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HomeMy WebLinkAboutResolution - 2002-R0193 - Certificate Of Obligation Notice Of Intention - 05/23/2002Resolution No. 2002-80193 May 23, 2002 Item No. 26 RESOLUTION NO. A RESOLUTION approving and authorizing publication of (i) notice of intention to issue certificates of obligation and (ii) notice of sale with respect to such certificates of obligation. WHEREAS, the City Council of the City of Lubbock, Texas, has determined that certificates of obligation should be issued in accordance with the provisions of V.T.C.A., Local Government Code, Subchapter C of Chapter 271, for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Sewer System, and (ii) professional services rendered in connection with such projects and the financing thereof; and WHEREAS, the City has determined to take bids for the purchase of such certificates of obligations and prior to the issuance of said certificates of obligation, this Council is required to give notice of its intention to issue the same in the manner and time provided by law and to publish a notice of sale with respect thereto in accordance with the provisions of the City's Charter; now, therefore, BE IT RESOLVED BY THE CITY COUNCIL OF THE ,CITY OF LUBBOCK, TEXAS: SECTION 1: The City Secretary is hereby authorized and directed to cause notice to be published of this Council's intention to issue certificates of obligation in the principal amount not to exceed $2,700,000 for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Sewer System and (ii) professional services rendered in connection with such projects and the financing thereof, such certificates to be payable from ad valorem taxes and a lien on and pledge of the net revenues of the City's Sewer System. The notice hereby approved and authorized to be given shall read substantially in the form and content of Exhibit A hereto attached and incorporated herein by reference as a part of this resolution for all purposes, and such notice shall be published in a newspaper of general circulation in the City, once a week for two consecutive weeks, the date of the first publication to be at least fifteen (15) days prior to the date stated therein for the passage of the ordinance authorizing the issuance of the certificates of obligation. SECTION 2: The City Secretary is hereby authorized and directed to cause a notice relating to the sale of certificates of obligation to be published once a week for a period of thirty (30) days; such notice of sale to read substantially in the form and content of Exhibit B hereto attached and incorporated herein by reference as a part of this resolution for all purposes. SECTION 3: It is officially found, determined, and declared the meeting at which this Resolution is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Resolution, was given, all as required by V.T.C.A., Government Code, Chapter 551, as amended. LUBBOCK SEWER C_O 2002A INTENT NOS RES.DOC SECTION 4: This Resolution shall be in force and effect from and after its passage on the date shown below. PASSED AND APPROVED, this May 23, 2002. ATTEST: Ci Secretary (City Seal) LUBBOCK SEWER C_O 2002A INTENT NOS RES.DOC 2 Resolution No. 2002-80193 Exhibit A NOTICE OF INTENTION TO ISSUE CITY OF LUBBOCK, TEXAS, CERTIFICATES OF OBLIGATION TAKE NOTICE that the City Council of the City of Lubbock, Texas, shall convene at 10:30 o'clock A.M. on the 11"' day of July, 2002, at the City Council Chambers, Municipal Complex, 1625 13th Street, Lubbock, Texas, and, during such meeting, the City Council will consider the adoption of an ordinance authorizing the issuance of certificates of obligation in an amount not to exceed $2,700,000 for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Sewer System and (ii) professional services rendered in connection with such projects and the financing thereof, such certificates to be payable from ad valorem taxes and a lien on and pledge of the net revenues of the City's Sewer System. The certificates are to be issued, and this notice is given, under and pursuant to the provisions of V.T.C.A., Local Government Code, Subchapter C of Chapter 271. Rebecca Garza City Secretary City of Lubbock, Texas LUBBOCK SEWER C_O 2002A INTENT NOS RES.DOC Resolution No. 2002-RO193 Exhibit B NOTICE OF SALE $2,700,000 City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002A On the 11th day of July, 2002, the City Council of the City of Lubbock, Texas, plans to sell the above referenced certificates of obligation during its regular meeting scheduled to begin at 10:30 o'clock A.M.. A complete description of the Certificates from the Division of Finance, City of Lubbock, P.O First Southwest Company, 1700 Pacific Avenue, Consultants to the City. LUBBOCK SEWER C_O 2002A INTENT NOS RES.DOC being authorized and sold may be obtained . Box 2000, Lubbock, Texas 79457; or from Suite 500, Dallas, Texas 75201, Financial Rebecca Garza City Secretary City of Lubbock, Texas Resolution No. 2002—RO193 CERTIFICATE OF CITY SECRETARY THE STATE OF TEXAS § COUNTY OF LUBBOCK § CITY OF LUBBOCK § I, the undersigned, City Secretary of the City of Lubbock, Texas, DO HEREBY CERTIFY as follows: 1. On the 23rd day of May, 2002, a regular meeting of the City Council of the City of Lubbock, Texas, was held at a meeting place within the City; the duly constituted members of the Council being as follows: MARC McDOUGAL ALEX "TY" COOKE ) FRANK W. MORRISON ) VICTOR HERNANDEZ ) T. J. PATTERSON ) GARY BOREN } TOM MARTIN ) MAYOR MAYOR PRO TEM COUNCILMEMBERS and all of said persons were present at said meeting, except the following: (all present) Among other business considered at said meeting, the attached resolution entitled: "A RESOLUTION approving and authorizing publication of (i) notice of intention to issue certificates of obligation and (ii) notice of sale with respect to such certificates of obligation." was introduced and submitted to the Council for passage and adoption. After presentation and due consideration of the resolution, and upon a motion being made by TY COOKE and seconded by TJ PATTERSON , the resolution was finally passed and adopted by the Council to be effective immediately by the following vote: voted "For" 0 voted "Against" 0 abstained all as shown in the official Minutes of the Council for the meeting held on the aforesaid date. 2. The attached resolution is a true and correct copy of the original on file in the official records of the City; the duly qualified and acting members of the City Council of said City on the date of the aforesaid meeting are those persons shown above and, according to the records of my office, advance notice of the time, place and purpose of the meeting was given to each member of the Council; and that said meeting and the deliberation of the aforesaid public business was open to the public and written notice of said meeting, including the subject of the above entitled resolution, was posted and given in advance thereof in compliance with the provisions of V.T.C.A., Government Code, Chapter 551, as amended. 45179659.1 IN WITNESS WHEREOF, I have hereunto signed my name officially and affixed the seal of said City, this the 25d day of May, 2002. City tecretary VAI City of Lubbock, Texas (City Seal) 45179659.1 2 FULBRIGHT & JAWORSKI L.L.P. A REGISTERED LIMITED LIABILITY PARTNERSHIP 2200 ROSS AVENUE, SUITE 2800 DALLAS, TEXAS 75201-2784 WWW. FU LBRIGHT.CO M DCALLAHANgFU LBRIGHT.CO M DIRECT DIAL: (214) 855-8024 October 17, 2002 Ms. Beverly Hodges Director of Finance City of Lubbock P.O. Box 2000 Lubbock, Texas 79457 TELEPHONE: (214) 855-8000 FACSIMILE: (214) 855-8200 Re: $2,605,000 "City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002K, dated July 1, 2002 Dear Ms. Hodges: Our services relating to the above described obligations having been completed, enclosed herewith please find a transcript of proceedings for the City's records. It has been a pleasure to serve the City of Lubbock in connection with this financing. Should you have any questions regarding the enclosure, please advise. Sincerely, w iane Callahan Senior Legal Assistant DC/ab Enclosures 45238664.1 AUSTIN . DALLAS • HONG KONG • HOUSTON . LONDON . LOS ANGELES • MINNEAPOLIS . NEW YORK . SAN ANTONIO . WASHINGTON DC TRANSCRIPT OF PROCEEDINGS RELATING TO $2,605,000 CITY OF LUBBOCK, TEXAS TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION SERIES 2002A DATED JULY 1, 2002 Document Number Description of Document 1 Resolution Approving and Authorizing Publication of Notice of Intention to Issue Certificates of Obligation/Notice of Sale 2 Affidavit. of Publication 3 Ordinance Authorizing the Issuance of the Certificates 4 Executed Paying Agent/Registrar Agreement 5 Purchase Contract 6 Final Official Statement 7 General Certificate 8 Signature and No -Litigation Certificate 9 Attorney General's Opinion and Comptroller's Registration Certificate 10 Closing Instructions 11 Certificate as to Tax Exemption 12 Closing Certificate 13 Receipt for Payment 14 Opinion of Bond Counsel 15 Supplemental Opinion of Bond Counsel 16 Opinion of City Attorney 17 Opinion of Underwriter 18 Certificate of Underwriter 19 MBIA Insurance Policy and Related Documents 20 Rating Letters 21 Filed Information Report No Text Resolution No. 2002 RO193 CERTIFICATE OF CITY SECRETARY THE STATE OF TEXAS § COUNTY OF LUBBOCK § CITY OF LUBBOCK § I, the undersigned, City Secretary of the City of Lubbock, Texas, DO HEREBY CERTIFY as follows: 1. On the 23rd day of May, 2002, a regular meeting of the City Council of the City of Lubbock, Texas, was held at a meeting place within the City; the duly constituted members of the Council being as follows: MARC McDOUGAL MAYOR ALEX "TY" COOKE ) MAYOR PRO TEM_ FRANK W. MORRISON ) VICTOR HERNANDEZ ) COUNCILMEMBERS T. J. PATTERSON ) GARY BOREN ) TOM MARTIN ) and all of said persons were present at said meeting, except the following: (all present) Among other business considered at said meeting, the attached resolution entitled: "A RESOLUTION approving and authorizing publication of (i) notice of intention to issue certificates of obligation and (ii) notice of sale with respect to such certificates of obligation." was introduced and submitted to the Council for passage and adoption. After presentation and due consideration of the resolution, and upon a motion being made by TY COOKE and seconded by TJ PAT=ON , the resolution was finally passed and adopted by the Council to be effective immediately by the following vote: 7 voted "For" 0 voted "Against" 0 abstained all as shown in the official Minutes of the Council for the meeting held on the aforesaid date.. 2. The attached resolution is a true and correct copy of the original on file in the official records of the City; the duly qualified and acting members of the City Council of said City on the date of the aforesaid meeting are those persons shown above and, according to the records of my office, advance notice of the time, place and purpose of the meeting was given to each member of the Council; and that said meeting and the deliberation of the aforesaid public business was open to the public and written notice of said meeting, including the subject of the above entitled resolution, was posted and given in advance thereof in compliance with the provisions of V.T.C.A., Government Code, Chapter 551, as amended. LUBBOCK SEWER C o 2002A CC INTENT.DOc IN WITNESS WHEREOF, I have hereunto signed my name officially and affixed the seal of said City, this the 2e day of May, 2002. difytecretary City of Lubbock, Texas (City Seal) LUBBOCK SEWER C_O 2 2002A CC INTENT.DOC r RESOLUTION NO. 2002 80193 A RESOLUTION approving and authorizing publication of (i) notice of intention to issue certificates of obligation and (ii) notice of sale with respect to such certificates of obligation. WHEREAS, the City Council of the City of Lubbock, Texas, has determined that certificates of obligation should be issued in accordance with the provisions of V.T.C.A., Local Government Code, Subchapter C of Chapter 271, for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Sewer System, and (ii) professional services rendered in connection with such projects and the financing thereof; and WHEREAS, the City has determined to take bids for the purchase of such certificates of obligations and prior to the issuance of said certificates of obligation, this Council is required to give notice of its intention to issue the same in the manner and time provided by law and to publish a notice of sale with respect thereto in accordance with the provisions of the City's Charter; now, therefore, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK, TEXAS: SECTION 1: The City Secretary is hereby authorized and directed to cause notice to be published of this Council's intention to issue certificates of obligation in the principal amount not to exceed $2,605,000 for the purpose of paying contractual obligations to be Incurred for (i) improvements and extensions to the City's Sewer System and (ii) professional services rendered in connection with such projects and the financing thereof, such certificates to be payable from ad valorem taxes and a lien on and pledge of the net revenues of the City's Sewer System. The notice hereby approved and authorized to be given shall read substantially in the form and content of Exhibit A hereto attached and incorporated herein by reference as a part of this resolution for all purposes, and such notice shall be published in a newspaper of general circulation in the City, once a week for two consecutive weeks, the date of the first publication to be at least fifteen (15) days prior to the date stated therein for the passage of the ordinance authorizing the issuance of the certificates of obligation. SECTION 2: The City Secretary is hereby authorized and directed to cause a notice relating to the sale of certificates of obligation to be published once a week for a period of thirty (30) days; such notice of sale to read substantially in the form and content of Exhibit B hereto attached and incorporated herein by reference as a part of this resolution for all purposes. SECTION 3: It is officially found, determined, and declared the meeting at which this Resolution is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Resolution, was given, all as required by V.T.C.A., Government Code, Chapter 551, as amended. LUBBOCK SEWER C_O 2002A INTENT NOS RES (2).DOC SECTION 4: This Resolution shall be in force and effect from and after its passage on the date shown below. PASSED AND APPROVED, this May 23, 2002. ATTEST: City Secretary (City Seal) LUBBOCK SEWER C_O 2002A INTENT NOS RES (2).DOC 2 Exhibit A NOTICE OF INTENTION TO ISSUE CITY OF LUBBOCK, TEXAS, CERTIFICATES OF OBLIGATION TAKE NOTICE that the City Council of the City of Lubbock, Texas, shall convene at 10:30 o'clock A.M. on the 11th day of July, 2002, at the City Council Chambers, Municipal Complex, 1625 13th Street, Lubbock, Texas, and, during such meeting, the City Council will consider the adoption of an ordinance authorizing the issuance of certificates of obligation in an amount not to exceed $2,605,000 for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Sewer System and (ii) professional services rendered in connection with such projects and the financing thereof, such certificates to be payable from ad valorem taxes and a lien on and pledge of the net revenues of the City's Sewer System. The certificates are to be issued, and this notice is given, under and pursuant to the provisions of V.T.C.A., Local Government Code, Subchapter C of Chapter 271. Rebecca Garza City Secretary City of Lubbock, Texas LUBBOCK SEWER C-0 2002A INTENT NOS RES (2).DOC Exhibit B NOTICE OF SALE $2,605,000 City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002A On the 11th day of July, 2002, the City Council of the City of Lubbock, Texas, plans to sell the above referenced certificates of obligation during its regular meeting scheduled to begin at 10:30 o'clock A.M.. A complete description of the Certificates being authorized and sold may be obtained from the Division of Finance, City of Lubbock, P.O. Box 2000, Lubbock, Texas 79457; or from First Southwest Company, 1700 Pacific Avenue, Suite 500, Dallas, Texas 75201, Financial Consultants to the City. Rebecca Garza City Secretary City of Lubbock, Texas LUBBOCK SEWER C_O 2002A INTENT NOS RES (2).DOC AFFIDAVIT OF PUBLICATION THE STATE OF TEXAS COUNTY OF LUBBOCK BEFORE ME, the undersigned authority on this day personE of the Lubbock Avalanche-Joumal, a County of LubbocR; Texas, who, being by me duly sworn, upon oatt That said newspaper is of general circulation in the City of L "NOTICE OF INTENTION TO ISSUE CITY OF LUBBOCK, T OBLIGATION", hereto attached, was published in said newspaper ii 5il�e. 2002; and -Se 2002; and said newspaper devotes not less than twenty-five percent (25%) of its total column lineage to items of general interest, is published not less frequently than once each week, entered as periodical postal matter in the county where it is published and has been published regularly and continuously for not less than twelve (12) months prior to the date of the publication of said "NOTICE OF INTENTION TO ISSUE CITY OF LUBBOCK, TEXAS, CERTIFICATES OF OBLIGATION". SWORN TO AND SUBSCRIBED BEFORE ME, this the day of aAkk_, 2002. � c�-- s0ss+r .�0.; csv :fid: -:yr K t_. NS wJPubk gwq--4„f M iN my owrW'Stion Exp*” (Notary Seal) 45179666.1 �te of Texas _• i i AFFIDAVIT OF PUBLICATION !► THE STATE OF TEXAS §airs` tC�- _;..th• ttvJ ourtctlf • �ItY of Luh k, § •lac%�coqnwi 111itday Of COUNTY OF LUBBOCK § P�Y�tathtt`Nuunclt tuua wtjny thla �YpCr Cll aw�flo�tnalnif;phraor:Ino the obli°atlrD n a of tct riot to BEFORE ME the undersigned authority on this da personally a eare p�`rpo'N + rrroro'ntactua► g tY Y P Y PP obli�atlon.-t0 t» Incnu red for �� Vek� of the Lubbock Avalanche -Journal, a newspaper x nem � "'th:'e41'Y�.s w.r IIY0 HT prf, County of Lubboc , Texas, who, being by me duly sworn, upon oath deposes Nrva ran i't� 0opp Aan w suq Protects ann t •tin clno t1lortf, uch c•Ytl cats a a pay pt , ad va�on�m 9u;anfci'a TI•n an: That said newspaper is of general circulation in the City of Lubbock, T +Vro3Y. m""" nth. a #Ir [ a f S "NOTICE OF INTENTION TO ISSUE CITY OF LUBBOCK, TEXAS, CEI ta�un ant4e. s " t��n, vht� oni of _�c�,f to OBLIGATION", hereto attached, was published in said newspaper in its issues u o°I3warp"o'i�C.a'�t'►'. haghr R 'd`a a}apriya ' r� . 2002; and1,�"s pock, T.xa. 2002; and said newspaper devotes not less than twenty-five percent (25%) of its total column lineage to items of general interest, is published not less frequently than once each week, entered as periodical postal matter in the county where it is published and has been published regularly and continuously for not less than twelve (12) months prior to the date of the publication of said "NOTICE OF INTENTION TO ISSUE CITY OF LUBBOCK, TEXAS, CERTIFICATES OF OBLIGATION". ♦is SWORN TO AND SUBSCRIBED BEFORE ME, this the k day of , 2002. 45179666.1 • ►' i M. - of Texas }�Y A• .,2 aro 1n t�i�f�Y{3yf5„�+-tins& i? ai ..L-.i� � h� 17ZfE4'.I; i_4�,R�r, •��YtN3 � i'�'-1�✓� ax rra GA�,v (Notary Seal) 45179666.1 • ►' i M. - of Texas No Text CERTIFICATE OF CITY SECRETARY THE STATE OF TEXAS § COUNTY OF LUBBOCK § CITY OF LUBBOCK § I, the undersigned, City Secretary of the City of Lubbock, Texas, DO HEREBY CERTIFY as follows: 1. On the 11`h day of July, 2002, the City Council of the City of Lubbock, Texas, convened in regular session at its regular meeting place in the City Hall of said City; the duly constituted members of the Council being as follows: MARC McDOUGAL MAYOR VICTOR HERNANDEZ ) MAYOR PRO TEM T. J. PATTERSON ) GARY BOREN ) COUNCILMEMBERS FRANK W. MORRISON ) TOM MARTIN ) ALEX "TY" COOKE ) all of said persons were present at said meeting, except the following: None Among other business considered at said meeting, the attached ordinance entitled: "AN ORDINANCE authorizing the issuance of 'CITY OF LUBBOCK, TEXAS, TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002A'; specifying the terms and features of said certificates; providing for the payment of said certificates of obligation by the levy of an ad valorem tax upon all taxable property within the City and a lien on and pledge of the net revenues from the operation of the City's Sewer System; and resolving other matters incident and related to the issuance, sale, security, payment and delivery of said certificates, including the approval of a Paying Agent/Registrar Agreement and a Purchase Contract and the approval and distribution of an Official Statement pertaining thereto; and providing an effective date." was introduced and submitted to the Council for final passage and adoption. After presentation and due consideration of the Ordinance, and upon a motion being made by T.J. Patterson and seconded by Tom Martin, the Ordinance was duly passed and adopted to be effective immediately in accordance with the Section 1201.028 by the following vote: all voted "For" none voted "Against" none abstained all as shown in the official Minutes of the Council for the meeting held on the aforesaid date. 45195617.1 2. The attached Ordinance is a true and correct copy of the original on file in the official records of the City; the duly qualified and acting members of the City Council of said City on the date of the aforesaid meeting are those persons shown above and, according to the records of my office, advance notice of the time, place and purpose of the meeting was given to each member of the Council; and that said meeting and the deliberation of the aforesaid public business was open to the public and written notice of said meeting, including the subject of the above entitled Ordinance, was posted and given in advance thereof in compliance with the provisions of V.T.C.A., Government Code, Chapter 551, as amended. IN WITNESS WHEREOF, I have hereunto signed my name officially and affixed the seal of said City, this the 11th day of July, 2002. City Secretary City of Lubbock, Texas (City Seal) 45195617.1 _ 2 _ ORDINANCE NO. 2002-00076 AN ORDINANCE authorizing the issuance of "CITY OF LUBBOCK, TEXAS, TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATES OF 'OBLIGATION, SERIES 2002A"; specifying the terms and features of said certificates; providing for the payment of said certificates of obligation by the levy of an ad valorem tax upon all taxable property within the City and a lien on and pledge of the net revenues from the operation of the City's Sewer System; and resolving other matters" incident and related to the issuance, sale, security, payment and delivery of said certificates, including the approval and execution of a Paying Agent/Registrar Agreement and a Purchase Contract and the approval and distribution of an Official Statement pertaining thereto; and providing an effective date. WHEREAS, notice of the City Council's intention to issue certificates of obligation in the maximum principal amount of $2,605,000 for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Sewer System and (ii) professional services rendered in connection with such project and the financing thereof, has been duly published in the Lubbock Avalanche -Journal, a newspaper hereby found and determined to be of general circulation in the City of Lubbock, Texas, on June 2, 2002 and June 9, 2002, the date of the first publication of such notice being not less than fifteen (15) days prior to the tentative date stated therein for the passage of this Ordinance; and WHEREAS, no petition, protesting the issuance of such certificates and bearing valid petition signatures of at least 5% of the qualified voters of the City, has been filed with the City Secretary, any member of the Council or any other official of the City on or prior to the date of the passage of this Ordinance; and WHEREAS, the Council hereby finds and determines the certificates of obligation described in the aforesaid notice should be issued and sold at this time in the amount and manner as hereinafter provided; now, therefore, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: SECTION 1: Authorization -Designation -Principal Amount -Purpose. Certificates of obligation of the City shall be and are hereby authorized to be issued in the aggregate principal amount of $2,605,000 to be designated and bear the title "CITY OF LUBBOCK, TEXAS, TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002A" (the "Certificates"), for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Sewer System, and (ii) professional services rendered in connection with such projects and the financing thereof, pursuant to authority conferred by and in conformity with the Constitution and laws of the State of Texas, including V.T.C.A., Local Government Code, Subchapter C of Chapter 271. 45194981.2 SECTION 2: Fully Registered Obligations - Authorized Denominations -Stated Maturities -Date. The Certificates are issuable in fully registered form only; shall be dated July 1, 2002 (the "Certificate Date") and shall be in denominations of $5,000 or any integral multiple thereof (within a Stated Maturity) and the Certificates shall become due and payable on February 15 in each of the years and in principal amounts (the "Stated Maturities") and bear interest at the per annum rate(s) in accordance with the following schedule: Year of Principal Interest Stated Maturity Amount Rate(s) 2003 $ 75,000 4.000% 2004 90,000 4.000% 2005 95,000 4.000% 2006 95,000 4.000% 2007 100,000 4.000% 2008 105,000 3.450% 2009 110,000 3.650% 2010 115,000 3.875% 2011 120,000 4.050% 2012 120,000 4.150% 2013 130,000 4.200% 2014 135,000 4.300% 2015 140,000 4.400% 2016 145,000 4.500% 2017 150,000 4.600% 2018 160,000 4.700% 2019 165,000 4.800%. 2020 175,000 5.000% 2021 185,000 5.000% 2022 195,000 5.000% The Certificates shall bear interest on the unpaid principal amounts from the Certificate Date at the per annum rate(s) shown above in this Section (calculated on the basis of a 360 -day year of twelve 30 -day months). Interest on the Certificates shall be payable on February 15 and August 15 in each year, commencing February 15, 2003. SECTION 3: Terms of Payment -Paying Agent/Registrar. The principal of, premium, if any, and the interest on the Certificates, due and payable by reason of maturity, redemption or otherwise, shall be payable only to the registered owners or holders of the Certificates (hereinafter called the "Holders") appearing on the registration and transfer books maintained by the Paying Agent/Registrar and the payment thereof shall be in any coin or currency of the United States of America, which at the time of payment is legal tender for the payment of public and private debts, and shall be without exchange or collection charges to the Holders. The selection and appointment of JPMorgan Chase Bank, Dallas, Texas, to serve as Paying Agent/Registrar for the Certificates is hereby approved and confirmed. Books and 45194981.2 2 records relating to the registration, payment, exchange and transfer of the Certificates (the "Security Register") shall at all times be kept and maintained on behalf of the City by the Paying Agent/Registrar, all as provided herein, in accordance with the terms and provisions of a "Paying Agent/Registrar Agreement", substantially in the form attached hereto as Exhibit A and such reasonable rules and _regulations as the Paying Agent/Registrar and the City may prescribe. The Mayor and City Secretary of the City are hereby authorized to execute and deliver such Agreement in connection with the delivery of the Certificates. The City covenants to maintain and provide a Paying Agent/Registrar at all times until the Certificates are paid and discharged, and any successor Paying Agent/Registrar shall be a bank, trust company, financial institution or other entity qualified and authorized to serve in such capacity and perform the duties and services of Paying. Agent/Registrar. Upon any change in the Paying Agent/Registrar for the Certificates, the City agrees to promptly cause a written notice thereof to be sent to each Holder by United States Mail, first class postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. Principal of and premium, if any, on the Certificates shall be payable at the Stated Maturities or the redemption thereof only upon presentation and surrender of the Certificates to the Paying Agent/Registrar at its designated offices in Dallas, Texas (the "Designated Payment/Transfer Office"). Interest on the Certificates shall be paid by the Paying Agent/Registrar to the Holders whose name appears in the Security Register at the close of business on the Record Date (the last business day of the month next preceding each interest payment date) and payment of such interest shall be (i) by check sent United States Mail, first class postage prepaid, to the address of the Holder recorded in the Security Register or (ii) by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the Holder. If the date for the payment of the principal of or interest on the Certificates shall be a Saturday, Sunday, a legal holiday, or a day when banking institutions 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 holiday, or day when banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. In the event of a nonpayment of interest on a scheduled payment date, and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/ Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States Mail, first class postage prepaid, to the address of each Holder appearing on the Security Register at the close of business on the last business next preceding the date of mailing of such notice. SECTION 4: Redemption. (a) Optional Redemption. The Certificates having Stated Maturities on and after February 15, 2014, shall be subject to redemption priorto maturity, at the option of the City, in whole or in part in principal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity by lot by the Paying Agent/Registrar), on February 15, 45194981.2 3 2013 or on any date thereafter at the redemption price of par plus accrued interest to the date of redemption. (b) Exercise of Redemption Option. At least forty-five (45) days prior to a redemption date for the Certificates (unless a shorter notification period shall be satisfactory to the Paying AgentlRegistrar), the City shall notify the Paying Agent/Registrar of the decision to redeem Certificates, the principal amount of each Stated Maturity to be redeemed, and the date of redemption therefor. The decision of the City to exercise the right to redeem Certificates shall be entered in the minutes of the governing body of the City. (c) Selection of Certificates for Redemption. If less than all Outstanding Certificates of the same Stated Maturity are to be redeemed on a redemption date, the Paying Agent/Registrar shall treat such Certificates as representing the number of Certificates Outstanding which is obtained -by dividing the principal amount of such Certificates by $5,000 and shall select the Certificates, or principal amount thereof, to be redeemed within such Stated Maturity by lot. (d) Notice of Redemption. Not less than thirty (30) days prior to a redemption date for the Certificates, a notice of redemption shall be sent by United States Mail, first class postage prepaid, in the name of the City and at the City's expense, to each Holder of a Certificate to be redeemed in whole or in part at the address of the Holder appearing on the Security Register at the close of business on the business day next preceding the date of mailing such notice, and any notice of redemption so mailed shall be conclusively presumed to have been duly given irrespective of whether received by the Holder. All notices of redemption shall (i) specify the date of redemption for the Certificates, (ii) identify the Certificates to be redeemed and, in the case of a portion of the principal amount to be redeemed, the principal amount thereof to be redeemed, (iii) state the redemption price, (iv) state that the Certificates, or the portion of the principal. amount thereof to be redeemed, shall become due and payable on the redemption date specified, and. the interest thereon, or on the portion of the principal amount thereof to be redeemed, shall cease to accrue from and after the redemption date, and (v) specify that payment of the redemption price for the Certificates, or the principal amount thereof to be redeemed, shall be made at the Designated PaymentlTransfer Office of the Paying �Agent/Registrar only upon presentation and surrender thereof by the Holder. If a Certificate is subject by its terms to prior redemption and has been called for redemption and notice of redemption thereof has been duly given as hereinabove provided, such Certificate (or the principal amount thereof to be redeemed) shall become due and payable and interest thereon shall cease to accrue . from and after the redemption date therefor; provided moneys sufficient for the payment of such Certificate (or of the principal amount thereof to be redeemed) at the then applicable redemption price are held for the purpose of such payment by the Paying Agent/Registrar. SECTION 5: Registration - Transfer — Exchange of Certificates -Predecessor Certificates. The Paying Agent/Registrar shall obtain, record, and maintain in the Security Register the name and address of each and every owner of the Certificates issued under and pursuant to the provisions of this, Ordinance, or if appropriate, the nominee thereof. Any Certificate may be transferred or exchanged for Certificates of other authorized denominations 45194981.2 4 by the Holder, in person or by his duly authorized agent, upon surrender of such Certificate to the Paying Agent/Registrar for cancellation, accompanied by a written instrument of transfer or request for exchange duly executed by the Holder or by his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. Upon surrender of any Certificate (other than the Initial Certificate(s) authorized in Section 8 hereof) for transfer at the Designated Payment/Transfer Office of the Paying Agent/Registrar, the Paying Agent/Registrar shall register and deliver, in the name of the designated transferee or transferees, one or more new Certificates of authorized denominations and having the same Stated Maturity and of a like aggregate principal amount as the Certificate or Certificates surrendered for transfer. At the option of the Holder, Certificates (other than the Initial Certificate(s) authorized in Section 8 hereof) may be exchanged for other Certificates of authorized denominations and having the same Stated Maturity, bearing the same rate of interest and of like aggregate principal amount as the Certificates surrendered for exchange, upon surrender of the Certificates to be exchanged at the Designated Payment/Transfer Office of the Paying Agent/. Registrar. Whenever any Certificates are surrendered for exchange, the Paying Agent/Registrar shall register and deliver new Certificates to the Holder requesting the exchange. All Certificates issued in any transfer or exchange of Certificates shall be delivered to the Holders at the Designated Payment/Transfer Office of the Paying Agent/Registrar or sent by United States Mail, first class, postage prepaid to the Holders, and, upon the registration and delivery thereof, the same shall be the valid obligations of the City, evidencing the same obligation to pay, and entitled to the same benefits under this Ordinance, as the Certificates surrendered in such transfer or exchange. All transfers or exchanges of Certificates pursuant to this Section shall be made without expense or service charge to the Holder, except as otherwise herein provided, and except that the Paying Agent/Registrar shall require payment by the Holder requesting such transfer or exchange of any tax or other governmental charges required to be paid with respect to such transfer or exchange. Certificates canceled by reason of an exchange or transfer pursuant to the provisions hereof are hereby defined to be 'Predecessor Certificates," evidencing all or a portion, as the case may be, of the same obligation to pay evidenced by the new Certificate or Certificates registered and delivered in the exchange or transfer therefor. Additionally, the term "Predecessor Certificates" shall include any mutilated, lost, destroyed, or stolen Certificate for which a replacement Certificate has been issued, registered and delivered in lieu thereof pursuant to the provisions of Section 23 hereof and such new replacement Certificate shall be deemed to evidence the same obligation as,the mutilated, lost, destroyed, or stolen Certificate. Neither the City nor the Paying Agent/Registrar shall be required to issue or transfer to an assignee of a Holder any Certificate called for redemption, in whole or in part, within 45 days of the date fixed for the redemption of such Certificate; provided, however, such limitation 45194981.2 5 on transferability shall not be applicable to an exchange by the Holder of the unredeemed balance of a Certificate called for redemption in part. SECTION 6: Book -Entry Only Transfers and Transactions. Notwithstanding the provisions contained in Sections 3, 4 and 5 hereof relating to the payment and transfer/exchange of the Certificates, the City hereby approves and authorizes the use of "Book -Entry Only" securities clearance, settlement and transfer system provided by The Depository Trust Company (DTC), a limited purpose trust company organized under the laws of the State of New York, in accordance with the operational arrangements referenced in the Blanket Issuer Letter of Representations by and between the City and DTC (the "Depository Agreement"). Pursuant to the Depository Agreement and the rules of DTC, the Certificates shall be deposited with DTC who shall hold said Certificates for its participants (the "DTC Participants") and, while the Certificates are held by DTC under the Depository Agreement, the Holder of the Certificates on the Security Register for all purposes, including payment and notices, shall be Cede & Co., as nominee of DTC, notwithstanding the ownership of each actual purchaser or owner of each Certificate (the "Beneficial Owners") being recorded in the records of DTC and DTC Participants. In the event DTC determines to discontinue serving as securities depository for the Certificates or otherwise ceases to provide book -entry clearance and settlement of securities transactions in general or the City determines that DTC is incapable of properly discharging its duties as securities depository for the Certificates, the City covenants and agrees with the Holders of the Certificates to cause Certificates to be printed in definitive form and provide for the Certificate certificates to be issued and delivered to DTC Participants and Beneficial Owners, as the case may be. Thereafter, the Certificates in definitive form shall be assigned, transferred and exchanged on the Security Register maintained by the Paying Agent/Registrar and payment of such Certificates shall be made in accordance with the provisions of Sections 3, 4 and 5 hereof. SECTION 7: Execution - Registration. The Certificates shall be executed on behalf of the City by the Mayor under its seal reproduced or impressed thereon and countersigned by the City Secretary. The signature of said officers on the Certificates, may be manual or facsimile. Certificates bearing the manual or facsimile signatures of individuals who are or were the proper officers of the City on the Certificate Date shall be deemed to be duly executed on behalf of the City, notwithstanding that one or more of the individuals executing the same shall cease to be such officer at the time of delivery of the Certificates to the initial purchaser(s) and with respect to Certificates delivered in subsequent exchanges and transfers, all as authorized and provided in V.T.C.A., Government Code, Chapter 1201. r. No Certificate shall be entitled to any right or benefit under this Ordinance, or be valid or obligatory for any purpose, unless there appears on such Certificate either a certificate of registration substantially in the form provided in Section 9C, manually executed by the Comptroller of Public Accounts of the State of Texas, or his duly authorized agent, or a certificate of registration substantially in the form provided in Section 9D, manually executed by an authorized officer, employee or representative of the Paying Agent/Registrar, and either 45194981.2 6 such certificate duly signed upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly certified, registered and delivered. SECTION 8: Initial Certificate(s). The Certificates herein authorized shall be initially issued either (i) as a single fully registered certificate in the total principal amount of $2,605,000 with principal installments to become due and payable as provided in Section 2 hereof and numbered T-1, or (ii) as multiple fully registered certificates, being one certificate for each year of maturity in the applicable principal amount and denomination and to be numbered consecutively from T-1 and upward (hereinafter called the "Initial Certificates)") and, in either case, the Initial Certificate(s) shall be registered in the name of the initial purchaser(s) or the designee thereof. The Initial Certificate(s) shall be the Certificates submitted to the Office of the Attorney General of the State of Texas for approval, certified and registered by the Office of the Comptroller of Public Accounts of the State of Texas and delivered to the initial purchaser(s). Any time after the delivery of the Initial Certificate(s), the Paying Agent/Registrar, pursuant to written instructions from the initial purchaser(s), or the designee thereof, shall cancel the Initial Certificate(s) delivered hereunder and exchange therefor definitive Certificates of authorized denominations, Stated Maturities, principal amounts and bearing applicable interest rates for transfer and delivery to the Holders named at the addresses identified therefor; all pursuant to and in accordance with such written instructions from the initial purchaser(s), or the designee thereof, and such other information and documentation as the Paying Agent/Registrar may reasonably require. SECTION 9: Forms. A. Forms Generally. The Certificates, the Registration Certificate of the Comptroller of Public Accounts of the State of Texas, the Registration Certificate of Paying Agent/Registrar, and the form of Assignment to be printed on each of the Certificates, shall be substantially in the forms set forth in this Section with such appropriate insertions, omissions, substitutions, and other variations as are permitted or required by this Ordinance and may have such letters, numbers, or other marks of identification (including identifying numbers and letters of the Committee on Uniform Securities Identification Procedures of the American Bankers Association) and such legends and endorsements (including insurance legends in the event the Certificates, or any maturities thereof, are purchased with insurance and any reproduction of an opinion of counsel) thereon as may, consistently herewith, be established by the City or determined by the officers executing such Certificates as evidenced by their execution. Any portion of the text of any Certificates may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Certificate. The definitive Certificates and the Initial Certificate(s) shall be printed, lithographed, or engraved, typewritten, photocopied or otherwise reproduced in any other similar manner, all as determined by the officers executing such Certificates as evidenced by their execution thereof. 45194981.2 7 B. Form of Certificates. REGISTERED REGISTERED NO. $ UNITED STATES OF AMERICA STATE OF TEXAS CITY OF LUBBOCK, TEXAS, TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATE OF OBLIGATION, SERIES 2002A Certificate Date: Interest Rate: Stated Maturity: CUSIP NO: July 1, 2002 % Registered Owner: Principal Amount: DOLLARS The City of Lubbock (hereinafter referred to as the "City"), a body corporate and municipal corporation in the. County of Lubbock, State of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to the Registered Owner named above, or the registered assigns thereof, on the Stated Maturity date specified above the Principal Amount stated above (or so much thereof as shall not have been paid upon prior redemption) and to pay interest (computed on the basis of a 360 -day year of twelve 30 -day months) on the unpaid Principal Amount hereof from the Certificate Date at the per annum rate of interest specified above; such interest being payable on February 15 and August 15 of each year, commencing February 15, 2003. Principal of this Certificate is payable at its Stated Maturity or redemption to the registered owner hereof, upon presentation and surrender, at the Designated Payment/Transfer Office of the Paying Agent/Registrar executing the registration certificate appearing hereon, or its successor; provided, however, while this Certificate is registered to Cede & Co., the payment of principal upon a partial redemption of the principal amount hereof may be accomplished without presentation and surrender of this Certificate. Interest is payable to the registered owner of this Certificate (or one or more Predecessor Certificates, as defined in the Ordinance hereinafter referenced) whose name appears on the "Security Register" maintained by the Paying Agent/Registrar at the close of business on the "Record Date", which is the last business day of the month next preceding each interest payment date and interest shall be paid by the Paying Agent/Registrar by check sent United States Mail, first class postage prepaid, to the address of the registered owner recorded in the Security Register on the Record Date or by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the registered owner. All r, payments of principal of, premium, if any, and interest on this Certificate shall be without exchange or collection charges to the owner hereof and in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. 45194981.2 8 This Certificate is one of the series specified in its title issued in the aggregate principal amount of $2,605,000 (herein referred to as the "Certificates") for the purpose of paying contractual obligations to be incurred for (i) improvements and extensions to the City's Sewer System and (ii) professional services rendered in connection with such projects and the financing thereof, under and in strict conformity with the Constitution and laws of the State of Texas, particularly V.T.C.A., Local Government Code, Subchapter C of Chapter 271, and pursuant to an Ordinance adopted by the governing body of the City (herein referred to as the "Ordinance"). The Certificates maturing on and after February 15, 2014, may be redeemed prior to their Stated Maturities, at the option of the City, in whole or in part in principal amounts of $5,000 or any integral multiple thereof (and if within a Stated Maturity by lot by the Paying Agent/Registrar), on February 15, 2013, or on any date thereafter, at the redemption price of par, together with accrued interest to the date of redemption. At least thirty days prior to a redemption date, the City shall cause a written notice of such redemption to be sent by United States Mail, first class postage prepaid, to the registered owners of each Certificate to be redeemed at the address shown on the Security Register and subject to the terms and provisions relating thereto contained in the Ordinance. If a Certificate (or any portion of its principal sum) shall have been duly called for redemption and notice of such redemption duly given, then upon the redemption date such Certificate (or the portion of its principal sum to be redeemed) shall become due and payable, and, if moneys for the payment of the redemption price and the interest accrued on the principal amount to be redeemed to the date of redemption are held for the purpose of such payment by the Paying Agent/Registrar, interest shall cease to accrue and be payable from and after the redemption date on the principal amount redeemed.. In the event a portion of the principal amount of a Certificate is to be redeemed and the registered owner is someone other than Cede & Co., payment of the redemption price of such principal amount shall be made to the registered owner only upon presentation and surrender of such Certificate to the Designated Payment/Transfer Office of the Paying Agent/Registrar, and a new Certificate or Certificates of like maturity and interest rate in any authorized denominations provided by the Ordinance for the then unredeemed balance of the principal sum thereof will be issued to the registered owner, without charge. If a Certificate is selected for redemption, in whole or in part, the City and the Paying Agent/Registrar shall not be required to transfer such Certificate to- an assignee of the registered owner within 45 days of the redemption date therefor; provided, however, such limitation on transferability shall not be applicable to an exchange by the registered owner of the unredeemed balance of a Certificate redeemed in part. The Certificates are payable from the proceeds of an ad valorem tax levied, within the r limitations prescribed by law, upon all taxable property in the City and, together with the Previously Issued Obligations (as defined in the Ordinance), are additionally payable from and secured by a lien on and pledge of the Net Revenues (as defined in the Ordinance) of the City's Sewer System (the "System"), such lien and pledge, however, being junior and subordinate to the lien on and pledge of the Net Revenues of the System securing the payment of "Prior Lien Obligations" (as defined in the Ordinance) hereafter issued by the City. 45194981.2 9 In the Ordinance, the City reserves and retains the right to issue Prior Lien Obligations while the Certificates are outstanding without limitation as to principal amount but subject to any terms, conditions or restrictions, as may be applicable thereto under law or otherwise, as well as the right to issue Additional Obligations (as defined in the Ordinance). Reference is hereby made to the Ordinance, a copy of which is on file in the Designated Payment/Transfer Office of the Paying Agent/Registrar, and to all the provisions of which the Holder hereof by the acceptance hereof hereby assents, for definitions of terms; the description of and the nature and extent of the tax levied for the payment of the Certificates; the nature and extent of the pledge of the Net Revenues securing the payment of the Certificates; the terms and conditions relating to the transfer or exchange of this Certificate; the conditions upon. which the Ordinance may be amended or supplemented with or without the consent of the Holders; the rights, duties, and obligations of the City and the Paying Agent/Registrar; the terms and provisions upon which the tax levy and the pledge of the Net Revenues and covenants made in the Ordinance may be discharged at or prior to the maturity of this Certificate, and this. Certificate deemed to be no longer Outstanding thereunder; and for the other terms and provisions contained therein. Capitalized terms used herein have the meanings assigned in the Ordinance. This Certificate, subject to certain limitations contained in the Ordinance, may be transferred on the Security Register only upon its presentation and surrender at the Designated Payment/Transfer Office of the Paying Agent/Registrar, with the Assignment hereon duly endorsed by, or' accompanied by a written instrument of transfer in form satisfactory to the Paying Agent/Registrar duly executed by, the registered owner hereof, or his duly authorized agent: When a transfer on the Security Register occurs, one or more fully registered Certificates of authorized denominations and of the same aggregate principal amount will be issued by the Paying Agent/Registrar to the designated transferee or transferees. The City and the Paying Agent/Registrar, and any agent of either, may treat the registered owner hereof whose name appears on the Security Register (i) on the Record Date as the owner entitled to payment of interest hereon, (ii) on the date of surrender of this Certificate as the owner entitled to payment of principal hereof at its Stated Maturity or its redemption, in whole or in part, and (iii) on any other date as the owner for all other purposes, and neither the City nor the Paying Agent/Registrar, or any agent of either, shall be affected by notice to the contrary. In the event of nonpayment of interest on a scheduled payment date and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States Mail, first class postage prepaid, to the address of each Holder appearing on the Security Register at the close of business on the last business day next preceding the date of mailing of such notice. It is hereby certified, recited, represented and covenanted that the City is a body corporate and political subdivision duly organized and legally existing under and by virtue of 45194981.2 10 r'. the Constitution and laws of the State of Texas; that the issuance of the Certificates is duly authorized by law; that all acts, conditions and things required to exist and be done precedent to and in the issuance of the Certificates to render the same lawful and valid obligations of the City have been properly done, have happened and have been performed in regular and due time, form and manner as required by the Constitution and laws of the State of Texas, and the Ordinance; that the Certificates do not exceed any constitutional or statutory _limitation; and that due provision has been made for the payment of the principal of and interest on the Certificates as aforestated. In case any provision in this Certificate or any application thereof shall be invalid, illegal, or, unenforceable, the validity, legality, and enforceability' of the remaining provisions and applications shall not in any way be affected or impaired thereby. The terms and provisions of this Certificate and the Ordinance shall be construed in accordance with and shall be governed by the laws of the State of Texas. h IN WITNESS WHEREOF, the City Council of the City has caused this Certificate to be duly executed under the official seal of the City as of the Certificate Date. CITY OF LUBBOCK, TEXAS Mayor COUNTERSIGNED: City Secretary (SEAL) 45194981.2 11 C. " Form of Registration Certificate of Comptroller of Public Accounts to Appear on Initial Certificate(s) only. REGISTRATION CERTIFICATE OF COMPTROLLER OF PUBLIC ACCOUNTS OFFICE OF THE COMPTROLLER ) OF PUBLIC ACCOUNTS ) REGISTER NO. THE STATE OF TEXAS ) HEREBY CERTIFY that this Certificate has been examined, certified as to validity and approved by the Attorney General of the State of Texas, and duly registered by the Comptroller of Public Accounts of the State of Texas. WITNESS my signature and seal of office this Comptroller of Public Accounts of the State of Texas (SEAL) *NOTE TO PRINTER:Do not print on definitive Certificates D. Form of Certificate of Paying Agent/Registrar to Appear on Definitive Certificates. REGISTRATION CERTIFICATE OF PAYING AGENT/REGISTRAR This Certificate has been duly issued and registered under the provisions of the within -mentioned Ordinance; the certificate or certificates of the above entitled and designated series originally delivered having been approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts, as shown by the records of the Paying Agent/Registrar. The designated offices of the Paying Agent/Registrar located in Dallas, Texas, is the "Designated Payment/Transfer Office" for this Certificate. Registration Date: 45194981.2 12 JP MORGAN CHASE BANK, Dallas, Texas, as Paying Agent/Registrar Authorized Signature E. Form of Assignment ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns, and transfers unto (Print or typewrite name, address, and zip code of transferee:) attorney to transfer the within ';Certificate on the books kept for registration thereof, with full power of substitution in the premises. DATED: NOTICE: The signature on this assignment must correspond with the Signature guaranteed: name of the registered owner as it appears on the face of the within Certificate in every particular. F. The Initial Certificate(s) shall be in the form set forth in paragraph B of this Section, except that the form of a single fully registered Initial Certificate shall be modified as follows: (i) immediately under the name of the certificate the headings "Interest Rate " and "Stated Maturity of shall both be omitted; paragraph one shall read as follows: Registered Owner: Principal Amount: Dollars The City of Lubbock (hereinafter referred to as the "City"), a body corporate and municipal corporation in the County of Lubbock, State of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to the Registered Owner named above, or the registered assigns thereof, the Principal Amount hereinabove stated, on February 15 in each of the years and in principal installments in accordance with the following schedule: PRINCIPAL INTEREST YEAR INSTALLMENTS RATE (Information to be'inserted from schedule in Section 2 hereof). 451949$1.2 13 (Social Security or other identifying number ) the within Certificate and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer the within ';Certificate on the books kept for registration thereof, with full power of substitution in the premises. DATED: NOTICE: The signature on this assignment must correspond with the Signature guaranteed: name of the registered owner as it appears on the face of the within Certificate in every particular. F. The Initial Certificate(s) shall be in the form set forth in paragraph B of this Section, except that the form of a single fully registered Initial Certificate shall be modified as follows: (i) immediately under the name of the certificate the headings "Interest Rate " and "Stated Maturity of shall both be omitted; paragraph one shall read as follows: Registered Owner: Principal Amount: Dollars The City of Lubbock (hereinafter referred to as the "City"), a body corporate and municipal corporation in the County of Lubbock, State of Texas, for value received, acknowledges itself indebted to and hereby promises to pay to the Registered Owner named above, or the registered assigns thereof, the Principal Amount hereinabove stated, on February 15 in each of the years and in principal installments in accordance with the following schedule: PRINCIPAL INTEREST YEAR INSTALLMENTS RATE (Information to be'inserted from schedule in Section 2 hereof). 451949$1.2 13 (or so much principal thereof as shall not have been prepaid prior to maturity) and to pay interest on the unpaid Principal Amount hereof from the Certificate Date at the per annum rates of interest specified above computed on the basis of a 360 -day year of twelve 30 -day months; such interest being payable on February 15 and August 15 of eachyear, commencing February 15, 2003. Principal installments of this Certificate are payable in the year of maturity or on a prepayment date to the registered owner hereof by JPMorgan Chase Bank, Dallas, Texas (the "Paying Agent/Registrar'), upon- presentation and surrender, at its designated offices in Dallas, Texas (the "Designated Payment/Transfer Office"). Interest is payable to the registered owner of this Certificate whose name appears on the "Security Register" maintained by the Paying Agent/Registrar at the close of business on the "Record Date", which is the last business day of the month next preceding each interest payment date hereof and interest shall be paid by the Paying Agent/Registrar by check sent United States Mail, first class postage prepaid, to the address of the registered owner recorded in the Security Register or by such. other method, acceptable to the Paying Agent/ Registrar, requested by, and at the risk and expense of, the registered owner. All payments of principal of, premium, if any, and interest on this Certificate shall be without exchange or collection charges to the owner hereof and in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. SECTION 10: Definitions. For purposes of this Ordinance and for clarity with respect to the issuance of the Certificates, and the levy of taxes and appropriation of Net Revenues therefor, the following words or, terms, whenever the same appear herein without qualifying language, are defined to mean as follows: (a) The term "Additional Obligations" shall mean tax and revenue obligations hereafter issued which by their terms are payable from ad valorem taxes and additionally payable from and secured by a parity lien on and pledge of the Net Revenues of the System of equal rank and dignity with the lien and pledge securing the payment of the Previously Issued Obligations and the Certificates. (b) The term"Certificates" shall mean $2,605,000 "CITY OF LUBBOCK, TEXAS, TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002A" authorized by this Ordinance. (c) The term "Certificate Fund" shall mean the special Fund created and established under the provisions of Section 11 of this Ordinance. (d) The term "Collection Date" shall mean, when reference is being made to the levy and collection of annual ad valorem taxes, the date annual ad valorem taxes levied each year by the City become delinquent. (e) The term "Fiscal Year" shall mean the annual financial accounting period used with respect to the operations of the System now ending on September 30th of each year; provided, however, the City Council 45194981.2 14 may change, by ordinance duly passed, such annual financial accounting period to end on another date if such change is found and determined to be necessary for budgetary or other fiscal purposes. (f) The term Government Securities shall mean (i) direct noncallable obligations of the United States of America, including obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, (ii) noncallable obligations of an agency or instrumentality of the United States, including obligations unconditionally guaranteed or insured by the agency or instrumentality and on the date of their acquisition or purchase by the City are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent and (iii) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and on the date of their acquisition or purchase by the City, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. (g) The term "Gross Revenues" shall mean, with respect to any period, all income, revenues and receipts received from the operation and ownership of the System. (h) The term "Net Revenues" shall mean the Gross Revenues of the System, with respect to any period, after deducting the System's Operating and Maintenance Expenses during such period. (i) The term Operating and Maintenance Expenses" shall mean all reasonable and necessary expenses directly related and attributable to the operation and maintenance of the System, including, but not limited to, the cost of insurance, the purchase and carrying of stores, materials, and supplies, the payment of salaries and labor, and other expenses reasonably and properly charged, under generally accepted accounting principles, to the operation and maintenance of the System. Depreciation charges on equipment, machinery, plants and other facilities comprising the System and expenditures classed under generally accepted accounting principles as capital expenditures shall not be considered as "Operating and Maintenance Expenses" for purposes of determining "Net Revenues". 0) The term "Outstanding" when used in this Ordinance with respect to Certificates means,. as of the date of determination, all Certificates theretofore issued and delivered under this Ordinance, except: (1) those Certificates canceled by the Paying Agent/Registrar or delivered to the Paying Agent/Registrar for cancellation; (2) those Certificates deemed to be duly paid by the City in accordance with the provisions of Section 19 hereof; and 45194981.2 15 (3) those Certificates that have been mutilated, destroyed, lost, or stolen and replacement Certificates have been registered and delivered in lieu thereof as provided in Section 23 hereof. (k) The term "Previously Issued Obligations" shall mean the outstanding (i) "City of Lubbock, Texas, Combination Tax and Sewer System Subordinate Lien Revenue Certificates of Obligation, Series 1992", (ii) "City of Lubbock, Texas, Combination Tax and Sewer System Subordinate Lien Revenue Certificates of Obligation, Series 1993", (iii) "City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 1999", dated April 1, 1999, and (iv) "City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002", dated January 1, 2002. (1) The term "Prior Lien Obligations" shall mean all bonds or other similar obligations hereafter issued that are payable in whole or in part from and secured by a lien on and pledge of the Net Revenues of the System and such lien and pledge securing the payment thereof is prior and superior in claim, rank and dignity to the lien and pledge of the Net Revenues securing the payment of the Certificates. (m) The term "System" shall mean the City's sanitary sewer system, being all sanitary sewage collection system, effluent treatment and disposal facilities and/or other works and equipment. SECTION 11: Certificate Fund. For the purpose of paying the interest on and to provide a sinking fund for the payment and retirement of the Certificates, there shall be and is hereby created a special Fund to be designated "SPECIAL 2002 CITY OF LUBBOCK, TEXAS, TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATE OF OBLIGATION FUND", which Fund shall be kept and maintained at the City's depository bank, and moneys deposited in said Fund shall be used for no other purpose. Proper officers of the City are hereby authorized and directed to cause to be transferred to the Paying Agent for the Certificates, from funds on deposit in the Certificate Fund, amounts sufficient to fully pay and discharge promptly each installment of interest and principal of the Certificates as the same accrues or matures or comes due by reason of redemption prior to maturity; such transfers of funds to be made in such manner as will cause immediately available funds to be deposited with the Paying Agent for the Certificates at the close of business on the last business day next preceding each interest and/or principal payment date for the Certificates. Pending the transfer of funds to the Paying Agent/Registrar, money in the Certificate Fund may, at the option of the City, be invested in obligations identified in, and in accordance with the provisions of the "Public Funds Investment Act" (V.T.C.A., Government Code, Chapter 2256); provided that ail such investments shall be made in such a manner that the money required to be expended from said Fund will be available at the proper time or times. All interest and income derived from deposits and investments in said Certificate Fund shall be credited to, and any losses debited to, the said Certificate Fund. All such investments shall be sold promptly when necessary to prevent any default in connection with the Certificates. 45194981.2 16 j SECTION 12: Tax Le ; That to provide for the payment of the "Debt Service Requirements" on the Certificates being (i) the interest on said Certificates and (ii) a sinking fund for their payment at maturity or redemption or a sinking fund of 2% (whichever amount shall be the greater), there shall be and there is hereby levied for the current year and each succeeding year thereafter while said Certificates or any interest thereon shall remain Outstanding, a sufficient tax on each one hundred dollars' valuation of taxable property in said City, adequate to pay such Debt Service Requirements, full allowance being made for delinquencies and costs of collection; said tax shall be assessed and collected each year and applied to the payment of the.Debt Service Requirements, and the same shall not be diverted to any other purpose. The taxes so levied and collected shall be deposited into the Certificate Fund. This governing body hereby declares its purpose and intent to provide and levy a tax legally and fully sufficient to pay the said Debt, Service Requirements, it having been determined that the existing and available taxing authority of the City for such purpose is adequate to permit a legally sufficient tax in consideration of all other outstanding indebtedness. The amount of taxes to be provided annually for the payment of the principal of and interest on the Certificates herein authorized to be issued shall be determined and accomplished in the following manner: (a) Prior to the date the City Council establishes the annual tax rate and passes an ordinance levying ad valorem taxes each year, the City Council shall determine: (1) The amours on deposit in the Certificate Fund after (a) deducting therefrom the total amount of Debt Service Requirements to become due on Certificates prior to the Collection Date for the ad valorem taxes to be levied and (b) adding thereto the amount of Net Revenues of the System appropriated and allocated to pay such Debt Service Requirements prior to the Collection Date for the ad valorem taxes to be levied. (2) The amount of Net Revenues if any, appropriated and to be set aside for the payment of the Debt Service Requirements on the Certificates between the Collection Date for the taxes then . to be levied and the Collection Date for the taxes to be levied during the next succeeding calendar year. (3) The amount of Debt Service Requirements to become due and payable on the Certificates between the Collection Date for the taxes then to be levied and the Collection Date for the taxes to be levied during the next succeeding calendar year. i (b) The amount of takes to be levied annually each year to pay the Debt Service Requirements on the Certificates shall be the amount established in paragraph (3) above less the sum total of the amounts established in paragraphs (1)and (2), after taking into consideration delinquencies and costs of collecting such annual taxes. SECTION 13: Pledge of; Revenues. The City hereby covenants and agrees that, subject only to a prior lien on an' pledge of the Net Revenues of the System for the payment 45194981.2 4{i 17 and security of Prior Lien Obligations, the Net Revenues of the System, with the exception of those in excess of the amounts required to be deposited to the Certificate Fund as hereafter provided, are hereby irrevocably pledged, equally and ratably, to the payment of the principal of and interest on the Previously Issued Obligations and the Certificates as herein provided, and the pledge of the Net Revenues of the System herein made for the payment of the Previously Issued Obligations and the Certificates shall constitute a lien on the Net Revenues of the System in accordance with the terms and provisions hereof and be valid and binding and fully perfected from and after the date of adoption of this Ordinance without physical delivery or transfer or transfer of control of the Net Revenues, the filing of this Ordinance or any other act; all as provided in Chapter 1208 of the Texas Government Code. Section 1208, Government Code, applies to the issuance of the Certificates and the pledge of the Net Revenues of the System granted by the City under this Section 13, and such pledge is therefore valid, effective and perfected. If Texas law is amended at any time while the Certificates are Outstanding such that the pledge of the Net Revenues of the System granted by the City under this Section 13 is to be subject to the filing requirements of Chapter 9, Business & Commerce Code, then in order to preserve to the registered owners of the Certificates the perfection of the security interest .in said pledge, the City agrees to take such measures as it determines are reasonable and necessary under Texas law to comply with the applicable provisions of Chapter 9, Business & Commerce Code and enable a fling to perfect the security interest in said pledge to occur. SECTION 14: System Fund. The City hereby reaffirms its covenant and agreement made in connection with. the issuance of the Previously. Issued Obligations that all Gross Revenues (excluding earnings from the investment of money held in any special funds or accounts created for the payment and security of Prior Lien Obligations) shall be deposited from day to day as collected into a "City of Lubbock, Texas,. Sewer System Operating Fund" (hereinafter called "System Fund") which Fund shall be kept and maintained at an official depository bank of the City. All moneys deposited in the System Fund shall be pledged and appropriated to the extent required for the following purposes and in the order of priority shown, to wit: First: To the payment of all necessary and reasonable Operating and Maintenance Expenses of the System as defined herein or required by statute to be a first charge on and claim against the Gross Revenues. Second: To the payment of the amounts required to be deposited in the special Funds created and established for the payment, security and benefit of Prior Lien Obligations in accordance with the terms and provisions of the ordinances authorizing the issuance of Prior Lien Obligations; and Third: Equally and ratably to the payment of the amounts required to be deposited in the special funds and accounts created and established for the payment of the Previously Issued Obligations, the Certificates and Additional Obligations, if issued. 