 10, 2003 25 CITY OF COt.t.E~E 9'rAI'ION, TEXAS COMBINED BALANCE SHEET N.L FUND TYPE8 AND ACCOUNT GROUPS SEPTEMBER 30, 2002 (With comparative total*= for the fiscal year ended September 30, 2001) OovernmentBl Fund Capital Projects $ 5,772,290$ 8,504,056$ 1,287,038 $ 20.761.465 4,878,881 7,186,084 1,08'T,571 17,543.820 81,34~ 79,649 13,874 207,320 47,201 t84,32t O 37,743 25,000 0 0 0 440,124 6,660 0 360,458 0 0 0 0 2t ,796 O 0 0 1,313,154 0 204.055 0 0 85,393 0 o 5,755 0 0 0 (25,721) (800) 0 (~0,340) 0 0 0 O 66,306 0 0 o 0 O o 0 ~40,748 0 O 0 203,436 0 0 0 0 0 0 0 0 0 0 o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o 13,048,320 $ 0 0 0 16,045,312 $ 0 0 0 2,562,53~ i 0 0 o Internal 8e~e Fund'r)1m Trust ~l FIx~ ~ UXI~- A~ T~n DMX 14.904,342 $ 4,715,260 12.622,330 3.094,46t 142.620 43,153 3,'/71 0 0 0 0 0 0 9.457.850 161,626 3,191 200,469 0 0 0 0 0 0 0 0 12,E22 0 0 1.117,660 1%240 0 (1,616,044) (15,513) (679) 0 0g,504 0 1,299,184 108,516 3,226 0 68,211 0 11.815.335 0 0 0 9,964,176 0 0 O 0 $ 0 129,752 0 0 0 0 422 0 0 0 0 200.~00 0 0 0 0 6,269,525 0 0 0 0 762.602 0 0 0 0 '160,790.112 9,511,334 0 140,353,195 0 0 0 0 0 0 0 228.11~866 $ 1&957~12 0 0 2,355,213 0 0 "1,433,465 0 0 72,689,786 7,44,649 $ 140~3,195 $ 76,376,496 (Continued) o $ 56,342,897 $ 43,430,t00 0 47,637,86t 45,780.767 851.735 967,969 26~,265 394.605 25,000 26,000 10.438,918 9,3~2,384 2OO,469 197.969 2%796 21,796 1.517.209 1.667.948 97,915 107,047 1.134.664 1.163.9~8 (1,~69,157) (1,663,544) 69.5O4 97~80 1.47/,2.34 2.001,674 68,21t 41,146 0 12,056.063 1%622,603 0 10,167,6t2 12.686,353 6,280,625 5.447.2O2 '/'62,60~ 705,759 310,6M,84t 273,486,9t2 2,355,213 3,563,5~9 1,433.495 1~86,346 '/2,589,788 56.406.411 ~ $ 4~9.~96,416 The nO~B lO b'~B general pu/poN Ihmfl(~al 8tstm'Tmnh~ mm Brl inland pl~t of ihjB statement. 27 CITY OF COLLEGE STATION, TEXAS COMBINED BALANCE SHEET AU. FUND TYPES AND ACCOUNT GROUPS 8EPTEMBER 30, 2002 (With comparative total,, for the fl~?,a~ year ended September 30, 2001) Govemmentsl Fund Special RevelllJe Uablliltes. Equib/.ad Olher Credits Liablll'des Account~ F~ble $ 782,260 $ 97,429 Due to Olher FunM 0 0 Ac~ued In~ P~yable 0 0 Rebsinsg, PsyMY. e 157 25.342 Ao%ln~e from C)fMf Funds 0 200.000 Re~ndalde Oepoelts 5,763 lg.(]44 CIMms Payable 0 0 AGcmed UaMWee 1~.18,055 (2/147) Cmtomer Cmal~uclk~ Adv~ces 29,963 0 O3ter Dof~md Revenues 896,827 82.338 LmbilWes Payable from Pa~Mcted A~ets A~ounts Pa~able 0 0 Re~lnage Payable 0 0 Accrued Ual~ff~ 0 0 Refundable Deto~ls 0 0 Revenue ~ 0 0 Long-Tram Debt Rew~ue Bond~ 0 0 Unamm'~ed PmmbJm on Bund~ 0 0 Generd Obllgallorl Bcmda 0 0 Cen~mlM of Ob~lmn 0 0 Accnmd Vacation 0 0 Eclult1~ and OIhw Credits ConVlbut~ CaplIM 0 0 Inwsfment I~ C.-enem] Fixed AMeI~ 0 0 RMmnnd Earning, Resentd 0 0 Unr~entd 0 0 Fund BalBn~e~ R~sermcl 082.025 3,1~6.4Sl Oeslgn~tnd ~o~ Subeequent Yems Expenddure6 0 0 Unde~;na~ 9.122,197 12,482,tS5 To~ Equ~y end C)~her Crndb I0,111,225 1S,0~6.820 'r(~t UM~d~ Equ~ ~d OR C,~W $ t3.048.320 $ 10.045712 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 237,325 0 0 0 0 2.355,213 0 0 2.355,2t3 c~t~l ProJ~m S 5t8,415 0 0 361,977 0 0 0 244 0 0 O 0 0 0 1.203.637 0 0 0 0 4,430,827 0 33,275,222 37.705,829 38,829,466 28 Fiduciary Prol:xteta~/Fund T}?es Fund Enterl~ Inte~nM SmVl~e Trust Torah ~eet~ .. Tefra Debt 2002 2001 $ 5,857.070 S 630.949 $ 1.582 $ 0 69.604 0 3.942 0 0 16.817 0 0 0 0 0 0 0 0 0 151,495 0 587,726 69,680 0 92.152 0 0 622 0 0 5,t40,909 0 0 814.201 0 0 857,256 0 0 9.238 0 0 t,036,099 0 0 3,815.000 0 0 74,420,000 0 0 (110.47t) 0 0 0 O 0 0 0 0 257,454 64,300 0 g2.798,715 1,005,928 1,562 3B,716,019 4,164,452 0 0 22,281.569 0 74.316,566 13.487.432 0 0 0 0 0 0 135.314,151 t7.651.884 S 228.112.866 $ 18,1~/.812 $ 0 0 0 140.35~,195 0 $ 0 $ 6,169,706 $ 7,265,60~ 0 0 69,604 97,680 0 0 3,942 3,940 0 0 404,293 407,066 0 0 200,000 0 0 24,~07 25.350 0 0 15t,495 412,6T/ 0 0 1,906,526 1,752,612 0 0 147,115 236,754 O 0 1,191,112 1,,258,747 0 0 5,140.809 5,955,401 0 0 814,201 446.457 0 0 657,256 485,247 0 0 9,236 32,738 0 0 1,036,~99 1,214,476 0 0 3,8'15.000 3,165.000 0 0 74,420,000 60,020,000 0 0 (110,471) (131,666) 0 41,8~5,000 41,~,000 39,375,000 0 33,260,000 33.280,000 20,695,000 0 1,433.496 1,775250 1,601,528 0 76~378.499 174,961,484 144.119,614 0 ,42,M0,466 42.011,668 0 140,353,195 123,674,551 0 0 0 0 0 0 743,067 0 0 0 0 0 0 0 0 743,067 140,353,195 0 744,64g $ 140,353.195 $ 76,376,496 22.281,569 87,603.996 82,16G,024 11,674,366 1D,056,109 0 12.749,505 54,857,57'4 34.215,379 359,8~1,170 _ 325,476,802. $ 534,842,654 S 469.596,416 CITY OF COLLEGE STATION, TEXAS COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES N.L GOVERNMENTAl. FUND TYPES For the Rs~al Year Ended September 30, 2002 (With comparative totals for the fiscal year e~decl Seplember 30, 2001) Revenues Ta)ms I.~enees and Pemats inha'govummental ChmoM for Servlcea Flnea, F~ ~ ~1~ ~nl ~n~ Expenditures General Go~ummenl fiscal P~lGe Put211= W~ Emnendc and Pa~s mtcl Rm:reeSon Infmmallofl Services BIGck C~amnce and Demolition Interim Commerct~ Rehsblhtaltlofl Houei,0 (:~tJon Reimbursed Admfrdslratlve Cofltfibutlmm O~her c~o~tm Capital 19.904,565 S 2,434.117 S ?.160,g62 S 0 870,636 0 0 0 423,126 2.139,541 0 9.761 2,067,513 25.341 0 67.52.5 2.225.354 0 0 0 0 0 0 082,760 438.885 579.448 200,119 1,312,057 113,724 114.8E8 0 0 0 9,626 0 0 21.475 0 0 329.1'69 32,8O3 0 0 0 171,298 264,524 1,0t3 524 2%260,679 5,567,265 7,422.094 2..__..__.702,396 2002 2001 $ 29,499,644 S 27254,701 870,636 779.159 2.572.426 3.221.85t 2.160.679 1.053.809 2.2.26.354 1,798,870 2.500.509 3.451.470 228.392 213.832 9.626 9.979 351,244 432.814 32.803 531.307 437.359 549,639 41,~61.4~4 41.142.157 3.279,7'i5 202,860 0 318.675 3,801,250 2,g00,436 2,153,217 5,031 0 0 2.156.248 1.869,611 8,914,893 O 0 O 8,914,893 8,273,632 6.,105.874 0 0 0 0..405.674 5.702,804 1,663,224 O O 0 '1,883,224. 1,667,375 5,211.720 0 0 0 5.211,720 4,583,796 122.074 0 0 0 122,074 41,923 6.045.622 0 0 0 6.045.622 5.196.309 2.293,734 0 0 0 2.293.7.34 2,229.600 734,083 0 0 0 734,f~3 581.78fl 0 538.901 0 0 538.90'1 0 0 626,848 0 0 926,845 0 0 0 0 0 0 64,?(~ 0 0 0 0 0 382.066 0 0 0 0 0 ?,500 0 0 0 0 0 53.18~ 0 0 0 0 0 1.941 0 0 0 0 0 83,561 0 0 0 0 0 8,217 0 0 0 0 0 32,122 0 0 0 0 0 130,000 (5.623.852) 1.264.296 0 1.000.000 ($.550.556') (3.538.877) 208,485 1.140,400 0 0 1.348.885 1,M1,173 98,564 31.739 0 fl5.147 183,450 577.806 150.000 1,341.625 0 11,700.964 13,192,589 9,885.474 30 CITY OF COLLEGE 81'ATION, TEXAS COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES For the Fiscal Year Ended ~otamber 30, 2002 (With comparative totals for the fiscal year ended September 30, 2001) (Co. IJnued) Prkldpat P. et~mment Intemat Payments leauenue Cuete Total ~s Exce~ (Deitaen~ of Revenues O~r (Under) ~ Other Rnand~g Sourm~ (Deue) Proeeeda ;,~. I.ong-Temt Debt Sale of Gerleml F'msd Assets OpemUng Tra~tem In To~ 0~' F~nan~ng ~ Capl~ Debt San4ce Projec~ 0 0 S.950.000 0 0 0 3.425,390 0 0 12.000 0 103,500 0 0 8,752 0 31,675,353 5,163,700 . g,384.142 . .13,178,2~6 [5,405,674) 40~,!185 (1.9e~2,048) 0 2,315.600 0 17,739,400 30.106 0 0 0 6.084.199 ee9~141 T~1,672 10.006,078 Tolal~ 5.950,000 4,475.00O 3,425.3~0 3.213.770 115.600 77.244 8.752 8.926 59,401,481 50,299,576 (17,440.M71 Ig.157.419} 20.066.200 T,292,870 30,106 580.909 8.7M,250 14,g45.966 ~2.007.066) (1,550.693) 28,M3.490 21,28g,052 EX~'~- - {Deflcter~) of Rewlue~ aad Other ~ Saurm~ Over (Under) Exisend~,ufes end Other Financing Uees Fund B~anoue, October 1 Fund BManc~, September 30 678,525 1~i03,106 (1,208,376) 8,630,188 9,403,443 12,111.633 9,432,700 14,213,5(X) 3,563.58D 29,175.641 56,386,430 44,273,797 10,111,27.5 $ 15,.___.616,606 S 2,355,243 S 37,705,820 $ 65,788.673 $ 56,385,430 The not~ to the germml ~ financial Matemlnte am an Integral pair of Ih',, etetemeflL 31 CfTY OF COLLEGE STATION, TEXAS COMBINED STATEMENT OF REVENUES, EXPENDITUFF.6 AND CHANGE8 IN FUND BN.ANCE$ BUDGET.AND ACTUAL (BUDGETARY BASIS) GENERAL, SPECIAL REVENUE, DEBT SERVICE, AND CAPITAL PROJECTS FUHD$ For the Fbrdal Year Ended September 30, 2002 'Tm $ ~ mmmM Pem'~ Fire. ~ ~ ~1~ ~m~ ~ T~ ~m Genital Fund I~:maMI F~ue Funds Budget Actu~ (UndBq Budoet ,,~=tueJ (Under) 19.670.172 $ 19.911B.422 $ 246.250 $ 2.502.4t9 $ 2.434.117 $ (68.302) 725.500 670.636 145.136 0 0 0 330.317 423.126 92.60;I 4.621.500 2.t 39..541 (2.481.966) 1.98'/'.6(]0 2.067.613 60.213 13.000 25.341 12.341 1.6~0.000 2.330.648 6.10.648 0 0 0 %00O 0 (~.000) 0 0 0 540.400 519.327 (21.073) 541.200 717.31 t 176.111 74.000 113.724 30.724 116.000 114.M8 (I.332) 0 0 0 0 9.626 9.626 27.000 21.475 (5.E2~) 0 O 0 6,000 32,803 26.eo3 o o o 13~,OQO t66,266 35,296 gt,Q0O 263,960 172,950 25.182,080 26.464.342 1,281,263 7,885,128 6.7O4.464 (2,'180.674) Eq)mldltulwe Current General Gommment 3.387,370 3,268,960 (128,371) 6,~00 7,746 1,646 ~ 8ewtcN 2,101,216 2,0M,637 (6,579) O 5,031 5.031 F'olk:e 8,eoa.5'rl e.~74,et9 (ae.g~.) 0 0 0 Fife 6.535090 6.294.174 (~40.916) 0 0 0 Dc'.~t 8graces 1.965.544 t.669.605 (g6.9~0) 26'7.1B00 201.6T2 (65.928) F'uM= Wodm 5.379.475 5.341.650 (37.925) 0 0 0 Emmom~ end C. emmufaLy De~el(Rmlmtt 0 3t.657 31.657 0 0 0 Ped~ and Recmatlm 6.~27.~75 '~.?~4A06 (4~3.176) 1.400 ~e (e62) Om~e ~'r~ and ~nromwao, Sen.tc~ 2.~.s.aee 2.233.~e9 (t2.6?0) 0 0 0 ~ 716.394 670.61;' (45.577) 0 0 0 Block G~mlt 0 0 0 2.339.397 638.001 (1.800.496) Home Grin1! 0 0 0 1.623.439 626.6~.6 (996.591) Rekwbia~ed Admm (5.805.123) (5.816.677) (11.754) 1.3..13.629 1.264.296 (60.633) C~tbtbutkms 20'/'.li~ 331.851 t23.853 1.t40.400 1.140.400 0 ~ t.221.276 134.976 (1.086.287) 316.127 t7.125 (301.002) Capmd Ouby 1.296.665 664.266 (632.697) 7.292.689 t.339.064 (6.gr-.3A25) Pdndp~ Rebemmlt 0 0 0 270.000 0 (270.000) Iht,feet P~ymml~ 0 0 0 0 0 0 IiBulnGe Co~ 0 0 0 0 12.000 12.000 FIKsI CIIBr0es 0 O 0 0 0 0 TO(~ ~ a4.243~ae 3l.,oe.'-'~ (2.e4s.046) 14rse;.le1 s.l,.e0t Budoet Over Vm~nce Over (Under) Buret Ag~m (Under) 7.265.601 $ 7.leO,ge2 $ (IM,639) $ 0 $ 0 0 0 0 0 0 0 0 0 0 0 272,000 (4,~11) (276,311) 0 0 0 50,000 67,525 17,525 0 0 0 0 O 0 O 0 0 g67,300 M't ,673 (5,627') 350.000 186.750 (163.250) 620,000 1.618,864 99~.864 0 o 0 0 0 0 o 0 o 0 0 0 0 0 0 0 328,3~ 328.398 0 0 0 0 0 0 0 t11.482 1~,,m2 o 7,615,601 7,459,194 (158,407) 0 0 0 0 356,419 356.419 0 0 0 50,000 1,517 (48.483) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 8,36O 6.3e0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 t ,000,000 t ,OOO,O00 0 0 O 0 0 0 0 0 330~0 23.~0 (306.060) 0 0 16,~,~.e32 11.ffQO,~OT (4,e~e,12~) 6,MO,O00 5,~0,000 70,000 0 0 0 3,168.263 ~,25,381 257,126 0 0 0 9,000 0 (9.000) 93,s00 1 n-$.- _~*~J 10,000 6,000 8,763 2.7~ 0 0 0 9.003~e3 e,3~4,144 ~0,e81 17,~A32 13o0~0~3 CITY OF COLLEGE STATION. 'TEXAS COMBINED STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL (BUDGETARY BASIS) GENERAL SPECIAL. REVENUE. DEBT SERVICE. AND C.~OlTAL PROJECTS FUNDS For the Fiscal Yam' EndecI September 30. 2002 (Continued) =...'~_ __- (Degclency) o~ Revenue~ Ow (Unde.') EXpendaums Operdt~g Tmmf, r Out (Uael) caener~ Fu~ Spem~ Revenue Faro (9.060,450~) (5,134,151) 3,g2E,2gg (61708,053~) 550,853 ?,2~,g06 0 0 0 2.300.000 2.$t6.800 t6.800 41.000 30.t06 (10.894) 0 0 0 ,.4e~.000 a.,~3 5~.eea ~;o.ooo ~o.a30 0 <4~e.oo~) <4eojeo) ~2,0ee) mee,o~ (4.437.2~) ,.. ~ee.207) e,047.~0~ a,oaa,a~ 38.700 l,~tA4a G.S4~ (~.,407) EGI~ (Dellder~ o~ ;bvenua8 Over (UmJer) ExpendlU~ and Oilier FInanc~O Uses Fund Ballut~a. O(~ober 1 Fund Balames. Set~ember 30 (3AI2.M1) 052.458 3.964.996 {5.156.105) 1.~0.:394 6.706.499 9.3~.239 9,agE,2~l 0 14.0~1.801 14.0.61.801 0 S 6.382.666 $ t0.347.697 $ 3.964..909 $ 8.~5.966 $ 15.602.165 $ 6.706.499 O O 0 16,5~0,000 17,739,400 '1,179,400 0 0 0 0 0 0 1,~A10 753,672 (269,738) 721,325 1.355,678 634,353 0 0 0 0 (6~,000) (69,000) 1.023,410 753,6?2 (299,738) 17,281,325 , 1%006,078 1,T'24,753 (424,252) (1,171,278) ('J'47,026) 1,211,193 8,~38,189 7,726,g~8 3,648004 3,548004 0 29,062,601 29,fl62,9~1 0 3.123,7~2 $ 2.376,726 '$ (747,0~ $ 30.274.184 S 38,00'1,180 $ 7.726.996 CITY OF COLLEGE ~I'ATION, TEXAS COMBINED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS/FUND BALANCE ALL PROPRIETARY AND FIDUCIARY FUND TYPES For the Flseal Year Ended September 30, 2002 (With comparative totals for the ~cal year ended September 30, 2001) o~ ~ Olhar Total O~rabng Rem~ues F~luc~/ EntefptlM tntamal Sen'ice Treat S 64,995,432 S 7,154,358 S 0 0 0 90,618 0 4.427,77..5 0 0 0 25269 0 0 5,12,5 !,904,236 160,096 0 66,699,868 11,742.,182 121,032 Elecb~c Ope,~;~,,4 Sabltes and Bene(l~ Maintenance Purchased ProfesalonM $enAcm; Pure'rased Pfopedy Sambas Olher Pm'eha~ed Santo;es Claims Admln~oaao. Fees Pfemlum~ O~ler To(al Operating Expemms 37.67g,409 0 0 4,,404,293 2,176,030 0 651,620 707,468 0 1,364,163 170,626 6,094 ~"/',g06 17,.~63 0 2,338,067 104,523 0 t,320,132 262,574 0 0 1,256,81] 0 0 134,712 0 0 2,492,559 0 2,~00.845 993.495 0 5,076.31g 2,385,806 0 56,16'/',420 10,T/'6,238 13,528 10,~2,248 965,944 107.504 1,932,675 260,609 0 96,376 '162,562 0 0 0 0 842,323 0 0 (3,989,!~8) 0 0 3.134,606 7.504 0 2,016.622 4,50,575 0 In(X~le ge~m Opemtk~ Trenafem 12.748,870 1,416,519 107,504 OI~MMIno ~PA C]pefa~lng TrarlaMfa In Operating TmnafMs Out To4al O~efallng T/mla~ Net b(~me ('..oM) 1,241 1.475 0 (.,7~,~00) 0 0 (6,758,85g) 1,475 0 5,990,211 1A 17,994 107,504 90,60'T,924 12,069,438 935,563 ~ $ 13,467A32 $ 743,067 72,149.790 $ 66,015.T64 90,618 64,523 4,427,725 $A63,439 25,289 36.344 5,125 16,135 2,064,336 1,057.803 78.762,682 73,774,1 tEL 37,679,409 37,038,395 6,680.323 5,871.424 1,359,086 1,213.738 1,540,683 1,212.902 575,4~9 516,352 2,442.5~0 2,48t.842 1,~2,706 1 ...~ ~,8.,'~,'~,'~,'~5 134,712 170,403 2.402,~59 5~8,445 3.504,341 3,800,378 7,4Q2,127 5,876,06t - 2~4,108 371,111 66,057,185 84,021,831 11,605,696 9.752,28/' 2,213.184 3.537.395 25~.038 157,050 0 14.800 842.32.3 664,692 (3,0a9,558) (2,402.950) 3,142,310 622,8¶2 2,467,197 2,503,802 14,272,993 12,346,089 2,716 995,2OO (6,7ff0,900) i~14,390,473) ~6.757,194) (~13,30~,273) 7,515,709 (I ,049,164) 103,312,025 I04,362,100 110,6;26,634 $ 103,312,925 37 CITY OF COLLEGE STATION, TEXAS COMBINED STATEMENT OF CASH FLOWS ALL PROPRIETARY AND FIDUCIARY FUND TYPES For the Fiscal Year Ended 8epMmber 30, 2002 (With cOmparafJve totals for the fiscal year ended September 3012001 Er~p~e Cash Flows imm Operolfng Acb'vJito8 Ca~RKdvshfromCuutomor8 $ 65.959,869 $ 11.741,8~2 Cash Paymmlte to Suppliers for Goods and Santo:as (4a.924,633) (5,881.S05) Cash Payments to E~ fo~ Services (3,434,8~2) (2.159,701 ) Customer DSho~Ito Re~ 1,475 O Ceetomor Dqx~e Retomed (179.251) 0 Ceeb Received bum Conbthubons 0 0 Cash Received for Reknbomod Expenass 96.376 125.674 Caah Received from 8ato of 8(:rup 0 0 Cash Reemvod fmfn Colecltofl Fees 0 0 Cash Received finn1 Grunto 0 0 Cash Rocelvod For MiKolidnooua Revendas 265.561 21,407 Cash Reee~ From OUmr Funds 0 79.262 Cish Pgid to OIMF Fu/Ms 0 (3~,760) Cash Paid far Idmehneeea ~mees (30,079) (5'r,ee6) Net Cash Provided by Opemllng,~ltvl~e 15.774.266 ' 3.83~.031 Ot~ Tmmfml I~ from Othe~ Funds 1,241 1,475 O~eret~g'Tmnde~ Out to Other Ftmds (6.750,900) 0 Cash Paid to Othm FLmdS 0 0 Cash Paid to PUI~O AOeeolee (361,851} 0 Net Cash Pmvtoed (Used) by Ncxtcap4tal Fktafl(:ktg A~tlvJtiee C~Sh Ftowg from Capitol g~l RO~to~ Ftosn~ftO AcEvJ~as Cash Flov~ ~tom Inveed~9 ~m~-tlvltias P~m~ ~ iM~t~ Pmeeeds f~ 8ale mhd Mato~tJ~ ~ Irmv~sh~ent SKudffee Net Cash Pro~tdsh by mve~Uno Ac0vttlas Net k',~ in Ceeb er41 Cash Equlvatonto Ceeb and Ca.II E.(lUlV.tonta. October 1 Ceeb and Cash Equlvaidnto, September 30 ('/',020,610) 1,475 (23,079,20~) (2,025,537) 0 3 ,847 0 0 (3,165.000) 8e8,800 (3,623,814) O (3,.12.1) o ¶8,115,000 O (go,6e2) 0 o o (~ 1,m,822). Inle~naf None)q~ndable ~[Memomndum Only} Sew~ce Trust 2002 2001 S 104,,001 $ 77,605,022 $ 73,424,857 (13,540) (40.810,876) (4g,666,615) o (3,504.5e3) (3,031.278) 0 1.475 228,240 0 ('179,251) (825,381) 5,12S 5,1~ 16,135 0 222,050 157,056 0 0 16.024 0 0 0 0 14,800 0 306,9B8 193.887 0 79,262 43,835 0 (3So760) (43.835) o (87.77'q (ee,lb-7) g5,.566 19,702.873 15.466.924 0 2,716 882,800 0 (6.769,900) (14,278,073) 0 0 ('200,000) 0 (25,.104,?,42) (26315,664) 0 3,.647 872,308 0 0 0 (2,296,200) (3,.1~,000) 0 (3,623.8'14) (2,621,28o) 0 (3,'12'1) fa,Gao) 0 16,115,000 23,gg7,,130 o (99,6e2) o o o {'1o,i 0 ('13,008.6'12) ~,170,177) $ ($3,626~.e5) s (6.313,073) S (517,864) s (40.457,042) $ (28,868.253) 36,936,541 5.278,~ 2,1g0.628 29~,862 s.-r,r,r,r,r,r,r,r,r~ 0.7 S 4 ~34,41e) 2.398,608 1,847,000 26,710,677 4,7t 5,~CI 496,358 42,711,504 35,829.067 28,257 2,518,747 , 3,774,464 8,031 4,773,200 10,435,,278 102,517 4,448.125 4,652,785 295,g20 27,38~,?J'o8 22,532 4?3 398,446 31,633,383 (CeeUnued) 38 CITY OF CO~ ~ ~:ae ~'FATION, TEXAS COMBINED STATEMENT OF CASH FLOWS ALL PROPRIETARY AND FIDUCIARY FUND 'tYPES For the Fiscal Year Ended ~ptember 30, 2002 0Nith comparat~ totnln for the 11scat year ended $el~e~ber 30, 2001) (com~m]) Torah Jflwm.~ No.exiMode~ (~nlo.,ru'um ~ Erttm~e Sewlce Tnmt 2002 2001 10,732,24~8 965,944 t07,E04 11,805,896 9,844.515 5,076,319 2.385,906 0 7.462.127 5,521,300 74,513 ri 0 74,513 0 0 0 (25~.e0) (25,2ee) 381,963 152,G47 0 S34.010 476,472 (30,079) (13,612) 0 (43,591) (119,662) (950,070~ 27.829 14,062 (009,079) (29(2,,272) 10,071 0 0 10,g. 15`000 0 71,679 0 ?t,8're (33.7o0) 483.462 ld0g,111 0 502,693 (47 0 (27,,ee6) 0 ~,ees) 96,341 438,131 (601) 531,781 865,736 0 (28,tT/) 0 (28,tT;) 33,?08 0 (26t,t80) 0 (26'1.t80) (288,3~6) Se,,32g 13.5~0 0 63.eae 112,7'r2 0 0 0 0 3.606 (IT/,Tr6) 0 0 ('/?7.T/~) 26,0t5 1,~"/' 0 28.5/2 ¶3,913 5,042,00~ 2.867,067 (11T918) 7,907,t'/T 5,622,409 18,774,~6 $ 3.833031 $ 9~,,~6 S 19,702,673 S 15A66,9~4 'flto notoe to the geflor~ purpose flnaflclal .l~mnout8 e~o In MMpRI part o~ iN8 u~&emaoL CiTY OF COLLEGE ~I'ATION, TEXA~ NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The general purpose financial alatm'nents of the CIb/of College Slatlon, Texas ('City"), have been prepared In cenformlly with generally accepted accmmfing pancipies ('GAAP") as applied to govent'nantal units. The Gov~mmastal A,~,~,~lltmlg S(81~ Board ~A~B') 18 ~ ~ptod stlalldsr~§ body f~' Jbhim~ governmental accounting end financial repe~ng prlnciplen. The more algnlflc, ast of the Clty~ accounting pol~m ere dee~lbed below. A REPORTING ENTITY ~ financial repo~ting entity Is cieaned as (1) the primary government and (2) these cenpenent units for which Ihe Ixlma~ govemmant Is finan~ally ae=ountabie. A prlmmy government b finan~ally a~:~xjntable for · e organizations that make up Ils legal efll~'y. It is also financmlly accountable for legally separate organizations If Its officials appoint a voting majority of an c~ganlmlton's governIng bcxly and one ~r both of the fdlowing comllttorm em mai. (a) the P~nary government m able to imlxme ~ will on the componeflt unit or (b) ~e prlman/govemment~ relationsh~l) wi~ the componem unit peses a real or potential financial benefit or Ixxdan for the prlman/govemmanL M~enver, financial ascountability is alas deemed ~o exist even In the abeenc=e of Bknple "e~ouniebllb/" (i.e., the appointment of a voting majority of the organization's gowmlng body) If the compcment unit Is finan~ally dependent upon the Ix~nm7 government. flnas=lal banldlt or burden ralaflor~hlp exists If the prrma~/government is: (a) entitled to the organizab~'s (b) legally obllgaled or hm othen~ise assumed the obllgellen to finance Ihe daliclie ~f, or provide financial support to, the organb:atien; ~' (c) obigated in come mmlner for the debt of the o~genizallon. If an =rganlzatlon 18 unable to adopt I~ ~dget, levy taxes, ~ est ratas or charges, or ismJe bonded debt m~hout aPProval by the Ix~ g~ent, then #, is dasmed to be fi~ (k~mdent en the ~,~..,ary government and ms Included ss a component unit. ~ ~e no enlitJes ~ meal the =iterla es a =omponent un# of the City. In, Jude<] wIINn the repod]ng entity as a jolrlt venture ~ the CIb/ is Ifte Brazes Vldiey ~ Wasto Menng~mant ~. 'n~ Braz~ Vallw ~al~l West~ ~ Ag~n~ ('I~/~NMA') was =rastod I~ 8, 1990, bythe Cltk~ of Bq~n and College Sta~en, Terns, to echieve e~on~mles of 8~ale esvinge fm the patois through Joint mmershlp and use of ragienal waste management facilities. BV~NMA Is governed complete maponalbll~ for the d-"y operating astlvitles of 13VSWMA. The BV~NMA annual budget is first apamve~ by the BVSWMA Board and Is then submltied for approval by both dries as a pert of the~ regular budget proeses. 41 CITY OF COLLEGE STATION, TEXAS NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. ME. ASUREMENT FOCUS, BASIS OF ACCOUNTING AND BA~I8 OF PRESENTATION funds according to thmr intaxled puqx~e ami is used to md management in demons~atlng compliance w#h finance-related legal and cmlmcttml provisions. The minimum number of funds are maintelnecl consistent wilh legal and manage~e] requlremenls, ,N=count groups are a reporting devoe to account for cedain assets and Imbllltias of the govammentel funds not recorded dirtily In Ihose funds. The City has the ~lovang fund types and aGGount groups: Governmental fun~ are used to account for Ihe City's general government actMtias. Govemmentel fund t*A)as uae Ibe flow of ;u~ent fl~anctel rasoumas measurement f~'tm and the medlfted ascmal basis of accrual (Le., when Ibey are "measumbte ,.nd available'). 