45194981.2 18 Any Net Revenues remaining in the System Fund after satisfying the foregoing payments, or making adequate and sufficient provision for the payment thereof, may be appropriated and used for any other City purpose now or hereafter permitted by law. SECTION 15: Deposits to Certificate Fund. The City hereby covenants and agrees to cause to be deposited in the Certificate Fund prior to each interest and principal payment date from the Net Revenues of the System, after deduction of all payments required to be made to special Funds or accounts created for the payment and security of the Prior Lien Obligations, an amount equal to one hundred per centum (100%) of the amount required to fully pay the accrued interest and principal of the Certificates then due and payable by reason of maturity or redemption prior to maturity, such deposits to pay accrued interest and principal on the Certificates to be made in substantially equal monthly installments on or before the last business day of each month beginning the month the Certificates are delivered to the initial purchaser. The monthly deposits to the Certificate Fund, as hereinabove provided, shall be made until such time as such Fund contains an amount equal to pay the principal of and interest on the Certificates to maturity. Ad valorem taxes levied, collected and deposited in the Certificate Fund for and on behalf of the Certificates may be taken into consideration and reduce the amount of the monthly deposits otherwise required to be deposited in the Certificate Fund from the Net Revenues of the System. In addition, any proceeds of sale of the Certificates in excess of the amount required to pay the contractual obligations to be incurred (including change orders to a construction contract) shall be deposited in the Certificate Fund, which amount shall reduce the sums otherwise required to be deposited in said Fund from ad valorem taxes and the Net Revenues of the System. SECTION 16: Security of Funds. All moneys on deposit in the Funds for which this Ordinance makes provision (except any portion thereof as may be at any time properly invested) shall be secured. in the manner and to the fullest extent required by the laws of Texas for the security of public funds, and moneys on deposit in such Funds shall be used only for the purposes permitted by this Ordinance. SECTION 17: Special Covenants. The City hereby further covenants as follows: (a) It has the lawful power to pledge the Net Revenues of the System supporting this issue of Certificates and has lawfully exercised said powers under the Constitution and laws of the State of Texas, including said power existing under V.T.C.A, Government Code, Sections 1502.056 and 1502.058 and V.T.C.A., Local Government Code, Sections 271.041, et seq. (b) Other than for the payment of the Previously Issued Obligations and the Certificates, the Net Revenues of the System have not in any manner been pledged to the payment of any debt or obligation of the City or of the System. SECTION 18: Issuance of Prior Lien Obligations and Additional Obligations; Subordinate to Prior Lien Obligations Covenants and Agreements. (a) The City hereby expressly reserves the right to hereafter issue Prior Lien Obligations, without limitation as to 45194981.2 19 principal amount but subject to any terms, conditions or restrictions applicable thereto under law or otherwise. In addition, the City reserves the right to issue Additional Obligations, without limitation or any restriction or condition being applicable to their issuance under the terms of this Ordinance, payable from and secured by a lien on and pledge of the Net Revenues of the System of equal rank and dignity, and on a parity in all respects, with the lien thereon and pledge thereof securing the payment of the Certificates. (b) It is the intention of this governing body and accordingly hereby recognized and stipulated. that the provisions, agreements and covenants contained herein bearing upon the management and operations of the System and the administering and application of revenues derived from the operation thereof, shall to the extent possible be harmonized with like provisions, agreements and covenants contained in ordinances authorizing the issuance of. Prior Lien Obligations, and to the extent of any irreconcilable conflict between the provisions contained herein and in ordinances authorizing the issuance of Prior Lien Obligations, the provisions, agreements and "covenants contained therein shall prevail to the extent of such conflict and be applicable to this Ordinance but in all respects subject to the priority of rights and benefits, if any, conferred thereby to the holders or owners of the Prior Lien Obligations. Notwithstanding the above, any change or modification affecting the application of revenues derived from the operation of the. System shall not impair the obligation of contract with respect to the pledge of revenues herein made for the payment and security of the Certificates. SECTION 19: Satisfaction of Obligations of City. If the City shall pay or cause to be paid, or there shall otherwise be paid to the Holders, the principal of, premium, if any, and interest on the Certificates, at the times and in the manner stipulated in.this Ordinance, then the pledge of taxes levied and the lien on and pledge of the Net Revenues of the System under this Ordinance and all covenants, agreements, and other obligations of the City to the Holders shall thereupon cease,terminate, and be discharged and satisfied. Certificates shall be deemed to have been paid within the meaning and with the effect expressed above in this Section when (i) money sufficient to pay in full such Certificates or the principal amount(s) thereof at maturity or (if notice of redemption has been duly given or waived or if irrevocable arrangements therefor acceptable to the Paying Agent/Registrar have been made) the redemption date thereof, together with all interest due thereon, shall have been irrevocably deposited with and held in trust by the Paying Agent/Registrar, or an authorized escrow agent, or (ii) Government Securities shall have been irrevocably deposited in trust with the Paying Agent/Registrar, or an authorized escrow agent, which Government Securities have been certified by an independent accounting firm to mature as to principal and interest in such amounts and at such times as will insure the availability, without reinvestment, of sufficient money, together with any moneys deposited therewith, if any, to pay when due the principal of and interest on such Certificates, or the principal amount(s) thereof, on and prior to the Stated Maturity thereof or (if notice of redemption has been duly given or waived or if irrevocable arrangements therefor acceptable to the Paying Agent/Registrar have been made) the redemption date thereof. The City covenants that no deposit of moneys or Government Securities will be made under this Section and no use made of any such deposit which would 45194981.2 20 cause the Certificates to be treated as "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended, or regulations adopted pursuant thereto. Any moneys so deposited with the Paying Agent/ Registrar and all income from Government Securities held in trust by the Paying Agent/Registrar, or an authorized escrow agent, pursuant to this Section which is not required for the payment of the Certificates, or any principal amount(s) thereof, or interest thereon with respect to which such moneys have been so deposited shall be remitted to the City or deposited as directed by the City. Furthermore, any money held by the Paying Agent/Registrar for the payment of the principal of and interest on the Certificates and remaining unclaimed for a period of four (4) years after the maturity, or applicable redemption date, of the Certificates for which such moneys were deposited and are held in trust to pay, shall upon the request of the City be remitted to the City against a written receipt therefor. Notwithstanding the above and foregoing, any remittance of funds from the Paying Agent/Registrar to the City shall be subject to any applicable unclaimed property laws of the State of Texas. SECTION 20: Ordinance a Contract Amendments. This Ordinance shall constitute a contract with the Holders from time to time, be binding on the City, and shall not be amended or repealed by the City so long as any Certificate remains Outstanding except as permitted in this Section. The City, may, without the consent of or notice to any Holders of the Certificates, from time to time and at any time, amend this Ordinance in any manner not detrimental to the interests of the Holders of the Certificates, including the curing of any ambiguity, inconsistency, or formal defect or omission herein. In addition, the City may, with the written consent of Holders of the Certificates holding a majority in aggregate principal amount of the Certificates then Outstanding affected thereby, amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the consent of all Holders of Outstanding Certificates, no such amendment, addition, or rescission shall (1) extend. the time or times of payment of the principal of, premium, if any, and interest on the Certificates, reduce the principal amount thereof, the redemption price, or the rate of interest thereon, or in any other way modify the terms of payment of the principal of, premium, if any, or interest on the Certificates, (2) give any preference to any Certificate over any other Certificate, or (3) reduce the aggregate principal amount of Certificates required to be held by Holders for consent to any such amendment, addition, or rescission. SECTION 21: Notices to Holders - Waivers. Wherever this Ordinance provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and sent by United States Mail, first class postage prepaid, to the address of each Holder appearing in the Security Register at the close of business on the business day next preceding the mailing of such notice. in any case where notice to Holders is given by mail, neither the failure to mail such notice to any particular Holders, nor any defect in any notice so mailed, shall affect the sufficiency of such notice with respect to all other Certificates. Where this Ordinance provides for notice in any manner, such notice may be waived in writing by the Holder entitled to receive such notice, either before or after the event with respect to which such notice is given, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be 45194981.2 21 filed with the Paying Agent/Registrar, but such filing shall not be a condition precedent to the validity of any action taken in -reliance upon such waiver. SECTION 22: Cancellation. Certificates surrendered for payment, redemption, transfer, or exchange, if surrendered to the Paying Agent/Registrar; shall be promptly canceled by it and, if surrendered to the City, shall be delivered to the Paying Agent/Registrar and, if not already canceled, shall be promptly canceled by the Paying Agent/Registrar. The City may at any time deliver to the Paying Agent/Registrar for cancellation any Certificates previously certified or registered and delivered which the City may have acquired in any manner whatsoever, and all Certificates so delivered shall be promptly canceled by the Paying Agent/Registrar. All canceled Certificates held by the Paying Agent/Registrar shall be returned to the City. SECTION 23: Mutilated, Destroyed, Lost and Stolen . Certificates. In case any, Certificate shall be mutilated, or destroyed, lost or stolen, the Paying Agent/Registrar may execute and deliver a replacement Certificate of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Certificate, or in lieu of and in substitution for such destroyed, lost or stolen Certificate, only upon the approval of the City and after (i) the filing by the Holder thereof with the Paying Agent/Registrar of evidence satisfactory to the Paying Agent/Registrar of the destruction, loss or theft of such Certificate, and of the authenticity of the ownership thereof and (ii) the furnishing to the Paying Agent/Registrar of indemnification in an amount satisfactory to hold the City and the Paying Agent/Registrar harmless. All expenses and charges associated with such indemnity and with the preparation, execution and delivery of a replacement Certificate shall be borne by the Holder of the Certificate mutilated, or destroyed, lost or stolen. Every replacement Certificate issued pursuant to this Section shall be a valid and binding obligation, and shall be entitled to all the benefits of this Ordinance equally and ratably with all other Outstanding Certificates; notwithstanding the enforceability of payment by anyone of the destroyed, lost or stolen Certificates. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement and payment of mutilated, destroyed, lost, or stolen Certificates. SECTION 24: Covenants to Maintain Tax -Exempt Status. A. Definitions. When used in this Section, the following terms have the following meanings: "Closing Date" means the date on which the Certificates are first authenticated and delivered to the initial purchasers against payment therefor. "Code" means the Internal Revenue Code of 1986, as amended by all legislation, if any, effective on or before the Closing Date. "Computation Date" has the meaning set forth in Section 1.148-1(b) of the Regulations. 45194981.2 22 "Gross Proceeds" means any proceeds as defined in Section 1.148-1(b) of the Regulations, and any replacement proceeds as defined in Section 1.148-1(c) of the Regulations, of the Certificates. "Investment" has the meaning set forth in Section 1.148-1(b) of the Regulations. "Nonpurpose Investment' means any investment property, as defined in section 148(b) of the Code, in which Gross Proceeds of the Certificates are invested and which is not acquired to carry out the governmental purposes of the Certificates. "Rebate Amount" has the meaning set forth in Section 1.148-1(b) of the Regulations. "Regulations" means any proposed, temporary, or final Income Tax Regulations issued pursuant to Sections 103 and 141 through 150 of the Code, and 103 of the Internal Revenue Code of 1954, which are applicable to the Certificates. Any reference. to any specific Regulation shall also mean, as appropriate, any proposed, temporary or final Income Tax Regulation designed to supplement, amend or replace the specific Regulation referenced. "Yield" of (1) any Investment has the meaning set forth in Section 1.148-5 of the Regulations; and (2) the Certificates has the meaning set forth in Section 1.1.48-4 of the Regulations. B. Not to Cause Interest to Become Taxable. The City shall not use, permit the use of, or omit to use Gross.Proceeds or any other amounts (or any property.the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner which if made or omitted, respectively, would cause the interest on any Certificate to become includable in the gross income, as defined in section 61 of the Code, of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the City receives a written opinion of counsel nationally recognized in the field of municipal bond law to the effect that failure to comply with such covenant will not adversely affect the exemption from federal income tax of the interest on any Certificate, the City shall comply with each of the specific covenants in this Section. C. No Private Use or Private Payments. Except as permitted by section 141 of the Code and the Regulations and rulings thereunder, the City shall at all times prior to the last Stated Maturity of Certificates: (1) exclusively own, operate and possess all property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with Gross Proceeds of the Certificates, and not use or permit the use of such Gross Proceeds (including all contractual arrangements with terms different than those applicable to the general public) or any property acquired, constructed or improved with such Gross Proceeds in any activity carried on by any person or entity (including the United States or any agency, department and instrumentality thereof) other than a state or local government, unless such use is solely as a member of the general public; and 45194981.2 23 (2) not directly or indirectly impose or accept any charge or other payment by any person or entity who is treated as using Gross Proceeds of the Certificates or any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds, other than taxes of general application within the City or interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes. D. No Private Loan. Except to the extent permitted by section 141 of the Code and the Regulations and rulings thereunder, the City shall not use Gross Proceeds of the Certificates to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be 'loaned" to a person or entity if: (1) property acquired, constructed or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction which creates a debt for federal income tax purposes; (2) capacity in or service from such property is committed to such person or entity under a take -or -pay, output or similar contract or arrangement; or (3) indirect benefits, or burdens and benefits of ownership, of such Gross Proceeds or any property acquired, constructed or improved with such Gross Proceeds are otherwise transferred in a transaction which is the economic equivalent of a loan. E. Not to Invest at Higher Yield. Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the City shall not at any time prior to the final Stated Maturity of the Certificates directly or indirectly invest Gross Proceeds in any Investment (or use Gross Proceeds to replace money so invested), if as a result of such investment the Yield from the Closing Date of all Investments acquired with Gross Proceeds (or with money replaced thereby), whether then held or previously disposed of, exceeds the Yield of the Certificates. F. Not Federally Guaranteed. Except to the extent permitted by section 149(b) of the .Code and the Regulations and rulings thereunder, the City shall not take or omit to take any action which would cause the Certificates to be federally guaranteed within the meaning of section 149(b) of the Code and the Regulations and rulings thereunder. G. Information Report The City shall timely file the information required by section 149(e) of the Code with the Secretary of the Treasury on Form 8038-G or such other form and in such place as the Secretary may prescribe. H. Rebate of Arbitrage Profits. Except to the extent otherwise provided in section 148(f) of the Code and the Regulations and rulings thereunder: (1) The City shall account for all Gross Proceeds (including all receipts, expenditures and investments thereof) on its books of account separately and apart from all other funds (and receipts, expenditures and investments thereof) and shall retain all records of accounting for at least six years after the day on which the last Outstanding Certificate is discharged. However, to the extent permitted by law, the City may commingle Gross Proceeds of the Certificates with other money of the City, provided that the City separately accounts for 45194981.2 24 each receipt and expenditure of Gross Proceeds and the obligations acquired therewith. (2) Not less frequently than each Computation Date, the City shall calculate the Rebate Amount in accordance with rules set forth in section 148(f) of the Code and the Regulations and rulings thereunder. The City shall maintain such calculations with its official transcript of proceedings relating to the issuance of the Certificates until six years after the final Computation Date. (3) As additional consideration for the purchase of the Certificates by the Purchasers and the loan of the money represented thereby and in order to induce such purchase by measures designed to insure the excludability of the interest thereon from the gross income of the owners thereof for federal income tax purposes, the City shall pay to the United States out of the Certificate Fund or its general fund, as permitted by .applicable Texas statute, regulation or opinion of the Attorney General of the State of Texas, the amount that when added to the future value of previous rebate payments made for the Certificates equals (i) in the case of a Final Computation Date as defined in Section 1.148- 3(e)(2) of the Regulations, one hundred percent (100%) of the Rebate Amount on such date; and (ii) in the case of any other Computation Date, ninety percent (90%) of the Rebate Amount on such date. In all cases, the rebate payments shall be made at the times, in the installments, to the place and in the manner as is or may be required by section 148(f) of the Code and the Regulations and rulings thereunder, and shall be accompanied by Form 8038-T or such other forms and information as is or may be required by Section 148(f) of the Code and the Regulations and rulings thereunder. (4) The City shall exercise reasonable diligence to assure that no errors are made in the calculations and payments required by paragraphs (2) and (3), and if an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter (and in all events within one hundred eighty (180) days after discovery of the error), including payment to the United States of any additional Rebate Amount owed to it, interest thereon, and any penalty imposed under Section 1.148-3(h) of the Regulations. I. Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the City shall not, at any time prior to the earlier of the Stated Maturity or final payment of the Certificates, enter into any transaction that reduces the amount required to be paid to the United States pursuant to Subsection H of this Section because such transaction results in a smaller profit or a larger loss than would have resulted if the transaction had been at arm's length and had the Yield of the Certificates not been relevant to either party. J. Elections. The City hereby City Manager, Director of Finance, and make elections permitted or required 45194981.2 directs and authorizes .the Mayor, City Secretary, Cash and Debt Manager, individually or jointly, to pursuant to the provisions of the Code or the 25 Regulations, as they deem necessary or appropriate in connection with the Certificates,. in the Certificate as to Tax Exemption or similar or other appropriate certificate, form or document. SECTION 25: Sale of Certificates -Approval and Execution of Purchase Contract. The sale of the Certificates to A. G. Edwards & Sons, Inc. (herein referred to as the "Purchasers") in accordance with the Purchase Contract, dated July 11, 2002, attached hereto as Exhibit B and incorporated herein by reference as a part of this Ordinance for all purposes. The Mayor is hereby authorized and directed to execute. said Purchase Contract for and on behalf of the Cityand as the act and deed of this Council, and in regard to the approval and - execution of the Purchase Contract, the Council hereby finds, determines and declares that the representations, warranties and agreements of the City contained therein are true and correct in all material respects and shall be honored and performed by the City. SECTION 26: Official Statement The use of the Preliminary Official Statement, dated July 2, 2002, in connection with the public offering and sale of the Certificates is hereby ratified, confirmed and approved in all respects. The final Official Statement reflecting the terms of sale (together with such changes approved by the Mayor, Mayor Pro Tem, City Manager, Director of Finance, Cash and Debt Manager, and City Secretary, any one or more of said officials), shall be and is hereby in all respects approved and the Purchasers are hereby authorized to use and distribute said final Official Statement, dated July 11, 2002, in the offering, sale and delivery of the Certificates to the public. The Mayor and City Secretary are further authorized and directed to manually execute and deliver for and on behalf of the City copies of said Official Statement in final form as may be required by the Purchasers, and such Official Statement in the final form and content manually executed by said officials shall be deemed to be approved by the City Council and constitute the Official Statement authorized for distribution and use by the Purchasers. SECTION 27: Proceeds of Sale. The proceeds of sale of the Certificates, excluding the accrued interest and premium, if any, received from the Purchasers, shall be deposited in a construction fund maintained at the City's depository bank. Pending expenditure for authorized projects and purposes, such proceeds of sale may be invested in authorized investments and any investment earnings realized may be expended for such authorized projects and purposes or deposited in the Certificate Fund as shall be determined by the City Council. Accrued interest and premium, if any, received from the Purchasers as well as all surplus proceeds of sale of the Certificates, including investment earnings, remaining after completion of all authorized projects or purposes shall be deposited to the credit of the Certificate Fund. SECTION 28: Control and Custody of Certificates. The Mayor of the City shall be and. is hereby authorized to take and have charge of all necessary orders and records pending investigation by the Attorney General of the State of Texas, including the printing of, the Certificates, and shall take and have charge and control of the Certificates pending the approval thereof by the Attorney General, the registration thereof by the Comptroller of Public Accounts and the delivery thereof to the Purchasers. Furthermore, the Mayor, Mayor Pro Tem, City Secretary, City Manager, Deputy City Manager, Director of Finance, and Cash and Debt Manager, any one or more of said officials, 45194981.2 26 are hereby authorized and directed to furnish and execute such documents and certifications relating to the City and the issuance of the Certificates, including a certification as to facts, estimates, circumstances and reasonable expectations pertaining to the use and expenditure and investment of the proceeds of the Certificates as may be necessary for the approval of the Attorney General, registration by the Comptroller of Public Accounts and delivery of the Certificates to the purchasers thereof and, together with the City's financial advisor, bond counsel and the Paying Agent/Registrar, make the necessary arrangements for the delivery of the Initial Certificate(s) to the purchasers. SECTION 29: Legal Opinion. The obligation of the Purchasers to accept delivery of the Certificates is subject to being furnished a final opinion of Fulbright & Jaworski L.L.P., Attorneys, Dallas, Texas, approving such Certificates as to their validity, said opinion to be dated and delivered as of the date of delivery and payment for such Certificates. A true and correct reproduction of said opinion is hereby authorized to be printed on the definitive Certificates or an executed counterpart thereof shall accompany the global Certificates deposited with the Depository Trust Company. SECTION 30: CUSIP Numbers. That CUSIP numbers may be printed or typed on the definitive Certificates. It is expressly provided, however, that the presence or absence of CUSIP numbers on the definitive Certificates shall be of no significance or effect as regards the legality thereof and neither the City nor attorneys approving said Certificates as to legality are to be held responsible for CUSIP numbers incorrectly printed or typed on the definitive Certificates. SECTION 31: Benefits of Ordinance. Nothing in this Ordinance, expressed or implied, is intended or shall be construed to confer upon any person other than the City, the Paying Agent/Registrar and the Holders, any right, remedy, or claim, legal or equitable, under or by reason of this Ordinance or any provision hereof, this Ordinance and all its provisions being intended to be and being for the sole and exclusive, benefit of the City, the Paying Agent/Registrar and the Holders. SECTION 32: Inconsistent Provisions. All ordinances, orders or resolutions, or parts thereof, which are in conflict or inconsistent with any provision of this Ordinance are hereby repealed to the extent of such conflict and the provisions of this Ordinance shall be and remain controlling as to the matters contained herein. SECTION 33: Governing Law. This Ordinance shall be construed and enforced in accordance with the laws of the State of Texas and the United States of America. SECTION 34: Severabili . If -any provision of this Ordinance or the application thereof to any circumstance shall be held to be invalid, the remainder of this Ordinance and the. application thereof to other circumstances shall nevertheless be valid, and the City Council hereby declares that this Ordinance would have been enacted without such invalid provision. SECTION 35: Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. 45194981.2 27 SECTION 36: Construction of Terms. If appropriate in the context of this Ordinance, words of the singular number shall be considered to include the plural, words of the plural number shall be considered to include the singular, and words of the masculine, feminine or neuter gender shall be considered to include the other genders. SECTION 37: Continuing Disclosure Undertaking. (a) Definitions. As used in this Section, the following terms have the meanings ascribed to such terms below: "MSRB" means the Municipal Securities Rulemaking Board. "NRMSIR" means each person whom the SEC or its staff has determined to be a nationally recognized municipal securities information repository within the meaning of the Rule from time to time. "Rule" means SEC Rule 15c2-12, as amended from time to time. "SEC" means the United States Securities and Exchange Commission. "SID" means any person designated by the State of Texas or an authorized department, officer, or agency thereof as, and determined by the SEC or its staff to be, a state information depository within the meaning of the Rule from time to time.. (b) Annual Reports. The City shall provide annually to each NRMSIR and any SID, within six months after the end of each fiscal year (beginning with the fiscal year ending September 30, 2002) financial information and operating data with respect to the City of the general type included in the final Official Statement approved by Section 26 of this Ordinance, being the information described in Exhibit C hereto. Financial statements to be provided shall be (1) prepared in accordance with the accounting principles described in .Exhibit C hereto and (2) audited, if the City commissions an audit of such statements and the audit is completed. within the period during which they must be provided. If audited financial statements are not available at the time the financial information and operating data must be provided, then the City shall provide unaudited financial statements for the applicable fiscal year to each NRMSIR and any SID with the financial information and operating data and will file the annual audit report, when and if the same becomes available. If the City changes its fiscal year, it will notify 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 otherwise would be required to provide financial information and operating data pursuant to this Section. The financial information and operating data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific reference to any document (including an official statement or other offering document, if it is available from the MSRB) that theretofore has been provided to each NRMSIR and any SID or filed with the SEC. (c) Material Event Notices. The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any of the following events with respect to the Certificates, if such event is material within the meaning of the federal securities laws: 45194981.2 28 1. Principal and interest payment delinquencies; 2. Non-payment related defaults; 3. Unscheduled draws on debt service reserves reflecting financial difficulties; 4. Unscheduled draws on credit enhancements reflecting financial difficulties; 5. Substitution of credit or liquidity providers, or their failure to perform; 6. Adverse tax opinions or events affecting the tax-exempt status of the Certificates; 7. Modifications to rights of holders of the Certificates; 8. Certificate calls; 9. Defeasances; 10. Release, substitution, or sale of property securing repayment of the Certificates; and 11. Rating changes. The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any failure by the City to provide financial information or operating data in accordance with subsection (b) of this Section by the time required by such Section. (d) Limitations, Disclaimers, and Amendments. The City shall be obligated to observe and perform the covenants specified in this Section while, but only while, the City remains an "obligated person" with respect to the Certificates within the meaning of the Rule, except that the City in any event will give the notice required by subsection (c) hereof of any Certificate calls and defeasance that cause the City to be no longer such an "obligated person." The provisions of this Section are for the sole benefit of the Holders and beneficial owners of the Certificates, and nothing in this Section, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The City undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Section and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the City's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Section or otherwise, except as expressly provided herein. The City does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Certificates at any future date. UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY CERTIFICATE OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE 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 SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. 45194981.2 29 No default by the City in observing or performing its obligations under this Section shall constitute a breach of or default under this Ordinance for purposes of any other provision of this Ordinance. Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. The provisions of this Section may be amended by the City from time to time to adapt to changed circumstances resulting from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, but only if (1) the provisions of this Section, as so amended, would have permitted an underwriter to purchase or sell Certificates in the primary offering of the Certificates in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (2) either (a) the Holders of a majority in° aggregate principal amount (or any greater amount required by any other provision of this Ordinance that authorizes such an amendment) of the Outstanding Certificates consent to such amendment or (b) a person that is unaffiliated with the City (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interests of the Holders and beneficial owners of the Certificates. The provisions of this Section may also be amended from time to time or repealed by the City if the SEC amends or repeals the applicable provisions of the Rule or a court of final jurisdiction determines that such provisions are invalid, but only if and to the extent that reservation of the City's right to do so would not prevent underwriters of the initial public offering of the Certificates from lawfully purchasing or selling Certificates in such offering. If the City so amends the provisions of this Section, it shall include with any amended financial information or operating data next provided in accordance with subsection (b) an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information or operating data so provided. SECTION 38: MBIA Insurance. The Certificates have been sold with the principal of and interest thereon being insured by MBIA Insurance Corporation (hereinafter called "MBIA") pursuant to a Financial Guaranty Insurance Policy. In accordance with the terms and conditions applicable to insurance provided by MBIA, the City covenants and agrees that, in the event the principal and interest due on the Certificates shall be paid by MBIA pursuant to the policy referred to this Section, the assignment and pledge of all funds and all covenants, agreements and other obligations of the City to the Holders shall continue to exist and MBIA shall be subrogated to the rights of such Holders; and furthermore, the City covenants and agrees that: (a) In the event that, on the second business day, and again on the business day, prior to the payment date on the Certificates, the Paying r Agent/Registrar has not received sufficient moneys to pay all principal of and interest on the Certificates due on the second following or following, as the case may be, business day, the Paying Agent/Registrar shall immediately notify MBIA or its designee on the same business day by telephone or telegraph, confirmed in writing by registered or certified mail, of the amount of the deficiency. 45194981.2 30 (b) If the deficiency is made up in whole or in part prior to or on the payment date, the Paying Agent/Registrar shall so notify MBIA or its designee. (c) In addition, if the Paying Agent/Registrar has notice that any Holder has been required to disgorge payments of principal of or interest on the Certificates to a trustee in bankruptcy or creditors or others pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes avoidable preference. to such Holder within the meaning of any applicable bankruptcy laws, then the Paying Agent/Registrar shall notify the MBIA or its designee of such fact by telephone or telegraphic notice, confirming in writing by registered or certified mail. (d) The Paying Agent/Registrar is hereby irrevocably designated, appointed, directed and authorized to act as attorney-in-fact for Holders of the Certificates as follows: (1) If and to the extent there is a deficiency in amounts required to pay interest on the Certificates, the Paying Agent/Registrar shall (a) execute and deliver to State Street Bank and Trust Company, N.A., or its successors under the Policy (the "Insurance Paying Agent"), in form satisfactory to the Insurance Paying Agent, an instrument appointing the MBIA as agent for such Holders in such legal proceeding related to the payment of such interest and an assignment to the MBIA of the claims for interest to which such deficiency relates and' which are paid by MBIA, (b) receive as designee to the respective Holders (and not as Paying Agent/Registrar) in accordance with the tenor of the Policy payment from the Insurance Paying Agent with respect to the claims for interest so assigned, and (c) disburse the same to such respective Holders; and (2) If and to the extent of a deficiency in amounts required to pay principal of the Certificates, the Paying Agent/Registrar shall (a) execute and deliver to the Insurance Paying Agent in form satisfactory to the Insurance Paying Agent an instrument appointing MBIA as agent for such Holder in any legal proceeding relating to the payment of such principal and an assignment to MBIA of any of the Certificates surrendered to the Insurance Paying Agent or so much of the principal thereof as has not previously been paid or for which moneys are not held by the Paying Agent/Registrar and available for such payment (but such assignment shall be delivered only if payment from the Insurance Paying Agent is received), (b) receive as designee of the respective Holders (and not as Paying Agent/Registrar) in accordance with the tenor of the Policy payment therefor from the Insurance Paying Agent, and (c) disburse the same to such Holders. . (e) Payments with respect to claims for interest on and principal of Certificates disbursed by the Paying Agent/Registrar from proceeds of the Policy shall not be considered to discharge the obligation of the City with respect to such Certificates, and MBIA shall become of the owner of such 45194981..2 31 unpaid Certificate and claims for the interest in accordance with the tenor of the assignment made to it under the provisions of this subsection or otherwise. (f) Irrespective of whether any such assignment is executed and delivered, MBIA and the Paying Agent/Registrar hereby agree for the benefit of the MBIA that: (1) They recognize that to the extent MBIA makes payments, directly or indirectly (as by paying through the Paying Agent/Registrar), on account of principal of and interest on the Certificates, MBIA will be subrogated to the rights of such Holders to .receive the amount of such principal and interest from the City as provided and solely from the sources stated in this Ordinance and the Certificates; and (2) They will accordingly pay to MBIA the amount of such principal and interest (including principal and interest recovered under subparagraph (ii) of the first paragraph of the Policy, which principal and interest shall be deemed past due and not to have been paid), as provided in this Ordinance- and the Certificates, but only from the sources and in the manner provided herein for the payment of principal of and interest on the Certificates to Holders, and will otherwise treat the MBIA as the owner of such rights to the amount of such principal and interest. (g) In connection with the issuance of additional obligations, the City shall deliver to the MBIA a copy of the disclosure document, if any, circulated with respect to such additional obligations. (h) Copies of any amendments made to the documents executed in connection with the issuance of the Certificates which are consented to by the MBIA shall be sent to Standard & Poor's Corporation. (i) MBIA shall receive notice of the resignation or removal of the Paying Agent/Registrar and the appointment of a successor thereto. Q) MBIA shall receive copies of all notices required to be delivered to Holders and, on an annual basis, copies of the City's audited financial statements and annual budget. (k) Any notice that is required to be given to a Holder of the Certificates or to the Paying Agent/Registrar pursuant to the Ordinance shall also be provided to MBIA. All notices required to be given to MBIA under the Ordinance shall be in writing and shall be sent by registered or certified mail addressed to MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504, Attention: Surveillance. SECTION 39: Public Meeting. It is officially found, determined, and declared that the meeting at which this Ordinance is adopted was open to the public and public notice of the 45194981.2 r-, 32 time, place, and subject matter of the public business to be considered at such meeting, including this Ordinance, was given, all as required by V.T.C.A., Government Code, Chapter 551, as amended. SECTION 40: Effective Date. This Ordinance shall take effect and be in full force from and after its adoption on the date shown below in accordance with V.T.C.A., Government Code, Section 1201.028. PASSED AND ADOPTED, this July 11, 2002. CITY OF LUBBOCK, TEXAS ATTEST: City Secretary (City Seal) APPROVED AS TO CONTENT: City Attorney 45194981.2 33 EXHIBIT A PAYING AGENT/REGISTRAR AGREEMENT See Document Number 4 EXHIBIT B PURCHASE CONTRACT See Document Number 5 EXHIBIT C to Ordinance DESCRIPTION OF ANNUAL FINANCIAL INFORMATION The following information is referred to in Section 37 of this Ordinance. Annual Financial Statements and Operating Data The financial information and operating data with respect to the City to be provided annually in accordance with such Section are as specified (and included in the Appendix or under the headings of the Official Statement referred to) below: 1. The financial statements of the City appended to the Official Statement as Appendix B, but for the most recently concluded fiscal year. 2. The information under Tables 1 through 6 and 8A through 17. Accounting Principles The accounting principles referred to in such Section are the generally accepted accounting principles as applicable to governmental units as prescribed by The Government Accounting Standards Board. 45194981.2 No Text PAYING AGENT/REGISTRAR AGREEMENT THIS AGREEMENT entered into as of July 11, 2002 (this "Agreement"), by and between the City of Lubbock, Texas (the "Issuer"), and JPMorgan Chase Bank, Dallas, Texas, a New York banking corporation organized and existing under the laws of the State of New York and authorized to do business in the State of Texas, or its successors, RECITALS WHEREAS, the Issuer has duly authorized and provided for the execution and delivery of its City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002A' (the "Securities"), dated July 1, 2002, and such Securities are scheduled to be delivered to the initial purchasers thereof on or about August 15, 2002; and WHEREAS, the Issuer has selected the Bank to serve as Paying Agent/Registrar in connection with the payment of the principal of, premium, if any, and interest on said Securities and with respect to the registration, transfer and exchange thereof by the registered owners thereof; and WHEREAS, the Bank has agreed to serve in such capacities for and on behalf of the Issuer and has full power and authority to perform and serve as Paying Agent/Registrar for the Securities; NOW, THEREFORE, it is mutually agreed as follows: ARTICLE ONE APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR Section 1.01 Appointment. The Issuer hereby appoints the Bank to serve as Paying Agent with respect to the Securities, and, as Paying Agent for the Securities, the Bank shall be responsible for paying on behalf of the Issuer the principal, premium (if any), and interest on the Securities as the same become due and payable to the registered owners thereof; all in accordance with this Agreement and the "Bond Resolution" (hereinafter defined), The Issuer hereby appoints the Bank as Registrar with respect to the Securities and, as Registrar for the Securities, the Bank shall keep and maintain for and on behalf of the Issuer books and records as to the ownership of said Securities and with respect to the transfer and exchange thereof as provided herein and in the "Bond Resolution". The Bank hereby accepts its appointment, and agrees to serve as the Paying Agent and Registrar for the Securities. Section 1.02 Compensation. As compensation for the Bank's services as Paying Agent/Registrar, the Issuer hereby agrees to pay the Bank the fees and amounts set forth in Annex A attached hereto for the first year of this Agreement and thereafter the fees and amounts set forth in the Bank's current fee schedule then in effect for services as Paying Agent/Registrar for municipalities, which shall be supplied to the Issuer on or before 90 days prior to the close of the Fiscal Year of the Issuer, and shall be effective upon the first day of the following Fiscal Year. 45195273.1 In addition, the Issuer agrees to reimburse the Bank upon its request for all reasonable expenses, disbursements and advances incurred or made by the Bank in accordance with any of the provisions hereof (including the reasonable compensation and the expenses and disbursements of its agents and counsel). ARTICLE TWO DEFINITIONS Section 2.01 Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: "Acceleration Date" on any Security means the date on and after which the principal or any or all installments of interest, or both, are due and payable on any Security which has become accelerated pursuant to the terms of the Security. "Bank Office" means the designated office of the Bank in Dallas, Texas at the address shown in Section 3.01 hereof. The Bank will notify the Issuer in writing of any change in location of the Bank Office. "Bond Resolution" means the resolution, order, or ordinance of the governing body of the Issuer pursuant to which the Securities are issued, certified by the Secretary or any other, officer of the Issuer and delivered to the Bank. "Fiscal Year" means the fiscal year of the Issuer, ending September 30th. "Holder" and "Security Holder" each means the Person in whose name a Security is registered in the Security Register. "Issuer Request" and . "Issuer Order" means a written request or order signed in the name of the Issuer by the Mayor, Mayor Pro Tem, City Manager, Deputy City Manager, Director of Finance, Cash and Debt Manager, or City Secretary, any one or more of said officials, and delivered to the Bank. "Legal Holiday" means a day on which the Bank is required or authorized to be closed. "Person" means any, individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision of a government. "Predecessor Securities" of any particular Security means every previous Security evidencing all or a portion of the same obligation as that evidenced by such particular Security (and, for the purposes of this definition, any mutilated, lost, destroyed, or stolen Security for which a replacement Security has been registered and delivered in lieu thereof pursuant to Section 4.06 hereof and the Resolution). 45195273.1 _2_ "Redemption Date" when used with respect to any Security to be redeemed means the date fixed for such redemption pursuant to the terms of the Bond Resolution. "Responsible Officer" when used with respect to the Bank means the Chairman or Vice -Chairman of the Board of Directors, the Chairman or Vice -Chairman of the Executive Committee of the Board of Directors, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, or any other officer of the Bank customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Security Register" means a register maintained by the Bank on behalf of the Issuer providing for the registration and transfers of Securities. "Stated Maturity" means the date specified in the Bond Resolution the principal of a Security is scheduled to be due and payable. Section 2.02 Other Definitions. The terms "Bank," "Issuer," and "Securities (Security)" have the meanings assigned to them in the recital paragraphs of this Agreement. The term "Paying Agent/Registrar" refers to the Bank in the performance of the duties and functions of this Agreement. ARTICLE THREE PAYING AGENT Section 3.01 Duties of Paying Agent As Paying Agent, the Bank shall, provided ' adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the principal of each Security at its Stated Maturity, Redemption Date, or Acceleration Date, to the Holder upon surrender of the Security to the Bank at the following address: P. O. Box 2320, Dallas, Texas 75221-2320 or 2001 Bryan Street, 9"' Floor, Dallas, Texas 75201, Attention: Operations. As Paying Agent, the -Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the interest on each Security when due, by computing the amount of interest to be paid each Holder and making payment thereof to the Holders of the Securities (or their Predecessor Securities) on the Record Date. All payments of principal and/or interest on the Securities to the registered owners shall be accomplished (1) by the issuance of checks, payable to the registered owners, drawn on the paying agent account provided in Section 5.05 hereof, sent by United States mail, first class, postage prepaid, to the address appearing on the Security Register or (2) by such other method, acceptable to the Bank, requested in writing by the Holder at ,the Holder's risk and expense. Section 3.02 Payment Dates. The Issuer hereby instructs the Bank to pay the principal of and interest on the Securities at the dates specified in the Bond Resolution. 45195273.1 -3- ARTICLE FOUR REGISTRAR Section 4.01 Security Register - Transfers and Exchanges. The Bank agrees to keep and maintain for and on behalf of the Issuer at the Bank Office books and records (herein sometimes referred to as the "Security Register") for recording the names and addresses of the Holders of the Securities, the transfer, exchange and replacement of the Securities and the payment of the principal of and interest on the Securities to the Holders and containing such other information as may be reasonably required by the Issuer and subject to such reasonable regulations as the Issuer and Bank may prescribe. All transfers, exchanges and replacement of Securities shall be noted in the Security Register. Every Security surrendered for transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer, the signature on which has been guaranteed by an officer of a federal or state bank or a member of the National Association of Securities Dealers, in form satisfactory to the Bank, duly executed by the Holder thereof or his agent duly authorized in writing. The Bank may request any supporting documentation it feels necessary to effect a re -registration, transfer or exchange of the Securities. To the extent possible and under reasonable circumstances, the Bank agrees that, in relation to an exchange or transfer of Securities, the exchange or transfer by the Holders thereof will be completed and new Securities delivered to the Holder or the assignee of the Holder in not more than three (3) business days after the receipt of the Securities to be cancelled in an exchange or transfer and the written instrument of transfer or request for exchange duly executed by the Holder, or his duly authorized agent, in form and manner satisfactory to the Paying Agent/Registrar. Section 4.02 Certificates. The Issuer shall provide an adequate inventory of printed Securities to facilitate transfers or exchanges thereof. The Bank covenants that the inventory of printed Securities will be kept in safekeeping pending their use and reasonable care will be exercised by the Bank in maintaining such Securities in safekeeping, which shall be not less than the care maintained by the Bank for debt securities of other governments or corporations for which it serves as registrar, or that is maintained for its own securities. Section 4.03 Form of Security Register. The Bank, as Registrar, will maintain the Security Register relating to the registration, payment, transfer and exchange of the Securities in accordance with the Bank's general practices and procedures in effect from time to time. The Bank shall not be obligated to maintain such Security Register in any form other than those which the Bank has currently available and currently utilizes at the time. The Security Register may be maintained in written form or in any other form capable of being converted into written form within a reasonable time. Section 4.04 List of Security Holders. The Bank will provide the Issuer at any time requested by the Issuer, upon payment of the required fee, a copy of the information contained in the Security Register. The Issuer may also inspect the information contained in the Security Register at any time the Bank is customarily open for business, provided that reasonable time is allowed the Bank to provide an up-to-date listing or to convert the information into written form. 45195273.1_ The Bank will not release or disclose the contents of the Security Register to any person _ other than to, or at the written request of, an authorized officer or employee of the Issuer, except upon receipt of a court order or as otherwise required by law. Upon receipt of a court order and prior to the release or disclosure of the contents of the Security Register, the Bank will notify the Issuer so that the Issuer may contest the court order or such release or disclosure of the contents of the Security Register. Section 4.05 Return of Cancelled Certificates. The Bank will, at such reasonable intervals as it determines, surrender to the Issuer, Securities in lieu of which or in exchange for which other Securities have been issued, or which have been paid. Section 4.06 Mutilated, Destroyed, Lost or Stolen Securities. The Issuer hereby instructs the Bank, subject to the provisions of Section 23 of the Bond Resolution, to deliver and issue Securities in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities as long as the same does not result in an overissuance. In case any Security shall be mutilated, or destroyed, lost or stolen, the Bank may execute and deliver a replacement Security of like form and 'tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Security, or in lieu of and in substitution for such destroyed lost or stolen Security, only upon the approval of the Issuer and after (i) the filing by the Holder thereof with the Bank of evidence satisfactory to the Bank of the destruction, loss or theft of such Security, and of the authenticity of the ownership thereof and (ii) the furnishing to the Bank of indemnification in an amount satisfactory to hold the Issuer and the Bank harmless. All expenses and charges associated with such indemnity and with the preparation, execution and delivery of a replacement Security shall be borne by the Holder of the Security mutilated, or destroyed, lost or stolen. Section 4.07 Transaction Information to Issuer. The Bank will, within a reasonable time after receipt of written request from the Issuer, furnish the Issuer information as to the Securities it has paid pursuant to Section 3.01, Securities it has delivered upon the transfer or exchange of any Securities pursuant to Section 4.01, and Securities it has delivered in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities pursuant to Section 4.06. ARTICLE FIVE THE BANK Section 5.01 Duties of Bank. The Bank undertakes to perform the duties set forth herein and agrees to use reasonable care in the performance thereof. Section 5.02 Reliance on Documents, Etc. (a) The Bank may conclusively rely, as to the truth of the statements and correctness of the opinions expressed therein, on certificates or opinions furnished to the Bank. (b) The Bank shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Bank was negligent in ascertaining the pertinent facts. (c) No provisions of this Agreement shall require the Bank to expend or risk its own funds or otherwise incur any financial liability for performance of any of its duties hereunder, or 45195273.1 r" in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is not assured to it. (d) The Bank may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, security, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. Without limiting the generality of the foregoing statement, the Bank need not examine the ownership of any Securities, but is protected in acting upon receipt of Securities containing an endorsement or instruction of transfer or power of transfer which appears on its face to be signed by the Holder or an agent of the Holder. The Bank shall not be bound to make any investigation into the facts or matters stated in a resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, security, or other paper or document supplied by Issuer. (e) The Bank may consult with counsel, and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection with respect to any action taken, suffered, or omitted by it hereunder in good faith and in reliance thereon. (f) The Bank may exercise any of the powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys of the Bank. Section 5.03 Recitals of Issuer. The recitals contained herein with respect to the Issuer and in the Securities shall be taken as the statements of the Issuer, and the Bank r assumes no responsibility for their correctness. The Bank shall in no event be liable to the Issuer, any Holder or Holders of any Security, or any other Person for any amount due on any Security from its own funds. Section 5.04 May Hold Securities. The Bank, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Issuer with the same rights it would have if it were not the Paying Agent/Registrar, or any other agent. Section 5.05 Moneys Held by Bank - Paying Agent Account/Collateralization. Money deposited by the Issuer with the Bank of the principal (or Redemption Price, if applicable) of or interest on any Securities shall be segregated from other funds of the Bank and the Issuer and shall be held in trust for the benefit of the Holders of such Securities. All money deposited with the Bank hereunder shall be secured in the manner and to the fullest extent required by law for the security of funds of the Issuer. Amounts held by the Bank which represent principal of and interest on the Securities remaining unclaimed by the owner after the expiration of three years from the date such amounts have become due.and payable shall be reported and disposed of by the Bank in accordance with the provisions of Texas law including, to the extent applicable, Title 6 of the Texas Property Code, as amended. The Bank shall have no liability by virtue of actions taken in compliance with this provision. The Bank is not obligated to pay interest on any money received by it hereunder. 45195273.1 so This Agreement relates solely to money deposited for the purposes described herein, and the parties agree that the Bank may serve as depository for other funds of the Issuer, act as trustee under indentures authorizing other bond transactions of the Issuer, or act in any other capacity not in conflict with its. duties hereunder. Section 5.06 Indemnification. To the extent permitted by law, the Issuer agrees to indemnify the Bank for, and hold it harmless against, any loss, liability, or expense incurred without negligence or bad faith on its part, arising out of or in connection with its acceptance or administration of its duties hereunder, including the cost and expense against any claim or liability in connection with the exercise or performance of any of its powers or duties under this Agreement. Section 5.07 Interpleader. The Issuer and the Bank agree that the Bank may seek adjudication of any adverse claim, demand, or controversy over its person as well as funds on deposit, in either a Federal or State District Court, located in the State and County where either the Bank Office or the administrative offices of the Issuer is located, and agree that service of process by certified or registered mail, return receipt requested, to the address referred to in Section 6.03 of this Agreement shall constitute adequate service. The Issuer and the Bank further agree that the Bank has the right to file a Bill of Interpleader in any court of competent jurisdiction in the State of Texas to determine the rights of any Person claiming any interest herein. Section 5.08 DT Services. It is hereby represented and warranted that, in the event the Securities are otherwise qualified and accepted for "Depository Trust Company" services or equivalent depository trust services by other organizations, the Bank has the capability and, to the extent within its control, will comply with the "Operational Arrangements", which establishes requirements for securities to be eligible for such type depository trust services, including, but not limited to, requirements for the timeliness of payments and funds availability, transfer turnaround time, and notification of redemptions and calls. ARTICLE SIX MISCELLANEOUS PROVISIONS Section 6.01 Amendment. This Agreement may be amended only by an agreement in writing signed by both of the parties hereto. Section 6.02 Assignment. This Agreement may not be assigned by either party without the prior written consent of the other. Section 6.03 Notices. ,Any request, demand, authorization, direction, notice, consent, waiver, or other document provided or permitted hereby to be given or furnished to the Issuer or the Bank shall be mailed or delivered to the Issuer or the Bank, respectively, at the addresses shown on page 9. Section 6.04 Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. Section 6.05 Successors and Assigns. All covenants and agreements herein by the Issuer shall bind its successors and assigns, whether so expressed or not. 45195273.1 _7_ Section 6.06 Severability. In case any provision herein shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 6.07 Benefits of Agreement Nothing herein, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy, or claim hereunder. Section 6.08 Entire Agreement. This Agreement and the Bond Resolution constitute the entire agreement between' the parties hereto relative to the Bank acting as Paying Agent/Registrar and if any conflict exists between this Agreement and the Bond Resolution, the Bond Resolution shall govern. Section 6.09 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. Section 6.10 Termination. This Agreement will terminate (i) on the date of final payment of the principal of and interest on the Securities to the Holders thereof or (ii) may be earlier terminated by either party upon sixty (60) days written notice; provided, however, an early termination of this Agreement by either party shall not be effective until (a) a successor Paying Agent/Registrar has been appointed by the Issuer and such appointment accepted and (b) notice given to the Holders of the Securities of the appointment of a successor Paying Agent/Registrar. Furthermore, the Bank and Issuer mutually agree that the effective date of an early termination of this Agreement shall not occur at any time which would disrupt, delay or otherwise adversely affect the payment of the Securities. Upon an early termination of this Agreement, the Bank agrees to promptly transfer and deliver the Security Register (or a copy thereof), together with other pertinent books and records relating to the Securities, to the! successor Paying Agent/Registrar designated and appointed by the Issuer. The provisions of Section 1.02 and of Article Five shall survive and remain in full force and effect following the termination of this Agreement. Section 6.11 Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Texas. 45195273.1 _$_ IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. JPMORGAN CHASE BANK, Dallas, Texas Title: ASSISTANT VICE PRESIDENT [SEAL] Address: 2001 Bryan Street, 10th Floor Dallas, Texas 75201 Attest: 0 - Title: 1e-,- e �yPS;dPy� CITY OF LUBBOCK, BY: Address: P. O. Box 290V Lubbock, as 79457 (CITY SEAL) Attest: City Secretary 45195273.1 -9- ' PJPMor9 an JPMorgan Chase Bank Issuer Administrative Services 2001 Bryan Street, 10th Floor Dallas, Texas 75201. July 8, 2002 Fee Schedule Paying Agent & Registrar Services City of Lubbock, TX $2,605,000 Tax and Sewer System Surplus Certificates of Obligation, Series 2002 Paying Agent & Registrar Services: Acceptance Fee Waived Annual Administration Fee $300 Notes: Please note charges for extraordinary expenses, including but not limited to, travel expenses and counsel fees, are billed to the issuer at cost. Administration fees include one annual audit confirmation without charge. Additional audit confirmations are billed at $75 per requested confirmation. In addition there is a $300 charge per bond call. The quoted fee is based on our understanding of the information and terms to date. As always, our acceptance of this appointment is subject to our internal credit review process and the review of final documentation furnished with respect to the debt financing. We reserve the right to revise this proposal should any material aspect of the transaction differ from our understanding. I - m D z,,,Nlombl Tag The Honorable Mayor and City of Lubbock 1625 13th St. Lubbock, Texas 79401 $2,605,000 =Y OF LUBBOCK, TEXAS ind Sewer System Surplus Revenue Certificates of Obligation, Series 2002A PURCHASE CONTRACT July 11, 2002 of the City Council Dear Mayor and Members of they City Council: A.G. Edwards & Sons, I>11c. (the "Underwriter"), offers to enter into this Purchase Contract with the City of Lubbock, Texas!(the "City"). This offer is made subject to the City's acceptance of this Purchase Contract on or befpre 9:00 p.m. Central Time on July 11, 2002. 1. Purchase and Sale of the Certificates. Upon the terms and conditions and upon the basis of the representations set forth herein, the Underwriter hereby agrees to purchase from the City, and the City hereby agrees to ell and deliver to the Underwriter, an aggregate of $2,605,000 principal amount of City of LubbPck, Texas Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002A (the "Certificates"). The Certificates shall have the maturities, interest rates and be subject to redemption in accordance with the provisions of Exhibit A hereto and shall be issued and secured under the provisions of the Ordinance (as defined below). The purchase price for the Certificates shall be $2,5961,931.92, representing the principal amount of the Certificates of $2,605,000.00, less an Underwriter's discount on the Certificates of $21,361.00, less an aggregate original issue discount on the Certificates of $661.65, and plus accrued interest in the amount of $13,954.57. i 2. Ordinance. The Certificates shall be as described in and shall be issued and secured under the provisions of the Ordnance authorizing the issuance and sale of the Certificates adopted by the City on July 11, 2002 (t a "Ordinance"). The Certificates shall be secured and payable as provided in the Ordinance. 3. Public OfferingIt shall be a condition of the obligations of the City to sell and deliver the Certificates to the Underwriter, and of the obligation of the Underwriter to purchase and accept delivery of the Certificat s, that the entire principal amount of the Certificates authorized by the Ordinance shall be sold and delivered by the City and accepted and paid for by the Underwriter at the Closing. The Underwriter agrees to make a bona fide public offering of all of the Certificates, at not in excess of the initial pubic offering prices, as set forth in the Official Statement; provided however at least ten percent (10%) of the principal amount of the Certificates of each maturity shall be sold to the "public" (exclusive of dealers, brokers and investment bankers, etc.) at the initial offering price set forth in the 0i cial Statement. 