'Measurable" mean~ the amount of~e ~'m~on ~an be detmmlned and 'available' mem~ mllac~de within the current period ar soon anough thereafter to pay I~ablWas of the ~umt period. Expendlklm am ~ when I~e relaled fund li~ll~ Is Incun~l, e~pt f~r matured int~est en g~eral Im~D-~,. debt whbh ii reci~gnb~l m due, and when Ihe obligatims am axpected to be Ikluldated wtih expendable avalable finan~al sm. racogntzed as revenue. Other receipts and tasas bec~me measurable and avallabte when cmh i~ received by the Cay and are recognlascl as revenue at Ihe time. and all other grant requirements have bean met. Govemment~ funds in(Jude ~e foilow~g fund IRms: The genera/fund Is lhe City's pdmmy operating fund. It amounte for all flnanctel remm of ganeml government, ex~epHhose required to he accounted for In anottw fund. The spec/at revenue fund~ amount for revenue sources Ihat are legally res~l=ted to exps~dltum for spsclF~ pu~ (not Including expexlal~e lmm or major capltel proJacte). The debt ~ fund _ecc~-__unte far the aswl~ing of general Iong-tem~ debt no~ being financed by proprietary or nonexpendable tnmt funds. CITY OF COLLEGE ~I'ATION, TEXA~ NOTES TO GENERAL PURPOSE FINANCIAL STATEMENT8 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 I. ~JMMARY OF SIGNIFICANT ACCOUNTING POLICIES (C(x~firtued) B. MEASUREMENT FOCUS, BASIS OF ACCOUNTING AND BASIS OF PRESENTATION (Con~ued) recto'tied at the time liabilities are Incurred. The City applies MI applicable GA,SB prono~ In accounting and reporting for ~ propdetm7 operations and all financial __,~o~__,~ntlng Standards Board confradlct GASB p~. md/er net Imome Is ~___~ry for nmrmGemant accountability. Infema/ser,'/ce funds account for opemflofts that provkle services to other departments or agancte~ of the Cay on a ce~t-relmbumame~ basis F/duc/a~ funds emqunl f~r asset~ held by Ihe Clly In a lrustee capadty or as an agent on beha~ ~ ~. krug-tram deM and rain o~her liabllee that ere not apecrl~ Imbillllea of proprk~ary or b-u~t fundL C. ASSETS, LIABILITIES AND EQUITY 1 Cash and C,a~h Equivalents Cash md cash equtvaler/m are sh(xt tem~ higNy liquid InveMmente that ere: (a) readily convedllfle to known mounts of cash and (b) so near their mabzlty that they present Ineignlflcant risk of changes in value becatme of changes In interest rates. Therefore, for purpoeee of the statement of cash flows, cash and cash equivalents (including reslricted a~ete) Include demand accounts, repurc, haae agreements, and govemmant secufllies and agency notes with miginel nmtur#k~ of bYee months or lees whan purchaaed. All cash, except for petty cash LC~___,nts, I~ deposited wtth the City's depeeltmy bank (First American Bank, Bryan, Texas) in interest bearing __~c~_ _ .mrs or i~ md. CITY OF COLLEGE STATION, TEXAS NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS FOR THE FI~.,AJ. YEAR ENDED SEPTEMBER 30, 2002 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C ASSETS, LIABILITIF-~ AND EQUITY (ConUmJed) 1. Cash and CBSh Equivalents The C~ ur, es a pooling mMhod to m:oount for cssh end cash equivalents. Equity in c~sh and crash equivalents ancI ir,~6~t Inoome ftqom 1he cash pool is ~located to ~ pnrllc~tmg fund8 on a monthly basis. The mnount of the sitocmUcm b, deWm~lned by cslculsting · ratio of each funcre equ~ In the pool 2. InvMtments In~stmerds are rmMe in eocorcianoe with ~e City's InvesbTteflt Policy whictt was EMopted by the City Coufl~ In k~rch 2002. This policy is appiosble to MI City funds end pmTnb k-,vMIment in oM~lstton8 of the U 8. Gove~,nent or its agEmoies, repurchase agreements, oommErcbd paper, oedllkmtss o~ deposit, gusmn~ecI investment contracts, publb fdnds Inves~nent pools, and mo~ey n-ark~ mutual funds. This policy states that Jhe Directm' of Fbcal 8ewioe8 shidl designate the CIb/s Inves~tent Of~,,~- w'Fd~ Mtom rmsponslt)ll#y and mJ~hodty for ~nves~Emt bm~i~tiofls reMde. The InvMl~ents purchased under the provisions of the Inveslment Policy ~e mmtaged lo maintafn Iklukl~/f~ mae~ng the Clty~ need. for =aah and to I~nlt p~entlal manet ~ In pe~ods ef m~g projooted dfd2umemem m=hedules. A~ a gefleml gu#MiMe, the City's ceoh m~t poflfollo Is designed with the objeo~ve of mee~g. over the course of full market we, leo, the average return on three-month U.8. Treasury Bib, or the average mW of federal funds, whichever b higher. Theeo JndJcos are conskMmd befl(~m~s for Invealmont program aeeks to augment rat~ of return above thb level In a diversified measured Iomms am ktev#ahlo and mum be conskJereff witrdn the (x~axt of tho ovemB portfolm. Tho Acllve porlf~lo manegement Includes Ihe prsdJce of aellin0 aer, ur#iee Ixkx' to matur&¥ md using the procoecbtopurthese other secufltkm. Such "swaps" are performed for a v~ of valld reasons: to lengthen matur#les as Interest rates rbe. to .ecure markot p, u;'~ and shortm mat~tfes n,, Interest rates varying mstuttbos. "Swup" anslysl8 18 ~0 responeellty ~the ¢~ IrweMment 0fflcor 8nd I~o da~slon to e,Mct~ the "swap" reots with him. To protect the pod~lo fTom Imprudent b'm~ng, no 8e(~#y may be sold ~ such t~o a. the cu~ent maf~et valuo c~ the security iMus Interest eemed from dam of jxrchme is ~t Ioast equal to b~o pun:haso pdGe ~' that security. State ab=idMs authorize the C#y to InvMt b fully. Insured time depo~lta, dlroct debt securffie~ of the Un#ed 8tares or its agencies, and fully coaatemllzed repumhase agreements. The ropurchase egreements m~t be pu;ca'~asod pursuit to a maste~ repumha~e agre~ which spucJfios that the Iramaotlon be held In a eafekeeping a~ounl subJact to lira oonbol end cuetody of the City. Cn'Y OF COLLEGE ~TATION, TEXAS NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS FOR THE fiSCAL YEAR ENDED SEPTEMBER 30, 2002 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIE~ (Cmfdnued) C ASSETS, UABILmE$ AND EQUITY (Conllnued) 2. Inv~=l.,ents (Continued) Inveslments In ~acu~ty rapurcha~e agreements may be m~de only wilh ~ City'*, dep~slt~'y bank. Nih state or national banks domiciled In the ~ate of Texas. or with ,ecurlllea dealem repor~g ~ ~ F~I Reserve Bank of New York ('Primal/I. Dealm'). NI e, ecurltles are purchased dMivery-vs.-payment arid hem In the City's name in a safek, eeping ac.,~c~nt at Cha~e Bank. Invastments of alt funds consist mainly of U. $. Tremmy and Agen~ m~-'ud~s. ~ repurdm~e agreements, and mvestment~ In public fand~ .~mt poo~ ('l'~xPool). Inve~ments am .tared at fair value In accordance with GASB Statement No. :31. A~=ountlng and financial Rap~,g for C~tmn Inveslnlents and for Extenlld Investment Pools. The City also u~es - pooling melhod to acoount for invastments. Equity In Invaatnmnt. and Interest income from the investment p~l b allocated to 1he pml~,paflng fund., on a monthly bas~ and is determined by oalculating a ratio of each funcrs equity In the Inv~Mment pool to the total ~. Inventory ~s valued at ~t, which ap~xoxlmates market, ming the flint-In, Itmt. out method. The costs of ~tal fund type and pmpfletary fund ~nvefltorma are re~m~cl as a3q~endltum,/expen~ when 4. P~id Co.ts In the Enterprise Funds, proGeed~ of ul]llty revenue bonds, as w~ll es resources sat same fo~ their repayment, are classified as restrk~mJ assels off the balance sheet beGause Ifleir use b limited by applicable bond covenenls. In acldltion, customer utllll~ clepoalts are clasait~l as reetr~ted assets because ~e deposit ~,~lns lite properly of the ~tmtomar end Is flor available f~' .parallorm. In Ihe General Fund, restdGtad assa~ are comprised of Municipal Court cash bonds, and police seizure funds. 6. II1V~I', 14fit IA Joint V~llture The I~'oprlelanj Funds' Inveub,,eflt In joint venture is re(m~led using the equity melhod of accounting. Required dbdomAa~ concemklg the Joint venture are IX~eefle~cl in Note IVD. 45 crrY OF COLLEGE 8TAI'ION, TEXAS NOTES TO GENERAL PURPOSE FINANCIAL 8'I'ATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Contlnued) C. ASSET8, LIABIUTIES AND EQUITY (Continued) GenamJ fixed as~ls have been acquired for ganeml government pmpoues. Asset purdmsm are record, ed as expandltur~ in the govemrnantol fund types and capitalized In the Oanaral F'_.,~ed__ A~ats Acoount Group at cost where histc~al records are evelable and al an eatlmated hlskx~l oost where Public domaIn fixed as~ts ~ansistrng of improvernant~ other than bulkllng$ are also included In the C.-eneml Fbeld Aase~ AcGount Group. Property and equlpmen~ owned by the Entaqxtse Funds and the internal ~ Funds b stated at the hlstndcal coat of aGqulalllun, mnme'unllon or, w~h respect to mnbtbutions of ~xt~nJ~m3n from third parbes (prlnGIpa#y pavelopem), at fak' market value. In a~'clenue wl~ Flnanclel AmmJn~ng Standards Board Statement No. 71, Inlamat is not capitalized dur~g conatru~ion because Intsmat is recovered cun'enlly in the City's astabllshed [=i.. Maintanance, repalm and nflnor ra~8 are d'targed to operating expanse; n~jor proper[y replammants are capitala=ed. Depreciation is rec~-~ecl In the above funds on a 8tmight4ine basis over the following mt~na~cl samba lives: Utll~ Systam8 Bullcllngs and Impmveman~ Equipment 25- 40 yuem 5- 50 yasm 3- lO¥~ars years. Upon te~mlnatiun, the P~ employees am paid for any a~nJed vacation nat taken (up to · e two-~mar maximum). _,~___,mulated vacation leave that ls expected to be Ilquldsted wtth expendable avalable financial ras4x81as is n~ as an expand~re end a liability of ~le General Fund. Amounts of accumuleted vac~ leave that ~re nat ~Xp~KI to be liquidated w#h expendable avalable financial raao~can am reposed in the C-enerat I.ong-Torm Debt A=count Group. is not mede to employass by the C, Ity and, a~x~llngly, no llaldllty has been recon:led in the financial 8tateme~l. CITY OF COLLEGE STATION, TEXA~ NOTES TO GENERAL PURPOSE FINANCIAL STATEMENT~ FOR THE FISCAL YEAR ENDED $EPTEMBER 30, 2002 SUMMARY OF SIONIFICANT ACCOUNTING POLICIES (Continued) C. ASSETS, LIABILITIES AND EQUITY (Continued) 9. long-Term ObligeUon8 Long-temt do~t Is recognized as a liebllity of a govemmentoJ fund when due or whm~ resources have been a~umufated In the Debt Smvice Fund for payment emly In the folowing yesr. For otter Iong-torm obligaUons, only that porbon expected to be financed from expenclable aveilebie flnenr, ml reso~ree~ is reported es a fund Imblldy of a governmental ~und. The rentaInlng portions of euch obligations are reporled In the General Long-Term Debt Amount Group. Long-tom~ hdot~k~ dlrec~y related to and flnmced imm prolxtatmy ~und operation~ mr. ccou~Y,~ for In ~ funds. All olher unmatumd long-tram Indobt~lnes$ of the City Is m~ounted for in the General Long-Term Debt ~,,~__]m Group. 10. Encumbranc~ Encumbrance aocounling, under which purchase orders, contracts end o~er commitments for the expenddure of monies are r~or~d In order to re.rye that portion of the appgceble approp~Uon, is Encumbrence~ outstandIng et yew end ~e reported m re~e~atJme cd fund balances sInce they do not constitute expend'gums or liaMflies In the genmat puqx~,e financial st~. 12. Bond DIscounbdlsm~q~ Ca~s l& Intmttmd Tmn~'lione are properly applicable to mo'd~' fund, are recorded es expenditures/expenses in ~e reb~buming fund and ae ~ce of expendlturee/expense~ In rite fund that b ratmbursed. In~--fund tran~ne outer Umn quasi..extemal lmns~dons and reimbursements are repmted as operating banefors. CiTY OF COLLEGE STATION, TEXA~ NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED 8EPTEMBER 30, 2002 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Conl';lued) C. ASSETS, UABILmES AND EQUITY (Continued) 14. Statomenta of Cash Flows The City ha~ electod to u"e the direct melhod In ~ the Stalm-nento of Cash Rows for each of Ihe Proprietary Fund lypes and Non-Expendable TnJ~t Fund. 15. Idemerandum ~. Total Celumns Telal r~lumns on Itm General Purpose Flnen~isl 8tatomento are captioned 'MemoramJum Only' to I~llcate that Ihey are ~ oflly to ~ ~enelal analysis. Data m Ihese mlumns doe~ no[ present financ~ ixmlbon, results of operation~, or ~mh flows in conform#y wilh generally __~'~__ptod not been made in the aggregation d ~ia da~. 16. Comparative Data/Recla~lf',~,~.~,s Comparalive total data for the prior year have been premmted in the accompanying Itnancal statements in enJer to provide an und~.;..