4. Security Deposit. Delivered to the City herewith is a corporate check of the Authorized Representative payable to the order of the City in the amount of $26,050. The City agrees to hold such check uncashed until the Closing to ensure the performance by the Underwriter of its obligation to purchase, accept delivery of and pay for the Certificates at the Closing. Concurrently with the payment b the Underwriter of the purchase price of the Certificates, the City shall return such check to the UnYerwriter as provided in Paragraphs 7 and 8 hereof. Should the City fail to deliver the Certificates at te Closing, or should the City be unable to satisfy the conditions of Un the obligation of the derwrite to purchase, accept delivery of and pay for the Certificates, as set forth in this Purchase Contract (unless waived by the Underwriter), or should such obligation of the Underwriter be terminated for ny reason permitted by this Purchase Contract, such check shall immediately be returned to the Jnderwriter. In the event the Underwriter fails (other than for a reason permitted hereunder) top irchase, accept delivery of and pay for the Certificates at the Closing as herein provided, such check s1 be retained by the City as and for full liquidated damages for such failure of the Underwriter andor any defaults hereunder on the part of the Underwriter. The Underwriter hereby agrees not to stop or cause payment on said check to be stopped unless the City has breached any of the terms of this Purchase Contract. 5. Official Statement. The Official Statement, including the cover pages and Appendices thereto, of the City, dated July 11, 2002, with respect to the Certificates, as further amended only in the manner herein provided, is hereinafter called the "Official Statement." The City hereby authorizes the Ordinanceland the Official Statement and the information therein contained to be used by the Underwriter in c?nnection with the public offering and sale of the Certificates. The City confirms its consent to the fuse by the Underwriter prior to the date hereof of the Preliminary Official Statement, relative to 1 the Certificates, dated July 2, 2002 (the "Preliminary Official Statement"), in connection with the preliminary public offering and sale of the Certificates, and it is "deemed final" as of its date, within the meaning, and for the purposes, of Rule 15c2-12 promulgated under authority granted by the f' deral Securities and Exchange Act of 1934 (the "Rule"). The City agrees to cooperate with the Underwriter to provide a supply of final Official Statements within seven business days of the date hereof n sufficient quantities to comply with the Underwriter's obligations under the Rule and the applicable rules of the Municipal Securities Rulemaking Board. The Underwriter will use its best efforts to assist the City in the preparation of the final Official Statement in order to ensure compliance with the aforementioned rules. If at any time after the d' to of this Purchase Contract but before the first to occur of (i) the date upon which the Underwriter notifies the City that the period of the initial public offering of the Certificates has expired or (ii) t date that is 90 days after the date hereof, any event shall occur that might or would cause the Offici Statement to contain any untrue statement of a material fact or to omit to state a material fact requ red to be stated therein or necessary to make the statements therein, 2 in the light of the circumstances under which they were made, not misleading, the City shall notify the Underwriter, and if, in the opinion of the Underwriter, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the City will at its expense supplement or amend the Official ;Statement in the form and in a manner approved by the Authorized Representative and furnish to the Underwriter a reasonable number of copies requested by the Underwriter in order to enable the Underwriter to comply with the Rule. To the best knowledge and belief of the City, the Official Statement contains information, including financial information or operating data, as required by the Rule. The City has not failed to comply with any undertaking specified in paragraph (b)(5)(i) of the Rule within the last five years. 6. Representations, Warranties and Agreements of the City. On the date hereof, the City represents, warrants and agrees as follows: (a) The City is a home rule municipality and a political subdivision of the State of Texas and a body politic and corporate, and has full legal right, power and authority to enter into this Purchase Contract, to adopt the Ordinance, to sell the Certificates, and to issue and deliver the Certificates to the Underwriter as provided herein and to carry out and consummate all other transactions contemplated by the Ordinance and this Purchase Contract; (b) By official action of the City prior to or concurrently with the acceptance hereof, the City has duly adopted the Ordinance, has duly authorized and approved the execution and delivery of and the performance by the City of the obligations contained in the Certificates and this Purchase Contract and has duly authorized and approved the performance by the City'of its obligations contained in the Ordinance and in this Purchase Contract; (c) The City is not in breach of or default under any applicable law or administrative regulation' of the State of Texas or the United States (including regulations of its agencies) or any applicable judgment or decree or any loan agreement, note, order, agreement or other instrument, except as may be disclosed in the Official Statement, to which the City is a party or to the knowledge of the City it is otherwise subject, that would have a material and adverse effect upon the business or financial condition of the City; and the execution and delivery of this Purchase Contract by the City and the execution and delivery of the Certificates and the adoption of the Ordinance by the City and compliance with the provisions of each thereof will not violate or constitute a breach of or default under any existing law, administrative regulation, judgment, decree or any agreement or other instrument to which the City is a party or, to the knowledge of the City, is otherwise subject; (d) All approvals, consents and orders of any governmental authority or agency having jurisdiction of any matter that would constitute a condition precedent to the performance by the City of its obligations to sell and deliver the Certificates hereunder will have been obtained prior to the Closing; I 3 r.. (e) At the time of the City's acceptance hereof and at the time of the Closing, the Official Statement does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (f) Between the date of this Purchase Contract and the Closing, the City will not, without the prior written consent of the Underwriter, issue any additional bonds, notes or other obligations for borrowed money payable in whole or in part from ad valorem taxes (except for the City's $10,$10,000 General Obligation Refunding Bonds, Series 2002 that are being sold concurrently with the Certificates), and the City will not incur any material liabilities, direct or contingent, nor will there be any adverse change of a material nature in the financial position of the City; (g) Except as described in the Official Statement, no litigation is pending or, to the knowledge of the City, threatened in any court affecting the corporate existence of the City, the title of its officers to their respective offices, or seeking to restrain or enjoin the issuance or delivery of the Certificates, the levy, collection or application of the ad valorem taxes and revenues of the City's Sewer System (the "System") pledged or to be pledged to pay the principal of and interest on the Certificates, or in any way contesting or affecting the issuance, execution, delivery, payment, security or validity of the Certificates, or in any way contesting or affecting the validity or enforceability of the Ordinance or this Purchase Contract, or contesting the powers of the City, or any authority for the Certificates, the Ordinance or this Purchase Contract or contesting in any way the completeness, accuracy or fairness of the Preliminary Official Statement or the Official Statement; (h) The City will cooperate with the Underwriter in arranging for the qualification of the Certificates for sale and the determination of their eligibility for investment under the laws of such jurisdictions as the Underwriter designates, and will use its best efforts to continue such qualifications in effect so long as required for distribution of the Certificates; provided, however, that the City will not be required to execute a consent to service of process or to qualify to do business in connection with any such qualification in any jurisdiction; (i) The descriptions ofthe Certificates and the Ordinance contained in the Official Statement accurately summarize certain provisions of such instruments, and the Certificates, when validly executed, authenticated and delivered in accordance with the Ordinance and sold to the Underwriter as provided herein, will be validly issued and outstanding obligations of f the City entitled to the benefits of, and subject to the limitations contained in, the Ordinance; (j) If prior to the Closing an event occurs affecting the City that is materially adverse for the purpose for which the Official Statement is to be used and is not disclosed in the Official Statement, the City shall notify the Underwriter, and if in the opinion of the City and the Underwriter such event requires a supplement or amendment to the Official 4 Statement, the City will supplement or amend the Official Statement in a form and in a manner approved by the Underwriter; (k) The financial statements contained in the Official Statement present fairly the financial position of the City as of the date and for the period covered thereby and are stated on a basis substantially consistent with that of the prior year's audited financial statements; (1) Any certificate signed by any official of the City and delivered to the Underwriter shall be deemed a representation and warranty by the City to the Underwriter as to the truth of the statements therein contained; (m) The City has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is a bond issuer whose arbitrage certifications may not be relied upon; and (n) The City will not knowingly take or omit to take any action, which action or omission will in any way cause the proceeds from the sale of the Certificates to be applied in a manner other than as provided in the Ordinance or that would cause the interest of the Certificates to be includable in gross income of the holders thereof for federal income tax purposes. 7. Closing. At 10:00 A.M., Central Time, on August 15, 2002 (the "Closing"), the City will deliver the initial Certificates: (as defined in the Ordinance) to the Underwriter and the City shall take appropriate steps to provide DTC with one definite securities certificate for each year of maturity of the Certificates, and to provide the Underwriter with the other documents hereinafter mentioned. On or prior to the date of Closing, the Underwriter shall make arrangements with The Depository Trust Company ("DTC") for the.Certificates to be immobilized and thereafter traded as book -entry only securities and on the date of Closing the Underwriter will accept such delivery and pay the purchase price of the Certificates as set forth in Paragraph 1 hereof in immediately available funds. Concurrently with such payment by the Underwriter, the City shall return to the Authorized Representative the check referred to in paragraph 4 hereof. Delivery and payment as aforesaid shall be made at the office of the paying agent/registrar, as noted in the Official Statement, or such other place as shall have been mutually agreed upon by the City and the Underwriter. 8. Conditions. The'Underwriter has entered into this Purchase Contract in reliance upon the representations and warranties of the City contained herein and to be contained in the documents and instruments to be delivered at the Closing, and upon the performance by the City of its obligations hereunder, both as of the date hereof and as of the date of Closing. Accordingly, the Underwriter's obligations under this Purchase Contract to purchase and pay for the Certificates shall be subject to the performance by the City of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the following conditions: l 5 (a) The representations and warranties of the City contained herein shall be true, complete and correct in all material respects on the date hereof and on and as of the date of Closing, as if made on the date of Closing; (b) At the time of the Closing, (i) the Ordinance shall be in full force and effect, and the Ordinance shall not have been amended, modified or supplemented and the Official Statement shall not have been amended, modified or supplemented, except as may have been agreed to by the Underwriter; and (ii) the net proceeds of the sale of the Certificates shall be deposited and applied as described in the Official Statement and in the Ordinance; (c) At the time of the Closing, all official action of the City related to the Ordinance shall be in fully force and effect and shall not have been amended, modified or supplemented; (d) The City shall not have failed to pay principal or interest when due on any of its outstanding obligation for borrowed money; j (e) At or prior to the Closing, the Underwriter shall have received each of the following documents: (1) The Official Statement of the City executed on behalf of the City by the Mayor and City Secretary; (2) The Ordinance certified by the City Secretary under the seal ofthe City as having been duly adopted by the City and as being in effect, with such changes or amendments as n}ay have been agreed to by the Underwriter, the Ordinance shall contain the agreement of the City, in form satisfactory to the Underwriter, that is described under the caption "Continuing Disclosure ofInformation" in the Preliminary Official Statement; (3) The opinion, dated the date of Closing, of Fulbright & Jaworski L.L.P. ("Bond Counsel") in substantially the form and substance of Appendix C to the Official Statement; (4) An opinion or certificate, dated on or prior to the date of Closing, of the Attorney General of Texas, approving the Certificates as required by law and the registration certificate of the Comptroller of Public Accounts of the State of Texas; (5) The supplemental opinion or opinions, dated the date of Closing, of Bond Counsel, addressed to the City and the Underwriter, which provides that the Underwriter may fely upon the opinion of Bond Counsel delivered in accordance with the provisions oil paragraph 8(f)(3) hereof, and opining to the effect that (a) the Purchase Contr4t has been duly authorized, executed and delivered by the City and (assuming due authorizationby the Underwriter) constitutes a binding and enforceable 6 r- agreement of the; City in accordance with its terms; (b) in its capacity as Bond Counsel, such firm has reviewed the information in the Official Statement under the captions or subcaptions "The Certificates" (exclusive of the information under the subcaptions "Bbo,k-Entry Only System" and "Bondholders' Remedies"), "Tax Matters," "Continuing Disclosure of Information" (exclusive ofthe information under the subcaption "CQmpliance with Prior Undertakings"), "Legal Matters" (exclusive of the last two sentences of the first paragraph thereof) and "Legal Investments and Eligibility to Secure Public Funds in Texas" and such firm is of the opinion that such descriptions present a fair and accurate summary of the provisions of the laws and instruments therein described and, with respect to the Certificates, such information conforms to the 6rdinance; and (c) the Certificates are exempt from registration pursuant to the Securities Act of 1933, as amended, and the Ordinance is exempt from qualification as an indenture pursuant to the Trust Indenture Act of 1939, as amended; (6) Ari opinion of McCall, Parkhurst & Horton L.L.P., Underwriters' Counsel addressed to the Underwriters, and dated the date of Closing in substantially the form attached 'hereto as Exhibit C; (7) A ;certificate, dated the date of Closing, signed by the Mayor and Finance Director �f the City, to the effect that (i) the representations and warranties of the City contained herein are true and correct in all material respects on and as of the date of Closing as if made on the date of Closing; (ii) except to the extent disclosed in the Official Statement, no litigation is pending or, to the knowledge of such persons, threatened in any court to restrain or enjoin the issuance or delivery of the Certificates, c r the levy, collection or application of the ad valorem taxes and revenues of the System. pledged or to be pledged to pay the principal of and interest on the Certificates, or the pledge thereof, or in any way contesting or affecting the validity ofthe Certificates, the Ordinance or this Purchase Contract, or contesting the powers of the City or the authorization of the Certificates or the Ordinance, or contesting in any way the accuracy, completeness or fairness ofthe Official Statement (but in lieu of or i{ conjunction with such certificate, the Underwriter may, in its sole discretion, accept certificates or opinions of the City Attorney that, in the opinion thereof, the issues raised in any such pending or threatened litigation are without substance or that the contentions of all plaintiffs therein are without merit); (iii) to the best of their knowledge, no event affecting the City has occurred since the date ofthe Official Statement that should be disclosed in the Official Statement for the purpose for which it is to be used or that it is necessary to disclose therein in order to make the statements and information therein not misleading in any respect; and (iv) that there has not been any!material and adverse change in the affairs or financial condition of the City since September 30, 2001, the latest date as to which audited financial information is 7 (8) An dated the date of n of the City Attorney addressed to the Underwriter and substantially in the form and substance of Exhibit B hereto; (9) A certificate, dated the date of the Closing, of an appropriate officer of the City to the a ect that, on the basis of the facts, estimates and circumstances in effect on the date of delivery of the Certificates, it is not expected that the proceeds of the Certificates; will be used in a manner that would cause the Certificates to be arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended; (10) Evidence of the rating on the Certificates, which shall be "Aaa" by Moody's Investors Service, Inc. ("Moody's"), "AAA" by Standard and Poor's Corporation, a di Sion of the McGraw-Hill Companies, Inc. ("W"), and "AAA" by Fitch Ratings ("Fitch"), shall be delivered in a form acceptable to the Underwriter; (11) A �opy of the policy of municipal bond insurance issued by MBIA Insurance Corpor tion with respect to the Certificates; and (12) Su` h additional legal opinions, certificates, instruments and other documents as Bond Counsel or the Underwriter may reasonably request to evidence the truth, accuracy and completeness, as of the date hereof and as of the date of Closing, of theCity's representations and warranties contained herein and of the statements and ' ormation contained in the Official Statement and the due performance and satisfaction by the City at or prior to the date of Closing of all agreements then to be performed and all conditions then to be satisfied by the City. certificates, instruments and other documents mentioned above All of the opinions, letter, or elsewhere in this Purchase Coract shall be deemed to be in compliance with the provisions hereof if, but only if, they are satisfactory to the Underwriter. If the City shall be unabl to satisfy the conditions to the obligations of the Underwriter to purchase, to accept delivery of a d to pay for the Certificates as set forth in this Purchase Contract, or if the obligations of the Un erwriter to purchase, to accept delivery of and to pay for the Certificates shall be terminated or any reason permitted by this Purchase Contract, this Purchase Contract shall terminate, the sec rity deposit referred to in Paragraph 4 of this Purchase Contract shall be returned to the Authorized Representative and neither the Underwriter nor the City shall be under further obligation hereu der, except that the respective obligations of the City and the Underwriter set forth in Paragra hs 10 and 12 hereof shall continue in full force and effect. 9. Vermination. 7 before the Closing if any of the (a) (i) Le or recommended to Underwriter may terminate its obligation to purchase at any time iowina should occur: ;ion shall have been enacted by the Congress of the United States, Congress for passage by the President of the United States or favorably reported for passage to either House of the Congress by any Committee of such House; or (ii) a decisions all have been rendered by a court established under Article III of the Constitution of the United States or by the United States Tax Court; or (iii) an order, ruling or regulation shall have been issued or proposed by or on behalf of the Treasury Department of the United States or the Internal Revenue Service or any other agency of the United States; or (iv) a re ease or official statement shall have been issued by the President of the United States or by the Treasury Department of the United States or by the Internal Revenue Service, the effect ofwhich, in any such case described in clause (i), (ii), (iii), or (iv), would be to impose, directly or indirectly, federal income taxation upon interest received on obligations of the gener 1 character of the Certificates or upon income of the general character to be derived b the City, other than any imposition of federal income taxes upon interest received on obligations of the general character as the Certificates on the date hereof and other than as disclose I in the Official Statement, in such a manner as in the judgment of the Authorized Representative would materially impair the marketability or materially reduce the market price of obligations of the general character of the Certificates. (b) Any action shall have been taken by the Securities and Exchange Commission or by a court that would require registration of any security under the Securities Act of 193 3, as amended, or qualification of any indenture under the Trust Indenture Act of 1939, as amended, in connection th the public offering of the Certificates, or any action shall have been taken by any courl or by any governmental authority suspending the use of the Preliminary Official State rnent or the Official Statement or any amendment or supplement thereto, or any proceedin for that purpose shall have been initiated or threatened in any such court or by any such auth mity. (c) (i) The Co stitution of the State of Texas shall be amended or an amendment shall be proposed; or (ii) legislation shall be enacted; or (iii) a decision shall have been rendered as to matters o Texas law; or (iv) any order, ruling or regulation shall have been issued or proposed by or on behalf of the State of Texas by an official, agency or department thereof, affecting the tax status of the City, its property or income, its bonds or other obligations (including the Certificates) or the interest thereon, that in the judgment of the Authorized Representative would materially affect the market price of the Certificates. (d) (i) A general suspension of trading in securities shall have occurred on the New York Stock Exchan e; or (ii) the United States shall have become engaged in hostilities (including the escalation f any hostilities existing on the date hereof, whether foreseeable), the effect of which, in eit ier case described in clause (i) and (ii), that, in the judgment of the -, Authorized Representati e, would materially affect the market price of the Certificates. (e) There shill have occurred any (i) new material outbreak of hostilities (including, without limit tion, an act of terrorism) or (ii) new material other national or international calamity or risis, or any material adverse change in the financial, political or economic conditions affe ting the United States, including, but not limited to, an escalation of hostilities that existe prior to the date hereof or (iii) material adverse change in the 9 r financial markets in the .ted States, and the effect of any such event on the financial markets of the United States shall be such as would make it impracticable, in the reasonable judgment of the Underwriter, for the Underwriter to sell the Certificates on the terms and in the manner contemplated y the Official Statement. (f) An event d scribed in Paragraph 60) hereof occurs that, in the opinion of the Authorized Representativ 'requires a supplement or amendment to the Official Statement that is deemed by them, in heir discretion, to adversely affect the market for the Certificates. (g) A general banking moratorium shall have been declared by authorities of the United States, the State o New York or the State of Texas. (h) Alowering of the ratings of "Aaa," "AAA" and "AAA," initially assigned to the Certificates by Mood 's, S&P and Fitch, respectively, shall occur prior to the Closing. 10. Expenses. (a) Certificates, including but not 1 the Preliminary Official Staten printing of the Certificates; (iii) disbursements of the City's acc by the City; (v) the fees for the t and (vi) the premium for muni City shall pay all expenses incident to the issuance of the ed to: (i) the cost of the preparation, printing and distribution of and the Official Statement; (ii) the cost of the preparation and fees and expenses of Bond Counsel to the City; (iv) the fees and tants, advisors, and of any other experts or consultants retained ratings and any travel or other expenses incurred incident thereto bond insurance policy pertaining to the Certificates. (b) The Underwriter ' hall pay (i) all advertising expenses in connection with the offering ofthe Certificates; (ii) the cost of he preparation and printing of all the underwriting documents; and (iii) the fee of McCall, Parkhurs & Horton L.L.P. for such firm's opinion required by Paragraph 8(e)(6) hereof. 11. Notices. Any n tice or other communication to be given to the City under this Purchase Contract may be given y delivering the same in writing at the address for the City set forth above, and any notice or other c mmunication to be given to the Underwriter under this Purchase Contract may be given by delivering the same in writing to A.G. Edwards & Sons, Inc., One N. Jefferson, 7th Floor, St. Louis, Missouri 63103, Attention: Mark Shamleffer. 12. Parties in Interest. This Purchase Contract is made solely for the benefit of the City and the Underwriter (including the successors or assigns of the Underwriter) and no other person shall acquire or have any right under this contract. The City's representations, warranties and agreements contained in this Purchase Contract that exist as of the Closing, and without regard to any change in fact or circumst a occurring subsequent to the Closing, shall remain operative and in full force and effect, regardless of (i) any investigations made by or on behalf of the Underwriter, and (ii) delivery of any payment for the Certificates hereunder; and the City's representations and warranties contained in Paragraph 6 of this Purchase Contract shall remain operative and in full force and effect, regardless of any to 'nation of this Purchase Contract. 10 13. Severability. If be or shall, in fact, be invalid, in jurisdiction or jurisdictions, or i constitution, statute, rule of publ. effect of rendering the provision or circumstances, or of renderir whatever. y provision of this Purchase Contract shall be held or deemed to )erative or unenforceable as applied in any particular case in any all jurisdictions because it conflicts with any provisions of any policy, or any other reason, such circumstances shall not have the i question invalid, inoperative or unenforceable in any other case any other provision inoperative or unenforceable to any extent 14. Choice of Law. I This Purchase Contract shall be governed by and construed in accordance with the laws of the State of Texas. 15. Execution in Cot nterparts. This Purchase Contract may be executed in any number of counterparts, all of which take i together shall constitute one and the same instrument, and any of the parties hereto may execute tf. is Purchase Contract by signing any such counterpart. 16. Section Heading . Section headings have been inserted in this Contract as a matter of convenience of reference onl , and it is agreed that such section headings are not a part of this Contract and will not be used in fhe interpretation of any provisions of this Contract. 17. Status of the Un Contract and the transactions cc acted solely as an independent fiduciary or agent to or for the recognizes that the Underwriter the Certificates. riter. It is understood and agreed that for all purposes of this plated hereby the Underwriter has, in its role as underwriter, .ctor and has not acted as a financial or investment advisor, whether directly or indirectly through any person. The City -ts to profit from the acquisition and potential distribution of 11 18. Effective Date. Th IS Purchase Contract shall become effective upon the execution of the acceptance hereof by the Mayor of the City and shall be valid and enforceable as of the time of such acceptance. Very truly yours, A.G. Ec By: Title: Accepted: This 11th day of July, 2002 By. ' ze riz Mayor City of Lubbock, T 12 Schedule of Maturiti Tax u Maturity (2/15) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 The Certificates maturing on, at the option of the City on F interest to the date of redemi EXHIBIT A Interest Rates, Yields and Redemption Provisions City of Lubbock, Texas ad Sewer System Surplus Revenue Ficates of Obligation, Series 2002A Principal Interest Rate Yield Amount (%) 75,000 4.000 1.46 90,000 4.000 2.00 95,000 4.000 2.51 95,000 4.000 2.87 100,000 4.000 3.17 105,000 3.450 3.49 110,000 3.650 3.69 115,000 3.875 3.89 120,000 4.050 4.05 120,000 4.150 4.15 130,000 4.200 4.27 135,000 4.300 4.40 140,000 4.400 4.50 145,000 4.500 4.60 150,000 4.600 4.70 160,000 4.700 4.80 165,000 4.800 4.90 175,000 5.000 5.00 185,000 5.000 5.06 195,000 5.000 5.12 after February 15, 2014 are subject to redemption prior to maturity xary 15, 2013, or any date thereafter, at a price of par plus accrued A-1 A.G. Edwards & Sons, Inc. One N. Jefferson 7th Floor St. Louis, Missouri 63103 Ladies and Gentlemen: I am the City Attorney fo and sale of the "City of Lubboc Obligation, Series 2002A," in tl pursuant to the provisions of an 2002 (the "Ordinance"). Capita] assigned in the Purchase Contra .-:R1r:� OF THE CITY ATTORNEY August 15, 2002 the City of Lubbock, Texas (the "City") at the time of the issuance ;, Texas Tax and Sewer System Surplus Revenue Certificates of e aggregate principal amount of $2,605,000 (the "Certificates"), )rdinance duly adopted by the City Council of the City on July 11, zed terms not otherwise defined in this opinion have the meanings In my capacity as City A ttorney to the City, I have reviewed such agreements, documents, certificates, opinions, letters, and other papers as I have deemed necessary or appropriate in rendering the opinions set forth below. In making my review, I, have assumed the authenticity of all documents and agreements submitted to me as originals co ormity to the originals of all documents and agreements submitted to me as certified or photostatic opies, the authenticity of the originals of such latter documents and agreements, and the accuracy o the statement contained in such documents. Based upon the foregoing, and subject to the qualifications and exceptions hereinafter set forth, I am of the opinion that under the applicable laws of the United States of America and the State of Texas in force and effect on I he date hereof: Based on reasonable inq liry made of the responsible City employees and public officials, the City is not, to the best o my knowledge, in breach of or in default under any applicable law or administrative regula ion of the State of Texas or the United States, or any applicable judgment or decree or an trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other inst ment to which the City is party or is otherwise subject and, to the best of my knowledge a ler due inquiry, no event has occurred and is continuing that, with the passage of time ort le giving of notice, or both, would constitute such a default by the City under any of the foregoing; and the execution and delivery of the Purchase Contract and the Certificates, and thadoption of the Ordinance and compliance with the provisions of each of such aareementl or instruments does not constitute a breach of or default under any applicable law or admi strative regulation of the State of Texas or the United States or any applicable judgment or decree or, to the best of my knowledge, any trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the City is a party or is otherwise subject; and B-1 2. Except as disclosed in th threatened, in any court i members of the City Cot issuance or delivery of ar to pay the principal of an or enforceability of the ( the powers of the City o of the Ordinance, or (e condition of the City, ii Drainage Utility System This opinion is furnished hereof or anyone to whom Official Statement, no litigation is pending, or, to my knowledge, any way (a) challenging the titles of the Mayor or any of the other cil to their respective offices, (b) seeking to restrain or enjoin the of the Certificates, or the collection of taxes levied or to be levied interest on the Certificates, (c) contesting or affecting the validity :rtificates, the Ordinance or the Purchase Contract (d) contesting any authority for the issuance of the Certificates, or the adoption that would have a material and adverse effect on the financial Juding, particularly on the financial condition of the Municipal f the City. ely for your benefit and may be relied upon only by the addresses permission is given in writing by me. Very truly yours, B-2 Exhibit C Proposed of Underwriter's Counsel Opinion of Parkhurst & Horton L.L.P. A.G. Edwards & Sons, Inc. One N. Jefferson 7th Floor St. Louis, Missouri 63103 Re: $2,605,000 City of Obligation, Series Ladies and Gentlemen: August 15, 2002 Texas Tax and Sewer System Surplus Revenue Certificates of We have acted as counsel for you as the underwriters of the Certificates of Obligation described above (the "Certificates"), issued under and pursuant to an ordinance (the "Ordinance") of the City of Lubbock, Texas (the "Issuer"), authorizing the issuance, of the Certificates, which Certificates you are purchasing pursuant to a Purchase Contract, dated July 11, 2002. All capitalized undefined terms used herein sha4 have the meaning set forth in the Purchase Contract. In connection with this 01 linion letter, we have considered such matters of law and of fact, and have relied upon such CertificE tes and other information furnished to us, as we have deemed appropriate as a basis for our op nion set forth below. We are not expressing any opinion or views herein on the authorization, issui nce, delivery, validity of the Certificates and we have assumed, but not independently verified, tha the signatures on all documents and Certificates that we have examined are genuine. Based on and subject to the foregoing, we are of the opinion that, under existing laws, the Certificates are not subject to the registration requirements ofthe Securities Act of 1933, as amended, and the Ordinance is not required to be qualified under the Trust Indenture Act of 1939, as amended. Because the primary pi establish factual matters, and b determinations involved in the p Statement") and because the i ENTRY ONLY SYSTEM," with Prior Undertakings" and E been engaged to review or pro, responsibility for, except as set f or fairness ofthe statements coi and exhibits thereto) and we accuracy, completeness or fair Statement, we had discussions Statement. In the course of of counsel, we had discussions w Counsel and Financial Advisor pose of our professional engagement as your counsel was not to cause of the wholly or partially nonlegal character of many of the eparation ofthe Official Statement dated July 11, 2002 (the "Official formation in the Official Statement under the headings "BOOK - AX MATTERS," "CONTINUING DISCLOSURE — Compliance ppendices B, C, and D thereto were prepared by others who have ide such information, we are not passing on and do not assume any firth in the last sentence of this paragraph, the accuracy, completeness .ained in the Official Statement (including any appendices, schedules nake no representation that we have independently verified the ess of such statements. In the course of our review of the Official lith representatives of the City regarding the contents of the Official r participation in the preparation of the Official Statement as your .h representatives of the Issuer, including its City Attorney, Bond regarding the contents of the Official Statement. In the course of C-1 n such activities, no facts came to c (except for the financial statemi information set forth under the b "CONTINUING DISCLOSURI D thereto, as to which we expr( material fact or omitted to state light of the circumstances under This opinion letter may to which reference is made ab, purposes whatsoever without ,r attention that would lead us to believe that the Official Statement its and other financial and statistical data contained therein, the adings "BOOK -ENTRY ONLY SYSTEM," "TAX MATTERS;" — Compliance with Prior Undertakings" and Appendices B, C and is no opinion), as of its date contained any untrue statement of a any material fact necessary to make the statements therein, in the vhich they were made, not misleading. relied upon by only you and only in connection with the transaction and may not be used or relied upon by any other person for any prior written consent. Respectfully, C-2 I � i • NEW ISSUE - Book -Entry -Only In the opinion of Bond Counsel, interest purposes under existing law, subject to the tax on corporations. THE OFFICIAL STATEMENT Ratings: Moody's: "Aaa/Aa2" Dated July 11, 2002 S&P: "Aaa/AA+" Fitch: "Aaa/AA+" MBIA Insured -See ("Bond Insurance" and "Other Information -Ratings" herein) the Certificates will be excludable from gross income for federal income tax otters described under "Tax Exemption" herein, including the alternative minimum 'IFICATES WILL NOT BE DESIGNATED AS LIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS $2,605,000 CITY OF LUBBOCK, TEXAS (Lubbock County) TAX ASD SEWER SYSTEM SURPLUS REVENUE CERTI FICATES OF OBLIGATION, SERIES 2002A Dated Date: July 1, 2002 PAYMENT TERMS ... Interest on the $2,6 of Obligation, Series 2002A (the "Certific 15 and August 15 of each year commenci: of twelve 30 -day months. The definitive C The Depository Trust Company ("DTC") the Certificates may be acquired in den Certificates will be made to the owners by the Paying Agent/Registrar to Cede & of DTC for subsequent payment to the be herein. The initial Paying Agent/Reg Agent/Registrar"). Due: February 15, as shown on inside cover page ,000 City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates :s") will accrue from July 1, 2002, (the "Dated Date") and will be payable February February 15, 2003, and will be calculated on the basis of a 360 -day year consisting ificates will be initially registered and delivered only to Cede & Co., the nominee of irsuant to the Book -Entry -Only System described herein. Beneficial ownership of Iinations of $5,000 or integral multiples thereof. No physical delivery of the :reof. Principal of, premium, if any, and interest on the Certificates will be payable �., which will make distribution of the amounts so paid to the participating members ficial owners of the Certificates. See "The Certificates - Book -Entry -Only System" rar is JPMorgan Chase Bank, Dallas, Texas (see "The Certificates - Paying AUTHORITY FOR ISSUANCE ... The Certificates are issued pursuant to the Constitution and general laws of the State of Texas, (the "State") particularly Subchapter C of Chapter 271, Texas Local Government Code (the Certificate of Obligation Act of 1971), as amended, and constitute direct obligations of the City of Lubbock, Texas (the "City"), payable from a combination of (i) the levy and collection of a direct and cc ntinuing ad valorem tax, within the limits prescribed by law, on all taxable property within the City, and (ii) a pledge of surplus net revenues of the City's Sewer System, as provided in the ordinance authorizing the Certificates (the "Ordinance") (see "The Certificates - Authority for Issuance"). PURPOSE ... Proceeds from the sale of the certificates will be used for Sewer System improvements and to pay costs associated with issuance of the Certificates. /f/IQL4 Payment of the principal of and interest on the Certificates when due will be insured by a municipal bond insurance policy to be issued by MBIA Insurance Corporation simultaneously with the delivery of theCertificates. SEE MATURITY SCHE]bULE AND REDEMPTION PROVISIONS ON THE REVERSE OF THIS PAGE LEGALITY ... The Certificates are offered for delivery when, as and if issued and received by the Underwriter and subject to the approving opinion of the Attorney Gener 1 of Texas and the opinion of Fulbright & Jaworski L.L.P., Bond Counsel, Dallas, Texas (see Appendix C, "Form of Bond Counsel's Opinion"). Certain legal matters will be passed upon for the Underwriter by McCall, Parkhurst & Horton L.L.P., Dallas Texas, Counsel for the Underwriter. DELIVERY ... It is expected that the will be available for delivery through the DTC on August 15, 2002. ' A.G. EDWARDS & SONS, INC. MATURITY SCHEDULE Maturity Price or j Amount F b (Accrued Interest from July 1, 2002 to be ad OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem Certi: February 15, 2014, in whole or in part in principal amounts of $5,000 or any integral any date thereafter, at the par value thereof plus accrued interest to the date of red Redemption"). Maturity ( e ruary 15) Rate Yield Amount $ 75,000 2003 4.000% 1.460% $ 130,000 90,000 2004 4.000% 2.000% 135,000 95,000 2005 4.000% 2.510% 140,000 95,000 2006 4.000% 2.870% 145,000 100,000 2007 4.000% 3.170% 150,000 105,000 2008 3.450% 3.490% 160,000 110,000 2009 3.650% 3.690% 165,000 115,000 2010 3.875% 3.890% 175,000 120,000 2011 4.050% 4.050% 185,000 120,000 2012 4.150% 4.150% 195,000 (Accrued Interest from July 1, 2002 to be ad OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem Certi: February 15, 2014, in whole or in part in principal amounts of $5,000 or any integral any date thereafter, at the par value thereof plus accrued interest to the date of red Redemption"). Maturity Price or (February 15) Rate Yield 2013 4.200% 4.270% 2014 4.300% 4.400% 2015 4.400% 4.500% 2016 4.500% 4.600% 2017 4.600% 4.700% 2018 4.700% 4.800% 2019 4.800% 4.900% 2020 5.000% 5.000% 2021 5.000% 5.060% 2022 5.000% 5.120% having stated maturities on and after Ile thereof, on February 15, 2013, or in (see "The Certificates - Optional No dealer, broker, salesman or other person has bee 'authorized by the City to give any information, or to make any representations other than those contained in this Oficial Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the City. This Oficial Statement does not constitute an offer to sell Certificates in any jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction. Certain information set forth herein has been oblaine d from the City and other sources which are believed to be reliable but is no guaranteed as to accuracy or completeness, and is not to be co trued as a representation by the Financial Advisor.Any information and expressions of opinion herein contained are subject to change with ,ut notice, and neither the delivery of this Oficial Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or other matters described herein since the date hereof. See "CONTINUING DISCLO URE OF INFORMATION" for a description of the City's undertaking to provide certain information on a continuing basis. THE CERTIFICATES ARE EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTEREDTHEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE CERTIFICATES IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTION IN WHICH THESE SECURITIES HAVE BEEN REGISTERED OR EXE , TED SHOULD NOT BE REGARDED ASA RECOMMENDATION THEREOF. NEITHER THE CITY NOR THE UNDERWRITER ALI KE ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT RE ARDING THE DEPOSITORY TRUST COMPANY OR ITS BOOK ENTRY- ONLY SYSTEM, AS SUCH INFORMATION HAS BEEN FURNISHED BY THE DEPOSITORY TRUST COMPANY IN CONNECTION WITH THE OFFERING OF THE CERTIFICATES OR INFORMATION UNDER THE CAPTION "MUNICIPAL BOND INSURANCE" REGARDING MBIA INSURANCE CORPORATION AND ITS INSURANCE POLICY FQ R THE BONDS, AS SUCH INFORMATION WAS FURNISHED BY MBIA INSURANCE CORPORATION. THE UNDERWRITER MAY OVER-ALLOT OR EF CT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE CERTIFICATES ATA LEVEL ABOVE THAT WHIC MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAYBE DISCONTINUED AT ANY TIME TABLE OF CONTENTS CAPITAL IMPROVEMENT PROGRAM....................................30 OFFICIAL STATEMENT SUMMARY....................................4 TABLE 15 -CURRENT INVESTMENTS .................................. 33 CITY OFFICIALS, STAFF AND CONSULTA S.................6 THE SYSTEM ............................................................................ 34 ELECTED OFFICIALS...........................................................6 SELECTED ADMINISTRATIVE STAFF....................................6 SEWER SYSTEM ....................................................................... 34 CONSULTANTS AND ADVISORS...........................................6 TABLE 16 - HISTORIC SEWER PLANT TREATMENT ............. 34 TABLE 17 - MONTHLY SEWER RATES................................35 INTRODUCTION................................................... 1...................7 TABLE 18 - SEWER SYSTEM CONDENSED STATEMENT OF THECERTIFICATES...............................................................7 OPERATIONS ............................................................ 35 MUNICIPAL BOND INSURANCE ..................... .................13 TAX MATTERS ......................................................................... 37 TAXINFORMATION ........................................... I .................15 OTHER INFORMATION ......................................................... 39 TABLE I - VALUATION, EXEMPTIONS AND ENERAL RATINGS.............................................................................39 OBLIGATIONDEBT .............................. .................. 18 LITIGATION........................................................................39 TABLE 2 - TAXABLE ASSESSED VALUATION BY REGISTRATION AND QUALIFICATION OF CERTIFICATES FOR ..................20 SALE ........................................................................39 CATEGORY.......................................... TABLE 3A -VALUATION AND GENERAL OB].iGATION DEBT LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC HISTORY .............................................. ..................21 FUNDS IN TEXAS......................................................39 ................ TABLE 3B - DERIVATION OF GENERAL OSE FUNDED LEGAL MATTERS...............................:................................39 TAX DEBT ............... 21 CONTINUING DISCLOSURE OF INFORMATION .....................40 ......................... N HISTORY 21 FINANCIAL ADVISOR..........................................................41 TABLE 4 - TAX RATE, LEVY AND COLLECTI TABLE 5 - TEN LARGEST TAXPAYERS ......... :.................. 22 FORWARD-LOOKING STATEMENTS DISCLAIMER .................41 TABLE 6 - TAX ADEQUACY.........................22 APPENDICES TABLE 7 - ESTIMATED OVERLAPPING DEBT: ...................23 GENERAL INFORMATION REGARDING THE CITY ................ A DEBT INFORMATION ....................................... x...................24 EXCERPTS FROM THE ANNUAL FINANCIAL REPORT ......... B TABLE 8A - GENERAL OBLIGATION DEBT SERVICE FORM OF BOND COUNSEL'S OPINION ................................ C REQUIREMENTS.................................. ................... 24 SPECIMEN BOND INSURANCE POLICY ............................... D TABLE 8B - DIVISION OF DEBT SERVICE REQUIREMENTs25 TABLE 9 - INTEREST AND SINKING FUND BUDGET The cover page hereof, this page, the appendices included herein PROJECTION.......................................:...................26 and any addenda, supplement or amendment hereto, are part of the TABLE 10 - COMPUTATION OF SELF-SUPPO TING DEBT.. 27 Official Statement. TABLE I 1 - AUTHORIZED BUT UNISSUED G ENERAL OBLIGATION BONDS...........................i...................27 TABLE 12 — OTHER OBLIGATIONS................r................... 28 FINANCIAL INFORMATION ........................... . ...................29 TABLE 13 - GENERAL FUND REVENUES AN EXPENDITURE HISTORY............................................29 TABLE 14 - MUNICIPAL SALES TAX HISTO �Y..................30 f 3 OFFICIAL STATEMENT SUMMAR This summary is subject in all respects to the more complete information and finitions contained or incorporated in this Official Statement. The offering of the Certificates to potential investors is made or y by means of this entire Official Statement. No person is authorized to detach this summary from this Official Stateme Statement. nt or tc otherwise use it without the entire Official THE CITY .................................... The City of Lubbock is a political subdivision d municipal corporation of the State, located in Lubbock County, Texas. The City covers proximately 115 square miles and has an estimated 2002 population of 202,000 (see "Intro uction - Description of City"). THE CERTIFICATES ..................... The Certificates are issued as $2,605,000 Tax md Sewer System Revenue Certificates of Obligation, Series 2002A. The Certificates are issued as serial certificates maturing February 15, 2003 through February 15, 2022 (see "The Ceitificates -Description of the Certificates"). PAYMENT OF INTEREST .............. Interest on the Certificates accrues from July 1, 2 02, and is payable February 15, 2003, and each August 15 and February 15 thereafter un Certificates 1 maturity or prior redemption (see "The - Description of the Certificates" and '� he Certificates -Optional Redemption"). of Chapter 271, Texas Local Government Code t p g ( laws of the State, particularly Subchapter C AUTHORITY FOR ISSUANCE ......... The Certificates are issued pursuant to the eneral, Certificate of Obligation Act uof 197 amended and an Ordinance passed by the City uncil of the City (see "The Certific tesas Authority for Issuance"). SECURITY FOR THE CERTIFICATES ..............................The Certificates constitute direct obligations of the ity, payable from a combination of (i) the levy and collection of a direct and continuing ad val em tax, within the limits prescribed by law, on all taxable property within the City, and (ii) a edge of surplus net revenues of the City's Sewer System (see "The Certificates - Security and S burce of Payment"). REDEMPTION The City reserves the right, at its option, to rede4n Certificates having stated maturities on and after February 15, 2014, in whole or in pa in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2013, or ny date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Certificates - Optional Redemption"). TAx ExEMPTION ......................... In the opinion of Bond Counsel, the interest on the Zertificates will be excludable from gross income for federal income tax purposes under exis ing law, subject to the matters described under the caption "Tax Matters" herein, including the alternative minimum tax on corporations. pay costs associated with issuance of the USE OF PROCEEDS ..................... Proceeds from the sale of the Certificates will be for Sewer System improvements and to Certificates, RATINGS ...................................• The Standard' &ates are rated "Aaa" Poor's Ratings ServicMood s Invest Y y' rs Service, Inc. ("Moody's"), "AAA" by , A Division; of The McGraw-Hill Companies, Inc. ("S&P") and "AAA" Fitch Ratings ("Fitch") by virfiie of an insurance policy to be issued by f MBIA Insurance Corporation. The presently outsY Inding tax -supported debt of the City is rated "Aa2" by Moody's, "AA+" by S&P and "A k+" by Fitch. The City also has four additional issues outstanding which are rated "Aaa"y Moody's, "AAA" by S&P and "AAA" by Fitch through insurance by various commei' ial insurance companies (see "Other Information - Ratings"). BOOK -ENTRY -ONLY J SYSTEM ...................................... The definitive Certificates will be initially registered and delivered only to Cede & Co., the nominee of DTC pursuant to the Book -Entry -Only System described herein. Beneficial ownership of the Certificates may be acquired i' denominations of $5,000 or integral multiples thereof. No physical delivery of the Ce' ificates will be made to the beneficial owners thereof. Principal of, premium, if any, and iri erest on the Certificates will be payable by the Paying Agent/Registrar to Cede & Co., which mill make distribution of the amounts so J paid to the participating members of DTC for subseql ent payment to the beneficial owners of the Certificates (see "The Certificates - Book -Entry -O ily System") . 4. PAYMENT RECORD ...................... The City h4, never defaulted in payment of its bonded indebtedness. Fiscal 90,4 Year Per Capita Ended Estimated 9/30 Population (1) 1997 195,367 1998 196,679 1999 197,117 2000 199,564 2001 201,061 2002 202,000 r- Taxable Assessed a J,Ju/,V/G,UY1 5,830,249,173 6,019,588,349 6,176,962,982 6,638,779,668 6,910,577,171 FINANCIAL INFORMATION Ratio General Purpose Funded Tax Debt to Taxable Assessed Valuation 1.11% 0.98% 0.85% 0.87% 0.88% 0.91% % of Total Tax Collections 99.78% 99.55% 99.24% 98.89% 99.29% 96.91% (4) (1) Source: The City of Lubbock, Texas. (2) Does not include self-supporting debt (se "Table 3B — Derivation of General Purpose Funded Tax Debt"). (3) Projected, includes the Certificates and the General Obligation Refunding Bonds, Series 2002 that are being offered simultaneously. Excludes the Refunded Bond. (4) Collections for part year only, through 4-10-02. GENERAL IFUND CONSOLIDATED STATEMENT SUMMARY Fund Balance at Beginning of Year $ 16,640,652 Total Revenues and Transfers 90,4 Per Capita Per Capita General General Taxable Purpose Purpose Assessed Funded Funded Valuation Tax Debt (2) Tax Debt $ 28,495 $ 61,728,036 $ 316 29,643 i 57,156,101 291 30,538 51,222,980 260 30,952 53,455,346 268 33,019 58,122,809 289 34,211 62,940,460 c3) 312 Ratio General Purpose Funded Tax Debt to Taxable Assessed Valuation 1.11% 0.98% 0.85% 0.87% 0.88% 0.91% % of Total Tax Collections 99.78% 99.55% 99.24% 98.89% 99.29% 96.91% (4) (1) Source: The City of Lubbock, Texas. (2) Does not include self-supporting debt (se "Table 3B — Derivation of General Purpose Funded Tax Debt"). (3) Projected, includes the Certificates and the General Obligation Refunding Bonds, Series 2002 that are being offered simultaneously. Excludes the Refunded Bond. (4) Collections for part year only, through 4-10-02. GENERAL IFUND CONSOLIDATED STATEMENT SUMMARY Fund Balance at Beginning of Year $ 16,640,652 Total Revenues and Transfers 90,4 3,799 Total Expenditures and Transfers 90,3 8,409 Fund Balance at End of Year $ 16,7 6,042 Less: Reserves and Designations (2,3 1,860 Undesignated Fund Balance $ 14,3 4,182 For additional information regarding the City, Mr. Andy Burcham Cash & Debt Manager City of Lubbock P.O. Box 2000 Lubbock, Texas 79457 Phone(806)775-2149 Fax (806)775-2033 Fiscal Year Ended September 30, 2006 1999 1998 1997 $ 17,248,025 $ 18,990,299 $ 18,472,903 $ 17,672,385 85,518,102 81,929,016 83,556,685 79,790,477 86,145,475 83,671,290 83,039,289 78,989,959 $ 16,620,652 $ 17,248,025 $ 18,990,299 $ 18,472,903 (2,857,096) (4,432,834) (51442,847) (4,997,379) $ 13,763,556 $ 12,815,191 $ 13,547,452 $ 13,475,524 please contact: Mr. Vince Viaille First Southwest Company r 1001 Main Street Suite 802 Lubbock, Texas 79401 Phone(806)749-3792 Fax (806) 749-3793 5 Mr. Joe W. Smith First Southwest Company or 402 Cypress, Suite 707 Abilene, Texas 79604 Phone(915)672-8432 Fax (915)675-6218 CITY OFFICIALS, STAFF AND ELECTED OFFICIALS Name Date of City Council Installation to Office Marc McDougal* May, 2002 Mayor City Secretary Victor Hernandez June, 1994 Mayor Pro Tem and Assistant City Manager Councilmember, District 1 Assistant City Manager T. J. Patterson April, 1984 Councilmember, District 2 Director of Finance Gary Boren May, 2002 Councilmember, District 3 Frank W. Morrison May, 2000 Councilmember, District 4 Tom Martin May, 2002 Councilmember, District 5 Alex "Ty" Cooke May, 1992 Councilmember, District 6 * Mr. McDougal has served on the Council since May, 1998. SELECTED ADMINISTRATIVE STAFF Name Position Bob Cass City Manager Anita Burgess City Attorney Rebecca Garza City Secretary Debra Fortd Deputy City Manager Quincy White Assistant City Manager Tommy Gonzalez Assistant City Manager Richard Burdine Assistant City Manager Beverly Hodges Director of Finance Andy Burcham Cash & Debt Manager Term May, May, 2 May, May, May, May, May, Date of Employment in Current Position September, 1992 December, 1995 January, 2001 January, 1995 September, 2000 April, 2000 April, 2000 July, 2001 November, 1998 ANTS Occupation Business Owner, Real Estate Attorney -at -Law Co -Publisher Business Owner, Personnel Services Business Owner, Commodities Retired Law Enforcement Investments e of Employment Total Government th City of Lubbock Service April, 1976 25 Years ecember, 1995 6 Years August, I996 7 Years anuary, 1995 23 Years ptember, 2000 11 Years June, 1991 10 Years July, 1997 16 Years July, 2001 20 Years ovember, 1998 3 Years CONSULTANTS AND ADVISORS Auditors ....................................:. Robinson urdette Martin Seright & Burrows, L.L.P. Lubbock, Texas Bond Counsel .......................................... ........................................ Fulbright & Jaworski L.L.P. ..................................................... Dallas, Texas Financial Advisor ................................................... ....................... First Southwest Company Lubbock and Dallas, Texas 6 J ;4 OFFICIAL STATEMENT RELATING TO $2,605,000 CITY OF LUBBOCK, TEXAS TAXA SEWER SYSTEM SURPLUS REVENUE CERTIF ATES OF OBLIGATION, SERIES 2002A INTRODUCTION This Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of $2,605,000 City of Lubbock, Texas, Tax and Sewer System Revenue Certificates of Obligation, Series 2002A. Capitalized terms used in this Official Statement have the same meanings assigned to such terms in the Ordinance to be adopted on the date of sale of the Certificates, which will authoriz 'the issuance of the Certificates, except as otherwise indicated herein. There follows in this Official Statement de riptions of the Certificates and certain information regarding the City and its finances. All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such document. Copies of such documents may be obtained from the City's Financial Advisor, First Southwest Company, Dallas, Texas. DESCRIPTION OF THE CITY ... The City is existing under the laws of the State, inclm adopted its Home Rule Charter in 1917. Th comprised of the Mayor and six Counciln numbered year. Each of the six members c office. The terms of three members of the administrative officer for the City. Some c highways and streets, electric, water and sa services, culture -recreation, public transpc services. The 2000 Census population for approximately 115 square miles. DESCRIPTION OF THE CERTIFICATES ... T. and in the amounts shown on the inside cc 30 -day months, and will be payable on Fet will be issued only in fully registered form and delivered only to Cede & Co., the no: System described herein. No physical deli if any, and interest on the Certificates distribution of the amounts so paid to the 1 Certificates. See "Book -Entry -Only Systei political subdivision and municipal corporation of the State, duly organized and ig the City's Home Rule Charter. The City was incorporated in 1909, and first City operates under a Council/Manager form of government with a City Council tubers. The Mayor is elected at -large for a two-year term ending in an even - the City Council is elected from a single -member district for a four-year term of ity Council expire in each even -numbered year. The City Manager is the chief the services that the City provides are: public safety (police and fire protection), tary sewer utilities, airport, sanitation and solid waste disposal, health and social ation, public improvements, planning and zoning, and general administrative e City was 199,564; the estimated 2002 population is 202,000. The City covers THE CERTIFICATES Certificates are dated July 1, 2002, and mature on February 15 in each of the years r page hereof. Interest will be computed on the basis of a 360 -day year of twelve ary 15 and August 15, commencing February 15, 2003. The definitive Certificates ;any integral multiple of $5,000 for any one maturity and will be initially registered iee of The Depository Trust Company ("DTC") pursuant to the Book -Entry -Only ry of the Certificates will be made to the owners thereof. Principal of, premium, I be payable by the Paying Agent/Registrar to Cede & Co., which will make ticipating members of DTC for subsequent payment to the beneficial owners of the AUTHORITY FOR ISSUANCE ... The Certificates are being issued pursuant to the Constitution and general laws of the State of Texas, particularly Subchapter C of Chapter 271, Te as Local Government Code (the Certificate of Obligation Act of 1971), as amended, and an Ordinance passed by the City Council.'' SECURITY AND SOURCE OF PAYMENT ... Th Certificates are payable from the proceeds of an ad valorem tax levied, within the limitations prescribed by law, upon all taxab Ile property in the City. Additionally, the Certificates are payable from and, together with certain Previously Issued Certificates, t qually and ratably secured by a lien on and pledge of the Net Revenues (as defined in the Ordinance) of the City's Sewer Syste L'(the "System"), such lien and pledge, however, being junior and subordinate to the lien on and pledge of such Net Revenues securing the payment of the "Prior Lien Obligations" (defined in the Ordinance) hereafter issued by the City. In the Ordinance, the City reserves and retai s the right to issue Prior Lien Obligations without limitation as to principal amount but subject to any applicable terms, conditions or restrictions under law or otherwise as well as the right to issue additional obligations payable from the same sources and, together with the Previously Issued Certificates and the Certificates, equally and ratably secured by a parity lien on and pledg p of the Net Revenues of the System. TAx RATE LIMITATION ... All taxable property within the City is subject to the as essment, levy and collection by the City of a continuing, direct annual ad valorem tax sufficient to provide for the payment of p incipal of and interest on all ad valorem tax debt within the limits prescribed by law. Article XI, Section 5, of the Texas Constitution is applicable to the City, and provides for a maximum ad valorem tax rate of $2.50 per $100 Taxable Assessed Valuat on for all City purposes. The Home Rule Charter of the City adopts the constitutionally authorized maximum tax rate of $2.5 1 0 per $100 Taxable Assessed Valuation. OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem Ce# February 15, 2014, in whole or in part in principal amounts of $5,000 or any integr any date thereafter, at the par value thereof plus accrued interest to the date of reder to be redeemed, the City may select the maturities of Certificates to be redeemed. Ii are to be redeemed, the Paying Agent/Registrar (or DTC while the Certificates are ii lot the Certificates, or portions thereof, within such maturity to be redeemed. If a Ci thereof) shall have been called for redemption and notice of such redemption sha principal amount thereof to be redeemed) shall become due and payable on such red to accrue from and after the redemption date, provided funds for the payment of thereon are held by the Paying Agent/Registrar on the redemption date. NOTICE OF REDEMPTION. Not less than 30 days prior to a redemption date for the redemption to be sent by United States mail, first class, postage prepaid, to the redeemed, in whole or in part, at the address of the registered owner appearing Agent/Registrar at the close of business on the business day next preceding the date', MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DUI REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN S FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE S1 NOTWITHSTANDING THAT ANY CERTIFICATE OR PORTION THEREOF PAYMENT, INTEREST ON SUCH CERTIFICATE OR PORTION THEREOF SHA DEFEASANCE ... The Ordinance provides for the defeasance of the Certificates N' premium, if any, on the Certificates, plus interest thereon to the due date thereof maturity, redemption, or otherwise), is provided by irrevocably depositing with a payi in trust (1) money sufficient to make such payment or (2) Government Securities, cer firm of national reputation to mature as to principal and interest in such amounts al without reinvestment, of sufficient money to make such payment, and all necessary az of the paying agent for the Certificates. The Ordinance provides that "Government obligations of the United States of America, including obligations that are unconditi America, (b) noncallable obligations of an,agency or instrumentality of the United St are unconditionally guaranteed or insured by the agency or instrumentality and tha nationally recognized investment rating firm not less than AAA or its equivalent, and'. agency or a county, municipality, or other political subdivision of a state that hart investment quality by a nationally recognized investment rating firm not less than AA) ficates having stated maturities on and after I multiple thereof, on February 15, 2013, or ption. If less than all of the Certificates are less than all the Certificates of any maturity Book -Entry -Only form) shall determine by tificate (or any portion of the principal sum have been given, such Certificate (or the nption date and interest thereon shall cease the redemption price and accrued interest -;ertiticates, the City shall cause a notice of -gistered owners of the Certificates to be on the registration books of the Paying if mailing such notice. ANY NOTICE SO Y GIVEN, WHETHER OR NOT THE GIVEN, THE CERTIFICATES CALLED ECIFIED REDEMPTION DATE, AND [AS NOT BEEN SURRENDERED FOR .L CEASE TO ACCRUE. hen the payment of the principal of and (whether such due date be by reason of ig agent or other authorized escrow agent, fied by an independent public accounting d at such times to insure the availability, J proper fees, compensation and expenses Securities" means (a) direct, noncallable finally guaranteed by the United States of Les of America, including obligations that are rated as to investment quality by a c) noncallable obligations of a state or an been refunded and that are rated as to or its equivalent. Upon making such deposit in the manner described, such Certificates shall no longer b deemed outstanding obligations secured by the Ordinance, but will be payable only from the funds and Government Securi ies deposited in escrow and will not be considered debt of the City for purposes of taxation or applying any limitation on the ity's ability to issue debt or for any other purpose. AMENDMENTS ... The City may amend the Ordinance without the consent of or notice to any registered owners in any manner not detrimental to the interests of the registered owners, including the curing of any am iguity, inconsistency, or formal defect or omission therein. In addition, the City may, with the written consent of the holders of a majority in aggregate principal amount of the Certificates then outstanding affected thereby, amend, add to, or rescind any of the provisions of the Ordinance without the consent of the registered owners of all of the Certificates, affected, no such amendment, addition or rescission may (1) change the date specified as the date on which the principal on any installment of interest is due payable, reduce the principal amount or the rate of interest, change the authorized coin or currency of payment any C rtificate or interest thereon is payable, or in any other way modify the terms of the payment of the principal of or interest on, () give any preference to any Certificate over any other Certificate or (3) reduce the aggregate principal amount required to be held by owners for consent to any amendment, addition or waiver. Boot[ -ENTRY -ONLY SYSTEM... This section describes how ownership of the CertificI tes are to be transferred and how the principal of, premium, if any, and interest on the Certificates are to be paid to and cre ifted by The Depository Trust Company ('DTC'), New York, New York, while the Certificates are registered in its nominee qame. The information in this section concerning DTC and the Book -Entry -Only System has been provided by DTC for us in disclosure documents such as this Official Statement. The City believes the source of such information to be reliable, but takes no responsibilityfor the accuracy or completeness thereof. 8 The City cannot and does not give any assun redemption or other notices, to DTC Particip DTC or its nominee (as the registered owner that they will do so on a timely basis, or (3) current rules applicable to DTC are on file wi be followed in dealing with DTC Participants ice that (1) DTC will distribute payments of debt service on the Certificates, or its, (2) DTC Participants or others will distribute debt service payments paid to f the Certificates), or redemption or other notices, to the Beneficial Owners, or )TC will serve and act in the manner described in this Official Statement. The the Securities and Exchange Commission, and the current procedures of DTC to re on file with DTC. The Depository Trust Company ("DTC"), Nem York, NY, will act as securities depository for the Certificates. The Certificates will be issued as fully -registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized,, representative of DTC. One fully -registered certificate will be issued for the Certificates, in the aggregate principal amount' f each maturity, and will be deposited with DTC. DTC, the world's largest depository, is a li "banking organization" within the meaning of corporation" within the meaning of the New Y provisions of Section 17A of the Securities E issues of U.S. and non -U.S. equity issues, c< countries that DTC's participants ("Direct Par Direct Participants of sales and other securitie transfers and pledges between Direct Partic certificates. Direct Participants include both 1 corporations, and certain other organization Corporation ("DTCC"). DTCC, in turn, is o Securities Clearing Corporation, Govemme Markets Clearing Corporation, (NSCC, GSCI Stock Exchange, Inc., the American Stock Ex DTC system is also available to others such and clearing corporations that clear through indirectly ("Indirect Participants"). DTC ha Participants are on file with the Securitie www.dtcc.com. Purchases of Certificates under the DTC syst the Certificates on DTC's records. The owner turn to be recorded on the Direct and Indirect DTC of their purchase. Beneficial Owners transaction, as well as periodic statements of Owner entered into the transaction. Transfers the books of Direct and Indirect Participai certificates representing their ownership inte Certificates is discontinued. To facilitate subsequent transfers, all Certi partnership nominee, Cede & Co., or such of Certificates with DTC and their registra in beneficial ownership. DTC has no knoN the identity of the Direct Participants to w Owners. The Direct and Indirect Particip customers. Conveyance of notices and other communi and by Direct Participants and Indirect Pari to any statutory or regulatory requirements take certain steps to augment the transmis redemptions, tenders, defaults, and propo Certificates may wish to ascertain that the notices to Beneficial Owners. In the alte registrar and request that copies of notices iited-purpose trust company organized under the New York Banking Law, a ie New York Banking Law, a member of the Federal Reserve System, a "clearing irk Uniform Commercial Code, and a "clearing agency" registered pursuant to the change Act of 1934. DTC holds and provides asset servicing for over 2 million porate and municipal debt issues, and money market instruments from over 85 cipants) deposit with DTC. DTC also facilitates the post -trade settlement among transactions in deposited securities, through electronic computerized book -entry Tants' accounts. This eliminates the need for physical movement of securities .S. and non -U.S. securities brokers and dealers, banks, trust companies, clearing ;. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing �ned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, MBS Clearing Corporation, and Emerging MBSCC, and EMCC, also subsidiaries of DTCC), as well as by the New York hang, LLC, and the National Association of Securities Dealers, Inc. Access to the s both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, it maintain a custodial relationship with a Direct Participant, either directly or Standard & Poor's highest rating: AAA. The DTC Rules applicable to its and Exchange Commission. More information about DTC can be found at must be made by or through Direct Participants, which will receive a credit for p interest of each actual purchaser of each Certificate ("Beneficial Owner") is in rticipants' records. Beneficial Owners will not receive written confirmation from , however, expected to receive written confirmations providing details of the :ir holdings, from the Direct or Indirect Participant through which the Beneficial ownership interests in the Certificates are to be accomplished by entries made on acting on behalf of Beneficial Owners. Beneficial Owners will not receive is in Certificates, except in the event that use of the book -entry system for the tes deposited by Direct Participants with DTC are registered in the name of DTC's er name as may be requested by an authorized representative of DTC. The deposit in the name of Cede & Co. or such other DTC nominee do not effect any change Gge of the actual Beneficial Owners of the Certificates; DTC's records reflect only ;e accounts such Certificates are credited, which may or may not be the Beneficial will remain responsible for keeping account of their holdings on behalf of their ions by DTC to Direct Participants, by Direct Participants to Indirect Participants, pants to Beneficial Owners will be governed by arrangements among them, subject may be in effect from time to time. Beneficial Owners of Certificates may wish to n to them of notices of significant events with respect to the Certificates, such as amendments to the Certificate documents. For example, Beneficial Owners of minee holding the Certificates for their benefit has agreed to obtain and transmit tive, Beneficial Owners may wish to provide their names and addresses to the ;provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Certificates within amaturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such i9l: to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote will respect to Certificates unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedut� s, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.$ consenting or voting rights to those Direct Participants to whose accounts Certificates are credited on the record date (identifie in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and interest payments on the Certificates i nominee as may be requested by an authorized representative of DTC. DTC's pra upon DTC's receipt of funds and corresponding detail information from the City o in accordance with their respective holdings shown on DTC's records. Payments governed by standing instructions and customary practices, as is the case with seg bearer form or registered in "street name", and will be the responsibility of such Pa Paying Agent/Registrar, or the City, subject to any statutory or regulatory require Payment of redemption proceeds, distributions, and interest payments to Cede & Cc by an authorized representative of DTC) is the responsibility of the City or the P payments to Direct Participants will be the responsibility of DTC, and disbursemet will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Certifi to the City or the Paying Agent/Registrar. Under such circumstances, in the event Certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book -entry transfers In that event, Certificates will be printed and delivered. I be made to Cede & Co., or such other ce is to credit Direct Participants' accounts ie Paying Agent/Registrar, on payable date Participants to Beneficial Owners will be ities held for the accounts of customers in ;ipant and not of DTC nor its nominee, the nts as may be in effect from time to time. or such other nominee as may be requested Ing Agent/Registrar, disbursement of such >f such payments to the Beneficial Owners at any time by giving reasonable notice a successor depository is not obtained, (or a successor securities depository). The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. Use of Certain Terms in Other Sections of this Official Statement In reading this Official Statement it should be understood that while the Certificates are in the Book -Entry -Only System, references in other sect ons of this Official Statement to registered owners should be read to include the person for which the Participant acquires an int rest in the Certificates, but (i) all rights of ownership must be exercised through DTC and the Book -Entry -Only System, and (iii' xcept as described above, notices that are to be given to registered owners under the Resolution will be given only to DTC. ! i Information concerning DTC and the Book -Entry -Only System has been obtaine l from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by the City',or the Underwriter. Effect of Termination of Book -Entry -Only System In the event that the Book -Ent -Only System is discontinued by DTC or the use of the Book -Entry -Only System is discontinued by the City, printed certificates will be issued to the holders and the Certificates will be subject to transfer, exchange and registration provisions as set fort in the Ordinance and summarized under "The Certificates - Transfer, Exchange and Registration" below. PAYING AGENT/ReGtsTR4R ... The initial Paying Agent/Registrar is JPMorgan Cha the City retains the right to replace the Paying Agent/Registrar. The City cove Agent/Registrar at all times until the Certificates are duly paid and any successor Pa} bank or trust company organized under the laws of the State of Texas or other entil serve as and perform the duties and services of Paying Agent/Registrar for the Cer Agent/Registrar for the Certificates, the City agrees to promptly cause a written notice of the Certificates by United States mail, first class, postage prepaid, which notice sh Agent/Registrar. Interest on the Certificates shall be paid to the registered owners appearing or. Agent/Registrar at the close of business on the Record Date (defined below), and suc United States Mail, first class postage prepaid to the address of the registered owner' Paying Agent/Registrar or (ii) by such other method, acceptable to the Paying Agent/B expense of, the registered owner. Principal of the Certificates will be paid to the reg earlier redemption, upon their presentation and surrender to designated payment/transfe the date for the payment of the principal of or interest on the Certificates shall be a & when banking institutions in the city where the designated payment/transfer office of t authorized to close, then the date for such payment shall be the next succeeding day N such date shall have the same force and effect as if made on the date payment was due. 10 Bank, Dallas, Texas. In the Ordinance, rots to maintain and provide a Paying g Agent/Registrar shall be a commercial duly qualified and legally authorized to icates. Upon any change in the Paying ereof to be sent to each registered owner also give the address of the new Paying the registration books of the Paying interest shall be paid (i) by check sent ,corded in the registration books of the gistrar requested by, and at the risk and ;tered owner at their stated maturity, or office of the Paying Agent/Registrar. If urday, Sunday, a legal holiday or a day Paying Agent/ Registrar is located are rich is not such a day, and payment on _l L+i TRANSFER, EXCHANGE AND REGISTRATION . . certificates will be issued to the registered ow registration books of the Paying Agent/Registrai Agent/Registrar and such transfer or exchange sl tax or other governmental charges required to b be assigned by the execution of an assignmei assignment acceptable to the Paying Agent/Reg. of the Certificates being transferred or exchanl States mail, first class, postage prepaid, to the issued in an exchange or transfer of Certificates not more than three business days after the rec request for exchange duly executed by the reg Agent/Registrar. New Certificates registered an for any one maturity and for a like aggregate "Book -Entry -Only System" herein for a des transferability of the Certificates. Neither the C Certificate called for redemption, in whole or ii limitation of transfer shall not be applicable to a RECORD DATE FOR INTEREST PAYMENT.. . 11 interest payment date means the close of busine In the event of a non-payment of interest on a interest payment (a "Special Record Date") will of such interest have been received from the Ci past due interest ("Special Payment Date", wl business days prior to the Special Record Date 1 a Certificate appearing on the registration boot next preceding the date of mailing of such notic OWNERS' REMEDIES ... The Ordinance does rid law there is no right to the acceleration of matin the Ordinance. Although a registered owner 4 occurred in the payment of principal of or Intel against any property of the City. Such regil mandatory injunction proceeding to compel t) principal of and interest on the Certificates as j consuming and a registered owner could be n provide for the appointment of a trustee to rept accordance with the terms of the Ordinance, or creditors under Chapter 9 of the U.S. Bankrupt represented by a specifically pledged source o entity is not specifically recognized as a securi that would prohibit, without Bankruptcy Court', an entity which has sought protection under ( creditors, the ability to enforce would be subjeS heard in Bankruptcy Court instead of other fe powers of a Bankruptcy Court in administering opinions relative to the enforceability of the O debtors relative to their creditors. In the event the Book -Entry -Only System should be discontinued, printed iers and thereafter the Certificates may be transferred and exchanged on the only upon presentation and surrender of such printed certificates to the Paying all be without expense or service charge to the registered owner, except for any paid with respect to such registration, exchange and transfer. Certificates may i form on the respective Certificates or by other instrument of transfer and arar. New Certificates will be delivered by the Paying Agent/Registrar, in lieu ed, at the designated office of the Paying Agent/Registrar, or sent by United ew registered owner or his designee. To the extent possible, new Certificates Will be delivered to the registered owner or assignee of the registered owner in ipt of the Certificates to be canceled, and the written instrument of transfer or stered owner or his duly authorized agent, in form satisfactory to the Paying I delivered in an exchange or transfer shall be in any integral multiple of $5,000 6ncipal amount as the Certificates surrendered for exchange or transfer. See ription of the system to be utilized initially in regard to ownership and ity nor the Paying Agent/Registrar shall be required to transfer or exchange any part, within 45 days of the date fixed for redemption; provided, however, such i exchange by the registered owner of the uncalled balance of a Certificate. record date ('Record Date") for the interest payable on the Certificates on any s on the last business day of the preceding month. scheduled payment date, and for 30 days thereafter, a new record date for such ie established by the Paying Agent/Registrar, if and when funds for the payment y. Notice of the Special Record Date and of the scheduled payment date of the ch shall be 15 days after the Special Record Date) shall be sent at least five Z United States mail, first class postage prepaid, to the address of each Holder of of the Paying Agent/Registrar at the close of business on the last business day t establish specific events of default with respect to the Certificates. Under State ity of the Certificates upon the failure of the City to observe any covenant under f Certificates could presumably obtain a judgment against the City if a default est on any such Certificates, such judgment could not be satisfied by execution tered owner's only practical remedy, if a default occurs, is a mandamus or e City to levy, assess and collect an annual ad valorem tax sufficient to pay becomes due. The enforcement of any such remedy may be difficult and time squired to enforce such remedy on a periodic basis. The Ordinance does not event the interests of the bondholders upon any failure of the City to perform in ipon any other condition. Furthermore, the City is eligible to seek relief from its ay Code. Although Chapter 9 provides for the recognition of a security interest revenues, the pledge of taxes in support of a general obligation of a bankrupt y interest under Chapter 9. Chapter 9 also includes an automatic stay provision ipproval, the prosecution of any other legal action by creditors or bondholders of 'hapter 9. Therefore, should the City avail itself of Chapter 9 protection from t to the approval of the Bankruptcy Court (which could require that the action be feral or state court); and the Bankruptcy Code provides for broad discretionary any proceeding brought before it. The opinion of Bond Counsel will note that all dinance and the Certificates are qualified with respect to the customary rights of 11 USE OF CERTIFICATE PROCEEDS ... Pyoceeds from the sale of the Certificates are SOURCES: Principal Amount of the Certificates Accrued Interest from 7/1/02 to 8/15/02 Reoffering Premium Less: Original Issue Discount Total Sources of Funds i USES: Deposit to the Project Fund Deposit to Interest and Sinking Fund Underwriter's Discount Costs of Issuance Gross Bond Insurance Premium Rounding Amount Total Uses of Funds 12 to, be expended as follows: $ 2,605,000.00 13,954.57 14,004.75 14,666.40 $ 2,618,292.92 $ 2,515,000.00 13,954.57 21, 361.00 60,000.00 6,000.00 1,977.35 $ 2,618,292.92 _'J AL BOND INSURANCE The following information has been furnished' by MBIA Insurance Corporation ("MBIA") for use in this Official Statement. Reference is made to Appendix D for a specimen of MBIA's policy. Such information has not been independently, accuracy by the City or the Underwriter and is MBIA's policy unconditionally and irrevocably the Issuer to the Paying Agent or its successor advancement of maturity pursuant to a mandato become due but shall not be so paid (except tb mandatory or optional redemption or accelerat pursuant to a mandatory sinking fund payment, such times as such payments of principal m reimbursement of any such payment which h judgment by a court of competent jurisdiction meaning of any applicable bankruptcy law (a ": led by the City or the Underwriter and is not guaranteed as to completeness or to be construed as a representation of the City or the Underwriter. guarantees the full and complete payment required to be made by or on behalf of of an amount equal to (i) the principal of (either at the stated maturity or by an ry sinking fund payment) and interest on, the Certificates as such payments shall it in the event of any acceleration of the due date of such principal by reason of on resulting from default or otherwise, other than any advancement of maturity the payments guaranteed by MBIA's policy shall be made in such amounts and at Auld have been due had there not been any such acceleration); and (ii) the subsequently recovered from any owner of the Certificates pursuant to a final that such payment constitutes an avoidable preference to such owner within the MBIA's policy does not insure against loss of y prepayment premium which may at any time be payable with respect to any Certificates. MBIA's policy does not, under '',any circumstance, insure against loss relating to: (i) optional or mandatory redemptions (other than mandatory sinking f ind redemptions); (ii) any payments to be made on an accelerated basis; (iii) payments of the purchase price of Certificates i pon tender by an owner thereof, or (iv) any Preference relating to (i) through (iii) above. MBIA's policy also does not insure ag 'nst nonpayment of principal of or interest on the Certificates resulting from the insolvency, negligence or any other act or omi ion of the Paying Agent or any other paying agent for the Certificates. Upon receipt of telephonic or telegraphic notic upon receipt of written notice by registered or payment of an insured amount for which is tb such payment or within one business day afte funds, in an account with State Street Bank ai the payment of any such insured amounts presentment of such other proof of ownershi evidence the assignment of the insured amou effect the appointment of MBIA as agent fo insured amounts on the Certificates, such instr State Street Bank and Trust Company, N.A. s due on such Certificates, less any amount h available therefor. MBIA MBIA Insurance Corporation ("MBIA") is the company (the "Company"). The Company is the State of New York and licensed to do bu Columbia, the Commonwealth of Puerto Ric( United States and the Territory of Guam. 1v Singapore and one in the Kingdom of Spain. and concentrations of investments and requiri both the aggregate and individual risks that transactions among affiliates. Additionally, amounts and for certain periods of time. , such notice subsequently confirmed in writing by registered or certified mail, or :ertified mail, by MBIA from the Paying Agent or any owner of a Certificate the a due, that such required payment has not been made, MBIA on the due date of receipt of notice of such nonpayment, whichever is later, will make a deposit of I Trust Company, N.A., in New York, New York, or its successor, sufficient for hich are then due. Upon presentment and surrender of such Certificates or of the Certificates, together with any appropriate instruments of assignment to is due on the Certificates as are paid by MBIA, and appropriate instruments to (such owners of the Certificates in any legal proceeding related to payment of ments being in a form satisfactory to State Street Bank and Trust Company, N.A., all disburse to such owners or the Paying Agent payment of the insured amounts ld by the Paying Agent for the payment of such insured amounts and legally )rincipal operating subsidiary of MBIA Inc., a New York Stock Exchange listed of obligated to pay the debts of or claims against MBIA. MBIA is domiciled in ness in and subject to regulation under the laws of all 50 states, the District of the Commonwealth of the Northern Mariana Islands, the Virgin Islands of the 3IA has three branches, one in the Republic of France, one in the Republic of New York has laws prescribing minimum capital requirements, limiting classes g the approval of policy rates and forms. State laws also regulate the amount of may be insured, the payment of dividends by MBIA, changes in control and MBIA is required to maintain contingency reserves on its liabilities in certain MBIA does not accept any responsibility f0f the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding the policy and MBIA set forth under the heading "Bond nsurance". Additionally, MBIA makes no representation regarding the Certificates or the advisability of investing in the Certifica tcs. The Financial Guarantee Insurance Policies Article 76 of the New York Insurance Law. not covered by the Property/Casualty Insurance Security Fund specified in 13 MBIA INFORMATION The following document filed by the Company with the Securities and Exchange by reference: (1) The Company's Annual Report on Form 10-K for the year ended (2) The Company's Quarterly Report on Form 10-Q for the quarter ended Any documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15( after the date of this Official Statement and prior to the termination of the offerii deemed to be incorporated by reference in this Official Statement and to be a document incorporated or deemed to be incorporated by reference herein, or c, deemed to be modified or superseded for purposes of this Official Statement to the any other subsequently filed document which also is or is deemed to be incorporate such statement. Any such statement so modified or superseded shall not be deer constitute a part of this Official Statement. ion (the "SEC") is incorporated herein 31, 2001; and 31, 2002. of the Exchange Act of 1934, as amended, of the Certificates offered hereby shall be rt hereof. Any statement contained in a ained in this Official Statement, shall be tent that a statement contained herein or in by reference herein modifies or supersedes 1, except as so modified or superseded, to The Company files annual, quarterly and special reports, information statements and other information with the SEC under File No. 1-9583. Copies of the SEC filings (including (1) the Company's Annual Report 'n Form 10-K for the year ended December 31, 2001, and (2) the Company's Quarterly Report on Form 10-Q for the quarter ere ed March 31, 2002), are available (i) over the Internet at the SEC's web site at http://www.sec.gov; (ii) at the SEC's public ref rence room in Washington D.C.; (iii) over the Internet at the Company's web site at http://www.mbia.com; and (iv) at I cost, upon request to MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504. The telephone number ofI OBIA is (914) 273-4545. As of December 31, 2001, MBIA had admitted assets of $8.5 billion (audited), total abilities of $5.6 billion (audited), and total capital and surplus of $2.9 billion (audited) determined in accordance with statutory a counting practices prescribed or permitted by insurance regulatory authorities. As of March 31, 2002, MBIA had admitted assets1of $8.6 billion (unaudited), total liabilities of $5.7 billion (unaudited), and total capital and surplus of $2.9 billion (unaudited determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. FINANCIAL STRENGTH RATINGS OF MBIA Moody's Investors Service, Inc. rates the financial strength of MBIA "Aaa. " Standard & Poor's, a division of The McGraw-Hill Companies, Inc. rates the financialtrength of MBIA "AAA. " Fitch, Inc. rates the financial strength of MBIA "AAA. " Each rating of MBIA should be evaluated independently. The ratings reflect the respe five rating agency's current assessment of the creditworthiness of MBIA and its ability to pay claims on its policies of insuf' nce. Any further explanation as to the significance of the above ratings may be obtained only from the applicable rating agen Y. The above ratings are not recommendations to buy, sell or hold the Certificates, and' uch ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal ' of any of the above ratings may have an adverse effect on the market price of the Certificates. MBIA does not guaranty the market price of the Certificates nor does it guaranty that the ratings on the Certificates will not be revised or withdrawn. DISCLOSURE OF GUARANTY FUND NONPARTICIPATION In the event the Insurer is unable to fulfill its contractual obligation under this policy' or contract or application or evidence of coverage, the policyholder or certificateholder is not protected by an insurance guanty fund or other solvency protection arrangement. 14 M r.J ._i TAX INFORMATION AD VALOREM TAx LAw ... The appraisal of p perty within the City is the responsibility of the Lubbock Central Appraisal District (the "Appraisal District"). Excluding agricultur and open -space land, which may be taxed on the basis of productive capacity, the Appraisal District is required under the Property Tax Code to appraise all property within the Appraisal District on the basis of 100% of its market value and is prohibited from applyii kg any assessment ratios. In determining market value of property, different methods of appraisal may be used, including the cost methc of appraisal, the income method of appraisal and market data comparison method of appraisal, and the method considered most approp 'ate by the chief appraiser is to be used. State law further limits the appraised value of a residence homestead fora tax year to an amount' of to exceed the less of (1) the market value of the property, or (2) the sum of (a) 100/0 of the appraised value of the property for the last yi w in which the property was appraised for taxation times the number of years since the property was last appraised, plus (b) the appraised'value of the property for the last year in which the property was appraised plus (c) the market value of all new improvements to the pr erty. The value placed upon property within the Appraisal District is subject to review by an Appraisal Review Board, consist of three members appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the alue of property within the Appraisal District at least every three years. The City may require annual review at its own expense, is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review board. Reference is made to the V.T.C.A., Property T Code, for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; thappraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection c f ad valorem taxes. Article VIII of the State Constitution ("Article VIP') and State law provide for certain exemptions from property taxes, the valuation of agricultural and open -space lands at productivity value, and the exemption of certain personal property from ad valorem taxation. Under Section 1-b, Article VIII, and State law, the governing body of a political subdivision, at its option, may grant: (1) An exemption of not less than $3,000 of the mark, ct value of the residence homestead of persons 65 years of age or older and the disabled from all ad valorem taxes thereafter leved by the political subdivision; (2) An exemption of up to 20% of the market value of residence homesteads. The minimum exemption under this provision is $5,000. In the case of residence homestead exemptions, granted under Section 1-b, Article VIII, ad valorem taxes may continue to be levied against the value of homesteads exemptd where ad valorem taxes have previously been pledged for the payment of debt if cessation of the levy would impair the obligation of the contract by which the debt was created. State law and Section 2, Article VIII, mandate Aa additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while pn active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation empted ranging from $5,000 to a maximum of $12,000. Article VIII provides that eligible owners of b; th agricultural land (Section 1-d) and open -space land (Section 1-d-1), including -space land devoted to timber production, may elect to have such property open -space land devoted to farm or ranch purpo' es or open appraised for property taxation on the basis of its productive capacity. The same land may not be qualified under both Section 1-d and 1-d-1. Nonbusiness personal property, such as automo iles or light trucks, are exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this propei ty. Boats owned as nonbusiness property are exempt from ad valorem taxation. Article VIII, Section 1-J, provides for "freeportproperty" to be exempted from ad valorem taxation. Freeport property is defined as goods detained in Texas for 175 days or les 'for the purpose of assembly, storage, manufacturing, processing or fabrication. Decisions to continue to tax may be reversed in he future; decisions to exempt freeport property are not subject to reversal. On November 6, 2001, the voters of the State approved amendment to Article VIII of the Texas Constitution. The amendment adds Section 1-n to Article VIII and authoriz $ the legislature to exempt from ad valorem taxation tangible personal property, other than oil, natural gas, and other petrol m products, if the property is (1) acquired in or imported into the State to be "forwarded to another location in or outside of the State; (2) detained at a location in the State that is not owned or under the control of the property owner for assemblini, storing, manufacturing, processing, or fabricating purposes by the person who acquired or imported the property; and (3) tt e property is transported to another location in or outside the State not later than 270 days after the date the person acquired th iproperty in or imported the property into the State. The amendment provides that the governing body of a political subdivision that imposes ad valorem taxes may opt not to permit the exemption. Before the amendment can be made effective, enabling Ic gislation must be adopted by the State legislature. The City and the other taxing bodies within i !territory may agree to jointly create tax increment financing zones, under which the tax values on property in the zone are "frozen" ;at the value of the property at the time of creation of the zone. The City also may enter into tax abatement agreements to encolirage economic development. Under the agreements, a property owner agrees to construct certain improvements on its prop The City in turn agrees not to levy a tax on all or part of the increased value 15 attributable to the improvements until the expiration of the agreement. The abater years. EFFECTIVE TAX RATE AND ROLLBACK TAX RATE ... By each September Council adopts a tax rate per $100 taxable value for the current year. The City for the City before the later of September 30 or the 60th day after the date the c the City Council does not adopt a tax rate by such required date the tax rate for i calculated for that tax year or the tax rate adopted by the City for the pre components: (1) a rate for funding of maintenance and operation expenditures, a agreement could last for a period of up to 10 as soon thereafter as practicable, the City ancil is required to adopt the annual tax rate .ted appraisal roll is received by the City. If tax year is the lower of the effective tax rate ng tax year. The tax rate consists of two 2) a rate for debt service. Under the Property Tax Code, the City must annually calculate and publicize its'"effective tax rate" and "rollback tax rate". Under current law, a tax rate cannot be adopted by the City Council that exceeds he lower of the rollback tax rate or 103 per cent of the effective tax rate until a public hearing is held on the proposed tax raW following a notice of such public hearing (including the requirement that notice be posted on the City's website if the City q ns, operates or controls an internet website and public notice be given by television if the City has free access to a television ''hannel) and the City Council has otherwise complied with the legal requirements for the adoption of such tax rate. If the ado p d tax rate exceeds the rollback tax rate the qualified voters of the City by petition may require that an election be held to det.rmine whether or not to reduce the tax rate adopted for the current year to the rollback tax rate. "Effective tax rate" means the rate that will produce last year's total tax levy (adj sted) from this year's total taxable values (adjusted). "Adjusted" means lost values are not included in the calculation of last ;rear's taxes and new values are not included in this year's taxable values. "Rollback tax rate" means the rate that will produce last year's maintenance and ole eration tax levy (adjusted) from this year's values (adjusted) multiplied by 1.08 plus a rate that will produce this year's debt service from this year's values (unadjusted) divided by the anticipated tax collection rate. The Property Tax Code provides that certain cities and counties in the State may sul mit a proposition to the voters to authorize an additional one-half cent sales tax on retail sales of taxable items. If the additiona tax is levied, the effective tax rate and the rollback tax rate calculations are required to be offset by the revenue that will be gen I ated by the sales tax in the current year. Reference is made to the Property Tax Code for definitive requirements for the levy, land collection of ad valorem taxes and the calculation of the various defined tax rates. PROPERTY ASSESSMENT AND TAX PAYMENT ... Property within the City is genera,!, ly assessed as of January 1 of each year. Business inventory may, at the option of -the taxpayer, be assessed as of September'' Oil and gas reserves are assessed on the basis of a valuation process which uses an average of the daily price of oil and gas for the prior year. Taxes become due October 1 of the same year, and become delinquent on February 1 of the following year. Taxp yers 65 years old or older are permitted by State law to pay taxes on homesteads in four installments with the first due on Februiry I of each year and the final installment due on August 1. PENALTIES AND INTEREST ... Charges for penalty and interest on the unpaid balance f delinquent taxes are made as follows: Cumulative Cumulative Month Penalty Interest February 6% 1% March 7 2 April 8 3 May 9 4 June 10 5 July 12 6 After July, penalty remains at 12%, and interest increases at the rate of I% each mot in July, a 15% attorney's collection fee is added to the total tax penalty and interest which become delinquent on the homestead of a taxpayer 65 years old or older i additional penalties or interest assessed. In general, property subject to the City's pursuant to court order to collect the amounts due. Federal law does not allow for tl an estate in bankruptcy. Federal bankruptcy law provides that an automatic stay including governmental units, goes into effect with the filing of any petition in governmental units from foreclosing on property and prevents liens for post -petit obtaining secured creditor status unless, in either case, an order lifting the stay is obi cases post-petition taxes are paid as an administrative expense of the estate in bankruc 16 Total 7% 11 13 15 18 . In addition, if an account is delinquent arge. Under certain circumstances, taxes ur a penalty of 8% per annum with no -n may be sold, in whole or in parcels, collection of penalty and interest against f action by creditors and other entities, nkruptcy. The automatic stay prevents n taxes from attaching to property and red from the bankruptcy court. In many y or by order of the bankruptcy court. J �J ) CITY APPLICATION OF TAX CODE.... The City grants an exemption to the market value of the residence homestead of persons 65 years of age or older of $16,600; the disable are also granted an exemption of $10,000. The City has not granted an additional exempti n of 20% of the market value of residence homesteads; the minimum exemption that may be granted under this provision being 5,000. See Table 1 for a listing of the amounts of the e: Ad valorem taxes are not levied by the City aga The City does not tax nonbusiness personal pro The City does not permit split payments of tax( permitted on a local -option basis by the Properl Since the 1999 tax year, the City has exempted described above. nst the exempt value of residence homesteads for the payment of debt. ,erty; and the Lubbock County Appraisal District collects taxes for the City. and discounts for early payment of taxes are not allowed by the City, although Code. property from taxation. The City collects an additional one-eighth cent les tax for reduction of ad valorem taxes. The City has adopted a tax abatement policy, as,described below. TAX ABATEMENT POLICY ... The City has est to be considered for tax abatement, a project i must be in an enterprise zone) and must meet City has established three enterprise zones, the 15.7 square miles, and the international airpor enterprise projects and tax abatements, princip abatement shall be determined on a case by cw years. TAX INCREMENT FINANCING ZONE ... Toge districts ("TIFs") pursuant to Chapter 311, 1 covers an approximately 12 square -mile area North Overton TIF, is bound by Fourth Stree miles. The base taxable value of the Central I in which it was created. The base taxable val tax year in which it was created. Any ad va used only to finance public improvements wi including the GO Bonds. The City is anticip; improvements in the North Overton TIF duri taxes and TIF revenues, but which would be that TIF. Such debt would be used to build in blished a tax abatement program to encourage economic development. In order lust be located in a reinvestment zone or enterprise zone (a commercial project everal criteria pertaining to job creation and property value enhancement. The iorth zone, of approximately 18.6 square miles, the south zone, of approximately zone, of approximately 10.3 square miles. At present, the City has initiated 20 lly in the northeast and southeast sections of the City. The amount and term of basis; however, in no event shall taxes be abated for a term in excess of ten (10) er with other taxing units, the City participates in two Tax Increment Financing xas Tax Code, VTCA. One TIF, known as the Central Business District TIF, rhich includes part of the central business district. The other TIF, known as the Avenue F, Broadway and University Avenue and covers approximately 2 square isiness District TIF was frozen at the level of taxable values for 2001, the tax year of the North Overton TIF was frozen at the level of taxable values for 2002, the rem taxes relating to growth of the TIFs tax base above the frozen base may be Lin the TIF and are not available for the payment of other obligations of the City, ng the issuance of less than $5 million of certificates of obligation to fund public the next two to three years, which would be secured by a pledge of ad valorem ticipated to be self-sufficient from amounts deposited into the increment fund for astructure improvements within the TIF. 17 TABLE 1 - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT 2001 Market Valuation Established by Lubbock Central Appraisal District $ 7,343,557,446 Less Exemptions/Reductions at 100% Market Value: Residential Homestead Exemptions $ 195,956,553 Homestead Cap Adjustment 38,599,250 Disabled Veterans 13,462,515 Agricultural/Open-Space Land Use Reductions 48,109,382 Pollution Exemptions 2,578,780 Freeport Exemptions 36,164,355 House Bill 366 110,094 Tax Abatement Reductions t'} 99,183,962 Prorated Exempt Property 82,848 Property Under Protest (add) (1,267,464) 432,980,275 2001 Taxable Assessed Valuation $ 6,910 577 17t City Funded Debt Payable from Ad Valorem Taxes General Obligation Debt (as of 6-30-02) (2) $ 203,854,683 The Refunding Bonds(3) The Certificates 10,810,000 2,605,000 Total Funded Debt Payable from Ad Valorem Taxes 217,269,683 Less: Self Supporting Debt (as of 6-30-02) �4) Waterworks System General Obligation Debt $ 63,157,639 Sewer System General Obligation Debt 50,755,940 Solid Waste Disposal System General Obligation Debt 5,575,644 Drainage Utility System General Obligation Debt 34,840,000 154,329,223 General Purpose Funded Debt Payable from Ad Valorem Taxes (5) $ 62,940,460 General Obligation Interest and Sinking Fund as of 6-30-02 $ 67,522,809 Ratio Total Funded Debt to Taxable Assessed Valuation Ratio General Purpose Funded Debt to Taxable Assessed Valuation 3.14% 0.91% 2002 Estimated Population - 202,000 (6) Per Capita Taxable Assessed Valuation - $34,211 Per Capita Total Funded Debt Payable from Ad Valorem axes - $1,076 Per Capita General Purpose Funded Debt Payable from Ad Va orem Taxes - $312 (1) See above, "Tax Information - Tax Abatement Policy". (2) The gtatement of indebtedness does not include outstanding $34,820,000 Electric Light and Power System Revenue Bonds, as these Bonds are payable solely from the Net Revenues of the Electric Light anJ Power System. Excludes accreted value on general obligation capital appreciation bonds in the amount of $1,648,114 as o F, February 15, 2002. (3) Simultaneously with the sale of the Certificates, the City is selling a series of general obligation refunding bonds (the "Refunding Bonds"). (4) As a matter of policy, the City provides for debt service on general obligation debt issued to fund Waterworks System improvements, Sewer System improvements, Solid Waste Disposal Syste improvements and Drainage System improvements from surplus revenues of these Systems (see "Table 8A —Pro- orma General Obligation Debt Service Requirements", "Table 8B - Division of Debt Service Requirements", "Table 9 - Interest and Sinking Fund Budget Projection and "Table 10 - Computation of Self -Supporting Debt"). "Waterworks System General Obligation Debt" includes $63,157,639 principal ount of outstanding general obligation bonds and certificates of obligation that were issued to finance Waterworks Syste improvements, and that'are being paid 18 from or are expected to be paid from W erworks System revenues. The City has no outstanding Waterworks System Revenue Bonds but has obligated revenues' f the Waterworks System under water supply contracts. "Sewer System General Obligation Debt" ncludes $50,755,940 principal amount of outstanding general obligation bonds and certificates of obligation that were iss iled to finance sewer system improvements, and that are being paid from sewer system revenues. The City has no outstand ng Sewer System Revenue Bonds. "Solid Waste Disposal System General Obligation Debt" consist of $5,575,644 principal amount of outstanding general obligation debt that was issued for solid M aste disposal improvements, and that is being paid from revenues derived from solid waste service fees. The City has no o itstanding, Solid Waste Disposal System Revenue Bonds. "Drainage Utility System General Obligation Debt" consists of $34,840,000 principal amount of outstanding general obligation debt that was issued for storm ater system improvements, and that is being paid from revenues derived form stormwater utility fees. The City has no ot tstaiiding Drainage Utility System Revenue Bonds. (4) "General Purpose Funded Debt Payable I rom Ad Valorem Taxes" includes $62,940,460 of general obligation debt and $2,545,000 principal amount of outstanding Tax and Airport Surplus Revenue Certificates of Obligation on which debt service is provided from Passenger Facil Charge ("PFC") revenues (see Footnote (2), "Table 9 - Interest and Sinking Fund Budget Projection"). (5) Source: The City of Lubbock, Texas. 19 TABLE 2 - TAXABLE ASSESSED VALUATIONS BY CATEGORY Category Real, Residential, Single -Family Real, Residential, Multi -Family Real, Vacant Lots/Tracts Real, Acreage (Land Only) Real, Farm and Ranch Improvements Real, Commercial and Industrial Real, Oil, Gas and Other Mineral Reserves Real and Tangible Personal, Utilities Tangible Personal, Commercial and Industrial Tangible Personal, Other Real Property, Inventory Special Inventory Total Appraised Value Before Exemptions Less: Total Exemptions/Reductions Taxable Assessed Value Category Real, Residential, Single -Family Real, Residential, Multi -Family Real, Vacant Lots/Tracts Real, Acreage (Land Only) Real, Farm and Ranch Improvements Real, Commercial and Industrial Real, Oil, Gas and Other Mineral Reserves Real and Tangible Personal, Utilities Tangible Personal, Commercial and Industrial Tangible Personal, Other Real Property, Inventory Total Appraised Value Before Exemptions Less: Total Exemptions/Reductions Taxable Assessed Value Taxable Appraised Value fort Fiscal Year Ended 2002 % of Amount 001 $ 3,417,179,021 51.99% % of 6.26% 87,184,492 % of Amount Total AmourI '', Total $ 3,935,486,660 53.59% $ 3,786,979'722 06 53.52% 466,775,473 6.36% 455,378 395 6.44% 96,407,484 1.31% 88,61192 $ 6,573,258,987 1.25% 60,171,506 0.82% 60,125617 0.85% 12,003,318 0.16% 11,0001161 ?6 0.16% 1,445,748,160 19.69% 1,364,333 20 19.28% 8,849,390. 0.12% 7,006 POO 0.10% 185,588,935 2.53% 181,228 03 2.56% 1,039,521,384 14.16% 1,032,704, 00 14.59% 15,296,446 0.21% 14,786!1; 89 0.21% 10,279,056 0.14% 13,320? 36 0.19% 67,429,634 0.92% 60,7861 10 0.86% $ 7,343,557,446 100.00% $ 7,076,255'',' 45 100.00% (432,980,275) (437,475, 77) 3; 6,910,577,171 $ 6,638,779,668 Taxable Appraised Value for Fiscal Year Ended September 30 1999 % of Amount Total $ 3,417,179,021 51.99% Of 6.26% 87,184,492 % of Amount Total Amount '', Total $ 3,219,691,355 50.90% $ 3,112,040,S 06 51.06% 396,277,540 6.26% 382,170, 49 6.27% 93,912,543 1.48% 96,312,-)75 $ 6,573,258,987 1.58% 45,494,120 0.72% 46,128,990 0.76% 6,778,453 0.11% 6,671,0 ?6 0.11% 1,272,262,327 20.11% 1,180,704,813 19.37% 7,862,650 0.12% 10,638,250 0.17% 178,399,714 2.82% 171,889,8 77 2.82% 1,081,053,583 17.09% 1,065,115,48 17.48% 12,807,717 0.20% 12,087,E 1 0.20% 11,256,034 0.18% 11,040,8 3 0.18% $ 6,325,796,036 100.00% $ 6,094,801,3 8 100.00% (306,207,687) (264,552,2 5) $ 6,019,588,349 $ 5.830249 F I ber 30, NOTE: Valuations shown are certified taxable assessed values reported by the Lubb' ck Central Appraisal District to the State Comptroller of Public Accounts. Certified values are subject to change throughout th' year as contested values are resolved and the Appraisal District updates records. 20 % of Amount Total $ 3,417,179,021 51.99% 411,487,582 6.26% 87,184,492 1.33% 46,378,532 0.71% 7,166,908 0.11% 1,322,413,335 20.12% 4,540,780 0.07% 180,418,060 2.74% 1,072,361,347 16.31% 14,283,024 0.22% 9,845,906 0.15% - 0.00% $ 6,573,258,987 100.00% (396,296,005) $ 6,176,962,982 NOTE: Valuations shown are certified taxable assessed values reported by the Lubb' ck Central Appraisal District to the State Comptroller of Public Accounts. Certified values are subject to change throughout th' year as contested values are resolved and the Appraisal District updates records. 20 TABLE 3A - VALUATION AND GENERAL Fiscal General Purpose Taxable Funded Tax Debt Year Outstanding Taxal ile at End Ended Estimated Assessed $ 61,728,036 9/30 Population (1) Valuati n121 1997 195,367 $ 5,567,0 2,641 1998 196,679 5,830,2t9,173 57,156,101 1999 197,117 6,019,5 38,349 - 2000 199,564 6,176,9 2,982 2001 201,061 6,63 8,7/9,668 58,122,809 2002 202,000 6,910,5177,171 �2) 62,940,460 (2) (1) Source: The City of Lubbock, Texas (2) As reported by the Lubbock Central 7 during the ensuing year. (3) Does not include self-supporting debt. (4) Projected, includes the Certificates ; simultaneously. Excludes the Refunded Bc TABLE 3B - DERIVATION OF GENERAL PU The following table sets forth certain in obligation debt. The City received voter September 18, 1999, and the City has a additional self-supporting general obligatic DEBT HISTORY Ratio Tax Debt to Taxable Assessed Valuation_ 1.11% 0.98% 0.85% 0.87% 0.88% 0.91% Funded Debt Per Capita $ 316 291 260 268 289 312 District on the City's annual State Property Tax Reports; subject to change 1 the General Obligation Refunding Bonds, Series 2002 that are being offered FUNDED TAX DEBT on with respect to the City's general purpose and self-supporting general al for authority to issue additional general obligation tax -supported debt on a capital improvement plan which is expected to result in the issuance of See "Debt Information—Anticipated Issuance of General Obligation Debt." Fiscal Funded I General Purpose Taxable Funded Tax Debt Assessed Outstanding Valuation at End Per Capita Of Year (3) $ 28,495 $ 61,728,036 29,643 57,156,101 30,538 51,222,980 30,952 53,455,346 33,019 58,122,809 34,211 62,940,460 (4) Ratio Tax Debt to Taxable Assessed Valuation_ 1.11% 0.98% 0.85% 0.87% 0.88% 0.91% Funded Debt Per Capita $ 316 291 260 268 289 312 District on the City's annual State Property Tax Reports; subject to change 1 the General Obligation Refunding Bonds, Series 2002 that are being offered FUNDED TAX DEBT on with respect to the City's general purpose and self-supporting general al for authority to issue additional general obligation tax -supported debt on a capital improvement plan which is expected to result in the issuance of See "Debt Information—Anticipated Issuance of General Obligation Debt." Fiscal Funded I ax Debt Less: General Purpose Year Outsta iding Self -Supporting Funded Tax Debt Ended at End Funded Tax Outstanding 9/30 of N ear Debt at End_ of Year(I) 1997 $ 138 914,318 $ 77,186,282 $ 61,728,036 1998 13 104,242 79,948,141 57,156,101 1999 15 117,749 106,894,769 51,222,980 2000 17 847,762 123,392,416 53,455,346 2001 21 408,321 152,285,512 58,122,809 2002 21-,,269,683 �2) 154,329,223 �2) 62,940,460 (2) (1) The City has a balance remaining of S15,627,000 general obligation bond authorization that has been authorized by the voters, but which has not yet been issu (see Table 11 — Authorized But Unissued General Obligation Bonds). (2) Projected; includes the Certificates and the General Obligation Refunding Bonds, Series 2002 that are being offered simultaneously. Excludes the Refunde Bonds. TABLE 4 - TAX RATE, LEVY AND COLLECT1 ON HISTORY % of Current % of Total Fiscal Year Distribution Tax Tax Ended Tax General Economic interest and Collections Collections 9/30 Rate Fund Development Sinking Fund Tax Levu to Tax Levy to Tax Lew 1997 $ 0.5859 $ 0.37771 $ 0.03000 $ 0.17819 $ 32,617,479 97.99% 99.78% 1998 0.5800 0.39689 0.03000 0.15311 33,815,445 97.80% 99.55% 1999 0.5800 0.41691 0.03000 0.13309 34,988,031 97.67% 99.24% 2000 0.5800 0.42750 0.03000 0.12250 35,844,243 97.35% 98.89% 2001 0.5700 0.42718 0.03000 0.11282 37,841,054 97.58% 99.29% ��) �l) 2002 0.5700 0.42844 1-- 0.03000 0.11156 39,391,179 95.62% 96.91% (1) Collections for part year only, through 30-02. I, 21 TABLE 5 - TEN LARGEST TAXPAYERS 2001/02 % of Total Taxable Taxable Name of Taxpayer Nature of Pronerty 1 Assessed Valuation Assessed Valuation Macerich Lubbock LTD Partnership Regional Shopping Mall I' $ 111,202,071 1.61 Southwestern Bell Telephone Company Telephone Utility 73,111,866 Xcel Energy Wal-Mart Electric Utility 52,730,368 1.06% 0.76% X -Fab Texas, Inc. Discount Retail Stores 32,798,872 0.47% Plains Co -Op Oil Mills Inc. Electronics Manufacturer 28,597,483 0.41% Fleming Companies, Inc. Agricultural Processing Wholesale Grocers 24,949,410 0.36% Methodist Hospital Hospital and Medical Office Bui ding 22,775,855 22,258,687 0.33% 0.32% United Supermarkets Inc. Retail Grocer 21,611,370 0.31% Farmers Co -Op Compress Agricultural Processing _19,044,5840.28% $ 409,080,566 5.92% GENERAL OBLIGATION DEBT LIMITATION ... law or the City's Home Rule Charter (see "Tax No general obligation debt limitat} Rate Limitation"). n is imposed on the City under current State TABLE 6 - TAX ADEQUACY() Maximum Principal and Interest Requirements, All General Obligation Debt, 2002(2) .................................... . .......$24,650,602 $0.3640 Tax Rate at 98% Collection Produces..............................................................,................................................. $24,651,411 Maximum Principal and Interest Requirements, General Purpose General Obligation Debt, 2003(')................................................'................................................. $ 8,379,340 $0.1238 Tax Rate at 98% Collection Produces .......................................................................... $ 8,384,189 (1) Based on 2001-2002 taxable assessed valuation. (2) See Table 8A. (3) See Table 8B. 22 TABLE 7 - ESTIMATED OVERLAPPING DEBT Expenditures of the various taxing entities wi entities on properties within the City. Such expenditures. This statement of direct and e information contained in "Texas Municipal Ri Central Appraisal District. Except for the ami completeness of such information, and no pei more, certain of the entities listed may have programs requiring the issuance of substantfal following table reflects the estimated share of < Taxing Jurisdiction City of Lubbock Lubbock Independent School District Lubbock County Lubbock County Hospital District High Plains Underground Water Conservation District No. I Frenship Independent School District Idalou Independent School District Lubbock -Cooper Independent School District New Deal Independent School District Roosevelt Independent School District Total Direct and Overlapping G.O. Debt Ratio of Direct and Overlapping G.O. Debt to the territory of the City are paid from of ad valorem taxes levied by such ties are independent of the City and may incur borrowings to finance their fated overlapping ad valorem tax bonds ("Tax Debt") was developed from ts" published by the Municipal Advisory Council of Texas and the Lubbock s relating to the City, the City has not independently verified the accuracy or should rely upon such information as being accurate or complete. Further- ied additional 'Tax Debt since the date hereof, and such entities may have unts of additional Tax Debt, the amount of which cannot be determined. The lapping Tax Debt of the City. 2001/02 0.00830 Total Funded 82.94% City's Authorized Taxable 1.58930 Debt Estimated Overlapping But Unissued kssessed Tax As Of % G.O. Debt Debt As Of Value Rate 6-30-02 Applicable As of 6-30-02 6-30-02 910,577,171 f 0.57000 T217,269,683"' 100.00% $ 217,269,683 $ 15,627,000 771,383,915 1.60620 68,878,092 98.91% 68,127,321 3,400,275 ,154,782,666 0.19170 -0- 82.94% -0- 500,000 154,942,166 0.09905 -0- 82.94% -0- -0- .154,105,887 0.00830 -0- 82.94% -0- -0- 909,360,034 1.58930 32,924,112 64.44% 21,216,298 -0- 112,085,028 1.48000 1,480,000 1.10% 16,280 -0- 321,002,498 1.58000 14,939,555 15.30% 2,285,752 -0- 84,092,988 1.50000 -0- 0.03% -0- -0- 103,727,668 1.50000 -0- 4.72% -0- -0- $ 308,915,333 ssessed Valuation .................. o ............................. 4.47/0 Per Capita Direct and Overlapping G.O. Debt ....... k .....................................................I.............$ 1,529 (1) General Purpose Funded Tax Debt; Debt"). as of 9-30-02 (see "Table I- Valuation, Exemptions and General Obligation 23 a o o •� •Y V; � � �h ; y o o d N h N C4 V Cr, h oo h N O\ '�Y h O� O h o0 V' O�Op C, a, V• 'n oo O M O ]m-- cD oo t" N b WV' N, 00 'O !` OD b l� O +i�O " oo c� OM OMi v N O N O .a b V Vr oo M oo [� 00 00 vi Oi vioo H ^ N�O N N N N N .. .. ,�.. .�.r �'O a\ O+ Qi h V' " N N N N N N NN N �O G9 O ' oo O O, \D V' p V• O �D 'n p 4: y 'n NO M�� M V• O d h �o 00 o V' rn w •-. II! ILII N V M N N^ to N N 4.9, O O O O o 0 0 0 0 O O O O O O O O O p O N O O O O O O O O O U M N �� N a U � tn I q M ' oo e} er �{ V• M V• oo O O O oo h H M h hI v� C W. 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O 00 0 0 g O O O O O O O 0 O0 N y O O O O O O O O O O O O O O O O O O O O 'O O M y h h O O h h h O O h h N O O O h h O h O v'i O OO V [� b 00 t- 00 O^ N ,O r� O� O, t- ,o V O '-� N M oo ,O M M t% O �t h ,O l w 00 N M b � OL O N M O0 t- h t+ t- 10 M M - .-.i - .-i - - N N N M N � 0 0 a O A h ,D t+ NN MN 00 O, O O O O O O O O O .�+ O O N O N N N N N O O O O O O O N N M M O O O O "C !d N N N N N N N N N N N N N N N N N N N N N N 25 v v TABLE 9 - INTEREST AND SINKING FUND BUDGET PROJECTION General Obligation Debt Service Requirements, Fiscal Year Ending 9-30-02 Fiscal Agent, Tax Collection and Other Uses $ 24,650,602 Total Requirements 16,000 $ 24,666,602 Sources of Funds Interest and Sinking Fund, 9-30-01 Budgeted Ad Valorem Tax Re ce�pts $ 1,415,094 7,708,026 Budgeted Transfers From: Water Fund Sewer Fund ��� $ 6,899,408 Solid Waste Fund 6,482,379 Drainage Utility Fund 951,300 Airport Fund - from Passenger Facility Charges ("PFCs") (2) 2,317,792 Budgeted Interest Earned 290,495 Total Sources of Funds 52,500 $ 26,116,994 Projected Balance, 9-30-02 $ 1,450,392 J (1) See "Table 10 - Computation of Self -Supporting Debt". (2) PFCs are authorized by the Federal Aviation Administration ("FAA"). PFC revenues must be used for allowable costs of FAA approved airport projects including debt service on airport obligations issued to carry out approved projects. The City issued Tax and Airport Surplus Revenue Certificates of Obligation (the "Ai' ort Certificates") outstanding principal balance of the 1993 Airport Certificates on 9-30-01 w as Certificates is provided from PFC in 1993 and 1995. The J on the Airport 65were,000; $1 eDebt revenues. PFC revenues in fiscal year ending' 9-30-01 557,918.ebt service on other airport general obligation debt (having an outstanding principal balance at 9-30-01 of $3,750,016) valorem taxes. is provided from ad 26 J (1) Each Fiscal Year the City transfers Net Rev ues of the Sewer Enterprise Fund to the General Obligation Interest and Sinking Fund in an amount equal to debt service requirements on Sewer System general obligation debt. THE SOLID WASTE DISPOSAL SYSTEM (1) Net System Revenue Available, Fiscal Year Ended 9-30-01 $ 5,932,931 Less: Requirements for Revenue Bonds, Fiscal Year Ending 9-30-02 -0- Balance Available for Other Purposes $ 5,932,931 Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-02 $ 951,300 Percentage of System General Obligation Debt elf -Supporting 100.00% (1) Each Fiscal Year the City transfers Net Rei enues of the Solid Waste Enterprise Fund to the General Obligation Interest and Sinking Fund in an amount equal to debt se ice requirements on Solid Waste System general obligation debt. THE DRAINAGE UTILITY SYSTEM (1) Net System Revenue Available, Fiscal Year En ed 9-30-01 $ 1,603,949 Less: Requirements for Revenue Bonds,iscal Year Ending 9-30-02 -0- Balance Available for Other Purposes (2) $ 1,603,949 Requirements for System General Obligation bt, Fiscal Year Ending 9-30-02 $ 2,317,792 Percentage of System General Obligation Debt elf-Supporting(2) 70.62% (1) Each Fiscal Year the City will transfer Net Revenues of the Drainage Enterprise Fund to the General Obligation Interest and Sinking Fund in an amount equal to debt se '..,ice requirements on Drainage Utility System general obligation debt. (2) Storm Drainage Utility Fees were increased on 10/01/01 for residential and commercial customers. The residential rate increased from $1.71 to $4.99 and the commercial rate increased from $11.35 to $33.12. The rate increase is expected to provide revenues that will exceed the requir #rents for System General Obligation Debt in the Storm Drainage Enterprise Fund. TABLE 11 - AUTHORIZED BUT UNISSUED GEN RAL OBLIGATION BONDS Amount _ ate Amount Previously Unissued Purpose Authorized Authorized Issued Balance Waterworks System 10: 17-87 $ 2,810,000 $ 200,000 $ 2,610,000 Sewer System 5 �1-77 3,303,000 2,175,000 1,128,000 Street Improvements 1-93 10,170,000 10,166,000 4,000 Street Improvements 9'' 18-99 17,165,000 11,800,000 5,365,000 Drainage 908-99 2,160,000 1,025,000 1,135,000 Traffic Signals 9+18-99 3,295,000 2,160,000 1,135,000 Parks 9''.18-99 14,765,000 10,515,000 4,250,000 $ 53,668,000 $ 38,041,000 $ 15,627,000 27 TABLE 10 - COMPUTATION OF SELF-SUPPORTING DEBT THE WATERWORKS SYSTEM (1) Net System Revenue Available, Fiscal Year Ended 9-30-01 $ 12,760,994 Less: Requirements for Revenue Bonds,' Fiscal Year Ended 9-30-02 -0- Balance Available for Other Purposes $ 12,760,994 Requirements for System General Obligation Dc bt, Fiscal Year Ending 9-30-02 $ 7,034,507 Percentage of System General Obligation Debt 8 elf -Supporting 100.00% (1) Each Fiscal Year the City transfers Net Rev nues of the Waterworks Enterprise Fund to the General Obligation Interest and Sinking Fund in an amount equal to debt service requirements on Waterworks System general obligation debt. THE SEWER SYSTEM (1) Net System Revenue Available, Fiscal Year Ended 9-30-01 $ 8,176,778 Less: Requirements for Revenue Bonds, liscal Year Ending 9-30-02 -0- Balance Available for Other Purposes $ 8,176,778 Requirements for System General Obligation D t'Fiscal Year Ending 9-30-02 $ 6,347,280 Percentage of System General Obligation Debt elf -Supporting 100.00% (1) Each Fiscal Year the City transfers Net Rev ues of the Sewer Enterprise Fund to the General Obligation Interest and Sinking Fund in an amount equal to debt service requirements on Sewer System general obligation debt. THE SOLID WASTE DISPOSAL SYSTEM (1) Net System Revenue Available, Fiscal Year Ended 9-30-01 $ 5,932,931 Less: Requirements for Revenue Bonds, Fiscal Year Ending 9-30-02 -0- Balance Available for Other Purposes $ 5,932,931 Requirements for System General Obligation Debt, Fiscal Year Ending 9-30-02 $ 951,300 Percentage of System General Obligation Debt elf -Supporting 100.00% (1) Each Fiscal Year the City transfers Net Rei enues of the Solid Waste Enterprise Fund to the General Obligation Interest and Sinking Fund in an amount equal to debt se ice requirements on Solid Waste System general obligation debt. THE DRAINAGE UTILITY SYSTEM (1) Net System Revenue Available, Fiscal Year En ed 9-30-01 $ 1,603,949 Less: Requirements for Revenue Bonds,iscal Year Ending 9-30-02 -0- Balance Available for Other Purposes (2) $ 1,603,949 Requirements for System General Obligation bt, Fiscal Year Ending 9-30-02 $ 2,317,792 Percentage of System General Obligation Debt elf-Supporting(2) 70.62% (1) Each Fiscal Year the City will transfer Net Revenues of the Drainage Enterprise Fund to the General Obligation Interest and Sinking Fund in an amount equal to debt se '..,ice requirements on Drainage Utility System general obligation debt. (2) Storm Drainage Utility Fees were increased on 10/01/01 for residential and commercial customers. The residential rate increased from $1.71 to $4.99 and the commercial rate increased from $11.35 to $33.12. The rate increase is expected to provide revenues that will exceed the requir #rents for System General Obligation Debt in the Storm Drainage Enterprise Fund. TABLE 11 - AUTHORIZED BUT UNISSUED GEN RAL OBLIGATION BONDS Amount _ ate Amount Previously Unissued Purpose Authorized Authorized Issued Balance Waterworks System 10: 17-87 $ 2,810,000 $ 200,000 $ 2,610,000 Sewer System 5 �1-77 3,303,000 2,175,000 1,128,000 Street Improvements 1-93 10,170,000 10,166,000 4,000 Street Improvements 9'' 18-99 17,165,000 11,800,000 5,365,000 Drainage 908-99 2,160,000 1,025,000 1,135,000 Traffic Signals 9+18-99 3,295,000 2,160,000 1,135,000 Parks 9''.18-99 14,765,000 10,515,000 4,250,000 $ 53,668,000 $ 38,041,000 $ 15,627,000 27 ANTICIPATED ISSUANCE OF GENERAL OBLIGATION DEBT ... As described Improvement Plan," the City has identified certain capital projects in its capital it through the issuance of tax -supported debt over the five year period ending Sepi Bonds, the City anticipates that within the next twelve months, it will issue addii approximately $12 million to fund the remaining projects approved by the voters "Table 11 - Authorized But Unissued General Obligation Bonds"). The City also to $45 million in combination tax and drainage district revenue certificates of ob certificates would finance phase two of a storm water drainage project that is curri issued for that project is expected to be self-supporting from storm water fees colic TABLE 12 — OTHER OBLIGATIONS Asset Classification Motor vehicles Heavy Equipment Heavy Moveable Equipment 2002 2003 $ 7,621 $ 7,621 163,552 106,201 207,888 35,359 PENSION FUND ... TEXAS MUNICIPAL RETIREMENT SYSTEM (1)(2) . . . All perm firefighters are covered by the Texas Municipal Retirement System ("TMRS"). ' employee retirement system which is covered by a State statute and is administerec Texas. TMRS operates independently of its member cities. The City of Lubbock joined TMRS in 1950 to supplement Social Security. All C by Social Security. Options offered under TMRS, and adopted by the City, includ ten year vesting, updated service credit, occupational disability benefits and s employee. An employee who retires receives an annuity based on the amount of tt for one by the City. Employee contribution rate is 7% of gross salary. The City's actuarial techniques applied to experience. The 2001 contribution rate was 13.6 Enabling statutes prohibit any member city from adopting options which impose years within a specified statutory rate. below under "Debt Information - Capital tprovement plan ("CIP") that may be financed ;tuber 30, 2006. In addition to the Refunding onal general obligation debt in the amount of in the September 1999 bond referendum (see nticipates the issuance of between $35 million igation during the next twelve months. Such ntly under construction in the City. The debt :ted by the City. ,t, full-time City employees who are not S is an agent, multiple -employer, public - six trustees appointed by the Governor of r employees except firefighters are covered urrent, prior and antecedent service credits, vivor benefits for the spouse of a vested employees contributions over -matched two ntribution rate is calculated each year using ). The 2002 contribution rate is 13.99%. abilities that cannot be amortized over 25 On December 31, 2000, the actuarial value of assets held by TMRS (not including hose of the Supplemental Disability Fund, which is "pooled"), for the City of Lubbock were $160,299,195. Unfunded actuariz I accrued liabilities on December 31, 2000 were $40,414,170, which is being amortized over a 25 -year period beginning Janua, 1997. Total contributions by the City to the System for Calendar Year 2001 were $8,112,713.96. FIREMEN'S RELIEF AND RETIREMENT FUND (1)... City of Lubbock firefightf Lubbock Firemen's Relief and Retirement Fund (the "FUND"), operating under an and adopted by City firefighters, by vote of the department, in 1941. Firefighters are The Fund is governed by seven trustees, three firefighters, two outside trustees apps his representative and the chief financial officer or his representative. Execut(ion Pension Commissioner, who is appointed by the Governor. Benefits of retired firemen are determined on a "formula" or a "final salary" plan. A years, and the fund is audited annually. Firefighters contribute 11% of full salary ini like amount; however, the City contributes on a basis of the percentage of salary whicl same relationship to the firefighter's contribution rate that the City's rate paid into th employees pay into the TMRS and FICA. The City's contribution rate for 2001 was 1( As of December 31, 2000, over -funded pension benefit obligations were $4,985,739': period beginning January 1, 1997. are members of the locally administered passed in 1937 by the State Legislature covered by Social Security. :ed by the other trustees), the Mayor or the act is monitored by the Firemen's tuarial reviews are performed every two the fund and the City must contribute a is a ratio adjusted annually that bears the TMRS and FICA bears to the rate other 02%. is being amortized over a 13 year (1) For historical information concerning the retirementlans, see Appendix ppendix B, "E' cerpts from the City's Annual Financial Report" —Note #III, Subsection E, "Retirement Plans".) (2) Source: Texas Municipal Retirement System, Comprehensive Annual Financi''l Report for Year Ended December 31, 2000, "City of Lubbock, Texas,,. 28 f Balance 2004 Outstanding $ 4,383 $ 19,625 48,326 318,079 18,327 261,574 ,t, full-time City employees who are not S is an agent, multiple -employer, public - six trustees appointed by the Governor of r employees except firefighters are covered urrent, prior and antecedent service credits, vivor benefits for the spouse of a vested employees contributions over -matched two ntribution rate is calculated each year using ). The 2002 contribution rate is 13.99%. abilities that cannot be amortized over 25 On December 31, 2000, the actuarial value of assets held by TMRS (not including hose of the Supplemental Disability Fund, which is "pooled"), for the City of Lubbock were $160,299,195. Unfunded actuariz I accrued liabilities on December 31, 2000 were $40,414,170, which is being amortized over a 25 -year period beginning Janua, 1997. Total contributions by the City to the System for Calendar Year 2001 were $8,112,713.96. FIREMEN'S RELIEF AND RETIREMENT FUND (1)... City of Lubbock firefightf Lubbock Firemen's Relief and Retirement Fund (the "FUND"), operating under an and adopted by City firefighters, by vote of the department, in 1941. Firefighters are The Fund is governed by seven trustees, three firefighters, two outside trustees apps his representative and the chief financial officer or his representative. Execut(ion Pension Commissioner, who is appointed by the Governor. Benefits of retired firemen are determined on a "formula" or a "final salary" plan. A years, and the fund is audited annually. Firefighters contribute 11% of full salary ini like amount; however, the City contributes on a basis of the percentage of salary whicl same relationship to the firefighter's contribution rate that the City's rate paid into th employees pay into the TMRS and FICA. The City's contribution rate for 2001 was 1( As of December 31, 2000, over -funded pension benefit obligations were $4,985,739': period beginning January 1, 1997. are members of the locally administered passed in 1937 by the State Legislature covered by Social Security. :ed by the other trustees), the Mayor or the act is monitored by the Firemen's tuarial reviews are performed every two the fund and the City must contribute a is a ratio adjusted annually that bears the TMRS and FICA bears to the rate other 02%. is being amortized over a 13 year (1) For historical information concerning the retirementlans, see Appendix ppendix B, "E' cerpts from the City's Annual Financial Report" —Note #III, Subsection E, "Retirement Plans".) (2) Source: Texas Municipal Retirement System, Comprehensive Annual Financi''l Report for Year Ended December 31, 2000, "City of Lubbock, Texas,,. 