~llng of changes h the City's Fman~al IxmlUon and o~. However, statements unduJy ;omple~ and difficult to undelMand. AJso, ~ttabt amounts pre~enlm/~n Ihe prior year data have been recia~stlied In order to be ~onsistent wffillhe ~urrent yea~s pre~entat~n. II. ~rEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. BUDGETARY INFORMATION The City ~tows these procedures In establbhhg 6~e budgeta~ data reflected In the financial statements: 1) Prim to September 1, the C~¥ ~ ;ubmiis to Ihe City Council a proposed operating budget for e~lturea and the means of rmand~g them 2) AJt budget requests are compled by Ihe Office of Management and Budget and pmsent~ with ~omparab~e and SUplx~lng data to ~ I~r ~ City Council for revfl;~. 3) Public hearings am properly adverted and mnducted at City Hall for taxpayer comn;enls. 4) Pflor to September 27, the budget Is Isgally ena~ed through pa~age of an ordlnar~e. 5) The City Council must approve all transfem of budgeted amounts between de~ wllhin any fund and any rm, leton that altom the toIM expenditure of any fund. An ammmt b also budgeted em=h be ~wed by City Council. City Council n~y transit amounts among Indlvklual bud~t Itoe wl~in n~jor exp~ditum ~;~9o~es dwlng the year, but no .uc=h Im;mfor may Ir,~.a~e ~ overa# total budget. Budgeted emountl as orlgina#y adoptad were no~ significantly dmnged by luch 48 CITY OF COLLEGE STATION, TEXAS NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (Oondnu~l) A BUDGETARY INFORMATION (Continued) 6) In accoMance with the City Charter, the budget may be mnmxJed altar the following condlt~ns are met: a) The City Manager ¢mtllles I~at there am available revemms in excms of those e~timated in the budget, b) The City Coun~ holds a public hea~g on the supplemental approt~atlon, c) Tbe 7) Budget mppropnat~ Bra adopted mt the fund Imve4 for all funds ex, opt the Generot Fund In the Generat Fund, bud0ot oppropdabons mm edupted at the dopedn~mt levat. F. xpendlb~ In e~es8 of appropriations for each fund m,e proha)lted by the City Charter. Approf~iations which have not been expended or lawfully encumbered Mi)se at the end of the budgat year. 8) Formal budgelary Integral~n is legally ena~ed and employed as a management confn~l dsv=e during the ye~' for MI funds. B. BUDGET/GAAP RECONCILIATION Revenue~ and Other Rnandng 8m~ce~ - Budget (Non-GAN= Basl~) Reeon~ling Items: .N~uat Inve~Imer~ to Fair Votue thventmy Adju~me~t Munbq~l Court Bond AdJuatment A~nm ~1,~ Tex Total R_ _~c~_n~lmng Itenm T~al Revenues and Other F'~anclng 8oume~. GAAP Bas~ $ 33,031,041 9,373 5,O3O (89,e15) (lOS.204) (13,857) (l (1~6,356) 32,834,685 4g CITY OF COLLEGE 81'ATION, TEXAS NOTES TO GENERAL PURPOSE FINANCIAL ~T'ATEMENT$ FOR THE FI~..,AL YEAR ENDED SEPTEMBER 30, 2002 II STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (Continued) B. BUDGET/GAAP RECONCILIATION (Con~nued) Adjus'~ents necessery to oonverl the General Fund expenditures end o~er financing uses at September 30, Expenditures and Other Financing Uses. Budget (Non.GAAP ~_ __~lng Items: I~d DeM A~m~ I~mll Ex~n~ FYO~ R~verse FY01 Payroll Accrual Adjust A==med Vacation Total Reconciling Tolal Expen~lluree and Other Flnenc~g ~ - GAAP B~I~ $ 32,078,583 (140,319) 20,030 644,780 (459,780) 13,909 (1.795) 75O 77,577 32,156,160 The budgets for '~e Special Rev~'~ue Funds and Capital Pro]__,~__ Funds am adopted on a basl~ ;onslstant with GAAP, except for the following signlfimnt Items: b) Budgetary amounts do not Include provisions for adjustments in ~ allowance for uncollectible ___,~u_ nts re~dvebk~. c) Bud~-,e~d_._ _ expenditure amounts do not Ind~ude a provision for the capitalization of salmtes for capllal ~mpmvamant d) Budgeted revmue amounts do not include a proviaio~ for adjusling Inveslments to fay v~lue. e) Budgetecl revenue amounts do not Include utility revenues earned but not blled. CITY OF COLLEGE ~I'ATION, TEXAS NOTES TO GENERAL PURPOEE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 II. STEWARDSHIP, COMPLIANCE AND ACCOUNTN~ILITY (Continued) B. BUDGET/GAAP RECONCIUATION (Continued) Adjustments na~___e~_ry to convert the ~cN~ild Revenue Funds and Capital ProJIK~ Funds revalues and Revenue~ E~I (:XhM Rnanclng Sourc~ - ~ (N~ ~ ~) ~leo ~: ~ua Ink.ma ~ Fa~ V~m ~ ~01 U~ ~ T~ ~1~ ~ ~u~ and ~ F~g ~ - ~ ~ $ 8r141~254 $ 22~087,742 12,164 31,599 0 40,501 0 (39.4'15) ('B~O,O~I) (;~24,459) 0 15,452 678 (14.o25) (137,180) (2oo,268) $ 8,004,065 $ 21,797,474 ,N:l, luStmenls neoessary to (x)nveft 'ate ~oecial Revenue Funds and Capital Projects Fundm e~3endltut~ and other financing uses at September 30. 2002 on Ihe budgata~ basis to the GAAP basis are as follows:. sp~ Revenue c~o~f Funds FLmdS Expenditures and Other F'rmnclng Uses- Budget (Noi't-GAAP Basis) $ 6t5~0,860 $ 15~149,593 Reconciling ItEms: Pi'02 Bad Debt 0 7,244 Capitalized 8aleries 10,593 134,157 Reelma FY02 Expenditure 0 (23,971) Oilier 6 3 Total Reconciling Items 10,009 117,733 Expenditures .,nd Other Financing Uses - OA/~P Basis $ 6,600,959 $ 13,267,286 6t CITY OF COLLEGE STATION, TEXAS NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS FOR THE FISCAL YF.~R ENDED SEPTEMBER 30. 2002 II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABIUT¥ (Continued) B. BUDGET/GAAP RECONCILIATION (Conthued) The Budget for Ihs Debt Buwice Fund is adopted on a basis consistent with GAAP except for budgeted revenue amounts which do not Include a provision for Investment accrual or adjustIng Inws'~ents to fair value For t'=cal year 2002, these amounts oumbined were a negative $37,100. Buclgets for the Entsrpnse Funds are adopted on a basis ounslstont with GAAP, except for the follovang slgniflGont Itsms. e) Capital o~lay = Includecl In the budget as an expenas Itorn. b) The budget treats prk~lpal payments for General Obligation Bonds and CeWI'r~ of Obligation asnAced by the Elecldo, WaWr, and 8ewer Funds end for Utility Revenue Bunds as m expense Item. Pllndpal payments for ~ from Othor Funds In the Solid Waste .C(~,~.____m Fund am Mso I~eated as e~pen~e Eonls In the budget. ¢) Ente~ Funds budgetary amounts do ix~ include provisions for adjustments ~n ~nvanfory or the d) Budgoted revenue ~mouots de not Include a provision for revenue aconJale. e) audgaed exper-.,e amounts do not n~ude a provision for de~reotalon expense. f) Budgeted sale/tas do not include e provlslen for asomed vacaf~on or a(xTued payroll. g) Budgeted revanue amounts do not Include a provbfon for adjuntin~ Inveslnlents to fair value. The budgets for Ihs Infamal Sewfoe Funds are acloptsd on a Pasla ;on~tsfant Mth GAAP, e~ for the folloIMng signl~snt items: a) Capbl outlay is Iriduded Iri the budget as an expense Itsm. b) BudgeWcl salarlM do not Inducle a provision for ~Jed vacation, Gtslms payable, or accnJed payroll. c) Budgetary amounts do not n~lude provisions for adjustments In Invanto~ or ~te allowance for unoulleclibts accounts reeelvabfa. d) Budgeted experts amounts do not Include a provision f~ deprecfatlon expense. e) BuclgeWd revenue amounts do not Include a provision for acl~ustlng Invastmenl~ to fair value. In ~ year 2002, bud~ for the Cedar Creel( Conclorninlum and the Cemepay Pe~l Ce/e were not CITY OF COLLEGE STATION, TEXAS NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (Continued) B. BUDGET/GAAP RECONCIL~TION (Continued) C. EXPENDITURES/EXPENSES IN EXCESS OF APPROPRIATIONS The amounts ~f any ~___ _~ of expenditu~rmes over appmprlation~ dIJitng flaml year 2002, ~ ~ funds in which they occun'ed are as fo#own' Fund Amount Debt Sen4ce S 320,881 Parks Pro~ 2,711,091 Elecl~o 144,726 Fleet Maintenance 42,611 Print/Ma# 46,553 Unbudgeted interest ~(pense on bolh the 2002 GO Im(:l CO Md to the $320,881 excess in Ihe Debt ~ervice Fund. Cap#aloutlay retotedto iheVMonms Pa~ & Alhletic Complex gmterMed the $2,71t,091 -~---~--; in the Parks Pro~ Fund, and higher Nan e)~ opending expenses generated Ihe $144,725 exne~$ I~ the Elect~ Fund. Higher than ~ ~ns for supp,n rettited in Ihe $42,611 exceaa In the Rent Malntmnnce Fund, end the $48,553 ex__,'~__ In the PrI~Mall Sewims Fund Is a result of higher than expected salaries and D. DEFICIT RETAINED F-NtNINGS The C(xflmuntGatlon ServIoe6 Fund and the Fleet Maintenance Fund ended '~e fl~,al year with an ~ RetldmKJ Earnings definlt. The $621,366 dMigit in the C(]mmurdGelkxt 8eh, Ices Fund is prknerlly due to unbudgoted depreciation e~pense, and ~te $159,2.36 defY, It In the Fleet Maintenance Fund Is due to unbudgeted depmcintton aM [ntonmt expem~. CITY OF COLLEGE STATION, 'rEXA~ NOTF.~ TO GENERAL PURPOSE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 IlL DETAILED NOTES ON ALL FUNDS AND ACCOUNT GROUPS A. DEPOSITS AND INVESTMENTS At ~ar-efld, Ihe carqmg amount of the City's cash and Ume depcmlts was S68,398,980 and the bank balance vms $1,603,297. Cash and time depos~ fncluded InveM~ents m the state ~,.~'~eflt pool amounting to $35A94,843, irt a Fidelity money market mutual fund amounting to $9,090,204 and in a flexible repur~m agreement with 8 balance totaling ~22,310,83~. Balance ~eet 8mount~ for ur..~,;c~ed and reatrioted cash and cash equivalents at September 30, 2002, are as follows: Unreslrk::ted Cash end Cash Equivalents Rest~ct~ Cash and Cash Equivalents Total Cash and Cash Equivalents The bank balance was entirely covered by federal depository Insuranoe or by pledged ¢~lateral held by the C~/Ii ~l~r~-p~ O.J~J~l I~1 th~ C~ name. The 8tare investment poor mpr~enta ~ tram investments In a pool managed by another govemma~t for which risk catago~tton b not apl~ because the City's U.S. Treasury Securities U S. Government Agencies and Inslmmentalltles 8emirfles Total Direc~ Inve~bnent~ t,819,018 56~06,455 I~t ~n Texa~ L_nc~l Government Inv~{,-,~ent Pool Invealn~nt In FldW#y Money ManV~ Mutual Fund Inveslment ~n Flexible Repumtmse Agreement Tolal Indirect InvMIment~ Total Invesl~nents 35,494J~,3 9,090.204 22,310.8~6 $ 124,'/'21,158 Wh~ Gash mtd cash equivaMnts ~ Inclu~ve of Investmen~ v~th orlglnM maturili~ of tt~ee months or le~s, above ~lledde~ am Inclmlve of all inveMment~. of Intm'est and pdncipal are guaranteed dimply or Indlreclty by Ihe U.8. Government. ff II nec~,~,a~y for ~e City to ~ell a portion or all of Ihe Iong4~m pofffdlo, ~e proceeds realized bY ~e City ~ such a ease would depend on the market =ondEofls In ~l~tence at the time of such sale, as ~e fair velue of the secufltle~ In the city~ Iong-t~m pm'dollo Mil Iluctua~ due to tntem~ rate tmnd~ and olhm' racom. CITY OF COU.EGE STATION, TEXA~ NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 III DETAILED NOTES ON ALL FUNDS AND ACCOUNT GROUP8 (Continued) A. DEPOSITS AND INVESTMENTS (Continued) -I'exponl' is a Coal governmont Investment ~ created and managed by the Texas C~ of Public Accounts to invest funds on behalf of Texas pallUcal 6ubd~vialona. This pool end the Fidelity Money Ms.at Mutual Fund operate on a $1.00 net asset value basis and allow same day or next day n~tsmplaons and daposlts. Interest on Ix~ I~ allocated ~ally based on port.ilo eemings and parl~! acf. c~nt balanase. The City's investments In Texponl ond the Fidallty Money Mmket Mutual Fund are a'.ated at tslr value ~d~ir.h Neither the Texpool account nor ~e F~dallty Money Market Mutual Fund account are manag~ by the therefore, the City does not passaas securities that exist In physical or book entry fon~. ConMqasntly, these AJI of the City's Mve~ Gonsmt of U.8. Governmont Secutffies and mp-.G, sae agreements of U.S Govemmant secuflttss and me hald by Its agant in the Ciys name (CatoOm'y Ofle credit risk). The reporting of investments at fair value resulted in an unrealized gain of Sll 3,693 at September 30. 2002. This unmatlasd gain was allocated to the pefliclpeOflg funds by osculating a ratio of each fund's equity In the B. NOTE.8 RECEIVABLE Special Revenue Funds: In 1988, the City InlttsflM a Community Development Loan Program witch provflJas luens to atlgdde applicants from Community Development Block Grant funds. The $85,393 balance In the Special Revenue Funds represents the outstandng prl~lpal for these loans at September 30, 2002. 55 CITY OF COLLEGE STATION, TEXAS NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS FOR THE FISCAl. YEAR ENDED SEPTEMBER 30, 2002 IlL DETAILED NOTES ON ALL FUNDS AND ACOOUNT GROUPS (Cor~tued) C. FIXED ASSETS Retlmmards Additions and Beginning and Transfers Ending Balance Tmn~ar~ In Out Balance Buildings and Bu~lng Improvements 19,258,899 20,303 0 19,280,202 Im~ 52.287.484 5,842.067 0 58,128.551 Idnchl~efy, Tools and Equil)mint 11,558J)81 523,091 152,738 11,955,284 PBIt~ System 14,321,778 421 ~91 0 14,743,069 Progr,~ 7,975,585 13,246,439 3,221,809 18,000.2.15 To~al $123.674,581 ~ ~ ~ E. nF~i~i~,e San~e Funds Total ~ Systam S 63,286,640 $ 0 $ 63.286,640 Wate~ System 54,553,955 0 54,595,955 Sewer S~stam 55,951,552 0 53,951,532 Machlne~/& Equipment 3,954,605 19,556,725 23,611,3~0 Bull(tings & Improvements 7,330,401 746,575 8,076~76 I.~nd 1,789,828 0 1,755,828 Ooflsb'uc'Uon in Prc~ 29,076,744 O 26,078,744 Total 212,695,705 20,303,300 233,196,005 Less Acc:um~ated DeSx~at~ (52,10~,553) (10,70'1,~) (~2,587,550) Net ~ $ 9;5'rl;334 $170,301,446 D. INTERFU ND ASSET&/LIABILITIE$ 1. Due T~Due From Olher Funds Due T9 Equipment Equipment Replacement DueF~ Amount Fleet Maintenance S 51,419 Communication Sewican 16,585 CITY OF COLLEGE STATION, TEXAS NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 III. DETAILED NOTE8 ON ALL FUND8 AND ACCOUNT GROUP8 (Continued) E DEFERRED CHARGES On November Ii, 1978, the City entered In~o an agreement with Texas A&M Univemlty whereby the C~ wouid m~ct wa~' systam Improvammts for Texa~ A&M Unlvemlty. This water ~j~em was ta IXovtde the City with an addltk)nal water source until Its own s~stem (xxdd be ~onstm(;ted baglnnlng in January 1979. The ~osta of Ihe 6y~'tam Bm being repaid by Ta~a,/~M Unlvemlty at a rate of $0.20 per 1,000 gallons of City water usage. Termination of the agremnants provides for absolute tale to the system !o be =xmb~d to Texas A&M Unlve~ity by the City. Total ProJe=l Co~t I _~_ _ Aemmtule4ad Watar U~age Cred#s Prepaid Watar C~ts, 8eptamber 30, 2002 $ 1,167,075 A summary of Ihe bond issuance costs ak)ag ~ Ihe ancumulated amorl~ roi' ~te EI~, Wata~, and Sewer Funds as of September 30. 2002. is m follows: Bond Issuance Cesta $ 240,272 Accum,~ated Ammizatk)n (90,400) Bond Issuance C~i, Nat $ 149.872 $ 282,472 S 4as,K1 $ 030,37s (so,iios) (14s,0~0) (30~,8~) $ 192,966 $ 290,641 S 633,479 F LONG.TERM DEBT The City I~sues general obfiga~ bonds to provide funds for the acqulaltlan and con~nJca~ of major ~apltal fa~llfles. General obligation bonds e~e dlre~ obligations and pledge the full fa~h and ='edit of the C, ity, and such bonds have bom'& le.=ued fix both Oanerlal government end Ix(3~'letarY ectlvtttae. Bonds CITY OF COLLEGE STATION, TEXAS NOTES TO GENERN. PURPOSE FINANCIAL. STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 IlL DETAILED NOTES ON AL, L FUNDS AND ACCOUNT GROUI:~ (C(~n~Ytued) F. LONG-TERM DEBT (Continued) On April 11, 2002 the C~ Issued $6.445 million In General Obllge~inn Bonds with a ~ue Inlemst ~,~[ of 4 93% percent. The proceecls from the nele of the bends will be uned for =[,.et pmjan~, Iralfi~ management proJecls, pa-k projects, drainage pro~, land acquisition, fire station Improventents and to pay the ~ ineun'm:l in c. onnecgJm~ with the issuence of Ihe bonds. ~wsnue I[~nds The City from t,me to time also Issues bonds for v~hlch Ihe City pledges Inoome dedved from the acquired or cmstn~nd ansets to pay dsbt sewtce. On .N~I 11, 2002 Ihe C#y issued $18.215 milinn in ulitty re~nue bonds with a I~ue Intmest cost of 5.01% peroant. Proceeds from ~e sale of Ihe bonds vdll be used for On Aprl 11, 2002 the City Issued $14.48 million tax (~lEtcates of obligation wllh a line Interest mt of 4.75~ pe~ent. The icxo~eds fl~om this debt bsuance Mil be u~ecl fir lite ~cquislllon of equipped, sl~,eet improvements, and the censtmctton of a Municipal Court Building. The prone~ls Mil abo he used fir CITY OF COLLEGE STATION, TEXA~ NOTES TO GENERN. PURPOSE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 IlL DETAILED NOTES ON ALL FUNDS AND ACCOUNT GROUPS (Continued) F LONG-TERM DEBT (Contlnu~) Beginning Balance Governmental Fund Twea General Obllgatlnn Bonds $ 3g,376,000 $ 6A45,500 $ 4,155,000 $ 41,665,000 ~ of Obligation 20,505,000 14,480,050 1,795,500 53,253,000 Ac~uecl V~n 1~..50,346 1,939~061 893,911 1,433,496 Subtotal 61~258~348 21~934~061 6~843~911 76~378~496 Pr~fletaw Fund Trees Utility Revenue Bonds 63,185,000 18,215,000 3,165,093 76,235,000 Accrued Va~tien: Beclrlc Fund 95,332 138,062 114,729 118,665 · Water Fund 49,722 53,927 50,876 53,Tr~ Se~er Fund 55,9~3 51,954 48,070 53,907 Commun;(,a~n Fund 11,412 3,501 7,040 8,333 I:~klng Gam~ Fund 1,050 2,537 3,203 434 Flee{ Mamtenanne Fund 17,892 25,634 21o099 22,42? Print/Mall Fund 6,056 6,728 6,307 6,477 Utllliy Billing Fund 47,281 48,642 48,860 47,063 Sut~otal 63,493,182 18,534,'/37 3,506,165 76,576,764 Total Long-Te~m Dabt $124,750,528 $40,648,793 $ 10,350,076 $154,955,250 CiTY OF COLLEGE ~TATION, TEXAS NOTE8 TO GENERAL PURPOSE FINNqCIN. STATEMENT~ FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 III. DETA, ;n NOTES ON ALL FUNDS AND ACCOUNT GROUPS (Continued) F. LONG-TERM DEBt' (Continued) Long-term debt outstanding as of September 30, 2002, co~slste¢l Ixtmaflly of bon~ls matu~g ~t~lly and is General Obligation Bonds: 1991 issue 6.00-8.00 2012 $ 975,000 1994 Issue 5.507.50 2014 3,350,000 1995 I~sue 5.10-7.00 2013 3,500,000 1996 Issue ~ R~fu~ng 4.70-7,50 2017 6~75,000 1998 Issue 4.50-6.50 2017 5,515,000 1999 issue 3A0-5.40 2017 5,595,000 2000 Mue 5.00-7.00 2018 7,210,000 2001 Issue 5.00-7.00 2017 2,800,000 2002 Issue 426-625 2021 6,445,000 Subtotal 41,665,000 1998 issue 4.55-7.30 2017 4,890,000 2000 issue 5.00-7,00 2018 3,445,000 2000A Issue 4 75-6.75 2020 7,300,000 200t issue 3.50-5.00 2020 3,t65,000 2002 issue 3.50-5.125 2020 14,480,000 Subtotal 33,28O,0OO Ut~lty Revenue Bonds: lg93 Issue 420-5.60 2013 2,750,000 lgg4 Issue 5.40-6.40 2014 9,900,000 1995 Ir4ue 525-6.25 2016 4,200,000 1996 Issue and Refunding 4.15-5.60 2017 7,965,000 1998 leeue 4.55-6.50 2017 2,385,000 2000 Issue 5.00-?.00 2018 9,930,000 2001 I~e 3.50-5.50 2021 22,890,000 2002 Issue 4.00-6.00 2022 18,215,000 Subtotal Totat $ 153,180,000 CITY OF COLLEGE 8'I'ATION, TEXA~ NOTES TO GENERAL PURPOSE fiNANCIAL STATEMENTS FOR THE Fla.,AL YEAR I~IDED 8EPTEMBER 30, 2002 III DETAILED NOTES ON ALL FUNDS AND ACCOUNT GROUPS (Conl]nued) F. LONG-TERM DEBT (Cordinued) Debt ~ requirements to metudty for ~ll Iong..t~n~ debt is ~ummm~z.d Y~r 2OO3 2OO4 2OO5 2OO6 2OO7 2008-2012 2013-2017 20182022 TOTAL Obllgabxt Bonds Revenue Bonds Pz, bmlmll Intamst Princimil Interest $3,285,000 $2,049,450 $3,8t$,000 $3,544,750 2'575,000 1,827,876 3,910,000 3.752,750 2,460,000 1,685,364 4,120,000 3,547,429 2,295,000 1,682,097 4,235,680 3,350,288 2,400,000 1,447,345 3,870,000 3,126,368 13,620,000 5,438,7t0 21,565,000 12,405,547 12,268,000 2,125,273 22,385,000 6,420,552 2,445,000 205,380 14,355,000 1,506,783 $41,665,000 $16,341,715 $ 78,235,000 $38,1:~3,383 Y~EIr 2O03 2004 2O05 2O06 2OO7 2008-2012 2013-2017 2018-2020 TOTAL $2,685,000 2'515,000 2,715,000 2,175,000 t ,340,000 7,455,000 9,168,000 4.768,000 $ 33,280,000 $1 1,445,500 1,311,641 1,164,683 1,103,525 4,457,226 2,4?6,328 13,939,092 61 CITY OF COLLEGE STATION, TEXA~ NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 III DETAILED NOTES ON ALL FUND8 AND ACCOUNT GROUPS (Continued) G. RESERVATIONS OF FUND BALANCES AND RETAINED EARNINGS Fund balances have been reserved at September ~0.2002. as follows- General Fund Reserved for Encumbranses Reserved for Inventory Reserved for Police Seizure Totol General Fund Reserved Special Revenue Funds: Resewed for Encumbrances Tots] Special Revenue Funds Resewed Debt Sewtce Fund: Reserved for Debt Serv,~e Capital Projects Funds: Resewed for Encumbrances Cemetery Perpetual Care Fund: Resewed for Pmpetual Cam Total Resen~:l Fund Balances 900,465 66,308 22,255 989,028 3.156.451 3.156.451 2.355.213 4.430.807. 743.OO7 $ 11,674,366 · Reserved retained esm,ngs for Ihe Enterprise Funds at September 30. 2002. are as follows' Resewad for Debt Servlse $ 5.643.783 Resewed for Capital Projects 16.637.786 Total Reserved Retained Earnings $ 22.281.589 H. CONTRIBUTED CAPITAL The changes during fir. esl year 2002 in the Clty~ contributed r. apltal account f~' the Equipment Replacement Fund was es follows: Sourcss Contributed Capital. October 1 Cen~buting Sources: Government Cont;Ibutod Capital. September 30 Equ~pmont $1..279.100 868rSOO $ 2,1477900 CITY OF COLLEGE b'TATION, TEXA~ NOTES TO GENERAl. PURPOSE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 IlL DETAILED NOTES ON ALL FUNDS AND ACCOUNT GROUPS (Continued) H. CON'rRIBUTED CAPITAL (Con~ued) Them were no changes ~n conlzibuted capital In the Electric, Water, Sewer, Solid Waste Collachon, Cedar Creek Condom~lum, Northgate Pad<lng Garage, or Internal Son, t~e Funds, excluding Equ~=ment Replacement, during risc, al year 2002 I OPERATING TRANSFERS Individual fiJnd operating and other transfers out and COfTasponding operating transfem In for fiscal year 2002 were as follows: Operating Tronsfem Out Gonoral C-eneml General General C~mmun~ Development Gommunlty Development Convention Center Parks Escrow Wolf Pen Creek TIF General Govemmont Water Sanitation Nodflgate Park~g Garage Operattng Tmnsfem In Amount Debt Service E]ec{~ Equipment Re~lacament Reet Malntenon~e Streets ProJec~ General Govemmont Projects Wolf Pen Creek Streets P~ects Perks Projects Goneml General General Streets Projec~ 478,091 1241 617 858 524.447 12,231 127,529 148.052 120,000 585,000 89,000 4,574,900 923,800 720,500 306,700 225,000 J RESTATEMENT OF RETAINED EARNINGS Retsined F. ammOs, October 1, 2001 Prior Peridd Adjustment 1 Prior Parlod Adjustment 2 F:b~alned Eamn~ga (Reetatad) O~tober 1, 2002 Electric Fund $39,922,630 (353,701) 261,533 $39;830~402 63 CiTY OF COt ~ r'~E STA'nON, TEX.f~ NOTES TO GENERAL PURPOSE FllqL, MqiClAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 III. DETAILED NOTES ON AIL FUNDS AND ACCOUNT GROUPS (Cofl~nued) J. RESTATEMENT OF RETAINED EARNING8 (C~ltinued) Retained Earnings in the Electric Fund has boon restated duo to pdoF pealed edjustments. Both edJuotme~o aro due to omx8 that occum~l In FY 2001 when tho EkmMc Fund began using a n~w system oxpenso to be calculatsd InGorre,~y. Tho $253,761 edjuotment represents 8n amount that should have been Included in dopreclatinn expense In FY 2001. Pdor period adjustment 2 relatmJ to 8n error rn · ansfemng conatru~tlmt in progress balances ~n