28 f TABLE 13 - GENERAL FUND REVENUES AND Revenues Ad Valorem Taxes Sales Taxes Franchise Fees Miscellaneous Taxes Licenses and Permits Intergovernmental Charges for Services Fines Miscellaneous Taxes Interest Operating Transfers (z) Total Revenues and Transfers Expenditures General Government Financial Services Management Services Non -departmental Health & Community Services Strategic Planning Culture/Leisure Services Police Fire Transportation Services Electric Utilities Human Resources Operating Transfers Total Expenditures Excess (Deficiency) of Revenues and Transfers Over Expenditures Fund Balance at Beginning of Year Fund Balance at End of Year Less: Reserves and Designations (3) INFORMATION HISTORY Fiscal Year Ended September 30, 201 4,141 2000 $ 26,595,709 1999 $ 25,338,127 1998 $ 23,271,939 1997) $ 22,440,626 $ 28,6 28,1 3,746 27,121,078 25,196,203 24,914,523 24,251,491 7,6 l4,683 6,619,755 6,235,099 7,128,034 5,438,688 7 4,587 743,771 721,907 675,694 687,574 1,2 2,794 1,138,924 976,091 1,037,458 1,077,878 3 '3,171 365,671 576,136 917,572 884,834 4,2 9,958 4,210,334 4,032,665 4,016,475 3,522,397 3,0;1,055 25,561,261 2,834,208 3,335,340 3,313,233 3,460,453 9)5,494 17,080,371 1,143,226 947,636 1,011,559 1,118,578 1,08,096 5,439,855 1,108,662 1,118,016 1,239,562 1,623,818 14,2 6,074 3,799 13,636,764 $ 85,518,102 13,451,796 $ 81,929,016 16,030,636 $ 83,556,685 15,284,140 $ 79,790,477 $ 90,4i $ 7,1 0,478 $ 6,193,124 $ 6,143,076 $ 5,762,283 $ 5,003,806 1,4 9,967 1,458,232 1,366,006 1,196,779 1,067,281 6 9,903 461,067 396,216 389,583 1,170,948 1,7 6,167 606,843 926,203 1,125,310 1,040,419 4,8 1,348 4,744,830 4,522,041 4,519,880 4,398,348 9 8,514 823,399 839,814 774,878 727,448 13,6 8,823 13,454,832 12,630,738 12,667,406 12,347,987 28,1 9,048 25,561,261 23,478,729 22,013,906 20,519,946 17,7 '5,641 17,080,371 15,616,543 14,468,027 13,897,682 4,7 1,680 5,439,855 5,195,459 5,007,496 4,993,564 2,1 ,211 1,923,584 1,759,509 1,848,283 1,778,824 9 3,250 871,596 870,172 810,997 831,758 6,1 7,379 8,409 7,526,481 $ 86,145,475 9,926,784 $ 83.671,290 12,454,461 $ 83,039,289 11,211,948 $ 78,989,959 $ 90,3 Undesignated Fund Balance $ .5,390 $ (627,373) $ (1,742,274) $ 517,396 $ 800,518 16,6 '0,652 17,248,025 18,990,299 18,472,903 17,672,385 16,7 6,042 $ 16,620,652 $ 17,248,025 $ 18,990,299 $ 18,472,903 (2,3 ;1,860) (2,857,096) (4,432,834) (5,442,847) (4,997,379) 14,3,4,182 $ 13,763,556 $ 12,815,191 $ 13,547,452 $ 13,475,524 (1) The presentation of the City's General Fi resulting in different categorizations of exl (2) The City's financial policies provide for provide that the water, waste water and s, City's general and administrative expense an amount representing a payment in lie purposes, and, in addition, makes a transfe The Electric System has a goal of reducii recent years to approximately 6%. The Among the factors that could affect the ti electric utility, which has competition frc certified service area. (3) The City's financial policies target a C expenditures. Amounts representing fund c. d income statements in its audited financial statements was changed in 1997, nditure items. ransfers to the General Fund from the City's enterprise funds. The policies id waste funds transfer an amount sufficient to cover the pro rata share of the an amount representing a franchise payment equal to 3% of gross receipts and of ad valorem taxes. The Electric System makes transfers for the foregoing reflecting the System's share of street lighting expense and for other purposes. transfers to the General Fund from approximately 12% of gross revenues in ity's policies with respect to enterprise fund transfers are subject to change. nsfers to the General Fund is the effect of increased competition on the City's i an investor owned utility and/or an electric cooperative in almost all of its ;neral Fund undesignated balance of at least two months of General Fund 41ances in excess of the target are reserved for future capital expenditures. 29 TABLE 14 - MUNICIPAL SALES TAX HISTORY The City has adopted the Municipal Sales and Use Tax Act, VTCA, Tax Code, C impose and levy a 1% Local Sales and Use Tax within the City; the proceeds pledged to the payment of the Certificates or other debt of the City. In addi approved the imposition of an additional sales and use tax of one-eighth of a ce 323, as amended. Collection for the additional tax commenced in October, 19' sales tax designated for the use and benefit of the City to replace property tax rev Collections and enforcements of the City's sales tax are effected through the offic of Texas, who remits the proceeds of the tax to the City monthly, after deductio the City's local Sales and Use Tax is shown below: Fiscal orem Per We Capita (2) 4184 $ 124.01 $ Year .4154 126.84 % of Ended Total Ad Valorem 9/30 Collected') Tax Levy 1997 $ 24,391,081 74.78% 1998 25,002,693 73.94% 1999 25,196,203 72.01% 2000 27,121,078 75.66% 2001 28,183,746 74.48% (1) Excludes bingo tax receipts. (2) Based on population estimates of the City. The sales tax breakdown for the City is as follows: City: City Sales & Use Tax City Tax for Property Tax Relief County Sales & Use Tax State Sales & Use Tax Total CAPITAL IMPROVEMENT PROGRAM ipter 321, which grants the City the power to •e credited to the General Fund and are not n, in January, 1995, the voters of the City as authorized by VTCA, Tax Code, Chapter with the proceeds from the one-eighth cent ues lost as a result of the adoption of the tax. of the Comptroller of Public Accounts, State )f a 2% service fee. Historical collections of 'quivajlent of Ad V' Taxi orem Per We Capita (2) 4184 $ 124.01 $ .4154 126.84 4079 126.33 4085 134.89 8 139.52 1.000¢ 0.125¢ 0.500¢ 6.250¢ G 7.875¢ The City Council adopted a resolution during the 1984-85 budget process establishing permanent capital maintenance funds for capital projects. A capital improvement plan is made for planning purposes and may identify projects that will be deferred or omitted entirely in future years. In addition, as conditions change, new projects may be added 1hat are not currently identified. In order for a project to be funded as a capital project it must have a cost of $25,000 or more and a life of seven or more years. Many of the projects require more than one year of completion and are accounted for on a life to d' to basis. For fiscal year ending 9-30-02, the City Council has approved $43,407,670 in total expenditures for capital projects for al general purpose projects, as well as projects for the City's Electric System Waterworks System, Sewer System, Solid Waste Sys em, Storm Water System and Airport. The Capital Projects Fund budget for 2001-2002 also identifies an additional $121,791,025 in future improvements, for all City departments over the four succeeding fiscal years, including $69,074,941 to be financ 'd through the issuance of tax -supported debt in these years. The balance of the capital expenditures are anticipated to be funded fron reserves or current year revenue sources. FINANCIAL POLICIES Basis or Accounting ... The accountipg policies of the City conform to gen Governmental Accounting Standards Board and program standards adopted by the the United States and Canada ("GFOA"). The GFOA has awarded a Certificate Reporting to the City for each of the fiscal years ended September 30, 1984 thr report will be submitted to GFOA to determine its eligibility for another certificate. GASB 34 Implications for the City of Lubbock ... In June 1999, the Goveri Statement No. 34, "Basic Financial Statements -- Management's Discussion and A The objective of this Statement is to enhance the clarity and usefulness of the gene and local governments to the citizenry, legislative and oversight bodies, and inves GASB 34 for its fiscal year ending September 30, 2002. While adoption of this 30 ly accepted accounting principles of the vernment Finance Officer's Association of Achievement for Excellence in Financial h September 30, 2001. The City's 2002 ital Accounting Standards Board issued sis -- for State and Local Governments". )urpose external financial reports of state and creditors. The City must implement sment will alter the presentation of some W financial information, management believes that there will be no material adverse impact to the City's financial position, results of operation, or cash flows. General Fund Balance ... The City's objecti is to maintain an unreserved/undesignated fund balance at a minimum of an amount equal to two months budgeted operating expenditures to meet unanticipated contingencies and fluctuations in revenue. Enterprise Fund Balance ... It is the policy of: the City to maintain retained earnings equal to three months operating expense and debt requirements in each enterprise fund Jor unforeseen contingencies. The City's financial policy was implemented in 1996 and provides that such retained earnings shall be accumulated over a roiling ten year period. Resources are also retained in the System's rate stabilization fund to meet sho falls in revenues or fluctuating rate environments, to fund capital improvements and may be allocated if there are not sufficient resources in unreserved/undesignated retained earnings. Enterprise Fund Revenues ... It is the policy of the City that each enterprise fund be operated in a manner that results in self sufficiency, without the need for additional monetary transfers from other funds and, with the exception of the airport enterprise fund, each of the enterprise funds are currently in compliance with this policy. Such self sufficiency is to be obtained through the rates, fees and charges of each enterprisefund. For purposes of determining self sufficiency, cost recovery for each enterprise fund includes direct operating and m iintenance expense, as well as indirect cost recovery, in -lieu of transfers to the General Fund for property and franchise tax pay ents, capital expenditures and debt service payments, where appropriate. Debt Service Fund Balance ... A reasonableebt service fund balance is maintained in order to compensate for unexpected contingencies. Budgetary Procedures ... The City follows thes 11, procedures in establishing operating budgets: 1) Prior to August 1, the City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following October L. The operating budget includes proposed expenditures and the means of financing them. 2) Public hearings are conducted to obtaiW taxpayer comments. 3) Prior to October 1 the budget is legall . enacted through passage of an ordinance. 4) The City Manager is authorized to trarisfer budgeted amounts between departments and funds. Expenditures may not legally exceed budgeted appropriationo at the fund level. 5) Formal budgetary integration is employed as a management control device during the year for the Convention and Tourism, Criminal Investigation, an ;Capital Projects Funds. Budgets are adopted on an annual basis. Formal budgetary integration is not employe, for Debt Service funds because effective budgetary control is alternatively achieved through general obligation bc nd indenture and other contract provisions. 6) The Budget for the General Fund is adopted on a basis consistent with generally accepted accounting principles ("GAAP"). 7) Appropriations for the General Fund lapse at year end. Unencumbered balances for the Capital Projects Funds c-. continue as authority for subsequent p 'riod expenditures. 8) Budgetary comparison is presented or the General Fund in the combined financial statement section of the Comprehensive Annual financial Report. The City has received the Distinguished Budget Presentation Award from the GFOA for the following budget years beginning October 1, 1983-88 and 1990-2001. The City w II submit the current budget to the GFOA to determine its eligibility for another award. Insurance ... The City is self-insured for ge eral liability and health benefits coverage, although it purchases reinsurance coverage for claims in excess of $250,000 for general liability claims. Airport liability insurance and workers' compensation is insured under policies issued by third party insu 'rs. The City's insurance policies are maintained with large deductibles for fire and extended coverage and boiler coverage. An p'surance Fund has been established in the Internal Service Fund to account for insurance programs and budgeted transfers are m ade to this fund based upon estimated payments for claim losses. At 9-30-01 the total Fund Equity of these Self-insurance — health Self-insurance — risk management ce funds were as follows: $ 8,841,546 $ 11,171,322 31 INVESTMENTS The City of Lubbock invests its investable funds in investments authorized by Tex law in accordance with investment policies approved by the City Council of the City of Lubbock. Both state law and the City's in t estment policies are subject to change. INVESTMENT AUTHORITY AND INVESTMENT PRACTICES OF THE CITY ... Under Te: obligations of the United States or its agencies and instrumentalities, (2) direct obi. and instrumentalities; (3) collateralized mortgage obligations directly issued by a f4 States, the underlying security for which is guaranteed by an agency or instt obligations, the principal and interest of which is guaranteed or insured by or back( Texas or the United States or their respective agencies and instrumentalities; (5) of and other political subdivisions of any state rated as to investment quality by a nati less than A or its equivalent; (6) bonds issued, assumed or guaranteed by the State o state or national bank domiciled in the State of Texas, a savings bank domiciled in union domiciled in the State of Texas and are guaranteed or insured by the Fd National Credit Union Share Insurance Fund, or are secured as to principal by oblig in any other manner and amount provided by law for City deposits, (8) fully colli defined termination date, are fully secured by obligations described in clause (1), ai securities dealer or a financial institution doing business in the State of Texas remaining term of 270 days or less, if the short-term obligations of the accepting bi or the equivalent by at least one nationally recognized credit rating agency, (10) cot days or less that is rated at least A-1 or P-1 or the equivalent by either (a) two natio one nationally recognized credit rating agency if the paper is fully secured by an it state bank, (11) no-load money market mutual funds registered with and regulated that have a dollar weighted average stated maturity of 90 days or less and include in, of a stable net asset value of $1 for each share, and (12) no-load mutual funds 1 Commission that have an average weighted maturity of less than two years, invest ei paragraph, and are continuously rated as to investment quality by at least one nation less than AAA or its equivalent. If specifically authorized in the authorizing do guaranteed investment contracts that have a defined termination date and are secur agencies and instrumentalities in an amount at least equal to the amount of bond than the prohibited obligations described in the next succeeding paragraph. The City may invest in such obligations directly or through government investmen provided that the pools are rated no lower than AAA or AAAm or an equivalent service. The City may also contract with an investment management firm registerei (15 U.S.C. Section 80b-1 et seq.) or with the State Securities Board to provide for i funds or other funds under its control for a term up to two years, but the City retai assets. In order to renew or extend such a contract, the City must do so by of specifically prohibited from investing in: (1) obligations whose payment represen principal balance of the underlying mortgage-backed security collateral and pays r represents the principal stream of cash flow from the underlying mortgage -b collateralized mortgage obligations that have a stated final maturity of greater tha obligations the interest rate of which is determined by an index that adjusts opposite INVESTMENT POLICIES ... Under Texas law, the City is required to invest its fi primarily emphasize safety of principal and liquidity; that address investment divers capability of investment management; and that include a list of authorized investmi stated maturity of any individual investment and the maximum average dollar -V groups. All City funds must be invested consistent with a formally adopted "Inve addresses each fund's investment. Each Investment Strategy Statement will describi investment type, (2) preservation and safety of principal, (3) liquidity, (4) marketabi the portfolio, and (6) yield. Under Texas law, the City's investments must be made "with judgment and care, and prudence, discretion, and intelligence would exercise in the management of the pers investment considering the probable safety of capital and probable income to investment officers must submit an investment report to the City Council detailing: that all investment officers jointly prepared and signed the report, (3) the beginning i to market value and the ending value of each pooled fund group, (4) the book valu asset at the beginning and end of the reporting period, (5) the maturity date of each fund or pooled fund group for which each individual investment was acquired, 32 as law, the City is authorized to invest in (1) rations of the State of Texas or its agencies eral agency or instrumentality of the United mentality of the United- States; (4) other I by the full faith and credit of, the State of igations of states, agencies, counties, cities, anally recognized investment rating firm not Israel; (7) certificates of deposit issued by a to State of Texas, or a state or federal credit eral Deposit Insurance Corporation or the tions described in clauses (1) through (6) or .eralized repurchase agreements that have a d are placed through a primary government (9) certain bankers' acceptances with the rik or its parent are rated at least A-1 or P-1 imercial paper with a stated maturity of 270 ally recognized credit rating agencies or (b) evocable letter of credit issued by a U.S. or y the Securities and Exchange Commission their investment objectives the maintenance ;gistered with the Securities and Exchange elusively in obligations described in the this Ily recognized investment rating firm of not ument, bond proceeds may be invested in d by obligations of the United States or its roceeds invested under such contract, other pools that invest solely in such obligations ly at least one nationally recognized rating under the Investment Advisers Act of 1940 e investment and management of its public is ultimate responsibility as fiduciary of its ler, ordinance, or resolution. The City is > the coupon payments on the outstanding > principal; (2) obligations whose payment eked security and bears no interest; (3) 10 years; and (4) collateralized mortgage the changes in a market index. ids under written investment policies that ication, yield, maturity, and the quality and its for City funds, the maximum allowable sighted maturity allowed for pooled fund ment Strategy Statement" that specifically its objectives concerning: (1) suitability of ly of each investment, (5) diversification of • prevailing circumstances, that a person of is own affairs, not for speculation, but for e derived." At least quarterly the City's 1) the investment position of the City, (2) arket value, and any additions and changes and market value of each separately listed -parately invested asset, (6) the account or nd (7) the compliance of the investment portfolio as it relates to: (a) adopted im written authority from the City Council. strategies and (b) Texas law. No person may invest City funds without express ADDITIONAL PROVISIONS ... Under Texas law ''the City is additionally required to: (1) annually review its adopted policies and strategies, (2) require any investment officers vith personal business relationships or family relationships with firms seeking to sell securities to the City to disclose the relationship and file a statement with the Texas Ethics Commission and the City, (3) require the registered principal of firms seekirg to sell securities to the City to: (a) receive and review the City's investment policy, (b) acknowledge that reasonable contr is and procedures have been implemented to preclude imprudent investment activities, and (c) deliver a written statement a esting to these requirements; (4) in conjunction with its annual financial audit, perform a compliance audit of the managernerit controls on investments and adherence to the City's investment policy, (5) restrict reverse repurchase agreements to not iri,ore than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the revers repurchase agreement, (6) restrict the investment in non -money market mutual funds in the aggregate to no more than 15% of the City's monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, (7) requir local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory borequirements and (8) provide specific investment training for the Treasurer, the chief financial officer (if not the Treasurer) and' he investment officer. TABLE 15 - CURRENT INVESTMENTS As of May 31, 2002, the City's investable funds Type Par United States Treasury Obligations $ 3 United States Agency Obligations 63 Bank Certificates of Deposit Local government investment pools (2) 97 (1) As determined by Patterson & Associates, i was approximately 100.00% of their book makes investments with the intent to hold f (2) Local government investment pools cons value of $1.00 per share. invested in the following categories: City's investment adviser. As of such date, the market value of such investments lue. No funds of the City are invested in mortgage-backed securities. The City i to maturity, which reduces the risk of market price volatility. of entities with investment objectives that include achieving a stable net asset 33 Estimated Fair Book Value Market Value0) Weighted % of Total % of Total Average Value Book Value Value Book Value Maturity (Days) $ 3,045,401 1.85% $ 3,048,984 1.84% 426 64,019,000 38.82% 64,515,139 39.00% 434 283,600 0.17% 283,600 0.17% 43 97,575,996 59.16% 97,575,996 58.99% 3 $ 164,923,997 100.00% $ 165,423,719 100.00% 178 City's investment adviser. As of such date, the market value of such investments lue. No funds of the City are invested in mortgage-backed securities. The City i to maturity, which reduces the risk of market price volatility. of entities with investment objectives that include achieving a stable net asset 33 THE SYSTEM Debt service on the Certificates is expected to be provided from surplus Net Revenues of the City's Sewer System. The following is a description of the Sewer System. The Sewer System is operated as a s parate enterprise fund of the City. SEWER SYSTEM The Collection System ... The sanitary sewage collection system, which is handled separately from the storm drainage system, includes approximately 877 miles of sanitary sewer gravity flow and force main lines VV4 ith trunk mains installed for future expansion of the collection system and 21 lift stations with a pumping capacity of 10,335 gallons r minute. Water Reclamation Facilities ... Treatment facilities consist of the Southeast Water It clamation Plant, with an average daily flow design capacity of 31.5 million gallons. The Southeast Plant uses two processes for trey ment: trickling filter and activated sludge. Discharge Permit Issues ... The City has received notice from the Texas Natural Resource Conservation Commission that it is in non-compliance under its discharge permit due to high levels of nitrate accumulation' ind groundwater mounding associated with the land -application of the City's effluent. No financial penalties have been assessed against the City as a result of the non- compliance status. The City is working with hydrologists and crop specialists ' remedy these non-compliance notices. Proceeds from the issuance of the Certificates will be used for system improveme is that will allow greater flexibility in the management of treated effluent. Proposed improvements will allow the City to bett''r manage the water applied to its two land application sites. Major components include over 3.5 miles of 36 inch pipe, addition:'] pumping capacity at the Southeast Water Reclamation Plant, and other piping improvements. Effluent Disposal ... Treated effluent is used for beneficial purposes; no effluent is pre'ently discharged into streams, although the City has a discharge permit that would allow it to discharge up to 9 million gallons of effluent per day into the North Fork of the Double Mountain Fork of the Brazos River. The City is anticipating that it will begin making stream discharges in the near future to reduce the issues relating to the land -application of effluent for which the City has been cited, although the City is committed to land -application as its primary method of discharging treated effluent. Treated effluent from the Southeast Water Reclamation Plant is used to irrigate two City —owned land application sites: (1) A site located adjacent to the City on the southeast, consisting of 5,997 acres, which is know as the Lubbock Land Application Site. Storage capacity for effluent pending use for irrigation 't that site is 412 million gallons. (2) A site located near Wilson, Texas, approximately 15 miles southeast of; Lubbock, consisting of 4,000 acre; storage capacity of 780 million gallons at this site for effluent pending its use for irrigation. Xcel Energy has a contract :with the City to use treated effluent from the Southeast P ant for cooling purposes in Xcel Energy's 512,000 kilowatt electric generating plant near Lubbock when the plant is in use. TABLE 16 - HISTORIC SEWER PLANT TREATMENT The Table below sets forth the average monthly effluent treated, in millions of gallons per day (mg/day), at the City's Southwest Water Reclamation Plant, for each of the last five calendar years and for 2002 through t ie first six months of the current year. Year Average Treatment 1997 19.1 mg/day 1998 22.5 mg/day 1999 19.5 mg/day 2000 18.9 mg/day 2001 7.5 mg/day 2002 18.8 mg/day 34 R TABLE 17 - MONTHLY SEWER RATES Residential Base Rate 0) 10-1-01)(1) n..._.._. n-_ $3.46 Flow Rate (Water Consumption) 1.44 ;ommercial/In iustrial (2) Base Rate f ) $7.95 Flow Rate ( ter Consumption) 1.44 (1) In 1992 the City restructured its sewer ra debt funding of the Southeast Water Reclamati another 3% increase in 2000 and a 2% increas were restructured in 1992. In general, rates ai capital improvement costs and to adjust fundi stabilization reserves. It is currently anticipate 2%, respectively, due in part to debt anticil approximate amount of $750,000 in 20024 improvements through the 2005 fiscal year. A of the annual City budget, and it is possible t operating costs of the System and the necessity (2) The Base Rate is for sewer service; Base ranging from V to 10". (3) Industrial waste that exceeds allowable lim total suspended solids ("T.S.S."). Present surcha TABLE 18 - SEWER SYSTEM CONDENSED -s as a result of a rate study conducted in association with the construction and (i Plant. In 1999, the City initiated an increase in sewer rates of 3%, followed by for the current fiscal year. The 1999 rate increases were the first since the rates adjusted and implemented on October 1 of each year in order to cover system g for financial targets pertaining to enterprise fund operating reserves and rate I that sewer rates will be increased again in 2002-03 and in 2003-04 by 4% and (ted to be issued or allocated by the City for System improvements in the I and $2,250,000 in 2003-04, which is anticipated to fund System capital tual rate changes are made by the City Council in connection with the adoption At the anticipated rate increases could be greater or less in future years due to )f making additional capital improvements to the System. Zates shown are for a V water meter; higher Base Rates apply to larger meters s is subject to a surcharge for treating biochemical oxygen demand ("B.O.D.") and ge rates are B.O.D. $0.2256/lb. and T.S.S. $0.1459/lb. OF OPERATIONS (1) Operating expense excludes depreciation and the Sewer System for general administrative, an purposes. Note: The City has no outstanding or authorized obligation debt (including the Sewer Certificates; revenues of the System (see "Table 10 - Compu rates and charges for sewer service that will prov obligation debt issued for Sewer System purpose System general obligation debt issued in the futur expenditures and transfers to the General Fund and other City funds from in lieu of taxes and franchise payments, economic development and other ewer System Revenue Bonds; however, there is outstanding $52,165,213 general ssued for sewer system purposes, on which annual debt service is provided from Jon of Self -Supporting Debt"). It is the City's policy and intention to maintain e Net Revenues of the System that will fully provide for debt service on general over the life of the present System general obligation and any additional Sewer 35 20 (1 Fiscal Year Ended September 30, 2000 1999 1998 1997 REVENUE Operating Revenues $ 16,57 ,673 $ 16,447,324 $ 15,118,621 $ 15,874,343 $ 15,332,893 Non -Operating Revenues 727,565 874,684 621,079 751,828 952,911 Gross Revenues $ 17,30 ,238 $ 17,322,008 $ 15,739,700 $ 16,626,17I $ 16,285,804 EXPENSE Operating Expense ��� $ 9,12, ,460 $ 8,104,859 $ 7,584,302 $ 6,632,390 $ 6,393,894 Net Revenues $ 8,17 ,778 $ 9,217,149 $ 8,155,398 $ 9,993,781 $ 9,891,910 Number of Sewer Accounts 7 ,794 71,561 71,467 70,022 68,646 (1) Operating expense excludes depreciation and the Sewer System for general administrative, an purposes. Note: The City has no outstanding or authorized obligation debt (including the Sewer Certificates; revenues of the System (see "Table 10 - Compu rates and charges for sewer service that will prov obligation debt issued for Sewer System purpose System general obligation debt issued in the futur expenditures and transfers to the General Fund and other City funds from in lieu of taxes and franchise payments, economic development and other ewer System Revenue Bonds; however, there is outstanding $52,165,213 general ssued for sewer system purposes, on which annual debt service is provided from Jon of Self -Supporting Debt"). It is the City's policy and intention to maintain e Net Revenues of the System that will fully provide for debt service on general over the life of the present System general obligation and any additional Sewer 35 Within the System enterprise fund, the City maintains a working capital fund reserve and a rate stabilization reserve. As for other City enterprise funds, the financial policies of the City include a rolling ten year accumulation period for such reserves. At present, the ten year reserve goal for System working capital is $4,700,000 and forSystem rate stabilization is $900,000. While no assurances can be given, City Staff anticipate that the actual amounts in such re" ryes will be approximately $1,200,000 and $500,000 at the end of the current fiscal year, as compared to approximately $900p 00 and $522,000, respectively for the year ended September 30, 2001. Billings...Customers of Lubbock's water, sewer and sanitation systems are billed simul aneously on one statement; if the customer is connected to the City's electric system, electric charges are also included. All custome's who do not pay their bill within 22 days of the date it is mailed to them are charged a 5% late payment penalty. If the bill has not een paid on the next billing date, a statement is mailed showing the past due bill together with the current bill. If the bill remains elinquent 7 days after the date of the second statement, a reminder/cut-off notice is mailed., The cut-off notice specifies that servic' will be discontinued in 7 days if payment in full is not made. At the end of the 7 day period, a field collector calls on the customer' . d if he is unable to collect payment, service is cut off. The reconnection charge, including electric service if the customer is con cted to the City's electric system, is $15.00 before 5:00 PM and $25.00 after 5:00 PM and during weekends and holidays. 36 l J TAX MATTERS TAx EXEMPTION ... The delivery of the Cert'' tcates is subject to the opinion of Bond Counsel to the effect that interest on the Certificates for federal income tax purposes ( ) will be excludable from gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the dat of such opinion (the "Code"), pursuant to section 103 of the Code and existing regulations, published rulings, and court decis ons, and (2) will not be included in computing the alternative minimum taxable income of the owners thereof who are individ' als or, except as hereinafter described, corporations. A form of Bond Counsel's opinion is reproduced as Appendix C. The statute, regulations, rulings, and court decisions on which such opinion is based are subject to change. Interest on all tax-exempt obligations, includir g the Certificates, owned by a corporation will be included in such corporation's adjusted current earnings for tax years beginni' ig after 1989, for purposes of calculating the alternative minimum taxable income of such corporation, other than an S corporate n, a qualified mutual fund, a real estate investment trust, a real estate mortgage investment conduit , or a financial asset secur tization investment trust (FASIT). A corporation's alternative minimum taxable income is the basis on which the alternative mi''imum tax imposed by Section 55 of the Code will be computed. In rendering the foregoing opinions, Bond C unsel will rely upon representations and certifications of the City made in a certificate dated the date of delivery of the Ce 'ficates pertaining to the use, expenditure, and investment of the proceeds of the Certificates and will assume continuing compl ance by the City with the provisions of the Ordinance subsequent to the issuance of the Certificates. The Ordinance contains c ' enants by the City with respect to, among other matters, the use of the proceeds of the Certificates and the facilities financed t ierewith by persons other than state or local governmental units, the manner in which the proceeds of the Certificates are to bt invested, and the reporting of certain information to the United States Treasury. Failure to comply with any of these covenants vould cause interest on the Certificates to be includable inythe gross income of the owners thereof from date of the issuance ofthe'Certificates. Bond Counsel's opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the City described above. No ruling has been sought from the Internal Revenue Se'' ice (the "Service") with respect to the matters addressed in the opinion of Bond Counsel, and Bond Counsel's opinion is not b' riding on the Service. The Service has an ongoing program of auditing the tax- exempt status of the interest on tax-exempt ob igations. If an audit of the Certificates is commenced, under current procedures the Service is likely to treat the City as the "t payer, " and the Owners would have no right to participate in the audit process. In responding to or defending an audit of the t' -exempt status of the interest on the Certificates, the City may have different or conflicting interests from the Owners. Public 'wareness of any future audit of the Certificates could adversely affect the value and liquidity of the Certificates during the penc ency of the audit, regardless of its ultimate outcome. Except as described above, Bond Counsel expresses no other opinion with respect to any other federal, state or local tax consequences under present law, or proposed legislation, resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Certificates. Prospective pL,irchasers of the Certificates should be aware that the ownership of tax-exempt obligations such as the Certificates may result In collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty i ;surance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earn, rigs and profits, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for t, a earned income tax credit, owners of an interest in a FASIT, and taxpayers who may be deemed to have incurred or continued Indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Prospectia purchasers should consult their own tax advisors as to the applicability of these consequences to their particular circumstances.'' TAX ACCOUNTING TREATMENT OF DISCOUNT 'ND PREMIUM ON CERTAIN CERTIFICATES ... The initial public offering price of certain Certificates (the "Discount Certificate ") may be less than the amount payable on such Certificates at maturity. An amount equal to the difference between the i itial public offering price of a Discount Certificate (assuming that a substantial amount of the Discount Certificates of that m iturity are sold to the public at such price) and the amount payable at maturity constitutes original issue discount to the initial purchaser of such Discount Certificate. A portion of such original issue discount allocable to the holding period of such Discou it Certificate by the initial purchaser will, upon the disposition of such Discount Certificate (including by reason of its paymen at maturity), be treated as interest excludable from gross income, rather than as taxable gain, for federal income tax purposes,' pn the same terms and conditions as those for other interest on the Certificates described above under "Tax Exemption." Suci interest is considered to be accrued actuarially in accordance with the constant interest method over the life of a Discount Cei ifficate, taking into account the semiannual compounding of accrued interest, at the yield to maturity on such Discount Certifi ate and generally will be allocated to an original purchaser in a different amount from the amount of the payment denominated a interest actually received by the original purchaser during the tax year. However, such interest may be required to be aken into account in determining the alternative minimum taxable income of a corporation, for purposes of calculating a corl Oration's alternative minimum tax imposed by Section 55 of the Code, and the amount of the branch profits tax applicable to rtain foreign corporations doing business in the United States, even though there will not be a corresponding cash payment. In iddition, the accrual of such interest may result in certain other collateral federal 37 income tax consequences to, among others, financial institutions, life insurance companies, S corporations with "subchapter C" earnings and profits, individua Retirement benefits, individuals otherwise qualifying for earned income tax ere taxpayers who may be deemed to have incurred or continued indebtedness to puri certain expenses allocable to, tax-exempt obligations. Moreover, in the event of the of a Discount Certificate by the initial owner prior to maturity, the amount realized Discount Certificate in the hands of such owner (adjusted upward by the portion c period for which such Discount Certificate was held) is includable in gross income. )mpanies, property and casualty insurance recipients of Social Security or Railroad t, owners of an interest in a FASIT, and ase or carry, or who have paid or incurred edemption, sale or other taxable disposition y such owner in excess of the basis of such the original issue discount allocable to the Owners of Discount Certificates should consult with their own tax advisors with res ect to the determination of accrued original issue discount on Discount Certificates for federal income tax purposes and with re' ect to the state and local tax consequences of owning and disposing of Discount Certificates. It is possible that, under appliq ible provisions governing determination of state and local income taxes, accrued interest on Discount Certificates may be deemi d to be received in the year of accrual even though there will not be a corresponding cash payment. The initial public offering price of certain Certificates (the "Premium Certificates") ay be greater than the amount payable on such Certificates at maturity. An amount equal to the difference between the ititial public offering price of a Premium Certificate (assuming that a substantial amount of the Premium Certificates of that maturity are sold to the public at such price) and the amount payable at maturity constitutes premium to the initial purchaser of such Premium Certificates. The basis for federal income tax purposes of a Premium Certificate in the hands of such initial 0 rchaser must be reduced each year by the amortizable bond premium, although no federal income tax deduction is allowed as a result of such reduction in basis for amortizable bond premium. Such reduction in basis will increase the amount of any ain (or decrease the amount of any loss) to be recognized for federal income tax purposes upon a sale or other taxable dispositi9 n of a Premium Certificate. The amount of premium which is amortizable each year by an initial purchaser is determined by usin such purchaser's yield to maturity. Purchasers of the Premium Certificates should consult with their own amortizable bond premium on Premium Certificates for federal income tax consequences of owning and disposing of Premium Certificates. 38 tax adviors with respect to the determination of purposell and with respect to the state and local tax i J OTHER INFORMATION RATINGS The Certificates are rated "Aaa" by Moody's, " by S&P and "AAA" Fitch by virtue of an insurance policy to be issued by MBIA Insurance Corporation. The presently outstanding tax supported debt of the City is rated "Aa2" by Moody's, "AA+" by S&P and "AA+" by Fitch. The City also has four additional issues outstanding which are rated "Aaa" by Moody's, "AAA" by S&P and "AAA" by Fitch through insurance b various commercial insurance companies. An explanation of the significance of such ratings may be obtained from the compiny furnishing the rating. The ratings reflect only the respective views of such organizations and neither the City nor the Un erwriter makes any representation as to the appropriateness of the ratings. There is no assurance that such ratings will Contin' 'e for any given period of time or that they will not be revised downward or withdrawn entirely by either or both of such r'iting companies, if in the judgment of said companies, circumstances so warrant. Any such downward revision or withdrawal o such ratings may have an adverse effect on the market price of the Certificates. LITIGATION Ii It is the opinion of the City Attorney and City;Staff that there is no pending litigation against the City that would have a material adverse financial impact upon the City or its o 'erations. REGISTRATION AND QUALIFICATION OF CER FICATES FOR SALE i' The sale of the Certificates has not been regi Bred under the Federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3( (2); and the Certificates have not been qualified under the Securities Act of Texas in reliance upon various exemptions containe therein; nor have the Certificates been qualified under the securities acts of any jurisdiction. The City assumes no responsibil ty for qualification of the Certificates under the securities laws of any jurisdiction in which the Certificates may be sold, asgigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or oft r disposition of the Certificates shall not be construed as an interpretation of any kind with regard to the availability of any exei 'ption from securities registration provisions. LEGAL INVESTMENTS AND ELIGIBILITY TO SE URE PUBLIC FUNDS IN TEXAS Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Certificates are negotiable instruments governed by C1 apter 8, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduci ries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State o Texas. With respect to investment in the Certificates by municipalities or other political subdivisions or public agencies o 'the State of Texas, the Public Funds Investment Act, Chapter 2256, Texas Government Code, requires that the Certific tes be assigned a rating of "A or its equivalent as to investment quality by a national rating agency. See "OTHER INFO TION - Ratings" herein. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent inves or standard, the Certificates are legal investments for state banks, savings banks, trust companies with at capital of one million' dollars or more, and savings and loan associations. The Certificates are eligible to secure deposits of any public funds of the (ate, its agencies, and its political subdivisions, and are legal security for those deposits to the extent of their market value. No review by the City has been made of the laws in other states to determine whether the Certificates are legal investments or various institutions in those states. LEGAL MATTERS i The City will furnish a complete transcript f proceedings had incident to the authorization and issuance of the Certificates, including the unqualified approving legal opi lion of the Attorney General of Texas approving the Initial Bond and to the effect that the Certificates are valid and legally bi. iding obligations of the City, and based upon examination of such transcript of proceedings, the approving legal opinion of B ond Counsel, to like effect and to the effect that the interest on the Certificates will be excludable from gross income for federa income tax purposes under Section 103(x) of the Code, subject to the matters described under "Tax Matters" herein, includ ng the alternative minimum tax on corporations. Bond Counsel was not requested to participate, and did not take part, in tl a preparation of the Official Statement, and such firm has not assumed any responsibility with respect thereto or undertal en independently to verify any of the information contained therein, except that, in its capacity as Bond Counsel, such firm ias reviewed the information under captions "The Certificates" (exclusive of subcaptions "Book -Entry -Only System", ers' Remedies" and "Use of Certificate Proceeds"), "Tax Matters" and the subcaptions "Legal Matters", "Legal Investm is and Eligibility to Secure Public Funds in Texas "and "Continuing Disclosure of Information" (exclusive of the information i I � the subcaption Compliance with Prior Undertakings')under the caption Other Information in the Official Statement and suc 1 firm is of the opinion that the information relating to the Certificates and the legal issues contained under such captions and su 'captions is an accurate and fair description of the laws and legal issues addressed therein and, with respect to the Certificates, such information conforms to the Ordinance. The legal fee to be paid to Bond Counsel for services rendered in connection ith the issuance of the Certificates is contingent on the sale and delivery of the i 39 J Certificates. The legal opinion will accompany the Certificates deposited with DT or will be printed on the Certificates in the event of the discontinuance of the Book -Entry -Only System. Certain legal matter will be passed upon for the Underwriter by McCall, Parkhurst & Horton L.L.P., Dallas, Texas, Counsel to the Underwriter. �I The legal opinions to be delivered concurrently with the delivery of the Certifica'Ies express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein- I rendering a legal opinion, the attorney does not become an insurer or guarantor of that expression of professional judgment, 0 he transaction opined upon, or of the future performance of the parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. CONTINUING DISCLOSURE OF INFORMATION In the Ordinance, the City has made the following agreement for the benefit o the holders and beneficial owners of the Certificates. The City is required to observe the agreement for so long as it real iins obligated to advance funds to pay the Certificates. Under the agreement, the City will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified material events, to certain information vert' ors. This information will be available to securities brokers and others who subscribe to receive the information from the venders. ANNUAL REPORTS ... The City will provide certain updated financial informatic vendors annually. The information to be updated includes all quantitative financia to the City of the general type included in this Official Statement under Tables nun Appendix B. The City will update and provide this information within six months after 2002. The City will provide the updated information to each nationally repository ("NRMSIR") and to any state information depository ("SID") that is desi; the State of Texas and approved by the staff of the United States Securities and Excl and operating data to certain information rformation and operating data with respect :red 1 through 6 and 8A through 18 and in ter the end of each fiscal year ending in or :ognized municipal securities information ited by the State of Texas and approved by ige Commission (the "SEC"). The City may provide updated information in full text or may incorporate by'' eference certain other publicly available documents, as permitted by SEC Rule 15c2-12. The updated information will inclu de audited financial statements, if the City commissions an audit and it is completed by the required time. If audited financial tatements `are not available by the required time, the City will provide unaudited financial statements by the required time and au Jited financial statements when and if such audited financial statements become available. Any such financial statements will be' repared in accordance with the accounting principles described in Appendix B or such other accounting principles as the City Pry y be required to employ from time to time pursuant to state law or regulation. The City's current fiscal year end is September 30. Accordingly, it must provide unless the City changes its fiscal year. If the City changes its fiscal year, it will ni The Municipal Advisory Council of Texas has been designated by the State of qualified SID. The address of the Municipal Advisory Council is 600 West 8th 2177, and its telephone number is 512/476-6947. MATERIAL EVENT NOTICES ... The City will also provide timely notices of certain City will provide notice of any of the following events with respect to the Certificate purchase or sell Certificates: (1) principal and interest payment delinquencies; (2) no] draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws difficulties; (5) substitution of credit or liquidity providers, or their failure to pe. affecting the tax-exempt status of the Certificates; (7) modifications to rights of hold (9) defeasances; (10) release, substitution, or sale of property securing repayment of (Neither the Certificates nor the Ordinance make any provision for credit, debt sery addition, the City will provide timely notice of any failure by the City to provide it accordance with its agreement described above under "Annual Reports." The City paragraph to the SID and to either each NRMSIR or the Municipal Securities Rulemal information by March 31 in each year, i NRMSIR and the SID of the change. and approved by the SEC staff as a P. O. Box 2177, Austin, Texas 78768- :nts to certain information vendors. The if such event is material to a decision to ayment related defaults; (3) unscheduled credit enhancements reflecting financial ,,in; (6) adverse tax opinions or events of the Certificates; (8) Certificate calls; e Certificates; and (11) rating changes. reserves or liquidity enhancement.) In rmation, data, or financial statements in 11 provide each notice described in this g Board ("MSRB"). AVAILABILITY OF INFORMATION FROM NRMSIRs AND SID ... The City has agreed provide the foregoing information only to NRMSIRs and the SID. The information will be available to holders of Certifie tes only if the holders comply with the procedures and pay the charges established by such information vendors or obtain tl e information through securities brokers who do so. LIMITATIONS AND AMENDMENTS ... The City has agreed to update information and to, rovide notices of material events only as described above. The City has not agreed to provide other information that ma' be relevant or material to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided, except as described above. The City makes no representation or warranty conceriking such information or concerning its 40 usefulness to a decision to invest in or sell Ceficates at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from y breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders of ertificates may seek a writ of mandamus to compel the City to comply with its agreement. The City may amend its continuing disclosure greement from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, ?r a change in the identity, nature, status, or type of operations of the City, if (i) the agreement, as amended, would have permit ed an underwriter to purchase or sell Certificates in the offering described herein in compliance with the Rule, taking into accou It any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and Ji) either (a) the holders of a majority in aggregate principal amount of the outstanding Certificates consent to the amendr jent or (b) any person unaffiliated with the City (such as nationally recognized bond counsel) determines that the amendment i vill not materially impair the interests of the holders and beneficial owners of the Certificates. The City may also amend or repe 11 the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provisions of the SEC Rt le 15c2-12 or a court of final jurisdiction enters judgment that such provisions of the SEC Rule 15c2-12 are invalid, but only f and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Certificates in the primary offering of the Certificates. If the City so amends the agreement, it has agried to include with the next financial information and operating data provided in accordance with its agreement described above', under "Annual Reports" an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in he type of financial information and operating data so provided. COMPLIANCE WITH PRIOR UNDERTAKINGS ... uring the last five years the City has complied in all material respects with all continuing disclosure agreements made by it in i ccordance with SEC Rule 15c2-12. FINANCIAL ADVISOR First Southwest Company is employed as Fin 'cial Advisor to the City in connection with the issuance of the Certificates. The Financial Advisor's fee for services rendered pith respect to the sale of the Certificates is contingent upon the issuance and delivery of the Certificates. First Southwest C' rrpany, in its capacity as Financial Advisor, does not assume any responsibility for the information, covenants and representations contained in any of the legal documents with respect to the federal income tax status of the Certificates, or the possible impact of any present, pending or future actions taken by any legislative or judicial bodies. The Financial Advisor to the City has provide' the following sentence for inclusion in this Official Statement. The Financial Advisor has reviewed the information in this 01, ficial Statement in accordance with, and as part of, its responsibilities to the City and, as applicable, to investors under the feder securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the ac 'uracy or completeness of such information. UNDERWRITING The Underwriter has agreed, subject to certain conditions, to purchase the Certificates from the City, at an underwriting discount of $21,351.94. The Underwriter will be obligated t purchase all of the Certificates if any Certificates are purchased. The Certificates to be offered to the public may be offered ansold to certain dealers (including the Underwriter and other dealers depositing Certificates into investment trusts) at prices love than the public offering prices of such Certificates, and such public offering prices may be changed, from time to time, by the Unde riter. FORWARD-LOOKING STATEMENTS DISCLAIMER J The statements contained in this Official Stat:# ent, and in any other information provided by the City, that are not purely historical, are forward-looking statements, including statements regarding the City's expectations, hopes, intentions, or strategies regarding the future. Readers should not place ndue reliance on forward-looking statements. All forward-looking statements included in this Official Statement are based o information available to the City on the date hereof, and the City assumes no obligation to update any such forward-looking atements. The City's actual results could differ materially from those discussed in such forward-looking statements. The forward-looking statements included her subject to various risks and uncertainties, inc assumptions and estimates and possible chat regulatory circumstances and conditions and e business partners and competitors, and legit related to the foregoing involve judgements conditions and future business decisions, all' are necessarily based on various assumptions and estimates and are inherently ing risks and uncertainties relating to the possible invalidity of the underlying > or developments in social, economic, business, industry, market, legal, and >ns taken or omitted to be taken by third parties, including customers, suppliers, ve, judicial, and other governmental authorities and officials. Assumptions th respect to, among other things, future economic, competitive, and market which are difficult or impossible to predict accurately and many of which are 41 i beyond the control of the City. Any of such assumptions could be inaccurate and' therefore, there can be no assurance that the forward-looking statements included in this Official Statement will prove to be acc ate. I MISCELLANEOUS j The financial data and other information contained herein have been obtained from ie City's records, audited financial statements and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and ordinances ntained in this Official Statement are made subject to all of the provisions of such statutes, documents and ordinances. The summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information. Reference is made to original documents in all respects. I The Ordinance authorizing the issuance of the Certificates will also approve the form d content of this Official Statement, and'any addenda, supplement or amendment thereto, and authorize its further use in the reofferf g of the Certificates by the Underwriter. i MARC McDOUGAL Mayor City of Lubbock, Texas ATTEST: REBECCA GARZA City Secretary City of Lubbock, Texas a:N J APPENDIX A GE NI RAL INFORMATION REGARDING THE crry ■ Amarillo LUBBOCK■ Fort Wortho mDallas Paso Austin San Antonio Houston ( THIS PAGE INTENTIONALLY LEFT BLQ J U J j i THE CITY LOCATION The City of Lubbock, which is the County Seat fLubbock County, Texas, is located on the South Plains of West Texas. Lubbock is the economic, educational, cultural and medic services center of the area. POPULATION Lubbock is the ninth largest City in Texas: 1910 1920 1930 1940 1950 1960 1970 1980 2000 2002 1970 1980 1990 2000 (1) S AGRICULTURE; BUSINESS AND INDUSTRY (1) City of Lubbock, Texas City of Lubbock (Corporate Limits) 1,938 4,051 20,520 31,853 71,747 128,691 149,701 173,979 186,206 199,564 202,000 179,295 211,651 222,636 242,628 Lubbock is the center of a highly mechanized a ''cultural area with a majority of the crops irrigated with water from underground sources. Principal crops are cotton and grain s �ghums with livestock a major additional source of agricultural income. In 2001, approximately 2.82 million bales of cotton were produced in Lubbock and the 25 -counties surrounding Lubbock. This was more than the 2.70 million bales produced in 2000 and, is 102.50% of the 10 -year average of 2.80 million bales. Projections for the 2002 cotton crop are about 3.00 million bales.(I) TN r,o major vegetable oil plants located in Lubbock have a combined weekly capacity of over 1,811 tons of cottonseed and soybean oiL Several major seed companies are headquartered in Lubbock. Over 200 manufacturing plants in Lubbock roduce such products as semiconductors, vegetable oils, heavy earth -moving machinery, irrigation equipment and pipe, farm :quipment, paperboard boxes, foodstuffs, mobile and prefabricated homes, poultry and livestock feeds, boilers and pressure vessels, ` tomatic sprinkler system heads, structural steel fabrication and soft drinks. (1) Source: Plains Cotton Growers, Inc., Lubb k, Texas. LUBBOCK MSA LABOR FORCE ESTIMATES (1) Source: Texas Workforce Commission. (2) Subject to revision. r, A-1 Annual Averages April 2002(2) 2001 2000 1999 1998 1997 Civilian Labor Force 129,604 126,786 123,980 123,473 122,692 122,182 Total Employment 126,375 123,547 120,729 119,912 118,568 117,376 Unemployment 3,229 3,239 3,251 3,561 4,124 4,806 Percent Unemployment 2.50% j 2.60% 2.60% 2.90% 3.40% 3.90% (1) Source: Texas Workforce Commission. (2) Subject to revision. r, A-1 Estimated non-agricultural wage and salaried jobs in various categories as of December �ooI were (1) Manufacturing Construction p200 ,600 Transportation & Public Utilities 100 Trade 3 400 Finance, Insurance and Real Estate 500 Services 3 300 Mining 1 100 Government 28,300 State University Total 125,500 8,535 (1) Source: Texas Workforce Commission. MAJOR EMPLOYERS (300 EMPLOYEES OR MORE) (1) Source: Business Development Support Service, City of Lubbock, Texas. (2) Full and part time. (3) See "Texas Department of Criminal Justice ("TDCJ") Prison Psychiatric Hospital" fa lowing for more detailed information. A-2 J s Estimated Employees Company Type of Bus ness November, 200dll Texas Tech University State University 8,535 Covenant Health System Hospital 5,900 Lubbock Independent School District Public Schools3,442 i TTU Health Sciences Center Medical and Allied Health School 2,259 City of Lubbock City Government 2,164 Convergys Call Center 1,650 Caprock Home Health Services Home Health Care Service 1,650 United Supermarkets Supermarkets 1,345 University Medical Center Hospital 999 SBC Wireless Communications', ' 999 Wal-Mart Discount Retailer 900 Lubbock County County Government 897 Lubbock State School School for Mentally Retar, d 876 Texas Dept. of Criminal Justice Psychiatric Hospital Psychiatric Hospital 870 State Department of Human Services Social Services 585 U.S. Postal Service Post Office 561 American State Bank Bank 559 West TeleServices Call Center 558 Southwestern Bell Telephone Company Telephone Utility 522 Industrial Molding Corporation Manufacturing/Plastic Prod icts 505 Texas Department of Transportation State Highway and Street N aintenance 487 Eagle Picher Heavy Equipment Manufa' wring 482 Lubbock Regional MHMR Center Social Services 450 McLane High Plains Wholesale Food Distributo 416 Operator Service Company Customer Service 409 Tyco International Industrial Machinery 400 Dillard's Department Stores Department Stores 400 Aramark . Food Broker 391 Energas company/Atmos Energy Corp. Natural Gas Transmission S Distribution 366 Jim Burns Automotive Group Automobile Dealership 365 K -Mart Discount Retailer 345 Lubbock Avalanche -Journal Newspaper 341 McDonald's Restaurants 331 Plains National Bank Bank 325 Marriott School Services Hotel/Housekeeping and H, tel 322 Wells Fargo Phone Bank Bank Phone Center 320 (1) Source: Business Development Support Service, City of Lubbock, Texas. (2) Full and part time. (3) See "Texas Department of Criminal Justice ("TDCJ") Prison Psychiatric Hospital" fa lowing for more detailed information. A-2 J s EDUCATION - TEXAS TECH UNIVERSITY Established in Lubbock in 1923, Texas Tech UJ�n ersity is the fifth largest State-owned University in Texas and had a Fall, 2001, enrollment of 24,558. Accredited by the SouthAssociation of Colleges and Schools, the University is a co-educational, State - supported institution offering a bachelor's degre158 major fields, the master's degree in 107 major fields, the doctorate degree in 64 major fields, and a professional degree in 2 mr fields (law and medicine). The University proper is situated on 451 acres �f the 1,829 acre campus, and has over 160 permanent buildings with additional construction in progress. Fall, 2001, total emplo3 mlent was 6,125. The medical school had an enrollment of 1,390 f 'r Fall, 2001, not including residents; there were 60 graduate students. The School of Nursing had a Fall, 2001, enrollment of 326 including the Permian Basin Program, located in Midland/Odessa; there were 79 graduate students. The Allied Health School had, Fall, 2001, enrollment of 454. Source: Texas Tech University. OTHER EDUCATION INFORMATION The Lubbock Independent School District, with area of 87.5 square miles, includes over 90% of the City of Lubbock. There are approximately 3,495 total employees. The Distri a operates four senior high schools, ten junior high schools, 38 elementary schools and other educational programs. j Scholastic Membership History (1) i! f Average School Daily Year Attendance 1992-93 28,357 1993-94 28,111 1994-95 28,089 1995-96 27,799 1996-97 27,661 1997-98 27,461 1998-99 27,946 1999-00 29,397 (2) (1) Source: Superintendent's Office, Lubbock 'dependent School District. (2) Estimated. Lubbock Christian University, a privately ownell, co-educational senior college located in Lubbock, had an enrollment of 1,617 for the Fall Semester, 2001. The State of Texas School for the Mentally ReWded, located on a 226 -acre site in Lubbock, consists of 40 buildings with bed - capacity for 436 students; 400 students were in r sidence. There are approximately 850 professional and other employees. Wayland Baptist College, Plainview Texas, ope es a Lubbock Campus which had a Fall, 2001, enrollment of 550 students. TRANSPORTATION i 'I Scheduled airline transportation at Lubbock Int ational Airport is furnished by Southwest Airlines, Atlantic Southeast, Continental Airlines and American Eagle; non-stop servic', its provided to Dallas -Fort Worth International Airport, Dallas Love Field, Bush Intercontinental Airport (Houston), Houston Hc by, EI Paso, Las Vegas, Austin, Amarillo and Albuquerque. Passenger boardings for 2000 totaled 585,000 and 565,000 for 2001. Extensive private aviation services are located at the airport. Rail transportation is furnished by the Burlingt '' Northern Santa Fe Railroad with through service to Dallas, Houston, Kansas City, Chicago, Los Angeles and San Francisco. SI!, rt -haul rail service is also furnished by the Seagraves, Whiteface and Lubbock Railroad. Texas, New Mexico and Oklahoma us Lines, a subsidiary of Greyhound Corporation, provides bus service. Several motor freight common carriers provide service.'; Lubbock has a well-developed highway nett Highway, a controlled -access outer loop and a c including Interstate 27 (Lubbock -Amarillo), four U.S. Highways, one State i -wide system of paved farm -to -market roads. A-3 GOVERNMENT AND MILITARY (1) Reese Air Force Base (Reese), a pilot training base located adjacent to the City, was ini luded on the list of bases approved for closure by the President and Congress in July, 1995. Reese closed on September 30, 1997. As a result of the closure, the City developed a re -use plan for the facilities. Reese resented approximately 2.6% of the local work force. While closure of the base did not have a positive impact on the Lubbock ec nomy, the growth in other economic sectors minimized or neutralized the effect of the closure of the base. In addition, there has b n a positive economic impact from the re -use of the base. In 1997, the Texas Legislature enacted Chapter 2300 of the Texas Government Code' i hat provided for the creation of the Lubbock Reese Redevelopment Authority (the "Authority"). The Authority is a political subdiv,i 3ion of the State of Texas and is authorized to accept title from the United States to all or any portion of the real, permanent, and m� Ked property situated within Reese Air Force Base. The Authority is empowered to manage, lease, sale and develop the property at . ese Air Force Base. The former air base, now known as Reese Technology Center and is the home of the Prized Institute of Environmental and Human Health (TIEHH). TIEHH is a joint venture between Texas Tech University and Tex ;';Tech Health Sciences Center and researches the exposure and effects toxic chemicals have on human health and the environment. T 'EHH has assisted in stimulating the Lubbock economy by creating 157 jobs with a payroll -to -date of 9.9 million. TIEHH's location the anchor tenant at the Reese Technology Center has assisted the facility in being transformed into a research, industrial and cory, mercial center. Other research facilities that have been relocated to Reese Technology Center is the Texas Tech University Wind En ineering and Advanced Vehicle Engineering Research Centers. South Plains College has also taken advantage of Reese Technology Centers access ility and proximity and moved their entire Lubbock campus to Reese. South Plains College has more than 3.300 students a seines r at the Reese Technology Center. I, Other businesses located at the Reese Technology Center include Supachill, an A' i§tralian based company that specializes in refrigeration, freezing and cryogenics for food products. Also located at Reese is the ciintralized operation of Aslan. This company will facilitate discovery, development and promulgation of new protocols, techniques an'I patient care services for pediatric and adult disabled citizens. The will be working closely with Texas Tech University in their reseai ch and development. State of Texas ... More than 25 State of Texas boards, departments, agencies and comr iissions have offices in Lubbock; several of these offices have multiple units or offices. Federal Government ... Several Federal departments and various other administratio I t s and agencies have offices in Lubbock; a Federal District Court is located in the City. I. (1) Source. City of Lubbock, Texas. TEXAS DEPARTMENT OF CRIMINAL JUSTICE ("TDCJ") PRISON PSYCHIATRIC HOSPITA TDCJ operates a 550 -bed Prison Psychiatric Hospital and a 48 -bed regional prison',hospital on a 1,303 acre site in southeast Lubbock. An adjacent 400 -bed capacity "trusty" facility houses prison trusties some of A hom work at the hospital. Employment for all facilities is approximately 870 with an annual estimated payroll of $17 million an an estimated remaining annual operating budget of $27 million. HOSPITALS AND MEDICAL CARE There are four hospitals in the City with over 1,500 beds. Covenant Medical Center is, nursing school. Lubbock County Hospital District, with boundaries contiguous with Lupi Center which it operates as a teaching hospital for the Texas Tech Health Sciences Ci practicing physicians, surgeons, and dentists. Lubbock's Health Care Sector employs $755.5 million and draws patients from 77 counties in West Texas and Eastern New Me of malignant diseases is located in the City. A-4 $e largest and also operates an accredited dock County, owns the University Medical tinter. There are 82 clinics and over 900 rver 15,000 people with a total payroll of ixico. A radiology center for the treatment RECREATION AND ENTERTAINMENT Lubbock's Mackenzie Regional Park and over 1 and art center, swimming pools, a golf course Yellowhouse Canyon Lakes system of six lakes along the Yellowhouse Canyon. There are sever i City parks and playgrounds provide recreation centers, shelter buildings, a garden tennis and volley ball courts, baseball diamonds and picnic areas, including the nd 750 acres of adjacent parkland extending from northwest to southeast Lubbock I privately -owned public swimming pools, golf courses, and country clubs. The City of Lubbock has developed a 36 squar '', block area of approximately 100 acres adjacent to downtown Lubbock under the Lubbock Memorial Civic Center program. Al proximately 50 acres contain the 300,000 square foot Lubbock Memorial Civic Center, the main City library building and State epartment of Public Safety offices•, a 50 -acre peripheral area has been redeveloped privately with office buildings, hotels and motels a hospital, and other facilities. Available to residents are Texas Tech Universi 'programs and events, Texas Tech University Museum, Planetarium and Ranching Heritage Center exhibits and programs, United 5 pirit Arena and its events, Lubbock Memorial Civic Center and its events, Lubbock Symphony Orchestra programs, Lubbock Theatr, Center, Lubbock Civic Ballet, Municipal Auditorium and coliseum programs and events, the library and its branches, the annual I mhandle-South Plains Fair, college and high school football, basketball, and other sporting events as well as modern movie theaters!' CHURCHES Lubbock has approximately 300 churches UTILITY SERVICES Water and Sewer - City of Lubbock. Utility Connections Gas - Energas Company. No. Dwell'. Electric - City of Lubbock (Lubbock Power & operative. (LP&L Only)(2) ECONOMIC INDICES (1) 63,380 54,085 Buildi Year Permi 1997 237,995. 