the old Wstsm to the now aystom. ~ $261,533 fldjusMmnt brings the cofls~uctinfl in progress balan=e~ off tho now system in Ilno with the genem~ lodger. IV. OTHER INFORMATION A. PROPERTY TAXE~ Property Jo appraised and a Ibfl off such pflRwty become~ eoforGe8~lo us of Jsfluery 1. Taxes sro IovJod andpeyebleoflOc~berl ThoBrazr~CotmtyTsxOflJusblllaandoolMctspropertytmmsforthaCJty. City The beMnus is mportod m defeiTed ravunuos. Taxes become de~t Fedrumy I of the followthg year and ere subject to intorest end peMdty chmgm. Tho City J8 pormlttsd by the Stets of Tm(as to levy tlww up to $2.50 per $100 of W vulus~on for gefleml govemmentsl servtces md for the paymeflt of pdr~ and intsmst on gemini inng-Wm deM. ~ Septsmber 30, 2002, was $.4/; ( per $100 of osseued vstuetJon. The Bruz~ County Appmlo81 DIstr~ ~AppmlMJ ~ Js responsible for the romxding md appraWI of properly for M taxing units In Bmzos County. The Appraisal Dbtrlct b required to mseM properly at 100% expense, require annuol reviews by the Appraisal District ~',~xJgll verlouo ~ and, If nece,~,~,,ry, legal mey pet~on for an e~ectinn to detsrmlne whether to limit the tax rots to no moro ~an 8% above the tsx ruts of the prevtsus yoer. B COMMITMENT8 AND CONTINGENCIES Canatructk~n Cmnmilment~ At September 30, 2002, the City had a number of o,~'Svo construMion project~ Gommltmortts with c;ontrs~om were ~8 tollowu: Remaining ProJoct Type Comm#ment 'Ge~erul Govemmeflt Fh-qocts $ 3,766,524 Parks ProJe~8 1,188,004 Sower ProJogls 1,079,239 Streets Projects 1,385,01 g Wator Projects 1,83%621 To~l S 9,250,407 CITY OF COLLEGE STATION, TEXAS NOTES TO GENERAL PURPOSE FINANCIAL 8'I'ATEMEHT8 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 IV. OTHER INFORMATION (Continued) B. COMMITMENTS NqD CONTINGENCIES (contlnuod) Other Commitments and Conlinnenciss Pricr to January 1, 1996, the CRy purdmsed elantrlc powe~ and energy from four cities (Bryan, Demon, Gadand and Grsenvlile) of the Texas Municipal Power Agency (TMPA) ufnlch was delivered itvough the TMPA and B~yan transmission facillitse. On January 1, 1996, lhe City of College Staito~ began purchea~ng its power through Texas Uiflitlex ('FU) Corporation. Bryan and TMPA elleged that College Station and TU were not au~orlzed to use their respective fa=lilies to deliver power to the City of College money damawm for the altaged trsepaes. The Texas Public Utility Commission (TPUC) adopted rates and c~ effective January 1, 1996. The rates and charges so established were to remain In effe~l until the TPUC adopted Iraneml~im rates for use throughout the Etactnc Rcitabil~y Council of Texas (ERCOT). TMPA ,and Bryan appeaicd ~ rates and cha~ges. The TPUC established rato~ and charges In a slmitar manner f~r the period Januanj 1, t997 through August 31, 1999. TMPA and B~yan appealed tho~,e chargse each year through the TPUC and various state distfl~t ~uris. In additicn, the C~ is a paty to an action before the Federal Energy Rngulato~ Cemmlesion (FERC) regarding rata issues for the s~ne period. On June 18, 2001, the Texas Supreme Court Invebdeted the rate set[lng porifon~ of ~ 8ubslantivo Rules 23.67 and 23.70. The coud held that the TPUC lacked autho~ to establish tran,,mlesisn rotes and charges for the period September 1, 1995 thro~lh August 31, 1999 for municipally owned bansmlesicn fa~ltlex. The TPUC and FERC had prevtousty eot rates for the City based on the methodciogy used by the TPUC. At this point, it is not ~lser the elfuct these so6nns Mil have on the Cit~e general purpese flnanolel statements. Due to the complexity of the rate setting methodotaglse and the legal bsues Involved, manegernant Is unable to make a detonninaiton of icso ~mtingency, if any;, therefore, no provision has been made In the e~onmpenying general puq~o~e ltnenciat atatomants. Management Intends to vigorously defend the City's position In regard to these actions. The City is onnt]ngeofly liable for lawsuits and other otalm~ In Ihe ordInary ooume of its opemitm~. The setilem~tt of such cnntingemics under the budgetoPJ pmcees voutd reclulm appmprlaitnn of revenues ~ to be realized and would nat maedelly affect the financial peslifo~ of the City at September 30, 2002. C. RISK MANAGEMENT A government entity, such m the City, is faced with the pessildl~ of vericua icsee,~ which can result from natural dissetors; theft of, damage to, or deatm,~on of essats; human errors and umbelonl; axl tod;. In order to mInlmtas I~ expo~m to euch ic~se~, the City is angagad In the fuilowing risk management activities: The City is ~f-insore~ for the fire $100,000 on propen'y Io~ses such a~ atden, dernagad, des~'oyed, vendelized, and loaf assets end for Itabllity iceses flied by persorm delmIng personal or p,-c-~er~y demages. This ~ovetage is provided through a Pmporty and Cesuaity Fund thet ta funded by ~lcutatad contdbutisoe from the circe operating funds The fund Includes an annual aggregate loss limit of $160,000. NI datms aes cn'Y OF COLLEGE ~rA'F. ION, 'rEXA~ NOTES TO GENERAL PURPOSE FINN~CIAL STATEMENT8 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 IV. OTHER INFORMATION (C=o~ued) C. RISK MANAGEMENT (C=otlfaJed) The City retolns the ~t ~-o0.000 on the ~lawing lines of In~renca =overage: Auto Llab~ity, General Uab#ity, Law Eofomemen! Liability, and Pul~lc Officlab UaMay. Tim=o property and casualty cove'ag~ am Cay relmbumes TML/IRP on all paid claims which are ~ e~'tin the $25,000 mtondon. The Clt3fs Unemployment Fund IS ,-ecl to a=oount far self~suranca a~lNt[y Involving dakns 9ad under unemployment =ompensalim laws. Monthly contributions based on a pamentage of pwmll me d=mmined each year during the budget proems and am u~cl to fund this agiJvay. The City IS al=o self-lrmured for won~em' mpanmti=o benefits, and the plan IS adminislamd by TMUIRP. In the Cay's contract telth TML. TML sgree~ to provide carta~ v,,a~am' =ompancallan s .en, f///////~e___ fa' the Cay hearings, and printing ¢ia~ reparis. The City Is required to pr=oeas end provide to TML In#iai papanvork =o any covered employee aliObla to receive won~e~ matlen ben~t~. The City pa~ a fixed =ontmct IS canceled. The City al=o reimburses 'TML for all claim, paid an the City's behalf up t~ a mum of $100,000 per ~lalm. Add#l=oally. the City baa a stop.lmm Insumnge polidy Ihat Ilmlis ~ ~ablllty per employee to ~500,000 par rnddent. The mount f~r e~Al,,,atod out=landing laecae for claims Incurrod but Fret repar~l m not matodal. The City ce~;no the f'~t $100,000 =o it's Win'gem Compansa~n coverage. The Cay oblak,~ Itm ;overage through TML Intergovernmental Risk Pool, who IS respons~la for all ~z,~ in em=es8 of the City's $100,000 relantion. TML/IRP provides mmplato ~alm$ admh;~:,~=o over all wod~em camper-maiJ=o dalms. The Cay reimburses TML/IRP on all pad dalm$ whish am sotllad v~thln the $100,000 reton~m. '1~ mount for estlmaled oulslandlng Im~e~ for ;lalms incu~d but =ol repo~M (IENR) Is not matedal. Changes in the balencas of alebrm Ilablllt~ ~' Ihe salf-k~,umnca funds which are a=oountad for as Ir~mal 8an~e Funds am ,~ follows. 2OO2 2001 Unpaid Claims, Oc~ber I $ 412,6T7 $ 701,053 Inctm'ed Claims (including IBNR's) 852,136 2,630,192 Clms Paid (1,107,316) (2,g18~568) Unpaid Claims, 8eplamber 30 S 157~497 $ 412r677 The City caea Internal Ser'v~,e Fund= to a==ount far ~ ~k-mamgemant antivttl=o. In eddlfion, intmfund premiums am reported m qcaal, extmnal ~anmm~ns. CITY OF COLLEGE ~I'ATION, 'IrEXA~ NOTE8 TO GENERAL PURPOSE FINNCCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 D. JOINT VENTURE In May lgg0, the City af College Station joined the City of B'yan In creating BVSWMA. The pr~nery purpose of BVSWMA Is to achieve economy of scale savings for the parit~pants through joint o~mershlp and use of regional waeta managemmt faellitm Each c~ hold-, a 50% Interest and ovmarshlp In BVSWMA. BVSWMA Is govemed by an Adm~n~-:.,,[;ee Board of Trustees ("Board") coml~sed of the City Manager and a staff penmn fTOm cacti city; In addison, the Mayom of each dty ,,awe allamaitng tw~.yaar trams on ~e Board The Board has oomplete responsibility far ee dally operating aciJvllles of BVSWMA. Alter Board approval, the BVSWMA annual budget Is pre~ented for approval by both cities as a part of their regular budget. The City's ~hare of BVSWMA's net income for fiscal 2002 was $842,323. The fallowing b a ,,ummary of infomlation fram the a,.~llted financial stetament, of BVSWMA as ~ September 30, 2002 and 2001: 2002 2001 Current Assets $ 11,471,225 $ 10,444,228 Proper[y, Plmt and Equipment (Net of $3,888,369 Accumulated Depreciation at 2002 and $3,265,871 at 2001) 4,773,722 4,024,545 Olher A~sets 238,048 77,148 TalalAs~ets $ 16,482,995 $ 14,545,g21 Llablll~es: Current Llabaitms $ 508,635 $ 489,989 NoncuEent Liabilities: .Nx:med V~ 48,492 37,548 Accrued Poet Closure Maintenance Costs 3,348,818 3,123,980 Total Uablll~s 31~1~4~ 3,6511517 Fund Equity:. Ca--ted Equity 170,700 170,200 Retalnnd Earnings 12~108,850 10~724~204 Talal Fancl Equity 12,b-/9~0E0 t0~41404 Tolal Liabilities and Fund Equity $ 16,482,gg5 $ 14,545,921 Total Operating Revenue~ S 5,396,098 S 5,23,7,840 Ta~al Operating E)q~nses 4,138,898 4,176,440 Operating Income 1,2.57,700 1,081.400 Net Nono~ng Revenues (Expenses) 426,948 267,984 Net Income $ 1,684t646 S 1,329,384 A copy of BVSWMA's separate audltnd linanelal statements may be obtained fram Itte City's FIm~l Services Depad~eet. CITY OF COLLEGE STATION, TEXA~ NOTES TO GENERAL PURPOSE FINANCIAL STATEMENT8 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 IV. OTHER INFORMATION (Continued) E. RETIREMENT PLAN The City has adopted GASB Statement No. 27, _,a~,__Jnting f~x Pensions by Stats and Local Oovemrn~t ~ This s~.~nent mClulms ~e follo,Mng d~uree: Plan DeKdotlon admlnlstared by TMRS, m agent multiple-employer publk~ employee retlmmm~t system. singe the plan began are 200 percent of the employee~ accumulated mnldbutimw. In addition, the C~ can grant as of~n as annually a~other type of monetary mKIIt re~mT(KI to as an updalad maYIGe Gmdlt which is · accumdated v~ Intemat If the cuban! employee ~ mrs and C~ matting percent had always bean In e3~tence and ff the employee's salary had ~ bean the average of his ~li~y In ~ la~ three employee's accumulated conMbutione wllh Interest and the amployar-fl~ monelmy credrm Mh InWmst were used tc) purchase an annuity. The plan ~lons am ~c;~p~=cl by the governing body of ~e City, within U~e options avagable In the state statutes governing TMRS and within e(~Jadal oon&lraln~ also In the ststut~. Plan prov~iom f~ h'm City Depoelt l~te: 6% M~tc~n; Ratio (C~to F. mptoyee): 2-1 The City of College Station is one or 758 munblpal~es havfng g~e bendit plan admkdstered by TMRS. Each of the 7,68 munl~ipalitiee has en ~nnual, Individual aduadal wluMIon pefonned. A~tuerbl Msumptlon8 os of I~e IBted Bc~uBrbd vlduBtk~n Bm m fogows: Actuarial Coa~ Melhod: Amorl~ation Idathocl: Ram~nlno Am~l~allon Pen~d: Asset Valu~ UnR Credit Level Pement ~ Payndl the requlmmeflt, of GASB S~ No. 25, per~mphs 38e and 1~8) CITY OF COLLEGE ~rATION, ~ NOTE8 TO GENERAL PURPOSE FINANCIAL STATEMENT8 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 IV. OTHER INFORMATION (Col~nued) E. RETIREMENT Pr. AN (C.,o~ued) Membam can rebre el age 60 and shove w#h 5 or more yearn of smvica er with 20 ye~ of ~ regardless of age. ^membar b veeled after 5 years. The plen pmvmlons m.e adoptsd by the governing bedy of ~e Cay, mth~n the o1~ available in the crate statutes governing TMRS and v/4hin the aotumtol cans~'elnts also in the statutes. Under the state law governing TMRS, the actumy annually da~'mlne, the City ~on~lbutton rots. This rats consists of the normal co~t c(3nl~lbu~on rem and the prior mm~e (~xddbutJon rote, both of which are calcutstsd to be - level pmcant of payroll from year to year. The normal Goat Gontrlbutton rate flnmm6 the cun~ntly accruing monetary credlls due to the City matching percent, which are the obligation of the City as of an employee's rebYemant date, not at the t~m the emplayee'e ~,.;~;~L~tlons am made. ~ normal cost conlribulk~ rots is the a;tuerlaby determined percant of daymll necassan/to ~a;i;]~ the oldlgatkxt of rots amortizes the unfunded (ova~undad) actuarial liability (an~at) over the remainder of the plan's 25-year amortization panod. Tba unit ;reda antoadal ~ost method is used for determining the Cby rate. Both the amptoyee~ and ~ City make cont~outlons monthly. Since the Cay needs to know Its co.biL~tion rate In advance for budgetmy puq~ses, there I~ olle-yeer delay bebvaan the ~cal valuation that b Ihe basis for the ra~ and ~e calendar year when the rots goes Into effect. (Le December 31,2001 valuatlo~ Is effec~e for rates beginning January 2003). The Cby of Co4iage Station b one of 758 muntdpalltlas ha~ng the baneflt plan adminlstsmd by TMR~. Each of the 758 Mun[dpelitles have an amual, Individual aclumtal valuatio~ pe~ormad. NI a~uml~ans for the 12-314)1 valuations are contmned In the 2001 TMRS Comprehensive Annual Financial Report, copy of wNch may be ~tsinad by ~ to P.O. Box 1491 58, Austin, Texas 78714..9153. Trend Information gives an indlcallm of the progress made In ac~umuiat;ng suft~en~ ~ to I~Y baneliis W due. Applicable hlsb~tcal ~ Infon'nellon concamlng this plan b pre,enid below and on the next F'_,~_~_ Year Annual I:~:lulmd Contrlbulkme Net Pan~ian 1994 980, t94 980,194 0 1995 1,028,586 1,028,086 0 1996 1,107,037 1,107,037 0 1997 1,299,737 1,299,737 0 199~ 1,662,022 1,662,022 0 1999 1,585,749 1,585,74~ 0 2000 2,154,204 2,154,2.04 0 2001 2,272,217 2,2.72~217 0 2002 2,511,159 2,511,1 58 0 CITY OF COLLF..~E STATION, TEXAS NOTE8 TO GENERAL PURPOSE FINANCIAL 8'TATEMENT~ FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2{X)2 IV. OTHER INFORMATION (Continued) E. RETIREMENT PLAN (Continued) Schedule of Fund~g Progress UAN.. 88 a A=tual~ Covered Percenlage of AnnusJ V~luntlon Oete Payroll Covered Payrol 12/31/92 14,658,546 17% 12/31/93 16,049,130 21% 12/31/94 17,086,936 29% 1231/95 17,581,968 31% 12/31/98 18,001,720 37% 12/31/97 17,839,856 42% 12/31/98 19,339,128 35% 12/31/99 20,803,862 34% 12/31/00 23,651,256 34% 12/31/01 25,422,588 35% September 13, lOgO..6-'~llng to mis resolu~afl, employees who mCb~ wldle working f~r~e C#y and their daflendenM are eligible to remain m lbo Cl¥$ heallh plan m long a~ the employee makro mmlNy pmm~ psymenb. Durlngfl~ceJyear2002, twelvefomlerenlldoye~were~:weredunderthbammgeme~, Pflorto tho pm~age of this resolution, employees who reached retirement while wo~lng for the City were ellga~e ~ on__the~ City's s~f. -insured he~th .l~ ~ ~ t~eir monthly premiums paid fur by the City. D~ng ~,~.~,r zu~z. one re=,e wm cemre= under t~ mn: howev, r. ~,~,, ~ed ~y ~h~ rae, e w~m ~ 7O CITY OF COLLEGE STATION, TEXA~ NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 IV. OTHER INFORMATION (Continued) F. SEGMENT INFORMATION OF ENTERPRISE FUNDS 'The C~ty malntmns s~x entellXme funds Segment ~nformation for the year ended September 30, 2002, is as fallows (amounts In thousands): So~clWaste Cedar Creek No~hgete Eleclflc Water 8ewer Colbcbon Condominium Parking Fund Fund Fund Fund Fund Gan~e Total Ol~Revenues $ 45,252 $ 8.686 $ 8,203 $ 4,307 $ 0 $ 452 $ 86,g00 (Exdudlng De--on) 37,679 4,566 4,030 4,37g 0 438 51,092 De--lion 2,39g 1.264 1,239 14 0 160 5,076 Opemllng Income 5.174 2,856 2,935 (86) 0 (146) 10,733 Opera~tg Tmr~, Net (4,574) (924) (730) (307) - 0 (225) (6,760) Net Inmme (Loss) 357 1,335 820 470 2 (261) 2.723 Properly and Equipment Addl~one 23,297 15.205 13.241 0 0 222 51,965 Net Wo~Jng Capital 14,266 11,1t8 3,757 1,305 303 833 31,582 Total A~els 70,089 72.765 69,857 7,757 446 7.198 228.112 Bonds arKI Olhm' Long-Term UablilJee Padlon) 13,713 27,239 33,588 26 0 0 74.566 TotEd Equity 44,731 42,654 32,650 7,686 303 7,187 135,314 G. DEFERRED COMPENSATION PLAN 'The City offers Its employees a deferred compensation plan created in acoordance with Inlemal Revenue Code seotlen 467. The plan Is available to ell City employees and pennlte Ihem to defer a portlen of I~er retirement, death or unforeseeable emm~gency. It is the opinion of the City's legal counsel I~at the City h~ no Ilebile/for IDs.sm under the plan. 71 CITY OF COLLEGE STATION, TEXAS NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS FOR THE FISCAl. YEAR ENDED SEPTEMBER 30, 2002 IV. OTHER INFORMATION (Continued) H POWER COST RECOVERY The Cb is allowed to recove~ purchased power costs as power cost adJusl~ne~s. This power cost recovery allows for the pass-through of power costs to the customers and has no ~mpact on net ~come The amount of any under or over recovererl purchased power costs at year-end was not material I REVENUE BOND COVERAGE All the net revenues of the Eleolrl;, Water, and Server Funds are pledged for the payment of debt asn~ce of the revenue bonds and other Indebtedness payable from those revenues. Net revenues, as defined by the revenue bond raxolutiena, include substantially all of the revenues end expenses of the above named funds other then cartetn Interest income and expense, and dedreelabon and amertlzefien. These bond resolutions further require that the net revenues, as defined, equal at least 1.40 t~mea the average annual debt service on all revenue bonds and o~er Indebtednas$ payable from tlx~e revenues and 125 times the maximum annual debt sennce on all revenue bonds and other Indebteclueas payable from thcee revenues The maximum annual debt ,andr. e ~s defined aa the maximum principal and interest payments to be paid In any one year remalmag In the Ida of the bonds, and the average annual debt es~ice ~ defined as ~e sum of all pr~clpet and ~nterest payments due over the remaIning life of the bonds divided by the remmning Ilts of the bonds The City is in compliance with these requirements. J. BONDS AVAILABLE FOR SALE Authorized general obligation bonds available for future ~ssue are as follows: Year Unissued Authonzed Amount Public Buildlnge 1984 $ 700,000 Street Improvemenls 1984 500,000 Slmet Improvements 1998 973,000 Traffic Management 1998 720,000 Fire Station Improvements 1998 1,317,000 C#y Faalllbes 1999 780,000 Drainage Improvements 1998 1,855,000 TOTAL $ 6,845,000 K RECENT ACCOUNTING PRONOUNCEMENT - GOVERNMENTAL ACCOUTING STANDAI~DS BOARD STATEMENT 34 - 'BASIC FINN~IClAL STATEMENTS - AND MN~IAGEMENT DISCUSSION AND ANALYSIS - FOR STATE AND LOCAL GOVERNMENTS' With tha fiscal year ending September 30. 2003. the City will implement the provisions of Governmental Aceounling Standards Bcent Statement 34. The City has not =ernplated the pronass of evalual~g the impact that mil result flom adopting Statement 34. The C~ is therefore unable to d~:lnse the rmpe,=t that adopting The New Reporl]ng Model wtll have on the financial pceil]on and results of opars'dons of the City when such statement is adopted. 72 APPENDIX C FORM OF OPINIONS OF BOND COUNSEL Proposed Form of Opinion of Bond Counsel ,4n opmton in substantially the following form will be dehvered by McCall. Parl~hurst & Horton L L P. Bond Counsel, upon the delivery of the Bonds, assuming no matertal changes tn facts or law. CITY OF COLLEGE STATION, TEXAS GENERAL OBLIGATION IMPROVEMENT AND REFUNDING BONDS, SERIES 2004, IN THE PRINCIPAL AMOUNT OF $13,235,000 AS BOND COUNSEL for the City of College Station, Texas (the "City"), the issuer of the bonds described above (the "Bonds"), we have examined into the legality and validity of the Bonds, wluch Bonds are issued m the aggregate principal amount of $13,235,000. The Bonds bear interest from the date and mature on the dates specified on the face of the Bonds, and are subject to redemption prior to maturity on the dates and in the manner specified un the face of the Bonds, all m accordance with the ordinance of the City authorizing the issuance of the Bonds (the "Ordinance") Terms used herein and not otherwise de£med shall have the meaning given m the Ordinance. WE HAVE EXAMINED the applicable and pertinent provisions of the Constitution and laws of the State of Texas, the charter of the City, certified copies of the proceedings of the City, and other proofs authorizing and relating to the issuance of the Bonds, including one of the executed Bonds (Bond No. R-I); however, we express no oplmon with respect to any statement of insurance printed on the Bonds. BASED ON SAID EXAMINATION, IT IS OUR OPINION that the Bonds have been anthonzed, issued and dehvered in accordance with the Constitution and laws of the State of Texas, and constitute valid and legally binding obligations of the City; and that the ad valorem taxes, upon all taxable property within the City. necessaPy to pay the interest on and pnncipal of said Bonds, have been pledged for such purpose, within the lurers prescribed by the Constitution and the charter of the City. The opinion hereinbefore expressed is qualified to the extent that the obligations of the City, and the enforceability thereof, are subject to applicable bankruptcy, reorganization or similar laws relating to or affecting creditors' rights generally, and the exercise of judicial d~scretion in accordance with general principles of eqmty IT IS FURTHER OUR OPINION, except as discussed below, that the interest on the Bonds is excludable from the gross income of the owners for federal mcorae tax purposes under the statutes, regulations, published rulings, and court decisions existing on the date of this opinion. We are farther of the opmmn that the Bonds are not "specified private activity bonds" and that. accordingly, interest on the Bonds will not be included as an inthvidual or corporate alternative minimum tax preforence item under section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code") in addition, we have relied upon the report of Grant Thornton LLP, independent certified public accountants, with respect to certain arithmetical and mathematical computations relating to the Bonds and the obhgations refunded with the proceeds of the Bonds In expressing the aforementioned opinions, we have relied on, certain representations, the accuracy of which we have not independently verified, and assume compliance with certain covenants, regarding the use and investment of the proceeds of the Bonds and the use of the property financed therewith We call your attention to the fact that if such representations are determined to be inaccurate or upon a failure by the City to comply with such covenants, interest on the