1998 181,716 1999 181,285 2000 200,427 2001 294,064 gtina more than 25 denominations. and Excel Energy Company; and, in a small area, South Plains Electric Co - (1) All data as of 12-31, except where noted; So ce: City of Lubbock. (2) Electric connections are those of City of Lubbock owned Lubbock Power and Light ("LP&L") and do not include those of Southwestern Public Service Company or Sou Plains Electric Cooperative. LP&L provides service to approximately 71% of the electric customers in the City. BUILDING PERMITS BY CLASSIFICATION (1) Calendar Utility Connections No. Dwell'. Electric Water Gas (LP&L Only)(2) 67,373 63,380 54,085 68,228 62,472 56,435 68,449 63,210 57,411 70,111 65,000 58,724 70,756 65,332 59,431 (1) All data as of 12-31, except where noted; So ce: City of Lubbock. (2) Electric connections are those of City of Lubbock owned Lubbock Power and Light ("LP&L") and do not include those of Southwestern Public Service Company or Sou Plains Electric Cooperative. LP&L provides service to approximately 71% of the electric customers in the City. BUILDING PERMITS BY CLASSIFICATION (1) Calendar No. No. Dwell'. Year Units Value Units (2) 1997 542 $ 57,767,458 736 1998 664 64,304,918 242 1999 747 80,496,444 222 2000 819 87,501,009 281 2001 941 108,589,812 .853 (1) Source: City of Lubbock, Texas. (2) Data shown under "No. Dwelling Units" is triplex, quadruplex and apartment permits. itial Permits Commercial, gamily Total Residential Public Total No. Dwelling and Other Building Value Units 0) Value Permits Permits $ 32,837,680 1,278 $ 90,605,138 $ 147,390,221 $ 237,995,359 9,186,999 906 73,491,917 108,224,615 181,716,532 22,134,000 969 102,630,444 78,654,645 181,285,089 11,548,809 1,100 99,049,818 101,377,832 200,427,650 37,242,260 1,794 145,936,072 148,128,128 294,064,200 each individual dwelling unit, and is not for separate buildings; includes duplex, A-5 THIS PAGE INTENTIONALLY LEFT BLA J J APPENDIX B EXCERPTS FROM THE CITY OF LUBBOCK, TEXAS ANNUAL FINANCIAL REPORT For the Year Ended September 30, 2001 The information contained in this Appendix consists of excerpts from the City of Lubbock, Texas Annual Financial eport for the Year Ended September 30, 2001, and is not intended to be a complete state lint of the City's financial condition. Reference is made to the complete Report for fu r information. THIS PAGE INTENTIONALLY LEFT General P4rpose Financial Statements THIS PAGE INTENTIONALLY LEFT Robinson G Burdette Martin Seright & Burrows,L.L.P. Honorable Mayor Windy Sitton Members of City Council City of Lubbock, Texas services firm of 1500 Broadway telephone (806) 744-3333 accountants Suite 1300 fax (806) 747-2106 Lubbock, Texas 79401-3107 www.rbmsb.com Independent Auditors' Report We have audited the General Pur ose Financial Statements ("GPFS") of the City of Lubbock, Texas ("Lubbock") as of and for the year #nded September 30, 2001, as listed in the Financial Section of the Table of Contents. These GPFS ar_ the responsibility of Lubbock's management. Our responsibility is to express an opinion on these GPFS ased on our audit. We conducted our audit in accordar ice with auditing standards generally accepted in the United States of America and the standards applicE Ole to financial audits contained in Government Auditing Standards ("GAS"), issued by the Comptroller; General of the United States. Those standards require that we plan and perform the audit to obtain rea,'onable assurance about whether the financial statements are free of material misstatement. The financh il statements of City Transit Management Company, Inc., dba Citibus, Market Lubbock Economic Develo I ent Corporation, dba Market Lubbock, Inc., and Civic Lubbock, Inc., component units of Lubbock, were rot audited in accordance with GAS. An audit includes examining, on a test basis, evidence supporting th p amounts and disclosures in the financial statements. An audit also includes assessing the accounting j ; rinciples used and significant estimates made by management, as well as evaluating the overall finae, tial statement presentation. We believe that our audit provides a reasonable basis for our opinion. !' In our opinion, the GPFS referred t ;above, present fairly, in all material respects, the financial position of Lubbock, as of September 30, 2001, and the results of its operations and the cash flows of its proprietary fund types for the year .then ende in conformity with accounting principles generally accepted in the United States of America. In accordance with GAS, we have 41so issued our report dated January 18, 2002 on our consideration of Lubbock's internal control over fina ial reporting and our tests of its compliance with certain provisions of laws, .regulations, contracts and grants. That report is an integral part of an audit performed in accordance with GAS and should bb read in conjunction with this report in considering the results of our audit. Ii Our audit was performed for the pi !rpose of forming an opinion on Lubbock's GPFS taken as a whole. The combining, individual fund a account group financial statements and schedules listed in the Financial Section of the Table of C `ntents are presented in Lubbock's Comprehensive Annual Financial Report ("CAFR") for purposes of ac 4itional analysis and are not a required part of the GPFS of Lubbock. Such information has been subject � to the auditing procedures applied in the audit of Lubbock's GPFS and, in our opinion, is fairly stated ; in all material respects, in relation to Lubbock's GPFS taken as a whole. The information provided in ,'the Introductory, Statistical and Supplementary sections listed in the Table of Contents has not been subjected to the auditing procedures applied in our audit of Lubbock's GPFS and we express no opinion o, i that information. 4rWo2ol ^7r,1 --ill January 18, 2002 Lubbock, Texas 3 CITY OF LUBBOCK, TEXAS I COMBINED BALANCE SHEET - ALL FUND TYPES, AC(- AND CCAND COMPONENT UNITS September 30, 2001 With Comparative Totals for September 30, i GROUPS Governmerl at Fund Types I Special j Debt Capital General Revenue 11 Service Projects Assets Pooled cash and cash equivalents $ 235,353 $ 1,281,392 Investments 1,575,058 8,575,472 Receivables (net, where applicable, of allowance for uncollectibles): Taxes, including interest, penalities, and liens 5,560,665 23,603 Accounts, notes, and mortgages 8,836,072 - Interest 164,549 12,450 1 Due from other funds8,551,093 ' Due from other governments 13,637 - Due from other agencies 1,413,228 847,647 i Prepaid items 165,995 - Advances to other funds 1,712,504 - Inventory, at average cost 95,094 - Restricted assets: Pooled cash and cash equivalents - - Investments - Accounts receivable - - Interest receivable - - Deferred charges - - Fixed assets (net of accumulated depreciation, if applicable) Other assets (net of accumulated amortization) _ Amount available in debt service funds - - Amount to be provided for retirement of general long-term debt - - Total assets $ 28,323,248 $ 10,740,564 $ 186,793 $ 4,534,929 1,250,080 30,349,139 188,955 - 86,099. 136,998 i 1,625,828 $ 35,107,165 J 6 J - 64,192,724 64,192,724 $ 682,722,363 $ 36,187,256 $ ;19,234,378 $ 265,161,726 $ 65,607,818 $ 1,144,710,346 See accbmoanvina notes to financial statements 7 Totals Proprietary Fiduciary Primary Fund Types and Type Account Groups Government General (Memorandum Internal Trust and General Long-term Only) Enterprise Service Agency Fixed Assets Debt 2001 $ 1,666,834 $ 409,422 $ 120,986 $ - $ - $ 8,435,709 11,136,298 2,739,982 11,275,896 - - 66,901,925 _ _ _ _ - 5,773,223 20,828,522 5,780 5,859,566 - - 35,529,940 46,660 111,005 - - - 420,763 7,620,000 - - - - 16,171,093 57,522 - 1,706,420 - - 1,777,579 - 84,843 - - - 2,482,716 - 624,314 - - - 790,309 1,733,144 - - - - 3,445,648 192,741 1,947,708 271,510 I' - - 2,507,053 14,151,030 2,582,021 - - - 16,733,051 88,675,794 19,295,621 - - - 107,971,415 4,071 92,933: - - - 97,004 284,267 - - - - 284,267 10,516,649 - - - - 10,516,649 505,678,186 8,293,627 - 265,161,726 - 779,133,539 20,130,645 - - - 20,130,645 __ 1,415,094 1,415,094 - 64,192,724 64,192,724 $ 682,722,363 $ 36,187,256 $ ;19,234,378 $ 265,161,726 $ 65,607,818 $ 1,144,710,346 See accbmoanvina notes to financial statements 7 i CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET -ALL FUND TYPES', ACCOUNT GROUPS AND COMPONENT UNITS September 30, 2001 With Comparative Totals for SeptembO 30, 2000 Co ponent Units Governmental Fund Tvoes Market Lubbock, Inc. CitibL Assets Pooled cash and cash equivalents $ 129,234 $ 284,10$ Investments 3,124,158 1 Receivables (net, where applicable, of allowance for uncollectibles): Taxes, including interest, penalities, and liens Accounts, notes, and mortgages 12,908 779,312 Interest _ Due from other funds 210,203 Due from other governments 23,256 Due from other agencies _ Prepaid items - 81380!; Advances to other funds _ _ Inventory, at average cost 34,991 336,825 Restricted assets: Pooled cash and cash equivalents _ _ Investments _ Accounts receivable _ Interest receivable _ Deferred charges _ Fixed assets (net of accumulated depreciation, if applicable) - 14,469,038 Other assets (net of accumulated amortization) _ Amount available in debt service funds - Amount to be provided for retirement of general long-term debt Total assets $ 3.534.750 S 15 A77 Ann rietary Fiduciary Types Fund Type Civic Market Lubbock Lubbock, Inc. Inc. $ 339,969 $ - - 30,902 22,549 100,259 63,594 100,000 - 34,618 - 382,914 - 1$ 943,644 $ 131,161 J ,.1 r J Component Units 9,189,017 $ Account Groups - - 3,155,060 General General 79,370,229 Fixed Assets Long-term Debt Totals Totals Market Market Component Reporting Entity Lubbock, Lubbock, Units (Memorandum Only) Inc. Inc. 2001 2001 2000 753,308 $ 9,189,017 $ 10,399,273 - - 3,155,060 70,056,985 79,370,229 i " - - 5,773,223 5,453,758 - - 814,769 36,344,709 25,502,189 - 420,763 487,562 - - 310,462 16,481,555 9,206,118 - - 23,256 1,800,835 1,778,444 - - - 2,482,716 1,403,345 - - 8,380 798,689 79,281 ' - - 3,445,648 3,924,214 - - 435,410 i. 2,942,463 2,816,410 - - 100,000 16,833,051 39,373,145 - 107,971,415 68,230,355 ' - - 97,004 129,868 - - - 284,267 420,888 - - 10,516,649 11,717,554 535,905 - 15,039,561 794,173,100 768,837,544 - - 382,914 20,513,559 20,900,256 ' - - 1,415,094 1,260,450 - 6,045,991 6,045,991 70,238,715 62,063,880 $ 535,905 $ 6,045,991 $ 27,069,111 $ 1,171,779,457 $ 1,113,354,763 See accompanyi g notes to financial statements c 9 CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET - ALL FUND TYPES, ACC AND COMPONENT UNITS September 30, 2001 With Comparative Totals for September 30,: Governme Speciali General Revenue OUNT GROUPS 000 i al Fund Types Debt Capital Service Projects $ 53,268 $ 1,304,025 J Liabilities Accounts and vouchers payable $ 8,488,238 $ 108,680 j' Contracts payable Due to other funds _ _ - 1,924,435 Due to other agencies and governments 632,000 1,031,067 _ Accrued general obligation interest Other accrued liabilities 1,028,472 Current portion of general obligation bonds and construction obligation payable .' Payable from restricted assets: Accounts payable Accrued interest Other accrued liabilities _ Accrued insurance claims Revenue bonds payable (current portion) Customer deposits Deferred revenue 1,059,429 19,058 157,466 Advances from other funds Advances from other agencies _ - 2,767,654 Accrued insurance claims General obligation bonds (net of current portion) Revenue bonds payable (net of current portion) Accrued vacation and sick leave Anticipated landfill closure and postclosure Total liabilities $ i 11,607,206 $ 759,738 210,734 $ 5,996,114 i I I 10 J r-; T See accompanying notes to financial statements Totals Proprietary Fiduciary Primary Fund Types Fund Type Account Groups Government General (Memorandum Internal Trust and General Long-term Only) Enterprise Service i Agency Fixed Assets Debt 2001 $ 7,018,830 $ 1,471,734 $ 1,939,468 $ - $ - $ 20,384,243 1,677,809 - - - - 3,602,244 13,664,692 255,000 " 1,619,401 - - 16,171,093 - - - - - 1,031,067 1,182,407 - - i - - 1,182,407 816,617 101,832 1,026 i. - 621,657 2,569,604 8,903,873 - - i' - - 8,903,873 1,132,612 916,180 - - - 2,048,792 969,670 - - - - 969,670 - 5,696 i - - - 5,696 - 4,764,865 - - - 4,764,865 3,958,950 - - - - 3,958,950 5,050 - - - - 5,050 23,191 - 1,025,504 - - 2,284,648 50,000 627,994 - - - 3,445,648 - 4,500,000 - - - 4,500,000 154,989,874 - - - 53,082,808 208,072,682 77,616,717 - - - - 77,616,717 3,372,027 563,684 - - 11,903,353 15,839,064 6,112,555 - - - - 6,112,555 $ 281,494,874 $ 13,206,985 $ 4,585,399 $ - $ 65,607,818 $ 383,468,868 See accompanying notes to financial statements i CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET -ALL FUND TYPES, ACCq UNT GROUPS AND COMPONENT UNITS September 30, 2001 With Comparative Totals for September 30, 00 Compone' t Units Governmental Prop Fund Types Fund Market Lubbock, Inc. Citibus Fiduciary Fund Type Civic Market ibbock Lubbock, Inc. Inc Liabilities Accounts and vouchers payable $ 166,453 $ 870,348 $ 19,367 $ _ Contracts payable Due to other funds 310,462 Due to other agencies and governments - - 132,421 99,692 Accrued general obligation interest _ Other accrued liabilities 19,840 314,556 18,538 _ Current portion of general obligation bonds and construction obligation payable 7,288 _ Payable from restricted assets: Accounts payable Accrued interest Other accrued liabilities 834,042 153,718 - 31,469 Accrued insurance claims _ Revenue bonds payable (current portion) Customer deposits Deferred revenue - - 12,815 _ Advances from other funds Advances from other agencies - 70,000 Accrued insurance claims General obligation bonds (net of current portion) Revenue bonds payable (net of current portion) Accrued vacation and sick leave Anticipated landfill closure and postclosure - _ Total liabilities $ 1,330,797 $ 1,408,622 $ 190,429 $ 131,161 12 i. J 1,056,168 $ 21,440,411 $ 22,618,721 ( ', ntinued) Component Units i Account Groups 16,481,555 General General - - 232,113 Fixed Assets Long-term Debt Totals Totals Market Market Component Reporting Entity Lubbock, Lubbock, Units (Memorandum Only) Inc. Inc. 2001 2001 2000 1,056,168 $ 21,440,411 $ 22,618,721 - - - 3,602,244 3,507,324 - - 310,462 16,481,555 9,206,118 - - 232,113 1,263,180 1,456,371 - - - 1,182,407 1,303,592 - - 352,934 2,922,538 4,216,743 - - 7,288 I' 8,911,161 8,750,373 - - - 2,048,792 2,303,095 - - - 969,670 736,309 - 6,045,991 7,065,220 7,070,916 3,725,991 - - - 4,764,865 4,372,861 - - - i' 3,958,950 3,599,316 - - - 5,050 433,832 - - 12,815 2,297,463 2,305,307 - - - 3,445,648 3,924,214 - - 70,000 70,000 70,000 - - - 4,500,000 2,803,358 - - - 208,072,682 175,256,312 - - - 77,616,717 73,847,298 - - - 15,839,064 14,810,951 - - - 6,112,555 5,918,343 $ - $ 6,045,991 $ 11i 9,107,000 $ 392,575,868 $ 345,166,429 See accompanyIng notes to financial statements 13 CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET - ALL FUND TYPES, A COUNT GROUPS AND COMPONENT UNITS September 30, 2001 With Comparative Totals for September 3 , 2000 Special .General pa Fund qty and Oth r r dd Contributed capital $ _ $ Investment in general fixed assets Retained earnings: Reserved for capital projects - Reserved for facilites/system improvements Reserved for system improvements _ Reserved for rate stabilization Reserved for economic development _ Reserved per bond indentures Reserved for self insurance - health _ Reserved for self insurance - risk management _ Unreserved _ Fund balances: Reserved for prepaid items 165,995 Reserved for advances to other funds 1,712,505 Reserved for debt service Reserved for capital projects - Reserved for economic development - Reserved for Federal housing programs _ Reserved for plan participants _ Unreserved: Designated for perpetual care 22,767 Designated for subsequent year's expenditures 460,593 Undesignated 14,354,182 Total retained earnings/fund balances _ 16,716,042 Total fund equity and other credits _ 16,716,042 Total liabilities and fund equity and other credits $ 28,323,248 $ 1 14 Intal Fund Types i. Debt Service Capital 1,415,094 29,111,051 $ 1,625,828 $ 35,107,165 J -1, _l See accompanying notes to financial statements 15 Totals Proprietary Fiduciary Primary Fund Types Fund Type Account Groups Government General (Memorandum Internal Trust and General Long-term Only) Enterprise Service Agency Fixed Assets Debt 2001 $ 138,930,382 $ 7,244,855 $I' - $ - $ - $ 146,175,237 - - - 265,161,726 - 265,161,726 40,760,391 1,710 - - - 40,762,101 7,427,734 11,318 - - - 7,439,052 41,472 - - - - 41,472 11,633,392 - - - - 11,633,392 894 - - - - 894 233,490 - - - - 233,490 - 5,354,356 - - - 5,354,356 - 4,529,015 - - - 4,529,015 202,199,734 5,839,017 - - - 208,038,751 " - - - - 165,995 " - - - - 1,712,505 - - - - 1,415,094 - - - - 29,111,051 - - 6,127,025 - 6,127,025 - - 10,483,055 - - 10,483,055 " - - - - 22,767 " - - - - 692,122 - - 1,961,101 - - 22,142,378 262,297,107 15,735,416 14,648,979 - - 349,904,515 401,227,489 22,980,271 14,648,979 265,161,726 - 761,241,478 $ 682,722,363 $ 36,187,256 $ 19,234,378 $ 265,161,726 $ 65,607,818 $ 1,144,710,346 See accompanying notes to financial statements 15 CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET - ALL FUND TYPES, ACCT AND COMPONENT UNITS September 30, 2001 With Comparative Totals for September 30, GROUPS .J J` ComPong " t Units Governmental Proprieta' f Fiduciary Fund Types Fund T Fund Type Market j Civic Market Lubbock, ubbock Lubbock, Fund Fqub and Other Gr ditc Inc. Citibus Inc. Inc. Contributed capital $ - $ 14,469,038 $ _ $ _ Investment in general fixed assets _ Retained earnings: Reserved for capital projects - - 100,000 _ Reserved for facilities/system improvements _ Reserved for system improvements Reserved for rate stabilization Reserved for economic development Reserved per bond indentures Reserved for self insurance - health Reserved for self insurance - risk management _ Unreserved - - 653,215 Fund balances: Reserved for prepaid items Reserved for advances to other funds Reserved for debt service Reserved for capital projects Reserved for economic development 6,080,982 Reserved for Federal housing programs Reserved for plan participants Unreserved: Designated for perpetual care Dbsignated for subsequent year's expenditures 479,699 Undesignated (4,356,728) _ _ _ Total retained earnings/fund balances 2,203,953 - 753,215 Total fund equity and other credits 2,203,953 14,469,038 753,215 _ Total liabilities and ------------ fund equity and other credits $ 3,534,750 $ 15,877,660 $ 943,644 $ 131,161 16 i'. .J J` Component Units 14,469,038 Account Groups 154,356,124535,905 General General_ L —_.- Fixed Assets Long- rm Debt Totals Totals��' ---___--__— Mp��. wom"� -- Reporting Entity Lubbock, Lubbock,Units (Memorandum Only) Inc. Inc. 2001 2001 2000 *535,905 $ * 1,113,354,763 ^. See accompanying notes to financial statements � 14,469,038 160,644,275 154,356,124535,905 -535,905 265,897.831 202,304.021 - '100,000 40,862,161 57�29,968 - ' 7,439,052 9/447.306 - ' 41,472 730J71 11,S38�392 13�73.Q72 ^'' ^^ " 894 35.550 - ' 233,490 302,444 5.354.356 3.204.358 4.528/015 9.264.690 653,215 208.081.966 183.195.511 ~ 185,995 79.281 1712,505 1,781,800 1/415,094 1,260,450 29 111,051 30,140780 6,080,982 6,080,982 ' ��127�25 6�8W�35 10,483,055,055 14,084.187 22,787 , 22,767 479,699 1.171,821 2,748,723 - '17,785,65018,926,487 ''2,957,168 352,861,683 351,527,289 _--535,905— � �i 17.9O2.111 779.203.589 768.188.334 *535,905 $ * 1,113,354,763 ^. See accompanying notes to financial statements � CITY OF LUBBOCK, TEXAS COMBINED STATEMENT OF REVENUES, EXPENDITURES FUND BALANCES — GOVERNMENTAL FUND TYPES, EXPENI AND COMPONENT UNITS For Year Ended September 30, 2001 With Comparative Totals for Year End d CHANGES IN E TRUST FUNDS 2000 Fiduciary Primary e Septembl Government - Governmental Fund T es Revenues: General Special Revenue Debt Service Taxes and special assessments $ 1,266,740 9,096,793 gL%808,542 Licenses and permits 65,247,157 $ 4,889,100 $ 7,454,057 Intergovernmental 1,202,794 _ 95,390 Charges for services 333,171 _ 16,620,652 Fines and forfeits 4,299,958 _ Contributions 3,051,055 Fund Fund balances •end of year $ 16,716,042 $ Miscellaneous 1,415,094 $ - Total revenues 2,053,590 849,810 64,317 _76,187,725 5,738,910 7,518,374 Expenditures: Current: Communications/Legislation Community Services ,024,481 11,828,025 Development Services 1 Electric 71 771 ,7,680 - - Financial Services 24211211 Fire- 1,499,967- _ General Government 17,785,641 Human Resources 6,105,997 5,044,166 _ Management Services 913,250 _ Police 629,903 _ Strategic Planning 28,139,048 Non -departmental 1,620,660 - Capital outlay 1,716,167 Debt service: - - Principal retirement Interest and fiscal charges - - 4,397,538 3,359,856 Total expenditures 84,181,030 5,044 166 _ 7,757,394 Excess (deficiency) of revenues over(under)expenditures 7,993,305 694,744 (239,020) CHANGES IN E TRUST FUNDS 2000 Fiduciary Primary Fund Type Government - (Memorandum Expendable Only) Trust - 3,051,055 6 _ $ - $ 77,590,314 - - 1,202,794 - 10,219,684 10,552,855 34,888 - 4,334,846 24,066 - 3,051,055 1,207,786 24,066 _(1,122,891) 3,052,612 1,266,740 9,096,793 gL%808,542 1,024,481 17,828,025 4,771,680 2,146,211 1,499,967 17,785,641 11,935,148 23,085,311 - 913,250 - 629,903 - 28,139,048 1,620,660 3,423,298 5139,465 13,493,224 556,723 14,049,947 - 4,397,538 31,826 - 3,391,682 16, 948, 348 12,491, 871 126, 422, 809 1 Other financing sources (uses): Bond proceeds Operating transfers in 14,276,074 4,387,588 15,719,276 187,379) 7,153,766 j 9,100,000 Operating transfers out (6, (2,773 922) (15,3r 25 612) 1,601,88T, Total other financing (1,832,626) 18,010,320 73,704,618 sources (uses) 1,088,695 1,613,666 393,664 Excess (deficiency) of revenues and other financing sources over (under) expenditures and other uses 95,390 2,308,410 154,644 Fund balances - beginning , as previously reported Prior period adjustment 16,620,652 7,672,416 1,260,450 Fund balances - beginning, as restated— 7,672,416 1,260,460 - Fund Fund balances •end of year $ 16,716,042 $ 9,980,826 $ _ 1,415,094 $ 18 (1,029,729) 30,140,780 11 (3,3_ 95__078) (26,6_ 14,267) 9,100,000 33,737 41,570,441 (25,888,800) 33,737 _24,781,641 (3,361,341) (1,832,626) 18,010,320 73,704,618 1870 73,704,618 $ 14,648,979 $ 71,871,992 _1 .J r -a $ 2,203,953 $ 74,075,945 $j 75,252,710 See accompanying notes to financial statem nts J 19 Component Unit Government�ype Tot, Is Market Reportin , Entity Lubbock, Memoran um Only) Inc. 2001 2000 $ 3,379,504 $ 80,969,818 $ 76,408,787 - 1,202,794 1,138,924 - 10,552,855 7,619,135 - 4,334,846 4,297,917 - 3,051,055 2,834,208 701,201 725,267 393,200 345,904 3,398,516 12,213,546 4,426,609 104,235,151 '" 104,905,717 - 1,024,481 937,889 - 17,828,025 16,963,231 - 4,771,680 5,439,855 - 2,146,211 1,923,584 - 1,499,967 1,458,232 - 17,785,641 17,080,372 6,195,512 29,280,823 26,503,471 - 913,250 871,596 - 629,903 1,022,720 - 28,139,048 25,561,261 - 1,620,660 1,498,176 - 5,139,465 1,348,723 327,521 14,377,468 15,446,464 - 4,397,538 4,622,633 3,391,682 3,141,086 6,523,033 132,945,842 123,819,293 (2,096,424) (28,710,691) it 18,913,576 i' - 9,100,000 7,000,000 147,283 41,717,724 41,518,150 (147,283) (26,036,083) 26,768,860 24, 781, 641 21, 74 9, 290 (2,096,424) (3,929,050) 2,835,714 1,548,092 75,252,710 72,416,996 2,752,285 2,752,285 4,300,377 78,004,995 72,416,996 $ 2,203,953 $ 74,075,945 $j 75,252,710 See accompanying notes to financial statem nts J 19 ` 1 Y T „i 20 r. COMBINED STA FUND 8 Revenues: Taxes and fees Licenses and permits Intergovernmental Charges for services Fines Miscellaneous Total revenues Expenditures: Current: Communications/Legislation Community Services Development Services Electric Financial Services Fire General Government Human Resources Management Services Police Strategic Planning Non -departmental Total expenditures Deficiency of revenues under expend Other financing sources (uses): ` Operating transfers in Operating transfers out Total other financing sources (uses) 'uq Excess (deficiency) of revenues and financing sources (uses) over (unde Fund balance at beginning of year Fund balance at end of year See CITY OF LUEBOCK, TEXAS MENT OF REVENUES, EXPENDITURES AND CHANGES IN ANCES -- BUDGET (GAAP BASIS) AND ACTUAL - GENERAL FUND Year Ended September 30, 2001 General Fund Variance - favorable $ 64,860,057 $ 65,247,157 $ 387,100 1,100, 571 1,202,794 102,223 375,148 333,171 (41,977) 4,262,062 4,299,958 37,896 3,530,300 3,051,055 (479,245) 2,007,915 2,053,590 45,675 76,136, 053 76,187, 725 51,672 tures ier expenditures 1,025,923 1,024,481 1,442 17, 830,279 17,828,025 2,254 5,499,348 4,771,680 727,668 2,300,946 2,146,211 154,735 1,537,684 1,499,967 37,717 17, 795, 897 17, 785,641 10,256 7,058,593 6,105,997 952,596 932,575 913,250 19,325 621,893 629,903 (8,010) 27,946,574 28,139,048 (192,474) 1,668,249 1,620,660 47,589 879,200 1,716,167 (836,967) 85,097,161 84,181,030 916,131 (8,961,108) (7,993,305) 967,803 14,803,026 14,276,074 (526,952) _ (5,841,918) (6,187,379) (345,461) 8,961,108 8,088,695 (872,413) 95,390 95,390 16,620,652 16,620,652 - $ 16,620,652 $ 16,716,042 $ 95,390 notes to financial statements 21 CITY OF LUBBOCK, TEXAS COMBINED STATEMENT OF REVENUES, EXPENSES AN CHANGES IN EQUITY ALL PROPRIETARY FUND TYPES AND DISCRETELY PRESS YTED COMPONENT UNITS Year Ended September 30, 2001 With Comparative Totals for Year Ended Septe ber 30- 2nnn Operating expenses: Personal services Insurance Supplies Materials Maintenance Uncollectible accounts Purchase of fuel and power Collection expense Other services and charges Depreciation and amortization Total operating expenses Operating income (loss) Nonoperating revenues (expenses): Interest Passenger facility charges Disposition of properties Miscellaneous Interest and fiscal charges Cash grants and reimbursements Total nonoperating revenues (expenses) Income (loss) before operating transfers Transfers: Operating transfers in Operating transfers out Total transfers in (out) Net income (loss) Depreciation on fixed assets acquired by contributions Retained earnings at beginning of year Retained earnings at end of year Contributed capital at beginning of year Capital contributions/Residual equity transfer in Depreciation on/disbursements of capital contributions Contributed capital at end of year Total equity at end of year 22,045,640 2,974,193 7,019,712 1,411,333 79,793,221 2,836,942 23,174,932 22,056,960 161,312,933 20,166,020 4,853,852 1,557,918 (333,513) 2,951,432 (11,882,075) (2,852,386) 17,313,634 15,707,518 (32,409,889) (16,702,371) 611,263 1,299,358 6,972,021 15,703,357 174,517 6,678,176 1,853,834 3,628,441 1,973,030 36,983,376 (1,555,656) 1,362,911 (340,003) 59,333 1,082,241 (473,415) 1,524,957 (504,227) 1,020,730 547,315 260,386,486 15,188,101 262,297,107 Totals Primary 132,984,984 6,846,827 7,244,756 Government (1,299,358) _ 138,930,382 (Memorandum $ 401,227,489 Proprietary F ind Types Onty) Internal Operating revenues: Enterprise Service 2001 Charges for services $ 175,061,302 35,153,811 $ 210,215,113 New taps and reconnects 331,716 Effluent water sales 678,784 - 331,716 Commodity sales 595,661 - 678,784 Landing fees 739,016 ' - � 595,661 Parking 1,324,288 _ 739,016 1,324,288 Greenfees and memberships 34,982 Rentals 1,636,374 _ _ 34,982 1,636,374 Concessions 1,076,830 - 1,076,830 Administrative charges - 273,909 273,909 Total operating revenues 181,478,953 35,427,720 216,906,673 Operating expenses: Personal services Insurance Supplies Materials Maintenance Uncollectible accounts Purchase of fuel and power Collection expense Other services and charges Depreciation and amortization Total operating expenses Operating income (loss) Nonoperating revenues (expenses): Interest Passenger facility charges Disposition of properties Miscellaneous Interest and fiscal charges Cash grants and reimbursements Total nonoperating revenues (expenses) Income (loss) before operating transfers Transfers: Operating transfers in Operating transfers out Total transfers in (out) Net income (loss) Depreciation on fixed assets acquired by contributions Retained earnings at beginning of year Retained earnings at end of year Contributed capital at beginning of year Capital contributions/Residual equity transfer in Depreciation on/disbursements of capital contributions Contributed capital at end of year Total equity at end of year 22,045,640 2,974,193 7,019,712 1,411,333 79,793,221 2,836,942 23,174,932 22,056,960 161,312,933 20,166,020 4,853,852 1,557,918 (333,513) 2,951,432 (11,882,075) (2,852,386) 17,313,634 15,707,518 (32,409,889) (16,702,371) 611,263 1,299,358 6,972,021 15,703,357 174,517 6,678,176 1,853,834 3,628,441 1,973,030 36,983,376 (1,555,656) 1,362,911 (340,003) 59,333 1,082,241 (473,415) 1,524,957 (504,227) 1,020,730 547,315 260,386,486 15,188,101 262,297,107 15,735,416 132,984,984 6,846,827 7,244,756 398,028 (1,299,358) _ 138,930,382 7,244,855 $ 401,227,489 22,980,271 22 29,017,661 15,703,357 3,148,710 6,678,176 8,873,546 1,411,333 79,793,221 2,836,942 26,803,373 24,029,990 198,296,309 18,610,364 6,216,763 1,557,918 (673,516) 3,010,765 (11,882,075) (1,770,145) 16,840,219 17,232,475 (32,914,116) (15,681,641) 1,158,578 1,299,358 275,574,587 278,032,523 139,831,811 7,642,784 (1,299,358) 146,175,237 $ 424,207,760 j Component Units ProprietaryTypes Civic Lubbock, Inc. Citibus Totals Component Units 2001 Totals Reporting Entity (Memorandum Only) 2001 2000 $ 1,389,463 $ 1,869,9 $ 3,259,403 $ 213,474,516 $ 172,325,148 - - 331,716 103,280 - - 678,784 560,626 - 595,661 720,499 - 739,016 740,882 - - 1,324,288 1,168,628 34,982 40,262 - 1,636,374 1,347,914 - - 1,076,830 1,065,423 1,389,463 1,869,940 i - 3,259,403 273,909 220,166,076 186,500 178,259,162 368,542 3,453,390 3,821,932 32,839,593 30,269,575 - 506,966 506,966 16,210,323 14,185,457 - - 3,148,710 2,944,224 - - 6,678,176 7,012,499 - 1,325,927 .1,325,927 10,199,473 8,373,093 - 1,411,333 1,186,657 - 79,793,221 49,299,758 - 964,903 1,542,990 - 2,507,893 2,836,942 29,311,266 2,210,385 24,305,695 12,665 1,962,162 1,974,827 26,004,817 22,763,415 1,346,110 8,791,435. 10,137,545 208,433,854 162,550,758 43,353 (6,921,495 (6,878,142) 11,732,222 15,708,404 15,216 15,216 6,231,979 8,170,502 - - 1,557,918 1,552,654 - (673,516) 27,403 (5,346) (4,50 : (9,849) 3,010,765 (11,891,924) 1,189,358 (13,393,543) - 4,963,836 .4,963,836 4,963,836 3,665,088 9,870 4,959,333 4,969,203 3,199,058 1,211,462 53,223 (1,962,162'. (1,908,939) 14,931,280 16,919,866 - - 17,232,475 17,245,329 ' - (32,914,116) (31,994,619) (15,681,641) (14,749,290) 53,223 (1,962,162 (1,908,939) (750,361) 2,170,576 - 1.962,162i', 1,962,162 3,261,520 2,748,681 699,992 699,992 276,274,579 271,355,322 753,215 - 753,215 278,785,738 276,274,579 14,524,313. 14,524,313 154,356,124 148,325,473 - 1,906,887 1,906,887 9,549,671 8,779,332 - (1,962,162 (1,962,162) (3,261,520) (2,748,681) $ 753,215 $ 14,469,0381 14,469,038 $ 14,469,038 15,222,253 160,644,275 154,356,124 $ 439,430,013 $ 430,630,703 Se� accompanying not2es to financial statements CITY OF LUBBOCK, TEXAS COMBINED STATEMENT OF CASH FLOV ALL PROPRIETARY FUND TYPES AND DISCRETELY PRESEN' Years Ended September 30, 2001 With Comparative Totals for Year Ended Sentprnl Cash flows from operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash from operating activities: Depreciation and amortization Increase (decrease) in long-term assets/liabilities not requiring cash Flow Other income Receipts from building rent Change in current assets and liabilities: Accounts receivable Inventory Due to/from other governments Prepaid expenses Accounts payable Due to/from others Other accrued expenses Customer deposits Accrued liabilities Long-term assets Net cash provided by (used for) operating activities Cash flows from capital and related financing activities: Payments for gas reserves and other deferred charges Refund of commodity prepayments Purchases of property, plant and equipment Sale of property, plant and equipment Payments for bond issuance costs Receipt of accrued interest on bond issuance Principal paid on revenue bonds Interest paid on revenue bonds Principal paid on general obligation bonds and other debt Interest paid on general obligation bonds Issuance of revenue, G.O. and C.O. bonds Refunds of pro -rata contracts Deposits on pro -rata contracts Passenger facility charges Interest paid on long-term debt Contributed capital Net cash used for capital and related financing activities Cash flows from noncapital and related financing activities: Operating transfers in from other funds Operating transfers out to other funds Short-term interfund borrowings Advances from other funds Payments received (made) on advances to (from) other funds Cash grants and reimbursements Book Overdrafts Net cash provided by (used for) noncapital and related financing activities Cash flows from investing activities: Proceeds from sales and maturities of investments Purchase of investments Interest earnings on cash and investments Net cash provided by (used for) investing activities Net increase (decrease) in pooled cash and cash equivalents Pooled cash and cash equivalents at beginning of year Pooled cash and cash equivalents at end of year $ 20,166,020 22,056,960 2,105,417 2,951,432 (3,416,229) 184,627 (25,945) (7,335,171) 364,871 (428,772) _ I 36,623,216— (393,367) 298,062 (42,924,887) 848,302 (717,161) 224,524 (5,125,000) (4,663,903) (8,911,904) (7,330,519) 46,970,000 (100,940) 1,557,918 5,464,011 (14,804,864) 15,707,518 (32,409,889) (592,408) 409,267 (16,885,512) 39,865,232 (72,694,239) 5,057,461 {27,771,546) (22,838,712) 38,656,576 $ 15,817,864 $ i Supplemental cash flow information: Noncash capital improvements and other charges for the Enterprise Funds during fiscal year Noncash capital improvements and other charges/(reductions) for the Internal Service Funds 24 COMPONENT UNITS er 30, 2000 29,731 Totals Primary 26,417 Government and Types (Memorandum Internal _ Only) Service 2001 (1,555,656) $ 18,610,364 1,973,030 24,029,990 (113,498) 1,991,919 44,451 2,995,883 15,635 15,635 29,731 (3,386,498) 26,417 211,044 1,524,957 (25,945) (624,314) (624,314) 773,089 (6,562,082) 6,709 6,709 2,278,870 2,643,741 - (428,772) 2,854,464 39,477,674 (393,367) 298,062 (2,282,906) (45,207,793) 6,268 854,570 - (717,161) 224,524 - (5,125,000) - (4,663,903) - (8,911,904) - (7,330,519) - 46,970,000 - (100,940) 1,557,918 - 5,464,011 2,276,638) (17,081,502) 1,524,957 17,232,475 (504,227) (32,914,116) (76,475) (668,883) (329,981) 79,286 614,274 (16,271,238) 7,826,946 47,692,178 (10,705,441) (83,399,680) 1,398,819 6,456,280 1,479,676) (29,251,222) (287,576) (23,126,288) 3,279,019 41,935,595 2,991,443 $ 18,809,307 001 was $2,088,536. fiscal year 2000-2001 was $(389,159). I Lub Inc. Cibbus $ 43,353 $ (6,921 12,665 21,330 8,308 (52,379) (431) (20,707) 583 12,722 (90,950) (5,346) (96,296) 15,216 15,216 (68,358) 508,327 $ 439,969 $ 1,962,162 657,0(1 (21,0 ) (8,3E ) (697,415) Seec Totals Component Units 2001 $ (6,878,142) 1,974,827 678,391 (12,697) (52,379) (8,811) (718,122) (4,515) 583 (5,020,865) (90,950) (5,346) (96,296) (4,503) 4,963,836 4,959,333 15,216 15,216 (142,612) 866,686 $ 724,074 panying notes to financial statements 25 Totals Reporting Entity Memorandum Onl 2001 2000 11,732,222 $ 15,708,404 26,004,817 22,763,414 1,991,919 2,403,371 2,995,883 1,199,376 15,635 12,764 (2,708,107) (3,428,175) 198,347 (57,565) (78,324) (524,105) (633,125) 106,974 (7,280,204) 9,383,549 6,709 (13,902) 2,639,226 (93,776) (428,772) 103,183 583 17,955 (42,650) 34,456,809 47,538,817 (393,367) (4,193,412) 298,062 _ (45,207,793) (44,957,151) 854,570 442,226 (717,161) _ 224,524 _ (5,125,000) (4,519,025) (4,663,903) (5,229,781) (9,002,854) (8,552,590) (7,335,865) (7,996,709) 46,970,000 24,055,000 (100,940) (71,052) - 42,789 1,557,918 1,552,654 - (3,904) 5,464,011 4,376,483 (17,177,798) (45,054,472) 17,232,475 17,245,329 (32,914,116) (31,994,619) (668,883) (5,060,379) (424,374) 74,783 511,322 4,963,836 3,665,088 - {32,568) (11,311,905) (16,090,201) 47,692,178 87,071,306 (83,399,680) (83,577,352) 6,471,496 8,226,385 (29,236,006) 1.1,720,339 (23,268,900) (1,885,517) 42,802,281 44,687,798 $ 19,533,381 $ 42,802,281 CITY OF LUBBOCK Notes to Financial Statements September 30, 2002 Note Page I. Summary of Significant Accounting Policies................:..........................29 A. Reporting Entity ...................................................... .......................... 29 B. Basis of Presentation - Fund Accounting ................:.......................... 31 C. Basis of Accounting............................................................................ 33 D. Budgetary Accounting........................................................................ 33 E. Encumbrances.....................:...............................................................34 F. Assets, Liabifities and Fund Equity ......................... .......................... 34 G. Risk Management................................................................................ 35 H. Revenues, Expenses and Expenditures ............................................. 36 I. Totals (Memorandum Only) .................................. ........................38 J. Reclassifications...................................................... ..........................38 H. Stewardship, Compliance and Accountability..........................................38 A. Retained Earnings/Fund Balance Deficits ......................................... 38 III. Detail Notes on all Funds and Account Groups ....................................... 39 A. Pooled Cash and Investments .................................. !..........................39 B. Interfund Transactions .............................................. i..........................42 C. Deferred Charges .................................................... ........................42 D. Property, Plant and Equipment..........................................................43 E. Retirement Plans.......................................................1..........................44 F. Deferred Compensation......................................................................49 G. Surface Water Supply .............................................. .........................49 H. Other Enterprise Fund Activities .............................4. .......................... 50 26 CITY OF LUBBOCK es to Financial Statements September 30, 2001 Note Page I. Segment Infoi mation - Enterprise Funds.............................................51 J. Long -Term D' bt.................................................................................. 52 K. Advanced Rej Unding ......................................................................56 i L. Accrued Insurance Claims...................................................................56 M. Landfill Closlilre and Postclosure Care Cost.......................................57 IV. Contingent Liabilties ................................................................................ 57 . A. Federal Grant ..................................................................................... i 57 B. Litigation ......'...................................................................................... 57 C. Site Remediat,ii on ................................................................................. 58 D. West Texas M nicipal Power Agency ................................................. 58 V. Recently Issued P onouncements............................................................... 58 P*i 28 ,",ITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE I. SUMMARY F SIGNIFICANT ACCOUNTING POLICIES The General Purpose Financh I Statements (GPFS) of the City of Lubbock, Lubbock County, Texas (City) have been prepared in confor. nity with Generally Accepted Accounting Principles (GAAP) as applicable to governmental units. The Government Accounting Standards Board (GASB) is the acknowledged standard-setting body for est dishing governmental accounting and financial reporting principles. With respect to proprietary activitie including component units, the City has adopted GASB Statement No. 20, "Accounting and Financial R pporting for Proprietary Funds and Other Governmental Entities that use Proprietary Fund Accountin "' The City applies all applicable GASB pronouncements as well as Financial Accounting Stand his Board (FASB) Statements and Interpretations, Accounting Principles Board (APB) Opinions and Accounting Research Bulletins of the Committee on Accounting Procedure, issued on or before Novembe 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. The more s' 0ificant accounting policies are described below. A. REPORTING ENTITY The City is a municipal c JIrporation governed by a Mayor -Council form of government. As required by GAAP, the GPFS pre t the reporting entity which consists of the City (a primary government), organizations for which he City is financially accountable and other organizations for which the nature and significance c f their relationship with the City are such that exclusion could cause the City's GPFS to be rnislea ling or incomplete. BLENDED COMPONE T UNITS The following comporier t unit has been included in the City's financial reporting entity using the blended method because though it is legally separate, its operations are so intertwined with the City that it is, in substance, a of the City. The Urban Renewal Ag ncy (URA) was formed to provide urban renewal services for the City, that include rehabilitation o !housing, acquisition of housing, and disposition of land. The Urban Renewal Agency Board i' composed of nine members appointed by the Mayor, with the consent of the City Council, and acl s only in an advisory capacity to the City Council. All powers to govern URA are held by the City', Council DISCRETELY PRESENTED COMPONENT UNITS The Component Unit col anns in the combined financial statements include the financial data of the City's other Component Jnits. They are reported in a separate column to emphasize that they are legally separate from the Pity. The following Component Units are included in the reporting entity because the primary go `mment is financially accountable and is able to impose its will on the organization. A primary ovemment has the ability to impose its will if it can significantly influence operations and/or activiti4 s of an organization. City Transit Manageme it Co.; Inc. dba Citibus (Citibus) is a legally separate entity that operates a City owned transportatior system. In 1998, the City renewed a five year management agreement with McDonald Transit Asso ates, Inc, to manage and operate Citibus. The City Council appoints the seven -member Lubbock I ublic Transit Advisory Board, and approves the annual budget. The City is responsible for funding :deficits. Citibus is reported as a proprietary type component unit. i 29 CITY OF LUMOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE I. SUMMARY OF SIGNIFICANT POLICIES �J A. REPORTING ENTITY (CONTINUED) J Civic Lubbock, Inc. promotes the cultural and educational usage of the Lubbock Memorial Civic Center and Lubbock Municipal Coliseum The 7 member board is al pointed by the City Council. City Council approves the annual budget for Civic Lubbock, Inc. Civic Lubbock, Inc. is reported as a proprietary type component unit. Market Lubbock Economic Development Corporation dba Mai cet Lubbock, Inc. (Market U Lubbock Inc.) was formed on October 10, 1995 by the City Council create, manage, operate and supervise programs and activities to promote, assist and enhance ecort uric development within and around the City. Market Lubbock, Inc. is a legally separate non-profit c orporation. The City Council appoints the seven -member board and its operations are funded by bud Ireted allocations of the City's property and hotel occupancy taxes and other City contributions. Mark t Lubbock, Inc. is reported as a governmental type component unit. Copies of financial statements of the individual component units y be obtained from their respective administrative offices listed below: Administrative Offices Citibus Civic Lubbock, Inc. Market ubbock, Inc 801 Texas 1501 61h Street 1301 Br, adway Lubbock, Texas Lubbock, Texas Suite 20 Lubboc Texas RELATED ORGANIZATIONS The City's officials are also responsible for appointing the merni ers of the boards of other organizations but the City's accountability for these organizations does i tot extend beyond making the appointments. The following are related organizations, which have not been included i i the reporting entity: Housing Authority of the City of Lubbock (Authority) is a legally separate entity. The Mayor appoints the five -member board. It is the City Attorney's opinion that d the City. The Authority is not fiscally dependent on the City and City, a Authority is independent of is its will on the entity. The City has no responsibility for debt issued by ouncil not able to impose e Authority. Lubbock Firemen's Retirement and Relief Fund(LFRRF) ( ERBF) oper es under provisions of the Firemen's Relief and Retirement Laws of the State of Texas for putil oses of providing retirement benefits for the City's firefighters. Its affairs are governed by theyor's Manager, three firefighters elected by members of the LFRRF and tw I designee, the Finance at -large members elected by the Board. It is funded by contributions by the firefighters and matcl City. ed by contributions from the As provided by enabling legislation, the City's responsibility to the LFRRF is limited to matching monthly contributions made by the members. Title to assets is' vested in the LFRRF and 30 NOTE I. SUMMARY [TY OF LUBBOCK, TEXAS otes to Financial Statements September 30, 2001 SIGNIFICANT ACCOUNTING POLICIES not in the City. The Stat Firemen's Pension Commission is the governing body over the LFRRF; the City does not significa#tly influence operations. Lubbock Arts Alliance, nc. (Alliance) is dedicated to the promotion and improvement of the arts and sponsoring the annual nnus 'Lubbock Arts Festival Fiscal dependence by the Alliance on the City is not significant to the City. City Council does not appoint the board. The City is not able to exert its will on the Alliance. Lubbock Health Facil'. I es Development Corporation (LHFDC) promotes health facilities development. City Council appoints the seven -member board. Bonds issued by LHFDC do not constitute indebtedness of the City. The City does not govern operations of LHFDC. Lubbock Housing Finan 'e Corporation, Inc. (LHFC) was formed pursuant to the Texas Housing Finance Corporation Act to finance the cost of decent, safe, affordable residential housing. The Mayor appoints the se v -member board. It is the opinion of the City Attorney that LHFC is independent of the City. I ndebtedness of the LHFC does not constitute indebtedness of the City. The City is not able to impose its will on the LHFC. JOINT VENTURE In May 1998, the City, al ng with three other cities in the West Texas area, entered into an agreement with the West Texas Mur icipal Power Authority ("WTMPA") to purchase power generated by a co- generation facility to be c Dristructed with the proceeds obtained from the issuance of $28,910,000 of revenue bonds issued b' WTMPA. The contractual arrangement with WTMPA calls for each participating city to guai antee payments of the WTMPA bond debt service in the event the net revenues of the power sa es contracts with the participating cities is not adequate to cover the debt service. The City has an ongoing financial interest in WTMPA through the contractual arrangement to purchase generated poter and is also considered to have an ongoing financial responsibility due to the manner in which the debt service is guaranteed as well as the responsibility for financing the operations of the joint vei iiure by purchasing the power generated by WTMPA which will benefit the citizens of Lubbock. Financial information fo' WTMPA can be obtained from the City of Lubbock, P.O. Box 2000, Lubbock, Texas 79401, ( tention Managing Director of Financial Services). B. BASIS OF PRESENTA ION - FUND ACCOUNTING The financial transactionj of the City are recorded in individual funds and account groups. A fund is a separate set of self-bal t ing accounts. The various funds are cls following fund types and into three categories: governmental, proprietary and fiduciary. The t groups are used by the City: 31 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GOVERNMENTAL FUND TYPES General Fund is the general operating fund of the City. It is us to account for all financial transactions except those required to be accounted for in another fund: Special Revenue Funds are used to account for the proceeds of speci$ revenue sources (other than special assessments, expendable trusts, or major capital projects) that are segregated for specified purposes. The Debt Service Fund is used to account for the accumulation o financial resources for the Payment of interest and principal on the general long-term debt of the C' y. Capital Project Funds are used to account for financial resources to a used for the acquisition or construction of major capital facilities (other than those financed b Proprietary Funds or Trust Funds). PROPRIETARY FUND TYPES Enterprise Funds are used to account for operations of the City (a) tha I I are financed and operated in a manner similar to private business enterprises, where the intent is to pri ivide goods or services to the general public on a continuing basis, the cost of which is to be recove ed in whole or part through user charges; or (b) where the governing body has decided that penodfc determination of revenues earned, expenses incurred, and/or net income is appropriate for capit maintenance, public policy, management control, accountability, or other purposes. Internal Service Funds are used to account for the financing of goodsd services provided by one department or agency to other departments or agencies of the City, or to ther governments, on a user charge basis. FIDUCIARY FUND TYPES Transactions related to assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments and other funds, are accounte for in fiduciary fund types. Fiduciary fund types are comprised of Expendable Trust Funds account for assets received and expendec by the City as trustee in essentially the same manner as governmental fund types. Agency Funds are used to account for assets held by the City as austodial trustee. They are accounted for on the modified accrual basis of accounting with rp�'Ot pect to asset and liability recognition, but do not have a measurement focus since agency funds do' account for operations. ACCOUNT GROUPS General Fixed Assets Account Group represents a summary of the fi than those fixed assets reported in the Proprietary Funds. Capital expen< Fund are the primary source from which the detailed records of the gene] are developed. Capital expenditures are carried in this account group as the projects are completed and are then capitalized by function and classi 32 d assets of the City, other ares of the Capital Projects fixed assets account group ]struction in progress until J .TY OF LUBBOCK. TEXAS otes to Financial Statements September 30, 2001 NOTE I. SUMMARY IF SIGNIFICANT ACCOUNTING POLICIES Infrastructure fixed assets such as streets, highways, bridges, sidewalks, street lighting, traffic poles and signals, and storm se vers, are accounted for in the General Fixed Assets Account Group and reported in the Schedule o 'General Fixed Assets. General fixed assets are ric t depreciated and are recorded at historical cost at the time of acquisition. Donated assets are recorde I at their fair market value on the date donated. General Long -Term Debi Account Group is used to account for the City's liability for general long- term debt such as general obligation bonds, certificates of obligation, and obligations for employee vacation, sick -leave benef ts, insurance claims and rebatable arbitrage, other than those reported in the Proprietary Funds. The modified accrual basis of accounting and the flow of current financial resources measurement focus is followed for governmental fund types and expendable trust funds. Under this basis of accounting, expenditures, 3ther than interest on long-term debt in the Debt Service Fund, which is recorded when due, are rec Drded when the liability is incurred. Revenues are recorded when received in cash unless susceptiblc to accrual. Revenues under the modified accrual basis must be both measurable and available to finance current year appropriations. Revenues considered to be susceptible to accrual unc er the modified accrual basis are property tax, sales tax, franchise tax, hotel/motel tax, certain gr nt revenue and investment income. The accrual basis of accounting and the flow of economic resources is followed in the enterprise funds and internal service funds. Under this method of accounting,, revenues are recognized when earned and expenses are recorded when a liability is incurred. Under the current financial resources measurement focus, only current assets and current liabilities are included on the balana sheet. Net current assets or fund balance is considered a measure of available expendable resources. This measurement focus is concerned primarily with the measure of interperiod equity (e.g. wh(Cher current year revenues were sufficient to pay for current year service's). Enterprise funds and int final service funds are accounted for using an economic resources measurement focus. All a., sets and liabilities including fixed assets and long-term debt are included on the balance sheet. Fui d equity is segregated into its contributed capital and retained earnings components. Proprietary f ind type operating statements present increases (revenues) and decreases (expenses) in net total asset Annual budgets are adopt on a basis consistent with generally accepted accounting principles for the General Fund only. Ca ital project funds adopt project -length budgets. All annual appropriations lapse at the end of the fisc vear. Annually, the City Managc r, submits to City Council a proposed operating budget for the upcoming fiscal year. Public hearinj s are conducted to obtain taxpayer comments, and the budget is legally enacted through passage of an ordinance by the City Council. Budgetary control is mai: personnel services, supplie must be approved by the accounts within categories ained by department and by the following category of expenditures: maintenance, other charges, and capital outlay. All budget supplements City Council. Administrative transfers and increases or decreases in lay be made by management as long as expenditures do not exceed 33 CITY OF LUBBOCK,TEXAS Notes to Financial Statements September 30, 2001 NOTE I. SUMMARY OF SIGNIFICANT D. BUDGETARY ACCOUNTING (CONTINUED) POLICIES budgeted appropriations at the fund level. Budgeted amounts shown are from the revised budget, adopted by Ordinance No. 2001-00040 on June 14, 2001. During the ar, the budget was revised to reflect a 2.6% increase in General Fund operating revenues and a 2.3% increase for the General Fund operating expenditures from the original budget. Each year, in accor ance with State law, the City Council sets an ad valorem tax levy for a sinking fund (General Obligat on Debt Service) which, with cash and investments in the fund, would be sufficient to pay all the bot ded indebtedness and interest due in the following fiscal year. E. ENCUMBRANCES At the end of the year, encumbrances for which goods and/or servic4s have not been received are canceled. At the beginning of the next year, management reviews all o en encumbrances. During the budget revision process, encumbrances may be re-established. On Octo er 1, 2001, the General Fund had no significant amounts of open encumbrances. F. ASSETS, LIABILITIES AND FUND EQUITY Equity in Pooled Cash and Investments - The City pools the resource of the various funds in order to facilitate the management of cash and enhance investment earnings. ecords are maintained which reflect each fund's equity in the pooled account. GAAP requires cert.1i n investments to be carried at fair value with the change in fair value included in the determination o investment income shown in the operating statement. Due to the nature of the City's inves nts, the difference between amortized cost and market value is not significant such that the carr ring value of the portfolio is considered to approximate fair market value. Cash Equivalents - Cash equivalents are defined as short-term high readily convertible to known amounts of cash and have original mati when purchased which present an insignificant risk of changes in value rates. Property Tax Receivable —The value of all real and business p assessed annually on January 1 in conformity with Subtitle E of the T taxes are levied on October l on those assessed values and the taxes an On the following January 1, a tax lien attaches to property to secs penalties and interest ultimately imposed. The taxes are considered February 1. "Therefore, at the City's fiscal year end, September 30, al. delinquent, but are secured by a tax lien. The City records property taxes receivable upon levy and defers t collected or available; for each fiscal year, the City recognizes re collected during the year plus an estimate of taxes to be collected in th allocates property tax revenue between the General, certain Special funds based on tax rates adopted for the year of levy. The Dist uncollectible taxes and deferred tax revenue at year end based upon 1 Accordingly, at August 31 of each year, property taxes receivable less taxes and deferred tax revenue is equivalent to the projected tax collect October 15 of the same year. To write-off property taxes receivable, 1 from the Texas Legislature, the District eliminates the receivable uncollectible accounts. Enterprise Fund Receivable - Within the Electric, Water, Sewer and services rendered but not billed as of the close of the fiscal year, a Amounts billed are reflected as accounts receivable net of an allowance 34 liquid investments that are ies of three months or less cause of changes in interest 3perty located in the City is xas Property Code. Property due on receipt of the tax bill. re the payment of all taxes, lelinquent if not paid before property taxes receivable are revenue until the taxes are Luc in the amount of taxes ibsequent 45 days. The City venue and the Debt Service t adjusts the allowance for orical collection experience. e allowance for uncollectible is from September 1 through i specific statutory authority reduces the allowance for id Waste Enterprise Funds, not considered significant. uncollectibles. J TY OF LU9190 c, TEXAS otes to Financial Statements September 30, 2001 NOTE I. SUMMARY F SIGNIFICANT ACCOUNTING POLICIES Inventories - Inventorie consist of expendable supplies held for consumption. Inventories are valued at cost using thik average cost method of valuation, and are accounted for using the consumption method of accounting (i.e., inventory is expensed when used rather than when purchased). Prepaid Items - Prepaid i gms are accounted for under the consumption method. Restricted Assets - Cert kin enterprise fund assets are restricted for construction which has been funded through long -tem debt, therefore, retained earnings have been reserved for these amounts. The excess of other restrii ted assets over related liabilities are included as retained earnings reserved for capital projects, rate st bilization, economic development and bond indentures. Fixed Assets and Deprec ation - General fixed assets are not capitalized in the funds used to acquire or construct them. InsteEd, capital acquisition and construction are reflected as expenditures in Governmental Funds, and the related assets are reported in the General Fixed Assets Account Group. All purchased fixed asset ;are recorded at cost. Donated assets are recorded at the fair value on the date of donation. Assets n the General Fixed Assets Account Group are not depreciated. Property, plant and equipment of th Proprietary Funds are stated at cost or estimated market value for donated assets and capitalized in t te fund that acquired or constructed them. Depreciation is computed using the straight-line method o er the estimated useful lives as follows: Improvements 10-50 years Buildings 15-50 years Equipment 3-15 years Interest Capitalization - rhe City does not capitalize interest cost. Interest capitalization would not be significant to the GPF Advances to Other Fund Amounts owed to one fund by another which are not due within one year are recorded as advances to other funds. These are equally offset by a fund balance reserve amount in the governmental funds, Alich indicates they do not constitute available expendable resources. The City is required to fur d amounts into accounts from which medical and dental claims are paid by a third party administrator and as a result is effectively self-insured. The liability for incurred claims represents estimates for mi dical and dental claims incurred as of September 30, 2001. Some of these claims were reported at Sctember 30, 2001, and others which are incurred but not reported (IBNR), may not be reported unti a later date. IBNR is calculated by the City's independent insurance administrator. In order t 'mitigate the risk associated with the City's medical coverage, the City purchased individual stop oss coverage of $150,000. In April 1999, the City purchased worker's compensation coverage, with no deductible, from a third ' party. Prior to April 1999,:the City was self insured for worker's compensation claims. Any claims outstanding in April 1999 tie the responsibility of the City. The City's self-insured get ral liability program is on a cash flow basis, which means that the service contractor processes, adju s and pays claims from a deposit provided by City. The City accounts for the general liability pi ograrn by charging premiums based upon losses, administrative fees and reserve requirements. In order to control the risks associated with general liability claims, the City purchased reinsurance coverage for claims in excess of $250.000. 35 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE I. SUMMARY OF SIGNIFICANT G. RISK MANAGEMENT (CONTINUED) For self-insured coverage, the Risk Management Fund established cl of the ultimate cost of claims (including future claim adjustment e) but not settled, and of claims that have been incurred but not reporte such costs must be estimated varies depending on the coverage it salvage and subrogation and reinsurance recoverable on unpaid clain for unpaid claims. Because actual claim costs depend on such coml in doctrines of legal liability, and damage awards, the process used in not necessarily result in an exact amount, particularly for general lial are recomputed periodically using a variety of actuarial and statistic estimates that reflect recent settlements, claim frequency, and othi Adjustments to claim liabilities are charged or credited to expense incurred. POLICIES n liabilities based on estimates .nses). that have been reported The length of time for which Aved. Estimated amounts of are deducted from the liability ,x factors as inflation, changes imputing claim liabilities does ity coverage. Claim liabilities techniques to produce current economic and social factors. the period in which they are Additionally, property and boiler coverage is accounted for in the'Risk Management Fund. The property insurance policy was purchased from an outside insurang a carrier. The policy has a $250,000 deductible per occurrence, and the boiler coverage insuran deductible is up to $100,000 dependent upon the unit. Premiums are charged to funds based upol i policy premiums and reserve payments. Other small insurance policies, such as surety bond coveragemiscellaneous floaters, are accounted for in the Risk Management Fund. Funds are charged a penditures based on premium amounts and administrative charges. The City has had no signi, cant reductions in insurance coverage during the year. Settlements in the current year and precedi two years have not exceeded insurance coverage. The City accounts for all insurance activity in Int al Service Funds. H. REVENUES EXPENSES AND EXPENDITURES Interest Income on pooled cash and investments is allocated monthly based on the percentage of a fund's six month rolling average monthly balance in pooled cash and i' estments to the total citywide six month rolling average monthly balance in pooled cash and invest ents, except for certain Trust and Agency Funds, certain Special Revenue Funds, Governmental Ca ital Project Funds, and certain Internal Service Funds. The interest income on pooled cash and, investments of these funds is. reported in the General Fund or the Debt Service Fund. Sales Tax Revenue for the City results from an allocation of 1. 12504 of the total sales tax levy of 7.875%, which is collected by the State of Texas and remitted to I ie City monthly. The tax is collected by the vendor and required to be remitted to the State by th 20th of the month following collection. The tax is then paid to the City by the 10th of the next month. On January 21, 1995, voters approved a 1/8 cent increase in sales tax to reduce the property) ax rate which went into effect October 1, 1995. The 45 day availability period provides for full accrq 1 of sales taxes. Grant Revenue from federal and state grants is recognized to the has been incurred and reimbursement received or requested. Interfund Transactions or quasi -external transactions are accounted f expenses. Transactions that constitute reimbursements to a fund for made from that fund that are properly applicable to anotl expenditures/expenses in the reimbursing fund and as reductions of ext that is reimbursed. 36 that the related expenditure as revenues, expenditures or penditures/expenses initially fund, are recorded as ditures/expenses in the fund J NOTE I. SUMMARY CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 SIGNIFICANT ACCOUNTING POLICIES Nonrecurring or nonrout' a permanent transfers of equity are reported as residual equity transfers. All other interfund trar sactions except quasi -external transactions, reimbursements, temporary receivables and payables, and residual equity transfers are reported as operating transfers. Compensated Absences consists of vacation leave and sick leave. Vacation leave of 10-20 days is granted to all regular emp oyees dependent upon the date employed, years of service, and civil service status. Currently, up to 4' hours of vacation leave may be "carried over" to the next calendar year. The City is obligated to � e payment upon retirement or termination for any available, unused vacation leave. Sick leave for employees is accrued at 1 '/. days per month with a maximum accrual status of 200 days. After 15 years of co ritinuous full time services for non -civil service personnel, vested sick leave is paid on retirement ort nation at the current hourly rate for up to 90 days. Upon retirement or termination, Civil Service Personnel (Police) are paid for up to 90 days accrued sick leave. after one year of employment. Civil Service Personnel (Firefighters) are paid for up to 135 days of accrued sick leave upon retiremen or termination. The Texas Civil Service laws dictate certain benefits and personnel policies above a ad beyond those policies of the City. The liability for the acpuz iulated vacation and sick leave is recorded in the general long-term debt r account group for govemr. tental fund employees and as a noncurrent liability in the proprietary funds for proprietary fund empl gees. Management has determined that the current portion of this liability is not significant to the oveTall financial position of the City. Post Employment Benefil s for retirees of the. City of Lubbock include the option to purchase health and life insurance benefit' at their own expense. Amounts to cover premiums and administrative costs, with an increment charge for reserve funding, are determined by the City's health care administrator. Employe contributions are: funded on a pay-as-you-go basis and approximated $475,000 for fiscal 2001. These contributions are included in the amount of insurance expense reflected in the financial activity reported in the Health Insurance Internal Service Fund. The following schedule reflects participation in the City's health care program: 2001 1,821 380 16 ive Claims $5,493,187 ired Claims 2,261,870 ira Claims 108,301 al Claims $7,863,358 of Employee Groups to total claims 69.86% d 28.76% 1.38% 100.00% 37 r', CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE I. SUMMARY OF SIGNIFICANT I. TOTALS !MEMORANDUM ONIM POLICIES The Totals (Memorandum Only) columns represent an aggregatio of the combined financial statements and do not represent consolidated financial information. ata in those columns do not represent financial position and results of operations, in conforrmty 4th GAAP and are presented only to facilitate analysis. Interfund eliminations have not been made in the aggregation of this data. I RECLASSIFICATIONS Certain 2000 amounts have been reclassified to conform to 2001 NOTE H. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. RETAINED EARNINGS/FUND BALANCE DEFICITS The deficit of $482,728 in the General Capital Projects Fund is due tot ming differences of incurring capital outlay expenditures for an internally financed project. Ovet the term of the borrowing arrangement, transfers in from Special Revenue Funds will eliminate thd deficit. The deficit of $179,387 in the Library Expendable Trust Fund is the result of a timing difference between expenditures incurred and the filing of requests for reimburse ents. These funds have not been accrued, as certain reimbursement amounts are not measurable at 3eptember 30, 2001, which is consistent with the revenue recognition required by the modified accrua basis of accounting. The deficit of $1,680,824 in the Community Development Expendab e Trust Fund is the result of timing differences between expenditures incurred and the filing of requ' sts for reimbursements. These funds have not been accrued, as certain reimbursement amounts are n A available at September 30, 2001, which is consistent with the revenue recognition required by' he modified accrual basis of accounting. The deficit of $28,332 in the Community Services Expendable Trust Fund is the result of timing differences between expenditures incurred and the filing of requests for reimbursements. These funds have not been accrued, as certain reimbursement amounts are not av' lable at September 30, 2001, which is consistent with the revenue recognition required by the modifit d accrual basis of accounting. The deficit of $507,846 in the Police Expendable Trust Fund is the result of a timing difference between expenditures incurred and the filing of requests for reimburs ments. These funds have not been accrued, as certain reimbursement amounts are not available at eptember 30, 2001, which is consistent with the revenue recognition required by the modified accru basis of accounting. The deficit .in the Golf Enterprise Fund of $1,870,791 is the resui of placing itself in a more competitive position through non -capital course equipment improveme ts. On October 13, 1994, the City contracted with Fore Star Golf, Inc. for management services to provided for the golf course operations. The management agreement is effective through Decemb 31, 2014. Over the term of the contract, Fore Star Golf, Inc. will receive a portion of the golf cour a revenues based on a sliding scale. Additionally, management has approved a 10 year funding so ce from the General Fund to eliminate the deficit beginning in fiscal 2002. The retained earnings deficit of $433,503 in the Internal Service N anagement Information Fund results from the practice of not recovering depreciation through i ser charges. Management is evaluating user charges in order to recover depreciation, financing and capital costs, and the retained earnings deficit. 38 [TY OF LUBBOCK, TEXAS otes to Financial Statements September 30, 2001 NOTE H. STEWARDSWP, COMPLIANCE AND ACCOUNTABILITY The retained earnings deftit of $427,155 in the Internal Service Communications Fund results from the practice of not recovc ring depreciation through user charges. Management is evaluating user charges in order to recovei depreciation and recover the retained earnings deficit. No other funds of the City; had deficits in either total fund balances or total retained earnings. NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS The City's investment p ices are governed by State statute and City ordinances. Permissible investments include dired obligations of the United States or its agencies and instrumentalities, certificates of deposit, rime domestic banker's acceptances, commercial paper, repurchase agreements, and deposits i i a qualifying investment pool. Collateral is required for demand deposits, certificates of obligation, d repurchase agreements at 102% of all amounts not covered by Federal deposit insurance. Obliga ions that may be pledged as collateral are obligations of the United States and its agencies and oblig tions of the state and its subdivisions. The City s deposits and investments are categorized below to i dicate the level of risk assumed by the City at September 30, 2001. INVESTMENT CATEG 3RY OF CREDIT RISK (1) Insured, registered or securities held by the City or its agent in the City's name. (2) Uninsured and unreg' eyed, with securities held by the counter party's trust department or its agent in the City's nar. ie. (3) Uninsured and unregi; tered, with securities held by the counter party or by the trust department or agent but not in the City's name. DEPOSIT CATEGORY OF CREDIT RISK (A) Insured or collateralh ed with securities held by the City or by its agent in the City's name. (B) Collateralized with se4 urities held by the pledging financial institution's trust department or agent in the City's name. (C) Uncollateralized. Pooled Cash and Investm nts The City's pooled cash at deposit, U.S. government regulated money market maturities ranging from of kept to under two years. September 30, 2001: investments consist of deposits with financial institutions, certificates of id agency securities, commercial paper, and deposits in qualifying non - vestment pools (Logic and TexPool). These investments have varying day to three years. The weighted average maturity of the total portfolio is he following is a schedule of the City's pooled cash and investments at 39 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE M. DETAM NOTES ON ALL FUNDS AND ACCIDUNT GROUPS A. POOLED CASH AND INVESTMENTS (CONTINUED) I Category Investments 7 Carrying 3 Amount Primary Government: U. S. Treasury and Agency Obligations $ 78,477,258 $ _ $ _ 78,477,258 Mutual Funds - - - 121,268,781 Subtotal 199,746,039 Component Units: U.S. Treasury and Agency Obligations 126,916 - - 126,916 Mutual Funds - - - 3,028,144 Subtotal 3,155,060 Total Investments 202,901,099 40 OF LUBBOCK, TEXAS i to Financial Statements September 30, 2001 NOTE M. DETAIL N:TES ON ALL FUNDS AND ACCOUNT GROUPS A. POOLED CASH AND VESTMENTS (CONTINUED) Cash and Category Bank Carrying Bank Deposits B (C) Balance Amount Primary Government $ 1, 10,658 $ i - $ - $ 1,710,658 $ 296,061 Component Units 537,108 105,487 396,556 1,139,151 853,308 Total $ 2 .47,766 $ 105,487 $ 396,556 $ 2,849,809 $ 1,149,369 i Cash and Investments 11Ire reported in the financial statements as: I I Total Total Total Primary Component Reporting Government Units Entity Cash and Cash Equivalents — Non - Restricted $ 8,435,709 $ 753,308 $ 9,189,017 Cash and Cash Equivalents — Restricted 16,733,051 100,000 16,833,051 Total Cash and Cash Eq "valents 25,168,760 853,308 26,022,068 Investments -Non Restri 'ted 66,901,925 3,155,060 70,056,985 Investments — Restricted 107,971,415 - 107,971,415 Total Investments 174,873,340 3,155,060 178,028,400 Total Cash and Investme is $ 200,042,100 $ 4,008,368 $ 204,050,468 41 CITY OF LUBBOCE, TEXAS Notes to Financial Statements September 30, 2001 NOTE M. DETAIL NOTES ON ALL FUNDS AND ACS B. INTERFUND TRANSACTIONS Interfund receivables and payables consisting of due to/from and at September 30, 2001 were as follows: Funds General Fund Special Revenue Funds: Hotel/Motel Tax Capital Project Funds Public Safety General Capital Projects Enterprise Funds: Electric Enterprise Water Enterprise Solid Waste Enterprise Golf Enterprise Stormwater Enterprise Internal Service Funds: Fleet Maintenance Print Shop & Office Store Radio Shop Management Information Custodial Services Communications Expendable Trust Funds: Community Development Community Services Library Total Primary Government GROUPS to/from other funds at Interfund Interfund teceivables Payables $10,263,597 $ 632,000 1,188,680 1,578,974 7,789,491 1,563,653 I 11,500,600 150,000 2,014,092 50,000 46,000 12,000 42,915 484,194 61,000 236,885 1,372,001 26,000 221,400 $19,616,741 $19,616,741 C. DEFERRED CHARGES The total deferred charges of $10,516,649 in the Electric Enterprise Fun I includes $3,744,444 which represents an advertising contract with the United Spirit Arena. The a vertising (and amortization) began with the opening of the sports arena in fiscal 2000 and will contin a for 30 years. The deferred charges also include an amount of $1,643,133 at Septemb 30, 2001, which represents prepayments for a contract for future delivery of natural gas as contracte for by the City. In 1988, a contract was entered into for the purchase of proven and unproveneserves, totaling 2,000,000 MMBTU at $1.56 per MMBTU with an option, which the City ha exercised, to purchase an additional 2,000,000 MMBTU at the same price. Quantities in excess of he first 4,000,000 MMBTU can then be purchased at market value. During 1988, proven reservef 338,000 MMBTU were purchased at the $1.56 rate. The remaining reserves are being purch d as proven. One-half the rate, or $.78 per MMBTU, is paid upon proven determination of the res es and the balance is to be paid upon delivery. The prepayments are to be expensed as the gas is t en until the prepaid units of ' o gas have been consumed. At September 30, 2001 and 2000, 1,317,934 MBTU had been delivered, and remaining proven reserves at September 30, 2001 and 2000 were 2,1 4,273 MMBTU. 42 j i t :TY OF LUBBOCK, TEXAS rotes to Financial Statements September 30, 2001 NOTE III. DETAIL NOVES ON ALL FUNDS AND ACCOUNT GROUPS During fiscal 2000, $3,000,1000 was transferred to the Management Information Internal. Service Fund from the Electric Enterprisc ,Fund to cover costs of implementing a new utility billing system. This amount will be amortized o ier 7 seven years once the new billing system has been placed in service, which is anticipated to occu in fiscal 2002. The remaining deferred 4harges of $2,129,072 represents infrastructure and other economic development costs being rtized over 5 years. General fixed assets of the City for the year ended September 30, 2001, are as follows: Construction in progress i4 composed of the following: Fire Station Park Improvements Street Improvements Permanent Street Maintenance General Permanent Capital Prc General Permanent Capital Iml Total Life -to -Date Activity The unexpended balance repr s anticipated future funding sou Project Balance Unexpended Authorization 9-30-01 Balance $ 9,061,110 $ 9-30-00 Additions* Deletions* Reclasses** 9-30-01 Land 7,933,228 $ 37,110 $ 117,907 $ (504,379) $ 7,348,052 Buildings and improvements 41,060,779 5,396,953 424,393 10,106 46,043,445 Other Improvements 135,674,760 7,119,792 701,288 497,852 142,591,116 Equipment 36,725,151 7,226,586 6,620,128 (3,579) 37,328,030 Construction in Progress 40,390,461 13,550,076 22,089,454 - 31,851,083 Total $ 261,784 379 $ 33,330,517 $ 29,953,170 $ - $ 265,161,726 * Includes transfers ** In fiscal 2001, certain sets were reclassified to more appropriate categories Construction in progress i4 composed of the following: Fire Station Park Improvements Street Improvements Permanent Street Maintenance General Permanent Capital Prc General Permanent Capital Iml Total Life -to -Date Activity The unexpended balance repr s anticipated future funding sou Project Expended Unexpended Authorization 9-30-01 Balance $ 9,061,110 $ 6,154,348 $ 2,906,762 10,070,772 2,775,530 7,295,242 36,216,067 7,812,446 28,403,621 1,500,000 1,049,912 450,088 4,981,765 4,141,942 839,823 & Other 17 852,926 9,916,905 7,936,021 $ 79,682,640 $ 31,851,083 $ 47,831,557 long-term capital planning that may be funded through existing or 43 i CITY OF LUBBOCK, TEXAS' Notes to Financial Statements September 30, 2001 NOTE III. DETAIL NOTES ON ALL FUNDS AND AC OUNT GROUPS D. PROPERTY. PLANT AND EQUIPMENT (CONTINUED) General fixed asset account group for component units for the year ! nded September 30, 2001, are Balance Balance 9-30-00 Additions Deletions 9-30-01 Equipment $ 520,542 $ 327,521 $ 312,158'' $ 535,905 Property, plant, and equipment recorded in the City's various propriet units) as of September 30, 2001, is as follows: Land Buildings Other Improvements Equipment Construction in Progress Total Less: Accumulated Depreciation Net E. RETIREMENT PLANS Internal Enterprise Service Fund Fund $ 30,830,572 $ 65,343 82,960,915 1,614,935 461,666,677 186,969 66,550,402 10,315,448 86,548,598 3,985,893 728,557,164 16,168,588 _(222,878,9781 _(7,874,961) $50_ 5,678>186 $ 8,293,627 funds (including component Total $ 30,895,915 84,575,850 461,853,646 76,865,850 90,534,491 744,725,752 Total Reporting Entity Component Proprietary _Units Fund Tvpe $ 520,403 $ 31,416,318 4,159,174 88,735,024 1,179,543 463,033,189 17,827,675 94,693,525 125,559 90,660,050 23,812,354 768,538,106 9,308,698 (240,062,637) $ 14,503,656 $ 528,475,469 Each qualified employee is included in one of two retirement plans i participates. These are the Texas Municipal Retirement System 1 which the City of Lubbock (TMR Relief and Retirement Fund (LFRRF). The City does not maintain th4 ) and the Lubbock Firemen's investments or administer either fund. accounting records, hold the Summary of significant data for each retirement plan follows: TEXAS MUNICIPAL RETIREMENT SYSTEM (TMRS) Plan Description The City provides pension benefits for all of its full-time employees firefighters) through a non-traditional, joint (with the exception of contributory, hybrid defined TMRS, one of 745 administered by TMRS, an agent multiple -employe benefit plan in the state-wide r public employee retirement system. Benefits depend upon the sum of the employee's contributions to the pla financed monetary credits, with interest. i, with interest, and the City - At the date the plan began, the for service rendered before the began ity granted monetary credits plan of a theoretical amount cql have been contributed by the employee, with interest, al to two times what would prior to establisf, credits for service since the plan began are a percent (100%, 150%, ment of the plan. Monetary Dr 2001/0) of the employee's accumulated contributions. In addition, the City can grant, as often monetary credit referred to as an updated service credit which is annually, another type of a thretical added to the employee's accumulated contributions and amount which, when the monetary credits 44 NOTE III. DETAIL OF LUBBOC,& TEXAS s to Financial Statements September 30, 2001 ON ALL FUNDS AND ACCOUNT GROUPS for service since the plan began, would be the total monetary credits and employee contributions accumulated with interest if the current employee contribution, rate and City matching percent had always been in existence a rid if the employee's salary had always been the average of his salary in the last three years that are ond year before the effective date. At retirement, the benefit is calculated as if the sum of the employe 's accumulated contributions with interest and the employer -financed monetary credits with intei est were used to purchase an annuity. Members can retire at ages 60 and above with 10 or more years of service or with 25 years of service regardless of age. As of September 30, 2001, a member is vested after 10 years. During 2001, legislation was enacted th' l changed the vesting period from 10 years to 5 years. This 5 year vesting period begins January 20 2. The plan provisions are adopted by the governing body of the City, within the options availab a in the state statutes governing TMRS and within the actuarial constraints also in the statutes. Contributions The contribution rate for adopted by the govemir annually determines ths ( and the prior service con from year to year. The n( due to the City matching date, not at the time the i actuarially determined p employee at the time h amortizes the unfunded year amortization period contribution rate. Both needs to know its contr between the actuarial val into effect. (i.e. Decembi Actuarial Assumptions The actuarial Actuarial cost met: Amortization tried Remaining amorti: Asset valuation m Investment rate of Projected salary in Includes inflation Cost of Living adj z employees is 7% and the City matching ratio is currently 2 to 1, both as body of the City. Under the state law governing TMRS, the actuary ty contribution rate. This rate consists of the normal cost contribution rate ibution rate, both of which are calculated to be a level percent of payroll nal cost contribution rate finances the currently accruing monetary credits ercent, which are the obligation of the City as of an employee's retirement iployee's contributions are made. The normal cost contribution rate is the cent of payroll necessary to satisfy the obligation of the City to each (her retirement becomes effective. The prior service contribution rate verfunded) actuarial liability (asset) over the remainder of the plan's 25 - The unit credit actuarial cost method is used for determining the City ie employees and the City make contributions monthly. Since the City ution rate in advance for budgetary purposes, there is a one-year delay Uion that is the basis for the rate and the calendar year when the rate goes 31, 2000 valuation is effective for rates beginning January 2002). for the December 30, 2000 valuations are as follows: Unit credit Level percent of payroll period: 25 years- open period Amortized cost 8% s: None None its: None 45 CITY OF LUBBOCK, TEXA Notes to Financial Statements September 30, 2001 NOTE M. DETAIL NOTES ON ALL FUNDS AND E. RETIREMENT PLANS (CONTINUED) TEXAS MUNICIPAL RETIREMENT SYSTEM REQUIRED St 3 YEAR HISTORICAL SCHEDULE OF ACTUA. AND FUNDING PROGRESS GROUPS EMENTAL DISLOSURE LIABILITIES 46 Unfunded As of Actuarial Actuarial December 31 Actuarial Value of Accrued Perc Accrued to e g Liability Assets Liabi1i Fu ed UAAL 1998 $ 132,735,475 $ 162,668,614 81. 1999 147,042,049 % $29,933,139 181,439,657 81.% 2000 160,299,195 200,713,365 79.1% 34,397,608 40,414,170 UALL as a % Annual IR As of Annual Covered Of Covered Contri Decemb31 equired ution Contribution er Payroll Payroll A Made 1998 $ 46,619,677 64.2% $7,149,029 1999 51,627,837 66.6% $ 7,149,029 2000 54,589,153 74.0% 8 794,560 7,794,560 010,122 8,010,122 The City of Lubbock is one of 745 municipalities having the benefil Each of the municipalities has an annual, individual plan administered by TMRS. actuarial valuatiori for the December 31, 2000 valuations are contained in the 2000 performed. All assumptions IMRS Financial Report, a copy of which may be obtained by writing to P. 78714-9153. Comprehensive Annual . Box 149153, Austin, Texas LUBBOCK FIREFIGHTER'S RELIEF AND RETIREMENT FUND (LFRRF) Plan Description The Board of Trustees of the LFRRF is the administrator of a su gle-employer defined benefit pension plan. This pension fund is a trust fund. It is reported by the Cif is not considered to be a of the City financial v as a related organization and part reporting entity. Fi Department are covered by the LFRRF. -efighters in the Lubbock Fire The LFRRF provides service retirement, death, disability and withdr vest after 20 years of credited wal benefits. These benefits service. Employees may retire at age 5 reduced early service retirement benefit is provided for employees with 20 years of service. A wl 20 or more years of service. A partially vested benefit is provided terminate employment with r firefighters who terminate employment with at least 10 but less than 20 years of service.The L 1, 2001 provides a monthly normal service Plan Effective December retirement benefit, payable Spouse form of annuity, equal to 70.02% of Final 48 -Month Average Sary in a Joint and Two -Thirds to Plus for each year of service in excess of 20 years. $335.05 per month 46 TY OF LUBBOCE, TEXAS otes to Finaneial statements September 30, 2001 I NOTE III. DETAIL NO ES ON ALL FUNDS AND ACCOUNT GROUPS A firefighter has the option to participate in a Retroactive Deferred Retirement Option Plan (RETRO DROP) which will provii le a lump sum benefit and a reduced annuity upon termination of employment. Firefighters ri iust be at least 51 with 21 years of service at the selected "RETRO DROP benefit calculation date" (''hich is prior to date of employment termination). Early RETRO DROP with benefit reductions is a ailable at age 50 with 20 years of service for the selected "early RETRO DROP benefit calculation ate'. A Partial Lump Sum option is also available where a reduced monthly benefit is determir d based on an elected lump sum amount such that the combined present value of the benefits and ` the option is actuarially equivalent to that of the normal form of the monthly benefit. Optional forms are also available at varying levels of surviving spouse benefits instead of the standard twobirds form. There is no provision for utomatic postretirement benefit increases. The fund has the authority to provide, and has periodic ' ly in the past provided for, ad hoc postretirement benefit increases. The benefit provisions of this, plan are authorized by the Texas Local Fire Fighter's Retirement Act (TLFFRA). TLFFRA pro ;['des the authority and procedure to amend benefit provisions. Contributions Required m 2d Contributions Made The contribution provisio of this plan are authorized by TLFFRA. TLFFRA provides the authority and procedure to change he amount of contributions determined as a percentage of pay by each firefighter and a percentage of payroll by the City. State law requires that eaA h plan of benefits adopted by the fund must be approved by an eligible actuary. The actuary cer ifies that the contribution commitment by the firefighters and the City provides an adequate fina icing arrangement. Using the entry age actuarial cost method LFRRF's normal cost contribution We is determined as a percentage of payroll. The excess of the total contribution rate over th normal cost contribution rate is used to amortize LFRRF's unfunded actuarial accrued liability', (UAAL), if any, and the number of years needed to amortize LFRRF's unfunded actuarial liabili if any, is determined using a level percentage of payroll method. When there is a negative I AAL, the actuarially required contribution rate for compliance with GASB 27 is determined by amort zing the negative UAAL over 30 years using a level percentage of payroll method. This will be the ase for 2001 and 2002 (calendar years) based on the most recent results of the December 31, 2000 va uation. The costs of administeringithe plan are financed from the trust. LFRRF's funding policy requires contributions equal to 11% of pay by the firefighters. Contributions by the City are based on a formula which causes the City's contribution rate to fluctuate from year to year. The December 31, 000 actuarial valuation (most recent) assumes that the City's contributions will average 15% of payro 1 in the future. The plan of benefits in allowing for future unfi existed in the fall of i Therefore, even though i somewhat greater than t recently adopted effective December 1, 2001 was adopted cautiously, :seen contingencies in light of the unsettled investment environment that )1 when various plan amendments were being studied and considered. :factual contributions for the 2001 and 2002 plan years (calendar years).are ie Annual Required Contributions defined by GASB 27, the actuary 47 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE III. DETAIL NOTES ON ALL FUNDS AND CCOUNT GROUPS E. RETIREMENT PLANS (CONTINUED) certified the most recent plan of benefits assuming that the present financing arrangement would continue and would be necessary for an adequate financing arrangers for the long-term future. Annual Pension Cost The Annual Required Contributions (ARC), the Annual Pension Co t (APC) and the Net Pension Obligation (NPO) are developed in such a manner to satisfy the par eters of GASB Statement No. 27. The required contributions for the period prior to January 1, 2, 1 are based on the actuarial valuation as of December 31, 1998. The required contributions for tt e period beginning January 1, 2001 are based on the actuarial valuation as of December 31, 2000 anc reflect the December 1, 2001 plan provisions. The ARC and the APC for the year ended September 30, 2001 was $1,366,293 and the actual City contributions (ARC) made for the year was $1,960 306 resulting in an NPO of $(594,013). The entry age actuarial cost method was used, with the normal cost calculated as a level percentage of payroll. The actuarial value of assets was determined based on afive-year smoothed fair -market value of assets. The actuarial assumptions included an investment rc turn assumption of 8.5 % per year (net of administrative expenses), projected salary increases inclu ling promotion and longevity averaging 6.5% per year over a 25 year career, and no postretirement Wst-of-living adjustments. An inflation assumption of 4.5% per year is included in the investme t return and salary increase assumptions. As of the December 31, 2000 actuarial valuation dated based on plan provisions effective December 1, 2001, the fund's assets exceeded the actuarial i. ccrued liability resulting in a negative unfunded actuarial accrued liability (UAAL). The negative UAAL is amortized over 30 years using an open, level percentage of payroll method, assuming that he payroll mill increase 4.5% per year. Further details concerning the financial position of the LFRRF and th latest actuarial valuation are available by contacting the Board of Trustees, LFRRF, City of Lubbo'k, P.O. Box 2000, Lubbock, Texas 79457. Trend Information Annual Pension Cost Percentage of AP Net Pension Fiscal Year Ending ApC Contributed 9/30/99 Obligation $1,745,357 100 9/30/00 1,852,835 100 9/30/01 1,366,293 143 $(594,013) LUBBOCK FIREMEN'S RELIEF AND RETIREM TINT FUND ANALYIS OF FUNDING PROGRESS' i Actuarial Actuarial Entry Age Unfunded Funded Annual UAAL as a Valuation Date Value of Actuarial AAL Ratio (alb) Covered Percentage of Assets (a) Accrued (UAAL) Payroll Covered Liability (b -a (AAL) (b) ) (c) Payroll 12/31/96 1,2 $73,626,537 $80,105,898 $ 6,479,361 12/31/981,3 90,364,681 97,533,314 7,168,633 12/31/00 1,4 119,660,788 114,675,049 ( 4,985,739) 48 91.9% 92.7 104.3 $ 9,223,974 70.2% 10,290,190 69.7 12,243,913 (40.7) NOTE M. DETAIL N? 1 Economic and demogn 2 Changes in plan ben November 1, 1997. 3 Reflects changes in pls 4 Reflects changes in pts 5 The covered payroll is [TY OF LUBBOCK, TEXAS otes to Financial Statements September 30, 2001 ON ALL FUNDS AND ACCOUNT GROUPS assumptions were revised. provisions were effective December 20, 1995, March 30, 1996 and benefit provisions effective November 1, 1999. benefit provisions effective December 1, 2001. aced in estimated annualized salaries used in the valuation. The City offers its emplo ees three deferred compensation plans created in accordance with Internal Revenue Code ("IRC") Se tion 457. The plans, available to all City employees, permit them to defer a portion of their salary ui itil future years. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. The Plan's assets are held in trust for the exclusive benefits c f the participants and their beneficiaries. In management's opinio the level of administrative services provided by City staff warrants inclusion of the plans in financial reporting entity as an expendable trust fund. Canadian River MuniciI 1 Water Authority The Canadian River Mu icipal Water Authority (CRMWA) is a Conservation and Reclamation District established by the Texas Legislature to construct a dam, water reservoir and aqueduct system for the purpose of suppl'' g water to surrounding cities. The District was created in 1953 and comprises eleven cities, it cluding the City. The budget, financing and operations of the District are governed by a Board of D rectors selected by the governing bodies of each of the member cities, each city being entitled to one Dr two members dependent upon population. At September 30, 2001, the Board was comprised of 1 members, two of which represented the City. The City contracted with e CRMWA to reimburse it for a portion of the cost of the Canadian River Dam and aqueduct syster i in exchange for surface water. Accordingly, prior to fiscal 1999, such payments were made soli ly out of water system revenues and were not general obligations of the City. The City's pro rat, 'share of annual fixed and variable operating and reserve assessments is recorded as an expense of Dbtaining surface water. Prior to fiscal 1999, the lc Construction of the facilil $32,905,862. During ti $12,300,000 were issue Reclamation via CRMW discount in the remaining This discount has been re of the refunding bonds. principal and interest pays r:, g -term debt was owed to the U.S. Bureau of Reclamation for the cost of , which was completed in 1969. The City's allocation of project cost was year ended September 30, 1999, bonds in the principal amount of to payoff the construction obligation owed to the U.S. Bureau of in the amount of .$20,809,067. The difference of $8,509,067' was a rincipal provided by the U.S. Bureau of Reclamation to the member cities. orded as a deferred gain on refunding and is being amortized over the life At September 30, 2001, $7,704,469 remains unamortized. The annual ents are included in the disclosures for other City related long - 49 J CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE III. DETAIL NOTES ON ALL FUNDS AND G. SURFACE WATER SUPPLY fCONTINUEDI Canadian River Municipal Water Authority (Continued) term debt. The above cost for the rights are recorded as other assets Years. The cost and debt are recorded in the Water Enterprise Fund, Brazos River Authority - Lake Alan Henry GROUPS are being amortized over 85 During 1989, the City entered into an agreement with the Brazos R ver Authority (BRA) for the construction, maintenance and operation of the facilities known as Lake Alan Henry. The BRA, which is authorized by the State of Texas to provide for the conservati' n and development of surface waters in the Brazos River Basin, has issued bonds for the construction' of the dam and lake facilities on the South Fork of the Double Mountains Fork of the Brazos River Total costs are expected to exceed $120 million. The agreement obligates the City to provide revenues to BRA in ankounts sufficient to cover all maintenance and operating costs, management fees to the authority, as ell as funds sufficient to pay all capital costs associated with construction. The City will receive surf a water for the payments to BRA. Approximately $154,000 was paid to the BRA for maintenance and operating costs in fiscal year 2001. The BRA issued $16,970,000 in revenue bonds in 1989 and $39,685,0 0 in revenue bonds in 1991. These bonds were refunded July 1995. Disclosure of the refunding an be found in Note III. K. Construction of the dam and lake facilities began in 1989. The City is bligated to provide sufficient funds over the remaining life of the bonds to service the debt require nent. The financial activity, along with the related obligation, is accounted for in the Water Enterpri Fund. At September 30, 2001, certain mineral rights associated with land to ted in the Lake Alan Henry site owned by individuals had not been acquired by the City. The ditional amount needed to purchase such mineral rights is yet to be determined. H. OTHER ENTERPRISE FUND ACTIVITIES Enterprise Fund Transfers Transfers to the General Fund from the Electric, Water, Solid Waste, an I Sewer Enterprise Funds, in the opinion of management, exceed the amount that would have been p iid to the City if these funds were private sector companies engaged in the same enterprises. In addit ion to the amount transferred in excess of private sector taxes, there is also an amount transferred to C Dmpensate the General Fund for shared services and indirect costs. 50 ITY OF LUBBOCK, TEXAS 'Totes to Financial Statements September 30, 2001 NOTE III. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS The City maintains seven enterprise funds, which include electric, water, sewer, solid waste, airport, . golf, and stormwater drainage Segment information for lie year ended September 30, 2001, was as follows: Solid Stormwater Total Electric V11 ter Sewer Waste Airport Golf Drainage Enterprise Fund Fluid Fund Fund Fund Fund Fund Funds Operating Revenues $ 112,077,148 $ 30,463,694 i5,382,462 $ 16,575,673 $ 15,564,356 $ 4,776,508 $ 34,982 $ 1,986,592 $ 181,478,953 Depreciation Expense 6,344,450 4,693,011 2,062,105 3,266,417 56,425 252,090 22,056,960 Operating income (loss) 6,476,894 9,178,172 2,756,202 2,913,294 (2,192,710) (21,443) 1,055,611 20,166,020 Operating Transfers In (out) (7,856,203) (J,549,148) (1,820,459) (2,372,390) (881,163) (34,982) (188,026) (16,702,371) Net lncome(loss) (645,156) 11,174,683 (1,049,616) 1,296,728 (1,178,907) (58,527) 1,072,058 611,263 Current capital Contributions(Reductions) 210,226 675,693 1,665,821 (8,981) 4,701,997 7,244,756 Property, plant, and equipment_ Additions: 10,590,127 7,962,043 5,879,650 4,229,141 5,876,791 - 550,256 45,088,008 Deletions: 596,108 1,450,937 233,978 1,537,238 319,358 6,708 97,800 4,242,127 Net Working Capital (875,028) 6,519,470 2,183,254 3,362,725 305,408 (2,033,760) 500,089 9,962,158 Allowance for doubtful Accounts (1,421,644) (280,102) (121,638) (107,065) (117,909) - - (2,048,358) Total Assets 150,826,651 2.11,019,746 117,049,474 50,658,914 66,070,706 165,760 46,931,112 682,722,363 Bonds and other long- term liabilities payable from operating revenues 39,923,286 1 3,515,487 50,827,408 12,532,278 5,272,541 - 34,633,996 256,704,996 Total FundEquity(Deficit) $92,270,912 $l 5,226,341 $65,604,178 $37,634,600 $60,452,751 $(1,870,791) $11,909,498 $401,227,489 51 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE M. DETAIL NOTES ON ALL FUNDS AND ACCO J. LONG-TERM DEBT GENERAL OBLIGATION BONDS AND CERTIFICATES OF O (A) Average Final Interest Issue Maturity Rate Date Date 7.86% 11-15-85 2-15-03 9.01 5-15-91 2-15-11 5.50 1-14-92 2-15-02 5.50 5-15-92 2-15-04 5.37 8-15-92 2-15-02 3.97 5-1-93 2-15-15 5.39 10-1-93 2-15-14 5.39 10-1-93 2-15-14 5.20 10-1-93 2-15-14 5.14 10-1-93 2-15-14 4.30 12-1-93 2-15-08 5.50 5-15-95 2-15-15 5.07 12-15-95 2-15-16 5.07 12-15-95 2-15-16 4.91 1-15-97 2-15-09 4.61 1-1-98 2-15-08 4.71 1-1-98 2-15-18 4.36 1-15-99 2-15-14 4.58 1-15-99 2-15-19 4.77 4-1-99 2-15-19 4.71 4-1-99 2-15-19 5.37 9-15-99 2-15-20 5.54 3-15-00 2-15-20 4.90 2-1-01 2-15-21 4.81 2-1-01 2-15-21 5.25 6-1-01 2-15-31 Total Amount $ 60,614,070 1,085,000 1,655,000 34,520,000 7,565,000 14,425,000 3,625,000 2,550,000 1,470,000 19,215,000 9,865,000 4,690,000 6,505,000 10,000,000 17,530,000 1,330,000 10,260,000 20,835,000 15,355,000 6,100,000''. 12,300,000 24,800,000 7,000,000 9,100,000 2,770,000 8 Excludes net deferred gains and losses on advance refunc discounts of $5,322,270. Additionally, this amount includes finance enterprise fund activities. 52 GROUPS TION: Balance Outstanding 9-30-01 $ 438,321 535,000 85,000 6,900,000 275,000 10,095,000 2,365,000 1,675,000 975,000 12,495,000 5,215,000 3,290,000 4,880,000 7,500,000 15,015,000 1,000,000 8,730,000 20,550,000 13,815,000 5,490,000 11,160,000 24,055,000 7,000,000 9,100,000 2,770,000 35,000,000 $ 210,408,321(A) bond issuance costs and ,325,513 of bonds used to 'ITY OF LUBBOCK, TEXAS votes to Financial Statements September 30, 2001 NOTE III. DETAIL N TES ON ALL FUNDS AND ACCOUNT GROUPS J. LONGTERM DEBT (C NTINUED ELECTRIC REVENUEBONDS: Balance Final Amount Outstanding Interest Rate(%) Isst a Date Maturity Date Issued 9-30-01 5.00 to 6.50 7-:5-91 4-15-02 $ 4,424,976 $ 400,000 3.80 to 5.50 645-95 4-15-08 13,560,000 8,150,000 ** 4.25 to 6.25 1-)1-98 4-15-18 9,170,000 7,805,000 3.10 to 5.00 1-15-99 4-15-19 14,975,000 13,250,000 *** 4.00 to 5.25 7-H-01 4-15-21 9,200,000 9,200,000 **** Total $ 51,3 29,976 $ 38,805,000 * Refunding bonds I ued for a partial refunding of the bonds issued May 15, 1983. ** Refunding bonds isued for a partial refunding of the bonds issued April 15, 1976, April 15, 1987, ar. I May 15, 1988. Balance outstanding includes $108,034 discount on bonds sold, bo d issuance costs and deferred amounts on refunded bonds. *** Refunding bonds isued for a partial refunding of the bonds issued April 25, 1991 and July 15, 1991. Balance ou'standing includes $462,430 costs and deferred amounts on bonds refunded. **** Balance outstandi g includes $294,694 of discount on bonds sold and bond issuance costs. WATER REVENUE Balance Final Amount Outstanding Interest Rate I ' sue Date Maturity Date Issued 09-30-01 3.80 to 5.50% -1-95 8-15-21 $58,170,000 $50,355,000 * Balance outstandi : g includes $5,473,212 discount, bond issuance costs and deferred losses on bonds sold or refu ded. 53 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE III. DETAIL NOTES ON ALL FUNDS AND GROUPS I LONGTERM DEBT (CONTINUED) The annual requirements to amortize all outstanding debt of the City as 3f September 30, 2001, including interest payments. of $150,158,057 are as follows: * This schedule does not include the effect of premiums or discounts. The City has complied in all material respects with the bond indenture. 54 ! as outlined in each issue's J Revenue Fiscal General (Electric, Year Obligation __LRA)_ Total 2001-02 $ 24,650,602 $ 9,979,928 $ 34,630,53 2002-03 23,021,722 9,428,398 32,450,12 2003-04 20,936,527 9,200,212 30,136,73 2004-05 20,394,713 8,522,688 28,917,40 2005-06 19,853,808 8,328,032 28,181,84 2006-07 19,324,162 8,165,148 27,489,31 2007-08 18,196,058 7,675,220 25,871,27 2008-09 17,307,735 6,750,435 24,058,17 2009-10 16,371,173 6,664,450 23,035,62' 2010-11 15,950,604 6,594,692 22,545,29 2011-12 14,358,933 6,176,220 20,535,15 2012-13 13,991,061 6,127,000 20,118,06 2013-14 13,647,539 6,083,240 19,730,77 2014-15 10,368,701 6,039,000 16,407,70 2015-16 9,241,852 5,988,960 15,230,81 2016-17 8,280,451 5,945,825 14,226,27 2017-18 8,174,718 5,895,560 14,070,27 2018-19 7,564,736 5,399,020 12,963,75 2019-20 5,832,482 3,469,150 9,301,63 2020-21 3,185,275 3,448,700 6,633,97 2021-22 2,317,910 - 2,317,91 2022-23 2,317,900 - 2,317,90 2023-24 2,318,470 - 2,318,47 2024-25 2,319,339 - 2,319,339; 2025-26 2,320,614 - 2,320,614 2026-27 2,321,575 - 2,321,575, 2027-28 2,317,068 - 2,317,068 2028-29 2,317,260 - 2,317,260 2029-30 2,321,622 - 2,321,622 2030-31 2,319,890 - 2,319 890 i Total 1313,844,500 $135,881,878 $ 449,726,M-1- * This schedule does not include the effect of premiums or discounts. The City has complied in all material respects with the bond indenture. 54 ! as outlined in each issue's J NOTE M. DETAIL Long-term debt tran 2001 are as follows: Governmental: Tax -Supported Obligation Bonds Rebatable arbitral Compensated Abs Total Government: Proprietary: Self -Supported Obligation Bonds Revenue Bonds Compensated Abs' Total Proprietary 7ITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 ON ALL FUNDS AND ACCOUNT GROUPS for governmental and proprietary funds for the year ended September 30, Debt Payable Debt $ 315,012,943 Interest Total amount Debt Payable 9-30-00 Additions Deletions 9-30-01 183,908,447 $ 48,380,346 $ 9,100,000 $ 4,397,538 $ 53,082,808 301,269 320,388 - 621,657 11,080,047 823,306 - 11,903,353 59,761,662 10,243,694 4,397,538 65,607,818 14,806,142 1,114,560 135,528,101 37,770,000 9,404,354 163,893,747 77,446,614 9,200,000 5,070,947 81,575,667 3,726,095 291,254 81,638 3,935,711 216,700,810 47,261,254 14,556,939 249,405,125 Total City -Wide: Debt $ 315,012,943 Interest Total amount 150,158,057 of debt $ 465,171,000 Obligation Bonds ' and deferred losses 1,016,099 183,908,447 46,870,000 13,801,892 216,976,555 Revenue Bonds future debt requirements $ 449,726,378 77,446,614 9,200,000 5,070,947 81,575,667 Rebatable arbitrage 301,269 320,388 - 621,657 Compensated Absences 14,806,142 1,114,560 81,638 15,839,064 Total City -Wide 11 $ 276,462,472 $ 57,504,948 $ 18,954,477 $ 315,012,943 i The total long-term debt s reconciled to the total annual requirements to amortize long-term debt.as follows: Long -,Tei Debt $ 315,012,943 Interest Total amount 150,158,057 of debt $ 465,171,000 Add: Di., counts and deferred losses 1,016,099 Rebatabl arbitrage (621,657) Less: Cotnpensated Absences (15,839,064) (15,444,622) Tota I future debt requirements $ 449,726,378 The City Council called a purpose tax -supported bor year general purpose debt $14,765,000; city-wide di traffic signal systems, $3,: since 1993, when voters ii 2001, the City issued $9, second installment of the proceeds from the sale of i $3,025,000; Streets $5,335 election for September 18, 1999 to seek voter approval to issue general Is in the amount of $37,385,000, which represents the City's current five ilan. The following four propositions were approved by the voters: parks, Linage projects, $2,160,000; city-wide street projects, $17,165,000; and 15,000. The City has not submitted a capital improvement plan to voters the City approved a $28,690,000 capital improvement plan. In February 00,000 General Obligation Bonds, Series 2001. This issuance was the apital improvement debt issuance approved by the voters in 1999. The ie Obligations will be used to fund projects in the following areas: Parks, 100; and Traffic Control $740,000. 55 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE III. DETAIL NOTES ON ALL FUNDS AND K. ADVANCED REFUNDING GROUPS In fiscal Yeats 1994, 1995, 1997 and 1999, the City defeased portions of City of Lubbock General Obligation Bonds. All of the defeased portions of the following bonds we r called and retired during the 2000-2001 fiscal year. Tax and Waterworks Certificates of Obligation, S ries 1992; General Obligation Refunding Bonds, Series 1993; General Obligation Bonds, Series 1987; Gf neral Obligation Bonds, Series 1989; Certificates of Obligation Bonds, Series 1989; General Obligation Bc nds, Series 1991; Combination Tax and Waterworks System Subordinate Lien Revenue Certificates of Obligation, Series 1991; Combination Tax and Exhibition Hall/Auditorium (Limited Pledge) Rev ue Certificates of Obligation, Series 1991; General Obligation Refunding Bonds, Series 1992; Comb' Lation Tax and Sewer System Subordinate Lien Revenue Certificates of Obligation, Series 1991 (pa3a 3ents due February 15, 2003 through 2012); Electric Light and Power System Revenue Bonds, Series 1991; and Electric Light and Power System Revenue refunding Bonds, Series 1991-B. In fiscal year 1995, Brazos River Authority defeased portions of Brazos Ri 7er Authority Revenue Bonds. All of the defeased portions of the following bonds were called and retin d during the 2000.2001 fiscal year. Brazos River Authority Revenue Bonds, and. Series 1989; Brazos Ri'er Authority Revenue Bonds, Series 1991. In fiscal year 1999, the City defeased certain General Obligation Bonds. A onion of the proceeds of the Series 1999 General Obligation Refunding Bonds were used to purchase U Lited States Treasury Securities State and Local Government Series, which were placed in an irrevocable truit to be used solely to partially refund the portion of the Series 1992 Combination Tax and Sewer Subordi iate Lien Revenue Certificates of Obligation payments due February 15, 2006 through 2014. Accordingf,, the trust account assets and the liability for the defeased bonds are not included in the City's financial s tements. On the September 30, 2001, $15,545,000 of bonds outstanding are considered defeased. L. ACCRUED INSURANCE CLAIMS As discussed in Note I.G., the Self -Insurance Funds establish a liabilir, for self-insurance for both reported and unreported insured events, which includes estimates of both ture payments of losses and related claim adjustment expenses. The following represents changes in th ise aggregate liabilities for the Insurance Funds during the past two years ended September 30: Worker's Compensation and Liability Reserves at beginning of fiscal year Claims expenses Claims payments Worker's Compensation and liability reserves at end of fiscal year Medical and Dental Claims Liability at end of fiscal year * Total Self -Insurance Liability at end of fiscal year Total Assets to pay claims at end of fiscal year Accrued insurance claims payable from restricted assets -current Accrued insurance claims -non-current Total accrued insurance claims 56 2001 2000 3,734,340 $ 3,734,341 5,735,258 2,763,142 3,469,598) (2,763,143) 6,000,000 3,734,340 3,441,879 665 $ 7,176,219 16 $ 16,841 919 s - 4,764,865 $ 4,372,861 4,500,000 2,803,358 9,264,865 $$ 7176219 J 1 ITY OF LUBBOCK, TEXAS otes to Financial Statements September 30, 2001 NOTE M. DETAIL NOTES ON ALL FUNDS AND ACCOUNT GROUPS * The information necess to'prepare the separate disclosures for medical and dental claims liabilities is unavailable. State and federal laws and regulations require the Gty to place a final cover on its landfill sites when it stops accepting waste and t perform certain maintenance and monitoring functions at the sites for thirty years after closure. Altho closure and postclosure care costs will be paid only near or after the date that the landfill stops accep ing waste, the City reports a portion of these closure and postclosure costs as an opening expense in each period based on landfill capacity used as of each balance sheet date. The $5,973,851 included a1L the landfill closure and postclosure care liability at September 30, 2001, represents the cumulative unount expensed by the City to date of $8,603,429 less amounts paid for closure of certain cells ba., ed on the use of over 90 percent of the estimated capacity of the landfill registered under TNROC F ermit number 69. Any unrecognized costs of closure and postclosure care at September 30, 2001, is no significant. These amounts are based on what it would cost to perform all closure and postclosure in 2001. The City expects Ito close this landfill within the next 5 years. Actual cost =4 due to inflation, deflation; changes in technology, or changes in regulations. The City has a second I ill (INROC permit number 2252) which effectively began accepting solid waste during fiscal 2000. ' Current closure and post -closure care costs have been estimated to be approximately $22,305,000of which $149,042 has been recognized to date and $10,338 has been paid. Approximately 1% of this ill's capacity has been used and the City expects this landfill to have a life in excess of 80 years base on current estimates of use. Actual cost may be different due to inflation, deflation, changes in technology, or changes in regulations. The City is required by sta and federal laws and regulations to provide assurance that financial resources will be available to pro ride for closure, postclosure care, and remediation or containment of environmental hazards at i landfill. The Gty is in compliance with these requirements and has chosen the Local Govemn ent Financial Test mechanism for providing this assurance. The City expects to finance costs through n meal operations. NOTE IV. CONTINGICNT LIABILITIES A. FEDERAL GRANTS In the normal course of o'- tions, the City receives grant funds from various Federal and state agencies. The grant programs are s i ject to audits by agents of the granting authority to ensure compliance with conditions precedent to granting of funds. Any liability for reimbursement which may arise as the result of audits of grants is of believed to be material. B. LITIGATION The City is involved in damage, personal inju condemnation proceeds rsu its arising in the normal course of business, including claims for property and personnel practices, disputes over contract awards and property suits contesting the legality of certain taxes and public safety 57 CITY OF LUBBOCK, TEXAS Notes to Financial Statements September 30, 2001 NOTE IV. CONTINGENT LIABILITIES B. LITIGATION CONT ED practices. In the opinion of management, the ultimate outcome o materiallyadverse effect on the (!Vs financial position as of September C. SITE REMEDIATION The City has identified specific locations requiring site remediation tanks. The potential exposure is not readily determinable as of Sel management, the ultimate liability will not have a materially adverse e D. WEST TEXAS MUNICIPAL POWER AGENCY In fiscal 1998, the West Texas Municipal Power Agency ("WIMPA") Revenue Bonds, Series 1998 maturing through February of 2018. The; revenues of certain power sales contracts with participating cities of whiff the net revenues of the power sales contracts are not sufficient to cover d participating cities are required under a debt service guarantee provisid. funds sufficient to cover any debt service deficit to the extent of their res) for the preceding 12 months. The Gty's percentage share in this a approximates 100%. At September 30, 2001, the City had accounts n million from WTMPA. During the year ended September 30, 2001, approximately $13 million for power purchases from WTMPA and contract service revenue. The City was not required to subsidize any dE these lawsuits will not have a 3, 2001. to underground fuel storage 30, 2001. In the opinion of the City s financial position. ued $28,910,000 of WIMPA bonds are secured by the net the City is one. In the event debt service of the bonds, the of the agreement, to provide mve participation percentages eement for the coming year livable of approximately $4.9 e City reported expenses of iproximately $15 million in : service payments. NOTE V. RECENTLY ISSUED PRONOUNCEMENTS GASB Statement No. 34, Basic Fr5h x Statorerxs — and Mamgwves Disc ssibn mrd Amlyik — for State and Load Gorenvw& was issued in June 1999. This Statement is effective f Dr the CitYs fiscal year ending September 30, 2002. This Statement will require the presentation of government -wide financial itatements as well as fund level statements. Additionally, there will be added information on the s finances in Management's ement's Discussion and Analysis which has not been previously presented. This Standard is expected to create new information and will restructure much of the previouslypresented f' information. The GASB developed these requirements to make annual reports more comprehensim and easier to understand and use. 58 J .J APPENDIX C OF BOND COUNSEL'S OPINION J THIS PAGE INTENTIONALLY LEFT FULIB A REGI TELEPHONE: 214/855-8000 FACSIMILE: 214/855-8200 WE HAVE ACTED as Bo Texas (the "City") of the "City c Certificates of Obligation, Series $2,605,000, dated July 1, 200: Certificates and the exclusion of income tax purposes, and for no verify, and we neither expressly financial condition or capabilitiE information or data pertaining 1 sufficiency of the security for or t� THE CERTIFICATES at $5,000 or any integral multiple t each of the years 2003 through applicable redemption provisioi rates per annum stated in the c issuance of the Certificates (the 15 and August 15 in each ye; appearing on the registration bl on the face of the Certificates). IN RENDERING THE C .; certified copies of the proceed including the Ordinance and an relating to the expected use ai certain other funds of the City ai City; and such other material an of the proceedings relating to the of all documents submitted to u: submitted to us as certified cc documents and certifications. BASED ON OUR EXAM of the United States of America; 1. The Certifies Certificates issued in co legally binding and enf valorem tax levied, withi in the City and additiona the Net Revenues (as c the manner and to the e; RIGHT & JAWORSKI L.L.P. TERED LIMITED LIABILITY PARTNERSHIP 00 ROSS AVENUE. SUITE 2800 HOUSTON DALLAS. TEXAS -7S201-2-784 WASHINGTON. D.C. AUSTIN SAN ANTONIO DALLAS NEW YORK LOS ANGELES MINNEAPOLIS LONDON HONG KONG td Counsel in connection with the issuance by City of Lubbock, f Lubbock, Texas, Tax and Sewer System Surplus Revenue ?002A" (the "Certificates") in the aggregate principal amount of solely to express legal opinions as to the validity of the the interest on the Certificates from gross income for federal other purpose. We have not been requested to investigate or nor by implication render herein any opinion concerning, the s of the City, the disclosure of any financial or statistical the City and used in the sale of the Certificates, or the �e value or marketability of the Certificates. issuable in fully registered form only and in denominations of .reof. The Certificates have stated maturities of February 15 in 022, unless redeemed prior to maturity in accordance with the Interest accrues on the Certificates from their date at the linance adopted by the City Council of the City authorizing the Drdinance"), and such accrued interest is payable on February , commencing February 15, 2003, to the registered owners Iks of the Paying Agent/Registrar on the Record Date (stated IIINIONS herein we have examined and rely upon original or igs had in connection with the issuance of the Certificates, executed initial Certificate; certifications of officers of the City d investment of proceeds of the sale of the Certificates and d to certain other facts within the knowledge and control of the such matters of law as we deem relevant. In the examination ,issuance of the Certificates, we have assumed the authenticity as originals, the conformity to original copies of all documents )ies, and the accuracy of the statements contained in such TIONS, IT IS OUR OPINION that, under the applicable law the State of Texas in force and effect on the date hereof: :s have been duly authorized by the City, and the pliance with the provisions of the Ordinance are valid, ceable obligations of the City, payable from an ad the limits prescribed by law, upon all taxable property payable from and secured by a lien on and pledge of 'ined in the Ordinance) of the City's Sewer System in .nt provided in the Ordinance; except to the extent that Legal Opinion of Fulbright & Jaworski L.L.P. Re: "City of Lubbock, Texas, Tax and Sewer System Surplus evenue Certificates of Obligation, Series 2002A", dated July 1, 2002 the enforceability thereof may be affected by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors' rights or the exercise of judicial discretion in accordance with the gene al principles of equity. 2. Pursuant to section 103 of the Internal Rev amended to the date hereof (the "Code"), and existing rulings, and court decisions thereunder, and assuming; after the date hereof by the City with the provisions of & sections 141 through 150 of the Code, interest on t excludable from the gross income, as defined in section owners thereof for federal income tax purposes, and st included in computing the alternative minimum taxable thereof who are individuals for federal income tax puri tax-exempt obligations, such as the Certificates, owned' than an "S" corporation or a qualified mutual fund, investment conduit, real estate investment trust, or a finan investment trust) will be included in such corporation's ac; for purposes of calculating the alternative minimum to corporation. A corporation's alternative minimum taxable which the alternative minimum tax imposed by sectic computed. WE EXPRESS NO OTHER OPINION with respect to an tax consequences under present law or any proposed legislatio accrual of interest on, or the acquisition or disposition of, thl tax-exempt obligations such as the Certificates may rest consequences to, among others, financial institutions, life insura casualty insurance companies, certain foreign corporations doing "S" corporations with subchapter "C" earnings and profits, own asset securitization investment trust, individual recipients of Retirement benefits, individuals otherwise qualifying for the eE taxpayers who may be deemed to have incurred or continued' carry, or who have paid or incurred certain expenses allocable to, OUR OPINIONS ARE BASED on existing law, which opinions are further based on our knowledge of facts as of the dal to update or supplement our opinions to reflect any facts or circu come to our attention or to reflect any changes in any law that mE effective. Moreover, our opinions are not a guarantee of result Internal Revenue Service; rather, such opinions represent our lec review of existing law that we deem relevant' to such opinior representations and covenants referenced above. EHE:dfc 45196573.1 nue Code of 1986,as regulations, published continuing compliance a Ordinance relating to ie Certificates will be 61 of the Code, of the ch interest will not be income of the owners poses. Interest on all )y a corporation (other real estate mortgage ;ial asset securitization usted current earnings cable income of such ncome is the basis on n 55 of the Code is r other federal, state, or local i resulting from the receipt or Certificates. Ownership of It in collateral federal tax ice companies, property and )usiness in the United States, ars of interests in a financial Social Security or Railroad rned income tax credit, and ndebtedness to purchase or ax -exempt obligations. is subject to change. Such hereof. We assume no duty nstances that may thereafter y thereafter occur or become and are not binding on the al judgment based upon our s and in reliance upon the -J APPENDIX D BOND INSURANCE POLICY MBIA FINANCIAL GUARANTY MBIA Insurance Corporati Armonk, New York 10504 MBIA Irtsurarrce Corporation (the "Insurer-, in consideration of the payment of the prem unconditionally and irrevocably guara== to any owner, as hereinaf defend, of the followi4 repriced to be made by or on behalf of the Issuer to (PAYING AGENT/IRUSTEE] or its sure principal of (either at the stated maturity or by any advancement of maturity pursuant to a n ObUgations (as that term is defined below) as such payments shall become due but shall not be the due date of such principal by reason of mandatory or optional redemption or acceleratio, advancement of maturity putmaat to a mandatory sinking fund payment, the payments guarana tithes as such payments of principal would have been duce had there not barn any such accelesan which is subsequently recovered from any owner pursuant to a finale judgment by a court of cc avoidable preference to such owner within the meaning of any applicable bankruptcy law. I preceding sentence shall be referred to herein collectively as the %suaed Amounts." "Obtigatiot> ]LEGAL N ME] OF ISSUE] Upon receipt oftelephonic or telegraphic notice, such notice subsequently cotrfirmed in writing by notice by registered or certified rnail,.by the Itrsrer from the Paying Agent err any owner of an Ob is then due, that such tequfred payment has not been made, the Inst= on the due date of such pay of such nom,=..eat, whichever is later, wiL make a deposit of fimds, in an ac countwirltt State S New York, or its successor, sufficient for the payment of any such Insatd Amounts which are Obhganons or presentment of such other proof of ownership of the Obligations, together with ar, the assignment of the Insured Amounts due on the Obligations as art paid by the Insurer, and Insurer as agent for such owners of the Obli any gal ping related to � gations in le payment of v being in a form satisfactory to State Strut Bank and Tntst Company, N.A ,Stan Suit Bank and or the Paying Agent payment of the Insured Amounts due on such Obligations, less any amour Insured Amounts and legally available therefor. This policy does not insure against loss of any prt:q with respect to any Obligation. As used hemicn, the term "owner" shall mean the registered owner of any Obligation as indicatec Issuer, or any designee of the Issuer for such purpose. The term owner shall not include the Is constitutes the underlying security for the Obligations. Any service of process on the Insurer may be made to the Insurer at its offices located at 113 King of process shall be valid and binding. This policy is non -cancellable for any reason The premium on this policy is not refundable for an the Obligations. IN WITNESS WHEREOF, the Insurer has caused this policy to be executed [MONTH, YEAR]. in facsimile on its beta COUNTERSIGNED: Resident Licensed Agent City, State POLICY Policy No. (NUMBER] Im and subject to the tetras of this policy, hereby q=ribed obGgarions, the full and comps m payment ,or (the "Paying AgenrD of an amount equal to () the ndatory smktmg fund payment) and interest oq•the I paid (except that in the event of any accxIeration of meting from defauh or otherwise, other than any d hereby shall be made in such amounts and at such n); and CH) the reimbursement of any such payment IPeseat Yzudgcticn that such payment eonstiutes an ue amounts M&rred to in clauses () and (ti) of the Shall mean: eglstersd or certified mail, or upon receipt of written ration the payment of an Insured Amount for which Mt or within one business day after r=ipt of nonce W Bank and Trust Cornpany, N.A., in New York, en due. Upon pr4serrrnent and surrender of such appropriate insruments of assignment to evidence rpriate instruments to effect the appoittmtmt of the nod Amounts on the Obligations, such instruments met Company, NA shall disburse to such ownets, field by the Paying Agent for the payment of such yment premium which may at any time be payable in the- books maintained by the Paying Agent, the ler or any party whose agreement with the Issuer Armonk, New York 10504 and such service reason including the payment prior to manriry of its duly authorized otEcets, this [DAY] day of MBIA 14surance Corporation • YreSJIl� I /"�� Attest Assistant DISCLOSURE OF GUARANTY FUND i ONPARTICIPATION: In the event the Insurer is unable to full or application or certificate or evidence of coverage, the policyholder or certiftcateholdcr is not protected by arrangement. SfDaCS-T-t-6 495 its contractual obligation under this policy or contract insurance guaranty fund or other solvency protection 0 1 Financial Advisory Si Provided By :ff?MT SOUTHWEST INVESTMENT BANKERS SME No Text THE STATE OF TEXAS COUNTY OF LUBBOCK CITY OF LUBBOCK WE, the undersigned, [ Lubbock, Texas, DO HEREBY 1. Relative to Noner Save and except for the (the "Sewer System") to the pad to the outstanding obligations is reference as a part hereof "Outstanding Sewer Obligation: System Surplus Revenue Cert "Sewer Certificates"), said incoi or hypothecated in any other m Obligations and the Sewer Ceri of said Sewer System or agains 2. Relative to No-Defaul GENERAL CERTIFICATE r of Finance and City Secretary, respectively, of the City of IFY as follows: brance. )ledge of the income and revenues of the City's Sewer System nent of the principal of and interest to become due with respect :ntified in Exhibit A attached hereto and incorporated herein by >r all purposes (hereinafter collectively referred to as the ') and the proposed "City of Lubbock, Texas, Tax and Sewer icates of Obligation, Series 2002A", dated July 1, 2002 (the ie and revenues of said Sewer System have not been pledged nner or for any other purpose; and that the Outstanding Sewer 'icates evidence the only liens, encumbrances or indebtedness the income and revenues of such Sewer System. The City is not in default as to any covenant, condition or obligation contained in the ordinances authorizing the issuance of the Outstanding Sewer Obligations; and there is on deposit in the respective specialfunds and accounts created for the payment and security of the Outstanding Sewer Obligations' the amounts now required to be on deposit therein. 3. Relative to Income and Revenues. A schedule of the gross receipts, operating expenses and net revenues of the Water System for the years stated is shown in Exhibit A attached hereto. 45195680.1 4. Relative to Utilib The sewer utility propeties owned, operated and maintained by the City currently provides sewer services to approximately 73,794 customers. As of the date hereof, r o question is pending and no proceedings of any nature have been instituted in any manner q questioning the City's right and title to its utility properties or its authority to operate the same. 5.. Relative to Rates. and Charges. The current monthly rates and charges for sewer services provided by the Sewer System are as shown in Exhibitattached hereto. 6. Relative to Tax SUpported Indebtedness. The total principal aMOL nt of indebtedness of the City, including the proposed "City of Lubbock, Texas, General Obligation Refunding Bonds, Series 2002," dated July 1, 2002 (the "Bonds") and the Sewer Certificates, payable from ad valorem taxes levied and collected by the City is as follows: OUTSTANDING INDE THE BONDS ---------- SEWER CERTIFICAT TOTAL INDEBTEDNE *excludes the bonds being refu 7. Relative to Debt A debt service requirerr Bonds and the Sewer Certific certificate for all purposes. 8. Relative to City Certain duly qualified ar 45195680.1 NESS :d by the Bonds $ 203,854,682* 10;810,000 $2,605,000 $217,269,682 schedule for all outstanding tax debt of the City, including the is attached hereto as Exhibit B and made a part of this Is. acting officers of said City are as follows: -2- MARC McDOUGAL ; MAYOR VICTOR HERNANDEZ MAYOR PRO TEM BOB CASS CITY MANAGER DEBRA B. FORTE DEPUTY CITY MANAGER BEVERLY HODGES DIRECTOR OF FINANCE REBECCA GARZA CITY SECRETARY ANITA BURGESS CITY ATTORNEY ANDY BURCHAM - I CASH AND DEBT MANAGER 9. Relative to Taxa le Values. The assessed value of E II taxable property (net of exemptions) in the City, as shown by the tax rolls for the year 2001, and which have been duly approved and are the latest official assessment of taxable property in the City is as follows: TOTAL ASSESSED TAXABLE VALUES OF REAL AN PERSONAL PROPER - 6,910,577,171 10. Relative to I The City is incorporated under the General Laws of the State of Texas, and is operating under the Home Rule Amendment to the Texas Constitution, Section 5, Article XI, as amended in 1912. The City Charter was originally adopted at an election held on December 27, 1917, and said Charter has not been 3mended or revised in any respect since January 18, 1992, the date of the last Charter Amendment Election. 11. Relative to No -Petition. No valid petition, signec by at least 5% of the qualified electors of the City, has been filed with or presented to the M yor, City Secretary or any other official of the City protesting the issuance of the Sewer Certifical as. 12. Relative to No Froe Services. Except for city buildinc Sewer System shall be allow System shall be equal and unif 45195680.1 S and institutions operated by the City, no free services of the d, and rates charged for services furnished by the respective irm as required by law. -3- WITNESS OUR HANDS 11th day of July, 2002. (City Seal) 45195680.1 D THE SEAL OF THE CITY OF LUBBOCK, TEXAS, this the CITY OF LUBBOCK, TEXAS Rebecca Garza City Secretary -4- EXHIBIT A Outstanding Sewer Obligation;: (a) "City of Lu bock, Texas, Combination Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 1992", dated May 15, 1992, now outstanding in the pi rncipal amount of $5,175,000; (b) "City of Lu bock, Texas, Combination Tax and Sewer System Subordinate Lien Revenue Certificates of Obligation, Series 1993", dated May 1, 1993, now outstanding in the principal amount of $9,370,000; (c) "City of Lubt ock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 1999", dated April 1, 1999, now outstanding in the principal amount of $ ,185,000; (d) "City of Lubl iock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligati n, Series 2002", dated February 15, 2002, now outstanding in the principal amount of $1,545,000; Sewer System Income and Expenses: Fiscal Year Maintenance and Ending 9-30 Gross Receipts Operating Expenses Net Revenues 1997 $16, 1998 16, 1999 15, 2000 17, 2001 17. Sewer Rates: Residential: Base Rate:' Flow Rate (water consumption) Commercial/industrial2: Base Rate:3 I Flow Rate (water consumption) ' base rate applies to 3/d' water 2 Industrial waste that exceeds demand ("13.0.13.") and total su T.S.S. $0.1459/lb 3 base rate applies to 3/4" water 45195680.1 ,804 $6,393,894 $9,891,910 ,171 6,632,390 9,993,781 ,700 7,584,302 8,155,398 ,008 8,104,859 9,217,149 ,238 9,126,460 8,176,778 $3.46 $1.44 $7.95 $1.44 higher base rates apply to larger meters ranging from 1" to 10" able limits is subject to a surcharge for treating biochemical oxygen led solids ("T.S.S."). Present surcharges are B.O.D. $0.2256/lb and :r; higher base rates apply to larger meters ranging from 1" to 10" N N N N N N N N N N N N N N N N N N N N N N N N N N N N N �p ,,,� •T7 O O O O O O O O O O '',O O O O O O O _O O O O O _• N9 a W w N N N N N N.N N Nt ON r 00 J O. U A .-• r -OO O O O O O O O aO O O O O O n N D, M" _ m �W CD �Ny 3 y p p Oi N N N �. �- .� ... .... 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U 10 A O ONO L. a J � R W O N U CD O - O w U A U C7, O A �J O O� A O� 10 O 00 ^ O O I y �O �D N _-4 ao tD W A p N 00 b b J •-• W O J N A W Ao� W O w to AO O ` to .A to M O A Cl P A M 10 O W I I y w N N N N N N N N N W D N W W W W W w W W W tp .A N W t0 W t0 N to tD to 00 00 J 00 W 00 A A 01 N N N 00 00 O O U J A 00 W N WD N O N A 'DA U m - `D 00 J W_ J �D �D O J D% 00 J C, 00 N � U W 00 t W A O �y U 00 m N O H oh W A10 to- N N-4 ? WO J O O 00 Orn C, A �j -. 00 O� N R. A O 10 w 0 00 VJ ? �D O O twn W N O w cn to r �O ? �D O� A .- w J U O p O� .-• O �D J? - �D N J 00 ... r U �D A N N O J U N t1 O to J !o 00 0 O Oo J 1' �• O 'O-� � i i SIGNATURE AND NO -LITIGATION CERTIFICATE THE STATE OF TEXAS § COUNTY OF LUBBOCK § WE, the undersigned, officials of the City of Lubbock, Texas (the "Issuer"), do hereby certify with respect to the "CITY OF LUBBOCK, TEXAS, TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002A", dated July 1, 2002 (the "Certificate Date"), in the aggregate principal amount of $2,605,000 (the "Certificates") as follows: (1) The Certificates have been duly and officially executed by the undersigned with their manual or facsimile signature in the same manner appearing hereon, and the undersigned hereby adopt and ratify their respective signatures in the manner appearing on each of the Certificates whether in manual or facsimile form, as the case may be, as their true, genuine and official signatures. (2) On the Certificate Date and on the date hereof, we were and are the duly qualified and acting officials of the Issuer indicated below. (3) The legally adopted proper and official corporate seal of the Issuer is impressed, imprinted or lithographed on all of the Certificates and impressed on this Certificate. (4) No litigation of any nature is now pending before any federal or state court, or administrative body, or to our knowledge threatened, seeking to restrain or enjoin the issuance or delivery of the Certificates or questioning the issuance or sale of the Certificates, the authority or action of the governing body of the Issuer relating to the issuance or sale of the Certificates, the levy of the tax, or the assessment and collection thereof, to pay the principal of and interest on the Certificates, the collection of the revenues of the Issuer's Sewer System (the "System"), or the imposition of rates and charges with respect to the System, pledged to pay the principal of and interest on the Certificates or that would otherwise adversely affect in a material manner the financial condition of the Issuer to pay the principal of and interest on the Certificates; and that neither the corporate existence or boundaries of the Issuer nor the right to hold office of any member of the governing body of the Issuer or any other elected or appointed official of the Issuer is being contested or otherwise questioned. (5) No valid petition has been filed with any official of the Issuer requesting the proceedings authorizing the issuance of the Certificates adopted by the governing body of the Issuer be submitted to a referendum or other election; no authority or proceeding for the issuance, sale or delivery of the Certificates by the governing body of the Issuer has been amended, repealed, revoked, rescinded or otherwise modified since the date of passage _ thereof, and all such proceedings and authority relating to the issuance and sale of the Certificates remain in full force and effect as of the date of this Certificate. 45195539.1 AUG 15 2002 DELIVERED this (Issuer's Seal) THE STATE OF TEXAS § COUNTY OF LUBBOCK § OFFICIAL TITLE Mayor, City of Lubbock, Texas City Secretary, City of Lubbock, Texas The undersigned, a Notary Public, hereby represents and certifies each of the signatures of Marc McDougal and Rebecca Garza, Mayor and City Secretary, respectively, of the City of Lubbock, Texas, appearing above is genuine. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this /l day of July, 2002. Notary Public, Stat o Tex s meal Ed a. Esquivel Notary Public. We 0 T xm My Comm. EX es 45195539.1 2 iI Val `VOFFICE OF THE ATTORNEY GENERAL • STATE OF TEXAS )k -r --JOHN CORNYN August 13, 2002 THIS IS TO CERTIFY that the City of Lubbock, Texas (the "Issuer") has submitted to me City of Lubbock. Texas. Tax and Sewer System Surplus Revenue Certificate of Obligation. Series 2002A (the "Certificate"), in the principal amount of $2,605,000, for approval. The Certificate is dated July 1, 2002, numbered T-1, and was authorized by Ordinance No. 2002- 00076 of the Issuer passed on July 11, 2002 (the "Ordinance"). I have examined the law and such certified proceedings and other papers as I deem necessary to render this opinion. As to questions of fact material to my opinion, I have relied upon representations of the Issuer contained in the certified proceedings and other certifications of public officials furnished to me without undertaking to verify the same by independent investigation. I express no opinion relating to the official statement or any other offering material relating to the Certificate. Based on my examination, I am of the opinion, as of the date hereof and under existing law, as follows (capitalized terms, except as herein defined, have the meanings given to them in the Ordinance): (1) The Certificate has been issued in accordance with law and is a valid and binding obligation of the Issuer. (2) The Certificate is payable from the proceeds of an ad valorem tax levied, within the limits prescribed by law, upon all taxable property in the Issuer and, together with the Previously Issued Obligations, are additionally payable from and secured by a lien on and pledge of the Net Revenues of the System, such lien and pledge, however, being junior and subordinate to the lien on and pledge of the Net Revenues of the System securing the payment of Prior Lien Obligations hereafter issued by the Issuer. Therefore, the Certificate is approved. No. 38159 Book No. 2002C MAA Ai torney General of the State f exas POST OFFICE BOX 12548, AUSTIN, TEXAS 78711-2548 TEL: (512)463-2100 WEB: WWW.OAG.STATF..TX.US An Equal Employment Opportunity Employer Printed on Recycled Paper OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, CAROLE KEETON RYLANDER, Comptroller of Public Accounts of the State of Texas, do hereby certify that the attachment is a true and correct copy of the opinion of the Attorney General approving the: City of Lubbock, Texas. Tax and Sewer System Surplus Revenue Certificate of Obligation. Series 2002A numbered T-1. of the denomination of $ 2,605.00 , dated July 1, 2002, as authorized by issuer, interest various percent, under and by authority of which said bonds/certificates were registered electronically in the office of the Comptroller, on the 13th day of August. 2002. under Registration Number 65923. Given under my hand and seal of office, at Austin, Texas, the 13th day of August. 2002. CAROLE KEETON RYLANDER Comptroller of Public Accounts of the State of Texas OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, _Melissa Mora, 0 Bond Clerk FR Assistant Bond Clerk in the office of the Comptroller of the State of Texas, do hereby certify that, acting under the direction and authority of the Comptroller on the 13th day of August. 2002, 1 signed the name of the Comptroller to the certificate of registration endorsed upon the: numbered T-, dated , and that in signing a certificate of registration I used the following signature: IN WIT WHEREOF I have executa,,1/lthis certificate this the 13th day of August. 2002. I, Carole Keeton Rylander, Comptroller of Public Accounts of the State of Texas, certify that the person who has signed the above certificate was duly designated and appointed by me under authority vested in me by Chapter 403, Subchapter H, Government Code, with authority to sign my name to all certificates of registration, and/or cancellation of bonds required by law to be registered and/or cancelled by me, and was acting as such on the date first mentioned in this certificate, and that the bonds/certificates described in this certificate have been duly registered in the office of the Comptroller, under Registration Number 65923. GIVEN under my hand and seal of office at Austin, Texas, this the 13th day of August. 2002. CAROLE KEETON RYLANDER Comptroller of Public Accounts of the State of Texas No Text ::FFIRST SOUIH4VFSTCOMPANY Vince viaiuc Yfee Phsidext City of Lubbock Ady- Bow ly Hadgas P_ O. Box 2000 Lubbock, Texas 79457 Phone: (806) 775-2161 Fax: (806) 775-2033 City of Lubbock 26% Andy Burcham P.O. Box 2000 Lubbock, Texas 79457 Phone: (806) 775-2149 Fax: (806) 775-2033 Fulbright & Jaworski L.L.P. Mr_ Ed H. Esquivel 2200 Ross Avenue, Suite 2800 Dallas, Texas 75201 Phone: (214) 855-8000 Fax: (214) 855-8200 McCall, Parkhurst & Horton L.L.P. A& Dan Culver 717 North Harwood, Ninth Floor Dallas, Texas 75201 Phone: (214) 754-9200 Fax: (214) 754-9250 August 13, 2002 A.G. Edwards & Sons, Inc. Ms Nora Chaves 70 NE Loop 410, Suite 915 San Antonio, Texas 78216 Phone: (800) 331-0558 Fax: (210) 384-8283 RMorgan Chase Bank Ms Mchelle Baldwin 2001 Bryan Street —10 Floor Dallas, Texas 75201 Phone: (214) 468-6254 Fax; (214) 468-6322 American State Bank RFs_ Shirley Dodran P. O- Box 1401 Lubbock, Texas 79408-1401 Phone: (806) 767-71$2 Fax: (806) 763-8269 MBIA Insurance Corporation Adr. Salvatore D'Addio 113 King Street Armonk, NY 10504 Phone: (914) 765-3371 Fax: (914) 765-3161 Re: Closing Instructions for the $2,605,000 City of Lubbock, Texas, Tax & Sewer System Surplus Revenue Certificates of Obligation, Series 2002A. (the "Cerdficates') Payment for the above referenced Certificates is scheduled to occur at 10:00 AM, CDT, on Thursday, August 15, 2002, and payment therefor is to occur at the offices of JPMorgan Chase Bank ("JPMorgan D. INVF 7XZVrBANJM U SDVCE 1946 1001 Main SMW • $nue S02 • Lubbock. Tara 794013322.806-749--3792 + Fax 806 74,9-3793 • MobAr $06-777--1347 SOURCES OF FUNDS Par Amount of Certificates -------------------------------------------------- $ 2,605,000-00 Net Reoffering Premium ....................... ............................ 14 004.75 Accrued interest (07/01/02 to 08/15/02) .............................. 13,954-57 Less: Underwriters Discount ............................................... " Less: Original Issue Discount (21,361.00) ............................................. (14,666 40) TOTAL FUNDS AVAILABLE AT CLOSING--------------------- S 2,596,331.92 USES OF FUNDS Deposit to Project Construction Fund ................................•• $ '2)1515,000-00 Deposit to Interest & Sinking Fund (rounding amount) ...... 1,977.35 Deposit to Interest & Sinldng Fund (accrued interest) ........ 13,954.57 Gross Bond Insurance Fee ................................................... 6,000.00 Paying Agent Registrar Fee ............................... I................. Costs of Issuance--------• 300-00 ......................................................... 59,700.00 TOTAL USES OF FUNDS .................................................... 2,596,931.92 (A) On Thw:sday, August 15, 2002, the Underwriter, A.G. Edwards & Sons, Inc., shall wire $2,596,931.92 in immediately available funds to the paying agent bank, JPMorgan, prior to 10:00 AM, CDT, for the account of the City of Lubbock, in payment for the purchase price of the Certificates. Wiring InsEructions for JPMorgan are as follows: JPMorgan Chase ABA: 113000609 Credit A/C #: 00103237013 Credit Name: ITS IAS Clearing FFC: City of Lubbock, Series 2002A Atte: Issuer Administrative Services / Michelle Baldwin (I3) On Thursday, August 15, 2002, JPMorgan shall wire or transfer immediately available funds prior to 11.00 AM, CDT, as follows: (1) Transmit by wire to JPMorgan Chase Bank ABA: 021000021, Credit AIC #: 910-2-721728 For the City of Lubbock, Texas Policy #38534 ...................................... $ 6,000-00 (2) Transmit by wire to American State Bank, Lubbock, 'Texas ABA #111322583, Attn: Shirley Dodson Phone (806) 767-7182, depository bank for City of Lubbock for credit to the following account: City of Lubbock Consolidated Account, Account #87793 ...................... 2,530,931.92 . (Project Construction Funds $2,515,000.00 and I&S Funds $15,931.92) (3) Retain in payment of services to be rendered as paying Agent/Registrar 300.00 (4) Tri =nit by wire to Bank One, Texas ABA #111000614, Atte: Jack Addams Account #1822155345 for client # 0336-022 for credit to First Southwest Company for costs of ................... 59,700.00 Totals Disbursement of Funds............................................................................... $ 2,596,931.92 The cooperation of the addressees with the above instructions is greatly appreciated. If you have any questions or cannot comply with any portion of the instructions, please contact us immediately at (806) 749-3792. Sincerely, V� Vince Viable cc: Jack Addams First Southwest Company TAB 11 CERTIFICATE AS TO TAX EXEMPTION The undersigned, being the duly chosen and qualified Director of Finance of the City of Lubbock, Texas (the "Issuer"), hereby certifies with respect to CITY OF LUBBOCK, TEXAS, GENERAL OBLIGATION REFUNDING BONDS, SERIES 2002, in the principal amount of $10,810,000 (the "Bonds") and "CITY OF LUBBOCK, TEXAS, TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002", in the principal amount of $2,605,000 (the "Certificates"), as follows: A. General. 1. I, along with other officers of the Issuer, am charged with the responsibility for issuing the Bonds and the Certificates (hereinafter collectively referred to as the "Obligations"). 2. This certificate is made pursuant to Sections 103 and 141 through 150 of the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), and Treasury Regulations promulgated thereunder, (the "Regulations"). 3. This certificate is based on the facts and estimates described herein in existence on this date, which is the date of delivery of the Obligations to and payment for the Obligations by the initial purchasers thereof, and, on the basis of such facts and estimates, the Issuer expects that the future events described herein will occur. 4. Capitalized terms used and not otherwise defined herein shall have the same h meaning as that set forth in the Ordinance finally adopted by the City Council of the Issuer on July 11, 2002 authorizing the issuance of the Bonds (the "Bond Ordinance") and the Ordinance finally adopted by the City Council of the Issuer on July 11, 2002 authorizing the issuance of the Certificates (the "Certificate Ordinance"). B. Purpose and Size of Bonds. 1. The Bonds are being issued pursuant to the Bond Ordinance to provide funds sufficient, together with anticipated income, to pay the principal and interest on the following Obligations of the Issuer (collectively, the "Refunded Obligations"): i. City of Lubbock, Texas, General Obligation Bonds, Series 1993, dated October 1, 1993, scheduled to mature on February 15 in each of the years 2004 through 2010, and aggregating in principal amount of $6,720,000; and ii. City of Lubbock, Texas, General Obligation Refunding Bonds, Series 1993, dated December 1, 1993, scheduled to mature on February 15 in each of the years 2003 through 2008, and aggregating in principal amount of $4,150,000; and to pay costs of issuance. 45209795.1 2. The Issuer has determined to refund the Refunded Obligations to achieve a debt service savings on such indebtedness. 3. The Issuer will realize a present value savings as a result of refunding such Refunded Obligations. The Refunded Obligations are being paid on the earliest date on which they may be redeemed or paid. 4. Neither the Bonds nor the Refunded Obligations are "private activity bonds" as that term is defined in section 141(a) of the Code. 5. The Bonds are the first advance refunding of the Series 1993 Refunded Obligations, dated October 1, 1993 and a current refunding of the Series 1993 Refunded Obligations, dated December 1, 1993, within the meaning of section 149(d)(3) of the Code. 6. The amounts received from the sale of the Bonds and expected earnings thereon do not exceed the amounts required to pay the principal, interest and redemption premium on the Refunded Obligations to the scheduled redemption date, and to pay the costs of issuing the Bonds. C. Purpose and Size of Certificates. 1. The Certificates are being issued pursuant to the Certificate Ordinance to finance improvements and extensions to the City's Sewer System (collectively, the "Projects"), and to pay contracts for professional services. 2. The Projects will be owned, operated, and maintained by the Issuer. The Issuer has not contracted with any person or entity to operate and/or maintain the Projects or any part of them for and on behalf of the Issuer. The Issuer does not expect to enter into any contract for the operation, maintenance or management of the Projects or any part of it. 3. There is not, and as of the date hereof the Issuer does not anticipate entering into, any lease, contract or other understanding or arrangement, such as a take -or -pay contract or output contract, with any person other than a state or local governmental unit pursuant to which the Issuer expects that proceeds of the Certificates, or the facilities financed therewith, will be used in the trade or business of such person (including all activities of such persons who are not individuals). 4. The amounts received from the sale of the Certificates, when added to the amounts expected to be received from the investment thereof ($___4 O ) do not exceed the amounts required to pay the costs of the Projects and of issuing the Certificates. 45209795.1 2 5. No receipt from the sale of the Certificates or amounts received from the investment thereof will be used to pay the principal of or interest on any presently outstanding issue of bonds or other similar obligations of the Issuer other than the Certificates. 6. Within six months from the date hereof, the Issuer will have incurred binding obligations or commitments to third parties for the Projects in the amount of at least 5% of the net sales proceeds of the Certificates. 7. After entering into said contracts, completion of the Projects and the allocation of net sales proceeds of the Certificates to expenditures will proceed with due diligence. 8. The Issuer expects that all of the net sales proceeds of the Certificates will be spent within three years from the date hereof, and that all investment proceeds of the Certificates will be spent within one year from the date of receipt. 9. Approximately $ 910,084 of the proceeds of the Certificates will be used to reimburse the Issuer for Project expenditures made by it from its own funds prior to the date hereof. The Issuer adopted an official intent for the original expenditures, if any (except possibly for expenditures meeting the preliminary expenditures exception set forth in section 1.150- 2(f)(2) of the Regulations) not -later than 60 days after payment of the original expenditures, and a copy of such official intent is attached to this Certificate As To Tax Exemption. Except for expenditures meeting the preliminary expenditures exception set forth in section 1.150-2(f)(2) of the Regulations, the Certificates are being issued and the reimbursement allocation is hereby being made not later than 18 months after the later of (i) the date the original expenditures were paid, or (ii) the date the Project is placed in service or abandoned, but in no event more than 3 years after the original expenditures were paid. The original expenditures were capital expenditures, and in connection with this allocation, the Issuer has not employed any abusive arbitrage device under section 1.148-10 of the Regulations to avoid the arbitrage restrictions or to avoid restrictions under section 142 through 147 of the Code. D. Source and Disbursement of Funds. 1. The Obligations are being issued and delivered to the initial purchasers thereof on the date hereof upon payment of the agreed purchase price. 2. The Issuer has received as a result of the sale of the Obligations an amount equal to $13,702,984.35 calculated as follows: Principal Amount of Certificates $2,605,000.00 Principal Amount of Bonds 10,810,000.00 Accrued Interest on Certificates 13,954.57 Accrued Interest on Bonds 53,660.14 Net Original Issue Discount on Certificates (661.65) Net Original Issue Premium on Bonds 296,833.75 Underwriter's Discount on Certificates (21,361.00) Underwriter's Discount on Bonds (54,441.46) $13,702,984.35 3. The Issuer has caused the deposit or disbursement of such amount as follows: 45209795.1 3 Disposition Amount Deposit to the Escrow Fund $10,969,000.21 established by the Special Escrow Agreement defined hereinafter Deposit of accrued interest on the 53,660.14 Bonds to the Interest and Sinking Fund Deposit of accrued interest on the 13,954.57 Certificates to the Certificate Fund Deposited to Construction Fund 2,515,000.00 Disbursed to pay Municipal Bond Insurance Premiums 23,000.00 Disbursed to pay costs of issuance 128,369.43 $13,702,984.35 4. Proceeds of the Bonds in the amount of $53,660.14 representing accrued interest received from the Purchaser are being deposited on the date hereof in the Interest and Sinking Fund to be used to pay the first payment of interest to become due on the Bonds on February 15, 2003. Proceeds of the Certificates in the amount of $13,954.57, representing accrued interest received from the Purchaser are being deposited on the date hereof in the Certificate Fund to be used to pay the first payment of interest to become due on the Certificates on February 15, 2003. None of such deposits or income from the investments thereof will be used to discharge the Refunded Obligations. E. Investment of Proceeds and Yield Restrictions. 1. Of the amount deposited this day to the Escrow Fund from the proceeds of the Bonds, $6,818,455.00 has been applied this day to the purchase of United States Treasury Certificates of Indebtedness and Notes -State and Local Government Series ("SLGS") described in Exhibit B to, and which will be held under, the Escrow Agreement. The Issuer expects to receive repayments of principal of and payment of .interest on such SLGS on the dates and in the amounts set forth on Exhibit B to the Escrow Agreement. All such receipts of principal and interest will be applied to the payment of principal of and interest on the Refunded Obligations or will be held uninvested as cash in the Escrow Fund until the next date for payment of interest or principal on the Refunded Obligations. 45209795.1 4 2. The Issuer elects to allocate all the SLGS described in the preceding paragraph to the amounts received from the sale of the Bonds and income received from the investment thereof, until such amounts are expended to pay principal and interest on the Refunded Obligations, which is the purpose for which the Bonds have been issued. 3. The discount factor required to reduce the receipts of principal and interest on the SLGS described in paragraph E.1. above, compounded semi-annually, to a present value on this date equal to the sum of the purchase price of the SLGS does not exceed 1.744219% which Grant Thornton LLP, certified public accountants, (the "Accountant") has verified in its Verification Report to the Issuer of even date herewith (the "Report"). 4. A. discount factor of 3.752446% is required to reduce the semi-annual payments of principal and interest on the Obligations to a present value on this date, compounded semi- annually, of $13,755,786.81 (which represents the principal amount of the Obligations, plus accrued interest on the Bonds of $53,660.14, plus accrued interest on the Certificates of $13,954.57, less a net original issue discount on the Certificates of $661.65, plus a net original issue premium on the Bonds of $296,833.75, less municipal bond insurance premium of $17,000.00 on the Bonds and less municipal bond insurance premium of $6,000.00 on the Certificates), which the Accountant has verified in its Report. 5. No other obligations of the Issuer which are reasonably expected to be paid from the same source of funds as the Obligations were sold within 15 days from the date the Obligations were sold. 6. As provided in the Ordinance, except as otherwise provided in section 148(f) of the Code, the Issuer will account for proceeds of the Obligations separately from other funds of the Issuer and will compute and pay to the United States Treasury the Rebate Amount due with respect to the Obligations no less frequently than every five years, in the installments, to the place, in the manner and accompanied by such forms or other information as is or may be required by Section 148(f) of the Code and the regulations and rulings thereunder. F. Transferred Proceeds. 1. All amounts received from the sale of the Refunded Obligations and from the investment of such amounts have been expended for the purposes for which the Refunded Obligations were issued. 45209795.1 5 G. Bonds Not Hedge Bonds. 1 Eighty-five percent of the proceeds of the original bonds refunded by the Bonds were used to carry out the governmental purposes of such bonds within three years after such bonds were issued. 2. Not more than 50 percent of the proceeds of the original bonds refunded by the Bonds were invested in Nonpurpose Investments having a substantially guaranteed yield of 4 years or more. H. Interest and Sinking Fund Certificate Fund and Svstem Fund. 1. Pursuant to Section 10 of the Bond Ordinance, the Issuer has levied a tax on all taxable property within the jurisdiction of the Issuer, within the limitations prescribed by law, sufficient to pay principal of and interest on the Bonds as such becomes due, and such tax has been pledged to the payment of the Bonds. Amounts collected from such tax are to be deposited to the credit of the Interest and Sinking Fund. 2. The Certificates are payable solely from amounts held for the credit of the Certificate Fund and are secured solely by a lien on and pledge of the Net Revenues of the System, after payment or provision for payment of the Prior Lien Obligations, and to the extent of any insufficiency in the Net Revenues of the System, a tax on all taxable property within the jurisdiction of the Issuer. Amounts collected from such tax are to be deposited to the Certificate Fund. 3. The Certificate Ordinance requires that all Net Revenues of the System are to be deposited as received in the System Fund, where they are to be disbursed in the following order of priority: i. To pay the Operating and Maintenance Expenses of the System, as defined in the Certificate Ordinance or required by statute; ii. To pay or provide for payment of the Prior Lien Obligations; iii. To the payment, equally and ratably, of the Previously Issued Obligations and the Certificates; and iv. For any other lawful purpose. 4. The Interest and Sinking Fund and the Certificate Fund (hereinafter collectively referred to as the "Interest and Sinking Funds") will be maintained by the Issuer primarily to achieve a proper matching of revenues and debt service within each bond year. The Issuer expects that the following will occur with respect to the money in the Interest and Sinking Funds (other than those portions thereof, if any, consisting of deposits made to defease in whole or in part the obligations of the Issuer to make deposits thereto): 45209795.1 6 i. The Interest and Sinking Funds will be depleted at least once a year except possibly for a carry-over amount not greater than the larger of one year's income from the investment of the Interest and Sinking Funds or one -twelfth of annual debt. service requirements on the respective series of Obligations for which such Fund is maintained; ii. All amounts deposited to the Interest and Sinking Funds will be spent within 13 months of deposit; and iii. All amounts received from the investment of the Interest and Sinking Funds will be deposited therein and will be expended within twelve months of receipt. 5. Except as described herein, no funds of the Issuer have been or will be pledged to payment of the principal of or interest on the Obligations or otherwise restricted so as to give reasonable assurance of the availability of such funds for such purpose. I. No Excess Proceeds 1. All receipts from the sale of the Bonds and all income from the investment thereof will be applied to pay: (i) the costs of issuing the Bonds; (ii) the cost of establishing the Escrow Fund for the Refunded Obligations as described in paragraph E. above to pay principal, interest or call premium on the Refunded Obligations; or (iii) to pay pre -issuance accrued interest on the Bonds and costs of carrying and repaying the Bonds, except for approximately $0.01 which will remain unexpended after final payment of the Refunded Obligations. 2. Consequently, less than 1 % of the sales proceeds of the Bonds will be expended for a purpose other than: L payment of principal, interest or call premium on the Refunded Obligations; Bonds; ii. payment of pre -issuance accrued interest on the iii. payment of costs of issuance of the Bonds; and 45209795.1 7 iv. payment of administrative costs of repaying the Refunded Obligations, carrying and repaying the Bonds and purchasing, carrying, and redeeming the SLGS described in paragraph E. above. J. Qualified Guarantee. 1. The Issuer has paid on the date hereof, the sum of $23,000.00 (the "Insurance Premium") has been paid from proceeds of sale of the Obligations to MBIA Insurance Corporation (the "Guarantor") to insure the payment of principal of and interest on the Obligations. 2. The Guarantof is not exempt from federal income taxation and by issuing its insurance has caused the Obligations to be rated "Aaa" by Moody's Investors Services. Neither the Guarantor nor any person related to the Guarantor within the meaning of section 144(a)(3) of the Code will use 10 percent or more of the proceeds of the Obligations. 3. Under the insurance contract, the Guarantor is unconditionally and with full recourse obligated to pay all or a portion of the principal of or interest on the Obligations. 4. The Issuer reasonably expects that the Guarantor will not be called upon to make a payment of principal of or interest on the Obligations. The Guarantor is entitled to be immediately and fully reimbursed for any payment of principal of or interest on the Obligations. 5. The Insurance Premium paid to the Guarantor represents a payment solely for the transfer of credit risk for the payment of principal of and interest on the Obligations and not for any other direct or indirect services other than the transfer of credit risk. The Insurance Premium does not exceed a reasonable, arm's length charge for the transfer of such credit risk. 6. The Insurance Premium has been allocated among each of the Obligations and to computation periods in a manner that properly reflects the proportionate credit risk for which the Guarantor has been compensated. 7. The Issuer has been advised by First Southwest Company, its financial advisors, that the present value of the Insurance Premium is less than the present value of the interest saved as a result of insuring the Obligations, using the yield on the Obligations as the discount factor. K. No Abusive Arbitraqe Device. 1. In connection with the issuance of the Obligations, the Issuer has not employed any action which has the effect of overburdening the market for tax-exempt obligations by issuing more bonds, issuing bonds earlier, or allowing bonds to remain outstanding longer than is reasonably necessary to accomplish the governmental purposes of the Obligations. 2. In connection with the issuance of the Obligations, the Issuer has not employed any action which has the effect of enabling the Issuer to exploit the difference between tax- exempt and taxable interest rates to gain a material financial advantage. 45209795.1 $ EXECUTED AND DELIVERED, August 15, 2002. CITY OF LUBBOCK, TEXAS 45209795.1 9 No Text CLOSING CERTIFICATE THE STATE OF TEXAS § COUNTY OF LUBBOCK § CITY OF LUBBOCK § WE, the undersigned, Mayor and Director of Finance, respectively, of the City of Lubbock, Texas (the "City"), in conformity with the requirements of the Purchase Contract, dated July 11, 2002 (the "Purchase Contract"), by and between the City and A. G. Edwards & Sons, Inc. (the "Underwriter"), DO HEREBY CERTIFY, in relation to the issuance and delivery of the "City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002", dated July 1, 2002 (the "Certificates") and the Official Statement, dated July 11, 2002 (the "Official Statement"), used by the Underwriters in connection with the offering and sale of the Certificates, as follows: (1) The representations and warranties of the City contained in the Purchase Contract are true and correct in all material respects on and as of the date hereof as if made on the date hereof; (2) Except to the extent disclosed in the Official Statement, no litigation is pending or, to our knowledge, threatened in any court to restrain or enjoin the issuance or delivery of the Certificates, or the levy, collection or application of the ad valorem taxes and revenues of the City's Sewer System pledged or to be pledged to pay the principal of and interest on the Certificates, or the pledge thereof, or in any way contesting or affecting the validity of the Certificates, the Ordinance authorizing the issuance of the Certificates (the "Ordinance"), or the Purchase Contract, or contesting the powers of the City, or contesting the authorization of the Certificates or the Ordinance, or contesting in any way the accuracy, completeness or fairness of the Official Statement; (3) To the best of our knowledge; no event affecting the City has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein not misleading in any respect; and (4) There has not been any material and adverse change in the affairs and financial condition of the City since September 30, 2001 the latest date as to which audited financial information is available. 45198159.1 TO CERTIFY WHICH, witness our hands and the seal of the City of Lubbock, Texas, this August 15, 2002. (City Seal) 45198159.1 -2- TAB 13 RECEIPT FOR PAYMENT On the date hereof the following described bonds: "CITY OF LUBBOCK, TEXAS, TAX AND SEWER SYSTEM SURPLUS REVENUE CERTIFICATES OF OBLIGATION, SERIES 2002A', dated July 1, 2002, in the aggregate principal amount of $2,605,000 (the "Certificates") were delivered to the purchaser(s) thereof, namely: A. G. EDWARDS & SONS, INC. following the receipt of immediately available funds from the purchaser(s) in settlement of the agreed purchase price for the Certificates as follows: PRINCIPAL AMOUNT $2,605,000.00 REOFFERING PREMIUM $ 14,004.75 ACCRUED INTEREST $ 13,954.57 LESS: UNDERWRITER'S DISCOUNT $ (21,361.00) LESS: ORIGINAL ISSUE DISCOUNT $ (14,666.40) TOTAL AMOUNT RECEIVED ON DELIVERY OF THE CERTIFICATES ........... $2,695,931.92 Furthermore, the undersigned has on the date of this receipt (i) transmitted the sum of $6,000.00 to MBIA Insurance Corporation in payment of the municipal bond insurance premium, (ii) transmitted the sum of $2,530,931.92 to the American State Bank, Lubbock, Texas, for deposit to the City's accounts as follows: $15,931.92 to the credit of the interest and sinking fund for the Certificates and $2,515,000.00 to the credit of the construction fund, (iii) retained the sum of $300.00 in payment of services to be rendered as paying agent/registrar for the Certificates and (iv) transmitted the sum of $59,700.00 to First Southwest Company for the payment of costs of issuance; all in accordance with instructions received. DELIVERED, this August 15, 2002. JPMORGAN CHASE BANK Title #45213383v1< ASSISTANT VICE PRESIDENT No Text FULBRIGHT & JAWORSKI L.L.P. A REGISTERED LIMITED LIABILITY PARTNERSHIP 2200 ROSS AVENUE, SUITE 2800 HOUSTON TELEPHONE: 214/855-8000 DALLAS, TEXAS 75201-2784 WASHINGTON, D.C. FACSIMILE: 214/855-8200 A U S T I N SAN ANTONIO DALLAS NEW YORK LOS ANGELES MINNEAPOLIS LONDON HONG KONG August 15, 2002 WE HAVE ACTED as Bond Counsel in connection with the issuance by City of Lubbock, Texas (the "City") of the "City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002A" (the "Certificates") in the aggregate principal amount of $2,605,000, dated July 1, 2002, solely to express legal opinions as to the validity of the Certificates and the exclusion of the interest on the Certificates from gross income for federal income tax purposes, and for no other purpose. We have not been requested to investigate or verify, and we neither expressly nor by implication render herein any opinion concerning, the financial condition or capabilities of the City, the disclosure of any financial or statistical information or data pertaining to the City and used in the sale of the Certificates, or the sufficiency of the security for or the value or marketability of the Certificates. THE CERTIFICATES are issuable in fully registered form only and in denominations of $5,000 or any integral multiple thereof. The Certificates have stated maturities of February 15 in each of the years 2003 through 2022, unless redeemed prior to maturity in accordance with the applicable redemption provisions. Interest accrues on the Certificates from their date at the rates per annum stated in the ordinance adopted by the City Council of the City authorizing the issuance of the Certificates (the "Ordinance"), and such accrued interest is payable on February 15 and August 15 in each year, commencing February 15, 2003, to the registered owners appearing on the registration books of the Paying Agent/Registrar on the Record Date (stated on the face of the Certificates). IN RENDERING THE OPINIONS herein we have examined and rely upon original or certified copies of the proceedings had in connection with the issuance of the Certificates, including the Ordinance and an executed initial Certificate; certifications of officers of the City relating to the expected use and investment of proceeds of the sale of the Certificates and certain other funds of the City and to certain other facts within the knowledge and control of the City; and such other material and such matters of law as we deem relevant. In the examination of the proceedings relating to the issuance of the Certificates, we have assumed the authenticity of all documents submitted to us as originals, the conformity to original copies of all documents submitted to us as certified copies, and the accuracy of the statements contained in such documents and certifications. BASED ON OUR EXAMINATIONS, IT IS OUR OPINION that, under the applicable law of the United States of America and the State of Texas in force and effect on the date hereof, 1. The Certificates have been duly authorized by the City, and the Certificates issued in compliance with the provisions of the Ordinance are valid, legally binding and enforceable obligations of the City, payable from an ad valorem tax levied, within the limits prescribed by law, upon all taxable property in the City and additionally payable from and secured by a lien on and pledge of the Net Revenues (as defined in the Ordinance) of the City's Sewer System in the manner and to the extent provided in the Ordinance; except to the extent that Legal Opinion of Fulbright & Jaworski L.L.P. Re: "City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002A", dated July 1, 2002 the enforceability thereof may be affected by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors' rights or the exercise of judicial discretion in accordance with the general principles of equity. 2. Pursuant to section 103 of the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), and existing regulations, published rulings, and court decisions thereunder, and assuming continuing compliance after the date hereof by the City with the provisions of the Ordinance relating to sections 141 through 150 of the Code, interest on the Certificates will be excludable from the gross income, as defined in section 61 of the Code, of the owners thereof for federal income tax purposes, and such interest will not be included in computing the alternative minimum taxable income of the owners thereof who are individuals for federal income tax purposes. Interest on all tax-exempt obligations, such as the Certificates, owned by a corporation (other than an "S" corporation or a qualified mutual fund, real estate mortgage investment conduit, real estate investment trust, or a financial asset securitization investment trust) will be included in such corporation's adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporation. A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by section 55 of the Code is computed. WE EXPRESS NO OTHER OPINION with respect to any other federal, state, or local tax consequences under present law or any proposed legislation resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Certificates. Ownership of tax-exempt obligations such as the Certificates may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, "S" corporations with subchapter "C" earnings and profits, owners of interests in a financial asset securitization investment trust, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. 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 thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above. EHE:dfc 45196573.1 TAB 15 FULBRIGHT & JAWORSKI L.L.P. A REGISTERED LIMITED LIABILITY PARTNERSHIP 2200 ROSS AVENUE, SUITE 2800 HOUSTON WASHINGTON, D.C. DALLAS, TEXAS 75201-2784 AUSTIN SAN ANTONIO DALLAS TELEPHONE: 214/855-8000 NEW YORK FACSIMILE: 214/855-8200 LOS ANGELES MINNEAPOLIS LONDON MUNICH HONG KONG ° August 15, 2002 City of Lubbock, Texas 1625 13" St. Lubbock, Texas 79401 A. G. Edwards & Sons, Inc. One North Jefferson, 7th Floor St. Louis, Missouri 63103 Re: $2,605,000 "City of Lubbock, Texas, Tax and Sewer System Revenue Certificates of Obligation, Series 2002A', dated July 1, 2002 Ladies and Gentlemen: In reference to the issuance and sale of the above described Certificates ( the "Certificates") and our serving as Bond Counsel for the City of Lubbock, Texas (the "City"), we prepared the ordinance (the "Ordinance") authorizing the issuance of the Certificates, adopted by the City Council of the City on July 11, 2002, which also approved and authorized the distribution of the final Official Statement, dated July 11, 2002 (the "Official Statement") relating to the Certificates and approved and authorized the execution of the Purchase Contract, dated July 11, 2002 ("Purchase Contract") with A. G. Edwards & Sons, Inc., as underwriters of the Certificates. We have examined such documents and satisfied ourselves as to such matters as we have deemed necessary in order to enable us to express the opinions set forth below. A. The Purchase Contract has been duly authorized, executed and delivered by the City and (assuming due authorization by the Underwriters) constitutes a binding and enforceable agreement of the City in accordance with its terms. B. We have not verified and are not passing upon, and do not assume any responsibility for, the accuracy, completeness or fairness of the statements contained in the Official Statement, but we have reviewed the information contained under the captions or subcaptions "The Certificates" (except under the subcaptions "Book -Entry Only System" and "Owners' Remedies"), "Tax Matters", "Continuing Disclosure of Information" (except under the subception "Compliance with Prior Undertakings"), "Legal Matters" (exclusive of the last two sentences of the first paragraph thereof) and "Legal Investments and Eligibility to Secure Public Funds in Texas" and we are of the opinion that such descriptions present a fair and accurate summary of the provisions of the laws and #45211341v1< Page 2 of Legal Opinion of Fulbright & Jaworski L.L.P. Re: $2,605,000 "City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002", dated July 1, 2002 instruments therein described and, with respect to the Certificates, such information conforms to the Ordinance. C. The Certificates are exempt from registration pursuant to the Securities Act of 1933, as amended, and the Ordinance is exempt from qualification as an indenture pursuant to the Trust Indenture Act of 1939, as amended. In reference to our opinion relating to the legality and validity of the above described Certificates and the interest thereon being excludable from gross income for federal income tax purposes, you may rely upon such opinion to the same extent and as fully as if such opinion were addressed to you. Very truly yours, / f EHE:dfc #45211341v1< 7mi P.O. Box 2000 • 1625 13th Street Lubbock, Texas 79457 (806) 775-2222 • Fax (806) 775-3307 EXHIBIT B August 15, 2002 A.G. Edwards & Sons, Inc. One N. Jefferson 7th Floor St. Louis, Missouri 63103 Ladies and Gentlemen: Office of the City Attorney I am the City Attorney for the City of Lubbock, Texas (the "City") at the time of the issuance and sale of. the "City of Lubbock, Texas Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002A," in the aggregate principal amount of $2,605,000 (the "Certificates"), pursuant to the provisions of an ordinance duly adopted by the City Council of the City on July 11, 2002 (the "Ordinance"). Capitalized terms not otherwise defined in this opinion have the meanings assigned in the Purchase Contract. In my capacity as City Attorney to the City, I have reviewed such agreements, documents, certificates, opinions, letters, and other papers as I have deemed necessary or appropriate in rendering the opinions set forth below. In making my review, I have assumed the authenticity of all documents and agreements submitted to me as originals conformity to the originals of all documents and agreements submitted to me as certified or photostatic copies, the authenticity of the originals of such latter documents and agreements, and the accuracy of the statement contained in such documents. Based upon the foregoing, and subject to the qualifications and exceptions hereinafter set forth, I am of the opinion that under the applicable laws of the United States of America and the State of Texas in force and effect on the date hereof: 1. Based on reasonable inquiry made of the responsible City employees and public officials, the City is not, to the best of my knowledge, in breach of or in default under any applicable law or administrative regulation of the State of Texas or the United States, or any applicable judgment or decree or any trust agreement, loan ul-M agreement, bond, note, resolution, ordinance, agreement or other instrument to which the City is party or is otherwise subject and, to the best of my knowledge after due inquiry, no event has occurred and is continuing that, with the passage of time or the giving of notice, or both, would constitute such a default by the City under any of the foregoing; and the execution and delivery of the Purchase Contract and the Certificates, and the adoption of the Ordinance and compliance with the provisions of each of such agreements or instruments does not constitute a breach of or default under any applicable law or administrative regulation of the State of Texas or the United States or any applicable judgment or decree or, to the best of my knowledge, any trust agreement, loan agreement, bond, note, resolution, ordinanee, agreement or other instrument to which the City is a party or is otherwise subject; and 2. Except as disclosed in the Oficial Statement, no litigation is pending, or, to my knowledge, threatened, in any court in any way (a) challenging the titles of the Mayor or any of the other members of the City Council to their respective offices, (b) seeking to restrain or enjoin the issuance or delivery of any of the Certificates, or the collection of taxes levied or to be levied to pay the principal of and interest on the Certificates, (c) contesting or affecting the validity or enforceability of the Certificates, the Ordinance or the Purchase Contract (d) contesting the powers of the City or any authority for the issuance of the Certificates, or the adoption of the Ordinance, or (e) that would have a material and adverse effect on the financial condition of the City, including, particularly on the financial condition of the Municipal Drainage Utility System of the City. This opinion is furnished solely for your benefit and may be relied upon only by the addresses hereof or anyone to whom specific permission is given in writing by me. Very truly yours, Anita Burgess City Attorney TAB 17 3 LAW OFFICES McCALL, PARKHURST & HORTON L.L.P. 600 CONGRESS AVENUE 1250 ONE AMERICAN CENTER AUSTIN, TEXAS 78701-3248 TELEPHONE: 512 4783805 FACSIMILE: 512472-0871 A.G. Edwards & Sons, Inc. One N. Jefferson 7th Floor St. Louis, Missouri 63103 717 NORTH HARWOOD NINTH FLOOR DALLAS, TEXAS 75201-6587 TELEPHONE: 214 754.9200 FACSIMILE: 214 754-9250 August 15, 2002 700 N. ST. MARY'S STREET 1225 ONE RIVERWALK PLACE SAN ANTONIO, TEXAS 78205-3503 TELEPHONE: 210 225.2800 FACSIMILE: 210 225.2984 Re: $2,605,000 City of Lubbock, Texas Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002A Ladies and Gentlemen: We have acted as counsel for you as the underwriters of the Certificates -of Obligation described above (the "Certificates"), issued under and pursuant to an ordinance (the "Ordinance") of the City of Lubbock, Texas (the "Issuer"), authorizing the issuance of the Certificates, which Certificates you are purchasing pursuant to a Purchase Contract, dated July 11, 2002. All capitalized undefined terms used herein shall have the meaning set forth in the Purchase Contract. In connection with this opinion letter, we have considered such matters of law and of fact, and have relied upon such Certificates and other information furnished to us, as we have deemed appropriate as a basis for our opinion set forth below. We are not expressing any opinion or views herein on the authorization, issuance, delivery, validity of the Certificates and we have assumed, but not independently verified, that the signatures on all documents and Certificates that we have examined are genuine. Based on and subject to the foregoing, we are of the opinion that, under existing laws, the Certificates are not subject to the registration requirements ofthe Securities Act of 1933, as amended, and the Ordinance is not required to be qualified under the Trust Indenture Act of 1939, as amended. Because the primary purpose of our professional engagement as your counsel was not to establish factual matters, and because of the wholly or partially nonlegal character of many of the determinations involved in the preparation ofthe Official Statement dated July 11, 2002 (the "Official Statement") and because the information in the Official Statement under the headings "BOOK - ENTRY ONLY SYSTEM," 11TAX MATTERS," "CONTINUING DISCLOSURE — Compliance with Prior Undertakings" and Appendices B, C, and D thereto were prepared by others who have been engaged to review or provide such information, we are not passing on and do not assume any responsibility for, except as set forth in the last sentence ofthis paragraph, the accuracy, completeness or fairness of the statements contained in the Official Statement (including any appendices, schedules and exhibits thereto) and we make no representation that we have independently verified the accuracy, completeness or fairness of such statements. In the course of our review of the Official Statement, we had discussions with representatives of the City regarding the contents of the Official Statement. In the course of our participation in the preparation of the Official Statement as your counsel, we had discussions with representatives of the Issuer, including its City Attorney, Bond Counsel and Financial Advisor, regarding the contents of the Official Statement. In the course of such activities, no facts came to our attention that would lead us to believe that the Official Statement (except for the financial statements and other financial and statistical data contained therein, the information set forth under the headings "BOOK -ENTRY ONLY SYSTEM," "TAX MATTERS," "CONTINUING DISCLOSURE — Compliance with Prior Undertakings" and Appendices B, C and D thereto, as to which we express no opinion), as of its date contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. This opinion letter may be relied upon by only you and only in connection with the transaction to which reference is made above and may not be used or relied upon by any other person for any purposes whatsoever without our prior written consent. Respectfully, k, "wqm - kj A � i i CERTIFICATE OF UNDERWRITER The undersigned hereby certifies as follows with respect to the sale and delivery of $2,605,000 City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002A (the "Certificates"): 1. The undersigned has purchased the Certificates from the City of Lubbock, Texas (the "Issuer") by negotiated sale. 2. The undersigned has made a bona fide offering of the Certificates of each maturity to the public at the initial offering prices set forth in paragraph 3. 3. The initial offering price (expressed as a dollar amount, yield percentage, or percentage of principal amount and exclusive of accrued interest) at which a substantial amount of the Certificates of each maturity was sold to the public (as defined in paragraph 4) is as set forth on the cover page of the Issuer's Official Statement with respect to the Certificates dated July 11, 2002. 4. The term "public", as used herein, means persons other than' bond houses, brokers, dealers, and similar persons or organizations acting in the capacity of underwriters or wholesalers. 5. The initial offering prices described above reflect current market prices at the time of such sales. 6. The undersigned understands that the statements made herein will be relied upon by the Issuer in its effort to comply with the conditions imposed by the Internal Revenue Code of 1986 on the exclusion of interest on the Certificates from the gross income of their owners. EXECUTED and DELIVERED this A06U)T ;U n A. G. EDWARDS & SONS, INC. By: Title 45211316.1 rs 6 TAB 19 MBIA FINANCIAL GUARANTY INSURANCE POLICY MBIA Insurance Corporation Armonk, New York 10504 PolicyNo. 38534 MBIA Insurance Corporation (the "Insuurer'�, in consideration of the payment of the premium and subject to the terms of this policy, hereby unconditionally and irrevocably guarantees to any owner, as hereinafter defined, of the following described obligations, the full and complete payment required robemade by or on behalf of the Issuer to JPMorganChase Bank, Dallas, Texas or its successor (the 'Paying Agent") of an amount equal to (1) the principal of (either at the stated maturity or by any advancement of maturity pursuant to a mandatory sinking fiord payment) and interest on, the Obligations (as that term is defined below) as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fimd payment, the payments guaranteed hereby shall be made in such amounts and at such times as such payments of principal would have been due bad there not been any such acceleration); and (u) the reimbursement of any such payment which is subsequently recovered from any owner pursuant to a final judgrnent by a court of competent jurisdiction that such payment constitutes an avoidable preference to such owner within the meaning of any applicable bankruptcy law The amounts refened to in clauses (1) and (ii) of the preceding sentence shallbe referred to herein collectively as the "Insured Amounts." "Obligations" shall mean: $2,605,000 City of Lubbock, Texas Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002A Upon receipt of telephonic or telegraphic notice, such notice subsequently confimued in writing by registered or certified marl, or upon receipt of written notice by registered or certified mail, by the Instuer from the Paying Agent or any owner of an Obligation the payment of an Insured Amount for which is then due, that such required payment has not been made, the Insurer on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of fiords, in an account with State Street Bank and Trust Company, N.A., in New York, New York, or its successor, sufficient for the payment of any such Insured Amounts which are then due. Upon presentment and surrender of such Obligations or presentment of such other proof of ownership of the Obligations, together with any appropriate instruments of assignment to evidence the assignment of the Insured Amounts due on the Obligations as are paid by the Insurer, and appropriate instruments to effect the appointment of the Insurer as agent for such owners of the Obligations in any legal proceeding related to payment of Insured Amounts on the Obligations, such insturnents being in a form satisfactory to State Street Bank and Tnrst Company, N.A., State Street Bank and Trust Company, N.A. shall disburse to such owners, or the Paying Agent payment of the Insured Amounts due on such Obligations, less any amount held by the Paying Agent for the payment of such Insured Amounts and legally available therefor. This policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Obligation As used herein, the tern "owner" shall mean the registered owner of any Obligation as indicated in the books maintained by the Paying Agent, the Issuer, or any designee of the Issuer for such purpose. The term owner shall not include the Issuer or any party whose agreement with the Issuer constitutes the underlying security for the Obligations. Any service of process on the Insurer may be made to the Insurer at its offices located at 113 Ding Street, Armonk, New York 10504 and such service of process shall be valid and binding. This policy is non -cancellable for any reason. The premium on this policy is not refundable for any reason including the payment prior to maturity of the Obligations. IN WITNESS WHEREOF, the Insurer has caused tins policy to be executed in facsimile on its behalf by its duly authorized officers, this 15th day of August, 2002. MBkIns urance Corlrgration President Attest: Assistant DISCLOSURE OF GUARANTY FUND NONPARTICIPATION: In the event the Insurer is unable to fulfill its contractual obligation under this policy or contract or application or certificate or evidence of coverage, the policyholder or certificateholder is not protected by an insurance guaranty fund or other solvency protection arrangement. STB -R -6 -TX Maya Capital Strength. Triple -A Performance. August 15, 2002 City of Lubbock, Texas 1625 13th Street Lubbock, Texas 79457 A.G. Edwards & Sons, Inc. 70 Northeast Loop 410, Suite 915 San Antonio, Texas 78216 MBIA Insurance Corporation 113 King Street, Armonk, NY 10504 Te 1914-273-4545 www.mbia.com $2,605,000 City of Lubbock, Texas Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002A Ladies and Gentlemen: I am Deputy General Counsel of the MBIA Insurance Corporation, a New York corporation (the "Corporation"), and have acted as counsel to the Corporation in connection with the issuance of Financial Guaranty Insurance Policy No. 38534 (the "Policy") relating to $2,605,000 City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002A. In so acting, I have examined a copy of the Policy and such other relevant documents as I have deemed necessary. Based upon the foregoing, I am of the following opinion: 2. The Corporation is a stock insurance corporation, duly incorporated and validly existing under the laws of the State of New York and is licensed and authorized to issue the Policy under the laws of the State of New York and the State of Texas. , MBIA Page 2 2. The Policy has been duly executed and is a valid and binding obligation of the Corporation enforceable in accordance with its terms except that the enforcement of the Policy may be limited by laws relating to bankruptcy, insolvency, reorganization, moratorium, receivership and other similar laws affecting creditors' rights generally and by general principles of equity (regardlem of whether such enforceability is considered in a proceeding in equity or at law). Very truly yours, Pauline M. Cullen Deputy General Counsel A0181A Capital Strength. Triple -A Performance. August 15, 2002 JPMorgan Chase Bank Dallas, Texas MBIA Insurance Corporation 113 King Street, Armonk, NY 10504 Tel 914-273-4545 www.mbia.com $2,605,000 City of Lubbock, Texas Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002A Gentlemen: In connection with the above-described obligations (the "Obligations") of which you are acting as paying agent (the 'Paying Agent"), please be advised that the payment to you of principal of and interest on the Obligations has been guaranteed by a policy of financial guaranty insurance (the "Policy") issued by the MBIA Insurance Corporation (the "Insurer"). State Street Bank and Trust Company, N.A., New York, New York, (the "Fiscal Agent") is acting as the fiscal agent for the Insurer. The Policy unconditionally and irrevocably guarantees to any owner or holder of the Obligations or, if applicable, of the coupons appertaining thereto (the "Owner"), the full and complete payment required to be made by or on behalf of the issuer of the Obligations (the "Issuer") to the Paying Agent or its successor of an amount equal to (i) the principal of (either at the stated maturity or by any advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Obligations as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed by the Policy shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any Owner pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference (a'Preference") to the Owner within the meaning of any applicable bankruptcy law. The amounts referred to in clauses (i) and (ii) of the preceding sentence are referred to collectively in this letter as the "Insured Amounts." The Policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Obligations. The Policy does not, under any circumstance, insure against loss relating to: (i) optional or mandatory redemptions (other than mandatory sinking fund redemptions); (ii) any payments to be made on an accelerated basis; (iii) payments of the purchase price of Obligations upon tender by an Owner thereof; or (iv) any Preference relating to (i) through (iii) above. FA i m M In the event that the Issuer does not make full and complete payment when due of the principal of and interest on the Obligations, please immediately notify, by telephone or telegraph, the Insurer, 113 King Street, Armonk, New York, 10504, (914) 273-4545. On the due date or within one business day after receipt of such notice, whichever is later, the Insurer will deposit funds with the Fiscal Agent sufficient to pay the Obligations (or, if applicable, coupons appertaining thereto) then due. Upon presentment and surrender of such Obligations (or, if applicable, coupons) or presentment of such other proof of ownership of Obligations together with any appropriate instruments of assignment to evidence the assignment of the Insured Amounts due on the Obligations as are paid by the Insurer, and appropriate instruments to effect the appointment of the Insurer as agent for the Owners in any legal proceeding related to payment of Insured Amounts on the Obligations (or, if applicable, coupons), such instruments being in a form satisfactory to the Fiscal Agent, the Fiscal Agent shall disburse to you payment of the Insured Amounts due on such Obligations (and, if applicable, coupons), less any amount held by you for the payment of such Insured Amounts and legally available therefor. Forms of such instruments of assignment and instruments to effect the appointment of the Insurer as such agent for the Owners (collectively, the "Claim Documents'), which are currently acceptable to the Fiscal Agent and the Insurer, are on file with the Fiscal Agent. The Insurer may, from time to time, file revised forms of Claim Documents with the Fiscal Agent in substitution for the forms previously•filed with the Fiscal Agent, and upon such filing, the revised forms shall supersede all forms of Claim Documents previously filed with the Fiscal Agent, except as otherwise directed by the Insurer in writing. In the event that you shall have prior knowledge of an impending failure by the Issuer to make payment on the Obligations (or, if applicable, coupons) when due, please immediately notify the Insurer so that it will be possible to have funds available for you on the due date to make payments against surrendered Obligations (and, if applicable, coupons). Your cooperation in this matter will be most appreciated and will make it possible for the Owners of Obligations guaranteed by the Insurer to be assured of all payments when due. Ve ly yours, Gary C. Dunton President A481A . IN A CERTIFICATE OF MBIA INSURANCE CORPORATION I, Amy R. Gonch, Assistant Secretary of MBIA Insurance Corporation, do hereby certify that the information concerning MBIA Insurance Corporation and its policies as set forth in the Official Statement, dated July 11, 2002 under the caption "Municipal Bond Insurance", regarding $2,605,000 City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002A, is accurate. IN WITNESS WHEREOF, I hereunto set my hand and deliver this Certificate on this 15th day of August, 2002. (�7L k f�� L-- Assistet ecretary . 0 MBIA Capital Strength. Triple -A Performance City of Lubbock, Texas 1625 13th Street Lubbock, Texas 79457 TAX CERTIFICATE MBIA Insurance Corporation 113 King Street, Armonk, NY 10504 Tel 914-273-4545 www.mbia.com RE: $10,810,000 City of Lubbock, Texas, General Obligation Refunding Bonds, Series 2002 $2,605,000 City of Lubbock, Texas, Tax and Sewer System Surplus Revenue Certificates of Obligation, Series 2002A (the "Obligations") Ladies and Gentlemen: In connection with the issuance of the above -referenced obligations (the "Obligations"), MBIA Insurance Corporation (the "Insurer") is issuing two financial guaranty insurance policies (the "Policies") securing the payment of principal and interest on the Obligations. This is to advise you that: 1. The Policies are unconditional obligations of the Insurer to pay scheduled payments of principal and interest on the Obligations in the event of a failure to do so by the City of Lubbock, Texas (the "Issuer"); 2. The insurance premiums in the amount of $17,000 and $6,000, represents the charge for a transfer of credit risk and were determined in arm's length negotiations and are required to be paid as a condition to the issuance of the Policies; 3. No portion of such premiums represents an indirect payment of costs related to the issuance of the Obligations other than for the transfer of credit risk; 4. The Insurer does not reasonably expect that it will be called upon to make any payment under the Policies; and 5. To the extent the Insurer is called upon to make any payment under the Policies, the Insurer reasonably expects to pursue all available legal remedies to secure reimbursement for such payment. Dated: August 15, 2002 MBIA Insurance Corporation .r -2L ssistSecretary— No Text 3 ll East Ah strut f veil, WY 82435 Dear Ms. Wilson: Re: $2,505,000 Tax and Sewer Systei Certificates of Obligs (35534) Fitch Ratings has assigned a r enhancement in the form of a which has an insurer fmancial `AAA' insurer financial strenf exceptionally strong capacity minima( and the impact of any small." Ratings assigned by Fitch Rati RatuIW does not audit or verif recommendation to buy, sell, a market price, the suitability of taxability of paymont made in i assigned to MBIA may be chat Of changes in MBIA's Financia a consent by Fitch to use its nal other filing under U.S., UK or s Sincerely, Surplus Revenue 3n, Series 2002A Fie tcfjdlilatjngs T 307 754 2012 / 800 235: 4824 W WW.fitchratings.com IVis. l: i!a Wilson Mall : nsuraace Corp. 11.3 ICE: g Street Armonk, NY 10504 August 14, 2002 ►ng of'AAWto tine ai Ove te'ferenced Bonds. This Ie$ects credit rnd insurance policy }provided by MBIA Insuzance Corp.(11MLk), Mgth Ming of'AAA- Fid Ratings defines con3panies with i ratings as follows: "Companies are viewed a s po.1 sessing meet policyholder and contract obligations. P isle f ictors are dverse business and economic factors is expe-:ted to be extremely bs S1e based on information provided to us by MBIA. Fitch :he troth or accuracy of such information. Rat ags ; ire not a hold any security. Ratings do not comment 03 t tl-w. adequacy of ry security for a particular investor, or the tax- exetiipt nature or sped of any security. The insurer financial str -ng, I. rating ed, mom, suspended, or placed on Ratin 1.9/a I eh as a result !ondition. The assignment of a raring by Fitch shat) not constitute as an expert in connection with any registrat .ort 3 i atement or y other relevant securities laws. Becky K. Christensen Manager / Insured Ratings CITY OF LUBBOCK, TEXAS COMBINED BALANCE SHEET - ALL FUND TYPES, ACCOUNT GROUPS AND COMPONENT UNITS September 30, 2001 With Comparative Totals for September 30, 2000 6 Governmental Fund Types Special Debt Capital General Revenue Service Projects Assets Pooled cash and cash equivalents $ 235,353 $ 1,281,392 $ 186,793 $ 4,534,929 Investments 1,575,058 8,575,472 1,250,080 30,349,139 Receivables (net, where applicable, of allowance for uncollectibles): Taxes, including interest, penalities, and liens 5,560,665 23,603 188,955 - Accounts, notes, and mortgages 8,836,072 - - _ Interest 164,549 12,450 - 86,099. Due from other funds 8,551,093 - Due from other governments 13,637 - - _ Due from other agencies 1,413,228 847,647 - 136,998 Prepaid items 165,995 - - _ Advances to other funds 1,712,504 Inventory, at average cost 95,094 Restricted assets: Pooled cash and cash equivalents - _ Investments _ _ Accounts receivable - _ Interest receivable - _ Deferred charges _ _ Fixed assets (net of accumulated depreciation, if applicable) 7 _ Other assets (net of accumulated amortization) _ _ Amount available in debt service funds Amount to be provided for retirement of general long-term debt _ _ _ _ Total assets $ 28,323,248 $ 10,740,564 $ 1,625,828 $ 35,107,165 6 7 Fors, 8038-G Information Return for Tax -Exempt Governmental Obligations ► ► Under Internal Revenue Code section 149(e) OMB No. 1545-0720 (Rev. November 2000) ► See separate instructions. Department of the Treasury Caution: Use Form 8038 -GC if the issue price is under$900,000. Internal Revenue Service Reporting Authority If Amended Return, check here ► ❑ 1 - Issuer's name 2 Issuer's employer identification number City of Lubbock, Texas 75-6000590 Report number 4 . �,,,, - 3 Number and street (or P.O. box if mail is not delivered to street address) Room/suite 3-24 ffi 1625 131 Street 6 Date of issue 5 City, town, or post oce, state, and ZIP code August 15, 2002 Lubbock, Texas 79401 8 CUSIP Number 7 Name of Issue Tax and Sewer System Surplus Revenue Certificates of obligation, Series 2002A 54gf$1'' STO 9 Name and title of officer or legal representative whom the IRS may call for more information 10 Telephone number of officer or legal representative Beverly Hodges, Director of Finance (806) 775-2000 ETUDE Type of Issue (check applicable box(es) and enter the issue price) See instructions and attach schedule 11 ❑ Education ............................ 11 12 E]............... Health and hospital....... .......................................... 12 13 ❑ Transportation.................................................... 13 r+•+14 14 ❑' Public safety .............................. . ................ . 15 ❑ Environment(including sewage bonds .................................... 15 16 E] Housing ......................................................................... 16 17 ® Utilities .......................................... 17 2 604 338.35 18 18 ❑ Other. Describe )- 19 If obligations are TANs or RANs, check box ► ❑ If obligations are BANs, check box ......... ► ❑ 20► ❑ If oblig ations are in the form of a lease or installment sale, check box ......... • . • • • • • • • • • _I /1L17.._L:- Irl—nintm fnr +nP anfira issue for which this form is being filed.) M:MM m Description of vu11VC1L1%i111a. k.,.,,,,rI— , ,., _..... - ---- - (c) Stated redemption (d) Weighted (e) Yield (a) Final maturity date (b) Issue price price at maturity average maturity 21 February 15, 2022$ 2-604-338.35 $ 2 605 000.00 11.372 years 3.75245 't ' d'scount) Uses of Proceeds of Bond Issue (including un e, vv, ers I 22 Proceeds used for accrued interest ......................... . •429 23 Issue price of entire issue (enter amount from line 21, column (b)) .... .....24 Proceeds used for bond issuance costs (including underwriters' discount).. 24 81 351.9425 Proceeds used for credit enhancement ....................•••••• • 25FOR 26 Proceeds allocated to reasonably required reserve or replacement fund ... 26 -0- 27 Proceeds used to currently refund prior issues ...................... 27 -0- 28 Proceeds used to advance refund prior issues .................... .. 28 -0- 29 Total (add lines 24 through 28) ....................................... 30 Nonrefunding proceeds of the issue (subtract line 29 from line 23 and enter amount here) ............. 30 2 - . Description of Refunded Bonds (complete this part only for refunding bonds.) M 31 Enter the remaining weighted average maturity of the bonds to be currently refunded ...................... ► 32 Enter the remaining weighted average maturity of the bonds to be advance refunded .................... ► 33 Enter the last date on which the refunded bonds will be called ....................................... ► 34 Enter the date(s) the refunded bonds were issued -- 35 87,351.94 516,986.41 Miscellaneous 35 Enter the amount of the state volume cap allocated to the issue under section 141(b)(5) .. • . • • . • .. ' 36a 36a Enter the amount of gross proceeds invested or to be invested in a guaranteed investment contract see b Enter the final maturity date of the guaranteed investment contract 37 Pooled financings: a Proceeds of this issue that are to be used to make loans to other governmental units 37a f �_ b If this issue is a loan made from the proceeds of another tax-exempt issue, check box ► ❑ and enter the name of the issuer ► and the date of the issue ► 38 If the issuer has designated the issue under section 265(b)(3)(B)(i)(II I) (small issuer exception), check box ......................... .............. ❑ 39 If the issuer has elected to pay a penalty in lieu of arbitrage rebate, check box ................................................ . ❑ 40 If the issuer has identified a hedge, check box . . . • • ... • ' ' • • ' ... •_• ` • ..... ' .. ' ❑ Under pe 'es of perj , I de a that have examined this return and accompanying schedules and stateents, and to the best of Please my kn d and b I ,the a true c rrecm t, and c e 4 Z Sign 10. ►Beverly Hodges Director of Finance Here Type or print name and title Signature of issues ut orized re re a tative Date 45199862 *blended yield wi ity of Lub c Texas, General Obligation Refunding Bonds, Series 2002" For Paperwork Reduction Act Not e, see page 2 o the Instructions. cat. No: ss�7ss Form 8038-G (Rev. 11-2000) 1