Bonds may become includable in gross income retroactively to the date of issuance of the Bonds WE CALL YOUR A'VI'ENTION TO THE FACT that thc interest on mx-exempt obligations, such as the Bonds, is (a) included in a corporatinn's alternative minimum taxable income for purposes of dctermining the alternative minimum tax imposed on corporations by section SS of the Code, (b) subject to the branch profits tax imposed on foreign corporations by section 884 of the Code, and (c) included in the passive investment income of an S corporation and subject to the tax imposed by sact~on 1375 of the Code. EXCEPT AS STATED ABOVE, we express no opinion as to any other federal, state, or local tax consequences of acquiring, carrying, owning, or disposing of the Bonds WE EXPRESS NO OPINION as to any insurance policies issued with respect to the payments due for the principal of and interest on the Bonds, nor as to any such insurance policies issued in the future. OUR SOLE EN(}AOEMENT in connection with the issuance of the Bonds is as Bond Counsel for the City, and, in that capacity, we have been engaged by the City for the sole purpose of rendering an opinion w~th respect to the legality and vahdity of the Bonds under the Constitution and laws of the State of Texas, and with respect to the exclusion from gross income of the interest on the Bonds for federal income tax purposes, and for no other reason or purpose The foregoing opimons represent our legal judgment based upon a review of existing legal authontias that we deem relevant to render such opinions and are not a guarantee of a result. We have not been requested to investigate or verify, and have not independently investigated or verified uny records, data~ or other material relatmg to the financial condition or capabilities of the City, or the disclosure thereof in connection with the sale of the Bonds, and have not assumed uny responsibility with respect thereto. We express no opinion and make no comment with respect to the marketab:hty of the Bonds and have relied solely on ce~ificates executed by officials of the City as to the current outstanding indebtedness of, and assessed valuation of taxable property within, the City. Our role in connection with the City's Official Statement prepared for use in connection with the sale of the Bonds has been limited as described therein. OUR OPINIONS ARE BASED ON EXISTIN(~ LAW, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guaruntee of result and are not binding on the Internal Revenue Service (the "Serviee")~ rather, such opinions represent our legal judgraent based upon our review of existing law and in reliance upon the representations and covenants referenced above that we deem relevant to such oplmons. The Service has an ongoing audit program to determine compliance with rules that relate to whether interest on state or local obhgatmns is includable in gross income for federal income tax purposes. No assurance can be given whether or not the Service will commence an audit of the Bonds. If an audit is commenced, in accordance with its current published procedures the Service is likely to treat the City as the taxpayer. We observe that the City has covenanted not to take any action, ur omit to take any action within its conlrol, that if taken or omitted, respectively, may result m the treatment of interest on the Bonds as includable in gross income fur federal income tax purposes. Respect'fully, Proposed Form of Opinion of Bond Counsel An opmion in substantially the followtngform will be dehvered by McCall, Parkhurst & Horton L L P, Bond Counsel, upon the delivery of the Certificates, assuming no material changes in facts or law. CITY OF COLLEGE STATION. TEXAS CERTIFICATES OF OBLIGATION, SERIES 2004. IN THE PRINCIPAL AMOUNT OF $9.315.000 AS BOND COUNSEL for the City of Collnge Station, Texas (the "City"). thc tssuer of the certificates of obhgation described above (the "Certificates of Obligation"), we have examined into thc legality and validity of thc Certificates of Obhgation, winch Certificates of Obligation are issued in the aggregate principal amount of $9,315.000. Thc Certificates of Obhgation bear interest from the date and mature on the dates specified on thc face of the Certificates of Obligatinn, and are subject to redemption prior to maturity on the dates and m the manner specified on thc face of thc Certificates of Obligation. all in accordance with thc ordinance of thc City authorizing thc issuance of the Certificates of Obligalion (the "Ordinance"). Terms used herein and not otherwise def'med shall have the meaning given in the Ordinance. WE HAVE EXAMINED the applicable and pertinent provisions of the Constitution and laws of the State of Texas, and a transcript of certified proceedings of the City. and other pertinent instruments authonzmg and relating to the issuance of the Certificates of Obligation, including one of the executed Certificates of Obhgation (Certificate of Obhgation No. R-I); however, we express no opinion w~th respect to any statement of insurance printed on the Cemficates of Obligation BASED ON SAID EXAMINATION, IT IS OUR OPINION that the Certificates of Obligation have been authorized, issued and delivered in accordance with law, and constitute valid and legally binding obligations oftbe City, that the interest on and principal of the Cemficates of Obligation shall be payable from the proceeds of an ad valorem tax levied and pledged for such purpose, within the limit prescribed by law, and that the principal of and interest on the Certificates of Obhgation are additionally secured by and payable from a limited pledge {.not to exceed $1,000) of the surplus revenues from the operation of the City's combined mumcipal electric light and power, waterworks and sewer system remaining after payment of all operation and maintenance expenses thereof and any other obligalions heretofore or hereat~r incurred to which such revenues have been or shall be encumbered by a lien on and pledge of such revenues supenor to the lien on and pledge of such revenues to the Certificates of Obligation The opinion hereinbefore expressed is qualified to the extent that the obligations of the City, and the enforceability thereof, are subject to applicable bankruptcy, reorganization or smular laws relating to or affecting creditors' nghts generally, and the exercise of judicial discretion in accordance with general principles of equity. IT IS FURTHER OUR OPINION, except as discussed below, that the interest on the Certificates is excludable from the gross income of the owners for federal income tax purposes under the statutes, regulations, published rulings, and court decisions existing on the date of this opimen. We are furtber of the opinion that the Certificates are not "specified private ectivity bonds" and that, accordingly, interest on the Certificates will not be included as an individual or corporate alternative minimum tax prcferenee item under section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code"). In expressing the aforementioned opinions, we have relied on, certain representations, the accuracy ofwhlch we have not indepondently verified, and assume compliance with certain covenants, regarding the usc and investment of the proceeds of the Certificates and the use of the property financed therewith. We call your attention to the fact that if such representations are determined to be inaccurate or upon a failure by the City to comply with such covenants, interest on the Certificates may become includable in gross income retroactively to the date of issuance of the Certificates WE CALL YOUR ATTENTION TO THE FACT that the interest on tax-exempt obligations, such as the Ceruficates, is (a) included m a corporation's alternative minimum taxable income for purposes of determining thc alternative minimum tax imposed on corporations by section 55 of the Code, (b) subject to the branch profits tax imposed on foreign corporations by section 884 of the Code, and (c) included m the passive investment income of an S corporation and subject to the tax imposed by section 1375 of the Code EXCEPT AS STATED ABOVE, we express no opnnon as to any other federal, state, or local tax consequences of acqumng, carrying, owning, or disposing of the Cer~ficates WE EXPRESS NO OPINION as to any insurance pohcles issued with respect to the payments due for the principal of and interest on the Certificates, nor as to any such insurance policies issued in the future. OUR SOLE EN(~AOEMENT in connection w~th the issuance of the Certificates is as Bond Counsel for the City, and, in that capacity, we have been engaged by thc City for the sole purpose of rendering an opinion with respect to thc legality and validity of the Certificates nnder the Constitution and laws of the State of Texas, and with respect to the exclusion from gross income of thc interest on the Certificates for federal income tax purposes, and for no other reason or purpose. The foregoing opinions represent our legal judgment based upon a review of existing legal authorities that we deem relevant to render such opinions and are not a guarantee of a result. Wc have not been requested to investigate or verify, and have not independently invcsugated or verified any records, data, or other material relating to the financial condition or capabilities of thc City, or the disclosure thereof m connection with thc sale of the Certificates, and have not assumed any responsibility with respect thereto. We express no opinion and make no comment with respect to thc marketability of the Certificates and have relied solely on certificates executed by officmls of the City as to thc current outstanding indebtedness of the City, the assessed valnation of taxable propctty within the City, and the revenues of thc City additionally pledged to the payment of the Cemficates. Our role in connection with thc City's Official Statement prepared for usc m connection with thc sale of the Cemficates has been limited as described thereto. OUR OPINIONS ARE BASED ON EXISTING LAW, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thc'reaRer occur or become effective Moreover, our opinions are not a guarantee of result and are not bindmg on the Internal Revenue Service (the "Service"), rather, such opinions represent our legal judgment based upon our review of existing law and m reliance upon the representations and covenants referenced above that we deem relevant to such opinions. The Service has an ongoing audit program to cletem~ine comphance with rules that relate to whether interest on state or local obligations is includable in gross income for federal income tax purposes. No assurance can be given whether the Service will commence an audit of the Certificates. If an audit is commenced, in accordance with its current published procedures the Service is ltkely to treat the City as the taxpayer We observe that the City has covenanted not to take any action, or onut to take any action within its conlrol, that if taken or omitted, respectively, may result m the treatment of interest on the Certtficates as includable in gross income for federal income tax purposes Respectfully,